<PAGE>   1
                                                                   Exhibit 10.26


                         STYLING TECHNOLOGY CORPORATION

                         1998 EMPLOYEE STOCK OPTION PLAN

SECTION 1. PURPOSE OF PLAN; TERM

     (a) General Purpose. The purpose of the Plan is to further the interests of
Styling Technology Corporation, a Delaware corporation (the "Company"), and its
stockholders by encouraging employees associated with the Company (or parent or
subsidiary corporations of the Company) to acquire shares of the Company's
common stock, thereby acquiring a proprietary interest in its business and an
increased personal interest in its continued success and progress. Such purpose
shall be accomplished by providing for the granting of options to acquire the
Company's common stock ("Options"). A "parent corporation" for purposes of this
Plan is any corporation in the unbroken chain of corporations ending with the
employer corporation, where, at each link of the chain, the corporation and the
link above owns at least 50 percent of the combined total voting power of all
classes of the stock in the corporation in the link below. A "subsidiary
corporation" for purposes of this Plan is any corporation in the unbroken chain
of corporations starting with the employer corporation, where, at each link of
the chain, the corporation and the link above owns at least 50 percent of the
combined voting power of all classes of stock in the corporation below.

     (b) Options. All Options granted under this Plan will be nonqualified
options and shall not be "incentive stock options" as defined in section 422 of
the Code.

     (c) Duration of Plan. The term of the Plan is 10 years commencing on the
date of adoption of the Plan by the Board, which was on May 4, 1998. No Option
shall be granted under the Plan unless granted within 10 years of the adoption
of the Plan by the Board, but Options outstanding on that date shall not be
terminated or otherwise affected by virtue of the Plan's expiration.

SECTION 2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN

     (a) Description of Stock and maximum Shares Allocated. The stock subject to
the provisions of the Plan and issuable upon the grant of Options granted under
the Plan is shares of the Company's common stock, $.0001 par value per share
(the "Stock"), which may be either unissued or treasury shares, as the Board may
from time to time determine. Subject to adjustment as provided in Section 7
hereof, the aggregate number of shares of Stock covered by the Plan and issuable
thereunder shall be 150,000 shares of Stock.

     (b) Calculation of Available Shares. For purposes of calculating the
maximum number of shares of Stock that may be issued under the Plan, the shares
issued (including the shares, if any, withheld for tax withholding requirements)
upon exercise of an Option shall be counted.

     (c) Restoration of Unpurchased Shares. If an Option expires of terminates
for any reason prior to its exercise in full and before the term of the Plan
expires, the shares of Stock subject to, but not issued under, such Option
shall, without further action or by or on behalf of the Company, again be
available under the Plan. If shares of Stock are used to pay for the exercise
price, those shares shall be added to the shares available under the Plan.

SECTION 3. ADMINISTRATION; APPROVAL; AMENDMENTS

     (a) General Administration. The power to administer the Plan with respect
to Eligible Persons shall be vested exclusively with the Board.

     (b) Plan Administrator. The Board shall be referred to herein as the "Plan
Administrator." The Board may, at any time, appoint a committee of one or more
persons who are members of the Aboard and delegate to that committee the power
to administer the Plan. Members of such committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board at
any time. The Board may, at any time, terminate the functions of any such
committee and reassume all powers and authority previously delegated to that
committee. The Plan Administrator shall have the authority and discretion to
select which Eligible Persons shall 
<PAGE>   2
participate in the Plan, to grant Options under the Plan, to establish such
rules and regulations as they may deem appropriate with the proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding Option as they may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan or any outstanding
Option.

     (c) Approval of Plan. This Plan shall not require the approval of the
stockholders of the Company and shall be effective as of the date adopted by the
Board.

     (d) Amendments to Plan. The Board may, without action on the part of the
Company's stockholders, make such amendments to, changes in and additions to the
Plan as it may, from time to time, deem necessary or appropriate and in the best
interests of the Company; provided, the Board may not, without the consent of
the Optionholder, take any action which adversely affects or impairs the rights
of the Optionholder of any Option outstanding under the Plan.

SECTION 4. PARTICIPANTS

     (a) Eligibility and Participation. Options may be granted only to persons
("Eligible Persons") who at the time of grant are employees of or consultants to
the Company or parent or subsidiaries of the Company; provided, however, that
any person that is an Affiliate shall not be an Eligible Person under this Plan.
The Plan Administrator shall have full authority to determine which Eligible
Persons in its administered group are to receive Option grants under the Plan,
the number of shares to be covered by each such grant, the time or times at
which each such Option is to become exercisable, and the maximum term for which
the Option is to be outstanding.

     (b) Guidelines for Participation. In designating and selecting Eligible
Persons for participation in the Plan, the Plan Administrator shall consult with
and give consideration to the recommendations and criticisms submitted by
appropriate managerial and executive officers of the Company. The Plan
Administrator also shall take into account the duties and responsibilities of
the Eligible Persons, their past, present and potential contributions to the
success of the Company and such other factors as the Plan Administrator shall
deem relevant in connection with accomplishing the purpose of the Plan.

SECTION 5. TERMS AND CONDITIONS OF OPTION

     (a) Allotment of Shares. The Plan Administrator shall determine the number
of shares of Stock to be optioned form time to time and the number of shares to
be optioned to any Eligible Person (the "Optioned Shares"). The grant of an
Option to a person shall neither entitle such person to, nor disqualify such
person from, participation in any other grant of Options under this Plan or any
other stock option plan of the Company.

     (b) Exercise Price. Upon the grant of any Option, the Plan Administrator
shall specify the option price per shares. In no event may the option price per
share specified by the Plan Administrator be less than 100 percent of the fair
market value per share of the Stock on the date the Option is granted.

     (c) Calculation of Fair Market Value of Stock. The fair market value of a
shares of Stock on any relevant date shall be the closing selling price per
share of Stock on the date in question on the stock exchange determined by the
Board to be the primary market for the Stock, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no reported
sale of Stock on such exchange on the date in question, then the fair market
value shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.

     (d) Individual Stock Option Agreements. Options granted under the Plan
shall be evidenced by option agreements in such form and content as the Plan
Administrator from time to time approves, which agreements shall substantially
comply with and be subject to the terms of the Plan, including the terms and
conditions of this Section 5. As determined by a Plan Administrator, each option
agreement shall state (i) the total number of shares to which it pertains, (ii)
the exercise price for the shares covered by the Option, (iii) the time at which
the Options vest and become exercisable and (iv) the Option's scheduled
expiration date. The option 


                                       2
<PAGE>   3
agreements may contain such other provisions or conditions as the Plan
Administrator deems necessary or appropriate to effectuate the sense and purpose
of the Plan, including covenants by the Optionholder not-to-compete and remedies
to the Company in the event of the breach of any such covenant.

     (e) Option Period. No Option granted under the Plan shall be exercisable
for a period in excess of 10 years from the date of its grant subject to earlier
termination in the event of termination of employment, retirement or death of
the Optionholder. An Option may be exercised in full or in part at any time or
from time to time during the term of the Option or provide for its exercise in
stated installments at stated times during the Option's term.

     (f) Vesting; Limitations. The time at which the Optioned Shares vest with
respect to a participant shall be in the discretion of the Plan Administrator.

     (g) No Fractional Shares. Options shall be exercisable only for whole
shares; no fractional shares will be issuable upon exercise of any Option
granted under the Plan.

     (h) Method of Exercising Options; Full Payment. Options shall be exercised
by written notice to the Company, addressed to the Company at its principal
place of business. Such notice shall state the election to exercise the Option
and the number of shares with respect to which it is being exercised, and shall
be signed by the person exercising the Option. Such notice shall be accompanied
by payment in full of the exercise price for the number of shares being
purchased. Payment may be made in cash or by check as prescribed by the
applicable Plan Administrator or by tendering duly endorsed certificates
representing shares of Stock then owned by the Optionholder and held for the
requisite period necessary to avoid a charge to the Company's earnings and
valued at fair market value on the date of exercise (as determined in accordance
with Section 5(c) hereof). Upon the exercise of any Option, the Company shall
deliver, or cause to be delivered, to the Optionholder a certificate or
certificates representing the shares of Stock purchased upon such exercise as
soon as practicable after payment for those shares has been received by the
Company. If an Option is exercised pursuant to Section 5(j) hereof by any person
other than the Optionholder, such notice shall be accompanied by appropriate
proof of the right of such person to exercise the Option. All shares that are
purchased and paid for in full upon the exercise of an Option shall be fully
paid and non-assessable.

     (i) Rights of a Stockholder. An Optionholder shall have no rights as a
stockholder with respect to shares covered by his Option until such Option
holder shall have exercised the Option and paid the full exercise price for the
Optioned Shares. No adjustment will be made for dividends or other rights with
respect to any Optioned Shares for which the record date is prior to the date on
which the Optionholder exercises the Option for such shares.

     (j) Exercise of Options After Cessation of Service; Termination of
Employment. If any Optionholder ceases to be in Service to the Company for a
reason other than death, such Optionholder may, within one month after the date
of termination of such Service, but in no event after the Option's stated
expiration date, exercise some or all of the Options that the Optionholder was
entitled to exercise on the date the Optionholder's Service terminated;
provided, that (i) if the Optionholder's Service is terminated by the Company in
its good faith judgment, for (A) commission of a crime by the Optionholder or
for reasons involving moral turpitude; (B) an act by the Optionholder which
tends to bring the Company into disrepute; or (C) negligent, fraudulent or
willful misconduct by the Optionholder, or (ii) if after the Service of the
Optionholder is terminated, the Optionholder commits acts detrimental to the
Company's interests, then the Option shall thereafter be void for all purposes.
Notwithstanding the foregoing, if any Optionholder who is an employee of the
Company ceases to be in Service to the Company by reason of permanent disability
within the meaning of section 22(e)(3) of the Internal Revenue Code (as
determined by the applicable Plan Administrator), the Optionholder shall have 12
months after the date of termination of Service, but in no event after
Optionholder's Option's stated expiration date, to exercise Options that the
Optionholder was entitled to exercise on the date the Optionholder's Service
terminated as a result of disability.

     (k) Death of Optionholder. If an Optionholder dies while in the Company's
Service, the Optionholder's vested Options on the date of death shall be
exercisable within three months of such death or until the stated expiration
date of the Optionholder's Option, whichever occurs first, by the person or
persons


                                       3
<PAGE>   4
("successors") to whom the Optionholder's rights pass under a will or by the
laws of descent and distribution. An Option may be exercised and payment of the
option price made in full by the successors only after written notice to the
Company specifying the number of shares to be purchased. Such notice shall state
that the Option price is being paid in full in the manner specified in Section
5(h) hereof. As soon as practicable after receipt by the Company of such notice
and of payment in full of the Option price, a certificate or certificates
representing such shares shall be registered in the name or names specified by
the successors in the written notice of exercise and shall be delivered to the
successors.

     (l) Other Plan Provisions Still Applicable. If an Option is exercised upon
the termination of Service or death of an Optionholder under this Section 5, the
other provisions of the Plan shall still be applicable to such exercise.

     (m) Definition of "Service." For purposes of this Plan, unless it is
evidenced otherwise in the option agreement with the Optionholder, the
Optionholder shall be deemed to be in "Service" to the Company so long as such
individual renders services on a periodic basis to the Company (or to any parent
or subsidiary corporation) in the capacity of an employee or a consultant or
independent contractor. The Optionholder shall be considered to be an employee
for so long as such individual remains in the employ of the Company or one or
more of its parent or subsidiary corporations.

     (n) Nonassignability. Except as specifically allowed by the Plan
Administrator at the time of grant and as set forth in the documents evidencing
an Option, no Option granted under the Plan or any of the rights and privileges
conferred thereby shall be assignable or transferable by an Optionholder other
than by will or the laws of descent and distribution, and such Option shall be
exercisable during the Optionholder's lifetime only by the Optionholder.

SECTION 6. CERTAIN ADJUSTMENT.

     (a) Capital Adjustments. The aggregate number of shares of Stock subject to
the Plan (and the number of shares covered by outstanding Options and the price
per share stated in such Options) shall be proportionately adjusted for any
increase or decrease in the number of outstanding shares of Stock of the Company
resulting from a subdivision or consolidation of shares or any other capital
adjustment or the payment of a stock dividend or any other increase or decrease
in the number of outstanding shares of Stock of the Company resulting from a
subdivision or consolidation of shares or any other capital adjustment or the
payment of a stock dividend or any other increase or decrease in the number of
shares effected without the Company's receipt of consideration therefor in
money, services or property.

     (b) Mergers, Etc. If the Company is the surviving corporation in any merger
or consolidation, any Option granted under the Plan shall pertain to and apply
to the securities to which a holder of the number of shares of Stock subject to
the Option would have been entitled prior to the merger or consolidation. A
dissolution or liquidation of the Company shall cause every Option outstanding
hereunder to terminate. A merger or consolidation in which the Company is not
the surviving corporation shall also cause every Option outstanding hereunder to
terminate.

     (c) Change in Control. With respect to any Change in Control, the Plan
Administrator shall have the discretion and authority, exercisable at any time,
whether before or after the Change in Control, to provide for the automatic
acceleration of one or more outstanding Options granted by it under the Plan
upon the occurrence of such Change in Control. The Plan Administrator may also
impose limitations upon the automatic acceleration of such Options to the extent
it deems appropriate. Any Options accelerated upon a Change in Control will
remain fully exercisable until the expiration or sooner termination of the
Option term.

SECTION 7. MISCELLANEOUS

     (a) Use of Proceeds. The proceeds received by the Company from the sale of
Stock pursuant to the exercise of Options hereunder, if any, shall be used for
general corporate purposes.


                                       4
<PAGE>   5
     (b) Cancellation of Options. The Plan Administrator shall have the
authority to effect, at any time and from time to time, with the consent of the
affected Optionholders, the cancellation of any or all outstanding Options
granted under the Plan by the Plan Administrator and to grant in substitution
therefore new Options under the Plan covering the same or different numbers of
shares of Stock as long as such new Options have an exercise price per share of
Stock no less than the minimum exercise price as set forth in Section 5(b)
hereof on the new grant date.

     (c) Regulatory Approvals. The implementation of the Plan, the granting of
any Option hereunder, and the issuance of Stock upon the exercise of any such
Option shall be subject to the procurement by the Company of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the Options granted under it and the Stock issued pursuant to it.

     (d) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Plan Administrator shall be indemnified and
held harmless by the Company, to the extent permitted under applicable law, for,
from and against all costs and expenses reasonably incurred by them in
connection with any action, legal proceeding to which any member thereof may be
a party by reason of any action taken, failure to act under or in connection
with the Plan or any rights granted thereunder and against all amounts paid by
them in settlement thereof or paid by them in satisfaction of a judgment of any
such action, suit or proceeding, except a judgment based upon a finding of bad
faith.

     (e) Plan Not Exclusive. This Plan is not intended to be the exclusive means
by which the Company may issue options or warrants to acquire its Stock, stock
awards or any other type of award. To the extent permitted by applicable law,
any such other option, warrants or awards may be issued by the Company other
than pursuant to this Plan without stockholder approval.

     (f) Governing Law. The Plan shall be governed by, and all questions arising
hereunder shall be determined in accordance with, the laws of the State of
Arizona.

     (g) Withholding Taxes. Whenever the Company issues Stock under the Plan
pursuant to an Option, the Company shall have the right to require the grantee
to remit to the Company an amount sufficient to satisfy any federal, state
and/or local withholding or employment tax requirements prior to the delivery of
any certificate or certificates for such shares. Alternatively, the Company may
issue or transfer such shares of Stock net of the number of shares sufficient to
satisfy the withholding or employment tax requirements. For such purposes, the
shares of Stock shall be valued on the date the withholding or employment tax
obligation is incurred.

SECTION 8. SECURITIES RESTRICTIONS

     (a) Legend on Certificates. All certificates representing shares of Stock
issued upon exercise of Options granted under the Plan shall be endorsed with a
legend reading as follows:

              The shares of Common Stock evidenced by this certificate have been
         issued to the registered owner in reliance upon written representations
         that these shares have been purchased solely for investment. These
         shares may not be sold, transferred or assigned unless in the opinion
         of the Company and its legal counsel such sale, transfer or assignment
         will not be in violation of the Securities Act of 1933, as amended, and
         the rules and regulations thereunder.

     (b) Private Offering for Investment Only. The Options are, and shall be,
made available only to a limited number of present and future employees of the
Company, and their permitted transferees, who have knowledge of the Company's
financial condition, management and its affairs. The Plan is not intended to
provide additional capital for the Company, but to encourage ownership of Stock
among the Company's employees. By the act of accepting an Option, each grantee
or such permitted transferee agrees (i) that, any shares of Stock acquired will
be solely for investment and not with any intention to resell or redistribute
those shares and (ii) such intention 


                                       5
<PAGE>   6
will be confirmed by an appropriate certificate at the time the Stock is
acquired if requested by the Company. The neglect or failure to execute such a
certificate, however, shall not limit or negate the foregoing agreement.

     (c) Registration Statement. If a Registration Statement covering the shares
of Stock issuable upon exercise of options granted under the Plan is filed under
the Securities Exchange Act of 1933, as amended, and is declared effective by
the Securities Exchange Commission, the provisions of Sections 8(a) and (b)
shall terminate during the period of time that such Registration Statement, as
periodically amended, remains effective.

SECTION 9. DEFINITIONS.

     The following capitalized terms used in this Plan shall have the meaning
described below:

     "Affiliates" shall mean all "executive officers" (as that term is defined
in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934) and
directors of the Company and all persons who own 10 percent or more of the
Company's issued and outstanding Stock.

     "Board" shall mean the Board of Directors of the Company.

     "Change in Control" shall mean (i) a person or related group of persons,
other than the Company or a person that directly or indirectly controls, is
controlled by, or under common control with the Company, acquires ownership of
40 percent or more of the Company's outstanding common stock pursuant to a
tender or exchange offer which the Board of Directors recommends that the
Company's stockholders not accept, or (ii) the change in the composition of the
Board occurs such that those individuals who were elected to the Board at the
last stockholders' meeting at which there was not a contested election for Board
membership subsequently ceased to comprise a majority of the Board by reason of
a contested election.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Company" shall mean Styling Technology Corporation, a Delaware
corporation.

     "Eligible Persons" shall mean those persons who, at the time that the
Option is granted, are employees of the Company, who provide valuable services
to the Company or parent or subsidiaries of the Company.

     "Optionholder" shall mean an Eligible Person to whom Options have been
granted.

     "Optioned Shares" shall be those shares of Stock to be optioned from time
to time to any Eligible Person.

     "Options" shall mean options to acquire Stock granted under the Plan.

     "Plan" shall mean this stock option plan for Styling Technology
Corporation.

     "Plan Administrator" shall mean the Board of Directors or a committee
thereof.

     "Service" shall have the meaning set forth in Section 5(m) hereof.

     "Stock" shall mean shares of the Company's common stock, $.0001 par value
per share, which may be unissued or treasury shares, as the Board may from time
to time determine.


                                       6
<PAGE>   7
     This Plan is hereby executed this ______ day of __________, 1998.

                                       STYLING TECHNOLOGY CORPORATION



                                       By:   ___________________________________
                                       Name: Sam L. Leopold
                                       Its:  Chairman, President, and Chief 
                                             Executive Officer

ATTESTED BY:


____________________________________
Secretary


                                       7