EXHIBIT 4.3

                                                                  Execution Copy

         THIS CO-SALE,  VOTING AND PREEMPTIVE  RIGHTS AGREEMENT dated as of July
25,  2000,  among  ALLOU  HEALTH & BEAUTY  CARE,  INC.,  a Delaware  corporation
(together with its successors and assigns, the "Company"),  and the Stockholders
(as defined herein) parties hereto.

         WHEREAS, the Company, all of its subsidiaries and the Mezzanine Lenders
are party to the Purchase Agreement (as defined below);

         WHEREAS,  in consideration  of, and as a condition to, the consummation
of the transactions  contemplated by the Purchase Agreement, the Company and the
Stockholders desire to enter into this Agreement for the purposes, among others,
of (i) limiting the manner and terms by which the Stockholder Shares held by the
Jacobs Family Holders (as defined  below) may be  transferred  and (ii) granting
certain preemptive rights to the Mezzanine Lenders (as defined below); and

         WHEREAS,  as a condition  to the  willingness  of RFE to enter into the
Purchase  Agreement,  RFE has required that each Jacobs Family Holder agree, and
in order to induce RFE to enter into the Purchase Agreement,  each Jacobs Family
Holder has agreed,  to enter into this  Agreement with respect to all the shares
of Common  Stock now owned and which may  hereafter  be  acquired  by any Jacobs
Family Holder and any other  securities,  if any, which any Jacobs Family Holder
is entitled to vote at any meeting of the stockholders of the Company.

         NOW,  THEREFORE,  in consideration  of the mutual  covenants  contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby  acknowledged,  the parties to this  Agreement  hereby agree as
follows:

         SECTION 1. DEFINITIONS. As used in this Agreement,  certain terms shall
have the meaning set forth in Annex I.

         SECTION 2. RESTRICTIONS ON TRANSFER;  CO-SALE RIGHT;  PREEMPTIVE RIGHTS
TO MEZZANINE LENDERS ONLY.

                  (a)  Retention  of Stock.  Each Jacobs  Family  Holder  hereby
agrees that no such Jacobs Family Holder shall Transfer any  Stockholder  Shares
held by such Jacobs Family Holder without complying with the provisions  hereof.
Notwithstanding the foregoing,  the prohibitions of Section 2(b) shall not apply
to any Transfer of any  Stockholder  Shares held by a Jacobs  Family Holder to a
member of the Jacobs Family  Holder's  Family Group in a transfer which complies
with Sections 5 and 6 hereof.

                  (b) Co-Sale Rights with Respect to Stockholder  Shares Held by
Jacobs Family Holders.

                           (i)  Prior to  making  any  Transfer  of  Stockholder
         Shares  involving,  for Victor  Jacobs in excess of 88,200  Stockholder
         Shares, for Herman Jacobs in excess of 44,062  Stockholder  Shares, for
         Jack  Jacobs in excess of 44,062  Stockholder  Shares,  in each case as
         adjusted for splits, reverse splits, stock dividends,  combinations and
         the like (other than a Transfer  permitted  under  Section  2(a)),  any
         Jacobs Family Holder  proposing to make such a Transfer of  Stockholder
         Shares (the  "Selling  Jacobs  Family  Holder")  shall give at least 15
         days'


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         prior  written  notice  (a  "Sale  Notice")  to the  Mezzanine  Lenders
         (collectively,  the "Other  Stockholders"),  which notice shall include
         the terms and  conditions  of such  proposed  Transfer,  including  the
         identity of each prospective  transferee.  Each such Other  Stockholder
         may  within 15 days of the  receipt  of the Sale  Notice  give  written
         notice (each, a "Tag-Along Notice") to the Selling Jacobs Family Holder
         that such Other  Stockholder  wishes to  participate  in such  proposed
         Transfer  and  specifying  the  number  of  shares  of and the class of
         Stockholder  Shares such Other  Stockholder  desires to include in such
         proposed  Transfer.  Any Other  Stockholder  desiring to participate in
         such  proposed  Transfer may include  Stockholder  Shares in such Other
         Stockholder's Tag-Along Notice up to the balance of the total number of
         Stockholder  Shares permitted to be included by such Other  Stockholder
         as provided in Section  2(b)(ii).  Any shares included in any Tag-Along
         Notice shall be transferred  upon the terms and conditions set forth in
         the  Sale  Notice;  provided  that if any  portion  of any  Warrant  is
         included in any Transfer of Stockholder Shares under this Section 2(b),
         the purchase  price for the Warrant shall be equal to the full purchase
         price  determined  hereunder  for the shares of Common Stock covered by
         the portion of the Warrant to be transferred,  reduced by the aggregate
         exercise  price for such shares upon exercise of such Warrant.  If none
         of the Other  Stockholders  gives the Selling  Jacobs  Family  Holder a
         timely  Tag-Along  Notice with respect to the Transfer  proposed in the
         Sale  Notice,  the  Selling  Jacobs  Family  Holder  may  Transfer  the
         Stockholder Shares specified in the Sale Notice for a period of 60 days
         after expiration of the time period during which the Other Stockholders
         may exercise  their rights  under this Section  2(b),  on the terms and
         conditions  set  forth  in  the  Sale  Notice.  If one  or  more  Other
         Stockholders  give the Selling Jacobs Family Holder a timely  Tag-Along
         Notice,  then the Selling Jacobs Family Holder shall use all reasonable
         efforts to cause the prospective transferees to agree to acquire all of
         the  Stockholder  Shares that are  identified in the Tag-Along  Notices
         that have been timely given to the Selling Jacobs Family  Holder,  upon
         the same terms and conditions as set forth in the Sale Notice.

                           (ii) If the prospective  transferees specified in the
         Sale Notice are  unwilling  or unable to acquire all of the shares that
         are  identified in the  Tag-Along  Notices that have been timely given,
         the Selling  Jacobs  Family  Holder may then elect either to (A) cancel
         the  proposed  Transfer  or (B)  allocate  to itself  and to each Other
         Stockholder  which or who has  given a  timely  Tag-Along  Notice  such
         Stockholder's  Co-Sale  Percentage of the aggregate number of shares of
         each class of Common Stock that the prospective transferees are willing
         to purchase.

                           For example,  if the Sale Notice  contemplated a sale
                           of 100 shares of Common  Stock by the Selling  Jacobs
                           Family  Holder,  and if  the  Selling  Jacobs  Family
                           Holder at such time owns 30% of the Common  Stock and
                           if one Other  Stockholder  elects to participate  and
                           owns 5% of the Common Stock,  then the Selling Jacobs
                           Family  Holder  would be  entitled  to sell 86 shares
                           (rounded  up from 85.7) ((30% /35%) x 100 shares) and
                           the Other  Stockholder  would be  entitled to sell 14
                           shares ((5% /35%) x 100 shares).

                  (c) Limited Equity Preemptive Rights to the Mezzanine Lenders.

                           (i) If the Company  authorizes  the issuance and sale
         of any shares of Common  Stock or any  shares of  capital  stock or any
         other securities  providing for options or rights to acquire any shares
         of capital stock (including, without limitation, convertible debt), the
         Company shall offer to sell to each Mezzanine  Lender a portion of such
         securities equal to the
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         percentage  determined by dividing (1) the total number of  Stockholder
         Shares then held by such Mezzanine  Lender, by (2) the number of shares
         of  Common  Stock  deemed  outstanding  (before  giving  effect to such
         authorized  issuance),  each on a Fully-Diluted  Basis.  Each Mezzanine
         Lender shall be entitled to purchase such  securities at the same price
         and on the same terms as such securities are to be offered, as long as,
         immediately  prior to such  issuance,  such  Mezzanine  Lender holds at
         least 50,000  Stockholder Shares (on a Fully Diluted Basis (as adjusted
         for splits,  reverse  splits,  stock  dividends,  combinations  and the
         like)).

                           (ii) Each Mezzanine Lender must elect to exercise its
         purchase  rights  hereunder  within 15 days  after  receipt  of written
         notice from the Company  describing in  reasonable  detail the stock or
         securities  being offered,  the purchase price thereof (if known),  the
         total  amount of the  offering,  the payment  terms and such  Mezzanine
         Lender's percentage allotment.

                           (iii) Upon the expiration of the offering  period set
         forth in Section  2(c)(ii),  the Company shall be free to sell any such
         stock or  securities  which the  Mezzanine  Lenders have not elected to
         purchase  during the 90 days  following  such  expiration  on terms and
         conditions  no more  favorable  to the  purchasers  thereof  than those
         offered to the Mezzanine  Lenders.  Any stock or securities  offered or
         sold by the Company  after such 90-day period must be reofferred to the
         Mezzanine Lenders pursuant to the terms of this Section 2(c).

                           (iv) The  provisions  of this  Section 2(c) shall not
         apply to (A) capital stock issued in  connection  with a pro rata stock
         dividend, stock split or recapitalization,  (B) Common Stock or options
         to acquire  Common Stock of the Company (up to an aggregate  maximum of
         300,000 shares of Common Stock (as adjusted for splits, reverse splits,
         stock dividends,  combinations and the like)) issued during each fiscal
         year of the Company to officers,  directors or employees of the Company
         or a  Subsidiary  pursuant to the Stock Option Plans (as defined in the
         Purchase  Agreement),  (C)  securities  issued upon the  conversion  or
         exercise  of any Common  Stock  Equivalent  specifically  listed on the
         schedules to the Purchase Agreement,  (D) additional Warrants issued at
         a subsequent closing pursuant to the terms of the Purchase Agreement or
         additional  Warrants  issued pursuant to Section 2.12.2 of the Purchase
         Agreement,  (E) Common Stock or Common Stock Equivalents  issued to the
         Mezzanine  Lenders upon exercise of the Warrants or Common Stock issued
         in lieu of interest  pursuant to the Notes,  (F) Common Stock or Common
         Stock  Equivalents  issued  directly  to  Persons  who  were  not  then
         stockholders of the Company in consideration  for an acquisition by the
         Company or any  Subsidiary of another  company or business  (whether by
         merger, stock purchase, asset purchase or otherwise) permitted pursuant
         to the  Purchase  Agreement,  (G) Common  Stock  issued in a  Qualified
         Public  Offering  and (H)  Common  Stock  issued  as  consideration  to
         consummate  a  Permitted   Acquisition  (as  defined  in  the  Purchase
         Agreement).

         SECTION 3.        VOTING OBLIGATION OF THE JACOBS FAMILY HOLDERS.

                  (a) Voting Agreement. Each Jacobs Family Holder hereby agrees,
jointly and severally,  that during the period that this Agreement is in effect,
at any meeting of the  stockholders of the Company,  however called,  and in any
action by consent of the stockholders of the Company,  each Jacobs Family Holder
shall vote his,  her or its  Stockholder  Shares (i) in favor of the issuance of
the  Warrants  at the Second RFE  Closing and the  Subsequent  Closing,  and the
issuance of Warrants referred to Section 2.12.2 of the Purchase Agreement or any
of the transactions contemplated by the Purchase Agreement;

<PAGE>

and (ii) against any other action or agreement  that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company  under the  Purchase  Agreement  or which could result in any of the
conditions to the Company's  obligations under the Purchase  Agreement not being
fulfilled.  Each Jacobs Family Holder acknowledges  receipt and review of a copy
of the Purchase Agreement.

                  (b)  Irrevocable  Proxy.  In the event that any Jacobs  Family
Holder  shall fail to comply  with the  provisions  of Section  3(a)  hereof (as
determined  by RFE in its  reasonable  discretion),  each Jacobs  Family  Holder
hereby agrees,  jointly and severally,  that such failure shall result,  without
any further action by any Jacobs Family Holder,  in the irrevocable  appointment
of RFE, as his,  her or its  attorney and proxy  pursuant to the  provisions  of
Section  212(c) of the General  Corporation  Law of the State of Delaware,  with
full power of  substitution,  to vote and otherwise  act (by written  consent or
otherwise with respect to the Stockholder  Shares which any Jacobs Family Holder
is  entitled  to vote at any meeting of  stockholders  of the  Company  (whether
annual or special  and  whether or not an  adjourned  or  postponed  meeting) or
consent in lieu of any such  meeting or  otherwise,  on the  matters  and in the
manner  specified in Section  3(a)  hereof.  THIS PROXY AND POWER OF ATTORNEY IS
IRREVOCABLE  AND COUPLED  WITH AN INTEREST.  Each Jacobs  Family  Holder  hereby
revokes all other proxies and powers of attorney with respect to the Stockholder
Shares  which he, she or it may have  heretofore  appointed  or granted,  and no
subsequent proxy or power of attorney shall be given or written consent executed
(and if given or executed,  shall not be effective) by the Jacobs Family Holders
with respect  thereto.  All authority herein conferred or agreed to be conferred
shall survive the death or  incapacity of each of the Jacobs Family  Holders and
any obligation of any of the Jacobs Family Holders under this Agreement shall be
binding upon the heirs,  personal  representatives and successors of each of the
Jacobs Family Holders.

         SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE JACOBS FAMILY HOLDERS.


                  Each Jacobs  Family  Holder  hereby  represents  and warrants,
jointly and severally, to RFE as follows:

                  (a) Authority  Relative to this Agreement.  Such Jacobs Family
Holder has all  necessary  power and  authority  to  execute  and  deliver  this
Agreement,  to perform his or her  obligations  hereunder and to consummate  the
transactions  contemplated  hereby.  This  Agreement  has been duly executed and
delivered  by such  Jacobs  Family  Holder and  constitutes  a legal,  valid and
binding obligation of such Jacobs Family Holder, enforceable against such Jacobs
Family Holder in accordance with its terms.

                  (b)      No Conflict.

                           (i) The execution  and delivery of this  Agreement by
         such  Jacobs  Family  Holder  does  not,  and the  performance  of this
         Agreement by such Jacobs  Family  Holder will not, (A) conflict with or
         violate any laws, rules or regulations applicable to such Jacobs Family
         Holder or by which the  Stockholder  Shares owned by such Jacobs Family
         Holder  are  bound  or  affected  or (B)  result  in any  breach  of or
         constitute  a default (or an event that with notice or lapse of time or
         both  would  become a default)  under,  or give to others any rights of
         termination,  amendment,  acceleration or cancellation of, or result in
         the creation of a lien or encumbrance on any of the Stockholder  Shares
         owned  by  such  Jacobs  Family  Holder  pursuant  to any  note,  bond,
         mortgage,  indenture,  contract,  agreement,  lease,  license,  permit,
         franchise or other instrument or obligation
<PAGE>

         to which such Jacobs  Family  Holder is a party or by which such Jacobs
         Family  Holder or the  Stockholder  Shares owned by such Jacobs  Family
         Holder are bound or affected.

                           (ii) The execution and delivery of this  Agreement by
         such  Jacobs  Family  Holder  does  not,  and the  performance  of this
         Agreement  by  such  Jacobs  Family  Holder  shall  not,   require  any
         commitment,  approval,  authorization  or permit of, or filing  with or
         notification to, any Governmental Authority (as such term is defined in
         the Purchase Agreement).

                  (c) Title to the  Shares.  As of the date  hereof,  the Jacobs
Family Holders are the record and beneficial  owners of the  Stockholder  Shares
listed on Schedule 4(c) hereto.  Such Stockholder  Shares are all the securities
of the Company  owned,  either of record or  beneficially,  by any Jacobs Family
Holder. The Stockholder Shares owned by each Jacobs Family Holder are owned free
and clear of all security interests,  liens, claims, pledges, options, rights of
first  refusal,  agreements,  limitations on any Jacobs Family  Holder's  voting
rights,  charges  and other  encumbrances  of any nature  whatsoever.  Except as
provided in this Agreement, no Jacobs Family Holder has appointed or granted any
proxy,  which  appointment  or grant is still  effective,  with  respect  to the
Stockholder  Shares owned by such Jacobs Family  Holder.  As of the date hereof,
there is no  "Event of  Default"  under  Section  7.1(x)  of the  Senior  Credit
Agreement (as defined in the Purchase Agreement).

         SECTION 5. ADDITIONAL RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.

                  (a) Legends.  The  certificates  representing  the Stockholder
Shares held by the Jacobs Family  Holders shall bear a legend  substantially  in
the following form:

                  THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
                  RESTRICTIONS  ON  TRANSFER,   AND  CERTAIN  VOTING  AND  OTHER
                  AGREEMENTS  SET FORTH IN THE  CO-SALE,  VOTING AND  PREEMPTIVE
                  RIGHTS  AGREEMENT  AMONG THE  CORPORATION  AND  CERTAIN OF ITS
                  SECURITYHOLDERS.  THE HOLDER  HEREOF MAY OBTAIN A COPY OF SUCH
                  AGREEMENT WITHOUT CHARGE AT THE CORPORATION'S  PRINCIPAL PLACE
                  OF BUSINESS.

                  (b)  Transfers  in  Violation  of  Agreement.  Any Transfer or
attempted  Transfer of any  Stockholder  Shares in violation of any provision of
this  Agreement  shall be null and void,  and the Company  shall not record such
Transfer  on its books or treat any  purported  transferee  of such  Stockholder
Shares as the owner of such stock for any purpose.

                  (c) Stop  Transfer.  In order to  ensure  compliance  with the
terms  hereof,  the  Company  shall  require its  transfer  agent to impose stop
transfer restrictions on Stockholder Shares held by the Jacobs Family Holders.

                  (d) Senior Credit Agreement. Each of the Jacobs Family Holders
covenants  not  to  Transfer  any  Stockholder   Shares  if  such   Transfer(s),
individually  or in the  aggregate,  could  reasonably be expect to result in an
Event of Default under Section 7.1(x) of the Senior Credit Agreement.

                  (e)   Options.   Notwithstanding   anything  to  the  contrary
contained in the Stock  Option  Plans (as defined in the  Purchase  Agreements),
none of the Jacobs Family Holders shall Transfer any options thereunder.

<PAGE>

         SECTION 6. BINDING EFFECT; JOINDERS; ADDITIONAL SHARES.

                  (a)      Delivery of Joinders.

                           (i)  Any  transferee  of  Stockholder  Shares  from a
         Jacobs Family Holder (other than a Mezzanine  Lender or a transferee in
         a transaction  in which the co-sale rights in Section 2 do not apply or
         as to which the Mezzanine  Lenders have not exercised  co-sale  rights)
         shall,  as a  condition  to such  Transfer,  be deemed a Jacobs  Family
         Holder for  purposes of this  Agreement  and be bound by and subject to
         the terms and provisions of this Agreement  applicable to Jacobs Family
         Holders,  and if not already a signatory to this  Agreement as a Jacobs
         Family  Holder,  such Person shall execute and deliver to the Company a
         Jacobs Family Holder Joinder. Without limiting the foregoing,  prior to
         the approval of the matters  described in Section 3(a),  any transferee
         of Stockholder Shares from a Jacobs Family Holder shall be bound by the
         provisions of Sections 3 and 4 hereof.

                           (ii) Any  transferee  of  Stockholder  Shares  from a
         Mezzanine  Lender and any  purchaser of  additional  Notes and Warrants
         under the Purchase  Agreement shall, as a condition to such Transfer or
         purchase,  be deemed a Mezzanine  Lender for purposes of this Agreement
         and be  bound  by and  subject  to the  terms  and  provisions  of this
         Agreement,  and if not  already  a  signatory  to this  Agreement  as a
         Mezzanine Lender,  such Person shall execute and deliver to the Company
         a Mezzanine Lender Joinder.

                  (b) Issuance of  Additional  Common  Stock.  In the event that
additional  shares of Common Stock are issued by the Company to a Stockholder at
any time during the term of this Agreement, either directly or upon the exercise
or exchange of Common Stock Equivalents,  such additional shares of Common Stock
shall,  as a  condition  to such  issuance,  be deemed  subject to the terms and
provisions of this Agreement.

         SECTION 7. NO  CONFLICTING  AGREEMENTS.  Neither  the  Company  nor any
Jacobs Family Holder may enter into any  stockholder  agreements or arrangements
of any kind with any Person on terms  inconsistent  with the  provisions of this
Agreement  (whether  or not such  agreements  or  arrangements  are  with  other
stockholders or with Persons that are not parties to this Agreement).

         SECTION 8. FURTHER  ASSURANCES.  Each party hereto shall do and perform
or cause to be done and  performed  all such  further  acts and things and shall
execute and deliver all such other  agreements,  certificates,  instruments  and
documents as any other party hereto reasonably may request in order to carry out
the  provisions  of this  Agreement  and the  consummation  of the  transactions
contemplated hereby.

         SECTION 9.        TERMINATION.

                  (a) Termination of Agreement Generally.  All of the provisions
of this Agreement shall terminate and,  except as otherwise  expressly  provided
herein, shall be of no further force or effect and shall not be binding upon any
party hereto, upon the first to occur of:

                           (i) the dissolution, liquidation or winding-up of the
         Company, and

<PAGE>

                           (ii) the approval of such  termination by each of the
         Company,  the holders of a majority of the  Stockholder  Shares held by
         all of the  Mezzanine  Lenders  and the  holders of a  majority  of the
         Stockholder  Shares held by all of the Jacobs  Family  Holders (in each
         case, on a Fully Diluted Basis).

                  (b)  Termination  as to a  Stockholder.  As to any  particular
Stockholder,  this  Agreement  shall no longer be binding or of further force or
effect as to such Stockholder, except as otherwise expressly provided herein, as
of the date such Stockholder has transferred all such Stockholder's  interest in
the Company's securities and each transferee of such securities,  if required by
this Agreement,  shall have become a party hereto;  provided,  however,  that no
such  termination  shall be effective if such  Stockholder  is in breach of this
Agreement immediately before or after giving effect to such Transfer(s).

                  (c) Termination of Section 3. Section 3 shall terminate and be
of no further force and effect after the  Stockholders of the Company shall have
approved the matters described in Section 3(a).

         SECTION 9.        GENERAL PROVISIONS.

                  (a)  Amendment,   Waiver  and  Release.  Except  as  otherwise
provided herein,  no modification,  amendment or waiver of any provision of this
Agreement shall be effective  unless such  modification,  amendment or waiver is
approved  in  writing  by the  Company  and the  holders  of a  majority  of the
Stockholder  Shares  then held by the Jacobs  Family  Holders  (calculated  on a
Fully-Diluted Basis) (other than a modification,  amendment or waiver of Section
2(c), as to which the Jacobs Family Holders shall have no approval rights),  and
the Mezzanine Lenders holding a majority of the Stockholder  Shares then held by
the Mezzanine Lenders (on a Fully Diluted Basis).

                  (b)  Severability.  It is the desire and intent of the parties
hereto that the  provisions of this  Agreement be enforced to the fullest extent
permissible  under the laws and public policies applied in each  jurisdiction in
which enforcement is sought.  Accordingly,  if any particular  provision of this
Agreement  shall be  adjudicated  by a court  of  competent  jurisdiction  to be
invalid,  prohibited or unenforceable for any reason, such provision, as to such
jurisdiction,   shall  be  ineffective,   without   invalidating  the  remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or  enforceability  of such provision in any
other jurisdiction.  Notwithstanding  the foregoing,  if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction,  it shall, as to such jurisdiction,  be so narrowly drawn, without
invalidating  the  remaining  provisions  of this  Agreement  or  affecting  the
validity or enforceability of such provision in any other jurisdiction.

                  (c) Entire Agreement.  Except as otherwise expressly set forth
herein,  this document embodies the complete  agreement and understanding  among
the parties  hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.

                  (d)  Successors  and  Assigns.  Except as  otherwise  provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Company and, so long as Stockholder Shares are held by such Person,  each
Person  which or who is a  Stockholder  on the date  hereof and each  subsequent
Stockholder.  None of the  provisions  hereof shall  create,  or be construed or
deemed to create,

<PAGE>

any right of  employment  in favor of any  Person by the  Company  or any of its
Subsidiaries.  This  Agreement  is  not  intended  to  create  any  third  party
beneficiaries.

                  (e)  Counterparts.  This Agreement may be executed in separate
counterparts  each of which shall be an original and all of which taken together
shall constitute one and the same agreement.

                  (f)  Remedies.  The  Company  and the  Stockholders  shall  be
entitled  to enforce  their  rights  under  this  Agreement  to recover  damages
(including reasonable attorneys' fees and costs, whether incurred in litigation,
mediation, arbitration,  bankruptcy or administrative proceedings or any appeals
therefrom)  by reason of any breach of any  provision of this  Agreement  and to
exercise  all  other  rights  existing  in  their  favor.  The  Company  and the
Stockholders  agree and  acknowledge  that money  damages may not be an adequate
remedy for any breach of the  provisions of this  Agreement and that the Company
and any Stockholder may in its or his sole discretion  apply to any court of law
or equity of competent  jurisdiction for specific  performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.

                  (g) Notices. Any notice, report, statement,  request, or other
communication  provided for in this  Agreement  shall be in writing and shall be
either personally  delivered,  transmitted via telecopier and confirmed by first
class mail, mailed registered or certified first class mail (postage prepaid) or
sent by reputable  overnight courier service (charges prepaid) to the Company at
its address set forth below and to any other recipient at the address  indicated
on Schedule A hereto and to any subsequent holder of Stockholder  Shares subject
to this Agreement at such address as indicated by the Company's records and sent
by the Company to all other persons entitled to receive notices hereunder, or at
such address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending  party.  Notices will be deemed
to have been given  hereunder  and  received  when  delivered  personally,  when
received if transmitted via telecopier, five days after deposit in the U.S. mail
and one day after  deposit  with a  reputable  overnight  courier  service.  The
Company's address is:

                  Allou Health & Beauty Care, Inc.
                  50 Enjoy Boulevard
                  Brentwood, NY 11717
                  Attention: David Shamilzadeh
                  Telephone: 631-787-1312
                  Telecopy: 631-273-5318

                  (h)  Governing  Law.  THIS  AGREEMENT  WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING  PROVISION OR RULE (WHETHER OF
THE STATE OF DELAWARE,  OR ANY OTHER  JURISDICTION) THAT WOULD CAUSE THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED.

                  (i)      Jurisdiction and Venue.

                           (i) Each of the parties hereto hereby irrevocably and
         unconditionally submits, for himself, herself or itself and its, his or
         her property,  to the  nonexclusive  jurisdiction of any New York State
         court or federal court of the United  States of America  sitting in New
         York, New York and any appellate court from any thereof,  in any action
         or  proceeding  arising  out

<PAGE>

         of or relating to this  Agreement or for  recognition or enforcement of
         any judgment,  and each of the parties  hereto hereby  irrevocably  and
         unconditionally agrees that all claims in respect of any such action or
         proceeding may be heard and determined in any such New York State court
         or, to the extent permitted by law, in any such federal court.  Each of
         the parties  hereto agrees that a final  judgment in any such action or
         proceeding   shall  be   conclusive   and  may  be  enforced  in  other
         jurisdictions  by suit on the judgment or in any other manner  provided
         by law.

                           (ii)  Each  of the  parties  hereto  irrevocably  and
         unconditionally  waives,  to the fullest  extent that he, she or it may
         legally and effectively do so, any objection that he, she or it may now
         or  hereafter  have to the  laying  of venue  of any  suit,  action  or
         proceeding  arising out of or relating to the Agreement in any New York
         State or  federal  court  sitting  in New York,  New York.  Each of the
         parties hereto  irrevocably  waives, to the fullest extent permitted by
         law, the defense of an  inconvenient  forum to the  maintenance of such
         action or proceeding in any such court.

                           (iii) Each of the  parties  further  agrees  that the
         mailing  of any  process  required  by any such court by  certified  or
         registered mail,  return receipt  requested,  to the address for notice
         herein  provided shall  constitute  valid and lawful service of process
         against him, her or it,  without the necessity for service by any other
         means provided by law.

                  (j) Descriptive  Headings.  The  descriptive  headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

                  (k)  Construction.  Where specific language is used to clarify
by example a general statement  contained  herein,  such specific language shall
not be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the  language  chosen by the  parties  to express  their  mutual
intent, and no rule of strict construction shall be applied against any party.

                  (l) Nouns and Pronouns.  Whenever the context may require, any
pronouns  used herein shall  include the  corresponding  masculine,  feminine or
neuter  forms,  and the singular  form of nouns and pronouns  shall  include the
plural and vice-versa.

                  (m) Waiver of Jury Trial.  NO PARTY TO THIS  AGREEMENT  OR ANY
ASSIGNEE,  SUCCESSOR,  HEIR OR PERSONAL  REPRESENTATIVE  OF A PARTY SHALL SEEK A
JURY TRIAL IN ANY  LAWSUIT,  PROCEEDING,  COUNTERCLAIM  OR ANY OTHER  LITIGATION
PROCEDURE  BASED  UPON OR  ARISING  OUT OF THIS  AGREEMENT  OR ANY OF THE  OTHER
AGREEMENTS  OR THE DEALINGS OR THE  RELATIONSHIP  BETWEEN THE PARTIES.  NO PARTY
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED,
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL  CANNOT OR HAS NOT BEEN WAIVED.  THE
PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO,  AND
THESE  PROVISIONS  SHALL BE  SUBJECT TO NO  EXCEPTIONS.  NO PARTY HAS IN ANY WAY
AGREED WITH OR  REPRESENTED TO ANOTHER PARTY THAT THE PROVISIONS OF THIS SECTION
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


<PAGE>



         IN WITNESS WHEREOF,  the parties hereto have executed this Stockholders
Agreement on the day and year first above written.

                                   ALLOU HEALTH & BEAUTY CARE, INC.


                                   By:
                                   Name: David Shamilzadeh
                                   Title: President and Chief Financial Officer

                                   MEZZANINE LENDERS:
                                   -----------------

                                   RFE INVESTMENT PARTNERS VI, L.P.
                                   By: RFE ASSOCIATES VI, LLC
                                          as general partner

                                           By: ______________________________
                                              Name: Howard C. Landis
                                              Title: Managing Member


                                   JACOBS FAMILY HOLDERS:
                                   ---------------------


                                   -------------------------------------
                                   Name:    Victor E. Jacobs

STATE OF                   )
                           :   ss.:
COUNTY OF                  )

         On the ____ day of July,  2000,  before me  personally  came  Victor E.
Jacobs to me known,  who,  being by me duly  sworn,  did  depose and say that he
resides at ____________________________; and that he is the person whose name is
subscribed  to the foregoing  instrument,  and that he executed the same for the
purpose and in the capacity therein expressed.

                                            ------------------------------------
                                                      Notary Public

                                      * * *


<PAGE>


                                              ----------------------------------
                                                  Name:    Herman Jacobs

STATE OF                   )
                           :   ss.:
COUNTY OF                  )

         On the ____ day of July, 2000,  before me personally came Herman Jacobs
to me known,  who, being by me duly sworn, did depose and say that he resides at
____________________________; and that he is the person whose name is subscribed
to the foregoing  instrument,  and that he executed the same for the purpose and
in the capacity therein expressed.

                                            ------------------------------------
                                                              Notary Public

                                      * * *


                                              ----------------------------------
                                                     Name:    Jack Jacobs

STATE OF                   )
                           :   ss.:
COUNTY OF                  )

         On the ____ day of July, 2000, before me personally came Jack Jacobs to
me known,  who,  being by me duly  sworn,  did depose and say that he resides at
____________________________; and that he is the person whose name is subscribed
to the foregoing  instrument,  and that he executed the same for the purpose and
in the capacity therein expressed.

                                            ------------------------------------
                                                        Notary Public


<PAGE>

                                                                   Schedule 4(c)


                         RECORD AND BENEFICIAL OWNERSHIP
                         OF JACOBS FAMILY HOLDER SHARES
                         ------------------------------

<TABLE>
<CAPTION>
   ----------------------------------- --------------------------------
<S>                                    <C>
   Victor E. Jacobs                    598,500

   ----------------------------------- --------------------------------
   Herman Jacobs                       318,750

   ----------------------------------- --------------------------------
   Jack Jacobs                         318,750

   ----------------------------------- --------------------------------
</TABLE>


<PAGE>

                                                                         Annex I

                                   DEFINITIONS
                                   -----------

         "Affiliate"  means, with respect to any Person,  any of (a) a director,
officer,  manager,  member,  or partner of such  Person,  (b) a spouse,  parent,
sibling or descendant of such Person or a spouse,  parent, sibling or descendant
of a director, officer, or partner of such Person and (c) any other Person that,
directly or  indirectly,  through one or more  intermediaries,  controls,  or is
controlled  by,  or is under  common  control  with,  another  Person.  The term
"control" includes, without limitation, the possession,  directly or indirectly,
of the power to direct the management and policies of a Person,  whether through
the ownership of voting securities, by contract or otherwise.

         "Agreement" means this Co-Sale, Voting and Preemptive Rights Agreement.

         "Common Stock" has the meaning set forth in the Purchase Agreement,  as
in effect from time to time.

         "Common Stock Equivalent" means a share of Common Stock or the right to
acquire,  whether or not  immediately  exercisable,  one share of Common  Stock,
whether  evidenced  by  an  option,  warrant,   convertible  security  or  other
instrument or agreement.

         "Company" has the meaning set forth in the caption to this Agreement.

         "Company  Charter" means the Restated  Certificate of  Incorporation of
the Company, as amended,  supplemented, or otherwise modified from time to time,
in each case  pursuant to the General  Corporation  Law of the State of Delaware
and as permitted by the Purchase Agreement.

         "Convertible Securities" means any stock or securities convertible into
or exchangeable for Common Stock.

         "Co-Sale  Percentage"  means,  with  respect to (i) any Selling  Jacobs
Family  Holder  or any Other  Stockholder  which or who has  delivered  a timely
Tag-Along  Notice  and (ii) the  shares of Common  Stock  which the  prospective
transferees specified in the applicable Sale Notice are willing to purchase, the
fraction,  expressed as a  percentage,  the  numerator of which is the number of
shares  held  by  such  Other  Stockholder  or  Jacobs  Family  Holder  and  the
denominator  of which is the  aggregate  number of the  shares  of Common  Stock
outstanding on a Fully-Diluted Basis.

         "Family  Group"  means,  with respect to any natural  Person,  (i) such
Person,  (ii) the spouse  and issue of such  Person,  (iii) the  parents of such
Person (whether natural or adoptive),  (iv) the siblings of such Person (whether
natural  or  adopted),  (v)  assuming  such  Person  were  or is  deceased,  the
descendants  of such Person  (whether  natural or adopted),  and (vi) any one or
more trusts  solely for the benefit of any one or more of the Persons  described
in clause (i) through clause (v) above.

<PAGE>

         "Fully-Diluted  Basis" means in the case of (i) any  calculation of the
number of shares of Common Stock deemed outstanding,  that effect is first given
to (A) all shares of Common Stock outstanding at the time of determination,  (B)
all shares of Common Stock  issuable  upon the  exercise of any option,  warrant
(including the Warrants) or other right outstanding at the time of determination
and (C) all shares of Common Stock  issuable upon the exercise of any conversion
or  exchange  right  contained  in  any  security  outstanding  at the  time  of
determination  that is  convertible  into or  exchangeable  for shares of Common
Stock; and (ii) any calculation of value,  that effect is first given to (A) the
securities  referred  to in  clause  (i)  above  and  (B)  the  payment  of  any
consideration  payable upon the exercise,  conversion or exchange of any option,
warrant, security or other right referred to in clause (i) above if such option,
warrant  (including the Warrants),  security or other right were  exercisable at
the time of  determination.  For purposes  hereof,  differences in voting rights
between  Class A Common  Stock and Class B Common  Stock shall not be taken into
account,  and all  shares  of  Common  Stock,  regardless  of  class,  shall  be
considered together.

         "Jacobs  Family  Holder" means each of the Jacobs Family  Holders,  any
Person who is a Jacobs  Family  Holder  within the  meaning of Section 4 and any
other Person who has executed a Jacobs Family Holder Joinder.

         "Jacobs Family Holder Joinder" means a joinder agreement, substantially
in the form of Exhibit A hereto,  by which a Person  may become a Jacobs  Family
Holder after the date hereof.

         "Mezzanine Lender" means the Mezzanine Lenders,  as of the date hereof,
listed on Schedule A attached hereto (both as holders of Warrants, alone, and as
holders  of  Stockholder  Shares),  and any Person  which or who is a  Mezzanine
Lender within the meaning of Section 4.

         "Mezzanine Lender Joinder" means a joinder agreement,  substantially in
the form of Exhibit B hereto,  by which a Person may become a  Mezzanine  Lender
after the date hereof.

         "Other Stockholders" has the meaning set forth in Section 2(b).

         "Person"  shall  be  construed  broadly  and  shall  include,   without
limitation,  an  individual,  a  partnership,  an  investment  fund,  a  limited
liability  company,  a corporation,  an  association,  a joint stock company,  a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.

         "Public  Offering" means the sale, in an  underwritten  public offering
registered under the Securities Act, of shares of the Company's Common Stock.

         "Public  Sale"  means the Sale of any  Stockholder  Shares as part of a
Public  Offering or through a broker,  dealer or market  maker  pursuant to Rule
144.

         "Purchase  Agreement"  means the Senior  Subordinated  Note and Warrant
Purchase  Agreement,  dated as of the date  hereof,  between the Company and the
purchasers named therein, as in effect from time to time.

         "Qualified  Public  Offering"  means  the  first  underwritten   public
offering of the Company's  Common Stock after the date hereof  registered  under
the  Securities  Act with (a) net  proceeds  to the Company of not less than $25
million and (b) such Common Stock being listed or authorized  for trading on any
of the New York Stock Exchange, the American Stock Exchange, the NASDAQ National
Market

<PAGE>

or any successors to any of the foregoing.

         "RFE" means RFE Investment Partners VI, a Delaware limited partnership.

         "Rule 144" means Rule 144  promulgated  by the  Securities and Exchange
Commission  pursuant to the Securities Act, or any successor  rules thereto,  as
the same may be amended or supplemented from time to time.

         "Sale Notice" has the meaning set forth in Section 2(b).

         "Sale of the Company" means the consummation of a Mandatory  Repurchase
Event, as defined in the Purchase Agreement.

         "Securities  Act" means the  Securities Act of 1933, as the same may be
amended or  supplemented  from time to time, or any successor  statute,  and the
rules and regulations thereunder, as the same are from time to time in effect.

         "Selling  Jacobs  Family  Holder"  has the meaning set forth in Section
2(b)(i).

         "Stockholder"  means a Jacobs Family Holder and/or a Mezzanine  Lender.
For purposes hereof, Mezzanine Lenders are treated as Stockholders both prior to
and after exercise of the Warrants and shall be subject to the provisions hereof
as to the  Warrants  (which will be treated as  Stockholder  Shares),  as to the
underlying Warrant Shares and as to any shares of Common Stock issued in lieu of
interest pursuant to the Notes issued pursuant to the Purchase Agreement.

         "Stockholder  Shares" means (i) any Common Stock purchased or otherwise
acquired by any Stockholder (including in the case of the Jacobs Family Holders,
Common Stock acquired by exercising  options  granted  pursuant to the Company's
stock option plans),  (ii) any Warrant Shares,  (iii) any shares of Common Stock
issued in lieu of interest pursuant to the Notes issued pursuant to the Purchase
Agreement,  and (iv) any  equity  securities  issued  or  issuable  directly  or
indirectly  with respect to the Common Stock  referred to in clauses (i) - (iii)
above  by  way  of  stock  dividend  or  stock  split  or in  connection  with a
combination  of  shares,   recapitalization,   merger,  consolidation  or  other
reorganization.  For purposes  hereof,  the holder of any portion of any Warrant
shall be deemed to be a holder of any Stockholder  Shares issuable upon exercise
of such Warrant and therefore shall be subject to the provisions  hereof both as
to the  Warrants  (which  will be treated as  Stockholder  Shares) and as to the
underlying Warrant Shares. As to any particular shares constituting  Stockholder
Shares, such shares will cease to be Stockholder Shares when they have been sold
through a Public Sale.

         "Subsidiary"  means any  corporation of which a Person owns  securities
having a  majority  of the  ordinary  voting  power  in  electing  the  board of
directors directly or through one or more subsidiaries.

         "Tag-Along Notice" has the meaning set forth in Section 2(b)(i).

         "Transfer"  means  the  direct  or  indirect  sale,  transfer,  pledge,
hypothecation,  gift,  assignment or other disposition  (whether with or without
consideration  and whether  voluntarily or involuntarily or by operation of law)
of any interest in any Stockholder  Share.  Without limiting the foregoing,  any
change in  beneficial  ownership  of a trust  described  in  clause  (vi) of the
definition of Family Group which will result in less than all of the  beneficial
or other interests in such trust being held by the Persons  described in clauses
(i) - (v) of such definition shall be deemed to be a Transfer.

<PAGE>

         "Warrant"  means (i) the  warrants to purchase  shares of Common  Stock
(subject to adjustment)  issued  pursuant to the Purchase  Agreement  (including
Warrants issued at a "Second RFE Closing" or "Subsequent  Closings"  pursuant to
the terms of the  Purchase  Agreement  and Warrants  issued  pursuant to Section
2.12.2 of the  Purchase  Agreement),  and (ii) any equity  securities  issued or
issuable  directly or indirectly with respect to the Warrants in connection with
a recapitalization, merger, consolidation or other reorganization.

         "Warrant  Shares"  means any  shares of  capital  stock of the  Company
issued upon exercise of the Warrants.


<PAGE>


                                                                      SCHEDULE A
                                                                      ----------


                              STOCKHOLDER ADDRESSES

MEZZANINE LENDERS:
-----------------

RFE INVESTMENT PARTNERS VI, L.P.
36 Grove Street
New Canaan, CT 06840
Attention:        Mr. Howard C. Landis
Telecopy:         203-966-3109

JACOBS FAMILY HOLDERS:
---------------------

All care of the Company at its address set forth in the  Agreement,  with a copy
to each such person at his or her home address as  maintained  in the  Company's
books and records.


<PAGE>


                                                                       EXHIBIT A
                                                                       ---------

                          JACOBS FAMILY HOLDER JOINDER

         By execution of this Jacobs  Family  Holder  Joinder,  the  undersigned
agrees to become a party to that certain Co-Sale,  Voting and Preemptive  Rights
Agreement dated as of July 25, 2000,  among Allou Health & Beauty Care,  Inc., a
Delaware corporation, and certain of its securityholders.  The undersigned shall
have all the rights,  and shall  observe all the  obligations,  applicable  to a
Jacobs Family Holder.

Name:

Address for Notices:




Date:

Signature:


<PAGE>


                                                                       EXHIBIT B
                                                                       ---------

                            MEZZANINE LENDER JOINDER

         By execution of this Mezzanine Lender Joinder,  the undersigned  agrees
to  become  a party  to that  certain  Co-Sale,  Voting  and  Preemptive  Rights
Agreement dated as of July 25, 2000,  among Allou Health & Beauty Care,  Inc., a
Delaware corporation, and certain of its securityholders.  The undersigned shall
have all the rights,  and shall  observe all the  obligations,  applicable  to a
Mezzanine Lender.

Name:


Address for Notices:                 with copies to:

_____________________________
_____________________________
_____________________________
_____________________________
_____________________________
                                     Signature:

Date: