THE FIRST NATIONAL BANK OF BOSTON, as Agent
                               100 Federal Street
                                Boston, MA 02110

Allou Health & Beauty Care, Inc.                             as of June 28, 1996
  and its Subsidiaries
50 Emjay Boulevard
Brentwood, NY  11717

           Re:       First Amendment to Second Restated and Amended Revolving
                     Credit and Security Agreement, dated as of June 6, 1996
                     ----------------------------------------------------------

Gentlemen:

           Reference is made to the Second Restated and Amended Revolving Credit
and Security Agreement (the  "Agreement"),  dated as of June 6, 1996 among Allou
Health  &  Beauty  Care,  Inc.  (the  "Parent")  and  Allou  Distributors,  Inc.
("Distributors")  (collectively,   including  Subsidiaries  of  the  Parent  and
Distributors  who have executed and  delivered  that certain  Subsidiary  Tie-In
Agreement   dated  December  10,  1991,  as  amended  from  time  to  time,  the
"Borrowers"),  The First  National  Bank of Boston,  IBJ  Schroder  Bank & Trust
Company,  Sanwa Business Credit  Corporation,  Lasalle Business Credit, Inc. and
The Bank of Tokyo - Mitsubishi Trust Company  (collectively the "Lenders"),  and
The  First  National  Bank of Boston as Agent  for the  Lenders  (the  "Agent").
Capitalized  terms used and not  otherwise  defined  herein  shall have the same
respective meanings as set forth in the Agreement.

           You have  requested  that (a) the Agreement be amended (i) to include
in the Borrowing Base a percentage of outstanding documentary Letters of Credit,
and (ii) to revise the  definition  of Operating  Cash Flow, to exclude from the
reduction from Net Income,  Capital Expenditures  financed by third parties; and
(b) the  failure to comply with  Section  5.26 of the  Agreement  for the fiscal
quarter ending March 31, 1996 be waived.

           Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this letter agreement, and fully intending
to be  legally  bound by this  letter  agreement,  we hereby  agree  with you as
follows:

1.         Amendments to Agreement. In compliance with the terms of Section 10.8
of the Agreement:

           1.1.  Sections 1.9 and 1.54 of the  Agreement  are hereby  amended to
read in their entirety as follows:

           "1.9  'Borrowing  Base' shall mean an amount  equal to the sum of (w)
the Borrowing Base  Percentage of the Net  Outstanding  Amount of Base Accounts,
(x) the Borrowing Base  Percentage of the Net Security Value of Base  Inventory,
(y) 55% of the Eligible Documentary Letters of Credit (Base Inventory),  and (z)
50% of the Eligible  Documentary  Letters of Credit  (California Base Inventory)
(provided  that for  purposes of clauses  (x),  (y) and (z) of this  Section the
aggregate amount determined by such percentages


<PAGE>





shall not exceed $47,500,000).  Whenever the Borrowing Base is used as a measure
of loans it shall be  computed  as of, and the loans  referred to shall be those
reflected in the Loan Account at, the time in question."

           "1.54  'Operating  Cash Flow'  shall  mean for any  fiscal  period an
amount equal to (i) Net Income for such period,  (ii) plus  interest,  taxes and
all  depreciation,  amortization  and other non-cash charges taken in accordance
with GAAP and  deducted in  computing  Net Income for such  period,  (iii) minus
taxes  actually paid during such period,  and,  (iv) minus Capital  Expenditures
made during such period (excluding  Capital  Expenditures  financed by any third
party which is not one of the Lenders)."

           1.2.  Sections 1.26.1 and 1.26.2 are hereby added to the Agreement to
read in their entirety as follows:

           "1.26.1  'Eligible  Documentary  Letters of Credit (Base  Inventory)'
shall  mean  documentary  Letters  of Credit  issued by the Agent  solely to the
extent such Letters of Credit are issued for the  importation  or other purchase
of finished goods  Inventory that would  otherwise  constitute Base Inventory at
such time as the Agent  acquires a perfected  first security  interest  therein,
provided that such Inventory is not otherwise included in the Borrowing Base."

           1.26.2  'Eligible  Documentary  Letters  of Credit  (California  Base
Inventory)' shall mean documentary  Letters of Credit issued by the Agent solely
to the extent  such  Letters of Credit are issued for the  importation  or other
purchase of finished goods Inventory that would otherwise constitute  California
Base  Inventory at such time as the Agent  acquires a perfected  first  security
interest therein,  provided that such Inventory is not otherwise included in the
Borrowing Base."

2.         WAIVER.  In  compliance  with  the  terms  of  Section  10.8  of  the
Agreement,  compliance  by the  Borrowers  with the terms of Section 5.26 of the
Agreement  as measured at the end of the  calendar  quarter  ending on March 31,
1996 is hereby waived.

3.         FEE.  Simultaneously  with the  execution  and delivery  hereof,  the
Borrowers shall pay to the Agent, for the ratable benefit of each of the Lenders
executing  and  delivering  this  Letter  Agreement,  an  amendment  fee  in the
aggregate sum of $17,500.

4.         GENERAL.

           4.1 The Agreement is hereby ratified and confirmed and shall continue
in full force and effect as amended hereby.

           4.2 The  Borrowers  hereby  represent  and  warrant  that there is no
default or Event of Default outstanding or continuing under the Agreement or any
instrument or document  executed in connection with the Agreement,  or any event
or  condition  which with the giving of notice or the passage of time,  or both,
would result in a default or an


                                       -2-

<PAGE>





Event of Default under the Agreement or any  instrument or document  executed in
connection with the Agreement.

           4.3 This Letter Agreement may be signed in any number of counterparts
with the same effect as if the signatures  hereto and thereto were upon the same
instrument.

           If the  foregoing  sets  forth  your  understanding  of  the  matters
addressed herein,  please evidence your agreement by countersigning  this letter
Agreement in the space set forth below,  whereupon this Letter  Agreement  shall
take effect as an agreement under seal as of the day first written above.

                                      THE FIRST NATIONAL BANK OF BOSTON


                                      By:/s/Brent E. Shay
                                         ----------------------------------
                                           Title:

                                      IBJ SCHRODER BANK & TRUST COMPANY


                                      By:/s/ May McLaughlin
                                         ----------------------------------
                                           Title: Vice President


                                      SANWA BUSINESS CREDIT CORPORATION


                                      By:/s/
                                         ----------------------------------
                                           Title: Vice President

                                       LASALLE BUSINESS CREDIT, INC.


                                      By:/s/ Lawrence P. Garni
                                         ----------------------------------
                                           Title: Vice President

                                      THE BANK OF TOKYO - MITSUBISHI TRUST
                                      COMPANY


                                      By:/s/
                                         ----------------------------------
                                           Title:


                  (Signatures continued on next page)

                                       -3-

<PAGE>




ALLOU HEALTH & BEAUTY CARE, INC.
ALLOU DISTRIBUTORS, INC.
ALLOU PERSONAL CARE CORPORATION
M. SOBOL, INC.
SUPERBUY OF NEW YORK, INC.
RONA BEAUTY SUPPLIES, INC.
HEMPSTEAD HEALTH & BEAUTY AIDS, INC.
PASTEL COSMETIC AND BEAUTY AIDS, INC.
HBA NATIONAL SALES CORP.
HBA DISTRIBUTORS, INC.
RUSS KALVIN PERSONAL CARE CORP.
STANFORD PERSONAL CARE MANUFACTURING, INC.



By:   /s/
   ----------------------------------
       Title:




                              Consent of Guarantors
                              ---------------------

           Each of Victor Jacobs,  Herman Jacobs and Jacob Jacobs (collectively,
the "Guarantors") has guaranteed  certain of the Obligations under the Agreement
by  executing  separate  Limited  Guaranties  dated  as  of  December  10,  1991
(collectively,  as amended, the "Guaranties"). By executing this letter, each of
the Guarantors hereby absolutely and  unconditionally  reaffirms the Guaranty to
which it is a party,  and acknowledges and agrees to the terms and conditions of
this letter and the Agreement as so amended.

/s/ Victor Jacobs
----------------------------------
Victor Jacobs

/s/ Jacob Jacobs
----------------------------------
Jacob Jacobs

/s/ Herman Jacobs
----------------------------------
Herman Jacobs

                                       -4-