SETTLEMENT AGREEMENT


         SETTLEMENT AGREEMENT (the "Settlement Agreement"), dated as of February
25, 2000,  between AM Products  Company,  formerly  known as AM Cosmetics,  Inc.
("AM"),  a corporation  duly organized and existing  pursuant to the laws of the
State  of  Delaware  with  its  principal  place of  business  located  in North
Arlington,  New Jersey,  AM Cosmetics  Corp.,  formerly known as PAM Acquisition
Corp. ("AM  Cosmetics"),  a corporation duly organized and existing  pursuant to
the laws of the State of Delaware with its principal  place of business in North
Arlington,  New Jersey,  and Carson Products Company  ("Carson"),  a corporation
duly  organized and existing  pursuant to the laws of the State of Delaware with
its principal place of business located in Savannah, Georgia.

         WHEREAS, AM commenced an  arbitration proceeding  against Carson before
the  American  Arbitration Association, entitled  AM  Cosmetics, Inc. v.  Carson
Products Company, Case No. 13-181-01123-98 (the "Arbitration"); and

         WHEREAS, Carson commenced a lawsuit against AM in the Superior Court of
Fulton County, State  of Georgia, entitled  Carson Products  Company, a Delaware
Corporation  v. AM  Cosmetics,  Inc., a  Delaware  Corporation, Civil Action No.
1999CV08276 (the "Lawsuit"); and

         WHEREAS, Carson  filed a  Verified  Complaint  for Declaratory Judgment
against AM  Cosmetics  and AM in the  Superior Court of the State of New Jersey,
Chancery Division, for Bergen  County on or about May 13, 1999, entitled  Carson
Products Company v. AM Cosmetics Corp. and AM Products Company, (the "New Jersey
Action"); and

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         WHEREAS,  AM, AM  Cosmetics  and  Carson  have now agreed to settle and
resolve all disputes,  claims and counterclaims of any kind whatsoever  asserted
by each of them in, or  otherwise  arising out of, the  Lawsuit,  the New Jersey
Action and the Arbitration;

         NOW, THEREFORE, the parties hereby agree as follows:

     1.  Carson  shall pay  to AM, by wire  transfer,  the sum  of  two  million
dollars  ($2,000,000.00) as follows: (a) one million dollars  ($1,000,000.00) on
or before  February 25, 2000, and (b) one million dollars  ($1,000,000.00)  (the
"Second  Payment")  on or before the Second  Payment  Date (as  defined  below).
"Second  Payment  Date" means the earlier of July 31, 2000 or the closing of the
merger (the "Merger") whereby Crayon  Acquisition Corp.  ("Sub"), a wholly-owned
subsidiary of Cosmair, Inc. ("Parent"), will merge with and into Carson's parent
corporation,  Carson, Inc. ("CIC"),  pursuant to an Agreement and Plan of Merger
dated as of February  25,  2000 by and among  Parent,  Sub and CIC (the  "Merger
Agreement").

     2.  Concurrently  with  the  execution  and  delivery  of  this  Settlement
Agreement,  as a condition  to the  performance  by AM and AM Cosmetics of their
obligations  hereunder,  six directors of CIC have caused GrandBank (the "Bank")
to issue an irrevocable  letter of credit for the benefit of AM, a copy of which
is  attached  hereto as Annex A (the  "Letter  of  Credit"),  providing  for the
payment by the Bank of up to $690,000 to AM upon  presentation  of the documents
described  in the Letter of Credit to the Bank no sooner  than March 31, 2000 in
the event that,  as of March 31, 2000 at 5:00 P.M., AM has not received full and
final  payment of the $2 million  settlement  amount  described  in  paragraph 1
hereinabove. In that event, AM shall be entitled to demand payment from the Bank
under the Letter of Credit for any and all portion(s) of such $2 million owed to
AM by Carson  that AM has not  received  as of March 31, 2000 at 5:00 P.M. up to

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the maximum amount of $690,000. Nothing contained herein is intended to limit or
affect,  nor should it be construed to limit or affect,  the  provisions  of the
Letter of Credit.

     3.  Carson is  presently the owner of 358.679399 shares of Payment In  Kind
Preferred  Shares (the  "Preferred  Shares") of AM Cosmetics.  Carson  purchased
certain  preferred  shares  pursuant  to  an  agreement  entitled  "Subscription
Agreement  dated as of June 26,  1996 by and among  MORNINGSIDE  AM  ACQUISITION
CORP.  and CARSON  PRODUCTS  COMPANY  with  respect to the shares of the capital
stock of MORNINGSIDE AM ACQUISITION CORP." ("Subscription Agreement"), and on or
about June 27, 1997, exchanged such shares for the Preferred Shares issued by AM
Cosmetics.  Pursuant to this  Settlement  Agreement,  on or before  February 25,
2000,  Carson  shall  deliver and  surrender to AM  Cosmetics  for  cancellation
(without  further payment of any  consideration by AM Cosmetics or AM to Carson)
stock  certificates  evidencing its ownership of certain of the Preferred Shares
together  with a stock  transfer  form duly  executed in blank,  together with a
Certificate and Agreement  Covering Lost Stock  Certificates with respect to the
remainder of its Preferred Shares in form and substance reasonably  satisfactory
to AM with respect to any  certificates for the Preferred Shares which cannot be
located by Carson. Carson agrees to waive and relinquish,  and hereby does waive
and relinquish, any and all of its rights and remedies with respect to and/or in
connection  with the  Preferred  Shares,  whether set forth in the  Subscription
Agreement, under the Certificate of Incorporation of AM Cosmetics or otherwise.

     4. AM  shall  transfer to  Carson all of the "Cutex" brand products in AM's
custody or possession as of the date of this  Settlement  Agreement  that are in
containers that bear "Cutex"  trademarks or trade names (the "Cutex  products").
In exchange, Carson shall pay to AM, on or before March 2, 2000, by certified or

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bank check or by wire transfer,  the sum of one dollar ($1.00).  Delivery of all
the Cutex products shall be effective upon Carson or its carrier picking up said
products at AM's warehouse at 4014 First Avenue, Brooklyn, New York 11232 ("AM's
warehouse"), during normal business hours, and the risk of loss of said products
shall be borne by AM until  such  delivery.  Carson  shall bear the risk of loss
upon  delivery of the aforesaid  inventory  and products to the carrier.  Carson
agrees to cause the Cutex products to be picked up by March 2, 2000, after which
AM's  obligation  to transfer  said  products to Carson,  and Carson's  right to
delivery of, possession of and/or title to the Cutex products,  shall terminate.
Carson  acknowledges  and agrees that the Cutex  products  that AM  transfers to
Carson pursuant to this Settlement  Agreement  represents and constitutes all of
the Cutex products in AM's possession.

     5.  AM  shall transfer to Carson all of the "Dark & Lovely" brand  products
in AM's custody or possession as of the date of this  Settlement  Agreement that
are in containers that bear "Dark & Lovely" trademarks or trade names (the "Dark
& Lovely products").  In exchange, Carson shall pay to AM, on or before March 2,
2000,  by  certified  or bank check or by wire  transfer,  the sum of one dollar
($1.00).  Delivery of all the Dark & Lovely  products  shall be  effective  upon
Carson or its carrier  picking up said products at AM's warehouse  during normal
business hours, and the risk of loss of said products shall be borne by AM until
such delivery. Carson shall bear the risk of loss upon delivery of the aforesaid
inventory and products to the carrier.  Carson agrees to cause the Dark & Lovely
products to be picked up March 2, 2000,  after which AM's obligation to transfer
the Dark & Lovely  products  to  Carson,  and  Carson's  right to  delivery  of,
possession  of  and/or  title to the Dark & Lovely  products,  shall  terminate.
Carson acknowledges and agrees that the Dark & Lovely products that AM transfers
to Carson pursuant to this Settlement  Agreement  represents and constitutes all
of the Dark & Lovely products in AM's possession.

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     6.  AM shall bear no responsibility for any costs relating to, arising from
or associated with returns by customers of any of the Cutex products or the Dark
& Lovely products after  February  25,  2000,  including,   without  limitation,
reimbursement  to said customers for returned  Cutex or Dark & Lovely  products.
Although Carson bears  responsibility for all costs relating to, arising from or
associated  with returns by customers of any of the Cutex products or the Dark &
Lovely  products  prior to February 25,  2000,  including,  without  limitation,
reimbursement to said customers for returned Cutex or Dark & Lovely products, AM
shall not seek  reimbursement  from  Carson for any such costs  arising  from or
associated  with returns of the Cutex  products or Dark & Lovely  products  that
occurred prior to February 25, 2000.

     7.  Simultaneously with the exchange between the parties of executed copies
of this Settlement Agreement, the parties shall, in addition, execute,  or cause
their respective counsel to execute, and exchange the following documents: (i) a
Consent Order of Dismissal With Prejudice,  a copy of which is annexed hereto as
Exh. A, terminating the Lawsuit with prejudice;  (ii) a Stipulation of Dismissal
With  Prejudice,  a copy of which is annexed hereto as Exh. B,  terminating  the
Arbitration  with  prejudice;   (iii)  a  Notice  of  Voluntary  Dismissal  With
Prejudice,  a copy of which is annexed  hereto as Exh.  C,  terminating  the New
Jersey Action with  prejudice;  and (iv)  Releases,  copies of which are annexed
collectively hereto as Exh. D (the "Releases").

     8.  Simultaneously  with or  immediately following the exchange between the
parties of executed copies of this Settlement Agreement, AM's attorneys, Baker &
McKenzie,  805 Third Avenue, New York, New York 10022 will cause to be filed the
Consent  Order  of  Dismissal  With  Prejudice,  terminating  the  Lawsuit  with
prejudice;  the  Stipulation  of  Dismissal  With  Prejudice,   terminating  the
Arbitration  with  prejudice;   and  the  Notice  of  Voluntary  Dismissal  With
Prejudice, terminating the New Jersey Action with prejudice, copies of which are

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annexed  hereto  as  Exhs.  A,  B  and  C,   respectively   (collectively,   the
"Stipulations of Dismissal"), in the appropriate fora.

     9.  The  following agreements  between AM  and/or AM  Cosmetics, on the one
hand, and Carson,  on the other,  are hereby  cancelled and terminated as of the
date of this  Settlement  Agreement  (to the  extent  that  any of them  has not
already been  terminated  prior thereto):  (i) Management  Agreement dated as of
June 26,  1996,  as amended,  a copy of which is annexed  hereto as Exh. E, (ii)
Manufacturing  Agreement  dated as of April 30, 1997, a copy of which is annexed
hereto as Exh. F, (iii) Broker  Agreement dated as of September 19, 1997, a copy
of which is annexed as Exh. G, (iv) Subscription  Agreement,  a copy of which is
annexed  hereto as Exh. H, and (v)  Commission  Agreement  dated as of August 1,
1996, a copy of which is annexed hereto as Exh. I, and (vi) any and all other or
further  agreements  (excluding this Settlement  Agreement)  between Carson, CIC
and/or any of their parents, subsidiaries,  affiliates, divisions, joint venture
partners, predecessors,  successors, assignees or grantees, on the one hand, and
AM,  AM  Cosmetics  and/or  any  of  their  parents,  subsidiaries,  affiliates,
divisions,  joint  venture  partners,  predecessors,  successors,  assignees  or
grantees, on the other.

     10.  Carson  represents  and warrants to AM and AM Cosmetics  that: (a) (i)
Carson  is a corporation duly  organized, validly  existing and in good standing
under the laws of the State of Delaware and  has all requisite  corporate  power
and  authority  to enter into this  Settlement  Agreement  and the Release to be
issued by Carson to AM (the "Carson  Release") and to carry out its  obligations
hereunder and  thereunder,  (ii) the  execution and delivery of this  Settlement
Agreement and the Carson Release by Carson and the consummation by Carson of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate action on the part of Carson and CIC and no other corporate
proceedings  on the  part of  Carson  or CIC are  necessary  to  authorize  this

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Settlement   Agreement  or  the  Carson  Release  or  any  of  the  transactions
contemplated  hereby or thereby and (iii) each of this Settlement  Agreement and
the  Carson  Release  has  been  duly  executed  and  delivered  by  Carson  and
constitutes a legal, valid and binding obligation of Carson, enforceable against
Carson in  accordance  with its terms,  except as may be  limited by  applicable
bankruptcy,  insolvency, fraudulent conveyance,  reorganization,  moratorium and
similar laws relating to or affecting  creditors' rights and remedies generally,
and  except as the  enforceability  thereof is  subject  to the  application  of
general principles of equity  (regardless of whether  enforcement is sought in a
proceeding at law or in equity).

                  (b)  Neither the  execution  and  delivery of this  Settlement
Agreement  or  the  Carson  Release  by  Carson  nor  the  consummation  of  the
transactions  contemplated  hereby or thereby will: (i) conflict with or violate
any provision of the certificate of  incorporation  or bylaws of Carson,  CIC or
any of their respective subsidiaries, (ii) conflict with or violate any statute,
law, rule, regulation, order, writ, injunction, judgment or decree applicable to
Carson,  CIC or any of their respective  subsidiaries or any of their respective
assets  or  (iii)  conflict  with or  result  in any  violation  or  breach  of,
constitute  a default  (or an event  that  with  notice or lapse of time or both
would  become a  default)  under,  result in or give to any  person any right of
payment or reimbursement (other than reimbursement  arrangements entered into in
connection   with  the   issuance  of  the  Letter  of   Credit),   termination,
cancellation,  modification or acceleration of, or result in the creation of any
lien  pursuant to, any note,  bond,  mortgage,  security  agreement,  indenture,
contract,  agreement or other  instrument or obligation to which Carson,  CIC or
any of  their  respective  subsidiaries  is a party  or by  which  any of  their
respective assets is bound.

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                  (c)  Except for the  filings  expressly  contemplated  by this
Settlement  Agreement,  no  notice,  declaration,  report  or  other  filing  or
registration  with, and no waiver,  consent,  approval or authorization  of, any
governmental or regulatory  authority or  instrumentality or any other public or
private third party,  including any  stockholder or creditor,  is required to be
given, made or obtained by Carson,  CIC or any of their respective  subsidiaries
in connection  with the execution,  delivery or  performance of this  Settlement
Agreement or the Carson Release.

                  (d)  Pursuant  to the  Merger  Agreement  and  the  applicable
provisions  of the General  Corporation  Law of the State of Delaware,  upon the
consummation of the Merger,  Sub will be merged with and into CIC, the corporate
existence of CIC and Carson will  continue and Carson's  obligations  under this
Settlement  Agreement,  the Carson  Release and the  Confession  of Judgment (as
defined below in paragraph 16) will not be limited or otherwise  affected by the
Merger.

     11.  AM and AM Cosmetics each represents  and warrants to Carson that:  (a)
(i)each of AM and AM Cosmetics is a corporation duly organized, validly existing
and in good  standing  under  the  laws of the  State  of  Delaware  and has all
requisite corporate power and authority to enter into this Settlement  Agreement
and the Release to be issued by AM to Carson (the "AM Release") and to carry out
its  obligations  hereunder and  thereunder,  (ii) the execution and delivery of
this Settlement  Agreement and the AM Release and the  consummation by AM and AM
Cosmetics  of the  transactions  contemplated  hereby and thereby have been duly
authorized by all necessary  corporate action on the part of AM and AM Cosmetics
and no  other  corporate  proceedings  on the  part of AM and AM  Cosmetics  are
necessary to authorize this Settlement Agreement or the AM Release or any of the
transactions  contemplated  hereby or thereby and (iii) each of this  Settlement

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Agreement  and the AM Release has been duly executed and delivered by each of AM
and AM Cosmetics and constitutes a legal, valid and binding obligation of AM and
AM Cosmetics,  enforceable  against AM and AM Cosmetics in accordance with their
terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws relating to or affecting
creditors'  rights and  remedies  generally,  and  except as the  enforceability
thereof  is  subject  to  the  application  of  general   principles  of  equity
(regardless  of  whether  enforcement  is  sought in a  proceeding  at law or in
equity).

                  (b)  Neither the  execution  and  delivery of this  Settlement
Agreement or the AM Release by AM or AM Cosmetics  nor the  consummation  of the
transactions  contemplated  hereby or thereby will: (i) conflict with or violate
any provision of the certificate of  incorporation or bylaws of AM, AM Cosmetics
or any of their  respective  subsidiaries,  (ii)  conflict  with or violate  any
statute,  law, rule,  regulation,  order, writ,  injunction,  judgment or decree
applicable to AM, AM Cosmetics or any of their respective subsidiaries or any of
their  respective  assets,  or (iii) conflict with or result in any violation or
breach of,  constitute  a default (or an event that with notice or lapse of time
or both would become a default) under, result in or give to any person any right
of  payment  or  reimbursement,   termination,  cancellation,   modification  or
acceleration  of, or result in the  creation of any lien  pursuant to, any note,
bond,  mortgage,  security agreement,  indenture,  contract,  agreement or other
instrument or  obligation  to which AM, AM Cosmetics or any of their  respective
subsidiaries is a party or by which any of their respective assets is bound.

                  (c)  Except for the  filings  expressly  contemplated  by this
Settlement  Agreement,  no  notice,  declaration,  report  or  other  filing  or
registration  with, and no waiver,  consent,  approval or authorization  of, any

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governmental or regulatory  authority or  instrumentality or any other public or
private third party,  including any  stockholder or creditor,  is required to be
given,  made  or  obtained  by AM,  AM  Cosmetics  or any  of  their  respective
subsidiaries in connection  with the execution,  delivery or performance of this
Settlement  Agreement  or the AM  Release,  except for the consent of holders of
shares of common  stock of AM  Cosmetics  representing  a majority of the voting
power of the  outstanding  shares of common stock,  voting  together as a single
class, which has been obtained.

     12.  Concurrently  with  the  execution  and  delivery  of  this Settlement
Agreement,  (a)  Milbank,  Tweed,  Hadley & McCloy LLP,  counsel to Carson,  has
delivered  a  written  opinion  to AM in the  form  attached  as  Annex B hereto
(together with a reliance letter addressed to Parent); and (b) Baker & McKenzie,
counsel to AM and AM Cosmetics,  has  delivered a written  opinion to Carson and
Cosmair, Inc., a Delaware corporation, in the form attached as Annex C hereto.

     13.  Neither  AM nor  Carson owes  any past, present  or future obligations
and/or  duties  over to the other  under or  pursuant  to any of the  agreements
described  in  paragraph 9  hereinabove,  copies of which are annexed  hereto as
Exhs. E, F, G, H and I.

     14.  Nothing contained in this Settlement Agreement,  and no act undertaken
in contemplation or pursuant to this Settlement  Agreement,  should be construed
as, nor is  intended  to be, an  admission  of fault or  liability  by any party
hereto.

     15.  This Settlement Agreement and the documents annexed hereto  constitute
the entire agreement between the parties hereto and supersede  any and all prior
agreements or  understandings  between the parties  hereto,  whether  written or
oral.

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     16.  As security for Carson's payments  to  AM  described  in  paragraph  1
hereinabove,  Carson,  simultaneously  with  the  execution  of this  Settlement
Agreement,  shall  execute and deliver to AM a  confession  of judgment  with an
accompanying  affidavit,  a copy of  which  is  annexed  hereto  as Exh.  J (the
"Confession of Judgment"), in the amount of $325,500, representing the amount of
the Second  Payment less the  original  face amount of the Letter of Credit (the
"Remainder"),  plus a five percent  addition as the agreed  reasonable  costs of
collection. In the event that AM has not received the Remainder on or before the
Second  Payment  Date,  then,  and in that event,  AM shall be entitled to file,
record and enforce the  Confession of Judgment at any time  following the Second
Payment  Date.  The judgment  shall bear  interest at the rate of 12 percent per
annum  beginning on the date set forth in the  Confession  of Judgment  until AM
receives from Carson full payment of the amount of the judgment,  including said
interest.  In the event  that AM has  received  the  Remainder  on or before the
Second  Payment Date,  then , and in that event,  AM shall  forthwith  return to
Carson the original Confession of Judgment (and all executed copies thereof).

     17.  This  Settlement  Agreement  may not be  modified, altered, amended or
changed, except by written agreement signed by the parties hereto.

     18.  This Settlement  Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective parents,  subsidiaries and
affiliates.

     19.  This  Settlement  Agreement  shall  be  governed  by and  construed in
accordance with the internal laws of the State of New York without  reference to
conflicts of laws principles.

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     20.  This  Settlement  Agreement  may be  executed  in  counterparts,  each
executed  counterpart  constituting an  original  but all  counterparts together
constituting only one instrument.

     21.  Each  of  the  parties  hereto agrees to keep confidential  and not to
disclose  (and  to  cause  its  officers,   directors,   employees,  agents  and
representatives  to keep  confidential and not to disclose) the contents of this
Settlement  Agreement and each of the documents executed in connection  herewith
(collectively,  the "Information").  Notwithstanding the foregoing,  each of the
parties  hereto  shall be permitted  to disclose  Information  (i) to the extent
required by applicable  laws and  regulations  (including in connection with any
filings  required under the rules and regulations of the Securities and Exchange
Commission with respect to the tender offer contemplated by the Merger Agreement
or the Merger) or by any subpoena or similar process, provided, however, that it
is agreed and understood  that (x) Carson may deliver the  Information to Parent
and its agents and  representatives and Parent may also disclose the information
as permitted by clause (i) above and (y) each of the parties  hereto may, on ten
(10) business days' prior written notice to the other parties  hereto,  disclose
any Information in any legal or court  proceeding in which it is or may become a
party or  party-in-interest;  (ii) to the extent  such  Information  (A) becomes
publicly  available  other  than as a  result  of a  breach  of this  Settlement
Agreement or (B) was available to such party on a  non-confidential  basis as of
the date hereof,  or (iii) to the extent the parties hereto shall have consented
to such disclosure in writing.

         IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
as of the date first above written.

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AM COSMETICS CORP.
  formerly known as PAM ACQUISITION CORP.


By:      /s/Stephen A. Heit
         Stephen A. Heit, Executive Vice
         President and Chief Financial Officer


Dated:   February 25, 2000




AM PRODUCTS COMPANY
  formerly known as AM COSMETICS, INC.


By:      /s/Stephen A. Heit
         Stephen A. Heit, Executive Vice
         President and Chief Financial Officer


Dated:   February 25, 2000




STATE OF NEW YORK )
COUNTY OF NEW YORK         ) ss.:


         On the 25th day of February, 2000, before me personally came Stephen A.
Heit to me  known,  who,  being by me duly  sworn,  did  depose  and say that he
resides  at 57  Drum  Hill  Road,  Wilton,  Connecticut  06897;  that  he is the
Executive  Vice  President and Chief  Financial  Officer of AM COSMETICS  CORP.,
formerly known as PAM ACQUISITION  CORP., and of AM PRODUCTS  COMPANY,  formerly
known as AM COSMETICS,  INC., the  corporations  described in and which executed
the  foregoing  instrument;  and that  deponent  is  authorized  to execute  the
foregoing instrument.


Sworn to before me this
25th day of February, 2000


/s/Robert S. Reder
        Notary Public


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CARSON PRODUCTS COMPANY


By:      /s/Malcolm R. Yesner
         Malcolm R. Yesner, Chief Executive Officer

Dated:   February 25, 2000




STATE OF NEW YORK )
COUNTY OF NEW YORK         ) ss.:


         On the 25th day February,  2000,  before me personally  came Malcolm R.
Yesner,  to me known,  who,  being by me duty sworn,  did depose and say that he
resides  at 4 Modena Road,  Savannah, Georgia 31411;  that he is Chief Executive
Officer  of  CARSON  PRODUCTS  COMPANY, the  corporation  described in and which
executed the foregoing  instrument;  and that deponent  is authorized to execute
the foregoing instrument.



Sworn to before me this
25th day of February, 2000


/s/Sue J. Doyle
        Notary Public