1999 Stock Plan - eToys Inc.

1999 Stock Plan - eToys Inc.

 eTOYS INC.

                     1999 STOCK PLAN

     1.   PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's
business. Options granted under the Plan may be either Incentive Stock
Options (as defined under Section 422 of the Code) or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant of an Option
and subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder. Stock Purchase Rights may also be granted
under the Plan.

     2.   DEFINITIONS. As used herein, the following definitions shall apply:

          (a)  "ADMINISTRATOR" means the Board or its Committee appointed
pursuant to Section 4 of the Plan.

          (b)  "AFFILIATE" means an entity other than a Subsidiary (as
defined below) in which the Company owns an equity interest or which,
together with the Company, is under common control of a third person or
entity.

          (c)  "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations
and requirements shall be in place from time to time.

          (d)  "BOARD" means the Board of Directors of the Company.

          (e)  "CAUSE" for termination of a Participant's Continuous Service
Status will exist if the Participant is terminated for any of the following
reasons: (i) Participant's willful failure substantially to perform his or
her duties and responsibilities to the Company or any Subsidiary, Parent,
Affiliate or successor thereto, as appropriate; (ii) Participant's repeated
unexplained or unjustified absence from the Company or any Subsidiary,
Parent, Affiliate or successor thereto, as appropriate; (iii) Participant's
commission of any act of fraud, embezzlement, dishonesty or any other willful
and serious misconduct that has caused or is reasonably expected to result in
material injury to the Company or to any Subsidiary, Parent, Affiliate or
successor thereto; (iv) unauthorized use or disclosure by Participant of any
proprietary information or trade secrets of the Company or any other party to
whom the Participant owes an obligation of nondisclosure as a result of his
or her relationship with the Company or a Subsidiary, Parent, Affiliate or
successor thereto; or (iv) Participant's willful breach of any of his or her
obligations under any written agreement or covenant with the Company or with
any Subsidiary, Parent, Affiliate or successor to the Company. The



determination as to whether a Participant is being terminated for Cause shall
be made in good faith by the Company or a Subsidiary, Parent, Affiliate or
successor thereto, as appropriate, and shall be final and binding on the
Participant. The foregoing definition does not in any way limit the ability
of the Company or a Subsidiary, Parent, Affiliate or successor thereto to
terminate a Participant's employment or consulting relationship at any time
as provided in Section 5(c) below.

          (f)  "CHANGE OF CONTROL" means a sale of all or substantially all
of the Company's assets, or any merger or consolidation of the Company with
or into another corporation other than a merger or consolidation in which the
holders of more than 50% of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.

          (g)  "CODE" means the Internal Revenue Code of 1986, as amended.   

          (h)  "COMMITTEE" means one or more committees or subcommittees of
the Board appointed by the Board to administer the Plan in accordance with
Section 4 below.

          (i)  "COMMON STOCK" means the Common Stock of the Company.

          (j)  "COMPANY" means eToys Inc., a Delaware corporation.

          (k)  "CONSULTANT" means any person, including an advisor, who
renders services to the Company or any Parent, Subsidiary or Affiliate and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.

          (l)  "CONTINUOUS SERVICE STATUS" means the absence of any
interruption or termination of service as an Employee or Consultant to the
Company or a Parent, Subsidiary or Affiliate. Continuous Service Status shall
not be considered interrupted in the case of (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the Administrator,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the
Company or between the Company, its Parent(s), Subsidiaries, Affiliates or
their respective successors. Unless otherwise determined by the Administrator
or the Company, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute a termination of Continuous
Service Status.

          (m)  "CORPORATE TRANSACTION" means a sale of all or substantially
all of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.

          (n)  "DIRECTOR" means a member of the Board.




          (o)  "EMPLOYEE" means any person (including, if appropriate, any
Named Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute
"employment" of such Director by the Company.

          (p)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

          (q)  "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:

               (i)    If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange on the date of determination
(or if no trading or bids occurred on the date of determination, on the last
trading day prior to the date of determination), as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems reliable;

               (ii)   If the Common Stock is quoted on the Nasdaq System (but
not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock for the date of determination (or if no bids occurred on the date of
determination, on the last trading day prior to the date of determination); or

               (iii)  In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (r)  "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code,
as designated in the applicable Option Agreement.

          (s)  "INVOLUNTARY TERMINATION" means termination of a Participant's
Continuous Service Status under the following circumstances: (i) termination
without Cause by the Company or a Subsidiary, Parent, Affiliate or successor
thereto, as appropriate; or (ii) voluntary termination by the Participant
following (A) a material reduction in the Participant's job responsibilities,
provided that neither a mere change in title alone nor reassignment following
a Change of Control to a position that is substantially similar to the
position held prior to the Change of Control shall constitute a material
reduction in job responsibilities; (B) without Participant's prior written
approval, the Company or a Subsidiary, Parent, Affiliate or successor
thereto, as appropriate, requires Participant to relocate to a facility or
location more than 50 miles from the Company's location at the time of the
Change of Control, provided that required travel on corporate business to an
extent consistent with Participant's job responsibilities does not constitute
such a forced relocation; or (C) a reduction in Participant's then-current
base salary, provided that an across-the-board reduction in the salary level
of all other employees or consultants in positions similar to the
Participant's by the same percentage amount as part of a general salary level
reduction shall not constitute such a salary reduction.



          (t)  "LISTED SECURITY" means any security of the Company that is
listed or approved for listing on a national securities exchange or
designated or approved for designation as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc.

          (u)  "NAMED EXECUTIVE" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four most highly compensated
officers of the Company (other than the chief executive officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.

          (v)  "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.

          (w)  "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16(a) of the Exchange Act and the rules and
regulations promulgated thereunder.

          (x)  "OPTION" means a stock option granted pursuant to the Plan.

          (y)  "OPTION AGREEMENT" means a written document, the form(s) of
which shall be approved from time to time by the Administrator, reflecting
the terms of an Option granted under the Plan and includes any documents
attached to or incorporated into such Option Agreement, including, but not
limited to, a notice of stock option grant and a form of exercise notice.

          (z)  "OPTION EXCHANGE PROGRAM" means a program approved by the
Administrator whereby outstanding Options are exchanged for Options with a
lower exercise price.

          (aa) "OPTIONED STOCK" means the Common Stock subject to an Option.

          (bb) "OPTIONEE" means an Employee or Consultant who receives an
Option.

          (cc) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(c) of the Code.

          (dd) "PARTICIPANT" means any holder of one or more Options or Stock
Purchase Rights, or the Shares issuable or issued upon exercise of such
awards, under the Plan.

          (ee) "PLAN" means this 1999 Stock Plan.

          (ff) "REPORTING PERSON" means an Officer, Director or greater than
10% stockholder of the Company within the meaning of Rule 16a-2 of the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 of the
Exchange Act.


          (gg) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.

          (hh) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
document, the form(s) of which shall be approved from time to time by the
Administrator, reflecting the terms of a Stock Purchase Right granted under
the Plan and includes any documents attached to such agreement.

          (ii) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time, or any successor provision.

          (jj) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.

          (kk) "STOCK EXCHANGE" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted
at any given time.

          (ll) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 below.

          (mm) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

          (nn) "TEN PERCENT HOLDER" means a person who owns stock
representing more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary.

     3.   STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of shares that may be sold under
the Plan is 7,200,000 Shares of Common Stock, plus an annual increase on the
first day of each of the Company's fiscal years beginning in 2000, 2001,
2002, 2003 and 2004 equal to the lesser of (i) 1,500,000 Shares, (ii) three
percent (3%) of the Shares outstanding on the last day of the immediately
preceding fiscal year, or (iii) such lesser number of Shares as the Board
shall determine. The Shares may be authorized, but unissued, or reacquired
Common Stock.

     If an Option expires or becomes unexercisable for any reason without
having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares that were subject thereto shall,
unless the Plan has been terminated, become available for future grant under
the Plan. In addition, any Shares of Common Stock that are retained by the
Company upon exercise of an Option or Stock Purchase Right in order to
satisfy the exercise or purchase price for such Option or Stock Purchase
Right or any withholding taxes due with respect to such exercise or purchase
shall be treated as not issued and shall continue to be available under the
Plan. Shares issued under the Plan and later repurchased by the Company
pursuant to any repurchase right that the Company may have shall not be
available for future grant under the Plan.



     4.   ADMINISTRATION OF THE PLAN.

          (a)  GENERAL. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board
may authorize one or more officers (who may (but need not) be Officers) to
grant Options or Stock Purchase Rights to Employees and Consultants.

          (b)  ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With respect
to Options granted to Reporting Persons and Named Executives, the Plan may
(but need not) be administered so as to permit such Options to qualify for
the exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.

          (c)  COMMITTEE COMPOSITION. If a Committee has been appointed
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of any Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Laws and, in the case of a
Committee administering the Plan pursuant to Section 4(b) above, to the
extent permitted or required by Rule 16b-3 and Section 162(m) of the Code.

          (d)  POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

               (i)    to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(q) of the Plan;

               (ii)   to select the Employees and Consultants to whom Options
and Stock Purchase Rights or any combination thereof may from time to time be
granted;

               (iii)  to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof are granted;

               (iv)   to determine the number of Shares of Common Stock to be
covered by each such award granted;

               (v)    to approve forms of agreement for use under the Plan;

               (vi)   to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any
Option,



Optioned Stock, Stock Purchase Right or Restricted Stock, based in each case
on such factors as the Administrator, in its sole discretion, shall determine;

               (vii)  to determine whether and under what circumstances an
Option may be settled in cash under Section 10(f) instead of Common Stock;

               (viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted and to make any other amendments or adjustments to any Option that
the Administrator determines, in its discretion and under the authority
granted to it under the Plan, to be necessary or advisable, provided however
that no amendment or adjustment to an Option that would materially and
adversely affect the rights of any Optionee shall be made without the prior
written consent of the Optionee;

               (ix)   to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights;

               (x)    to initiate an Option Exchange Program;

               (xi)   to construe and interpret the terms of the Plan and
awards granted under the Plan; and

               (xii)  in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options or Stock Purchase
Rights to Participants who are foreign nationals or employed outside of the
United States in order to recognize differences in local law, tax policies or
customs.

          (e)  EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Participants.

     5.   ELIGIBILITY.

          (a)  RECIPIENTS OF GRANTS. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees, provided however that Employees of
Affiliates shall not be eligible to receive Incentive Stock Options. An
Employee or Consultant who has been granted an Option or Stock Option Right
may, if he or she is otherwise eligible, be granted additional Options or
Stock Purchase Rights.

          (b)  TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options are exercisable for
the first time by an Optionee during any calendar year (under all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted,



and the Fair Market Value of the Shares shall be determined as of the date of
grant of such Option.

          (c)  NO EMPLOYMENT RIGHTS. The Plan shall not confer upon any
Participant any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere in any way
with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.

     6.   TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 16 of the Plan.

     7.   TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided however that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to a person who at the time of such grant is a
Ten Percent Holder, the term of such Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided
in the Option Agreement.

     8.  LIMITATION ON GRANTS TO EMPLOYEES.  Subject to adjustment as
provided in Section 13 below, the maximum number of Shares which may be
subject to Options and Stock Purchase Rights granted to any one Employee
under this Plan for any fiscal year of the Company shall be 3,000,000.

     9.  OPTION EXERCISE PRICE AND CONSIDERATION.

         (a)   EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator and set forth in the Option Agreement, but
shall be subject to the following:

               (i)    In the case of an Incentive Stock Option

                      (A)    granted to an Employee who at the time of grant
is a Ten Percent Holder, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant; or

                      (B)    granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.

               (ii)   In the case of a Nonstatutory Stock Option

                      (A)    granted prior to the date, if any, on which the
Common Stock becomes a Listed Security to a person who is at the time of
grant is a Ten Percent Holder, the per Share exercise price shall be no less
than 110% of the Fair Market Value per Share on the date of grant if required
by the Applicable Laws and, if not so required, shall be such price as is
determined by the Administrator;


                      (B)    granted to a person who, at the time of the
grant of such Option, is a Named Executive of the Company, the per share
Exercise Price shall be no less than 100% of the Fair Market Value on the
date of grant if such Option is intended to qualify as performance-based
compensation under Section 162(m) of the Code; or

                      (C)    granted prior to the date, if any, on which the
Common Stock becomes a Listed Security to any person other than a Named
Executive or a Ten Percent Holder, the per Share exercise price shall be no
less than 85% of the Fair Market Value per Share on the date of grant if
required by Applicable Law and, if not so required, shall be such price as is
determined by the Administrator.

               (iii)  Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.

          (b)  PERMISSIBLE CONSIDERATION. The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administration (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash; (2) check; (3) delivery of Optionee's
promissory note with such recourse, interest, security and redemption
provisions as the Administrator determines to be appropriate (subject to the
provisions of Section 153 of the Delaware General Corporation Law); (4)
cancellation of indebtedness; (5) other Shares that (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee
for more than six months on the date of surrender (or such other period as
may be required to avoid a charge to the Company's earnings) or were not
acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which the Option is exercised; (6) authorization from the
Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to
which the Option is exercised; (7) delivery of a properly executed exercise
notice together with such other documentation as the Administration and the
broker, if applicable, shall require to effect exercise of the Option and
prompt delivery to the Company of the sale or loan proceeds required to pay
the exercise price and any applicable withholding taxes; (8) any combination
of the foregoing methods of payment; or (9) such other consideration and
method of payment for the issuance of Shares to the extent permitted under
the Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company and the
Administrator may refuse to accept a particular form of consideration at the
time of any Option exercise if, in its sole discretion, acceptance of such
form of consideration is not in the best interests of the Company at such
time.

     10.  EXERCISE OF OPTION.

          (a)  PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the



Administrator, consistent with the terms of the Plan, and reflected in the
Option Agreement, including vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee; provided however that, if
required by the Applicable Laws, any Option granted prior to the date, if
any, upon which the Common Stock becomes a Listed Security shall become
exercisable at a rate of at least 20% per year over five years from the date
the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a
right of repurchase in the Company's favor, such repurchase right shall, if
required by the Applicable Laws, lapse at the rate of at least 20% per year
over five years from the date the Option is granted. Notwithstanding the
above, in the case of an Option granted to an officer (including but not
limited to Officers), Director or Consultant, the Option may become
exercisable, or a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator. The
Administrator shall have the discretion to determine whether and to what
extent the vesting of Options shall be tolled during any unpaid leave of
absence; provided however that in the absence of such determination, vesting
of Options shall be tolled during any such leave.

          An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 9(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no
right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 14 of the Plan.


          Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.

          (b)  TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the
event of termination of an Optionee's Continuous Service Status, such
Optionee may, but only within the (3) months (or such other period of time,
not less than thirty (30) days, as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the date of such termination (but in no
event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his or her Option to the extent that
he or she was entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date
of such termination, or if the Optionee does not exercise the Option to the
extent so entitled within


the time specified above, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
Unless otherwise determined by the Administrator or the Company, no
termination shall be deemed to occur and this Section 10(b) shall not apply
if (i) the Optionee is a Consultant who becomes an Employee, or (ii) the
Optionee is an Employee who becomes a Consultant.

          (c)  DISABILITY OF OPTIONEE.  Notwithstanding Section 10(b) above,
in the event of termination of an Optionee's Continuous Service Status as a
result of his or her total and permanent disability (as defined in Section
22(e)(3) of the Code), such Optionee may, but only within twelve (12) months
(or such other period of time as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option made at the time
of grant of the Option) from the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise the Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Option Stock underlying the unexercised portion of the Option shall revert to
the Plan.

          (d)  DEATH OF OPTIONEE.  In the event of the death of an Optionee
during the period of Continuous Service Status since the date of grant of the
Option, or within 30 days following termination of the Optionee's Continuous
Service Status, the Option may be exercised at any time within twelve (12)
months following the date of death (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement) by such
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise
that had accrued at the date of death or, if earlier, the date of termination
of the Optionee's Continuous Service Status. To the extent that the Optionee
was not entitled to exercise the Option at the date of death or termination,
as the case may be, or if the Optionee does not exercise such Option to the
extent so entitled within the time specified above, the Option shall
terminate and the Optioned Stock underlying the unexercised portion of the
Option shall revert to the Plan.

          (e)  EXTENSION OF EXERCISE PERIOD.  The Administrator shall have
full power and authority to extend the period of time for which an Option is
to remain exercisable following termination of an Optionee's Continuous
Service Status from the periods set forth in Sections 10(b), 10(c) and 10(d)
above or in the Option Agreement to such greater time as the Administrator
shall deem appropriate, provided that in no event shall such Option be
exercisable later than the date of expiration of the term of such Option as
set forth in the Option Agreement.

          (f)  BUY-OUT PROVISIONS.  The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option previously granted under
the Plan based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time such offer is made.



     11.  STOCK PURCHASE RIGHTS.

          (a)  RIGHTS TO PURCHASE.  Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall
be entitled to purchase, the price to be paid, and the time within which such
person must accept such offer, which shall in no event exceed 30 days from
the date upon which the Administrator made the determination to grant the
Stock Purchase Right. In the case of a Stock Purchase Right granted prior to
the date, if any, on which the Common Stock becomes a Listed Security and if
required by the Applicable Laws at such time, the purchase price of Shares
subject to such Stock Purchase Rights shall not be less than 85% of the Fair
Market Value of the Shares as of the date of the offer, or, in the case of a
person owning stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
price shall not be less than 100% of the Fair Market Value of the Shares as
of the date of the offer. If the Applicable Laws do not impose the
requirements set forth in the preceding sentence and with respect to any
Stock Purchase Rights granted after the date, if any, on which the Common
Stock becomes a Listed Security, the purchase price of Shares subject to
Stock Purchase Rights shall be as determined by the Administrator. The offer
to purchase Shares subject to Stock Purchase Rights shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by
the Administrator.

         (b)  REPURCHASE OPTION.  Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's employment with the Company for any reason (including
death or disability). The purchase price for Shares repurchased pursuant to
the Restricted Stock Purchase Agreement shall be the original purchase price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at such rate
as the Administrator may determine; provided however that with respect to a
Stock Purchase Right granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a purchaser who is not an officer
(including an Officer), Director or Consultant of the Company or of any Parent
or Subsidiary of the Company, it shall lapse at a minimum rate of 20% per
year if required by the Applicable Laws.

         (c)  OTHER PROVISIONS.  The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock Purchase
Agreements need not be the same with respect to each purchaser.

         (d) RIGHTS AS A STOCKHOLDER.  Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is


prior to the date the Stock Purchase Right is exercised, except as provided
in Section 14 of the Plan.

     12.  TAXES.

          (a)  As a condition of the exercise of an Option or Stock Purchase
Right granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising the Option or Stock Purchase
Right) shall make such arrangements as the Administrator may require for the
satisfaction of any applicable federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise of Option or
Stock Purchase Right and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied.

          (b)  In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Option or Stock Purchase Right.

          (c)  This Section 12(c) shall apply only after the date, if any,
upon which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the
next payroll payment is not sufficient to satisfy such tax obligations, with
respect to any remaining tax obligations), in the absence of any other
arrangement and to the extent permitted under the Applicable Laws, the
Participant shall be deemed to have elected to have the Company withhold from
the Shares to be issued upon exercise of the Option or Stock Purchase Right
that number of Shares having a Fair Market Value determined as of the
applicable Tax Date (as defined below) equal to the amount required to be
withheld. For purposes of this Section 12, the Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined under the Applicable Laws (the "TAX DATE").

          (d)  If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock Purchase Right by surrendering to the Company Shares that
(i) in the case of Shares previously acquired from the Company, have been
owned by the Participant for more than six (6) months on the date of
surrender, and (ii) have a Fair Market Value determined as of the applicable
Tax Date equal to the amount required to be withheld.

          (e)  Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d)
above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 12(d) above must be
made on or prior to the applicable Tax Date.

          (f)  In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because
no election is filed under Section 83(b) of the Code, the Participant shall
receive the full number of Shares with respect to



which the Option or Stock Purchase Right is exercised but such Participant
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.

     13.  NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution; provided that, after the date, if any, upon which
the Common Stock becomes a Listed Security, the Administrator may in its
discretion grant transferable Nonstatutory Stock Options pursuant to Option
Agreements specifying (i) the manner in which such Nonstatutory Stock Options
are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option or Stock Purchase Right may be exercised,
during the lifetime of the holder of Option or Stock Purchase Right, only by
such holder or a transferee permitted by this Section 13.

     14.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS
AND CERTAIN OTHER TRANSACTIONS.

          (a)  CHANGES IN CAPITALIZATION. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, the number of Shares set
forth in Sections 3(a)(i) and 8 above, and the number of shares of Common
Stock that have been authorized for issuance under the Plan but as to which no
Options or Stock Purchase Rights have yet been granted or that have been
returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per Share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock
(including any change in the number of Shares of Common Stock effected in
connection with a change of domicile of the Company), or any other increase or
decrease in the number of issued Shares of Common Stock effected without
receipt of consideration by the Company; provided however that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares of Common
Stock subject to an Option or Stock Purchase Right.

          (b)  DISSOLUTION OR LIQUIDATION. In the event of the dissolution or
liquidation of the Company, each outstanding Option or Stock Purchase Right
shall terminate immediately prior to the consummation of the transaction,
unless otherwise provided by the Administrator.

          (c)  CORPORATE TRANSACTIONS; CHANGE OF CONTROL. In the event of a
Corporate Transaction, each outstanding Option and Stock Purchase Right shall
be assumed or



an equivalent option or right shall be substituted by the successor
corporation or a Parent or Subsidiary of such successor corporation (such
entity, the "SUCCESSOR CORPORATION"), unless the Successor Corporation does
not agree to such assumption or substitution, in which case such Options and
Stock Purchase Rights shall terminate upon consummation of the transaction.
Notwithstanding the preceding sentence, in the event of a Change of Control,
each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right shall be substituted by the Successor Corporation,
unless the Successor Corporation does not agree to such assumption or
substitution, in which case the vesting of each Option shall accelerate and
the Options shall become exercisable in full (including with respect to
Shares as to which an Option would not otherwise be vested and exercisable),
and any repurchase right in favor of the Company with respect to any Shares
purchased upon exercise of an Option or Stock Purchase right shall lapse in
full, prior to consummation of the transaction at such time and on such
conditions as the Administrator shall determine. To the extent an Option is
not exercised prior to consummation of a Change of Control in which the
vesting of Options is being accelerated, such Option shall terminate upon
such consummation and the Administrator shall notify the Optionee of such
fact at least five (5) days prior to the date on which the Option terminates.

          In the event Plan awards are assumed or substituted in connection
with a Change of Control and a Participant holding such an assumed or
substituted award experiences an Involuntary Termination within twenty-four
(24) months following the Change of Control, any assumed or substituted
Option held by the terminated Participant at the time of termination shall
accelerate and become exercisable in full (including with respect to any
shares of stock then underlying the Option as to which the Option would not
otherwise be vested and exercisable), and any repurchase right in favor of
the Company or the Successor Corporation with respect to any Shares (or any
shares of stock issued in exchange for such Shares) purchased upon exercise
of an Option or Stock Purchase Right shall lapse in full, immediately prior
to the effective date of the Involuntary Termination.

          For purposes of this Section 14(c), an Option or a Stock Purchase
Right shall be considered assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon a Corporate Transaction or
a Change of Control, as the case may be, each holder of an Option or Stock
Purchase Right would be entitled to receive upon exercise of the Option or
Stock Purchase Right the same number and kind of shares of stock or the same
amount of property, cash or securities as such holder would have been
entitled to receive upon the occurrence of the transaction if the holder had
been, immediately prior to such transaction, the holder of the number of
Shares of Common Stock covered by the Option or the Stock Purchase Right at
such time (after giving effect to any adjustments in the number of Shares
covered by the Option or Stock Purchase Right as provided for in this
Section 14); provided however that if the consideration received in the
transaction is not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon exercise of the Option or Stock
Purchase Right to be solely common stock of the Successor Corporation equal
to the Fair Market Value of the per Share consideration received by holders
of Common Stock in the transaction.

          (d)  ACCOUNTING AND TAX TREATMENT.



               (i)  POOLING ISSUES. Notwithstanding Section 14(c) above, no
vesting acceleration or lapse of a repurchase right pursuant to such section
shall occur if such acceleration or lapse would cause a contemplated Change
of Control transaction that was intended to be accounted for as a "pooling of
interests" transaction to be ineligible for such treatment under generally
accepted accounting principles, as determined by the Company's independent
accountants prior to the Change of Control.

              (ii)  LIMITATION ON PAYMENTS. In the event that the vesting
acceleration or lapse of a repurchase right provided for in Section 14(c)
above (x) constitutes "parachute payments" within the meaning of Section 280G
of the Code, and (y) but for this Section 14(d)(ii) would be subject to the
excise tax imposed by Section 4999 of the Code (or any corresponding
provisions of state income tax law), then such vesting acceleration or lapse
of a repurchase right shall be either

                    (A)  delivered in full, or

                    (B)  delivered as to such lesser extent which would
result in no portion of such severance benefits subject to excise tax under
Code Section 4999,

whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Code
Section 4999, results in the receipt by the Participant on an after-tax basis
of the greater amount of acceleration or lapse of repurchase rights benefits,
notwithstanding that all or some portion of such benefits may be taxable
under Code Section 4999. Any determination required under this Section 14(d)
shall be made in writing by the Company's independent accountants, whose
determination shall be conclusive and binding for all purposes on the Company
and any affected Participant. In the event that (ii)(A) above applies, then
the Participant shall be responsible for any excise taxes imposed with
respect to such benefits. In the event that (ii)(B) above applies, then each
benefit provided hereunder shall be proportionately reduced to the extent
necessary to avoid imposition of such excise taxes.

           (e)  CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without
receipt of consideration by the Company, the Administrator may, in its
discretion, appropriately adjust the price per Share of Common Stock covered
by each outstanding Option or Stock Purchase Right to reflect the effect of
such distribution.

     15.  TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. To date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option
or Stock Purchase Right, or such other date as is determined by the
Administrator; provided however that in the case of an Incentive Stock Option,
the grant date shall be the later of the date on which the Administrator makes
the determination granting such Incentive Stock Option or the date of
commencement of the Optionee's employment relationship with the Company.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.




     16.  AMENDMENT AND TERMINATION OF THE PLAN.

          (a)  AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend, discontinue or terminate the Plan, but no amendment,
alteration, suspension, discontinuance or termination (other than an
adjustment made pursuant to Section 14 above) shall be made that would
materially and adversely affect the rights of any Optionee or holder of Stock
Purchase Rights under any outstanding grant, without his or her consent. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain stockholder approval of any Plan amendment in
such a manner and to such as degree as required.

          (b)  EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall materially and adversely affect Options or
Stock Purchase Rights already granted, unless mutually agreed otherwise
between the Optionee or holder of the Stock Purchase Rights and the
Administrator, which agreement must be in writing and signed by such Optionee
or holder and the Company.

     17.  CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant
to the Plan, the Company shall not be obligated, and shall have no liability
for failure, to issue or deliver any Shares under the Plan unless such
issuance or delivery would comply with the Applicable Laws, with such
compliance determined by the Company in consultation with its legal counsel.

     As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell
or distribute such Shares if, in the opinion of counsel for the Company, such
a representation is required by law.

     18.  RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.

     19.  AGREEMENTS. Options and Stock Purchase Rights shall be evidenced
by Option Agreements and Restricted Stock Purchase Agreements, respectively,
in such form(s) as the Administrator shall from time to time approve.

     20.  STOCKHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to
the degree required under the Applicable Laws.

     21.  INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS.  Prior to
the date, if any, upon which the Common Stock becomes a Listed Security and
if required by the Applicable Laws, the Company shall provide financial
statements at least annually to each Optionee and to each individual who
acquired Shares pursuant to the Plan, during the period such Optionee or




purchaser has one or more Options or Stock Purchase Rights outstanding, and
in the case of an individual who acquired Shares pursuant to the Plan, during
the period such individual owns such Shares. The Company shall not be
required to provide such information if the issuance of Options or Stock
Purchase Rights under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information.






                                     eTOYS INC.
                                         
                                  1999 STOCK PLAN
                                         
                            NOTICE OF STOCK OPTION GRANT

Optionee

     You have been granted an option to purchase Common Stock of eToys Inc.
(the "COMPANY") as follows:

     Board Approval Date:               ((GrantDate))

     Date of Grant (Later of Board
     Approval Date or Commencement of
     Employment/Consulting):            ((GrantDate))

     Exercise Price Per Share:          ((PricePerShare))

     Total Number of Shares Granted:    ((NumberofShares))

     Total Price of Shares Granted:     ((TotalExercisePrice))

     Type of Option:                    ((NoSharesISO)) Incentive Stock Option
                                        ((NoSharesNSO)) Nonstatutory Stock
                                          Option

     Term/Expiration Date:              ((Expiration))

     Vesting Commencement Date:         ((VestingCommencement))

     Vesting Schedule:                  ((VestingSchedule))

     Termination Period:                Option may be exercised for a period of
                                        ______ after termination of employment
                                        or consulting relationship except as set
                                        out in Sections 7 and 8 of the Stock
                                        Option Agreement (but in no event later
                                        than the Expiration Date).

     By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and
governed by the terms and conditions of the eToys Inc. 1999 Stock Plan and
the Stock Option Agreement, all of which are attached and made a part of this
document.

OPTIONEE                                eTOYS INC.

                                        By:                     
---------------------------------          ----------------------------------
Signature

Address:                                Title:                       
        -------------------------             -------------------------------

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


                                         -1-



                                     ETOYS INC.
                               STOCK OPTION AGREEMENT

     1.   GRANT OF OPTION. 

          (a)  GENERAL TERMS.  eToys Inc., a Delaware corporation (the
"COMPANY"), hereby grants to the Optionee named in the Notice of Stock Option
Grant attached to this Agreement ("OPTIONEE"), an option (the "OPTION") to
purchase the total number of shares of Common Stock (the "SHARES") set forth
in the Notice of Stock Option Grant, at the exercise price per share set
forth in the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to
the terms, definitions and provisions of the 1999 Stock Plan (the "PLAN")
adopted by the Company, which is incorporated in this Agreement by reference.
In the event of a conflict between the terms of the Plan and the terms of
this Agreement, the terms of the Plan shall govern.  Unless otherwise defined
in this Agreement, the terms used in this Agreement shall have the meanings
defined in the Plan.

          (b)  TAX STATUS OF OPTION.  Unless and to the extent designated a
Nonstatutory Stock Option in the Notice of Stock Option Grant, this Option is
intended to be an Incentive Stock Option as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE"), to the maximum extent
permitted under applicable tax law.  If any portion of this Option is
designated as an Incentive Stock Option it shall qualify as such only to the
extent that the aggregate fair market value of the Shares (generally, the
Option's exercise price) subject to this Option (and all other Incentive
Stock Options granted to Optionee by the Company or any Parent or Subsidiary)
that first become exercisable in any calendar year does not exceed $100,000. 
To the extent that the aggregate fair market value of such Shares exceeds
$100,000, the Shares in excess of such limit shall be treated as subject to a
Nonstatutory Stock Option, in accordance with Section 5 of the Plan.

     2.   EXERCISE OF OPTION.  This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Stock
Option Grant and with the provisions of Sections 9 and 10 of the Plan as
follows:

          (a)  RIGHT TO EXERCISE.

               (i)   This Option may not be exercised for a fraction of a share.

               (ii)  In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
this Section 2 and by Sections 6, 7 and 8 below.

               (iii) In no event may this Option be exercised after the
Expiration Date of the Option as set forth in the Notice of Stock Option
Grant.

          (b)  METHOD OF EXERCISE.

               (i)   This Option shall be exercisable by delivering to the
Company a written notice of exercise (in the form attached as EXHIBIT A)
which shall state the election to exercise the Option, the number of Shares
in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with
respect to such Shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan.  Such written notice shall be signed
by Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company.  The


                                     -1-



written notice shall be accompanied by payment of the Exercise Price.  This
Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.

               (ii)  As a condition to the exercise of this Option, Optionee
agrees to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the Company,
or otherwise.

               (iii) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed.  Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to Optionee on the date on which
the Option is exercised with respect to such Shares.

     3.   OPTIONEE'S REPRESENTATIONS.  In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the
Company an investment representation statement in customary form, a copy of
which is available for Optionee's review from the Company upon request.

     4.   METHOD OF PAYMENT.  Payment of the Exercise Price shall be by any
of the following, or a combination of the following, at the election of
Optionee: (a) cash; (b) check; (c) surrender of other Shares of Common Stock
of the Company that (i) either have been owned by Optionee for more than six
(6) months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (ii) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
the Option shall be exercised; (d) authorization from the Company to retain
from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market value on the date of exercise equal to
the exercise price for the total number of Shares as to which the Option is
exercised; or (e) if there is a public market for the Shares and they are
registered under the Securities Act, delivery of a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds required to pay the
exercise price.

     5.   RESTRICTIONS ON EXERCISE.  This Option may not be exercised until
such time as the Plan has been approved by the stockholders of the Company,
or if the issuance of such Shares upon such exercise or the method of payment
of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("REGULATION G") as promulgated by the Federal Reserve Board.  As a condition
to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.

     6.   TERMINATION OF RELATIONSHIP.  In the event of termination of
Optionee's Continuous Service Status, Optionee may, to the extent otherwise
so entitled at the date of such termination (the "TERMINATION DATE"),
exercise this Option during the Termination Period set out in the Notice of
Stock Option Grant.  To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified in the Notice of Stock Option Grant,
the Option shall terminate.


                                         -2-



     7.   DISABILITY OF OPTIONEE.  Notwithstanding the provisions of Section
6 above, in the event of termination of Optionee's Continuous Service Status
as a result of total and permanent disability (as defined in Section 22(e)(3)
of the Code), Optionee may, but only within twelve (12) months from the date
of termination of employment (but in no event later than the Expiration Date
of the Option as set forth in the Notice of Stock Option Grant), exercise the
Option to the extent otherwise so entitled at the date of such termination. 
To the extent that Optionee was not entitled to exercise the Option at the
date of termination, or if Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified in this Agreement,
the Option shall terminate.

     8.   DEATH OF OPTIONEE.  In the event of the death of Optionee (a)
during the term of this Option and while an Employee or Consultant of the
Company and having been in Continuous Service Status since the date of grant
of the Option, or (b) within thirty (30) days after the termination of
Optionee's Continuous Service Status, the Option may be exercised, at any
time within twelve (12) months following the date of death (but in no event
later than the Expiration Date of the Option as set forth in the Notice of
Stock Option Grant), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of death or
termination, as applicable.  To the extent that Optionee was not entitled to
exercise this Option at the date of death or termination, as applicable, or
if Optionee's estate or the person who acquired the right to exercise the
Option as a result of Optionee's death does not exercise this Option within
the time specified in the Notice of Stock Option Grant, the Option shall
terminate

     9.   NON-TRANSFERABILITY OF OPTION.  This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or
distribution. The designation of a beneficiary does not constitute a
transfer.  An Option may be exercised during the lifetime of Optionee only by
Optionee or a transferee permitted by this section.  The terms of this Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of Optionee.

     10.  TERM OF OPTION.  This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.

     11.  NO ADDITIONAL EMPLOYMENT RIGHTS.  Optionee understands and agrees
that the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not
through the act of being hired, being granted this Option or acquiring Shares
under this Agreement).  Optionee further acknowledges and agrees that nothing
in this Agreement or the Plan shall confer upon Optionee any right with
respect to continuation as an Employee or Consultant with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with
or without cause.

     12.  TAX CONSEQUENCES.  Optionee acknowledges that he or she has read
the brief summary set forth below of certain federal tax consequences of
exercise of this Option and disposition of the Shares under the law in effect
as of the date of grant.  OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS
NECESSARILY INCOMPLETE AND DOES NOT ADDRESS STATE, LOCAL OR FOREIGN ISSUES,
AND THAT THE TAX LAWS AND REGULATIONS SUMMARIZED ARE SUBJECT TO CHANGE. 
OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.

          (a)  EXERCISE OF INCENTIVE STOCK OPTION.  If this Option is an
Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the


                                     -3-



excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price will be treated as an item of alternative
minimum taxable income for federal tax purposes and may subject Optionee to
the alternative minimum tax in the year of exercise.

          (b)  EXERCISE OF NONSTATUTORY STOCK OPTION.  If this Option does
not qualify as an Incentive Stock Option, Optionee may incur regular federal
income tax liability upon the exercise of the Option.  Optionee will be
treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price.  In addition, if
Optionee is an employee of the Company, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.

          (c)  DISPOSITION OF SHARES.  If this Option is an Incentive Stock
Option and if Shares transferred pursuant to the Option are held for more
than one year after exercise and more than two years after the Date of Grant,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.  If Shares purchased under an
Incentive Stock Option are disposed of before the end of either of such two
holding periods, then any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of
the excess, if any, of the lesser of (i) the fair market value of the Shares
on the date of exercise, or (ii) the sales proceeds, over the Exercise Price.
If this Option is a Nonstatutory Stock Option, then gain realized on the
disposition of Shares will be treated as long-term or short-term capital gain
depending on whether or not the disposition occurs more than one year after
the exercise date.  In the case of either an Incentive Stock Option or a
Nonstatutory Stock Option, the long-term capital gain will be taxed for
federal income tax and alternative minimum tax purposes as a maximum rate of
20% if the Shares are held more than one year after exercise.

          (d)  NOTICE OF DISQUALIFYING DISPOSITION.  If the Option granted to
Optionee in this Agreement is an Incentive Stock Option, and if Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to the
Incentive Stock Option on or before the later of (i) the date two years after
the Date of Grant, or (ii) the date one year after transfer of such Shares to
Optionee upon exercise of the Incentive Stock Option, Optionee shall notify
the Company in writing within thirty (30) days after the date of any such
disposition. Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by Optionee
from the early disposition by payment in cash or out of the current earnings
paid to Optionee.

     13.  SIGNATURE.  This Stock Option Agreement shall be deemed executed by
the Company and Optionee upon execution by such parties of the Notice of
Stock Option Grant attached to this Stock Option Agreement.

                                         
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                                        -4-
                                         

                                         
                                     EXHIBIT A
                                         
                                 NOTICE OF EXERCISE

To:       eToys Inc.
Attn:     Stock Option Administrator
Subject:  NOTICE OF INTENTION TO EXERCISE STOCK OPTION

     This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase __________ shares of eToys Inc. Common
Stock, under and pursuant to the Company's 1999 Stock Plan and the Stock
Option Agreement dated ___________, as follows:

     Grant Number:           
                              --------------------------------

     Date of Purchase:       
                              --------------------------------

     Number of Shares:       
                              --------------------------------

     Purchase Price:         
                              --------------------------------

     Method of Payment
     of Purchase Price:      
                              --------------------------------

     Social Security No.:    
                              --------------------------------

     The shares should be issued as follows:

     Name:                             
               -------------------------

     Address:                          
               -------------------------

     Signed:                           
               -------------------------

     Date:                             
               -------------------------