UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                     Annual Report Pursuant to Section 13 or
                  15(d) of the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 1998

                         Commission file number 0-28174

                             The Lamaur Corporation
             (Exact name of registrant as specified in its charter)

 Delaware                                                  68-0301547
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation of organization)                      Identification No.)

                     One Lovell Avenue, Mill Valley CA 94941
               (Address of principal executive offices) (Zip Code)

                                 (415) 380-8200
              (Registrant's telephone number, including area code)


           Securities registered pursuant to Section 12(b) of the Act:
                                      None
 
           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein,  and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.

                                 [X] Yes [ ] No

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant as of March 24, 1999 was approximately  $0.9 million.  This number is
calculated by excluding all shares held by directors,  Intertec  Holdings,  L.P.
and  DowBrands  Inc.  without  conceding  that all such  persons or entities are
affiliates of registrant.

As  of  March  24,  1999,  there  were  7,309,561   outstanding  shares  of  the
registrant's common stock, $.01 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

 Part III: Portions of Proxy Statement for 1999 annual meeting of stockholders
<PAGE>

Item I.  BUSINESS

Overview

The Lamaur  Corporation (the "Company") was  incorporated  under the laws of the
State of Delaware on January 4, 1996. The Company's predecessor, Electronic Hair
Styling, Inc., was incorporated in the State of Washington on April 1, 1993 and,
effective  March 18, 1996,  it merged with the Company to  accomplish a Delaware
reincorporation.  Effective November 15, 1995, as a result of the acquisition of
the Personal Care  Division of DowBrands  L.P. (an affiliate of The Dow Chemical
Company),  the Company  became a successor  to a business  started in 1930 known
prior to its  acquisition by DowBrands in 1987 as Lamaur Inc. On March 26, 1997,
the Company changed its name to The Lamaur  Corporation.  

Corporate  functions,  including  financial  and  legal  services,  as  well  as
corporate development,  investor relations,  science and technology, are managed
at the Company's  headquarters  in Mill Valley,  California.  Through its Lamaur
Division  based in Fridley,  Minnesota,  the Company  operates  three  operating
segments, the Retail Group, the Salon Group, and the Custom Manufacturing Group.
As the Retail and Salon Groups have similar economic characteristics,  they have
been aggregated  into one reportable  segment called the Retail and Salon Group.
The Retail and Salon  Group  develops,  formulates,  manufactures,  and  markets
personal hair care products consisting of shampoos,  conditioners,  hair sprays,
and other styling  aids,  for the consumer  market and until July 1998,  for the
professional  hair  care  market.  The  Company's  Custom   Manufacturing  Group
develops,  formulates,  and  manufactures for third parties a variety of aerosol
and other liquid products, consisting of hair care, personal care, and household
products.

As a result of the Company's  economic  difficulty,  it has retained  investment
bankers  and,  with  their  assistance,  has been  actively  pursuing  strategic
transactions  in order to satisfy the needs of its creditors and to  rationalize
the business going forward. In July of 1998 the Company sold its Salon brands to
a subsidiary  of Shiseido for net  proceeds of $10.0  million.  The net proceeds
were used primarily to pay down borrowings under the Company's credit agreement,
to pay down  extended  accounts  payable,  and for  operations.  To satisfy  its
obligations  to creditors  and improve its financial  condition,  the Company is
continuing to restructure operations to reduce expenses and is actively pursuing
a buyer for the manufacturing operations and related assets. A final decision as
to whether to sell the  manufacturing  operations and related assets will depend
upon  receiving  offers,  analysis of the  economics  of those  offers,  and may
require  shareholder  approval.  The Company  continues to experience  declining
revenues and corresponding  cash shortfalls.  Without  additional  financing and
restructuring,  no  assurance  can be given that the Company  can  continue as a
going concern.

The Company has conducted early stages of research and development of Electronic
Chemistry,  a new hair styling concept which is intended to combine electronics
and chemicals to create new products designed to color, style and condition hair
quickly,   without  the  damaging  side  effects  often  experienced  with  most
chemical-based hair styling products.  Because of budget constraints the Company
substantially  discontinued activity related to advanced technology  development
in 1998. Until sufficient financial resources can be obtained from operations or
from  capital,  efforts  related  to  advanced  technology  will be  limited  to
completing the prosecution of the Company patents and to exploring opportunities
with prospective  licensees.  In 1999 an additional Electronic Chemistry patent
was issued to the Company.

The Company's  Retail and Salon Group product lines are sold through mass retail
outlets  under the  premium-priced  Willow  Lake,  Perma Soft and Color Soft,
mid-priced Salon Style and value-priced  Style and Style Natural  Reflections
brand names ("Retail  Brands").  Most product lines contain a wide assortment of
shampoos, conditioners and styling products positioned towards distinct consumer
segments.  In  addition,   until  July  1998,  a  full  line  of  high  quality,
premium-priced products including shampoos, conditioners, hair sprays, perms and
a  variety  of other  styling  aids  were  sold to the  professional  salon  and
specialty shops under the  Nucleic A,  Apple Pectin,  Apple Pectin  Naturals,
Vita/E and Pativa brand names ("Salon Brands").

During  1998,  sales by the Retail and Salon  Group  accounted  for 75.9% of the
Company's  total net sales,  and were made to mass  merchandisers,  food stores,
drug stores, professional salons, specialty outlets, and others by a combination
of the Company's direct sales force and a network of independent brokers.  Sales
by the Custom Manufacturing Group accounted for 24.1% of the Company's total net
sales for the same period.

During 1998, the Company focused a substantial  portion of its marketing efforts
to the  growing  naturals  product  segment of the market;  however,  all retail
brands experienced  significant sales declines from the previous year, including
Style down 31%, Perma Soft down 79%,  Willow Lake down 21%, and Salon Style down
61%.
<PAGE>
The Company's net loss for 1998 of  approximately  $0.2 million was  principally
due to lower than expected revenues from retail brands discussed above which had
a negative impact on revenues,  earnings, overhead allocation and cash flow. The
operating  loss  was  substantially  offset  by the  gain  from  the sale of the
Company's Salon Brands to Shiseido.

In 1998, as a result of the expired  Manufacturing  Agreement  with DowBrands in
November  1997,  lower  Retail  Brand  sales  and the sale of its  Salon  Brands
previously  discussed,  the Company  restructured  its operations by eliminating
positions in the sales,  marketing,  production,  administrative  and management
areas. On February 28, 1999, the Company had 225 employees  compared with 323 on
February 28, 1998.

The Company was out of  compliance  with the  financial  loan  covenants  of its
credit  agreement at December  31, 1998.  The Company has received a waiver from
Norwest Business Credit ("Norwest") in regard to these covenants. In conjunction
with receiving a waiver, the Company has renegotiated the terms and covenants of
the loan  agreement  with Norwest on March 12, 1999.  Although the Company is in
compliance,  no assurances can be given that the Company will continue to remain
in compliance.

On March 16, 1998, the Company  retained the investment  banking firm of McCabe,
Mintz &  Company,  L.L.C.  ("MMC")  to assist in  evaluating  various  strategic
alternatives  seeking to satisfy the needs of creditors and enhance  stockholder
value.  These  alternatives  include a sale of the Company or selected assets, a
business  combination,  strategic  alliance,  or merger with a third party. This
process  resulted in the sale of the Company's  Salon Brands to Shiseido in July
of 1998 for net proceeds of $10.0 million.  The Company  continues to experience
financial  difficulty and liquidity  problems and to satisfy  creditors may sell
its  manufacturing  operations and related  assets and/or its retail assets.  No
assurance  can  be  given  as  to  whether  any  further  transactions  will  be
consummated.


Investment Considerations

The Company has a limited  operating history evolving from its development stage
in 1995 by acquiring the  operations of the Personal Care Division of DowBrands.
The Personal Care Division had experienced nine consecutive  years of losses and
new management's  efforts to turn around  operations have not been successful to
date.  No assurance  can be given that the Company will have  earnings in future
periods. The Company will require additional financing to fund its term loan pay
off, and to satisfy the Company's  projected  working  capital for 1999,  and to
reduce its extended aged payables which at December 31, 1998 were  approximately
$6.0  million.  A portion of the working  capital would be used to support a new
retail brand  marketing  strategy and to introduce new brands  without which the
Company will not be successful. Additional working capital may not be available,
and the  absence of such  working  capital  has had and will  continue to have a
material adverse impact on the Company.  The price of the Company's Common Stock
went below $1.00 per share for an extended period, and in accordance with Nasdaq
listing requirements, the Company's shares were delisted in February of 1999. No
assurance  can be given that the shares  will be relisted on Nasdaq or any other
national exchange.

In March 1998, the Company retained the investment banking firm of McCabe, Mintz
& Company,  L.L.C. to explore  strategic  alternatives  to maximize  stockholder
value. In 1998, the Company reported losses. Revenues for future periods are not
expected to generate  sufficient  cash to meet the Company's  current  operating
needs and to satisfy its extended obligations. To address the cash requirements,
MMC, in conjunction with management,  identified  potential acquirers of some or
all of the assets of the  Company and has sought  bids or other  proposals  from
such  parties.  On July  31,  1998  the  Company  sold to  Shiseido  Co.  Ltd.'s
subsidiary,  Zotos International,  Inc. ("Zotos"), its professional salon brands
and related  inventory for net proceeds of $10.0 million.  The net proceeds were
used primarily to pay down borrowings under the Company's credit  agreement,  to
pay down extended accounts payable, and for operations.

The Company currently  intends to continue its retail business,  selling branded
products to traditional  mass,  food and drug  retailers.  The Company's  Willow
Lake  brand of  shampoos,  conditioners  and  styling  aids,  launched in 1997,
accounts  for  approximately  40.2% of Retail  and Salon  Group net  sales.  The
Company  believes that the Willow Lake product line,  properly  supported,  may
provide the foundation upon which additional  products can be added such as skin
care  products.  In addition to revenues from the Company's  other or new retail
brands,  future growth may come from  acquisition or licensing of other products
in the  niche  segment  of  the  personal  care  market.  The  Company  also  is
considering plans to sell or continue its manufacturing operations on a contract
basis.

Management  believes that there could be an  opportunity  for a future return to
stockholders through reorganized operations. However, to satisfy its obligations
to creditors,  the Company is actively exploring additional asset sales and will
consider offers to acquire all of the Company's assets or outstanding  shares of
the Company's  stock  through a merger,  acquisition  or tender offer.  Based on
information currently available,  the Company believes that a sale of additional
assets  is  likely,   and  it  is  currently   anticipated  that  the  Company's
manufacturing  operations and related assets in Fridley,  Minnesota may be sold.
An  important  factor in any  decision to pursue this plan is the price that the
Company might receive for its manufacturing operations and related assets and/or
its Retail  assets.
<PAGE>
If the Company determines that a sale of all of its assets (i.e., both the plant
and retail assets) would be in the best interests of the Company,  its creditors
and its  stockholders,  it is anticipated  that a plan of  liquidation  would be
proposed  to  stockholders.   The  preferred  stockholders  are  entitled  in  a
liquidation to a preference of approximately  $15 million before any payment may
be made to the holders of Common Stock.  Based upon  discussions to date,  there
will be less  than $15  million  available  for  distribution  to the  preferred
stockholders  if all of the assets  are sold  currently.  Therefore,  unless the
preferred  stockholders  waive this right or convert to common,  no distribution
would be available to common stockholders if such a liquidation were to occur.

No assurance can be given that  management  and the Board will continue to carry
out its plan for reorganized  operations or that if the plan is pursued that the
Company  will be  successful  in carrying out this plan or that the Company will
not determine  based upon future offers that it is in the best  interests of the
Company, its creditors and its stockholders to sell the retail assets as well as
the manufacturing  operations and related assets. No assurance can be given that
any asset sales will occur or will occur on terms favorable to the Company.

The Company  finances its ongoing  operations  through its credit agreement with
Norwest  Business  Credit,  its primary  lender and by  extended  terms from its
creditors.  The Company was out of compliance  with the financial loan covenants
of its credit  agreement at December 31, 1998. The Company has received a waiver
from Norwest in regards to these  covenants.  In  conjunction  with  receiving a
waiver,  the  Company  has  renegotiated  the  terms and  covenants  of the loan
agreement with Norwest on March 12, 1999. Although the Company is in compliance,
no  assurances  can be  given  that the  Company  will  continue  to  remain  in
compliance.  Norwest  holds a  security  interest  in  substantially  all of the
Company's assets, including cash.


Products

The Company  formulates  and  manufactures  a broad  range of hair care  product
lines,  marketed under several distinct brand names.  Product lines sold through
consumer  retail outlets  include  Willow Lake,  Perma Soft,  Color Soft,  Salon
Style, Style and Style Natural Reflections (Retail Brands). Most lines contain a
broad assortment of shampoos,  conditioners,  and styling  products.  Until July
1998 product  lines used by stylists and sold by salons and beauty supply stores
throughout the United States and in Canada included shampoos, conditioners, hair
sprays,  perms and a variety of styling  aids sold under the Pativa,  Nucleic A,
Nucleic A Botanicals, Apple Pectin, Apple Pectin Naturals and Vita/E brand names
(Salon Brands). In addition,  the Company's Custom Manufacturing Group develops,
formulates,  and  manufactures  for third parties a variety of aerosol and other
liquid products, consisting of hair care, personal care, and household products.
<PAGE>

The following table sets forth the Company's  principal brands and products sold
within each brand by the Retail and Salon Group during 1998:
<TABLE>
<CAPTION>


                                                             Retail Brands
<S>                                <C>                                             <C>
Brand                                        Shampoos and Conditioners                      Styling Aids and Perms

Willow Lake...................     Cherry   Bark  &   Irish   Moss   Conditioning   Raspberry  &  Vitamin E  Non-Aero  Hair
                                   Shampoo;  Citrus & Rosemary Shampoo;  Lavender   Spray;   White  Lily  &  Jasmine   Hair
                                   & Mint  Shampoo;  Witch  Hazel  &  Honeysuckle   Spray;  Aloe & Clover  Blossom  Mousse;
                                   Shampoo;  Hops, Apricot & Almond  Conditioner;   Rosehips  &  Ivy  Spray   Gel;   Orange
                                   Sunflower,   Honey  &  Hibiscus   Conditioner;   Blossom & Clove Spritz
                                   Vitamin  E,  Carrot  Extract  &  Milk  Protein
                                   Conditioner
Perma Soft....................     Revitalizing  Shampoo,  Moisturizing  Shampoo,   Aerosol  Hair  Sprays,   Mousse,   Gel,
                                   Extra Body Shampoo,  Shampoo Plus Conditioner,   Frizz Control Cream
                                   Revitalizing     Conditioner,     Moisturizing
                                   Conditioner,     Extra    Body    Conditioner,
                                   Moisturizing Mist Conditioner
Color Soft....................     Daily    Cleansing    Shampoo;    Moisturizing   Aerosol   Finishing   Spray;    Styling
                                   Shampoo;     Clean    Rinsing     Conditioner;   Mousse; Spray Gel
                                   Moisturizing Conditioner; Spray-On Conditioner
Salon Style...................     Moisture  Potion  Shampoo,  Therapy  Shampoo,   Hair Sprays (aerosol and  non-aerosol),
                                   Strengthening  Shampoo,   NutriShine  Shampoo,   Spray Gel, Body Boost Mousse
                                   Botanical   Conditioner,    Moisture   Potion
                                   Conditioner,   Detangling  Conditioner,  Hydro
                                   Balance Deep Conditioner
Style.........................     Moisturizing  Shampoo,   Extra  Body  Shampoo,   Hair Sprays (aerosol and  non-aerosol),
                                   Regular    Shampoo,     Strawberry    Shampoo,   Gel, Mousse,  Dry Style Hair Spray for
                                   Nourishing Shampoo,  Coconut & Papaya Shampoo,   Men (aerosol)
                                   Rainwater Shampoo;  Moisturizing  Conditioner,
                                   Extra Body Conditioner,  Regular  Conditioner,
                                   Strawberry   Conditioner,   Deep  Conditioning
                                   Conditioner,   Coconut &  Papaya  Conditioner;
                                   Rainwater   Conditioner;   Style  Plus  Extra
                                   Conditioning Shampoo and Conditioner In-One
Style Natural Reflections.....     Clarifying   Shampoo;    Volumizing   Shampoo;
                                   Moisturizing    Shampoo;    Daily    Finishing
                                   Conditioner;      Volumizing      Conditioner;
                                   Moisturizing Conditioner

                                             Salon Brands Until July 1998 (1)

Brand                                        Shampoos and Conditioners                      Styling Aids and Perms

Pativa........................     Curl  Cleanse  Shampoo,   Volumizing   Cleanse   Mousse,     Spritz,    Design    Creme,
                                   Shampoo,    Moisturizing    Cleanse   Shampoo,   Alternative Wave (Normal),  Alternative
                                   Purifying     Cleanse,     Curl    Revitalizer   Wave (Tinted),  Sprae  Concentrate Hair
                                   Conditioner,  Leave-In Fortifier, Moisturizing   Spray
                                   Rinse,  Purifying  Rinse,   Replenishing  Hair
                                   Masque
Nucleic A.....................     Body Plus  Shampoo,  Proteplex  Shampoos and     Botanicals Hair Spray, Glaz Gel
                                   Conditioner
Apple Pectin ..................    Shampoo    and    Conditioner,    Moisturizing   Moisturizing  Hair  Spray,  Acid  Perm,
                                   Shampoo,      ScentSates     Shampoos     and    Apple  Pectin  Plus  Perm,  Ten-Minute
                                   Conditioners,  Apple Pectin Plus  Shampoo and    Wave, Ultra Hold Mousse, Styling Creme
                                   Conditioner in One
Apple Pectin  Naturals.........    Witch Hazel & Honeysuckle Shampoo,  Irish Moss   Gel, Mousse, Spritz, Hair Spray
                                   & Cherry Bark  Shampoo;  Rosemary & Grapefruit
                                   Shampoo;     Hops,    Apricots    &    Almonds
                                   Conditioner;   Sunflower,   Honey  &  Hibiscus
                                   Conditioner;  Milk Protein,  Carrot  Extract &
                                   Vitamin E  Conditioner;  Peppermint & Lavender
                                   Bath & Body Wash
Vita/E ........................    Shampoo, Conditioners                            Perm,   Hair  Spray,   Ultrahold   Hair
                                                                                    Spray,  Unscented  Hair Spray,  Maximum
                                                                                    Hold     Hair     Spray,     Ultra-hold
                                                                                    Concentrate Hair Spray

Other Salon Products...........    Lamaur    Moisturizing    Shampoo,    Lamaur     Natural Woman Hair Spray, CO-A Perm,
                                   Smoothing Shampoo, Bone Marrow Conditioners      CO-A Kinetics Perm,  Lamaur Inception
                                                                                    Thio-Free  Perm,  Strata  Perm,  Gamma
                                                                                    pHactor  Wave  Set  and   Concentrate,
                                                                                    Beauti-Lac  Hair Spray,  Stylac  Hair
                                                                                    Spray,   Sprayage  Hair  Spray,   Body
                                                                                    Plus  Mousse,  Axiom  Perm,  Body for
                                                                                    Sure   Perm,   Lamaur   Straightening
                                                                                    Balm,  Lamaur  Sealing Spray,  Lamaur
                                                                                    Plus Styling Spray
   
</TABLE>

(1) Salon  Brands were sold to a division of Shiseido  for net proceeds of $10.0
million in July of 1998.
<PAGE>
Willow Lake, a premium priced retail hair care product of shampoos, conditioners
and styling aids is the Company's  entry in the  "naturals"  segment of the hair
care category.  Perma Soft, a premium-priced retail product line, is intended to
meet the needs of a segment of consumers who use permanent wave products.  Color
Soft was developed and marketed for consumers who color treat their hair.  Salon
Style is a line of mid-priced shampoos,  conditioners, and styling aids targeted
toward the salon segment of the retail  market.  Style is the  Company's  "value
priced" brand,  intended for use by the entire family. Style Natural Reflections
is a "mid-priced" entry in the "naturals" segment.

The Apple Pectin Naturals product line was positioned as "natural"  products for
the professional  market. Apple Pectin is based on the use of pectin from apples
as a key  ingredient in the  products.  Pativa is a line of  professional  salon
shampoos,  conditioners and styling products distributed by exclusive dealers to
full-service  salons.  Vita/E products contain vitamin E, a natural  antioxidant
which protects the hair and prevents  color fading.  Nucleic A is a full line of
salon products prescribed to meet hair care needs.

The following table sets forth certain information  concerning the Company's net
sales by operating segment in each of the last three fiscal years:

<TABLE>
<CAPTION>

                                1998                              1997                              1996
                     --------------------------------  -------------------------------   ---------------------------
                                                              (In thousands)
<S>                  <C>           <C>                 <C>            <C>                 <C>            <C>
Retail and 
Salon Group (1)         $ 56,216        75.9  %           $ 93,098       78.6  %            $ 86,265       73.7  %

Custom Manufacturing 
Group (2)                 17,827        24.1                25,377       21.4                 30,818       26.3
                    --------------- ----------------  --------------- ---------------   --------------- ------------

Total:                  $ 74,043       100.0  %          $ 118,475      100.0  %           $ 117,083      100.0  %
                   =============== ================  =============== ===============   =============== =============
</TABLE>

                                       
(1) 1998 Salon revenues are for seven months due to the sale of the Salon Brands
in July 1998.
(2)  Custom  Manufacturing  Group  sales  included  sales to  DowBrands  of $0.0
million, $16.4 million and $22.2 million in each of the years ended December 31,
1998, 1997 and 1996, respectively. In November 1997, the Manufacturing Agreement
with DowBrands expired.


Marketing and Distribution

The Company's Retail and Salon Group sales are made to mass merchandisers,  food
stores,  drug  stores and other  retail  outlets as well as to  wholesalers  who
service  retail  outlets,  and  until  July  1998  to the  professional  market,
including  sales  to  distributors  who then  sell to  professional  salons  and
specialty outlets.  Sales for the Retail and Salon Group are carried out through
a combination of the Company's own sales force and independent brokers.

The Company  currently  maintains more than 300 active customer  accounts and in
1998 no  customer  other  than  Wal-Mart  accounted  for  more  than  10% of the
Company's  total  net  sales.  Wal-Mart  accounted  for 21%,  15% and 17% of the
Company's  total  net  sales  in each of  1998,  1997  and  1996,  respectively.
DowBrands,  whose manufacturing agreement expired in 1997, accounted for 0%, 14%
and 19% of the  Company's  total  net  sales  in each of 1998,  1997  and  1996,
respectively. The loss of sales to Wal-Mart or other significant customers would
have a material  adverse  effect on the business and  operations of the Company.
There are no  contractual  obligations  from any  customers  to make  continuing
purchases from the Company.

The Company  promotes  sales of its  products  utilizing  advertising,  consumer
promotions and merchandising  support programs.  During the years ended December
31,  1998,  1997  and  1996,  the  Company's   marketing   support  expense  was
approximately $14.0 million, $43.7 million and $23.8 million,  respectively. The
significant  decrease in these  expenses  from 1997 was  principally  due to the
launch of the  Company's  new  premium-priced  brand,  Willow  Lake in 1997 and
revenue and working capital shortfalls in 1998.

The Company  anticipates a need to increase  expenditures in connection with its
marketing  activities,  and will require additional  financial resources to fund
those  activities.  The  Company's  strategy  in 1999 is to  focus  its  limited
resources  to support  the Willow  Lake  brand with  advertising  and  consumer
promotion and to provide maintenance promotional support behind the other retail
brands.


Research and Development

The  Company  continuously  engages  in  the  development  of new  products  and
improvements to its existing formulations. The Company relies principally on the
experience of its staff in connection with formulating new products. The Company
believes its research and development  efforts are enhanced by the  availability
of its  on-site  salon,  which is fully  equipped  to permit the  testing of new
products. The Company also maintains a laboratory, quality assurance and quality
control facilities.
<PAGE>

Manufacturing and Supply

All the Company's  manufacturing,  packaging,  and  warehousing  operations  are
located in a 475,000 square foot facility in Fridley,  Minnesota. The production
area  comprises  135,000  square feet and includes  formula  compounding  areas,
quality control laboratories,  multiple fully-automated,  high speed aerosol and
liquid filling lines and state-of-the-art  packaging facilities. The compounding
or mixing department utilizes a combination of manual and fully-automated  batch
processing  systems.  A portion of the  aerosol  batching  is  controlled  by an
automated  computer-driven  blending  system  which has  significantly  improved
efficiencies and product  integrity.  The high speed  fully-automated  packaging
equipment used for both liquid filling and aerosol lines runs at speeds of up to
300  containers  per  minute.  The  Company has  substantial  excess  production
capacity, which results in a high fixed overhead and contributes to unprofitable
operations.  The Company is considering selling its manufacturing operations and
related assets and outsourcing production of its retail brands.

Raw  materials  used  by  the  Company  are  principally  alcohol,  surfactants,
fragrances,  propellants and a wide variety of packaging materials and compounds
including  containers  such  as  aerosol  cans,  corrugated  boxes  and  plastic
containers,  container caps, tops, valves and labels, all of which are purchased
from outside  sources.  The  Company's  principal  raw  materials  and packaging
components are available from several domestic suppliers and it is not dependent
on the availability of supplies from any single source.  While at times the hair
care industry has experienced a shortage of raw materials of the types essential
to the Company's  business,  because the Company has  long-established  supplier
relationships and has developed alternative raw material suppliers,  it does not
anticipate  any  difficulty in obtaining  adequate  supplies of raw materials to
meet its needs. Similarly,  while the industry has from time to time experienced
raw material cost increases,  the Company  believes it has been and remains able
to purchase its requirements at competitive prices from sources that are readily
available.

Because of financial  difficulty the Company has extended payables to vendors of
approximately  $6  million  and,  in  some  cases,   supply  is  provided  on  a
cash-on-delivery  basis. Should the past due accounts not be reduced,  supply of
materials  could be  discontinued.  The Company is working  with its vendors and
working on capital programs to resolve aged payables. No assurance can be given,
however,  that payments can be made or that  production will not be interrupted,
which would have a material adverse effect on the Company.

The Company uses tank railcars to transport  certain high volume raw  materials.
Trucks are used to transfer smaller volume raw material  requirements as well as
packaging  components  such as  aerosol  cans,  plastic  bottles  and caps,  and
corrugated  shipping  containers.  A separate  tank farm for  above-ground  bulk
storage of  chemicals  and  aerosol  propellants  is  located in a secured  area
outside of the plant.  The Company  maintains  inventory  of raw  materials  and
packaging  materials as well as certain  finished  goods in its on-site  265,000
square foot warehouse.  Finished goods inventory is warehoused for  distribution
throughout the United States at the Company's  on-site  warehouse,  but products
produced for third parties are in most cases immediately released to third-party
warehouses and do not remain on the Fridley site as inventory. As many as twelve
over-the-road  truck  trailers  can  be  loaded  and  unloaded  in  the  plant's
warehousing and shipping area at one time.

Custom  manufacturing  of hair care aerosol sprays and liquid products for third
parties,  particularly  with respect to the production of aerosol spray products
utilizing the Company's  automated high speed production  lines, has contributed
24.1%,  21.4%,  and 26.3% to the  Company's net sales in 1998,  1997,  and 1996,
respectively.

The Company  maintains a strict quality control system to monitor the quality of
its  products.  The quality  control  laboratory is well equipped and capable of
conducting both micro and analytical testing. The Company also maintains product
liability insurance at levels it believes to be adequate.


Government Regulation

The Company's manufacturing and packaging operations are subject to a wide range
of  federal,  state,  and  local  regulations.  These  regulations  include  the
applicable cosmetic purity and labeling  requirements  prescribed by the Federal
Food,  Drug and Cosmetic  Act, the  applicable  labeling  provisions of the Fair
Packaging  and Labeling Act, the  discharge,  handling and disposal of hazardous
wastes regulations contained in applicable environmental laws, and the plant and
laboratory safety  requirements of various  applicable  occupational  safety and
health laws. Existing and future aerosol-based  products are also expected to be
subject to state and, possibly, federal standards relating to permissible levels
of volatile organic compounds.  While there will be related capital  investment,
the Company does not expect that  compliance with those standards will adversely
affect its  revenues or costs in 1999.  The  Company is also  subject to federal
regulations  concerning the content of its  advertising,  trade  practices,  and
certain other matters.

DowBrands  Inc. has agreed,  for a period of eight years from November 15, 1995,
(but only until May 15,  1996, with respect to asbestos related matters, if any)
to indemnify the Company against environmental liabilities in excess of $150,000
arising  at  the  Fridley  facility  from  events  that  occurred  prior  to the
acquisition.

Regulatory  agencies  continue to monitor  activities  related to the  Company's
products, and no assurance can be given that additional regulatory  requirements
will not be enacted.
<PAGE>

Patents and Trademarks

The Company  markets its products  under a number of trademarks  and trade names
that are  registered in the United  States and several  foreign  countries.  The
Company will seek to register significant trademarks and trade names if and when
it commences  operations or marketing  activities  in other  foreign  countries.
Principal trademarks of the Retail Brands include Willow Lake, Perma Soft, Color
Soft,  Salon  Style,  Style  and Style  Natural  Reflections.  The Salon  Brands
trademarks,  including Pativa,  Nucleic A, Apple Pectin,  Apple Pectin Naturals,
and  Vita/E,  were sold to Shiseido in July of 1998.  The Company  believes  its
position  in the  marketplace  is  significantly  dependent  upon  the  goodwill
engendered by its trademarks and trade names, and therefore  considers trademark
protection  to be material to its  business.  Although  the Company owns certain
patents,  its business is not  materially  dependent  upon any patent,  license,
franchise, or concession, whether owned by or licensed to the Company.

The Company  believes  that  protection  of its  proprietary  technology  (which
includes  certain  technology  licensed  from  an  affiliate)  and  know-how  is
important to the development of its business.  It seeks to protect its interests
through a combination of patent protection and  confidentiality  agreements with
all its critical  employees,  as well as by limiting the availability of certain
critical  information  to a small  number  of key  employees.  To  date,  it has
obtained the rights,  pursuant to an exclusive  license,  to cosmetic  hair care
applications   of  the   technology   reflected  in  a  United   States   patent
(No. 5,395,490,  issued to Messrs. Don Hoff and Joseph Stiley in March 1995, and
expiring in March 2012) and (No.  5,858,179,  issued to Dr. Rich Loda in January
1999) that it believes is important  to the  protection  of the core  technology
underlying  its  research  activities.  Mr. Hoff,  Chairman and Chief  Executive
Officer, and Mr. Stiley,  Director and one of the Company's  co-inventors of the
Electronic  Chemistry   technology,  are affiliates of the Company.  The Company
believes  that its  patents,  which  contain  claims  relating  to the method of
applying   electronic   signals  at   frequencies   determined  by  the  natural
characteristics  of a material in order to alter certain molecular bonds in that
material,  as well as change the characteristics of certain chemical components,
provide broad coverage,  and hence significant  protection,  for its proprietary
technology;  however,  there  can be no  assurance  that  this will be the case.
Moreover,  the Company  currently has no patent  protection  for its  technology
outside the United States,  and may be unable to obtain even limited  protection
for its proprietary technology in foreign countries.


Competition

The markets for the  Company's  products are very  competitive  and sensitive to
changing  consumer needs and  preferences.  They are  characterized  by frequent
introductions  of  new  competitive   products,   often   accompanied  by  major
advertising and promotional activities.

There have been significant  changes in the personal care products market in the
last 24  months.  The cost of  goods  and  marketing  expense  in the hair  care
products market has been rising steadily for several years.  The result has been
an  erosion  in profit  margins  among  the  industry's  competitors  generally.
Consequently,  the hair care industry has been experiencing both a consolidation
in the number of competitors as well as retailers.

The  Company  competes  primarily  on  the  basis  of  product  quality,  price,
marketing, and brand name recognition.  As a result of competitive conditions in
the industry which have adversely  affected profit margins and growing  consumer
demand for greater product  convenience and  performance,  the industry has been
experiencing  a  consolidation  and a  globalization  in the  activities  of its
members.  The hair care  products  market is dominated by large,  multi-national
corporations,  all of which compete with the Company and have greater  financial
and other resources than those of the Company. Principal competitors include The
Procter & Gamble Company, Unilever N.V., Bristol-Myers Squibb Company (Clairol),
L'Oreal S.A. and Alberto-Culver Company.


Personnel

The Company  employed 225 persons as of February 28, 1999. None of the Company's
employees is a member of a labor union.  The Company  considers its relationship
with its employees to be good.
<PAGE>

Item 2.  PROPERTIES

The Company  owns its facility in Fridley,  Minnesota,  near  Minneapolis.  This
facility contains administrative,  laboratory, production and warehousing areas.
The 475,000 square foot air  conditioned  facility is located on a 25 acre site,
and includes an  approximately  75,000 square foot office center that houses the
administrative  staff,  research  laboratories,  computer  services and the test
salon.  The Company  believes the facility,  which was  constructed  in 1969 and
improved during the 1980's is well maintained. The Company has excess production
capacity.

At December 31, 1998, the Company  leased its 4,224 square foot office  facility
in Mill Valley,  California,  near San Francisco,  from Intertec,  a division of
Innovative Capital Management, Inc., a related party, on a month-to-month basis.


Item 3.  LEGAL PROCEEDINGS


On  November 2, 1998,  a class  action and  derivative  lawsuit was filed by the
stockholders  (on behalf of themselves and the Company) in the Delaware Court of
Chancery  in and for New Castle  County  alleging  that the  defendant  Board of
Directors  breached their fiduciary duties to the Company and failed to disclose
certain  information  in the Company's  1998 Proxy  Statement.  Plaintiffs  seek
injunctive  relief,  damages  and a  recision  of all  actions  approved  at the
November 2, 1998 Annual  Meeting.  In addition,  the  plaintiffs are seeking the
appointment  of a receiver  for the Company and  changes in the  disclosures  to
correct what they allege are errors and costs and  attorney's  fees. The Company
believes  the  lawsuit is without  merit and will  defend the action in the best
interest  of the  stockholders.  No  discovery  has been  commenced  against the
Company,  only  minimal  discovery  has been  conducted  by  plaintiffs,  and no
significant dates have been set in the litigation.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In October 1998 the Company  submitted to shareholders four matters all of which
were approved at the annual  meeting held on November 2, 1998. The matters were:
To elect five  directors  to hold  office for a  one-year  term and until  their
respective  successors are elected and  qualified;  to ratify a reduction in the
number of members of the board of directors  from seven to five; to consider and
vote upon a proposal  to approve and adopt a  potential  sale of certain  assets
relating to the Company's manufacturing operations and to consider,  approve and
ratify the  appointment  of Deloitte & Touche LLP as the  Company's  independent
auditors for the year ended December 31, 1998.

At the annual meeting, the following directors received the following votes:

                                                 FOR           WITHHELD

         Don G. Hoff                          5,442,013         595,810
         Dominic J. LaRosa                    5,432,448         605,375
         Harold M. Copperman                  5,441,513         596,310
         Perry D. Hoff                        5,431,513         606,310
         Joseph F. Stiley, III                5,442,013         595,810


The  shareholders  also  approved a reduction in the number of directors to five
with voting as follows: 5,372,741 for, 659,760 against, and 5,322 abstaining.

The  shareholders  also  approved a proposal  for the sale of the  manufacturing
facility at any time through  January  1999,  with voting as follows:  3,806,223
for, 604,513 against, 931 abstaining, and 1,626,156 broker non-votes.

The  shareholders  also  ratified  the  selection  of  Deloitte  & Touche LLP as
independent  auditors  for the Company for the fiscal year ending  December  31,
1998  with  voting  as  follows:  5,539,840  for,  495,433  against,  and  2,550
abstaining.
<PAGE>

PART II


Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Until February 1999 the Company's Common Stock was traded on the Nasdaq National
Market under the symbol  LMAR.  The table below sets forth the range of the high
and low sale prices, as reported by the Nasdaq Stock Market:

<TABLE>
<CAPTION>

                                1998                             1997                            1996
                  -------------------------------  -------------------------------  ----------------------------------

                     High              Low            High              Low             High                Low
               --------------   --------------  --------------    -------------  ----------------    --------------
<S>               <C>              <C>            <C>               <C>         <C>                    <C>           
First Quarter      $ 2.438          $ 1.250         $ 4.250          $ 2.750
Second Quarter       3.000            0.656           3.813            2.375        $8.250  (1)          $ 5.250
Third Quarter        0.750            0.063           3.500            2.500         6.000                 3.750
Fourth Quarter       0.313            0.031           2.938            1.500         4.875                 3.125

</TABLE>

                                                          
(1)  Includes  only the period May 23,  1996,  the first  trading date after the
Company's initial public offering, to June 30, 1996.

Because  the  Company's  share  price was below  $1.00 per share for an extended
period, in accordance with Nasdaq listing  requirements,  LMAR was delisted from
the Nasdaq reporting system in February 1999. The Company's shares are currently
traded  in the  "Pink  Sheets."  No  assurance  can be given  that  LMAR will be
relisted in the future.

As of March 24, 1999,  the number of holders of record of the  Company's  Common
Stock was 482 and the  number of holders  of record of the  Company's  Preferred
Stock was one. As for the Common Stock, this number does not include  beneficial
holders where nominees hold shares of record.

Dividends  are payable with respect to the Series A Preferred  Stock only to the
extent (on an  as-converted  basis) that  dividends are declared  payable on the
Common  Stock.  The Series B  Preferred  Stock is entitled  to  cumulative  cash
dividends at the rate of 8.0% per annum,  payable quarterly ($400,000 annually).
As of  December  31,  1998 the  Company is $600,000 in arrears on the payment of
dividends on its Series B preferred stock held by DowBrands.

The Company does not anticipate  paying any dividends on its Common Stock in the
foreseeable  future.  The  payment  of  future  dividends  will  depend  on  the
evaluation  by the  Company's  Board of  Directors  of such  factors as it deems
relevant at the time. Currently, the Board of Directors believes that all of the
Company's  earnings,  if any,  should be  retained  for the  development  of the
Company's  business.  In  addition,  payment of dividends on the Common Stock is
prohibited by the terms of the Norwest Credit Agreement and is restricted by the
terms of its Preferred Stock.

On March 18,  1998,  the Company  issued  109,581  shares of its common stock to
Intertec  Holdings,  L.P.  pursuant  to the  terms  of a Common  Stock  Purchase
Agreement.  The issue price was $8.00 per share.  These  securities  were exempt
from registration under Section 4(2) of the Securities Act of 1933.
<PAGE>

Item 6.   SELECTED FINANCIAL DATA

Set forth below is selected  financial  data with respect to the  statements  of
operations of the Company, for the twelve months ended December 31,  1998, 1997,
1996,  1995 and 1994, and the balance sheet data of the Company at  December 31,
1998, 1997, 1996, 1995 and 1994.

In  addition,  included  below is selected  financial  data with  respect to the
statements  of  operations  for the Personal  Care  Division for the period from
January 1, 1995 to November 30, 1995 (the effective date of the  acquisition for
financial  reporting  purposes)  and the year ended  December 31, 1994,  and the
balance  sheet of the Personal  Care  Division at December 31, 1994.  Such data
were derived from the Personal Care Division  financial  statements.
<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                              ------------------------------------------------------------------------------
                                                  1998      1997           1996      1995(1)        1994
                                                --------   --------      --------   --------      -------
                                                            (In thousands, except per share data)
<S>                                        <C>          <C>         <C>           <C>          <C>
Selected Statements of Operations Data:
Total Net Sales .........................   $  74,043    $ 118,475    $ 117,083    $   8,070    $    --
Cost of Goods Sold ......................      46,062       69,626       70,215        5,656         --
Gross Margin ............................      27,981       48,849       46,868        2,414         --
Operating Expenses ......................      31,243       66,375       45,641        3,496          557
Operating (Loss) Income .................      (3,262)     (17,526)       1,227       (1,082)        (557)
Interest Expense ........................       1,951        2,236        1,386          300           59
Other Income (Expense) ..................         432         (402)        (712)        --           --
Gain on sale of professional salon brands       5,436         --           --           --           --
Net (Loss) Income .......................   $    (209)   $ (19,360)   $     553    $  (1,382)   $    (616)
                                            =========    =========    =========    =========    =========

Basic (Loss) Income Per Common Share ....   $   (0.10)   $   (3.48)   $    0.07    $   (0.52)   $   (0.25)
                                            =========    =========    =========    =========    =========

Weighted Average Common Shares
Outstanding - Basic (2) .................       5,854        5,685        4,557        2,667        2,498
Diluted (Loss) Income Per Common Share ..   $   (0.10)   $   (3.48)   $    0.06    $   (0.52)   $   (0.25)
Weighted Average Common Shares
Outstanding - Diluted (2) ...............       5,854        5,685        5,609        2,667        2,498

Balance Sheet Data
Working Capital (Deficit) ...............   $   2,116    $  15,794    $  26,126    $  10,346    $    (466)
Total Assets ............................      36,712       58,326       61,566       42,967            6
Long-Term Debt, less Current Portion ....       8,290       24,046       14,473       20,350        1,000
Stockholders' Equity (Deficit) ..........      11,246       10,949       30,252        6,594       (1,462)

</TABLE>
<PAGE>
Selected Financial Data of the Personal Care Division

<TABLE>
<CAPTION>
                                                            Period from
                                                          January 1, 1995
                                                              through              Year Ended
                                                           November 30,           December 31,
                                                             1995 (3)                 1994
                                                       ----------------------  -------------------
                                                                     (In thousands)
<S>                                                              <C>                 <C>
Selected Statements of Operations Data:
Total Net Sales                                                    $ 109,696            $ 121,277
Cost of Goods Sold                                                    67,088               71,735
                                                       ----------------------  -------------------
Gross Margin                                                          42,608               49,542
Operating Expenses                                                    42,344               57,830
Write-Down of Assets                                                  11,000              120,100
                                                       ----------------------  -------------------
Operating Loss                                                       (10,736)            (128,388)
Interest Expense from Dow                                             (1,603)              (5,805)
Other Expense                                                            101                  705
Net Loss                                                           $ (12,238)          $ (133,488)
                                                       ======================  ===================

                                                                                       At
                                                                                  December 31,
                                                                                      1994
                                                                               -------------------
Balance Sheet Data
Working Capital                                                                          $ 16,787
Total Assets                                                                               58,021
Net invested capital                                                                       47,493
</TABLE>

(1) Includes the results of  operations  of the Personal  Care  Division for the
month of December 1995 following its acquisition by the Company.

(2) In accordance  with SEC Staff  Accounting  Bulletin 98, when computing basic
and diluted  earnings per share,  all common stock,  options,  and warrants that
were issued for nominal consideration during periods prior to the initial public
offering  have  been  considered  as  outstanding  for  all  historical  periods
presented.

(3)  Results  of  operations  of  the  Personal  Care  Division   following  its
acquisition  by the  Company in  November  1995 are  included  in the results of
operations of the Company for the year ended December 31, 1995.
<PAGE>

Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


Historical Results of Operations

      Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Total  net sales for the year  ended  December  31,  1998  were  $74.0  million,
compared with $118.5  million in 1997, a decrease of 37.5%.  The decrease is due
to the decline in sales of the Company's retail and salon brands, and decline in
sales of custom manufacturing as a result of the expiration of the manufacturing
agreement with DowBrands in November 1997.  There were no sales to DowBrands for
the year ended  December 31, 1998  compared to $16.4  million for the year ended
December 31, 1997.

Style, Perma Soft, Willow Lake, Salon Style, and Color Soft (retail brands)
had sales  declines of $28.2  million,  and the  professional  salon  brands had
declines of $9.3 million during the year ended December 31, 1998. Style,  Perma
Soft,  and Salon  Style have  continued  to decline in sales since  management
began its turnaround efforts in the first quarter of 1996.  Management  believes
that sales of these and the Company's other retail brands are likely to continue
to decline.  The decrease in net sales of the professional  salon brands for the
year ended  December  31, 1998 is  attributable  to the sale of these  brands to
Zotos on July 31, 1998.  Beginning in August 1998 and continuing for six months,
the Company manufactures these professional salon brands for Zotos. However, net
sales of these brands will continue to decline since such brands will be sold by
the Custom Manufacturing Group to Zotos on a contract basis which provides for a
lower markup over cost.  Zotos may terminate  purchases  from the Company at any
time after January 1999.

Gross margin as a percentage  of net sales was 37.8% for the twelve months ended
December  31,  1998 as  compared  with  41.2% for the same  period in 1997.  The
reduction  in gross  margin as a  percentage  of net  sales  for the year  ended
December 31, 1998 was principally  due to the sale of  lower-margin  promotional
merchandise  for the Willow Lake line, and a change in product mix. In addition,
as a result of the sale of the Salon  Division  and a  decrease  in sales of the
Company's  retail brands,  Custom  Manufacturing  sales,  which are lower margin
sales,  represented  a greater  percentage  of net sales  resulting in a reduced
gross margin as a percentage of sales.

Selling, general, and administrative expenses (SG&A) were $31.2 million or 42.2%
of net sales for the twelve  months  ended  December  31, 1998 as compared  with
$66.4 million or 56.0% of net sales for the same period last year, a decrease of
$35.2  million.  The decrease is  principally  attributed  to reduced  marketing
expenses of $29.7 million,  and reduced freight and brokerage as a result of the
decrease in sales. In addition, personnel, travel and other expenses declined as
a result of the Company's cost cutting efforts and the sale of the  professional
salon brands to Zotos.  In 1997 the Company  increased  its marketing to support
the launch of Willow Lake, and in 1998 such support was substantially  reduced.
In addition,  the Company has reduced  marketing  expenditures  for other brands
which have continued to experience sales declines.  The lower level of marketing
support in 1998 is a result of the Company's limited working capital. Because of
the Company's  limited working capital and the competitive  environment for hair
care products,  there can be no assurance  concerning the future  performance of
Willow Lake and other brands or the Company's  ability to attain any particular
level  of sales or to be  profitable  in the  future  with  the  lower  level of
marketing support.

Interest expense  decreased to $2.0 million for the twelve months ended December
31,  1998 as  compared  with $2.2  million in the same  period  last  year.  The
decrease in interest expense during the twelve months ended December 31, 1998 is
principally  attributable  to lower  borrowings  under the credit  facility with
Norwest  Business  Credit during 1998.  This  decrease was  partially  offset by
higher interest rates charged by Norwest Business Credit during the year.

Other  expense  increased as a result of loan fees  charged by Norwest  Business
Credit in conjunction  with the  amendments to the credit  agreement in 1998 and
the reduction of interest  income.  The lower  interest  income is the result of
less cash available for investment in 1998.

On July 31, 1998,  the Company sold its  professional  salon  brands,  including
inventory ($4.3  million),  and trade names for net proceeds of $10.0 million to
Zotos.  This  transaction  resulted  in a  pre-tax  gain of  approximately  $5.4
million.

As a result of the foregoing  factors,  the net loss for the year ended December
31, 1998 was $0.2 million  compared to a net loss of $19.4  million for the year
ended December 31, 1997.


      Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Total  net sales for the year  ended  December  31,  1997 were  $118.5  million,
compared  with  $117.1  million in 1996 an  increase  of 1.2%.  The  increase is
principally  due to sales  from  Willow  Lake  and Color  Soft  the  Company's
premium-priced  retail hair care product lines and Style Natural  Reflections a
mid-priced  retail  hair care  product  line.  Willow  Lake,  targeted  for the
Natural's segment and positioned as "Nature's Prescription for Beautiful Hair,"
began shipping in the fourth quarter of 1996. Color Soft,  formulated to retain
color  longer for color-  treated  hair began  shipping in the first  quarter of
1997.  Style  Natural  Reflections  positioned  as a  mid-priced  brand  in the
"Natural's" segment began shipping in the third quarter of 1997. Sales growth of
Willow Lake, Color Soft, and Style Natural Reflections will be dependent upon
competition from other brands, consumer acceptance, and marketing support behind
these brands.

Sales for the twelve months ended December 31, 1997 were  adversely  affected by
sales declines in the Company's  established brands, Perma Soft, Style and Salon
Style, and in custom manufacturing,  principally  DowBrands.  Perma Soft, Style,
and Salon Style have  continued to decline in sales since  management  began its
turnaround  efforts in the first  quarter of 1996.  Perma Soft,  Style and Salon
Style had  sales  declines  of $8.8  million,  $8.4  million  and $8.3  million,
respectively,  during the twelve months ended December 31, 1997 as compared with
1996.

Gross margin as a percentage  of net sales was 41.2% for the twelve months ended
December  31,  1997 as  compared  with  40.0% for the same  period in 1996.  The
improvement  in the gross  margin as a  percentage  of net sales for the  twelve
months ended December 31, 1997 was due to a change in product mix resulting from
the  Company's  strategic  shift to focus on  higher  margin  brands  driven  by
Willow Lake and Color Soft.

Selling, general, and administrative expenses (SG&A) were $66.4 million or 56.0%
of net sales for the twelve  months  ended  December  31, 1997 as compared  with
$45.6  million or 39.0% of net sales for the same period in 1996, an increase of
$20.8 million.  As general and administrative  expenses have remained relatively
flat, the increase is principally attributable to increased marketing expense of
$19.9 million and fees to brokers in the Company's distribution chain supporting
the launch of Willow Lake, Color Soft and Style Natural Reflections.

Interest expense  increased to $2.2 million for the twelve months ended December
31, 1997 as compared with $1.4 million in the same period in 1996.  The increase
in  interest  expense  during the  twelve  months  ended  December  31,  1997 is
attributable to higher  borrowings under the Company's  revolving line of credit
with Norwest Business Credit to support the Company's  working capital needs and
the increased  interest rate invoked by Norwest as a result of the Company being
out of compliance  with certain  financial  loan  covenants  during a portion of
1997.

Other income  decreased to $0.4 million for the twelve months ended December 31,
1997 as compared with $0.7 million for the same period in 1996.  The decrease in
other income in 1997 is principally due to the absence of a one-time gain on the
sale of equipment that was realized in 1996.

Primarily   because  of  the  $19.9  million   increase  in  marketing   expense
attributable to the launch of new products and lower than expected revenues from
the  Company's  established  brands,  the net loss for the twelve  months  ended
December 31, 1997 increased to $19.4 million as compared with net income of $0.6
million for the same period in 1996.
<PAGE>

Liquidity and Capital Resources

As of December 31, 1998, the amounts  outstanding under the Company's  revolving
and term loan  facilities were $7.4 million and $3.1 million,  respectively,  as
compared with $17.7 million and $6.2 million,  respectively,  as of December 31,
1997.  On July 31,  1998,  the Company  used a portion of the $10.0  million net
proceeds  from  the  sale of its  professional  salon  brands  to pay  down  its
revolving line of credit and term loan facility. In addition, in April 1998, the
Company  reduced its investments in US Treasury  Securities  from  approximately
$4.3 million to zero to pay down the revolving loan facility in accordance  with
the March 31, 1998 Amended Loan  Agreement  with Norwest.  The interest rates on
the loans are variable and are tied to Norwest Bank's base rate, which was 7.75%
at December  31,  1998.  As of December  31,  1998,  the  interest  rates on the
revolving  line of credit and the term loan  facility  were  10.25% and  10.50%,
respectively.

In October 1998,  the Company  entered into the Fourth  Amendment to the Amended
and Restated  Credit and Security  Agreement with Norwest  Business  Credit (the
"Lender").  This amendment  provides for an additional  advance of approximately
$2.9  million  under  the term  loan and a  reduction  in the  revolving  credit
facility  from $20.0  million to $11.5  million.  The Company  incurred a fee of
$75,000 in conjunction  with this loan  amendment.  Additionally,  the amendment
reduces the borrowing base by excluding certain categories of inventory from the
calculation  of the  borrowing  base and by  reducing  the  advance  rate on the
eligible  inventory by four percentage  points.  The revolving line of credit is
payable in full by November 15, 2000.

Under the terms of the term loan, the Company may borrow up to $3.1 million. The
term loan is due on demand and is payable in full by September 1, 1999.

Both credit  facilities  are secured by virtually all the assets of the Company.
Additionally,  the credit facilities prohibit the payment of dividends, restrict
the Company's  ability to incur additional  indebtedness and require the Company
to comply with certain financial covenants regarding profitability,  minimum net
worth and capital expenditures.

The Company was out of  compliance  with the  financial  loan  covenants  of its
credit  agreement at December  31, 1998.  The Company has received a waiver from
Norwest in regard to these covenants. In conjunction with receiving this waiver,
the Company  renegotiated the terms and covenants of the loan agreement with the
Lender on March 12, 1999 in the Fifth  Amendment  to the  Amended  and  Restated
Credit and Security  Agreement.  This amendment  provides for increased  advance
rates on eligible  receivables and inventory of three percentage points and five
percentage points, respectively. As of December 31, 1998 the Company's available
borrowing  capacity was $1.3 million.  Based on the amended loan agreement,  the
Company's  available  borrowing  capacity  would  have been  approximately  $3.4
million  at  December  31,  1998.  The  Company  incurred a fee of  $100,000  in
conjunction with this amendment, $50,000 of which is not payable until August 1,
1999.

In March 1998,  the Company  issued  109,581 shares of common stock at $8.00 per
share to Intertec  Holdings,  L.P. under a stock purchase agreement entered into
in March 1996 between the Company and Intertec Holdings,  L.P. With the issuance
of these shares,  the Company  satisfied the remaining  balance of $750,000 on a
note payable to Intertec Holdings,  L.P., and Intertec Holdings,  L.P. fulfilled
its  obligation to acquire a total of 146,107  shares under the  agreement.  The
note was for a license fee for  proprietary  technology  licensed  from Intertec
Ltd., a limited partnership controlled by the Company's Chairman of the Board.

On July 31, 1998 the  Company  sold its  professional  salon  brands,  including
inventory ($4.3  million),  and trade names for net proceeds of $10.0 million of
which $0.2 million is being held in escrow in order to provide funds for product
returns and indemnity  payments that the Company may become obligated to make to
Zotos.  The net proceeds were used  primarily to pay down  borrowings  under the
Company's  credit  agreement,  to pay down extended  accounts  payable,  and for
operations.

Total accounts payable  exceeding their normal payment terms were  approximately
$6.0  million as of December  31, 1998.  Because the Company has  announced  its
intent to obtain  financing,  and/or establish  an alliance  through a merger or
additional  sale of assets,  major  trade  creditors  and other  creditors  have
extended  their  "normal"  terms to allow the  Company  additional  time to make
payments.  In August 1998,  the Company used a portion of the proceeds  from the
sale of its professional  salon brands to reduce its extended  accounts payable.
The Company is operating  its business to preserve  working  capital in order to
pay the Company's current and extended obligations. To date the Company has been
able to make timely shipments to its customers.

As of December 31,  1998,  the Company was $600,000 in arrears on the payment of
dividends on its Series B preferred  stock.  The preferred stock provides for an
annual dividend of $400,000, payable in quarterly installments.

The Company's  ability to continue  operations  is dependent on its ability:  to
generate  sufficient  cash flow to meet its  obligations  as they become due, to
comply with the terms and  conditions  of the amended  financing  agreement,  to
obtain additional financing or refinancing,  to reduce aged payables,  to reduce
its cost structure, and attain sales and operating levels to be profitable.

The Company's  strategy in 1999 is to focus its limited resources to support the
Willow  Lake  brand with  advertising  and  consumer  promotion  and to provide
maintenance  promotional  support for the other retail brands.  The Company will
continue to evaluate sales and operating performance and, if necessary, initiate
further cost reductions.

Management is currently  seeking  additional  sources of financing through a new
credit  facility  and/or the sale of its  manufacturing  operations  and related
assets.  No  assurance  can be given as to the timing of such  financing or that
such financing will be obtained.
<PAGE>


Inflation

The impact of inflation on operations  has not been  significant in the past few
years due to the relatively low inflation that has been  experienced  throughout
the United  States.  Raw material  costs,  labor costs,  and interest  costs are
important components of the Company's costs. Increased operating costs are taken
into consideration and increased pricing action is taken, where possible, within
competitive and marketplace limitations.


Year 2000 Compliance

Many computer systems were not designed to properly handle dates beyond the year
1999. Additionally, these systems may not properly handle certain dates in 1999.
Failure to process dates  properly  could result in failure or disruption of the
Company's  information  systems  and/or  processing  equipment.  To be Year 2000
compliant,  computer  systems must correctly  process dates before and after the
Year 2000,  recognize  the Year 2000 as a leap year,  accept and  display  dates
unambiguously  and  correctly  process  dates  for  non-date  functions  such as
archiving.

Disruptions  to the  Company's  operations  may also occur if key  suppliers  or
customers  experience  disruptions  in their  ability  to  purchase,  supply  or
transact  with the Company due to Year 2000 issues.  The Year 2000  readiness of
infrastructure  suppliers  (utilities,  government agencies such as customs, and
shipping  organizations)  will be  critical  to the  Company's  ability to avoid
disruption of its operations.

The Company installed an enterprise-wide  software solution in December 1996. At
that time,  some  modules of the system  were not Year 2000  compliant.  A newer
release of the same  software  is  certified  to be  compliant  by the  software
vendor.  The  Company's  current  activity  surrounds  upgrading  to this  newer
release.  It is the  Company's  intent  to test the  functionality  and make the
necessary  Company-specific  modifications  to the  software.  This  process  is
currently underway and should be completed during the third quarter in 1999. The
Company's  contingency  plan  would be to use the  certified-compliant  software
without Company-specific modifications.  The operating system on the computer is
Year 2000 compliant.

The Company is also reviewing its computer-dependent manufacturing activities to
determine the necessary  hardware and software  changes.  For all  non-mainframe
applications such as personal computers,  production-related equipment, etc., an
inventory has been taken of the hardware and software involved.  The Company has
researched the status of these items and determined a course of action to assure
compliance.  This process is  currently  scheduled to be completed by the end of
the third quarter in 1999. The Company's  electronic  data  interchange  system,
which receives orders from its customers,  has already been certified to be Year
2000 compliant by the software vendor.

The Company will perform remediation  procedures  concurrent with its assessment
planning.  The Company intends to use internal  resources to implement,  replace
and test  software  and related  assets  affected  by the Year 2000  issue.  The
Company  currently  believes that the  remediation  costs of the Year 2000 issue
will not be  material  to the  Company's  results  of  operations  or  financial
position and will be absorbed by the Company through normal  operating  budgets.
The Company does not expect any incremental  costs associated with its Year 2000
remediation activities to be significant. Cumulatively through December 31, 1998
the Company has not incurred a material amount of remediation expenses.

The Company  will be working  with key  suppliers  and  customers  to  determine
whether the  suppliers'  operations  and the  products  and  services  that they
provide  are Year 2000  capable or to monitor  their  progress  toward Year 2000
compliance.  The  Company is in the  process of  sending  questionnaires  to its
suppliers who furnish product or services to the Company. The Company may choose
to identify  those  suppliers  it deems  critical  and pursue  other  methods of
assuring readiness. The Company is also in the process of surveying customers to
determine the status of their Year 2000 efforts.

While the  Company  currently  expects  that the Year 2000  issue  will not pose
significant  operational  problems,  delays in adequately  addressing  Year 2000
issues,  or a  failure  to fully  identify  all Year  2000  dependencies  in the
Company's  systems and in the systems of its suppliers,  customers and financial
institutions could have material adverse  consequences,  including delays in the
production,  delivery or sale of products. In addition,  time and cost estimates
are  based  on  currently  available   information  and  are  management's  best
estimates.  However,  no  assurance  can be given that these  estimates  will be
achieved, and actual results may differ materially from those anticipated.


SAFE HARBOR CAUTIONARY STATEMENT

Statements in this report  regarding the Company's  outlook for its business and
their respective markets, such as projections of future performance,  statements
of  management's  plans and  objectives,  forecasts  of market  trends and other
matters, are forward-looking statements, some of which may be identified by such
words or phrases as "will likely  result," "are  expected to," "will  continue,"
"outlook," "is anticipated,"  "estimate,"  "project" or similar expressions.  No
assurance can be given that the results in any forward-looking statement will be
achieved and actual results could be affected by one or more factors which could
cause them to differ materially.  These forward-looking statements involve risks
and uncertainties  that could cause actual results to differ materially from the
forward-looking statements. Such risks include those described under "Investment
Considerations,"  including the Company's  ability to raise capital  through the
sale of assets or other financing,  market acceptance of the Company's products,
effectiveness  of  recently  adopted or planned  initiatives,  competition,  the
Company's ability to implement  appropriate cost controls,  price changes by the
Company or its  competitors and  fluctuations in capital and operating  results.
For these  statements,  the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
<PAGE>


Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

At December 31, 1998,  the Company had $10.5  million of debt  outstanding  with
variable interest rates as follows:

<TABLE>
<CAPTION>
                                                              (In thousands)
<S>                                                                  <C>
Term loan (10.50%, due September 1, 1999)                               $ 3,123
Revolving loan (10.25%, due November 15, 2000)                            7,397
                                                                      ----------

                                                                       $ 10,520
                                                                      ==========

</TABLE>

The interest  rates are based on the Lender's  base rate plus 2.75% for the term
loan and 2.50% for the revolving line of credit. A one percentage point increase
or  decrease in the  Lender's  base rate would  increase  or  decrease  interest
expense by approximately $105,000 at December 31, 1998.

The  Company  does not have  significant  transactions  denominated  in  foreign
currencies and does not purchase or hold any derivative financial instruments.

<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                  Index to Financial Statements            
<TABLE>
<CAPTION>
                                                                                                    
THE LAMAUR CORPORATION                                                                              
                                                                                                       Page
                                                                                                      --------
   <S>                                                                                                <C>   
    Independent Auditors' Report                                                                        F-1

    Balance Sheets at December 31, 1998 and 1997                                                        F-2

    Statements of Operations for the Years Ended                                                    
            December 31, 1998, 1997 and 1996                                                            F-3

    Statements of Changes in Stockholders' Equity for the Years Ended                               
            December 31, 1998, 1997 and 1996                                                            F-4

    Statements of Cash Flows for the Years Ended                                                    
            December 31, 1998, 1997 and 1996                                                            F-5

    Notes to Financial Statements for the Years Ended                                               
            December 31, 1998, 1997 and 1996                                                            F-6
                                                  
</TABLE>


Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL STATEMENT DISCLOSURE

         Not applicable.

<PAGE>

PART III


Item 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

         Incorporated by reference from the Company's 1999 Proxy Statement.


Item 11.  EXECUTIVE COMPENSATION

         Incorporated by reference from the Company's 1999 Proxy Statement.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Incorporated by reference from the Company's 1999 Proxy Statement.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Incorporated by reference from the Company's 1999 Proxy Statement.

<PAGE>

PART IV


Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      Financial Statements and Schedules - See index in Item 8.
(b)      Reports on Form 8-K.  None.
(c)      List of Exhibits.

Exhibit 
Number                         Description
       *2.1   Asset Purchase Agreement, dated as of November 15, 1995, between 
             DowBrands, Inc. and Registrant.
       *2.2  Plan of Merger, dated March 15, 1996.
       *3.1  Restated Certificate of Incorporation of the Registrant.
       *3.2  By-Laws of the Registrant.
      **3.3  Certificate of Amendment of Restated Certificate of Incorporation.
       *4.1  Restated Certificate of Incorporation of the Registrant 
             (incorporated by reference to Exhibits 3.1 and 3.3 hereof).
       *4.2  Specimen Copy of Stock Certificate for shares of Common Stock.
       *4.3  Form of Warrant issued to the Representatives.
       *4.4  Form of Common Stock Purchase Warrant, dated as of November 1995, 
             issued to certain investors.
       *4.5  Registration Rights Agreement, dated as of November 15, 1995, 
             between Dow and Registrant.
       *4.6  Form of Registration Rights Agreement between Registrant and 
             certain holders of Registrant Common Stock.
      *10.1  License Agreement by and between Registrant and Intertec Ltd., 
             dated May 5, 1993.
      *10.2  Credit and Security Agreement, dated as of November 16, 1995, 
             between Registrant and Norwest Business Credit, Inc.
     **10.3  First Amendment to Credit Agreement, Second Amendment to Credit
             Agreement, Amendment Agreement and Third Amendment to Credit 
             Agreement between Registrant and Norwest Business Credit, Inc.
    ***10.4  Amended Credit and Security Agreement between Registrant and 
             Norwest Business Credit, Inc.
   ****10.5  First Amendment to Amended Credit and Security Agreement between 
             Registrant and Norwest Business Credit, Inc.
 ******10.6  Second Amendment to Amended and Restated Credit and Security 
             Agreement between Registrant and Norwest Business Credit, Inc.
 ******10.7  Third Amendment to Amended and Restated Credit and Security 
             Agreement and Waiver of Defaults between Registrant and Norwest 
             Business Credit, Inc.
      *10.9  1996 Stock Incentive Plan of the Registrant.
     *10.10  1996 Stock Incentive Plan for Non-Employee Directors and Advisory 
             Board Members of the Registrant.
     *10.11 Employment Agreement between Registrant and Don G. Hoff, made as of 
             June 1, 1994, and modified as of November 6, 1995.
    **10.12  1996 Non-Qualified Stock Option Plan of the Registrant.
    **10.13  Sublease dated October 1, 1996 between Registrant and Intertec,Ltd.
******10.14  Form of Employee Severance Agreement - Minnesota
******10.15  Memorandum from the Company to Dominic J LaRosa re Insurance
             Coverage
 *****10.16  1997 Stock Plan
      10.17  Form of Stock Grant Agreement (Non-Plan)
      10.18  Form of Stock Grant Agreement (Plan)
      10.19  Fourth Amendment to Amended and Restated Credit and Security
             Agreement
      10.20  Fifth Amendment to Amended and Restated Credit and Security
             Agreement
      11.1   Statement regarding computation of per share earnings.
      23.1   Consent of Deloitte & Touche LLP.
      27.1   Financial Data Schedule

*99.1 U.S. Patent Number 5,395,490,  issued March 7, 1995,  registered to Don G.
Hoff and  Joseph F.  Stiley,  III,  for a method of  treating  materials  by the
application of electromagnetic energy at resonant absorption frequencies.
*Incorporated  by reference from the Form S-1  Registration  Statement (File No.
333-2722).
**Incorporated  by  reference  from  Annual  Report on Form 10-K for fiscal year
ended 12/31/96
***Incorporated  by  reference  from  Quarterly  Report on Form 10-Q for quarter
ended 6/30/97
****Incorporated  by reference  from  Quarterly  Report on Form 10-Q for quarter
ended 9/30/97
*****Incorporated by reference to Form S-8 Registration Statement (File No. 333-
26811)
******Incorporated  by reference from Annual Report on Form 10-K for fiscal year
ended 12/31/97
<PAGE>



2.       SIGNATURES

Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


Date:  March 30, 1999                         
                                                  

                        The Lamaur Corporation
         --------------------------------------------------
                             (Registrant)

         By:                   /s/ DON G. HOFF
         --------------------------------------------------
         Don G. Hoff, Chairman of the Board and Chief Executive
         Officer
         --------------------------------------------------





Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been duly signed by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.




Signature               Title                                     Date


/s/ DON G. HOFF
---------------   Chairman of the Board and Chief                 March 30, 1999
    Don G. Hoff   Executive Officer
                 (Principal Executive Officer)


/s/ JOHN D. HELLMANN
-------------------- Vice President, Chief Financial Officer      March 30, 1999
    John D. Hellmann (Principal Financial and Accounting
                      Officer)


/s/ DOMINIC J. LaROSA
------------------   President and CEO - Lamaur Division and      March 30, 1999
    Dominic J. LaRosa      Director



/s/ HAROLD M. COPPERMAN
-----------------------   Director                                March 30, 1999
    Harold M. Copperman


/s/ PERRY D. HOFF
-----------------   Director                                      March 30, 1999
    Perry D. Hoff


/s/ JOSEPH F. STILEY
--------------------   Director                                   March 30, 1999
    Joseph F. Stiley, III
<PAGE>




                          INDEPENDENT AUDITORS' REPORT


The Lamaur Corporation:

We have audited the accompanying  balance sheets of The Lamaur  Corporation (the
"Company"),  as of  December 31,  1998, and 1997, and the related  statements of
operations,  stockholders'  equity and cash flows for each of the three years in
the  period  ended  December  31,  1998.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of the  Company as of December  31, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended  December  31,  1998,  in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  at December 31, 1998 and 1997, the Company would not have
been in compliance with certain covenants of its credit agreement had the lender
not waived the covenants.  The Company  renegotiated  the terms and covenants of
the loan agreement and also is seeking other sources of long-term financing. The
Company's  difficulties  in meeting its loan  agreement  covenants and financing
needs and its recurring losses from operations raise substantial doubt about its
ability to continue as a going  concern.  Management's  plans  concerning  these
matters are also  described in Note 2. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.




DELOITTE & TOUCHE LLP
San Francisco, California
March 30, 1999



                                      F-1

<PAGE>

<TABLE>
<CAPTION>


                             THE LAMAUR CORPORATION
                                 BALANCE SHEETS
                 (In thousands, except share and per share data)

                                                                            December 31,
                                                                      -------------------------
                                                                         1998          1997
                                                                      ------------  -----------
<S>                                                                   <C>            <C>
ASSETS

Current Assets:
    Cash and cash equivalents (Notes 1 and 3)                               $ 568      $ 6,465
    Receivables from DowBrands (Note 12)                                        -          741
    Accounts receivable, net (Note 4)                                      10,244       15,943
    Inventories (Note 5)                                                    7,969       15,523
    Prepaid expenses and other current assets                                 511          453
                                                                      ------------  -----------
                                                                   
      Total Current Assets                                                 19,292       39,125
                                                                   
Property, Plant and Equipment, Net (Note 6)                                17,392       19,131
                                                                   
Other Assets                                                                   28           70
                                                                      ------------  -----------
                                                                   
    Total Assets                                                         $ 36,712     $ 58,326
                                                                      ============  ===========
                                                                   
LIABILITIES AND STOCKHOLDERS' EQUITY                               
                                                                   
Current Liabilities:                                               
    Accounts payable (Note 2)                                            $ 10,056     $ 14,592
    Accrued expenses                                                        2,623        4,666
    Accrued salaries, wages and employee-related expenses                   1,147        2,211
    Current portion of long-term debt (Note 7)                              3,350        1,612
    Payables to related parties (Note 12)                                       -          250
                                                                      ------------  -----------
                                                                   
      Total Current Liabilities                                            17,176       23,331
                                                                   
Long-Term Debt (Note 7)                                                     8,290       23,546
Related Party Obligations (Note 12)                                             -          500
Commitments and Contingencies (Notes 13 and 14)                    
                                                                   
Stockholders' Equity (Note 8):                                     
    Preferred stock, $.01 par value, 4,000,000 shares authorized:  
      Series A Preferred stock, $.01 par value, 1,000,000 shares issued
       and outstanding at December 31, 1998 and 1997.              
       ($10.0 million liquidation preference)                               8,500        8,500
      Series B Preferred stock, $.01 par value, 763,500 shares issued
       and outstanding at December 31, 1998 and 1997.              
       ($5.0 million liquidation preference)                                5,000        5,000
    Common stock, $.01 par value, 12,000,000 shares authorized,    
      5,939,761 and 5,747,544 shares issued and outstanding at     
      December 31, 1998 and 1997, respectively                                 59           57
    Additional paid-in-capital                                             20,356       19,852
    Stock subscriptions receivable                                            (50)         (50)
    Accumulated deficit                                                   (22,619)     (22,410)
                                                                      ------------  -----------
                                                                   
      Total Stockholders' Equity                                           11,246       10,949
                                                                      ------------  -----------
                                                                   
    Total Liabilities and Stockholders' Equity                           $ 36,712     $ 58,326
                                                                      ============  ===========


                      

                        See notes to financial statements

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                             THE LAMAUR CORPORATION
                            STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)



                                                                                            Years Ended
                                                                                           December 31,
                                                                        ----------------------------------------------------
                                                                             1998              1997              1996
                                                                        ---------------   ----------------  ----------------
<S>                                                                        <C>               <C>                <C>       
Net Sales                                                                     $ 74,043          $ 102,104          $ 94,912
                                                                       
Net Sales to DowBrands (Note 12)                                                     -             16,371            22,171
                                                                        ---------------   ----------------  ----------------
                                                                       
Total Net Sales (Note 3)                                                        74,043            118,475           117,083
                                                                       
Cost of Goods Sold                                                              46,062             69,626            70,215
                                                                        ---------------   ----------------  ----------------
                                                                       
Gross Margin                                                                    27,981             48,849            46,868
                                                                       
Selling, General and Administrative Expenses                                    31,243             66,375            45,641
                                                                        ---------------   ----------------  ----------------
                                                                       
Operating (Loss) Income                                                         (3,262)           (17,526)            1,227
                                                                       
Interest Expense                                                                 1,951              2,236             1,386
Other Expense (Income)                                                             432               (402)             (712)
Gain on sale of professional salon brands (Note 1)                               5,436                  -                 -
                                                                        ---------------   ----------------  ----------------
                                                                       
Net (Loss) Income                                                                 (209)           (19,360)              553
                                                                       
Dividends on Series B Preferred Stock                                             (400)              (400)             (233)
                                                                        ---------------   ----------------  ----------------
                                                                       
Net (Loss) Income Available to Common Shareholders                              $ (609)         $ (19,760)            $ 320
                                                                        ===============   ================  ================
                                                                       
Basic (Loss) Income per Common Share                                           $ (0.10)           $ (3.48)           $ 0.07
                                                                        ===============   ================  ================
                                                                       
Weighted Average Common Shares Outstanding - Basic                               5,854              5,685             4,557
                                                                        ===============   ================  ================
                                                                       
Diluted (Loss) Income per Common Share                                         $ (0.10)           $ (3.48)           $ 0.06
                                                                        ===============   ================  ================
                                                                       
Weighted Average Common Shares Outstanding - Diluted                             5,854              5,685             5,609
                                                                        ===============   ================  ================


                       See notes to financial statements

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                             THE LAMAUR CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 1998, 1997 and 1996
                                 (In thousands)

                                                                                                                         Additional
                                                      Series A                  Series B                                   Paid-In
                                                ------------------------ ---------------------- ----------------------- ------------
                                                Shares       Amount      Shares     Amount       Shares      Amount
                                              ---------- ------------- --------- ------------ ----------- ----------- 
<S>                                          <C>          <C>         <C>          <C>         <C>            <C>       <C>
   Balance
   December 31, 1995 ..................        1,000        $8,500        --           --          2,945        $29        $  1,718

Issuance of Series B
preferred stock .......................         --            --          764        $5,000         --           --            --   

Issuance of common
stock .................................         --            --          --           --          2,643         26          18,086

Grants of non-cash
stock option credits ..................         --            --          --           --           --           --             132

Stock grants to
employees .............................         --            --          --           --             15          1              93

Dividends on preferred
stock .................................         --            --          --           --           --           --            (233)

Net income ............................         --            --          --           --           --           --            --   
                                               -----        ------        ---        ------        -----        ---        --------

   Balance,
   December 31, 1996 ..................        1,000         8,500        764         5,000        5,603         56          19,796

Issuance of common
stock .................................         --            --          --           --            145          1             456

Dividends on preferred
stock .................................         --            --          --           --           --           --            (400)

Net loss ..............................         --            --          --           --           --           --            --   
                                               -----        ------        ---        ------        -----        ---        --------

   Balance,
   December 31, 1997 ..................        1,000         8,500        764         5,000        5,748         57          19,852

Issuance of common
stock .................................         --            --          --           --            192          2             904

Dividends on preferred
stock .................................         --            --          --           --           --           --            (400)

Net loss ..............................         --            --          --           --           --           --            --   
                                               -----        ------        ---        ------        -----        ---        --------

   Balance,
   December 31, 1998 ..................        1,000        $8,500        764        $5,000        5,940        $59        $ 20,356
                                               =====        ======        ===        ======        =====        ===        ========

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                       Stock
                                   Subscriptions  Accumulated     Total
                                     Receivable     Deficit
                                   ____________  ____________    _______
 
<S>                                <C>            <C>            <C>
   Balance               
   December 31, 1995 .             $    (50)       $ (3,603)      $  6,594

Issuance of Series B
preferred stock ......                   --              --          5,000

Issuance of common
stock ................                   --              --         18,112

Grants of non-cash
stock option credits .                   --              --            132

Stock grants to
employees ............                   --              --             94

Dividends on preferred
stock ................                   --              --           (233)

Net income ...........                   --             553            553
                                    --------       --------       --------

   Balance,
   December 31, 1996 .                  (50)         (3,050)        30,252

Issuance of common
stock ................                   --              --            457

Dividends on preferred
stock ................                   --              --           (400)

Net loss .............                   --         (19,360)       (19,360)
                                      --------      --------       --------

   Balance,
   December 31, 1997 .                  (50)        (22,410)        10,949

Issuance of common
stock ................                   --              --            906

Dividends on preferred
stock ................                   --              --           (400)

Net loss .............                   --            (209)          (209)
                                      --------       --------       --------

   Balance,
   December 31, 1998 .             $    (50)        $(22,619)     $ 11,246
                                       ========      ========      ========


                       See notes to financial statements

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                             THE LAMAUR CORPORATION
                            STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                                                                        Years Ended December 31,
                                                                             -----------------------------------------------
                                                                                  1998            1997            1996
<S>                                                                                <C>            <C>              <C>             
Cash Flows From Operating Activities:
Net (loss) income                                                                    $ (209)       $(19,360)          $ 553
     Adjustments to reconcile net (loss) income to net cash                 
     used in operating activities:                                          
        Gain on sale of professional salon brands                                    (5,436)              -               -
        Noncash credits for services                                                      -               -             132
        Issuance of common stock for services                                             -               -              94
        Utilization of DowBrands credits                                                  -          (1,500)         (1,500)
        Loss (gain) on disposal of assets                                                18              41            (214)
        Depreciation and amortization                                                 2,177           1,697           1,365
        Effect of changes in:                                               
            Receivables                                                               6,323           1,980          (5,985)
            Inventories                                                               3,264          (3,824)           (559)
            Prepaid expenses and other assets                                           (58)             39            (177)
            Payables                                                                 (4,936)          7,868             999
            Accrued expenses                                                         (3,018)           (176)           (478)
                                                                             ---------------  --------------  --------------
                                                                            
        Net cash used in operating activities                                        (1,875)        (13,235)         (5,770)
                                                                            
Cash Flows From Investing Activities:                                       
     Additions to property, plant and equipment                                        (642)         (1,236)         (3,110)
     Net proceeds from sale of assets                                                10,166              16             225
                                                                             ---------------  --------------  --------------

        Net cash provided by (used in) investing activities                           9,524          (1,220)         (2,885)
                                                                            
Cash Flows From Financing Activities:                                       
     (Repayments) borrowings under revolving credit agreement, net                  (10,254)          7,837           1,764
     Borrowings of long-term debt                                                     2,875           2,738               -
     Repayments of long-term debt                                                    (6,196)         (1,501)         (1,445)
     Proceeds from sales of common stock, net                                            29             165          18,112
     Payment of preferred dividends                                                       -            (400)            (33)
                                                                             ---------------  --------------  --------------
                                                                            
        Net cash (used in) provided by financing activities                         (13,546)          8,839          18,398
                                                                             ---------------  --------------  --------------
                                                                            
Net (Decrease) Increase in Cash and Cash Equivalents                                 (5,897)         (5,616)          9,743
Cash and Cash Equivalents at Beginning of Period                                      6,465          12,081           2,338
                                                                             ===============  ==============  ==============
Cash and Cash Equivalents at End of Period                                            $ 568         $ 6,465        $ 12,081
                                                                             ===============  ==============  ==============
                                                                            
                                                                            
Supplemental Disclosures of Cash Flow Information:                          
     Cash paid during period for interest                                           $ 2,354         $ 2,315         $ 1,186

Noncash investing and financing activities:                                 
        Capital lease obligations entered into                                         $ 57         $ 1,088           $ 401
        Dividends payable on preferred stock                                            400             200             200
        Exchange of related party note payable for common stock                         877             292               -
        Conversion of convertible subordinated note into stock                            -               -           5,000
        

                       See notes to financial statements
                                                                 
</TABLE>

<PAGE>

                             THE LAMAUR CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


1.    ORGANIZATION AND OPERATIONS

The Company develops,  formulates,  manufactures, and markets personal hair care
products, consisting of shampoos,  conditioners,  hair sprays, and other styling
aids, for both consumer and  professional  hair care markets.  The Company began
operations  in  November  1995,  upon the  acquisition  of  certain  assets  and
liabilities of the Personal Care Division of DowBrands L.P.  ("PCD").  DowBrands
L.P. is a limited  partnership  whose  managing  partner is  DowBrands  Inc.,  a
wholly-owned subsidiary of The Dow Chemical Company (collectively, "DowBrands").
In July 1998,  the  Company  sold its  professional  salon  brands  and  related
inventory to Zotos  International,  Inc., a subsidiary  of Shiseido  Co.,  Ltd.,
Tokyo,  Japan  ("Zotos") for net proceeds of $10.0 million of which $0.2 million
is being held in escrow.  In conjunction  with this sale, the Company recorded a
pre-tax  gain  of  $5.4  million.  Proceeds  were  used  primarily  to pay  down
borrowings under the credit agreement and to pay down extended accounts payable.


2.   MANAGEMENT'S PLANS REGARDING OPERATING LOSSES 
     AND EXTENDED CREDITOR OBLIGATIONS

In 1998, the Company  incurred an operating loss of  approximately  $3.3 million
and negative cash flows from operating activities of approximately $1.9 million.
In addition,  the Company was not in  compliance  with certain  covenants of its
credit  facility at December  31,  1998.  The lender  waived the  covenants  and
amended the  agreement  on March 12,  1999.  The  Company's  ability to continue
operations is dependent on its ability to generate  sufficient cash flow to meet
its  obligations  as they become due, to comply with the terms and conditions of
the amended financing  agreement,  to obtain additional financing or refinancing
as may be  required,  and to reduce  its cost  structure  and  attain  sales and
operating levels to be profitable. Management's plans regarding operating losses
and its plans concerning the above matters are presented below.

In 1998, the Company  implemented  its cost  reduction  program which included a
reduction  in its  workforce  by  approximately  120  employees  and an  overall
reduction in operating  expenses.  The Company also  substantially  discontinued
activity related to advanced  technology  development.  As a result of the above
initiatives, the Company reduced its annual costs by approximately $6.0 million.

The Company's  strategy in 1999 is to focus its limited resources to support the
Willow  Lake  brand  with  advertising  and  consumer  promotion  and to provide
maintenance  promotional  support for the other retail brands.  The Company will
continue to evaluate sales and operating performance and, if necessary, initiate
further cost reductions.

As of December 31, 1998, the Company's  principal sources of liquidity  included
unrestricted cash and cash equivalents of approximately  $0.4 million,  accounts
receivable of approximately  $10.2 million and inventories of approximately $8.0
million.  As discussed in Note 7, the Company  amended its credit  agreement and
related  covenants  on March 12,  1999.  Under the terms of the  amended  credit
agreement,  the Company's term loan of $3.1 million  becomes due on September 1,
1999.  The Company will require  additional  financing to fund the term loan pay
off and to satisfy  the  Company's  projected  working  capital  for 1999 and to
reduce its extended aged payables which at December 31, 1998 were  approximately
$6.0 million.  Management is currently seeking  additional  sources of liquidity
through a new credit  facility and or the sale of its  manufacturing  operations
and related assets. No assurance can be given as to the timing of such financing
or that such financing will be concluded.

<PAGE>


3.    SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.  Significant  accounting  estimates reflected in the Company's
financial statements include the allowances for doubtful accounts, sales returns
and cash discounts,  the inventory valuation reserve,  accrued coupon redemption
reserve,  accrued market development  reserve,  accrued employee  benefits,  and
employee  stock option and stock  purchase  plan pro forma  disclosures.  Actual
results could differ from those estimates.

Revenue  recognition  policy - The Company recognizes revenue when title passes,
normally upon shipment of product.

Cash and Cash  Equivalents  - For purposes of the  statement of cash flows,  the
Company  considers all investments with an original  maturity of three months or
less  on  their  acquisition  date  to  be  cash  equivalents.  Restricted  cash
equivalents  consist of U.S.  Treasuries  which at  December  31, 1997 were $6.2
million.  The U.S.  Treasuries  were  maintained as collateral in support of the
revolving line of credit with Norwest Business Credit (Note 7). The Company also
maintains a collateral  account,  certain  balances of which are applied against
the Company's  revolving  debt after  remaining in the account for one day (Note
7).  Additionally,  the Company  considers  the escrow  account  balance of $0.2
million at December 31, 1998,  established in  conjunction  with the sale of the
professional salon brands to Zotos (Note 1), to be restricted cash.

Accounts Receivable, net includes an allowance for doubtful accounts.

Receivables from DowBrands represent amounts due under a contract  manufacturing
agreement (Note 12).

Inventories are stated at the lower of weighted average cost or market.

Property,  Plant,  and  Equipment  is recorded at cost and is being  depreciated
using the  straight-line  method over the estimated  useful lives of the related
assets which range from 10 to 50 years for buildings and  improvements  and 3 to
20 years for machinery and equipment.  The Company evaluates the  recoverability
of long-lived  assets using discounted cash flows when events and  circumstances
warrant such review. The Company adopted Statement of Position 98-1, "Accounting
for the Costs of Computer  Software  Developed or Obtained for Internal Use," in
1998 which  requires  capitalization  of the costs of  developing  software  for
internal use. This  statement had no material  impact on the Company's  December
31, 1998 financial statements.

Income  Taxes -  Deferred  taxes  reflect  the impact of  temporary  differences
between the amounts of assets and liabilities recognized for financial reporting
purposes  and the  amounts  recognized  for tax  purposes  as well as tax credit
carryforwards  and loss  carryforwards.  These  deferred  taxes are  measured by
applying currently enacted tax rates. A valuation allowance reduces deferred tax
assets as future profits are not yet predictable and utilization of deferred tax
assets is not determinable.

Stock Based  Compensation - The Company  applies the recognition and measurement
principles of Accounting  Principles Board Opinion No. 25, "Accounting for Stock
Issued  to  Employees"  to its  stock  option  and  other  stock-based  employee
compensation  awards.  The  disclosure of the pro forma net income and pro forma
earnings  per share under the fair value method of SFAS 123 may be found in Note
8.

Earnings Per Share - Basic EPS is  calculated  using income  available to common
shareholders divided by the weighted average number of common shares outstanding
during the year.  Diluted EPS is similar to Basic EPS except  that the  weighted
average  number of common shares  outstanding is increased to include the number
of  additional  common shares that would have been  outstanding  if the dilutive
potential common shares,  such as options,  had been issued.  The treasury stock
method is used to calculate  dilutive  shares which  reduces the gross number of
dilutive  shares by the number of shares  purchasable  from the  proceeds of the
options assumed to be exercised. In loss years, diluted EPS equals basic EPS.

<PAGE>

Comprehensive Income - Comprehensive income equals net income.

Fair Value of Financial  Instruments - Generally accepted accounting  principles
require  the  disclosure  of the fair  value of certain  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate fair value. The Company estimated the fair values presented below using
appropriate valuation  methodologies and market information available as of year
end.  Considerable  judgment is required to develop estimates of fair value, and
the estimates  presented are not necessarily  indicative of the amounts that the
Company could realize in a current market exchange.  The use of different market
assumptions  or  estimation  methodologies  could have a material  effect on the
estimated  fair values.  Additionally,  these fair values were estimated at year
end,  and  current  estimates  of fair value may differ  significantly  from the
amounts presented.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

Accounts Receivable,  Accounts Payable and Short-Term  Borrowings - The carrying
amount of these items approximates fair value.

Debt - To estimate the fair value of debt, the Company uses those interest rates
that are  currently  available to it for issuance of debt with similar terms and
remaining maturities.  At December 31, 1998 and 1997, the carrying value of debt
approximated fair value.

Reclassifications  - Certain  prior year amounts have been  reclassified  in the
accompanying   financial   statements   in  order  to  conform   with  the  1998
presentation.   These   reclassifications  have  no  effect  on  net  income  or
stockholders' equity as previously reported.


4.    ACCOUNTS RECEIVABLE

Accounts Receivable include the following:
<TABLE>
<CAPTION>


                                                                 December 31,                                            
                                                         ---------------------------------
                                                              1998              1997
                                                         ---------------   ---------------
                                                                  (In thousands)
<S>                                                         <C>                 <C>                                         
Accounts receivable trade                                      $ 10,571          $ 16,669

Non-trade accounts receivable                                        52               109

Allowance for doubtful accounts and returns                        (379)             (835)
                                                         ---------------   ---------------
                                                     
    Total                                                      $ 10,244          $ 15,943
                                                         ===============   ===============
                                                     

</TABLE>

Write-offs of accounts  receivable were $128,000,  $21,000,  and $55,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
<PAGE>


5.    INVENTORIES

Inventories include the following:
<TABLE>
<CAPTION>
                                                                       December 31,
                                                            ------------------------------------
                                                                  1998               1997
                                                            -----------------  -----------------
                                                                       (In thousands)
<S>                                                         <C>                      <C>                                     
Finished goods                                                       $ 3,263            $ 9,233

Work in process                                                          164                 93

Raw materials                                                          4,542              6,197
                                                            -----------------  -----------------
                                                        
    Total                                                            $ 7,969           $ 15,523
                                                            =================  =================
</TABLE>


6.    PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>

                                                                       December 31,
                                                            ------------------------------------
                                                                  1998               1997
                                                            -----------------  -----------------
                                                                       (In thousands)
<S>                                                              <C>                 <C>                              
Land and land improvements                                           $ 1,662            $ 1,662
                                                        
Buildings and improvements                                             5,318              5,290
                                                        
Machinery and equipment                                               15,172             14,822
                                                        
Construction in progress                                                 311                398
                                                            -----------------  -----------------
                                                        
    Total                                                             22,463             22,172
                                                        
Less accumulated depreciation                                         (5,071)            (3,041)
                                                            -----------------  -----------------
                                                        
    Total                                                           $ 17,392           $ 19,131
                                                            =================  =================

</TABLE>

<PAGE>

7.       LONG-TERM DEBT

Long-term debt includes the following:

<TABLE>
<CAPTION>
                                                                       December 31,
                                                            ------------------------------------
                                                                  1998               1997
                                                            -----------------  -----------------
                                                                       (In thousands)
<S>                                                              <C>                 <C>                                         
Revolving loan                                                       $ 7,397           $ 17,651
                                                        
Term loan                                                              3,123              6,222
                                                        
Obligations under capital leases                                       1,120              1,285
                                                            -----------------  -----------------
                                                        
    Total                                                             11,640             25,158
                                                        
Less current portion                                                  (3,350)            (1,612)
                                                            -----------------  -----------------
                                                        
Long-term portion                                                    $ 8,290           $ 23,546
                                                            =================  =================
</TABLE>

In October 1998,  the Company  entered into the Fourth  Amendment to the Amended
and Restated  Credit and Security  Agreement with Norwest  Business  Credit (the
"Lender").  This  amendment  provides  for a reduction in the  revolving  credit
facility  from $20.0  million to $11.5  million.  The Company  incurred a fee of
$75,000 in conjunction with this loan amendment.

Under the terms of the amended revolving line of credit,  the Company may borrow
up to $11.5 million or a lesser amount as determined by the borrowing  base. The
borrowing base is defined in the loan agreement and is comprised of a percentage
of eligible receivables,  inventory, and equipment. The revolving line of credit
is payable in full by November 15, 2000. The interest rate on the revolving loan
is based on the Lender's  base rate (7.75% at December 31, 1998) plus 2.50%.  At
December 31, 1998 and 1997, the interest rates on the revolving loan were 10.25%
and 12.0%, respectively.

Under the terms of the term loan, the Company may borrow up to $3.1 million. The
term loan is due on demand  and is  payable in full by  September  1, 1999.  The
interest  rate on the term loan is based on Lender's  base rate plus  2.75%.  At
December 31, 1998 and 1997,  the annual  interest  rates were 10.50% and 12.25%,
respectively.

Both credit  facilities  are secured by virtually all the assets of the Company.
Additionally,  the credit facilities prohibit the payment of dividends, restrict
the Company's  ability to incur additional  indebtedness and require the Company
to comply with certain financial covenants regarding profitability,  minimum net
worth and capital expenditures.

The Company was out of  compliance  with the  financial  loan  covenants  of its
credit  agreement at December  31, 1998.  The Company has received a waiver from
Norwest in regard to these covenants. In conjunction with receiving this waiver,
the Company  renegotiated the terms and covenants of the loan agreement with the
Lender on March 12, 1999 in the Fifth  Amendment  to the  Amended  and  Restated
Credit and Security  Agreement.  This amendment  provides for increased  advance
rates on eligible  receivables and inventory of three percentage points and five
percentage points, respectively. As of December 31, 1998 the Company's available
borrowing  capacity was $1.3 million.  Based on the amended loan agreement,  the
Company's  available  borrowing  capacity  would  have been  approximately  $3.4
million  at  December  31,  1998.  The  Company  incurred a fee of  $100,000  in
conjunction with this amendment, $50,000 of which is not payable until August 1,
1999.

The  obligations  under capital  leases are at fixed interest rates ranging from
4.9% to 20.2% and are  collateralized  by  equipment  and a letter of credit for
$319,000.  Machinery and equipment  under capital leases were $1,152,000 (net of
$368,000  of  accumulated  depreciation)  and  $1,290,000  (net of  $172,000  of
accumulated  depreciation)  as of  December  31,  1998 and  1997,  respectively.
Minimum  payments  on  noncancellable   operating  lease  obligations  are  for
buildings,  autos,  and  office  equipment.  Rent  expense  for the years  ended
December  31,  1998,  1997 and 1996 was  approximately  $219,000,  $380,000  and
$150,000, respectively.
<PAGE>

Future  minimum  principal  payments  on  long-term  debt,  capital  lease,  and
noncancellable operating lease obligations are as follows:
<TABLE>
<CAPTION>
                                                       Principal Payments on
                                                        Long-Term Debt and                  Minimum Payments on
                 Year Ending                               Capital Lease                     Operating Lease
                                                            Obligations                         Obligations

                                               ----
-----------------------------------------------    --------------------------------------------------------------
                                                                           (In thousands)
<S>                                                              <C>                                <C>
      1999                                                        $ 3,350                            $ 68
      2000                                                          7,627                              22
      2001                                                            210                               6
      2002                                                            153                               -
      2003                                                            115                               -
      2004 and thereafter                                             185                               -
                                                           ---------------                 ---------------
                                                                                            
      Total minimum principal payments                           $ 11,640                            $ 96
                                                           ===============                 ===============
</TABLE>


8.    STOCKHOLDERS' EQUITY

Effective May 22, 1996,  the Company  completed its initial  public  offering of
2,600,000  shares of its common  stock.  Net proceeds to the Company  aggregated
approximately  $18.1  million.  As of the closing date of the  offering,  a $5.0
million  convertible note with DowBrands converted into 763,500 shares of Series
B preferred stock (see below).

Preferred Stock - The Company has authorized  4,000,000 shares of $.01 par value
preferred  stock,  the terms of which are established at the time of issuance by
the Board of Directors.  In connection with the acquisition described in Note 1,
the Company  issued one million shares of Series A convertible  preferred  stock
("Series A Preferred").  The Series A Preferred has a liquidation  preference of
$10.00 per share or $10.0  million in the  aggregate and has dividend and voting
rights equal to common stock on an  as-converted  basis.  Each share of Series A
Preferred is  convertible  into .660 shares of common stock at the option of the
holder; however, if the trading price of the common equals or exceeds $21.21 per
share for a 30-day trading period, the Company may force conversion.

Also in  connection  with the  acquisition,  the  Company's  Board of  Directors
authorized  763,500  shares of Series B convertible  preferred  stock ("Series B
Preferred")  which was issued in May 1996,  upon  conversion  of a $5.0  million
DowBrands  Convertible  Note.  Series  B  Preferred  bears  an  8.0%  per  annum
cumulative dividend,  payable quarterly,  has a liquidation  preference of $6.55
per share or $5.0 million in the aggregate, has dividend and voting rights equal
to common stock on an as-converted basis, and is redeemable at face value at the
option of the  Company in $1.0  million  increments  at any time.  Each share of
Series B Preferred is convertible into .660 shares of common stock at the option
of the holder;  however,  if the trading  price of the common  equals or exceeds
$21.21 per share for a 30-day trading period,  the Company may force conversion.
At  December  31, 1998 and 1997,  the  Company  was in arrears on its  quarterly
dividend  payments  by  $600,000  and  $200,000,  respectively,  on the Series B
Preferred Stock.

Fixed Stock Option Plans - The Company  maintains  four fixed stock option plans
for employees,  consultants,  directors, and advisory board members. These plans
are the 1997 Stock Plan, 1996 Stock Incentive Plan, the 1996 Nonstatutory  Stock
Option Plan, and the Stock Option Plan for  Non-Employee  Directors and Advisory
Board Members. Stock options under these plans are issued at an option price not
less than market  value on date of grant.  Total shares  authorized  under these
four plans are 972,852, 448,293, 16,155 and 113,700, respectively.  Total shares
available for grant at December 31, 1998 under the 1997 Stock Plan and the Stock
Option Plan for  Non-Employee  Directors and Advisory Board Members were 384,928
and 64,200,  respectively.  No additional  shares were available for grant under
the 1996  Stock  Incentive  Plan or the 1996  Nonstatutory  Stock  Option  Plan.
Options granted to directors and advisory board members  generally vest one year
from  the  date of  grant,  and  options  currently  granted  to  employees  and
consultants  generally vest annually over three years.  The 1996 Stock Incentive
Plan also provides for the issuance of stock appreciation  rights and restricted
stock, none of which have been granted as of December 31, 1998.
<PAGE>

A summary of changes in common stock options  during 1996,  1997, and 1998 is as
follows:
<TABLE>
<CAPTION>
                                                                                Weighted                                            
                                                             Shares               Price
                                                         ---------------   --------------------
<S>                                                          <C>                     <C>                              
Outstanding at December 31, 1995                                735,900                  $2.84
Granted (average fair value of $3.17)                         1,036,050                   4.61
Canceled                                                       (416,650)                  5.77
Exercised                                                       (42,900)                  1.64
                                                         ---------------
                                                     
Outstanding at December 31, 1996                              1,312,400                   3.35
Granted (average fair value of $1.55)                           656,950                   2.37
Canceled                                                       (673,799)                  3.95
Exercised                                                       (56,100)                  2.76
                                                         ---------------

Outstanding at December 31, 1997                              1,239,451                   2.53
Granted (average fair value of $2.41)                            76,300                   2.41
Canceled                                                       (213,879)                  3.27
                                                         ---------------

Outstanding at December 31, 1998                              1,101,872                  $2.51
                                                         ===============

</TABLE>

During 1998, 16,000 options were cancelled at exercise prices ranging from $3.63
to $4.25 per share and reissued at $2.25 per share. During 1997, 587,000 options
were  canceled  at  exercise  prices  ranging  from $3.03 to $4.25 per share and
reissued at $2.25 per share.  During  1996,  340,350  options  were  canceled at
exercise  prices ranging from $6.06 to $8.00 per share and reissued at $4.25 per
share. The reissued shares are included in the above table.  Options exercisable
at  December 31,  1998 and 1997,  were  874,432 and 751,599,  respectively.  The
following table summarizes  information about the four equity incentive plans at
December 31, 1998:
<TABLE>
<CAPTION>

                            Options Outstanding                                    Options Exercisable
--------------------------------------------------------------------------------------------------------------

                                        Weighted-
                                         Average           Weighted-                            Weighted-
     Range of                           Remaining           Average                              Average
     Exercise                          Contractual         Exercise                              Exercise
      Prices            Number       Life (in years)         Price               Number           Price
-------------------------------------------------------------------------   ----------------------------------
<S>                       <C>           <C>                <C>                  <C>            <C>       
  $ 0.16 - 0.38               1,550        9.80              $0.22                         -
     1.52 - 1.94            308,932        6.40              1.52                    307,032      $1.52
     2.16 - 2.88            510,966        6.92              2.31                    359,359       2.28
     3.00 - 4.38            280,424        7.34              3.99                    208,041       3.93
                   -----------------                                        -----------------

                          1,101,872                                                  874,432
                   =================                                        =================
</TABLE>
<PAGE>
The Company  applies APB No. 25,  "Accounting for Stock Issued to Employees" and
related interpretations in accounting for its fixed stock option plans and stock
purchase plan.  Accordingly,  no compensation cost has been recognized for these
stock-based   compensation  plans.  Had  compensation  cost  for  the  Company's
stock-based  compensation  plans been determined  based on the fair value at the
grant dates for awards under those plans consistent with the method of SFAS 123,
"Accounting for Stock-Based  Compensation,"  the Company's net income (loss) and
net income  (loss) per share  would have been  reduced to the pro forma  amounts
indicated below:

<TABLE>
<CAPTION>
                                                 1998                 1997                1996
                                           -----------------    -----------------   -----------------
                                                           (In thousands, except per
                                                                share amounts)
<S>                                          <C>                 <C>                 <C>
Net (loss) income:
      As reported                                    $ (209)           $ (19,360)              $ 553
                                           =================    =================   =================
      Pro forma                                    $ (1,170)           $ (20,413)             $ (142)
                                           =================    =================   =================
                                           
Basic (loss) income per common share:
      As reported                                   $ (0.10)             $ (3.48)             $ 0.07
                                           =================    =================   =================
      Pro forma                                     $ (0.27)             $ (3.66)            $ (0.08)
                                           =================    =================   =================
                                           
                                           
Diluted (loss) income per common share:
      As reported                                   $ (0.10)             $ (3.48)             $ 0.06
                                           =================    =================   =================
      Pro forma                                     $ (0.27)             $ (3.66)            $ (0.08)
                                           =================    =================   =================
</TABLE>

In  determining  the above pro forma amounts under SFAS 123, fair values for the
fixed  stock  option  plans  are  estimated  on the  date  of  grant  using  the
Black-Scholes  pricing model,  with the following  weighted-average  assumptions
used for grants in 1998,  1997 and 1996,  respectively:  expected  volatility of
333%, 77%, and 65%;  risk-free  interest rates of 4.5%, 5.9% and 6.4%;  expected
lives  of 6.5  years  for  all  three  years;  and no  expected  dividends.  The
assumptions and proforma effects underlying the Employee Stock Purchase Plan are
immaterial  to the  financial  statements  at December 31, 1998.  The effects of
applying  SFAS 123 in this pro forma  disclosure  are not  indicative  of future
amounts.

Employee Stock  Purchase Plan - In 1997,  the Company  adopted the 1997 Employee
Stock Purchase  Plan.  Under the terms of the plan, the Company is authorized to
issue up to 400,000  shares of common stock to its full-time  employees,  nearly
all of whom are eligible to participate.  Employees can choose to have up to 20%
of their annual base earnings  withheld to purchase the Company's  common stock.
The  purchase  price of the stock is 85% of the fair market  value of a share of
the  Company's  common stock on the  enrollment  date or on the  exercise  date,
whichever is lower.  Approximately 8% of eligible employees  participated in the
Plan at  December  31,  1998.  The  Company  sold  72,636 and  34,833  shares to
employees in 1998 and 1997, respectively.

Employee Stock Plan - In November  1995, the Company  adopted the Employee Stock
Plan for the purpose of issuing up to an  aggregate  of 16,500  shares to former
DowBrands employees at no cost to the employees. As of December 31, 1996, 15,575
shares were issued  pursuant  to this plan and had an  immaterial  impact on the
Company's financial statements. No other grants have been issued under the plan.

Noncash Credits - Certain of the Company's  employees have received a portion of
their salaries in the form of noncash credits which may be applied to 80% of the
exercise price of options  granted to them.  Such credits,  $132,000 at December
31, 1996,  have been recorded as expense and additional  paid-in  capital as the
related salaries were earned.  The Company ceased issuing any additional noncash
credits at December 31, 1996.
<PAGE>

Stock  Subscription  Receivable - In 1995,  the Company  issued 33,000 shares of
common stock in exchange for a $50,000 note receivable.  The note bears interest
at 6% and is due  July  2001 or 30 days  after  the sale of such  common  stock,
whichever is earlier.

Warrants - In November  1995, the Company  borrowed  $225,000 from employees and
stockholders.  The borrowings were repaid in February 1996 with interest at 12%.
In addition,  the lenders received  warrants to purchase 74,250 shares of common
stock at $3.03 per share.  The  warrants  became  exercisable  in May,  1996 and
expired in November, 1998.

9.       EARNINGS PER SHARE
<TABLE>
<CAPTION>
                                                                                      1998            1997            1996
                                                                                 --------------- --------------- ---------------
                                                                                     (In thousands, except per share data)
<S>                                                                                  <C>            <C>                 <C>
Net (Loss) Income                                                                        $ (209)      $ (19,360)          $ 553
Less: Dividends on Series B Preferred Stock                                                (400)           (400)           (233)
                                                                                 --------------- --------------- ---------------
                                                                                
Net (Loss) Income Available to Common Shareholders                                       $ (609)      $ (19,760)          $ 320
                                                                                 =============== =============== ===============
                                                                                

Weighted Average Common Shares Outstanding - Basic                                        5,854           5,685           4,557
                                                                                 --------------- --------------- ---------------
                                                                                
Basic (Loss) Income per Common Share                                                    $ (0.10)        $ (3.48)         $ 0.07
                                                                                 =============== =============== ===============
                                                                                
Weighted Average Common Shares Outstanding                                                5,854           5,685           4,557
    Dilutive Shares Issuable in Connection with:                                                                  
      Conversion of Series A Preferred Stock                                                  -               -             660
      Stock Plans                                                                             -               -             998
    Less: Shares purchasable with proceeds from stock plans                                   -               -            (606)
                                                                                 --------------- --------------- ---------------

Weighted Average Common Shares Outstanding - Diluted                                      5,854           5,685           5,609
                                                                                 --------------- --------------- ---------------

Diluted (Loss) Income per Common Share                                                  $ (0.10)        $ (3.48)         $ 0.06
                                                                                 =============== =============== ===============
</TABLE>

Options to purchase  706,500  shares of common stock at prices of $4.25 to $4.75
per share were outstanding as of December 31, 1996, but were not included in the
computation  of diluted  earnings per share because the options'  exercise price
was greater than the average  market price of the common  shares.  These options
will expire in 2006.


10.      EMPLOYEE BENEFIT PLANS

The Company  established  an Employee  Savings Plan (401k)  during 1996 covering
substantially  all  employees.  Company  contributions  to this  plan are at the
discretion  of the Board of  Directors,  subject  to  certain  limitations.  The
Company made no  contributions  to the plan during the years ending December 31,
1998, 1997, or 1996.

The Company does not provide other post-retirement benefits to its employees.

<PAGE>


11.      INCOME TAXES

The  (benefit)  provision  for income taxes has been offset by the change in the
valuation  allowance for the years ended  December 31, 1998,  1997, and 1996. As
future profits are not yet  predictable,  the  utilization of net operating loss
carryforwards is not determinable.

A reconciliation  of the provision for income taxes to the amount computed using
U.S. federal statutory rates is as follows:

<TABLE>
<CAPTION>
                                                                              1998            1997            1996                
                                                                         --------------  --------------  --------------
                                                                                          (In thousands)
<S>                                                                             <C>          <C>              <C>                 
(Benefit) provision for income at U.S. federal statutory rates (34%)             $ (71)       $ (6,582)          $ 188
Other items                                                                        176             488              63
Change in valuation allowance                                                     (105)          6,094            (251)
                                                                         --------------  --------------  --------------
                                                                        
Provision for income tax                                                           $ -             $ -             $ -
                                                                         ==============  ==============  ==============
                                                                        

                                                                             
</TABLE>
The  significant  components  of deferred  income taxes as of December 31 are as
follows:

<TABLE>
<CAPTION>

                                                                                 1998             1997
                                                                             --------------   --------------
                                                                                   (In thousands)
<S>                                                                             <C>                 <C>
Tax effects of:
    Current deferred tax assets and liabilities:
       Accounts Receivable, principally due to reserves                              $ 144            $ 317
       Inventories, partially due to additional costs                       
         capitalized for tax purposes                                                  518              482
       Employee benefits                                                               300              389
       Other (includes contingencies, other assets and                      
         other accruals)                                                               210              (25)
                                                                             --------------   --------------
                                                                                     1,172            1,163
    Long-term deferred tax assets and liabilities:                          
       License fee                                                                       -              285
       Tax credits                                                                      82              110
       Federal and state operating loss                                              8,155            7,534
       Property, plant and equipment                                                (1,644)          (1,222)
                                                                             --------------   --------------
                                                                                     6,593            6,707
                                                                             --------------   --------------
    Gross deferred tax assets                                                        7,765            7,870
    Valuation allowance                                                             (7,765)          (7,870)
                                                                             --------------   --------------
                                                                            
Net deferred taxes                                                                     $ -              $ -
                                                                             ==============   ==============
                                                                            

</TABLE>

Due to the Company's net operating losses,  the Company has not paid significant
income taxes in 1998,  1997, or 1996. The Company has accumulated  approximately
$24.0  million of  federal  and state  operating  loss  carryforwards  (NOLs) at
December 31,  1998.  These NOLs expire  periodically  between the years 2009 and
2013.
<PAGE>


12.   RELATED PARTY TRANSACTIONS

Promissory Note - In May 1993, the Company  licensed its proprietary  technology
from Intertec Ltd., a limited  partnership  controlled by the Company's Chairman
of the Board, pursuant to an exclusive 30-year,  nonassignable license agreement
(the "License Agreement").  According to the terms of the License Agreement, the
Company is  required to pay a $1.0  million  license  fee,  plus  royalties,  to
Intertec Holdings,  L.P. as agent for Intertec Ltd. Due to uncertainty regarding
recoverability  from future operations,  the license fee was expensed in 1993. A
note for the license  fee  ("Intertec  Note") was  payable in four equal  annual
installments  of  $250,000.  The first  installment  was made in May,  1997.  At
December  31,  1997,  related  party  obligations   consisted  of  the  $750,000
promissory note for license rights, of which $250,000 was classified as current.
The balance of the note plus accrued  interest was satisfied in March 1998.  The
Company will pay a royalty to Intertec  Ltd.  equal to (i) 1.0% of the Company's
proceeds from any direct sales made by the Company of products,  instruments  or
components using, or derived from, the technology, and (ii) 1.0% of the "revenue
base" of the Company's sublicensees. The "revenue base" is the proceeds received
by the  sublicensees  for their sales of  products  using the  technology.  This
royalty declines in steps as the revenue base increases, ultimately declining to
0.4% when  cumulative  sales from all products  using the  Company's  technology
reach $10.0 billion. No royalty fees have been earned or paid to date.

Stock  Purchase  Agreement - In March 1996,  the Company and Intertec  Holdings,
L.P. entered into a stock purchase  agreement  whereby Intertec  Holdings,  L.P.
agreed to purchase from the Company,  and the Company agreed to sell to Intertec
Holdings,  L.P.  a total of 146,107  shares of common  stock at $8.00 per share.
Intertec  Holdings,  L.P.  was  obligated,  subject  to there  being no event of
default under the Company's  loan  agreements and certain other  conditions,  to
purchase  and pay for the shares in four  equal  annual  installments,  with the
option of accelerating  one or more purchases on 30 days' notice to the Company.
In May 1997,  Intertec  acquired the first  installment  of 36,526 shares of the
Company's  common  stock  based on $8.00  per  share.  In March  1998,  Intertec
Holdings,  L.P. elected to acqiure the remaining 109,581 shares of the Company's
common stock at $8.00 per share thereby  fulfilling  its obligation to acquire a
total of 146,107 shares.

Leases - The Company  leases its offices and certain  office  equipment  in Mill
Valley,  California,  from Innovative Capital Management,  Inc., (ICM) a related
party,  under a  month-to-month  lease  with  monthly  rentals  of  $5,779.  The
Company's  Chairman of the Board and Chief Executive  Officer and his family own
100% of the outstanding stock of ICM. Rental expense was $86,196,  $121,919, and
$99,975 for the years ended 1998, 1997 and 1996, respectively.

DowBrands  Purchase  Credits - In connection with the  acquisition  described in
Note 1,  DowBrands  agreed to  purchase  100% of its  requirements  for  certain
DowBrands products from the Company for a period of two years beginning November
16, 1995. In connection with this  requirements  agreement,  DowBrands agreed to
accept,  as part of the  purchase  price,  $3  million  in credits to be applied
against future purchases. These credits were issued to DowBrands each quarter in
the amount of $375,000 until the credits were fully used in 1997.  Revenues from
this  arrangement  totaled $0, $16.4  million,  and $22.2  million for the years
ended December 31, 1998, 1997 and 1996, respectively. Services were priced based
on direct material and labor costs incurred plus an agreed upon profit margin.


13.   LEGAL PROCEEDINGS

On  November 2, 1998,  a class  action and  derivative  lawsuit was filed by the
stockholders  (on behalf of themselves and the Company) in the Delaware Court of
Chancery  in and for New Castle  County  alleging  that the  defendant  Board of
Directors  breached their fiduciary duties to the Company and failed to disclose
certain  information  in the Company's  1998 Proxy  Statement.  Plaintiffs  seek
injunctive  relief,  damages  and a  recision  of all  actions  approved  at the
November 2, 1998 Annual  Meeting.  In addition,  the  plaintiffs are seeking the
appointment  of a receiver  for the Company and  changes in the  disclosures  to
correct what they allege are errors and costs and  attorney's  fees. The Company
believes  the  lawsuit is without  merit and will  defend the action in the best
interest  of the  stockholders.  No  discovery  has been  commenced  against the
Company,  only  minimal  discovery  has been  conducted  by  plaintiffs,  and no
significant dates have been set in the litigation.

The  Company  is a party to other  legal  proceedings  in the  normal  course of
business.  It is the opinion of management  that any losses in  connection  with
these  matters  will not have a material  effect on its  financial  position  or
operating results.
<PAGE>


14.   COMMITMENTS AND CONTINGENCIES

The  Company  has  entered  into  various  purchase  and sales  commitments  and
obligations in the ordinary course of business which management does not believe
will have a material  adverse  effect on its  financial  position  or results of
operations.

15.      SEGMENT INFORMATION

The Company develops,  formulates,  manufactures, and markets personal hair care
products for the consumer  market and,  until July 1998, the  professional  hair
care market.  In addition,  the Company develops,  formulates,  and manufactures
hair  care,  personal  care,  and  household  products  for third  parties.  The
Company's reportable segments have separate sales departments,  and although the
products are similar, they are sold and marketed differently.

The Company adopted  Statement of Financial  Accounting  Standards No. 131 (SFAS
131),  "Disclosures  about Segments of an Enterprise  and Related  Information,"
during  1998.  Operating  segments are defined by SFAS 131 as  components  of an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision maker or decision  making
group in deciding  how to  allocate  resources  in  assessing  performance  (the
"management  approach").   The  Company's  chief  operating  decision-maker  who
determines  the  allocation  of resources  and assesses the  performance  of the
operating segments is the chief executive officer of the operating division.

The accounting  policies of the segments are the same as those of the Company as
described in Note 3. The Company's  operating segments include the Retail Group,
Salon Group, and the Custom  Manufacturing Group. As the Retail and Salon Groups
have  similar  economic  characteristics,  they  have been  aggregated  into one
reportable  segment  called the Retail and Salon  Group.  The Company  evaluates
performance based on contribution before fixed expenses.

The  Retail  and Salon  Group  sells  hair  care  products  including  shampoos,
conditioners,   hair  sprays,   and  other  styling  aids.  These  products  are
distributed to consumer retail outlets and until July 1998,  professional  salon
and  specialty  shops.  Products  sold by the  Retail  and Salon  Group  require
substantial marketing support to maintain their sales.

The Custom Manufacturing Group develops, formulates, and manufactures hair care,
personal care, and household  products for third parties.  This group is service
oriented and no significant marketing is required to support its sales.

The Company does not allocate fixed  expenses by segment for internal  reporting
or decision making purposes and therefore has not disclosed  operating profit by
segment.  The majority of the Company's  fixed  expenses are shared  expenses of
both  reporting   segments  and  consist   principally  of  administration   and
manufacturing  overhead.  The  Company's  products  are  manufactured  on common
production  lines and  therefore  the Company  does not analyze  fixed assets or
capital expenditures by segment.

<PAGE>

Following is the financial information related to the Company's segments:

<TABLE>
<CAPTION>
                                                         1998               1997               1996
                                                    ----------------   ----------------   ----------------
                                                                        (In thousands)
<S>                                                       <C>              <C>                 <C>                 
Net sales
     Retail and Salon Group                                $ 56,216           $ 93,098           $ 86,266
     Custom Manufacturing Group                              17,827             25,377             30,817
                                                    ----------------   ----------------   ----------------
                                                    
        Total net sales                                      74,043            118,475            117,083
                                                    
Profit before fixed expenses
     Retail and Salon Group                                  13,342              4,842             19,365
     Custom Manufacturing Group                               4,634              5,012              6,104
                                                    ----------------   ----------------   ----------------
                                                    
        Total profit before fixed expenses                   17,976              9,854             25,469
                                                    
Fixed expenses                                               21,238             27,380             24,242
Operating (loss) income                                      (3,262)           (17,526)             1,227
Interest expense                                              1,951              2,236              1,386
Other expense (income)                                          432               (402)              (712)
Gain on sale of professional salon brands                     5,436                  -                  -
                                                    ----------------   ----------------   ----------------

Net (loss) income                                            $ (209)         $ (19,360)             $ 553
                                                    ================   ================   ================

                                                            
</TABLE>

The  Company  sells  the  majority  of its  products  to large  U.S.  retailers.
Excluding  sales to  DowBrands,  sales to the  Company's  largest  customer were
$15.7, $18.4, and $19.1 million in 1998, 1997, and 1996, respectively.  No other
customer  accounted for more than 10% of total net sales in 1998, 1997, or 1996.
The Company performs  ongoing credit  evaluations of its customers and generally
does not require collateral. The Company maintains reserves for potential credit
losses, which have been insignificant.
<PAGE>

Exhibit 10.19
                    FOURTH AMENDMENT TO AMENDED AND RESTATED
                          CREDIT AND SECURITY AGREEMENT

This Amendment,  dated as of October 19, 1998, is made by and between THE LAMAUR
CORPORATION,  a Delaware  corporation  (the  "Borrower"),  and NORWEST  BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender").

                                    Recitals

The Borrower and the Lender have entered into an Amended and Restated Credit and
Security  Agreement dated as of May 16, 1997, as amended by a First Amendment to
Amended and Restated Credit and Security  Agreement dated as of August 13, 1997,
a Second  Amendment to Amended and Restated Credit and Security  Agreement dated
as of November 13, 1997,  and a Third  Amendment to Amended and Restated  Credit
and Security  Agreement and Waiver of Defaults dated as of March 31, 1998 (as so
amended, the "Credit Agreement").  Capitalized terms used in these recitals have
the meanings given to them in the Credit Agreement unless otherwise specified.

The  Borrower  has  requested  that  certain  amendments  be made to the  Credit
Agreement,  which  the  Lender  is  willing  to make  pursuant  to the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

1. Defined Terms.  Capitalized terms used in this Amendment which are defined in
the Credit  Agreement  shall have the same meanings as defined  therein,  unless
otherwise  defined herein.  In addition,  Section 1.1 of the Credit Agreement is
amended by adding or amending, as the case may be, the following definitions:

"'Borrowing  Base' means, at any time and subject to change from time to time at
the Lender's sole discretion, the lesser of:

(a) the Commitment, or

(b) the sum of

(i) the lesser of (A) 75% of Eligible Accounts, or (B) $10,000,000; plus

(ii)  the  lesser  of (A)  50% of  Eligible  Finished  Goods  Inventory,  or (B)
$4,000,000." "'Commitment' means $11,500,000."
<PAGE>

"'Fourth  Amendment  means that certain Fourth Amendment to Amended and Restated
Credit and Security Agreement, dated as of October 19,  1998, by and between the
Borrower and Lender."

"'Fourth  Amendment  Effective  Date'  means  the date on which all of the items
listed in paragraph 9 of the Fourth Amendment are satisfied in full."

"'Note'  means  collectively,  the Revolving  Note A, the Revolving  Real Estate
Note, and the Real Estate Note."

"'Original Real Estate Loan' means the Real Estate Loan made pursuant to Section
2.3 of the Credit  Agreement  before such  Section  was amended  pursuant to the
Fourth Amendment."

"'Real  Estate Note' means the  promissory  note of the Borrower  payable to the
order of the Lender in the amount of $3,123,333.43, in substantially the form of
Exhibit C to the  Fourth  Amendment  (as such  promissory  note may be  amended,
extended  or  otherwise  modified  from time to time)  and also  means all other
promissory  notes  accepted  from time to time in  substitution  therefor  or in
renewal thereof."

"'Revolving  Note A' means the  promissory  note of the Borrower  payable to the
order of the Lender in the amount of $9,375,000,  in  substantially  the form of
Exhibit A to the  Fourth  Amendment  (as such  promissory  note may be  amended,
extended  or  otherwise  modified  from time to time)  and also  means all other
promissory  notes  accepted  from time to time in  substitution  therefor  or in
renewal thereof."

"'Revolving  Notes' means  collectively,  the Revolving Note A and the Revolving
Real Estate Note."

"'Revolving  Real Estate Note' means the promissory note of the Borrower payable
to the order of the Lender in the amount of  $2,125,000,  in  substantially  the
form of  Exhibit  B to the  Fourth  Amendment  (as such  promissory  note may be
amended,  extended or otherwise  modified  from time to time) and also means all
other promissory notes accepted from time to time in substitution therefor or in
renewal thereof."

"'Second Amendment to Mortgage' means the Second Amendment to Mortgage, Security
Agreement and Fixture  Financing  Statement  and  Assignment of Leases and Rents
dated as of October 19, 1998 by and between the Lender and the Borrower."
<PAGE>
"'Term  Loan  Floating  Rate'  means an annual rate equal to the sum of the Base
Rate plus two and  three-quarters  percent (2.75%) which Term Loan Floating Rate
shall change when and as the Base Rate Changes."

"'Term Loan Termination Date' means April 16, 1999."

2. Real Estate Loan.  Section 2.3 of the Credit  Agreement is hereby  amended by
replacing it with the following:

"Section 2.3 Real Estate Loan. As of the Fourth  Amendment  Effective  Date, the
outstanding balance of the Original Real Estate Loan is $248,333.43.  The Lender
may, in its sole  discretion,  make an  additional  real estate term loan in the
original   principal  amount  of  $2,875,000,   which  is   $3,123,333,43   less
$248,333.43.  The real estate term loan described in the  immediately  preceding
sentence, together with the outstanding balance of the Original Real Estate Loan
as of the Fourth  Amendment  Effective  Date is  referred to herein as the "Real
Estate  Loan."  The Real  Estate  Loan shall be  secured  by the  Collateral  as
provided  in  Article  III  hereof  and by the Real  Estate as  provided  in the
Mortgage. Upon fulfillment of the applicable conditions set forth in paragraph 9
of the Fourth  Amendment,  the Lender shall  disburse loan proceeds by crediting
the same to the Borrower's  demand deposit  account  specified in Section 2.1(b)
unless the Lender and the Borrower  shall agree in writing to another  manner of
disbursement."

3. Notes.  Sections 2.4(a) and 2.4(c) of the Credit Agreement are hereby amended
by replacing them with the following:

"(a) The  Borrower's  obligation  to pay the  Advances  made by the Lender under
Section 2.1, to the extent the  outstanding  principal  balance  thereof is less
than or equal to  $2,125,000,  shall be evidenced by the  Revolving  Real Estate
Note and shall be secured by the  Collateral,  as provided in Article III hereof
and by the Real Estate as provided in the Mortgage. The Borrower's obligation to
pay the  Advances  made by the  Lender  under  Section  2.1,  to the  extent the
outstanding  principal  balance  thereof is  greater  than  $2,125,000  shall be
evidenced by Revolving Note A and shall be secured by the Collateral as provided
in  Article  III.  The  principal  of the  Revolving  Notes  shall be payable as
provided  herein and on the earlier of the  Termination  Date or acceleration by
the Lender  pursuant to Section 8.2 hereof,  and shall bear interest as provided
herein."

(c) The  Borrowers  obligation to pay the Real Estate Loan shall be evidenced by
and  repayable  with  interest  in  accordance  with the Real Estate  Note.  The
principal  of the Real  Estate  Note shall be payable on demand or, if demand is
not  sooner  made,  on  the  earlier  of  the  Term  Loan  Termination  Date  or
acceleration by the Lender pursuant to Section 8.2 hereof.  The Real Estate Note
shall bear interest as provided herein."

4. Interest.  The final  sentence of Section  2.5(c) of the Credit  Agreement is
amended to read as follows:

"Interest  accruing on the Principal balance of the Real Estate Loan outstanding
from time to time  shall be  payable  on the first day of each  month and on the
Term Loan Termination Date or earlier demand therefore or prepayment in full."

5. Revolving Notes.  Except as explicitly  amended by the Fourth Amendment,  all
references  in the Credit  Agreement  to the  Revolving  Note shall be deemed to
refer to the Revolving Notes.

6. No Other Changes.  Except as explicitly amended by the Fourth Amendment,  all
of the terms and conditions of the Credit  Agreement  shall remain in full force
and effect and shall apply to any Advance or Letter of Credit thereunder.

7.  Restructuring Fee. The Borrower shall pay the Lender as of the date hereof a
fully earned,  non-refundable  fee in the amount of $75,000 in  consideration of
the Lender's execution of this Amendment.

8. Existing Advances.  As of October 16, 1998, the outstanding principal balance
of the  Advances  made by the  Lender  pursuant  to  Section  2.1 of the  Credit
Agreement was  $7,248,610.02,  with accrued but unpaid  interest of  $32,691.39.
Such  amounts are due and owing by the  Borrower in  accordance  with the Credit
Agreement  and the Borrower has no knowledge as of the  execution  hereof of any
claim, defense or offset to enforcement of the Credit Agreement.  Upon execution
and delivery of this  Amendment,  such Advances and accrued but unpaid  interest
shall be repayable in accordance with the Revolving Notes.

9. Conditions Precedent. This Amendment, and the waiver set forth in Paragraph 4
hereof,  shall be  effective  when the Lender  shall have  received  an executed
original hereof, together with each of the following, each in substance and form
acceptable to the Lender in its sole discretion:

(a) The Revolving Note A, duly executed on behalf of the Borrower.

(b) The Revolving Real Estate Note, duly executed on behalf of the Borrower.

(c) The Real Estate Note, duly executed on behalf of the Borrower.
<PAGE>


(d) Second Amendment to Mortgage, duly executed by the Borrower.

(e) A  Certificate  of the  Secretary of the Borrower  certifying  as to (i) the
resolutions  of the board of directors of the Borrower  approving  the execution
and delivery of this Amendment and the Notes, (ii) the fact that the Articles of
Incorporation and Bylaws of the Borrower,  which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower's  Secretary
dated as of May 16,  1997  continue  in full  force and effect and have not been
amended  or  otherwise  modified  except as set forth in the  Certificate  to be
delivered, and (iii) certifying that the officers and agents of the Borrower who
have been certified to the Lender,  pursuant to the  Certificate of Authority of
the Borrower's  Secretary dated as of May 16, 1997, as being  authorized to sign
and to act on behalf of the  Borrower  continue to be so  authorized  or setting
forth the sample  signatures  of each of the officers and agents of the Borrower
authorized  to execute  and  deliver  this  Amendment  and all other  documents,
agreements and certificates on behalf of the Borrower.

(f) An updated title insurance commitment, in form and substance satisfactory to
the Lender,  issued by a title insurance company acceptable to the Lender,  with
such  commitment  constituting  a  commitment  by such title  company to issue a
mortgagee's  title policy in the Lender's favor as mortgagee under the Mortgage,
that will be free from all standard  exceptions,  including mechanics' liens and
all other exceptions not previously  approved by the Lender and that will insure
the Mortgage to be a valid first lien on the Real  Estate,  subject only to such
prior liens and  encumbrances  as are  approved by the Lender,  in an amount not
less than the Maximum  Line;  such  commitment  shall be without  the  so-called
"pending  disbursement"  clause and shall  include the  following  endorsements:
comprehensive 100, contiguity, easement, access, and zoning.

(g) Payment of the fee described in Paragraph 7.

(h) Such other matters as the Lender may require.

10. Representations and Warranties.  The Borrower hereby represents and warrants
to the Lender as follows:

(a) The Borrower has all requisite power and authority to execute this Amendment
and  the  Notes  and to  perform  all of its  obligations  hereunder,  and  this
Amendment and the Note have been duly executed and delivered by the Borrower and
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their terms.

(b) The  execution,  delivery and  performance by the Borrower of this Amendment
and the Notes have been duly authorized by all necessary corporate action and do
not  (i) require  any  authorization,  consent or approval  by any  governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  (ii) violate  any  provision of any law,  rule or regulation or of any
order, writ,  injunction or decree presently in effect,  having applicability to
the Borrower,  or the articles of incorporation  or by-laws of the Borrower,  or
(iii) result  in a breach of or constitute a default under any indenture or loan
or credit  agreement or any other  agreement,  lease or  instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.
<PAGE>

(c) All of the  representations  and  warranties  contained  in Article V of the
Credit  Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such  representations  and warranties
relate solely to an earlier date.

11. References. All references in the Credit Agreement to "this Agreement" shall
be deemed to refer to the Credit  Agreement as amended  hereby;  and any and all
references in the Security  Documents to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby.

12. No Waiver.  The  execution and  acceptance  of this  Amendment and the Notes
shall not be deemed to be a waiver of any Default or Event of Default  under the
Credit  Agreement  or breach,  default or event of  default  under any  Security
Document  or other  document  held by the  Lender,  whether  or not known to the
Lender and whether or not existing on the date of this Amendment.

13. Release.  The Borrower hereby  absolutely and  unconditionally  releases and
forever   discharges  the  Lender,   and  any  and  all   participants,   parent
corporations,   subsidiary  corporations,   affiliated  corporations,  insurers,
indemnitors,  successors and assigns  thereof,  together with all of the present
and former  directors,  officers,  agents and employees of any of the foregoing,
from any and all  claims,  demands  or causes  of action of any kind,  nature or
description,  whether arising in law or equity or upon contract or tort or under
any state or federal law or  otherwise,  which the  Borrower has had, now has or
has made  claim to have  against  any such  person  for or by reason of any act,
omission,  matter,  cause or thing whatsoever arising from the beginning of time
to and including the date of this  Amendment,  whether such claims,  demands and
causes of action are matured or unmatured or known or unknown.

14. Costs and Expenses.  The Borrower  hereby  reaffirms its agreement under the
Credit  Agreement to pay or reimburse  the Lender on demand for all fees,  costs
and expenses incurred by the Lender in connection with the Credit Agreement, the
Security  Documents  and all other  documents  contemplated  thereby,  including
without  limitation all reasonable fees and  disbursements  of legal counsel and
any  mortgage  registration  tax  payable in  connection  with the filing of the
Second Amendment to Mortgage.  Without limiting the generality of the foregoing,
the Borrower specifically agrees to pay all fees and disbursements of counsel to
the Lender for the services  performed by such  counsel in  connection  with the
preparation  of this  Amendment  and the documents  and  instruments  incidental
hereto. The Borrower hereby agrees that the Lender may, at any time or from time
to  time  in its  sole  discretion  and  without  further  authorization  by the
Borrower,  make a loan to the Borrower under the Credit Agreement,  or apply the
proceeds of any loan,  for the  purpose of paying any such fees,  disbursements,
costs and expenses.

15. Miscellaneous. This Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and all
of  which  counterparts,  taken  together,  shall  constitute  one and the  same
instrument.

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be duly
executed as of the date first written above.

THE LAMAUR CORPORATION                   NORWEST BUSINESS CREDIT, INC.

By _________________________________     By _________________________________
     John D. Hellmann                           Brian F. Fitzpatrick
     Its Vice President                         Its Vice President
<PAGE>

                          Exhibit A to Fourth Amendment
                    to Amended and Restated Credit Agreement

                                REVOLVING NOTE A

                                    $9,375,000 
                              Minneapolis, Minnesota
                                October 19, 1998

For  value  received,  THE  LAMAUR  CORPORATION,  a  Delaware  corporation  (the
"Borrower"),  promises to pay to the order of Norwest  Business  Credit,  Inc, a
Minnesota  corporation  (the  "Lender"),  at its  main  office  in  Minneapolis,
Minnesota,  or at such other place as the holder hereof may hereafter  from time
to time designate in writing,  on the  Termination  Date, in lawful money of the
United States of America,  the principal sum of Nine Million,  Three Hundred and
Seventy-Five  Thousand Dollars  ($9,375,000),  or, if less, the aggregate unpaid
principal amount of all advances made by the Lender to the Borrower  pursuant to
the Amended and Restated Credit and Security Agreement dated as of May 16, 1997,
between the Borrower  and the Lender as amended by a First  Amendment to Amended
and Restated Credit and Security Agreement dated as of August 13, 1997, a Second
Amendment to Amended and  Restated  Credit and  Security  Agreement  dated as of
November 13, 1997, a Third Amendment to Amended and Restated Credit and Security
Agreement  and  Waiver  of  Defaults  dated as of March 31,  1998,  and a Fourth
Amendment to Amended and Restated Credit Agreement of even date herewith (and as
the same may  hereafter  be amended or restated  from time to time,  the "Credit
Agreement"),  and  to pay  interest  on  the  principal  balance  of  this  Note
outstanding  from time to time at the rate or rates and at the times  determined
pursuant to the Credit Agreement.

To the extent this Note evidences the Borrower's obligation to pay Advances made
before the date hereof,  this Note is issued in substitution for and replacement
of but not in payment of the Borrower's  revolving  promissory  note dated as of
May 16,  1997,  payable  to the order of the  Lender in the  original  principal
amount of $20,000,000.

This Note is issued pursuant to, and is subject to, the Credit Agreement,  which
provides  (among other things) for  acceleration of the maturity hereof upon the
occurrence  of an Event of Default (as defined  therein)  and for the  mandatory
prepayment hereof as provided in Section 2.7 of the Credit Agreement.  This Note
is the  Revolving  Note A  referred  to in the  Credit  Agreement.  This Note is
secured,  among other things,  pursuant to the Credit Agreement and the Security
Documents (other than the Mortgage) as therein defined, and may now or hereafter
be secured by one or more other security agreements,  mortgages, deeds of trust,
assignments or other instruments or agreements.

The Borrower shall pay all costs of collection,  including reasonable attorneys
fees and legal expenses, if this Note is not paid when due, whether or not legal
proceedings are commenced.

Presentment  or other  demand for  payment,  notice of dishonor  and protest are
expressly waived.
                             THE LAMAUR CORPORATION

By____________________________________________________________ 
Its___________________________________________________________

<PAGE>

                          Exhibit B to Fourth Amendment
                    to Amended and Restated Credit Agreement

                           REVOLVING REAL ESTATE NOTE

                                   $2,125,000
                              Minneapolis, Minnesota
                                October 19, 1998

For  value  received,  THE  LAMAUR  CORPORATION,  a  Delaware  corporation  (the
"Borrower"),  promises to pay to the order of Norwest  Business  Credit,  Inc, a
Minnesota  corporation  (the  "Lender"),  at its  main  office  in  Minneapolis,
Minnesota,  or at such other place as the holder hereof may hereafter  from time
to time designate in writing,  on the  Termination  Date, in lawful money of the
United  States of America,  the  principal  sum of Two Million,  One Hundred and
Twenty-Five  Thousand  Dollars  ($1,125,000),  or, if less, the aggregate unpaid
principal amount of all advances made by the Lender to the Borrower  pursuant to
the Amended and Restated Credit and Security Agreement dated as of May 16, 1997,
between the Borrower  and the Lender as amended by a First  Amendment to Amended
and Restated Credit and Security Agreement dated as of August 13, 1997, a Second
Amendment to Amended and  Restated  Credit and  Security  Agreement  dated as of
November 13, 1997, a Third Amendment to Amended and Restated Credit and Security
Agreement  and  Waiver  of  Defaults  dated as of March 31,  1998,  and a Fourth
Amendment to Amended and Restated Credit Agreement of even date herewith (and as
the same may  hereafter  be amended or restated  from time to time,  the "Credit
Agreement"),  and  to pay  interest  on  the  principal  balance  of  this  Note
outstanding  from time to time at the rate or rates and at the times  determined
pursuant to the Credit Agreement.

To the extent this Note evidences the Borrower's obligation to pay Advances made
before the date hereof,  this Note is issued in substitution for and replacement
of but not in payment of the Borrower's  revolving  promissory  note dated as of
May 16,  1997,  payable  to the order of the  Lender in the  original  principal
amount of $20,000,000.

This Note is issued pursuant to, and is subject to, the Credit Agreement,  which
provides  (among other things) for  acceleration of the maturity hereof upon the
occurrence  of an Event of Default (as defined  therein)  and for the  mandatory
prepayment hereof as provided in Section 2.7 of the Credit Agreement.  This Note
is the Revolving Real Estate Note referred to in the Credit Agreement. This Note
is  secured,  among  other  things,  pursuant  to the Credit  Agreement  and the
Security Documents,  including the Mortgage,  as therein defined, and may now or
hereafter be secured by one or more other security agreements,  mortgages, deeds
of trust, assignments or other instruments or agreements.

The Borrower shall pay all costs of collection,  including reasonable attorneys'
fees and legal expenses, if this Note is not paid when due, whether or not legal
proceedings are commenced.

Presentment  or other  demand for  payment,  notice of dishonor  and protest are
expressly waived.
                             THE LAMAUR CORPORATION
By____________________________________________________________
Its______________________________________________________
<PAGE>


                          Exhibit C to Fourth Amendment
                    to Amended and Restated Credit Agreement


                                REAL ESTATE NOTE

                                   $3,123,333.43 
                              Minneapolis, Minnesota
                                October 19, 1998

For  value  received,  THE  LAMAUR  CORPORATION,  a  Delaware  corporation  (the
"Borrower"), hereby promises to pay ON DEMAND, and if demand is not sooner made,
then as  provided  in the  Credit  Agreement  (defined  below),  to the order of
NORWEST BUSINESS CREDIT,  INC., a Minnesota  corporation (the "Lender"),  at its
main office in Minneapolis,  Minnesota,  or at any other place designated at any
time by the holder  hereof,  in lawful money of the United States of America and
in immediately  available funds, the principal sum of Three Million, One Hundred
Twenty-Three  Thousand,  Three Hundred and Thirty-three  Dollars and Forty-Three
Cents  ($3,123,333.43) or, if less, the aggregate unpaid principal amount of all
Real Estate Loans made by the Lender to the Borrower under the Credit  Agreement
(defined  below)  together  with  interest  on the  principal  amount  hereunder
remaining  unpaid from time to time,  computed on the basis of the actual number
of days  elapsed and a 360-day  year,  from the date  hereof  until this Note is
fully  paid at the rate  from  time to time in  effect  under  the  Amended  and
Restated  Credit and Security  Agreement  dated as of May 16, 1997,  between the
Borrower and the Lender as amended by a First  Amendment to Amended and Restated
Credit and Security Agreement dated as of August 13, 1997, a Second Amendment to
Amended and  Restated  Credit and  Security  Agreement  dated as of November 13,
1997, a Third  Amendment to Amended and Restated  Credit and Security  Agreement
and Waiver of Defaults  dated as of March 31,  1998,  and a Fourth  Amendment to
Amended and Restated  Credit  Agreement  of even date  herewith (as the same may
hereafter be amended,  supplemented  or restated from time to time,  the "Credit
Agreement") by and between the Lender and the Borrower. The principal hereof and
interest  accruing  thereon  shall be due and  payable as provided in the Credit
Agreement.  This  Note  may be  prepaid  only  in  accordance  with  the  Credit
Agreement.

To the extent this Note evidences the Borrower's obligation to pay Advances made
before the date hereof,  this Note is issued in substitution for and replacement
of but not in payment of the  Borrower's  amended and restated  real estate note
dated as of May 16,  1997,  payable to the order of the  Lender in the  original
principal amount of $4,700,000.

This Note is issued pursuant,  and is subject,  to the Credit  Agreement,  which
provides,  among other things,  for acceleration  hereof.  This Note is the Real
Estate Note  referred to in the Credit  Agreement.  This Note is secured,  among
other things,  pursuant to the Credit  Agreement  and the Security  Documents as
therein  defined,  and may now or  hereafter  be  secured  by one or more  other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.

The Borrower hereby agrees to pay all costs of collection,  including attorneys'
fees and legal expenses in the event this Note is not paid when due,  whether or
not legal proceedings are commenced.

Presentment  or other  demand for  payment,  notice of dishonor  and protest are
expressly waived.
                             THE LAMAUR CORPORATION

By____________________________________________________________
Its______________________________________________________

<PAGE>
Exhibit 10.20
                     FIFTH AMENDMENT TO AMENDED AND RESTATED
                          CREDIT AND SECURITY AGREEMENT

This  Amendment,  dated as of March 12, 1999,  is made by and between THE LAMAUR
CORPORATION,  a Delaware  corporation  (the  "Borrower"),  and NORWEST  BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender").

                                    Recitals

The Borrower and the Lender have entered into an Amended and Restated Credit and
Security  Agreement dated as of May 16, 1997, as amended by a First Amendment to
Amended and Restated Credit and Security  Agreement dated as of August 13, 1997,
a Second  Amendment to Amended and Restated Credit and Security  Agreement dated
as of November 13, 1997,  a Third  Amendment to Amended and Restated  Credit and
Security  Agreement  and  Waiver of  Defaults  dated as of March 31,  1998 and a
Fourth Amendment to Amended and Restated Credit and Security  Agreement dated as
of October 19, 1998 (as so amended, the "Credit  Agreement").  Capitalized terms
used in these recitals have the meanings  given to them in the Credit  Agreement
unless otherwise specified.

The  Borrower  has  requested  that  certain  amendments  be made to the  Credit
Agreement,  which  the  Lender  is  willing  to make  pursuant  to the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

1. Defined Terms.  Capitalized terms used in this Amendment which are defined in
the Credit  Agreement  shall have the same meanings as defined  therein,  unless
otherwise  defined herein.  In addition,  Section 1.1 of the Credit Agreement is
amended by adding or amending, as the case may be, the following definitions:

"'Borrowing  Base' means, at any time and subject to change from time to time at
the Lender's sole discretion, the lesser of:

(a) the Commitment, or

(b) the sum of

(i) the lesser of (A) 78% of Eligible Accounts, or (B) $10,000,000; plus

(ii)  the  lesser  of (A)  55% of  Eligible  Finished  Goods  Inventory,  or (B)
$4,000,000; plus
<PAGE>
(iii) the lesser of (A) 100% of Equipment Eligibility, or (B) $2,000,000."

"'Contract  Division Sale' has the meaning set forth in Paragraph 7 of the Fifth
Amendment."

"'Equipment  Eligibility'  means  the  forced  sale  liquidation  value  of  the
Borrower's  existing Equipment located at the address set forth in Schedule 1 to
the Fifth  Amendment,  not including any existing  equipment in which the Lender
does not hold a first priority perfected security interest."

"'Fifth  Amendment'  means that certain Fifth  Amendment to Amended and Restated
Credit and Security  Agreement,  dated as of March 12, 1999,  by and between the
Borrower and Lender."

"'Revolving  Note A' means the  promissory  note of the Borrower  payable to the
order of the Lender in the amount of $6,875,000,  in  substantially  the form of
Exhibit  A to the  Fifth  Amendment  (as such  promissory  note may be  amended,
extended  or  otherwise  modified  from time to time)  and also  means all other
promissory  notes  accepted  from time to time in  substitution  therefor  or in
renewal thereof."

"'Revolving  Real Estate Note' means the promissory note of the Borrower payable
to the order of the Lender in the amount of  $4,625,000,  in  substantially  the
form of  Exhibit  B to the  Fifth  Amendment  (as  such  promissory  note may be
amended,  extended or otherwise  modified  from time to time) and also means all
other promissory notes accepted from time to time in substitution therefor or in
renewal thereof."

"'Term Loan Termination Dat' means September 1, 1999."

"'Third  Amendment to Mortgage' means the Third Amendment to Mortgage,  Security
Agreement and Fixture  Financing  Statement  and  Assignment of Leases and Rents
dated as of March 12, 1999 by and between the Lender and the Borrower."

2. Notes.  Section 2.4(a) of the Credit Agreement is hereby amended by replacing
them with the following:

"(a) The  Borrower's  obligation  to pay the  Advances  made by the Lender under
Section 2.1, to the extent the  outstanding  principal  balance  thereof is less
than or equal to  $4,625,000,  shall be evidenced by the  Revolving  Real Estate
Note and shall be secured by the  Collateral,  as provided in Article III hereof
and by the Real Estate as provided in the Mortgage. The Borrowe's obligation to
pay the  Advances  made by the  Lender  under  Section  2.1,  to the  extent the
outstanding  principal  balance  thereof is  greater  than  $4,625,000  shall be
evidenced by Revolving Note A and shall be secured by the Collateral as provided
in  Article  III.  The  principal  of the  Revolving  Notes  shall be payable as
provided  herein and on the earlier of the  Termination  Date or acceleration by
the Lender  pursuant to Section 8.2 hereof,  and shall bear interest as provided
herein."
<PAGE>


3.  Financial  Covenants.  Sections  6.12,  6.13,  6.14,  and 6.15 of the Credit
Agreement are hereby amended as follows:

"Section 6.12 [Reserved]."

Section 6.13 Book Net Worth Plus Subordinated Indebtedness.  The Borrower shall
at all times maintain  (exclusive of any  Subsidiaries or Affiliates  unless the
Lender specifically consents in writing to their inclusion in such calculation),
Book  Net  Worth  plus  Subordinated  Indebtedness  of at least  the  following,
calculated monthly as of the following dates:

 .................................... .........................................
       For the Month Ending            Minimum Book Net Worth Plus Subordinated
                                                     Indebtedness
 .................................... ..........................................
 .................................... ..........................................
              1/31/99                                $10,200,000
 .................................... ..........................................
 .................................... ..........................................
              2/28/99                                 $9,600,000
 .................................... .........................................
 .................................... .........................................
              3/31/99                                 $9,450,000
 .................................... .........................................
 .................................... .........................................
              4/30/99                                 $9,000,000
 .................................... .........................................
 .................................... .........................................
              5/31/99                                 $9,100,000
 .................................... .........................................
 .................................... .........................................
              6/30/99                                 $9,100,000
 .................................... .........................................
 .................................... .........................................
              7/31/99                                 $9,100,000
 .................................... .........................................
 .................................... .........................................
              8/31/99                                 $9,100,000
 .................................... .........................................
 .................................... .........................................
              9/30/99                                 $9,500,000
 .................................... .........................................
 .................................... .........................................
             10/31/99                                 $9,350,000
 .................................... .........................................
 .................................... .........................................
             11/30/99                                 $9,250,000
 .................................... .........................................
 .................................... .........................................
             12/31/99                                 $9,150,000
 .................................... .........................................
This covenant will be adjusted  dollar-for-dollar to account for any 1998 fiscal
year-end  adjustment in the Borrower's Book Net Worth required by the Borrower's
certified  public  accountants  that will change the Borrower's 1999 fiscal year
opening Book Net Worth."

                           "Section 6.14 [Reserved]."
<PAGE>

Section 6.15 Year to Date Net Income.  The Borrower shall at all times maintain
(exclusive  of any  Subsidiaries  or Affiliates  unless the Lender  specifically
consents  in  writing  to  their  inclusion  in  such  calculation)  Net  Income
calculated on a fiscal  year-to-date basis of at least the following amounts for
the following dates:
 ..................................... ..............................
        For the Month Ending             Year-to-Date Net Income
 ..................................... ..............................
 ..................................... ..............................
              1/31/99                         ($1,000,000)
 ..................................... ..............................
 ..................................... ..............................
              2/28/99                         ($1,650,000)
 ..................................... ..............................
 ..................................... ..............................
              3/31/99                         ($1,800,000)
 ..................................... ..............................
 ..................................... ..............................
              4/30/99                         ($2,100,000)
 ..................................... ..............................
 ..................................... ..............................
              5/31/99                         ($2,100,000)
 ..................................... ..............................
 ..................................... ..............................
              6/30/99                         ($2,100,000)
 ..................................... ..............................
 ..................................... ..............................
              7/31/99                         ($2,100,000)
 ..................................... ..............................
 ..................................... ..............................
              8/31/99                         ($2,100,000)
 ..................................... ..............................
 ..................................... ..............................
              9/30/99                         ($1,800,000)
 ..................................... ..............................
 ..................................... ..............................
              10/31/99                        ($1,900,000)
 ..................................... ..............................
 ..................................... ..............................
              11/30/99                        ($2,000,000)
 ..................................... ..............................
 ..................................... ..............................
              12/31/99                        ($2,100,000)
 ..................................... ..............................

4. Capital Expenditures. Section 7. of the Credit Agreement is hereby amended as
follows:

"Section 7.10 Capital Expenditures.  The Borrower will not expend or contract to
expend  Capital  Expenditures  more than  $400,000 in the  aggregate  during the
Borrower's 1999 fiscal year."

5. No Other Changes. Except as explicitly amended by the Fifth Amendment, all of
the terms and conditions of the Credit  Agreement shall remain in full force and
effect and shall apply to any Advance or Letter of Credit thereunder.

6. Waiver of Defaults. The Borrower is in default of the following provisions of
the Credit Agreement (collectively, the "Defaults"):
<PAGE>

                                                         


Section/Covenant            Date           Required                 Actual

 ..................................................... ............. ........
6.12 Debt Service
 Coverage Ratio            12/31/98      3.00 to 1.00           2.24 to 1.00
 ..................................................... ............. .........
 ..................................................... ............. .........
6.13 Minimum Book Net 
Worth Plus Subordinated 
Debt                       12/31/98      $11,500,000         $11,246,000
 ..................................................... ............. ..........
 ..................................................... ............. ..........
6.15 Minimum Year-to-Date
 Net Income                12/31/98      $1,000,000          ($208,000)
 ..................................................... ............. ..........

Upon the terms and subject to the  conditions set forth in this  Amendment,  the
Lender hereby waives the Defaults.  In  consideration of the  restructuring  fee
payable  under  paragraph  9 of this  Amendment,  the Lender  hereby  waives the
Default Rate interest  payable  under  Section 2.5 of the Credit  Agreement as a
result of the  Defaults.  This waiver shall be effective  only in this  specific
instance  and for the  specific  purpose for which it is given,  and this waiver
shall not entitle the Borrower to any other or further  waiver in any similar or
other circumstances.

7.  Continuation  Fee.  Pursuant to the Fourth  Amendment,  the  Commitment  was
reduced from $20,000,000 to $11,500,000;  therefore,  the Borrower  acknowledges
and agrees that  pursuant to Paragraph 14 of the Third  Amendment,  a fee in the
amount of $127,500 is currently payable (the  "Continuation  Fee"). The Borrower
has informed the Lender that it intends to sell all or substantially  all of the
assets  comprised  of the  manufacturing  plant and  equipment  of the  Borrower
located in Fridley, Minnesota, together with third party manufacturing contracts
associated with said Fridley, Minnesota location (the "Contract Division Sale");
in lieu of the Contract  Division  Sale,  the Borrower  intends to refinance the
Credit   Facility.   The  Lender  hereby  agrees  to  delay  collection  of  the
Continuation  Fee until the earlier of the  Termination  Date, the completion of
the Contract  Division  Sale, or other  payment of the Credit  Facility from any
source,  including,  but not limited to, refinancing or liquidation.  Nothing in
this Paragraph  should be construed as a consent to the Contract  Division Sale.
This collection delay shall be effective only in this specific  instance and for
the specific purpose for which it is given, and this delay shall not entitle the
Borrower to any other or further  forbearance  or waiver in any similar or other
circumstances.  Moreover,  the Borrower  acknowledges  that if the Commitment is
further reduced or refinanced before the Termination Date, the Borrower will owe
a fee equal to equal to one and one half percent (1.5%) of such reduction.

8.  Appraisals.  If the Borrower has not  provided a signed  purchase  agreement
acceptable  to the Lender  relating to the Contract  Division  Sale on or before
June 30,  1999,  Lender  will  require a real  estate  appraisal,  an  equipment
appraisal and an inventory appraisal,  which appraisals shall be paid for by the
Borrower.

9.  Restructuring  Fee.  The  Borrower  shall  pay the  Lender  a fully  earned,
non-refundable  fee in the amount of $100,000 in  consideration  of the Lender's
execution  of this  Amendment,  including  the waiver of  defaults  set forth in
Paragraph 6 and the Lender's  willingness to extend the Term Termination Date to
September 1, 1999.  The Borrower  shall pay the Lender $50,000 of such fee as of
the date hereof.  If the Credit Facility is not paid in full on or before August
1, 1999,  the Borrower  shall pay the Lender,  on August 1, 1999,  the remaining
$50,000 of such fee, if the Credit  Facility is paid in full on or before August
1, 1999, the Lender shall waive payment of such remainder.

10. Conditions Precedent.  This Amendment, and the waiver set forth in Paragraph
6 hereof,  shall be effective  when the Lender  shall have  received an executed
original hereof, together with each of the following, each in substance and form
acceptable to the Lender in its sole discretion:

(a) The Revolving Note A, duly executed on behalf of the Borrower.

(b) The Revolving Real Estate Note, duly executed on behalf of the Borrower.

(c) Third Amendment to Mortgage, duly executed by the Borrower.

(d) A  Certificate  of the  Secretary of the Borrower  certifying  as to (i) the
resolutions  of the board of directors of the Borrower  approving  the execution
and delivery of this Amendment and the Notes, (ii) the fact that the Articles of
Incorporation and Bylaws of the Borrower,  which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower's  Secretary
dated as of May 16,  1997  continue  in full  force and effect and have not been
amended  or  otherwise  modified  except as set forth in the  Certificate  to be
delivered, and (iii) certifying that the officers and agents of the Borrower who
have been certified to the Lender,  pursuant to the  Certificate of Authority of
the Borrower's  Secretary dated as of May 16, 1997, as being  authorized to sign
and to act on behalf of the  Borrower  continue to be so  authorized  or setting
forth the sample  signatures  of each of the officers and agents of the Borrower
authorized  to execute  and  deliver  this  Amendment  and all other  documents,
agreements and certificates on behalf of the Borrower.

(e) An updated title insurance commitment, in form and substance satisfactory to
the Lender,  issued by a title insurance company acceptable to the Lender,  with
such  commitment  constituting  a  commitment  by such title  company to issue a
mortgagee's  title policy in the Lender's favor as mortgagee under the Mortgage,
that will be free from all standard  exceptions,  including mechanics' liens and
all other exceptions not previously  approved by the Lender and that will insure
the Mortgage to be a valid first lien on the Real  Estate,  subject only to such
prior liens and  encumbrances  as are  approved by the Lender,  in an amount not
less than the Maximum  Line;  such  commitment  shall be without  the  so-called
"pending  disbursement"  clause and shall  include the  following  endorsements:
comprehensive 100, contiguity, easement, access, and zoning.

(f) A current equipment list of the Borrower, acceptable to the Lender.

(g) Payment of the fee described in Paragraph 97.

(h) Such other matters as the Lender may require.

11. Representations and Warranties.  The Borrower hereby represents and warrants
to the Lender as follows:

(a) The Borrower has all requisite power and authority to execute this Amendment
and  the  Notes  and to  perform  all of its  obligations  hereunder,  and  this
Amendment and the Note have been duly executed and delivered by the Borrower and
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their terms.

(b) The  execution,  delivery and  performance by the Borrower of this Amendment
and the Notes have been duly authorized by all necessary corporate action and do
not  (i) require  any  authorization,  consent or approval  by any  governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  (ii) violate  any  provision of any law,  rule or regulation or of any
order, writ,  injunction or decree presently in effect,  having applicability to
the Borrower,  or the articles of incorporation  or by-laws of the Borrower,  or
(iii) result  in a breach of or constitute a default under any indenture or loan
or credit  agreement or any other  agreement,  lease or  instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.

(c) All of the  representations  and  warranties  contained  in Article V of the
Credit  Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such  representations  and warranties
relate solely to an earlier date.

12. References. All references in the Credit Agreement to "this Agreement" shall
be deemed to refer to the Credit  Agreement as amended  hereby;  and any and all
references in the Security  Documents to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby.

13. No Other Waiver. Except as set forth in Paragraph 6 above, the execution and
acceptance of this Amendment and the Notes shall not be deemed to be a waiver of
any Default or Event of Default under the Credit Agreement or breach, default or
event of default  under any  Security  Document  or other  document  held by the
Lender,  whether or not known to the Lender and  whether or not  existing on the
date of this Amendment.

14. Release.  The Borrower hereby  absolutely and  unconditionally  releases and
forever   discharges  the  Lender,   and  any  and  all   participants,   parent
corporations,   subsidiary  corporations,   affiliated  corporations,  insurers,
indemnitors,  successors and assigns  thereof,  together with all of the present
and former  directors,  officers,  agents and employees of any of the foregoing,
from any and all  claims,  demands  or causes  of action of any kind,  nature or
description,  whether arising in law or equity or upon contract or tort or under
any state or federal law or  otherwise,  which the  Borrower has had, now has or
has made  claim to have  against  any such  person  for or by reason of any act,
omission,  matter,  cause or thing whatsoever arising from the beginning of time
to and including the date of this  Amendment,  whether such claims,  demands and
causes of action are matured or unmatured or known or unknown.

15. Costs and Expenses.  The Borrower  hereby  reaffirms its agreement under the
Credit  Agreement to pay or reimburse  the Lender on demand for all fees,  costs
and expenses incurred by the Lender in connection with the Credit Agreement, the
Security  Documents  and all other  documents  contemplated  thereby,  including
without  limitation all reasonable fees and  disbursements  of legal counsel and
any  mortgage  registration  tax  payable in  connection  with the filing of the
Second Amendment to Mortgage.  Without limiting the generality of the foregoing,
the Borrower specifically agrees to pay all fees and disbursements of counsel to
the Lender for the services  performed by such  counsel in  connection  with the
preparation  of this  Amendment  and the documents  and  instruments  incidental
hereto. The Borrower hereby agrees that the Lender may, at any time or from time
to  time  in its  sole  discretion  and  without  further  authorization  by the
Borrower,  make a loan to the Borrower under the Credit Agreement,  or apply the
proceeds of any loan,  for the  purpose of paying any such fees,  disbursements,
costs and expenses.

16. Miscellaneous. This Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and all
of  which  counterparts,  taken  together,  shall  constitute  one and the  same
instrument.

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be duly
executed as of the date first written above.

THE LAMAUR CORPORATION                           NORWEST BUSINESS CREDIT, INC.


By _________________________________       By _________________________________
     John D. Hellmann                               Brian F. Fitzpatrick
     Its Vice President                             Its Vice President

<PAGE>


                          Exhibit A to Fifth Amendment
                    to Amended and Restated Credit Agreement

                                REVOLVING NOTE A
                                   $6,875,000
                               Minneapolis, Minnesota
                                 March 12, 1999

For  value  received,  THE  LAMAUR  CORPORATION,  a  Delaware  corporation  (the
"Borrower"),  promises to pay to the order of Norwest  Business  Credit,  Inc, a
Minnesota  corporation  (the  "Lender"),  at its  main  office  in  Minneapolis,
Minnesota,  or at such other place as the holder hereof may hereafter  from time
to time designate in writing,  on the  Termination  Date, in lawful money of the
United States of America,  the  principal sum of Six Million,  Eight Hundred and
Seventy-Five  Thousand Dollars  ($6,875,000),  or, if less, the aggregate unpaid
principal amount of all advances made by the Lender to the Borrower  pursuant to
the Amended and Restated Credit and Security Agreement dated as of May 16, 1997,
between the Borrower  and the Lender as amended by a First  Amendment to Amended
and Restated Credit and Security Agreement dated as of August 13, 1997, a Second
Amendment to Amended and  Restated  Credit and  Security  Agreement  dated as of
November 13, 1997, a Third Amendment to Amended and Restated Credit and Security
Agreement and Waiver of Defaults dated as of March 31, 1998, a Fourth  Amendment
to Amended and Restated  Credit and Security  Agreement  dated as of October 19,
1998 and a Fifth Amendment to Amended and Restated Credit Agreement of even date
herewith  (and as the same may  hereafter  be amended or  restated  from time to
time, the "Credit  Agreement"),  and to pay interest on the principal balance of
this  Note  outstanding  from time to time at the rate or rates and at the times
determined pursuant to the Credit Agreement.

To the extent this Note evidences the Borrower's obligation to pay Advances made
before the date hereof,  this Note is issued in substitution for and replacement
of but not in payment of the Borrower's  revolving  promissory  note dated as of
October 19, 1998,  payable to the order of the Lender in the original  principal
amount of $9,375,000.

This Note is issued pursuant to, and is subject to, the Credit Agreement,  which
provides  (among other things) for  acceleration of the maturity hereof upon the
occurrence  of an Event of Default (as defined  therein)  and for the  mandatory
prepayment hereof as provided in Section 2.7 of the Credit Agreement.  This Note
is the  Revolving  Note A  referred  to in the  Credit  Agreement.  This Note is
secured,  among other things,  pursuant to the Credit Agreement and the Security
Documents (other than the Mortgage) as therein defined, and may now or hereafter
be secured by one or more other security agreements,  mortgages, deeds of trust,
assignments or other instruments or agreements.

The Borrower shall pay all costs of collection,  including reasonable attorneys'
fees and legal expenses, if this Note is not paid when due, whether or not legal
proceedings are commenced.

Presentment  or other  demand for  payment,  notice of dishonor  and protest are
expressly waived.

                             THE LAMAUR CORPORATION

         By____________________________________________________________

            Its______________________________________________________
<PAGE>

                        


                          Exhibit B to Fifth Amendment
                    to Amended and Restated Credit Agreement

                           REVOLVING REAL ESTATE NOTE

                                   $4,625,000 
                              Minneapolis, Minnesota
                                 March 12, 1999

For  value  received,  THE  LAMAUR  CORPORATION,  a  Delaware  corporation  (the
"Borrower"),  promises to pay to the order of Norwest  Business  Credit,  Inc, a
Minnesota  corporation  (the  "Lender"),  at its  main  office  in  Minneapolis,
Minnesota,  or at such other place as the holder hereof may hereafter  from time
to time designate in writing,  on the  Termination  Date, in lawful money of the
United States of America,  the principal sum of Fourt  Million,  Six Hundred and
Twenty-Five  Thousand  Dollars  ($4,625,000),  or, if less, the aggregate unpaid
principal amount of all advances made by the Lender to the Borrower  pursuant to
the Amended and Restated Credit and Security Agreement dated as of May 16, 1997,
between the Borrower  and the Lender as amended by a First  Amendment to Amended
and Restated Credit and Security Agreement dated as of August 13, 1997, a Second
Amendment to Amended and  Restated  Credit and  Security  Agreement  dated as of
November 13, 1997, a Third Amendment to Amended and Restated Credit and Security
Agreement and Waiver of Defaults dated as of March 31, 1998, a Fourth  Amendment
to Amended and Restated  Credit and Security  Agreement  dated as of October 19,
1998 and a Fifth Amendment to Amended and Restated Credit Agreement of even date
herewith  (and as the same may  hereafter  be amended or  restated  from time to
time, the "Credit  Agreement"),  and to pay interest on the principal balance of
this  Note  outstanding  from time to time at the rate or rates and at the times
determined pursuant to the Credit Agreement.

To the extent this Note evidences the Borrower's obligation to pay Advances made
before the date hereof,  this Note is issued in substitution for and replacement
of but not in payment of the Borrower's  revolving  promissory  note dated as of
October 19, 1998,  payable to the order of the Lender in the original  principal
amount of $2,125,000.

This Note is issued pursuant to, and is subject to, the Credit Agreement,  which
provides  (among other things) for  acceleration of the maturity hereof upon the
occurrence  of an Event of Default (as defined  therein)  and for the  mandatory
prepayment hereof as provided in Section 2.7 of the Credit Agreement.  This Note
is the Revolving Real Estate Note referred to in the Credit Agreement. This Note
is  secured,  among  other  things,  pursuant  to the Credit  Agreement  and the
Security Documents,  including the Mortgage,  as therein defined, and may now or
hereafter be secured by one or more other security agreements,  mortgages, deeds
of trust, assignments or other instruments or agreements.

The Borrower shall pay all costs of collection,  including reasonable attorneys'
fees and legal expenses, if this Note is not paid when due, whether or not legal
proceedings are commenced.

Presentment  or other  demand for  payment,  notice of dishonor  and protest are
expressly waived.

                             THE LAMAUR CORPORATION

         By____________________________________________________________

            Its______________________________________________________

<PAGE>

Exhibit 10.17            STOCK GRANT AGREEMENT (NON-PLAN)

THIS AGREEMENT is made as of the day of January __, 1999, (the "Effective Date")
by and between The Lamaur Corporation,  a Delaware  corporation (the "Company"),
and _______________,  an individual  ("Employee"),  together described herein as
(the "Parties").


                                   WITNESSETH:

WHEREAS,  the Company is willing to grant to the Employee  capital  stock of the
Company as herein described according to the terms and subject to the conditions
hereinafter set forth;

WHEREAS,  the Employee  would like to receive a grant of the  Company's  capital
stock.

NOW, THEREFORE, in consideration for the mutual promises and covenants set forth
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which is hereby acknowledged,  the parties hereto hereby agree as
follows:

1.  Number of Shares and Price Per Share.  The  Company  agrees,  subject to the
execution of this Agreement, to grant to Employee,  ______________ shares of the
Company's  Common Stock,  no par value (the "Shares") which shares are priced at
$_____  per  share at close of  market as of the  Effective  Date  (the  "Market
Price").

2. Unvested Share Repurchase Option. In the event the Employee's employment with
the Company is  terminated  for any  reason,  with or without  cause,  or if the
Employee or the  Employee's  legal  representative  attempts to sell,  exchange,
transfer,  pledge or otherwise  dispose of any shares received  pursuant to this
Agreement which have not vested  pursuant to  Section 2(a)  below (the "Unvested
Shares"),  the Company  shall have the right to reacquire  the  Unvested  Shares
under the terms and subject to the  conditions  set forth in this Section 2 (the
"Unvested Share Repurchase Option").

(a) Vesting of Shares.  The term "Initial Vesting Date" shall mean the Effective
Date. As of the Initial Vesting Date, one-sixth (16.67%) of the shares of Common
Stock,  consisting  of  ________________  of the  Shares,  will be vested in and
issued to the Employee.  The balance of the Shares  granted to the Employee will
become  "Vested  Shares" after the Initial  Vesting Date in accordance  with the
following schedule:

                  Date                                        Portion Vested

                  On the Initial Vesting Date
                  (January 13, 1999)                          ___________ Shares
                                                              (16.67% of Grant)
                  For each full six months of the
                  Company's employment of Employee
                  Following the Initial Vesting Date,
                  and Until fully vested.                     ___________ Shares
                                                              (16.67% of Grant)

Provided that the aggregate  percentage of the Shares constituting Vested Shares
may not  exceed one  hundred  percent  (100%),  and that such  numbers  shall be
adjusted   appropriately   to  reflect  any  stock  splits,   stock   dividends,
recombinations, recapitalizations or the like by the Company.

(b) Exercise of Unvested Share Repurchase  Option. If the Employee's  employment
with the Company is terminated for any reason or for no reason,  with or without
cause,  or if the Employee or the Employee's  legal  representative  attempts to
dispose of any  Unvested  Shares  other than as allowed in this  Agreement,  the
Company may exercise the Unvested Share  Repurchase  Option by written notice to
the Employee or the Employee's legal representative within sixty (60) days after
such  termination  or after the Company  has  received  notice of the  attempted
disposition.

(c)  Payment  for Shares and  Return of  Shares.  Payment by the  Company to the
Employee or the  Employee's  legal  representative  shall be made in cash within
sixty (60) days after the date of the mailing of the written  notice of exercise
of the Unvested Share  Repurchase  Option.  The purchase price per share for the
shares  being  purchased  by the Company  shall be an amount equal to the Market
Price specified in Section.

(d) Legends.  The Company  will place a legend  referencing  the Unvested  Share
Repurchase Option on any shares subject to the Unvested Share Repurchase Option.

(e) Assignment of Unvested Share Repurchase  Option. In the event the Company is
unable to exercise the Unvested Share Repurchase  Option, the Company shall have
the right to assign the Unvested Share Repurchase  Option to one or more persons
as may be selected by the Company.

3. Market Stand Off Agreement. The Employee who's ownership of shares exceeds 1%
of the total issued  shares of the Company,  if requested by an  underwriter  of
common stock (or other  securities)  of the Company,  shall agree not to sell or
otherwise  transfer or dispose of any securities held by the Employee during the
one  hundred  eighty  (180)  day  period  following  the  effective  date  of  a
registration  statement of the Company filed under the  Securities  Act provided
that:

(a) such agreement shall only apply to the first such registration  statement of
the Company including shares of common stock (or other securities) to be sold on
its behalf to the public in an underwritten offering; and

(b) all securities  holders of the Company  holding more than one percent of the
outstanding  voting  stock,  all officers  and  directors of the Company and all
other holders of registration  rights of the Company (whether or not pursuant to
this agreement) agree to be bound by similar instructions.  Such agreement shall
be in writing in the form satisfactory to the Company and such underwriter.  The
Company may impose stop-transfer instructions with respect to the Shares subject
to the foregoing restriction until the end of the foregoing period.

4. Dividends,  etc. If, from time to time,  there is any stock  dividend,  stock
split or other change in the character or amount of any of the outstanding stock
of the Company,  then in such event any and all new  substituted  or  additional
securities  to which the  Employee  is  entitled  by  reason  of the  Employee's
ownership of the shares granted  pursuant to this Agreement shall be immediately
subject to the  Unvested  Share  Repurchase  Option and all other  terms of this
Agreement  immediately  before such  eventincluding  and in accordance  with the
formula set forth in Section 2(a) above.

5.  Restrictions  on Transfer of Unvested  Shares.  The  Employee  may not sell,
transfer,  pledge or  otherwise  dispose  of any  Shares  still  subject  to the
Unvested Share Repurchase.

6. Consent of Spouse.  If the Employee is married on the date of this Agreement,
the Employee's spouse shall execute a Consent of Spouse in the form of Exhibit A
hereto, effective on the date hereof. Such consent shall not be deemed to confer
or convey to the spouse any rights in the Shares that do not otherwise  exist by
operation of law or the agreement of the parties.

7.  Legends.  All  certificates  representing  Unvested  Shares  subject  to the
provisions of this Agreement shall have endorsed thereon the following legends:

(a) "THE SHARES  REPRESENTED  BY THIS  CERTIFICATE  ARE SUBJECT TO A  REPURCHASE
OPTION AND OTHER  RESTRICTIONS ON TRANSFER SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY."

(b) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  AND MAY NOT BE  SOLD,  TRANSFERRED,
ASSIGNED OR  HYPOTHECATED  UNLESS THERE IS AN EFFECTIVE  REGISTRATION  STATEMENT
UNDER SUCH ACT COVERING SUCH  SECURITIES,  THE SALE IS MADE IN  ACCORDANCE  WITH
RULE 144 UNDER THE ACT,  OR THE  COMPANY  RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY,  STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."

8. Warranties and  Representations.  In connection with the grant of the Shares,
the Employee hereby agrees, represents and warrants as follows:

(a) The Employee is receiving the Shares solely for the  Employee's  own account
for  investment  and not with a view to,  or for sale in  connection  with,  any
distribution  thereof  within the meaning of the  Securities  Act.  The Employee
further  represents  that the  Employee  does not have any present  intention of
selling,  offering to sell or otherwise  disposing of or distributing the Shares
or any portion thereof, and that the entire legal and beneficial interest of the
Shares the Employee is receiving is being received for, and will be held for the
account  of, the  Employee  only and  neither in whole nor in part for any other
person.

(b) The  Employee  is aware of the  Company's  business  affairs  and  financial
condition and has acquired sufficient  information about the Company to reach an
informed and knowledgeable  decision to receive the Shares. The Employee further
represents  and warrants that the Employee has received all such  information as
the Employee deems  necessary and appropriate to enable the Employee to evaluate
the  financial  risk  inherent  in  ownership  of the  Shares  and has  received
satisfactory  and complete  information  concerning  the business and  financial
condition of the Company in response to all inquiries in respect thereof.

(c) The Employee  realizes that ownership of the Shares are highly  speculative,
and the Employee is able, without impairing the Employee's  financial condition,
to hold the  Shares  for an  indefinite  period of time and to suffer a complete
loss on the Shares.

(d). The Company has disclosed to the Employee that:

(i) The grant of the Shares has not been  registered  under the Securities  Act,
and  the  Shares  must  be  held  indefinitely  unless  a  transfer  of  them is
subsequently  registered  under the  Securities  Act or an  exemption  from such
registration  is  available,  and that the  Company  is under no  obligation  to
register the Shares;

(ii) The  Company  will make a notation  in its  records  of the  aforementioned
restrictions on transfer and legends.

(e) The Employee is aware of the provisions of Rule 144,  promulgated  under the
Securities Act, which, in substance,  permits limited public sale of "restricted
securities"  acquired,  directly or  indirectly,  from the issuer thereof (or an
affiliate of such issuer),  in a non-public offering subject to the satisfaction
of certain conditions, including among other things: the sale occurring not less
than  one year  from  the  date  the  Employee  has  received  the  Shares;  the
availability  of certain public  information  concerning  the Company;  the sale
being  through  a  broker  in  an  unsolicited  "broker's  transaction"  or in a
transaction  directly  with a market  maker (as said term is  defined  under the
Securities  Exchange Act of 1934,  as amended);  and that any sale of the Shares
may be made by the  Employee  only in limited  amounts  during  any  three-month
period not exceeding specified limitations. The Employee further represents that
the Employee understands that at the time the Employee wishes to sell the Shares
there may be no public market upon which to make such a sale, and that,  even if
such a public market then exists,  the Company may not be satisfying the current
public  information  requirements  of  Rule 144,  and that,  in such event,  the
Employee  would be precluded  from selling the Shares under Rule 144 even if the
one-year minimum holding period had been satisfied. The Employee represents that
the Employee  understands  that in the event all of the requirements of Rule 144
are not satisfied,  registration  under the Securities Act or compliance with an
exemption from registration will be required; and that, notwithstanding the fact
that  Rule 144  is not  exclusive,  the  staff of the  Securities  and  Exchange
Commission  has  expressed  its opinion that  persons  proposing to sell private
placement  securities  other than in a registered  offering and  otherwise  than
pursuant to Rule 144  will have a  substantial  burden of proof in  establishing
that an exemption from  registration is available for such offers or sales,  and
that  such  persons  and  their  respective  brokers  who  participate  in  such
transactions do so at their own risk.

(f) Without in any way limiting the  Employee's  representations  and warranties
set forth above, the Employee further agrees that the Employee shall in no event
make any  disposition  of all or any  portion of the  Shares  which he or she is
receiving unless and until:

(i) There is then in effect a  Registration  Statement  under the Securities Act
covering such proposed  disposition  and such  disposition is made in accordance
with said Registration Statement; or

(ii)  The  Employee  shall  have   (1) notified  the  Company  of  the  proposed
disposition  and  furnished  the  Company  with  a  detailed  statement  of  the
circumstances  surrounding  the  proposed  disposition,  and  (2) furnished  the
Company  with an opinion of the  Employee's  own counsel to the effect that such
disposition  will not require  registration  of such shares under the Securities
Act, and such opinion of the Employee"s  counsel shall have been concurred in by
counsel for the Company, and the Company shall have advised the Employee of such
concurrence.


9. Escrow. As security for the Employee's  faithful  performance of the terms of
this  Agreement and to insure the  availability  for delivery of the Shares upon
exercise of the  Unvested  Share  Repurchase  Option  herein  provided  for, the
Employee  agrees to a deposit  with the Company  (hereinafter  also known as the
"Escrow Agent"), as Escrow Agent in this transaction, two Stock Assignments duly
endorsed  (with date and number of shares blank) in the form attached  hereto as
Exhibit B, together with the certificate or certificates evidencing the Unvested
Shares; such documents are to be held by the Escrow Agent pursuant to the Escrow
Instructions  of the Company and the Employee  set forth in  Exhibit C  attached
hereto and  incorporated by this  reference,  which  instructions  shall also be
delivered to the Escrow Agent at the closing hereunder.

10.  Transfers  in  Violation of  Agreement.  The Company  shall not be required
(i) to  transfer  on its  books  any  Shares  which  shall  have  been  sold  or
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to  treat as owner of such  shares or to  accord  the right to vote as such
owner or to pay dividends to any  transferee to whom such shares shall have been
so transferred.

11. Rights as  Stockholder.  Subject to the  provisions of this  Agreement,  the
Employee  shall,  during  the term of this  Agreement,  exercise  all rights and
privileges of a stockholder of the Company with respect to the Shares  deposited
in escrow.

12. Further  Instruments.  The parties agree to execute such further instruments
and to take such further  action as may reasonably be necessary to carry out the
intent of this Agreement.

13. Notice. Any notice required or permitted hereunder shall be given in writing
and shall be deemed  effectively given upon personal delivery or upon deposit in
the United States Post Office,  by registered or certified mail with postage and
fees  prepaid,  addressed to the other party  hereto at the address  hereinafter
shown below the Employee's  signature or at such other address as such party may
designate by ten (10) days' advance written notice to the other party hereto.

14.  Successors and Assigns.  This  Agreement  shall inure to the benefit of the
successors  and  assigns of the  Company  and,  subject to the  restrictions  on
transfer herein set forth, be binding upon the Employee,  the Employee's  heirs,
executors, administrators, successors and assigns.

15. Entire  Agreement;  Amendments.  This Agreement,  together with the Exhibits
hereto,  shall be  construed  under the laws of the State of  California  (as it
applies to  agreements  between  California  residents,  entered  into and to be
performed entirely within  California),  and constitutes the entire agreement of
the parties  with respect to the subject  matter  hereof  superseding  all prior
written or oral agreements,  and no amendment or addition hereto shall be deemed
effective unless agreed to in writing by the parties hereto.

16. Right to Specific Performance. The Employee agrees that the Company shall be
entitled  to a  decree  of  specific  performance  of  the  terms  hereof  or an
injunction restraining violation of this Agreement, said right to be in addition
to any other remedies available to the Company.

17.  Separability.  If any  provision  of this  Agreement  is held by a court of
competent  jurisdiction  to be invalid,  void or  unenforceable,  the  remaining
provisions  shall  nevertheless  continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Agreement.

18. No Tax Advice. The grant of shares to the Employee shall represent income to
the Employee in 1999,  based upon the value of all of the shares  granted on the
Effective Date (not only on the shares vested). The income to the Employee shall
be the total number of shares granted times the value or share price, e.g. 1,000
shares  granted  times  $0.12 - $120 of income.  Employee  should  consider  tax
consequence  prior to agreeing to exchange  Stock Options for Stock Grants.  The
Company does not provide tax advice.


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

"COMPANY"                    "EMPLOYEE"
Signed:  __________________   Signed:  _____________________

Printed:  _________________   Printed:  ____________________

Title:  ___________________     Address:____________________
                                                            




                                    EXHIBIT A

                                CONSENT OF SPOUSE



I, ____________________________,  spouse of ___________, acknowledge that I have
read the Stock Grant  Agreement  dated as of January  ___,  1999,  to which this
Consent is attached as Exhibit A (the "Agreement") and that I know its contents.
I am aware that by its provisions  that The Lamaur  Corporation  (the "Company")
has the option to purchase  certain  shares of the  Company's  common stock (the
"Shares") which my spouse owns pursuant to the Agreement  including any interest
I might have therein.

I hereby agree that my interest,  if any, in the Shares subject to the Agreement
shall be  irrevocably  bound by the Agreement and further  understand  and agree
that any community property interest I may have in the Shares shall be similarly
bound by the Agreement.

Dated as of the ____ day of January __, 1999.



                 Signed: ________________________________________________

                  Printed: ______________________________________________





                                   EXHIBIT B
                      ASSIGNMENT SEPARATE FROM CERTIFICATE



FOR VALUE  RECEIVED,  ____________________________,  hereby  sells,  assigns and
transfers unto  _______________________  _____________________  (______________)
shares of the Common  Stock of The Lamaur  Corporation,  a Delaware  corporation
(the "Company"),  standing in the undersigned's name on the books of the Company
represented  by   Certificate   No.____________   herewith,   and  does  hereby
irrevocably constitute and appoint  ____________________________  my attorney to
transfer  the  said  stock  on the  books  of the  Company  with  full  power of
substitution in the premises.

Dated: January ___, 1999                                     

Signed: _________________________________

Printed: _________________________________






                                    EXHIBIT C

                               ESCROW INSTRUCTIONS



                                                              January __, 1999


The Lamaur Corporation
One Lovell Avenue
Mill Valley, CA  94941

To Whom it May Concern:

The Lamaur  Corporation,  a Delaware  corporation  (the "Company")  shall act as
Escrow Agent for itself and the undersigned grantee ("Employee") of Stock of the
Company (the "Shares"),  and therefore is hereby authorized and directed to hold
the documents  delivered to it pursuant to the terms of that certain Stock Grant
Agreement  ("Agreement"),  dated as of the date hereof, to which a copy of these
Escrow  Instructions is attached as Exhibit C,  in accordance with the following
instructions:

1. In the event the Company  and/or any  assignee of the  Company  (referred  to
collectively  for convenience  herein as the "Company")  shall elect to exercise
the Unvested Share  Repurchase  Option set forth in the  Agreement,  the Company
shall give to Employee a written  notice  specifying  the number of Shares to be
purchased,  the  purchase  price,  and the time for a closing  hereunder  at the
principal  office of the Company.  Employee  hereby  irrevocably  authorizes and
directs  the  Company to close the  transaction  contemplated  by such notice in
accordance with the terms of such notice.

2. At the  closing of a  transaction  pursuant  to  Paragraph 1,  the Company is
directed  (a) to  date the  stock  assignments  necessary  for the  transfer  in
question,  (b) to  fill in the number of Shares  being  transferred,  and (c) to
retain  same,  together  with  the  certificates  evidencing  the  Shares  to be
transferred, against the simultaneous delivery to Employee of the purchase price
(by check) for the number of Shares being purchased  pursuant to the exercise of
the Unvested Share Repurchase Option.

3.  Employee  irrevocably  authorizes  the  Company  to  hold  any  certificates
evidencing Unvested Shares and any additions and substitutions to said Shares as
defined in the  Agreement.  Employee  does  hereby  irrevocably  constitute  and
appoint the Company as the Employee's attorney-in-fact and agent for the term of
this escrow to execute with respect to such  securities all stock  certificates,
stock  assignments,  or other  documents  necessary or  appropriate to make such
securities negotiable and complete any transaction herein contemplated.  Subject
to the  provisions of this  paragraph 3,  Employee shall exercise all rights and
privileges  of a  shareholder  of the  Company  while the Shares are held by the
Company.

4. This escrow  shall  terminate  at such time as there are no longer any Shares
subject to the Unvested Share Repurchase Option.

5. If at the time of  termination  of this escrow the Company should have in its
possession any documents,  securities,  or other property belonging to Employee,
the Company shall deliver all of same to Employee and shall be discharged of all
further obligations hereunder.

6. The Company's duties hereunder may be altered,  amended,  modified or revoked
only by writing signed by all of the parties hereto.

7. The Company shall be obligated only for the performance of such duties as are
specifically  set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument  reasonably  believed by the Company to
be genuine and to have been signed or  presented by the proper party or parties.
The Company shall not be  personally  liable for any act it may do or omit to do
hereunder as Escrow Agent or as  attorney-in-fact  for Employee  while acting in
good faith and in the  exercise  of its own good  judgment,  and any act done or
omitted by you pursuant to the advice of your own attorneys  shall be conclusive
evidence of such good faith.

8. The Company is hereby expressly  authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or company,  excepting
only orders or process of courts of law, and is hereby  expressly  authorized to
comply  with and obey  orders,  judgments  or decrees of any court.  In case the
Company obeys or complies with any such order,  judgment or decree of any court,
the  Company  shall not be liable to any of the  parties  hereto or to any other
person,  firm or company by reason of such compliance,  notwithstanding any such
order, judgment or decree being subsequently reversed,  modified,  annulled, set
aside, vacated or found to have been entered without jurisdiction.

9. The Company  shall not be liable in any  respect on account of the  identity,
authorities  or rights of the parties  executing or  delivering or purporting to
execute or deliver the Agreement or any documents or papers  deposited or called
for hereunder.

10. The Company  shall not be liable for the  outlawing  of any rights under the
statute of limitations  with respect to these Joint Escrow  Instructions  or any
documents deposited with the Company.

11. The Company shall be entitled to employ such legal counsel and other experts
as it may  deem  necessary  or  proper  to  advise  it in  connection  with  its
obligations  hereunder,  may rely upon the advice of such  counsel,  and may pay
such counsel reasonable compensation therefor.

12.  If the  Company  reasonably  requires  other  or  further  instructions  in
connection  with these  Joint  Escrow  Instructions  or  obligations  in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.

13. It is  understood  and agreed that should any dispute  arise with respect to
the delivery and/or  ownership or rights of possession of the securities held by
the Company  hereunder,  the Company is authorized and directed to retain in its
possession without liability to any one all or any part of said securities until
such dispute shall have been settled either by mutual  written  agreement of the
parties  concerned  or by a final  order,  decree,  or  judgment  of a court  of
competent  jurisdiction  after the time for appeal has expired and no appeal has
been  perfected,  but the Company shall be under no duty whatsoever to institute
or defend any such proceedings.

14. Any notice  required or  permitted  hereunder  shall be given in writing and
shall be deemed  effectively given upon personal delivery or upon deposit in the
United  States  Post,  by  registered  or  certified  mail with postage and fees
prepaid,  addressed  to each of the  other  parties  thereunto  entitled  at the
following addresses,  or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.

         COMPANY:                               
Printed: _______________________________________________
                                                
Signed: ________________________________________________
                                                 
Title: _________________________________________________


         EMPLOYEE:                               
Printed:________________________________________________
                                                 
Signed: _______________________________________________

ESCROW AGENT:                           The Lamaur Corporation
                                        One Lovell Avenue
                                        Mill Valley, CA  94941
                                        Attn.: ___________________________

15.______This  instrument  shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.

"COMPANY"                                "EMPLOYEE"
Signed:  _________                        Signed:  _________

Printed:  ________                        Printed:  ________

Title:  __________


"ESCROW AGENT"


Signed:  _________

Printed:  ________

Title:  __________

<PAGE>
Exhibit 10.18
                          STOCK GRANT AGREEMENT (PLAN)

THIS AGREEMENT is made as of the day of January 13, 1999, (the "Effective Date")
by and between The Lamaur Corporation,  a Delaware  corporation (the "Company"),
and _______________,  an individual  ("Employee"),  together described herein as
(the "Parties").


                                   WITNESSETH:

WHEREAS,  the Company is willing to grant to the Employee  capital  stock of the
Company  pursuant  to the  Company's  1997  Stock  Plan and as herein  described
according to the terms and subject to the conditions hereinafter set forth;

WHEREAS,  the Employee  would like to receive a grant of the  Company's  capital
stock.

NOW, THEREFORE, in consideration for the mutual promises and covenants set forth
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which is hereby acknowledged,  the parties hereto hereby agree as
follows:

1.  Number of Shares and Price Per Share.  The  Company  agrees,  subject to the
execution of this  Agreement,  to grant to Employee,  pursuant to the  Company's
1997 Stock Plan,  ______________  shares of the Company's  Common Stock,  no par
value  (the  "Shares")  which  shares are priced at $_____ per share at close of
market as of the Effective Date (the "Market Price").

2. Unvested Share Repurchase Option. In the event the Employee's employment with
the Company is  terminated  for any  reason,  with or without  cause,  or if the
Employee or the  Employee's  legal  representative  attempts to sell,  exchange,
transfer,  pledge or otherwise  dispose of any shares received  pursuant to this
Agreement which have not vested  pursuant to  Section 2(a)  below (the "Unvested
Shares"),  the Company  shall have the right to reacquire  the  Unvested  Shares
under the terms and subject to the  conditions  set forth in this Section 2 (the
"Unvested Share Repurchase Option").

(a) Vesting of Shares.  The term "Initial Vesting Date" shall mean the Effective
Date. As of the Initial Vesting Date, one-sixth (16.67%) of the shares of Common
Stock,  consisting  of  ________________  of the  Shares,  will be vested in and
issued to the Employee.  The balance of the Shares  granted to the Employee will
become  "Vested  Shares" after the Initial  Vesting Date in accordance  with the
following schedule:

                  Date                                        Portion Vested

                  On the Initial Vesting Date
                  (January 13, 1999)                        ___________ Shares
                                                              (16.67% of Grant)

                  For each full six months of the
                  Company's employment of Employee
                  Following the Initial Vesting Date, and
                  Until fully vested.                       ____________ Shares
                                                              (16.67% of Grant)


Provided that the aggregate  percentage of the Shares constituting Vested Shares
may not  exceed one  hundred  percent  (100%),  and that such  numbers  shall be
adjusted   appropriately   to  reflect  any  stock  splits,   stock   dividends,
recombination's, recapitalizations or the like by the Company.

(b) Exercise of Unvested Share Repurchase  Option. If the Employee's  employment
with the Company is terminated for any reason or for no reason,  with or without
cause,  or if the Employee or the Employee's  legal  representative  attempts to
dispose of any  Unvested  Shares  other than as allowed in this  Agreement,  the
Company may exercise the Unvested Share  Repurchase  Option by written notice to
the Employee or the Employee's legal representative within sixty (60) days after
such  termination  or after the Company  has  received  notice of the  attempted
disposition.

(c)  Payment  for Shares and  Return of  Shares.  Payment by the  Company to the
Employee or the  Employee's  legal  representative  shall be made in cash within
sixty (60) days after the date of the mailing of the written  notice of exercise
of the Unvested Share  Repurchase  Option.  The purchase price per share for the
shares  being  purchased  by the Company  shall be an amount equal to the Market
Price specified in Section 1.

(d) Legends.  The Company  will place a legend  referencing  the Unvested  Share
Repurchase Option on any shares subject to the Unvested Share Repurchase Option.

(e) Assignment of Unvested Share Repurchase  Option. In the event the Company is
unable to exercise the Unvested Share Repurchase  Option, the Company shall have
the right to assign the Unvested Share Repurchase  Option to one or more persons
as may be selected by the Company.

3. Market Stand-Off Agreement. The Employee who's ownership of shares exceeds 1%
of the total issued  shares of the Company,  if requested by an  underwriter  of
common stock (or other  securities)  of the Company,  shall agree not to sell or
otherwise  transfer or dispose of any securities held by the Employee during the
one  hundred  eighty  (180)  day  period  following  the  effective  date  of  a
registration  statement of the Company filed under the  Securities  Act provided
that:

(a) such agreement shall only apply to the first such registration  statement of
the Company including shares of common stock (or other securities) to be sold on
its behalf to the public in an underwritten offering; and

(b) all securities  holders of the Company  holding more than one percent of the
outstanding  voting  stock,  all officers  and  directors of the Company and all
other holders of registration  rights of the Company (whether or not pursuant to
this agreement) agree to be bound by similar instructions.  Such agreement shall
be in writing in the form satisfactory to the Company and such underwriter.  The
Company may impose stop-transfer instructions with respect to the Shares subject
to the foregoing restriction until the end of the foregoing period.

4. Dividends,  etc. If, from time to time,  there is any stock  dividend,  stock
split or other change in the character or amount of any of the outstanding stock
of the Company,  then in such event any and all new  substituted  or  additional
securities  to which the  Employee  is  entitled  by  reason  of the  Employee's
ownership of the shares granted  pursuant to this Agreement shall be immediately
subject to the  Unvested  Share  Repurchase  Option and all other  terms of this
Agreement  immediately  before such event  including and in accordance  with the
formula set forth in Section 2(a) above.

5.  Restrictions  on Transfer of Unvested  Shares.  The  Employee  may not sell,
transfer,  pledge or  otherwise  dispose  of any  Shares  still  subject  to the
Unvested Share Repurchase Option.

6. Consent of Spouse.  If the Employee is married on the date of this Agreement,
the Employee's spouse shall execute a Consent of Spouse in the form of Exhibit A
hereto, effective on the date hereof. Such consent shall not be deemed to confer
or convey to the spouse any rights in the Shares that do not otherwise  exist by
operation of law or the agreement of the parties.

7.  Legends.  All  certificates  representing  Unvested  Shares  subject  to the
provisions of this Agreement shall have endorsed thereon the following legend:

(a) "THE SHARES  REPRESENTED  BY THIS  CERTIFICATE  ARE SUBJECT TO A  REPURCHASE
OPTION AND OTHER  RESTRICTIONS ON TRANSFER SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY."

8. Warranties and  Representations.  In connection with the grant of the Shares,
the Employee hereby agrees, represents and warrants as follows:

(a) The Employee is receiving the Shares solely for the  Employee's  own account
for  investment  and not with a view to,  or for sale in  connection  with,  any
distribution  thereof  within the meaning of the  Securities  Act.  The Employee
further  represents  that the  Employee  does not have any present  intention of
selling,  offering to sell or otherwise  disposing of or distributing the Shares
or any portion thereof, and that the entire legal and beneficial interest of the
Shares the Employee is receiving is being received for, and will be held for the
account  of, the  Employee  only and  neither in whole nor in part for any other
person.

(b) The  Employee  is aware of the  Company's  business  affairs  and  financial
condition and has acquired sufficient  information about the Company to reach an
informed and knowledgeable  decision to receive the Shares. The Employee further
represents  and warrants that the Employee has received all such  information as
the Employee deems  necessary and appropriate to enable the Employee to evaluate
the  financial  risk  inherent  in  ownership  of the  Shares  and has  received
satisfactory  and complete  information  concerning  the business and  financial
condition of the Company in response to all inquiries in respect thereof.

(c) The Employee  realizes that ownership of the Shares are highly  speculative,
and the Employee is able, without impairing the Employee's  financial condition,
to hold the  Shares  for an  indefinite  period of time and to suffer a complete
loss on the Shares.

9. Escrow. As security for the Employee's  faithful  performance of the terms of
this  Agreement and to insure the  availability  for delivery of the Shares upon
exercise of the  Unvested  Share  Repurchase  Option  herein  provided  for, the
Employee  agrees to a deposit  with the Company  (hereinafter  also known as the
"Escrow Agent"), as Escrow Agent in this transaction, two Stock Assignments duly
endorsed  (with date and number of shares blank) in the form attached  hereto as
Exhibit B, together with the certificate or certificates evidencing the Unvested
Shares; such documents are to be held by the Escrow Agent pursuant to the Escrow
Instructions  of the Company and the Employee  set forth in  Exhibit C  attached
hereto and  incorporated by this  reference,  which  instructions  shall also be
delivered to the Escrow Agent at the closing hereunder.

10.  Transfers  in  Violation of  Agreement.  The Company  shall not be required
(i) to  transfer  on its  books  any  Shares  which  shall  have  been  sold  or
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to  treat as owner of such  shares or to  accord  the right to vote as such
owner or to pay dividends to any  transferee to whom such shares shall have been
so transferred.

11. Rights as  Stockholder.  Subject to the  provisions of this  Agreement,  the
Employee  shall,  during  the term of this  Agreement,  exercise  all rights and
privileges of a stockholder of the Company with respect to the Shares  deposited
in escrow.

12. Further  Instruments.  The parties agree to execute such further instruments
and to take such further  action as may reasonably be necessary to carry out the
intent of this Agreement.

13. Notice. Any notice required or permitted hereunder shall be given in writing
and shall be deemed  effectively given upon personal delivery or upon deposit in
the United States Post Office,  by registered or certified mail with postage and
fees  prepaid,  addressed to the other party  hereto at the address  hereinafter
shown below the Employee's  signature or at such other address as such party may
designate by ten (10) days' advance written notice to the other party hereto.

14.  Successors and Assigns.  This  Agreement  shall inure to the benefit of the
successors  and  assigns of the  Company  and,  subject to the  restrictions  on
transfer herein set forth, be binding upon the Employee,  the Employee's  heirs,
executors, administrators, successors and assigns.

15. Entire  Agreement;  Amendments.  This Agreement,  together with the Exhibits
hereto,  shall be  construed  under the laws of the State of  California  (as it
applies to  agreements  between  California  residents,  entered  into and to be
performed entirely within  California),  and constitutes the entire agreement of
the parties  with respect to the subject  matter  hereof  superseding  all prior
written or oral agreements,  and no amendment or addition hereto shall be deemed
effective unless agreed to in writing by the parties hereto.

16. Right to Specific Performance. The Employee agrees that the Company shall be
entitled  to a  decree  of  specific  performance  of  the  terms  hereof  or an
injunction restraining violation of this Agreement, said right to be in addition
to any other remedies available to the Company.

17.  Separability.  If any  provision  of this  Agreement  is held by a court of
competent  jurisdiction  to be invalid,  void or  unenforceable,  the  remaining
provisions  shall  nevertheless  continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Agreement.

18. No Tax Advice. The grant of shares to the Employee shall represent income to
the Employee in 1999,  based upon the value of all of the shares  granted on the
Effective Date (not only on the shares vested). The income to the Employee shall
be the total number of shares granted times the value or share price, e.g. 1,000
shares  granted  times  $0.12 = $120 of income.  Employee  should  consider  tax
consequence  prior to agreeing to exchange  Stock Options for Stock Grants.  The
Company does not provide tax advice.


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

"COMPANY"               "EMPLOYEE"
Signed:  __________     Signed:  ______________

Printed:  _________     Printed:  _____________

Title:  __________     Address:__________
                                                          



                                 



                                    EXHIBIT A

                                CONSENT OF SPOUSE



I,  ____________________________,  spouse of  _____________,  acknowledge that I
have read the Stock Grant Agreement dated as of January ___, 1999, to which this
Consent is attached as Exhibit A (the "Agreement") and that I know its contents.
I am aware that by its provisions  that The Lamaur  Corporation  (the "Company")
has the option to purchase  certain  shares of the  Company's  common stock (the
"Shares") which my spouse owns pursuant to the Agreement  including any interest
I might have therein.

I hereby agree that my interest,  if any, in the Shares subject to the Agreement
shall be  irrevocably  bound by the Agreement and further  understand  and agree
that any community property interest I may have in the Shares shall be similarly
bound by the Agreement.

I am aware  that the legal,  financial  and  related  matters  contained  in the
Agreement  are  complex  and  that I am free to  seek  independent  professional
guidance or counsel  with  respect to this  Consent.  I have either  sought such
guidance or counsel or determined after reviewing the Agreement carefully that I
will waive such right.

Dated as of the ____ day of January __, 1999.



   Signed: ________________________________________________

   Printed: ______________________________________________




                                    EXHIBIT B

                      ASSIGNMENT SEPARATE FROM CERTIFICATE



FOR VALUE  RECEIVED,  ____________________________,  hereby  sells,  assigns and
transfers unto  _______________________  _____________________  (______________)
shares of the Common  Stock of The Lamaur  Corporation,  a Delaware  corporation
(the "Company"),  standing in the undersigned's name on the books of the Company
represented  by   Certificate   No.____________   herewith,   and  does  hereby
irrevocably constitute and appoint  ____________________________  my attorney to
transfer  the  said  stock  on the  books  of the  Company  with  full  power of
substitution in the premises.

Dated: January ___, 1999                                    

 Signed:_________________________________________________
Printed: _______________________________________________




                                               
                                    EXHIBIT C

                               ESCROW INSTRUCTIONS



                                                                 January 1999

The Lamaur Corporation
One Lovell Avenue
Mill Valley, CA  94941

To Whom it May Concern:

The Lamaur  Corporation,  a Delaware  corporation  (the "Company")  shall act as
Escrow Agent for itself and the undersigned grantee ("Employee") of Stock of the
Company (the "Shares"),  and therefore is hereby authorized and directed to hold
the documents  delivered to it pursuant to the terms of that certain Stock Grant
Agreement  ("Agreement"),  dated as of the date hereof, to which a copy of these
Escrow  Instructions is attached as Exhibit C,  in accordance with the following
instructions:

1. In the event the Company  and/or any  assignee of the  Company  (referred  to
collectively  for convenience  herein as the "Company")  shall elect to exercise
the Unvested Share  Repurchase  Option set forth in the  Agreement,  the Company
shall give to Employee a written  notice  specifying  the number of Shares to be
purchased,  the  purchase  price,  and the time for a closing  hereunder  at the
principal  office of the Company.  Employee  hereby  irrevocably  authorizes and
directs  the  Company to close the  transaction  contemplated  by such notice in
accordance with the terms of such notice.

2. At the  closing of a  transaction  pursuant  to  Paragraph 1,  the Company is
directed  (a) to  date the  stock  assignments  necessary  for the  transfer  in
question,  (b) to  fill in the number of Shares  being  transferred,  and (c) to
retain  same,  together  with  the  certificates  evidencing  the  Shares  to be
transferred, against the simultaneous delivery to Employee of the purchase price
(by check) for the number of Shares being purchased  pursuant to the exercise of
the Unvested Share Repurchase Option.

3.  Employee  irrevocably  authorizes  the  Company  to  hold  any  certificates
evidencing Unvested Shares and any additions and substitutions to said Shares as
defined in the  Agreement.  Employee  does  hereby  irrevocably  constitute  and
appoint the Company as the Employee's attorney-in-fact and agent for the term of
this escrow to execute with respect to such  securities all stock  certificates,
stock  assignments,  or other  documents  necessary or  appropriate to make such
securities negotiable and complete any transaction herein contemplated.  Subject
to the  provisions of this  paragraph 3,  Employee shall exercise all rights and
privileges  of a  shareholder  of the  Company  while the Shares are held by the
Company.

4. This escrow  shall  terminate  at such time as there are no longer any Shares
subject to the Unvested Share Repurchase Option.

5. If at the time of  termination  of this escrow the Company should have in its
possession any documents,  securities,  or other property belonging to Employee,
the Company shall deliver all of same to Employee and shall be discharged of all
further obligations hereunder.

6. The Company's duties hereunder may be altered,  amended,  modified or revoked
only by writing signed by all of the parties hereto.

7. The Company shall be obligated only for the performance of such duties as are
specifically  set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument  reasonably  believed by the Company to
be genuine and to have been signed or  presented by the proper party or parties.
The Company shall not be  personally  liable for any act it may do or omit to do
hereunder as Escrow Agent or as  attorney-in-fact  for Employee  while acting in
good faith and in the  exercise  of its own good  judgment,  and any act done or
omitted by you pursuant to the advice of your own attorneys  shall be conclusive
evidence of such good faith.

8. The Company is hereby expressly  authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or company,  excepting
only orders or process of courts of law, and is hereby  expressly  authorized to
comply  with and obey  orders,  judgments  or decrees of any court.  In case the
Company obeys or complies with any such order,  judgment or decree of any court,
the  Company  shall not be liable to any of the  parties  hereto or to any other
person,  firm or company by reason of such compliance,  notwithstanding any such
order, judgment or decree being subsequently reversed,  modified,  annulled, set
aside, vacated or found to have been entered without jurisdiction.

9. The Company  shall not be liable in any  respect on account of the  identity,
authorities  or rights of the parties  executing or  delivering or purporting to
execute or deliver the Agreement or any documents or papers  deposited or called
for hereunder.

10. The Company  shall not be liable for the  outlawing  of any rights under the
statute of limitations  with respect to these Joint Escrow  Instructions  or any
documents deposited with the Company.

11. The Company shall be entitled to employ such legal counsel and other experts
as it may  deem  necessary  or  proper  to  advise  it in  connection  with  its
obligations  hereunder,  may rely upon the advice of such  counsel,  and may pay
such counsel reasonable compensation therefor.

12.  If the  Company  reasonably  requires  other  or  further  instructions  in
connection  with these  Joint  Escrow  Instructions  or  obligations  in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.

13. It is  understood  and agreed that should any dispute  arise with respect to
the delivery and/or  ownership or rights of possession of the securities held by
the Company  hereunder,  the Company is authorized and directed to retain in its
possession without liability to any one all or any part of said securities until
such dispute shall have been settled either by mutual  written  agreement of the
parties  concerned  or by a final  order,  decree,  or  judgment  of a court  of
competent  jurisdiction  after the time for appeal has expired and no appeal has
been  perfected,  but the Company shall be under no duty whatsoever to institute
or defend any such proceedings.

14. Any notice  required or  permitted  hereunder  shall be given in writing and
shall be deemed  effectively given upon personal delivery or upon deposit in the
United  States  Post,  by  registered  or  certified  mail with postage and fees
prepaid,  addressed  to each of the  other  parties  thereunto  entitled  at the
following addresses,  or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.

COMPANY:         Printed: _______________________________________________

                 Signed: ________________________________________________

                 Title: _________________________________________________


         EMPLOYEE:   Printed:________________________________________________

                     Signed: ________________________________________________

         ESCROW AGENT:                           The Lamaur Corporation
                                                 One Lovell Avenue
                                                 Mill Valley, CA  94941
                                                 Attn.: _____________________

15.______This  instrument  shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.

"COMPANY"                                                    "EMPLOYEE"
Signed:  _________                                           Signed:  _________

Printed:  ________                                           Printed:  ________

Title:  __________


"ESCROW AGENT"


Signed:  _________

Printed:  ________

Title:  __________



<PAGE>


Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
<TABLE>
<CAPTION>


                                                                                   1998           1997            1996
                                                                               -------------- --------------  --------------
                                                                                  (In thousands, except per share data)

<S>                                                                             <C>            <C>                 <C>            
Net (Loss) Income                                                                     $ (209)     $ (19,360)          $ 553
Less: Dividends on Series B Preferred Stock                                             (400)          (400)           (233)
                                                                               -------------- --------------  --------------
                                                                              
Net (Loss) Income Available to Common Shareholders                                    $ (609)     $ (19,760)          $ 320
                                                                               ============== ==============  ==============
                                                                              

Weighted Average Common Shares Outstanding - Basic                                     5,854          5,685           4,557
                                                                               -------------- --------------  --------------
                                                                              
Basic (Loss) Income per Common Share                                                 $ (0.10)       $ (3.48)         $ 0.07
                                                                               ============== ==============  ==============

</TABLE>
<PAGE>
EX 23.1
AUDITOR'S CONSENT


INDEPENDENT AUDITOR'S CONSENT

We  consent  to the  incorporation  by  reference  in The  Lamaur  Corporation's
Registration  Statements  No.  333-12029  and No.  333-26811 of our report dated
March 30, 1999 on the financial  statements of The Lamaur Corporation  appearing
in this Annual Report on Form 10-K of The Lamaur  Corporation for the year ended
December 31, 1998.


Deloitte & Touche LLP
San Francisco, California
March 30, 1999