TOYS R US INC, S-8, 1995-11-16

TOYS R US INC
S-8, 1995-11-16
HOBBY, TOY & GAME SHOPS

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As filed with the Securities and Exchange Commission
on November 16, 1995

Registration No. 33-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

TOYS "R" US, INC.
(Exact name of registrant as specified in its charter)

Delaware 13-5159250
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)

461 From Road, Paramus, New Jersey 07652
(Address of Principal Executive Offices) (Zip Code)

TOYS "R" US, INC.
1994 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
1995 EMPLOYEE STOCK OPTION PLAN
(Full Title of the Plans)

Louis Lipschitz
Senior Vice President - Finance and Chief Financial Officer
TOYS "R" US, INC.
461 From Road
Paramus, New Jersey 07652
(202) 262-7800
(Name, Address and Telephone Number of Agent for Service)

Copy to:
Andre Weiss, Esq.
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022

CALCULATION OF REGISTRATION FEE

Proposed Proposed
Title of Maximum Maximum Amount of
Securities to Amount to be Offering Price Aggregate Registration
be Registered Registered Per Share (1) Offering Price (1) Fee
- ------------- ------------ -------------- ------------------ ------------
Common Stock, 30,000,000 $24.25 $727,414,369.86 $145,483.00
par value shares (2)
$.10 per share

<PAGE>

(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(h)(1) under the Securities Act of 1933,
as amended (the "Securities Act"), based on (1) the average of the
exercise prices ($261,003,558.96) at which all 9,776,225 options
outstanding under the Plans may be exercised, plus (2) the average
of the high and low prices of the Common Stock, as reported on the
New York Stock Exchange on November 15, 1995 ($23.0625), multiplied
by the 20,223,775 shares that remain available for grant under the
Plans.

(2) Of this total, 15,000,000 shares are the shares authorized for
issuance under the Toys "R" Us, Inc. 1994 Stock Option and
Performance Incentive Plan (the "1994 Plan") and 15,000,000 shares
are the shares authorized for issuance under the Toys "R" Us, Inc.
1995 Employee Stock Option Plan (the "1995 Plan").

-ii-
<PAGE>

EXPLANATORY NOTE

Pursuant to General Instruction C of Form S-8, this Registration
Statement contains a prospectus meeting the requirements of Part I of Form S-3
relating to reofferings by certain persons of shares of common stock, par
value $.10 per share (the "Common Stock"), of Toys "R" Us, Inc. to be acquired
pursuant to the 1994 Plan.

-iii-
<PAGE>

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents By Reference.
------- ----------------------------------------
The following documents which have been or will in the future be
filed by Toys "R" Us, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission (the "Commission") are incorporated in this
Registration Statement by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995, filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
contains certified financial statements for the Company's fiscal year ended
January 28, 1995.

2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended April 29, 1995 and July 29, 1995, filed pursuant to Section 13(a) or
15(d) of the Exchange Act.

3. The Company's Notice of Annual Meeting of Stockholders and
Proxy Statement for its Annual Meeting of Stockholders held on June 7, 1995,
filed pursuant to Section 14 of the Exchange Act.

4. The description of the Common Stock contained in Item 1 of the
Company's Registration Statement on Form 8-A filed with the Commission on June
13, 1979 pursuant to Section 12 of the Exchange Act, including any amendments
or reports filed for the purpose of updating such description.

All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then
remaining unsold shall be deemed to be incorporated by reference in and to be
a part of this Registration Statement from the date of filing of such reports
and documents.

Item 4. Description of Securities.
------- --------------------------
Not Applicable.

Item 5. Interests of Named Experts and Counsel.
------- ---------------------------------------
Legal Opinion.
- --------------
The legality of the shares of Common Stock being registered
hereby is being passed upon by Schulte Roth & Zabel, 900 Third Avenue, New York,
New York 10022, counsel for the Company. Andre Weiss, a member of Schulte
Roth & Zabel, is the Secretary of the Company.

Experts.
- --------
The consolidated financial statements of Toys "R" Us, Inc. and
subsidiaries incorporated by reference in the Company's Annual Report (Form
10-K) for the year ended January 28, 1995 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated
by reference therein and incorporated herein by reference. Such financial
statements are, and audited financial statements to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of Ernst & Young LLP pertaining to such financial statements (to the

-1-
<PAGE>

extent covered by consents filed with the Securities and Exchange Commission)
given upon the authority of such firm as experts in accounting and auditing.

Item 6. Indemnification of Directors and Officers.
------- ------------------------------------------
Limitation of Directors' Liability.
- -----------------------------------
The Delaware General Corporation Law ("DGCL") provides that a
corporation's certificate of incorporation may include a provision limiting
the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director. However, no
such provision can eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law, (iii) under Section
174 of the DGCL, which relates to liability for unlawful payments of dividends
or unlawful stock repurchases or redemptions, (iv) for any transaction from
which the director derived an improper personal benefit, or (v) for any act or
omission prior to the adoption of such a provision in the certificate of
incorporation. The Company's Restated Certificate of Incorporation contains a
provision eliminating the personal liability for monetary damages of its
directors to the full extent permitted under the DGCL.

Indemnification and Insurance.
- ------------------------------
The DGCL contains provisions setting forth conditions under which
a corporation may indemnify its directors and officers. The Company's
Restated Certificate of Incorporation provides that a director or officer who
is a party to any action, suit or proceeding shall be entitled to be
indemnified by the Company to the extent permitted by the DGCL against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement incurred by such director or officer in connection with such
action, suit or proceeding. The Company has entered into indemnification
agreements with each of its directors and intends to enter into
indemnification agreements with each of its future directors. Pursuant to
such indemnification agreements, the Company has agreed to indemnify its
directors against certain liabilities, including any liabilities arising out
of this Registration Statement. The Company maintains a standard form of
officers' and directors' liability insurance policy which provides coverage to
the officers and directors of the Company for certain liabilities.

Item 7. Exemption from Registration Claimed.
------- ------------------------------------
Not Applicable.

Item 8. Exhibits.
------- ---------
The following is a complete list of exhibits filed as a part of
this Registration Statement:

Exhibit No. Document
----------- --------
4.1 Toys "R" Us, Inc. 1994 Stock
Option and Performance Incentive
Plan, as amended

4.2 Toys "R" Us, Inc. 1995 Employee
Stock Option Plan

5 Opinion of Schulte Roth & Zabel re
legality of original issuance
of shares of Common Stock being
registered

-2-
<PAGE>

Exhibit No. Document
----------- --------
23.1 Consent of Ernst & Young LLP

23.2 Consent of Schulte Roth & Zabel
(included in Exhibit 5)

24 Powers of Attorney (see pages II-1
and II-2 of this Registration
Statement)

Item 9. Undertakings.
------- -------------
A. To Update Annually.
-------------------
The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement;

(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;

provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13 or 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement;

(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

B. Incorporation of Subsequent Exchange Act Documents
by Reference.
--------------------------------------------------
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

-3-
<PAGE>

C. Indemnification of Officers and Directors.
------------------------------------------
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemni-
fication against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is as-
serted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

-4-
<PAGE>

REOFFER
PROSPECTUS
- ----------
TOYS "R" US, INC.
461 From Road
Paramus, New Jersey 07652
Telephone No. (201) 262-7800
_______________________

Common Stock, par value $.10 per share
15,000,000 Shares
______________________

This Prospectus relates to the subsequent resale or offer for
sale on the New York Stock Exchange, or otherwise, of shares of Common Stock,
par value $.10 per share ("Common Stock"), of Toys "R" Us, Inc., a Delaware
corporation (the "Company"), which may be acquired by certain persons who may
be deemed affiliates of the Company pursuant to the purchase by them of shares
of Common Stock upon the exercise of options and other awards granted to them
under the Company's 1994 Stock Option and Performance Incentive Plan (the
"1994 Plan"). In connection with such resales or offers for sale, such
persons and the brokers through whom such shares may be sold may be deemed to
be "underwriters" as that term is defined in Section 2(11) of the Securities
Act of 1933, as amended (the "Securities Act"). The Company will not receive
any of the proceeds from the sale of the shares offered hereby. All expenses
incurred in connection with the registration under the Securities Act and the
offering of the securities hereby will be borne by the Company, but all
selling and other expenses incurred by an individual Registered Stockholder
(as defined herein) will be borne by such Registered Stockholder.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

No person has been authorized to give any information or to make
any representations, other than as contained herein, in connection with the
offer contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon. This Prospectus does not constitute
an offer to sell or solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such
offer or solicitation.

The date of this Prospectus is November 16, 1995.

A-1
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission") which may be inspected and copied
at the public reference facilities maintained by the Commission located at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C., 20549,
and at the regional offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048, and at the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60651. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock is listed on the New York Stock
Exchange. Reports, proxy statements, information statements and other
information concerning the Company can be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.

A copy of any document incorporated by reference in the
Registration Statement (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically incorporated
by reference into the information that the Registration Statement
incorporates) of which this Prospectus forms a part but which is not delivered
with this Prospectus will be provided by the Company without charge to any
person to whom this Prospectus has been delivered, upon the oral or written
request of such person. Such requests should be directed to Louis Lipschitz,
Senior Vice President - Finance and Chief Financial Officer, Toys "R" Us,
Inc., 461 From Road, Paramus, New Jersey 07652, telephone number (201) 262-
7800.

THE COMPANY

The Company is the world's largest children's specialty retail
chain in terms of both sales and earnings. At October 28, 1995, the Company
operated 629 toy stores in the United States, 330 international toy stores and
212 Kids "R" Us children's clothing stores. The Company was incorporated in
1928 under the laws of the State of Delaware and has executive offices located
at 461 From Road, Paramus, New Jersey 07652, telephone number (201) 262-7800.
The Common Stock is listed on the New York Stock Exchange under the symbol
"TOY".

THE OFFERING

This Reoffer Prospectus relates to shares of Common Stock which
may be acquired by certain key employees (the "Registered Stockholders") of
the Company, each of whom may be deemed to be "affiliates" of the Company,
pursuant to the exercise of options and other awards granted to such persons
under the 1994 Plan. The address of each Registered Stockholder is c/o Toys
"R" Us, Inc., 461 From Road, Paramus, New Jersey 07652.

A-2
<PAGE>

The following table sets forth certain information with respect
to the Registered Stockholders:
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares to be Shares to be
Beneficially Acquired Under Owned After
Registered Position with Owned as of the 1994 Plan and Exercises and
Stockholder the Company 10/28/95 (1) Offered Hereby (2) Sales
<S> <C> <C> <C> <C>
Michael Goldstein Vice Chairman of the 695,681 208,430 662,251
Board and Chief
Executive Officer

Robert C. Nakasone President and Chief 798,385 237,901 735,484
Operating Officer

Roger V. Goddu Executive Vice 303,823 402,800 106,023
President - General
Merchandise Manager

Louis Lipschitz Senior Vice President - 155,644 153,230 69,244
Finance and Chief
Financial Officer;
Assistant Secretary

Richard Markee Vice President - 170,464 227,800 22,664
President of Kids "R"
Us

Gregory R. Staley Vice President - 137,867 99,800 38,067
President of Toys "R"
Us International

Joseph J. Lombardi Vice President - -0- 25,000 -0-
Controller

</TABLE>

(1) Includes, among other things, shares of Common Stock underlying
options and other awards granted to each Registered Stockholder
under the 1994 Plan only to the extent that such options and
other awards are exercisable as of, or within 60 days of, October
28, 1995.

(2) Represents all shares of Common Stock underlying options and other
awards granted under the 1994 Plan to each Registered
Stockholder, whether or not exercisable as of, or within 60 days
of, October 28, 1995.

None of the Registered Stockholders owned more than one percent
of the Common Stock outstanding as of October 28, 1995.

Shares of Common Stock covered by this Reoffer Prospectus may be
offered and sold from time to time by the Registered Stockholders through
brokers on the New York Stock Exchange or otherwise, at the prices prevailing
at the time of such sales. To the Company's knowledge, no specific brokers or
dealers have been designated by the Registered Stockholders nor has any
agreement been entered into in respect of brokerage commissions or for the
exclusive or coordinated sale of any securities which may be offered pursuant
to this Reoffer Prospectus. The Registered Stockholders and any broker or
other person through whom sales are made by the Registered Stockholders may be
regarded as "underwriters" within the meaning of the Securities Act although
the Registered Stockholders disclaim such status, and their compensation may
be regarded and underwriters' compensation.

The Company will not receive any of the proceeds from the
offering hereunder. All expenses incurred in connection with the
registration under the Securities Act and the offering of the securities
hereby will be borne by the Company, but all selling and other expenses
incurred by an individual Registered Stockholder will be borne by such
Registered Stockholder.

A-3
<PAGE>

On October 27, 1995, the closing market price of the Common
Stock, as reported by the New York Stock Exchange, was $22.13.

DOCUMENTS INCORPORATED BY REFERENCE

Incorporated herein by reference and made a part hereof are:

1. The Company's Annual Report on Form 10-K for the
fiscal year ended January 28, 1995, filed pursuant to Section 13(a) or 15(d) of
the Exchange Act.

2. The Company's Quarterly Reports on Form 10-Q for the
quarters ended April 29, 1995 and July 29, 1995, filed pursuant to Section
13(a) or 15(d) of the Exchange Act.

3. The Company's Notice of Annual Meeting of Stockholders
and Proxy Statement for its Annual Meeting of Stockholders held on June 7, 1995,
filed pursuant to Section 14 of the Exchange Act.

4. The description of the Company's Common Stock contained
in Item 1 of the Company's Registration Statement on Form 8-A filed with the
Commission on June 13, 1979 pursuant to Section 12 of the Exchange Act,
including any amendments or reports filed for the purpose of updating such
description.

All of such documents are on file with the Commission. All
documents subsequently filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities to be offered pursuant hereto
have been sold or which deregisters all such securities then remaining unsold
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of the filing of such documents.

EXPERTS

The consolidated financial statements of Toys "R" Us, Inc. and
subsidiaries incorporated by reference in the Company's Annual Report (Form
10-K) for the year ended January 28, 1995 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated
by reference therein and incorporated herein by reference. Such financial
statements are, and audited financial statements to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of Ernst & Young LLP pertaining to such financial statements (to the
extent covered by consents filed with the Securities and Exchange Commission)
given upon the authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock being
offered hereby are being passed upon by Schulte Roth & Zabel, 900 Third
Avenue, New York, New York 10022, counsel for the Company. Andre Weiss, a
member of Schulte Roth & Zabel, is the Secretary of the Company.

A-4
<PAGE>

INDEMNIFICATION

Limitation of Directors' Liability.
- -----------------------------------
The Delaware General Corporation Law ("DGCL") provides that a
corporation's certificate of incorporation may include a provision limiting
the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director. However, no
such provision can eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law, (iii) under Section
174 of the DGCL, which relates to liability for unlawful payments of dividends
or unlawful stock repurchases or redemptions, (iv) for any transaction from
which the director derived an improper personal benefit, or (v) for any act or
omission prior to the adoption of such a provision in the certificate of
incorporation. The Company's Restated Certificate of Incorporation contains a
provision eliminating the personal liability for monetary damages of its
directors to the full extent permitted under the DGCL.

A-5
<PAGE>

TABLE OF CONTENTS TOYS "R" US, INC.

Page

Available Information.... A-2 15,000,000 Shares

The Company.............. A-2

The Offering............. A-2

Documents Incorporated
by Reference............. A-4
COMMON STOCK,
Experts.................. A-4 PAR VALUE
$.10 PER SHARE
Legal Matters............ A-4

Indemnification.......... A-5

Toys "R" Us, Inc. has filed
with the Securities and Exchange
Commission, Washington, D.C.,
a Registration Statement under
the Securities Act of 1933
with respect to this Offering.
This Prospectus omits certain PROSPECTUS
information contained in the
Registration Statement. The
information omitted may be November 16, 1995
obtained from the Securities
and Exchange Commission upon
payment of the regular charge
therefor.

A-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Paramus, State of New Jersey, on
this 16th day of November, 1995.

TOYS "R" US, INC.

By: /s/ Louis Lipschitz
Louis Lipschitz
Senior Vice President -
Finance and Chief
Financial Officer

POWER OF ATTORNEY

The Registrant and each person whose signature appears below
hereby appoint Michael Goldstein and Louis Lipschitz, and each of them, as
their attorneys-in-fact, with full power of substitution, to execute in their
names and on behalf of the Registrant and each such person, individually and
in each capacity stated below, one or more amendments (including
post-effective amendments) to this Registration Statement as the
attorney-in-fact acting on the premise shall from time to time deem
appropriate and to file any such amendment to this Registration Statement with
the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated, on this 16th day of November, 1995.

Name and Signature Title
- ------------------ -----

/s/ Charles Lazarus Chairman of the Board
Charles Lazarus

/s/ Michael Goldstein Vice Chairman and Chief
Michael Goldstein Executive Officer
(Principal Executive
Officer)

/s/ Robert C. Nakasone President and Chief
Robert C. Nakasone Operating Officer

/s/ Louis Lipschitz Senior Vice President -
Louis Lipschitz Finance and Chief
Financial Officer
(Principal Financial and
Accounting Officer)

/s/ Robert A. Bernhard Director
Robert A. Bernhard

II-1
<PAGE>

Name and Signature Title
- ------------------ -----

/s/ Milton S. Gould Director
Milton S. Gould

/s/ Shirley Strum Kenny Director
Shirley Strum Kenny

/s/ Reuben Mark Director
Reuben Mark

/s/ Howard W. Moore Director
Howard W. Moore

/s/ Norman M. Schneider Director
Norman M. Schneider

/s/ Harold M. Wit Director
Harold M. Wit

II-2
<PAGE>

EXHIBIT INDEX

Exhibit No. Document Page
- ----------- -------- ----
4.1 Toys "R" Us, Inc. 1994
Stock Option and Performance
Incentive Plan, as amended

4.2 Toys "R" Us, Inc. 1995 Employee
Stock Option Plan

5 Opinion of Schulte Roth & Zabel
re legality of original
issuance of shares of
Common Stock being
registered

23.1 Consent of Ernst & Young LLP

23.2 Consent of Schulte Roth & Zabel
(included in Exhibit 5)

24 Powers of Attorney (see
pages II-1 and II-2 of this
Registration Statement)

TOYS "R" US, INC.
1994 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN

<PAGE>

TOYS "R" US, INC.
1994 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN

TABLE OF CONTENTS

Page

ARTICLE 1. ESTABLISHMENT AND PURPOSE . . . . . . . . . . . . . . . . . .3

1.1 Establishment and Effective Date . . . . . . . . . . .3
1.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . .3

ARTICLE 2. AWARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . .3

2.1 Form of Awards . . . . . . . . . . . . . . . . . . . .3
2.2 Maximum Shares Available . . . . . . . . . . . . . . .4
2.3 Return of Prior Awards . . . . . . . . . . . . . . . .4

ARTICLE 3. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . .4

3.1 Committee. . . . . . . . . . . . . . . . . . . . . . .4
3.2 Powers of Committee. . . . . . . . . . . . . . . . . .4
3.3 Delegation . . . . . . . . . . . . . . . . . . . . . .5
3.4 Interpretations. . . . . . . . . . . . . . . . . . . .5
3.5 Liability; Indemnification . . . . . . . . . . . . . .5

ARTICLE 4. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . .5

ARTICLE 5. STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . .6

5.1 Grant of Options . . . . . . . . . . . . . . . . . . .6
5.2 Designation as Non-qualified Stock Option
or Incentive Stock Option. . . . . . . . . . . . . . .6
5.3 Option Price . . . . . . . . . . . . . . . . . . . . 6
5.4 Limitation on Amount of Incentive
Stock Options. . . . . . . . . . . . . . . . . . . . .7
5.5 Limitation on Time of Grant. . . . . . . . . . . . . .7
5.6 Exercise and Payment . . . . . . . . . . . . . . . . .7
5.7 Term of Options. . . . . . . . . . . . . . . . . . . .7
5.8 Rights as Stockholder. . . . . . . . . . . . . . . . .7
5.9 General Restrictions . . . . . . . . . . . . . . . . .7
5.10 Cancellation of Stock Appreciation Rights. . . . . . .8

ARTICLE 6. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . 8

6.1 Grants of Stock Appreciation Rights. . . . . . . . . .8
6.2 Limitations on Exercise. . . . . . . . . . . . . . . .8
6.3 Surrender or Exchange of Tandem Stock
Appreciation Rights. . . . . . . . . . . . . . . . . .8
6.4 Exercise of Nontandem Stock Appreciation Rights. . . .9
6.5 Settlement of Stock Appreciation Rights. . . . . . . .9
6.6 Cash Settlement. . . . . . . . . . . . . . . . . . . .9

ARTICLE 7. NONTRANSFERABILITY OF OPTIONS AND STOCK
APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . .9

ARTICLE 8. EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT,
DISABILITY, RETIREMENT, DEATH OR SPECIAL
EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

8.1 General Rule . . . . . . . . . . . . . . .. . . . . . 10
8.2 Relocation Event . . . . . . . . . . . . .. . . . . . 10
8.3 Disability or Retirement . . . . . . . . .. . . . . . 11
8.4 Death. . . . . . . . . . . . . . . . . . .. . . . . . 11

<PAGE>
8.5 Special Event. . . . . . . . . . . . . . . . . . . . 11
8.6 Leave of Absence . . . . . . . . . . . . . . . . . . 12

ARTICLE 9. RESTRICTED SHARES . . . . . . . . . . . . . .. . . . . . . . 12

9.1 Grant of Restricted Shares . . . . . . . . . . . . . 12
9.2 Restrictions . . . . . . . . . . . . . . . . . . . . 12
9.3 Restricted Stock Certificates. . . . . . . . . . . . 12
9.4 Rights of Holders of Restricted Shares .. . . . . . . 13
9.5 Forfeiture . . . . . . . . . . . . . . . . . . . . . 13
9.6 Delivery of Restricted Shares. . . . . . . . . . . . 13

ARTICLE 10. PERFORMANCE SHARES. . . . . . . . . . . . . . .. . . . . . . 13

10.1 Award of Performance Shares. . . .. . . . . . . . . . 13
10.2 Performance Period . . . . . . . .. . . . . . . . . . 13
10.3 Right to Payment of Performance Shares . .. . . . . . 13
10.4 Payment for Performance Shares . . . . . .. . . . . . 14
10.5 Voting and Dividend Rights . . . . . . . .. . . . . . 14

ARTICLE 11. PERFORMANCE UNITS . . . . . . . . . . . . . . . .. . . . . . 14

11.1 Award of Performance Units . . . . . . . . . . . . . 14
11.2 Right to Payment of Performance Units. . . . .. . . . 15
11.3 Payment for Performance Units. . . . . . . . .. . . . 15

ARTICLE 12. UNRESTRICTED SHARES . . . . . . . . . . . . . . . .. . . . . 15

12.1 Award of Unrestricted Shares . . . . . . . . . . . . 15
12.2 Delivery of Unrestricted Shares. . . . . . . . . . . 15

ARTICLE 13. TAX OFFSET PAYMENTS . . . . . . . . . . . . . . . . . . . . 16

ARTICLE 14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION . . . . . . . . . 16

ARTICLE 15. AMENDMENT AND TERMINATION . . . . . . . . . . . . . .. . . . 16

ARTICLE 16. WRITTEN AGREEMENT . . . . . . . . . . . . . . . . . . .. . . 17

ARTICLE 17. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 17

17.1 Tax Withholding. . . . . . . . . . . . . . . . . . . 17
17.2 Compliance With Section 16(b). . . . . . . . . . . . 17
17.3 Successors . . . . . . . . . . . . . . . . . . . . . 17
17.4 General Creditor Status. . . . . . . . . . . . . . . 17
17.5 No Right to Employment . . . . . . . . . . . . . . . 18
17.6 Other Plans. . . . . . . . . . . . . . . . . . . . . 18
17.7 Notices. . . . . . . . . . . . . . . . . . . . . . . 18
17.8 Severability . . . . . . . . . . . . . . . . . . . . 18
17.9 Governing Law. . . . . . . . . . . . . . . . . . . . 18

2
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TOYS "R" US, INC.

1994 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN

ARTICLE 1.

ESTABLISHMENT AND PURPOSE

1.1 Establishment and Effective Date. Toys "R" Us, Inc.,
a Delaware corporation (the "Corporation"), hereby establishes a stock
incentive plan to be known as the "Toys "R" Us, Inc. 1994 Stock Option
and Performance Incentive Plan" (the "Plan"). The Plan shall become
effective as of November 1, 1993, subject to the approval of the
Corporation's stockholders at the 1994 Annual Meeting of Stockholders.
In the event that such stockholder approval is not obtained, any awards
made hereunder shall be cancelled and all rights of employees with
respect to such awards shall thereupon cease. Upon approval by the
Board of Directors of the Corporation (the "Board") and the Board's
Management Compensation and Stock Option Committee (the "Committee"),
awards may be made as provided herein.

1.2 Purpose. The purpose of the Plan is to encourage and
enable all employees (subject to such requirements as may be prescribed
by the Committee) of the Corporation and its subsidiaries to acquire a
proprietary interest in the Corporation through the ownership of the
Corporation's common stock, par value $.10 per share ("Common Stock"),
and other rights with respect to the Common Stock. Such ownership will
provide such employees with a more direct stake in the future welfare of
the Corporation and encourage them to remain with the Corporation and
its subsidiaries. It is also expected that the Plan will encourage
qualified persons to seek and accept employment with the Corporation and
its subsidiaries.

ARTICLE 2.

AWARDS

2.1 Form of Awards. Awards under the Plan may be granted
in any one or all of the following forms: (i) incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"); (ii) non-
qualified stock options ("Non-qualified Stock Options") (unless
otherwise indicated, references in the Plan to "Options" shall include
both Incentive Stock Options and Non-qualified Stock Options); (iii)
stock appreciation rights ("Stock Appreciation Rights"), as described in
Article 6 hereof, which may be awarded either in tandem with Options
("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock
which are restricted as provided in Article 9 hereof ("Restricted
Shares"); (v) units representing shares of Common Stock, as described in
Article 10 hereof ("Performance Shares"); (vi) units which do not
represent shares of Common Stock but which may be paid in the form of
Common Stock, as described in Article 11 hereof ("Performance Units");
(vii) shares of Common Stock that are not subject to any conditions to
vesting ("Unrestricted Shares"); and (viii) tax offset payments ("Tax
Offset Payments"), as described in Article 13 hereof.

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2.2 Maximum Shares Available. The maximum aggregate
number of shares of Common Stock available for award under the Plan is
15,000,000 subject to adjustment pursuant to Article 14 hereof. In
addition, Tax Offset Payments which may be awarded under the Plan will
not exceed the number of shares available for issuance under the Plan.
Shares of Common Stock issued pursuant to the Plan may be either
authorized but unissued shares or issued shares reacquired by the
Corporation. In the event that prior to the end of the period during
which Options may be granted under the Plan, any Option or any Nontandem
Stock Appreciation Rights under the Plan expires unexercised or is
terminated, surrendered or cancelled (other than in connection with the
exercise of Stock Appreciation Rights) without being exercised in whole
or in part for any reason, or any Restricted Shares, Performance Shares
or Performance Units are forfeited, or if such awards are settled in
cash in lieu of shares of Common Stock, then such shares or units shall
be available for subsequent awards under the Plan, upon such terms as
the Committee may determine.

2.3 Return of Prior Awards. As a condition to any
subsequent award, the Committee shall have the right, at its discretion,
to require employees to return to the Corporation awards previously
granted under the Plan. Subject to the provisions of the Plan, such new
award shall be upon such terms and conditions as are specified by the
Committee at the time the new award is granted.

ARTICLE 3.

ADMINISTRATION

3.1 Committee. Awards shall be determined, and the Plan
shall be administered, by the Committee as appointed from time to time
by the Board, which Committee shall consist of not less than two (2)
members of the Board. Except as permitted by Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Act"), and by Section
162(m) of the Code (or Regulations promulgated thereunder), no member of
the Board may serve on the Committee if such member: (i) is or has been
granted or awarded stock, stock options, stock appreciation rights or
any other equity security or derivative security of the Corporation or
any of its affiliates pursuant to the Plan or any other plan of the
Corporation or its affiliates either while serving on the Committee or
during the one year period prior to being appointed to the Committee;
(ii) is an employee or former employee of the Corporation; or (iii)
receives remuneration from the Corporation, either directly or
indirectly, in any capacity other than as a director.

3.2 Powers of Committee. Subject to the express
provisions of the Plan, the Committee shall have the power and authority
(i) to grant Options and to determine the purchase price of the Common
Stock covered by each Option, the term of each Option, the number of
shares of Common Stock to be covered by each Option and any performance
objectives or vesting standards applicable to each Option; (ii) to
designate Options as Incentive Stock Options or Non-qualified Stock
Options and to determine which Options, if any, shall be accompanied by
Tandem Stock Appreciation Rights, (iii) to grant Tandem Stock
Appreciation Rights and Nontandem Stock Appreciation Rights and to
determine the terms and conditions of such rights; (iv) to grant
Restricted Shares and to determine the term of the restricted period and
other conditions and restrictions applicable to such shares; (v) to
grant Performance Shares and Performance Units and to determine the
performance objectives, performance periods and other conditions
applicable to such shares or units; (vi) to grant Unrestricted Shares;

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<PAGE>

(vii) to determine the amount of, and to make, Tax Offset Payments; and
(viii) to determine the employees to whom, and the time or times at
which, Options, Stock Appreciation Rights, Restricted Shares,
Performance Shares, Performance Units and Unrestricted Shares shall be
granted.

3.3 Delegation. The Committee may delegate to one or more
of its members or to any other person or persons such ministerial duties
as it may deem advisable; provided, however, that the Committee may not
delegate any of its responsibilities hereunder if such delegation would
cause the Plan to fail to comply with the "disinterested administration"
rules under Section 16 of the Act. The Committee may also employ
attorneys, consultants, accountants or other professional advisors and
shall be entitled to rely upon the advice, opinions or valuations of any
such advisors.

3.4 Interpretations. The Committee shall have sole
discretionary authority to interpret the terms of the Plan, to adopt and
revise rules, regulations and policies to administer the Plan and to
make any other factual determinations which it believes to be necessary
or advisable for the administration of the Plan. All actions taken and
interpretations and determinations made by the Committee in good faith
shall be final and binding upon the Corporation, all employees who have
received awards under the Plan and all other interested persons.

3.5 Liability; Indemnification. No member of the
Committee, nor any person to whom ministerial duties have been
delegated, shall be personally liable for any action, interpretation or
determination made with respect to the Plan or awards made thereunder,
and each member of the Committee shall be fully indemnified and
protected by the Corporation with respect to any liability he or she may
incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law and to the extent provided in
the Corporation's Certificate of Incorporation and Bylaws, as amended
from time to time, or under any agreement between any such member and
the Corporation.

ARTICLE 4.

ELIGIBILITY

Awards may be made to all employees of the Corporation or
any of its subsidiaries (subject to such requirements as may be
prescribed by the Committee); provided, however, that no employee may
receive awards of or relating to more than 250,000 shares of Common
Stock in the aggregate in any fiscal year of the Corporation. Awards
may be made to a director of the Corporation who is not also a member of
the Committee, provided that the director is also an employee. In
determining the employees to whom awards shall be granted and the number
of shares to be covered by each award, the Committee shall take into
account the nature of the services rendered by such employees, their
present and potential contributions to the success of the Corporation
and its subsidiaries and such other factors as the Committee in its sole
discretion shall deem relevant.

As used herein, the term "subsidiary" shall mean any present
or future corporation, partnership or joint venture in which the
Corporation owns, directly or indirectly, 40% or more of the economic
interests. Notwithstanding the foregoing, only employees of the
Corporation and any present or future corporation which is or may be a
"subsidiary corporation" of the Corporation (as such term is defined in

5
<PAGE>

Section 424 (f) of the Code) shall be eligible to receive Incentive
Stock Options.

ARTICLE 5.

STOCK OPTIONS

5.1 Grant of Options. Options may be granted under the
Plan for the purchase of shares of Common Stock. Options shall be
granted in such form and upon such terms and conditions, including the
satisfaction of corporate or individual performance objectives and other
vesting standards, as the Committee shall from time to time determine.

5.2 Designation as Non-qualified Stock Option or Incentive
Stock Option. In connection with any grant of Options, the Committee
shall designate in the written agreement required pursuant to Article 16
hereof whether the Options granted shall be Incentive Stock Options or
Non-qualified Stock Options, or in the case both are granted, the number
of shares of each.

5.3 Option Price. The purchase price per share under each
Incentive Stock Option shall be the Market Price (as hereinafter
defined) of the Common Stock on the date the Incentive Stock Option is
granted. The purchase price per share under each Non-qualified Stock
Option shall be specified by the Committee, but in no event shall it be
less than 90% of the Market Price on the date the Non-qualified Stock
Option is granted. In no case, however, shall the purchase price per
share of either an Incentive Stock Option or Non-qualified Stock Option
be less than the par value of the Common Stock ($.10). Notwithstanding
the foregoing, to the extent required by the Code, the purchase price
per share under each Non-qualified Stock Option granted to an employee
who is treated as a "covered employee" (as defined in Section 162(m)(3)
of the Code) on the date such Non-Qualified Option is exercised shall
not be less than 100% of the Market Price of the Common Stock on the
date of grant. In the case of an Incentive Stock Option granted to an
employee owning (actually or constructively under Section 424(d) of the
Code), more than 10% of the total combined voting power of all classes
of stock of the Corporation or of a subsidiary (a "10% Stockholder"),
the option price shall not be less than 110% of the Market Price of the
Common Stock on the date of grant.

The "Market Price" of the Common Stock on any day shall be
determined as follows: (i) if the Common Stock is listed on a national
securities exchange or quoted through the NASDAQ National Market System,
the Market Price on any day shall be the average of the high and low
reported Consolidated Trading sales prices, or if no such sale is made
on such day, the average of the closing bid and asked prices reported on
the Consolidated Trading listing for such day; (ii) if the Common Stock
is quoted on the NASDAQ inter-dealer quotation system, the Market Price
on any day shall be the average of the representative bid and asked
prices at the close of business for such day; or (iii) if the Common
Stock is not listed on a national stock exchange or quoted on NASDAQ,
the Market Price on any day shall be the average of the high bid and low
asked prices reported by the National Quotation Bureau, Inc. for such
day. In no event shall the Market Price of a share of Common Stock sub-
ject to an Incentive Stock Option be less than the fair market value as
determined for purposes of Section 422(b)(4) of the Code.

The Option price so determined shall also be applicable in
connection with the exercise of any Tandem Stock Appreciation Rights
granted with respect to such Option.

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<PAGE>

5.4 Limitation on Amount of Incentive Stock Options. In
the case of Incentive Stock Options, the aggregate Market Price
(determined at the time the Incentive Stock Option is granted) of the
Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any optionee during any calendar year
(under all plans of the Corporation and any subsidiary) shall not exceed
$100,000.

5.5 Limitation on Time of Grant. No grant of an Incentive
Stock Option shall be made under the Plan more than ten (10) years after
the date the Plan is approved by stockholders of the Corporation.

5.6 Exercise and Payment. Options may be exercised in
whole or in part. Common Stock purchased upon the exercise of Options
shall be paid for in full at the time of purchase. Such payment shall
be made in cash or, in the discretion of the Committee, through delivery
of shares of Common Stock or a combination of cash and Common Stock, in
accordance with procedures to be established by the Committee. Any
shares so delivered shall be valued at their Market Price on the date of
exercise. Upon receipt of notice of exercise and payment in accordance
with procedures to be established by the Committee, the Corporation or
its agent shall (except as the Committee may otherwise determine on or
prior to the date of grant of the Options being exercised) deliver to
the person exercising such Options (or his or her designee) a
certificate for such shares. In the event that payment for exercised
Options is made through the delivery of shares of Common Stock, the
Committee, in accordance with procedures established by the Committee,
may grant Non-qualified Stock Options ("Restoration Options") to the
person exercising the Option for the purchase of a number of shares
equal to the number of shares underlying the number of shares of Common
Stock delivered to the Corporation in connection with the payment of the
exercise price of the Option and the payment of or surrender of shares
for any withholding taxes due upon such exercise. The purchase price
per share under each Restoration Option shall be the Market Price of the
Common Stock on the date the Restoration Option is granted.

5.7 Term. The term of each Option granted hereunder shall
be determined by the Committee; provided, however, that, notwithstanding
any other provision of the Plan, in no event shall an Incentive Stock
Option be exercisable after ten (10) years from the date it is granted,
or in the case of an Incentive Stock Option granted to a 10%
Stockholder, five (5) years from the date it is granted.

5.8 Rights as a Stockholder. A recipient of Options shall
have no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until the date a stock certificate is
issued to such recipient representing such shares. Except as otherwise
expressly provided in the Plan, no adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date
such stock certificate is issued.

5.9 General Restrictions. Each Option granted under the
Plan shall be subject to the requirement that, if at any time the Board
shall determine, in its discretion, that the listing, registration or
qualification of the shares issuable or transferable upon exercise
thereof upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the
granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall

7
<PAGE>

have been effected or obtained free of any conditions not acceptable to
the Board.

The Board or the Committee may, in connection with the
granting of any Option, require the individual to whom the Option is to
be granted to enter into an agreement with the Corporation stating that
as a condition precedent to each exercise of the Option, in whole or in
part, such individual shall if then required by the Corporation
represent to the Corporation in writing that such exercise is for
investment only and not with a view to distribution, and also setting
forth such other terms and conditions as the Board or the Committee may
prescribe.

5.10 Cancellation of Stock Appreciation Rights. Upon
exercise of all or a portion of an Option, the related Tandem Stock
Appreciation Rights shall be cancelled with respect to an equal number
of shares of Common Stock.

ARTICLE 6.

STOCK APPRECIATION RIGHTS

6.1 Grants of Stock Appreciation Rights. Tandem Stock
Appreciation Rights may be awarded by the Committee in connection with
any Option granted under the Plan, either at the time the Option is
granted or thereafter at any time prior to the exercise, termination or
expiration of the Option. Nontandem Stock Appreciation Rights may also
be granted by the Committee at any time. At the time of grant of
Nontandem Stock Appreciation Rights, the Committee shall specify the
number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the
calculation described in Section 6.4 below. The base price of any
Nontandem Stock Appreciation Rights shall be not less than 100% of the
Market Price of a share of Common Stock on the date of grant. Stock
Appreciation Rights shall be subject to such terms and conditions not
inconsistent with the other provisions of the Plan as the Committee
shall determine.

6.2 Limitations on Exercise. Tandem Stock Appreciation
Rights shall be exercisable only to the extent that the related Option
is exercisable and shall be exercisable only for such period as the
Committee may determine (which period may expire prior to the expiration
date of the related Option). Upon the exercise of all or a portion of
Tandem Stock Appreciation Rights, the related Option shall be cancelled
with respect to an equal number of shares of Common Stock. Shares of
Common Stock subject to Options, or portions thereof, surrendered upon
exercise of Tandem Stock Appreciation Rights shall not be available for
subsequent awards under the Plan. Nontandem Stock Appreciation Rights
shall be exercisable during such period as the Committee shall
determine.

6.3 Surrender or Exchange of Tandem Stock Appreciation
Rights. Tandem Stock Appreciation Rights shall entitle the recipient to
surrender to the Corporation unexercised the related Option, or any
portion thereof, and to receive from the Corporation in exchange
therefor that number of shares of Common Stock having an aggregate
Market Price equal to (A) the excess of (i) the Market Price of one (1)
share of Common Stock as of the date the Tandem Stock Appreciation
Rights are exercised over (ii) the option price per share specified in
such Option, multiplied by (B) the number of shares of Common Stock

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subject to the Option, or portion thereof, which is surrendered. Cash
shall be delivered in lieu of any fractional shares.

6.4 Exercise of Nontandem Stock Appreciation Rights. The
exercise of Nontandem Stock Appreciation Rights shall entitle the
recipient to receive from the Corporation that number of shares of
Common Stock having an aggregate Market Price equal to (A) the excess of
(i) the Market Price of one (1) share of Common Stock as of the date on
which the Nontandem Stock Appreciation Rights are exercised over (ii)
the base price of the shares covered by the Nontandem Stock Appreciation
Rights, multiplied by (B) the number of shares of Common Stock covered
by the Nontandem Stock Appreciation Rights, or the portion thereof being
exercised. Cash shall be delivered in lieu of any fractional shares.

6.5 Settlement of Stock Appreciation Rights. As soon as is
reasonably practicable after the exercise of any Stock Appreciation
Rights, the Corporation shall (i) issue, in the name of the recipient,
stock certificates representing the total number of full shares of
Common Stock to which the recipient is entitled pursuant to Section 6.3
or 6.4 hereof and cash in an amount equal to the Market Price, as of the
date of exercise, of any resulting fractional shares, and (ii) if the
Committee causes the Corporation to elect to settle all or part of its
obligations arising out of the exercise of the Stock Appreciation Rights
in cash pursuant to Section 6.6 hereof, deliver to the recipient an
amount in cash equal to the Market Price, as of the date of exercise, of
the shares of Common Stock it would otherwise be obligated to deliver.

6.6 Cash Settlement. The Committee, in its discretion, may
cause the Corporation to settle all or any part of its obligation
arising out of the exercise of Stock Appreciation Rights by the payment
of cash in lieu of all or part of the shares of Common Stock it would
otherwise be obligated to deliver in an amount equal to the Market Price
of such shares on the date of exercise.

ARTICLE 7.

NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS

No Option or Stock Appreciation Rights may be transferred,
assigned, pledged or hypothecated (whether by operation of law or
otherwise), except as provided by will or the applicable laws of descent
and distribution, and no Option or Stock Appreciation Rights shall be
subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an
Option or Stock Appreciation Rights not specifically permitted herein
shall be null and void and without effect. An Option or Stock
Appreciation Rights may be exercised by the recipient only during his or
her lifetime, or following his or her death pursuant to Section 8.4
hereof.

Notwithstanding anything to the contrary in the preceding
paragraph, the Committee may, in its sole discretion, cause the written
agreement relating to any Non-qualified Stock Options or Stock
Appreciation Rights granted hereunder to provide that the recipient of
such Non-qualified Stock Options or Stock Appreciation Rights may
transfer any of such Non-qualified Stock Options or Stock Appreciation
Rights other than by will or the laws of descent and distribution in any
manner authorized under applicable law; provided, however, that in no
event may the Committee permit any transfers which would cause this Plan
to fail to satisfy the applicable requirements of Rule 16b-3 under the
Act, or would cause any recipient of awards hereunder to fail to be

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entitled to the benefits Rule 16b-3 or other exemptive rules under
Section 16 of the Act or be subject to liability thereunder.

ARTICLE 8.

EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT,
DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT

8.1 General Rule. Except as expressly determined by the
Committee in its sole discretion, no Option or Stock Appreciation Rights
shall be exercisable after 30 days following the recipient's termination
of employment with the Corporation or a subsidiary, unless such
termination of employment occurs by reason of (i) a Relocation Event (as
defined in Section 8.2), (ii) Retirement (as defined in Section 8.3),
(iii) death or (iv) a Special Event (as defined in Section 8.5),
provided that, in the case of a Special Event, the Committee shall have
modified such Option or Stock Appreciation Rights to remain exercisable
as provided in Section 8.5.

Options and Stock Appreciation Rights shall not be affected
by any change of employment so long as the recipient continues to be em-
ployed by either the Corporation or a subsidiary. The Committee may, in
its sole discretion, cause any Option or Stock Appreciation Rights to be
forfeited upon an employee's termination of employment if the employee
was terminated for one (or more) of the following reasons: (i) the
employee's conviction, or plea of guilty or nolo contendere to the
commission of a felony, (ii) the employee's commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the employee
resulting or intended to result, directly or indirectly, in gain or
personal enrichment at the expense of the Corporation or a subsidiary,
(iv) any breach of the employee's fiduciary duties to the Corporation as
an employee or officer, or (v) a violation by the employee of the Toys
"R" Us Ethics Agreement or any other serious violation of a Corporation
policy. It shall be within the sole discretion of the Committee to
determine whether the employee's termination was for one of the
foregoing reasons, and the decision of the Committee shall be final and
conclusive.

8.2 Relocation Event. Options and Stock Appreciation
Rights granted to an employee shall remain outstanding after termination
of such employee's employment with the Corporation or a subsidiary, if
such termination solely occurs by reason of a "Relocation Event," which
shall be deemed to occur if (i) husband and wife are both current
employees of the Corporation, (ii) the Corporation transfers one spouse
to a new location, (iii) the Corporation is unable to offer the other
spouse a position that is substantially comparable to his or her current
position, and (iv) as a result, the other spouse's employment with the
Corporation is terminated and the other spouse, as recipient, holds
outstanding Options or Stock Appreciation Rights.

In case of a Relocation Event, the Options or Stock
Appreciation Rights held by a terminated employee shall be exercisable
for a period equal to the lesser of (i) the period such Options or Stock
Appreciation Rights would be exercisable absent the termination of such
employee, and (ii) the period such Options or Stock Appreciation Rights
would be exercisable if granted to the spouse continuing in the
Corporation's employ on the date originally granted to the terminated
spouse.

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8.3 Disability or Retirement. Except as expressly
provided otherwise in the written agreement relating to any Option or
Stock Appreciation Rights granted under the Plan, in the event of the
Disability or Retirement of a recipient of Options or Stock Appreciation
Rights, the Options or Stock Appreciation Rights which are held by such
recipient on the date of such Disability or Retirement, whether or not
otherwise exercisable on such date, shall be exercisable at any time
until the expiration date of the Options or Stock Appreciation Rights;
provided, however, that any Incentive Stock Option of such recipient
shall no longer be treated as an Incentive Stock Option unless exercised
within three (3) months of the date of such Disability or Retirement (or
within one (1) year in the case of an employee who is "disabled" within
the meaning of Section 22(e)(3) of the Code).

"Disability" shall mean any termination of employment with
the Corporation or a subsidiary because of a long-term or total
disability, as determined by the Committee in its sole discretion.
"Retirement" shall mean a termination of employment with the Corporation
or a subsidiary either (i) on a voluntary basis by a recipient who is at
least 60 years of age and has at least 15 years of service with the
Corporation or a subsidiary or (ii) otherwise with the written consent
of the Committee in its sole discretion. The decision of the Committee
shall be final and conclusive.

8.4 Death. In the event of the death of a recipient of
Options or Stock Appreciation Rights while an employee of the
Corporation or any subsidiary, Options or Stock Appreciation Rights
which are held by such employee at the date of death, whether or not
otherwise exercisable on the date of death, shall be exercisable by the
beneficiary designated by the employee for such purpose (the "Designated
Beneficiary") or if no Designated Beneficiary shall be appointed or if
the Designated Beneficiary shall predecease the employee, by the
employee's personal representatives, heirs or legatees at any time
within three (3) years from the date of death (subject to the limitation
in Section 5.7 hereof), at which time such Options or Stock Appreciation
Rights shall terminate; provided, however, that any Incentive Stock
Option of such recipient shall no longer be treated as an Incentive
Stock Option unless exercised within three (3) months of the date of the
recipient's death.

In the event of the death of a recipient of Options or Stock
Appreciation Rights following a termination of employment due to
Retirement, Disability or a Special Event (as defined in Section 8.5
hereof), if such death occurs before the Options or Stock Appreciation
Rights are exercised, the Options or Stock Appreciation Rights which are
held by such recipient on the date of termination of employment, whether
or not otherwise exercisable on such date, shall be exercisable by such
recipient's Designated Beneficiary, or if no Designated Beneficiary
shall be appointed or if the Designated Beneficiary shall predecease
such recipient, by such recipient's personal representatives, heirs or
legatees to the same extent such Options or Stock Appreciation Rights
were exercisable by the recipient following such termination of
employment.

8.5 Special Event. In the case of a Special Event, the
Committee in its sole discretion may elect to modify all or any lesser
number of any Options or Stock Appreciation Rights held by an employee
terminated as a result of a Special Event which are or are not
exercisable on the date of termination, to provide that any of such
Options or Stock Appreciation Rights may continue to be exercisable for
the term and in the manner specified therein or for such other term and
subject to such other provisions and conditions (including, without

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<PAGE>

limitation, acceleration of the time or times at which any such Options
or Stock Appreciation Rights may be exercised) as the Committee shall
specify. The Committee shall have the sole discretion to determine the
employees to whom and in the manner in which any such modification shall
be made. If the Committee does not elect to modify an Option or Stock
Appreciation Rights, then only Options and Stock Appreciation Rights
currently exercisable at the date of termination shall be exercisable as
provided in the first sentence of Section 8.1 hereof.

A "Special Event" shall mean (i) the sale or other
disposition of a subsidiary or division of the Corporation; (ii) the
closing or discontinuation of a specific operation of the Corporation or
any subsidiary; (iii) the elimination of job categories; or (iv) a
limited program of terminations in connection with a personnel
reorganization or restructuring of the Corporation or any subsidiary of
the Corporation scheduled to be completed on a date certain, provided,
however, that only those employees who meet the terms and conditions as
established by the Board or the Committee in its discretion shall be
eligible to receive accelerated vesting of Options and Stock
Appreciation Rights.

8.6 Leave of Absence. In the case of an employee on an
approved leave of absence, the Options and Stock Appreciation Rights of
such employee shall not be affected unless such leave is longer than 13
weeks. The date of exercisability of any Options or Stock Appreciation
Rights of an employee which are unexercisable at the beginning of an
approved leave of absence lasting longer than 13 weeks shall be
postponed for a period equal to the length of such leave of absence.
Notwithstanding the foregoing, the Committee may, in its sole
discretion, waive in writing any such postponement of the date of
exercisability of any Options or Stock Appreciation Rights due to a
leave of absence.

ARTICLE 9.

RESTRICTED SHARES

9.1 Grant of Restricted Shares. The Committee may from
time to time cause the Corporation to grant Restricted Shares under the
Plan to employees, subject to such restrictions, conditions and other
terms as the Committee may determine.

9.2 Restrictions. At the time a grant of Restricted Shares
is made, the Committee shall establish a period of time (the "Restricted
Period") applicable to such Restricted Shares. Each grant of Restricted
Shares may be subject to a different Restricted Period. The Committee
may, in its sole discretion, at the time a grant is made, prescribe
restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which shall be applicable to all or any portion
of the Restricted Shares. The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any
other restrictions applicable to all or a portion of such Restricted
Shares. None of the Restricted Shares may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of during the
Restricted Period or prior to the satisfaction of any other restrictions
prescribed by the Committee with respect to such Restricted Shares.

9.3 Restricted Stock Certificates. The Corporation shall
issue, in the name of each employee to whom Restricted Shares have been
granted, stock certificates representing the total number of Restricted

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<PAGE>

Shares granted to the employee, as soon as reasonably practicable after
the grant. The Corporation, at the direction of the Committee, shall
hold such certificates, properly endorsed for transfer, for the
employee's benefit until such time as the Restricted Shares are
forfeited to the Corporation, or the restrictions lapse.

9.4 Rights of Holders of Restricted Shares. Holders of
Restricted Shares shall not have the right to vote such shares or the
right to receive any cash dividends with respect to such shares. All
distributions, if any, received by an employee with respect to
Restricted Shares as a result of any stock split, stock distribution, a
combination of shares, or other similar transaction shall be subject to
the restrictions of this Article 9.

9.5 Forfeiture. Any Restricted Shares granted to an
employee pursuant to the Plan shall be forfeited if the employee
terminates employment with the Corporation or its subsidiaries prior to
the expiration or termination of the Restricted Period and the
satisfaction of any other conditions applicable to such Restricted
Shares. Upon such forfeiture, the Restricted Shares that are forfeited
shall be retained in the treasury of the Corporation and available for
subsequent awards under the Plan, unless the Committee directs that such
Restricted Shares be cancelled upon forfeiture. If the employee's
employment terminates as a result of his or her Disability, Retirement
or death, or a Relocation Event or Special Event, Restricted Shares of
such employee shall be forfeited, unless the Committee, in its sole
discretion, shall determine otherwise.

9.6 Delivery of Restricted Shares. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to
the Restricted Shares shall lapse and a stock certificate for the number
of Restricted Shares with respect to which the restrictions have lapsed
shall be delivered, free of all such restrictions, to the employee or
the employee's beneficiary or estate, as the case may be.

ARTICLE 10.

PERFORMANCE SHARES

10.1 Award of Performance Shares. For each Performance
Period (as defined in Section 10.2), Performance Shares may be granted
under the Plan to such employees of the Corporation and its subsidiaries
as the Committee shall determine in its sole discretion. Each
Performance Share shall be deemed to be equivalent to one (1) share of
Common Stock. Performance Shares granted to an employee shall be
credited to an account (a "Performance Share Account") established and
maintained for such employee.

10.2 Performance Period. "Performance Period" shall mean
such period of time as shall be determined by the Committee in its sole
discretion. Different Performance Periods may be established for
different employees receiving Performance Shares. Performance Periods
may run consecutively or concurrently.

10.3 Right to Payment of Performance Shares. With respect
to each award of Performance Shares under the Plan, the Committee shall
specify performance objectives (the "Performance Objectives") which must
be satisfied in order for the employee to vest in the Performance Shares
which have been awarded to him or her for the Performance Period. If
the Performance Objectives established for an employee for the

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<PAGE>

Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of
the Performance Shares have vested. If the Performance Objectives for a
Performance Period are exceeded, the Committee may, in its sole
discretion, grant additional, fully vested Performance Shares to the
employee. The Committee may also determine, in its sole discretion,
that Performance Shares awarded to an employee shall become partially or
fully vested upon the employee's Disability, Retirement or death, or
upon a Relocation Event or Special Event, or upon the termination of the
employee's employment prior to the end of the Performance Period.

10.4 Payment for Performance Shares. As soon as
practicable following the end of a Performance Period, the Committee
shall determine whether the Performance Objectives for the Performance
Period have been achieved (or partially achieved to the extent necessary
to permit partial vesting at the discretion of the Committee pursuant to
Section 10.3). If the Performance Objectives for the Performance Period
have been exceeded, the Committee shall determine whether additional
Performance Shares shall be granted to the employee pursuant to Section
10.3. As soon as reasonably practicable after such determinations, or
at such later date as the Committee shall determine at the time of
grant, the Corporation shall pay to the employee an amount with respect
to each vested Performance Share equal to the Market Price of a share of
Common Stock on such payment date or, if the Committee shall so specify
at the time of grant, an amount equal to (i) the Market Price of a share
of Common Stock on the payment date less (ii) the Market Price of a
share of Common Stock on the date of grant of the Performance Share.
Payment shall be made entirely in cash, entirely in Common Stock
(including Restricted Shares) or in such combination of cash and Common
Stock as the Committee shall determine in its sole discretion.

10.5 Voting and Dividend Rights. Except as provided in
Article 14 hereof, no employee shall be entitled to any voting rights,
to receive any cash dividends, or to have his or her Performance Share
Account credited or increased as a result of any cash dividends or other
distribution with respect to Common Stock. Notwithstanding the
foregoing, within sixty (60) days from the date of payment of a cash
dividend by the Corporation on its shares of Common Stock, the
Committee, in its sole discretion, may credit an employee's Performance
Share Account with additional Performance Shares having an aggregate
Market Price equal to the cash dividend per share paid on the Common
Stock multiplied by the number of Performance Shares credited to his or
her account at the time the cash dividend was declared.

ARTICLE 11.

PERFORMANCE UNITS

11.1 Award of Performance Units. For each Performance
Period (as defined in Section 10.2), Performance Units may be granted
under the Plan to such employees of the Corporation and its subsidiaries
as the Committee shall determine in its sole discretion. The award
agreement covering such Performance Units shall specify a value for each
Performance Unit or shall set forth a formula for determining the value
of each Performance Unit at the time of payment (the "Ending Value").
If necessary to make the calculation of the amount to be paid to the
employee pursuant to Section 11.3, the Committee shall also state in the
award agreement the initial value of each Performance Unit (the "Initial
Value"). Performance Units granted to an employee shall be credited to
an account (a "Performance Unit Account") established and maintained for
such employee.

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<PAGE>

11.2 Right to Payment of Performance Units. With respect
to each award of Performance Units under the Plan, the Committee shall
specify Performance Objectives which must be satisfied in order for the
employee to vest in the Performance Units which have been awarded to him
or her for the Performance Period. If the Performance Objectives
established for an employee for the Performance Period are partially but
not fully met, the Committee may, nonetheless, in its sole discretion,
determine that all or a portion of the Performance Units have vested.
If the Performance Objectives for a Performance Period are exceeded, the
Committee may, in its sole discretion, grant additional, fully vested
Performance Units to the employee. The Committee may, in its sole
discretion, adjust the Performance Objectives or the Initial Value or
Ending Value of any Performance Units to reflect extraordinary events,
such as stock splits, recapitalizations, mergers, combinations,
divestitures, spin-offs and the like. The Committee may also determine,
in its sole discretion, that Performance Units awarded to an employee
shall become partially or fully vested upon the employee's termination
of employment due to Disability, Retirement, death or otherwise, or upon
a Relocation Event or Special Event.

11.3 Payment for Performance Units. As soon as practicable
following the end of a Performance Period, the Committee shall determine
whether the Performance Objectives for the Performance Period have been
achieved (or partially achieved to the extent necessary to permit
partial vesting at the discretion of the Committee pursuant to Section
11.2). If the Performance Objectives for the Performance Period have
been exceeded, the Committee shall determine whether additional
Performance Units shall be granted to the employee pursuant to Section
11.2. As soon as reasonably practicable after such determinations, or
at such later date as the Committee shall determine at the time of
grant, the Corporation shall pay to the employee an amount with respect
to each vested Performance Unit equal to the Ending Value of the
Performance Unit or, if the Committee shall so specify at the time of
grant, an amount equal to (i) the Ending Value of the Performance Unit
less (ii) the Initial Value of the Performance Unit. Payment shall be
made entirely in cash, entirely in Common Stock (including Restricted
Shares) or in such combination of cash and Common Stock as the Committee
shall determine in its sole discretion.

ARTICLE 12.

UNRESTRICTED SHARES

12.1 Award of Unrestricted Shares. The Committee may cause
the Corporation to grant Unrestricted Shares to employees at such time
or times, in such amounts and for such reasons as the Committee, in its
sole discretion, shall determine. No payment shall be required for
Unrestricted Shares.

12.2 Delivery of Unrestricted Shares. The Corporation
shall issue, in the name of each employee to whom Unrestricted Shares
have been granted, stock certificates representing the total number of
Unrestricted Shares granted to the employee, and shall deliver such
certificates to the employee as soon as reasonably practicable after the
date of grant or on such later date as the Committee shall determine at
the time of grant.

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<PAGE>

ARTICLE 13.

TAX OFFSET PAYMENTS

The Committee shall have the authority at the time of any
award under the Plan or anytime thereafter to make Tax Offset Payments
to assist employees in paying income taxes incurred as a result of their
participation in the Plan. The Tax Offset Payments shall be determined
by multiplying a percentage established by the Committee times all or a
portion (as the Committee shall determine) of the taxable income
recognized by an employee upon (i) the exercise of Non-qualified Stock
Options or Stock Appreciation Rights, (ii) the disposition of shares
received upon exercise of Incentive Stock Options, (iii) the lapse of
restrictions on Restricted Shares, (iv) the award of Unrestricted
Shares, or (v) payments for Performance Shares or Performance Units.
The percentage shall be established, from time to time, by the Committee
at that rate which the Committee, in its sole discretion, determines to
be appropriate and in the best interests of the Corporation to assist
employees in paying income taxes incurred as a result of the events
described in the preceding sentence. Tax Offset Payments shall be
subject to the restrictions on transferability applicable to Options and
Stock Appreciation Rights under Article 7.

ARTICLE 14.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION

Notwithstanding any other provision of the Plan, the
Committee may: (i) at any time, make or provide for such adjustments to
the Plan or to the number and class of shares available thereunder or
(ii) at the time of grant of any Options, Stock Appreciation Rights,
Restricted Shares or Performance Shares, provide for such adjustments to
such Options, Stock Appreciation Rights, Restricted Shares or
Performance Shares, in each case, as the Committee shall deem
appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock
splits, recapitalizations, mergers, consolidations, combinations or
exchanges of shares, separations, spin-offs, reorganizations,
liquidations and the like.

ARTICLE 15.

AMENDMENT AND TERMINATION

The Board may suspend, terminate, modify or amend the Plan,
provided that any amendment that would (i) materially increase the
aggregate number of shares which may be issued under the Plan,
(ii) materially increase the benefits accruing to employees under the
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the Plan, shall be subject to the approval of the
Corporation's stockholders, except that any such increase or
modification that may result from adjustments authorized by Article 14
hereof shall not require such stockholder approval. If the Plan is
terminated, the terms of the Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such
termination. No suspension, termination, modification or amendment of
the Plan may, without the consent of the employee to whom an award shall
theretofore have been granted, adversely affect the rights of such
employee under such award.

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<PAGE>

ARTICLE 16.

WRITTEN AGREEMENT

Each award of Options, Stock Appreciation Rights, Restricted
Shares, Performance Shares, Performance Units, Unrestricted Shares and
Tax Offset Payments shall be evidenced by a written agreement containing
such restrictions, terms and conditions, if any, as the Committee may
require. In the event of any conflict between a written agreement and
the Plan, the terms of the Plan shall govern.

ARTICLE 17.

MISCELLANEOUS PROVISIONS

17.1 Tax Withholding. The Corporation shall have the right
to require employees or their beneficiaries or legal representatives to
remit to the Corporation an amount sufficient to satisfy Federal, state
and local withholding tax requirements, or to deduct from all payments
under the Plan, including Tax Offset Payments, amounts sufficient to
satisfy all withholding tax requirements. Whenever payments under the
Plan are to be made to an employee in cash, such payments shall be net
of any amounts sufficient to satisfy all Federal, state and local
withholding tax requirements. The Committee may, in its sole
discretion, permit an employee to satisfy his or her tax withholding
obligation either by (i) surrendering shares owned by the employee or
(ii) having the Corporation withhold from shares otherwise deliverable
to the employee. Shares surrendered or withheld shall be valued at
their Market Price as of the date on which income is required to be
recognized for income tax purposes.

17.2 Compliance With Section 16(b). In the case of
employees who are or may be subject to Section 16 of the Act, it is the
intent of the Corporation that the Plan and any award granted hereunder
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3, so that such persons will be entitled to the
benefits of Rule 16b-3 or other exemptive rules under Section 16 of the
Act and will not be subjected to liability thereunder. If any provision
of the Plan or any award would otherwise conflict with the intent
expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the
extent of any remaining irreconcilable conflict with such intent, such
provision shall be deemed void as applicable to employees who are or may
be subject to Section 16 of the Act.

17.3 Successors. The obligations of the Corporation under
the Plan shall be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization of the
Corporation, or upon any successor corporation or organization
succeeding to all or substantially all of the assets and business of the
Corporation. In the event of any of the foregoing, the Committee may,
at its discretion prior to the consummation of the transaction and
subject to Article 15 hereof, cancel, offer to purchase, exchange,
adjust or modify any outstanding awards, at such time and in such manner
as the Committee deems appropriate and in accordance with applicable
law.

17.4 General Creditor Status. Employees shall have no
right, title, or interest whatsoever in or to any investments which the
Corporation may make to aid it in meeting its obligations under the
Plan. Nothing contained in the Plan, and no action taken pursuant to

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<PAGE>

its provisions, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Corporation and any
employee or beneficiary or legal representative of such employee. To
the extent that any person acquires a right to receive payments from the
Corporation under the Plan, such right shall be no greater than the
right of an unsecured general creditor of the Corporation. All payments
to be made hereunder shall be paid from the general funds of the
Corporation and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts
except as expressly set forth in the Plan.

17.5 No Right to Employment. Nothing in the Plan or in any
written agreement entered into pursuant to Article 16 hereof, nor the
grant of any award, shall confer upon any employee any right to continue
in the employ of the Corporation or a subsidiary or to be entitled to
any remuneration or benefits not set forth in the Plan or such written
agreement or interfere with or limit the right of the Corporation or a
subsidiary to modify the terms of or terminate such employee's
employment at any time.

17.6 Other Plans. Effective upon the adoption of the Plan
by the stockholders, no further awards shall be made under The Toys "R"
Us, Inc. Stock Option Plan, originally adopted on April 7, 1978 and last
amended and restated as of April 22, 1993 (the "Prior Plan").
Thereafter, all awards made under the Prior Plan prior to adoption of
the Plan by the stockholders shall continue in accordance with the terms
of the Prior Plan.

17.7 Notices. Notices required or permitted to be made
under the Plan shall be sufficiently made if personally delivered to the
employee or sent by regular mail addressed (a) to the employee at the
employee's address as set forth in the books and records of the
Corporation or its subsidiaries, or (b) to the Corporation or the
Committee at the principal office of the Corporation clearly marked
"Attention: Stock Option Committee."

17.8 Severability. In the event that any provision of the
Plan shall be held illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

17.9 Governing Law. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of New York.

TOYS "R" US, INC.
1995 EMPLOYEE STOCK OPTION PLAN

ARTICLE 1

ESTABLISHMENT AND PURPOSE

1.1 Establishment and Effective Date. Toys "R" Us, Inc., a Delaware
corporation (the "Company"), hereby establishes a stock option plan to be
known as the Toys "R" Us, Inc. 1995 Employee Stock Option Plan (the "Plan").
The Plan shall become effective as of April 27, 1995.

1.2 Purpose. The purpose of the Plan is to encourage and enable all
eligible employees (subject to such requirements as may be prescribed by the
Management Compensation and Stock Option Committee (the "Committee")) of the
Company and its subsidiaries to acquire a proprietary interest in the Company
through the ownership of the Company's common stock, par value $.10 per share
("Common Stock"). Such ownership will provide such employees with a more
direct stake in the future welfare of the Company and encourage them to remain
with the Company and its subsidiaries. It is also expected that the Plan will
encourage qualified persons to seek and accept employment with the Company and
its subsidiaries.

ARTICLE 2

AWARDS

2.1 Form of Awards. Awards under the Plan may be granted in the form
of stock options ("Options") that are not intended to qualify as incentive
stock options under Section 422 of the Internal Revenue Code.

2.2 Maximum Shares Available. The maximum aggregate number of shares
of Common Stock available for award under the Plan is 15,000,000 subject to
adjustment pursuant to Article 8 hereof. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Company. In the event that prior to the end of the
period during which Options may be granted under the Plan, any Option expires
unexercised or is terminated, surrendered or cancelled without being exercised
in whole for any reason, the shares of Common Stock covered by such Option
shall be available for subsequent awards of Options under the Plan upon such
terms as the Committee may determine. In addition, shares of Common Stock
withheld in payment of taxes relating to Options, and the number of shares of
Common Stock equal to the number of shares surrendered in payment of the
exercise price of Options or taxes relating to Options, shall be available for
subsequent awards of Options under the Plan upon such terms as the Committee
may determine.

2.3 Return of Prior Awards. As a condition to any subsequent award,
the Committee shall have the right, at its discretion, to require employees to
return to the Company Options previously granted under the Plan. Subject to
the provisions of the Plan, such new Option shall be upon such terms and
conditions as are specified by the Committee at the time the new award is
granted.

ARTICLE 3

ADMINISTRATION

3.1 Committee. Awards shall be determined, and the Plan shall be
administered by, the Committee.

<PAGE>

3.3 Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may
deem advisable. The Committee may also delegate to the Chief Executive
Officer of the Company the authority, subject to such terms as the Committee
shall determine, to perform any and all functions as the Committee may
determine. The Committee may also employ attorneys, consultants, accountants
or other professional advisors and shall be entitled to rely upon the advice,
opinions or valuations of any such advisors.

3.4 Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Company, all employees who have received awards under the Plan and
all other interested persons.

3.5 Liability; Indemnification. No member of the Committee, nor the
Chief Executive Officer, or any person to whom ministerial duties have been
delegated, shall be personally liable for any action, interpretation or
determination made with respect to the Plan or Options granted thereunder, and
each member of the Committee and the Chief Executive Officer shall be fully
indemnified and protected by the Company with respect to any liability he or
she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Company's Certificate of Incorporation and Bylaws, as amended
from time to time, or under any agreement between such member, the Chief
Executive Officer and the Company.

ARTICLE 4

ELIGIBILITY

Options may be granted to all employees of the Company or any of its
subsidiaries other than officers of the Company. In determining the employees
to whom Options shall be granted and the number of shares to be covered by
each Option, the Committee shall take into account the nature of the services
rendered by such employees, their present and potential contributions to the
success of the Company and its subsidiaries and such other factors as the
Committee in its sole discretion shall deem relevant.

As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Company owns, directly
or indirectly, 40% or more of the economic interests.

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<PAGE>

ARTICLE 5

STOCK OPTIONS

5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the
Committee shall from time to time determine.

5.2 Option Price. The purchase price per share under each Option
shall be specified by the Committee, but in no event shall it be less than 90%
of the Market Price on the date the Option is granted. In no case, however,
shall the purchase price per share of an Option be less than the par value of
the Common Stock ($.10).

The "Market Price" of the Common Stock on any day shall be determined as
follows: (i) if the Common Stock is listed on a national securities exchange
or quoted through the NASDAQ National Market System, the Market Price on any
day shall be the average of the high and low reported Consolidated Trading
sales prices, or if no such sale is made on such day, the average of the
closing bid and asked prices reported on the Consolidated Trading listing for
such day; (ii) if the Common Stock is quoted on the NASDAQ inter-dealer
quotation system, the Market Price on any day shall be the average of the
representative bid and asked prices at the close of business for such day; or
(iii) if the Common Stock is not listed on a national stock exchange or quoted
on NASDAQ, the Market Price on any day shall be the average of the high bid
and low asked prices reported by the National Quotation Bureau, Inc. for such
day.

5.3 Exercise and Payment. Options may be exercised in whole or in
part. Common Stock purchased upon exercise of Options shall be paid for in
full at the time of purchase. Such payment shall be made in cash or, in the
discretion of the Committee, through delivery of shares of Common Stock or a
combination of cash and Common Stock, in accordance with procedures to be
established by the Committee. Any shares so delivered shall be valued at
their Market Price on the date of exercise.

5.4 Term. The term of each Option granted hereunder shall be
determined by the Committee.

5.5 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable
upon exercise thereof until the date a stock certificate is issued to such
recipient representing such shares. Except as otherwise expressly provided in
the Plan, no adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date such stock certificate is issued.

5.6 General Restrictions. Each Option granted under the Plan shall
be subject to the requirement that, at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of
shares thereunder, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the Board.

The Board or the Committee may, in connection with the granting of any
Option, require the individual to whom the Option is to be granted to enter
into an agreement with the Company stating that as a condition precedent to

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<PAGE>

each exercise of the Option, in whole or in part, such individual shall if
then required by the Company represent to the Company in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Board or the Committee
may prescribe.

ARTICLE 6

NONTRANSFERABILITY OF OPTIONS

No Option may be transferred, assigned, pledged or hypothecated (whether
by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void and without effect. An Option may be
exercised by the recipient only during his or her lifetime, or following his
or her death pursuant to Section 7.4 hereof.

Notwithstanding anything to the contrary in the preceding paragraph, the
Committee may, in its sole discretion, cause the written agreement relating to
any Options granted hereunder to provide that the recipient of such Options
may transfer any such Options other than by will or the laws of descent and
distribution in any manner authorized under applicable law.

ARTICLE 7

EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT,
DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT

7.1 General Rule. Except as expressly determined by the Committee in
its sole discretion, no Option shall be exercisable after 30 days following
the recipient's termination of employment with the Company or a subsidiary,
unless such termination of employment occurs by reason of (i) a Relocation
Event (as defined in Section 7.2), (ii) Retirement (as defined in Section
7.3), (iii) death or (iv) a Special Event (as defined in Section 7.5),
provided that, in the case of a Special Event, the Committee shall have
modified such Option to remain exercisable as provided in Section 7.5.

Options shall not be affected by any change of employment so long as the
recipient continues to be employed by either the Company or a subsidiary. The
Committee may, in its sole discretion, cause any Option to be forfeited upon
an employee's termination of employment if the employee was terminated for one
(or more) of the following reasons: (i) the employee's conviction, or plea of
guilty or nolo contendere to the commission of a felony, (ii) the employee's
commission of any fraud, misappropriation or misconduct which causes
demonstrable injury to the Company or a subsidiary, (iii) an act of dishonesty
by the employee resulting or intended to result, directly or indirectly, in
gain or personal enrichment at the expense of the Company or a subsidiary,
(iv) any breach of the employee's fiduciary duties to the Company as an
employee or officer, or (v) a violation by the employee of the Toys "R" Us
Ethics Agreement or any other serious violation of a Company policy. It shall
be within the sole discretion of the Committee to determine whether the
employee's termination was for one of the foregoing reasons, and the decision
of the Committee shall be final and conclusive.

7.2 Relocation Event. Options granted to an employee shall remain
outstanding after termination of such employee's employment with the Company
or a subsidiary, if such termination solely occurs by reason of a "Relocation
Event," which shall be deemed to occur if (i) husband and wife are both

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current employees of the Company, (ii) the Company transfers one spouse to a
new location, (iii) the Company is unable to offer the other spouse a position
that is substantially comparable to his or her current position, and (iv) as a
result, the other spouse's employment with the Company is terminated and the
other spouse, as recipient, holds outstanding Options.

In case of a Relocation Event, the Options held by a terminated employee
shall be exercisable for a period equal to the lesser of (i) the period such
Options would be exercisable absent the termination of such employee, and (ii)
the period such Options would be exercisable if granted to the spouse
continuing in the Company's employ on the date originally granted to the
terminated spouse.

7.3 Disability or Retirement. Except as expressly provided otherwise
in the written agreement relating to any Option granted under the Plan, in the
event of the Disability or Retirement of a recipient of Options, the Options
which are held by such recipient on the date of such Disability or Retirement,
whether or not otherwise exercisable on such date, shall be exercisable at any
time until the expiration date of the Options.

"Disability" shall mean any termination of employment with the Company
or a subsidiary because of a long-term or total disability, as determined by
the Committee in its sole discretion. "Retirement" shall mean a termination
of employment with the Company or a subsidiary either (i) on a voluntary basis
by a recipient who is at least 60 years of age and who has at least 15 years
of service with the Company or a subsidiary or (ii) otherwise with the written
consent of the Committee in its sole discretion. The decision of the
Committee shall be final and conclusive.

7.4 Death. In the event of the death of a recipient of Options while
an employee of the Company or any subsidiary, Options which are held by such
employee at the date of death, whether or not otherwise exercisable on the
date of death, shall be exercisable by the beneficiary designated by the
employee for such purpose (the "Designated Beneficiary") or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall
predecease the employee, by the employee's personal representatives, heirs or
legatees at any time within three (3) years from the date of death, at which
time such Options shall terminate.

In the event of the death of a recipient of Options following a
termination of employment due to Retirement, Disability or a Special Event (as
defined in Section 7.5 hereof), if such death occurs before the Options are
exercised, the Options which are held by such recipient on the date of
termination of employment, whether or not otherwise exercisable on such date,
shall be exercisable by such recipient's Designated Beneficiary, or if no
Designated Beneficiary shall be appointed or if the Designated Beneficiary
shall predecease such recipient, by such recipient's personal representatives,
heirs or legatees to the same extent such Options were exercisable by the
recipient following such termination of employment.

7.5 Special Event. In the case of a Special Event, the Committee in
its sole discretion may elect to modify all or any lesser number of any
Options held by an employee terminated as a result of a Special Event which
are or are not exercisable on the date of termination, to provide that any of
such Options may continue to be exercisable for the term and in the manner
specified therein or for such other term and subject to such other provisions
and conditions (including, without limitation, acceleration of the time or
times at which any such Options may be exercised) as the Committee shall
specify. The Committee shall have the sole discretion to determine the
employees to whom and in the manner in which any such modification shall be
made. If the Committee does not elect to modify an Option, then only Options

5
<PAGE>

currently exercisable at the date of termination shall be exercisable as
provided in the first sentence of Section 7.1 hereof.

A "Special Event" shall mean (i) the sale or other disposition of a
subsidiary or division of the Company; (ii) the closing or discontinuation of
a specific operation of the Company or any subsidiary; (iii) the elimination
of job categories; or (iv) a limited program of terminations in connection
with a personnel reorganization or restructuring of the Company or any
subsidiary of the Company scheduled to be completed on a date certain;
provided, however, that only those employees who meet the terms and conditions
as established by the Board or the Committee in its discretion shall be
eligible to receive accelerated vesting of Options.

7.6 Leave of Absence. In the case of an employee on an approved
leave of absence, the Options of such employee shall not be affected unless such
leave is longer than 13 weeks. The date of exercisability of any Options of
an employee which are unexercisable at the beginning of an approved leave of
absence lasting longer than 13 weeks shall be postponed for a period equal to
the length of such leave of absence. Notwithstanding the foregoing, the
Committee may, in its sole discretion, waive in writing any such postponement
of the date of exercisability of any Options due to a leave of absence.

ARTICLE 8

ADJUSTMENT UPON CHANGES IN CAPITALIZATION

Notwithstanding any other provision of the Plan, the Committee may: (i)
at any time, make or provide for such adjustments to the Plan or to the number
and class of shares available thereunder or (ii) at the time of grant of any
Options, provide for such adjustments to such Options as the Committee shall
deem appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of
shares, separations, spin-offs, reorganizations, liquidations and the like.

ARTICLE 9

AMENDMENT AND TERMINATION

The Board may suspend, terminate, modify or amend the Plan at any time
and from time to time. Any Plan amendment shall become effective upon the
date stated therein, and shall be binding on the Company, except as otherwise
provided in such amendment. If the Plan is terminated, the terms of the Plan
shall, notwithstanding such termination, continue to apply to awards granted
prior to such termination. No suspension, termination, modification or
amendment of the Plan may, without the consent of the employee to whom an
award shall theretofore have been granted, adversely affect the rights of such
employee under such award.

ARTICLE 10

WRITTEN AGREEMENT

Each award of Options shall be evidenced by a written agreement
containing such restrictions, terms and conditions, if any, as the Committee
may require. In the event of any conflict between a written agreement and the
Plan, the terms of the Plan shall govern.

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ARTICLE 11

MISCELLANEOUS PROVISIONS

11.1 Tax Withholding. The Company shall have the right to require
employees or their beneficiaries or legal representatives to remit to the
Company an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan amounts
sufficient to satisfy all withholding tax requirements. The Committee may, in
its sole discretion, permit an employee to satisfy his or her tax withholding
obligation either by (i) surrendering shares owned by the employee or (ii)
having the Company withhold from shares otherwise deliverable to the employee.
Shares surrendered or withheld shall be valued at their Market Price as of the
date on which income is required to be recognized for income tax purposes.

11.2 Successor. The obligations of the Company under the Plan shall
be binding upon any successor Company or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
Company or organization succeeding to all or substantially all of the assets
and business of the Company. In the event of any of the foregoing, the
Committee may, at its discretion prior to the consummation of the transaction
and subject to Article 9 hereof, cancel, offer to purchase, exchange, adjust
or modify any outstanding awards, at such time and in such manner as the
Committee deems appropriate and in accordance with applicable law.

11.3 General Creditor Status. Employees shall have no right, title,
or interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between
the Company and any employee or beneficiary or legal representative of such
employee. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All payments to
be made hereunder shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts except as expressly set forth in
the Plan.

11.4 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employ of
the Company or a subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such written agreement or interfere with or limit
the right of the Company or a subsidiary to modify the terms of or terminate
such employee's employment at any time.

11.5 Notices. Notices required or permitted to be made under the Plan
shall be sufficiently made if personally delivered to the employee or sent by
regular mail addressed (a) to the employee at the employee's address as set
forth in the books and records of the Company or its subsidiaries, or (b) to
the Company or the Committee at the principal office of the Company clearly
marked "Attention: Management Compensation and Stock Option Committee."

11.6 Severability. In the event that any provision of the Plan shall
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.

11.7 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of New York.

[LETTERHEAD OF SCHULTE ROTH & ZABEL]

November 16, 1995

Toys "R" Us, Inc.
461 From Road
Paramus, New Jersey 07652

Dear Sirs:

We have acted as counsel to Toys "R" Us, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company with the Securities and Exchange Commission (the "Commission") of
a Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
offer and sale of an aggregate of up to 30,000,000 shares (the "Shares") of
common stock, par value $.10 per share, of the Company to certain key
employees of the Company and its subsidiaries pursuant to the exercise of
stock options and other awards (the "Options") granted to such persons under
the Company's 1994 Stock Option and Performance Incentive Plan and 1995
Employee Stock Option Plan.

In this capacity, we have examined originals, telecopies or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and all such agreements, documents, certificates and corporate
or other records as we have deemed necessary or appropriate as a basis for
this opinion.

In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons signing or delivering any
instrument, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
latter documents. As to any facts material to this opinion that were not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company and
others.

Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that the Shares have
been duly authorized and, when issued and delivered to and paid for by the
purchasers thereof in accordance with the terms of the Options, will be
validly issued, fully paid and nonassessable.

<PAGE>

Toys "R" Us, Inc.
November 16, 1995
Page 2

We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectuses which form a part thereof. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission promulgated thereunder.

Very truly yours,

/s/ Schulte Roth & Zabel
Schulte Roth & Zabel

[LETTERHEAD OF ERNST & YOUNG LLP]

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8) and related prospectuses pertaining to the
Toys "R" Us, Inc. 1994 Stock Option and Performance Incentive Plan and the
Toys "R" Us, Inc. 1995 Employee Stock Option Plan and to the incorporation by
reference therein of our report dated March 8, 1995, with respect to the
consolidated financial statements of Toys "R" Us, Inc. and subsidiaries
incorporated by reference in its Annual Report (Form 10-K) for the year ended
January 28, 1995, filed with the Securities and Exchange Commission.

Ernst & Young LLP

/s/ Ernst & Young LLP
Ernst & Young LLP

New York, New York
November 14, 1995