FULFILLMENT SERVICES AGREEMENT


     THIS FULFILLMENT SERVICES AGREEMENT (this "Agreement") is made as of 
this 21st day of April, 1999 (the "Effective Date"), by and between Fingerhut 
Business Services, Inc., a Minnesota corporation with offices located at 4400 
Baker Road, Minnetonka, Minnesota 55343 ("FBSI"), and eToys Inc., a Delaware 
corporation with offices located at 2850 Ocean Park Boulevard, Suite 225, 
Santa Monica, California 90405 ("eToys").

     WHEREAS, FBSI desires to provide to eToys, and eToys desires to receive 
from FBSI, support for eToys based in the western United States under the 
terms and conditions of this Agreement and the Schedules (as defined below).

     NOW, THEREFORE, in consideration of the mutual covenants and agreements 
contained herein, FBSI and eToys hereby agree as follows:

1.   SCHEDULES

     (a) The parties acknowledge and agree that the detailed terms and 
conditions of any and all projects entered into between the parties shall be 
set forth in a form and format substantially similar to the schedule of even 
date herewith and delivered concurrently herewith (the "Original Schedule"), 
which sets forth the fulfillment project.  The parties acknowledge and agree 
that in addition to the terms and conditions of the Original Schedule and any 
other comparable schedule acknowledged in writing by the parties hereto and 
referencing this Agreement (each a "Schedule" and collectively the 
"Schedules"), the general terms of this Agreement shall apply to each project 
contained therein, as applicable, and the overall relationship between the 
parties. If there is a conflict between the terms of the Schedules and this 
Agreement, the terms of the Schedules shall control.

     (b) Commencing as of the date hereof and continuing during the term of 
this Agreement, FBSI shall, subject to the terms and conditions of this 
Agreement and any Schedules, provide eToys or cause FBSI's various affiliates 
(all of which are collectively referred to as "FBSI") to provide the services 
identified on any Schedules (collectively referred to as the "Fulfillment 
Services").

     (c) From time to time during the term of this Agreement, eToys may 
request that FBSI take part in a new project(s).  Any such request shall be 
in writing.  FBSI reserves the right to accept or decline any project in 
which eToys seeks its participation for any reason; provided, however, that 
FBSI shall discuss in good faith with eToys any request that FBSI take part 
in a new project and shall give any such request due and fair consideration.  
In the event a new project is accepted, a Schedule will be created pursuant 
to the terms hereof and attached to and made a part of this Agreement as 
contemplated in Section 1(a) above.

     (d) PRICING OF FULFILLMENT SERVICES.  The pricing of Fulfillment 
Services for each individual project shall be set forth in the relevant 
Schedule.  Commencing after the expiration of one year from and after the 
Effective Date, FBSI reserves the right, upon sixty (60) days prior written 
notice to eToys, to increase the price of Fulfillment Services that FBSI 
provides to eToys 



on a recurring basis on one occasion during each subsequent one year term of 
this Agreement,  which increases shall not exceed ten percent (10%) of the 
price of the Fulfillment Services, as applicable, during the immediately 
preceding one year term of this Agreement.

     (e) POSTAGE AND FREIGHT.  Postage and freight rates anticipated to apply 
to the performance of any Fulfillment Services project shall be determined by 
FBSI for each project and shall be communicated in writing to eToys prior to 
the start of Fulfillment Services on each project.  FBSI reserves the right 
to increase these rates for ground shipping, contained in the Original 
Schedule, at any time upon thirty (30) days notice to reflect actual 
increases in costs.  Any increase in these rates shall be substantiated in 
writing by FBSI.  FBSI considers all postage and freight information to be 
Confidential Information (as defined in Section 11).  National carrier 
premium service rates, including, for example, United States Postal Service 
Priority Mail, United Parcel Service, One, Two and Three day service and 
Federal Express shall be billed to eToys at cost.  eToys reserves the right, 
in its sole discretion, to require FBSI to use, or to operate under separate 
arrangements with, carriers with whom eToys or an eToys' affiliate has 
separately negotiated postage and freight rates, in lieu of FBSI rates.

     (f) TAX MATTERS.  eToys acknowledges that it or its agent is solely 
responsible for identifying and resolving sales and use tax collection issues 
for product orders, including the necessity of charging and collecting such 
taxes.

     (g) REPORTS.  The parties agree to provide each other such reports as 
are mutually agreed upon and set forth in each Schedule or as either party 
shall reasonably request during the performance of any Fulfillment Services.  

2.   PAYMENT TERMS

     (a) FULFILLMENT SERVICES.  FBSI shall invoice eToys for the Fulfillment 
Services every fifteen (15) days, setting forth (i) a detailed list of 
Fulfillment Services provided to eToys during the prior fifteen (15) days 
(e.g., quantity/rate/extension) and (ii) associated charges for the services. 
 eToys shall pay all invoices within thirty (30) days of receipt. 

     (b) BILLING DISPUTES.  eToys and FBSI shall use best efforts to 
expediently resolve any disputed invoice through negotiations between each 
party's Account Manager; provided, however, that disputed amounts not 
resolved within ninety (90) calendar days of eToys' receipt of the invoice 
shall be immediately due and payable. 

     (c) INTEREST.  FBSI shall assess interest at a rate of 1% per month on 
all receivables not paid within the above-stated time periods.  Interest will 
start accruing on the 45th day from the date of invoice, and will continue to 
accrue until all overdue payments, plus interest charges, are paid in full.

3.   BOOKS AND RECORDS

     (a) RECORDKEEPING.  Both parties agree to keep complete and accurate 
books of account, records, and other documents with respect to this Agreement 
and any Schedule ("Books and Records").  Such Books and Records shall be kept 
by both parties for the longer of (i) a 

                                     -2-


period of time consistent with FBSI's general document records management 
policy, or (ii) three (3) years following expiration or termination of the 
Agreement.

     (b) AUDIT. The Books and Records shall be available for inspection and 
copying by any qualified representative or agent of a party or its 
affiliates, at the expense of that party, subject to the following terms and 
conditions:  (a) such examination shall take place at the principal place of 
business or the location where the Books and Records are regularly 
maintained, during normal business hours and only to the extent necessary  to 
verify inventory levels and payment amounts; (b) the party demanding the 
audit shall give the other party at least seven (7) business days' written 
notice prior to any such examination; (c) both parties shall keep each 
party's Confidential Information disclosed to it during the examination 
confidential in accordance with each party's obligations set forth in Section 
13 below; and (d) a party may not conduct more than four (4) such inspections 
during any twelve-month period during the term of this Agreement.

4.   TERM AND TERMINATION

     (a) TERM AND RENEWAL OPTION.  Unless terminated earlier, the term of 
this Agreement shall be for a period of three (3) years commencing on the 
Effective Date and terminating on April 21, 2002 ("Expiration Date") (the 
"Original Term"); provided, however, that eToys shall have the option of 
extending the Original Term for three additional one (1) year terms 
("Additional Terms") after the Expiration Date on the terms and conditions 
provided herein, such option to be effected by eToys providing written notice 
to FBSI of its intent to extend the Original Term no later than one hundred 
eighty (180) days prior to the Expiration Date or, after the Expiration Date 
and during an Additional Term, by providing such written notice 180 days 
prior to the expiration date of the Additional Term, as applicable.

     (b) TERMINATION.  This Agreement may be terminated as follows:

         (1)  BREACH - by either party, upon 30 days prior written notice to 
the other party, in the event of a material breach of this Agreement by the 
other party.  The written notice shall specify the precise nature of the 
breach.  In the event the breaching party cures the breach within the 30 day 
notice period, this Agreement shall not terminate.

         (2)  INSOLVENCY - by either party, immediately upon written notice to 
the other party, in the event the other party voluntarily files or has filed 
involuntarily against it a petition under the United States Bankruptcy Code, 
including a petition for Chapter 11 reorganization as set forth in the United 
States Bankruptcy Code.

         (3)  CHANGE IN CONTROL - by eToys, upon 30 days prior written notice 
to FBSI, if FBSI enters into an agreement with Toys R Us, Inc. or Amazon.com 
or with any affiliate of any such entity (each, a "Prohibited Entity") 
pursuant to which FBSI (i) proposes to sell the Facility to a Prohibited 
Entity, (ii) proposes to enter into a transaction or series of transactions 
with a Prohibited Entity in which (A) FBSI sells, conveys or otherwise 
disposes of all or substantially all of its property to a Prohibited Entity, 
(B) merges with or consolidates with a Prohibited Entity or (C) more than 
fifty percent (50%) of the voting power of FBSI is transferred to a 
Prohibited Entity.

                                     -3-



     (c) OTHER RIGHTS.  The rights of the parties to terminate this Agreement 
or any Schedule are not exclusive of any other rights and remedies available 
at law or in equity, and such rights shall be cumulative.  The exercise of 
any such right or remedy shall not preclude the exercise of any other rights 
and remedies.

     (d) POST-TERMINATION PERFORMANCE.  Notwithstanding any termination by 
either party of this Agreement or any Schedule, FBSI shall continue to 
fulfill all orders from customers, and eToys shall continue to remit amounts 
due to FBSI under this Agreement or any Schedule, in connection with any 
product orders made prior to the effective date of such termination. 

     (e) RETURN OF PROPRIETARY INFORMATION.  Upon termination of this 
Agreement for any reason, each party shall immediately return to the other 
all property (including without limitation, Confidential Information and all 
material related to any customers) that it has received from the other party 
in connection with the performance of its obligations hereunder except to the 
extent such property is needed to fulfill its continuing obligations under 
Section 4(d) above.  In such event, such property shall be returned 
immediately upon the party's fulfillment of its obligations under such 
Section 4(d).

     (f) SURVIVAL.  Sections 3, 4(d), 4(e), 4(f), 8, 9, 11 and 12 shall 
survive any expiration or termination of this Agreement or any Schedule.

5.   LICENSE

     (a) TRADEMARK LICENSE.  eToys hereby grants to FBSI a limited, 
revocable, non-exclusive license to use the trademarks, logos, or artwork 
owned or licensed to eToys and identified in Exhibit I hereto (collectively 
referred to as the "Licensed Marks"), solely for the purpose of displaying 
such Licensed Marks on packaging, invoices and customer service 
correspondence.  Other than as contemplated by this Agreement or any 
Schedule, FBSI shall not make any other use of the Licensed Marks or any 
related marks or intellectual property of eToys.  

     (b) REPRESENTATION AND WARRANTY.  eToys represents and warrants to FBSI 
that it is authorized to grant the aforementioned trademark license and that 
it shall fully indemnify and hold FBSI and its affiliates harmless against 
any and all claims by a third party alleging a violation of such third 
party's intellectual property or other proprietary rights in connection with 
FBSI's use of the Licensed Marks pursuant to the trademark license or this 
Agreement or any Schedule.  The indemnification granted under this Section 
5(b) expressly includes indemnification with respect to reasonable attorneys 
fees and any and all expenses and costs incurred or amounts paid in 
settlement or in satisfaction of any judgment or award.

6.   RELATIONSHIP OF THE PARTIES

     (a) INDEPENDENT CONTRACTORS.  The relationship created hereunder between 
FBSI and eToys shall be solely that of independent contractors entering into 
an agreement.  No representations or assertions shall be made or actions 
taken by either party which could imply or establish any agency, joint 
venture, partnership, employment or trust relationship between the parties 
with respect to the subject matter of this Agreement or any Schedule.  
Neither FBSI nor 

                                     -4-


eToys shall have any authority or power whatsoever to enter into any 
agreement, contract or commitment on behalf of the other, or to create any 
liability or obligation whatsoever on behalf of the other, to any person or 
entity.

     (b) SUBCONTRACTORS.  FBSI reserves the right to subcontract with other 
individuals and businesses for Fulfillment Services required to be performed 
pursuant to this Agreement and any Schedule.  Use of any subcontractor shall 
be subject to receipt of prior written consent of eToys, which consent shall 
not be unreasonably withheld.  FBSI shall be responsible for all payments to, 
as well as the direction and control of the work to be performed by its 
subcontractors, if any.  Subject to and solely in accordance with the 
provisions of Section 1, FBSI reserves the right to increase its pricing at 
any time in accordance with any rate increases by subcontractors.

7.   INVENTORY, FACILITIES AND RISK OF LOSS

     (a) GENERAL.  eToys shall provide FBSI with sufficient in ventory (the 
"Inventory") to meet the fulfillment requirements under this Agreement.  FBSI 
shall have no liability to eToys or third parties for losses caused directly 
or indirectly by eToys' failure to provide sufficient Inventory.

     (b) TITLE.  FBSI acknowledges that eToys shall retain all right and 
title to all Inventory and packaging materials which eToys causes to be 
delivered to FBSI under this Agreement.  eToys reserves the right to 
physically inspect or remove any and all Inventory from FBSI's possession and 
control.

     (c) RISK OF LOSS.  FBSI shall be responsible for all risk of direct 
physical loss of the Inventory while it is in FBSI's possession or control 
during the term of  this Agreement.  eToys waives its right to recover 
damages from FBSI for any loss of use of the Inventory or loss of income 
therefrom, except to the extent provided pursuant to Section 9(a) of this 
Agreement.  FBSI shall maintain the same levels of insurance coverage on the 
Inventory as it maintains with respect to its own inventory in the same 
warehouse(s).

8.   REPRESENTATIONS AND WARRANTIES

     (a) REPRESENTATIONS AND WARRANTIES OF FBSI.  With the knowledge that 
eToys is relying thereon in entering into this Agreement and any Schedule, 
FBSI hereby represents, warrants and covenants as follows:

         (1)  FBSI is a corporation duly organized, validly existing, and in 
good standing under the laws of the State of  Minnesota. 

         (2)  This Agreement and any and all Schedules constitute the legal, 
valid, and binding obligation of FBSI, enforceable against FBSI in accordance 
with its terms except as enforcement may be limited by any applicable 
bankruptcy, insolvency, reorganization or similar laws affecting creditors' 
rights generally and except as enforcement may be limited by general 
principles of equity. As of the Effective Date, FBSI has taken all corporate 
action necessary for the authorization, execution and delivery of this 
Agreement and any Schedule, and for the performance by FBSI of its 
obligations under this Agreement and any Schedule.

                                     -5-


         (3)  Neither the execution and delivery of this Agreement (including 
the Original Schedule) nor the consummation or performance of any obligations 
hereunder shall, directly or indirectly (with or without notice or lapse of 
time) in any material respect, contravene, conflict with, or result in a 
violation or breach of any provision of, or give any person the right to 
declare a default or exercise any remedy under, or to accelerate the maturity 
or performance of, or to cancel, terminate, or modify, any material contract 
to which FBSI is a party.

         (4) FBSI is not and shall not be required to give any notice to or 
obtain any consent from any person in connection with the execution and 
delivery of this Agreement and the Original Schedule or the consummation or 
performance of any of its obligations hereunder.

         (5) FBSI's facilities utilized to provide the Fulfillment Services 
have been designed or will be modified to ensure continuous operation and use 
prior to, during and after the calendar year 2000, and to operate during such 
time periods so that eToys will not experience any loss of information or 
assets, interruption in service, or invalid and/or incorrect reporting or 
results.

         (6) FBSI is, to its knowledge, and, at all times during the 
performance of Fulfillment Services under this Agreement and any Schedules 
hereunder, will remain in material compliance with all applicable laws, rules 
and regulations, including, but not limited to, the laws, rules and 
regulations of the Federal Trade Commission and the Direct Marketing 
Association, including by way of illustration and not limitation, the Mail 
Order Rule and Telemarketing Rule, if applicable.

         (7) FBSI is not currently in default under any material contract or 
agreement.

     (b) REPRESENTATIONS AND WARRANTIES OF ETOYS.  With the knowledge that 
FBSI is relying thereon in entering into this Agreement and any Schedule, 
eToys hereby represents, warrants and covenants as follows:

         (1)  eToys is a corporation duly organized, validly existing, and in 
good standing under the laws of the State of Delaware, and has the full power 
to grant the license rights set forth in this Agreement.

         (2)  This Agreement and the Original Schedule constitute the legal, 
valid, and binding obligation of eToys, enforceable against eToys in 
accordance with its terms except as enforcement may be limited by any 
applicable bankruptcy, insolvency, reorganization or similar laws affecting 
creditors' rights generally and except as enforcement may be limited by 
general principles of equity.  As of the Effective Date, eToys has taken all 
corporate action necessary for the authorization, execution and delivery of 
this Agreement and any Schedule, and for the performance by eToys of its 
obligations under this Agreement and any Schedule.

         (3)  Neither the execution and delivery of this Agreement and any 
Schedule nor the consummation or performance of any obligations hereunder 
shall, with or without notice or lapse of time, in any material respect, 
contravene, conflict with, or result in a violation or breach of any 
provision of, or give any person the right to declare a default or exercise 
any 

                                     -6-


remedy under, or to accelerate the maturity or performance of, or to cancel, 
terminate, or modify, any material contract to which eToys is a party.

         (4)  eToys is not and shall not be required to give any notice to or 
obtain any consent from any person in connection with the execution and 
delivery of this Agreement  and any Schedule or the consummation or 
performance of any of its obligations hereunder.

         (5)  eToys' assets and equipment utilized in connection with this 
Agreement and any Schedule have been designed or will be modified to ensure 
continuous operation and use prior to, during and after the calendar year 
2000, and to operate during such time periods so that FBSI will not 
experience any loss of information or assets, interruption in service, 
invalid and/or incorrect reporting or results.

         (6)  eToys is to its knowledge and, at all times during the term of 
this Agreement, will remain in material compliance with all applicable laws 
and regulations, including, but not limited to, the laws, rules and 
regulations of the Federal Trade Commission and the Direct Marketing 
Association.

         (7)  eToys is not currently in default under any material contract 
or agreement.

     (c) SURVIVAL.  The representations and warranties under this Section 
shall survive the termination of this Agreement and any Schedule.

9.   INDEMNIFICATION, INSURANCE AND LIMITATIONS ON LIABILITY

     (a) INDEMNIFICATION BY FBSI.  Subject to the limitations specified in 
this Section 9, FBSI shall indemnify, hold harmless and defend eToys and each 
person or entity that is a stockholder, officer, director, partner, employee, 
affiliate or agent of eToys from and against any and all losses, claims, 
damages, liabilities, whether joint or several, expenses (including 
reasonable legal fees and expenses), judgments, fines and other amounts paid 
in settlement, incurred or suffered by any such person or entity arising out 
of or in connection with (i) the inaccuracy of any representation or warranty 
made by FBSI hereunder, (ii) any breach of this Agreement by FBSI, or 
(iii) any negligent act or omission by FBSI or its employees or agents in 
connection with the performance by FBSI or its employees or agents of the 
Fulfillment Services hereunder, provided such negligent act or omission was 
not done or omitted at the direction of eToys.

     (b) INDEMNIFICATION BY ETOYS.  Subject to the limitations specified in 
this Section 9, eToys shall indemnify, hold harmless and defend FBSI and each 
person or entity that is a stockholder, officer, director, partner, employee, 
affiliate or agent of FBSI from and against any and all losses, claims, 
damages, liabilities, whether joint or several, expenses (including 
reasonable legal fees and expenses), judgments, fines and other amounts paid 
in settlement, incurred, or suffered by any such person arising out of or in 
connection with (i) the inaccuracy of any representation or warranty made by 
eToys hereunder, (ii) any breach of this Agreement by eToys, (iii) any 
negligent act or omission by eToys or its employees or agents in connection 
with the performance by eToys or its employees or agents required of eToys 
hereunder provided such negligent act or omission was not done or omitted at 
the direction of eToys, or (iv) any claim or 

                                     -7-


action for personal injury, death, property damage or other cause of action 
(A) involving a product liability claim arising from or relating to products 
for which Fulfillment Services are provided to eToys hereunder, or (B) 
resulting from alleged defects in, or the inherently dangerous nature of, 
eToys' products that are the subject of this Agreement and any Schedule.

     (c) NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS.  If a claim for 
indemnification hereunder arises from a claim or demand from a third party, 
the rights of the indemnified parties to be indemnified pursuant to this 
Agreement and any Schedule shall be governed by the following:

         (1)  Promptly after receipt by an indemnified party of notice of  
any claim, allegation or facts which may result in a claim for 
indemnification hereunder, an indemnified party shall give the indemnifying 
party prompt notice thereof.  The failure to give such notice shall not 
affect the indemnified party's ability to seek reimbursement unless such 
failure has materially and adversely affected the indemnifying party's 
ability to defend the claims.

         (2)  An indemnified party shall have the right (i) to employ 
separate counsel in any action as to which indemnification may be sought 
under any provision of this Agreement and to participate in the defense 
thereof, or (ii) to the extent that it may wish, jointly with any other 
indemnified party, to assume the defense of any such action with counsel 
reasonably satisfactory to the indemnifying party but the fees and expenses 
of such counsel shall be at the expense of such indemnified party unless (x) 
the indemnifying party has agreed in writing to pay such fees and expenses, 
(y) the indemnifying party has failed to assume the defense thereof without 
reservation and employ counsel within a reasonable period of time after being 
given the notice required above, and as a consequence thereof the indemnified 
party has employed separate counsel to protect its rights, or (z) the named 
parties to any such action (including any impleaded parties) include both 
such indemnified party and the indemnifying party and such indemnified party 
shall have been advised by its counsel that representation of such 
indemnified party and the indemnifying party by the same counsel would be 
inappropriate under applicable standards of professional conduct (whether or 
not such representation by the same counsel has been proposed) due to actual 
or potential differing interests between them.  It is understood, however, 
that the indemnifying party shall, in connection with any one such action or 
separate but substantially similar or related actions in the same 
jurisdiction arising out of the same general allegations or circumstances, be 
liable for the reasonable fees and expenses of only one separate firm of 
attorneys (in addition to any local counsel) at any time for all such 
indemnified parties having actual or potential differing interest with the 
indemnifying party.

         (3)  The indemnifying party shall not be liable for any settlement 
of any such action effected without its written consent, which consent shall 
not be unreasonably withheld, but if settled with such written consent, or if 
there be a final judgment against any indemnified party in any such action, 
the indemnifying party agrees to indemnify and hold harmless any indemnified 
parties to the extent provided above from and against any loss, claim, 
damage, liability or expense by reason of such settlement or judgment.

     (d)  INSURANCE. During the term of this Agreement, FBSI will maintain, 
with a financially sound insurance company having an A.M. Best rating of A or 
better, the following insurance coverage:

                                     -8-



         (1)  commercial general liability insurance with a combined single 
limit of $2 million per occurrence for bodily injury, including death and 
property damage; 

         (2)  umbrella excess liability insurance with a combined single 
limit of $5 million per occurrence for bodily injury, including death, and 
property damage; 

         (3)  worker's compensation, occupational disease, employer's 
liability with limits of not less than $500,000 per accident for bodily 
injury and $500,000 per employee for bodily injury by disease, disability 
benefit and similar employee benefit insurance required under the laws of the 
states where FBSI will perform the Fulfillment Services provided for 
hereunder;

         (4)  fidelity insurance with limits no less than $1 million per 
occurrence;

         (5)  FBSI will furnish eToys with certificates of insurance 
evidencing this coverage upon written request.

     (e) LIMITATIONS ON LIABILITY.

         (1)  IN NO EVENT SHALL EITHER PARTY'S LIABILITY HEREUNDER INCLUDE 
ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, EVEN IF 
SUCH PARTY SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS 
OR DAMAGE.

         (2)  Each of the parties hereto shall be liable to the other for 
damages arising out of or in connection with any negligent act or breach of 
this Agreement or any Schedule by such party to the extent permitted by law, 
subject to the duty of the non-breaching party to take all reasonable actions 
in order to mitigate such damages;  PROVIDED, HOWEVER, that (i) FBSI's 
liability for any Fulfillment Services provided hereunder shall be limited to 
the recovery by eToys of the amount actually paid to FBSI by eToys for such 
Fulfillment Service, and (ii) FBSI's total liability hereunder shall be 
limited to the aggregate amount actually paid by eToys to FBSI for 
Fulfillment Services.  eToys and FBSI shall mutually develop a quarterly 
inventory cycle count program.  The year-end inventory accuracy standard 
shall be 99.7%.  If, at year-end, inventory accuracy has been maintained 
between 97% and 99.7%, the cost of the inventory discrepancy shall be shared 
equally by both parties.  If the inventory accuracy is less than 97%, FBSI 
shall reimburse eToys, at cost, for the inventory adjustment.  eToys will 
report monthly to FBSI, eToys' product costs and inventory value based upon 
the monthly cycle counts completed by FBSI.  eToys shall maintain the 
necessary inventory Books and Records for FBSI's audit pursuant to Section 3. 
Both parties will manage and report compliance issues monthly.

     (f) DISPUTE RESOLUTION.  To be selected jointly by two mediators 
selected by the parties.

         (1)  If there is any controversy, dispute or claim arising out of or 
relating to interpretation or breach of this Agreement, the parties will 
endeavor to settle it promptly.  

                                     -9-



         (2)  If such a dispute cannot be resolved, the parties will promptly 
initiate and participate in good faith mediation of the dispute, with the 
mediator to be selected jointly by the parties or, if the parties cannot 
agree upon a mediator, by a mediator to be selected jointly by two mediators 
selected by the parties.

         (3)  If the dispute is not resolved through mediation, the parties 
will promptly submit such dispute to binding arbitration in accordance with 
the Commercial Arbitration Rules and regulations of The American Arbitration 
Association ("AAA"), with the arbitrator to be a retired federal or state 
court judge jointly selected by the parties or, if the parties cannot agree, 
by an arbitrator that satisfies such qualifications and that is jointly 
selected by two arbitrators selected by the parties.  Judgment upon the award 
rendered by the arbitrator(s) may be entered in any court of competent 
jurisdiction.

         (4)  Nothing shall prevent either party from directly seeking 
injunctive or other equitable relief from any court of competent jurisdiction 
in situations where damages would not adequately compensate for an alleged 
breach of this Agreement.  By way of illustration and not limitation, such 
relief would be appropriate in the case of either party's need to: obtain 
cooperation of the other party in litigation; secure the timely delivery of 
information or services; or, prevent the disclosure of Confidential 
Information.

         (5)  The prevailing party in any mediation, arbitration or legal 
action to enforce or interpret this Agreement shall be entitled to recover 
from the non-prevailing party all costs and expenses, including reasonable 
attorneys' fees, incurred in such action or proceeding. 

     (g) GOVERNMENT ACTIONS.  eToys hereby agrees to promptly provide FBSI 
copies of all complaints or inquiries received by it from any governmental 
agency that in any way relate to or have a potential effect on the 
Fulfillment Services provided hereunder. In the event FBSI is required, as a 
result of any such action, to change the manner in which it does business in 
any material respect, FBSI shall have the option to terminate  as soon as 
practicable the availability of such Fulfillment Services hereunder.  FBSI 
hereby agrees that it will promptly forward to eToys copies of all written 
complaints or written inquiries addressed to FBSI from any governmental 
agency in any way relating to or having a potential effect on the Fulfillment 
Services provided hereunder.

     (h) SURVIVAL.  The provisions of this Section shall survive the 
termination of this Agreement and any Schedule.

10.  MARKETING MATERIALS

     Both parties agree to act as a customer reference for the other in 
regard to the subject matter of this Agreement dur ing the term hereof.  The 
written consent of the other party shall be obtained before that party is 
used as a reference in any particular instance.  Until the expiration of 25 
days following the date of the final prospectus relating to eToys proposed 
initial public offering, FBSI shall not issue any press releases or make any 
public statement in regard to this Agreement or the subject matter hereof.  
Upon the expiration of this 25 day period, the parties shall issue a joint 
press release that is mutually acceptable to each party.  After the issuance 
of such joint press release, either party may issue a press release regarding 
this Agreement or the 

                                     -10-



subject matter hereof provided such party obtains the written consent of the 
other party, which consent will not be unreasonably withheld.  In addition, 
FBSI agrees not to use the Licensed Marks in any publicly distributed 
marketing materials without prior written consent of eToys.

11.  CONFIDENTIALITY

     (a) GENERAL.  As used herein, "Confidential Information" means (i) the 
terms and provisions of this Agreement and any related documents delivered 
concurrently herewith, and (ii) all computer hardware, all software, all 
data, reports, analyses, compilations, studies, interpretations, forecasts, 
records and other materials (in whatever form maintained, whether 
documentary, computer storage or otherwise) that contain or otherwise reflect 
information concerning eToys, FBSI, any of their subsidiaries or affiliates, 
or any portion thereof, that one party or its Agents may provide to the 
Receiving Party or its Agents in connection with this Agreement ("Provided 
Information"),  together with all data, reports, analyses, compilations, 
studies, interpretations, forecasts, records or (ii) other materials (in 
whatever form maintained, whether documentary, computer storage or otherwise) 
prepared by the Disclosing Party receiving Provided Information or its Agents 
that contain or otherwise reflect or are based upon, in whole or in part, any 
Provided Information or that reflect the review of, interest in, or 
evaluation of all or any portion of the transactions contemplated by this 
Agreement and any related documents delivered concurrently herewith ("Derived 
Information").  As used herein, "Agents" means, collectively, the respective 
directors, employees, controlling persons or attorneys of eToys or FBSI.  As 
used herein, the term "person" shall be broadly interpreted to include, 
without limitation, any corporation, partnership, trust or individual; the 
term "Receiving Party" shall mean the person receiving Provided Information; 
and the term "Disclosing Party" shall mean the person providing Provided 
Information.

     (b) ACKNOWLEDGMENT.  The parties hereby agree that all Confidential 
Information shall be kept confidential and shall not, without the prior 
written consent of the Disclosing Party, be disclosed by the Receiving Party 
in any manner whatsoever, in whole or in part, other than to the Disclosing 
Party's Agents, and shall not be used, directly or indirectly, for any 
purpose other than in connection with this Agreement and not in any way 
inherently detrimental to the other party.  Moreover, eToys and FBSI agree to 
reveal Confidential Information only to their Agents if and to the extent 
that such Agents, have a strict need to know such Confidential Information 
for the purpose of the Receiving Party satisfying its obligations under this 
Agreement and are informed of the confidential nature of the Confidential 
Information and agree to be bound by the terms and conditions of this 
Agreement.  eToys and FBSI shall each be responsible for any breach of this 
Agreement by their respective Agents (including Agents who, subsequent to the 
first date of disclosure of Confidential Information hereunder, become former 
Agents).  Moreover, eToys and FBSI shall take all reasonably necessary 
measures to restrain their respective Agents (and former Agents) from 
unauthorized disclosure or use of the Confidential Information.

     (c) EXCEPTIONS.  Notwithstanding anything in this Agreement to the 
contrary, Confidential Information shall not include any information which 

         (1)  at the time of disclosure to the Receiving Party is generally 
available to and known by the public (other than as a result of any 
disclosure made directly or indirectly or 

                                     -11-


other action or inaction by the Receiving Party or anyone to whom the 
Receiving Party or any of its Agents transmit or transmitted any Confidential 
Information);

         (2)  becomes publicly available in the future (other than as a 
result of a disclosure made directly or indirectly or other action or 
inaction by the Receiving Party or anyone to whom the Receiving Party or any 
of its Agents transmit or have transmitted any Confidential Information);

         (3)  was available to the Receiving Party or its Agents on a 
non-confidential basis from a source other than the Disclosing Party or any 
of its Subsidiaries or affiliates or any of their respective Agents providing 
such information (provided that to the best of the Receiving Party's 
knowledge, after due inquiry, such source is not or was not bound to maintain 
the confidentiality of such information); or

         (4)  has been independently acquired or developed by the Receiving 
Party without violating any of its obli gations under this Agreement, 
provided such independent development can reasonably be proven by the 
Receiving Party upon written request.

In the event that a party or any of such party's Agents become legally 
compelled (by deposition, interrogatory, request for documents, subpoena, 
civil investigative demand or similar process) to disclose any of the 
Confidential Information of the other party, that party or person under the 
legal compulsion (the "Compelled Party") from whom such information is being 
sought shall, unless prohibited by law, provide the party to whom such 
Confidential Information belongs with prompt prior written notice of such 
requirement so that it may seek a protective order or other appropriate 
remedy, or both, or waive compliance with the terms of this Agreement.  In 
the event that such protective order or other remedy is not obtained, or the 
other party waives compliance with the provisions hereof, the Compelled Party 
agrees to furnish only such portion of the Confidential Information that the 
Compelled Party is advised by written opinion of its counsel is legally 
required to be furnished by it and shall exercise its reasonable best efforts 
to obtain reliable assurance that confidential treatment shall be accorded 
such Confidential Information.  Notwithstanding the foregoing, to the extent 
required under applicable state and federal securities laws, either party may 
file this Agreement as an exhibit with federal and state securities filings, 
provided that each party shall use its best efforts to obtain confidential 
treatment of the portions of this Agreement that contain Confidential 
Information.  In this regard, the party making such filing shall obtain the 
prior written consent of the other party, which consent shall not be 
unreasonably withheld.

     (d) USE OF CONFIDENTIAL INFORMATION.  Each party shall be subject to the 
obligations under this Section 13 until the expiration of three (3) years 
following the termination of this Agreement.  Other than as specifically 
provided in this Agreement, neither party shall duplicate the Disclosing 
Party's Confidential Information for any purpose other than for the 
performance of its obligations under this Agreement and for the benefit of 
the Disclosing Party; or use the Disclosing Party's Confidential Information 
for any reason or purpose other than as expressly permitted in this Agreement.

     (e) RETURN OF CONFIDENTIAL INFORMATION.  Upon termination of this 
Agreement or if either party so requests, the Receiving Party shall return to 
the Disclosing Party or destroy all 

                                     -12-


copies of the Confidential Information in its possession and the possession 
of its Agents and will destroy all copies of any Derived Information; 
provided, however, that this Agreement will continue to apply to the 
Confidential Information and/or Derived Information contained or reflected in 
such copies.

     (f) The Parties agree that eToys and FBSI would be irreparably injured 
by a breach of this Agreement by the other party or its Agents and that the 
other party shall be entitled to seek equitable relief, including injunctive 
relief and specific performance, in the event of any breach of the provisions 
of this Section 11.  Such remedies shall not be deemed to be the exclusive 
remedies for a breach of this Section 11 by either party or their Agents, but 
shall be in addition to all other remedies available at law or in equity.

12.  MISCELLANEOUS PROVISIONS

     (a) NOTICES.  All notices, demands, requests, approvals, consents or 
other communications to be given or delivered under this Agreement 
("Notices") will be in writing and will be deemed to have been given 

         (1)  when delivered in person or by courier or confirmed facsimile; 

         (2)  upon confirmation of receipt when sent by certified mail, 
return receipt requested; or 

         (c)  five (5) days after deposit in first class U.S. mail, as the 
case may be to the addresses indicated below:

         (1)  If to FBSI:
                      FBSI Business Services, Inc.
                      4400 Baker Road
                      Minnetonka, Minnesota  55343
                      Attention:  Account Manager
                      Facsimile:  (612) 936-5106

With a copy to:  Fingerhut Companies, Inc.
                 4400 Baker Road
                 Minnetonka, Minnesota  55343
                 Attention:  General Counsel

         (2)  If to eToys:
                      eToys, Inc.
                                      2850 Ocean Park Boulevard, Suite 225
                                      Santa Monica, CA  90405
                      Attention:  President and Chief Executive Officer
                      Facsimile:  (310) 664-8101

or to such other addresses as a party may designate from time to time by 
written notice to the other party.

                                     -13-


     (b) SEVERABILITY.  Whenever possible, each provision of this Agreement 
and any Schedule shall be interpreted in such a manner as to be effective and 
valid under applicable law, but if any provision of this Agreement or any 
Schedule is held to be prohibited by or invalid under applicable law, such 
provision will be ineffective only to the extent of such prohibition or 
invalidity, without invalidating the remainder of such provision or the 
remaining provisions of this Agreement and any Schedule.

     (c) AMENDMENT AND WAIVER.  This Agreement and any Schedule may be 
amended, and any provision of this Agreement and any Schedule may be waived; 
provided that any such amendment or waiver will be binding upon any party 
hereto only if such amendment or waiver is set forth in a writing executed by 
such party.  No course of dealing between or among any persons having any 
interest in this Agreement and any Schedule will be deemed effective to 
modify or amend any part of this Agreement and any Schedule or any rights or 
obligations of any person under or by reason of this Agreement or any 
Schedule.  The waiver of any default, or the remedying of any default in any 
manner, shall not operate as a waiver of any other prior or subsequent 
default.  No extension of time for the performance of any obligation or act 
shall be deemed to be an extension of time for the performance of any other 
obligation or act hereunder.  No delay or omission by a party to exercise 
rights hereunder shall impair any such rights or shall be construed to be a 
waiver of any such default or any acquiescence therein.

     (d) COMPLETE AGREEMENT.  This Agreement, all Schedules and exhibits 
hereto and any related documents delivered concurrently herewith, contain the 
complete agreement between the parties relating to the Fulfillment Services 
and supersede any prior understandings, agreements or representations by or 
between the parties, written or oral, which may be related to the subject 
matter hereof in any way.

     (e) FURTHER ASSURANCES.  eToys and FBSI will each execute such other 
documents and take such actions as the other may reasonably request in order 
to effect the relationships, services and activities contemplated by this 
Agreement and any Schedule and to account for and document those activities.  

     (f) HEADINGS.  Section headings contained in this Agreement and any 
Schedule are inserted for convenience of reference only, shall not be deemed 
to be a part of this Agreement and any Schedule, respectively, or any 
purpose, and shall not in any way define or affect the meaning, construction 
or scope of any of the provisions hereof.

     (g) GOVERNING LAW.  The internal law, and not the law of conflicts, of 
the State of Delaware will govern all questions concerning the construction, 
validity and interpretation of this Agreement and any Schedule and the 
performance of the obligations imposed by this Agreement and any Schedule.

     (h) ASSIGNMENT.  This Agreement and any Schedule and all of the 
provisions will be binding upon and inure to the benefit of the parties 
hereto and their respective successors and permitted assigns, except that 
neither this Agreement and any Schedule nor any of the rights, interest or 
obligations set forth in each may be assigned by any party hereto without the 
prior written consent of the other party hereto, which shall not be 
unreasonably withheld.  

                                     -14-


Notwithstanding the foregoing, eToys shall have the right to assign this 
Agreement to any wholly owned subsidiary of eToys, provided that eToys 
guarantees the obligations of any such subsidiary hereunder.

     (i) INTERPRETATION.  Each party acknowledges it has participated in the 
negotiation and preparation of this Agreement, and has reviewed this 
Agreement and had the opportunity to consult with its counsel and accountants 
with respect to its terms. Therefore, each Party agrees that the rule of 
construction to the effect that any ambiguities in a document shall be 
interpreted against the drafting party, will not be utilized in the 
interpretation, construction, or enforcement of this Agreement, and no 
consideration shall be given to the issue of which party hereto actually 
prepared, drafted or requested any term or condition of this Agreement or any 
Schedule or other instrument subject hereto.

     (j) FORCE MAJEURE.  Neither party shall be liable for any failure of or 
delay in the performance of this Agreement or any Schedule for the period 
that such failure or delay is due to acts of God, public enemy, war, strikes 
or labor disputes, or any other cause beyond the parties' reasonable control 
(each a "Force Majeure"), it being understood that lack of financial 
resources shall not to be deemed a cause beyond a party's control.  Each 
party shall notify the other party promptly of the occurrence of any Force 
Majeure and carry out this Agreement and any Schedule as promptly as 
practicable after such Force Majeure is terminated.  The existence of any 
Force Majeure shall not extend the term of this Agreement or any Schedule.

     (k) COUNTERPARTS.  This Agreement may be signed in any number of 
counterparts.


                          [SIGNATURE PAGE FOLLOWS]




                                     -15-



     IN WITNESS WHEREOF, the parties hereto executed this Agreement effective 
as of the date first set forth above.


                                       FINGERHUT BUSINESS SERVICES, INC.



                                       By      /s/ William J Lansing
                                         ----------------------------------
                                       Name    William J Lansing
                                           --------------------------------
                                       Its     Chief Executive Officer
                                          ---------------------------------


                                       eTOYS INC.



                                       By      /s/ Stephen E Paul
                                         ----------------------------------
                                       Name    Stephen E Paul
                                           --------------------------------
                                       Its     V.P. of Business Development
                                          ---------------------------------

Attachments:
      Exhibit I (Licensed Marks)








 TYPE:  EX-23.1
 SEQUENCE:  6
 DESCRIPTION:  EXHIBIT 23.1



                                                                    EXHIBIT 23.1
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
 
   
    We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 15, 1999 (except Note 8, as to which the
date is April 18, 1999), in Amendment No. 2 to the Registration Statement (Form
S-1 No. 333-72469) and related Prospectus of eToys Inc. for the registration of
8,200,000 shares of its common stock.
    
 
                                          Ernst & Young LLP
 
Los Angeles, California
 
    The foregoing consent is in the form that will be signed upon the completion
of the stock split described in Note 8 to the financial statements.
 
                                          /s/ Ernst & Young LLP
 
   
Los Angeles, California
April 21, 1999