<PAGE>   1
NOTE: The omitted portions of this document marked with an asterisk are subject
to a confidential treatment request and have been filed separately with the
Securities and Exchange Commission.


                               LICENSE AGREEMENT
                               -----------------


Date: December 3, 1996

Re: WINNIE THE POOH

This license agreement ("Agreement") is entered into by and between Disney
Enterprises, Inc. ("Disney"), with a principal place of business at 500 South
Buena Vista Street, Burbank, California 91521, and THE FIRST YEARS, INC.
("Licensee"), with its principal place of business at One Kiddie Drive, Avon, MA
02322-1171. Disney and Licensee agree as follows:

1.   MEANING OF TERMS
     ----------------

A.   "LICENSED MATERIAL" means the graphic representations of the following:

          WINNIE THE POOH, CHRISTOPHER ROBIN, EEYORE, KANGA, ROO, RABBIT,
          PIGLET, OWL, GOPHER, and TIGGER, all in the style as designed by
          Disney.

B.   "TRADEMARKS" means "WALT DISNEY", "DISNEY", and the representations of
     Licensed Material included in Subparagraph 1.A. above.

C.   "ARTICLES" means the items set forth on Schedule A, which is attached
     hereto and incorporated herein by this reference, on or in connection with
     which the Licensed Material and/or the Trademarks are reproduced or used,
     and includes each and every stock keeping unit ("SKU") of each Article.

D.   "MINIMUM PER ARTICLE ROYALTY" means for each Article identified herein
     which is sold the sum indicated herein:

          None.

E.   "PRINCIPAL TERM" means the period commencing January 1, 1997, and 
     ending * .

F.   "TERRITORY" means the United States, United States PX's wherever located,
     and United States territories and possessions, excluding Puerto Rico, Guam,
     Commonwealth of Northern Mariana Islands and Palau. However, if sales are
     made to chain stores in the United States which have stores in Puerto Rico,
     such chain stores may supply Articles to such stores in Puerto Rico.

G.   "ROYALTIES" means a royalty in the amounts set forth below in Subparagraphs
     1.G(1)(a), (b), and (c) and Royalties shall be further governed by the
     provisions contained in Subparagraphs 1.G.(2)-(6):


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Agreement dated December 3, 1996
Page 2


  (1)(a)* percent ( * %) of Licensee's Net Invoiced Billings to authorized
          Retailers and Wholesalers for Articles shipped by Licensee from a
          location in the Territory for delivery to a customer located in the
          Territory ("F.O.B. In Sales"); or

     (b)* percent ( * %) of Licensee's Net Invoiced Billings to authorized
          Retailers and Wholesalers when Licensee's customer located in the
          Territory takes title to the Articles outside the Territory and/or
          bears the risk of loss of Articles manufactured and shipped to the
          customer from outside the Territory ("F.O.B. Out Sales"); or

     (c)  if a Minimum Per Article Royalty has been specified in Subparagraph
          1.D. above, and it would result in a higher royalty to be paid for the
          Articles, Licensee agrees to pay the higher royalty amount.

     (2)  The sums paid to Disney as Royalties on any sales to Licensee's
          Affiliates shall be no less than the sums paid on sales to customers
          not affiliated with Licensee.

     (3)  All sales of Articles shipped to a customer outside the Territory
          pursuant to a distribution permission shall bear a Royalty at the rate
          for F.O.B. Out Sales. However, sales of Articles to Disney's
          Affiliates outside the Territory shall bear a Royalty at the rate for
          F.O.B. In Sales.

     (4)  No Royalties are payable on the mere manufacture of Articles.

     (5)  The full Royalty percentage shall be payable on close-out or other
          deep discount sales of Articles, including sales to employees.

     (6)  Royalties reported on sales of Articles which have been returned to
          Licensee for credit or refund and on which a refund has been made or
          credit memo issued may be credited against Royalties due. The credit
          shall be taken in the Royalty Payment Period in which the refund is
          given or credit memo issued. Unused credits may be carried forward,
          but in no event shall Licensee be entitled to a refund of Royalties.

                                                                               


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Winnie The Pooh
Agreement dated December 3, 1996
Page 3

H.   "NET INVOICED BILLINGS" means the following:

     (1)  actual invoiced billings (i.e., sales quantity multiplied by
          Licensee's selling price) for Articles sold, and all other receivables
          of any kind whatsoever, received in payment for the Articles, whether
          received by Licensee or any of Licensee's Affiliates, except as
          provided in Subparagraph 1.H.(2), less "Allowable Deductions" as
          hereinafter defined.

     (2)  The following are not part of Net Invoiced Billings: invoiced charges
          for transportation of Articles within the Territory which are
          separately identified on the sales invoice, and sales taxes.

I.   "ALLOWABLE DEDUCTIONS" means the following:

     (1)  volume discounts, and other discounts from the invoice price (or
          post-invoice credits) unilaterally imposed in the regular course of
          business by Licensee's customers, so long as Licensee documents such
          discounts (or credits) to Disney's satisfaction. In the event a
          documented unilateral discount (or credit) is taken with respect to
          combined sales of Articles and other products not licensed by Disney,
          and Licensee cannot document the portion of the discount (or credit)
          applicable to the Articles, Licensee may apply only a pro rata portion
          of the discount (or credit) to the Articles. Unilateral discounts or
          credits are never deductible if they represent items listed below in
          Subparagraph 1.1.(2).

     (2)  The following are not Allowable Deductions, whether granted on sales
          invoices or unilaterally imposed as discounts or as post-invoice
          credits: cash discounts granted as terms of payment; early payment
          discounts; allowances or discounts relating to advertising; mark down
          allowances; new store allowances; defective goods allowances or
          allowances taken by customers in lieu of returning goods; costs
          incurred in manufacturing, importing, selling or advertising Articles;
          freight costs incorporated in the selling price; and uncollectible
          accounts.

J.   "ROYALTY PAYMENT PERIOD" means each calendar quarterly period during the
     Principal Term and during the sell-offperiod, if granted.


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Winnie The Pooh
Agreement dated December 3, 1996
Page 4


     K.   "ADVANCE" means the following sum(s) payable by the following
           date(s) as an advance on Royalties to accrue in the following
           period(s):
             
                  None.
    
     L.   "GUARANTEE" means the following sum(s) which Licensee guarantees
          to pay as minimum Royalties on Licensee's cumulative sales in the
          following period(s):

                   *              


     M.   "SAMPLES" means twelve (12) samples of each SKU of each Article, from
          the first production run of each supplier of each SKU of each Article.

     N.   "PROMOTION COMMITMENT" means the following sum(s) which Licensee
          agrees to spend in the following way(s):

          
          Licensee hereby acknowledges Licensee's understanding that Disney is
          implementing a common marketing and promotional fund (the "Common
          Marketing Fund"), during the Principal Term, for purposes of
          marketing and promoting the Licensed Material, the Trademarks,
          and/or the brand(s), as Disney may deem appropriate in Disney's 
          absolute discretion. In order to implement the Common Marketing
          Fund, Licensee shall be required, from time to time at Disney's 
          request, to provide a contribution(s) to the Common Marketing Fund,
          the cumulative total of which shall not exceed * percent ( * %) of
          Licensee's Net Invoiced Billings for Articles (such Net Invoiced
          Billings to be estimated by Disney in a reasonable manner) during the
          Principal Term, but in no event less than a cumulative total of *  
          percent ( * %) of the quotient of (the Guarantee divided by the
          Royalty rate for F.O.B. In Sales). Within fifteen (15) days after each
          request by Disney, Licensee shall pay to Disney the amount of the
          contribution designated by Disney. Such contribution may be expended
          by Disney and/or Disney's designees in the amount and in the manner
          Disney deems most appropriate in order to market, promote, and
          advertise the Licensed Material, the Trademarks, and/or the brand(s). 
          Licensee's contribution shall only be spent for the promotion of the
          Licensed Material, the Trademarks, and/or the brand(s) licensed
          hereunder. However, Disney does not ensure that Licensee will benefit
          directly or pro-rata from the operation of the Common Marketing     
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Winnie The Pooh
Agreement dated December 3, 1996
Page 5

     Fund. Licensee shall not be entitled to any audit rights with regard to the
     Common Marketing Fund.

O.   "MARKETING DATE" means the following date(s) by which the following
     Article(s) shall be available for purchase by the public at the retail
     outlets authorized pursuant to Subparagraph 2.A.:

          By January 1, 1997, for all Articles.

P.   "AFFILIATE" means, with regard to Licensee, any corporation or other entity
     which directly or indirectly controls, is controlled by, or is under common
     control with Licensee; with regard to Disney, "Affiliate" means any
     corporation or other entity which directly or indirectly controls, is
     controlled by, or is under common control with Disney. "Control" of an
     entity shall mean possession, directly or indirectly, of power to direct or
     cause the direction of management or policies of such entity, whether
     through ownership of voting securities, by contract or otherwise.

Q.   "LAWS" means any and all applicable laws, rules, regulations, voluntary
     industry standards, association laws, codes or other obligations pertaining
     to any of Licensee's activities under this Agreement, including but not
     limited to those applicable to the manufacture, pricing, sale and/or
     distribution of the Articles.

R.   "RETAILER" means independent and chain retail outlets which have
     storefronts and business licenses, and which customers walk into, not up
     to; "WHOLESALER" means a seller of items to retailers, not consumers, and
     includes the term "distributor". The following do not qualify as authorized
     sales outlets for Articles under this Agreement under any circumstances:
     swap meets, flea markets, street peddlers, unauthorized kiosks, and the
     like.

2.   RIGHTS GRANTED
     --------------
 
A.   In consideration for Licensee's promise to pay and Licensee's payment of
     all Royalties, Advances and Guarantees required hereunder, Disney grants
     Licensee the non-exclusive right, during the Principal Term, and only
     within the Territory, to reproduce the Licensed Material only on or in
     connection with the Articles, to use such Trademarks and uses thereof as
     may be approved when each SKU of the Articles is approved and only on or
     in connection with the Articles, and to manufacture, distribute for sale
     and sell the Articles (other than by direct marketing methods, which
     includes but is not limited to, computer on-line selling, direct mail and
     door-to-door solicitation). Licensee will sell the Articles only to the
     following Retailers in


<PAGE>   6




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Winnie The Pooh
Agreement dated December 3, 1996
Page 6

     the Territory for resale to the public in the Territory, or to Wholesalers
     in the Territory for resale only to the following Retailers: (1) mass
     market Retailers (including such Retailers as Target, Toys R Us, WalMart
     and KMart), and (2) drug chains; provided, however, that the Articles
     identified in Schedule A as A.12, and B.1 through B.7 must be carded and
     sold only to the infant accessory departments or the juvenile products
     departments of such authorized Retailers. Licensee will not sell the
     Articles to other Retailers, or to other Wholesalers. In addition, License
     may not sell the Articles to Retailers selling merchandise on a duty-free
     basis, or to Wholesalers for resale to such Retailers, unless such Retailer
     or Wholesaler has a then-current license agreement with Disney or any of
     Disney's Affiliates permitting it to make such duty-free sales. Licensee
     may sell the Articles to authorized customers for resale through the
     pre-approved mail order catalogs listed on the Catalog Schedule to this
     Agreement. If there is a question as to whether a particular customer falls
     within any of the categories specified above, Disney's determination shall
     be binding.

B.   Unless Disney consents in writing, Licensee shall not sell or otherwise
     provide Articles for use as premiums (including those in
     purchase-with-purchase promotions), promotions, give-aways, fund-raisers,
     or entries in sweepstakes, or through unapproved direct marketing methods,
     including but not limited to, home shopping television programs, or to
     customers for inclusion in another product. If Licensee wishes to sell the
     Articles to customers for resale through mail order catalogs other than
     those listed on the Catalog Schedule hereto, Licensee must obtain Disney's
     prior written consent in each instance. However, Licensee may solicit
     orders by mail from those Wholesalers or Retailers authorized pursuant to
     Subparagraph 2.A. above, and Licensee may sell to such authorized Retailers
     which sell predominantly at retail, but which include the Articles in their
     mail order catalogs, or otherwise sell Articles by direct marketing methods
     as well as at retail.

C.   The prohibition of computer on-line selling referenced in Subparagraph 2.A.
     includes, but is not limited to, the display, promotion or offering of
     Articles in or on any on-line venues, including but not limited to, any
     catalog company's or Retailer's "Websites," "home pages," or any similar
     venues, except as specifically permitted in the next two sentences. With
     Disney's prior written permission, Articles approved by Disney may be
     displayed and promoted on Disney-controlled Internet services, only within
     the Territory. In addition, with Disney's prior written permission,
     Articles approved by Disney may be displayed and promoted on Licensee's own
     Website; however, Licensee must obtain Disney's prior written approval of
     all creative and editorial elements of


<PAGE>   7




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Winnie The Pooh
Agreement dated December 3, 1996
Page 7

     such promotional uses, in accordance with the provisions of Paragraph 7 of
     this Agreement.

D.   Unless Disney consents in writing, Licensee shall not give away or donate
     Articles to Licensee's accounts or other persons for the purpose of
     promoting sales of Articles, except for minor quantities or samples which
     are not for onward distribution.

E.   Nothing contained herein shall preclude Licensee from selling Articles to
     Disney or to any of Disney's Affiliates, or to Licensee's or Disney's
     employees, subject to the payment to Disney of Royalties on such sales.

F.   Disney further grants Licensee the right to reproduce the Licensed Material
     and to use the approved Trademarks, only within the Territory, during the
     Principal Term, on containers, packaging and display material for the
     Articles, and in advertising for the Articles.

G.   Nothing contained in this Agreement shall be deemed to imply any
     restriction on Licensee's freedom and that of Licensee's customers to sell
     the Articles at such prices as Licensee or they shall determine.

H.   Licensee recognizes and acknowledges the vital importance to Disney of the
     characters and other proprietary material Disney owns and creates, and the
     association of the Disney name with them. In order to prevent the
     denigration of Disney's products and the value of their association with
     the Disney name, and in order to ensure the dedication of Licensee's best
     efforts to preserve and maintain that value, Licensee agrees that, during
     the Principal Term and any extension hereof, Licensee will not manufacture
     or distribute any merchandise embodying or bearing any artwork or other
     representation which Disney determines, in Disney's reasonable discretion,
     is confusingly similar to Disney's characters or other proprietary
     material.

3.   ADVANCE
     -------

A.   Licensee agrees to pay the Advance, which shall be on account of Royalties
     to accrue during the Principal Term only, and only with respect to sales in
     the Territory; provided, however, that if any part of the Advance is
     specified hereinabove as applying to any period less than the Principal
     Term, such part shall be on account of Royalties to accrue during such
     lesser period only. If said Royalties should be less than the Advance, no
     part of the Advance shall be repayable. .


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Winnie The Pooh
Agreement dated December 3, 1996
Page 8

B.   Royalties accruing during any sell-off period or extension of the Principal
     Term shall not be offset against the Advance unless otherwise agreed in
     writing. Royalties accruing during any extension of the Principal Term or
     any other term shall be offset only against an advance paid with respect to
     such extended term.

C.   In no event shall Royalties accruing by reason of any sales to Disney or
     any of Disney's Affiliates or by reason of sales outside the Territory
     pursuant to a distribution permission be offset against the Advance or any
     subsequent advance.

4.   GUARANTEE
     ---------
 
A.   Licensee shall, with Licensee's statement for each Royalty Payment Period
     ending on a date indicated in Subparagraph 1.L. hereof defining
     "Guarantee," or upon termination if the Agreement is terminated prior to
     the end of the Principal Term, pay Disney the amount, if any, by which
     cumulative Royalties paid with respect to sales in the Territory during any
     period or periods covered by the Guarantee provision, or any Guarantee
     provision contained in any agreement extending the term hereof, fall short
     of the amount of the Guarantee for such period.

B.   Advances applicable to Royalties due on sales in the period to which the
     Guarantee relates apply towards meeting the Guarantee.

C.   In no event shall Royalties paid with respect to sales to Disney or to any
     of Disney's Affiliates, or with respect to sales outside the Territory
     pursuant to a distribution permission, apply towards the meeting of the
     Guarantee or any subsequent guarantee.

5.   PRE-PRODUCTION APPROVALS
     ------------------------

A.   As early as possible, and in any case before commercial production of any
     Article, Licensee shall submit to Disney for Disney's review and written
     approval (to utilize such materials in preparing a pre-production sample)
     all concepts, all preliminary and proposed final artwork, and all three-
     dimensional models which are to appear on or in any and all SKUs of the
     Article. Thereafter, Licensee shall submit to Disney for Disney's written
     approval a pre-production sample of each SKU of each Article. Disney shall
     endeavor to respond to such requests within a reasonable time, but such
     approvals should be sought as early as possible in case of delays. In
     addition to the foregoing, as early as possible, and in any case no later
     than sixty (60) days following written conceptual approval, Licensee shall
     supply to Disney


<PAGE>   9




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Winnie The Pooh
Agreement dated December 3, 1996
Page 9

     for Disney's use for internal purposes, a mock-up, prototype or
     pre-production sample of each SKU of each Article on or in connection with
     which the Licensed Material is used. Licensee acknowledges that Disney may
     not approve concepts or artwork submitted near the end of the Principal
     Term. Any pre-production approval Disney may give will not constitute or
     imply a representation or belief by Disney that such materials comply with
     any applicable Laws.

B.   Approval or disapproval shall lie solely in Disney's discretion, and any
     SKU of any Article not so approved in writing shall be deemed unlicensed
     and shall not be manufactured or sold. If any unapproved SKU of any Article
     is being sold, Disney may, together with other remedies available to
     Disney, including but not limited to, immediate termination of this
     Agreement, by written notice require such SKU of such Article to be
     immediately withdrawn from the market. Any modification of any SKU of an
     Article, including, but not limited to, change of materials, color, design
     or size of the representation of Licensed Material must be submitted in
     advance for Disney's written approval as if it were a new SKU of an
     Article. Approval of any SKU of an Article which uses particular artwork
     does not imply approval of such artwork for use with a different Article.
     The fact that artwork has been taken from a Disney publication or a
     previously approved Article does not mean that its use will necessarily be
     approved in connection with an Article licensed hereunder.

C.   If Licensee submits for approval artwork from an article or book
     manufactured or published by another licensee of Disney's or of any of
     Disney's Affiliates, Licensee must advise Disney in writing of the source
     of such artwork. If Licensee fails to do so, any approval which Disney may
     give for use by Licensee of such artwork may be withdrawn by giving
     Licensee written notice thereof, and Licensee may be required by Disney not
     to sell Articles using such artwork.

D.   Licensee is responsible for the consistent quality and safety of the
     Articles and their compliance with applicable Laws. Disney will not
     unreasonably object to any change in the design of an Article or in the
     materials used in the manufacture of the Article or in the process of
     manufacturing the Articles which Licensee advises Disney in writing is
     intended to make the Article safer or more durable. 

E.   If Disney has supplied Licensee with forms for use in applying for approval
     of artwork, models, pre-production and production samples of Articles, 
     Licensee shall use such forms when submitting anything for Disney's
     approval.


<PAGE>   10




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Winnie The Pooh
Agreement dated December 3, 1996
Page 10

6.   APPROVAL OF PRODUCTION SAMPLES
     ------------------------------
 
A.   Before shipping an Article to any customer, Licensee agrees to furnish to
     Disney, from the first production run of each supplier of each of the
     Articles, for Disney's approval of all aspects of the Article in question,
     the number of Samples with packaging which is hereinabove set forth, which
     shall conform to the approved artwork, three-dimensional models and
     pre-production sample. Approval or disapproval of the artwork as it appears
     on any SKU of the Article, as well as of the quality of the Article, shall
     lie in Disney's sole discretion and may, among other things, be based on
     unacceptable quality of the artwork or of the Article as manufactured. Any
     SKU of any Article not so approved shall be deemed unlicensed, shall not be
     sold and, unless otherwise agreed by Disney in writing, shall be destroyed.
     Such destruction shall be attested to in a certificate signed by one of
     Licensee's officers. Production samples of Articles for which Disney has
     approved a pre-production sample shall be deemed approved, unless within
     twenty (20) days of Disney's receipt of such production sample Disney
     notifies Licensee to the contrary. Any approval of a production sample
     attributable to Disney will not constitute or imply a representation or
     belief by Disney that such production sample complies with any applicable
     Laws.

B.   Licensee agrees to make available at no charge such additional samples of
     any or all SKUs of each Article as Disney may from time to time reasonably
     request for the purpose of comparison with earlier samples, or for Disney's
     anti-piracy efforts, or to test for compliance with applicable Laws, and to
     permit Disney to inspect Licensee's manufacturing operations and testing
     records (and those of Licensee's third-party manufacturers) for the
     Articles.

C.   Licensee acknowledges that Disney may disapprove any SKU of an Article or a
     production run of any SKU of an Article because the quality is unacceptable
     to Disney, and accordingly, Disney recommends that Licensee submit
     production samples to Disney for approval before committing to a large
     original production run or to purchase a large shipment from a new
     supplier.

D.   No modification of an approved production sample shall be made without
     Disney's further prior written approval. All SKUs of Articles being sold
     must conform in all respects to the approved production sample. It is
     understood that if in Disney's reasonable judgment the quality of any SKU
     of an Article originally approved has deteriorated in later production
     runs, or if the SKU has otherwise been altered, Disney may, in addition to
     other remedies available to Disney, by written notice require such SKU of
     the Article to be immediately withdrawn from the market.


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Winnie The Pooh
Agreement dated December 3, 1996
Page 11

E.   The rights granted hereunder do not permit the sale of "seconds" or
     "irregulars". All Articles not meeting the standard of approved samples
     shall be destroyed or all Licensed Material and Trademarks shall be removed
     or obliterated therefrom.

F.   Licensee is responsible for the consistent quality and safety of the
     Articles and their compliance with applicable Laws. Disney will not
     unreasonably object to any change in the design of an Article or in the
     materials used in the manufacture of the Article or in the process of
     manufacturing the Articles which Licensee advises Disney in writing is
     intended to make the Article safer or more durable.

G.   Disney shall have the right, by written notice to Licensee, to require
     modification of any SKU of any Article approved by Disney under this or any
     previous agreement between the parties pertaining to Licensed Material.
     Likewise, if the Principal Term of this Agreement is extended by mutual
     agreement, Disney shall have the right, by written notice to Licensee, to
     require modification of any SKU of any Article approved by Disney under
     this Agreement. It is understood that there is no obligation upon either
     party to extend the Agreement.

H.   If Disney notifies Licensee of a required modification under Subparagraph
     6.G. with respect to any SKU of a particular Article, such notification
     shall advise Licensee of the nature of the changes required, and Licensee
     shall not accept any order for any such Article until the subject SKU has
     been resubmitted to Disney with such changes and Licensee has received
     Disney's written approval of the Article as modified. However, Licensee
     may continue to distribute Licensee's inventory of the previously approved
     Articles until such inventory is exhausted (unless such Articles are
     dangerously defective, as determined by Disney).

I.   Upon Disney's request, Licensee agrees to give Disney written notice of the
     first ship date for each Article.

J.   If Disney has inadvertently approved a concept, pre-production sample, or
     production sample of a product which is not included in the Articles under
     this Agreement, or if Disney has inadvertently approved an Article using
     artwork and/or trademarks not included in the Agreement, such approval may
     be revoked at any time without any obligation whatsoever on Disney's part 
     to Licensee. Any such product as to which Disney's approval is revoked 
     shall be deemed unauthorized and shall not be distributed or sold by or for
     Licensee.


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Winnie The Pooh
Agreement dated December 3, 1996
Page 12

7.   APPROVAL OF PACKAGING, PROMOTIONAL MATERIAL, AND ADVERTISING

A.   All containers, packaging, display material, promotional material,
     catalogs, and all advertising, including but not limited to, television
     advertising and press releases, for Articles must be submitted to Disney
     and receive Disney's written approval before use. To avoid unnecessary
     expense if changes are required, Disney's approval thereof should be
     procured when such is still in rough or storyboard format. Disney shall
     endeavor to respond to requests for approval within a reasonable time.
     Approval or disapproval shall lie in Disney's sole discretion, and the use
     of unapproved containers, packaging, display material, promotional
     material, catalogs or advertising is prohibited. Disney's approval of any
     containers, packaging, display material, promotional material, catalogs or
     advertising under this Agreement will not constitute or imply a
     representation or belief by Disney that such materials comply with any
     applicable Laws. Whenever Licensee prepares catalog sheets or other printed
     matter containing illustrations of Articles, Licensee will furnish to
     Disney five (5) copies thereof when they are published.

B.   If Disney has supplied Licensee with forms for use in applying for approval
     of materials referenced in this Paragraph 7, Licensee shall use such forms
     when submitting anything for Disney's approval.

C.   Disney has designed character artwork and/or a brand name logo(s) to be
     used by all licensees in connection with the packaging of all merchandise
     using the Licensed Material, and, if applicable, on hang tags and garment
     labels for such merchandise. Disney will supply Licensee with reproduction
     artwork thereof; and Licensee agrees to use such artwork and/or logo(s) on
     the packaging of the Articles, and, if applicable, on hang tags and garment
     labels, which Licensee will have printed and attached to each Article at
     Licensee's cost. Disney recommends that Licensee source the hang tags and
     garment labels from Disney's authorized manufacturer (if any) of pre-
     approved hang tags and garment labels, the name of which will be provided
     to Licensee upon request. However, Licensee may use another manufacturer
     for the required hang tags and garment labels if the hang tags and garment
     labels manufactured are of equivalent quality and are approved by Disney in
     accordance with Disney's usual approval process.

8.   ARTWORK
     -------
            
     Licensee shall pay Disney, within thirty (30) days of receiving an invoice
     therefor, for Style Guides and for artwork done at Licensee's request by
     Disney or third parties


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Winnie The Pooh
Agreement dated December 3, 1996
Page 13

     under contract to Disney in the development and creation of Articles,
     display, packaging or promotional material (including any artwork which in
     Disney's opinion is necessary to modify artwork initially prepared by
     Licensee and submitted to Disney for approval, subject to Licensee's prior
     written approval) at Disney's then prevailing commercial art rates.
     Estimates of artwork charges are available upon request. While Licensee is
     not obligated to utilize the services of Disney's Art Department, Licensee
     is encouraged to do so in order to minimize delays which may occur if
     outside artists do renditions of Licensed Material which Disney cannot
     approve and to maximize the attractiveness of the Articles. Artwork will be
     returned to Licensee by overnight courier, at Licensee's cost (unless other
     arrangements are made).

9.   PRINT, RADIO OR TV ADVERTISING
     ------------------------------

     Licensee will obtain all approvals necessary in connection with print,
     radio or television advertising, if any, which Disney may authorize.
     Licensee represents and warrants that all advertising and promotional
     materials shall comply with all applicable Laws. Disney's approval of copy
     or storyboards for such advertising will not constitute or imply a
     representation or belief by Disney that such copy or storyboards comply
     with any applicable Laws. This Agreement does not grant Licensee any rights
     to use the Licensed Material in animation. Licensee may not use any
     animation or live action footage from the motion picture from which the
     Licensed Material comes without Disney's prior written approval in each
     instance. In the event Disney approves the use of film clips of the motion
     picture from which the Licensed Material comes, for use in a television
     commercial, Licensee shall be responsible for any re-use fees which may be
     applicable, including SAG payments for talent. No reproduction of the
     film clip footage shall be made except for inclusion, as approved by
     Disney, in such commercial and there shall be no modifications of the film
     clip footage. All film clip footage shall be returned to Disney immediately
     after its inclusion in such commercial. Disney shall have the right to
     prohibit Licensee from advertising the Articles by means of television
     and/or billboards. Such right shall be exercised within Disney's absolute
     discretion, including without limitation for reasons of overexposure of the
     Licensed Material.

10.  LICENSEE NAME AND ADDRESS ON ARTICLES
     -------------------------------------

     A.   Licensee's name, trade name (or Licensee's trademark which Licensee
          has advised Disney in writing that Licensee is using) and Licensee's
          address (at least city and state) will appear on permanently affixed
          labeling on each Article or, if the Article is sold to the public in
          packaging or a container, printed on such packaging or a container so
          that the public can identify the supplier of the Article. On soft
          goods "permanently affixed" shall mean sewn on. RN numbers do not
          constitute a sufficient label under this paragraph.




<PAGE>   14




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 14

     B.   Licensee shall advise Disney in writing of all trade names or
          trademarks Licensee wishes to use on Articles being sold under this
          license. Licensee may sell the Articles only under mutually agreed
          upon trade names or trademarks.

11.  COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE LAWS AND STANDARDS
     ------------------------------------------------------------------

     A.   Licensee covenants that each Article and component thereof distributed
          hereunder shall be of good quality and free of defects in design,
          materials and workmanship, and shall comply with all applicable Laws,
          and such specifications, if any, as may have been specified in
          connection with this Agreement (e.g., Disney's Apparel Performance
          Specification Manual, if the Articles are items of apparel), and shall
          conform to the Sample thereof approved by Disney.

     B.   Without limiting the foregoing, Licensee covenants on behalf of
          Licensee's own company, and on behalf of all of Licensee's third-party
          manufacturers and suppliers (collectively, "Manufacturers"), as
          follows:

          (1)  Licensee and the Manufacturers agree not to use child labor in
               the manufacturing, packaging or distribution of Disney
               merchandise. The term "child" refers to a person younger than the
               age for completing compulsory education, but in no case shall any
               child younger than fourteen (14) years of age be employed in the
               manufacturing, packaging or distribution of Disney merchandise.

          (2)  Licensee and the Manufacturers agree to provide employees with a
               safe and healthy workplace in compliance with all applicable
               Laws. Licensee and the Manufacturers agree to provide Disney with
               all information Disney may request about manufacturing, packaging
               and distribution facilities for the Articles.

          (3)  Licensee and the Manufacturers agree only to employ persons whose
               presence is voluntary. Licensee and the Manufacturers agree not
               to use prison labor, or to use corporal punishment or other forms
               of mental or physical coercion as a form of discipline of
               employees.

          (4)  Licensee and the Manufacturers agree to comply with all
               applicable wage and hour Laws, including minimum wage, overtime,
               and maximum hours Licensee and the Manufacturers agree to
               utilize fair employment practices as defined by applicable Laws.


<PAGE>   15




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 15

          (5)  Licensee and the Manufacturers agree not to discriminate in
               hiring and employment practices on grounds of race, religion,
               national origin, political affiliation, sexual preference, or
               gender.

          (6)  Licensee and the Manufacturers agree to comply with all
               applicable environmental Laws.

          (7)  Licensee and the Manufacturers agree to comply with all
               applicable Laws pertaining to the manufacture, pricing, sale and
               distribution of the Articles.

          (8)  Licensee and the Manufacturers agree that Disney may engage in
               activities such as unannounced on-site inspections of
               manufacturing, packaging and distribution facilities in order to
               monitor compliance with applicable Laws.

     C.   Both before and after Licensee puts Articles on the market, Licensee
          shall follow reasonable and proper procedures for testing that
          Articles comply with all applicable Laws, and shall permit Disney's
          designees to inspect testing, manufacturing and quality control
          records and procedures and to test the Articles for compliance.
          Licensee agrees to promptly reimburse Disney for the reasonable costs
          of such testing. Licensee shall also give due consideration to any
          recommendations by Disney that Articles exceed the requirements of
          applicable Laws. Articles not manufactured, packaged or distributed in
          accordance with applicable Laws shall be deemed unapproved, even if
          previously approved by Disney, and shall not be shipped unless and
          until they have been brought into full compliance therewith.

12.  DISNEY OWNERSHIP OF ALL RIGHTS IN LICENSED MATERIAL
     ---------------------------------------------------

     Licensee acknowledges that the copyrights and all other proprietary rights
     in and to Licensed Material are exclusively owned by and reserved to Disney
     or its licensor. Licensee shall neither acquire nor assert copyright
     ownership or any other proprietary rights in Licensed Material or in any
     derivation, adaptation, variation or name thereof. Without limiting the
     foregoing, Licensee hereby assigns to Disney all Licensee's worldwide
     right, title and interest in the Licensed Material and in any material
     objects consisting of or incorporating drawings, paintings, animation cels,
     or sculptures of Licensed Material, or other derivations, adaptations,
     compilations, collective works, variations or names of Licensed Material,
     heretofore or hereafter created by or for Licensee or any of Licensee's
     Affiliates. All such new materials shall be included in the definition of
     "Licensed Material" under this Agreement. If any third party makes or has
     made any contribution to the creation of any new materials which are
     included in the definition of Licensed Material under this


<PAGE>   16




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 16

     Paragraph 12, Licensee agrees to obtain from such party a full assignment
     of rights so that the foregoing assignment by Licensee shall vest full
     rights to such new materials in Disney. Licensee further covenants that any
     such new materials created by Licensee or by any third party Licensee has
     engaged are original to Licensee or such third party and do not violate the
     rights of any other person or entity; this covenant regarding originality
     shall not extend to any materials Disney supplies to Licensee, but does
     apply to all materials Licensee or Licensee's third party contractors may
     add thereto. The foregoing assignment to Disney of material objects shall
     not include that portion of Licensee's displays, catalogs or promotional
     material not containing Licensed Material, or the physical items
     constituting the Articles, unless such items are in the shape of the
     Licensed Material.

13.  COPYRIGHT NOTICE
     ----------------

     As a condition to the grant of rights hereunder, each Article and any other
     matter containing Licensed Material shall bear a properly located
     permanently affixed copyright notice in Disney's name (e.g., "(C) Disney"),
     or such other notice as Disney specifies to Licensee in writing. Licensee
     will comply with such instructions as to form, location and content of the
     notice as Disney may give from time to time. Without limiting the
     foregoing, Licensee agrees to include on the Article, or the packaging for
     the Article, or the hang tag for the Article (if applicable), the following
     language: Based on the "Winnie The Pooh" works, copyright A.A. Milne and
     E.H. Shepard. Licensee will not, without Disney's prior written consent, 
     affix to any Article or any other matter containing Licensed Material a 
     copyright notice in any other name. If through inadvertence or otherwise 
     a copyright notice on any Article or other such matter should appear in 
     Licensee's name or the name of a third party, Licensee hereby agrees to 
     assign to Disney the copyright represented by any such copyright notice in
     Licensee's name and, upon request, cause the execution and delivery to 
     Disney of whatever documents are necessary to convey to Disney that 
     copyright represented by any such copyright notice. If by inadvertence a 
     proper copyright notice is omitted from any Article or other matter 
     containing Licensed Material, Licensee agrees at Licensee's expense to use
     all reasonable efforts to correct the omission on all such Articles or
     other matter in process of manufacture or in distribution. Licensee agrees
     to advise Disney promptly and in writing of the steps being taken to
     correct any such omission and to make the corrections on existing Articles
     which can be located.

14.  NON-ASSOCIATION OF OTHER FANCIFUL CHARACTERS WITH LICENSED MATERIAL
     -------------------------------------------------------------------

     To preserve Disney's identification with Disney's characters and to avoid
     confusion of the public, Licensee agrees not to associate other characters
     or licensed properties with the Licensed Material or the Trademarks either
     on the Articles or in their


<PAGE>   17




The First Years, Inc. 
Winnie The Pooh
Agreement dated December 3, 1996
Page 17

     packaging, or, without Disney's written permission, on advertising,
     promotional or display materials. If Licensee wishes to use a character
     which constitutes Licensee's trademark on the Articles or their packaging,
     or otherwise in connection with the Articles, Licensee agrees to obtain
     Disney's prior written permission.

15.  ACTIVE MARKETING OF ARTICLES
     ----------------------------

     Licensee agrees to manufacture (or have manufactured for Licensee) and
     offer for sale all the Articles and to exercise the rights granted herein.
     Licensee agrees that by the Marketing Date applicable to a particular
     Article or, if such a date is not specified in Subparagraph 1.O., by six
     (6) months from the commencement of the Principal Term or the date of any
     applicable amendment, shipments to customers of such Article will have
     taken place in sufficient time that such Article shall be available for
     purchase in commercial quantities by the public at the retail outlets
     authorized pursuant to Subparagraph 2.A. In any case in which such sales
     have not taken place or when the Article is not then and thereafter
     available for purchase in commercial quantities by the public, Disney may
     either invoke Disney's remedies under Paragraph 28, or withdraw such
     Article from the list of Articles licensed in this Agreement without
     obligation to Licensee other than to give Licensee written notice thereof.

16.  PROMOTION COMMITMENT
     --------------------

     Licensee agrees to carry out the Promotion Commitment, if any, as defined
     in Subparagraph 1.N.

17.  TRADEMARK RIGHTS AND OBLIGATIONS
     --------------------------------

     A.   All uses of the Trademarks by Licensee hereunder shall inure to
          Disney's benefit. Licensee acknowledges that Disney or its licensor is
          the exclusive owner of all the Trademarks, and of any trademark
          incorporating all or any part of a Trademark or any Licensed Material,
          and the trademark rights created by such uses. Without limiting the
          foregoing, Licensee hereby assigns to Disney all the Trademarks, and
          any trademark incorporating all or any part of a Trademark or any
          Licensed Material, and the trademark rights created by such uses,
          together with the goodwill attaching to that part of the business in
          connection with which such Trademarks or trademarks are used. Licensee
          agrees to execute and deliver to Disney such documents as Disney
          requires to register Licensee as a Registered User or Permitted User
          of the Trademarks or such trademarks and to follow Disney's
          instructions for proper use thereof in order that protection and/or
          registrations for the Trademarks and such trademarks may be obtained
          or maintained.


<PAGE>   18




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 18

     B.   Licensee agrees not to use any Licensed Material or Trademarks, or any
          trademark incorporating all or any part of a Trademark or of any
          Licensed Material, on any business sign, business cards, stationery or
          forms (except as licensed herein), or to use any Licensed Material or
          Trademark as the name of Licensee's business or any division thereof,
          unless otherwise agreed by Disney in writing.

     C.   Nothing contained herein shall prohibit Licensee from using Licensee's
          own trademarks on the Articles or Licensee's copyright notice on the
          Articles when the Articles contain independent material which is
          Licensee's property. Nothing contained herein is intended to give
          Disney any rights to, and Disney shall not use, any trademark,
          copyright or patent used by Licensee in connection with the Articles
          which is not derived or adapted from Licensed Material, Trademarks, or
          other materials owned by Disney or its licensor.

18.  REGISTRATIONS
     -------------

     Except with Disney's written consent, neither Licensee nor any of
     Licensee's Affiliates will register or attempt in any country to register
     copyrights in, or to register as a trademark, service mark, design patent
     or industrial design, or business designation, any of the Licensed
     Material, Trademarks or derivations or adaptations thereof, or any word,
     symbol or design which is so similar thereto as to suggest association with
     or sponsorship by Disney or any of Disney's Affiliates. In the event of
     breach of the foregoing Licensee agrees, at Licensee's expense and at
     Disney's request, immediately to terminate the unauthorized registration
     activity and promptly to execute and deliver, or cause to be delivered, to
     Disney such assignments and other documents as Disney may require to
     transfer to Disney all rights to the registrations, patents or applications
     involved.

19.  UNLICENSED USE OF LICENSED MATERIALS
     ------------------------------------
 
     A.   Licensee agrees that Licensee will not use the Licensed Material, or
          the Trademarks, or any other material the copyright to which is owned
          or licensed by Disney in any way other than as herein authorized (or
          as is authorized in any other written contract in effect between the
          parties). In addition to any other remedy Disney may have, Licensee
          agrees that all revenues from any use thereof on products other than
          the Articles (unless authorized by Disney in writing), and all
          revenues from the use of any other copyrighted material of Disney's or
          its licensor's without written authorization, shall be immediately
          payable to Disney.

     B.   Licensee agrees to give Disney prompt written notice of any unlicensed
          use by third parties of Licensed Material or Trademarks, and that
          Licensee will


<PAGE>   19




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 19

          not, without Disney's written consent, bring or cause to be brought
          any criminal prosecution, lawsuit or administrative action for
          infringement, interference with or violation of any rights to Licensed
          Material or Trademarks. Because of the need for and the high costs of
          an effective anti-piracy enforcement program, Licensee agrees to
          cooperate with Disney, and, if necessary, to be named by Disney as a
          sole complainant or co-complaimant in any action against an infringer
          of the Licensed Material or Trademarks and, notwithstanding any right
          of Licensee to recover same, legal or otherwise, Licensee agrees to
          pay to Disney, and hereby waives all claims to, all damages or other
          monetary relief recovered in such action by reason of a judgment or
          settlement whether or not such damages or other monetary relief, or
          any part thereof, represent or are intended to represent injury
          sustained by Licensee as a licensee hereunder; in any such action
          against an infringer, Disney agrees to reimburse Licensee for
          reasonable expenses incurred at Disney's request, including reasonable
          attorney's fees if Disney has requested Licensee to retain separate
          counsel.

20.  STATEMENTS AND PAYMENTS OF ROYALTIES
     ------------------------------------
 
     A.   Licensee agrees to furnish to Disney by the 30th day after each
          Royalty Payment Period full and accurate statements on statement forms
          Disney designates for Licensee's use, showing all information
          requested by such forms, including but not limited to, the quantities,
          Net Invoiced Billings and applicable Royalty rate(s) of Articles
          invoiced during the preceding Royalty Payment Period, and the
          quantities and invoice value of Articles returned for credit or refund
          in such period. At the same time Licensee will pay Disney all
          Royalties due on billings shown by such statements. To the extent that
          any Royalties are not paid, Licensee authorizes Disney to offset
          Royalties due against any sums which Disney or any of Disney's
          Affiliates may owe to Licensee or any of Licensee's Affiliates. No
          deduction or withholding from Royalties payable to Disney shall be
          made by reason of any tax. Any applicable tax on the manufacture,
          distribution and sale of the Articles shall be borne by Licensee.

     B.   The statement forms Disney designates for Licensee's use may be
          changed from time to time, and Licensee agrees to use the most current
          form Disney provides to Licensee. Licensee agrees to fully comply with
          all instructions supplied by Disney for completing such forms.

     C.   In addition to the other information requested by the statement forms,
          Licensee's statement shall with respect to all Articles report
          separately:

          (1)  F.O.B. In Sales;


<PAGE>   20




The First Years, Inc.
Wmnie The Pooh
Agreement dated December 3, 1996
Page 20

          (2)  F.O.B. Out Sales;

          (3)  sales of Articles outside the Territory pursuant to a
               distribution permission (indicating the country involved);

          (4)  Licensee's sales of Articles to any of Disney's licensees or
               Disney's Affiliates' licensees who are licensed to sell the
               Articles, and who are reselling such Articles and paying Disney
               royalties on such resales;

          (5)  sales of Articles to Disney or any of Disney's Affiliates;

          (6)  sales of Articles to Licensee's or Disney's employees;

          (7)  sales of Articles under any brand or program identified in
               Subparagraph 1.B. hereinabove;

          (8)  sales of Articles to or for distribution through any mail order
               catalogs approved under this Agreement.

     D.   Sales of items licensed under contracts with Disney other than this
          Agreement shall not be reported on the same statement as sales of
          Articles under this Agreement.

     E.   Licensee's statements and payments, including all Royalties and
          Advances, shall be delivered to Wachovia South Metro Center, DEI
          Account, P.O. Box 101947, Atlanta, Georgia 30392. A copy of each
          statement must be sent to Disney at 500 South Buena Vista Street,
          Burbank, California 91521-6771, to the attention of the Contract
          Administrator, Consumer Products Division. If Licensee wishes to send
          statements and payments by overnight courier, please use the following
          address: Wachovia South Metro Center, DEI Account, 3585 Atlanta
          Avenue, Hapeville, GA 30354, Attention Peggy Morris, Reference Lock
          Box 101947.

21.  CONFIDENTIALITY
     ---------------

     Licensee agrees to keep the terms and conditions of this Agreement
     confidential, and Licensee shall not disclose such terms and conditions to
     any third party without obtaining Disney's prior written consent; provided,
     however, that this Agreement may be disclosed on a need-to-know basis to
     Licensee's attorneys and accountants who agree to be bound by this
     confidentiality provision. In the event Licensee is required to disclose
     this Agreement, or any part thereof, pursuant to any law, court


<PAGE>   21




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 21

     order or process, the rules and regulations of any governmental department,
     agency or authority (including, but not limited to, the Securities and
     Exchange Commission) or any generally accepted accounting rules mandating
     disclosure in Licensee's financial statements, Licensee agrees to give
     Disney prior written notice and to use its best efforts to obtain
     confidential treatment of this Agreement. Upon Disney's request, Licensee
     agrees to incorporate Disney's comments into Licensee's request for
     confidential treatment, provided such request and comments are received in
     writing by Licensee within five (5) business days after Disney's receipt of
     the notice referred to in the preceding sentence.

22.  INTEREST
     --------

     Royalties or any other payments due to Disney hereunder which are received
     alter the due date shall bear interest at the rate of 18% per annum from
     the due date (or the maximum permissible by law if less than 18%).

23.  AUDITS AND MAINTAINING RECORDS
     ------------------------------

     A.   Licensee agrees to keep accurate records of all transactions relating
          to this Agreement and any prior agreement with Disney regarding the
          Licensed Material, including, without limitation, shipments to
          Licensee of Articles and components thereof, inventory records,
          records of sales and shipments by Licensee, and records of returns,
          and to preserve such records for the lesser of seven (7) years or two
          (2) years after the expiration or termination of this Agreement.

     B.   Disney, or Disney's representatives, shall have the right from time to
          time, during Licensee's normal business hours, but only for the
          purpose of confirming Licensee's performance hereunder, to examine and
          make extracts from all such records, including the general ledger,
          invoices and any other records which Disney reasonably deems
          appropriate to verify the accuracy of Licensee's statements or
          Licensee's performance hereunder, including records of Licensee's
          Affiliates if they are involved in activities which are the subject of
          this Agreement. In particular, Licensee's invoices shall identify the
          Articles separately from goods which are not licensed hereunder.
          Licensee acknowledges that Disney may furnish Licensee with an audit
          questionnaire, and Licensee agrees to fully and accurately complete
          such questionnaire, and return it to Disney within the
          designated-time. Disney's use of an audit questionnaire shall not
          limit Disney's ability to conduct any on-site audit(s) as provided
          above.

     C.   If in an audit of Licensee's records it is determined that there is a
          short fall of five percent (5%) or more in Royalties reported for any
          Royalty Payment


<PAGE>   22




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 22

          Period, Licensee shall upon request from Disney reimburse Disney for
          the full out-of-pocket costs of the audit, including the costs of
          employee auditors calculated at $60 per hour per person for travel
          time during normal working hours and actual working time.

     D.   If Licensee has failed to keep adequate records for one or more
          Royalty Payment Periods, Disney will assume that the Royalties owed to
          Disney for such Royalty Payment Period(s) are equal to a reasonable
          amount, determined in Disney's absolute discretion, which may be up to
          but will not exceed the highest Royalties owed to Disney in a Royalty
          Payment Period for which Licensee has kept adequate records; if
          Licensee has failed to keep adequate records for any Royalty Payment
          Period, Disney will assume a reasonable amount of Royalties which
          Licensee will owe to Disney, based on the records Licensee has kept
          and other reasonable assumptions Disney deems appropriate.

24.  MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS
     ----------------------------------------------------

     A.   If Licensee at any time desires to have Articles or components thereof
          containing Licensed Material manufactured by a third party, whether
          the third party is located within or outside the United States,
          Licensee must, as a condition to the continuation of this Agreement,
          notify Disney of the name and address of such manufacturer and the
          Articles or components involved and obtain Disney's prior written
          permission to do so. If Disney is prepared to grant permission, Disney
          will do so if Licensee and each of Licensee's manufacturers and any
          submanufacturers sign a Consent/Manufacturer's Agreement in a form
          which Disney will furnish to Licensee and Disney receives all such
          agreements properly signed.

     (A SAMPLE OF SAID AGREEMENT FORM IS AVAILABLE ON REQUEST)

     B.   It is not Disney's policy to reveal the names of Licensee's suppliers
          to third parties or to any Disney division involved with buying
          products, except as may be necessary to enforce Disney's contract
          rights or protect Disney's trademarks and copyrights.

     C.   If any such manufacturer utilizes Licensed Material or Trademarks for
          any unauthorized purpose, Licensee shall cooperate fully in bringing
          such utilization to an immediate halt. If, by reason of Licensee's not
          having supplied the above mentioned agreements to Disney or not having
          given Disney the name of any supplier, Disney makes any representation
          or takes any action and is thereby subjected to any penalty or
          expense, Licensee will


<PAGE>   23




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 23

          fully compensate Disney for any cost or loss Disney sustains (in
          addition to any other legal or equitable remedies available to Disney.

25.  INDEMNITY
     ---------

     A.   Licensee shall indemnify Disney during and after the term hereof
          against all claims, demands, suits, judgments, losses, liabilities
          (including settlements entered into in good faith with Licensee's
          consent, not to be unreasonably withheld) and expenses of any nature
          (including reasonable attorneys' fees) arising out of Licensee's
          activities under this Agreement, including but not limited to, any
          actual or alleged: (1) negligent acts or omissions on Licensee's part,
          (2) defect (whether obvious or hidden and whether or not present in
          any Sample approved by Disney) in an Article, (3) personal injury, (4)
          infringement of any rights of any other person by the manufacture,
          sale, possession or use of Articles, (5) breach on Licensee's part of
          any covenant contained in this Agreement, or (6) failure of the
          Articles or by Licensee to comply with applicable Laws. The parties
          indemnified hereunder shall include Disney Enterprises, Inc., its
          licensor, and its and their parent, Affiliates and successors, and its
          and their officers, directors, employees and agents. The indemnity
          shall not apply to any claim or liability relating to any infringement
          of the copyright of a third party caused by Licensee's utilization of
          the Licensed Material and the Trademarks in accordance-with the
          provisions hereof, unless such claim or liability arises out of
          Licensee's failure to obtain the full assignment of rights referenced
          in Paragraph 12.

     B.   Disney shall indemnify Licensee during and after the term hereof
          against all claims, demands, suits, judgments, losses, liabilities
          (including settlements entered into in good faith with Disney's
          consent, not to be unreasonably withheld) and expenses of any nature
          (including reasonable attorneys' fees) arising out of any claim that
          Licensee's use of any representation of the Licensed Material or the
          Trademarks approved in accordance with the provisions of this
          Agreement infringes the copyright of any third party or infringes any
          right granted by Disney to such third party, except for claims arising
          out of Licensee's failure to obtain the full assignment of rights
          referenced in Paragraph 12. Licensee shall not, in any case, be
          entitled to recover for lost profits.

     C.   Additionally, if by reason of any claims referred to in Subparagraph
          25.B., Licensee is precluded from selling any stock of Articles or
          utilizing any materials in Licensee's possession or which come into
          Licensee's possession by reason of any required recall, Disney shall
          be obligated to purchase such Articles and materials from Licensee at
          their out-of-pocket cost to Licensee,

          


<PAGE>   24




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 24

          excluding overheads, but Disney shall have no other responsibility or
          liability with respect to such Articles or materials.

     D.   Disney gives no warranty or indemnity with respect to any liability or
          expense arising from any claim that use of the Licensed Material or
          the Trademarks on or in connection with the Articles hereunder or any
          packaging, advertising or promotional material infringes on any
          trademark right of any third party or otherwise constitutes unfair
          competition by reason of any prior rights acquired by such third
          party, other than rights acquired from Disney. It is expressly agreed
          that it is Licensee's responsibility to carry out such investigations
          as Licensee may deem appropriate to establish that Articles,
          packaging, and promotional and advertising material which are
          manufactured or created hereunder, including any use made of the
          Licensed Material and the Trademarks therewith, do not infringe such
          right of any third party, and Disney shall not be liable to Licensee
          if such infringement occurs.

     E.   Licensee and Disney agree to give each other prompt written notice of
          any claim or suit which may arise under the indemnity provisions set
          forth above. Without limiting the foregoing, Licensee agrees to give
          Disney written notice of any product liability claim made or suit
          filed with respect to any Article, any investigations or directives
          regarding the Articles issued by the Consumer Product Safety
          Commission ("CPSC") or other federal, state or local consumer safety
          agency, and any notices sent by Licensee to, or received by Licensee
          from, the CPSC or other consumer safety agency regarding the Articles
          within fourteen (14) days of Licensee's receipt or promulgation of the
          claim, suit, investigation, directive, or notice.

26.  INSURANCE
     ---------

     Licensee shall maintain in full force and effect at all times while this
     Agreement is in effect and for three years thereafter commercial general
     liability insurance on a per occurrence form, including broad form coverage
     for contractual liability, property damage, products liability and personal
     injury liability (including bodily injury and death), waiving subrogation,
     with minimum limits of no less than two million dollars (US $2,000,000.00)
     per occurrence, and naming as additional insureds those indemnified in
     Paragraph 25 hereof. Licensee also agrees to maintain in full force and
     effect at all times while this Agreement is in effect such Worker's
     Compensation Insurance as is required by applicable law and Employer's
     Liability Insurance with minimum limits of one million dollars (US
     $1,000,000.00) per occurrence. All insurance shall be primary and not
     contributory. Licensee shall deliver to Disney a certificate or
     certificates of insurance evidencing satisfactory coverage and indicating
     that Disney shall receive thirty (30) days unrestricted prior written
     notice of cancellation, non-renewal or of any material change in coverage.
     Licensee's insurance


<PAGE>   25




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 25

     shall be carried by an insurer with a BEST Guide rating of B + VII or
     better. Compliance herewith in no way limits Licensee's indemnity
     obligations, except to the extent that Licensee's insurance company
     actually pays Disney amounts which Licensee would otherwise pay Disney.

27.  WITHDRAWAL OF LICENSED MATERIAL
     -------------------------------
 
     Licensee agrees that Disney may, without obligation to Licensee other than
     to give Licensee written notice thereof, withdraw from the scope of this
     Agreement any Licensed Material which by the Marketing Date or, if such a
     date is not specified in Subparagraph 1.O., by six (6) months from the
     commencement of the Principal Term or the date of any applicable amendment,
     is not being used on or in connection with the Articles. Disney may also
     withdraw any Licensed Material or Articles the use or sale of which under
     this Agreement would infringe or reasonably be claimed to infringe the
     rights of a third party, other than rights granted by Disney, in which case
     Disney's obligations to Licensee shall be limited to the purchase at cost
     of Articles and other materials utilizing such withdrawn Licensed Material
     which cannot be sold or used. In the ease of any withdrawal under the
     preceding sentence, the Advances and Guarantees shall be adjusted to
     correspond to the time remaining in the Principal Term, or the number of
     Articles remaining under the Agreement, at the date of withdrawal.

28.  TERMINATION
     -----------

     Without prejudice to any other right or remedy available to Disney:

     A.   Disney shall have the right at any time to terminate this Agreement by
          giving Licensee written notice thereof, if Licensee fails to
          manufacture, sell and distribute the Articles, or to furnish
          statements and pay Royalties as herein provided, or if Licensee
          otherwise breaches the terms of this Agreement, and if any such
          failure is not corrected within thirty (30) days (or, in the case of
          non-payment of Royalties within fifteen (15) days) after Disney sends
          Licensee written notice thereof.

     B.   Disney shall have the right at any time to terminate this Agreement
          immediately by giving Licensee written notice thereof:

          (1)  if Licensee delivers to any customer without Disney's written
               authorization merchandise containing representations of Licensed
               Material or other material the copyright or other proprietary
               rights to which are owned or licensed by Disney other than
               Articles listed herein and approved in accordance with the
               provisions hereof,


<PAGE>   26






The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 26

          (2)  if Licensee delivers Articles outside the Territory or knowingly
               sells Articles to a third party for delivery outside the
               Territory, unless pursuant to a written distribution permission
               or separate written license agreement with Disney or any of
               Disney's Affiliates;

          (3)  if a breach occurs which is of the same nature, and which
               violates the same provision of this Agreement, as a breach of
               which Disney has previously given Licensee written notice;

          (4)  if Licensee breaches any material term of any other license
               agreement between the parties, and Disney terminates such
               agreement for cause;

          (5)  if Licensee shall make any assignment for the benefit of
               creditors, or file a petition in bankruptcy, or is adjudged
               bankrupt, or becomes insolvent, or is placed in the hands of a
               receiver, or if the equivalent of any such proceedings or acts
               occurs, though known by some other name or term;

          (6)  if Licensee is not permitted or is unable to operate Licensee's
               business in the usual manner, or is not permitted or is unable to
               provide Disney with assurance satisfactory to Disney that
               Licensee will so operate Licensee's business, as debtor in
               possession or its equivalent, or is not permitted, or is unable
               to otherwise meet Licensee's obligations under this Agreement or
               to provide Disney with assurance satisfactory to Disney that
               Licensee will meet such obligations; and/or

          (7)  if Licensee breaches any covenant set forth in Paragraph 11 of
               this Agreement.

29.  RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
     -----------------------------------------------------

     A.   Upon the expiration or termination of this Agreement, all rights
          herein granted to Licensee shall revert to Disney, any unpaid portion
          of the Guarantee shall be immediately due and payable, and Disney
          shall be entitled to retain all Royalties and other things of value
          paid or delivered to Disney. Licensee agrees that the Articles shall
          be manufactured during the Principal Term in quantities consistent
          with anticipated demand therefor so as not to result in an excessive
          inventory build-up immediately prior to the end of the Principal Term.
          Licensee agrees that from the expiration or termination of this
          Agreement Licensee shall neither manufacture nor have manufactured for
          Licensee any Articles, that Licensee will deliver to Disney any and
          all artwork


<PAGE>   27




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 27

          (including Style Guides, animation cels and drawings) which may have
          been used or created by Licensee in connection with this Agreement,
          that Licensee will at Disney's option either sell to Disney at cost or
          destroy or efface any molds, plates and other items used to reproduce
          Licensed Material or Trademarks, and that, except as hereinafter
          provided, Licensee will cease selling Articles. Any unauthorized
          distribution of Articles after the expiration or termination of this
          Agreement shall constitute copyright infringement.

     B.   If Licensee has any unsold Articles in inventory on the expiration or
          termination date, Licensee shall provide Disney with a full statement
          of the kinds and numbers of such unsold Articles. If such statement
          has been provided to Disney and if Licensee has fully complied with
          the terms of this Agreement, including the payment of all Royalties
          due and the Guarantee, upon notice from Disney Licensee shall have the
          right for a limited period of three (3) calendar months from such
          expiration or earlier termination date to sell off and deliver such
          Articles as authorized under Subparagraph 2.A. Licensee shall furnish
          Disney statements covering such sales and pay Disney Royalties in
          respect of such sales. Such Royalties shall not be applied against the
          Advance or towards meeting the Guarantee. If the sell-off period is
          extended by Disney to a date which is not a quarter end month,
          Licensee's statement and Royalties for such sell-off period shall be
          due thirty (30) days after the last day of the sell-off period.

     C.   In recognition of Disney's interest in maintaining a stable and viable
          market for the Articles during and after the Principal Term and any
          sell-off period, Licensee agrees to refrain from "dumping" the
          Articles in the market during any sell-off period granted to Licensee.
          "Dumping" shall mean the distribution of product at volume levels
          significantly above Licensee's prior sales practices with respect to
          the Articles, and at price levels so far below Licensee's prior sales
          practices with respect to the Articles as to disparage the Articles;
          provided, however, that nothing contained herein shall be deemed to
          restrict Licensee's ability to set product prices at Licensee's
          discretion.

     D.   Except as otherwise agreed by Disney in writing, any inventory of
          Articles in Licensee's possession or control after the expiration or
          termination hereof and of any sell-off period granted hereunder shall
          be destroyed, or all Licensed Material and Trademarks removed or
          obliterated therefrom.

     E.   If Disney supplies Licensee with forms regarding compliance with this
          Paragraph 29, Licensee agrees to complete, execute and return such
          forms to Disney expeditiously.


<PAGE>   28




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 28

     F.   Notwithstanding any provision to the contrary, in the case of
          termination under Paragraph 28.B. (5) or (6), in order to protect the
          value of the Articles and to avoid any disparagement of the Articles
          which could occur as a result of the circumstances of termination,
          Disney shall have the option, in Disney's absolute discretion, to
          purchase any or all unsold Articles in Licensee's inventory on the
          termination date at 20% over Licensee's cost of goods for such
          Articles (not including overhead).

30.  WAIVERS
     -------
 
     A waiver by either party at any time of a breach of any provision of this
     Agreement shall not apply to any breach of any other provision of this
     Agreement, or imply that a breach of the same provision at any other time
     has been or will be waived, or that this Agreement has been in any way
     amended, nor shall any failure by either party to object to conduct of the
     other be deemed to waive such party's right to claim that a repetition of
     such conduct is a breach hereof.

31.  PURCHASE OF ARTICLES BY DISNEY
     ------------------------------

     If Disney wishes to purchase Articles, Licensee agrees to sell such
     Articles to Disney or any of Disney's Affiliates at as low a price as
     Licensee charges for similar quantities sold to Licensee's regular
     customers and to pay Disney Royalties on any such sales.

32.  NON-ASSIGNABILITY
     -----------------

     A.   Licensee shall not voluntarily or by operation of law assign,
          sub-license, transfer, encumber or otherwise dispose of all or any
          part of Licensee's interest in this Agreement without Disney's prior
          written consent, to be granted or withheld in Disney's absolute
          discretion. Any attempted assignment, sub-license, transfer,
          encumbrance or other disposal without such consent shall be void and
          shall constitute a material default and breach of this Agreement.
          "Transfer" within the meaning of this Paragraph 32 shall include any
          merger or consolidation involving Licensee or any directly or
          indirectly controlling Affiliate(s) of Licensee ("Controlling
          Affiliate"); any sale or transfer of all or substantially all of
          Licensee's or its Controlling Affiliate(s)' assets; any transfer of
          Licensee's rights hereunder to a division, business segment or other
          entity different from the one specifically referenced on page 1 hereof
          (or any sale or attempted sale of Articles under a trademark or trade
          name of such division, business segment or other entity); any public
          offering, or series of public offerings, whereby a cumulative total of
          thirty-three and one-third percent (33 1/3%) or more of the voting
          stock of Licensee or its Controlling Affiliate(s) is offered for
          purchase; and any acquisition or series



<PAGE>   29




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 29

          of acquisitions, by any person or entity, or group of related persons
          or entities, of a cumulative total of thirty-three and one-third
          percent (33-1/3%) or more of the voting stock of Licensee or its
          Controlling Affiliate(s), or the right to vote such percentage (or, if
          Licensee is a partnership, resulting in the transfer of thirty-three
          and one-third percent (33-1/3%) or more of the profit and loss
          participation in Licensee, or the occurrence of any of the foregoing
          with respect to any general partner of Licensee).

     B.   Licensee agrees to provide Disney with at least two (2) weeks prior
          written notice of any desired assignment of this Agreement or other
          transfer as defined in Subparagraph 32.A. At the time Licensee gives
          such notice, Licensee shall provide Disney with the information and
          documentation necessary to evaluate the contemplated transaction.
          Disney's consent (if given) to any assignment of this Agreement or
          other transfer as defined in Subparagraph 32A. shall be subject to
          such terms and conditions as Disney deems appropriate, including but
          not limited to, payment of a transfer fee. The amount of the transfer
          fee shall be determined by Disney based upon the circumstances of the
          particular assignment or transfer, taking into account such factors as
          the estimated value of the license being assigned or otherwise
          transferred; the risk of business interruption or loss of quality,
          production or control Disney may suffer as a result of the assignment
          or other transfer; the identity, reputation, creditworthiness,
          financial condition and business capabilities of the proposed assignee
          or transferee; and Disney's internal costs related to the assignment
          or other transfer; provided, however, in no event shall the transfer
          fee be less than $ * . The foregoing transfer fee shall not 
          apply if this Agreement is assigned to one of Licensee's Affiliates 
          as part of a corporate reorganization exclusively among some or all 
          of the entities existing in Licensee's corporate structure when this 
          Agreement is signed; provided, however, that Licensee must give 
          Disney written notice of such assignment and a description of the 
          reorganization. The provisions of this Subparagraph 32.B. shall 
          supersede any conflicting provisions on this subject in any 
          merchandise license agreement previously entered into between the 
          parties for this Territory.

     C.   Notwithstanding Subparagraphs 32.A. and B., Licensee may, upon written
          notice to Disney, unless Disney has objected within thirty (30) days
          of receipt of such notice, sublicense Licensee's rights hereunder to
          Licensee's Affiliates. Licensee hereby irrevocably and unconditiona!ly
          guarantees that they will observe and perform all of Licensee's
          obligations hereunder, including, without limitation, the provisions
          governing approvals, and compliance with approved samples, applicable
          Laws. and all other provisions hereof, and that they will otherwise
          adhere strictly to all of the terms hereof and act in accordance with
          Licensee's obligations hereunder. Any involvement of an


<PAGE>   30






The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 30

          Affiliate in the activities which are the subject of this Agreement
          shall be deemed carried on pursuant to such a sublicense and thus
          covered by such guarantee; however such involvement may be treated by
          Disney as a breach of this Agreement, unless Licensee has notified
          Disney of Licensee's intent to sublicense an Affiliate in each
          instance, and Disney has failed to object within thirty (30) days of
          receipt of such notice.

33.  RELATIONSHIP
     ------------

     This Agreement does not provide for a joint venture, partnership, agency or
     employment relationship between the parties, or any other relationship than
     that of licensor and licensee.

34.  CONSTRUCTION
     ------------
 
     The language of all parts of this Agreement shall in all cases be construed
     as a whole, according to its fair meaning and not strictly for or against
     any of the parties. Headings of paragraphs herein are for convenience of
     reference only and are without substantive significance.

35.  MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT
     ---------------------------------------------

     Except as otherwise provided herein, this Agreement can only be extended or
     modified by a writing signed by both parties; provided, however, that
     certain modifications shall be effective if signed by the party to be
     charged and communicated to the other party.

36.  NOTICES
     -------

     All notices which either party is required or may desire to serve upon the
     other party shall be in writing, addressed to the party to be served at the
     address set forth on page 1 of this Agreement, and may be served personally
     or by depositing the same addressed as herein provided (unless and until
     otherwise notified), postage prepaid, in the United States mail. Such
     notice shall be deemed served upon personal delivery or upon the date of
     mailing; provided, however, that Disney shall be deemed to have been served
     with a notice of a request for approval of materials under this Agreement
     only upon Disney's actual receipt of the request and of any required
     accompanying materials. Any notice sent to Disney hereunder shall be sent
     to the attention of "Vice President, Licensing", unless Disney advises
     Licensee in writing otherwise.




<PAGE>   31




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 31

37.  MUSIC
     -----

     Music is not licensed hereunder. Any charges, fees or royalties payable for
     music rights or any other rights not covered by this Agreement shall be
     additional to the Royalties and covered by separate agreement.

38.  PREVIOUS AGREEMENTS
     -------------------

     This Agreement, and any confidentiality agreement Licensee may have signed
     pertaining to any of the Licensed Material, contains the entire agreement
     between the parties concerning the subject matter hereof and supersedes any
     pre-existing or contemporaneous agreement and any oral or written
     communications between the parties.

39.  CHOICE OF LAW AND FORUM
     -----------------------

     This Agreement shall be deemed to be entered into in California and shall
     be governed and interpreted according to the laws of the State of
     California. Any legal actions pertaining to this Agreement shall be
     commenced within the State of California and within either Los Angeles or
     Orange Counties.

40.  EQUITABLE RELIEF
     ----------------

     Licensee acknowledges that Disney will have no adequate remedy at law if
     Licensee continues to manufacture, sell, advertise, promote or distribute
     the Articles upon the expiration or termination of this Agreement. Licensee
     acknowledges and agrees that, in addition to any and all other remedies
     available to Disney, Disney shall have the right to have any such activity
     by Licensee restrained by equitable relief, including, but not limited to,
     a temporary restraining order, a preliminary injunction, a permanent
     injunction, or such other alternative relief as may be appropriate, without
     the necessity of Disney posting any bond.

41.  GOODWILL
     --------

     Licensee acknowledges that the rights and powers retained by Disney
     hereunder are necessary to protect Disney's or its licensor's copyrights
     and property rights, and, specifically, to conserve Disney's and its
     licensor's goodwill and good name, and the name "Disney", and therefore
     Licensee agrees that Licensee will not allow the same to become involved in
     matters which will, or could, detract from or impugn the public acceptance
     and popularity thereof, or impair their legal status.




<PAGE>   32




The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 32

42.  POWER TO SIGN
     -------------

     The parties warrant and represent that their respective representatives
     signing this Agreement have full power and proper authority to sign this
     Agreement and to bind the parties.

43.  SURVIVAL OF OBLIGATIONS
     -----------------------

     The respective obligations of the parties under this Agreement, which by
     their nature would continue beyond the termination, cancellation or
     expiration of this Agreement, including but not limited to indemnification,
     insurance, payment of Royalties, and Paragraph 29, shall survive
     termination, cancellation or expiration of this Agreement.


Please sign below under the word "Agreed". When signed by both parties this
shall constitute an agreement between Disney and Licensee.



AGREED:

DISNEY ENTERPRISES, INC.


By: /s/ Nicole Kristmor
   -----------------------------------------------

Title: Vice President, Licensing
      --------------------------------------------

Date: 12/23/96
     ---------------------------------------------





THE FIRST YEARS, INC.


By: /s/ Ronald J. Sidman
   -----------------------------------------------

Title: President
      --------------------------------------------




<PAGE>   33




                              THE FIRST YEARS, INC.
                                 WINNIE THE POOH
                        AGREEMENT DATED DECEMBER 3, 1996
                                   SCHEDULE A


A.   FEEDING AND SOOTHING ARTICLES:

     1.   Reusable and disposable bottles
     2.   Bibs
     3.   Cups
     4.   Pacifiers and attachers
     5.   Bowls
     6.   Dishes
     7.   Containers
     8.   Cool totes
     9.   Flatware
     10.  Placemats
     11.  Floormats
     12.  Teethers
     13.  Burp cloths
     14.  Toothbrushes

B.   PLAY ARTICLES:

     1.   Handheld rattles (plastic and plush)
     2.   Suction toys
     3.   Blocks
     4.   Linking toys
     5.   Electronic handheld toys with rattle or squeaker function
     6.   Bath toys
     7.   Pull-down musical plush toys
     8.   Magnets
     9.   Foot rattles

C.   CARE AND SAFETY ARTICLES:

     1.   Changing pads
     2.   Bouncy seats
     3.   Booster seats
     4.   Step stools
     5.   Front carriers
     6.   Back carriers
     7.   Handheld showers
     8.   Sponges


<PAGE>   34




                              THE FIRST YEARS, INC.
                                 WINNIE THE POOH
                        AGREEMENT DATED DECEMBER 3, 1996
                             SCHEDULE A - CONTINUED

C.   CARE AND SAFETY ARTICLES:

     9.   Hooded towels
     10.  Washcloths
     11.  Spout guards
     12.  Shampoo visors
     13.  Nursery organizers
     14.  Car organizers
     15.  Non-activity crib lights
     16.  Combs and brushes
     17.  Night lights
     18.  Car shades
     19.  Diaper pins
     20.  Nursery hampers
     21.  Scales
     22.  Light-up clip-ons
     23.  Tub thermometers
     24.  Tub Organizers

All of the Articles listed in A, B and C above may be sold separately or as part
as a set. Sets may include packaging appropriate for a gift set, or a card with
an instant gift; provided, however, that the packaging and cards may not be sold
separately.





<PAGE>   35

                                CATALOG SCHEDULE
                         (LIST OF PRE-APPROVED CATALOGS)

                                HOME FURNISHINGS

                                      Mass
                                      ----

                           Domestications
                           Fingerhut
                           Lillian Vernon
                           One Step Ahead
                           The Right Start





This Catalog Schedule is subject to change. Disney reserves the right to add
catalogs to or delete catalogs from the Catalog Schedule without prior notice to
Licensee. Licensee agrees to cease selling Articles to a deleted catalog within
sixty (60) days after written notice of the deletion. Disney will consider new
catalogs requested by Licensee on a case-by-case basis.

6/15/96