<PAGE>
                                                                    EXHIBIT 10.3



           CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS.

                                                         (G) Modfn. (1) 070501ps
SESAMEWORKSHOP(TM)
                                            One Lincoln Plaza  New York NY 10023
Dated as of July 1, 2001                tel 212 595 3456 www.sesameworkshop.org
                                                         ----------------------



The First Years, Inc.
One Kiddie Drive
Avon, Massachusetts  02322

Ladies and Gentlemen:

The following, when signed by you ("The First Years") and by us ("Sesame
Workshop"), will constitute a renewal of the agreement between Sesame Workshop
and The First Years dated as of the 1st day July, 1996, as the same may have
heretofore been amended and/or extended (hereinafter referred to as the
"Agreement"):

The Term of the Agreement, solely with respect to the distribution and sale of
Products in the United States including its Territories and Possessions, is
hereby renewed for an additional period of two (2) years commencing July 1, 2001
and ending June 30, 2003, upon all the terms and conditions therein contained,
except as herein otherwise specified:

     1.   During the Term of this renewal, The First Years shall have the right
to manufacture, distribute and sell the Products listed in Appendix A annexed
hereto and hereby made a part hereof. It is further understood and agreed that
if The First Years fails to achieve at least [ ] ([ ]) [ ] of its projected
sales for [ ] during the first contract year of the Term of this renewal (July
1, 2001 - June 30, 2002), then Sesame Workshop shall have the right, at its
election, to delete "[ ]" as a Product hereunder for the second contract year of
the Term hereof. The current sales forecast for [ ] is $[ ] for the period
ending June 30, 2002.

     2.   The First Years' Authorized Channels of Distribution, during the Term
of this renewal, shall be as follows:

               "MASS MARKET CHANNELS" means those channels of distribution
               through wholesalers, distributors and retailers which result in
               the Products being offered for sale in value-oriented retail
               stores, which in the normal course of business usually sell
               product items in the same category as the Products and catalog
               operations conducted by major retailers;
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The First Years, Inc.
Page 2                                                  Dated as of July 1, 2001

               "MID-TIER DEPARTMENT STORE CHANNELS" means those channels of
               distribution through wholesalers, distributors and retailers
               which result in the Products being offered for sale in moderately
               priced department stores such as J.C. Penny, Sears, Kohl's, etc;

               "SPECIALTY STORES" means those channels of distribution through
               wholesalers, distributors and retailers which result in the
               Products being offered for sale primarily to specialty stores,
               gift stores, card stores and gift and card departments of
               department stores;

               DRUG STORES AND GROCERY STORES;

               REGIONAL DISCOUNTERS;

               E-TAILERS (I.E. AMAZON.COM); AND

               INTERNET SITES OF RETAILERS THAT ARE IN THE ABOVE CHANNELS OF
               DISTRIBUTION.

     3.   The Royalty that is payable by The First Years to Sesame Workshop,
during the Term of this renewal, pursuant to subparagraph 5(a) hereof with
respect to each Product hereunder is as follows:

               [    ]

     4.   The First Years guarantees that Sesame Workshop's minimum earnings,
during the Term of this renewal, shall be as follows:

               $[      ] for the Guaranteed Period July 1, 2001 - June 30, 2002

               $[      ] for the Guaranteed Period July 1, 2002 - June 30, 2003

     5.   Effective December 29, 2000, all rights and interest in, and title to,
the Licensed Elements which were owned by JHP and controlled by Sesame Workshop
were acquired by Sesame Workshop, and consequently, subsequent to such date, {i}
any right of JHP under the Agreement shall inure to Sesame Workshop and {ii}
any obligation owed to JHP by The First Years hereunder shall be owed to Sesame
Workshop.



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The First Years, Inc.
Page 3                                                  Dated as of July 1, 2001

     6.   Division {iii} of subparagraph 9(a) of the Agreement is hereby
modified by deleting the term "CTWs Quality Control Department" and substituting
in its place and stead "Sesame Workshop's and/or its representative."

     7.   All notices to Sesame Workshop should be sent to:

              Sesame Workshop
              One Lincoln Plaza
              New York, New York 10023
              Attention: Group President, Products and to David Chan,


                                               Vice President,
                                               Deputy General Counsel
                                               Legal and Business Affairs.


Except as herein expressed modified and/or amended, the Agreement shall remain
in full force and effect according to the terms thereof and, as herein modified,
amended and/or extended, is hereby expressly ratified and confirmed. This
modification, its construction and effect shall be determined in accordance with
the laws of the State of New York with respect to agreements to be fully
performed therein.

If the foregoing accords with your understanding, please sign this renewal at
the place set forth below.



Very truly yours,                           ACCEPTED AND AGREED TO:

SESAME WORKSHOP                             THE FIRST YEARS, INC.


By:                                         By:
   --------------------------------            ---------------------------------


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                                   APPENDIX A


Products hereunder for which THE FIRST YEARS has been granted the non-exclusive
right to distribute and sell in the Territory shall consist solely of the
following Infant Care Items:

    Reusable & Disposable Bottles
    Pacifiers and Attachers
    Splat Mats
    Cups: trainer cups, spout cups, straw cups, and spill proof cups
    Sport Bottles
    *#Teethers (with or without sound)
    100% Vinyl Bibs (specifically excluding fabric and vinyl coated fabric bibs)
    Melamine Set (two-section dish with sippy cup and sculpted spoon)
    Feeding and Soothing Gift Set combinations consisting of the above Products

    *#Rattles (with and without sound)
    Baby Bather
    Baby Bath Tubs
    Car Sunshades
    Bed Rails
    Boo Boo Cold Packs
    Harness and Handstrap
    Medicine Feeders
    Thermometers
    Plastic Step Stools
    Toilet Training
    Potty Booster Seats
    Bathtub Toy Bags
    #Crib Pull Downs
    #Chime Balls
    #Squeaky Playbook for bath use (with sound and visual-no text or story)
    Comb and Brush Set
    Spout Guards
    *#High Chair Suction Toys


* Combination Plastic and Plush elements shall be of equal proportion.
  Specifically excluded are plush only designs.

# These Products shall be sold solely to Juvenile Product Buyers of the
  Authorized Distribution Channels specified in Paragraph 2 of the renewal and
  must be packaged on blister cards and merchandised on racks. Peggable boxed
  items will be approved on a case-by-case basis.