SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

|X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997

|_|     TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
        ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _________

                           Commission File No. 0-23538

                       MOTORCAR PARTS & ACCESSORIES, INC.
             (Exact name of Registrant as specified in its charter)

                          New York                              11-2153962
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

2727 Maricopa Street, Torrance, California                        90503
 (Address of principal executive offices)                       Zip Code

Registrant's telephone number, including area code:  (310) 212-7910

Securities registered under Section 12(b) of the Act:  None

Securities  registered  under Section 12(g) of the Act:  Common Stock,  $.01 par
value

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

                              Yes [X]  No [_]

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

Issuer's revenues for its most recent fiscal year:  $86,872,000.

The aggregate market value, calculated on the basis of the average bid and asked
prices of such stock on the National Association of Securities Dealers Automated
Quotation System, of Common Stock held by non-affiliates of the Registrant as of
June 23, 1997 was approximately $65,774,512.

There were 5,036,455 shares of Common Stock outstanding as of June 23, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Part III of the Registrant's Proxy Statement relating to its 1997 Annual
           Meeting of Shareholders is incorporated by reference herein








                                     PART I

ITEM 1.     BUSINESS.
- -------     ---------

GENERAL

            The  Company  is  a  leading   remanufacturer   and  distributor  of
replacement  alternators  and starters for both  imported and domestic  cars and
light trucks in the United States.  The Company's  alternators  and starters are
remanufactured  for vehicles  imported  from Japan,  Germany,  Sweden,  England,
France, Italy and Korea and, as commenced in fiscal 1997, for domestic vehicles.
The  imported  vehicles  for which the Company  remanufactures  alternators  and
starters  also include (i) "world  cars," which are produced by General  Motors,
Chrysler and Ford and originally  equipped with  components  produced by foreign
manufacturers,  and (ii)  "transplants,"  which are  manufactured  in the United
States by Toyota,  Nissan,  Honda,  Mazda and others. The Company also assembles
and  distributes  ignition  wire sets for imported  and domestic  cars and light
trucks.

            The Company's products are sold throughout the United States to many
of the nation's largest chains of retail automotive stores,  including AutoZone,
CSK  Auto,  The  Pep  Boys,  O'Reilly  Automotive,  Hi-Lo  Automotive  and  Trak
Automotive.  The Company  also sells its  alternators  and  starters  throughout
Canada as a  supplier  to that  country's  largest  chain of  retail  automotive
stores,   Canadian  Tire.  During  the  last  several  years,  the  Company  has
concentrated on sales to retail automotive chains, which the Company believes is
the fastest growing segment of the automotive  after-market industry. For fiscal
1997,  approximately 85% of the Company's sales were to retail automotive chains
comprised of approximately  4,000 stores, with the balance of sales primarily to
large warehouse  distributors,  such as APS Holdings.  The Company also supplies
remanufactured  alternators and starters for imported  vehicles for distribution
through  Service  Parts  Operations  (SPO),  which units are sold under  General
Motors' private label, AC Delco.

THE AUTOMOTIVE AFTER-MARKET INDUSTRY

            The Company's historical market, the import automotive  after-market
industry for alternators and starters,  which is comprised almost exclusively of
remanufacturers and rebuilders, has experienced significant growth during recent
years.  The  Company  expects  this  growth to  continue  as a result of several
trends. These trends include the proliferation of imported cars and light trucks
(including world cars and transplants) in use, the growth in the number of miles
driven each year and the growth in the number of imported  vehicles at the prime
repair age of four years and older.  In addition,  the Company  believes its new
market,  the  domestic  automotive  after-market  industry for  alternators  and
starters, represents substantial growth opportunities. The Company believes that
this  new  market  is  approximately  three  times  the  size  of the  Company's
historical import market.

            The  Company  targets  two  distinct  groups of  end-users  that buy
replacement  automotive parts: (i) individual  consumers,  who purchase parts to
perform  "do-it-yourself"  repairs on their own vehicles;  and (ii) professional
"do-it-for-me" installers, which include automotive repair shops and the


                                       -2-





service  departments of automobile  dealers.  The individual  consumer market is
typically  supplied  through  retailers and through the retail arms of warehouse
distributors.  Automotive  repair shops  generally  purchase parts through local
independent parts wholesalers, through national warehouse distributors and, more
recently,   through  automotive  parts  retailers.   Automobile  dealer  service
departments   generally  obtain  parts  through  the  distribution   systems  of
automobile  manufacturers.  In recent  years,  chains  of  retail  stores in the
automotive  after-market industry have become an increasingly  important channel
for the distribution of the Company's  products.  The Company also believes that
significant consolidation among distributors of automotive replacement parts has
resulted in fewer and larger  distributors.  In addition,  the Company  believes
that,  as a  result  of  its  entrance  into  the  business  of  remanufacturing
alternators  and starters for domestic  vehicles,  warehouse  distributors  will
become a more important distribution channel for the Company.

            Remanufacturing  of operational  replacement  parts is a significant
component  of the  automotive  aftermarket  industry.  Sales by chains of retail
automotive stores and by automotive  wholesalers of  remanufactured  alternators
and starters  are  believed by the Company to comprise the vast  majority of the
Company's  market.  Only a portion  of that  market is  supplied  by the sale of
similar new  replacement  parts.  Remanufacturing,  which involves the re-use of
parts  which  might  otherwise  be  discarded,  creates  a supply  of parts at a
significantly  lower cost to the user than newly-  manufactured parts, and makes
available  automotive  parts which are no longer being  manufactured.  By making
readily  available parts for automotive  general use,  remanufacturing  benefits
automotive  repair shops by relieving  them of the need to rebuild worn parts on
an individual  basis and conserves  materials  which would  otherwise be used to
manufacture new replacement  parts.  Most  importantly,  however,  the Company's
remanufactured parts are sold at significantly lower prices than competitive new
replacement  parts.  These features also enable retail  customers  themselves to
engage in cost- saving repairs.

COMPANY PRODUCTS

            The  Company's  primary  products  are  remanufactured   replacement
alternators  and starters for both  imported and domestic cars and light trucks.
The Company also assembles and distributes ignition wire sets for the automotive
after-market  for  use  in a  wide  variety  of  makes  and  models  of  foreign
automobiles.   Alternators,  starters  and  ignition  wire  sets  are  essential
components in all makes and models of  automobiles.  These  products  constitute
non-elective  replacement  parts,  which are  required for a vehicle to operate.
Approximately  17% of the  Company's  products  are sold  under its brand  name,
including the use of its registered  trademark "MPA," and the remainder are sold
for resale under  customer  private  labels.  Customers  that sell the Company's
products  under private  label include  AutoZone,  CSK Auto,  The Pep Boys,  APS
Holdings and Delphi.

            The  Company's  alternators  and  starters  are  produced to meet or
exceed automobile manufacturer  specifications depending upon the make and model
of the automobile. The Company remanufactures a broad assortment of starters and
alternators  in order to accommodate  the numerous and  increasing  varieties of
these products  currently in use. The Company currently  provides  approximately
825 different  alternators  and 575  different  starters.  The Company's  import
alternators


                                       -3-





and starters are provided for  virtually all Japanese  manufacturers,  including
Toyota,  Honda,  Nissan, Mazda and Mitsubishi,  certain European  manufacturers,
including Mercedes Benz, BMW, Volvo and Volkswagen, manufacturers of world cars,
including  Chrysler,  General  Motors and Ford,  and  foreign  manufacturers  of
transplant cars.

CUSTOMERS

            The Company's products are marketed throughout the United States and
Canada.  The Company's  customers  consist of many of the United States' largest
chains of retail automotive stores and automotive  warehouse  distributors.  The
Company also sells its products to Canada's  largest chain of retail  automotive
stores, Canadian Tire.

            A  significant   percentage   of  the   Company's   sales  has  been
concentrated  among a relatively small number of customers.  The Company's three
largest customers accounted for approximately 29%, 18% and 18%, respectively, of
net sales during fiscal 1997. The Company's four largest customers accounted for
approximately  21%, 11%, 20% and 18%,  respectively,  of net sales during fiscal
1996. The Company's three largest customers accounted for approximately 27%, 14%
and 12%, respectively,  of the Company's net sales during fiscal 1995. There can
be no  assurance  that this  concentration  of sales  among  customers  will not
continue  in the future.  The loss of a  significant  customer or a  substantial
decrease in sales to such a customer would have a material adverse effect on the
Company's sales and operating results.  In addition,  customers may demand price
concessions  from the Company that could adversely  affect profit  margins.  The
Company's  arrangements  with most of its  customers are based on the receipt of
purchase orders and otherwise are not subject to long-term written contracts and
generally may be terminated upon short notice.

OPERATIONS OF THE COMPANY

            Cores

            In  its  remanufacturing   operations,   the  Company  obtains  used
alternators  and starters,  commonly  known as "cores," which are sorted by make
and model and stored until needed.  When needed for  remanufacturing,  the cores
are  completely  disassembled  into  component  parts.  Components  which can be
incorporated into the remanufactured product are thoroughly cleaned,  tested and
refinished.  All  components  known to be  subject  to  major  wear,  and  those
components  determined  not to be reusable or  repairable,  are  replaced by new
components.  The unit is then  reassembled  on an assembly  line into a finished
product.  Inspection  and  testing  are  conducted  at  various  stages  of  the
remanufacturing  process,  and each finished  product is inspected and tested on
equipment   designed  to  simulate   performance  under  operating   conditions.
Components  of cores  which are not used by the  Company in its  remanufacturing
process are sold as scrap.

            The majority of the cores remanufactured by the Company are obtained
from customers as trade-ins,  which are credited against future  purchases.  The
Company's customers encourage consumers to exchange their used units at the time
of purchase through the use of credits. To a lesser


                                       -4-





extent,  the Company also purchases  cores in the open market from core brokers,
who are dealers  specializing in buying and selling cores.  Although the Company
believes  that the open market  does not and will  continue  not to  represent a
primary source of cores,  this market offers a reliable  source for  maintaining
stock balance.  Other materials and components used in remanufacturing  are also
purchased  in the open  market.  The  ability  to obtain  cores of the types and
quantities required by the Company is essential to the Company's ability to meet
demand and expand production.

            The  price  of  a  finished  product  generally  is  comprised  of a
separately  invoiced  amount for the core included in the product ("core value")
and an amount for remanufacturing.  Upon receipt of a core as a trade-in, credit
generally  is given to the  customer  for the amount  originally  invoiced  with
respect to that core. The Company  limits  trade-ins to cores for units included
in its sales catalogs and in condition able to be remanufactured, and credit for
cores is allowed only against purchases by a customer of similar  remanufactured
products within a specified time period. A customer's total allowable credit for
core  trade-ins  is  further  limited  by the  dollar  volume of the  customer's
purchases of similar products within such time period.  Core values fluctuate on
the basis of several economic factors,  including market availability and demand
and core prices then being paid by other remanufacturers and core brokers.

            Beginning with fiscal 1997, the Company implemented a new accounting
presentation  with respect to its reporting of sales.  In the past,  the Company
deducted the value of all cores  returned  from its  customers in order to reach
net sales.  Under the new presentation,  revenues are reported on a gross basis,
that is core  returns  from  customers  are not  deducted  in order to reach net
sales,  but rather are included in cost of goods sold.  Fiscal 1996 and 1995 net
sales  and cost of  goods  sold  have  been  reclassified  to  reflect  this new
presentation.  The Company believes that this new presentation  provides a truer
depiction  of actual sales and cost of goods sold.  In  addition,  it reflects a
more proper relationship between sales and inventory.

            Production Process

            The initial step in the  Company's  remanufacturing  process  begins
with the receipt in boxed  quantities of cores from various  sources,  including
trade-ins  from  customers  and  purchases  in the open  market.  The  cores are
assessed and evaluated for  inventory  control  purposes and then sorted by part
number.  Each core is then completely  disassembled  into all of its fundamental
components.  The  components  are cleaned in a process that  employs  customized
equipment,  detergents and other chemicals. The cleaning process is accomplished
in accordance with the required specifications of the particular units.

            After the cleaning  process is  complete,  the  components  are then
inspected and tested as prescribed by the  Company's  rigorous  quality  control
program. This program,  which is implemented throughout the operational process,
is  known as  statistical  process  control.  Upon  passage  of all  tests,  the
components  are placed on an automatic  conveyor for assembly  into the required
units.  The  assembly  process  is  monitored  by  designated   quality  control
personnel.  Each fully assembled unit is then subjected to additional testing to
ensure performance and quality. Finished products are then


                                       -5-





either  stored in the  Company's  warehouse  facility or packaged for  immediate
delivery.  In  addition,  to  maximize  efficiency,  the  Company  stores in its
warehousing  facilities  component  parts  ready  for  assembly.  The  Company's
management information systems, including hardware and software,  facilitate the
remanufacturing  process  from cores to  finished  products.  In  general,  this
process takes approximately four days.

            The  Company  conducts  business  through two  wholly-owned  foreign
subsidiaries,  MVR  Products  Pte  Limited  ("MVR"),  which  operates a shipping
warehouse and testing  facility and maintains  office space and  remanufacturing
capability  in  Singapore,  and Unijoh Sdn, Bhd  ("Unijoh"),  which  conducts in
Malaysia remanufacturing operations similar to those conducted by the Company at
its remanufacturing facility in Torrance. These foreign operations are conducted
with quality  control  standards and other  internal  controls  similar to those
currently implemented at the Company's  remanufacturing  facilities in Torrance.
The facilities of MVR and Unijoh are located approximately one hour drive apart.
The  Company  believes  that the  operations  of its  foreign  subsidiaries  are
important because of the lower labor costs experienced by these  subsidiaries in
the same remanufac turing process.

            In April 1997, the Company  acquired all of the outstanding  capital
stock of MVR and Unijoh  from its  shareholders,  Mel Marks,  Richard  Marks and
Vincent Quek (each of whom owned  one-third  of each  acquired  entity),  for an
aggregate  purchase  price to all such selling  shareholders  for both  acquired
entities  of  145,455  shares  of Common  Stock.  The  shares  of  Common  Stock
constituting  the purchase  price have not been  registered for sale pursuant to
the Securities Act of 1933 and are subject to a lock-up  arrangement between the
Company and each such selling shareholder releasing for public resale one-fourth
of such shares on each of the first four anniversaries of the acquisitions.  The
purchase  price and  other  terms of the  acquisitions  were  determined  by the
Special   Committee  of  the  Board  of  Directors  of  the  Company   following
negotiations  with  the  selling  shareholders.  In  connection  with,  and as a
condition  to,  the  acquisitions,  the  Special  Committee  received a fairness
opinion from Houlihan Lokey Howard & Zukin, a specialty investment banking firm.

            Product Trade-Ins

            The  Company  has a trade-in  policy that it believes is typical for
the  remanufactured   automotive  replacement  parts  industry.  A  manufacturer
typically  provides  a  product  warranty  that is  honored  whether  or not the
purchaser  continues  to do  business  with  the  manufacturer.  As the  Company
believes is the practice in its industry,  however,  the Company accepts product
trade-ins only if the purchaser makes future purchases from the Company within a
specified time period.  Product  trade-ins to the Company result only in credits
against future purchases.  If a customer ceases doing business with the Company,
the Company  recognizes no further  obligations to that customer with respect to
product  trade-ins  and no additional  product  returns would be accepted by the
Company.   The  customer  would  return  any   returnable   products  to  a  new
remanufacturer  maintaining the same policy,  which  remanufacturer would accept
the product  trade-ins and grant appropriate  credits  regardless of whether the
units were originally purchased from that new remanufacturer.



                                       -6-





            As a  result  of  the  product  trade-in  policy  in  the  Company's
industry,  the Company  accounts for product  trade-ins on a current  basis.  No
reserve  is made  for  future  product  trade-ins  since  there  is no  on-going
obligation to accept such  trade-ins in the absence of  continuing  sales to the
returning  customer.  The  Company  believes  that  its  return  rate  has  been
consistent  with the return rates  generally  experienced  in its  industry.  In
addition,  the  obligation  to accept  trade-ins is only  recognized as a credit
against  future sales in the form of a reduction in the purchase price for those
sales. The Company's product trade-in policy  encompasses all product trade-ins,
including cores,  true warranty  trade-ins,  alleged warranty  trade-ins and any
other product  adjustments.  The amount of the credit given in connection with a
returned unit is equal to the sum of the unit price and the core price.

COMPETITION

            The  automotive   after-market   industry  of  remanufacturers   and
rebuilders of  alternators  and starters for both imported cars and light trucks
is  highly  competitive.   The  Company's   competitors  include  several  other
relatively large sources of remanufactured units and numerous smaller,  regional
rebuilders.  Certain of the Company's  competitors  sell a wide variety of other
automotive parts,  thereby  establishing  broader name recognition in the entire
automotive after-market.  In addition,  certain of the Company's competitors are
divisions or  subsidiaries  of entities also engaged in other  businesses  which
have substantially  greater financial  resources than those of the Company.  The
Company also  competes  with several  large  regional  remanufacturers  and with
remanufacturers which are franchised by certain original equipment manufacturers
to  remanufacture  their  products for regional  distribution.  Alternators  and
starters  produced by  regional  and other small  rebuilders  typically  are not
processed and finished to the same extent as, and do not compete  directly with,
the Company's products. The Company also competes with numerous rebuilders which
serve comparatively local areas.

            The  Company's  products have not been patented nor does the Company
believe that its products are  patentable.  The Company will continue to attempt
to protect its proprietary  processes and other  information by relying on trade
secret laws and  non-disclosure and  confidentiality  agreements with certain of
its employees and other persons who have access to its proprietary processes and
other information.

GOVERNMENTAL REGULATION

            The  Company's  operations  are subject to federal,  state and local
laws and regulations governing,  among other things, emissions to air, discharge
to waters and the generation, handling, storage,  transportation,  treatment and
disposal  of waste and other  materials.  The Company is not subject to any such
laws and regulations which are specific to the automotive after-market industry.
The Company believes that its business,  operations and facilities have been and
are being  operated in  compliance  in all  material  respects  with  applicable
environmental and health and safety laws and regulations,  many of which provide
for substantial  fines and criminal  sanctions for violations.  The operation of
automotive parts remanufacturing plants, however,  entails risks in these areas,
and there can be no assurance  that the Company will not incur material costs or
liabilities. In addition,


                                       -7-





potentially  significant  expenditures could be required in order to comply with
evolving  environmental and health and safety laws,  regulations or requirements
that may be adopted or imposed in the  future.  The Company  believes,  although
there  can  be  no  assurance,  that  the  overall  impact  of  compliance  with
regulations and legislation  protecting the environment will not have a material
effect on its future financial position or results of operations.

EMPLOYEES

            The  Company  has  approximately  640 full  time  employees.  Of the
Company's  employees,  20 are  considered  administrative  personnel and six are
sales  personnel.  None of the Company's  employees is a party to any collective
bargaining  agreement.  The Company has not  experienced  any work stoppages and
considers its employee relations to be satisfactory.

ITEM 2.     PROPERTIES.
- -------     -----------

            The Company maintains  facilities in Torrance,  California,  Roslyn,
New York and Nashville,  Tennessee. The Torrance facilities contain an aggregate
of  approximately  352,000  square feet and  accommodate  most of the  Company's
corporate  headquarters  and  remanufacturing,   warehousing  and  other  office
requirements.  The Company moved into its initial Torrance facility,  consisting
of  approximately  125,000  square feet,  in September  1993.  The lease for the
initial  facility  provides for a monthly  rental of $44,280  through  September
1999,  increasing  thereafter to $47,601 through March 31, 2002, the termination
date of the lease.  In September  1995, the Company  entered into a lease for an
additional  approximately  80,000  square feet in a second  facility in the same
industrial area in Torrance and, in October 1996,  increased its leased space in
the second facility to a total of  approximately  227,000 square feet. The lease
for the second  facility  provides for a base monthly rental of $60,252  through
September  1999,  increasing  thereafter to $64,771  through March 31, 2002, the
termination  date of the lease.  The  Company's  facilities  were  designed  and
equipped  according  to  specifications  generated  by the  Company  in order to
accommodate  the  Company's  current and projected  needs.  The  facilities  are
anticipated  to be sufficient to satisfy the  Company's  foreseeable  production
requirements.  The Company also maintains an East Coast administrative and sales
office in Roslyn, New York. This site contains  approximately  1,000 square feet
of office  space.  In October  1995,  the Company  opened a  31,000-square  foot
warehouse  and  distribution  facility in  Nashville,  Tennessee  to service the
Company's  growing East Coast and Southern  market.  The lease for this facility
expires on October  31, 1998 and  provides  for a monthly  rental of $9,331.  In
addition, the Company has facilities at its subsidiaries'  locations in Malaysia
and Singapore.

ITEM 3.     LEGAL PROCEEDINGS.
- -------     ------------------

            There are no pending material legal proceedings to which the Company
or any of its  properties is subject nor, to the  knowledge of the Company,  are
any such legal proceedings threatened.



                                       -8-





ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------     ----------------------------------------------------

            None.




                                       -9-





                                     PART II


Item 5.     Market for Registrant's Common Equity and Related Stockholder
- -------     -------------------------------------------------------------
            Matters.
            --------

            The Company's  Common Stock,  par value $0.01 per share (the "Common
Stock"), is quoted on the National  Association of Securities Dealers' Automated
Quotation  ("NASDAQ") National Market under the symbol MPAA. The following table
sets forth the high and low bid prices for the Common  Stock during each quarter
of fiscal  1996 and  fiscal  1997 as  reported  by NASDAQ.  The prices  reported
reflect  inter-dealer  quotations,  may not represent actual transactions and do
not include retail mark-ups, mark-downs or commissions.



                               Fiscal 1996                    Fiscal 1997
                               -----------                    -----------
                           High          Low              High          Low
                           ----          ---              ----          ---
                                       
First Quarter               11         8.5                  19         14.250
Second Quarter              15        10.375              15.750        9.375
Third Quarter              15.875     12.750                15         11.875
Fourth Quarter             15.875     11.375              17.625       13.250
                                   

            As of June 23,  1997,  there were  5,036,455  shares of Common Stock
outstanding held by 45 holders of record.

            The Company has not  declared or paid  dividends on the Common Stock
during the last two fiscal years.

            The  declaration  of dividends in the future will be at the election
of  the  Board  of  Directors  and  will  depend  upon  the  earnings,   capital
requirements and financial position of the Company, general economic conditions,
state law requirements and other relevant  factors.  In addition,  the Company's
agreement with its bank lender prohibits payment of dividends without the bank's
prior consent, except dividends payable in Common Stock.




                                      -10-





ITEM 6.     SELECTED FINANCIAL DATA.
- -------     ------------------------

            The financial information set forth below for the fiscal years ended
March 31, 1997,  1996 and 1995 should be read in  conjunction  with the detailed
information in the financial  statements and notes thereto  appearing  elsewhere
herein.

            The financial information set forth below for the fiscal years ended
March 31, 1994 and 1993 have been  audited by Richard A. Eisner & Company,  LLP,
independent certified public accountants.

Fiscal Year Ended March 31, -------------------------------------------------------- 1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- (in thousands, except per share data) Income Statement Data (1): Net sales ....................................... $ 86,872 $ 64,358 $ 39,235 $ 29,018 $ 24,033 Cost of goods sold .............................. 69,255 50,965 30,690 21,816 19,038 Research and development ........................ 185 -- -- -- -- Selling expenses ................................ 2,305 1,984 1,498 2,117 1,441 General and administrative expenses ............. 4,974 4,577 3,704 2,593 2,134 Moving expenses ................................. -- -- -- 256 -- Operating income ................................ 10,153 6,832 3,343 2,236 1,420 Interest expense (net of interest income) ....... (1,090) (833) (540) (453) (352) -------- -------- -------- -------- -------- Income before income taxes ...................... 9,063 5,999 2,803 1,783 1,068 Provision for income taxes (pro forma for fiscal 1994 and 1993) (2) .............................. 3,529 2,353 1,197 728 453 -------- -------- -------- -------- -------- Net Income ............................... $ 5,534 $ 3,646 $ 1,606 $ 1,055 $ 615 ======== ======== ======== ======== ======== Net Income per share (pro forma for fiscal 1994 and fiscal 1993) (3) ................ $ 1.11 $ 0.93 $ 0.49 $ 0.52 $ 0.29 ======== ======== ======== ======== ======== Weighted average common shares outstanding (pro forma for fiscal 1994 and fiscal 1993) (3) . 5,007 3,939 3,295 2,018 2,145 ======== ======== ======== ======== ======== March 31, -------------------------------------------------------- 1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- (in thousands) Balance Sheet Data: Total assets ............................ $75,510 $60,189 $25,823 $16,871 $ 9,045 Working capital ......................... 51,800 44,254 18,096 12,041 1,958 Long-term debt and capitalized lease obligations -- less current portions 17,839 15,135 9,502 4,920 14 Shareholders' equity .................... 40,108 34,031 10,016 8,410 2,274
- ---------------------- (1) Net sales and cost of goods sold for fiscal 1996, 1995, 1994 and 1993 have been reclassified to increase cost of goods sold, rather than decrease net sales, by core trade-ins. See Note A[6] to the financial statements contained herein. (2) From January 1, 1987 through December 31, 1993, the Company was subject to taxation as an "S" corporation in accordance with the Code. As a result, the net income of the Company during that time was faxed for federal (and some state) income tax purposes directly to the Company's shareholders rather than to the Company. Pro forma data reflects the income tax expense that would have been recorded had the Company not been exempt from the payment of such taxes. (3) Pro forma data for fiscal 1994 and fiscal 1993 reflect the stock split effected by the Company in January 1994, which increased the number of issued and outstanding shares of Common Stock from 54.3428 shares to 2,000,000 shares. -11- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ------- --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATION. --------------------------------------------- GENERAL The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein. RESULTS OF OPERATIONS Fiscal Year Ended March 31, 1997 1996 1995 ------- ------- ------- Net sales 100.0% 100.0% 100.0% Cost of goods sold 79.7 79.2 78.2 ------- ------- ------- Gross profit 20.3 20.8 21.8 Research and development 0.2 0.0 0.0 Selling expenses 2.7 3.1 3.8 General and administrative expenses 5.7 7.1 9.4 ------- ------- ------- Operating income 11.7 10.6 8.5 Interest expense - net of interest income 1.3 1.3 1.4 ------- ------- ------- Income before income taxes 10.4 9.3 7.1 Provision for income taxes 4.1 3.7 3.1 ------- ------- ------- Net income 6.4% 5.7% 4.1% ======= ======= ======= In its remanufacturing operations, the Company obtains used alternators and starters, commonly known as "cores," from various sources, principally the Company's existing customers, as trade-ins. Such trade-ins are recorded when cores are received from customers. Credits for cores are allowed only against purchases of similar remanufactured products and are generally used within sixty days of issuance by the customer. Due to this trade-in policy, the Company does not reserve for trade-ins. In addition, since it is unlikely that a customer will not utilize its trade-in credits, the credit is recorded when the core is returned as opposed to when the customer purchases new products. The Company believes that this policy is consistent throughout the remanufacturing and rebuilding industry. Beginning with fiscal 1997, the Company implemented a new accounting presentation with respect to its reporting of sales. In the past, the Company deducted the value of all cores returned from its customers in order to reach net sales. Under the new presentation, revenues are reported on a gross basis, that is core returns from customers are not deducted in order to reach net sales, but rather are included in cost of goods sold. Fiscal 1996 and 1995 have been reclassified to reflect this new presentation. The Company believes that this new presentation provides a truer depiction of -12- actual sales and cost of goods sold. In addition, it reflects a more proper relationship between sales and inventory. Fiscal 1997 compared to Fiscal 1996 - ----------------------------------- Net sales for fiscal 1997 increased $22,514,000 or 35.0%, from $64,358,000 to $86,872,000, over fiscal 1996. The increase is attributable to the general growth of business with existing customers, including the commencement of sales to a large customer of alternators for domestic vehicles, and the number of SKUs that these customers offer in their stores. In addition, the Company believes that the continued aging of the import vehicle fleet also contributed to its increased sales. The expansion of the Company's product line to include remanufactured alternators and starters for domestic vehicles generated net sales of approximately $6,832,000 for fiscal 1997. The number of all units shipped to all customers was approximately 1,379,000 units during fiscal 1997 and approximately 1,093,000 units during fiscal 1996, representing an increase of approximately 26.2%. The increase in net sales also reflects an increase in the number of higher priced, later-model units. Cost of goods sold for fiscal 1996 increased $18,290,000 or 35.9%, from $50,965,000 to $69,255,000, over fiscal 1996. The increase is primarily attributable to additional costs in connection with increased production. Cost of goods sold as a percentage of net sales increased over the periods from 79.2% to 79.7%. While the increase in cost of goods sold over the periods is minimal, it can be primarily attributed to pricing pressures experienced by the Company as offset by the continuing lowering of manufacturing costs by the Company. Selling expenses for fiscal 1997 increased $321,000 or 16.2%, from $1,984,000 to $2,305,000, over fiscal 1996. Selling expenses as a percentage of net sales decreased to 2.7% for fiscal 1997 from 3.1% for fiscal 1996. This decrease in selling expenses as a percentage of net sales represents the continued leveraging of selling costs over the Company's increased net sales. The increases in selling expenses in general are attributable to increased payroll relating to the Company's sales department. General and administrative expenses for fiscal 1997 increased $397,000 or 8.7%, from $4,577,000 to $4,974,000, over fiscal 1996. As a percentage of net sales these expenses decreased over the periods from 7.1% to 5.7%. This decrease represents the continued leveraging of these costs over the Company's increased net sales. The increase over the periods was the result of additional insurance costs, including as a result of an increase in directors and officers liability coverage up to $15,000,000, general salary increases (including giving effect to the 1996 federal minimum wage increase) and certain non-income-based state and local taxes. Interest expense net of interest income was $1,090,000 for fiscal 1997. This represents an increase of $257,000 or 30.9% over fiscal 1996. Interest expense is comprised principally of interest paid on the Company's revolving credit facility, the borrowings under which increased over the periods. The balance of interest expense is from loans on the Company's capital leases. Interest -13- income of $218,000 for fiscal 1997 was derived from investments principally from the Company's second public offering in November 1995. Fiscal 1996 compared to Fiscal 1995 - ----------------------------------- Net sales for fiscal 1996 increased $25,123,000 or 64.0% from $39,235,000 to $64,358,000. The increase in net sales is attributable to sales to new customers, the general growth of business with existing customers and, indirectly, to, the Company believes, the continued aging of the import vehicle fleet. During fiscal 1996, the Company began shipping products to two significant new customers. The number of units shipped to all customers was approximately 1,093,000 during fiscal 1996 as compared with approximately 689,000 during fiscal 1995, representing an increase of approximately 55.9%. Cost of goods sold over the periods increased $20,275,000 or 66.1% from $30,690,000 to $50,965,000. The increases are attributable to additional costs during the recent year in connection with increased production. As a percentage of net sales these expenses increased to 79.2% for the recent fiscal year from 78.2% for the prior fiscal year. This relatively small percentage increase is primarily attributable to increased direct production costs, which were partially offset by benefits the Company experienced from leveraging indirect production costs over increased net sales. In February 1996, the Company began experiencing pricing pressures on certain of its alternators and starters, which may affect gross profit to a limited extent in the future. The Company also anticipates lowering its manufacturing costs to help offset price decreases in response to these pricing pressures. Selling expenses over the periods increased $486,000 or 32.4% from $1,498,000 to $1,984,000. This increase was the result of an increase of approximately $433,000 in advertising and other allowances to customers during fiscal 1996. The balance of the increase was primarily attributable to increased salaries of the Company's sales force. Advertising allowances accounted for 57.5% of the Company's total selling expenses for fiscal 1996 as compared to 47.3% for fiscal 1995. Despite these increases, selling expenses as a percentage of net sales decreased to 3.1% from 3.8% over the periods reflecting leveraging of these expenses over increased net sales. General and administrative expenses over the periods increased $873,000 or 23.6% from $3,704,000 to $4,577,000. Approximately 69.2% of the increase was due to costs incurred under the Company's new incentive bonus plan which was implemented in September 1995. The additional increase is primarily attributable to increased insurance coverage, computer expenses and professional fees. As a percentage of net sales, general and administrative expenses decreased from 9.4% to 7.1% over the periods reflecting leveraging of these expenses over increased net sales. Interest expense net of interest income of $219,000 for fiscal 1996 was $833,000, an increase of 54.3% from $540,000 in fiscal 1995. Interest expense is comprised principally of interest on the Company's revolving credit facility. The significantly increased interest expense over the prior year was due to the Company's increased borrowing under this facility. Interest income is derived from short-term investments principally from the Company's second public offering in November 1995. -14- Liquidity and Capital Resources - ------------------------------- The Company's recent operations have been financed principally from the net proceeds of the Company's second public offering in November 1995, borrowings under its revolving credit facility and cash flow from operations. As of March 31, 1997, the Company's working capital was $51,800,000, including $3,539,000 of cash and cash equivalents. Net cash used in operating activities during fiscal 1997, 1996 and 1995 was $5,978,000, $15,344,000 and $6,721,000, respectively. The principal use of cash in fiscal 1997 related to an increase in inventory of $13,311,000 and an increase in accounts receivable of $5,064,000 offset by an increase in accounts payable and accrued expenses of $5,134,000. The increase in inventory was due in large part to the addition of inventory in excess of $10,000,000 in connection with the Company's entrance during fiscal 1997 into the business of remanufacturing alternators and starters for domestic vehicles. The timing of this inventory build-up was based in part upon the Company's belief that the demand for its initial domestic alternator product will be highest in the summer. The increase in accounts receivable was due primarily to the increased net sales in fiscal 1997, although the days outstanding of the accounts receivable remained constant over the periods. As of March 31, 1997, the current portion of capitalized lease obligations was $743,000. Net cash provided by investing activities during fiscal 1997 was $6,770,000 as compared to net cash used in investing activities during fiscal 1996 and 1995 of $10,770,000 and $991,000, respectively. During fiscal 1997, the Company used $8,855,000 of investments to fund its operations and purchased $2,085,000 of property, plant and equipment. In fiscal 1996, short-term investments of $10,113,000 were purchased with proceeds from the Company's 1996 public offering, which short-term investments provided the source of the cash used during fiscal 1997. Net cash provided by financing activities in fiscal 1997, 1996 and 1995 was $2,583,000, $25,667,000 and $4,525,000, respectively. The net cash provided by financing activities in 1997 was primarily attributable to an increase in the Company's revolving line of credit as offset primarily by payments on a capital lease obligation. The increase in fiscal 1996 was primarily attributable to the proceeds from the second public offering and, to a lesser extent, an increase in the Company's revolving line of credit and the exercise of warrants and options. Proceeds from the second public offering totaled $19,501,000. The balance of cash provided by financing activities in fiscal 1996 was from an increase in the Company's revolving line of credit. The increase in fiscal 1995 was due primarily to an increase in the Company's revolving line of credit. During fiscal 1997, the Company realized $356,000 from the proceeds of exercised stock options and increased its borrowings under the line of credit by $2,955,000. The Company has a credit agreement expiring in 1998 with Wells Fargo Bank, National Association (the "Bank") that provides for a revolving credit facility in an aggregate principal amount not exceeding $25,000,000, which credit facility is secured by a lien on substantially all of the assets of the Company. The credit facility provides for an interest rate on borrowings at the lower of the -15- Bank's prime rate less .25% or LIBOR plus 1.65%. Under the terms of the credit facility and included in the maximum amount thereunder, the Bank will issue letters of credit and banker's acceptances for the account of the Company in an aggregate amount not exceeding $2,500,000. At June 16, 1997, the outstanding balance on the credit facility was approximately $23,878,000. The Company's accounts receivable as of March 31, 1997 was $22,328,000. This represents an increase of $5,064,000 or 29.3% over accounts receivable on March 31, 1996. This is consistent with the 35.0% increase in net sales in fiscal 1997 over fiscal 1996. In addition, there are times when the Company extends payment terms with certain customers in order to help them finance an increase in the number of SKUs carried by that customer and for other purposes. The Company partially protects itself from losses due to uncollectible accounts receivable through an insurance policy with an independent credit insurance company at an annual premium of approximately $70,000. The Company's policy generally has been to issue credit to new customers only after the customers have been included under the coverage of its accounts receivable insurance policy. As of March 31, 1997, the Company's accounts receivable from its largest customer represented approximately 57% of all accounts receivable. The Company's inventory as of March 31, 1997 was $41,862,000, which represents an increase of $13,311,000 or 46.6% over inventory as of March 31, 1996. The increase includes the addition of approximately $10,800,000 of inventory during the last half of fiscal 1997 for the Company's entrance into the business of remanufacturing alternators and starters for domestic vehicles. The increase generally reflects the Company's anticipated growth in net sales, primarily in connection with respect to domestic vehicles, increased business from existing customers and the need to have sufficient inventory to support shorter lead times for deliveries to customers. Also, the Company continues to increase the number of SKUs sold requiring the Company to carry raw materials for this wider variety of parts. Disclosure Regarding Private Securities Litigation Reform Act of 1995 - --------------------------------------------------------------------- This report contains certain forward-looking statements with respect to the future performance of the Company that involve risks and uncertainties. Various factors could cause actual results to differ materially from those projected in such statements. These factors include, but are not limited to, the uncertainty of long-term results from the Company's recent entrance into the business of remanufacturing alternators and starters for domestic vehicles, concentration of sales to certain customers, the potential for changes in consumer spending, consumer preferences and general economic conditions, increased competition in the automotive parts remanufacturing industry, unforeseen increases in operating costs and other factors discussed herein and in the Company's other filings with the Securities and Exchange Commission. -16- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ------- -------------------------------------------- The information required by this item is set forth in the Financial Statements, commencing on page F-1 included herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON - ------- ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE. ------------------------------------ Not applicable. -17- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. - -------- --------------------------------------------------- The information required by this item is incorporated by reference herein in the "Election of Directors" section of the Company's Proxy Statement to be filed pursuant to Regulation 14A. ITEM 11. EXECUTIVE COMPENSATION. - -------- ----------------------- The information required by this item is incorporated by reference herein in the "Executive Compensation" section of the Company's Proxy Statement to be filed pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN - -------- ----------------------------- BENEFICIAL OWNERS AND MANAGEMENT. --------------------------------- The information required by this item is incorporated by reference herein in the "Security Ownership of Management" section of the Company's Proxy Statement to be filed pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - -------- ----------------------------------------------- The information required by this item is incorporated by reference herein in the "Certain Transactions" section of the Company's Proxy Statement to be filed pursuant to Regulation 14A. -18- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. - -------- ---------------------------------------------------------------- a. Exhibits: Number Description of Exhibit Method of Filing - ------ ---------------------- ---------------- 3.1 Certificate of Incorporation Incorporated by reference to of the Company. Exhibit 3.1 to the Company's Registration Statement on Form SB-2 (No. 33-74528) declared effective on March 22, 1994 (the "1994 Registration Statement"). 3.2 Amendment to Certificate of Incorporated by reference to Incorporation of the Company. Exhibit 3.2 to the Company's Registration Statement on Form S-1 (No. 33-97498) declared effective on November 14, 1995 (the "1995 Registration Statement"). 3.3 Amendment to Certificate of Filed herewith. Incorporation of the Company. 3.4 By-Laws of the Company. Incorporated by reference to Exhibit 3.2 to the 1994 Registration Statement. 4.1 Specimen Certificate of the Incorporated by reference to Company's Common Stock. Exhibit 4.1 to the 1994 Registration Statement. 4.2 Form of Underwriter's Common Incorporated by reference to Stock Purchase Warrant. Exhibit 4.2 to the 1994 Registration Statement. 4.3 1994 Stock Option Plan. Incorporated by reference to Exhibit 4.3 to the 1994 Registration Statement. -19- Number Description of Exhibit Method of Filing - ------ ---------------------- ---------------- 4.4 Form of Incentive Stock Option Incorporated by reference to Agreement. Exhibit 4.4 to the 1994 Registration Statement. 4.5 1994 Non-Employee Director Incorporated by reference to Stock Option Plan. Exhibit 4.5 to the Company's Annual Report on Form 10- KSB for the fiscal year ended March 31, 1995. 4.6 Executive and Key Employee Incorporated by reference to Incentive Bonus Plan. Exhibit 4.6 to the 1995 Registration Statement. 10.1 Credit Agreement, dated as Incorporated by reference to of June 1, 1996, by and Exhibit 10.4 to the Company's between the Company and Quarterly Report on Form 10- Q for Wells Fargo Bank, N.A. the quarter ended December 31, 1996 (the "December 31, 1996 Form 10- Q"). 10.2 First Amendment to Credit Filed herewith. Agreement, dated as of November 1, 1996, by and between the Company and Wells Fargo Bank, N.A. 10.3 Revolving Line of Credit Note, Incorporated by reference to dated as of November 1, 1996, Exhibit 10.5 to the December 31, by and between the Company and 1996 Form 10-Q. Wells Fargo Bank, N.A. 10.4 Lease Agreement, dated March 9, Incorporated by reference to 1993, by and between the Company Exhibit 10.3 to the 1994 and Maricopa Enterprises, Ltd., Registration Statement. relating to the Company's initial facility located in Torrance, California. -20- Number Description of Exhibit Method of Filing - ------ ---------------------- ---------------- 10.5 Second Amendment to Lease, Filed herewith. dated October 1, 1996, by and between the Company and Maricopa Enterprises, Ltd., relating to the Company's initial facility located in Torrance, California. 10.6 Amendment to Lease, dated Incorporated by reference to October 3, 1996, by and between Exhibit 10.17 to the December 31, the Company and Golkar 1996 Form 10-Q. Enterprises, Ltd. relating to additional property in Torrance, California. 10.7 Amended and Restated Employment Incorporated by reference to Agreement, dated as of September Exhibit 10.7 to the 1995 1, 1995, by and between the Registration Statement. Company and Mel Marks. 10.8 First Amendment to Amended and Filed herewith. Restated Employment Agreement, dated as of April 1, 1997, by and between the Company and Mel Marks. 10.9 Amended and Restated Employment Incorporated by reference to Agreement, dated as of September Exhibit 10.8 to the 1995 1, 1995, by and between the Registration Statement. Company and Richard Marks. 10.10 First Amendment to Amended Filed herewith. and Restated Employment Agreement, dated as of April 1, 1997, by and between the Company and Richard Marks. 10.11 Employment Agreement, dated Incorporated by reference to as of February 1, 1994, by and Exhibit 10.7 to the 1994 between the Company and Registration Statement. Steven Kratz. -21- Number Description of Exhibit Method of Filing - ------ ---------------------- ---------------- 10.12 First Amendment to Employment Exhibit 10.12 to the 1995 Agreement, dated as of Registration Statement. September 1, 1995, by and between the Company and Steven Kratz. 10.13 Second Amendment to Employment Filed herewith. Agreement, dated as of April 1, 1997, by and between the Company and Steven Kratz. 10.14 Employment Agreement, dated Incorporated by reference to as of March 1, 1994, by and Exhibit 10.12 to the 1994 between the Company and Peter Registration Statement. Bromberg. 10.15 First Amendment to Employment Incorporated by reference to Agreement, dated as of September Exhibit 10.12 to the 1995 1, 1995, by and between the Registration Statement. Company and Peter Bromberg. 10.16 Second Amendment to Employment Filed herewith. Agreement, dated as of April 1, 1997, by and between the Company and Peter Bromberg. 10.17 Employment Agreement, dated as Incorporated by reference to of September 1, 1995, by and Exhibit 10.13 to the 1995 between the Company and Eli Registration Statement. Markowitz. 10.18 Employment Agreement, dated as Filed herewith. of April 1, 1997, by and among MVR, Unijoh and Vincent Quek. 10.19 Form of Consulting Agreement, Incorporated by reference to dated as of September 1, 1995, Exhibit 10.14 to the 1995 by and between the Company and Registration Statement. Selwyn Joffe. -22- Number Description of Exhibit Method of Filing - ------ ---------------------- ---------------- 10.20 Lease Agreement, dated March Incorporated by reference to 28, 1995, by and between the Exhibit 10.11 to the Company's Company and Equitable Life Annual Report on Form 10-KSB for Assurance Society of the the fiscal year ended March 31, United States, relating to 1995. the Company's facility located in Nashville, Tennessee. 10.21 Lease Agreement, dated Incorporated by reference to September 19, 1995, by and Exhibit 10.18 to the 1995 between Golkar Enterprises, Registration Statement. Ltd. and the Company relating to the Company's facility located in Nashville, Tennessee. 10.22 Agreement and Plan of Filed herewith. Reorganization, dated as of April 1, 1997, by and among the Company, Mel Marks, Richard Marks and Vincent Quek relating to the acquisition of MVR and Unijoh. 22.1 List of Subsidiaries. Filed herewith. 23.1 Consent of Richard A. Eisner Filed herewith. & Company, LLP. 27.1 Financial Data Schedule. Filed herewith. b. REPORTS ON FORM 8-K: No reports on Form 8-K were filed by the Company during the fiscal quarter ended March 31, 1997. -23- MOTORCAR PARTS & ACCESSORIES, INC. - I N D E X - PAGE NUMBER REPORT OF INDEPENDENT AUDITORS F-2 BALANCE SHEETS AS AT MARCH 31, 1997 AND MARCH 31, 1996 F-3 STATEMENTS OF INCOME FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED MARCH 31, 1997 F-4 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED MARCH 31, 1997 F-5 STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED MARCH 31, 1997 F-6 NOTES TO FINANCIAL STATEMENTS F-7 F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Motorcar Parts & Accessories, Inc. Torrance, California We have audited the accompanying balance sheets of Motorcar Parts & Accessories, Inc. as at March 31, 1997 and March 31, 1996 and the related statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements enumerated above present fairly, in all material respects, the financial position of Motorcar Parts & Accessories, Inc. at March 31, 1997 and March 31, 1996 and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. Richard A. Eisner & Company, LLP New York, New York May 16, 1997 F-2 MOTORCAR PARTS & ACCESSORIES, INC. BALANCE SHEETS A S S E T S March 31, ----------- ------------------------- (Note F) 1997 1996 ----------- ----------- Current assets: Cash and cash equivalents (Note A[1]) . . $ 3,539,000 $ 164,000 Short-term investments (Notes A[2] and B) 8,336,000 Accounts receivable - net of allowance for doubtful accounts of $200,000 and $100,000, respectively (Note J) . . . . 22,328,000 17,264,000 Inventory (Notes A[3] and C) . . . . . . . 41,862,000 28,551,000 Prepaid expenses and other current assets 593,000 637,000 Deferred income tax asset (Notes A[4] and K) . . . . . . . . . . . 142,000 226,000 ----------- ----------- Total current assets . . . . . . . 68,464,000 55,178,000 Long-term investments (Notes A[2] and B) . . 1,874,000 2,393,000 Plant and equipment - net (Notes A[7] and D) 4,291,000 2,469,000 Other assets . . . . . . . . . . . . . . . . 881,000 149,000 ----------- ----------- T O T A L . . . . . . . . . . . . . $75,510,000 $60,189,000 =========== =========== L I A B I L I T I E S --------------------- Current liabilities: Current portion of capital lease obligations (Note E) . . . . . . . . . . $ 743,000 $ 554,000 Accounts payable and accrued expenses . . 13,777,000 8,855,000 Income taxes payable (Notes A[6] and K) . 2,005,000 1,331,000 Due to affiliate (Note G) . . . . . . . . 139,000 184,000 ----------- ----------- Total current liabilities . . . . . 16,664,000 10,924,000 Long-term debt (Note F) . . . . . . . . . . . 17,496,000 14,541,000 Capitalized lease obligations - less current portion (Note E) . . . . . . . . . . . . . 343,000 594,000 Other liabilities . . . . . . . . . . . . . . 570,000 Deferred income tax liability (Notes A[6] and K) . . . . . . . . . . . . 329,000 99,000 ----------- ----------- T o t a l . . . . . . . . . . . . . 35,402,000 26,158,000 ----------- ----------- Commitments and other matters (Notes H, I and J) SHAREHOLDERS' EQUITY -------------------- (Note L) Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued Common stock; par value $.01 per share, 20,000,000 shares authorized; 4,867,500 and 4,819,750 shares issued and outstanding . . . . . . . . . . . . . . . 49,000 48,000 Additional paid-in capital . . . . . . . . . 28,973,000 28,431,000 Retained earnings . . . . . . . . . . . . . . 11,086,000 5,552,000 ----------- ----------- Total shareholders' equity . . . . 40,108,000 34,031,000 ----------- ----------- T O T A L . . . . . . . . . . . . . $75,510,000 $60,189,000 =========== =========== The accompanying notes to financial statements are an integral part hereof. F-3 MOTORCAR PARTS & ACCESSORIES, INC. STATEMENTS OF INCOME Year Ended March 31, ----------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Income: Net sales (Note A[6]) . . . $86,872,000 $64,358,000 $39,235,000 ----------- ----------- ----------- Operating expenses: Cost of goods sold . . . . 69,255,000 50,965,000 30,690,000 Research and development . 185,000 Selling expenses . . . . . 2,305,000 1,984,000 1,498,000 General and administrative expenses . . . . . . . . 4,974,000 4,577,000 3,704,000 ----------- ----------- ----------- Total operating expenses . . . . . 76,719,000 57,526,000 35,892,000 ----------- ----------- ----------- Operating income . . . . . . . 10,153,000 6,832,000 3,343,000 Interest expense (net of interest income of $218,000, $219,000 and $73,000 for 1997, 1996 and 1995, respectively) . . . . . . . 1,090,000 833,000 540,000 ----------- ----------- ----------- Income before income taxes . . 9,063,000 5,999,000 2,803,000 Provision for income taxes (Notes A[4] and K) . . . . 3,529,000 2,353,000 1,197,000 ----------- ----------- ----------- NET INCOME . . . . . . . . . . $ 5,534,000 $ 3,646,000 $ 1,606,000 =========== =========== =========== Weighted average common shares outstanding (Note A[7]) . . 5,007,000 3,939,000 3,295,000 =========== =========== =========== Net income per common share . $ 1.11 $ .93 $ .49 =========== =========== =========== The accompanying notes to financial statements are an integral part hereof. F-4 MOTORCAR PARTS & ACCESSORIES, INC. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Note L)
Common Stock ------------------------- Additional Number of Paid-in Retained Shares Amount Capital Earnings Total ----------- ----------- ----------- ----------- ----------- Balance - March 31, 1994 ....................... 3,207,500 $ 32,000 $ 8,078,000 $ 300,000 $ 8,410,000 Net income ...................................... 1,606,000 1,606,000 ----------- ----------- ----------- ----------- ----------- Balance - March 31, 1995 ....................... 3,207,500 32,000 8,078,000 1,906,000 10,016,000 Proceeds from exercise of warrants and options .................................. 112,250 1,000 867,000 868,000 Proceeds from public offering (net of costs of $1,874,000) ..................... 1,500,000 15,000 19,486,000 19,501,000 Net income ...................................... 3,646,000 3,646,000 ----------- ----------- ----------- ----------- ----------- Balance - March 31, 1996 ....................... 4,819,750 48,000 28,431,000 5,552,000 34,031,000 Proceeds from exercise of options ............... 47,750 1,000 355,000 356,000 Tax benefit from exercise of options ............ 187,000 187,000 Net income ...................................... 5,534,000 5,534,000 ----------- ----------- ----------- ----------- ----------- BALANCE - MARCH 31, 1997 ....................... 4,867,500 $ 49,000 $28,973,000 $11,086,000 $40,108,000 =========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part hereof. F-5 MOTORCAR PARTS & ACCESSORIES, INC. STATEMENTS OF CASH FLOWS
Year Ended March 31, -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Cash flows from operating activities: Net income ........................................................... $ 5,534,000 $ 3,646,000 $ 1,606,000 Adjustments to reconcile net income to net cash (used in) operating activities: Depreciation and amortization .................................... 717,000 429,000 306,000 (Increase) decrease in: Accounts receivable ............................................ (5,064,000) (6,589,000) (6,409,000) Inventory ...................................................... (13,311,000) (16,434,000) (4,886,000) Prepaid expenses and other current assets ...................... 44,000 (300,000) (115,000) Other assets ................................................... (732,000) (50,000) 29,000 Deferred income taxes .......................................... 314,000 (82,000) 20,000 Increase (decrease) in: Accounts payable and accrued expenses .......................... 5,134,000 3,094,000 2,486,000 Income taxes payable ........................................... 861,000 785,000 290,000 Due to affiliate ............................................... (45,000) 157,000 (48,000) Other liabilities .............................................. 570,000 ------------ ------------ ------------ Net cash (used in) operating activities ...................... (5,978,000) (15,344,000) (6,721,000) ------------ ------------ ------------ Cash flows from investing activities: Purchase of property, plant and equipment ............................ (2,085,000) (657,000) (375,000) Change in investments ................................................ 8,855,000 (10,113,000) (616,000) ------------ ------------ ------------ Net cash provided by (used in) investing activities .......... 6,770,000 (10,770,000) (991,000) ------------ ------------ ------------ Cash flows from financing activities: Net increase in line of credit ....................................... 2,955,000 5,552,000 4,683,000 Payments on capital lease obligation ................................. (728,000) (254,000) (158,000) Proceeds from public offerings ....................................... 19,501,000 Proceeds from exercise of warrants and options ....................... 356,000 868,000 ------------ ------------ ------------ Net cash provided by financing activities .................... 2,583,000 25,667,000 4,525,000 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... 3,375,000 (447,000) (3,187,000) Cash and cash equivalents - beginning of year ........................... 164,000 611,000 3,798,000 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS - END OF YEAR ................................. $ 3,539,000 $ 164,000 $ 611,000 ============ ============ ============ Supplemental disclosures of cash flow information: Cash paid during the year for: Interest ........................................................... $ 1,262,000 $ 1,035,000 $ 572,000 Income taxes ....................................................... 2,354,000 1,590,000 862,000 Noncash investing and financing activities: Property acquired under capital lease .............................. 454,000 707,000 93,000 Property acquired included in accounts payable and accrued expenses at March 31, 1996 and financed through a capitalizable lease during fiscal 1997 ............................................... 212,000 212,000
The accompanying notes to financial statements are an integral part hereof. F-6 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE A) - The Company and its Significant Accounting Policies: Motorcar Parts & Accessories, Inc. (the "Company"), remanufactures and distributes alternators and starters and assembles and distributes spark plug wire sets for the automotive after-market industry (replacement parts sold for use on vehicles after initial purchase). These automotive parts are sold to automotive retail chains and warehouse distributors throughout the United States. [1] Cash equivalents: The Company considers all highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents. [2] Investments: The Company's marketable securities are classified as available for sale and reported at fair value which approximates amortized cost. Any unrealized gains or losses are classified as a separate component of shareholders' equity. [3] Inventory: Inventory is stated at the lower of cost or market; cost being determined by the average cost method. [4] Income taxes: The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes" which requires the use of the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. The resulting asset or liability is adjusted to reflect changes in the tax laws as they occur. [5] Depreciation and amortization: Property and equipment are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are amortized by the straight-line method over the shorter of their estimated useful life or the term of the lease. (continued) F-7 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE A) - The Company and its Significant Accounting Policies: - --------------------------------------------------------------- (continued) [6] Revenue recognition: The Company recognizes sales when products are shipped. The Company obtains used alternator and starter units, commonly known as cores, from its customers as trade-ins and by purchasing them from vendors. Cores are an essential material needed for remanufacturing operations. During the year ended March 31, 1997, the Company implemented a new accounting presentation with respect to its reporting of sales. In the past, net sales were reduced by the core inventory value to reflect deductions for cores returned for credit from customers ("core trade- ins") and by the value of the credits issued in excess of core inventory value ("product trade-ins"). Cost of goods sold was reduced for core trade-ins only. As reclassified, net sales are reduced by product trade-ins and other deductions and allowances only and core trade-ins are included in cost of goods sold. Net sales and cost of goods sold for the years ended March 31, 1996 and March 31, 1995 were reclassified to reflect this change. Trade-ins are recorded upon receipt of cores from customers. Credits for core and product trade-ins are allowed only against future purchases of similar remanufactured products and are generally used by the customer within sixty days of issuance. Due to this unique trade-in policy, the Company does not provide a reserve for trade-ins. In addition, since it is remote that a customer will not utilize its trade-in credits, the credit is recorded when the core is returned as opposed to when the customer purchases new products. This policy is consistent throughout the remanufacturing and rebuilding industry. The effect of this policy is as follows: March 31, ------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- Sales. . . . . . . . . . $ 97,677,000 $ 73,826,000 $ 45,272,000 Product trade-ins. . . . (10,805,000) (9,468,000) (6,037,000) ------------- ------------- ------------- Net sales. . . . . . . . 86,872,000 64,358,000 39,235,000 Core trade-ins . . . . . (29,179,000) (19,445,000) (10,978,000) ------------- ------------- ------------- Net sales as previously classified. . . . . . $ 57,693,000 $ 44,913,000 $ 28,257,000 ============= ============= ============ Cost of goods sold . . . $ 69,255,000 $ 50,965,000 $ 30,690,000 Core trade-ins . . . . . (29,179,000) (19,445,000) (10,978,000) ------------- ------------- ------------- Cost of goods sold as previously classified $ 40,076,000 $ 31,520,000 $ 19,712,000 ============= ============= ============ (continued) F-8 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE A) - The Company and its Significant Accounting Policies: (continued) [7] Earnings per share: Earnings per share is computed using the weighted average number of shares outstanding during each year, which include the incremental effect of common stock equivalents consisting of stock options. [8] Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. [9] Impairment of long-lived assets: The Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during the year. SFAS 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable assets, and goodwill related to those assets. There was no effect of adoption of SFAS 121 on the financial statements. [10] Financial instruments: The carrying amounts of accounts receivable, accounts payable, accrued expenses, capitalized lease obligations and long-term debt approximate their fair value. Estimated fair value of these financial instruments, some of which are for short durations, has been determined using available market information. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. (continued) F-9 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE A) - The Company and its Significant Accounting Policies: (continued) [11] Stock-based compensation: In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation". SFAS 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has elected to continue to account for its stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"), Accounting for Stock Issued to Employees" and disclose the pro forma effects on net income and earnings per share had the fair value of options been expensed. Under the provisions of APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of the grant over the amount an employee must pay to acquire the stock. (See Note L[2]). [12] Recently issued accounting pronouncements: In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share". This new standard requires dual presentation of basic and diluted earnings per share ("EPS") on the face of the statement of income and requires reconciliation of the numerators and the denominators of the basic and diluted EPS calculations. This statement will be effective for the third quarter of the Company's 1998 fiscal year. The Company has not yet quantified what effect the adoption of SFAS 128 will have on its earnings per share of common stock. (NOTE B) - Investments: The estimated fair value of available for sale investments at March 31 is as follows: 1997 1996 ----------- ----------- U.S. Treasury bills due in one year or less . . . . . . $ - 0 - $ 2,272,000 Municipal bonds due in one year or less . . . . . . . . - 0 - 4,492,000 U.S. Treasury notes due in one year or less . . . . . . - 0 - 1,572,000 ----------- ----------- - 0 - 8,336,000 Mortgage-backed securities and municipal bonds due after one year . . . . . . . . . . 1,874,000 2,393,000 ----------- ----------- T o t a l . . . . . . $ 1,874,000 $10,729,000 =========== =========== (continued) F-10 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE B) - Investments: (continued) The estimated fair value of each investment approximates the amortized cost and, therefore, there are no unrealized gains or losses as of March 31, 1997. (NOTE C) - Inventory: Inventory is comprised of the following: March 31, ------------------------- 1997 1996 ------------ ----------- Raw materials. . . . . . . . . $24,046,000 $17,568,000 Work-in-process. . . . . . . . 4,270,000 3,466,000 Finished goods . . . . . . . . 13,546,000 7,517,000 ------------ ----------- T o t a l. . . . . . $41,862,000 $28,551,000 ============ =========== (NOTE D) - Plant and Equipment: Plant and equipment, at cost, are summarized as follows: March 31, ------------------------- 1997 1996 ------------ ----------- Machinery and equipment. . . . $ 4,362,000 $ 2,311,000 Office equipment and fixtures. 1,272,000 891,000 Leasehold improvements . . . . 472,000 365,000 ------------ ----------- 6,106,000 3,567,000 Less accumulated depreciation and amortization (including assets held under capital lease). . . . . . . . . . . (1,815,000) (1,098,000) ------------ ------------ T o t a l. . . . . . $ 4,291,000 $ 2,469,000 ============ ============ (NOTE E) - Obligations Under Capital Leases: The Company has various capital leases for machinery and computer equipment. Assets aggregating approximately $2,338,000 have been capitalized. (continued) F-11 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE E) - Obligations Under Capital Leases: (continued) Future minimum lease payments at March 31, 1997 for the capitalized leases are as follows: 1998......................................... $ 829,000 1999......................................... 306,000 2000......................................... 61,000 ---------- 1,196,000 Amount representing imputed interest . 110,000 Present value of future minimum lease payments............................ 1,086,000 Less current maturities...................... 743,000 Long-term obligation at March 31, 1997....... $ 343,000 ========== (NOTE F) - Long-Term Debt: In November 1996, the Company amended its revolving line of credit agreement. The agreement provides for a credit facility in an aggregate principal amount not exceeding $25,000,000 and is collateralized by a lien on substantially all of the assets of the Company. The agreement expires on June 1, 1998 and provides for interest on borrowings at a fluctuating rate per annum .25% below the bank's prime rate or at a fixed rate at 1.65% above LIBOR. The agreement allows the Company to obtain from the bank letters of credit, and banker's acceptances in an aggregate amount not exceeding $2,500,000 and requires the Company to maintain certain financial ratios. As of March 31, 1997 balances due under this agreement amounted to $17,496,000. The Company previously had a $15,000,000 revolving line of credit agreement with the same bank. Balances due under this agreement amounted to $14,541,000 as of March 31, 1996. (continued) F-12 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE G) - Related Parties: - --------------------------- The Company conducts business with MVR Products Co. PTE, Ltd. ("MVR"). MVR operates a shipping warehouse which conducts business with Unijoh Sdn, Bhd ("Unijoh"). Unijoh operates a remanufacturing facility similar to the Company. MVR's warehouse is located in Singapore and Unijoh's factory is located in Malaysia. Two shareholders/officers/directors of the Company own 70% of both MVR and Unijoh, with the remaining 30% owned by an unrelated third party. All of the cores processed by Unijoh are produced for the Company on a contract remanufacturing basis. The cores and other raw materials used in production by Unijoh are supplied by the Company and are included in the Company's inventory. Inventory owned by the Company and held by MVR and Unijoh was $762,000 and $920,000 as at March 31, 1997 and March 31, 1996, respectively. The Company incurred costs of approximately $1,574,000, $1,432,000 and $1,349,000 from the affiliates for the years ended March 31, 1997, March 31, 1996 and March 31, 1995, respectively. The amount due to affiliate as at March 31, 1997 and March 31, 1996 was due to MVR. In April 1997, MVR and Unijoh became wholly owned subsidiaries of the Company in a stock-for-stock merger which will be accounted for in a manner similar to a pooling of interests. Under the terms of the merger agreement, the Company issued 145,455 shares of common stock. The financial statements prior to the date of combination have not been restated as the effect is not material to the Company's financial condition and results of operations. The combined assets and combined liabilities of MVR and Unijoh aggregated approximately $632,000 and $398,000, respectively, at the date of combination. (NOTE H) - Employment Agreement and Bonus Plan: - ----------------------------------------------- The Company has employment agreements with six officers, expiring from September 1, 1997 through September 1, 2000, which provide for annual base salaries aggregating $1,295,000. In addition, four of the officers were granted options pursuant to the Company's Stock Option Plan (Note L[2]) for the purchase of 317,500 shares of common stock (92,500, 90,000 and 135,000 granted in fiscal years 1997, 1996 and 1995, respectively). Of these options, 25,000 and 10,000 were exercised during the years ended March 31, 1997 and March 31, 1996, respectively. The Company has established a bonus plan for the benefit of executives and certain key employees. The bonus is calculated as a percentage of the base salary ranging from 18% to 50%. The bonus percentage varies according to the percentage increase in earnings before income taxes and other predetermined parameters. (continued) F-13 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE I) - Commitments: - ----------------------- The Company leases offices and warehouse facilities in New York, California and Tennessee under operating leases expiring through 2002. The aggregate rentals under these leases and leases which have been terminated was $819,000, $609,000 and $435,000 for the years ended March 31, 1997, March 31, 1996 and March 31, 1995, respectively. Certain leases contain escalation clauses for real estate taxes and operating expenses. The Company also leases office equipment and machinery under noncancellable operating leases having remaining terms in excess of one year. At March 31, 1997, the future minimum rental payments under the above operating leases are as follows: Real Total Estate Machinery 1998. . . . . . . . . $1,493,000 $1,366,000 $127,000 1999. . . . . . . . . 1,401,000 1,319,000 82,000 2000. . . . . . . . . 1,334,000 1,301,000 33,000 2001. . . . . . . . . 1,353,000 1,348,000 5,000 2002. . . . . . . . . 1,348,000 1,348,000 ----------- ---------- -------- T o t a l . $6,929,000 $6,682,000 $247,000 =========== =========== ======== (NOTE J) - Major Customers and Credit Concentration: - ---------------------------------------------------- The Company partially protects itself from losses due to uncollectible accounts receivable through the purchase of credit insurance. Accounts receivable balances not covered by credit insurance are primarily due from leading automotive parts retailers. The Company's four largest customers accounted for the following percentage of net sales: Year Ended March 31, ---------------- Customer 1997 1996 1995 -------- ---- ---- ---- A. . . . . . . . . . . . 18% 21% 27% B. . . . . . . . . . . . 18 11 14 C. . . . . . . . . . . . 29 20 12 D. . . . . . . . . . . . 8 18 (continued) F-14 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE J) - Major Customers and Credit Concentration: (continued) - ---------------------------------------------------- Customer A accounted for approximately 13%, 25% and 50% of the accounts receivable at March 31, 1997, March 31, 1996 and March 31, 1995. In addition, Customer C accounted for approximately 57% and 35% of the accounts receivable at March 31, 1997 and March 31, 1996. (NOTE K) - Income Taxes: - ------------------------ The provision for income taxes consists of the following: Year Ended March 31, -------------------- 1997 1996 1995 ---- ---- ---- Current: Federal. . . . . . . $2,750,000 $1,913,000 $ 900,000 State. . . . . . . . 465,000 522,000 277,000 Deferred . . . . . . 314,000 (82,000) 20,000 ----------- ----------- ---------- T o t a l . . $ 3,529,000 $ 2,353,000 $ 1,197,000 =========== =========== =========== The difference between the tax provision and the amount that would be computed by applying the statutory federal income tax rate to income before taxes is attributable to the following: Year Ended March 31, -------------------- 1997 1996 1995 ---- ---- ---- Income tax provision at 34% . . . . . . . $ 3,081,000 $ 2,040,000 $ 953,000 State and local taxes, net of federal benefit. . . . . . . 307,000 345,000 183,000 Permanent differences . (20,000) 18,000 11,000 Other . . . . . . . . . 161,000 (50,000) 50,000 ----------- ----------- ----------- T o t a l . . $ 3,529,000 $ 2,353,000 $ 1,197,000 =========== =========== =========== Deferred income tax asset of $142,000 and $226,000 at March 31, 1997 and March 31, 1996, respectively, is comprised of temporary differences in tax and financial reporting resulting primarily from capitalization of certain inventory costs for tax purposes. Deferred tax liability of $329,000 and $99,000 at March 31, 1997 and March 31, 1996, respectively, is comprised of differences resulting from using accelerated depreciation rates for tax purposes. (continued) F-15 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE L) - Shareholders' Equity: - -------------------------------- [1] Capital Stock: -------------- In November 1995, the Company effected a public offering of its securities. The Company issued 1,500,000 shares for $14.25 a share, yielding net proceeds of approximately $19,501,000 after underwriting commissions and expenses totalling approximately $1,874,000. Also, two principal shareholders sold an aggregate of 344,500 shares in connection with this offering. [2] Stock option plan: ------------------ In December 1993, the shareholders approved a Stock Option Plan (the "Plan") which was amended in October 1996 to provide for the granting of options to purchase 720,000 common shares to employees and directors. Options granted may be either "incentive stock options" within the meaning of Section 422A of the Internal Revenue Code or nonqualified options. The Plan is administered by the Board of Directors, which determines the terms of options exercised, including the exercise price, the number of shares subject to the option and the terms and conditions of exercise. In August of 1995, the shareholders approved a Nonemployee Director Stock Option Plan (the "Directors Plan") which provides for the granting of options to purchase 15,000 common shares to directors. The Directors Plan is administered by the Board of Directors. The following table summarizes the activity under these Plans:
Y e a r E n d e d M a r c h 3 1, ----------------------------------------------------------------- 1997 1996 1995 -------------------- -------------------- ------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------- ------- --------- ------- --------- ------- Options outstanding at beginning of year ....................... 335,000 $ 9.23 250,000 $ 7.40 85,000 $ 6.00 Granted .......................... 381,500 12.98 109,000 12.96 165,000 8.13 Exercised ........................ (47,750) 7.46 (23,000) 7.19 Cancelled ........................ (180,250) 14.69 (1,000) 8.13 --------- --------- --------- Options outstanding at end of year 488,500 10.31 335,000 9.23 250,000 7.40 ========= ========= ========= Options exercisable at end of year .......................... 290,417 9.34 278,000 8.83 173,000 7.47 ========= ========= =========
(continued) F-16 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE L) - Shareholders' Equity: (continued) - -------------------------------- [2] Stock option plan: (continued) ------------------ The following table presents information relating to stock options outstanding at March 31, 1997: Options Outstanding Options Exercisable ---------------------------- ------------------- Weighted Weighted Average Weighted Average Remaining Average Range of Exercise Life in Exercise Exercise Price Shares Price Years Shares Price -------------- ------ ----- ----- ------ ----- $ 6.00 - $ 8.125 178,000 $ 7.41 7.06 178,000 $ 7.41 $ 9.00 - $10.625 184,500 10.59 8.72 61,250 10.51 $11.875 - $12.250 51,500 12.31 9.13 15,000 13.13 $14.69 - $17.313 74,500 15.20 9.68 36,167 15.26 --------- --------- T o t a l. . 488,500 10.31 8.30 290,417 9.34 ========= ========= As of March 31, 1997, 165,000 options are available for future grant under the Plan and 10,500 options are available for future grant under the Directors Plan. The weighted-average fair value at date of grant for options granted during the year ended March 31, 1997 and March 31, 1996 was $5.50 and $5.63 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes option pricing model utilizing the following assumptions: March 31, ----------------------- 1997 1996 ---------- ---------- Risk-free interest rates. . . . . 5.8% - 6.5% 6.1% - 6.9% Expected option life in years . . 5 5 Expected stock price volatility . 36% 38% Expected dividend yield . . . . . 0% 0% Had the Company elected to recognize compensation cost based on the fair value of the options at the date of grant as prescribed by SFAS 123, net income for the years ended March 31, 1997 and March 31, 1996 would have been $5,180,000 and $3,425,000 or $1.03 per share and $.87 per share, respectively. (continued) F-17 MOTORCAR PARTS & ACCESSORIES, INC. NOTES TO FINANCIAL STATEMENTS (NOTE L) - Shareholders' Equity: (continued) - --------------------------------- [3] Warrants: --------- In connection with the Company's initial public offering the Company issued to the underwriter 105,000 warrants to purchase common stock at an exercise price of $7.20. In connection with a public offering in November 1995, 90,000 warrants were exercised. F-18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: June 26, 1997 MOTORCAR PARTS & ACCESSORIES, INC. By: /s/ Mel Marks ------------------------------- Mel Marks, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Mel Marks Chairman of the Board, June 26, 1997 - ------------------------ Chief Executive Officer Mel Marks and Director (principal executive officer) /s/ Richard Marks President, Chief June 26, 1997 - ------------------------ Operating Officer and Richard Marks Director /s/ Murray Rosenzweig Director June 26, 1997 - ------------------------ Murray Rosenzweig /s/ Mel Moskowitz Director June 26, 1997 - ------------------------ Mel Moskowitz Director June 26, 1997 - ------------------------ Selwyn Joffe /s/ Peter Bromberg Chief Financial Officer June 26, 1997 - ------------------------ (principal financial officer Peter Bromberg and principal accounting officer) -24- EXHIBIT INDEX Exhibit Number Description Page Number - ------ ----------- ----------- 3.3 Amendment to Certificate of Incorporation of the Company 10.2 First Amendment to Credit Agreement, dated as of November 1, 1996, by and between the Company and Wells Fargo Bank, N.A. 10.5 Second Amendment to Lease, dated October 1, 1996, by and between the Company and Maricopa Enterprises, Ltd., relating to the Company's initial facility located in Torrance, California 10.8 First Amendment to Amended and Restated Employment Agreement, dated as of April 1, 1997, by and between the Company and Mel Marks 10.10 First Amendment to Amended and Restated Employment Agreement, dated as of April 1, 1997, by and between the Company and Richard Marks 10.13 Second Amendment to Employment Agreement, dated as of April 1, 1997, by and between the Company and Steven Kratz 10.16 Second Amendment to Employment Agreement, dated as of April 1, 1997, by and between the Company and Peter Bromberg 10.18 Employment Agreement, dated as of April 1, 1997, by and among MVR, Unijoh and Vincent Quek. 10.22 Agreement and Plan of Reorganization, dated as of April 1, 1997, by and among the Company, Mel Marks, Richard Marks and Vincent Quek relating to the acquisition of MVR and Unijoh 21.1 List of Subsidiaries 23.1 Consent of Richard A. Eisner & Company, LLP 27.1 Financial Data Schedule -25- COMMISSION FILE NO. 0-23538 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS to FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 MOTORCAR PARTS & ACCESSORIES, INC.


          CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION

                                       OF

                       MOTORCAR PARTS & ACCESSORIES, INC.

                Under Section 805 of the Business Corporation Law


            It is hereby certified that:

            FIRST:  The name of the Corporation is MOTORCAR PARTS & ACCESSORIES,
INC.  The name  under  which the  Corporation  was  formed  was  MOTORCAR  PARTS
ASSOCIATES, INC.

            SECOND:  The  Certificate of  Incorporation  of the  Corporation was
filed by the  Department  of  State  of the  State of New York on the 2nd day of
April, 1968.

            THIRD:  The  Amendment  to  the  Certificate  of  Incorporation,  as
heretofore amended and restated, effected by this Certificate of Amendment is as
follows:

            (a) to increase the aggregate number of shares which the Corporation
shall have authority to issue by authorizing  10,000,000 additional shares of ii
Common  Stock,  with a par  value of $.01 per  share,  and of the same  class of
Common Stock as the presently authorized shares.

            FOURTH: To accomplish the foregoing amendment, Article FOURTH of the
Certificate of  Incorporation  relating to the aggregate  number of shares which
the Corporation is authorized to issue, is hereby amended to read as follows:

            "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,

                                       -2-





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 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

                                       -3-





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 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

                                       -4-





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."

               FIFTH:   The   foregoing   Amendment   of  the   Certificate   of
Incorporation of the Corporation was authorized by the consent in writing of all
the members of the Board of Directors of the  Corporation,  followed by the vote
of the  holders of more than 50% of all  outstanding  shares of the  Corporation
entitled to vote on the said Amendment of the Certificate of Incorporation.

               IN WITNESS  WHEREOF,  we have  subscribed this document this 22nd
day of August,  1996, and do hereby affirm,  under penalty of perjury,  that the
statements contained therein have been examined by us and are true and correct.



                                           /s/ Mel Marks
                                          -----------------------------------
                                          MEL MARKS, Chairman of the Board of
                                          Directors and Chief Executive Officer
                                         
                                         
                                           /s/ Peter Bromberg
                                          -----------------------------------
                                          PETER BROMBERG, Assistant Secretary
                                    
                                       -5-




STATE OF      New York    )
                          )  SS.:
COUNTY OF     New York    )


               Peter Bromberg,  being duly sworn deposes and says that he is one
of the persons who signed the foregoing certificate of amendment; that he signed
said certificate in the capacity set opposite or beneath his signature  thereon;
that he has read the said certificate and knows the contents  thereof;  and that
the statements contained therein are true to his own knowledge.



                                           /s/ Peter Bromberg
                                           -----------------------------------
                                           Peter Bromberg, Assistant Secretary
                                           

Subscribed and sworn to before 
me on August 22 , 1996.

         /s/ Brooke Spiegel
         ------------------
             Notary Public

                                       -6-


                       FIRST AMENDMENT TO CREDIT AGREEMENT


     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into
as of November 1, 1996, by and between MOTORCAR PARTS & ACCESSORIES, INC., a New
York  corporation  ("Borrower"),  and WELLS  FARGO  BANK,  NATIONAL  ASSOCIATION
("Bank").

                                    RECITALS
                                    --------

     WHEREAS,  Borrower is currently  indebted to Bank pursuant to the terms and
conditions of that certain Credit  Agreement  between Borrower and Bank dated as
of June 1, 1996, as amended from time to time ("Credit Agreement");

     WHEREAS,  Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement to reflect said changes;

     NOW, THEREFORE, for valuable consideration,  the receipt and sufficiency of
which  are  hereby  acknowledged,  the  parties  hereto  agree  that the  Credit
Agreement shall be amended as follows:

     1. Section 1.1(a) is hereby amended by deleting  "Fifteen  Million  Dollars
($15,000,000.00)"  as the maximum  principal  amount available under the Line of
Credit,  and by  substituting  for  said  amount  "Twenty-five  Million  Dollars
($25,000,000.00),"  with such  change to be  effective  upon the  execution  and
delivery to Bank of a  promissory  note  substantially  in the form of Exhibit A
attached  hereto (which  promissory note shall replace and be deemed the Line of
Credit Note defined in and made pursuant to the Credit  Agreement) and all other
contracts, instruments and documents required by Bank to evidence such change.

     2. Section  1.2(c) is hereby  deleted in it's  entirety  and the  following
substituted therefor:

          "Borrower shall pay to Bank a non-refundable annual commitment fee for
          the Line of Credit equal to Twenty-five Thousand Dollars ($25,000.00),
          which fee shall be due and  payable  in full  upon  execution  of this
          Amendment,  and in June of each following year if and only if the Line
          of Credit is renewed by Bank for an additional year."






     3. Section  4.9(e) is hereby  deleted in it's  entirety  and the  following
substituted therefor:

               "(e) Ratio of Funded Debt to EBITDA not  greater  than 30 to 1.0,
          with "Funded Debt" defined as the principal balance  outstanding under
          the Line of Credit as of any given calculation date, and with "EBITDA"
          defined  as net  profit  before  tax  plus  interest  expense  (net of
          capitalization    interest   expense),    depreciation   expense   and
          amortization expense, calculated on a rolling four-quarter basis as of
          any given calculation date;"

     4. The following is hereby added to the Credit Agreement as Sections 4.9(f)
and (g):

               "(f)  EBITDA  Coverage  Ratio  not  less  than  5.0  to 1.0 to be
          calculated on a rolling four quarter  basis,  with "EBITDA" as defined
          above and "EBITDA  Coverage  Ratio"  defined as EBITDA  divided by the
          aggregate of total  interest  expense  plus the prior  period  current
          maturity of long-term  debt and the prior period  current  maturity of
          subordinated debt;

               (g)  from  time to  time  such  other  information  as  Bank  may
          reasonably request."

     5. The following is hereby added to the Credit Agreement as Section 7.10:

          "SECTION 7.10. ARBITRATION.

               (a) Arbitration.  Upon the demand of any party, any Dispute shall
          be resolved by binding  arbitration (except as set forth in (e) below)
          in accordance with the terms of this Agreement. A "Dispute" shall mean
          any action,  dispute,  claim or  controversy  of any kind,  whether in
          contract or tort,  statutory or common law,  legal or  equitable,  now
          existing or hereafter  arising under or in connection  with, or in any
          way pertaining to, any of the Loan Documents,  or any past, present or
          future  extensions  of credit and other  activities,  transactions  or
          obligations  of any kind related  directly or indirectly to any of the
          Loan Documents,  including  without  limitation,  any of the foregoing
          arising in connection with the exercise of any self-help, ancillary or
          other remedies pursuant to any of the Loan Documents. Any party may by
          summary  proceedings bring an action in court to compel arbitration of
          a Dispute.  Any party who fails or  refuses  to submit to  arbitration
          following a lawful demand by any other party shall bear all costs

                                       -2-





          and expenses incurred by such other party in compelling arbitration of
          any Dispute.

               (b)   Governing   Rules.   Arbitration   proceedings   shall   be
          administered by the American  Arbitration  Association ("AAA") or such
          other  administrator  as the  parties  shall  mutually  agree  upon in
          accordance  with the AAA Commercial  Arbitration  Rules.  All Disputes
          submitted  to  arbitration  shall be resolved in  accordance  with the
          Federal   Arbitration  Act  (Title  9  of  the  United  States  Code),
          notwithstanding  any conflicting choice of law provision in any of the
          Loan Documents.  The  arbitration  shall be conducted at a location in
          California selected by the AAA or other administrator. If there is any
          inconsistency  between the terms hereof and any such rules,  the terms
          and  procedures  set forth  herein  shall  control.  All  statutes  of
          limitation  applicable to any Dispute  shall apply to any  arbitration
          proceeding.  All discovery  activities  shall be expressly  limited to
          matters directly  relevant to the Dispute being  arbitrated.  Judgment
          upon any award rendered in an arbitration  may be entered in any court
          having jurisdiction;  provided however,  that nothing contained herein
          shall  be  deemed  to be a  waiver  by any  party  that is bank of the
          protections  afforded  to it under  12  U.S.C.  ss.91  or any  similar
          applicable state law.

               (c) No Waiver;  Provisional Remedies,  Self-Help and Foreclosure.
          No  provision  hereof  shall  limit the right of any party to exercise
          self-help remedies such as setoff,  foreclosure against or sale of any
          real  or  personal  property  collateral  or  security,  or to  obtain
          provisional  or  ancillary  remedies,   including  without  limitation
          injunctive  relief,  sequestration,  attachment,  garnishment  or  the
          appointment  of a  receiver,  from a court of  competent  jurisdiction
          before,  after or during  the  pendency  of any  arbitration  or other
          proceeding.  The exercise of any such remedy shall not waive the right
          of any party to compel arbitration or reference hereunder.

               (d) Arbitrator  Qualifications  and Powers;  Awards.  Arbitrators
          must be active members of the  California  State Bar or retired judges
          of the state or federal judiciary of California, with expertise in the
          substantive  laws  applicable  to the subject  matter of the  Dispute.
          Arbitrators  are empowered to resolve  Disputes by summary  rulings in
          response  to motions  filed  prior to the final  arbitration  hearing.
          Arbitrators  (i) shall  resolve all  Disputes in  accordance  with the
          substantive law of the state of California, (ii)

                                       -3-





          may grant any remedy or relief that a court of the state of California
          could order or grant within the scope hereof and such ancillary relief
          as is necessary to make effective any award,  and (iii) shall have the
          power to award recovery of all costs and fees, to impose sanctions and
          to take such other actions as they deem necessary to the same extent a
          judge  could  pursuant to the Federal  Rules of Civil  Procedure,  the
          California  Rules of Civil  Procedure  or other  applicable  law.  Any
          Dispute in which the amount in controversy is $5,000,000 or less shall
          be  decided  by a single  arbitrator  who shall not render an award of
          greater than $5,000,000 (including damages, costs, fees and expenses).
          By submission to a single arbitrator,  each party expressly waives any
          right or claim to recover more than  $5,000,000.  Any Dispute in which
          the  amount in  controversy  exceeds  $5,000,000  shall be  decided by
          majority vote of a panel of three arbitrators;  provided however, that
          all three  arbitrators  must actively  participate in all hearings and
          deliberations.

               (e)  Judicial  Review.  Notwithstanding  anything  herein  to the
          contrary,  in any  arbitration  in which  the  amount  in  controversy
          exceeds  $25,000,000,  the  arbitrators  shall  be  required  to  make
          specific,  written  findings of fact and  conclusions  of law. In such
          arbitrations (i) the arbitrators  shall not have the power to make any
          award which is not supported by substantial evidence or which is based
          on legal  error,  (ii) an award shall not be binding  upon the parties
          unless the findings of fact are supported by substantial  evidence and
          the  conclusions of law are not erroneous under the substantive law of
          the state of California,  and (iii) the parties shall have in addition
          to  the  grounds  referred  to in  the  Federal  Arbitration  Act  for
          vacating,  modifying  or  correcting  an award the  right to  judicial
          review of (A) whether the findings of fact rendered by the arbitrators
          are supported by substantial evidence, and (B) whether the conclusions
          of law  are  erroneous  under  the  substantive  law of the  state  of
          California.  Judgment  confirming an award in such a proceeding may be
          entered  only  if  a  court  determines  the  award  is  supported  by
          substantial   evidence   and  not  based  on  legal  error  under  the
          substantive law of the state of California.

               (f) Real Property Collateral; Judicial Reference. Notwithstanding
          anything  herein to the  contrary,  no Dispute  shall be  submitted to
          arbitration if the Dispute concerns  indebtedness  secured directly or
          indirectly,  in whole or in part, by any real property  unless (i) the
          holder of the mortgage,  lien or security interest specifically elects
          in writing to proceed with the arbitration,

                                       -4-





          or (ii) all  parties to the  arbitration  waive any rights or benefits
          that might accrue to them by virtue of the single  action rule statute
          of California,  thereby agreeing that all indebtedness and obligations
          of the  parties,  and all  mortgages,  liens  and  security  interests
          securing such  indebtedness and obligations,  shall remain fully valid
          and enforceable.  If any such Dispute is not submitted to arbitration,
          the  Dispute  shall  be  referred  to a  referee  in  accordance  with
          California  Code of Civil  Procedure  Section  638 et  seq.,  and this
          general reference agreement is intended to be specifically enforceable
          in accordance with said Section 638. A referee with the qualifications
          required  herein for  arbitrators  shall be  selected  pursuant to the
          AAA's selection  procedures.  Judgment upon the decision rendered by a
          referee  shall be entered in the court in which  such  proceeding  was
          commenced  in  accordance  with  California  Code of  Civil  Procedure
          Sections 644 and 645.

               (g) Miscellaneous.  To the maximum extent  practicable,  the AAA,
          the  arbitrators  and the  parties  shall take all action  required to
          conclude any arbitration  proceeding  within 180 days of the filing of
          the  Dispute  with  the  AAA.  No  arbitrator  or  other  party  to an
          arbitration proceeding may disclose the existence,  content or results
          thereof,  except for disclosures of information by a party required in
          the ordinary course of its business,  by applicable law or regulation,
          or to the extent  necessary to exercise any judicial review rights set
          forth herein. If more than one agreement for arbitration by or between
          the  parties  potentially  applies  to  a  Dispute,   the  arbitration
          provision  most directly  related to the Loan Documents or the subject
          matter of the Dispute shall control.  This arbitration provision shall
          survive  termination,  amendment  or  expiration  of any  of the  Loan
          Documents or any relationship between the parties."

     6. Except as specifically  provided herein, all terms and conditions of the
Credit   Agreement   remain  in  full  force  and  effect,   without  waiver  or
modification.  All terms  defined  in the Credit  Agreement  shall have the same
meaning when used in this  Amendment.  This  Amendment and the Credit  Agreement
shall be read together, as one document.

     7. Borrower hereby remakes all representations and warranties  contained in
the Credit  Agreement and reaffirms  all covenants set forth  therein.  Borrower
further certifies that as of the date of this Amendment there exists no Event of
Default  as defined in the Credit  Agreement,  nor any  condition,  act or event
which with the giving of notice or the passage of time or both would  constitute
any such Event of Default.


                                       -5-




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

MOTORCAR PARTS &                                  WELLS FARGO BANK,
     ACCESSORIES, INC.                                 NATIONAL ASSOCIATION



By:      /s/ Richard Marks                        By: /s/ John P. Manning
         -----------------                            -------------------
                                                      John P. Manning
                                                      Vice President
Title:   President
         ---------

By:      /s/ Peter Bromberg
         ------------------


Title:   CFO
         ---

                                       -6-


                            SECOND AMENDMENT TO LEASE

     This Second Amendment to Lease,  dated for reference purposes only, October
1, 1996,  between Maricopa  Enterprises,  Ltd.,  (Lessor),  and Motorcar Parts &
Accessories, Inc., (Lessee), who agree as follows:

     1. RECITALS:  This Second  Amendment to Lease is made with reference to the
following facts and objectives:

          a.   Lessor and Lessee  entered  into a written  Lease  dated March 8,
               1993, whereby Lessor leased to Lessee the Premises commonly known
               as 2727 Maricopa Street, Torrance, California 90503;

          b.   The  parties  desire  to amend the Term of the Lease on the terms
               and conditions hereinafter set forth.

     2.  AMENDMENT  OF TERM:  The Term of the Lease shall be amended so that the
Term of the Lease shall extend to and including March 31, 2002.

     3. RENT: Base Rent for the period from April 1, 1997 through  September 30,
1999 shall be $44,280.00 per month. From October 1, 1999 through March 31, 2002,
Base Rent shall be $47,601.00 per month.

     4. EFFECTIVENESS OF LEASE:  Except as set forth in this Second Amendment to
Lease,  all of the provisions of the Lease shall remain in full force and effect
and unchanged.

     5.  OPTIONS  TO  EXTEND  TERM:  If this  Lease  has not been  cancelled  or
terminated prior to March 31, 2002, and if the Lessee is at the time of exercise
and through March 31, 2002, in possession of the Premises and is not at the time
of exercise and through March 31, 2002 in default of any of the terms, covenants
or conditions of this Lease,  Lessee is hereby granted two (2) options to extend
the Term of this Lease for two (2) additional  terms of five (5) years each from
and after March 31, 2002; provided that Lessee gives written notice to Lessor of
the exercise of each option of extension at least one hundred  twenty (120) days
prior to the  expiration of the preceding  Term. The terms and conditions of the
Lease  during the  extended  five (5) year option  periods  shall be the same as
herein  contained,  except  that the  monthly  Base Rent shall be  increased  to
ninety-five  percent  (95%) of the then  prevailing  fair rental value as of the
commencement date of each option period,  which shall be mutually agreed upon by
Lessor and Lessee,  if  possible.  However,  no  reevaluation  shall result in a
rental rate less than that established for the prior rental period. In the event
that  Lessor and Lessee  cannot  mutually  agree upon the then  prevailing  fair
rental value of the Premises,  the  determination of the fair rental value as of
the commencement  date of each option period shall be based upon an appraisal by
an S.I.R. broker or an M.A.I.  appraiser acceptable to both Lessor and Lessee to
the Los Angeles Chapter of the American Arbitration  Association.  All costs and
fees of said broker or of the American






Arbitration  Association  shall be borne equally by Lessor and Lessee.  The fair
rental  value shall be  increased  during the second  thirty (30) months of each
five (5) year extended  term,  the amount of such increases to be agreed upon at
the time the fair rental value is established.

     IN WITNESS WHEREOF,  the parties hereto have executed this Second Amendment
to Lease.

                                            MARICOPA ENTERPRISES, LTD.


Dated:       11/14/96                       /s/ David V. Karney
             --------                       --------------------------------
                                            DAVID V. KARNEY, General Partner



                                            MOTORCAR PARTS & ACCESSORIES, INC.


Dated:        11/14/96                      /s/ Richard Marks
              --------                      --------------------------------





                                       -2-


                                 FIRST AMENDMENT

                                       TO

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT



            This First Amendment to Amended and Restated  Employment  Agreement,
dated as of April 1, 1997 (the "Amendment"),  is by and between MOTORCAR PARTS &
ACCESSORIES,  INC, a New York  corporation  having an  address at 2727  Maricopa
Street, Torrance,  California 90503 (the "Company") and MEL MARKS, an individual
residing at 269 Gramercy Drive, Jericho, New York 11753 (the "Employee").

            WHEREAS,  the Company and the Employee are parties to an Amended and
Restated  Employment  Agreement dated as of September 1, 1995 (the "Agreement");
and

            WHEREAS,  the Company and the Employee desire to amend the Agreement
in certain respects.

            NOW,  THEREFORE,  in  consideration  of the foregoing and the mutual
covenants and  conditions  hereinafter  set forth,  the parties  hereby agree as
follows:

            1. Amendment to the Agreement. The Agreement is hereby amended as of
April 1, 1997, as follows:

            Paragraph 5(a) of the Agreement is hereby amended in its entirety as
follows:

                        "(a).  Base  Salary.  The Company  shall pay  Employee a
            minimum base salary  ("Salary")  of Three Hundred  Thousand  Dollars
            ($300,000)  per year.  The  Salary  shall be  subject  to review and
            adjustment on an annual basis, or, at the Company's  discretion,  on
            such date as the Company may designate;  provided,  however, that in
            no event  shall  Employee's  Salary be  adjusted  below  the  Salary
            designated herein."

            2.  Counterparts.  This  Amendment  may be  signed  in  one or  more
counterpart  copies,  each of which  constitutes an original,  but all of which,
when taken  together,  shall consti tute one  agreement  binding upon all of the
parties hereto.

            3. Governing Law. This Amendment  shall be governed by and construed
in  accordance  with the laws of the  State of New York,  without  regard to the
conflicts of law rules thereof.





            4. Agreement to Continue as Amended.  Except as modified and amended
by this  Amendment,  the  Agreement  shall remain and continue in full force and
effect after the date hereof.

            IN WITNESS WHEREOF, the parties hereunto have executed and delivered
this Amendment as of the date first written above.


                                            MOTORCAR PARTS & ACCESSORIES


                                            By:
                                                  -----------------------------
                                                  Name:
                                                  Title:



                                                  -----------------------------
                                                  Mel Marks



                                       -2-


                                 FIRST AMENDMENT

                                       TO

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT



            This First Amendment to Amended and Restated  Employment  Agreement,
dated as of April 1, 1997 (the "Amendment"),  is by and between MOTORCAR PARTS &
ACCESSORIES,  INC, a New York  corporation  having an  address at 2727  Maricopa
Street,  Torrance,  California  90503 (the  "Company")  and  RICHARD  MARKS,  an
individual with an address c/o Motorcar Parts & Accessories, Inc., 2727 Maricopa
Street, Torrance, California 90503 (the "Employee").

            WHEREAS,  the Company and the Employee are parties to an Amended and
Restated  Employment  Agreement dated as of September 1, 1995 (the "Agreement");
and

            WHEREAS,  the Company and the Employee desire to amend the Agreement
in certain respects.

            NOW,  THEREFORE,  in  consideration  of the foregoing and the mutual
covenants and  conditions  hereinafter  set forth,  the parties  hereby agree as
follows:

            1. Amendment to the Agreement. The Agreement is hereby amended as of
April 1, 1997, as follows:

            Paragraph 5(a) of the Agreement is hereby amended in its entirety as
follows:

                        "(a).  Base  Salary.  The Company  shall pay  Employee a
            minimum  base salary  ("Salary")  of Four Hundred  Thousand  Dollars
            ($400,000)  per year.  The  Salary  shall be  subject  to review and
            adjustment on an annual basis, or, at the Company's  discretion,  on
            such date as the Company may designate;  provided,  however, that in
            no event  shall  Employee's  Salary be  adjusted  below  the  Salary
            designated herein."

            2.  Counterparts.  This  Amendment  may be  signed  in  one or  more
counterpart  copies,  each of which  constitutes an original,  but all of which,
when taken  together,  shall consti tute one  agreement  binding upon all of the
parties hereto.

            3. Governing Law. This Amendment  shall be governed by and construed
in  accordance  with the laws of the  State of New York,  without  regard to the
conflicts of law rules thereof.






            4. Agreement to Continue as Amended.  Except as modified and amended
by this  Amendment,  the  Agreement  shall remain and continue in full force and
effect after the date hereof.

            IN WITNESS WHEREOF, the parties hereunto have executed and delivered
this Amendment as of the date first written above.


                                               MOTORCAR PARTS & ACCESSORIES


                                               By:
                                                     --------------------------
                                                     Name:
                                                     Title:



                                                     --------------------------
                                                     Richard Marks



                                      -2-



                                SECOND AMENDMENT

                                       TO

                              EMPLOYMENT AGREEMENT



            This Second Amendment to Employment Agreement,  dated as of April 1,
1997 (the "Amendment"),  is by and between MOTORCAR PARTS & ACCESSORIES,  INC, a
New York  corporation  having an  address  at 2727  Maricopa  Street,  Torrance,
California 90503 (the "Company") and STEVEN KRATZ, an individual with an address
c/o  Motorcar  Parts  &  Accessories,  Inc.,  2727  Maricopa  Street,  Torrance,
California 90503 (the "Employee").

            WHEREAS,  the Company and the Employee are parties to an  Employment
Agreement dated as of February 1, 1994 (the "Agreement"); and

            WHEREAS,  the Company and the Employee desire to amend the Agreement
in certain respects.

            NOW,  THEREFORE,  in  consideration  of the foregoing and the mutual
covenants and  conditions  hereinafter  set forth,  the parties  hereby agree as
follows:

            1. Amendment to the Agreement. The Agreement is hereby amended as of
April 1, 1997, as follows:

            The  first  paragraph  of  Paragraph  5 of the  Agreement  is hereby
amended in its entirety as follows:

                        "5.  Compensation.  As compensation for his services and
            covenants  hereunder,  the Company shall pay Employee a minimum base
            salary  ("Salary")  of  Two  Hundred  Twenty-Five  Thousand  Dollars
            ($225,000)  per year.  The  Salary  shall be  subject  to review and
            adjustment on an annual basis, or, at the Company's  discretion,  on
            such date as the Company may designate;  provided,  however, that in
            no event  shall  Employee's  Salary be  adjusted  below  the  Salary
            designated herein."

            2.  Counterparts.  This  Amendment  may be  signed  in  one or  more
counterpart  copies,  each of which  constitutes an original,  but all of which,
when taken  together,  shall  constitute  one agreement  binding upon all of the
parties hereto.

            3. Governing Law. This Amendment  shall be governed by and construed
in  accordance  with the laws of the  State of New York,  without  regard to the
conflicts of law rules thereof.





            4. Agreement to Continue as Amended.  Except as modified and amended
by this  Amendment,  the  Agreement  shall remain and continue in full force and
effect after the date hereof.

            IN WITNESS WHEREOF, the parties hereunto have executed and delivered
this Amendment as of the date first written above.


                                              MOTORCAR PARTS & ACCESSORIES


                                              By:
                                                  ------------------------------
                                                  Name:
                                                  Title:



                                                  -----------------------------
                                                  Steven Kratz



                                       -2-


                                SECOND AMENDMENT

                                       TO

                              EMPLOYMENT AGREEMENT



            This Second Amendment to Employment Agreement,  dated as of April 1,
1997 (the "Amendment"),  is by and between MOTORCAR PARTS & ACCESSORIES,  INC, a
New York  corporation  having an  address  at 2727  Maricopa  Street,  Torrance,
California  90503 (the  "Company") and PETER S. BROMBERG,  an individual with an
address c/o Motorcar Parts & Accessories,  Inc., 2727 Maricopa Street, Torrance,
California 90503 (the "Employee").

            WHEREAS,  the Company and the Employee are parties to an  Employment
Agreement dated as of March 14, 1994 (the "Agreement"); and

            WHEREAS,  the Company and the Employee desire to amend the Agreement
in certain respects.

            NOW,  THEREFORE,  in  consideration  of the foregoing and the mutual
covenants and  conditions  hereinafter  set forth,  the parties  hereby agree as
follows:

            1. Amendment to the Agreement. The Agreement is hereby amended as of
April 1, 1997, as follows:

            The  first  paragraph  of  Paragraph  5 of the  Agreement  is hereby
amended in its entirety as follows:

                        "5.  Compensation.  (a) As compensation for his services
            and  covenants  hereunder,  the Company shall pay Employee a minimum
            base salary  ("Salary") of One Hundred  Forty-Five  Thousand Dollars
            ($145,000)  per year.  The  Salary  shall be  subject  to review and
            adjustment on an annual basis, or, at the Company's  discretion,  on
            such date as the Company may designate;  provided,  however, that in
            no event  shall  Employee's  Salary be  adjusted  below  the  Salary
            designated herein."

            2.  Counterparts.  This  Amendment  may be  signed  in  one or  more
counterpart  copies,  each of which  constitutes an original,  but all of which,
when taken  together,  shall consti tute one  agreement  binding upon all of the
parties hereto.

            3. Governing Law. This Amendment  shall be governed by and construed
in  accordance  with the laws of the  State of New York,  without  regard to the
conflicts of law rules thereof.

                                       -1-




            4. Agreement to Continue as Amended.  Except as modified and amended
by this  Amendment,  the  Agreement  shall remain and continue in full force and
effect after the date hereof.

            IN WITNESS WHEREOF, the parties hereunto have executed and delivered
this Amendment as of the date first written above.


                                          MOTORCAR PARTS & ACCESSORIES


                                          By:
                                                -------------------------------
                                                Name:
                                                Title:



                                                -------------------------------
                                                Peter S. Bromberg


                                       -2-


                              EMPLOYMENT AGREEMENT
                              --------------------


            Employment Agreement dated as of April 1, 1997, between MVR Products
Pte  Limited,  a  Singapore  corporation,  and  Unijoh  Sdn,  Bhd,  a  Malaysian
corporation  (collectively,  the  "Companies"),  and Vincent Quek, also known as
Quek Kok Hoe, an individual residing in Singapore (the "Employee"),  each of the
foregoing having an address at 18, Penjuru Road, Singapore 609126.


                              W I T N E S S E T H :
                              - - - - - - - - - - 

            WHEREAS,  the Companies desire that Employee be employed by them and
render services to them, and Employee is willing to be so employed and to render
such services to the Companies, all upon the terms and subject to the conditions
contained herein.

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

            1.  Employment.  Subject  to  and  upon  the  terms  and  conditions
contained in this Agreement,  the Companies  hereby agree to employ Employee and
Employee  agrees to enter the employ of the Companies,  for the period set forth
in Paragraph 2 hereof, to render the services to the Companies, their affiliates
and subsidiaries described in Paragraph 3 hereof.

            2. Term.  Employee's  term of employment  under this Agreement shall
commence on the date hereof (the  "Commencement  Date") and shall continue for a
period  through and  including  the second  anniversary  of the date hereof (the
"Employment  Term")  unless  extended  in  writing  by both  parties  or earlier
terminated pursuant to the terms and conditions set forth herein.

            3. Duties.  (a)  Employee  shall be employed as President of MVR and
Unijoh and responsible for management of the operations thereof.

               (b) Employee  agrees to abide by all by-laws,  policies and other
general employment conditions of each of the Companies' parent, Motorcar Parts &
Accessories, Inc. ("MPA") and the Companies.

            4.  Exclusive  Services and Best Efforts.  Employee shall devote his
entire working time, attention, best efforts and ability during regular business
hours  exclusively  to  the  service  of the  Companies,  their  affiliates  and
subsidiaries during the term of this Agreement.

            5.  Compensation.  As compensation  for his services,  covenants and
agreements hereunder, the Companies collectively shall pay Employee an aggregate
salary  ("Salary")  of One  Hundred  and  Ten  Thousand  United  States  Dollars
(US$110,000) per year.






            6. Business Expenses. Employee shall be reimbursed for, and entitled
to advances  (subject to repayment to the Companies if not actually  incurred by
Employee)  with respect to, only those business  expenses  incurred by him which
are  authorized by MPA and the  Companies  and for which  Employee has submitted
receipts.

            7. Employee Benefits.  During the Employment Term, Employee shall be
entitled to such insurance,  disability, health, medical and automobile benefits
from the Companies as he was entitled to from the Companies during the preceding
fiscal  year;  provided  that  Employee  shall be  required  to comply  with the
conditions  attendant  to  coverage  by such plans and shall  comply with and be
entitled to benefits  only in accordance  with the terms and  conditions of such
plans.  Employee  shall be entitled to such paid  vacation  each year during the
Employment  Term as he was entitled to from the  Companies  during the preceding
fiscal year and of such  duration  and at such times as does not, in the opinion
of MPA and the Companies,  interfere with  Employee's  performance of his duties
hereunder.  The Companies may withhold from any benefits payable to Employee all
taxes and amounts as shall be  permitted  or required  pursuant to law,  rule or
regulation. All of the benefits to which Employee may be entitled may be changed
from  time to time or  withdrawn  at any  time in the  discretion  of MPA or the
Companies.

            8. Death and Disability.  (a) The Employment Term shall terminate on
the date of Employee's  death, in which event  Employee's  Salary,  reimbursable
expenses and benefits  owing to Employee  through the date of  Employee's  death
shall be paid to his estate.  Other than a death  benefit equal to one-fourth of
Employee's  Salary on the date of Employee's  death,  which shall be paid to his
estate  within 120 days  following  such  date,  Employee's  estate  will not be
entitled to any other  compensation upon termination of this Agreement  pursuant
to this Paragraph 8(a).

               (b) If,  during the  Employment  Term,  in the  opinion of a duly
licensed  physician  selected  by MPA and the  Companies,  Employee,  because of
physical or mental illness or incapacity,  shall become  substantially unable to
perform  the duties and  services  required  of him under this  Agreement  for a
period of 60 consecutive  days or 120 days in the aggregate during any six-month
period MPA and the Companies  may, upon at least twenty (20) days' prior written
notice given at any time after the  expiration of such 60 or 120 day period,  as
the  case may be,  to  Employee  of their  intention  to do so,  terminate  this
Agreement  as of such  date as may be set forth in the  notice.  In case of such
termination,  Employee  shall be entitled  to receive  his Salary,  reimbursable
expenses  and  benefits  owing to  Employee  through  the  date of  termination.
Employee will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Paragraph 8(b).

            9.  Termination.   (a)  MPA  or  the  Companies  may  terminate  the
employment of Employee for Cause (as herein defined). Upon such termination, the
Companies  and its  affiliates  shall  be  released  from  any  and all  further
obligations  under  this  Agreement  (it being  agreed  that MPA  shall  have no
obligations  hereunder),  except that the  Companies  shall be  obligated to pay
Employee  his  Salary,  reimbursable  expenses  and  benefits  owing to Employee
through the day on which Employee is  terminated.  Employee will not be entitled
to any other  compensation  upon termination of this Agreement  pursuant to this
Paragraph 9(a).

                                       -2-





               (b) As used herein,  the term "Cause" shall mean: (i) the willful
failure of Employee to perform his duties pursuant to Paragraph 3 hereof,  which
failure  is not cured by  Employee  within  twenty  (20) days  following  notice
thereof  from MPA or the  Companies;  (ii) any  other  material  breach  of this
Agreement  by  Employee,  including  any  of  the  material  representations  or
warranties  made by  Employee;  (iii) any act, or failure to act, by Employee in
bad faith or to the detriment of MPA or the  Companies;  (iv) the  commission by
Employee of an act  involving  moral  turpitude,  dishonesty,  theft,  unethical
business  conduct,  or  any  other  conduct  which  significantly   impairs  the
reputation of, or harms, MPA or the Companies, their subsidiaries or affiliates;
(v) any  misrepresentation,  concealment or omission by Employee of any material
fact  in  seeking  employment  hereunder;   or  (vi)  any  other  occurrence  or
circumstance  generally  recognized as "cause" for employment  termination under
applicable law.

               (c) In the event that during the 90-day period ending on the last
day of the  Employment  Term the  employment  of Employee is  terminated  by the
Companies  other  than  for  Cause or the  Companies  notify  Employee  of their
election  not to renew or  extend  this  Agreement  for a period of at least one
year,  then  Employee,  in  addition  to any and all other  amounts  to which he
expressly may be entitled hereunder, shall be entitled to a severance benefit in
an amount equal to his Salary  multiplied  by a fraction the  numerator of which
shall  be the  number  of days  elapsed  in such  period  up to the date of such
termination or election and the denominator of which shall be 360; provided that
in the event that no notice of such  election  is given  prior to the end of the
Employment  Term,  then such  severance  benefit  shall be in an amount equal to
one-fourth of such Salary.

            10.  Disclosure of Information  and Restrictive  Covenant.  Employee
acknowledges that, by his employment,  he has been and will be in a confidential
relationship  with MPA and the  Companies  and  their  affiliates  (which  term,
whenever used in this  Agreement,  includes  without  limitation  the Companies'
parent(s)) and will have access to confidential information and trade secrets of
MPA  and  the  Companies,   their  subsidiaries  and  affiliates.   Confidential
information  and  trade  secrets  include,  but are not  limited  to,  customer,
supplier  and client  lists,  price  lists,  marketing,  distribution  and sales
strategies and procedures,  operational and equipment techniques, business plans
and  systems,  quality  control  procedures  and systems,  special  projects and
technological research,  including projects, research and reports for any entity
or client or any  project,  research,  report  or the like  concerning  sales or
manufacturing  or new  technology,  employee  compensation  plans  and any other
information   relating  thereto,  and  any  other  records,   files,   drawings,
inventions,   discoveries,   applications,   processes,   data  and  information
concerning  the  business  of MPA  or  the  Companies,  their  subsidiaries  and
affiliates  which  are  not  in the  public  domain.  Employee  agrees  that  in
consideration of the execution of this Agreement by the Companies:

               (a) Employee  will not,  during the term of this  Agreement or at
any time  thereafter,  use,  or disclose to any third  party,  trade  secrets or
confidential  information of MPA or the Companies including, but not limited to,
confidential  information  or trade secrets  belonging or relating to MPA or the
Companies, their subsidiaries,  affiliates, customers and clients or proprietary
processes or procedures of MPA or the Companies, their subsidiaries, affiliates,
customers and clients.  Proprietary  processes and procedures shall include, but
shall not be limited to, all information

                                       -3-





which  is  known  or  intended  to be  known  only  to  employees  of MPA or the
Companies,  their  subsidiaries  and  affiliates  or  others  in a  confidential
relationship  with MPA or the  Companies or their  subsidiaries  and  affiliates
which relates to business matters.

               (b) Employee will not,  during the term of this Agreement and for
a  period  of two (2)  years  thereafter,  directly  or  indirectly,  under  any
circumstance  other  than at the  direction  and for the  benefit of MPA and the
Companies, engage in or participate in any business activity, including, but not
limited  to,  acting  as  a  director,  officer,  employee,  agent,  independent
contractor, partner, consultant, licensor or licensee, franchisor or franchisee,
proprietor,  syndicate  member,  shareholder or creditor or with a person having
any other  relationship  with any other  business,  company,  firm occupation or
business  activity,  in  any  geographic  area  within  Singapore,  Malaysia  or
southeastern Asia that is, directly or indirectly, competitive with any business
conducted by the Companies or any of their subsidiaries or affiliates during the
term of this  Agreement  or  thereafter.  Should  Employee own 5% or less of the
issued and  outstanding  shares of a class of securities  of a  corporation  the
securities  of which are  traded on a  national  securities  exchange  or in the
over-the-counter  market, such ownership shall not cause Employee to be deemed a
shareholder under this Paragraph 10(b).

               (c) Employee will not,  during the term of this Agreement and for
a period of two (2) years  thereafter,  on his  behalf or on behalf of any other
business enterprise,  directly or indirectly,  under any circumstance other than
at the direction and for the benefit of MPA and the Companies, solicit or induce
any  creditor,  customer,  supplier,  officer,  employee  or agent of MPA or the
Companies or any of their  subsidiaries or affiliates to sever its  relationship
with or leave the employ of any such entities.

               (d) This  Paragraph 10 and  Paragraphs 11, 12 and 13 hereof shall
survive the expiration or termination of this Agreement for any reason.

               (e) It is expressly  agreed by Employee that the nature and scope
of each of the  provisions  set forth above in this  Paragraph 10 are reasonable
and  necessary.  If, for any reason,  any aspect of the above  provisions  as it
applies to Employee is  determined  by a court of competent  jurisdiction  to be
unreasonable  or  unenforceable,  the  provisions  shall only be modified to the
minimum extent required to make the provisions reasonable and/or enforceable, as
the case may be.  Employee  acknowledges  and agrees that his  services are of a
unique  character and expressly  grants to MPA and the Companies or any of their
subsidiaries,  affiliates,  successors  or  assignees,  the right to enforce the
provisions above through the use of all remedies  available at law or in equity,
including, but not limited to, injunctive relief.

               (f) It is expressly  agreed by Employee that the  provisions  set
forth  above in this  Paragraph  10 are  separate  from and  independent  of any
similar  such  provisions  entered  into  under the  agreement  relating  to the
acquisition by MPA of the Companies.


                                       -4-





            11. Companies' Property. (a) Any patents,  inventions,  discoveries,
applications  or  processes,   designed,  devised,  planned,  applied,  created,
discovered or invented by Employee in the course of Employee's  employment under
this  Agreement  and which  pertain  to any  aspect of the  Companies'  or their
respective  subsidiaries' or affiliates' business shall be the sole and absolute
property of the Companies,  and Employee shall make prompt report thereof to the
Companies  and promptly  execute any and all documents  reasonably  requested to
assure the Companies the full and complete ownership thereof.

               (b) All  records,  files,  lists,  including  computer  generated
lists,  drawings,  documents,  equipment  and  similar  items  relating  to  the
Companies'  business  which Employee shall prepare or receive from the Companies
shall remain the Companies'  sole and exclusive  property.  Upon  termination of
this Agreement,  Employee shall promptly return to the Companies all property of
the Companies in his possession.  Employee  further  represents that he will not
copy or cause to be copied,  print out or cause to be printed out any  software,
documents or other  materials  originating  with or belonging to the  Companies.
Employee  additionally  represents that, upon termination of his employment with
the Companies, he will not retain in his possession any such software, documents
or other materials.

            12. Remedy.  It is mutually  understood  and agreed that  Employee's
services are special,  unique,  unusual,  extraordinary  and of an  intellectual
character  giving them a peculiar value,  the loss of which cannot be reasonably
or adequately  compensated in damages in an action at law.  Accordingly,  in the
event of any breach of this  Agreement by Employee,  including,  but not limited
to, the breach of the non-disclosure,  non-solicitation  and non-compete clauses
under Paragraph 10 hereof,  MPA and the Companies shall be entitled to equitable
relief by way of  injunction  or  otherwise  in  addition to damages MPA and the
Companies may be entitled to recover.  In addition,  MPA and the Companies shall
be  entitled  to  reimbursement  from  Employee,  upon  request,  of any and all
reasonable  attorneys' fees and expenses incurred by it in enforcing any term or
provision of this Agreement.

            13.  Representations  and  Warranties  of Employee.  (a) In order to
induce the Companies to enter into this Agreement,  Employee  hereby  represents
and  warrants to MPA and the  Companies  as follows:  (i) Employee has the legal
capacity and  unrestricted  right to execute and deliver this  Agreement  and to
perform all of his  obligations  hereunder;  (ii) the  execution and delivery of
this Agreement by Employee and the performance of his obligations hereunder will
not  violate or be in conflict  with any  fiduciary  or other duty,  instrument,
agreement,  document,  arrangement or other understanding to which Employee is a
party or by which he is or may be bound or subject;  and (iii) Employee is not a
party to any instrument, agreement, document, arrangement or other understanding
with any person (other than MPA or the Companies)  requiring or restricting  the
use or  disclosure  of any  confidential  information  or the  provision  of any
employment, consulting or other services.

               (b) Employee hereby agrees to indemnify and hold harmless MPA and
the Companies from and against any and all losses,  costs,  damages and expenses
(including, without

                                       -5-





limitation,  its reasonable  attorneys' fees) incurred or suffered MPA or by the
Companies resulting from any breach by Employee of any of his representations or
warranties set forth in Paragraph 13(a) hereof.

            14.  Notices.  All notices given  hereunder  shall be in writing and
shall  be  deemed  effectively  given  when  mailed,  if sent by  registered  or
certified mail, return receipt  requested,  addressed to Employee at his address
set  forth on the  first  page of this  Agreement  and to the  Companies  at the
address set forth on the first page of this Agreement,  with a copy to MPA, 2727
Maricopa  Street,  Torrance,  California  90503,  Attention:  Mr. Richard Marks,
President,  and with a copy to Parker Chapin Flattau & Klimpl,  LLP, 1211 Avenue
of the Americas, New York, New York 10036, Attention: Gary J. Simon, Esq., or at
such address as such party shall have designated by a notice given in accordance
with  this  Paragraph  14,  or when  actually  received  by the  party  for whom
intended, if sent by any other means.

            15.  Entire  Agreement.   This  Agreement   constitutes  the  entire
understanding  of the parties with respect to its subject  matter and no change,
alteration or  modification  hereof may be made except in writing  signed by the
parties  hereto.  Any  prior  or other  agreements,  promises,  negotiations  or
representations  not  expressly  set forth in this  Agreement are of no force or
effect.

            16.  MPA  Ownership.  Employee  acknowledges  and  agrees  that  the
Companies  are  controlled  by its parent,  MPA, and that any  reference in this
Agreement to the judgment,  discretion,  opinion or other  determination  of any
kind  (including as contemplated by Paragraph 9) to be made by the Companies may
be made on behalf of the Companies by MPA.

            17.  Severability.  If any  provision  of this  Agreement  shall  be
unenforceable   under   any   applicable   law,   then    notwithstanding   such
unenforceability,  the remainder of this Agreement  shall continue in full force
and effect.

            18.  Waivers,  Modifications,  Etc. No  amendment,  modification  or
waiver of any  provision of this  Agreement  shall be effective  unless the same
shall be in writing  and  signed by each of the  parties  hereto,  and then such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given.

            19.  Assignment.  Neither  this  Agreement,  nor  any of  Employee's
rights,  powers, duties or obligations  hereunder,  may be assigned by Employee.
This  Agreement  shall be binding  upon and inure to the benefit of Employee and
his heirs and legal  representatives  and the Companies and their successors and
assigns.  Successors of the Companies  shall include,  without  limitation,  any
corporation  or  corporations   acquiring,   directly  or  indirectly,   all  or
substantially   all  of  the  assets  of  the  Companies,   whether  by  merger,
consolidation, purchase, lease or otherwise, and such successor shall thereafter
be deemed "the Companies" for the purposes hereof.

            20.  Applicable  Law.  This  Agreement  shall be deemed to have been
made, drafted,  negotiated and a portion of the transactions contemplated hereby
consummated and performed in the

                                       -6-





State of New York and shall be governed by and construed in accordance  with the
laws of the State of New York,  without  regard  to the  conflicts  of law rules
thereof. Nothing contained in this Agreement shall be construed so as to require
the  commission  of any act contrary to law, and whenever  there is any conflict
between any provision of this Agreement and any statute,  law, ordinance,  order
or  regulation,  contrary  to which the  parties  hereto  have no legal right to
contract,  the latter  shall  prevail,  but in such event any  provision of this
Agreement  so  affected  shall  be  curtailed  and  limited  only to the  extent
necessary to bring it within the legal requirements.

            21. Jurisdiction and Venue. It is hereby irrevocably agreed that all
disputes or controversies  between the Companies and Employee arising out of, in
connection  with or  relating  to this  Agreement  shall be  exclusively  heard,
settled and determined by arbitration to be held in the City of New York, County
of New York, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. The parties also agree that judgment may
be entered on the arbitrator's  award by any court having  jurisdiction  thereof
and the parties consent to the  jurisdiction of any court located in the City of
New York, County of New York, for this purpose.

            22. Full Understanding. Employee represents and agrees that he fully
understands  his right to discuss all aspects of this Agreement with his private
attorney, that to the extent, if any that he desired, he availed himself of this
right, that he has carefully read and fully understands all of the provisions of
this  Agreement,  that he is  competent  to  execute  this  Agreement,  that his
agreement to execute this Agreement has not been obtained by any duress and that
he freely and voluntarily  enters into it, and that he has read this document in
its entirety and fully understands the meaning,  intent and consequences of this
document which is that it constitutes an agreement of employment.

            23.  Counterparts.  This  Agreement may be executed in any number of
counterparts,  each of which shall be deemed an original  and all of which taken
together shall constitute one and the same agreement.



                                       -7-




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

                                         MVR PRODUCTS PTE LIMITED

                                         By:_________________________________
                                               Name:
                                               Title:


                                         UNIJOH SDN, BHD

                                         By:_________________________________
                                               Name:
                                               Title:


                                            _________________________________
                                                     Vincent Quek




                                       -8-


                      AGREEMENT AND PLAN OF REORGANIZATION
                      ------------------------------------

            AGREEMENT  AND PLAN OF  REORGANIZATION  dated as of March 31,  1997,
among  MOTORCAR  PARTS & ACCESSORIES,  INC., a New York  corporation  having its
principal place of business at 2727 Maricopa Street, Torrance,  California 90503
("Transferee"),  MEL MARKS,  an individual  having a residence at 17906 Aberdeen
Way, Boca Raton, Florida 33496 ("M. MARKS"), RICHARD MARKS, an individual having
a residence at 13484 Bayliss Road, Los Angeles,  California  90049 ("R.  MARKS")
and VINCENT QUEK,  also known as Quek Kok Hoe, an individual  having a residence
in Singapore and having an office at 2727 Maricopa Street, Torrance,  California
90503  ("QUEK").   M.  Marks,  R.  Marks  and  Quek  are  hereinafter  sometimes
collectively referred to as "Transferors".

                              W I T N E S S E T H :
                              - - - - - - - - - - 

            WHEREAS,  each of the Transferors  owns 133,333 (133,334 in the case
of Quek)  ordinary  shares of S$1.00 per share of MVR Products  Pte  Limited,  a
corporation  organized under the laws of Singapore  ("MVR") and 333,333 (333,334
in the case of Quek)  ordinary  shares  RM1 per  share of  Unijoh  Sdn,  Bhd,  a
corporation  organized  under the laws of Malaysia  ("Unijoh") all such ordinary
shares of MVR (the "MVR  Shares")  and all such  ordinary  shares of Unijoh (the
"Unijoh  Shares")  (the MVR  Shares  and the Unijoh  Shares,  collectively,  the
"Shares")  being all of the issued and  outstanding  ordinary  shares of MVR and
Unijoh, respectively; and






            WHEREAS,  MVR and  Unijoh are  affiliated  with the  Transferee  and
conduct,  on a  contract  basis,  remanufacturing  operations  similar  to those
conducted by the  Transferee at its Los Angeles  remanufacturing  facility;  and

            WHEREAS, the Transferors desire to exchange the Shares for shares of
common stock,  par value $.01 per share, of the Transferee ("MPA Common Stock"),
and the Transferee is willing to issue and deliver shares of MPA Common Stock to
the Transferors solely in exchange for the Shares, upon the terms and subject to
the  conditions  hereinafter  set  forth  pursuant  to a plan of  reorganization
designed to qualify as a tax-free  reorganization  under Section 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended (the "Code"); and

            WHEREAS,  the Transferee  has obtained an independent  analysis from
Houlihan Lokey Howard & Zukin, a speciality  investment  banking firm ("Houlihan
Lokey"), as to the value of Unijoh and MVR; and

            WHEREAS,  based in part  upon the  valuation  analysis  provided  by
Houlihan Lokey and following  such  negotiations,  the Special  Committee of the
Board of Directors of the Transferee  deems  advisable and in the best interests
of the  shareholders  of the Transferee the acquisition of all of the issued and
outstanding  Shares in  exchange  for 145,455  shares (the "MPA  Shares") of MPA
Common Stock.

            NOW,  THEREFORE,  in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:

                                      - 2 -





                                    ARTICLE I

                               EXCHANGE OF SHARES
                                 FOR MPA SHARES
                                 --------------

            Section 1.1. Exchange Transaction. Upon the terms and subject to the
conditions set forth in this Agreement,  the  Transferors  shall, at the Closing
(as defined in Section 2.1 hereof), convey, transfer,  assign and deliver to the
Transferee  transfer forms representing all of the Shares,  which transfer forms
duly executed shall convey title to and ownership of the  Transferors'  interest
in MVR and Unijoh to the Transferee. In exchange therefor, the Transferee shall,
at the Closing, issue and deliver to each Transferor  certificates  representing
an aggregate of 145,455 authorized but previously-unissued  shares of MPA Common
Stock  registered  in  the  name  each  such  Transferor.  Any  transfer  tax or
registration  duty up to an aggregate  amount of $10,000 which may be payable in
Singapore  and/or Malaysia in connection with such exchange  transaction will be
the responsibility of the Transferee.


                                   ARTICLE II

                                     CLOSING
                                     -------

            Section 2.1. Date of Closing.  The closing under this Agreement (the
"Closing")  shall take place at the offices of Parker  Chapin  Flattau & Klimpl,
LLP, 1211 Avenue of the  Americas,  New York,  New York 10036,  or at such other
place as shall be  mutually  agreed  upon in writing by the  Transferee  and the
Transferors,  at 2:00 P.M., local time, on March 31, 1997. If the Closing is not
held by the close of business on such date, the Closing may be postponed, at the
sole option of the Transferee, to a date not later than April 30, 1997. However,
if the Closing is not held by the close

                                      - 3 -





of  business on April 30,  1997,  this  Agreement  shall  terminate  without any
further obligation or liability on the part of any party hereto.

            Section 2.2. Action at Closing.  At the Closing,  the Transferee and
the Transferors  shall take such actions and execute and deliver such documents,
instruments, certificates and opinions as are provided for in this Agreement.


                                   ARTICLE III

                REPRESENTATIONS AND WARRANTIES OF THE TRANSFERORS
                -------------------------------------------------

            Each  Transferor,  jointly  and  severally,  hereby  represents  and
warrants to the Transferee as follows:

            Section  3.1.  Authority  and  Capacity  of  the  Transferors.  Each
Transferor  has all  requisite  power,  authority  and  capacity  to perform the
obligations required of him under this Agreement.

            Section  3.2.  Title to the Shares.  Each  Transferor  is the lawful
record and beneficial  owner of 133,333 (133,334 in the case of Quek) MVR Shares
and 333,333  (333,334 in the case of Quek) Unijoh Shares,  which,  together with
the MVR Shares and Unijoh Shares so owned by the other  Transferors,  constitute
100% of the issued and outstanding shares of common stock of MVR and Unijoh; and
the  conveyance,  transfer,  assignment  and  delivery  of  the  Shares  by  the
Transferors to the  Transferee  pursuant to Section 1.1 hereof will transfer to,
and vest in,  Transferee  legal and valid title  thereto,  free and clear of all
claims, liens, charges and encumbrances of any kind whatsoever.

            Section 3.3.  Organization,  Good Standing and  Corporate  Power and
Authority  of MVR and  Unijoh.  Each of MVR and  Unijoh  is a  corporation  duly
organized, validly existing and in

                                      - 4 -





good standing under the laws of Singapore and Malaysia,  respectively,  and each
is duly qualified and authorized to transact  business as a foreign  corporation
in each jurisdiction in which it owns properties or is otherwise  conducting its
business,  except where the failure to be so qualified or  authorized  would not
have a material  adverse  effect on the  financial  condition of MVR and Unijoh,
taken as a whole.  Each of MVR and Unijoh has the corporate  power and authority
to own,  lease and operate its  properties and to carry on its business as it is
now being conducted.

            Section 3.4.  Capitalization.  The  authorized  capital stock of MVR
consists of 400,000  ordinary shares of $1.00 per share, all of which shares are
issued  and  outstanding,  of  which  133,333  shares  are  held of  record  and
beneficially by M. Marks,  133,333 shares are held of record and beneficially by
R. Marks and 133,334  shares are held of record and  beneficially  by Quek.  The
authorized capital stock of Unijoh consists of 1,000,000 ordinary shares RM1 per
share, all of which shares are issued and  outstanding,  of which 333,333 shares
are held of record and  beneficially  by M.  Marks,  333,333  shares are held of
record and  beneficially  by R. Marks and 333,334  shares are held of record and
beneficially by Quek. All of the issued and  outstanding  shares of common stock
of  MVR  and  Unijoh  are  duly  authorized,  validly  issued,  fully  paid  and
non-assessable,  with no personal liability  attaching to the ownership thereof.
There are no existing options, calls, agreements or commitments of any character
obligating  either  MVR or  Unijoh to  authorize,  issue or  acquire  any of its
respective  shares of capital  stock and there are no options,  calls or similar
agreements  or  commitments  relating  to the issued and  outstanding  shares of
common  stock of MVR and  Unijoh. 

            Section 3.5.  Subsidiaries  and Affiliates.  Neither MVR nor Unijoh,
directly or  indirectly,  owns any  material  interest in or controls  any other
corporation, association or other form of business organization.

                                      - 5 -





            Section 3.6. No  Violation.  Neither the  execution  and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(a) violate any provision of the  corporate  charter or by-laws of either MVR or
Unijoh,  as amended to date, (b) with or without the giving of notice and/or the
passage of time,  materially  violate,  conflict  with,  result in the breach or
termination of,  constitute a material  default under, or result in the creation
of any material lien, charge or encumbrance upon any of the assets of either MVR
or Unijoh pursuant to, any material  contract,  agreement,  indenture,  lease or
commitment to which either MVR or Unijoh is a party or by which it or any of its
assets may be bound, except as may be set forth in Schedules 3.6(a) or 3.6(b) or
as would not have a material  adverse  effect on the financial  condition of MVR
and Unijoh,  taken as a whole, or (c) materially  violate any judgment,  decree,
order,  statute,  rule or  governmental  regulation  applicable to either MVR or
Unijoh.

            Section 3.7. Financial Statements.  There have been furnished to the
Transferee the audited  balance sheets of MVR as at March 31, 1995 and 1996 (the
latter  balance sheet of MVR being  hereinafter  referred to as the "MVR Balance
Sheet") and the audited  statements  of income for each of the years then ended,
in each case  including  the  respective  notes thereto and  accompanied  by the
report of Ernst & Young, independent certified public accountants. Such 1995 and
1996 financial statements fairly present the financial position of MVR as at the
respective  dates  specified  and  the  results  of  operations  of MVR  for the
respective  periods  specified,   in  conformity  with  Statements  of  Auditing
Guideline  and  Statements  of  Auditing  Practice  and  applicable   accounting
standards.  Except for  liabilities  and  obligations  incurred in the  ordinary
course of  business  since the date of the MVR  Balance  Sheet or referred to in
Schedules  3.7(a)  or  3.7(b),  MVR does not have any  material  liabilities  or
obligations, other than liabilities and obligations reflected in the MVR Balance
Sheet or the respective notes thereto and liabilities and obligations  which, in
accordance with the foregoing

                                      - 6 -





accounting  standards,  were not  required to have been so  reflected as of such
date.  In  addition,  there have been  furnished to the  Transferee  the audited
balance sheets of Unijoh as at March 31, 1995 and 1996 (the latter balance sheet
of Unijoh being  hereinafter  referred to as the "Unijoh Balance Sheet") and the
audited  statements  of income  for each of the years then  ended,  in each case
including the respective  notes thereto and accompanied by the report of Ernst &
Young,  independent  certified public accountants.  Such 1995 and 1996 financial
statements fairly present the financial  position of Unijoh as at the respective
dates  specified  and the  results of  operations  of Unijoh for the  respective
periods specified,  in conformity with approved auditing  standards.  Except for
liabilities  and  obligations  incurred in the ordinary course of business since
the date of the Unijoh  Balance  Sheet or  referred  to in  Schedules  3.7(a) or
3.7(b), Unijoh does not have any material liabilities or obligations, other than
liabilities  and  obligations  reflected  in the  Unijoh  Balance  Sheet  or the
respective  notes thereto and liabilities  and obligations  which, in accordance
with approved auditing standards, were not required to have been so reflected as
of such date.

            Section  3.8.  Title to  Assets.  Except as set  forth in  Schedules
3.8(a) and 3.8(b),  MVR owns the assets  reflected  on the MVR Balance  Sheet as
owned by it and Unijoh owns the assets  reflected on the Unijoh Balance Sheet as
owned by it, in each case free and clear of all material claims,  liens, charges
and encumbrances. All of such assets generally are in good condition and repair,
reasonable wear and tear excepted,  and are suitable for the uses for which they
are intended.

            Section 3.9.  Contracts,  Etc. Schedules 3.9(a) and 3.9(b) set forth
all material written contracts,  agreements,  indentures,  leases,  licenses and
commitments (collectively, the "Contracts") to which MVR or Unijoh is a party or
by which either of them or any of their  respective  assets may be bound,  other
than (a) sales orders and purchase orders entered into in the ordinary course of
business, (b) contracts,  agreements,  indentures,  leases and commitments which
may be terminated

                                      - 7 -





at the  option of MVR or  Unijoh,  as the case may be, on not more than 60 days,
prior notice and do not  involve,  in the  aggregate,  more than $50,000 and (c)
contracts  with the  Transferee.  All of the  Contracts  are in full  force  and
effect, without material amendment.

            Section 3.10. Insurance. The assets of MVR and Unijoh are covered by
insurance  policies  which are in full force and effect  with all  premiums  due
thereon  paid in full and which are  reasonably  adequate  in amount,  scope and
coverage to protect MVR and Unijoh  against any material loss of its  properties
or any material interruption in its operations.

            Section  3.11.  Books and Records.  The books and records of each of
MVR and Unijoh are in all material  respects  complete  and  correct,  have been
maintained in accordance with sound business  practices and reflect all material
transactions to which either MVR or Unijoh was a party since January 1, 1995.

            Section 3.12. Bank Accounts.  The Transferors have advised, and will
continue to advise,  the  Transferee  as to the name and address of each bank or
other financial  institution  which is a depositary of MVR or Unijoh or in which
either has a safe  deposit  box,  the name and account  number  under which such
account  is  maintained  and the  name  and  title or  capacity  of each  person
authorized to draw thereon or have access thereto.

            Section  3.13.  Taxes.  Each of MVR and  Unijoh  has filed  with the
 .appropriate  governmental agencies all tax returns required to be filed and has
paid all  assessments  shown to be due on such tax returns  and all  assessments
claimed to be due by a governmental  authority with respect thereto. To the best
knowledge  of  the  Transferors,  there  are  no  pending  examinations  by  any
governmental  authority  of the income tax returns of either MVR or Unijoh,  and
all prior additional  assessments for taxes (or interest or penalties  thereon),
if any, have been paid or provided  for.  Neither MVR nor Unijoh has executed or
filed with any taxing authority any agreement extending

                                      - 8 -





the period for assessment or collection of any tax and neither MVR nor Unijoh is
a party to any action or proceeding by any governmental authority for assessment
or collection of taxes.

            Section  3.14.  Litigation.  Except as set forth in  Schedule  3.14,
there are no actions, suits,  proceedings,  judgments or decrees existing or, to
the knowledge of the  Transferors,  threatened or proposed  against or affecting
MVR or Unijoh or any of the  properties  of either which have  resulted or would
result in any material  adverse change in the business,  properties or financial
condition of MVR or Unijoh,  and neither MVR nor Unijoh nor any of the assets of
either is subject to any  outstanding  judgment issued by any court involving in
excess of $25,000 in the aggregate.  To the best  knowledge of the  Transferors,
there  are no  pending  orders  known  to the  Transferors  of any  governmental
authority which may materially  adversely affect the operations of MVR or Unijoh
as now conducted.

            Section  3.15.  Trademarks,  Trade Names,  Patents,  Etc.  Schedules
3.15(a) and 3.15(b) set forth complete and correct lists and descriptions of all
patents, copyrights,  trade names, trademarks,  logos, service names and service
marks  which are used or held for use in the  business or  operations  of MVR or
Unijoh,  respectively (the "Intangible Property"). Each of MVR and Unijoh is the
registered and beneficial  owner, or registered user, as the case may be, of all
such Intangible Property set forth on Schedule 3.15(a) or 3.15(b).  All of MVR's
and Unijoh's rights in said Intangible Property are in full force and effect and
the Transferors have no knowledge of any claims that any such right is not valid
or enforceable by MVR or Unijoh, as the case may be, or of any infringement upon
or conflict with any Intangible  Property rights, or of any infringement upon or
conflict with any trademark, trade name, copyright, patent or proprietary right,
or any  application  relating  to the  foregoing,  or of any third  party  claim
alleging such infringement or conflict.  Each of MVR and Unijoh has the right to
use all patents, trademarks, trade names, copyrights, inventions, designs,

                                      - 9 -





formulae, trade secrets,  manufacturing processes, know-how and other industrial
property  rights  necessary to  manufacture  and market the  products  presently
manufactured or marketed by it, including any product licensed from others.

            Section 3.16. Absence of Defaults, Etc. Neither MVR nor Unijoh is in
default,  and neither has received any notice of any alleged  material  default,
under any contract, agreement,  indenture, lease or other commitment to which it
is a party  or by  which  it or any of its  assets  is  bound  and,  to the best
knowledge of the  Transferors,  no other party to any such contract,  agreement,
indenture,  lease or other commitment is in material default thereunder.  To the
best knowledge of the Transferors,  neither MVR nor Unijoh has violated,  in any
material respect,  or received notice of any alleged material  violation of, any
applicable  law,  regulation or ordinance  relating to its operations or assets.
All material  licenses and permits  required in connection with the operation of
MVR's business and Unijoh's  business have been issued and are in full force and
effect.

            Section 3.17. Absence of Certain Changes.  Since the date of the MVR
Balance Sheet and the Unijoh Balance Sheet neither MVR nor Unijoh has:

                        (a)  operated  its  business  and dealt  with its assets
            other than in the ordinary course;

                        (b) cancelled or compromised any material debt or claim;

                        (c)  released,   transferred  or  granted  any  material
            rights;

                        (d)  suffered  any  material   adverse   change  in  its
            financial  condition,  properties  or business  or  obtained  actual
            knowledge of any present or future  business  condition  which would
            materially  adversely  affect the assets,  properties or business of
            MVR or Unijoh or which would prevent either of them from carrying on
            its business in substantially the same manner as that in which it is
            being conducted;

                        (e) made,  amended or cancelled  any material  contract,
            agreement,  indenture,  lease or other  commitment or failed to keep
            any of  them in full  force  and  effect  or to  perform  any of its
            obligations thereunder;


                                     - 10 -





                        (f)   paid   any   material   bonus   or   extraordinary
            compensation to any director,  officer or employee inconsistent with
            past practice;

                        (g) entered into any  transaction  which would result in
            any representation or warranty of the Transferors  contained in this
            Agreement becoming untrue in any material respect  immediately after
            the consummation of such transaction; or

                        (h) declared any  dividend or made any  distribution  to
            its shareholders.

            Section 3.18. Consideration.  For purposes of Section 505 of the New
York Business  Corporation Law,  notwithstanding  any other  representations  or
warranties  hereunder,  the right to receive any MPA Shares under this Agreement
or pursuant to the transactions contemplated hereby has not been agreed to as an
incentive  to  service  or  continued  service  with  MPA or any  subsidiary  or
affiliate of MPA.

              
                                   ARTICLE IV

                REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE
                ------------------------------------------------

            The  Transferee  hereby  represents  and  warrants  to  each  of the
Transferors as follows:

            Section 4.1.  Organization,  Good Standing and  Corporate  Power and
Authority. The Transferee is a corporation duly organized,  validly existing and
in good standing under the laws of the State of New York. The Transferee has the
corporate  power and authority to own,  lease and operate its  properties and to
carry on its business as it is now being conducted.

            Section 4.2.  Capitalization.  The  authorized  capital stock of the
Transferee  consists of 10,000,000  shares of common  stock,  par value $.01 per
share, of which 4,866,000 shares are issued and outstanding and 5,000,000 shares
of preferred stock, none of which is issued or outstanding. Upon the delivery at
the Closing of the MPA Shares to the Transferors in exchange for

                                     - 11 -





the MVR  Shares,  the  MPA  Shares  delivered  to the  Transferors  will be duly
authorized,  validly  issued,  fully paid and  non-assessable,  with no personal
liability attaching to the ownership thereof.

            Section 4.3. Financial  Statements and Other Corporate  Information.
The  Transferee  has furnished to each of the  Transferors  copies of the Annual
Report to  Shareholders  of the  Transferee  for the fiscal year ended March 31,
1996, the Annual Report on Form 10-K of the Transferee for the fiscal year ended
March 31, 1996 filed with the Securities and Exchange Commission ("SEC") and the
Quarterly Reports on Form 10-Q of the Transferee for each of the fiscal quarters
ended June 30,  September  30 and  December  31,  1996  filed with the SEC.  The
financial statements of the Transferee contained in the aforesaid reports fairly
present the  financial  position of the  Transferee as at the  respective  dates
specified  and the  consolidated  results  of  operations  and cash flows of the
Transferee  for the  respective  periods  specified,  in conformity  with United
States generally accepted accounting principles  consistently applied,  subject,
in the  case of  unaudited  financial  statements,  to  changes  resulting  from
year-end audit adjustments.  None of such reports, as of the respective dates on
which they were filed with the SEC, contained any untrue statement of a material
fact or  failed to state a  material  fact  required  to be  stated  therein  or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

            Section 4.4. Effective Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly  authorized by all necessary  corporate  action of the  Transferee and this
Agreement  constitutes the legal, valid and binding obligation of the Transferee
enforceable  against the  Transferee in accordance  with its terms.  Neither the
execution  and  delivery  of  this  Agreement  nor  the   consummation   of  the
transactions   contemplated  hereby  will  (a)  violate  any  provision  of  the
certificate of incorporation or by-laws of the Transferee,

                                     - 12 -





as amended to date,  (b) with or without the giving of notice and/or the passage
of time, materially violate,  conflict with, result in the breach or termination
of,  constitute  a material  default  under,  or result in the  creation  of any
material lien, charge or encumbrance upon any of the assets of the Transferee or
its subsidiary pursuant to, any material contract,  agreement,  indenture, lease
or commitment to which the  Transferee is a party or by which the  Transferee or
any of its  properties  may be bound or (c)  materially  violate  any  judgment,
decree,  order,  statute,  rule or  governmental  regulation  applicable  to the
Transferee,   except   such   individual   violations,    conflicts,   breaches,
terminations,  defaults or liens as would not have a material  adverse effect on
the financial condition of the Transferee.

            Section 4.5. Litigation.  There are no actions, suits,  proceedings,
judgments or decrees existing or, to the knowledge of the Transferee, threatened
or proposed  against or affecting the Transferee or any of its properties  which
would  result  in any  material  adverse  change in the  consolidated  business,
properties or financial  condition of the  Transferee.  

            Section 4.6. Absence of Certain  Changes.  Since March 31, 1996, the
Transferee  has not  suffered  any  material  adverse  change  in its  financial
condition, properties or business.


                                    ARTICLE V

                          COVENANTS OF THE TRANSFERORS
                          ----------------------------

            Section 5.1.  Access to Properties  and Records.  From and after the
date  hereof,  the  Transferors  will  cause  MVR and  Unijoh  to  afford to the
officers,  attorneys,  accountants and other  representatives  of the Transferee
full and free access to such of the premises,  properties,  personnel, books and
records of MVR and Unijoh as the Transferee may reasonably request.

                                     - 13 -





            Section 5.2. Certain Restrictions. Each Transferor acknowledges that
by his  employment  with or stock  ownership  of MVR and Unijoh and  prospective
stock ownership of MPA that he may have access to  confidential  information and
trade  secrets of such  entities.  Confidential  information  and trade  secrets
include,  but are not limited to,  customer,  supplier and client  lists,  price
lists, marketing, distribution and sales strategies and procedures,  operational
and equipment techniques, business plans and systems, quality control procedures
and systems,  special projects and technological  research,  including projects,
research and reports for any entity or client or any project,  research,  report
or the  like  concerning  sales or  manufacturing  or new  technology,  employee
compensation  plans and any other information  relating  thereto,  and any other
records, files, drawings, inventions, discoveries, applications, processes, data
and  information  concerning  the business of such entities which are not in the
public domain. Each Transferor agrees that he will not at any time following the
date hereof use or disclose to any third party,  trade  secrets or  confidential
information of any such entities,  including,  but not limited to,  confidential
information or trade secrets  belonging to such entities or their  customers and
clients or proprietary  processes or procedures thereof.  Each Transferor agrees
that for two  years  (four  years in the case of Mr.  Quek)  following  the date
hereof he will not, directly or indirectly,  under any circumstances  other than
at the direction and for the benefit of such entities,  engage in or participate
in any business activity,  including,  but not limited to, acting as a director,
officer, employee, agent, independent contractor,  partner, consultant, licensor
or licensee, franchisor or franchisee, proprietor, syndicate member, shareholder
or  creditor  or with a person  having  any  other  relationship  with any other
business,  company, firm occupation or business activity, in any geographic area
within the United States or southeastern Asia (including Singapore and Malaysia)
that is, directly or indirectly, competitive with any business conducted by such
entities. Should Mr. Quek own 5% or less of the issued and outstanding shares of
a class of securities of a

                                     - 14 -





corporation  the  securities  of which are  traded on a United  States  national
securities exchange or in the over-the-counter  market, such ownership shall not
cause  Mr.  Quek to be deemed a  shareholder  under  the  immediately  preceding
sentence.  Each Transferor  agrees that for two years (four years in the case of
Mr. Quek)  following  the date hereof he will not, on his behalf or on behalf of
any other business  enterprise,  directly or indirectly,  under any circumstance
other than at the  direction  and for the benefit of such  entities,  solicit or
induce any creditor,  customer, supplier, officer, employee or agent of any such
entity to sever its  relationship  with or leave the employ of any such  entity.
Each  Transferor  agrees  that the  nature and scope of the  provisions  of this
Section 5.2 are reasonable and necessary.  If, for any reason, any aspect of the
above  provisions  as it applies to a  Transferor  is  determined  by a court of
competent jurisdiction to be unreasonable or unenforceable, the provisions shall
only  be  modified  to the  minimum  extent  required  to  make  the  provisions
reasonable and/or enforceable, as the case may be.


                                   ARTICLE VI

              CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRANSFEREE
              -----------------------------------------------------

            The  obligations of the Transferee  under this Agreement are subject
to the  satisfaction  at or  prior  to the  Closing  of  each  of the  following
conditions  (any  of  which  may  be  waived  by  the  Transferee  in  its  sole
discretion):

            Section 6.1.  Correctness of Representations and Warranties.  All of
the  representations  and  warranties  of  the  Transferors  contained  in  this
Agreement or otherwise  made in writing  pursuant to this  Agreement  shall have
been true and correct in all material  respects  when made and shall be true and
correct in all material  respects at the date of the Closing as though  restated
and made at such  time;  all of the  terms,  covenants  and  conditions  of this
Agreement  required to be complied with and performed by the  Transferors  shall
have been duly complied with and performed

                                     - 15 -





in all  material  respects;  and the  Transferors  shall have  delivered  to the
Transferee a certificate  signed by M. Marks, R. Marks and Quek,  dated the date
of the Closing, to the foregoing effect.

            Section 6.2. Fairness Opinion. The Transferee shall have received an
opinion of Houlihan Lokey, in form and substance satisfactory to the Transferee,
to the effect that the terms of the  transaction  contemplated by this Agreement
are fair, from a financial viewpoint, to the shareholders of the Transferee.

            Section 6.3. Absence of Litigation.  There shall be no action, suit,
proceeding,  judgment or decree  pending  before or  threatened  by any court or
governmental  agency which would result in any  material  adverse  change in the
business,  properties or financial condition of either MVR or Unijoh or in which
it is sought or threatened to restrain, enjoin or prohibit (or to obtain damages
in a material  amount in connection  with) the  consummation  of the transaction
contemplated hereby.

            Section  6.4.  Absence  of  Certain  Changes.  There  shall not have
occurred  since  the  date  of the  MVR  Balance  Sheet  any  material  casualty
(irrespective of any insurance  relating thereto) to any of the assets of either
MVR or Unijoh or any other material  adverse change in the financial  condition,
properties or business of either MVR or Unijoh.

            Section 6.5. Corporate Books;  Corporate  Approvals.  The Transferee
shall have received (a) all of the corporate  minute books,  stock books,  stock
transfer ledgers, corporate seals and other corporate records of MVR and Unijoh;
and (b) such other items and documents as the Transferee may reasonably  request
and as may be consistent with the purposes of this Agreement.

            Section 6.6. Opinions of Counsel. The Transferee shall have received
an  opinion  of  counsel  to each of MVR and  Unijoh  substantially  in the form
attached hereto as Annex A.

            Section 6.7. Employment  Agreement.  MVR, Unijoh and Quek shall have
entered into an  employment  agreement  between them  substantially  in the form
attached hereto as Annex B.

                                     - 16 -





                                   ARTICLE VII

             CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRANSFERORS
             ------------------------------------------------------

            The obligations of the Transferors  under this Agreement are subject
to the  satisfaction at or prior to the date of Closing of each of the following
conditions (any of which may be waived by the Transferors jointly) in their sole
discretion:

            Section 7.1.  Correctness of Representations and Warranties.  All of
the representations and warranties of the Transferee contained in this Agreement
or otherwise made in writing pursuant to this Agreement shall have been true and
correct in all material  respects when made and shall be true and correct in all
material respects at the date of the Closing as though restated and made at such
time; all of the terms,  covenants and conditions of this Agreement  required to
be complied with and performed by the  Transferee at or prior to the date of the
Closing  shall  have been  duly  complied  with and  performed  in all  material
respects;  and  the  Transferee  shall  have  delivered  to  the  Transferors  a
certificate  signed by the Chief Financial Officer of the Transferee,  dated the
date of the Closing, to the foregoing effect.

            Section 7.2. Absence of Litigation.  There shall be no action, suit,
proceeding,  judgment or decree  pending  before or  threatened  by any court or
governmental  agency which could result in any  material  adverse  change in the
business,  properties or financial condition of the Transferee or in which it is
sought or threatened to restrain,  enjoin or prohibit (or to obtain damages in a
material  amount  in  connection  with)  the  consummation  of the  transactions
contemplated hereby.

            Section 7.3.  Fairness  Opinion.  The Transferee shall have received
the opinion of Houlihan Lokey described in Section 6.2 hereof.

            Section 7.4. Employment  Agreement.  MVR, Unijoh and Quek shall have
entered into an  employment  agreement  between them  substantially  in the form
attached hereto as Annex B.

                                     - 17 -





                                  ARTICLE VIII

                   INVESTMENT UNDERTAKING; REGISTRATION RIGHTS
                   -------------------------------------------

            Section 8.1. Investment  Undertaking and Lock-Up.  Each of M. Marks,
R. Marks and Quek confirms his understanding that the shares of MPA Shares to be
issued to him pursuant to this Agreement will be "restricted  securities" within
the  meaning  of  Rule  144 of the  General  Rules  and  Regulations  under  the
Securities Act of 1933, as amended (the "Act"),  and  acknowledges  that he will
acquire  such shares for his own account for  investment  and not with a view to
the distribution  thereof.  Each of M. Marks, R. Marks and Quek severally agrees
that he will not sell,  transfer  or  otherwise  dispose  of any of such  shares
unless (a) a  registration  statement  under the Act with respect to such shares
has become,  and is at the time of disposition,  effective or (b) in the opinion
of  counsel  for  the  Transferee,  the  proposed  disposition  may be  made  in
accordance  with the  provisions  of such  Rule 144 or  another  exemption  from
registration  without  constituting  a  violation  of the  Act  or of any  other
applicable federal or state securities laws. Each of M. Marks, R. Marks and Quek
further  agrees that he may sell  one-fourth  of the MPA Shares  received by him
hereunder commencing on the first anniversary of the date hereof and may sell an
additional  one-fourth of the MPA Shares received by him hereunder commencing on
each of the next succeeding  three  anniversaries  of the date of this Agreement
(notwithstanding  earlier saleability under any applicable securities laws) (the
"Lock-Up") and further agrees that the Transferee may place on all  certificates
representing  MPA Shares delivered to them pursuant to this Agreement (or shares
issued in  replacement  thereof)  (a) a legend  to the  effect  that the  shares
represented by such certificates have not been registered under the Act and that
the  sale,  transfer  or other  disposition  of such  shares is  subject  to the
provisions of the Act and of this Agreement,  a copy of which shall be available
for inspection at the office of the Transferee in

                                     - 18 -





Torrance, California, and (b) a legend to the effect that the shares represented
by such certificates are subject to the Lock-Up.

            Section 8.2. Additional Investment Representations.  Each Transferor
represents  that he is an  accredited  investor  as that term is  defined  under
Regulation  D  promulgated  by the SEC under the Act (or is not a United  States
person for purposes of  applicability  of the Act and any rules and  regulations
thereunder),  is financially  able to bear the economic risk of this investment,
including the ability to afford holding the MPA Shares for an indefinite  period
or to afford a complete loss of the investment  therein,  has such knowledge and
experience in financial and business  matters as to be capable of evaluating the
merits and risks of an investment  in the MPA Shares,  has received and read the
financial  and other  information  regarding  MPA  referred to herein,  has been
employed by and/or conducted  extensive business with MPA for an extended period
of time  prior to the  date  hereof,  has  been  given  the  opportunity  to ask
questions of, and receive answers from, MPA concerning this  transaction and the
business and financial condition of MPA, and has made an independent  evaluation
of the merits of this transaction.

            Section 8.3. No Registration  Rights.  Each Transferor  acknowledges
and agrees that the  Transferee  does not grant any  registration  rights of any
kind with respect to the MVR Shares.


                                   ARTICLE IX

           SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
           -----------------------------------------------------------

            Section  9.1.  Survival  of  Representations  and  Warranties.   All
representations,  warranties  and  agreements  made  by the  Transferors  or the
Transferee in this Agreement or in any instrument  pursuant hereto shall survive
the  Closing  and any  investigation  at any time  made by or on  behalf of such
party,  provided,  however,  that no claim shall be  asserted by the  Transferee
against

                                     - 19 -





either of the Transferors or by either of the Transferors against the Transferee
for breach of any such  representation,  warranty or agreement  unless the party
asserting  such claim shall have given written notice of such claim to the party
or parties  against  whom it is asserted on or before the date which is one year
after the date of the Closing (except that the foregoing proviso shall not apply
to the obligations of the Transferors set forth in Section 5.2 of this Agreement
or those of the Transferors and the Transferee set forth in Article VIII of this
Agreement).

            Section 9.2.  Indemnification.  (a) Each of the Transferors  jointly
and  severally,  shall,  on demand,  indemnify and hold harmless the  Transferee
from,  and  reimburse  the  Transferee  for, any losses,  damages,  liabilities,
deficiencies and expenses (including reasonable attorneys' fees) incurred by the
Transferee  after the date  hereof by reason  of,  or  arising  out of,  (i) any
material  misrepresentation,   omission  of  fact  or  material  breach  of  any
representation  or warranty  contained in this  Agreement  or in any  instrument
delivered to the Transferee  hereunder on behalf of any Transferor,  or (ii) any
failure by any  Transferor  to perform  any  obligation  or duty  required to be
performed  by any of them under any  provision of this  Agreement.  In the event
that any claim shall be asserted against the Transferee, MVR or Unijoh by anyone
other than a party to this  Agreement,  which may result in the assertion by the
Transferee  of a claim  under  this  Section  9.2(a) or  otherwise  against  the
Transferors, the Transferee shall notify the Transferors of such claim promptly,
and the  Transferors  shall be given a  reasonable  opportunity,  at their  sole
expense, to control or, at their option, to participate in, the original defense
against or the compromise of such claim. In connection therewith, the Transferee
shall  cooperate  fully with the  Transferors  and shall make  available  to the
Transferors all pertinent  information  under the Transferee's  control relating
thereto.  Notwithstanding  anything in this  Agreement to the contrary,  (x) the
Transferors  shall in no event be liable to the  Transferee  under this  Section
9.2(a) or otherwise under this Agreement until the aggregate damages

                                     - 20 -





sustained by the  Transferee  shall exceed $50,000 and then only for the damages
above $50,000 and (y) in no event shall such liability of any Transferor  exceed
the value,  at  Closing,  of the MPA Shares  received  by him  pursuant  to this
Agreement.

            (b) The  Transferee  shall,  on demand,  indemnify and hold harmless
each Transferor  from, and reimburse each  Transferor for, any losses,  damages,
liabilities,  deficiencies and expenses (including  reasonable  attorneys' fees)
incurred  by him after the date  hereof by reason of, or arising  out of (i) any
material  misrepresentation,   omission  of  fact  or  material  breach  of  any
representation  or warranty  contained in this  Agreement  or in any  instrument
delivered  to him  hereunder  by the  Transferee  or  (ii)  any  failure  by the
Transferee  to perform any  obligation  or duty  required to be performed by the
Transferee  under any provision of this  Agreement.  In the event that any claim
shall be asserted  against any  Transferor  by anyone other than a party to this
Agreement  which may result in the assertion by any  Transferor of a claim under
this Section 9.2(b) or otherwise  against the Transferee,  the Transferors shall
notify the Transferee of such claim promptly,  and the Transferee shall be given
a reasonable opportunity,  at its sole expense, to control or, at its option, to
participate in the original  defense against or the compromise of such claim. In
connection therewith,  the Transferors shall cooperate fully with the Transferee
and shall make available to the Transferee all pertinent  information  under the
Transferors'  control  relating  thereto.   Notwithstanding   anything  in  this
Agreement to the contrary, (x) the Transferee shall in no event be liable to the
Transferors  under this Section 9.2(b) or otherwise  under this Agreement  until
the aggregate  damages sustained by the Transferors shall exceed $50,000 and (y)
in no event shall such liability of the Transferee exceed the value, at Closing,
of the MPA Shares transferred to the Transferors at the Closing.

                                    ARTICLE X


                                     - 21 -





                                  MISCELLANEOUS
                                  -------------

            Section 10.1. Expenses. Whether or not the transactions contemplated
by this  Agreement  shall be  consummated  and  except  as  otherwise  expressly
provided in this  Agreement,  each of the parties  hereto shall pay the fees and
expenses of its counsel, accountants and other experts (including Houlihan Lokey
in the  case  of the  Transferee)  and  all  other  expenses  incurred  by it in
connection  with the  preparation  for,  entering into and  consummation  of the
transactions  contemplated  by this  Agreement  and all other  matters  incident
thereto.

            Section  10.2.  Notices.  All notices,  requests,  demands and other
communications  which are required or permitted to be given under this Agreement
shall be in  writing  and  shall be deemed  to have  been  duly  given  upon the
delivery or mailing thereof, as the case may be, if delivered personally or sent
by registered or certified mail, return receipt requested,  postage prepaid,  as
follows:

                        (a) if to any or all of the Transferors, to such parties
            at any of their  respective  addresses set forth above,  with a copy
            thereof to William Pollak, Esq., Putney, Twombly, Hall & Hirson, 521
            Fifth Avenue, New York, New York 10175; and

                        (b) if to  the  Transferee,  to  Peter  Bromberg,  Chief
            Financial Officer, Motorcar Parts & Accessories, Inc., 2727 Maricopa
            Street,  Torrance,  California 90503, with a copy thereof to Gary J.
            Simon, Esq., Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
            Americas, New York, New York 10036;

or to such  other  person or  address as any of the  parties  hereto  shall have
specified by notice in writing to all other parties hereto.

            Section 10.3. Entire Agreement. This Agreement sets forth the entire
agreement  and   understanding  of  the  parties  hereto  with  respect  to  the
transactions contemplated hereby and supersedes any and all prior agreements and
understandings  relating  to  the  subject  matter  hereof.  No  representation,
promise, inducement or statement of intention has been made by any party hereto

                                     - 22 -





which is not embodied in this Agreement or the written statements, certificates,
schedules or other documents delivered pursuant hereto or in connection with the
transactions  contemplated  hereby,  and no  party  hereto  shall be bound by or
liable for any alleged  representation,  promise,  inducement  or  statement  of
intention not set forth herein or therein.

            Section 10.4.  Amendment.,  Waiver.  This  Agreement may be amended,
modified.   superseded   or  cancelled,   and  any  of  the  terms,   covenants,
representations,  warranties  or  conditions  hereof  may be  waived,  only by a
written  instrument  executed by the parties hereto or, in the case of a waiver,
by the party waiving compliance.

            Section  10.5.  Parties in  Interest.  All of the terms,  covenants,
representations,  warranties and conditions contained in this Agreement shall be
binding  upon,  and shall  inure to the  benefit of and be  enforceable  by, the
parties hereto and their  respective  heirs,  successors  and assigns,  but this
Agreement  and  the  rights  and  obligations  contained  herein  shall  not  be
assignable by any of the parties  hereto prior to the Closing  without the prior
written consent of each other party hereto.

            Section 10.6.  Severability.  If any provision of this  Agreement or
the  application  of any such provision to any person or  circumstance  shall be
held invalid,  illegal or  unenforceable  in any respect by a court of competent
jurisdiction,  such invalidity,  illegality or unenforceability shall not affect
any other provision hereof.

            Section 10.7. Delivery of Schedules and Documents. The schedules and
documents  referred to herein have been delivered and initialed on behalf of the
respective parties hereto for identification purposes.

            Section 10.8. Governing Law. This Agreement shall be governed by and
construed  and  enforced in  accordance  with the laws of the State of New York,
without regard to the application of the conflicts of law rules thereof.

                                     - 23 -





            Section 10.9.  Captions.  The section headings  contained herein are
for  reference  purposes  only and shall not in any way  affect  the  meaning or
interpretation of this Agreement.

            Section 10.10.  Counterparts.  This Agreement may be executed in any
number  of  counterparts,  each of  which  shall  be  deemed  to be an  original
instrument and all of which together shall constitute a single agreement.


                                     - 24 -




            IN WITNESS  WHEREOF,  the  parties  hereto have duly  executed  this
Agreement on the date first above written.

                                           /s/ Mel Marks
                                           ------------------------------------
                                           MEL MARKS


                                           /s/ Richard Marks
                                           ------------------------------------
                                           RICHARD MARKS


                                           /s/ Vincent Quek
                                           ------------------------------------
                                           VINCENT QUEK


           
                                           MOTORCAR PARTS & ACCESSORIES, INC.


                                           By: /s/ Peter Bromberg
                                               --------------------------------
                                                  Peter Bromberg,
                                                  Chief Financial Officer


                                      -25-





                                  SUBSIDIARIES

      Name                                          Jurisdiction of Organization

MVR Products Pte Limited                                    Singapore

Unijoh Sdn, Bhd                                             Malaysia







                         CONSENT OF INDEPENDENT AUDITORS


           We  hereby  consent  to  the   incorporation   by  reference  in  the
Registration  Statement  pertaining  to the 1994 stock  option  plan of Motorcar
Parts & Accessories,  Inc. on Form S-8 of our report dated May 16, 1997 which is
included in the annual report on Form 10-K for the year ended March 31, 1997.


/s/ Richard A. Eisner & Company, LLP

New York, New York
June 23, 1997

 


5 0000918251 Motorcar Parts and Accessories YEAR MAR-31-1998 APR-01-1996 MAR-31-1997 3,539,000 0 22,528,000 200,000 41,862,000 68,464,000 6,106,000 1,815,000 75,510,000 16,664,000 0 0 0 49,000 40,059,000 75,510,000 86,872,000 86,872,000 69,255,000 76,719,000 0 0 1,090,000 9,063,000 3,529,000 5,534,000 0 0 0 5,534,000 1.11 1.11