Exhibit 10.32

                                TOYS "R" US, INC.

                  PARTNERSHIP GROUP DEFERRED COMPENSATION PLAN


                             Amended and Restated To
                          Include All Amendment Adopted
                           Through August 21, 2002 and
                       Effective Through November 1, 2002

<PAGE>



                                TABLE OF CONTENTS

                  Partnership Group Deferred Compensation Plan



                                                                            Page
                                                                            ----

1.    Purposes.................................................................1

2.    Definitions..............................................................1

3.    Administration...........................................................3

4.    Participation............................................................4

5.    Deferrals................................................................4

6.    Company Contributions....................................................5

7.    Participant Accounts.....................................................6

8.    Deferral of Certain Stock-Denominated Awards.............................7

9.    Settlement of Participant Accounts.......................................8

10.   Provisions Relating to Section 16 of the Exchange Act
        and Section 162(m) of the Code.........................................9

11.   Statements..............................................................10

12.   Sources of Stock:  Limitation on Amount of Stock-Denominated
        Deferrals.............................................................10

13.   Amendment/Termination...................................................11

14.   General Provisions......................................................11

15.   Effective Date..........................................................13

<PAGE>

                                TOYS "R" US, INC.
                  Partnership Group Deferred Compensation Plan

1.    Purposes.  The purposes of this  Partnership  Group Deferred  Compensation
      Plan (the "Plan") are to provide certain highly  compensated  employees of
      Toys  "R"  Us,  Inc.  (the  "Company")  and  its  subsidiaries   with  the
      opportunity   to  elect  to  defer   receipt  of  specified   portions  of
      compensation,   to  provide  certain  highly  compensated  employees  with
      deferred  compensation  that is dependent upon the employee's  having made
      the  maximum  elective  deferrals  permitted  under the terms of the "TRU"
      Partnership  Employees'  Savings and Profit Sharing Plan, and to have such
      amounts treated as if invested.

2.    Definitions.  In  addition  to the terms  defined in Section 1 above,  the
      following terms used in the Plan shall have the meanings set forth below:

      (a)   "Administrator" shall mean the Administrative Committee set forth in
            Section 3(b) to whom the Committee  has delegated  authority to take
            action under the Plan,  except as may  otherwise  be required  under
            Section 10.

      (b)   "Beneficiary" shall mean any person (which may include trusts and is
            not  limited  to  one  person)  who  has  been   designated  by  the
            Participant   in  his  or  her  most  recent   written   beneficiary
            designation filed with the Company to receive the benefits specified
            under  the  Plan in the  event  of the  Participant's  death.  If no
            Beneficiary  has been  designated  who  survives  the  Participant's
            death, then Beneficiary means any person(s)  entitled by will or, in
            the absence thereof, the laws of descent and distribution to receive
            such benefits.

      (c)   "Change in Status"  shall  mean the merger or  consolidation  of the
            Company with another  corporation or the acquisition of the property
            or stock of the  Company by another  corporation,  or a  separation,
            reorganization  or liquidation of the Company,  in each case only if
            so determined by a majority of the members of the Board of Directors
            of the  Company  who have served on the Board for at least two years
            prior to such event.

      (d)   "Code"  shall mean the Internal  Revenue  Code of 1986,  as amended.
            References to any  provision of the Code or regulation  (including a
            proposed   regulation)   thereunder   shall  include  any  successor
            provisions or regulations.

      (e)   "Committee"   shall  mean  the   Compensation   and   Organizational
            Development  Committee  of the Board of  Directors of the Company or
            any other  directors  of the Company  designated  as the  Committee.
            Except  as  may  be  otherwise  required  under  Section  10  or  by
            applicable  law, any function of the  Committee  may be delegated to
            the Administrator.

      (f)   "Company  Contribution Account" shall mean the account or subaccount
            established   and   maintained   by  the  Company  for  the  Company
            Contributions  allocated to a  Participant,  as described in Section
            7(b).  Company  Contribution

<PAGE>

            Accounts will be  maintained  solely as  bookkeeping  entries by the
            Company to evidence unfounded obligations of the Company.

      (g)   "Deferral Account" shall meant the account or subaccount established
            and  maintained  by  the  Company  for  specified   deferrals  by  a
            Participant,  as  described  in  Section  7(a)  and  8(a).  Deferral
            Accounts will be  maintained  solely as  bookkeeping  entries by the
            Company to evidence unfunded obligations of the Company.

      (h)   "Disability"  shall mean  termination of employment with the Company
            or a  subsidiary  because  of the  Participant's  long term or total
            disability as  determined  by the Committee in its sole  discretion.
            The decision of the Committee shall be final and conclusive.

      (i)   "Eligible   Participant"  shall  mean  an  Eligible  Participant  as
            described in Section 6(b).

      (j)   "Exchange  Act" shall mean the  Securities  Exchange Act of 1934, as
            amended.  References  to any  provision  of the Exchange Act or rule
            thereunder include any successor provisions or rules.

      (k)   "Participant"  shall  mean  any  employee  of  the  Company  or  any
            subsidiary (i) who is designated by the Committee as a member of the
            Partnership  Group,  (ii) who  participates  or makes an election to
            participate in the Plan or whose eligible compensation or awards are
            mandatorily  deferred by the Committee  under the Plan and (iii) who
            receives  compensation  or an award that is subject to income tax in
            the United States.

      (l)   "Participant  Account" shall mean a Participant's  Deferral Account,
            and if applicable, his Company Contribution Account.

      (m)   "Plan Quarter" means the three-month  periods beginning  February 1,
            May 1, August 1 and November 1 of each year.

      (n)   "Plan Year" shall mean the 12-month period ending each January 31.

      (o)   "Retirement"  shall mean a  Participant's  termination of employment
            with the Company or a subsidiary  either (i) on a voluntary basis by
            a  Participant  who is at  least 60 years of age and 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.

      (p)   "Savings Plan" shall mean the "TRU" Partnership  Employees'  Savings
            and Profit Sharing Plan.

      (q)   "Stock" shall mean Toys "R" Us, Inc. Common Stock,  $0.10 par value,
            or any other  equity  securities  of the Company  designated  by the
            Committee.

<PAGE>

      (r)   "Trust" shall mean the trust or trusts established by the Company as
            part of the Plan; provided,  however, that the assets of such trusts
            shall remain  subject to the claims of the general  creditors of the
            Company.

      (s)   "Trustee" shall mean the trustee of the Trust.

      (t)   "Trust  Agreement" shall mean the agreement entered into between the
            Company  and the Trustee to carry out the  purposes of the Plan,  as
            amended or restated from time to time.

      (u)   "Valuation Date" shall mean each business day.

3.    Administration.

      (a)   Committee Authority.  The Committee or the Administrator (subject to
            the ability of the  Committee to restrict the  Administrator)  shall
            administer the Plan in accordance with its terms, and shall have all
            powers necessary to accomplish such purpose, including the power and
            authority to construe and  interpret  the Plan,  to define the terms
            used herein, to prescribe,  amend and rescind rules and regulations,
            agreements, forms, and notices relating to the administration of the
            Plan,  and to make all other  determinations  necessary or advisable
            for the  administration of the Plan. Any actions of the Committee or
            the  Administrator  with respect to the Plan shall be conclusive and
            binding  upon all persons  interested  in the Plan,  except that any
            action of the Administrator  will not be binding upon the Committee.
            The Committee and Administrator may each appoint agents and delegate
            thereto  powers  and  duties  under  the Plan,  except as  otherwise
            limited by the Plan.

      (b)   Administrator.  The  Administrative  Committee shall consist of such
            number of members as shall be determined by the  Committee,  each of
            whom shall be  appointed  by, shall remain in office at the will of,
            and may be removed,  with or without cause,  by the  Committee.  Any
            member of the  Administrative  Committee  may resign at any time. No
            member of the  Administrative  Committee shall be entitled to act on
            or decide any matter relating solely to himself or herself or any of
            his or her rights or  benefits  under the Plan.  The  members of the
            Administrative  Committee shall not receive any special compensation
            for  serving in their  capacities  as members of the  Administrative
            Committee  but  shall  be  reimbursed  for any  reasonable  expenses
            incurred in connection therewith.  No bond or other security need be
            required of the  Administrative  Committee or any member  thereof in
            any jurisdiction.

      (c)   Limitation  of  Liability.  Each  member  of the  Committee  and the
            Administrator  shall be entitled to, in good faith, rely or act upon
            any  report  or  other  information  furnished  to him or her by any
            officer or other  employee  of the  Company or any  subsidiary,  the
            Company's independent certified public accountants, or any executive
            compensation  consultant,   legal  counsel,  or  other  professional
            retained by the Company to assist in the administration of the Plan.
            To the maximum

<PAGE>

            extent  permitted  by  law,  no  member  of  the  Committee  or  the
            Administrator,  nor any person to whom ministerial  duties have been
            delegated,  shall be liable to any person  for any  action  taken or
            omitted in connection with the  interpretation and administration of
            the Plan. To the maximum extent  permitted by law, the Company shall
            indemnify the members of the Committee and the Administrator against
            any and all claims, losses, damages, expenses, including any counsel
            fees and costs,  incurred by them, and any liability,  including any
            amounts paid in settlement with their  approval,  arising from their
            action or failure to act.

4.    Participation.  The Administrator  will notify each employee of his or her
      participation  or eligibility to participate in the Plan not later than 30
      days (or such lesser period as may be  practicable  in the  circumstances)
      prior to any deadline for filing an election form.

5.    Deferrals.  A Participant may elect to defer  compensation or awards which
      may be in the  form of  cash,  Stock,  Stock-denominated  awards  or other
      property  to be  received  from the  Company  or a  subsidiary,  including
      salary,  annual incentive award, long term award, shares received on stock
      option exercise and  compensation  payable under other plans and programs,
      employment  agreements  or other  arrangements,  or  otherwise,  as may be
      provided under the terms of such plans,  programs and  arrangements  or as
      designated by the Committee;  provided,  however,  that a Participant  may
      defer,  with respect to a given year,  receipt of only that portion of the
      Participant's  salary,  annual  incentive award,  long term award,  shares
      received on stock option  exercise and  compensation  payable  under other
      plans and  programs,  employment  agreements  or other  arrangements  that
      exceeds  the amount  necessary  to satisfy  FICA,  Medicare  and all other
      applicable withholding taxes imposed on the wages of such Participant from
      the Company and its subsidiaries.  In addition to such limitation, and any
      terms and  conditions  of  deferral  set forth  under  plans,  programs or
      arrangements from which receipt of compensation or awards is deferred, the
      Committee may impose  limitations on the amounts  permitted to be deferred
      and other  terms and  conditions  on  deferrals  under the Plan.  Any such
      limitations,  and other terms and  conditions  of  deferral,  shall be set
      forth in the rules relating to the Plan or election forms, other forms, or
      instructions  published  by the  Committee  and/or the  Administrator.  In
      addition, the Committee may mandate deferral of payment in accordance with
      the Plan of all or a portion of the  compensation or awards to be received
      under plans, programs and arrangements of the Company.

      (a)   Elections. Once an election form, properly completed, is received by
            the  Administrator,  the  elections  of  the  Participant  shall  be
            irrevocable;  provided,  however,  that  the  Committee  and/or  the
            Administrator may, in its discretion,  permit a Participant to elect
            a further  deferral  of amounts  credited  to a Deferral  Account by
            filing  a  later  election  form;   provided  further  that,  unless
            otherwise  approved by the Committee,  any election to further defer
            amounts credited to a Deferral Account must be made at least one (1)
            year prior to the date such amounts would otherwise be payable.

      (b)   Date of  Election.  An  election  to defer  compensation  or  awards
            hereunder  must be received by the  Administrator  prior to the date
            specified by the  Administrator;  provided,  however,  that,  unless
            otherwise  approved by the  Committee,  any

<PAGE>

            elections  to defer (i) salary  shall be made  prior to the  service
            period   during   which  such  salary  is  earned,   (ii)  Stock  or
            Stock-denominated awards shall be made at least six (6) months prior
            to the  exercise  of  Stock  options  or one (1)  year  prior to the
            vesting  of any  Stock or  Stock-denominated  awards,  whichever  is
            later,  and (iii) incentive  awards shall be made prior to first day
            of the Plan Quarter with  respect to which such  incentive  award is
            made. Under no circumstances may a Participant defer compensation or
            awards  to  which  the  Participant  has  attained,  at the  time of
            deferral,  a legally  enforceable  right to current  receipt of such
            compensation or awards.

6.    Company Contributions.

      (a)   For  each  Plan  Year  in  which  a   Participant   is  an  Eligible
            Participant,  the  Administrator  shall credit to the  Participant's
            Company  Contribution  Account an amount  equal to a percent of such
            Participant's Compensation determined by the Committee.

      (b)   For purposes of this Section 6, an Eligible  Participant  for a Plan
            Year is a Participant:

            (i)   who is a Highly Compensated  Employee (as defined in Article I
                  of the Savings  Plan) under the Savings Plan for the plan year
                  of the Savings Plan that coincides with the Plan Year;

            (ii)  who elected to make the maximum Savings Contribution under the
                  terms of the Savings Plan for such plan year;

            (iii) whose  Savings  Contributions  under  the  Savings  Plan  were
                  suspended for all or a portion of such plan year under Section
                  3.06(d) of the Savings Plan (respecting  suspension of Savings
                  Contributions in order to satisfy Section  401(k)(3)(A)(ii) of
                  the Code) or a portion of whose Matching  Contributions  under
                  the    Savings    Plan   were    forfeited    under    Section
                  3.06(a)(2)(A)(iii) of the Savings Plan (respecting  forfeiture
                  of   Matching   Contributions   made  in   respect  to  excess
                  contributions under the Savings Plan);

            (iv)  who elected pursuant to Section 5 hereof to defer an amount at
                  least equal to the Savings  Contributions that would have been
                  made to the Savings Plan but for the suspension referred to in
                  Section 6(b)(iii) hereof or, if applicable,  at least equal to
                  the  Savings   Contributions  that  were  distributed  to  the
                  Participant  under Section  3.06(a)(2)(A)(iii)  of the Savings
                  Plan (respecting  distribution of excess  contributions  under
                  the Savings Plan); and

            (v)   who is in the employ (within the meaning of Section 3.02(a) of
                  the  Savings  Plan)  of  the  Company  (or a  subsidiary  that
                  participates in this Plan) on the last day of the Plan Year.

<PAGE>

      (c)   For purposes of this Section 6, Compensation  means compensation (i)
            referred  to in Section  3.02(a)  of the  Savings  Plan  (respecting
            Matching  Contributions),  and  (ii)  that is not in  excess  of the
            Social  Security  Integration  Level as  defined in Article I of the
            Savings Plan.

7.    Participant  Accounts.  The following provisions will apply to Participant
      Accounts other than those established under Section 8.

      (a)   Establishment of Deferral  Accounts;  Crediting of Amounts Deferred.
            One  or  more  Deferral   Accounts  will  be  established  for  each
            Participant,  as  determined  by the  Administrator.  The  amount of
            compensation  or  awards  deferred  with  respect  to each  Deferral
            Account  will be  credited  to such  Account as of the date on which
            such  amounts  would have been paid to the  Participant  but for the
            Participant's  election to defer receipt  hereunder.  The amounts of
            hypothetical  income and  appreciation  and depreciation in value of
            such  account will be credited and debited to such Account from time
            to time.  Unless  otherwise  determined by the  Administrator,  cash
            amounts credited to a Deferral Account shall be deemed invested in a
            hypothetical investment as of the date of deferral.

      (b)   Establishment of Company  Contribution  Account. One or more Company
            Contribution   Accounts  will  be  established   for  each  Eligible
            Participant,  as  determined  by  the  Administrator.   The  amounts
            provided  in Section 6 will be  credited  to such  Account as of the
            date  on  which  such  amounts  would  have  been  allocated  to the
            Participant's  Account under the Savings Plan but for the suspension
            or forfeiture  referred to in Section 6(b)(iii) hereof.  The amounts
            of hypothetical income and appreciation and depreciation in value of
            such  Account will be credited and debited to such Account from time
            to time.  Unless  otherwise  determined by the  Administrator,  cash
            amounts credited to a Company  Contribution  Account shall be deemed
            invested in a hypothetical investment as of the date of deferral.

      (c)   Hypothetical  Investment  Vehicles.  Subject  to the  provisions  of
            Section 7(d) and 10, amounts credited to a Participant Account shall
            be deemed to be invested in one or more  investment  vehicles as may
            be specified from time to time by the Administrator.  Subject to the
            authority of the  Administrator  to disregard the  directions of any
            Participant,   each   affected   Participant   shall  be  given  the
            opportunity to express a preference  regarding the allocation of his
            or  her  Participant  Account  among  such  hypothetical  investment
            vehicles.   The   Administrator   may  change  or  discontinue   any
            hypothetical  investment  vehicle  available  under  the Plan in its
            discretion;  provided, however, that subject to the authority of the
            Administrator to disregard the directions of any  Participant,  each
            affected  Participant  shall be given the  opportunity  to express a
            preference  regarding  the  reallocation  of his or her  Participant
            Account deemed invested in the discontinued investment vehicle among
            the  other   hypothetical   investment   vehicles,   including   any
            replacement vehicle.

<PAGE>

      (d)   Allocation and Reallocation of Hypothetical Investments.  Subject to
            the rules established by the Administrator, a Participant may revise
            his or her preference  regarding the allocation of amounts  credited
            to his or her  Participant  Account as of any Valuation Date but not
            more often than once in any  calendar  quarter,  by filing  with the
            Administrator  a  notice,  in such form as may be  specified  by the
            Administrator, not later than 15 days preceding such Valuation Date.
            The Committee or the Administrator may, in its discretion,  restrict
            allocation or reallocation by specified  Participants into or out of
            specified  investments  vehicles or specify minimum amounts that may
            be allocated or reallocated.

      (e)   Trusts. The Committee may, in its discretion,  establish one or more
            Trusts  (including  sub-accounts  under such  Trusts),  and  deposit
            therein amounts of cash,  Stock, or other property not exceeding the
            amount of the Company's  obligations with respect to a Participant's
            Participant  Account established under this Section 7. In such case,
            the amounts of hypothetical income and appreciation and depreciation
            in value of such  Participant  Account  shall be equal to the actual
            income on, and  appreciation and depreciation of, the assets in such
            Trusts,  reduced by charges  against such assets to reflect all or a
            portion,  if any, as specified by the  Committee,  of the  Company's
            cost of funds (as determined by the Company)  resulting from payment
            of taxes on the income on and realized  appreciation of trust assets
            prior to the time the  Company is entitled  to a tax  deduction  for
            payment of the Participant Account. Other provisions of this Section
            7  notwithstanding,  the timing of allocations and  reallocations of
            assets in such a Participant  Account,  and the investment  vehicles
            available with respect to such Participant Account, may be varied to
            reflect the timing of actual investments of the assets of such Trust
            and the actual investments available to such Trust.

8.    Deferral of Certain Stock-Denominated Awards.

      (a)   Establishment.  Subject to any terms and  conditions  imposed by the
            Committee,  Participants may elect to defer,  under the Plan, awards
            denominated in Stock specified by the Committee or Administrator. In
            connection  with  such  deferral  of a  Stock-denominated  award,  a
            Deferral  Account shall be established  for such  Participant  and a
            Trust  (including  sub-accounts  under  such  Trust)  will  also  be
            established,  on terms  determined by the Committee,  into which the
            Company  shall  deposit a number of shares of Stock,  rounded to the
            nearest whole share,  equal to the number of shares  subject to such
            deferred award. In such case, the amounts of hypothetical income and
            appreciation  and  depreciation  in value of such  Deferral  Account
            shall  be  equal to the  actual  income  on,  and  appreciation  and
            depreciation of, the assets in the Trust,  including charges against
            such assets to reflect all or a portion, if any, as specified by the
            Committee,  of the  Company's  cost of funds (as  determined  by the
            Company)  resulting  from  payment  of  taxes on the  income  on and
            realized  appreciation of Trust assets prior to the time the Company
            is entitled to a tax deduction for payment of the Deferral Account.

<PAGE>

      (b)   Investment of Trust Assets.  The Trustee of each Trust,  which shall
            be  a  party  not  under  the  control  of  the  Company,  shall  be
            authorized,    upon   written   instructions   received   from   the
            Administrator or investment  manager appointed by the Administrator,
            to invest and  reinvest the assets of the Trust in  accordance  with
            the applicable  Trust  Agreement,  including the disposition of such
            Stock and  reinvestment  of the  proceeds in one or more  investment
            vehicles  designated by the Administrator;  provided that, except as
            may be permitted  under Section 8(c), no such  disposition  shall be
            made until the date that the shares of Stock subject to the deferred
            award  are  no  longer  subject  to a  risk  of  forfeiture  by  the
            Participant.  In no event  shall a  Participant  who is  subject  to
            Section  16(a)  of  the  Exchange  Act  have  the  right  to  direct
            investments of amounts credited to such Deferral Account.

      (c)   Stock-for-Stock  Exercise.  In  accordance  with  procedures  to  be
            established  by the Committee  from time to time, a Participant  may
            submit a request to the  Administrator  to surrender Stock allocated
            to his or her  Deferral  Account  to pay the  purchase  price of any
            stock  options  of the  Company  granted  to the  Participant  under
            another plan, program or arrangement;  provided,  however,  that the
            number of shares of Stock  otherwise  deliverable to the Participant
            upon the exercise of such  options  equal to the number of shares of
            Stock  surrendered  shall  automatically be deposited into the Trust
            and  remain  subject  to the  terms and  conditions  of the Stock so
            surrendered.

9.    Settlement of Participant Accounts.

      (a)   Form  of  Payment.   The  Company   shall  settle  a   Participant's
            Participant  Account,  and discharge all of its payment  obligations
            under the Plan,  by  payment  of cash or, in the  discretion  of the
            Committee,  by delivery of other  assets  having a fair market value
            equal to the amount of cash otherwise  payable:  provided,  however,
            that Stock may be delivered in settlement  of any  Stock-denominated
            award  deferred  under the Plan if such award has been  continuously
            deemed  invested in Stock under the Plan,  except that Stock may not
            be delivered to a  Participant  who is then subject to Section 16(a)
            of the Exchange Act.

      (b)   Forfeited  Shares.  To the extent that Stock (i) is  deposited  in a
            Trust  pursuant to Section 7 in connection  with a deferral of Stock
            or a Stock-denominated award under another plan, program, employment
            agreement or other arrangement and (ii) is forfeited pursuant to the
            terms  of  such  plan,  program,   agreement  or  arrangement,   the
            Participant  shall not be  entitled  to the value of such  Stock and
            other  property  related  thereto  (including  without   limitation,
            dividends and distributions thereon). Any Stock or Stock-denominated
            awards  and  other  property  forfeited  shall  be  returned  to the
            Company.

      (c)   Timing of Payments.  Payments in settlement of a Participant Account
            shall  be made  as  soon as  practicable  after  the  date or  dates
            (including  upon the  occurrence of specified  events),  and in such
            number of installments, as may be directed by the Participant in his
            or her election relating to such Participant  Account, or

<PAGE>

            earlier in the event of termination of employment by the Participant
            in the following circumstances:

            (i)   In the event of  termination  of employment  for reasons other
                  than Retirement or Disability,  a single  lump-sum  payment in
                  settlement of any Participant Account (including a Participant
                  Account with respect to which one or more installment payments
                  have  previously  been  made)  shall  be made as  promptly  as
                  practicable   following  the  next  Valuation   Date,   unless
                  otherwise determined by the Administrator; or

            (ii)  In the event of a Change in Status,  payments in settlement of
                  any Participant  Account (including a Participant Account with
                  respect  to  which  one  or  more  installment  payments  have
                  previously  been  made)  shall  be made  within  fifteen  (15)
                  business days following such Change in Status.

            Notwithstanding  anything  to the  contrary  in  this  Section  9(c)
            however,   payments  in  settlement  of  a   Participant's   Company
            Contribution  Account  may not be made  prior  to the  Participant's
            termination of employment.

      (d)   Financial Emergency and Other Payments. Other provisions of the Plan
            (except   Section   10)   notwithstanding,   if,  upon  the  written
            application  of a  Participant,  the Committee  determines  that the
            Participant has a financial  emergency of such a substantial  nature
            and  beyond  the  individual's   control  that  payment  of  amounts
            previously  deferred under the Plan is warranted,  the Committee may
            direct  the  payment to the  Participant  of all or a portion of the
            balance  of a  Deferral  Account  and the  time and  manner  of such
            payment,  and the  Committee  may  direct  such  payments  in  other
            circumstances  if, in the exercise of its independent  judgment,  it
            determines  that  circumstances   beyond  the  individual's  control
            warrant such action.

10.   Provisions  Relating to Section 16 of the Exchange Act and Section  162(m)
      of the Code.

      (a)   Compliance  with  Section 16. With respect to a  Participant  who is
            then subject to the reporting  requirements  of Section 16(a) of the
            Exchange Act:

            (i)   Any function of the Committee  under the Plan relating to such
                  Participant shall be performed solely by the Committee, if and
                  to the  extent  required  to  ensure  the  availability  of an
                  exemption  under Rule 16b-3 or exclusion  under Rule  16a-1(c)
                  for such Participant with respect to the Plan.

            (ii)  The  provisions  of  Section  7(d)  notwithstanding,  no  such
                  Participant may reallocate  amounts  credited to a Participant
                  Account into or out of a Stock-denominated or Stock Equivalent
                  investment vehicle.

            (iii) To the extent necessary so that  transactions by and rights of
                  such a Participant  under the Plan are excluded from reporting
                  under Rule

<PAGE>

                  16a-1(c)  (unless  acknowledged  by the Participant in writing
                  with respect to a specified  transaction  not to be excluded),
                  if any  provision of this Plan or any rule,  election  form or
                  other  form,   or   instruction   does  not  comply  with  the
                  requirements   of  such  Rule  as  then   applicable  to  such
                  transaction or right under the Plan,  such provision  shall be
                  construed or deemed amended to the extent necessary to conform
                  to such requirements.

      (b)   Compliance with Code Section 162(m). It is the intent of the Company
            that any compensation  (including any award) deferred under the Plan
            by a person who is,  with  respect to the year of payout,  deemed by
            the Committee to be a "covered  employee" within the meaning of Code
            Section  162(m)  and  regulations  thereunder,   which  compensation
            constitutes either "qualified performance-based compensation" within
            the meaning of Code Section  162(m) and  regulations  thereunder  or
            compensation   not   otherwise   subject   to  the   limitation   on
            deductibility under Section 162(m) and regulations thereunder, shall
            not, as a result of deferral  hereunder,  become  compensation  with
            respect to which the  Company in fact would not be entitled to a tax
            deduction under Code Section 162(m).  Accordingly,  unless otherwise
            determined by the  Committee,  if any  compensation  would become so
            disqualified under Section 162(m) as a result of deferral hereunder,
            the terms of such deferral  shall be  automatically  modified to the
            extent necessary to ensure that the  compensation  would not, at the
            time of payout, be so disqualified.

11.   Statements.  The Administrator will furnish statements to each Participant
      reflecting the amount credited to a Participant's Participant Accounts and
      transactions therein not less frequently than once each calendar year.

12.   Sources of Stock: Limitation on Amount of Stock-Denominated  Deferrals. If
      Stock is deposited  under the Plan in a rabbi trust  pursuant to Section 8
      in connection with a deferral of a  Stock-denominated  award under another
      plan, program, employment agreement or other arrangement that provides for
      the issuance of shares,  the shares so  deposited  shall be deemed to have
      originated,  and shall be counted  against the number of shares  reserved,
      under  such  other  plan,  program  or  arrangement.  The  number of Stock
      equivalents  credited to such Deferral  Accounts  shall in no event exceed
      the number of shares  subject  to the  Stock-denominated  awards  deferred
      under the Plan.  The number of Stock  equivalents  otherwise  credited  to
      Deferral  Accounts of Participants who are subject to Section 16(a) of the
      Exchange  Act shall not exceed 10% of the Stock  outstanding  at any time.
      Stock  actually  delivered in  settlement  of Deferral  Accounts  shall be
      originally  issued  shares or treasury  shares,  in the  discretion of the
      Committee.

13.   Amendment/Termination.  The Committee may, with prospective or retroactive
      effect, amend, alter, suspend,  discontinue,  or terminate the Plan at any
      time  without  the  consent of  Participants,  stockholders,  or any other
      person; provided,  however, that, without the consent of a Participant, no
      such  action  shall  materially  and  adversely  affect the rights of such
      Participant  with respect to any rights to payment of amounts  credited to
      such Participant's Participant Account. Notwithstanding the foregoing, the
      Committee may, in

<PAGE>

      its sole discretion, terminate the Plan and distribute to Participants the
      amounts credited to their Participant Accounts.

14.   General Provisions.

      (a)   Limits on  Transfer  of  Awards.  Other  than by will or the laws of
            descent and distribution, no right, title or interest of any kind in
            the Plan shall be transferable or assignable by a Participant or his
            or  her  Beneficiary  or be  subject  to  alienation,  anticipation,
            encumbrance, garnishment, attachment, levy, execution or other legal
            or  equitable  process,   nor  subject  to  the  debts,   contracts,
            liabilities or  engagements,  or torts of any  Participant or his or
            her Beneficiary.  Any attempt to alienate,  sell, transfer,  assign,
            pledge, garnish, attach or take any other action subject to legal or
            equitable process or encumber or dispose of any interest in the Plan
            shall be void.

      (b)   Receipt and Release.  Payments (in any form) to any  Participant  or
            Beneficiary in accordance  with the provisions of the Plan shall, to
            the extent thereof,  be in full satisfaction of all claims under the
            Plan against the Company or any subsidiary  thereof,  the Committee,
            or  the  Administrator,  and  the  Administrator  may  require  such
            Participant  or  Beneficiary,  as a condition to such  payments,  to
            execute a receipt and release to such effect.

      (c)   Unfunded Status of Awards;  Creation of Trusts. The Plan is intended
            to  constitute  an  "unfunded"  plan for deferred  compensation  and
            Participants  shall  rely  solely on the  unsecured  promise  of the
            Company for payment  hereunder.  With respect to any payment not yet
            made to a Participant under the Plan,  nothing contained in the Plan
            shall give a Participant any rights that are greater than those of a
            general unsecured creditor of the Company;  provided,  however, that
            the Committee  may  authorize the creation of Trusts,  including but
            not limited to the Trusts referred to in Sections 7 and 8 hereof, or
            make other arrangements to meet the Company's  obligations under the
            Plan,  which Trusts or other  arrangements  shall be consistent with
            the  "unfunded"  status of the Plan unless the  Committee  otherwise
            determines with the consent of each affected Participant.

      (d)   Compliance. A Participant in the Plan shall have no right to receive
            payment (in any form) with respect to his or her Participant Account
            until legal and contractual  obligations of the Company  relating to
            establishment of the Plan and the making of such payments shall have
            been complied  with in full.  In addition,  the Company shall impose
            such restrictions on Stock delivered to a Participant  hereunder and
            any other interest  constituting a security as it may deem advisable
            in order to comply with the Securities Act of 1933, as amended,  the
            requirements  of the New York  Stock  Exchange  or any  other  stock
            exchange or automated  quotation system upon which the Stock is then
            listed or quoted,  any state  securities  laws  applicable to such a
            transfer,   any   provision   of  the   Company's   Certificate   of
            Incorporation or Bylaws,  or any other law,  regulation,  or binding
            contract to which the Company is a party.

<PAGE>

      (e)   Other  Participant  Rights.  No  Participant  shall  have any of the
            rights or privileges of a stockholder of the Company under the Plan,
            including as a result of the crediting of Stock equivalents or other
            amounts  to a Deferral  Account,  or the  creation  of any Trust and
            deposit of such Stock  therein,  except at such time as Stock may be
            actually delivered in settlement of a Deferral Account. No provision
            of  the  Plan  or  transaction   hereunder  shall  confer  upon  any
            Participant  any right to be employed by the Company or a subsidiary
            thereof, or to interfere in any way with the right of the Company or
            a subsidiary to increase or decrease the amount of any  compensation
            payable to such Participant. Subject to the limitations set forth in
            Section 14(a) hereof, the Plan shall inure to the benefit of, and be
            binding upon, the parties hereto and their successors and assigns.

      (f)   Tax Withholding. The Company and any subsidiary shall have the right
            to  deduct  from  amounts  otherwise  payable  in  settlement  of  a
            Participant  Account any sums that federal,  state, local or foreign
            tax law requires to be withheld with respect to such payment. Shares
            may be  withheld  to  satisfy  such  obligations  in any case  where
            taxation  would be imposed upon the delivery of shares,  except that
            shares  issued or  delivered  under any  plan,  program,  employment
            agreement or other  arrangement  may be withheld  only in accordance
            with the terms of such plan, program,  employment agreement or other
            arrangement and any applicable  rules,  regulations,  or resolutions
            thereunder.

      (g)   Governing  Law. The validity,  construction,  and effect of the Plan
            and  any  rules  and  regulations  relating  to the  Plan  shall  be
            determined  in  accordance  with the laws of the  State of New York,
            without  giving  effect to  principles  of  conflicts  of laws,  and
            applicable  provisions of the Delaware  General  Corporation Law and
            federal law.

      (h)   Limitation.  A Participant and his or her  Beneficiary  shall assume
            all risk in connection with any decrease in value of the Participant
            Account and neither the Company, the Committee nor the Administrator
            shall be liable or responsible therefor.

      (i)   Construction. The captions and numbers preceding the sections of the
            Plan are included solely as a matter of convenience of reference and
            are not to be taken as  limiting  or  extending  the  meaning of the
            terms and provisions of the Plan. Whenever  appropriate,  words used
            in the singular  shall  include the plural or the plural may be read
            as the singular.

      (j)   Severability.  In the event that any  provision of the Plan shall be
            declared  illegal or invalid  for any  reason,  said  illegality  or
            invalidity shall not affect the remaining provisions of the Plan but
            shall  be fully  severable,  and the Plan  shall  be  construed  and
            enforced  as if said  illegal  or invalid  provision  had never been
            inserted herein.

      (k)   Status.  The  establishment  and  maintenance of, or allocations and
            credits to, the  Participant  Account of any  Participant  shall not
            vest in any Participant  any right,  title or interest in and to any
            Plan  assets  or  benefits  except at the time or times and

<PAGE>

            upon the terms and conditions and to the extent  expressly set forth
            in the Plan and in accordance with the terms of the Trust.

15.   Effective Date. The Plan shall be effective as of May 17, 1995.



                                            TOYS R US, INC.


______________________________              ___________________________________
Date