_______________________________

Amazon.com and Toysrus.com are joining forces to create a co-branded toy and video games store. The deal is designed to exploit the strengths of the individual companies: the brand, merchandise selection and marketing strength of Toys "R" Us and the brand, e-commerce expertise and the fulfillment capabilities of Amazon. In addition, both companies stand to benefit from gaining access to the other's customer base.

The toy and video game store is expected to launch in Fall 2000, in time to on the holiday season so important to toy retailers. The two will again join forces for the launch of a co-branded baby products store, in the first half of 2001.

"This is a huge win for our customers," said Jeff Bezos, founder and CEO of Amazon.com. "Our existing toys and games business has grown rapidly because customers appreciate our passionate focus on selection and customer experience. By joining with Toys "R" Us, we're bringing customers an even greater and more diverse product selection and teaming up with the world's leading resource for toys, games and baby products."

"Amazon.com is widely regarded as the gold standard in online retailing, and we are thrilled to deliver to our customers the enormous benefits we know this alliance will bring. The strength of the Toys "R" Us brand and our merchandising expertise combined with Amazon's unbeatable Internet savvy will create an online presence second to none," said John Eyler, CEO of Toys "R" Us, Inc. "Together, we will be the global leader for toys and children's and babies' products on the Internet."

During the course of the 10-year deal, each company will assume responsibility for specific aspects of the toy and video games and baby products stores. Toysrus.com, in collaboration with its majority shareholder, Toys "R" Us, Inc., will identify, buy and manage inventory; Amazon.com will handle site development, order fulfillment, and customer service, housing both Toysrus.com's and its own inventory in Amazon.com's U.S. distribution centers. The agreement also allows for global expansion of the arrangement. Amazon.com will be compensated through a combination of periodic fixed payments, per unit payments and single-digit percentage of revenue. Amazon.com will also receive warrants entitling it to acquire 5 percent of Toysrus.com. All parties, including Toys "R" Us, Inc., will market the co-branded store to their respective customers.

Toysrus.com reported revenue of $49 million in 1999, which would have been higher had system and delivery problems not hampered its ability to do business. Toys "R" Us had total revenue exceeding $11.8 billion in 1999, and is the largest specialty toy retailer in the world. Amazon.com's children's products category, which includes toys, produced $95 million in sales. The NPD Group estimated Amazon.com to have the highest online consumer market share in the toy arena at 26%. Toysrus.com was in third place at 12 percent at the end of the 1999 holiday season. Total online toy sales in 1999 amounted to $425 million USD, and is likely reach $1.6 billion by 2002. According to NPD, online toy sales accounted for 2% of all 1999 toy sales, which totaled $23 billion.

Shares of Amazon.com fell $1/4 to $30-5/8, while Toys "R" Us shares gained $11/16 to $18-1/16 in midday trade on Thursday.