EXECUTION COPY


                              RETENTION AGREEMENT

                                    BETWEEN

                                 TOYS "R" US, INC.

                                      AND

                                  ROGER GASTON

                             DATED AS OF MAY 1, 1997



<PAGE>
                               TABLE OF CONTENTS
                               ----------------
                                                                          Page
                                                                          ----

1.   Employment Period..................................................

2.   Terms of Employment................................................

     (a)   Position.....................................................

     (b)   Compensation.................................................
           (i)   Base Salary............................................
           (ii)   Incentive Bonus.......................................
           (iii)   Participation in Other Plans
           Stock Units..................................................

3.   Termination of Employment Upon Death, Disability or Retirement.....

4.   Other Termination of Employment....................................

     (a)   Company Termination..........................................

     (b)   Good Reason..................................................

     (c)   Notice of Termination........................................

     (d)   Obligations of the Company Upon Termination Under Section 4..

     (e)   Cause........................................................

5.   Release Agreement..................................................

6.   Offset.............................................................

7.   Compensation and Benefits Following Change of Control..............

8.   Nonexclusivity of Rights...........................................

9.   Full Settlement; Legal Fees........................................

     (a)   No Obligation to Mitigate....................................

     (b)   Expenses of Contests.........................................

10.   Certain Additional Payments by the Company........................

11.   Restrictions and Obligations of the Executive.....................

     (a)   Consideration for Restrictions and Covenants.................
<PAGE>

     (b)   Confidentiality..............................................

     (c)   Non-Solicitation or Hire.....................................

     (d)   Non-Competition and Consulting...............................

     (e)   Definitions..................................................

     (f)   Relief.......................................................

12.   Successors........................................................

13.   Miscellaneous.....................................................

     (a)   Governing Law................................................

     (b)   Captions.....................................................

     (c)   Amendment....................................................

     (d)   Notices......................................................

     (e)   Assistance to Company........................................

     (f)   Severability of Provisions...................................

     (g)   Withholding..................................................

     (h)   Waiver.......................................................

     (i)   Arbitration..................................................


EXHIBIT A         Separation and Release Agreement
EXHIBIT B         Definitions
EXHIBIT C         Change of Control and Tax Gross-Up

ANNEX A           Stock Unit Agreement


<PAGE>


                              TOYS "R" US, INC.
                       RETENTION AGREEMENT


          AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a 
Delaware corporation (the "Company"), and Roger Gaston (the "Executive"), dated 
as of May 1, 1997.  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 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 
continue to serve in the Executive's current position at the Company or such 
other senior executive position to which the Executive may be appointed by 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 full time during normal business hours to the business and 
affairs of the Company and to use the Executive's 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 the Executive's responsibilities as an employee of 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 Chief Executive Officer.  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.

          (b)   Compensation.  (i)   Base Salary.  During the Employment 
Period, the Executive shall receive the Executive's 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 an annual 
incentive bonus and long-term incentive awards pursuant to the Company's 
incentive Plans and subject to the terms thereof at a level commensurate with 
the Executive's current grants and the Executive's current position or any more 
senior position(s) to which the Executive may be appointed.  Each such 

<PAGE>

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 the Executive's position.

               (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.

          3.   Termination of Employment Upon Death, Disability or Retirement.  
The Executive's employment shall terminate upon the Executive's death, 
Disability or Retirement during the Employment Period and the obligations of 
the Company upon such termination shall be limited to those benefits provided 
by the Company's Plans at the Date of Termination, except as specifically set 
forth herein or in the Stock Unit Agreement.

          4.   Other Termination of Employment.  (a)  Company Termination.  The 
Company may terminate the Executive's employment during the Employment Period 
with or without Cause.

          (b)   Good Reason.  The Executive's employment may be terminated 
during the Employment Period by the Executive for Good Reason.

          (c)   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.

          (d)   Obligations of the Company Upon Termination Under Section 4.  
If the Executive's employment shall have been terminated under Section 4(a) 
(other than for Cause) or 4(b):

               (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 (1) the Executive's pro rata Annual Base Salary payable through the 
Date of Termination to the extent not theretofore paid, (2) the targeted amount 
of the Executive's annual bonus and long-term incentive awards 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 (3) the Executive's actual earned annual or 
long-term incentive awards for any completed fiscal year or period not 
theretofore paid or deferred;

<PAGE>

               (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 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 that would have been paid 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 stock options and except as set 
forth in this Section 4(d) and in Section 7(b)), the benefits provided under 
the Plans that the Executive would receive on an after-tax basis if the 
Executive's employment had continued for two years after the Date of 
Termination assuming for this purpose that the Executive's compensation for 
each such year would have been one-half of the amount paid pursuant to clause 
(ii) above, and the Executive shall be fully vested in any account balance and 
all other benefits continuation under such Plans; provided, however that the 
benefits provided under this clause (iii) shall be limited to the coverage 
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.

               (iv)   (1) all unvested options held by the Executive 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 
vest on the two year anniversary date of 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 continue to vest 
in accordance with their terms for two years after the Date of Termination and 
all remaining profit shares shall vest on the two year anniversary date of the 
Date of Termination, 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 (iv) and any such 
unvested profit share not permitted to be so held shall vest immediately and be 
delivered to the Executive, (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 promptly delivered to the Executive 
entirely in the form of Common Stock, $.10 par value per share, of the Company, 
(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 earlier of (x) the thirty-month anniversary date of the Date of 
Termination and (y) the expiration date of such options and (5) the Executive 
shall not be entitled to any additional grants of any stock options, restricted 
stock, other equity based or long-term awards; and

<PAGE>

               (v)   the Executive will be entitled to continuation of health 
benefits under the Plans at a level commensurate with the Executive's current 
position or more senior position(s) to which the Executive may be appointed, 
and if the Executive elects to receive such health benefits, the Company shall 
pay the medical premiums therefore for the first twenty-four months after the 
Date of Termination, and thereafter the Executive shall pay the premium charged 
to former employees of the Company pursuant to Section 4980B of the Code until 
the Executive is sixty-five years of age; 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 or more 
senior position(s) to which the Executive may be appointed; 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 (v) 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.

 .         (e)   Cause.  If the Executive's employment shall be terminated for 
Cause during the Employment Period or if the Executive voluntarily terminates 
employment during the Employment Period, excluding a termination for Good 
Reason, death, Disability or Retirement, the Employment Period shall terminate 
without further obligations to the Executive other than the obligation to pay 
to the Executive all payments and benefits due, in accordance with the 
Company's Plans through the Date of Termination.

          5.   Release Agreement.  The benefits pursuant to Section 4 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.   Compensation and Benefits Following 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 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)   In the event of termination of the Executive's employment under 
Section 4(a) (other than for Cause) or 4(b), whether before or after a Change 
of Control, following a Change of Control: (i) any remaining amounts payable 
under Sections 4(d)(i), (ii) and (iii) shall be payable in a lump sum within 30 

<PAGE>

days after the later of the Date of Termination or the Change of Control and 
(ii) in lieu of the Company's obligations under Section 4(d)(iv), all unvested 
options and equity based awards shall vest immediately on the later of the Date 
of Termination or the Change of Control and all such options may be exercised 
until the earlier of (x) the thirty-month anniversary date of the Date of 
Termination and (y) the expiration date of such options.

          8.   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.

          9.   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:  In each case solely to the extent that 
the Executive is successful with respect thereto, 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 

<PAGE>

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.

          10.   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.

          11.   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 11.  Specifically, Executive agrees to comply with the 
provisions of this Section 11 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.

          (c)   Non-Solicitation or Hire.  During the Employment Period and for 
a two-year period following the termination of the Executive's employment for 
any reason, 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 

<PAGE>

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.

          (d)   Non-Competition and Consulting.  (i)  During the Employment 
Period and for a two-year period (the "Consulting Period") following the 
termination of the Executive's employment for any reason, 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

               (ii)   During the Consulting Period, the Executive shall

               (x)   be available to render services to the Company as an 
independent contractor/consultant but not as an employee of the Company; and

               (y)   perform such duties as may be reasonably requested in 
writing from time to time during the Consulting Period by the Chief Executive 
Officer; provided that such duties shall not conflict with the duties of the 
Executive for a new employer if such employment does not violate the terms of 
Section 11(d)(i)  hereof.

               (iii)   Section 11(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.

               (iv)   Nothing contained in this Section 11(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.

<PAGE>

          (e)   Definitions.  For purposes of this Section 11:

               (i)   "Restricted Business" means the 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.

               (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.

          (f)   Relief.  The parties hereto hereby acknowledge that the 
provisions of this Section 11 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 11, 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 breaches any 
of the covenants applicable to the Executive contained in this Section 11, the 
Executive will immediately return to the Company any 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.

          12.   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>

          13.   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.

          (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 11 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 11, 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.

<PAGE>

          (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>
          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.


                                     ROGER GASTON



                                     /s/ Roger Gaston




                                     TOYS "R" US, INC.



                                     By: /s/ Michael Goldstein
                                        Name:  Michael Goldstein
                                        Title: Chief Executive Officer


<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. and any successor thereto (collectively, the "Company") and Roger Gaston 
(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 
Company has agreed to pay the Executive certain payments and to make certain 
benefits available after the Termination Date.

          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 
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 

<PAGE>

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.  This release does not release the Company 
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or 
13(e) of the Executive's Retention Agreement, the Executive's Indemnification 
Agreement with the Company or under this Agreement.

          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 9(b), 11 
or 13(e) 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.

          7.   The Executive shall continue to be bound by Sections 11 and 
13(e) 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 car at 
the expiration of the Consulting Period (as defined in 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 

<PAGE>

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.

          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:



                                     ROGER GASTON



                                     -----------------------------




<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 as 
of the date of the Agreement as may be increased from time to time 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 material 
breach of the Executive's fiduciary duties to the Company as an employee or 
officer; (v) a serious violation of the Toys "R" Us Ethics Agreement or any 
other serious 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 11 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 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" - See Exhibit C.

<PAGE>

          "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.

          "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, and (iv) 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 materially 
inconsistent with the requirements of Section 2(a) of the Agreement, excluding 
for this purpose an action not taken in bad faith and which is remedied by the 
Company promptly after receipt of notice thereof given by the Executive; 
provided, however, that the foregoing shall not constitute "Good Reason" if it 
is not attendant to a reduction in the Executive's Annual Base Salary or total 
target compensation, except that a request by the Company for the Executive to 
relocate outside Northeastern New Jersey shall constitute "Good Reason";

          (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 
12(c) of the Agreement; or

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

          "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 

<PAGE>

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 (which date shall be not more than thirty days after the 
giving of such notice).

          "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, 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.

<PAGE>



                                                               EXHIBIT C



                   CHANGE OF CONTROL AND TAX GROSS-UP
                   ----------------------------------






     I.   Certain Definitions

          "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:

              (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 

<PAGE>

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.

     II.   Tax Gross-Up

          (a)   If required by Section 10 of the Agreement, in addition to the 
payments described in Sections 4 and 7 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 

<PAGE>

(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 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>

                                                             ANNEX A

                           STOCK UNIT AGREEMENT

          STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit 
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the 
"Company"), and Roger Gaston (the "Executive").

                          W I T N E S S E T H:

          WHEREAS, the Company has 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");

          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, subject to the approval of the Amendment by the stockholders 
of the Company at the 1997 Annual Meeting of Stockholders; 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.

          2.   Stock Unit Grant.  Subject to the approval of the Amendment by 
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and 
subject to the terms and conditions set forth in this Unit Agreement and in 
Section 10 of the Plan, the Executive is hereby granted 23,000 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 23,000 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 
forfeiture conditions of Section 3 below.  Any property attributable to the 
Shares, including, without limitation, dividends and distributions thereon, 

<PAGE>

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 forfeiture conditions of 
Section 3 below.

          3.   Forfeiture Conditions.  The Stock Units granted to the 
Executive hereunder shall be forfeited in their entirety, subject to the terms 
of the Retention Agreement, if:

               (i) the Executive's employment with the Company terminates 
prior to the fifth anniversary of the date hereof ; or

               (ii) the Performance Objective set forth on Exhibit A hereto is 
not achieved.

          4.   Payment of Stock Units.  As soon as practicable but no later 
than May 1, 2002, the Committee shall determine whether the Performance 
Objective set forth on Exhibit A has been achieved.  The Shares, 
together with any property attributable thereto (including, without 
limitation, dividends and distributions thereon), shall be delivered to the 
Executive promptly following May 1, 2002 unless the Executive has elected to 
defer receipt of such Shares in accordance with the terms and conditions of 
any deferred compensation program maintained by the Company or has failed to 
satisfy the condition set forth in Section 3(i) hereof.

            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 

<PAGE>

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 Unit 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:

               (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>

          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:
                                             ------------------------

                                    Title:  ------------------------

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


                                   ---------------------------------
                                   Roger Gaston



<PAGE>

                                                             EXHIBIT A

                  Performance Objective Under Section 3(ii)
                       of the Stock Unit Agreement

The consolidated net earnings of the Company in any fiscal quarter (beginning 
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or 
2000 fiscal year is at least equal to the amount of any corresponding quarter 
in 1996.  For these purposes, "consolidated net earnings" shall exclude 
extraordinary or unusual items reported by the Company as such.


<PAGE>



                                                              EXECUTION COPY

                              RETENTION AGREEMENT

                                   BETWEEN

                               TOYS "R" US, INC.

                                    AND
                                 
                                LOUIS LIPSCHITZ

                                 DATED AS OF

                                 MAY 1, 1997


<PAGE>

                               TABLE OF CONTENTS

                                                                          Page

1.   Employment Period..................................................... 4

2.   Terms of Employment....................................................4
     (a)   Position.........................................................4

     (b)   Compensation.....................................................4

           (i)   Base Salary................................................4

           (ii)   Incentive Bonus...........................................4

           (iii)   Participation in Other Plans.............................5

           Stock Units......................................................5

3.   Termination of Employment Upon Death, Disability or Retirement.........5

4.   Other Termination of Employment........................................5

     (a)   Company Termination..............................................5

     (b)   Good Reason......................................................5

     (c)   Notice of Termination............................................5

     (d)   Obligations of the Company Upon Termination Under Section 4......5

     (e)   Cause............................................................7

5.   Release Agreement......................................................7

6.   Offset.................................................................7

7.   Compensation and Benefits Following Change of Control..................7

8.   Nonexclusivity of Rights...............................................8

9.   Full Settlement; Legal Fees............................................8

     (a)   No Obligation to Mitigate........................................8

     (b)   Expenses of Contests.............................................8

10.   Certain Additional Payments by the Company............................9

11.   Restrictions and Obligations of the Executive.........................9

     (a)   Consideration for Restrictions and Covenants.....................9
<PAGE>

     (b)   Confidentiality..................................................9

     (c)   Non-Solicitation or Hire.........................................9

     (d)   Non-Competition and Consulting..................................10

     (e)   Definitions.....................................................11

     (f)   Relief..........................................................11

12.   Successors...........................................................11

13.   Miscellaneous........................................................12

     (a)   Governing Law...................................................12

     (b)   Captions........................................................12

     (c)   Amendment.......................................................12

     (d)   Notices.........................................................12

     (e)   Assistance to Company...........................................12

     (f)   Severability of Provisions......................................12

     (g)   Withholding.....................................................13

     (h)   Waiver..........................................................13

     (i)   Arbitration.....................................................13



EXHIBIT A     Separation and Release Agreement
EXHIBIT B     Definitions
EXHIBIT C     Change of Control and Tax Gross-Up

ANNEX A       Stock Unit Agreement






<PAGE>






                             TOYS "R" US, INC.
                             RETENTION AGREEMENT

            AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a 
Delaware corporation (the "Company"), and Louis Lipschitz (the "Executive"), 
dated as of May 1, 1997.  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 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 
continue to serve in the Executive's current position at the Company or such 
other senior executive position to which the Executive may be appointed by 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 full time during normal business hours to the 
business and affairs of the Company and to use the Executive's 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 the Executive's responsibilities as an 
employee of 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 Chief 
Executive Officer.  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.

            (b)    Compensation.  (i)   Base Salary.  During the Employment 
Period, the Executive shall receive the Executive's 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 
an annual incentive bonus and long-term incentive awards pursuant to the 
Company's incentive Plans and subject to the terms thereof at a level 
commensurate with the Executive's current grants and the Executive's current 
position or any more senior position(s) to which the Executive may be 

<PAGE>

appointed.  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 the Executive's position.

                  (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.

            3.    Termination of Employment Upon Death, Disability or 
Retirement.  The Executive's employment shall terminate upon the Executive's 
death, Disability or Retirement during the Employment Period and the 
obligations of the Company upon such termination shall be limited to those 
benefits provided by the Company's Plans at the Date of Termination, except as 
specifically set forth herein or in the Stock Unit Agreement.

            4.    Other Termination of Employment.  (a)  Company Termination.  
The Company may terminate the Executive's employment during the Employment 
Period with or without Cause.  

            (b)    Good Reason.  The Executive's employment may be terminated 
during the Employment Period by the Executive for Good Reason.

            (c)    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.

            (d)    Obligations of the Company Upon Termination Under Section 4.
If the Executive's employment shall have been terminated under Section 4(a) 
(other than for Cause) or 4(b):

                  (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 (1) the Executive's pro rata Annual Base Salary payable through the 
Date of Termination to the extent not theretofore paid, (2) the targeted amount 
of the Executive's annual bonus and long-term incentive awards 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 (3) the Executive's actual earned annual or 
long-term incentive awards for any completed fiscal year or period not 
theretofore paid or deferred; 
 
<PAGE>

                  (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 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 that would have been paid 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 stock options and except as 
set forth in this Section 4(d) and in Section 7(b)), the benefits provided 
under the Plans that the Executive would receive on an after-tax basis if the 
Executive's employment had continued for two years after the Date of 
Termination assuming for this purpose that the Executive's compensation for 
each such year would have been one-half of the amount paid pursuant to clause 
(ii) above, and the Executive shall be fully vested in any account balance and 
all other benefits continuation under such Plans; provided, however that the 
benefits provided under this clause (iii) shall be limited to the coverage 
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.

                  (iv)    (1) all unvested options held by the Executive 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 
vest on the two year anniversary date of 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 continue to vest 
in accordance with their terms for two years after the Date of Termination and 
all remaining profit shares shall vest on the two year anniversary date of the 
Date of Termination, 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 (iv) and any such 
unvested profit share not permitted to be so held shall vest immediately and be 
delivered to the Executive, (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 promptly delivered to the Executive 
entirely in the form of Common Stock, $.10 par value per share, of the Company, 
(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 earlier of (x) the thirty-month anniversary date of the Date of 
Termination and (y) the expiration date of such options and (5) the Executive 
shall not be entitled to any additional grants of any stock options, restricted 
stock, other equity based or long-term awards; and

<PAGE>
                  (v)    the Executive will be entitled to continuation of 
health benefits under the Plans at a level commensurate with the Executive's 
current position or more senior position(s) to which the Executive may be 
appointed, and if the Executive elects to receive such health benefits, the 
Company shall pay the medical premiums therefore for the first twenty-four 
months after the Date of Termination, and thereafter the Executive shall pay 
the premium charged to former employees of the Company pursuant to Section 
4980B of the Code until the Executive is sixty-five years of age; 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 or more senior position(s) to which the Executive may be 
appointed; 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 (v) 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.

            (e)    Cause.  If the Executive's employment shall be terminated 
for Cause during the Employment Period or if the Executive voluntarily 
terminates employment during the Employment Period, excluding a termination for 
Good Reason, death, Disability or Retirement, the Employment Period shall 
terminate without further obligations to the Executive other than the 
obligation to pay to the Executive all payments and benefits due, in accordance 
with the Company's Plans through the Date of Termination.  

            5.    Release Agreement.  The benefits pursuant to Section 4 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.    Compensation and Benefits Following 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 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)    In the event of termination of the Executive's employment 
under Section 4(a) (other than for Cause) or 4(b), whether before or after a 
Change of Control, following a Change of Control: (i) any remaining amounts 
payable under Sections 4(d)(i), (ii) and (iii) shall be payable in a lump sum 
within 30 days after the later of the Date of Termination or the Change of 

<PAGE>

Control and (ii) in lieu of the Company's obligations under Section 4(d)(iv), 
all unvested options and equity based awards shall vest immediately on the 
later of the Date of Termination or the Change of Control and all such options 
may be exercised until the earlier of (x) the thirty-month anniversary date of 
the Date of Termination and (y) the expiration date of such options.

            8.    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.

            9.    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:  In each case solely to the extent that 
the Executive is successful with respect thereto, 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 

<PAGE>

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.

            10.    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.

            11.    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 11.  Specifically, Executive agrees to comply with the 
provisions of this Section 11 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.  

            (c)    Non-Solicitation or Hire.  During the Employment Period and 
for a two-year period following the termination of the Executive's employment 
for any reason, 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 

<PAGE>

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.

            (d)    Non-Competition and Consulting.  (i)  During the Employment 
Period and for a two-year period (the "Consulting Period") following the 
termination of the Executive's employment for any reason, 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

                  (ii)    During the Consulting Period, the Executive shall 

                  (x)    be available to render services to the Company as an 
independent contractor/consultant but not as an employee of the Company; and  

                  (y)    perform such duties as may be reasonably requested in 
writing from time to time during the Consulting Period by the Chief Executive 
Officer; provided that such duties shall not conflict with the duties of the 
Executive for a new employer if such employment does not violate the terms of 
Section 11(d)(i)  hereof.

                  (iii)    Section 11(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.  

                  (iv)    Nothing contained in this Section 11(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.

<PAGE>
            (e)    Definitions.  For purposes of this Section 11:

                      (i)    "Restricted Business" means the 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.

                     (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.

            (f)    Relief.  The parties hereto hereby acknowledge that the 
provisions of this Section 11 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 11, 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 breaches any 
of the covenants applicable to the Executive contained in this Section 11, the 
Executive will immediately return to the Company any 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.

            12.    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>

            13.    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.

            (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 11 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 11, 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.

<PAGE>
            (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>

            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.

                                       LOUIS LIPSCHITZ




                                       /S/ Louis Lipschitz


                                      TOYS "R" US, INC.

                                      By:  /s/ Michael Goldstein
                                        Name:  Michael Goldstein
                                        Title: Chief Executive Officer


<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. and any successor thereto (collectively, the "Company") and Louis 
Lipschitz (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 
Company has agreed to pay the Executive certain payments and to make certain 
benefits available after the Termination Date.

            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 
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 

<PAGE>

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.  This release does not release the Company 
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or 
13(e) of the Executive's Retention Agreement, the Executive's Indemnification 
Agreement with the Company or under this Agreement.

            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 9(b), 11 
or 13(e) 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.

            7.    The Executive shall continue to be bound by Sections 11 and 
13(e) 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 car at the expiration of the Consulting Period (as defined in 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 

<PAGE>

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.

            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:

                                                   LOUIS LIPSCHITZ


                                                   -------------------------

<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 
as of the date of the Agreement as may be increased from time to time 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 material 
breach of the Executive's fiduciary duties to the Company as an employee or 
officer; (v) a serious violation of the Toys "R" Us Ethics Agreement or any 
other serious 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 11 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 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" - See Exhibit C.

<PAGE>

            "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.

            "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, and (iv) 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 materially 
inconsistent with the requirements of Section 2(a) of the Agreement, excluding 
for this purpose an action not taken in bad faith and which is remedied by the 
Company promptly after receipt of notice thereof given by the Executive; 
provided, however, that the foregoing shall not constitute "Good Reason" if it 
is not attendant to a reduction in the Executive's Annual Base Salary or total 
target compensation, except that a request by the Company for the Executive to 
relocate outside Northeastern New Jersey shall constitute "Good Reason"; and 
provided, further, that notwithstanding the foregoing, the appointment of 
another person as Chief Financial Officer of the Company shall constitute "Good 
Reason";

            (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 12(c) of the Agreement; or

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

            "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 

<PAGE>

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 (which date shall be not more than thirty days after the 
giving of such notice).

            "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, 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.

<PAGE>



                                                                 EXHIBIT C



                         CHANGE OF CONTROL AND TAX GROSS-UP



             I.    Certain Definitions

             "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: 

                  (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 

<PAGE>

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.

            II.    Tax Gross-Up

            (a)    If required by Section 10 of the Agreement, in addition to 
the payments described in Sections 4 and 7 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 

<PAGE>

(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 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>

                                                                     ANNEX A

                            STOCK UNIT AGREEMENT

            STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit 
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the 
"Company"), and Louis Lipschitz (the "Executive").

                           W I T N E S S E T H:

            WHEREAS, the Company has 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");

            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, subject to the approval of the Amendment by the stockholders 
of the Company at the 1997 Annual Meeting of Stockholders; 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.

            2.    Stock Unit Grant.  Subject to the approval of the Amendment 
by the stockholders of the Company at the 1997 Annual Meeting of Stockholders 
and subject to the terms and conditions set forth in this Unit Agreement and 
in Section 10 of the Plan, the Executive is hereby granted 29,000 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 29,000 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 
forfeiture conditions of Section 3 below.  Any property attributable to the 
Shares, including, without limitation, dividends and distributions thereon, 

<PAGE>

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 forfeiture conditions of 
Section 3 below.

            3.    Forfeiture Conditions.  The Stock Units granted to the 
Executive hereunder shall be forfeited in their entirety, subject to the terms 
of the Retention Agreement, if:

                 (i) the Executive's employment with the Company terminates 
prior to the fifth anniversary of the date hereof ; or

                 (ii) the Performance Objective set forth on Exhibit A hereto 
is not achieved.

            4.    Payment of Stock Units.  As soon as practicable but no later 
than May 1, 2002, the Committee shall determine whether the Performance 
Objective set forth on Exhibit A has been achieved.  The Shares, 
together with any property attributable thereto (including, without 
limitation, dividends and distributions thereon), shall be delivered to the 
Executive promptly following May 1, 2002 unless the Executive has elected to 
defer receipt of such Shares in accordance with the terms and conditions of 
any deferred compensation program maintained by the Company or has failed
to satisfy the condition set forth in Section 3(i) hereof.  

            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 

<PAGE>

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 Unit 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:

                  (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>

            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:
                                         ---------------------------------

                                      Title:
                                            ------------------------------

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




                                      ------------------------------------
                                      Louis Lipschitz

<PAGE>

                                                                EXHIBIT A

                    Performance Objective Under Section 3(ii)
                        of the Stock Unit Agreement

The consolidated net earnings of the Company in any fiscal quarter (beginning 
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or 
2000 fiscal year is at least equal to the amount of any corresponding quarter 
in 1996.  For these purposes, "consolidated net earnings" shall exclude 
extraordinary or unusual items reported by the Company as such.


<PAGE>





                                                              EXECUTION COPY

                                RETENTION AGREEMENT

                                      BETWEEN

                                 TOYS "R" US, INC.

                                        AND

                                 MICHAEL J. MADDEN                         

                                    DATED AS OF

                                    MAY 1, 1997






<PAGE>
                                 TABLE OF CONTENTS

                                                                          Page

1.   Employment Period.......................................................1

2.   Terms of Employment.....................................................1

     (a)   Position..........................................................1

     (b)   Compensation......................................................1
          (i)   Base Salary..................................................1
          (ii)   Incentive Bonus.............................................1
          (iii)   Participation in Other Plans...............................2
          Stock Units........................................................2

3.   Termination of Employment Upon Death, Disability or Retirement..........2

4.   Other Termination of Employment.........................................2

     (a)   Company Termination...............................................2

     (b)   Good Reason.......................................................2

     (c)   Notice of Termination.............................................2

     (d)   Obligations of the Company Upon Termination Under Section 4.......2

     (e)   Cause.............................................................4

5.   Release Agreement.......................................................4

6.   Offset..................................................................4

7.   Compensation and Benefits Following Change of Control...................4

8.   Nonexclusivity of Rights................................................5

9.   Full Settlement; Legal Fees.............................................5

     (a)   No Obligation to Mitigate.........................................5

     (b)   Expenses of Contests..............................................5

10.   Certain Additional Payments by the Company.............................6

11.   Restrictions and Obligations of the Executive..........................6

     (a)   Consideration for Restrictions and Covenants......................6

<PAGE>

     (b)   Confidentiality...................................................6

     (c)   Non-Solicitation or Hire..........................................6

     (d)   Non-Competition and Consulting....................................7

     (e)   Definitions.......................................................8

     (f)   Relief............................................................8

12.   Successors.............................................................8

13.   Miscellaneous..........................................................9

     (a)   Governing Law.....................................................9

     (b)   Captions..........................................................9

     (c)   Amendment.........................................................9

     (d)   Notices...........................................................9

     (e)   Assistance to Company.............................................9

     (f)   Severability of Provisions........................................9

     (g)   Withholding......................................................10

     (h)   Waiver...........................................................10

     (i)   Arbitration......................................................10





EXHIBIT A........Separation and Release Agreement
EXHIBIT B........Definitions
EXHIBIT C........Change of Control and Tax Gross-Up

ANNEX A..........Stock Unit Agreement



<PAGE>




                            TOYS "R" US
                 RETENTION AGREEMENT


          AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a 
Delaware corporation (the "Company"), and Michael J. Madden (the "Executive"), 
dated as of May 1, 1997.  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 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 continue to serve in the Executive's current position at the Company or 
such other senior executive position to which the Executive may be appointed 
by 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 full time during normal business hours to the business and 
affairs of the Company and to use the Executive's 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 the Executive's responsibilities as an employee of 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 Chief Executive 
Officer.  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.

          (b)   Compensation.  (i)   Base Salary.  During the Employment 
Period, the Executive shall receive the Executive's 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 an annual 
incentive bonus and long-term incentive awards pursuant to the Company's 
incentive Plans and subject to the terms thereof at a level commensurate with 
the Executive's current grants and the Executive's current position or any 
more senior position(s) to which the Executive may be appointed.  Each such 

<PAGE>

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 the Executive's position.

               (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.

          3.   Termination of Employment Upon Death, Disability or Retirement.  
The Executive's employment shall terminate upon the Executive's death, 
Disability or Retirement during the Employment Period and the obligations of 
the Company upon such termination shall be limited to those benefits provided 
by the Company's Plans at the Date of Termination, except as specifically set 
forth herein or in the Stock Unit Agreement.

          4.   Other Termination of Employment.  (a)  Company Termination.  
The Company may terminate the Executive's employment during the Employment 
Period with or without Cause.  

          (b)   Good Reason.  The Executive's employment may be terminated 
during the Employment Period by the Executive for Good Reason.

          (c)   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.

          (d)   Obligations of the Company Upon Termination Under Section 4.  
If the Executive's employment shall have been terminated under Section 4(a) 
(other than for Cause) or 4(b):

               (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 (1) the Executive's pro rata Annual Base Salary payable through the 
Date of Termination to the extent not theretofore paid, (2) the targeted 
amount of the Executive's annual bonus and long-term incentive awards 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 (3) the Executive's actual 
earned annual or long-term incentive awards for any completed fiscal year or 
period not theretofore paid or deferred; 

<PAGE>
               (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 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 that would have been paid 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 stock options and except as set 
forth in this Section 4(d) and in Section 7(b)), the benefits provided under 
the Plans that the Executive would receive on an after-tax basis if the 
Executive's employment had continued for two years after the Date of 
Termination assuming for this purpose that the Executive's compensation for 
each such year would have been one-half of the amount paid pursuant to clause 
(ii) above, and the Executive shall be fully vested in any account balance and 
all other benefits continuation under such Plans; provided, however that the 
benefits provided under this clause (iii) shall be limited to the coverage 
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.

               (iv)  (1) all unvested options held by the Executive 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 
vest on the two year anniversary date of 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 continue to vest 
in accordance with their terms for two years after the Date of Termination and 
all remaining profit shares shall vest on the two year anniversary date of the 
Date of Termination, 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 (iv) and any such 
unvested profit share not permitted to be so held shall vest immediately and 
be delivered to the Executive, (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 promptly delivered to the Executive 
entirely in the form of Common Stock, $.10 par value per share, of the 
Company, (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 earlier of (x) the thirty-month anniversary date of the Date of 
Termination and (y) the expiration date of such options and (5) the Executive 
shall not be entitled to any additional grants of any stock options, 
restricted stock, other equity based or long-term awards; and

<PAGE>

               (v)  the Executive will be entitled to continuation of health 
benefits under the Plans at a level commensurate with the Executive's current 
position or more senior position(s) to which the Executive may be appointed, 
and if the Executive elects to receive such health benefits, the Company shall 
pay the medical premiums therefore for the first twenty-four months after the 
Date of Termination, and thereafter the Executive shall pay the premium 
charged to former employees of the Company pursuant to Section 4980B of the 
Code until the Executive is sixty-five years of age; 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 or more senior position(s) to which the Executive may be 
appointed; 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 (v) 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.

          (e)   Cause.  If the Executive's employment shall be terminated for 
Cause during the Employment Period or if the Executive voluntarily terminates 
employment during the Employment Period, excluding a termination for Good 
Reason, death, Disability or Retirement, the Employment Period shall terminate 
without further obligations to the Executive other than the obligation to pay 
to the Executive all payments and benefits due, in accordance with the 
Company's Plans through the Date of Termination.  

          5.   Release Agreement.  The benefits pursuant to Section 4 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.   Compensation and Benefits Following 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 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)   In the event of termination of the Executive's employment 
under Section 4(a) (other than for Cause) or 4(b), whether before or after a 
Change of Control, following a Change of Control: (i) any remaining amounts 
payable under Sections 4(d)(i), (ii) and (iii) shall be payable in a lump sum 
within 30 days after the later of the Date of Termination or the Change of 

<PAGE>

Control and (ii) in lieu of the Company's obligations under Section 4(d)(iv), 
all unvested options and equity based awards shall vest immediately on the 
later of the Date of Termination or the Change of Control and all such options 
may be exercised until the earlier of (x) the thirty-month anniversary date of 
the Date of Termination and (y) the expiration date of such options.

          8.   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.

          9.   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:  In each case solely to the extent 
that the Executive is successful with respect thereto, 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 

<PAGE>

that were determined to have been made or asserted by the Executive in bad 
faith or frivolously.

          10.   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.

          11.   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 11.  Specifically, Executive agrees to comply with the 
provisions of this Section 11 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.  

          (c)   Non-Solicitation or Hire.  During the Employment Period and 
for a two-year period following the termination of the Executive's employment 
for any reason, 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 

<PAGE>

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.

          (d)   Non-Competition and Consulting.  (i)  During the Employment 
Period and for a two-year period (the "Consulting Period") following the 
termination of the Executive's employment for any reason, 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

               (ii)  During the Consulting Period, the Executive shall 

               (x)   be available to render services to the Company as an 
independent contractor/consultant but not as an employee of the Company; and  

               (y)   perform such duties as may be reasonably requested in 
writing from time to time during the Consulting Period by the Chief Executive 
Officer; provided that such duties shall not conflict with the duties of the 
Executive for a new employer if such employment does not violate the terms of 
Section 11(d)(i)  hereof.

               (iii) Section 11(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.  

               (iv)  Nothing contained in this Section 11(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.

<PAGE>
          (e)   Definitions.  For purposes of this Section 11:

               (i)   "Restricted Business" means the 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.

               (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.

          (f)   Relief.  The parties hereto hereby acknowledge that the 
provisions of this Section 11 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 11, 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 breaches any 
of the covenants applicable to the Executive contained in this Section 11, the 
Executive will immediately return to the Company any 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.

          12.   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>
          13.   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.

          (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 11 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 11, 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.

<PAGE>
          (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>

          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.

                                             MICHAEL J. MADDEN

                                             /s/ Michael J. Madden


                                             TOYS "R" US, INC.

                                             By: /s/ Michael Goldstein
                                                Name:  Michael Goldstein
                                                Title: Chief Executive Officer


<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. 
and any successor thereto (collectively, the "Company") and Michael J. Madden 
(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 Company 
has agreed to pay the Executive certain payments and to make certain benefits 
available after the Termination Date.

     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 
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 

<PAGE>

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.  This release does not release the 
Company from any obligations due to the Executive under Section 4, 7, 9(b), 
10, 11 or 13(e) of the Executive's Retention Agreement, the Executive's 
Indemnification Agreement with the Company or under this Agreement.

     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 9(b), 11 
or 13(e) 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.

     7.   The Executive shall continue to be bound by Sections 11 and 13(e) 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 car at 
the expiration of the Consulting Period (as defined in 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 

<PAGE>

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.

     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:


                                          MICHAEL J. MADDEN



                                          ____________________________________



<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 
as of the date of the Agreement as may be increased from time to time 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 material 
breach of the Executive's fiduciary duties to the Company as an employee or 
officer; (v) a serious violation of the Toys "R" Us Ethics Agreement or any 
other serious 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 11 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 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" - See Exhibit C.

<PAGE>

          "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.

          "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, and (iv) 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 materially 
inconsistent with the requirements of Section 2(a) of the Agreement, excluding 
for this purpose an action not taken in bad faith and which is remedied by the 
Company promptly after receipt of notice thereof given by the Executive; 
provided, however, that the foregoing shall not constitute "Good Reason" if it 
is not attendant to a reduction in the Executive's Annual Base Salary or total 
target compensation, except that a request by the Company for the Executive to 
relocate outside Northeastern New Jersey shall constitute "Good Reason";

               (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 12(c) of the Agreement; or

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

          "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 

<PAGE>

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 (which date shall be not more than thirty days after the 
giving of such notice).

          "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, 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.


<PAGE>

                                                                     EXHIBIT C


                         CHANGE OF CONTROL AND TAX GROSS-UP
                         ----------------------------------



     I.   Certain Definitions

          "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: 

               (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 

<PAGE>

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.

     II.   Tax Gross-Up

          (a)   If required by Section 10 of the Agreement, in addition to the 
payments described in Sections 4 and 7 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 

<PAGE>

(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 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>






                                                                       ANNEX A

                               STOCK UNIT AGREEMENT

          STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit 
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the 
"Company"), and Michael J. Madden (the "Executive").

                               W I T N E S S E T H:

          WHEREAS, the Company has 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");

          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, subject to the approval of the Amendment by the stockholders 
of the Company at the 1997 Annual Meeting of Stockholders; 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.

          2.   Stock Unit Grant.  Subject to the approval of the Amendment by 
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and 
subject to the terms and conditions set forth in this Unit Agreement and in 
Section 10 of the Plan, the Executive is hereby granted 28,000 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 28,000 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 
forfeiture conditions of Section 3 below.  Any property attributable to the 
Shares, including, without limitation, dividends and distributions thereon, 

<PAGE>

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 forfeiture conditions of 
Section 3 below.

          3.   Forfeiture Conditions.  The Stock Units granted to the 
Executive hereunder shall be forfeited in their entirety, subject to the terms 
of the Retention Agreement, if:

               (i)   the Executive's employment with the Company terminates 
prior to the fifth anniversary of the date hereof ; or

               (ii)  the Performance Objective set forth on Exhibit A hereto 
is not achieved.

          4.   Payment of Stock Units.  As soon as practicable but no later 
than May 1, 2002, the Committee shall determine whether the Performance 
Objective set forth on Exhibit A has been achieved.  The Shares, 
together with any property attributable thereto (including, without 
limitation, dividends and distributions thereon), shall be delivered to the 
Executive promptly following May 1, 2002 unless the Executive has elected to 
defer receipt of such Shares in accordance with the terms and conditions of 
any deferred compensation program maintained by the Company or has failed to
satisfy the condition set forth in Section 3(i) hereof.  

          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 

<PAGE>

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 Unit 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:

               (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>
          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:     _________________________

                                             Title:  _________________________

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



                                             _________________________________
                                             Michael J. Madden



<PAGE>


                                                                     EXHIBIT A

                    Performance Objective Under Section 3(ii)
                          of the Stock Unit Agreement
                          ---------------------------

The consolidated net earnings of the Company in any fiscal quarter (beginning 
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or 
2000 fiscal year is at least equal to the amount of any corresponding quarter 
in 1996.  For these purposes, "consolidated net earnings" shall exclude 
extraordinary or unusual items reported by the Company as such.


<PAGE>





                                                             EXECUTION COPY

                               RETENTION AGREEMENT

                                   BETWEEN

                                TOYS "R" US, INC.

                                     AND

                               RICHARD L.  MARKEE

                             DATED AS OF MAY 1, 1997









<PAGE>
                               TABLE OF CONTENTS 
 
                                                                          Page 
 
1.   Employment Period.......................................................1 
 
2.   Terms of Employment.....................................................1 
 
     (a)   Position..........................................................1 
 
     (b)   Compensation......................................................1 
 
          (i)   Base Salary..................................................1 
          (ii)   Incentive Bonus.............................................1 
          (iii)   Participation in Other Plans...............................2 
          Stock Units........................................................2 
 
3.   Termination of Employment Upon Death, Disability or Retirement..........2 
 
4.   Other Termination of Employment.........................................2 
 
     (a)   Company Termination...............................................2 
 
     (b)   Good Reason.......................................................2 
 
     (c)   Notice of Termination.............................................2 
 
     (d)   Obligations of the Company Upon Termination Under Section 4.......2 
 
     (e)   Cause.............................................................4 
 
5.   Release Agreement.......................................................4 
 
6.   Offset..................................................................4 
 
7.   Compensation and Benefits Following Change of Control...................4 
 
8.   Nonexclusivity of Rights................................................5 
 
9.   Full Settlement; Legal Fees.............................................5 
 
     (a)   No Obligation to Mitigate.........................................5 
 
     (b)   Expenses of Contests..............................................5 
 
10.   Certain Additional Payments by the Company.............................6 
 
11.   Restrictions and Obligations of the Executive..........................6 
 
     (a)   Consideration for Restrictions and Covenants......................6 

 <PAGE>

     (b)   Confidentiality...................................................6 
 
     (c)   Non-Solicitation or Hire..........................................6 
 
     (d)   Non-Competition and Consulting....................................7 
 
     (e)   Definitions.......................................................8 
 
     (f)   Relief............................................................8 
 
12.   Successors.............................................................8 
 
13.   Miscellaneous..........................................................9 
 
     (a)   Governing Law.....................................................9 
 
     (b)   Captions..........................................................9 
 
     (c)   Amendment.........................................................9 
 
     (d)   Notices...........................................................9 
 
     (e)   Assistance to Company.............................................9 
 
     (f)   Severability of Provisions........................................9 
 
     (g)   Withholding......................................................10 
 
     (h)   Waiver...........................................................10 
 
     (i)   Arbitration......................................................10 
 
 
EXHIBIT A        Separation and Release Agreement 
EXHIBIT B        Definitions 
EXHIBIT C        Change of Control and Tax Gross-Up 
 
ANNEX A          Stock Unit Agreement 
 
 
 
 
 
 
 
 
 
 
<PAGE> 
 
                               TOYS "R" US, INC. 
                         RETENTION AGREEMENT 
 
          AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a  
Delaware corporation (the "Company"), and Richard L. Markee (the "Executive"),  
dated as of May 1, 1997.  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 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 continue to serve in the Executive's current position at the Company or  
such other senior executive position to which the Executive may be appointed  
by 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 full time during normal business hours to the business and  
affairs of the Company and to use the Executive's 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 the Executive's responsibilities as an employee of 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 Chief Executive  
Officer.  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. 
 
          (b)   Compensation.  (i)  Base Salary.  During the Employment  
Period, the Executive shall receive the Executive's 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 an annual  
incentive bonus and long-term incentive awards pursuant to the Company's  
incentive Plans and subject to the terms thereof at a level commensurate with  
the Executive's current grants and the Executive's current position or any  
more senior position(s) to which the Executive may be appointed.  Each such  

<PAGE>
 
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 the Executive's position. 
 
                (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. 
 
          3.   Termination of Employment Upon Death, Disability or Retirement.
The Executive's employment shall terminate upon the Executive's death,  
Disability or Retirement during the Employment Period and the obligations of  
the Company upon such termination shall be limited to those benefits provided  
by the Company's Plans at the Date of Termination, except as specifically set  
forth herein or in the Stock Unit Agreement. 
 
          4.   Other Termination of Employment.  (a)  Company Termination.   
The Company may terminate the Executive's employment during the Employment  
Period with or without Cause.   
 
          (b)   Good Reason.  The Executive's employment may be terminated  
during the Employment Period by the Executive for Good Reason. 
 
          (c)   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. 
 
          (d)   Obligations of the Company Upon Termination Under Section 4.   
If the Executive's employment shall have been terminated under Section 4(a)  
(other than for Cause) or 4(b): 
 
                (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 (1) the Executive's pro rata Annual Base Salary payable through the  
Date of Termination to the extent not theretofore paid, (2) the targeted  
amount of the Executive's annual bonus and long-term incentive awards 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 (3) the Executive's actual  
earned annual or long-term incentive awards for any completed fiscal year or  
period not theretofore paid or deferred;  
 
<PAGE>
                (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 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 that would have been paid 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 stock options and except as  
set forth in this Section 4(d) and in Section 7(b)), the benefits provided  
under the Plans that the Executive would receive on an after-tax basis if the  
Executive's employment had continued for two years after the Date of  
Termination assuming for this purpose that the Executive's compensation for  
each such year would have been one-half of the amount paid pursuant to clause  
(ii) above, and the Executive shall be fully vested in any account balance and  
all other benefits continuation under such Plans; provided, however that the  
benefits provided under this clause (iii) shall be limited to the coverage  
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. 
 
                (iv)   (1) all unvested options held by the Executive 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  
vest on the two year anniversary date of 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 continue to vest  
in accordance with their terms for two years after the Date of Termination and  
all remaining profit shares shall vest on the two year anniversary date of the  
Date of Termination, 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 (iv) and any such  
unvested profit share not permitted to be so held shall vest immediately and  
be delivered to the Executive, (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 promptly delivered to the Executive  
entirely in the form of Common Stock, $.10 par value per share, of the  
Company, (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 earlier of (x) the thirty-month anniversary date of the Date of  
Termination and (y) the expiration date of such options and (5) the Executive  
shall not be entitled to any additional grants of any stock options,  
restricted stock, other equity based or long-term awards; and 

<PAGE> 
                (v)   the Executive will be entitled to continuation of health  
benefits under the Plans at a level commensurate with the Executive's current  
position or more senior position(s) to which the Executive may be appointed,  
and if the Executive elects to receive such health benefits, the Company shall  
pay the medical premiums therefore for the first twenty-four months after the  
Date of Termination, and thereafter the Executive shall pay the premium  
charged to former employees of the Company pursuant to Section 4980B of the  
Code until the Executive is sixty-five years of age; 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 or more senior position(s) to which the Executive may be  
appointed; 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 (v) 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. 
 
          (e)   Cause.  If the Executive's employment shall be terminated for  
Cause during the Employment Period or if the Executive voluntarily terminates  
employment during the Employment Period, excluding a termination for Good  
Reason, death, Disability or Retirement, the Employment Period shall terminate  
without further obligations to the Executive other than the obligation to pay  
to the Executive all payments and benefits due, in accordance with the  
Company's Plans through the Date of Termination.   
 
          5.   Release Agreement.  The benefits pursuant to Section 4 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.   Compensation and Benefits Following 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 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)   In the event of termination of the Executive's employment  
under Section 4(a) (other than for Cause) or 4(b), whether before or after a  
Change of Control, following a Change of Control: (i) any remaining amounts  
payable under Sections 4(d)(i), (ii) and (iii) shall be payable in a lump sum  
within 30 days after the later of the Date of Termination or the Change of  

<PAGE>

Control and (ii) in lieu of the Company's obligations under Section 4(d)(iv),  
all unvested options and equity based awards shall vest immediately on the  
later of the Date of Termination or the Change of Control and all such options  
may be exercised until the earlier of (x) the thirty-month anniversary date of  
the Date of Termination and (y) the expiration date of such options. 
 
          8.   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. 
 
          9.   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:  In each case solely to the extent  
that the Executive is successful with respect thereto, 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  

<PAGE>

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. 
 
          10.   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. 
 
          11.   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 11.  Specifically, Executive agrees to comply with the  
provisions of this Section 11 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.   
 
          (c)   Non-Solicitation or Hire.  During the Employment Period and  
for a two-year period following the termination of the Executive's employment  
for any reason, 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,

<PAGE>
  
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. 
 
          (d)   Non-Competition and Consulting.  (i)  During the Employment  
Period and for a two-year period (the "Consulting Period") following the  
termination of the Executive's employment for any reason, 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 
 
                (ii)  During the Consulting Period, the Executive shall 
 
                (x)   be available to render services to the Company as an  
independent contractor/consultant but not as an employee of the Company; and   
 
                (y)   perform such duties as may be reasonably requested in  
writing from time to time during the Consulting Period by the Chief Executive  
Officer; provided that such duties shall not conflict with the duties of the  
Executive for a new employer if such employment does not violate the terms of  
Section 11(d)(i)  hereof. 
 
                (iii) Section 11(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.   
 
                (iv)  Nothing contained in this Section 11(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. 
 
 <PAGE>
         (e)   Definitions.  For purposes of this Section 11: 
 
                (i)   "Restricted Business" means the 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. 
 
                (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. 
 
          (f)   Relief.  The parties hereto hereby acknowledge that the  
provisions of this Section 11 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 11, 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 breaches any  
of the covenants applicable to the Executive contained in this Section 11, the  
Executive will immediately return to the Company any 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. 
 
          12.   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. 
 
          13.   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. 
 
          (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 11 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 11, 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. 
 
<PAGE>
          (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>
 
          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. 
 
 
                                              RICHARD L. MARKEE 
 
 
                                              /s/ Richard L. Markee 
 
 
                                              TOYS "R" US, INC. 
 
 
 
                                              By: /s/ Michael Goldstein 
                                                 Name: Michael Goldstein
                                                 Title: Chief Executive Officer
 
 
 
 <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.  
and any successor thereto (collectively, the "Company") and Richard L. Markee  
(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 Company  
has agreed to pay the Executive certain payments and to make certain benefits  
available after the Termination Date. 
 
     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  
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  

<PAGE>

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.  This release does not release the  
Company from any obligations due to the Executive under Section 4, 7, 9(b),  
10, 11 or 13(e) of the Executive's Retention Agreement, the Executive's  
Indemnification Agreement with the Company or under this Agreement. 
 
     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 9(b), 11  
or 13(e) 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. 
 
     7.   The Executive shall continue to be bound by Sections 11 and 13(e) 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 car at  
the expiration of the Consulting Period (as defined in 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  

<PAGE>
 
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. 
 
     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: 
 
 
                                          RICHARD L. MARKEE 
 
 
                                         ____________________________________ 
 
 
 <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  
as of the date of the Agreement as may be increased from time to time 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 material  
breach of the Executive's fiduciary duties to the Company as an employee or  
officer; (v) a serious violation of the Toys "R" Us Ethics Agreement or any  
other serious 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 11 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 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" - See Exhibit C. 
<PAGE> 

          "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. 
 
          "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, and (iv) 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 materially  
inconsistent with the requirements of Section 2(a) of the Agreement, excluding  
for this purpose an action not taken in bad faith and which is remedied by the  
Company promptly after receipt of notice thereof given by the Executive;  
provided, however, that the foregoing shall not constitute "Good Reason" if it  
is not attendant to a reduction in the Executive's Annual Base Salary or total  
target compensation, except that a request by the Company for the Executive to  
relocate outside Northeastern New Jersey shall constitute "Good Reason"; 
 
          (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  
12(c) of the Agreement; or 
 
          (iv)  notice by the Company that it is not extending the termination  
date of the Employment Period. 
 
          "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  

<PAGE>

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 (which date shall be not more than thirty days after the  
giving of such notice). 
 
          "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, 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. 
 
 
 <PAGE>
 
 
                                                                     EXHIBIT C 
 
 
                         CHANGE OF CONTROL AND TAX GROSS-UP 
                         ---------------------------------- 
 
 
 
 
 
 
     I.   Certain Definitions 
 
          "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:  
 
               (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  

<PAGE>

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. 
 
     II.   Tax Gross-Up 
 
          (a)   If required by Section 10 of the Agreement, in addition to the  
payments described in Sections 4 and 7 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  

<PAGE>

(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 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>
 
 
 
 
 
                                                                       ANNEX A 
 
                               STOCK UNIT AGREEMENT 
 
          STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit  
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the  
"Company"), and Richard L. Markee (the "Executive"). 
 
                            W I T N E S S E T H: 
 
          WHEREAS, the Company has 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"); 
 
          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, subject to the approval of the Amendment by the stockholders  
of the Company at the 1997 Annual Meeting of Stockholders; 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. 
 
          2.   Stock Unit Grant.  Subject to the approval of the Amendment by  
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and  
subject to the terms and conditions set forth in this Unit Agreement and in  
Section 10 of the Plan, the Executive is hereby granted 34,000 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 34,000 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  
forfeiture conditions of Section 3 below.  Any property attributable to the  
Shares, including, without limitation, dividends and distributions thereon,  

<PAGE>

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 forfeiture conditions of  
Section 3 below. 
 
          3.   Forfeiture Conditions.  The Stock Units granted to the  
Executive hereunder shall be forfeited in their entirety, subject to the terms  
of the Retention Agreement, if: 
 
               (i)   the Executive's employment with the Company terminates  
prior to the fifth anniversary of the date hereof ; or 
 
               (ii)  the Performance Objective set forth on Exhibit A hereto  
is not achieved. 
 
          4.   Payment of Stock Units.  As soon as practicable but no later  
than May 1, 2002, the Committee shall determine whether the Performance  
Objective set forth on Exhibit A has been achieved.  The Shares,  
together with any property attributable thereto (including, without  
limitation, dividends and distributions thereon), shall be delivered to the  
Executive promptly following May 1, 2002 unless the Executive has elected to  
defer receipt of such Shares in accordance with the terms and conditions of  
any deferred compensation program maintained by the Company or has failed
to satisfy the condition set forth in Section 3(i) hereof.   
 
          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  

 <PAGE>

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 Unit 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: 
 
          (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> 
          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:     __________________________ 
 
                                         Title:  __________________________ 
 
          I hereby acknowledge receipt of the Stock Units and agree to the  
provisions set forth in this Agreement. 
 
 
 
                                         ______________________________ 
                                         Richard L. Markee 
 
 
 <PAGE>
 
 
 
 
                                                                     EXHIBIT A 
 
                      Performance Objective Under Section 3(ii) 
                            of the Stock Unit Agreement 
                            --------------------------- 
 
The consolidated net earnings of the Company in any fiscal quarter (beginning  
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or  
2000 fiscal year is at least equal to the amount of any corresponding quarter  
in 1996.  For these purposes, "consolidated net earnings" shall exclude  
extraordinary or unusual items reported by the Company as such. 



<PAGE>



                                                                EXECUTION COPY




                              RETENTION AGREEMENT


                                   BETWEEN


                              TOYS "R" US, INC.


                                    AND


                              GREGORY R. STALEY


                                 DATED AS OF


                                 May 1, 1997









<PAGE>






                                                                    STALEY


                                 TABLE OF CONTENTS

                                                                         Page

1.   Employment Period.....................................................1

2.   Terms of Employment...................................................1

     (a)   Position........................................................1

     (b)   Compensation....................................................1
           (i)   Base Salary...............................................1
           (ii)  Incentive Bonus...........................................1
           (iii)   Participation in Other Plans............................2
            Stock Units....................................................2

3.   Termination of Employment Upon Death, Disability or Retirement........2

4.   Other Termination of Employment.......................................2

     (a)   Company Termination.............................................2

     (b)   Good Reason; Change of Reporting Requirement....................2

     (c)   Notice of Termination...........................................2

     (d)   Obligations of the Company Upon Termination Under Section 4.....3

     (e)   Cause...........................................................4

     (f)   Reporting Requirements..........................................4

5.   Release Agreement.....................................................4

6.   Offset................................................................5

7.   Compensation and Benefits Following Change of Control.................5

8.   Nonexclusivity of Rights..............................................5

9.   Full Settlement; Legal Fees...........................................5

     (a)   No Obligation to Mitigate.......................................5

     (b)   Expenses of Contests............................................5

10.   Certain Additional Payments by the Company...........................6



                                      -i-                           STALEY


11.   Restrictions and Obligations of the Executive........................6

      (a)   Consideration for Restrictions and Covenants...................6

<PAGE>
      (b)   Confidentiality................................................6

      (c)   Non-Solicitation or Hire ......................................7

      (d)   Non-Competition and Consulting.................................7

      (e)   Definitions....................................................8

      (f)   Relief.........................................................8

12.   Successors...........................................................9

13.   Miscellaneous........................................................9

      (a)   Governing Law..................................................9

      (b)   Captions.......................................................9

      (c)   Amendment......................................................9

      (d)   Notices........................................................9

      (e)   Assistance to Company..........................................9

      (f)   Severability of Provisions.....................................10

      (g)   Withholding....................................................10

      (h)   Waiver.........................................................10

      (i)   Arbitration....................................................10


EXHIBIT A       Separation and Release Agreement
EXHIBIT B       Definitions
EXHIBIT C       Change of Control and Tax Gross-Up

ANNEX A         Stock Unit Agreement

<PAGE>




                                 -ii-                               STALEY



                              TOYS "R" US, INC.
                            RETENTION AGREEMENT


          AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a 
Delaware corporation (the "Company"), and Gregory R. Staley (the "Executive"), 
dated as of May 1, 1997.  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 , at least 
six months prior to the scheduled expiration of the Employment Period, the 
Company 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 
continue to serve in the Executive's current position at the Company or such 
other senior executive position to which the Executive may be appointed by 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 full time during normal business hours to the business and 
affairs of the Company and to use the Executive's 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 the Executive's responsibilities as an employee of 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 Chief Executive Officer.  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.

          (b)    Compensation.  (i)  Base Salary.  During the Employment 
Period, the Executive shall receive the Executive's 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 an annual 
incentive bonus and long-term incentive awards pursuant to the Company's


                                 -1-                           STALEY
<PAGE>

incentive Plans and subject to the terms thereof at a level commensurate with 
the Executive's current grants and the Executive's current position or any more 
senior position(s) to which the Executive may be appointed.  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 the Executive's position.

                 (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.

          3.    Termination of Employment Upon Death, Disability or Retirement.
The Executive's employment shall terminate upon the Executive's death, 
Disability or Retirement during the Employment Period and the obligations of 
the Company upon such termination shall be limited to those benefits provided 
by the Company's Plans at the Date of Termination, except as specifically set 
forth herein or in the Stock Unit Agreement.

          4.    Other Termination of Employment.  (a)  Company Termination.  
The Company may terminate the Executive's employment during the Employment 
Period with or without Cause.  

          (b)  Good Reason; Change of Reporting Requirements.  (i)  The 
Executive's employment may be terminated during the Employment Period by the 
Executive for Good Reason.

               (ii)  Due to the unique nature of the Company's International 
Division and the resulting burdens imposed on the Executive thereby, 
notwithstanding anything to the contrary contained herein, the Executive's 
employment may be terminated during the Employment Period by the Executive by 
providing written notice to the Company within 30 days of the first day on 
which the Executive no longer reports directly to either Michael Goldstein or 
Robert C. Nakasone, in which event the "Date of Termination" for purposes 
hereof shall be the date set forth in such notice (which shall not be less than 
60 days from the date of such notice unless the Company consents thereto in 
writing).

           (c)  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.


                                   -2-                           STALEY
<PAGE>


           (d)  Obligations of the Company Upon Termination Under Section 4.  
If the Executive's employment shall have been terminated under Section 4(a) 
(other than for Cause) or 4(b)(i):

                (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 (1) the Executive's pro rata Annual Base Salary payable through the 
Date of Termination to the extent not theretofore paid, (2) the targeted amount 
of the Executive's annual bonus and long-term incentive awards 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 (3) the Executive's actual earned annual or 
long-term incentive awards 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 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 that would have been paid 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 stock options and except as set 
forth in this Section 4(d) and in Section 7(b)), the benefits provided under 
the Plans that the Executive would receive on an after-tax basis if the 
Executive's employment had continued for two years after the Date of 
Termination assuming for this purpose that the Executive's compensation for 
each such year would have been one-half of the amount paid pursuant to clause 
(ii) above, and the Executive shall be fully vested in any account balance and 
all other benefits continuation under such Plans; provided, however that the
benefits provided under this clause (iii) shall be limited to the coverage 
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.

               (iv)  (1) all unvested options held by the Executive 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 
vest on the two year anniversary date of 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 continue to vest 
in accordance with their terms for two years after the Date of Termination and 
all remaining profit shares shall vest on the two year anniversary date of the

                                   -3-                           STALEY
<PAGE>

Date of Termination,  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 (iv) and any such unvested 
profit share not permitted to be so held shall vest immediately and be 
delivered to the Executive, (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 promptly delivered to the Executive 
entirely in the form of Common Stock, $.10 par value per share, of the Company, 
(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 earlier of (x) the thirty-month anniversary date of the Date of 
Termination and (y) the expiration date of such options and (5) the Executive 
shall not be entitled to any additional grants of any stock options, restricted 
stock, other equity based or long-term awards; and

                (v)  the Executive will be entitled to continuation of health 
benefits under the Plans at a level commensurate with the Executive's current 
position or more senior position(s) to which the Executive may be appointed, 
and if the Executive elects to receive such health benefits, the Company shall 
pay the medical premiums therefore for the first twenty-four months after the 
Date of Termination, and thereafter the Executive shall pay the premium charged 
to former employees of the Company pursuant to Section 4980B of the Code until 
the Executive is sixty-five years of age; 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 or more 
senior position(s) to which the Executive may be appointed; 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 (v) 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.

          (e)  Cause.  If the Executive's employment shall be terminated for 
Cause during the Employment Period or if the Executive voluntarily terminates 
employment during the Employment Period, excluding a termination for Good 
Reason, death, Disability or Retirement, the Employment Period shall terminate 
without further obligations to the Executive other than the obligation to pay 
to the Executive all payments and benefits due, in accordance with the 
Company's Plans through the Date of Termination.  

          (f)  Reporting Requirements.  If the Executive's employment shall be 
terminated by the Executive pursuant to Section 4(b)(ii), the Company shall 
not make the payment described in Section 4(d) hereof, and the Employment

                                   -4-                           STALEY
<PAGE>

Period shall terminate without further obligations to the Executive other than 
the obligation to pay to the Executive all payments and benefits due, in 
accordance with the Company's Plans through the Date of Termination.

          5.  Release Agreement.  The benefits pursuant to Section 4 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.  Compensation and Benefits Following 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 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)  In the event of termination of the Executive's employment under 
Section 4(a) (other than for Cause) or 4(b)(i) (but not 4(b)(ii)), whether 
before or after a Change of Control, following a Change of Control: (i) any 
remaining amounts payable under Sections 4(d)(i), (ii) and (iii) shall be 
payable in a lump sum within 30 days after the later of the Date of Termination 
or the Change of Control and (ii) in lieu of the Company's obligations under 
Section 4(d)(iv), all unvested options and equity based awards shall vest 
immediately on the later of the Date of Termination or the Change of Control 
and all such options may be exercised until the earlier of (x) the thirty-month 
anniversary date of the Date of Termination and (y) the expiration date of such 
options.

          8.  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.

          9.  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.

      
                             -5-                           STALEY

<PAGE>
          (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:  In each case solely to the extent that 
the Executive is successful with respect thereto, 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),  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),   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.

          10.  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.

          11.  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 11.  Specifically, Executive agrees to comply with the

                                   -6-                           STALEY
<PAGE>

provisions of this Section 11 irrespective of whether the Executive is entitled 
to receive any payments under Section 3 or 4 of this Agreement; , r, that, 
notwithstanding anything to the contrary contained herein or in the Release 
Agreement, the Executive shall not be bound by the provisions of Section 11(d) 
if the Executive's employment is terminated pursuant to Section 4(b)(ii).

          (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.

          (c)  Non-Solicitation or Hire.  During the Employment Period and for 
a two-year period following the termination of the Executive's employment for 
any reason, 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.

          (d)  Non-Competition and Consulting.  (i)  During the Employment 
Period and for a two-year period (the "Consulting Period") following the 
termination of the Executive's employment for any reason, the Executive shall 
not, directly or indirectly:

                                   -7-                           STALEY
<PAGE>
              (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

             (ii)  During the Consulting Period, the Executive shall 

              (x)  be available to render services to the Company as an
     independent contractor/consultant but not as an employee of the Company;
     and  

              (y)  perform such duties as may be reasonably requested in
     writing from time to time during the Consulting Period by the Chief
     Executive Officer;  that such duties shall not conflict with the duties of
     the Executive for a new employer if such employment does not violate the
     terms of Section 11(d)(i) hereof.

            (iii)  Section 11(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.

             (iv)  Nothing contained in this Section 11(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.

          (e)  Definitions.  For purposes of this Section 11:

               (i)  "Restricted Business" means the 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.

              (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.


                                   -8-                           STALEY
<PAGE>

         (f)  Relief.  The parties hereto hereby acknowledge that the 
provisions of this Section 11 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 11, 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 breaches any 
of the covenants applicable to the Executive contained in this Section 11, the 
Executive will immediately return to the Company any 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.

         12.  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.

         13.  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.


                                   -9-                           STALEY
<PAGE>

         (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.

         (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 11 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 11, 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.

                                   -10-                           STALEY
<PAGE>

          (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.






































                                   -11-                           STALEY
<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.


                                            GREGORY R. STALEY


                                            /s/ Gregory R. Staley

                                            TOYS "R" US, INC.


                                            By: /s/ Michael Goldstein
                                               Name: Michael Goldstein
                                               Title: Chief Executive Officer








                                  -12-                           STALEY
<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. 
and any successor thereto (collectively, the "Company") and Gregory R. Staley 
(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 Company 
has agreed to pay the Executive certain payments and to make certain benefits 
available after the Termination Date.

     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 
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

                                   A-1                           STALEY
<PAGE>

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.  This release does not release the Company 
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or 
13(e) of the Executive's Retention Agreement, the Executive's Indemnification 
Agreement with the Company or under this Agreement.

     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 9(b), 11 
or 13(e) 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.

     7.  The Executive shall continue to be bound by Sections 11 and 13(e) 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 car at 
the expiration of the Consulting Period (as defined in 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.
                                   A-2                           STALEY
<PAGE>

     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.

     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:


                                                  GREGORY R. STALEY


                                                  __________________________





                                   A-3                           STALEY

<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 as of the 
date of the Agreement as may be increased from time to time 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 material 
breach of the Executive's fiduciary duties to the Company as an employee or 
officer; (v) a serious violation of the Toys "R" Us Ethics Agreement or any 
other serious 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 11 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 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" - See Exhibit C.

                                   B-1                           STALEY
<PAGE>
          "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.

          "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, and (iv) 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 materially
     inconsistent  with  the  requirements  of  Section  2(a) of the  Agreement,
     excluding  for this  purpose  an action not taken in bad faith and which is
     remedied by the Company  promptly  after receipt of notice thereof given by
     the Executive;  provided,  however, that the foregoing shall not constitute
     "Good  Reason" if it is not  attendant  to a reduction  in the  Executive's
     Annual Base Salary or total target  compensation,  except that a request by
     the Company for the Executive to relocate  outside  Northeastern New Jersey
     shall constitute "Good Reason";
         (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
     12(c) of the Agreement; or

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


                                   B-2                           STALEY

<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 (which date shall be not more than thirty days after the 
giving of such notice).

         "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, 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.











                                B-3                           STALEY

<PAGE>

                                                                  EXHIBIT C


                         CHANGE OF CONTROL AND TAX GROSS-UP

     I.  Certain Definitions

         "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 notconstitute a Change of Control: (i) any acquisition by the
Company or any ofits subsidiaries, (ii) any acquisition by any employee benefit 
plan (or related trust) sponsored or maintained by the Company or any subsidiary
of theCompany, (iii) any acquisition by any Person pursuant to a transaction 
thatcomplies 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:

               (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

                                   C-1                           STALEY
<PAGE>

     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.

     II.  Tax Gross-Up

          (a)  If required by Section 10 of the Agreement, in addition to the 
payments described in Sections 4 and 7 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 (, 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

                                   C-2                           STALEY
<PAGE>

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 
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, further, however that the Company shall pay and indemnify 
the Executive from and against all costs and expenses incurred in connection 
with such contest; provided, 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).


                                   C-3                           STALEY

<PAGE>

                                                                ANNEX A


                           STOCK UNIT AGREEMENT

          STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit 
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the 
"Company"), and Gregory R. Staley (the "Executive").

                           W I T N E S S E T H:

          WHEREAS, the Company has 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");

          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, subject to the approval of the Amendment by the stockholders 
of the Company at the 1997 Annual Meeting of Stockholders; 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.

          2.  Stock Unit Grant.  Subject to the approval of the Amendment by 
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and 
subject to the terms and conditions set forth in this Unit Agreement and in 
Section 10 of the Plan, the Executive is hereby granted 33,000 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 33,000 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

                                                                      STALEY
<PAGE>


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 
forfeiture conditions of Section 3 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 forfeiture conditions of 
Section 3 below.

          3.  Forfeiture Conditions.  The Stock Units granted to the Executive 
hereunder shall be forfeited in their entirety, subject to the terms of the 
Retention Agreement, if:

              (i)  the Executive's employment with the Company terminates
          prior to the fifth anniversary of the date hereof; or

             (ii)  the Performance Objective set forth on Exhibit A hereto is
          not achieved.

          4.  Payment of Stock Units.  As soon as practicable but no later 
than May 1, 2002, the Committee shall determine whether the Performance 
Objective set forth on Exhibit A has been achieved.  The Shares, 
together with any property attributable thereto (including, without 
limitation, dividends and distributions thereon), shall be delivered to the 
Executive promptly following May 1, 2002 unless the Executive has elected to 
defer receipt of such Shares in accordance with the terms and conditions of 
any deferred compensation program maintained by the Company or has failed to 
satisfy the condition set forth in Section 3(i) hereof.

          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.

                                 -2-                                    STALEY
<PAGE>

          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 Unit 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:

              (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.









                                 -3-                                    STALEY
<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:________________________

                                                 Title:_____________________

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


                                                 ___________________________
                                                 Gregory R. Staley


































                                 -4-                                   STALEY

<PAGE>


                                                               EXHIBIT A


                   Performance Objective Under Section 3(ii)
                               of the Stock Unit Agreement


The consolidated net earnings of the Company in any fiscal quarter (beginning 
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or 
2000 fiscal year is at least equal to the amount of any corresponding quarter 
in 1996.  For these purposes, "consolidated net earnings" shall exclude 
extraordinary or unusual items reported by the Company as such.



<PAGE>





                                                               EXECUTION COPY
 
                                RETENTION AGREEMENT

                                      BETWEEN

                                 TOYS "R" US, INC.
  
                                       AND

                                 ROBERT J. WEINBERG 

                                    DATED AS OF                              

                                     MAY 1, 1997

<PAGE>
                                  TABLE OF CONTENTS
                                                                    Page
1.   Employment Period.................................................4

2.   Terms of Employment...............................................4

     (a)   Position....................................................4

     (b)   Compensation................................................4

          (i)   Base Salary............................................4
         (ii)   Incentive Bonus........................................4
        (iii)   Participation in Other Plans...........................5
        Stock Units....................................................5

3.   Termination of Employment Upon Death, Disability or Retirement....5

4.   Other Termination of Employment...................................5

    (a)   Company Termination..........................................5

    (b)   Good Reason..................................................5

    (c)   Notice of Termination........................................5

    (d)   Obligations of the Company Upon Termination Under Section 4..5

    (e)   Cause........................................................7

5.   Release Agreement.................................................7

6.   Offset............................................................7

7.   Compensation and Benefits Following Change of Control.............7

8.   Nonexclusivity of Rights..........................................8

9.   Full Settlement; Legal Fees.......................................8

    (a)   No Obligation to Mitigate....................................8

    (b)   Expenses of Contests.........................................8

10.   Certain Additional Payments by the Company.......................9

11.   Restrictions and Obligations of the Executive....................9

     (a)   Consideration for Restrictions and Covenants................9
<PAGE>

     (b)   Confidentiality.............................................9

     (c)   Non-Solicitation or Hire....................................9

     (d)   Non-Competition and Consulting.............................10

     (e)   Definitions................................................11

     (f)   Relief.....................................................11

12.   Successors......................................................11

13.   Miscellaneous...................................................12

     (a)   Governing Law..............................................12

     (b)   Captions...................................................12

     (c)   Amendment..................................................12

     (d)   Notices....................................................12

     (e)   Assistance to Company......................................12

     (f)   Severability of Provisions.................................12

     (g)   Withholding................................................13

     (h)   Waiver.....................................................13

     (i)   Arbitration................................................13



EXHIBIT A          Separation and Release Agreement
EXHIBIT B          Definitions
EXHIBIT C          Change of Control and Tax Gross-Up

ANNEX A          Stock Unit Agreement







<PAGE>




                               TOYS "R" US, INC.
                             RETENTION AGREEMENT

          AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a 
Delaware corporation (the "Company"), and Robert J. Weinberg (the "Executive"), 
dated as of May 1, 1997.  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 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 
continue to serve in the Executive's current position at the Company or such 
other senior executive position to which the Executive may be appointed by 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 full time during normal business hours to the 
business and affairs of the Company and to use the Executive's 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 the Executive's responsibilities as an 
employee of 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 Chief 
Executive Officer.  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.

          (b)     Compensation.  (i)   Base Salary.  During the Employment 
Period, the Executive shall receive the Executive's 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 
an annual incentive bonus and long-term incentive awards pursuant to the 
Company's incentive Plans and subject to the terms thereof at a level 
commensurate with the Executive's current grants and the Executive's current 
position or any more senior position(s) to which the Executive may be 

<PAGE>

appointed.  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 the Executive's position.

                    (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.

          3.     Termination of Employment Upon Death, Disability or 
Retirement.  The Executive's employment shall terminate upon the Executive's 
death, Disability or Retirement during the Employment Period and the 
obligations of the Company upon such termination shall be limited to those 
benefits provided by the Company's Plans at the Date of Termination, except as 
specifically set forth herein or in the Stock Unit Agreement.

          4.     Other Termination of Employment.  (a)  Company Termination.  
The Company may terminate the Executive's employment during the Employment 
Period with or without Cause.  

          (b)     Good Reason.  The Executive's employment may be terminated 
during the Employment Period by the Executive for Good Reason.

          (c)     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.

          (d)     Obligations of the Company Upon Termination Under Section 4.  
If the Executive's employment shall have been terminated under Section 4(a) 
(other than for Cause) or 4(b):

                    (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 (1) the Executive's pro rata Annual Base Salary payable through 
the Date of Termination to the extent not theretofore paid, (2) the targeted 
amount of the Executive's annual bonus and long-term incentive awards 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 (3) the Executive's actual 
earned annual or long-term incentive awards for any completed fiscal year or 
period not theretofore paid or deferred; 

<PAGE>

                    (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 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 that would have been paid 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 stock options and 
except as set forth in this Section 4(d) and in Section 7(b)), the benefits 
provided under the Plans that the Executive would receive on an after-tax basis 
if the Executive's employment had continued for two years after the Date of 
Termination assuming for this purpose that the Executive's compensation for 
each such year would have been one-half of the amount paid pursuant to clause 
(ii) above, and the Executive shall be fully vested in any account balance and 
all other benefits continuation under such Plans; provided, however that the 
benefits provided under this clause (iii) shall be limited to the coverage 
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.

                    (iv)     (1) all unvested options held by the Executive 
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 vest on the two year anniversary date of 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 continue to vest 
in accordance with their terms for two years after the Date of Termination and 
all remaining profit shares shall vest on the two year anniversary date of the 
Date of Termination, 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 (iv) and any such 
unvested profit share not permitted to be so held shall vest immediately and be 
delivered to the Executive, (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 promptly delivered to the Executive 
entirely in the form of Common Stock, $.10 par value per share, of the Company, 
(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 earlier of (x) the thirty-month anniversary date of the Date of 
Termination and (y) the expiration date of such options and (5) the Executive 
shall not be entitled to any additional grants of any stock options, restricted 
stock, other equity based or long-term awards; and

<PAGE>

                    (v)     the Executive will be entitled to continuation of 
health benefits under the Plans at a level commensurate with the Executive's 
current position or more senior position(s) to which the Executive may be 
appointed, and if the Executive elects to receive such health benefits, the 
Company shall pay the medical premiums therefore for the first twenty-four 
months after the Date of Termination, and thereafter the Executive shall pay 
the premium charged to former employees of the Company pursuant to Section 
4980B of the Code until the Executive is sixty-five years of age; 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 or more senior position(s) to which the Executive may be 
appointed; 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 (v) 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.

          (e)     Cause.  If the Executive's employment shall be terminated for 
Cause during the Employment Period or if the Executive voluntarily terminates 
employment during the Employment Period, excluding a termination for Good 
Reason, death, Disability or Retirement, the Employment Period shall terminate 
without further obligations to the Executive other than the obligation to pay 
to the Executive all payments and benefits due, in accordance with the 
Company's Plans through the Date of Termination.  

          5.     Release Agreement.  The benefits pursuant to Section 4 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.     Compensation and Benefits Following 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 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)     In the event of termination of the Executive's employment 
under Section 4(a) (other than for Cause) or 4(b), whether before or after a 
Change of Control, following a Change of Control: (i) any remaining amounts 
payable under Sections 4(d)(i), (ii) and (iii) shall be payable in a lump sum 
within 30 days after the later of the Date of Termination or the Change of 

<PAGE>

Control and (ii) in lieu of the Company's obligations under Section 4(d)(iv), 
all unvested options and equity based awards shall vest immediately on the 
later of the Date of Termination or the Change of Control and all such options 
may be exercised until the earlier of (x) the thirty-month anniversary date of 
the Date of Termination and (y) the expiration date of such options.

          8.     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.

          9.     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:  In each case solely to the extent that 
the Executive is successful with respect thereto, 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 

<PAGE>

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.

          10.     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.

          11.     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 11.  Specifically, Executive agrees to comply with the 
provisions of this Section 11 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.  

          (c)     Non-Solicitation or Hire.  During the Employment Period and 
for a two-year period following the termination of the Executive's employment 
for any reason, 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 

<PAGE>

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.

          (d)     Non-Competition and Consulting.  (i)  During the Employment 
Period and for a two-year period (the "Consulting Period") following the 
termination of the Executive's employment for any reason, 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

                    (ii)     During the Consulting Period, the Executive shall 

                    (x)     be available to render services to the Company as 
an independent contractor/consultant but not as an employee of the Company; and

                    (y)     perform such duties as may be reasonably requested 
in writing from time to time during the Consulting Period by the Chief 
Executive Officer; provided that such duties shall not conflict with the duties 
of the Executive for a new employer if such employment does not violate the 
terms of Section 11(d)(i)  hereof.

                    (iii)     Section 11(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.  

                    (iv)     Nothing contained in this Section 11(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.

<PAGE>
          (e)     Definitions.  For purposes of this Section 11:

                         (i)     "Restricted Business" means the 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.

                         (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.

          (f)     Relief.  The parties hereto hereby acknowledge that the 
provisions of this Section 11 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 11, 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 breaches any 
of the covenants applicable to the Executive contained in this Section 11, the 
Executive will immediately return to the Company any 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.

          12.     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>

          13.     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.

          (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 11 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 11, 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.

<PAGE>
          (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>

          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 J. WEINBERG

                                           /s/ Robert J. Weinberg
                                          
                                           TOYS "R" US, INC.
 

                                           By: /s/ Michael Goldstein
                                           Name: Michael Goldstein
                                           Title: Chief Executive Officer


<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. 
and any successor thereto (collectively, the "Company") and Robert J. Weinberg 
(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 
Company has agreed to pay the Executive certain payments and to make certain 
benefits available after the Termination Date.

     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 
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 

<PAGE>

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.  This release does not release the Company 
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or 
13(e) of the Executive's Retention Agreement, the Executive's Indemnification 
Agreement with the Company or under this Agreement.

     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 9(b), 11 
or 13(e) 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.

     7.     The Executive shall continue to be bound by Sections 11 and 13(e) 
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 car at 
the expiration of the Consulting Period (as defined in 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 

<PAGE>

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.

     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 J. WEINBERG


                                    ------------------------------






<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 as 
of the date of the Agreement as may be increased from time to time 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 material 
breach of the Executive's fiduciary duties to the Company as an employee or 
officer; (v) a serious violation of the Toys "R" Us Ethics Agreement or any 
other serious 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 11 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 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" - See Exhibit C.
<PAGE>

          "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.

          "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, and (iv) 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 materially 
inconsistent with the requirements of Section 2(a) of the Agreement, excluding 
for this purpose an action not taken in bad faith and which is remedied by the 
Company promptly after receipt of notice thereof given by the Executive; 
provided, however, that the foregoing shall not constitute "Good Reason" if it 
is not attendant to a reduction in the Executive's Annual Base Salary or total 
target compensation, except that a request by the Company for the Executive to 
relocate outside Northeastern New Jersey shall constitute "Good Reason";

          (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 12(c) of the Agreement; or

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

          "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 

<PAGE>

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 (which date shall be not more than thirty days after the 
giving of such notice).

          "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, 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.


<PAGE>




                                                                      EXHIBIT C

                            CHANGE OF CONTROL AND TAX GROSS-UP



     I.    Certain Definitions

           "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: 

                    (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 

<PAGE>

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.

     II.    Tax Gross-Up

          (a)     If required by Section 10 of the Agreement, in addition to 
the payments described in Sections 4 and 7 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 

<PAGE>

(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 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>




                                                                        ANNEX A

                              STOCK UNIT AGREEMENT

          STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit 
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the 
"Company"), and Robert J. Weinberg (the "Executive").

                             W I T N E S S E T H:

          WHEREAS, the Company has 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");

          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, subject to the approval of the Amendment by the stockholders 
of the Company at the 1997 Annual Meeting of Stockholders; 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.

          2.     Stock Unit Grant.  Subject to the approval of the Amendment 
by the stockholders of the Company at the 1997 Annual Meeting of Stockholders 
and subject to the terms and conditions set forth in this Unit Agreement and 
in Section 10 of the Plan, the Executive is hereby granted 23,000 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 23,000 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 
forfeiture conditions of Section 3 below.  Any property attributable to the 
Shares, including, without limitation, dividends and distributions thereon, 

<PAGE>

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 forfeiture conditions of 
Section 3 below.

          3.     Forfeiture Conditions.  The Stock Units granted to the 
Executive hereunder shall be forfeited in their entirety, subject to the terms 
of the Retention Agreement, if:

               (i) the Executive's employment with the Company terminates 
prior to the fifth anniversary of the date hereof ; or

               (ii) the Performance Objective set forth on Exhibit A hereto is 
not achieved.

          4.     Payment of Stock Units.  As soon as practicable but no later 
than May 1, 2002, the Committee shall determine whether the Performance 
Objective set forth on Exhibit A has been achieved.  The Shares, together
with any property attributable thereto (including, without limitation,
dividends and distributions thereon), shall be delivered to the Executive
promptly following May 1, 2002 unless the Executive has elected to 
defer receipt of such Shares in accordance with the terms and conditions of 
any deferred compensation program maintained by the Company or has
failed to satisfy the conditions set forth in Section 3(i) hereof.

          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 

<PAGE>

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 Unit 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:

                    (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>

          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:          
                                           ------------------------------
                                        Title:          
                                              ---------------------------

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


                                           --------------------------------
                                           Robert J. Weinberg


<PAGE>


                                                                      EXHIBIT A

                    Performance Objective Under Section 3(ii)
                           of the Stock Unit Agreement

The consolidated net earnings of the Company in any fiscal quarter (beginning 
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or 
2000 fiscal year is at least equal to the amount of any corresponding quarter 
in 1996.  For these purposes, "consolidated net earnings" shall exclude 
extraordinary or unusual items reported by the Company as such.



<PAGE>