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CEO Employment Agreement

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Sectors: Retail, Specialty Retail
Governing Law: California , View California State Laws
Effective Date: December 05, 1998
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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 t
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