SCHEDULE 14A

                     Information Required in Proxy Statement

                            SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant to Section 14(a) of the
                         Securities Exchange Act of 1934


Filed by the Registrant [ X ]

Filed by a Party other than the Registrant [  ]

Check the appropriate box:

[X]    Preliminary Proxy Statement           [ ]   Confidential, for Use of the
[ ]    Definitive Proxy Statement                  Commission Only (as permitted
[ ]    Definitive Additional Materials             by Rule 14a-6(e)(2))
[ ]    Soliciting Material Pursuant
       to Rule 14a-11(c) or Rule 14a-12

                       Motorcar Parts & Accessories, Inc.
               -------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


               -------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement,
                          if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]     $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
        or Item 22(a)(2) of Schedule 14A.

[ ]     $500 per each party  to the  controversy pursuant to Exchange  Act Rule
        14a-6(i)(3).

[ ]     Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

         1)      Title of each class of securities to which transaction applies:

                 ---------------------------------------------------------------


                                                                  
                                                        


<PAGE>


         2)       Aggregate number of securities to which transaction applies:

                  --------------------------------------------------------------

         3)       Per  unit  price  or other  underlying  value  of  transaction
                  computed  pursuant  to  Exchange  Act Rule 0-11 (Set forth the
                  amount on which the filing fee is calculated  and state how it
                  was determined):

                  --------------------------------------------------------------

         4)       Proposed maximum aggregate value of transaction:

                  --------------------------------------------------------------

         5)       Total fee paid:

                  --------------------------------------------------------------

[ ]    Fee paid previously with preliminary materials.

[ ]    Check box if any part of the fee is offset as  provided  by  Exchange
       Act Rule  0-11(a)(2)  and identify the filing for which the  offsetting
       fee was paid  previously.  Identify the previous filing by registration
       statement number, or the Form or Schedule and the date of its filing.

         1)       Amount Previously Paid:

                  --------------------------------------------------------------

         2)       Form, Schedule or Registration Statement No.:

                  --------------------------------------------------------------

         3)       Filing Party:

                  --------------------------------------------------------------

         4)       Date Filed:

                  --------------------------------------------------------------


                                                                  
                                       -2-


<PAGE>


                                                               PRELIMINARY PROXY
                                                               -----------------

                       MOTORCAR PARTS & ACCESSORIES, INC.
                              2727 Maricopa Street
                           Torrance, California 90503

                                --------------------

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD ON AUGUST 22, 1996

To the Shareholders of Motorcar Parts & Accessories, Inc.:

                  NOTICE  IS  HEREBY  GIVEN  that the  1996  Annual  Meeting  of
Shareholders  (the  "Meeting")  of  Motorcar  Parts  &  Accessories,  Inc.  (the
"Company")  will be held at the offices of Parker Chapin Flattau & Klimpl,  LLP,
1211 Avenue of the Americas, New York, New York, on Thursday, August 22, 1996 at
10:30 A.M., New York City time, to consider and act upon the following matters:

(1)      The election of five  directors to serve until the next annual  meeting
         of shareholders and until their  respective  successors are elected and
         qualified;

(2)      The  approval  of  an  amendment  to  the  Company's   Certificate   of
         Incorporation  to increase  the number of  authorized  shares of Common
         Stock, par value $.01 per share, from 10,000,000 to 20,000,000;

(3)      The approval of an amendment to the Company's 1994 Stock Option Plan;

(4)      The ratification and approval of the appointment of Richard A. Eisner &
         Company, LLP as  the Company's independent certified public  accountant
         for the fiscal year ending March 31, 1997; and

(5)      The  transaction of such other business as may properly come before the
         Meeting or any adjournment or postponement thereof.

                  Information  regarding  the  matters  to be acted  upon at the
Meeting is contained in the accompanying Proxy Statement.

                  The close of  business  on July 8, 1996 has been  fixed as the
record date for the  determination of shareholders  entitled to notice of and to
vote at the Meeting or any adjournment or postponement thereof.

                                    By Order of the Board of Directors,

                                                         GARY J. SIMON
                                                          Secretary
Torrance, California
July 12, 1996

- --------------------------------------------------------------------------------

It is important that your shares be represented at the Meeting. Each shareholder
is  urged to sign,  date and  return  the  enclosed  proxy  card  which is being
solicited  on behalf of the Board of  Directors.  An envelope  addressed  to the
Company's  transfer  agent is enclosed  for that purpose and needs no postage if
mailed in the United States.

- --------------------------------------------------------------------------------


                                                         


<PAGE>



                       MOTORCAR PARTS & ACCESSORIES, INC.
                              2727 Maricopa Street
                           Torrance, California 90503

                              --------------------

                                 PROXY STATEMENT

                              --------------------

                  This Proxy  Statement  is  furnished  to the holders of Common
Stock,  par  value  $.01  per  share  ("Common  Stock"),  of  Motorcar  Parts  &
Accessories,  Inc. (the "Company") in connection with the solicitation by and on
behalf of its Board of Directors of proxies  ("Proxy" or  "Proxies")  for use at
the 1996 Annual Meeting of Shareholders  (the "Meeting") to be held on Thursday,
August 22,  1996,  at 10:30 A.M.,  New York City time,  at the offices of Parker
Chapin  Flattau & Klimpl,  LLP, 1211 Avenue of the Americas,  New York, New York
and at any  adjournment or postponement  thereof,  for the purposes set forth in
the  accompanying  Notice  of  Annual  Meeting  of  Shareholders.  The  cost  of
preparing,  assembling and mailing the Notice of Annual Meeting of Shareholders,
this Proxy Statement and Proxies is to be borne by the Company. The Company will
also  reimburse  brokers  who are  holders  of record of Common  Stock for their
expenses in forwarding  Proxies and Proxy soliciting  material to the beneficial
owners of such  shares.  In  addition  to the use of the mails,  Proxies  may be
solicited without extra compensation by directors, officers and employees of the
Company by telephone, telecopy, telegraph or personal interview. The approximate
mailing date of this Proxy Statement is July 15, 1996.

                  Unless  otherwise  specified,  all  Proxies,  in proper  form,
received  by the time of the  Meeting  will be  voted  for the  election  of all
nominees  named  herein  to  serve  as  directors  and in  favor  of each of the
proposals set forth in the accompanying Notice of Annual Meeting of Shareholders
and described below.

                  A Proxy may be revoked by a shareholder at any time before its
exercise by filing with Gary J. Simon,  the  Secretary  of the  Company,  at the
address set forth above,  an instrument  of revocation or a duly executed  proxy
bearing a later date,  or by  attendance  at the Meeting and electing to vote in
person.  Attendance  at the  Meeting  will  not,  in and of  itself,  constitute
revocation of a Proxy.

                  The close of  business  on July 8, 1996 has been  fixed by the
Board of Directors as the record date ("Record Date") for the  determination  of
shareholders  entitled  to  notice  of,  and to vote  at,  the  Meeting  and any
adjournment  thereof.  As of the Record  Date,  there were  4,864,500  shares of
Common Stock  outstanding.  Each share of Common Stock outstanding on the Record
Date will be entitled to one vote on all matters to come before the Meeting.

                  A majority  of the shares  entitled  to vote,  represented  in
person or by proxy,  is required to constitute a quorum for the  transaction  of
business. Proxies submitted which contain abstentions or broker nonvotes will be
deemed present at the Meeting for determining the presence of a quorum.

                                                         
                                                      


<PAGE>



                                   Proposal 1
                              ELECTION OF DIRECTORS

                  At the  Meeting,  shareholders  will elect five  directors  to
serve until the next annual meeting of shareholders  and until their  respective
successors are elected and qualified.  Unless  otherwise  directed,  the persons
named in the Proxy  intend to cast all  Proxies  received  for the  election  of
Messrs. Mel Marks,  Richard Marks,  Murray Rosenzweig,  Mel Moskowitz and Selwyn
Joffe  (the  "nominees")  to serve as  directors  upon their  nomination  at the
Meeting.  Each nominee has advised the Company of his  willingness to serve as a
director of the  Company.  In case any nominee  should  become  unavailable  for
election  to the Board of  Directors  for any reason,  the persons  named in the
Proxies  have  discretionary  authority  to  vote  the  Proxies  for one or more
alternative nominees who will be designated by the Board of Directors.

DIRECTORS AND EXECUTIVE OFFICERS:

                  The  directors and  executive  officers of the Company,  their
ages and present positions with the Company, are as follows:

     NAME                 AGE                 POSITION WITH THE COMPANY
  ---------               ---                 --------------------------

Mel Marks *                68                 Chairman of the Board of Directors
                                              and Chief Executive Officer

Richard Marks+             43                 President, Chief Operating Officer
                                              and Director

Murray Rosenzweig*+        70                 Director

Mel Moskowitz*+            62                 Director

Selwyn Joffe*+             38                 Director

Steven Kratz               40                 Vice President - Operations

Thomas Stricker            42                 Vice President - Sales

Peter Bromberg             31                 Chief Financial Officer and
                                              Assistant Secretary
- -----------
*       Member of Audit Committee
+       Member of Compensation Committee




                                                         
                                       -2-


<PAGE>



INFORMATION ABOUT DIRECTORS AND NOMINEES

                 The  following  is a brief  summary of the  background  of each
director and nominee:

                 MEL MARKS founded the Company in 1968.  Mr. Marks has served as
the  Company's  Chairman of the Board of Directors and Chief  Executive  Officer
since that time. Prior to founding the Company,  Mr. Marks was employed for over
twenty years by  Beck/Arnley-Worldparts,  a division of Echlin, Inc. (one of the
largest importers and distributors of parts for imported cars),  where he served
as Vice President. Mr. Marks is based in the Company's New York office.

                 RICHARD MARKS joined the Company in 1979.  Mr. Marks has served
as the  Company's  Vice  President of Sales and,  since 1987,  its President and
Chief  Operating  Officer.  Since 1979 he also has  served as a director  of the
Company.  Mr. Marks is based in the Company's Los Angeles  office.  Mr. Marks is
the son of Mel Marks.

                 MURRAY ROSENZWEIG has served as a director of the Company since
February  1994.  Since 1973,  Mr.  Rosenzweig  has been the  President and Chief
Executive Officer of Linden Maintenance Corp., which operates one of the largest
fleets of taxicabs in New York City. Mr.  Rosenzweig has been a certified public
accountant since 1953.

                 MEL  MOSKOWITZ  has served as a director of the  Company  since
February 1994. In 1957, he founded and, until 1989,  served as the President and
Chief  Executive  Officer of Rodi  Automotive,  Inc.,  a company  engaged in the
automotive parts distribution business. Since that time, Mr. Moskowitz has acted
as a private investor.

                 SELWYN JOFFE has served as a director of the Company since June
1994.  Since  September  1995,  Mr. Joffe also has served as a consultant to the
Company.  Since  1989,  Mr.  Joffe has been the  President  and Chief  Executive
Officer of Wolfgang Puck Food Company, LP, which owns and operates restaurants.

INFORMATION ABOUT NON-DIRECTOR EXECUTIVE OFFICERS

                 The  following  is a brief  summary of the  background  of each
executive officer of the Company who is not also a director of the Company:

                 STEVEN  KRATZ has been  employed  by the  Company  since  1988.
Before joining the Company,  he was General Manager of GKN Products  Company,  a
division of Beck/Arnley- Worldparts.  As Vice President - Operations,  Mr. Kratz
heads the Company's  research and  development  efforts and manages  production,
inventory planning and engineering.

                 THOMAS STRICKER has been employed by the Company in his present
capacity  since 1989.  Prior to joining the Company,  he was the National  Sales
Manager for Eurasian, a division of S.K.F. Bearing.


                                                         
                                       -3-


<PAGE>



                 PETER BROMBERG,  a certified  public  accountant,  has been the
Company's  Chief  Financial  Officer since March 1994.  For more than five years
prior thereto,  he was an accountant in the New York City firm of Kraft Haiken &
Bell, certified public accountants.

                 Section  16(a)  of the  Securities  Act of  1934,  as  amended,
requires the Company's  directors and  executive  officers,  and persons who own
more than ten percent of the Company's Common Stock, to file with the Securities
and Exchange  Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
To the  Company's  knowledge,  based  solely on a review  of the  copies of such
reports  furnished to the Company  during the year ended March 31,  1996,  there
were no late or delinquent  filings  except that Selwyn Joffe,  Steven Kratz and
Mel  Moskowitz  were  inadvertently  late in filing a report with respect to one
transaction.

COMMITTEES

                 All  directors of the Company hold office until the next annual
meeting of the  shareholders  and until their  successors  have been elected and
qualified.  The officers of the Company are elected by the Board of Directors at
the first meeting after each annual  meeting of the Company's  shareholders  and
hold office until their death, until they resign or until they have been removed
from office.  The Company has an Audit Committee of the Board of Directors.  The
function of the Audit  Committee  is to oversee the auditing  procedures  of the
Company,  receive and accept the reports of the Company's  independent certified
public  accountants,  oversee the Company's  internal  systems of accounting and
management controls and make recommendations to the Board of Directors as to the
selection and  appointment of the auditors for the Company.  The Audit Committee
met once during fiscal 1996.  The Company also has a  Compensation  Committee of
the  Board of  Directors.  The  function  of the  Compensation  Committee  is to
administer   the  Company's   1994  Stock  Option  Plan,   make  other  relevant
compensation  decisions  of the  Company  and such  other  matters  relating  to
compensation  as may be prescribed by the Board of Directors.  The  Compensation
Committee met twice during fiscal 1996.

                 The  Company's  Board of Directors  held five meetings and took
action by written  consent on two occasions  during fiscal 1996.  Each incumbent
director  attended each meeting of the Board of Directors  that occurred  during
his directorship in fiscal 1996.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

                 The members of the  Compensation  Committee  during fiscal 1996
were Messrs.  Rosenzweig and Moskowitz,  non-employee  directors of the Company,
and Messrs.  M. Marks and R. Marks,  executive  officers  and  directors  of the
Company.  No member of the Compensation  Committee has a relationship that would
constitute an interlocking  relationship with executive officers or directors of
another entity.


                                                         
                                       -4-


<PAGE>



PERFORMANCE GRAPH

                 The following  graph compares the cumulative  return to holders
of Common Stock from the date of the Company's  initial public offering on March
23,  1994 to March 31,  1994 and for the two fiscal  years  ended March 31, 1996
with the National  Association of Securities Dealers Automated  Quotation Market
Index  and a peer  group  index  of five  competing  companies  (1) for the same
period.  The  comparison  assumes  $100 was invested at the close of business on
March 23, 1994 in the Common  Stock and in each of the  comparison  groups,  and
assumes  reinvestment  of  dividends.  The Company paid no dividends  during the
periods.


                                 [Insert Graph]


                TOTAL SHAREHOLDER RETURNS - DIVIDENDS REINVESTED


Fiscal Year:   March

                                                        Yearly Returns


                                               Return
                                               3/23/94*     Return       Return
Company\Index Name                             3/31/94      3/31/95      3/31/96
================================================================================
MOTORCAR PARTS & ACCESSORIES, INC.              41.67        14.71         61.54
NASDAQ                                          -6.84        11.27         35.74
PEER GROUP                                      -6.93        -2.35         15.10


                                                Indexed\Cumulative Returns


                              Base
                              Period       Return      Return         Return
Company\Index Name            3/23/94      3/31/94     3/31/95        3/31/96
================================================================================
MOTORCAR PARTS &
  ACCESSORIES, INC.            100         141.67       162.50        262.50
NASDAQ                         100          93.16       103.66        140.71
PEER GROUP                     100          93.07        90.89        104.61




Peer Group Population:
======================
ARROW AUTOMOTIVE INDUSTRIES, INC.
DANA CORPORATION
ECHLIN INC.
THE STANDARD PRODUCTS COMPANY
SUPERIOR INDUSTRIES INTERNATIONAL, INC.




*  Client provided opening IPO price of $6.00 on March 23, 1994.





- --------
(1)     The peer group  selected by the Company include the following companies:
        The Standard  Products Company, Dana  Corporation, Echlin Inc., Superior
        Industries International, Inc. and Arrow  Automotive Industries, Inc.
                                                      
                                       -5-


<PAGE>



COMPENSATION COMMITTEE REPORT

        Overview and Philosophy
        -----------------------

                 The  Compensation  Committee  of  the  Board  of  Directors  is
composed of four directors,  three of whom are not employees of the Company. The
Compensation  Committee is responsible for developing and making recommendations
to the Board of Directors with respect to the Company's  executive  compensation
policies.  In  addition,  the  Compensation  Committee,  pursuant  to  authority
delegated by the Board of Directors,  determines the  compensation to be paid to
the Chief  Executive  Officer  and each of the other  executive  officers of the
Company.

                 The objectives of the Company's executive  compensation program
are to:

                    *    Support the achievement of desired Company performance.
                    *    Provide compensation  that  will  attract  and  retain
                          superior talent and reward performance.

                 The executive compensation program provides an overall level of
compensation   opportunity   that   is   competitive   within   the   automotive
remanufacturing  industry,  as well as with a  broader  group  of  companies  of
comparable size and complexity.

        Executive Officer Compensation Program
        --------------------------------------

                 The  Company's  executive  officer   compensation   program  is
comprised  of base salary,  annual cash  incentive  compensation,  non-qualified
deferred compensation and long-term incentive  compensation in the form of stock
options and various  benefits,  including  medical plans generally  available to
employees of the Company.

                 Base Salary.  Base salary  levels for the  Company's  executive
officers  are   competitively  set  relative  to  companies  in  the  automotive
remanufacturing industry. In determining salaries, the Committee also takes into
account individual  experience and performance and specific issues particular to
the Company.  The Company  considered  each of these  factors in  approving  the
salary  increases  for Mel Marks as well as for certain  other of the  Company's
executive officers.

                 Stock Option Program. The stock option program is the Company's
long-term incentive plan for providing an incentive to key employees  (including
directors and officers who are key employees),  consultants and to directors who
are not employees of the Company.

                 Deferred  Compensation.  The Company  contributes  on behalf of
each  executive  officer,  $.50  on  each  dollar,  up to 6% of  such  executive
officer's  annual  salary and bonus,  to the  Company's  non-qualified  deferred
compensation plan.



                                                         
                                       -6-


<PAGE>



                 Benefits.  The Company provides to executive officers,  medical
benefits  that  generally  are  available  to Company  employees.  The amount of
perquisites,  as determined in accordance  with the rules of the  Securities and
Exchange  Commission  relating to executive  compensation  did not exceed 10% of
salary for fiscal 1996.

                                           Richard Marks
                                           Murray Rosenzweig
                                           Mel Moskowitz
                                           Selwyn Joffe

                                           Members of the Compensation Committee

COMPENSATION OF DIRECTORS

                 Each of the Company's  non-employee  directors is paid a fee of
$1,000 for each  meeting of the Board of  Directors  attended  and $500 for each
meeting of a Committee  of the Board of  Directors  attended  and is  reimbursed
reasonable out-of-pocket expenses in connection therewith.

                 The Company's 1994 Non-Employee Director Stock Option Plan (the
"Non-Employee  Director Plan"), which is administered by the Board of Directors,
provides  that  each  non-employee  director  of the  Company  will  be  granted
thereunder  ten-year  options to purchase  1,500 shares of Common Stock upon his
initial  election  as  a  director  and  are  fully  exercisable  on  the  first
anniversary of the date of grant. The exercise price of the option will be equal
to the  fair  market  value  of the  Common  Stock  on the  date of  grant.  The
Non-Employee  Director  Plan was adopted by the Board of Directors on October 1,
1994, and by the  shareholders  in August 1995, in order to attract,  retain and
provide  incentive to directors who are not employees of the Company.  The Board
of Directors does not have authority, discretion or power to select participants
who will receive options pursuant to the Non-Employee  Director Plan, to set the
number of  shares  of Common  Stock to be  covered  by each  option,  to set the
exercise  price or period  within which the options may be exercised or to alter
other terms and conditions  specified in such plan. To date, options to purchase
4,500 shares of Common  Stock,  at an exercise  price of $8.125 per share,  have
been  granted  under the  Non-Employee  Director  Plan,  none of which have been
exercised.

                 In addition,  the Company's  1994 Stock Option Plan (the "Stock
Option Plan") provides that each  non-employee  director of the Company receives
formula grants of stock options as described below.  Each person who served as a
non-employee  director of the  Company  during all or part of a fiscal year (the
"Fiscal  Year") of the Company,  including  March 31 of that Fiscal  Year,  will
receive  on  the  immediately   following  April  30  (the  "Award  Date"),   as
compensation for services rendered in that Fiscal Year, an award under the Stock
Option Plan of immediately exercisable ten-year options to purchase 1,500 shares
of Common Stock (a "Full  Award") at an exercise  price equal to the fair market
value of the Common  Stock on the Award Date.  Each  non-employee  director  who
served during less than all of the Fiscal Year is awarded  one-twelfth of a Full
Award for each month or portion  thereof that he or she served as a non-employee
director of the Company. As formula

                                                         
                                       -7-


<PAGE>



grants under the Stock Option Plan, the foregoing grants of options to directors
are  not  subject  to  the  determinations  of the  Board  of  Directors  or the
Compensation Committee.

                 In  September  1995,  the  Company  entered  into a  three-year
consulting  agreement with Selwyn Joffe, a director of the Company,  pursuant to
which Mr. Joffe is to provide certain financial advisory and consulting services
to the Company.  The agreement provides that Mr. Joffe receive,  as compensation
for his services thereunder, a one-time grant of immediately-exercisable options
under the Stock  Option Plan to  purchase  15,000  shares of Common  Stock at an
exercise  price equal to the fair market value of the Common Stock on that date.
Accordingly, in September 1995, Mr. Joffe was granted options to purchase 15,000
shares of Common Stock at an exercise price of $13.125 per share.


                                                         
                                       -8-


<PAGE>




                          SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT


                 The  following  table sets forth,  as of June 6, 1996,  certain
information as to the Common Stock ownership of each of the Company's  directors
and  nominees  for  director,  each  of the  officers  included  in the  Summary
Compensation  Table below,  all executive  officers and directors as a group and
all persons known by the Company to be the  beneficial  owners of more than five
percent of the Company's Common Stock.



                                                     Amount and
                                                     Nature of
Name and Address                                     Beneficial         Percent
of Beneficial Shareholder                            Ownership(1)       of Class
- -------------------------                            ------------       --------
Mel Marks                                              698,511            14.5%
        c/o Motorcar Parts & Accessories, Inc.
        2727 Maricopa Street
        Torrance, CA 90503
Richard Marks                                          484,782(2)         10.1%
        c/o Motorcar Parts & Accessories, Inc.
        2727 Maricopa Street
        Torrance, CA 90503
Gary J. Simon, Esq.(3)                                 262,714             5.4%
        c/o Parker Chapin Flattau & Klimpl, LLP
        1211 Avenue of the Americas
        New York, NY 10036
Steven Kratz                                            45,000(4)          (8)
        c/o Motorcar Parts & Accessories, Inc.
        2727 Maricopa Street
        Torrance,  CA  90503
Peter Bromberg                                          20,000(4)          (8)
        c/o Motorcar Parts & Accessories, Inc.
        2727 Maricopa Street
        Torrance,  CA  90503
Thomas Stricker                                         15,000(4)          (8)
        c/o Motorcar Parts & Accessories, Inc.
        2727 Maricopa Street
        Torrance,  CA  90503



                                                         
                                       -9-


<PAGE>



                                                   Amount and
                                                   Nature of
Name and Address                                   Beneficial           Percent
of Beneficial Shareholder                          Ownership(1)         of Class
- -------------------------                         ------------          --------
Murray Rosenzweig                                   12,500(5)              (8)
        34 Knolls Drive
        Manhasset Hills, NY  11042
Mel Moskowitz                                        6,500(5)              (8)
        6963 Queen Ferry Circle
        Boca Raton, FL  33496
Selwyn Joffe                                        20,150(6)              (8)
        c/o Wolfgang Puck Food Company
        1333 2nd Street
        Santa Monica, CA  90401
Directors and executive                          1,302,443(7)             26.2%
        officers as a group
        (8 persons)
- ------------------
(1)      The listed  shareholders,  unless otherwise  indicated in the footnotes
         below, have direct ownership over the amount of shares indicated in the
         table.

(2)      Includes  142,857  shares held by The  Richard  Marks  Trust,  of which
         Richard Marks is a Trustee and a beneficiary,  3,500 shares held by Mr.
         Marks' wife and 6,300 shares held by his son.

(3)      Gary J. Simon, by virtue of his shared voting and dispositive  power as
         a Trustee over the shares held by both The Richard  Marks Trust and The
         Debra Schwartz Trust,  may be deemed the beneficial owner of a total of
         260,714  shares,  representing  the  aggregate  share  holdings  of the
         trusts.

(4)      Represents  shares  issuable  upon  exercise of  currently  exercisable
         options granted under the Stock Option Plan.

(5)      Includes 3,000 shares  issuable upon exercise of currently  exercisable
         options  granted under the Stock Option Plan and 1,500 shares  issuable
         upon  exercise  of  currently  exercisable  options  granted  under the
         Non-Employee Director Plan.

(6)      Includes 17,750 shares issuable upon exercise of currently  exercisable
         options  granted under the Stock Option Plan and 1,500 shares  issuable
         upon  exercise  of  currently  exercisable  options  granted  under the
         Non-Employee Director Plan.


                                                         
                                      -10-


<PAGE>



(7)      Includes 103,750 shares issuable upon exercise of currently exercisable
         options  granted under the Stock Option Plan and 4,500 shares  issuable
         upon  exercise  of  currently  exercisable  options  granted  under the
         Non-Employee Director Plan.

(8)      Less than 1%.


                                                         
                                      -11-


<PAGE>



                             EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

                  The  following  table sets forth  information  concerning  the
annual  compensation  of the Company's  chief  executive  officer and other most
highly compensated executive officers,  whose salary and bonus exceeded $100,000
for the 1996 fiscal year,  for services in all  capacities to the Company during
the Company's 1996, 1995 and 1994 fiscal years.

                           SUMMARY COMPENSATION TABLE


<TABLE>

                                                                                                                   Long Term
                                                                          Annual Compensation                      Compensation
                                                             -------------------------------------------------     ------------
                                                                                                Other Annual       Shares Underlying
Name and Principal Position                    Year           Salary             Bonus          Compensation(1)    Options
- ------------------------------------           ----          --------          --------         ---------------    -----------------
<S>                                            <C>           <C>               <C>               <C>                 <C>
Mel Marks                                      1996          $252,000          $175,000              --                --
 Chairman of the Board and                     1995          $252,969          $ 50,000              --                --
 Chief Executive Officer                       1994          $250,000              --                --                --

Richard Marks                                  1996          $252,145          $175,000          $  9,060              --
   President and Chief                         1995          $252,969          $ 50,000              --                --
   Operating Officer                           1994          $250,000              --                --                --

Steven Kratz                                   1996          $152,395          $ 75,000          $  4,569            35,000
   Vice President -                            1995          $128,442          $ 10,000              --                --
   Operations                                  1994          $105,031              --                --              65,000

Peter Bromberg                                 1996          $100,057          $ 40,000          $  3,180             5,000
   Chief Financial Officer                     1995          $ 85,000              --                --                --
   and Assistant Secretary                     1994              --                --                --              20,000

Thomas Stricker                                1996          $100,087          $ 40,000          $  3,150              --
   Vice President -                            1995          $122,268              --                --              25,000
    Sales                                      1994          $117,173              --                --                --

</TABLE>


- -------------------------
(1)      Represents  amounts  subject to the  Company's  non-qualified  deferred
         compensation plan contributed on the executive employee's behalf by the
         Company.



                                                         
                                      -12-


<PAGE>



                        Option Grants in Last Fiscal Year



<TABLE>
                                                                                                   Potential Realizable
                                                                                                   Value at Assumed
                                                                                                   Annual Rates of Stock
                    Number of           % of Total                                                 Price Appreciation for
                    Securities          Options Granted                                            Option Terms
                    Underlying          to Employees         Exercise or      Expiration           --------------------- 
Name                Options Granted     in Fiscal 1996       Base Price       Date                    5%($)        10%($)
- ----                ---------------     -------------------  --------------   ------------------      -----        ------
<S>                    <C>                    <C>            <C>                     <C> <C>        <C>           <C>     
Steven Kratz           35,000(1)              31.96          $13.125/share    August 31, 2005       $288,925      $730,275
Peter Bromberg         5,000(2)                4.57          $13.125/share    August 31, 2005       $ 41,275      $104,325
</TABLE>


- ---------------
(1)      The options are exercisable as follows:   15,000 shares on September 1,
         1997 and 20,000 shares on September 1, 1998.
(2)      The options are immediately exercisable.


                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR END OPTION VALUES



<TABLE>

                                                           Number of Securities          Value of Unexercised
                                                           Underlying Unexercised        in-the-Money Options
                     Shares Acquired        Value          Options at Fiscal Year End    at Fiscal Year End
Name                 on Exercise (#)        Realized ($)   Exercisable/Unexercisable     Exercisable/Unexercisable(1)
- ----                 -------------------    ------------   ---------------------------   ----------------------------
<S>                        <C>               <C>                <C>    <C>                     <C>      <C>    
Steven Kratz               10,000            $85,000            55,000/35,000                  $536,250/$91,875
Thomas Stricker            3,750             $23,750            21,250/0                       $162,031/$0
Peter Bromberg             0                 $0                 25,000/0                       $208,125/$0
</TABLE>


- ---------------
(1)      Based  on the  closing bid price per share of $15.75 on the last day of
         fiscal 1996.

                  The  Company  has  obtained  individual  term  life  insurance
policies  covering  each of Mel Marks,  Richard  Marks and  Steven  Kratz in the
amount of $1,400,000,  $1,650,000 and $1,000,000,  respectively.  The Company is
the sole beneficiary  under these policies.  The Company has obtained  directors
and  officers  liability  insurance  in the  amount of  $10,000,000.  The annual
premium for this insurance is $108,900.

                  The  Company  has  agreed  to  fund on a  split  dollar  basis
approximately  $6,000,000 of  survivorship  life insurance on the joint lives of
Mel Marks  and his wife.  The  aggregate  annual  premiums  are  expected  to be
approximately  $52,000.  Under the agreements the Company will be reimbursed for
its premium costs either by insurance proceeds upon the death of the insureds or
out  of  the  cash  surrender  value  or  otherwise  upon   termination  of  the
arrangement.


                                                         
                                      -13-


<PAGE>



EMPLOYMENT AGREEMENTS

                  The Company has entered into an employment  agreement with Mel
Marks  pursuant to which he is employed  full-time as the Company's  Chairman of
the Board and Chief Executive  Officer.  The agreement expires in September 1999
and  provides  for an annual base salary of  $300,000.  The  Company's  Board of
Directors  also may grant  bonuses or increase  the base  salary  payable to Mr.
Marks.  In addition to his cash  compensation,  Mr. Marks receives an automobile
allowance  and other  benefits,  including  those  generally  provided  to other
employees of the Company. The agreement further provides for a severance payment
of one year's salary upon termination of employment under certain circumstances.
In  addition,   in  the  event  of  the  termination  of  employment  (including
termination by Mr. Marks for "good reason")  within two years after a "change in
control" of the Company,  Mr. Marks will (except if termination is for cause) be
entitled  to  receive a lump sum  payment  equal in amount to the sum of (i) Mr.
Marks' base salary and average three-year bonus through the termination date and
(ii) three times the sum of such salary and bonus. In addition, the Company must
in such circumstances continue Mr. Marks' then current employee benefits for the
remainder of the term of the employment agreement.  In no case, however, may Mr.
Marks receive any payment or benefit in  connection  with a change in control in
excess of 2.99 times his "base  amount" (as that term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code")).

                  The Company has entered into an employment  agreement with Mr.
Richard  Marks  pursuant  to which he is  employed  full-time  as the  Company's
President and Chief Operating  Officer.  The agreement expires in September 2000
and  provides  for an annual base salary of  $300,000.  The  Company's  Board of
Directors  also may grant  bonuses or increase  the base  salary  payable to Mr.
Marks.  In addition to his cash  compensation,  Mr. Marks receives an automobile
allowance  and other  benefits,  including  those  generally  provided  to other
employees of the Company. The agreement further provides for a severance payment
of one year's salary upon termination of employment under certain circumstances.
In  addition,   in  the  event  of  the  termination  of  employment  (including
termination by Mr. Marks for "good reason")  within two years after a "change in
control" of the Company,  Mr. Marks will (except if termination is for cause) be
entitled  to  receive a lump-sum  payment  equal in amount to the sum of (i) Mr.
Marks' base salary and average three-year bonus through the termination date and
(ii) three times the sum of such salary and bonus. In addition, the Company must
in such circumstances continue Mr. Marks' then current employee benefits for the
remainder of the term of the employment agreement.  In no case, however, may Mr.
Marks receive any payment or benefit in  connection  with a change in control in
excess of 2.99 times his "base  amount" (as that term is defined in Section 280G
of the Code).

                  The Company has entered into an employment  agreement with Mr.
Steven Kratz  pursuant to which he is employed  full-time as the Company's  Vice
President - Operations. The agreement expires in September 1999 and provides for
an annual base salary of $175,000.  The  Company's  Board of Directors  also may
grant bonuses or increase the base salary  payable to Mr. Kratz.  In addition to
his cash compensation, Mr. Kratz has exclusive use of a Company-owned automobile
and he receives additional benefits, including those that are generally provided
to other employees of the Company. Pursuant to the agreement, Mr. Kratz also has
been granted options

                                                         
                                      -14-


<PAGE>



under the Stock  Option Plan to  purchase  65,000  shares of Common  Stock at an
exercise  price of $6.00 per share,  20,000 of which have been exercised and the
remainder of which are fully vested.

                  The Company has entered into an employment  agreement with Mr.
Peter Bromberg pursuant to which he is employed full-time as the Company's Chief
Financial  Officer.  The agreement expires in September 1998 and provides for an
annual  base salary of  $120,000.  In  addition  to his cash  compensation,  Mr.
Bromberg  receives an automobile  allowance and additional  benefits,  including
those that are generally provided to other employees of the Company. Pursuant to
the agreement, Mr. Bromberg also has been granted options under the Stock Option
Plan to purchase 20,000 shares of Common Stock at an exercise price of $6.00 per
share,  5,000 of which have been  exercised and the remainder of which are fully
vested.

                  In conformity with the Company's policy,  all of its directors
and officers  execute  confidentiality  and  nondisclosure  agreements  upon the
commencement of employment with the Company.  The agreements  generally  provide
that all  inventions  or  discoveries  by the employee  related to the Company's
business  and  all  confidential  information  developed  or made  known  to the
employee  during the term of employment  shall be the exclusive  property of the
Company and shall not be disclosed to third parties  without  prior  approval of
the Company. The Company's employment agreements with Messrs. Marks and Bromberg
also  contain  non-competition  provisions  that  preclude  each  employee  from
competing  with  the  Company  for a  period  of two  years  from  the  date  of
termination of his employment. The Company's employment agreement with Mr. Kratz
contains a non-competition provision which precludes him from competing with the
Company for a period of one year from the date of termination of his employment.
Public policy limitations and the difficulty of obtaining  injunctive relief may
impair the Company's  ability to enforce the  non-competition  and nondisclosure
covenants made by its employees.

                                                         
                                      -15-


<PAGE>



                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


                  The Company conducts business with an affiliated  entity,  MVR
Products Pte Limited  ("MVR"),  which is 70%-owned by Mel and Richard  Marks and
30%-owned by Vincent  Quek,  a resident of Singapore  who is not an affiliate of
the Company. MVR operates a shipping warehouse and testing facility in Singapore
and does business with Unijoh Sdn, Bhd ("Unijoh"), which is an affiliated entity
70%-owned  by  Messrs.   Marks  and  30%-owned  by  Mr.  Quek.  Unijoh  conducts
remanufacturing  operations  similar to those  conducted  by the  Company at its
remanufacturing  facility.  Prior to the current  fiscal year, MVR had conducted
similar   operations.   The  Company  believes  that  its  costs  in  purchasing
remanufactured  products from Unijoh are lower than costs that would be incurred
by  remanufacturing  those  products at the Company's  facility or in purchasing
them  in  independent  arms-length  transactions.  All  of the  alternators  and
starters  processed  by  Unijoh  are  produced  for the  Company  on a  contract
remanufacturing basis. The Company provides Unijoh with raw materials and Unijoh
conducts the same  remanufacturing  operations as are conducted at the Company's
remanufacturing  facility,  with similar  quality  control  standards  and other
internal  controls.  During fiscal 1996 and 1995, the Company  incurred costs of
approximately   $1,432,000  and   $1,349,000,   respectively,   to  its  foreign
affiliates.

                                                         
                                      -16-


<PAGE>



                                   Proposal 2
            APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
              INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK


                  On April 18, 1996, the Board of Directors  unanimously adopted
a  resolution  approving a proposal  to amend  Article  Fourth of the  Company's
Certificate  of  Incorporation  to increase the number of shares of Common Stock
which the Company is authorized  to issue from  10,000,000  to  20,000,000.  The
Board of Directors determined that such amendment is advisable and directed that
the proposed amendment be considered at the Meeting.

PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK

                  The proposed  amendment would increase the number of shares of
Common  Stock  which the  Company  is  authorized  to issue from  10,000,000  to
20,000,000.  The  additional  10,000,000  shares will be a part of the  existing
class of Common  Stock and,  if and when  issued,  will have the same rights and
privileges as the shares of Common Stock presently issued and outstanding.  Each
share of Common  Stock  entitles  the holder to one vote.  The holders of Common
Stock of the Company are not entitled to preemptive rights or cumulative voting.

                  Reference is made to the proposed  amendment to Article Fourth
of the  Company's  Certificate  of  Incorporation  which is set forth  under the
heading   "Proposed  New  Article   Fourth  to  the  Company's   Certificate  of
Incorporation" in Exhibit A to this Proxy Statement.

                  The  Board of  Directors  believes  that the  adoption  of the
proposed  amendment is  advantageous  to the Company and its  shareholders.  The
proposed  amendment would provide  additional  authorized shares of Common Stock
that could be used from time to time, without further action or authorization by
the  shareholders  (except as may be required by law or by any stock exchange on
which the Company's securities may then be listed), for corporate purposes which
the Board of Directors may deem desirable,  including, without limitation, stock
splits, stock dividends or other distributions,  financings, acquisitions, stock
grants, stock options and employee benefit plans.

                  The  authority  possessed  by the Board of  Directors to issue
Common Stock could also potentially be used to discourage  attempts by others to
obtain control of the Company  through  merger,  tender offer,  proxy contest or
otherwise by making such attempts more difficult or costly to achieve.

                  If  the  proposed   amendment  is  adopted,   there  would  be
14,608,000  authorized  shares  of  Common  Stock  that are not  outstanding  or
reserved for issuance.  As of the Record Date, the Company had 4,864,500  shares
of Common  Stock issued and 528,000  shares of Common Stock  reserved for future
issuance upon the exercise of certain warrants and options.

                  THE BOARD OF DIRECTORS  RECOMMENDS THAT  SHAREHOLDERS VOTE FOR
THIS PROPOSAL.

                                                         
                                      -17-


<PAGE>



                                   Proposal 3
        APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN

                  The Company's 1994 Stock Option Plan (the "Stock Option Plan")
was adopted by the  Company's  Board of Directors  and approved by the Company's
shareholders  in January 1994 and amended by the  shareholders in September 1994
to  increase  the  number of shares  available  under the Stock  Option  Plan to
450,000 and to annually award to non-employee  directors  options to purchase up
to 1,500 shares of Common  Stock.  On April 18,  1996,  the  Company's  Board of
Directors  approved an amendment to the Stock Option Plan and directed  that the
amendment  be  submitted  to the  Company's  shareholders  for  approval  at the
Meeting.  The  amendment  provides  for an increase by 270,000,  from 450,000 to
720,000,  in the  number  of shares of  Common  Stock for which  options  may be
granted  under  the  Stock  Option  Plan.  The Board of  Directors  adopted  the
amendment upon evaluating the Company's existing  compensation  programs and the
Company's long-range goals and expansion plans.

                  The Board  concluded that the increase in the number of shares
of Common Stock  covered by the Stock Option Plan was  necessary for the Company
to continue to attract, motivate and retain qualified employees and directors.

                  Subject to shareholder  approval of the amendment to the Stock
Option Plan, set forth below is the number of shares of Common Stock  underlying
options  currently  determined to be granted under the Stock Option Plan to each
of the persons indicated:

                             1994 Stock Option Plan
                             ----------------------

         Name and Position             Dollar Value        Number of Options (1)
         -----------------             ------------        ---------------------

Mel Marks (CEO)                             $0                     0
Richard Marks (President and COO)           $0                     0
Steven Kratz (VP-Operations)                $0                     0
Thomas Stricker (VP-Sales)                  $0                     0
Peter Bromberg (CFO)                        $0                     0
Executive Group                             $0                     0
Non-Executive Director Group                $0                     0
Non-Executive Officer Employee Group        $0                     0

- ----------------

(1)      No grants of options under the Stock Option Plan have been determined.

                                                         
                                      -18-


<PAGE>



THE 1994 STOCK OPTION PLAN

         The  following  is a  discussion  of certain  terms of the Stock Option
Plan, as amended:

         Types of Grants and Eligibility
         -------------------------------

         The Stock  Option  Plan is  designed  to  provide an  incentive  to key
employees (including officers and directors who are key employees), non-employee
directors and consultants of the Company and its present and future subsidiaries
and to  offer  an  additional  inducement  in  obtaining  the  services  of such
individuals.  The Stock Option Plan provides for the grant of  "incentive  stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and nonqualified stock options ("NQSOs").

         Shares Subject to the Stock Option Plan
         ---------------------------------------

         The aggregate number of shares of Common Stock for which options may be
granted  under the Stock  Option  Plan may not exceed  720,000.  Such  shares of
Common Stock may consist  either in whole or in part of authorized  but unissued
shares of Common  Stock or shares of Common  Stock held in the  treasury  of the
Company.  Shares of Common  Stock  subject  to an  option  which for any  reason
expires, is canceled or is terminated unexercised or which ceases for any reason
to be exercisable  may again become  available for the granting of options under
the Stock Option Plan.

         Administration of the Stock Option Plan
         ---------------------------------------

         The Stock  Option Plan is  administered  by a committee of the Board of
Directors (the "Committee") consisting of not less than three directors, each of
whom is a  "disinterested  person"  within the meaning of rules and  regulations
promulgated by the Securities and Exchange Commission.  In addition, in order to
comply  with  Section  162(m)  of the  Code,  the  Stock  Option  Plan  must  be
administered  by  a  committee  consisting  solely  of  at  least  two  "outside
directors" (within the meaning of such section).

         Subject  to the  express  provisions  of the  Stock  Option  Plan,  the
Committee has the  authority,  in its sole  discretion,  with respect to options
other than Director Options (as defined below) to determine, among other things:
the key employees and  consultants  who are to receive  options;  the times when
they may receive  options;  whether an option granted to an employee is to be an
ISO or a NQSO;  the  number  of shares of  Common  Stock to be  subject  to each
option; the term of each option; the date each option is to become  exercisable;
whether an option is to be  exercisable  in whole,  in part or in  installments,
and, if in  installments,  the number of shares of Common Stock to be subject to
each installment;  whether the installments are to be cumulative;  the date each
installment is to become  exercisable and the term of each installment;  whether
to accelerate the date of exercise of any installment;  whether shares of Common
Stock may be issued on  exercise  of an option as partly  paid,  and, if so, the
dates when future  installments  of the exercise price are to become due and the
amounts of such  installments;  the exercise  price of each option;  the form of
payment of the exercise price; whether to restrict the sale or other disposition
of the shares of Common Stock acquired upon the

                                                         
                                      -19-


<PAGE>



exercise of an option and to waive any such restriction;  and whether to subject
the  exercise  of  all  or any  portion  of an  option  to  the  fulfillment  of
contingencies as specified in an applicable stock option contract.  With respect
to all options,  the Committee has such  discretion to determine the amount,  if
any,  necessary to satisfy the Company's  obligation to withhold taxes; with the
consent of the optionee, to cancel or modify an option,  provided such option as
modified  would be  permitted  to be granted on such date under the terms of the
Stock  Option  Plan;  to  prescribe,  amend and  rescind  rules and  regulations
relating  to the  Stock  Option  Plan;  and to  make  all  other  determinations
necessary or advisable for administering the Stock Option Plan.

         Director Options
         ----------------

         On each April 30 during the term of the Stock Option Plan,  each person
who is a  non-employee  director  of the  Company  ("Outside  Director")  on the
immediately preceding March 31 will be granted an option ("Director Options") to
purchase 125 shares of Common Stock for each month or portion thereof during the
12-month  period  ended on such March 31 that such  person  served as an Outside
Director.  In the event the remaining shares available for grant under the Stock
Option  Plan are not  sufficient  to grant  the  Director  Options  to each such
Outside  Director  in any year,  the number of shares  subject  to the  Director
Options for such year is to be reduced  proportionately.  The Committee does not
have any  discretion  with  respect to the  selection  of  Directors  to receive
Director  Options or the amount,  the price or the timing with respect  thereto.
Outside Directors are not permitted to receive any other options under the Stock
Option Plan.

         Exercise Price
         --------------

         The  exercise  price of the shares of Common  Stock  under each  option
other than  Director  Options is to be determined  by the  Committee;  provided,
however,  that the exercise price is not to be less than 100% of the fair market
value of the  Common  Stock  subject  to such  option on the date of grant;  and
further  provided,  that if, at the time an ISO is granted,  the  optionee  owns
shares  possessing  more  than 10% of the  total  combined  voting  power of all
classes of stock of the Company,  of any of its subsidiaries or of a parent, the
exercise price of such ISO may not be less than 110% of the fair market value of
the Common Stock subject to such ISO on the date of grant. The exercise price of
the  shares of Common  Stock  under  each  Director  Option is equal to the fair
market value of the Common Stock subject to the option on the date of grant.

         Term
         ----
         The term of each employee or consultant  option granted pursuant to the
Stock Option Plan is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
ISO  granted  pursuant  to the  Stock  Option  Plan  is to be for a  period  not
exceeding 10 years from the date of grant thereof,  and further  provided,  that
if, at the time an ISO is granted, the optionee owns shares possessing more than
10% of the total  combined  voting power of all classes of stock of the Company,
of any of its  subsidiaries  or of a parent,  the term of the ISO is to be for a
period not exceeding five years from the date of grant.  Each Director Option is
to be exercisable for a term of 10 years commencing on the date of grant.

                                                         
                                      -20-


<PAGE>



         Exercise
         --------

         An option (or any part or  installment  thereof),  to the  extent  then
exercisable,  is to be exercised by giving  written notice to the Company at its
principal  office.  Payment in full of the aggregate  exercise price may be made
(a) in cash or by certified  check, or (b) in the case of an option other than a
Director Option, if the applicable stock option contract at the time of grant so
permits,  with  previously  acquired  shares of Common Stock having an aggregate
fair market  value,  on the date of exercise,  equal to the  aggregate  exercise
price of all options being exercised, or with any combination of cash, certified
check or shares of Common Stock.

         The Committee  may, in its  discretion,  permit payment of the exercise
price of an option by delivery by the optionee of a properly  executed  exercise
notice,  together  with  a copy  of his  irrevocable  instructions  to a  broker
acceptable  to the  Committee  to deliver  promptly to the Company the amount of
sale or loan proceeds sufficient to pay such exercise price.

         Termination of Relationship
         ---------------------------

         Any employee holder of an option whose employment with the Company (and
its parent and  subsidiaries) has terminated for any reason other than his death
or disability may exercise such option, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not  thereafter  and in no event after the date the option  would  otherwise
have expired; provided, however, that if his employment is terminated either (a)
for cause,  or (b) without the consent of the  Company,  said option  terminates
immediately.  Options  granted to employees  under the Stock Option Plan are not
affected  by any  change  in the  status  of the  holder  so  long  as he or she
continues to be a full-time  employee of the  Company,  its parent or any of its
subsidiaries  (regardless  of having been  transferred  from one  corporation to
another).

         The  termination of an optionee's  relationship  as a consultant of the
Company or of a subsidiary  of the Company will not affect the option  except as
may otherwise be provided in the applicable  stock option  contract.  A Director
Option may be exercised at any time during its 10 year term. The Director Option
will not be  affected  by the holder  ceasing to be a director of the Company or
becoming an employee or consultant of the Company or any of its subsidiaries.

         Death or Disability
         -------------------

         If an optionee dies (a) while he is employed by the Company, its parent
or any of its subsidiaries, (b) within three months after the termination of his
employment  (unless such termination was for cause or without the consent of the
Company),  or (c) within one year following the termination of his employment by
reason of  disability,  an  employee's  option may be  exercised,  to the extent
exercisable on the date of his death,  by his executor,  administrator  or other
person at the time entitled by law to his rights under such option,  at any time
within one year after death,  but not  thereafter and in no event after the date
the option would otherwise have expired.


                                                         
                                      -21-


<PAGE>



         Any optionee  whose  employment  has terminated by reason of disability
may exercise his option,  to the extent  exercisable  upon the effective date of
such  termination,  at any  time  within  one  year  after  such  date,  but not
thereafter  and in no event  after  the date the  option  would  otherwise  have
expired.

         The death or disability of a consultant  optionee to whom an option has
been granted  under the Stock Option Plan will not effect the option,  except as
may otherwise be provided in the applicable stock option contract. The term of a
Director Option will not be affected by the death or disability of the optionee.
In such case,  the  option my be  exercised  at any time  during its term by his
executor,  administrator  or other  person  at the time  entitled  by law to the
optionee's rights under such option.

         Adjustments Upon Changes in Common Stock
         ----------------------------------------

         Notwithstanding  any other  provisions of the Stock Option Plan, in the
event  of any  change  in the  outstanding  Common  Stock by  reason  of a share
dividend, recapitalization,  merger or consolidation in which the Company is the
surviving corporation,  split-up, combination or exchange of shares or the like,
the aggregate  number and kind of shares  subject to the Stock Option Plan,  the
aggregate number and kind of shares subject to each  outstanding  option and the
exercise price thereof will be appropriately adjusted by the Board of Directors,
whose determination will be conclusive.

         In the event of (a) the liquidation or dissolution of the Company,  (b)
a merger or consolidation in which the Company is not the surviving corporation,
or (c) any other capital reorganization (other than a recapitalization) in which
more than 50% of the shares of Common Stock of the Company  entitled to vote are
exchanged,  any outstanding  options will  terminate,  unless other provision is
made therefor in the transaction.

         Amendments and Termination of the Stock Option Plan
         ---------------------------------------------------

         No option may be granted  under the Stock Option Plan after January 27,
2004.  The  Board  of  Directors,  without  further  approval  of the  Company's
shareholders,  may at any time  suspend or  terminate  the Plan,  in whole or in
part, or amend it from time to time in such  respects as it may deem  advisable,
including,  without  limitation,  in order that ISOs granted thereunder meet the
requirements for "incentive stock options" under the Code and to comply with the
provisions of certain rules and  regulations  promulgated  by the Securities and
Exchange Commission,  among other things;  provided,  however, that no amendment
may be effective without the requisite prior or subsequent  shareholder approval
which would (a) except as required for anti-dilution  adjustments,  increase the
maximum  number of shares of Common Stock for which options may be granted under
the Stock  Option Plan,  (b)  materially  increase the benefits to  participants
under the Stock  Option Plan,  or (c) change the  eligibility  requirements  for
individuals entitled to receive options under the Stock Option Plan.


                                                         
                                      -22-


<PAGE>



         Non-Transferability of Options
         ------------------------------

         No  option  granted  under the Stock  Option  Plan may be  transferable
otherwise than by will or the laws of descent and distribution,  and options may
be exercised,  during the lifetime of the holder thereof, only by such holder or
such  holder's  legal  representatives.  Except to the  extent  provided  above,
options may not be assigned,  transferred,  pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise)  and may not be subject to
execution, attachment or similar process.

         Withholding Taxes
         -----------------

         The  Company may  withhold  cash  and/or  shares of Common  Stock to be
issued  having an  aggregate  fair  market  value  equal to the amount  which it
determines is necessary to satisfy its obligation to withhold Federal, state and
local income taxes or other taxes incurred by reason of the grant or exercise of
an option,  its  disposition,  or the  disposition of the  underlying  shares of
Common  Stock.  Alternatively,  the Company may require the holder to pay to the
Company  such amount,  in cash,  promptly  upon  demand.  The Company may not be
required to issue any shares of Common  Stock  pursuant to any such option until
all required payments have been made.

         Federal Income Tax Treatment
         ----------------------------

         The  following  is  a  general   summary  of  the  Federal  income  tax
consequences  under  current  tax law of ISOs and NQSOs.  It does not purport to
cover special rules  relating to, among other things,  the exercise of an option
with  previously  acquired  shares  nor  state or  local  income  or  other  tax
consequences  inherent in the  ownership  and exercise of stock  options and the
ownership and disposition of the underlying shares.

         Generally,  a holder  does not  recognize  taxable  income for  Federal
income tax purposes upon the grant of an ISO or NQSO.

         In the case of an ISO, no taxable income is recognized upon exercise of
the option.  If the  optionee  disposes of the shares  acquired  pursuant to the
exercise of an ISO more than two years after the date of grant and more than one
year after the transfer of the shares to him or her, the optionee will recognize
long-term  capital  gain or loss  and the  Company  will  not be  entitled  to a
deduction.  However, if the optionee disposes of such shares within the required
holding  period (a  "disqualifying  disposition"),  a portion of his or her gain
equal to the  excess  of the fair  market  value  of the  shares  on the date of
exercise  over the  exercise  price (but not more than the gain  realized on the
disposition)  will be treated as ordinary  income and the Company will generally
be entitled to a deduction for such amount.  Any additional gain or loss will be
treated as a long-term or  short-term  capital gain or loss.  Long-term  capital
gain is generally taxed at a more favorable rate than ordinary income.  Proposed
legislation  would  make such  treatment  even more  favorable.  There can be no
assurance, however, that such proposed legislation will be enacted.


                                                         
                                      -23-


<PAGE>



         Upon the exercise of a NQSO, the holder  recognizes  ordinary income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise  price of the NQSO; the holder's basis in
the  shares  acquired  is equal  to the  amount,  if any,  paid  upon  exercise,
increased by the amount of ordinary  income  required to be recognized;  and the
Company is generally  entitled to a deduction for the amount of ordinary  income
recognized  by the  holder.  If the  optionee  later  sells the shares  acquired
pursuant to the NQSO, he or she will recognize  long-term or short-term  capital
gain or loss depending upon the optionee's holding period for the stock.

         In addition to the Federal income tax consequences  described above, an
optionee  who  exercises an ISO may be subject to the  alternative  minimum tax,
which is payable to the extent it exceeds the  optionee's  regular tax. For this
purpose, upon the exercise of an ISO, the excess of the fair market value of the
shares on the date of exercise over the exercise  price  therefor is an increase
to his or her alternative  minimum taxable income.  In addition,  the optionee's
basis in such shares is increased  by such amount for purposes of computing  the
gain or loss on the  disposition  of the  shares  for  alternative  minimum  tax
purposes.  If an optionee is required to pay an  alternative  minimum  tax,  the
amount of such tax which is attributable to deferral preferences  (including the
ISO  adjustment)  is allowed as a credit  against  the  optionee's  regular  tax
liability  in  subsequent  years.  To the extent  the credit is not used,  it is
carried forward.

         THE  BOARD OF  DIRECTORS  RECOMMENDS  THAT  SHAREHOLDERS  VOTE FOR THIS
PROPOSAL.



                                                         
                                      -24-


<PAGE>



                                   Proposal 4
                           RATIFICATION OF APPOINTMENT
                                       OF
                        INDEPENDENT CERTIFIED ACCOUNTANTS


                  The Board of Directors  believes it is  appropriate  to submit
for approval by its shareholders its appointment of Richard A. Eisner & Company,
LLP as the Company's independent certified public accountant for the fiscal year
ending March 31, 1997.

                  Representatives  of  Richard  A.  Eisner  &  Company,  LLP are
expected to be present at the Meeting with the  opportunity  to make a statement
and to be  available  to  respond  to  questions  regarding  these and any other
appropriate matters.

         THE  BOARD OF  DIRECTORS  RECOMMENDS  THAT  SHAREHOLDERS  VOTE FOR THIS
PROPOSAL.

                               VOTING REQUIREMENTS

                  Directors are elected by a  plurality of the votes cast at the
Meeting  (Proposal 1). The affirmative  vote of the holders of a majority of the
outstanding  shares of Common Stock will be required to approve the amendment to
the  Certificate  of  Incorporation  (Proposal 2). The  affirmative  vote of the
majority of votes cast at the Meeting will be required to approve the  amendment
to the  Company's  1994  Stock  Option  Plan  (Proposal  3) and  to  ratify  the
appointment of Richard A. Eisner & Company as independent  certified accountants
and auditors of the Company for the fiscal year ending March 31, 1997  (Proposal
4).  Abstentions  and  broker  nonvotes  with  respect  to any  matter  are  not
considered as votes cast with respect to that matter.

                  The Board of Directors has  unanimously  recommended a vote in
favor of each Nominee named in the Proxy and FOR Proposals 2, 3 and 4.

                                  MISCELLANEOUS

SHAREHOLDER PROPOSALS

                  Any shareholder  proposal intended to be presented at the 1997
Annual  Meeting of  Shareholders  must be received by the Company not later than
March 15, 1997 for inclusion in the Company's  proxy statement and form of proxy
for that meeting.

OTHER MATTERS

                  Management  does not intend to bring  before the  Meeting  for
action any matters  other than those  specifically  referred to above and is not
aware of any other matters which are proposed to be presented by others.  If any
other matters or motions should properly come before the Meeting,

                                                         
                                      -25-


<PAGE>



the persons named in the Proxy intend to vote thereon in  accordance  with their
judgment on such matters or motions,  including  any matters or motions  dealing
with the conduct of the Meeting.

PROXIES

                  All  shareholders  are  urged  to fill in their  choices  with
respect to the matters to be voted on,  sign and  promptly  return the  enclosed
form of Proxy.

                                   By Order of the Board of Directors,

                                         GARY J. SIMON
                                          Secretary

July 12, 1996



                                                         
                                      -26-



<PAGE>


                                                                   Exhibit A

                       PROPOSED NEW ARTICLE FOURTH TO THE
                     COMPANY'S CERTIFICATE OF INCORPORATION

                (Changes from current Article Fourth are shaded)


                  "FOURTH:  The aggregate number of shares which the Corporation
is authorized to issue is 25,000,000 shares,  consisting of 20,000,000 shares of
                          ----------                        ----------
Common  Stock  of the par  value of $.01  per  share  and  5,000,000  shares  of
Preferred Stock of the par value of $.01 per share.

                  The relative rights, preferences and limitations of the shares
of each class of capital stock are as follows:

                  (a)      COMMON STOCK.

                           (1)  Subject  to the  rights of  any  other  class or
series of stock,  the  holders of shares of Common  Stock  shall be  entitled to
receive,  when and as declared by the Board of  Directors,  out of the assets of
the Corporation  legally available  therefor,  such dividends as may be declared
from time to time by the Board of Directors.

                           (2)  Subject to  such  rights of  any other  class or
series of securities as may be granted from time to time,  the holders of shares
of Common  Stock shall be entitled to receive all the assets of the  Corporation
available  for  distribution  to  shareholders  in the event of the voluntary or
involuntary liquidation,  dissolution or winding up of the Corporation, ratably,
in proportion to the number of shares of Common Stock held by them.  Neither the
merger or consolidation  of the Corporation  into or with any other  corporation
nor the  merger  or  consolidation  of any  other  corporation  into or with the
Corporation nor the sale, lease, exchange or other disposition (for cash, shares
of stock,  securities or other  consideration)  of all or substantially  all the
assets of the  Corporation  shall be deemed to be a dissolution,  liquidation or
winding up, voluntary or involuntary, of the Corporation.

                           (3)  Common Stock shall not be subject to redemption.

                           (4)  Subject to such voting rights of any other class
or series of  securities  as may be granted  from time to time  pursuant to this
Certificate of Incorporation,  any amendment  thereto,  or the provisions of the
laws of the State of New York  governing  business  corporations,  voting rights
shall be vested  exclusively  in the  holders of Common  Stock.  Each  holder of
Common Stock shall have one vote in respect of each share of such stock held.

                  (b) PREFERRED STOCK. The Board of Directors of the Corporation
is authorized,  subject to  limitations  prescribed by law and the provisions of
this Certificate of Incorporation,  to provide for the issuance of the Preferred
Stock in series,  and by filing a certificate  pursuant to the New York Business
Corporation Law, to establish the number of shares to be included in each

                                                         
                                       A-1


<PAGE>



such  series,  and to fix the  designation,  relative  rights,  preferences  and
limitations  of the shares of each such  series.  The  authority of the Board of
Directors  with  respect to each series  shall  include,  but not be limited to,
determination of the following:

                          (1)  the number of shares constituting that series and
the distinctive designation of that series;

                          (2) whether the holders of shares of that series shall
be  entitled  to receive  dividends  and,  if so,  the rates of such  dividends,
conditions  under which and times such  dividends  may be declared or paid,  any
preference of any such dividends to, and the relation to, the dividends  payable
on any other class or classes of stock or any other series of the same class and
whether dividends shall be cumulative or non-cumulative and, if cumulative, from
which date or dates;

                           (3) whether the holders of shares of that series have
voting rights in addition to the voting  rights  provided by law and, if so, the
terms and conditions of exercise of such voting rights;

                          (4) whether shares of that series shall be convertible
into or exchangeable for shares of any other class, or any series of the same or
any other class,  and, if so, the terms and  conditions  thereof,  including the
date or dates when such shares shall be  convertible  into or  exchangeable  for
shares of any other  class,  or any series of the same or any other  class,  the
price or prices of or the rate or rates at which  shares of such series shall be
so convertible or exchangeable, and any adjustments which shall be made, and the
circumstances in which any such adjustments shall be made, in such conversion or
exchange prices or rates;

                           (5)  whether  the  shares  of  that  series  shall be
redeemable,  and, if so, the terms and conditions of such redemption,  including
the date or dates upon or after  which they shall be  redeemable  and the amount
per share payable in case of redemption,  which amount may vary under  different
conditions and at different redemption dates;

                           (6)  whether  the  shares  of that series  shall  be 
subject to the operation of a retirement or sinking fund and, if so subject, the
extent and the manner in which it shall be applied to the purchase or redemption
of the  shares of that  series,  and the terms and  provisions  relative  to the
operation thereof;

                           (7)  the rights of the shares of that series in the
event of voluntary or involuntary liquidation,  dissolution or winding up of the
Corporation  and any  presence of any such rights to, and the  relation  to, the
rights in respect  thereto of any class or classes of stock or any other  series
of the same class; and

                           (8)  any  other  relative  rights,  preferences  and 
limitations of that series; provided,  however, that if the stated dividends and
amounts  payable  on  liquidation  with  respect  to shares of any series of the
Preferred Stock are not paid in full, the shares of all series of the

                                                         
                                      A-2


<PAGE>



Preferred  Stocks  shall  share  ratably in the payment of  dividends  including
accumulations,  if any,  in  accordance  with the sums which would be payable on
such  shares  if all  dividends  were  declared  and  paid in  full,  and in any
distribution  of assets (other than by way of dividends) in accordance  with the
sums which  would be  payable  on such  distribution  if all sums  payable  were
discharged in full.



                                                         
                                       A-3


<PAGE>



                                   PROXY CARD


PROXY                                                                     PROXY
- -----                                                                     -----

                       MOTORCAR PARTS & ACCESSORIES, INC.
                 (Solicited on behalf of the Board of Directors)


                  The  undersigned  holder of Common  Stock of MOTORCAR  PARTS &
ACCESSORIES,  INC., revoking all proxies heretofore given, hereby constitute and
appoint Mel Marks and Richard Marks and each of them,  Proxies,  with full power
of  substitution,  for the undersigned  and in the name,  place and stead of the
undersigned, to vote all of the undersigned's shares of said stock, according to
the  number of votes and with all the powers the  undersigned  would  possess if
personally present, at the 1996 Annual Meeting of Shareholders of MOTORCAR PARTS
&  ACCESSORIES,  INC.,  to be held at the  offices  of Parker  Chapin  Flattau &
Klimpl,  LLP,  1211 Avenue of the  Americas,  New York,  New York,  on Thursday,
August 22, 1996 at 10:30 A.M.,  New York City time, and at any  adjournments  or
postponements thereof.

                  The undersigned hereby  acknowledges  receipt of the Notice of
Meeting and Proxy Statement relating to the meeting and hereby revokes any proxy
or proxies heretofore given.

                  Each properly  executed Proxy will be voted in accordance with
the specifications  made on the reverse side of this Proxy and in the discretion
of the Proxies on any other  matter that may come before the  meeting.  Where no
choice is  specified,  this Proxy will be FOR all  listed  nominees  to serve as
directors and FOR each of the proposals set forth on the reverse side.


            PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE



                                                         
                                     


<PAGE>


     The Board of Directors  Recommends  a Vote FOR all listed  nominees and FOR
each of Proposals 2, 3 and 4


1.   Election of five Directors
     |_| FOR all nominees listed (except as marked to the contrary)

         Nominees:  Mel Marks, Richard Marks,  Murray Rosenzweig,
         Mel Moskowitz and Selwyn Joffe
         (Instruction: To withhold authority to vote for any individual nominee,
          circle that nominee's name in the list provided above.)

     |_|WITHHOLD AUTHORITY
        to vote for all listed nominees

2.   Proposal  to  approve  an  amendment  to  the  Company's   Certificate   of
     Incorporation to increase the number of authorized  shares of Common Stock,
     par value $.01 per share, from 10,000,000 to 20,000,000.
     |_|  FOR            |_| AGAINST          |_| ABSTAIN

3.   Proposal to approve an amendment to the Company's 1994 Stock Option Plan.
     |_|  FOR            |_| AGAINST          |_| ABSTAIN

4.   Proposal to ratify the Board of Director's selection of Richard A. Eisner &
     Company, LLP as the Company's  independent  certified public accountant for
     the year ending March 31, 1997.
     |_|  FOR            |_| AGAINST          |_| ABSTAIN

5.   The proxies are authorized to vote in their discretion upon such other
     matters as may properly come before the meeting.
     |_|  FOR            |_| AGAINST          |_| ABSTAIN



     The shares represented by this proxy will be voted in the manner
directed.  In the absence of any direction, the shares will be voted FOR
each nominee named in Proposal No. 1 and FOR each of Proposals 2, 3
and 4 and in accordance with their discretion on such other matters as
may properly come before the meeting.
Dated _________________________________________________________, 1996

_____________________________________________________________________

_____________________________________________________________________
                            Signature(s)
(Signature(s)  should conform to names as registered.  For jointly owned shares,
each owner should  sign.  When  signing as  attorney,  executor,  administrator,
trustee, guardian or officer of a corporation, please give full title).

                   PLEASE MARK AND SIGN ABOVE AND
                           RETURN PROMPTLY




<PAGE>


                             1994 STOCK OPTION PLAN

                                       of

                       MOTORCAR PARTS & ACCESSORIES, INC.

                         (as amended on April 18, 1996)



                      1.      PURPOSES OF THE PLAN.  This stock option plan (the
"Plan") is designed to provide an incentive to key employees (including officers
and directors who are key employees), Outside Directors (as defined in Paragraph
19)  and  consultants  of  Motorcar  Parts  &  Accessories,  Inc.,  a  New  York
corporation (the "Company"), and its present and future subsidiary corporations,
as  defined  in  Paragraph  19  ("Subsidiaries"),  and to  offer  an  additional
inducement in obtaining the services of such individuals.  The Plan provides for
the grant of "incentive  stock options"  ("ISOs")  within the meaning of Section
422 of the  Internal  Revenue  Code  of  1986,  as  amended  (the  "Code"),  and
nonqualified  stock options  ("NQSOs"),  but the Company makes no warranty as to
the qualification of any option as an "incentive stock option" under the Code.

                     2.     STOCK SUBJECT TO THE PLAN. Subject to the provisions
of Paragraph 12, the aggregate number of shares of Common Stock,  $.01 par value
per share,  of the Company  ("Common  Stock")  for which  options may be granted
under the Plan shall not exceed 720,000. Such shares of Common Stock may, in the
discretion of the Board of Directors of the Company (the "Board of  Directors"),
consist either in whole or in part of authorized  but unissued  shares of Common
Stock or shares of Common Stock held in the treasury of the Company. The Company
shall at all times during the term of the Plan reserve and keep  available  such
number  of  shares  of  Common  Stock  as  will be  sufficient  to  satisfy  the
requirements of the Plan.  Subject to the provisions of Paragraph 13, any shares
of Common Stock subject to an option which for any reason expires,  is cancelled
or is terminated  unexercised  or which ceases for any reason to be  exercisable
shall again become available for the granting of options under the Plan.

                      3.      ADMINISTRATION  OF THE PLAN.   The Plan  shall  be
administered  by a  committee  of  the  Board  of  Directors  (the  "Committee")
consisting  of  not  less  than  three  Directors,  each  of  whom  shall  be  a
"disinterested  person"  within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the  "Exchange  Act").  A  majority  of  the  members  of the  Committee  shall
constitute  a quorum,  and the acts of a majority of the members  present at any
meeting at which a quorum is  present,  and any acts  approved in writing by all
members without a meeting, shall be the acts of the Committee.

                    Subject to the express provisions of the Plan, the Committee
shall have the  authority,  in its sole  discretion,  with  respect to  Employee
Options  (as  defined in  Paragraph  19) and  Consultant  Options (as defined in
Paragraph 19): to determine the key employees and

                                                                     
                                       -1-


<PAGE>



consultants  who shall  receive  options;  the times  when  they  shall  receive
options;  whether an Employee  Option  shall be an ISO or a NQSO;  the number of
shares of Common  Stock to be subject to each  option;  the term of each option;
the date each  option  shall  become  exercisable;  whether  an option  shall be
exercisable in whole, in part or in installments,  and, if in installments,  the
number of shares of Common Stock to be subject to each installment;  whether the
installments  shall  be  cumulative;  the date  each  installment  shall  become
exercisable and the term of each installment;  whether to accelerate the date of
exercise of any  installment;  whether  shares of Common  Stock may be issued on
exercise  of an  option as partly  paid,  and,  if so,  the  dates  when  future
installments  of the  exercise  price  shall  become due and the amounts of such
installments;  the  exercise  price of each  option;  the form of payment of the
exercise price;  whether to restrict the sale or other disposition of the shares
of Common  Stock  acquired  upon the exercise of an option and to waive any such
restriction;  whether to subject the exercise of all or any portion of an option
to the fulfillment of  contingencies  as specified in the Contract (as described
in Paragraph  11),  including  without  limitations,  contingencies  relating to
entering  into a covenant  not to compete  with the  Company  and its Parent and
Subsidiaries, to financial objectives for the Company, a Subsidiary, a division,
a product line or other category,  and/or the period of continued  employment of
the optionee with the Company or its Subsidiaries, and to determine whether such
contingencies  have been met; and, with respect to Employee Options,  Consultant
Options  and  Director  Options (as defined in  Paragraph  19): to construe  the
respective Contracts and the Plan; to determine the amount, if any, necessary to
satisfy the  Company's  obligation  to withhold  taxes;  with the consent of the
optionee, to cancel or modify an option,  provided such option as modified would
be  permitted  to be  granted  on such date  under  the  terms of the  Plan;  to
prescribe,  amend and rescind rules and regulations relating to the Plan; and to
make all other determinations necessary or advisable for administering the Plan.
The determinations of the Committee on the matters referred to in this Paragraph
3 shall be  conclusive.  No member or former  member of the  Committee  shall be
liable for any action or  determination  made in good faith with  respect to the
Plan or any option granted hereunder.

                      4.      ELIGIBILITY; GRANTS. The Committee may, consistent
with the purposes of the Plan,  grant Employee Options from time to time, to key
employees   (including  officers  and  directors  who  are  key  employees)  and
Consultant  Options to  consultants  of the Company or any of its  Subsidiaries.
Options  granted  shall  cover  such  number of  shares  of Common  Stock as the
Committee may determine;  provided,  however,  that the maximum number of shares
subject to options that may be granted to any employee in any fiscal year of the
Company  under the Plan (the  "162(m)  Maximum")  may not  exceed  100,000;  and
further,  provided,  that the aggregate market value (determined at the time the
option is granted) of the shares of Common Stock for which any eligible employee
may be granted  ISOs under the Plan or any other  plan of the  Company,  or of a
Parent or a Subsidiary of the Company,  which are exercisable for the first time
by such  optionee  during  any  calendar  year shall not  exceed  $100,000.  The
$100,000  ISO  limitation  shall be applied by taking  ISOs into  account in the
order in which they were granted. Any option (or the portion thereof) granted in
excess of such amount shall be treated as a NQSO.


                                                                     
                                       -2-


<PAGE>



                     Beginning on April 30, 1995 and on each April 30 thereafter
during  the term of the Plan,  each  person who is an  Outside  Director  on the
immediately preceding March 31 shall be granted an option to purchase 125 shares
of Common Stock for each month or portion  thereof  during the  12-month  period
ended on such March 31 that such person  served as an Outside  Director.  In the
event the remaining shares available for grant under the Plan are not sufficient
to grant the  Director  Options to each such Outside  Director in any year,  the
number of shares subject to the Director  Options for such year shall be reduced
proportionately. The Committee shall not have any discretion with respect to the
selection of Directors to receive Director  Options or the amount,  the price or
the timing with respect  thereto.  An Outside  Director shall not be entitled to
receive any option under the Plan, other than a Director Option.

                      5.      EXERCISE PRICE.  The  exercise price of the shares
of Common  Stock  under each  Employee  Option and  Consultant  Option  shall be
determined by the Committee;  provided,  however,  that the exercise price shall
not be less than 100% of the fair market  value of the Common  Stock  subject to
such option on the date of grant; and further provided,  that if, at the time an
ISO is granted,  the optionee owns (or is deemed to own under Section  424(d) of
the Code) stock  possessing  more than 10% of the total combined voting power of
all classes of stock of the Company,  of any of its Subsidiaries or of a Parent,
the  exercise  price of such ISO shall not be less than 110% of the fair  market
value of the Common Stock subject to such ISO on the date of grant. The exercise
price of the shares of Common Stock under each Director Option shall be equal to
the fair market value of the Common  Stock  subject to the option on the date of
grant.

                     The fair market value of a share of Common Stock on any day
shall  be (a) if the  principal  market  for  the  Common  Stock  is a  national
securities exchange, the average between the high and low sales prices per share
of  the  Common  Stock  on  such  day  as  reported  by  such  exchange  or on a
consolidated tape reflecting transactions on such exchange, (b) if the principal
market for the Common Stock is not a national securities exchange and the Common
Stock is quoted on the National  Association  of  Securities  Dealers  Automated
Quotations  System  ("NASDAQ"),  and (i) if actual  sales price  information  is
available with respect to the Common Stock, the average between the high and low
sales  prices  per share of the Common  Stock on such day on NASDAQ,  or (ii) if
such  information is not available,  the average between the highest bid and the
lowest asked  prices for the Common  Stock on such day on NASDAQ,  or (c) if the
principal market for the Common Stock is not a national  securities exchange and
the Common  Stock is not quoted on NASDAQ,  the average  between the highest bid
and lowest  asked  prices per share for the Common Stock on such day as reported
on  the  NASDAQ  OTC  Bulletin  Board  Service,   National   Quotation   Bureau,
Incorporated or a comparable service;  provided that if clauses (a), (b) and (c)
of this  Paragraph  are all  inapplicable,  or if no trades have been made or no
quotes are  available  for such day,  the fair market value of a share of Common
Stock  shall be  determined  by the  Committee  by any  method  consistent  with
applicable  regulations  adopted by the  Treasury  Department  relating to stock
options.  The  determination of the Committee shall be conclusive in determining
the fair market value of the stock.


                                                                     
                                       -3-


<PAGE>



                      6.       TERM.  The  term  of  each  Employee  Option  and
Consultant  Option  granted  pursuant  to the  Plan  shall  be  such  term as is
established by the Committee, in its sole discretion, at or before the time such
option is granted; provided, however, that the term of each ISO granted pursuant
to the Plan shall be for a period not  exceeding 10 years from the date of grant
thereof,  and  further,  provided,  that if, at the time an ISO is granted,  the
optionee  owns (or is  deemed  to own under  Section  424(d) of the Code)  stock
possessing  more than 10% of the total  combined  voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the term of the
ISO  shall be for a period  not  exceeding  five  years  from the date of grant.
Employee Options and Consultant Options shall be subject to earlier  termination
as hereinafter provided. Each Director Option shall be exercisable for a term of
10 years commencing on the date of grant.

                      7.      EXERCISE.  An  option (or any part or  installment
thereof),  to the extent then exercisable,  shall be exercised by giving written
notice to the Company at its principal  office (at present 2727 Maricopa Street,
Torrence, California, Attn: Chairman of the Board), stating which ISO or NQSO is
being  exercised,  specifying  the number of shares of Common  Stock as to which
such  option  is being  exercised  and  accompanied  by  payment  in full of the
aggregate exercise price therefor (or the amount due on exercise if the Contract
permits  installment  payments) (a) in cash or by certified  check or (b) in the
case of an Employee Option or a Consultant  Option,  if the Contract at the time
of grant so permits,  with previously  acquired shares of Common Stock having an
aggregate  fair market  value,  on the date of exercise,  equal to the aggregate
exercise price of all options being exercised,  or with any combination of cash,
certified check or shares of Common Stock.

                     The Committee may, in its discretion, permit payment of the
exercise  price of an option by delivery by the optionee of a properly  executed
exercise  notice,  together  with a copy of his  irrevocable  instructions  to a
broker acceptable to the Committee to deliver promptly to the Company the amount
of sale or loan proceeds  sufficient to pay such exercise  price.  In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.

                     A person entitled to receive Common Stock upon the exercise
of an option  shall not have the rights of a  shareholder  with  respect to such
shares of Common Stock until the date of issuance of a stock  certificate to him
for such shares; provided, however, that until such stock certificate is issued,
any option holder using previously acquired shares of Common Stock in payment of
an option exercise price shall continue to have the rights of a shareholder with
respect to such previously acquired shares.

                      8.      TERMINATION  OF  RELATIONSHIP.  Any  holder  of an
Employee  Option  whose   employment  with  the  Company  (and  its  Parent  and
Subsidiaries)  has  terminated for any reason other than his death or Disability
(as defined in Paragraph 19) may exercise such option, to the extent exercisable
on the date of such termination,  at any time within three months after the date
of  termination,  but not  thereafter  and in no event after the date the option
would

                                                                     
                                       -4-


<PAGE>



otherwise  have expired;  provided,  however,  that if his  employment  shall be
terminated either (a) for cause, or (b) without the consent of the Company, said
option shall  terminate  immediately.  Employee  Options  granted under the Plan
shall not be  affected  by any  change in the status of the holder so long as he
continues to be a full-time  employee of the  Company,  its Parent or any of the
Subsidiaries  (regardless  of having been  transferred  from one  corporation to
another).

                      For purposes of the Plan, an employment relationship shall
be deemed to exist  between an individual  and a corporation  if, at the time of
the  determination,  the  individual  was an  employee of such  corporation  for
purposes of Section 422(a) of the Code. As a result,  an individual on military,
sick leave or other bona fide leave of absence  shall  continue to be considered
an  employee  for  purposes  of the Plan  during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the individual's  right
to reemployment with the Company (or a related corporation) is guaranteed either
by  statute  or by  contract.  If the  period of leave  exceeds  90 days and the
individual's  right to reemployment is not guaranteed by statute or by contract,
the employment  relationship  shall be deemed to have terminated on the 91st day
of such leave. In addition,  for purposes of the Plan, an optionee's  employment
with a Subsidiary or Parent of the Company shall be deemed to have terminated on
the date such corporation ceases to be a Subsidiary or Parent of the Company.

                   The termination of an optionee's relationship as a consultant
of the Company or of a  Subsidiary  of the  Company  shall not affect the option
except as may  otherwise be provided in the Contract.  A Director  Option may be
exercised at any time during its 10 year term. The Director  Option shall not be
affected  by the holder  ceasing to be a director  of the Company or becoming an
employee or consultant of the Company or any of its subsidiaries.

                     Nothing in the Plan or in any option granted under the Plan
shall  confer on any  individual  any right to  continue  in the  employ or as a
consultant or director of the Company, its Parent or any of its Subsidiaries, or
interfere  in any way with the right of the  Company,  its  Parent or any of its
Subsidiaries  to  terminate  such  relationship  at  any  time  for  any  reason
whatsoever  without  liability  to  the  Company,  its  Parent  or  any  of  its
Subsidiaries.

                      9.      DEATH OR DISABILITY OF AN OPTIONEE. If an optionee
dies  (a)  while  he is  employed  by  the  Company,  its  Parent  or any of its
Subsidiaries,  (b) within three months after the  termination  of his employment
(unless such termination was for cause or without the consent of the Company) or
(c) within one year  following the  termination  of his  employment by reason of
Disability,  an Employee Option may be exercised,  to the extent  exercisable on
the date of his death,  by his  executor,  administrator  or other person at the
time  entitled by law to his rights  under such  option,  at any time within one
year after death,  but not  thereafter and in no event after the date the option
would otherwise have expired.

                      Any optionee whose  employment has terminated by reason of
Disability may exercise his Employee Option, to the extent  exercisable upon the
effective date of such
                                                                     
                                       -5-


<PAGE>



termination, at any time within one year after such date, but not thereafter and
in no event after the date the option would otherwise have expired.

                     The death or Disability of an optionee to whom a Consultant
Option has been  granted  under the Plan shall not affect the option,  except as
may otherwise be provided in the Contract.  The term of a Director  Option shall
not be affected by the death or Disability of the  optionee.  In such case,  the
option  may  be  exercised  at  any  time  during  its  term  by  his  executor,
administrator  or other  person at the time  entitled  by law to the  optionee's
rights under such option.

                      10.     COMPLIANCE WITH SECURITIES LAWS. The Committee may
require,  in its  discretion,  as a condition to the exercise of any option that
either (a) a Registration Statement under the Securities Act of 1933, as amended
(the "Securities  Act"), with respect to the shares of Common Stock to be issued
upon such exercise  shall be effective  and current at the time of exercise,  or
(b) there is an exemption  from  registration  under the  Securities Act for the
issuance of shares of Common Stock upon such  exercise.  Nothing herein shall be
construed  as  requiring  the Company to register  shares  subject to any option
under the Securities Act.

                       The Committee  may require  the optionee  to execute  and
deliver to the Company his representations and warranties, in form and substance
satisfactory to the Committee,  that (i) the shares of Common Stock to be issued
upon the  exercise of the option are being  acquired by the optionee for his own
account,  for investment  only and not with a view to the resale or distribution
thereof,  and (ii) any  subsequent  resale or  distribution  of shares of Common
Stock  by such  optionee  will  be  made  only  pursuant  to (a) a  Registration
Statement  under the  Securities Act which is effective and current with respect
to the shares of Common Stock being sold, or (b) a specific  exemption  from the
registration requirements of the Securities Act, but in claiming such exemption,
the  optionee  shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable  written opinion of counsel,  in form
and  substance  satisfactory  to the Company,  as to the  applicability  of such
exemption to the proposed sale or distribution.

                      In addition, if at any  time the Committee shall determine
in its  discretion  that the  listing or  qualification  of the shares of Common
Stock subject to such option on any securities  exchange or under any applicable
law,  or the  consent  or  approval  of any  governmental  regulatory  body,  is
necessary or desirable as a condition of, or in connection with, the granting of
an option, or the issuance of shares of Common Stock thereunder, such option may
not be exercised in whole or in part unless such listing, qualification, consent
or approval  shall have been  effected or obtained  free of any  conditions  not
acceptable to the Committee.

                      11.      STOCK  OPTION  CONTRACTS.   Each option  shall be
evidenced by an appropriate Contract which shall be duly executed by the Company
and the optionee,  and shall contain such terms and conditions not  inconsistent
herewith as may be determined by the Committee.

                                                                     
                                       -6-


<PAGE>



                       12.      ADJUSTMENTS  UPON  CHANGES  IN  COMMON  STOCK.
Notwithstanding  any other provisions of the Plan, in the event of any change in
the outstanding  Common Stock by reason of a stock  dividend,  recapitalization,
merger or  consolidation  in which the  Company  is the  surviving  corporation,
split-up, spin-off, combination or exchange of shares or the like, the aggregate
number and kind of shares subject to the Plan, the aggregate  number and kind of
shares subject to each  outstanding  option and the exercise price thereof,  the
number and kind of shares  subject to future grants of Director  Options and the
162(m) Maximum shall be appropriately adjusted by the Board of Directors,  whose
determination shall be conclusive.

                      In the event of (a)  the liquidation or dissolution of the
Company, (b) a merger or consolidation in which the Company is not the surviving
corporation,   or  (c)  any  other   capital   reorganization   (other   than  a
recapitalization)  in which more than 50% of the  shares of Common  Stock of the
Company entitled to vote are exchanged, any outstanding options shall terminate,
unless other provision is made therefor in the transaction.

                      13.     AMENDMENTS AND TERMINATION OF THE PLAN.  The Plan
was  adopted by the Board of  Directors  on January  28, 1994 and amended by the
Board of Directors on July 26, 1994 and April 18, 1996. No option may be granted
under the Plan after January 27, 2004. The Board of Directors,  without  further
approval of the Company's  share  holders,  may at any time suspend or terminate
the Plan, in whole or in part, or amend it from time to time in such respects as
it may deem advisable,  including, without limitation, in order that ISO granted
hereunder meet the requirements for "incentive stock options" under the Code, to
comply with the  provisions  of Rule 16b-3  promulgated  under the Exchange Act,
Section  162(m) of the Code and to conform to any change in applicable law or to
regulations or rulings of administrative  agencies;  provided,  however, that no
amendment  shall  be  effective   without  the  requisite  prior  or  subsequent
shareholder  approval  which would (a) except as  contemplated  in Paragraph 12,
increase the maximum  number of shares of Common Stock for which  options may be
granted  under the Plan or the  162(m)  Maximum,  (b)  materially  increase  the
benefits  to  participants   under  the  Plan  or  (c)  change  the  eligibility
requirements   for   individuals   entitled   to  receive   options   hereunder.
Notwithstanding  the  foregoing,  the  provisions  regarding  the  selection  of
Directors  for  participation  in, and the  amount,  the price or the timing of,
Director  Options  shall not be amended  more than once every six months,  other
than to  comport  with  changes  in the Code,  the  Employee  Retirement  Income
Security Act or the rules thereunder. No termination, suspension or amendment of
the Plan shall, without the consent of the holder of an existing option affected
thereby,  adversely  affect  his  rights  under  such  option.  The power of the
Committee to construe and administer any options granted under the Plan prior to
the termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.

                      14.     NON-TRANSFERABILITY OF OPTIONS.  No option granted
under  the Plan  shall  be  transferable  otherwise  than by will or the laws of
descent and distribution,  and options may be exercised,  during the lifetime of
the  holder  thereof,  only by him or his legal  representatives.  Except to the
extent provided above, options may not be assigned, transferred,

                                                                     
                                       -7-


<PAGE>



pledged,  hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.

                      15.     WITHHOLDING TAXES.  The Company may withhold cash 
and/or  shares  of Common  Stock to be issued  with  respect  thereto  having an
aggregate fair market value equal to the amount which it determines is necessary
to satisfy its obligation to withhold  Federal,  state and local income taxes or
other  taxes  incurred  by reason of the grant or  exercise  of an  option,  its
disposition,  or the  disposition  of the  underlying  shares of  Common  Stock.
Alternatively,  the Company  may  require the holder to pay to the Company  such
amount,  in cash,  promptly  upon demand.  The Company  shall not be required to
issue any shares of Common Stock  pursuant to any such option until all required
payments  have been made.  Fair market value of the shares of Common Stock shall
be determined in accordance with Paragraph 5.

                      Notwithstanding anything in the Plan or in any Contract to
the contrary, the Company may not withhold shares of Common Stock to satisfy the
tax  withholding  consequences  of the  exercise of an option by a holder who is
subject to the reporting  requirements  of Section 16(a) of the Exchange Act (as
it  constitutes a deemed  exercise of a stock  appreciation  right ("SAR") under
Rule  16b-3  under the  Exchange  Act),  unless  (a) the  Company  has filed all
periodic  reports and statements  required to be filed by it pursuant to Section
13(a)  of the  Exchange  Act for at  least  one  year  prior to the date of such
exercise,  (b) the Company on a regular basis releases for publication quarterly
and annual summary  statements of sales and earnings in the manner  contemplated
in the rules  promulgated  under Section 16 of the Exchange Act, (c) except when
the date of exercise of such SAR is automatic or fixed in advance under the Plan
and is outside the control of the holder,  the election by the holder to receive
cash in full or partial  settlement  of the SAR, as well as the  exercise of the
SAR for cash,  is made during the period  beginning  on the third  business  day
following  the date of release of the summary  statements  referred to in clause
(b) and ending on the 12th business day following  such date, and (d) the option
has been held for at least six months from the date of grant to the date of cash
settlement.

                      16.     LEGENDS;  PAYMENT  OF  EXPENSES.  The  Company may
endorse such legend or legends upon the  certificates for shares of Common Stock
issued  upon  exercise  of an option  under the Plan and may  issue  such  "stop
transfer"  instructions  to its  transfer  agent in respect of such shares as it
determines,  in its discretion,  to be necessary or appropriate to (a) prevent a
violation of, or to perfect an exemption from, the registration  requirements of
the  Securities  Act, (b) implement the  provisions of the Plan or any agreement
between  the  Company  and the  optionee  with  respect to such shares of Common
Stock, or (c) permit the Company to determine the occurrence of a "disqualifying
disposition,"  as  described  in  Section  421(b) of the Code,  of the shares of
Common Stock transferred upon the exercise of an ISO granted under the Plan.

                      The Company shall pay  all issuance taxes  with respect to
the issuance of shares of Common  Stock upon the  exercise of an option  granted
under the Plan,  as well as all fees and  expenses  incurred  by the  Company in
connection with such issuance.

                                                                     
                                       -8-


<PAGE>



                      17.     USE OF PROCEEDS.  The cash  proceeds from the sale
of shares of Common  Stock  pursuant to the  exercise of options  under the Plan
shall be added to the  general  funds of the  Company  and used for its  general
corporate purposes as the Board of Directors may determine.

                      18.    SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of  Directors  may,  without  further  approval  by the  shareholders,
substitute  new  options  for prior  options of a  Constituent  Corporation  (as
defined  in  Paragraph  19) or assume  the  prior  options  of such  Constituent
Corporation.

                      19.     DEFINITIONS.

                              (a)      Subsidiary.  The term  "Subsidiary" shall
have the same  definition as "subsidiary  corporation"  in Section 424(f) of the
Code.

                              (b)      Parent.  The term "Parent" shall have the
same definition as "parent corporation" in Section 424(e) of the Code.

                              (c)       Constituent  Corporation.   The  term 
"Constituent  Corporation"  shall mean any  corporation  which  engages with the
Company,  its Parent or any  Subsidiary in a transaction to which Section 424(a)
of the Code applies (or would apply if the option assumed or substituted were an
ISO), or any Parent or any Subsidiary of such corporation.

                              (d)      Disability.  The term  "Disability" shall
mean a permanent and total disability  within the meaning of Section 22(e)(3) of
the Code.

                              (e)      Outside  Director.   The  term  "Outside
Director"  shall  mean  an  individual  who,  on the  date  of  grant  of a NQSO
hereunder,  is a director of the Company but is not a common law employee of the
Company or of any of its Subsidiaries or its Parent.

                               (f)      Employee Option.   The  term  "Employee
Option" shall mean an option granted  pursuant to the Plan to an individual who,
on the date of grant,  is a key employee of the Company or a  Subsidiary  of the
Company.

                              (g)      Consultant Option.   The term "Consultant
Option"  shall mean a NQSO granted  pursuant to the Plan to a person who, on the
date of grant, is a consultant to the Company or a Subsidiary of the Company and
who is not an employee of the Company or any of its Subsidiaries on such date.

                              (h)    Director Option. The term "Director Option"
shall mean a NQSO granted pursuant to the Plan to a director of the Company who,
on the date of grant,  is not an  employee  or  consultant  of the  Company or a
Subsidiary of the Company.

                                                                     
                                       -9-


<PAGE>


                      20.     GOVERNING LAW.  The  Plan, such  options as may be
granted hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of New York.

                      21.     PARTIAL INVALIDITY.  The  invalidity or illegality
of any provision herein shall not affect the validity of any other provision.

                      22.     SHAREHOLDER APPROVAL.  The  amendment to  the Plan
shall be subject to  approval  by a majority  of the votes cast at the next duly
held  meeting  of  the  Company's  shareholders  at  which  a  majority  of  the
outstanding voting shares are present,  in person or by proxy, and voting on the
Plan. No options  granted  pursuant to the  amendment may be exercised  prior to
such approval, provided that the date of grant of any options granted thereunder
shall be determined as if the amendment to the Plan had not been subject to such
approval.  Notwithstanding  the  foregoing,  if the amendment to the Plan is not
approved by a vote of the  shareholders  of the  Company on or before  April 17,
1997, the amendment and any options granted thereunder shall terminate,  but the
Plan as in effect  prior to the  amendment  and all options  granted  thereunder
shall remain in full force and effect.


                                                                     
                                      -10-