December 5, 1998



John Hnanicek
2570 S.W. Beacon Hill Drive
West Linn, Oregon 97068



Dear Candidate:

eToys Inc. (the "Company") is pleased to offer you employment on the 
following terms:

POSITION.  You will serve in a full-time capacity as Chief Information 
Officer of the Company.  You will report to the Company's Chief Executive 
Officer.  You will be encouraged to participate in meetings of the Company's 
Board of Directors (the "Board") at the discretion of the Company's Chief 
Executive Officer.  Your start date will be mutually agreed by you and the 
Company but will be no later than Monday January 18th, 1999.

CASH COMPENSATION.  You will be paid a monthly salary of not less than 
$12,500.00, which is equivalent to $150,000 on an annual basis, payable in 
monthly installments in accordance with the Company's standard payroll 
practices for salaried employees.  In addition, you will receive a signing 
bonus of $60,000 payable in a lump sum in cash on or about your first day of 
employment with the Company.  You will vest with respect to your signing 
bonus in 12 equal monthly installments for each of the 12 months during which 
you continue to be employed by the Company following the commencement of your 
employment.  If  your employment with the Company is terminated prior to the 
end of this 12th month period, you will be obligated to refund to the Company 
the unvested portion of your signing bonus.  Your cash compensation will be 
reviewed annually by the Board.

STOCK OPTIONS.  In connection with the commencement of your employment, the 
Company will recommend that the Board of Directors grant you stock options to 
purchase 200,000 shares of the Company's Common Stock.  The exercise price 
will be equal to the fair market value of the Common Stock on the date of 
grant.  The option will be an incentive stock option to the maximum extent 
permitted by applicable tax law and will be subject to the terms and 
conditions applicable to options granted under the Company's 1997 Stock Plan, 
as described in that Plan and the applicable stock option agreement 
(including customary transfer and "lock-up" restrictions).  The option will 
be immediately exercisable, but the purchased shares will be subject to 
repurchase by the Company at the exercise price in the event that your 
employment terminates before you vest in the shares.  You will vest in 1/4th 
of the option shares after twelve months of employment, and the balance will 
vest in monthly installments over the next 36 months of employment, as 
described in the applicable stock option agreement. If you are terminated by 
the Company without Cause within the first 6 months of employment, you will 
vest a number of shares equivalent to 1/8th of the option shares. If you are 
terminated by the Company without Cause within the first 6-12 months of 
employment, you will vest a number of shares equivalent to 1/48th of the 
option shares for each month of employment.

"Cause" means (a) willful and repeated failure to comply with the lawful 
directions of the Board, (b) gross negligence or willful misconduct in the 
performance of your duties to the Company, (c) commission of any act of fraud 
against, or the misappropriation of material property belonging to, the 
Company or (d) 


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conviction of a crime that is materially injurious to the business or 
reputation of the Company, in each case as determined in good faith by the 
Board.

BENEFITS.  

a.  INSURANCE BENEFITS.  The Company will provide you with standard medical and 
    dental insurance benefits.  In addition, the Company currently indemnifies 
    all officers and directors to the maximum extent permitted by law, and you 
    will be requested to enter into the Company's standard form of 
    Indemnification Agreement giving you such protection.  Pursuant to the 
    Indemnification Agreement, the Company will agree to advance any expenses 
    for which indemnification is available to the extent allowed by applicable 
    law. 

b.  VACATION.  You will be entitled to 2 weeks paid vacation per year.

MOVING ASSISTANCE.  The Company will, on a basis mutually agreed to by you 
and the Company, enter into a relocation agreement with a relocation 
specialist to assist in the sale of your current residence.  In addition, the 
company will pay a moving company to transport your belongings to the Los 
Angeles area.  The Company will also pay for two months of rent, at a 
reasonable and mutually agreed monthly rental rate, toward temporary housing.

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT.  Like all Company 
employees, you will be required, as a condition to your employment with the 
Company, to sign the Company's standard Employee Information and Inventions 
Agreement, a copy of which is attached hereto as Exhibit A.

PERIOD OF EMPLOYMENT.  Your employment with the Company will be "at will", 
meaning that either you or the Company will be entitled to terminate your 
employment at any time and for any reason, with or without cause.  Any 
contrary representations which may have been made to you are superseded by 
this offer.  This is the full and complete agreement between you and the 
Company on this term.  Although your job duties, title, compensation and 
benefits, as well as the Company's personnel policies and procedures, may 
change from time to time, the "at will" nature of your employment may only be 
changed in an express written agreement signed by you and a duly authorized 
officer of the Company.  

PROOF OF RIGHT TO WORK. For purposes of federal immigration law, you will be 
required to provide to the Company documentary evidence of your identity and 
eligibility for employment in the United States.  Such documentation must be 
provided to us within three (3) business days of your date of hire, or our 
employment relationship with you may be terminated and, in such event, you 
would not be entitled to the severance payment set forth in the preceding 
paragraph.

WITHHOLDING TAXES.  All forms of cash compensation referred to in this letter 
are subject to reduction to reflect applicable withholding and payroll taxes.

CONFIDENTIALITY OF TERMS:  You agree to follow the Company's strict policy 
that employees must not disclose, either directly or indirectly, any 
information, including any of the terms of this agreement, regarding salary, 
bonuses, or stock purchase or option allocations to any person, including 
other employees of the Company; provided, however, that you may discuss such 
terms with members of your immediate family and any legal, tax or accounting 
specialists who provide you with individual legal, tax or accounting advice.

ENTIRE AGREEMENT.  This letter and the Exhibit attached hereto contain all of 
the terms of your employment with the Company and supersede any prior 
understandings or agreements, whether oral or written, between you and the 
Company.

AMENDMENT AND GOVERNING LAW.  This letter agreement may not be amended or 
modified except by an express written agreement signed by you and a duly 
authorized officer of the Company.  The terms of this letter agreement and 
the resolution of any disputes will be governed by California law.

We hope that you find the foregoing terms acceptable. You may indicate your 
agreement with these terms and accept this offer by signing and dating both 
the enclosed duplicate original of this letter and the 


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enclosed Employee Information and Inventions Agreement and returning them to 
me. This offer of employment is contingent upon the satisfactory completion 
of reference checks regarding you past employment. As required by law, your 
employment with the Company is also contingent upon your providing legal 
proof of your identity and authorization to work in the United States.

We look forward to your decision to join eToys Inc. no later than December 
7th, 1998 at 5 p.m. Pacific Standard Time.


Very truly yours,

By: /s/ TOBY LENK
    --------------------------
    Toby Lenk
    Chief Executive Officer
    eToys Inc.


I have read and accept this employment offer:

/s/ John R. Hnanicek

Signature of Candidate
Dated December 5, 1998


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