EXECUTION COPY



















                           RETENTION AGREEMENT

                                 BETWEEN

                            TOYS "R" US, INC.

                                   AND

                            ROBERT C. NAKASONE

                               DATED AS OF


                            February 25, 1998











                                                   NAKASONE AGREEMENT





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                                                          EXECUTION COPY

                           TOYS "R" US, INC.
                          RETENTION AGREEMENT


             AGREEMENT (this "Agreement"), by and between Toys "R" Us, 
Inc., a Delaware corporation (the "Company"), and Robert C. Nakasone 
(the "Executive"), dated as of February 25, 1998.  Capitalized terms 
used in this Agreement and in Exhibit A hereto that are not defined in 
the operative provisions shall have the meanings ascribed to them on 
Exhibit B hereto.

             1.   Employment Period.  The Company hereby agrees to 
continue to employ the Executive and the Executive hereby agrees to 
remain in the employ of the Company subject to the terms and conditions 
of this Agreement, for the Employment Period.  The term "Employment 
Period" means the period commencing on the date hereof and ending on the 
second anniversary of such date as automatically extended for successive 
additional one-year periods unless, at least six months prior to the 
scheduled expiration of the Employment Period, the Company, based upon a 
determination by the Board, shall give notice to the Executive that the 
Employment Period shall not be so extended.

            2.   Terms of Employment.  (a)  Position.  (i)  Commencing 
on the date hereof and for the remainder of the Employment Period, the 
Executive shall serve as the Chief Executive Officer of the Company.  
The Executive shall be based in Northeastern New Jersey.

                         (ii)   During the Employment Period, and 
excluding any periods of vacation and sick leave to which the Executive 
is entitled, the Executive agrees to devote his full time during normal 
business hours to the business and affairs of the Company and to use his 
best efforts to perform faithfully and efficiently such 
responsibilities.  During the Employment Period, the Executive may, so 
long as such activities do not interfere with the performance of his 
responsibilities to the Company in accordance with this Agreement, 
continue the corporate directorships on which the Executive serves, if 
any, as of the date hereof and such other corporate directorships as are 
consented to by the Committee.  It is expressly understood and agreed 
that to the extent that any such activities have been conducted by the 
Executive with the knowledge of the Company prior to a Change of 
Control, the continued conduct of such activities (or the conduct of 
activities similar in nature and scope thereto) subsequent to a Change 
of Control shall not thereafter be deemed to violate this Agreement.



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                  (b)   Compensation.  (i)   Base Salary.  During the 
Employment Period, the Executive shall receive his Annual Base Salary, 
which will be paid in accordance with the Company's regular payroll 
policies as in effect from time to time.  
                       (ii)   Incentive Bonus.  The Executive shall also 
be eligible, for each fiscal year ending during the Employment Period, 
to receive (A) an annual incentive bonus, in accordance with targets 
established by the Committee, of one-hundred percent (100%) of Annual 
Base Salary at the target and up to two-hundred percent (200%) of Annual 
Base Salary and (B) long-term incentive awards pursuant to the Company's 
incentive Plans and subject to the terms thereof at a level commensurate 
with his current grants and his current position.  Each such incentive 
bonus shall be paid in accordance with the Company's incentive Plans.
                       (iii)   Participation in Other Plans.  During the 
Employment Period, the Executive shall be eligible to participate in all 
other Plans at a level commensurate with his participation in such Plans 
as of the date hereof, including continued vesting of outstanding option 
grants and profits shares.
                       (iv)   Stock Units.   As further inducement for 
the Executive to enter into this Agreement and to continue in the employ 
of the Company, the Company has granted to the Executive stock units 
contingent on performance and future service, pursuant to the Stock Unit 
Agreement executed and delivered by the Company on the date hereof in 
the form attached as Annex A hereto.
                       (v)   Partnership Plan Units.  During the 
Employment Period the Executive shall be granted units under the 
Partnership Plan in accordance with targets established by the Committee 
in an amount equal to forty percent (40%) of the actual Annual Base 
Salary at such target.

3.   Termination of Employment.

            (a)   Notice of Termination.  Any termination by the Company 
for Cause, or by the Executive for Good Reason, shall be communicated by 
Notice of Termination to the other party hereto given in accordance with 
this Agreement.  The failure by the Executive or the Company to set 
forth in the Notice of Termination any fact or circumstance that 
contributes to a showing of Good Reason or Cause shall not waive any 
right of the Executive or the Company, respectively, hereunder or 
preclude the Executive or the Company, respectively, from asserting such 
fact or circumstance in enforcing the Executive's or the Company's 
rights hereunder.


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            (b)   Termination for Death, Disability or Retirement.  the 
Executive's employment shall terminate upon his death, Disability or 
Retirement during the Employment Period.  In the event of such 
termination:

                      (i)   the Company shall make a lump sum cash 
payment to the Executive (or, in the event that termination results from 
the death of the Executive, to his estate) within 30 days after the Date 
of Termination in an amount equal to the sum of:

                             (A)   the Executive's pro rata Annual Base 
Salary payable through the Date of Termination to the extent not already 
paid; 

                             (B)   the targeted amount of the 
Executive's annual bonus, long-term incentive awards and Partnership 
Plan Units that would have been awarded with respect to the fiscal year 
in which the Date of Termination occurs, in each case absent the 
termination of the Executive's employment, prorated for the portion of 
such fiscal year through the Date of Termination taking into account the 
number of complete months during such fiscal year through the Date of 
Termination; 

                             (C)   the Executive's actual earned annual 
bonus and long-term incentive awards and Partnership Plan Units for any 
completed fiscal year or period not theretofore paid; and

                             (D)   the account balance provided for 
under the Plans, including the Company's supplemental executive 
retirement plan, which shall be fully vested; and 

                        (ii)   (1)  all unvested options held by the 
Executive shall vest on the Date of Termination, (2)  all unvested 
profit shares held by the Executive or for the benefit of the Executive 
by a grantor trust established by the Company shall vest on the Date of 
Termination and shall be promptly delivered to the Executive or his 
estate, (3) any other unvested equity based award (including, without 
limitation, restricted stock and stock units) held by the Executive 
shall vest on the Date of Termination and shall be delivered to the 
Executive, or in the event of termination due to his death, the 
Executive's estate, entirely in the form of Common Stock, $.10 par value 
per share ("Common Stock") of the Company immediately upon termination 
in the event of the Executive's death, or, in the event of termination 
due to Retirement or Disability upon the later of May 1, 2002; or the 
expiration of the period that the Executive's activities are restricted 
under Section 10(c), subject to his compliance with the terms of this 
Agreement through such date, (4) any options held by the Executive may 


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be exercised until the expiration date of such options and (5) the 
Executive shall not be entitled to any additional grants of any stock 
options, restricted stock, or other equity based or long-term awards; 
and 

                        (iii)  the Executive (and his spouse and 
dependent children) will be entitled to continuation of health benefits 
under the Plans at a level commensurate with the Executive's current 
position and if the Executive (or his spouse and dependent children upon 
his death) elects to receive such health benefits, the Executive shall 
pay the premium charged to former employees of the Company pursuant to 
Section 4980B of the Code; provided, that the Company can amend or 
otherwise alter the Plans to provide benefits to the Executive that are 
no less than those commensurate with the Executive's current position; 
provided, that to the extent such benefits cannot be provided to the 
Executive under the terms of the Plans or the Plans cannot be so amended 
in any manner not adverse to the Company, the Company shall pay the 
Executive, on an after-tax basis, an amount necessary for the Executive 
to acquire such benefits from an independent insurance carrier; and 
provided further, that the obligations of the Company under this clause 
(iii) shall be terminated if, at any time after the Date of Termination, 
the Executive is employed by or is otherwise affiliated with a party 
that offers comparable health benefits to the Executive.  

                 (c)   Resignation by the Executive Without Good Reason.  
If the Executive shall resign his employment with the Company without 
Good Reason, the Executive shall provide the Company with a Notice of 
Termination at least six (6) months prior to the Date of Termination.  
In the event of such resignation:

                       (i)   the Company shall make a lump sum cash 
payment to the Executive within 30 days after the Date of Termination in 
an amount equal to the sum of: 

                             (A)   the Executive's pro rata Annual Base 
Salary payable through the Date of Termination to the extent not already 
paid; 

                             (B)   the Executive's actual earned annual 
incentive awards for any completed fiscal year or period not theretofore 
paid or deferred unless the Committee determines not to permit the 
cancellation of such deferral; and 

                             (C)   the account balance provided for 
under the Plans, including the Company's supplemental executive 
retirement plan, which shall be fully vested; and


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                       (ii)   (1)  all unvested options held by the 
Executive that otherwise do not vest on the Date of Termination shall 
continue to vest in accordance with their terms for two years after the 
Date of Termination, and all remaining unvested options held by the 
Executive shall be forfeited at the end of such two-year period, (2) all 
unvested profit shares held by the Executive or for the benefit of the 
Executive by a grantor trust established by the Company that otherwise 
do not vest on the Date of Termination shall continue to vest in 
accordance with their terms for two years after the Date of Termination 
at the rate of 20% per annum and all remaining unvested profit shares 
shall be forfeited at the end of such two-year period provided that, if 
permitted by the terms of any such trust, any unvested profit shares 
shall continue to be held by such grantor trust until such profit shares 
vest pursuant to this clause (ii) and any such unvested profit share 
that would otherwise vest in accordance with this clause (ii) but that 
is not permitted to be so held shall vest immediately, (3) any other 
unvested equity based award (including, without limitation, restricted 
stock and stock units) held by the Executive shall be forfeited, (4) any 
other vested equity award (including, without limitation, restricted 
stock and stock units) shall be delivered to the Executive upon the 
later of May 1, 2002; or the expiration of the period that the 
Executive's activities are restricted under Sections 10(c) and (d), 
subject to his compliance with the terms of this Agreement through such 
date, (5) any options held by the Executive that are vested on the Date 
of Termination or vest thereafter pursuant to this clause (ii) may be 
exercised until the earlier of (x) 30 days after the twenty-four month 
anniversary date of the Date of Termination and (y) the expiration date 
of such options, and (6) the Executive shall not be entitled to any 
additional grants of any stock options, restricted stock or, other 
equity based or long-term awards; and 

                        (iii)   the Executive, his spouse and dependent 
children will be entitled to the benefits set forth under Section 
3(b)(iii).

                 (d)   Termination by the Company for Cause.  If the 
Executive's employment shall be terminated for Cause during the 
Employment Period, the Employment Period shall terminate without further 
obligations to the Executive other than the obligation to pay him all 
payments and benefits due, in accordance with the Company's Plans 
through the Date of Termination.  All stock units held by the Executive, 
whether or not vested, shall be forfeited on the Date of Termination.





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                 (e)   Termination by the Company Without Cause or By 
the Executive for Good Reason.  If the Executive's employment shall be 
terminated by the Company without Cause during the Employment Period, or 
by the Executive for Good Reason, then: 

                       (i)   the Company shall make a lump sum cash 
payment to the Executive within 30 days after the Date of Termination of 
(x) the Executive's pro rata Annual Base Salary payable through the Date 
of Termination to the extent not theretofore paid, (y) the targeted 
amount of the Executive's annual incentive bonus and long-term incentive 
awards and Partnership Plan Units that would have been payable with 
respect to the fiscal year in which the Date of Termination occurs in 
each case absent the termination of the Executive's employment, prorated 
for the portion of such fiscal year through the Date of Termination 
taking into account the number of complete months during such fiscal 
year through the Date of Termination and (z) the Executive's actual 
earned annual incentive bonus or long-term incentive awards and 
Partnership Plan Units for any completed fiscal year or period not 
theretofore paid or deferred; 

                       (ii)   the Company shall pay to the Executive in 
equal installments, made at least monthly, over the twenty-four months 
following the Date of Termination, an aggregate amount equal to (1) two 
times the Executive's Annual Base Salary in effect on the Date of 
Termination, (2) two times the targeted amount of the annual incentive 
bonus that would have been paid or accrued to the Executive with respect 
to the Company's fiscal year in which such Date of Termination occurs 
and (3) two times the targeted amount of the long-term incentive award 
and Partnership Plan Units that would have been paid or accrued to the 
Executive with respect to such fiscal year; 

                       (iii)   the Company shall continue to provide, in 
the manner and timing provided for in the Plans (other than as provided 
in clauses (i), (ii), (iv) and (v) of this Section 3(e)), the benefits 
provided under the Plans that the Executive would receive if the 
Executive's employment continued for two years after the Date of 
Termination, assuming for this purpose that the Executive's compensation 
is the amount paid pursuant to clause (ii) above, and the Executive 
shall be fully vested in any account balance and all other benefits 
under the Plans; provided, however, that the benefits provided under 
this clause (iii) shall be limited to the amounts permitted by law or as 
would otherwise not potentially adversely impact on the tax 
qualification of any Plans; provided, further, that if such benefits may 
not be continued under the Plans, the Company shall pay to the Executive 
an amount equal to the Company's cost had such benefits been continued. 




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                       (iv)   (1)   all unvested options held by the 
Executive shall vest on the Date of Termination, (2) all unvested profit 
shares held by the Executive or for the benefit of the Executive by a 
grantor trust established by the Company shall vest on the Date of 
Termination, (3) any other unvested equity based award (including, 
without limitation, restricted stock and stock units) held by the 
Executive shall vest on the two year anniversary date of the Date of 
Termination on a pro rata basis determined by a fraction, the numerator 
of which is the number of months elapsed from the grant of such equity 
award through the Date of Termination plus the twenty-four months after 
the Date of Termination and the denominator of which is the total number 
of months in the vesting period for such award, and shall be delivered 
to the Executive entirely in the form of Common Stock upon the later of 
May 1, 2002 and the expiration of the period of that the Executive's 
activities are restricted under Section 10(c), subject to compliance 
with this Agreement through such date, (4) any options held by the 
Executive that are vested on the Date of Termination or vest thereafter 
pursuant to this clause (iv) may be exercised until the expiration date 
of such options and (5) the Executive shall not be entitled to any 
additional grants of any stock options, restricted stock, or other 
equity based or long-term awards; and 

                       (v)   the Executive, his spouse and dependent 
children shall be entitled to the benefits set forth under Section 
3(b)(iii).

          4.   Obligations of the Company Relating to a Change of 
Control.  

                 (a)   Notwithstanding any provision of this Agreement 
or any Plan, in no event shall any compensation or benefits, 
individually or in the aggregate, to which the Executive would be 
entitled be less favorable for the two years following a Change of 
Control than to which the Executive would have been entitled based upon 
the most favorable of the Company's Plans in effect for the Executive at 
any time during the 120-day period immediately preceding such Change of 
Control.

                 (b)   If the Executive's employment shall have been 
terminated by the Company (other than for Cause) or by the Executive for 
Good Reason during a Change of Control Period:






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                       (i)   the Company shall make a lump sum cash 
payment to the Executive within 30 days after the Date of Termination in 
an amount equal to the sum of the amounts provided by Sections 3(e)(i), 
(ii) and (iii) except that all references therein to "two times" shall 
be "three times"; and  

                       (ii)  (1) all unvested options held by the 
Executive shall vest on the Date of Termination, (2) all unvested profit 
shares held by the Executive or for his benefit by a grantor trust shall 
vest on the Date of Termination, (3) any other unvested equity awards 
(including, without limitation, restricted stock and stock units) held 
by the Executive shall vest immediately and be promptly delivered to the 
Executive entirely in the form of Common Stock, (4) any options held by 
the Executive may be exercised until the expiration date of the options, 
and (5) the Executive shall not be entitled to any additional grants of 
any stock options, restricted stock, and other equity based or long term 
awards; and

                       (iii)  the Executive, his spouse and dependent 
children shall be entitled to the benefits set forth in Section 
3(b)(iii). 

           5.   Release Agreement.  The benefits pursuant to Section 3 
are contingent upon the Executive (i) executing a Separation and Release 
Agreement (the "Release Agreement") upon or after any Date of 
Termination, a copy of which is attached as Exhibit A to this Agreement 
and (ii) not revoking or challenging the enforceability of the Release 
Agreement or this Agreement.

           6.   Offset.  The Company shall have the right to offset the 
amounts required to be paid to the Executive under this Agreement 
against any amounts owed by the Executive to the Company, and nothing in 
this Agreement shall prevent the Company from pursuing any other 
available remedies against the Executive.

           7.   Nonexclusivity of Rights.  Nothing in this Agreement 
shall prevent or limit the Executive's continuing or future 
participation in any Plan for which the Executive may qualify nor shall 
anything herein limit or otherwise affect such rights as the Executive 
may have under any contract or agreement with the Company.  Amounts that 
are vested benefits or that the Executive is otherwise entitled to 
receive under any Plan, contract or agreement with the Company at or 
subsequent to the Date of Termination shall be payable in accordance 
with such Plan, or contract or agreement except as explicitly modified 
by this Agreement.



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           8.   Full Settlement; Legal Fees.  

                  (a)  No Obligation to Mitigate.  In no event shall the 
Executive be obligated to seek other employment or take any other action 
by way of mitigation of the amounts payable to the Executive under any 
of the provisions of this Agreement, and, except as specifically 
provided in this Agreement, such amounts shall not be reduced whether or 
not the Executive obtains other employment. 

                  (b)   Expenses of Contests.  (i) The following shall 
apply for any dispute arising hereunder, under the Release Agreement or 
under the Stock Unit Agreement prior to a Change of Control:  Other than 
with respect to claims brought by the Executive against, or defenses by 
the Executive of any claim of, the Company with respect to this 
Agreement, the Release Agreement or the Stock Unit Agreement that were 
determined to have been made or asserted by the Executive in bad faith 
or frivolously, the Company agrees to pay all reasonable legal and 
professional fees and expenses that the Executive may reasonably incur 
as a result of any contest by the Executive, by the Company or others of 
the validity or enforceability of, or liability under, any provision of 
this Agreement, the Release Agreement or the Stock Unit Agreement 
(including as a result of any contest by the Executive about the amount 
of any payment pursuant to this Agreement), plus in each case interest 
on any delayed payment at the applicable Federal rate provided for in 
Section 7872(f)(2)(A) of the Code or any successor Section of the Code.  

                        (ii)   The following shall apply for any dispute 
arising hereunder, under the Release Agreement or under the Stock Unit 
Agreement upon or following a Change of Control:  The Company agrees to 
advance to the Executive all reasonable legal and professional fees and 
expenses that the Executive may reasonably incur as a result of any 
contest by the Executive, by the Company or others of the validity or 
enforceability of, or liability under, any provision of this Agreement, 
the Release Agreement or the Stock Unit Agreement (including as a result 
of any contest by the Executive about the amount of any payment pursuant 
to this Agreement), plus,  in each case, interest on any delayed payment 
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of 
the Code or any successor Section of the Code.

                        (iii)   the Executive shall reimburse the 
Company for its reasonable legal and professional fees and expenses, and 
in the case of advances made pursuant to paragraph (ii) above, shall 
refund the Company the amount of such advances, to the extent there is a 
final determination that  such fees, expenses or advances relate to 
claims brought by the Executive against, or defenses by the Executive of 
any claim of, the Company with respect to this Agreement, the Release 
Agreement or the Stock Unit Agreement that were determined to have been 
made or asserted by the Executive in bad faith or frivolously.

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             9.   Certain Additional Payments by the Company.   Anything 
in this Agreement to the contrary notwithstanding, in the event that any 
actual or constructive payment or distribution by the Company to or for 
the benefit of the Executive (whether paid or payable or distributed or 
distributable pursuant to the terms of this Agreement, the Stock Unit 
Agreement or otherwise) is subject to the excise tax imposed by Section 
4999 of the Code or any successor provision of the Code (the "Excise 
Tax"), then the Company shall make the payments described on Exhibit C 
hereto.

            10.   Restrictions and Obligations of the Executive.  (a)   
Consideration for Restrictions and Covenants.  The parties hereto 
acknowledge and agree that the principal consideration for the agreement 
to make the payments provided in Sections 3 and 4 hereof from the 
Company to the Executive and the grant to the Executive of the stock 
units of the Company as set forth in Section 2 hereof is the Executive's 
compliance with the undertakings set forth in this Section 10.  
Specifically, the Executive agrees to comply with the provisions of this 
Section 10 irrespective of whether the Executive is entitled to receive 
any payments under Section 3 or 4 of this Agreement.

                  (b)   Confidentiality.  The confidential and 
proprietary information and in any material respect trade secrets of the 
Company are among its most valuable assets, including but not limited 
to, its customer and vendor lists, database, computer programs, 
frameworks, models, its marketing programs, its sales, financial, 
marketing, training and technical information, and any other 
information, whether communicated orally, electronically, in writing or 
in other tangible forms concerning how the Company creates, develops, 
acquires or maintains its products and marketing plans, targets its 
potential customers and operates its retail and other businesses.  The 
Company has invested, and continues to invest, considerable amounts of 
time and money in obtaining and developing the goodwill of its 
customers, its other external relationships, its data systems and data 
bases, and all the information described above (hereinafter collectively 
referred to as "Confidential Information"), and any misappropriation or 
unauthorized disclosure of Confidential Information in any form, would 
irreparably harm the Company.  The Executive shall hold in a fiduciary 
capacity for the benefit of the Company all Confidential Information 
relating to the Company and its business, which shall have been obtained 
by the Executive during the Executive's employment by the Company and 
which shall not be or become public knowledge (other than by acts by the 
Executive or representatives of the Executive in violation of this 
Agreement).  After termination of the Executive's employment with the 
Company, the Executive shall not, without the prior written consent of 
the Company or as may otherwise be required by law or legal process, 
communicate, divulge or use any such information, knowledge or data to 
anyone other than the Company and those designated by it.

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                 (c)   Non-Solicitation or Hire.  During the Employment 
Period and for a three-year period following the Date of Termination, 
the Executive shall not, directly or indirectly (i) employ or seek to 
employ any person who is at the Date of Termination, or was at any time 
within the six-month period preceding the Date of Termination, an 
officer, general manager or director or equivalent or more senior level 
employee of the Company or any of its subsidiaries or otherwise solicit, 
encourage, cause or induce any such employee of the Company or any of 
its subsidiaries to terminate such employee's employment with the 
Company or such subsidiary for the employment of another company 
(including for this purpose the contracting with any person who was an 
independent contractor (excluding consultant) of the Company during such 
period) or (ii) take any action that would interfere with the 
relationship of the Company or its subsidiaries with their suppliers and 
franchisees without, in either case, the prior written consent of the 
Company's Board of Directors, or engage in any other action or business 
that would have a material adverse effect on the Company; provided, 
however, that if the Executive terminates the Agreement for "Good 
Reason" or the Company terminates the Executive's employment hereunder 
without Cause, the obligations under this Section 10(c) shall survive 
for only a two-year period following the Date of Termination.

                 (d)   Non-Competition and Consulting.  (i)  During the 
Employment Period and for a two-year period following the Date of 
Termination, the Executive shall not, directly or indirectly:

                       (x)   engage in any managerial, administrative, 
advisory, consulting, operational or sales activities in a Restricted 
Business anywhere in the Restricted Area, including, without limitation, 
as a director or partner of such Restricted Business, or

                       (y)   organize, establish, operate, own, manage, 
control or have a direct or indirect investment or ownership interest in 
a Restricted Business or in any corporation, partnership (limited or 
general), limited liability company enterprise or other business entity 
that engages in a Restricted Business anywhere in the Restricted Area; 
and

                       (z)   interfere with, disrupt or attempt to 
disrupt the relationship, contractual or otherwise, between the Company 
and any customer, supplier, lessor, lessee, employee, consultant, 
research partner or investor of the Company.





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                 (e)   Litigation Assistance.  The Executive agrees to 
cooperate with the Company and its counsel in regard to any litigation 
presently pending or subsequently initiated involving matters of which 
the Executive has particular knowledge as a result of your employment 
with the Company.  Such cooperation shall consist of the Executive 
making himself available at reasonable times for consultation with 
officers of the Company and its counsel and for depositions or other 
similar activity should the occasion arise.  The Executive shall not 
receive any additional compensation for rendering such assistance.  
Reasonable travel costs and out-of-pocket expenses in connection with 
such cooperation shall be reimbursed by the Company.  The obligations 
under the Section 10(e) shall survive for a five-year period following 
the Date of Termination.

                  (f)   Exceptions.   Sections 10(c) and (d) shall not 
bind the Executive during any period following the termination of the 
Executive's employment if there has been a Change of Control, 
irrespective of whether the Change of Control occurs before or after the 
Date of Termination.

                  (g)   Permitted Investments.   Nothing contained in 
Section 10(d) shall prohibit or otherwise restrict the Executive from 
acquiring or owning, directly or indirectly, for passive investment 
purposes not intended to circumvent this Agreement, securities of any 
entity engaged, directly or indirectly, in a Restricted Business if 
either (i) such entity is a public entity and such Executive (A) is not 
a controlling Person of, or a member of a group that controls, such 
entity and (B) owns, directly or indirectly, no more than 3% of any 
class of equity securities of such entity or (ii) such entity is not a 
public entity and the Executive (A) is not a controlling Person of, or a 
member of a group that controls, such entity and (B) does not own, 
directly or indirectly, more than 1% of any class of equity securities 
of such entity.

                  (h)   Definitions.  For purposes of this Section 10:

                        (i)   "Restricted Business" means, (A) if the 
Executive's employment is terminated for Cause or if the Executive 
terminates his employment other than for Good Reason, any retail store 
or mail order business or any business, in each case if it is involved 
in the manufacture or marketing of toys, juvenile or baby products, 
juvenile furniture or children's clothing or any other business in which 
the Company may be engaged on the Date of Termination, and (B) if the 
Executive's employment is terminated for any other reason, Restricted 
Business shall be limited to any such entity if it derives at least 10% 
or more of its revenues in the aggregate from such products and/or 
business in its most recent fiscal year.


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                        (ii)   "Restricted Area" means any country in 
which the Company or its subsidiaries owns or franchises any retail 
store operations or otherwise has operations on the Date of Termination.

                 (i)   Relief.  The parties hereto hereby acknowledge 
that the provisions of this Section 10 are reasonable and necessary for 
the protection of the Company and its subsidiaries.  In addition, the 
Executive further acknowledges that the Company and its subsidiaries 
will be irrevocably damaged if such covenants are not specifically 
enforced.  Accordingly, the Executive agrees that, in addition to any 
other relief to which the Company may be entitled, the Company will be 
entitled to seek and obtain injunctive relief (without the requirement 
of any bond) from a court of competent jurisdiction for the purposes of 
restraining the Executive from any actual or threatened breach of such 
covenants.  In addition, without limiting the Company's remedies for any 
breach of any restriction on the Executive set forth in Section 10, 
except as required by law, the Executive shall not be entitled to any 
payments set forth in Section 3 or 4 hereof if the Executive willfully 
breaches in any material respect any of the covenants applicable to the 
Executive contained in this Section 10, the Executive will immediately 
return to the Company such payments previously received upon such a 
breach, and, in the event of such breach, the Company will have no 
obligation to pay any of the amounts that remain payable by the Company 
under Section 3 or 4.

             11.   Successors.  (a)  This Agreement is personal to the 
Executive and without the prior written consent of the Company shall not 
be assignable by the Executive otherwise than by will or the laws of 
descent and distribution.  This Agreement shall inure to the benefit of 
and be enforceable by the Executive's legal representatives.

                  (b)   This Agreement shall inure to the benefit of and 
be binding upon the Company and its successors and assigns.

                  (c)   The Company will, within thirty days after a 
Change of Control, and the Company will require any successor (whether 
direct or indirect, by purchase, merger, consolidation or otherwise) to 
all or substantially all of the business and/or assets of the Company 
within thirty days after any such event of succession to, assume 
expressly and agree to perform this Agreement in the same manner and to 
the same extent that the Company would be required to perform it if no 
such succession had taken place.  As used in this Agreement, "Company" 
shall mean the Company as hereinbefore defined and any successor to its 
business and/or assets as aforesaid that assumes and agrees to perform 
this Agreement by operation of law, or otherwise.



                            <Page 14 of 33>
<PAGE>



             12.   Miscellaneous.  (a)  Governing Law.  This Agreement 
shall be governed by and construed in accordance with the laws of the 
State of New Jersey, without reference to principles of conflict of 
laws.  

                  (b)   Captions.  The captions of this Agreement are 
not part of the provisions hereof and shall have no force or effect.  

                  (c)   Amendment.  This Agreement may not be amended or 
modified otherwise than by a written agreement executed by the parties 
hereto or their respective successors and legal representatives.

                  (d)   Notices.  All notices and other communications 
hereunder shall be in writing and shall be given by hand delivery to the 
other party or by registered or certified mail, return receipt 
requested, postage prepaid, addressed as follows:

                        (i)   If to the Executive, to the address 
on file with the Company; and

                        (ii)   If to the Company, to it at Toys 
"R" Us, Inc., 461 From Road, Paramus, New Jersey 07652, Attention: 
Senior Vice President - Human Resources;

or to such other address as either party shall have furnished to the 
other in writing in accordance herewith.  Notice and communications 
shall be effective when actually received by the addressee.

                  (e)   Assistance to Company.  At all times during and 
after the Employment Period and at the Company's expense for significant 
out-of-pocket expenses actually and reasonably incurred by the Executive 
in connection therewith, the Executive shall provide reasonable 
assistance to the Company in the collection of information and documents 
and shall make the Executive available when reasonably requested by the 
Company in connection with claims or actions brought by or against third 
parties or investigations by governmental agencies based upon events or 
circumstances concerning the Executive's duties, responsibilities and 
authority during the Employment Period.










                             <Page 15 of 33>
<PAGE>



                  (f)   Severability of Provisions.  Each of the 
sections contained in this Agreement shall be enforceable independently 
of every other section in this Agreement, and the invalidity or 
nonenforceability of any section shall not invalidate or render 
unenforceable any other section contained in this Agreement.  The 
Executive acknowledges that the restrictive covenants contained in 
Section 10 are a condition of this Agreement and are reasonable and 
valid in geographical and temporal scope and in all other respects.  If 
any court or arbitrator determines that any of the covenants in Section 
10, or any part of any of them, is invalid or unenforceable, the 
remainder of such covenants and parts thereof shall not thereby be 
affected and shall be given full effect, without regard to the invalid 
portion.  If any court or arbitrator determines that any of such 
covenants, or any part thereof, is invalid or unenforceable because of 
the geographic or temporal scope of such provision, such court or 
arbitrator shall reduce such scope to the minimum extent necessary to 
make such covenants valid and enforceable.

                  (g)   Withholding.  The Company may withhold from any 
amounts payable under this Agreement such Federal, state, local or 
foreign taxes as shall be required to be withheld pursuant to any 
applicable law or regulation.

                  (h)   Waiver.  The Executive's or the Company's 
failure to insist upon strict compliance with any provision hereof or 
any other provision of this Agreement or the failure to assert any right 
the Executive or the Company may have hereunder shall not be deemed to 
be a waiver of such provision or right or any other provision or right 
of this Agreement.

                  (i)   Arbitration.  Except as otherwise provided for 
herein, any controversy arising under, out of, in connection with, or 
relating to, this Agreement, and any amendment hereof, or the breach 
hereof or thereof, shall be determined and settled by arbitration in New 
York, New York, by a three person panel mutually agreed upon, or in the 
event of a disagreement as to the selection of the arbitrators, in 
accordance with the Employment Dispute Resolution Rules of the American 
Arbitration Association.  Any award rendered therein shall specify the 
findings of fact of the arbitrator or arbitrators and the reasons of 
such award, with the reference to and reliance on relevant law.  Any 
such award shall be final and binding on each and all of the parties 
thereto and their personal representatives, and judgment may be entered 
thereon in any court having jurisdiction thereof.




                            <Page 16 of 33>
<PAGE>



            IN WITNESS WHEREOF, the Executive has hereunto set the 
Executive's hand and the Company has caused these presents to be 
executed in its name on its behalf, all as of the day and year first 
above written.

                                    ROBERT C. NAKASONE


                                    /s/ Robert C. Nakasone


                                    TOYS "R" US


                                    By:  /s/ Roger C. Gaston
                                         Name: Roger C. Gaston
                                         Title: Sr. V.P. - Human Resources































                            <Page 17 of 33>
<PAGE>



                                                              EXHIBIT A

                    SEPARATION AND RELEASE AGREEMENT

            This Separation and Release Agreement ("Agreement") is 
entered into as of this __ day of ___________________________, 19__, 
between TOYS "R" US, INC., a Delaware corporation, and any successor 
thereto (collectively, the "Company") and Robert C. Nakasone (the 
"Executive").

            the Executive and the Company agree as follows:

            1.   The employment relationship between the Executive and 
the Company terminated on __________________________________ (the 
"Termination Date").

            2.   In accordance with the Executive's Retention Agreement 
(the "Retention Agreement"), the Company has agreed to pay the Executive 
certain payments and to make certain benefits available after the Date 
of Termination.

            3.   In consideration of the above, the sufficiency of which 
the Executive hereby acknowledges, the Executive, on behalf of the 
Executive and the Executive's heirs, executors and assigns, hereby 
releases and forever discharges the Company and its members, parents, 
affiliates, subsidiaries, divisions, any and all current and former 
directors, officers, employees, agents, and contractors and their heirs 
and assigns, and any and all employee pension benefit or welfare benefit 
plans of the Company, including current and former trustees and 
administrators of such employee pension benefit and welfare benefit 
plans, from all claims, charges, or demands, in law or in equity, 
whether known or unknown, which may have existed or which may now exist 
from the beginning of time to the date of this letter agreement, 
including, without limitation, any claims the Executive may have arising 
from or relating to the Executive's employment or termination from 
employment with the Company, including a release of any rights or claims 
the Executive may have under Title VII of the Civil Rights Act of 1964, 
as amended, and the Civil Rights Act of 1991 (which prohibit 
discrimination in employment based upon race, color, sex, religion, and 
national origin); the Americans with Disabilities Act of 1990, as 
amended, and the Rehabilitation Act of 1973 (which prohibit 
discrimination based upon disability); the Family and Medical Leave Act 
of 1993 (which prohibits discrimination based on requesting or taking a 
family or medical leave); Section 1981 of the Civil Rights Act of 1866 
(which prohibits discrimination based upon race); Section 1985(3) of the 



                             <Page 18 of 33>
<PAGE>



Civil Rights Act of 1871 (which prohibits conspiracies to discriminate); 
the Employee Retirement Income Security Act of 1974, as amended (which 
prohibits discrimination with regard to benefits); any other federal, 
state or local laws against discrimination; or any other federal, state, 
or local statute, or common law relating to employment, wages, hours, or 
any other terms and conditions of employment.  This includes a release 
by the Executive of any claims for wrongful discharge, breach of 
contract, torts or any other claims in any way related to the 
Executive's employment with or resignation or termination from the 
Company.  This release also includes a release of any claims for age 
discrimination under the Age Discrimination in Employment Act, as 
amended ("ADEA").  The ADEA requires that the Executive be advised to 
consult with an attorney before the Executive waives any claim under 
ADEA.  In addition, the ADEA provides the Executive with at least 21 
days to decide whether to waive claims under ADEA and seven days after 
the Executive signs the Agreement to revoke that waiver. 

            Additionally, the Company agrees to discharge and release 
the Executive and the Executive's heirs from any claims, demands, and/or 
causes of action whatsoever, presently known or unknown, that are based 
upon facts occurring prior to the date of this Agreement, including, but 
not limited to, any claim, matter or action related to the Executive's 
employment and/or affiliation with, or termination and separation from 
the Company; provided that such release shall not release the Executive 
from any loan or advance by the Company or any of its subsidiaries, any 
act that would constitute "Cause" under the Executive's Retention 
Agreement or a breach under Section ________ or _______ of the 
Executive's Retention Agreement.

            4.   This Agreement is not an admission by either the 
Executive or the Company of any wrongdoing or liability.

            5.   the Executive waives any right to reinstatement or 
future employment with the Company following the Executive's separation 
from the Company on the Termination Date.

            6.   the Executive agrees not to engage in any act after 
execution of the Separation and Release Agreement that is intended, or 
may reasonably be expected to harm the reputation, business, prospects 
or operations of the Company, its officers, directors, stockholders or 
employees.  The Company further agrees that it will engage in no act 
which is intended, or may reasonably be expected to harm the reputation, 
business or prospects of the Executive.





                            <Page 19 of 33>
<PAGE>



            7.   the Executive shall continue to be bound by Sections 
_____ and _____ of the Executive's Retention Agreement.

            8.   the Executive shall promptly return all the Company 
property in the Executive's possession, including, but not limited to, 
the Company keys, credit cards, cellular phones, computer equipment, 
software and peripherals and originals or copies of books, records, or 
other information pertaining to the Company business.  The Executive 
shall return any leased or Company automobile at the expiration of the 
restrictions under Section 10(d) of the Executive's Retention Agreement.

            9.   This Agreement shall be governed by and construed in 
accordance with the laws of the State of New Jersey, without reference 
to the principles of conflict of laws.  Exclusive jurisdiction with 
respect to any legal proceeding brought concerning any subject matter 
contained in this Agreement shall be settled by arbitration as provided 
in the Executive's Retention Agreement.

            10.   This Agreement represents the complete agreement 
between the Executive and the Company concerning the subject matter in 
this Agreement and supersedes all prior agreements or understandings, 
written or oral.  This Agreement may not be amended or modified 
otherwise than by a written agreement executed by the parties hereto or 
their respective successors and legal representatives.

            11.   Each of the sections contained in this Agreement shall 
be enforceable independently of every other section in this Agreement, 
and the invalidity or nonenforceability of any section shall not 
invalidate or render unenforceable any other section contained in this 
Agreement.

            12.   It is further understood that for a period of 7 days 
following the execution of this Agreement in duplicate originals, the 
Executive may revoke this Agreement, and this Agreement shall not become 
effective or enforceable until the revocation period has expired.  No 
revocation of this Agreement by the Executive shall be effective unless 
the Company has received within the 7-day revocation period, written 
notice of any revocation, all monies received by the Executive under 
this Agreement and all originals and copies of this Agreement.









                            <Page 20 of 33>
<PAGE>



            13.   This Agreement has been entered into voluntarily and 
not as a result of coercion, duress, or undue influence.  The Executive 
acknowledges that the Executive has read and fully understands the terms 
of this Agreement and has been advised to consult with an attorney 
before executing this Agreement.  Additionally, the Executive 
acknowledges that the Executive has been afforded the opportunity of at 
least 21 days to consider this Agreement.

            The parties to this Agreement have executed this Agreement 
as of the day and year first written above.

                                   TOYS "R" US, INC.


                                   By: ___________________________
                                   Name:
                                   Title:


                                   ROBERT C. NAKASONE


                                   _______________________________
























                            <Page 21 of 33>
<PAGE>



                                                            EXHIBIT B

Capitalized terms used in the Agreement that are not elsewhere defined 
in the Agreement have the definitions set forth below:

            "Annual Base Salary" means the annual base salary of the 
Executive in effect as of the date of the Agreement as may be increased 
in the discretion of the Committee.

            "Board" means the Board of Directors of the Company.

            "Cause" means:  (i) the conviction of, or pleading guilty or 
nolo contendere to, a felony involving moral turpitude; (ii)  the 
commission of any fraud, misappropriation or misconduct which causes 
demonstrable injury to the Company or a subsidiary; (iii) an act of 
dishonesty resulting or intended to result, directly or indirectly, in 
material gain or personal enrichment to the Executive at the expense of 
the Company or a subsidiary; (iv) any willful and material breach of the 
Executive's fiduciary duties to the Company as an employee or director; 
(v) a serious and willful violation of the Toys "R" Us Ethics Agreement 
or any other serious and willful violation of a Company policy; (vi) the 
willful and continued failure of the Executive to perform substantially 
the Executive's duties with the Company or one of its subsidiaries 
(other than any such failure resulting from incapacity due to physical 
or mental illness resulting in a Disability), within a reasonable time 
after a written demand for substantial performance is delivered to the 
Executive by the Board, which specifically identifies the manner in 
which the Board believes that the Executive has not substantially 
performed the Executive's duties; (vii) the failure by the Executive to 
comply, in any material respect, with the provisions of Section 10 of 
the Agreement; or (viii) the failure by the Executive to comply with any 
other undertaking set forth in the Agreement or any breach by the 
Executive hereof that is reasonably likely to result in a material 
injury to the Company.

            For purposes of this provision, no act or failure to act, on 
the part of the Executive, shall be considered "willful" unless it is 
done, or omitted to be done, by the Executive in bad faith or without 
reasonable belief that the Executive's action or omission was in the 
best interests of the Company.  Any act, or failure to act, based upon 
authority given pursuant to a resolution duly adopted by the Board or 
based upon the advice of regular outside counsel for the Company shall 
be conclusively presumed to be done, or omitted to be done, by the 
Executive in good faith and in the best interests of the Company.  The 
cessation of employment of the Executive shall not be deemed to be for 
Cause unless and until there shall have been delivered to the Executive 



                           <Page 22 of 33>
<PAGE>



a copy of a resolution duly adopted by the affirmative vote of a 
majority of the entire membership of the Board at a meeting of the Board 
called and held for such purpose (after reasonable notice is provided to 
the Executive and the Executive is given an opportunity, together with 
counsel, to be heard before the Board), finding that, in the good faith 
opinion of the Board, the Executive is guilty of the conduct described, 
and specifying the particulars thereof in detail.

            "Change of Control" means, after the date hereof:

                 (a)   The acquisition by any individual, entity or 
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a 
"Person") of beneficial ownership (within the meaning of Rule 13d-3 
promulgated under the Exchange Act) of 25% or more of either (i) the 
then outstanding shares of common stock of the Company (the "Outstanding 
Company Common Stock") or (ii) the combined voting power of the then 
outstanding voting securities of the Company entitled to vote generally 
in the election of directors (the "Outstanding Company Voting 
Securities"); provided, however, that for purposes of this subsection 
(a), the following acquisitions shall not constitute a Change of 
Control:   (i) any acquisition by the Company or any of its 
subsidiaries,  (ii) any acquisition by any employee benefit plan (or 
related trust) sponsored or maintained by the Company or any subsidiary 
of the Company, (iii) any acquisition by any Person pursuant to a 
transaction that complies with clauses (i), (ii) and (iii) of subsection 
(c) below, or (iv) any acquisition by any entity in which the Executive 
has a material direct or indirect equity interest; or

                  (b)   The cessation of the "Incumbent Board" for any 
reason to constitute at least a majority of the Board.  "Incumbent 
Board" means the members of the Board on the date hereof and any member 
of the Board subsequent to the date hereof whose election, or nomination 
for election by the Company's stockholders, was approved by a vote of at 
least a majority of the directors then comprising the Incumbent Board, 
except that the Incumbent Board shall not include any member of the 
Board whose initial assumption of office occurs as a result of an actual 
or threatened election contest with respect to the election or removal 
of directors or other actual or threatened solicitation of proxies or 
consents by or on behalf of a Person other than the Board.

                  (c)   The consummation of a reorganization, merger or 
consolidation or sale or other disposition of all or substantially all 
of the assets of the Company (a "Business Combination"), in each case, 
unless, immediately following such Business Combination each of the 
following would be correct: 


                            <Page 23 of 33>
<PAGE>



                        (i)   all or substantially all of the 
individuals and entities who were the beneficial owners, respectively, 
of the  Outstanding Company Common Stock and Outstanding Company Voting 
Securities immediately prior to such Business Combination beneficially 
own, directly or indirectly, more than 60% of, respectively, the then 
outstanding shares of common stock and the combined voting power of the 
then outstanding voting securities entitled to vote generally in the 
election of directors, as the case may be, of the Person resulting from 
such Business Combination (including, without limitation, a Person which 
as a result of such transaction owns the Company or all or substantially 
all of the Company's assets either directly or through one or more 
subsidiaries) in substantially the same proportions as their ownership, 
immediately prior to such Business Combination of the Outstanding 
Company Common Stock and Outstanding Company Voting Securities, as the 
case may be, and 

                       (ii)   no Person (excluding (A) any employee 
benefit plan (or related trust) sponsored or maintained by the Company 
or any subsidiary of the Company, or such corporation resulting from 
such Business Combination or any Affiliate of such corporation, or (B) 
any entity in which the Executive has a material equity interest, or any 
"Affiliate" (as defined in Rule 405 under the Securities Act of 1933, as 
amended) of such entity) beneficially owns, directly or indirectly, 25% 
or more of, respectively, the then outstanding shares of common stock of 
the corporation resulting from such Business Combination, or the 
combined voting power of the then outstanding voting securities of such 
corporation except to the extent that such ownership existed prior to 
the Business Combination, and 

                       (iii)   at least a majority of the members of the 
board of directors of the corporation resulting from such Business 
Combination were members of the Incumbent Board at the time of the 
execution of the initial agreement, or of the action of the Board, 
providing for such Business Combination; or

                  (d)   Approval by the stockholders of the 
Company of a complete liquidation or dissolution of the 
Company.

            "Change of Control Period" means the period commencing 120 
days prior to a Change of Control and expiring on the second anniversary 
date of a Change of Control.

            "Committee" means the Company's Management Compensation and 
Stock Option Committee of the Board of Directors or any successor 
committee of the Board performing equivalent functions.


                           <Page 24 of 33>
<PAGE>



            "Date of Termination" means (i) if the Executive's 
employment is terminated by the Company for Cause, or by the Executive 
for Good Reason, the date of receipt of the Notice of Termination or any 
later date specified therein, as the case may be (although such Date of 
Termination shall retroactively cease to apply if the circumstances 
providing the basis of termination for Cause or Good Reason are cured in 
accordance with the Agreement), (ii) if the Executive's employment is 
terminated by the Company other than for Cause, the Date of Termination 
shall be the date so designated by the Company in its notification to 
the Executive of such termination, (iii) if the Executive's employment 
is terminated by reason of death or Disability, the Date of Termination 
shall be the date of death of the Executive or the effective date of the 
Disability, as the case may be, (iv) if the Executive's Employment is 
terminated by the Executive without Good Reason, the Date of Termination 
shall be the last day on which the Executive is employed by the Company 
as a regular employee, or (v) the last day of the Employment Period 
during which the Company shall have given notice to the Executive that 
the Employment Period shall not be extended.

            "Disability" means the determination that the Executive is 
disabled pursuant to the terms of the TRU Partnership Employees' Savings 
and Profit Sharing Plan, as amended and restated as of October 1, 1993, 
as the same may be amended from time to time.

            "Good Reason" means, without the Executive's prior written 
consent, the occurrence of any of the following, provided that the 
Executive delivers a Notice of Termination specifying such occurrence 
within 30 days thereof:

                 (i)   the assignment of the Executive to a position 
other than Chief Executive Officer;

                 (ii)   any failure by the Company to comply in any 
material respect with any of the provisions of Section 2(b) of the 
Agreement, other than failure not occurring in bad faith and that is 
remedied by the Company within a reasonable time after receipt of notice 
thereof given by the Executive;

                 (iii)   any failure by the Company to comply with and 
satisfy Section 11(c) of the Agreement; or

                 (iv)   notice by the Company that it is not extending 
the termination date of the Employment Period.




                            <Page 25 of 33>
<PAGE>



            "Notice of Termination" means a written notice that (i) 
indicates the specific termination provision in this Agreement relied 
upon, (ii) to the extent applicable, sets forth in reasonable detail the 
facts and circumstances claimed to provide a basis for termination of 
the Executive's employment under the provision so indicated and (iii) if 
the Date of Termination (as defined above) is other than the date of 
receipt of such notice, specifies the termination date.

            "Partnership Plan" means the Partnership Group Deferred 
Compensation Plan of the Company.

            "Plans" means all employee compensation, benefit and welfare 
plans, policies and programs of the Company, which may include, without 
limitation, incentive, savings, retirement, stock option, restricted 
stock, supplemental executive retirement, the Partnership Plan, pension, 
medical, prescription, dental, disability, salary continuance, employee 
life, group life, accidental death and travel accident insurance plans, 
vacation practices, fringe benefit practices and policies relating to 
the reimbursement of business expenses.

            "Retirement" shall have the meaning ascribed to that term in 
the Plan under which benefits are being sought by the Executive or, if 
such meaning is inapplicable, the term shall mean a termination of 
employment with the Company or a subsidiary on a voluntary basis prior 
to the age of sixty (60).  The term "Retirement" shall also include 
"early" retirement prior to the age of sixty (60) provided that the 
Committee, in its sole discretion, consents in writing to accept such 
early retirement.  




















                            <Page 26 of 33>
<PAGE>



                                                             EXHIBIT C

                             TAX GROSS-UP


            (a)   If required by Section 9 of the Agreement, in addition 
to the payments described in Section 4 of the Agreement and the grants 
described in the Stock Unit Agreement, the Company shall pay to the 
Executive an amount (the "Gross-up") such that the net amount retained 
by the Executive, after deduction of any Excise Tax and any Federal, 
state and local income taxes, equals the amount of such payments that 
the Executive would have retained had such Excise Tax not been imposed.  
In addition, the Company shall indemnify and hold the Executive harmless 
on an after-tax basis from any Excise Tax imposed on or with respect to 
any such payment (including, without limitation, any interest, penalties 
and additions to tax) payable in connection with any such Excise Tax.  
For purposes of determining the amount of any Gross-up or the amount 
required to make an indemnity payment on an after-tax basis, it shall be 
assumed that the Executive is subject to Federal, state and local income 
tax at the highest marginal statutory rates in effect for the relevant 
period after taking into account any deduction available in respect of 
any such tax (e.g., if state and local taxes are deductible for Federal 
income tax purposes in the relevant period, it shall be assumed that 
such taxes offset income that would otherwise be subject to Federal 
income tax at the highest marginal statutory rate in effect for such 
period).

            (b)   Subject to the provisions of paragraph (c) of this 
Exhibit C, the determination of (i) whether a Gross-up is required and 
the amount of such Gross-up and (ii) the amount necessary to make any 
payment on an after-tax basis, shall be made in accordance with the 
assumptions set forth in paragraph (a) of this Exhibit C  by Ernst & 
Young LLP or such other "Big Six" accounting firm designated by the 
Executive and reasonably acceptable to the Company.

            (c)   the Executive shall notify the Company as soon as 
practicable in writing of any claim by the Internal Revenue Service 
that, if successful, would require any Gross-up or indemnity payment.  
The Executive shall not pay such claim prior to the expiration of the 
30-day period following the date on which it gives such notice to the 
Company.  If the Company notifies the Executive in writing prior to the 
expiration of such period that it desires to contest such claim, the 
Executive shall take all actions necessary to permit the Company to 
control all proceedings taken in connection with such contest.  In that 



                             <Page 27 of 33>
<PAGE>



connection, the Company may, at its sole option, pursue or forgo any and 
all administrative appeals, proceedings, hearings and conferences in 
respect of such claim and may, at its sole option, either direct the 
Executive to pay the tax claimed and sue for a refund or contest the 
claim in any permissible manner; provided, however, that the Company 
shall pay and indemnify the Executive from and against all costs and 
expenses incurred in connection with such contest; provided further, 
however, that if the Company directs the Executive to pay such claim and 
sue for a refund, the Company shall advance the amount of such payment 
to the Executive on an interest-free basis and at no net after-tax cost 
to the Executive.  If the Executive becomes entitled to receive any 
refund or credit with respect to such claim (or would be entitled to a 
refund or credit but for a counterclaim for taxes not indemnified 
hereunder), the Executive shall promptly pay to the Company the amount 
of such refund (together with any interest paid or credited thereon) 
plus the amount of any tax benefit available to the Executive as a 
result of making such payment (any such benefit calculated based on the 
assumption that any deduction available to the Executive offsets income 
that would otherwise be taxed at the highest marginal statutory rates of 
Federal, state and local income tax for the relevant periods).




























                            <Page 28 of 33>
<PAGE>



                                                          EXECUTION COPY

                                                                 ANNEX A


                         STOCK UNIT AGREEMENT
            STOCK UNIT AGREEMENT, dated as of February 25, 1998 (the 
"Unit Agreement"), between TOYS "R" US, INC., a Delaware corporation 
(the "Company"), and ROBERT C. NAKASONE (the "Executive").  

                         W I T N E S S E T H:

            WHEREAS, the Company proposed for the approval of the 
stockholders of the Company at the 1997 Annual Meeting of Stockholders 
an Amendment (the "Amendment") to the Company's 1994 Stock Option and 
Performance Incentive Plan (the "Plan") providing for performance 
criteria that may be utilized by the Management Compensation and Stock 
Option Committee (the "Committee") in connection with the grant of 
Performance Shares (as defined in the Plan and referred to herein as 
"Stock Units"), and the Stockholders approved such Amendment;

            WHEREAS, concurrently herewith, the Executive and the 
Company are entering into a Retention Agreement, dated as of even date 
herewith (the "Retention Agreement");

            WHEREAS, as further inducement for the Executive to execute 
the Retention Agreement and continue in the employ of the Company, the 
Committee has determined to grant the Executive the Stock Units as 
described in this Unit Agreement, and

            WHEREAS, the Board and the Committee desire that the 
compensation arising from the Stock Units shall qualify as "performance-
based compensation" for purposes of Section 162(m) of the Internal 
Revenue Code of 1986, as amended.

            NOW, THEREFORE, in consideration of the covenants set forth 
herein and for other good and valuable consideration, the parties agree 
as follows:

            1.   Definitions.  Capitalized terms used herein without 
definition shall have the meanings ascribed to them in the Plan and in 
the Retention Agreement.





                            <Page 29 of 33>
<PAGE>



            2.   Stock Unit Grant.  Subject to the terms and conditions 
set forth in this Unit Agreement and in Section 10 of the Plan, the 
Executive is hereby granted 158,000 Stock Units.  Each Stock Unit 
represents the right to receive one share of Common Stock (collectively, 
with other shares of Common Stock relating to the Stock Units and held 
in the Executive's account in the Trust (as defined below) in respect of 
the Stock Units, the "Shares").  The 158,000 Shares shall be promptly 
deposited after the date hereof in the grantor trust created pursuant to 
the Grantor Trust Agreement, dated as of October 1, 1995 between the 
Company and American Express Trust Company, a Minnesota trust company 
(together with any grantor trust subsequently established by the 
Company, the "Trust") and shall be allocated by the Trust to the 
Executive's account therein subject to the vesting conditions of 
Sections 3 and 4 below.  Any property attributable to the Shares, 
including, without limitation, dividends and distributions thereon shall 
be deposited into the Trust, shall as promptly as practicable be 
reinvested in shares of Common Stock, and shall be allocated by the 
Trust to the Executive's account therein subject to the vesting 
conditions of Sections 3 and 4 below.

            3.   Vesting.  (a) Except as provided in the Retention 
Agreement and subject to Section 4(b), the Stock Units shall vest at the 
rate of twenty percent (20%) per annum on May 1 of each year, beginning 
on May 1, 1998, throughout the Employment Period; provided that, the 
Committee has determined that the Performance Objective set forth in 
Exhibit A has been achieved.

            (b)   The Committee shall determine whether the Performance 
Objective set forth on Exhibit A has been achieved as soon as 
practicable, but no later than the earlier of (x) May 1, 2002 or (y) the 
Date of Termination.

            4.   Payment of Stock Units.  (a)   The Shares, together 
with any property attributable thereto (including, without limitation, 
dividends and distributions thereon), shall be delivered to the 
Executive as provided in the Retention Agreement.

            (b)   The provisions of Sections 8(b) and 9 of the Retention 
Agreement shall apply to the Stock Unit and related Shares, whether or 
not the Retention Agreement is then in effect.








                            <Page 30 of 33>
<PAGE>



            5.   Investment Representation. The Shares acquired by the 
Executive under this Unit Agreement will be acquired for the Executive's 
account and not with a view to the distribution thereof, and the 
Executive will not sell or otherwise dispose of the Shares unless the 
Shares are registered under the Securities Act of 1933, as amended (the 
"Act"), or the Executive shall furnish the Company with an opinion of 
counsel reasonably satisfactory to the Company that such registration is 
not required, and a legend to such effect may be placed on the 
certificate for the Shares.

            6.   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 this Unit Agreement, and each member 
of the Committee shall be fully indemnified and protected by the Company 
with respect to any liability such member 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 any such member and the Company.

            7.   Severability.  Each of the Sections contained in this 
Unit Agreement shall be enforceable independently of every other section 
in this Unit Agreement, and the invalidity or nonenforceability of any 
section shall not invalidate or render unenforceable any other section 
contained in this Unit Agreement.

            8.   Governing Law.  This Unit Agreement shall be governed 
by and construed in accordance with the laws of the State of New Jersey, 
without reference to principles of conflict of laws.  Exclusive 
jurisdiction with respect to any legal proceeding brought concerning any 
subject matter contained in this Unit Agreement shall be settled by 
arbitration as provided in the Retention Agreement.

            9.   Captions.  The captions of this Agreement are not part 
of the provisions hereof and shall have no force or effect.  

            10.   Amendment.  This Unit Agreement may not be amended or 
modified otherwise than by a written agreement executed by the parties 
hereto or their respective successors and legal representatives.

            11.   Notices.  All notices and other communications 
hereunder shall be in writing and shall be given by hand delivery to the 
other party or by registered or certified mail, return receipt 
requested, postage prepaid, addressed as follows:



                             <Page 31 of 33>
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            (i)   If to the Executive, to the address on file with the 
Company; and

            (ii)   If to the Company, to it at Toys "R" Us, Inc., 
461 From Road, Paramus, New Jersey 07652, Attention: Senior Vice 
President - Human Resources;

or to such other address as either party shall have furnished to the 
other in writing in accordance herewith.  Notice and communications 
shall be effective when actually received by the addressee.

            12.   Interpretation.  The interpretation and decision with 
regard to any question arising under this Unit Agreement or with respect 
to the Stock Units made by the Committee shall be final and conclusive 
on the Executive.

            13.   Successors.  This Unit Agreement shall be binding upon 
the Company and its successors and assigns.






























                             <Page 32 of 33>
<PAGE>



            IN WITNESS WHEREOF, this Agreement has been executed by the 
Company by one of its duly authorized officers as of the date specified 
above. 

                                    TOYS "R" US, INC.


                                    By:  Roger C. Gaston
                                    Title:  Sr. V.P. - Human Resources

            I hereby acknowledge receipt of the Stock Units and agree to 
the provisions set forth in this Agreement.



                                    /s/ Robert C. Nakasone
                                    Signature of Executive






























                             <Page 33 of 33>
<PAGE>