<PAGE>

                                                                    EXHIBIT 10.3


To:  Polaroid Corporation; and

     Polaroid (U.K.) Limited



Date:



Re: Amendment and Waiver Agreement relating to Facility Agreement dated
    3 August 1999



We refer to the Amendment and Waiver Agreement (the "AMENDMENT AND WAIVER
AGREEMENT") dated 26 March 2001 entered into between Polaroid Corporation,
Polaroid (UK) Limited, Deutsche Banc Alex Brown Inc., ABN AMRO Bank N.V. and
others in relation to the facility agreement dated 3 August 1999 between such
parties and referred to in the Amendment and Waiver Agreement as the UK Facility
Agreement.

Terms and expressions defined in the Amendment and Waiver Agreement and the UK
Facility Agreement shall, unless otherwise defined herein, bear the same
meanings in this letter.

We hereby agree to extend the waiver referred to in the Amendment and Waiver
Agreement so that the Waiver Expiry Time referred to therein shall be the
earlier of (i) 5.00 p.m. (New York City time) on 12 July 2001, (ii) the date on
which any waiver granted in relation to the US Facility Agreement pursuant an
amendment and restatement agreement dated 21 March, 2001, as supplemented on 20
April 2001 and on or around 15 May 2001, expires and (iii) such earlier date as
may be determined pursuant to the other provisions of the Amendment and Waiver
Agreement including Clause 5 thereof. Accordingly, the Waiver Period referred to
in the Amendment and Waiver Agreement shall be construed as being the period
beginning on February 16, 2001 and ending at such Waiver Expiry Time.

In addition we hereby agree that the reference to "first and second Fiscal
Quarters of Fiscal Year 2001" in Clause 2.1 of the Amendment and Waiver
Agreement shall be deleted and replaced by a reference to "first, second and
third Fiscal Quarters of Fiscal Year 2001".

The extension of the waiver and the above amendment is granted by the
Beneficiaries on the following conditions:-

(i)      The Amendment and Waiver Agreement shall, with effect from the date on
         which this waiver becomes effective, be amended as follows:-

         (a)      Clause 7 shall be deleted and replaced with the following:-

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         "7.      INTEREST AND FEES

         Each of the Guarantor and the Borrower agree that:-

                  (i)      during the period commencing on 5 March 2001 and
                           ending on the date immediately preceding the date on
                           which this waiver becomes effective, the Facility Fee
                           Rate and the Applicable Margin shall be as set forth
                           in the table below, regardless of the Guarantor's
                           Long-Term Debt Ratings:-

                                  Facility Fee Rate       0.75%

                                  Applicable Margin       2.50%; and

                  (ii)     (a) during the period commencing on the date on which
                           this waiver becomes effective and ending on the last
                           day of the Waiver Period (as extended by this letter)
                           and (b) if immediately after such Waiver Period ends
                           any Termination Event has occurred and is continuing,
                           during any period that any such Termination Event
                           continues to exist, the Facility Fee Rate and the
                           Applicable Margin shall be as set forth in the table
                           below, regardless of the Guarantor's Long-Term Debt
                           Ratings.

                                  Facility Fee Rate       0.75%

                                  Applicable Margin       3.50%; and

         (b)      The words "or any provision of any amendment, variation or
                  extension hereof" shall be inserted after the words "any
                  provision of this Agreement" in Clause 5.

         (c)      The reference to "the date hereof" in Clause 8 shall be
                  construed as being a reference to the date of this letter.

(ii)     The UK Facility Agreement shall, with effect from the date on which
         this waiver becomes effective, be amended as follows:-

         (a)      Each of the text in paragraph (A) of Clause 6.2 reading,
                  "shown in the quarterly balance provided under paragraph 14 of
                  Schedule 2 or, upon becoming available, in the latest
                  quarterly balance delivered to the Agent under Clause 18.1(f)"
                  shall be deleted and replaced with the following wording:-

                           "shown in the latest monthly balance delivered to the
                           Agent under Clause 18.1(f)";

         (b)      Paragraph (D) of Clause 6.2 shall be deleted and replaced with
                  the following:-

                           "The Term of the Advance must be a period of 1, 2 or
                           3 months or any other period as the Agent (on behalf
                           of, and with the consent of, all the Lenders) and the
                           Borrower may agree in writing. The Borrower will be
                           treated as choosing a period of one month if it fails
                           to select a period";


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         (c)      Clause 8.3 shall be deleted and replaced with the following:-

                           "8.3 Payment of Interest

                           The Borrower agrees to pay interest accrued on each
                           Advance in arrear on the last day of its Term. Where
                           the term is longer than three months the Borrower
                           also agrees to pay interest on the day three months
                           after the start of the Term."

         (d)      In paragraph (f) of Clause 18.1 the reference to "quarterly"
                  shall be deleted and replaced by a reference to "monthly" and
                  the reference to "45 days after the end of each quarter of its
                  financial year "shall be deleted and replaced by a reference
                  to "30 days after the end of each calendar month"; and

         (e)      The reference to "THIS AGREEMENT" in paragraph (B) of Clause
                  20.1 shall be deleted and replaced by a reference to "THE
                  FINANCE DOCUMENTS".

(iii)    Each of the Borrower and the Guarantor agree to procure that, as soon
         as possible but in any event no later than the date falling 30 days
         after the date hereof, Polaroid Trading B.V. shall execute and deliver
         to the Agent the Pledge of Polaroid Trading Receivables together with a
         certified copy of evidence of corporate authority approving execution
         and delivery of such document in a form satisfactory to the Agent.

(iv)     The Guarantor agrees that it will:-

         (a)      comply with the obligations set out in Sections 4, 5, 6 and
                  7(c) of the second US supplemental waiver agreement entered
                  into or to be entered into on or around 15 May 2001 in respect
                  of the US Facility Agreement (the "SECOND US SUPPLEMENTAL
                  WAIVER AGREEMENT") as the same may be amended, varied, waived,
                  supplemented or otherwise superseded from time to time;

         (b)      deliver to each of the Beneficiaries by facsimile or e-mail,
                  no later than 9 a.m. (Amsterdam time) on the third Business
                  Day of each week, a weekly report in relation to the Borrower
                  and its subsidiaries (on a consolidated basis) and in a form
                  and level of detail specified by the Beneficiaries and agreed
                  with the Borrower setting forth the closing cash position for
                  the Borrower and its subsidiaries (on a consolidated basis)
                  for the week ending on the most recent Friday.

(v)      The Guarantor agrees that, if reasonably requested by the Agent, it
         will have a meeting to which all Lenders are invited on a date and in
         location to be mutually agreed with the Agent, at which its senior
         management will make a detailed presentation of its recent results of
         operations and current financial condition and the current status of
         its business and affairs, with a particular focus on (a) its liquidity,
         (b) the status of the proposed asset-based refinancing previously
         described to the Lenders and alternative strategic actions being
         considered by the Guarantor and (c) a current analysis of the Operating
         Plan referred in the Second US Supplemental Waiver Agreement.


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(vi)     The Guarantor agrees that, if the Agent so requests, at least once a
         month whilst this waiver or any extended one is effective, and more
         frequently if reasonably requested by the Agent, senior management will
         participate in a conference call with the Lenders, on a day and at a
         time to be mutually agreed with the Agent, during which it will provide
         an update on the matters described in paragraphs (a), (b) and (c) of
         paragraph (iv) above. The Guarantor further agrees that in addition to
         any such conference calls that are requested, promptly after it
         receives a substantially final version of the McKinsey report described
         at the Lenders' meeting with the Guarantor on 30 April 2001, it will,
         initiate a conference call with the Lenders, on a day and at a time to
         be mutually agreed with the Agent, during which senior management will
         describe the major areas addressed by such report, the major
         conclusions that they have taken from such report and what actions, if
         any, the Guarantor proposes to take on account thereof.

(vii)    The Guarantor agrees that the cumulative net cash flow for any Weekly
         Period, as reported in the Weekly Report, will not be less than the
         cumulative net cash flow projected for such Weekly Period in the Cash
         Forecast by more than $5 million (each such term referred to in this
         paragraph (vii) having the meaning ascribed to it in the Second US
         Supplemental Waiver Agreement).

(viii)   The Guarantor agrees that Consolidated Capital Expenditures (as defined
         in the US Facility Agreement) will not, for each period beginning on 1
         January 2001 and ending on the last day of a fiscal month specified
         below, exceed the amount specified for such fiscal month below:

         FISCAL MONTH                                        AMOUNT

         April 2001                                       $24,000,000

         May 2001                                         $32,000,000

         June 2001                                        $41,000,000

Clauses 11, 12, 14 and 15 of the Amendment and Waiver Agreement shall be deemed
incorporated, MUTATIS MUTANDIS, into this letter but so that and all
references:-

(i)      in Clauses 11, 12 and 15 of the Amendment and Waiver Agreement to "this
         Agreement" shall be construed as being references to this letter; and

(ii)     in Clause 14 of the Amendment and Waiver Agreement to "this Agreement"
         shall be construed as being references to "the Amendment and Waiver
         Agreement and this letter".

All references in the Amendment and Waiver Agreement to "herein", "hereof",
"hereunder", "hereby", "this Agreement", "the waivers granted hereby", "the
waiver referred to in this Agreement", "the waiver contained herein", "this
waiver" and each other similar reference contained in the Amendment and Waiver
Agreement shall be construed as being references to the Amendment and Waiver
Agreement as amended by this letter.


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All other terms of the UK Facility Agreement and the Amendment and Waiver
Agreement shall, save as amended pursuant to this letter, remain in full force
and effect and the terms of the UK Facility Agreement shall be read as one with
the Amendment and Waiver Agreement and this letter.

Each of the Borrower and the Guarantor hereby repeat the representations and
warrants set out in Clause 9 of the Amendment and Waiver Agreement as if
references therein to "the date hereof" were references to the date of this
letter.

By its signature below, the Guarantor consents to the terms of this letter, and
acknowledges that this letter shall not alter, release, discharge or otherwise
affect any of its obligations under the UK Facility Agreement or any Finance
Document and hereby ratifies and confirms all of the Finance Documents to which
it is a party.

Each of the Guarantor and the Borrower confirm, by execution of this letter,
that all corporate or other action or steps required to authorise its entry
into, performance and delivery of each of the Amendment and Waiver Agreement and
this letter and the transactions contemplated thereby have been duly taken.

The Guarantor agrees that it shall, on the date of this letter, pay the Agent in
immediately available funds for the account of each Lender a waiver fee in an
amount equal to 0.25% of such Lender's Commitment (as of the opening of business
on the date hereof). This waiver fee is additional to any waiver fee previously
paid pursuant to the Waiver and Amendment Agreement.

This waiver shall become effective in accordance with the terms herein on the
date when Deutsche Bank AG, in its capacity as Agent under the UK Facility
Agreement, shall have received the following:-

         (i)      a counterpart hereof signed by each of the parties hereto or a
                  facsimile evidencing that such party has signed a counterpart
                  hereof; and

         (ii)     evidence satisfactory to it that the Lenders under the US
                  Facility Agreement shall have waived any defaults under the US
                  Facility Agreement until a date no earlier than 5 p.m. (New
                  York City time) on 12 July 2001 pursuant to a waiver
                  containing terms that, taken as a whole, are neither more
                  favourable to those lenders nor more restrictive or burdensome
                  to the Guarantor or the Borrower than the terms hereof.

Each of the Borrower and the Guarantor agree that this letter shall be
considered a "Finance Document" for all purposes of the UK Facility Agreement.

This letter shall be governed by and construed in accordance with English law.

Please indicate your agreement to the foregoing terms of this letter by
executing a counterpart hereof in the space provided below and returning it to
the Agent at the address notified by it to you.

For and on behalf of


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        CO-ARRANGERS AND DOCUMENTATION AGENT

        DEUTSCHE BANC ALEX BROWN INC.

        as Co-Arranger



        By:       /s/ DAVID MAYHEW
                  ----------------

        Title:    Vice President



        By:       /s/ KEITH C. BRAUN
                  ------------------

        Title:    Vice President



        ABN AMRO BANK N.V.

        as Co-Arranger and Documentation Agent



        By:       /s/ STEVEN C. WIMPENNY
                  ----------------------

        Title:    Group Senior Vice President



        By:       /s/ WILLIAM J. TERESKY
                  ----------------------

        Title:    Group Vice President



        LENDERS



        ABN AMRO BANK N.V.



        By:       /s/ STEVEN C. WIMPENNY
                  ----------------------

        Title:    Group Senior Vice President


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        By:       /s/ WILLIAM J. TERESKY
                  ----------------------

        Title:    Group Vice President



        DEUTSCHE BANK A.G., LONDON BRANCH



        By:       /s/ DAVID MAYHEW
                  ----------------

        Title:    Vice President



        By:       /s/ KEITH C. BRAUN
                  ------------------

        Title:    Vice President



        DEUTSCHE BANK A.G., AMSTERDAM BRANCH



        By:       /s/ DAVID MAYHEW
                  ----------------

        Title:    Vice President



        By:       /s/ KEITH C. BRAUN
                  ------------------

        Title:    Vice President



                                      -7-

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                                     Agreed to and accepted.

                                     POLAROID CORPORATION



                                     By: /s/ CARL L. LUEDERS
                                         -------------------



                                     Title: Vice President & Acting Chief
                                            Financial Officer

                                     Date:  May 15, 2001



                                     POLAROID (U.K.) LIMITED



                                     By: /s/ CARL L. LUEDERS
                                         -------------------



                                     Title: Vice President & Acting Chief
                                            Financial Officer

                                     Date:  May 15, 2001


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