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, 1998

|_|   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:  $112,952,000.

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 26, 1998 was approximately $81,642,451.

There were 6,433,455 shares of Common Stock outstanding as of June 26, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE


    Part III of the Registrant's Proxy Statement relating to its 1998 Annual
           Meeting of Shareholders is incorporated by reference herein




<PAGE>




                                     PART I
                                     ------


ITEM 1.  BUSINESS.

GENERAL

           The Company is a leading  remanufacturer  of replacement  alternators
and  starters  for  imported  and  domestic  cars and light trucks in the United
States and Canada.  The  Company's  full line of  alternators  and  starters are
remanufactured  for vehicles  imported  from Japan,  Germany,  Sweden,  England,
France, Italy and Korea and, as recently commenced,  for domestic vehicles.  The
imported vehicles for which the Company remanufactures  alternators and starters
also include  vehicles  produced by General  Motors,  Chrysler and Ford that are
originally  equipped  with  components  produced by foreign  manufacturers,  and
"transplants,"  which are  manufactured in the United States by Toyota,  Nissan,
Honda,  Mazda and other foreign  manufacturers.  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 and Trak Automotive,  and throughout
Canada to that country's  largest chain of retail  automotive  stores,  Canadian
Tire.  The Company also  supplies  remanufactured  alternators  and starters for
imported  vehicles  to Delphi,  a division  of General  Motors.  During the last
several  years,  the Company's  marketing and sales of its products for imported
vehicles  principally has been to retail  automotive  chains,  which the Company
believes  has been the fastest  growing  segment of the  automotive  aftermarket
industry.  During fiscal 1998,  approximately 87% of the Company's sales were to
retail  automotive  chains  comprised of  approximately  5,000 stores,  with the
balance of sales primarily to large warehouse distributors.

THE AUTOMOTIVE AFTERMARKET INDUSTRY

           The Company's  historical market,  the import automotive  aftermarket
for  alternators  and starters,  has  experienced  significant  growth in recent
years.  The Company  believes  that this growth has resulted  from,  among other
trends, (i) the proliferation of imported cars and light trucks in use, (ii) the
increase  in the  number of miles  driven  each year and (iii) the growth in the
number of imported  vehicles at the prime repair age of four years and older. In
addition,  the  Company  recently  entered  the  significantly  larger  domestic
automotive aftermarket for alternators and starters,  which the Company believes
represents substantial growth opportunities.

           Two distinct  groups of end-users buy replacement  automotive  parts:
(i) individual  "do-it-yourself" consumers; and (ii) professional "do-it-for-me"
installers.  The  individual  consumer  market  is  typically  supplied  through
retailers and through retail arms of warehouse  distributors.  Automotive repair
shops  generally  purchase parts through local  independent  parts  wholesalers,
through  national  warehouse  distributors  and,  at  a  growing  rate,  through
automotive parts retailers.



                                       -2-


<PAGE>



           The increasing  complexity of cars and light trucks and the number of
different  makes and models of these  vehicles  have  resulted in a  significant
increase in the number of different alternators and starters required to service
imported and domestic cars and light trucks. The technology used in starters and
alternators has become more advanced in response to the installation in vehicles
of an increasing  number of electrical  components such as cellular  telephones,
electrically powered windows, air conditioning  equipment,  and radio and stereo
systems.  Consequently, per unit sale prices have increased for such alternators
and starters.

           Remanufacturing,  which  involves  the  reuse  of parts  which  might
otherwise be discarded, creates a supply of parts at 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  material 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.

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
aftermarket  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.
Most of the  Company's  products  are sold for  resale  under  customer  private
labels,  with the remaining  products being sold under the Company's brand name,
which includes the use of its registered  trademark,  "MPA." Customers that sell
the Company's  products under private label include AutoZone,  CSK Auto, The Pep
Boys, Delphi, Canadian Tire and APS Holdings.

           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 a full line of
approximately  1,100  different  alternators  and 800  different  starters.  The
Company's  import  alternators  and  starters are  provided  for  virtually  all
Japanese  manufacturers,  including Toyota, Honda, Nissan, Mazda and Mitsubishi,
for certain  European  manufacturers,  including  Mercedes Benz,  BMW, Volvo and
Volkswagen,  for vehicles manufactured by Chrysler, General Motors and Ford that
are  equipped  with  components  produced  by  foreign  manufacturers,  and  for
manufacturers of transplants.



                                       -3-


<PAGE>



CUSTOMERS

           The Company's products are marketed  throughout the United States and
Canada. The Company's  customers consist of many of the largest chains of retail
automotive  stores and automotive  warehouse  distributors in the United States.
The  Company  also  sells  its  products  to  Canada's  largest  chain of retail
automotive stores,  Canadian Tire. The Company services  automotive retail chain
store  accounts  servicing  approximately  5,000  retail  outlets and  warehouse
distributor accounts servicing  approximately 6,000 jobbers. Each jobber in turn
sells to various  automotive  repair  facilities,  such as garages,  dealers and
service stations, as well as to individual motorists.

           Many of the largest chains of retail  automotive stores in the United
States  obtain their  imported car  alternators  and starters  from the Company.
Consequently,   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 43%, 17% and 15%, respectively, of
net sales during fiscal 1998. 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%, 20%,
18% and 11%, respectively,  of the Company's net sales during fiscal 1996. 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.  The Company's  arrangements with most of
its customers are based  principally  on the receipt of purchase  orders and any
long-term written contracts  generally may be terminated by customers upon short
notice.  In addition,  customers may demand price  concessions  from the Company
that could adversely affect profit margins.

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-


<PAGE>



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.  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.  Net sales and cost of
goods  sold  for  prior  years  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  and cleaning  materials.  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-


<PAGE>



either  stored in the  Company's  warehouse  facility or packaged for  immediate
delivery.  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.  This  process  takes
approximately four days.

           The  Company  generally  assembles  ignition  wires  from  components
manufactured  by third  parties.  The assembly  process  involves the cutting of
predetermined  lengths of wire,  which have been  manufactured  to the Company's
specifications,  and the  attaching of terminals to the ends of such wires.  The
final  product  ultimately is tested and packaged  under the  Company's  name or
customers' private labels.

           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 remanufacturing 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


                                       -6-


<PAGE>



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.

           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.

MARKETING AND DISTRIBUTION

           The Company markets and distributes its products  regionally  through
salaried personnel and independent sales representatives. The Company's products
are sold under either its registered name and trademark, "MPA," or private label
names.

           Approximately  87% of the  Company's  sales  are to  chains or retail
stores,  which,  the Company  believes,  constitute  the  dominant  distribution
channel in the Company's market.  Sales to chains or retail stores involve fewer
tiers in the  distribution  process.  Products are  delivered  directly by or on
behalf of the Company to the chain's  distribution  centers,  which then deliver
the  merchandise  directly to the retail  stores for purchase by  consumers.  By
contrast,  sales to  warehouse  distributors  involve more  participants  in the
distribution network.  Products are delivered to warehouse  distributors,  which
then deliver the  merchandise  to jobbers,  which then sell the  merchandise  to
automotive  repair  facilities as well as to individual  motorists.  The Company
believes that it has obtained significant marketing and distribution, as well as
manufacturing,  efficiencies  through  its focus on sales  efforts  to chains of
automotive retail stores.

           Each year,  the Company  exhibits its products at  customer-sponsored
trade shows and several major national trade shows, including the trade shows of
the  Automobile  Parts  and  Accessories   Association,   Automotive  Parts  and
Rebuilders  Association,  the Automotive Service Industries  Association and the
Automotive  Warehouse  Distributors  Association.  The Company believes that its
brand name is  recognized  throughout  its  industry.  The Company  prepares and
publishes a comprehensive  catalog of its starters and alternators,  including a
pictorial product  identification  guide and a detailed  technical  glossary and
explanation  guide.  The Company  believes that it maintains one of its market's
most extensive catalog and product identification  systems,  offering one of the
widest  varieties  of  alternators  and starters  available in that market.  The
Company  further  believes that certain of its customers' use of and reliance on
the  catalog and  product  identification  system  provide  incentives  to those
customers to continue to purchase products from the Company.



                                       -7-


<PAGE>



COMPETITION

           The automotive aftermarket 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
aftermarket.  In addition, certain of the Company's competitors are divisions or
subsidiaries   of  entities  also  engaged  in  other   businesses   which  have
substantially  greater  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.

           Retailers and other  purchasers of replacement  automotive  parts for
resale are constrained to a finite amount of space in which to display and stock
products.  Consequently, the reputation for quality and customer service which a
supplier  enjoys is a significant  factor in a purchaser's  decision as to which
product lines to carry in the limited space available. The Company believes that
these factors favor the Company,  which provides quality replacement  automotive
products,  rapid and reliable delivery  capabilities and promotional support. In
this regard,  there is increasing  pressure from customers,  particularly larger
ones, for suppliers to provide "just-in-time" delivery, which allows delivery on
an as-needed basis to promptly meet customer  orders.  The Company believes that
its ability to provide "just-in-time" delivery distinguishes it from many of its
competitors  and provides it a  significant  competitive  advantage and also may
represent a barrier to entry to current or future competitors.

           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  aftermarket 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.  Potentially
significant  expenditures,  however,  could be  required in order to comply with
evolving


                                       -8-


<PAGE>



environmental  and health and safety laws,  regulations or requirements that may
be adopted or imposed in the future.

EMPLOYEES

           The  Company  has  approximately  690  full  time  employees.  Of the
Company's employees,  30 are considered  administrative  personnel and eight 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.


I
TEM 2.  PROPERTIES.

           The Company  maintains  facilities  in Torrance,  California,  Roslyn
Heights, 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 April 1997,  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 Company believes that
its   facilities   are   sufficient  to  satisfy  its   foreseeable   production
requirements.  The Company also maintains an East Coast administrative and sales
office in Roslyn  Heights,  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.



                                       -9-


<PAGE>




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

           None.











                                      -10-


<PAGE>




                                     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  1997 and  fiscal  1998 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 1997               FISCAL 1998
                            -------------------------------------
                         HIGH         LOW          HIGH         LOW
                         ----         ---          ----         ---
First Quarter            19           14.250       18.50        13.250
Second Quarter           15.750        9.375       20.50        16.750
Third Quarter            15           11.875       20.250       16.250
Fourth Quarter           17.625       13.250       18           14.750

           As of June 26,  1998,  there were  6,433,455  shares of Common  Stock
outstanding held by 47 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.




                                      -11-


<PAGE>




ITEM 6.  SELECTED FINANCIAL DATA.

           The  following  selected  financial  data has been  derived  from the
Company's  audited financial  statements.  The Income Statement Data relating to
the fiscal years 1998,  1997 and 1996 and the Balance Sheet Data as of March 31,
1998  and  1997  should  be read  in  conjunction  with  the  Company's  audited
consolidated financial statements and notes thereto appearing elsewhere herein.


<TABLE>
<CAPTION>
                                                                      FISCAL YEAR ENDED MARCH 31,
                                                     -------------------------------------------------------------
                                                       1998         1997         1996         1995         1994
                                                     ---------    ---------    ---------    ---------    ---------
                                                                 (in thousands, except per share data)
<S>                                                  <C>          <C>          <C>          <C>          <C>      
INCOME STATEMENT DATA (1):
Net sales ........................................   $ 112,952    $  86,872    $  64,358    $  39,235    $  29,018
Cost of goods sold ...............................      91,317       69,255       50,965       30,690       21,816
Research and development .........................         549          185         --           --           --
Selling expenses .................................       2,417        2,305        1,984        1,498        2,117
General and administrative expenses ..............       6,298        4,974        4,577        3,704        2,593
Moving expenses ..................................        --           --           --           --            256
Operating income .................................      12,371       10,153        6,832        3,343        2,236
Interest expense (net of interest income) ........      (1,577)      (1,090)        (833)        (540)        (453)
                                                     ---------    ---------    ---------    ---------    ---------
Income before income taxes .......................      10,794        9,063        5,999        2,803        1,783
Provision for income taxes (pro forma for fiscal
1994) (2) ........................................       4,192        3,529        2,353        1,197          728
                                                     ---------    ---------    ---------    ---------    ---------
      Net income .................................   $   6,602    $   5,534    $   3,646    $   1,606    $   1,055
                                                     =========    =========    =========    =========    =========
      Basic income per share (pro forma for
      fiscal 1994) (3) ...........................   $    1.20    $    1.14    $    0.96    $    0.50    $    0.52
                                                     =========    =========    =========    =========    =========
      Diluted income per share (pro forma for                                                            
      fiscal 1994) (3) ...........................   $    1.16    $    1.11    $    0.93    $    0.49    $    0.52
                                                     =========    =========    =========    =========    =========
Weighted average common shares outstanding -
basic income per share (pro forma for fiscal
1994) (3) ........................................       5,521        4,859        3,812        3,208        2,018
                                                     =========    =========    =========    =========    =========
Weighted average common shares outstanding -
diluted income per share (pro forma for fiscal
1994) (3) ........................................       5,693        5,007        3,939        3,295        2,018
                                                     =========    =========    =========    =========    =========

                                                                               MARCH 31,
                                                     -------------------------------------------------------------
                                                       1998         1997         1996         1995         1994
                                                     ---------    ---------    ---------    ---------    ---------
                                                                             (in thousands)

BALANCE SHEET DATA:
Total assets .....................................   $  98,245    $  75,510    $  60,189    $  25,823    $  16,871
Working capital ..................................      75,333       51,800       44,254       18,096       12,041
Long-term debt and capitalized lease
     obligations -- less current portions ........      14,585       17,839       15,135        9,502        4,920
Shareholders' equity .............................      68,127       40,108       34,031       10,016        8,410
</TABLE>

- ----------------------
(1)   Net sales and cost of goods sold for fiscal 1996,  1995 and 1994 have been
      reclassified  to increase  cost of goods sold,  rather than  decrease  net
      sales,  by core  trade-ins.  See  Note  A[8] 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 taxed 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  reflects  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.

                                      -12-


<PAGE>




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

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

Net sales                                     100.0%    100.0%    100.0%
Cost of goods sold                             80.8      79.7      79.2
                                             ------    ------    ------
Gross profit                                   19.2      20.3      20.8
Research and development                        0.4       0.2       0.0
Selling expenses                                2.1       2.7       3.1
General and administrative expenses             5.6       5.7       7.1
                                             ------    ------    ------
Operating income                               10.9      11.7      10.6
Interest expense, net of interest income        1.4       1.3       1.3
                                             ------    ------    ------
Income before income taxes                      9.5      10.4       9.3
Provision for income taxes                      3.7       4.1       3.7
                                             ------    ------    ------
Net income                                      5.8%      6.4%      5.7%
                                             ======    ======    ======

           In  its   remanufacturing   operations,   the  Company  obtains  used
alternators  and  starters,  commonly  known as "cores,"  from its  customers as
trade-ins and by purchasing them from vendors.  Such trade-ins are recorded when
cores are received  from  customers.  Credits for cores are allowed only against
purchases of similar  remanufactured  products and  generally are used within 60
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,  net sales 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.  The Company's  financial
information has 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 and reflects a more proper relationship between sales and
inventory.


                                      -13-


<PAGE>



Fiscal 1998 compared to Fiscal 1997
- -----------------------------------

           Net  sales for  fiscal  1998  increased  $26,080,000  or 30.0%,  from
$86,872,000 to $112,952,000, over net sales for fiscal 1997. The increase in net
sales  is  primarily  attributable  to  sales  to one of the  Company's  largest
customers of  alternators  for domestic  vehicles in connection  with the recent
expansion of the Company's product line to include  remanufactured  products for
domestic vehicles.

           Cost of goods sold for fiscal 1998  increased  $22,062,000  or 31.9%,
from  $69,255,000 to  $91,317,000.  The increase  primarily is  attributable  to
additional  costs  incurred  in  connection  with  increased  production.  As  a
percentage of net sales,  cost of goods sold  increased to 80.8% for fiscal 1998
as compared to 79.7% for fiscal 1997.  The increase as a percentage of net sales
is attributable to (i) slightly  reduced  efficiencies  resulting from increased
labor and overtime costs in connection with increased production requirements in
response to strong demand for the Company's  products,  (ii) lower gross margins
relating  to the  Company's  new product  line,  and,  (ii) to a lesser  extent,
pricing pressures.

           Selling expenses increased over the periods by $112,000 or 4.9%, from
$2,305,000 to $2,417,000.  This increase resulted  principally from an expansion
of the Company's  sales force and related travel  expenses  offset  partially by
reduced sales commissions to outside sales agents. As a percentage of net sales,
selling expenses decreased from 2.7% to 2.1%, reflecting the leveraging of these
expenses over the Company's increased net sales.

           General and  administrative  expenses  increased  over the periods by
$1,324,000  or 26.6%,  from  $4,974,000  to  $6,298,000.  The increase  over the
periods resulted  principally from the addition of certain management  personnel
in connection  with the expansion of the  Company's  operations,  an increase in
certain  compensation  expense and the  inclusion of general and  administrative
expenses  related to the Company's  ownership of MVR and Unijoh  effective April
1997.  Notwithstanding  the  increase,  general  administrative  expenses  as  a
percentage of net sales decreased over the periods from 5.7% to 5.6%, reflecting
the leveraging of these expenses over the Company's increased net sales.

           For  fiscal  1998  interest   expense  net  of  interest  income  was
$1,577,000.  This  represents an increase of $487,000 or 44.7% over net interest
expense  of  $1,090,000  for  fiscal  1997.   Interest   expense  was  comprised
principally of interest on the Company's  revolving credit facility,  borrowings
under  which  increased  over the  periods  but were  significantly  reduced  by
payments from the proceeds of the Company's public offering in November 1997.

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 net sales for fiscal  1996.  The increase is
attributable  to  the  general  growth  of  business  with  existing  customers,
including the commencement of sales of alternators for domestic  vehicles to one
of the  Company's  largest  customers,  and an unusually  large  increase in the
number of stock keeping

                                      -14-


<PAGE>



units  ("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.

           Cost of goods sold for fiscal 1997  increased  $18,290,000  or 35.9%,
from  $50,965,000 to  $69,255,000,  over cost of goods sold for 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  selling  expenses  for 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.

           General  and  administrative   expenses  for  fiscal  1997  increased
$397,000 or 8.7%, from $4,577,000 to $4,974,000, over general and administrative
expenses for 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,  general salary
increases 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 interest expense net
of interest income for fiscal 1996.  Interest expense was comprised  principally
of interest paid on the Company's  revolving credit  facility,  borrowings under
which increased over the periods. The balance of interest expense relates to the
Company's capital leases.

Liquidity and Capital Resources
- -------------------------------

           The Company's recent  operations have been financed  principally from
the net proceeds of the Company's  public offering in November 1997,  borrowings
under its revolving credit facility and cash flow from  operations.  As of March
31, 1998, the Company's working capital was $75,333,000, including $3,108,000 of
cash and cash equivalents.

           Net cash used in operating  activities  during fiscal 1998,  1997 and
1996 was $15,616,000,  $5,978,000 and $15,344,000,  respectively.  The principal
use of cash in fiscal 1998 related to an increase in  inventory  of  $12,850,000
and an increase in accounts receivable of $7,263,000.  The increase in inventory
was due  principally  to the  addition  of  inventory  in  connection  with  the
Company's recent entrance into the business of  remanufacturing  alternators and
starters for domestic  vehicles.  The  increase in accounts  receivable  was due
primarily to the increased net sales in fiscal


                                      -15-


<PAGE>



1998,  although  the  days  outstanding  of  the  accounts  receivable  remained
relatively  constant over the periods. As of March 31, 1998, the current portion
of capitalized lease obligations was $395,000.

           Net  cash  used  in  investing  activities  during  fiscal  1998  was
$1,367,000  as compared  to net cash  provided by  investing  activities  during
fiscal  1997  of  $6,770,000  and  net  cash  used in  investing  activities  of
$10,770,000  during fiscal 1996. During fiscal 1998, the Company used $1,874,000
of  investments  to fund its  operations  and purchased  $3,241,000 of property,
plant and  equipment  in order to  facilitate  the  continued  expansion  of the
Company's manufacturing capacity.

           Net cash provided by financing  activities  in fiscal 1998,  1997 and
1996 was  $16,431,000,  $2,583,000 and $25,667,000,  respectively.  The net cash
provided by financing  activities in fiscal 1998 primarily was  attributable  to
the net proceeds in the amount of $19,807,000 from the Company's public offering
in November  1997, the proceeds from which were used in part for a net reduction
of borrowing during the year under the Company's revolving line of credit in the
amount of $3,513,000. The Company also received during fiscal 1998 $911,000 from
the exercise of stock options.  The net cash provided by financing activities in
1997 primarily was  attributable to an increase in borrowing over the year under
the  revolving  line of credit and  proceeds  from the  exercise of warrants and
stock options as offset primarily by payments on a capital lease obligation. The
increase in fiscal 1996 was  primarily  attributable  to the net proceeds in the
amount of $19,501,000  from the Company's  public offering in November 1995 and,
to a lesser extent, an increase in borrowing of $5,552,000 during the year under
the  Company's  revolving  line of credit and the exercise of warrants and stock
options.

           The Company has a credit  agreement  expiring in June 1999 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  Bank's  prime rate less .25% or LIBOR  plus  1.25%.  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 March  31,  1998,  the
outstanding balance on the credit facility was approximately $13,983,000.

           The  Company's   accounts   receivable  as  of  March  31,  1998  was
$29,591,000,  representing  an increase  of  $7,263,000  or 32.5% over  accounts
receivable on March 31, 1997.  This increase  compares to the 30.0%  increase in
net sales from fiscal 1997 to fiscal 1998. In addition, the Company occasionally
extends payment terms with certain  customers.  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  $90,000.  The Company's policy generally has been to issue credit
to new  customers  only after the  customers  have been  included to some extent
under the coverage of its accounts receivable  insurance policy. As of March 31,
1998, the Company's  accounts  receivable from its largest customer  represented
approximately 49% of all accounts receivable.


                                      -16-


<PAGE>



           The  Company's  inventory  as of  March  31,  1998  was  $54,736,000,
representing  an increase of $12,874,000 or 30.7% over inventory as of March 31,
1997.  This  increase,  as discussed  above,  primarily  reflects the  Company's
anticipated  growth in net sales in connection with domestic  vehicles and, to a
lesser extent,  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.

           The  Company   currently   expects  that  its  capital   expenditures
(exclusive of any potential  acquisitions)  will be approximately  $3,500,000 in
fiscal 1999.  However,  the Company's capital  expenditures will be affected by,
and may be greater  than  currently  anticipated  depending  upon,  the size and
nature of new business opportunities.

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.


                                      -17-


<PAGE>




I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

           The   information   required  by  this  item  is  set  forth  in  the
Consolidated Financial Statements, commencing on page F-1 included herein.


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

           Not applicable.










                                      -18-


<PAGE>




                                    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.








                                      -19-


<PAGE>





                                     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 of the      Incorporated by reference
            Company.                                 to 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
            Incorporation of the Company.            to 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              Incorporated by reference
            Incorporation of the Company.            to Exhibit 3.3 to the
                                                     Company's Annual Report
                                                     on Form 10-K for the fiscal
                                                     year ended March 31, 1997
                                                     (the "1997 Form 10-K").
                                                     

3.4         Amendment to Certificate of              Filed herewith.
            Incorporation of the Company.

3.5         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 
            Company's Common Stock.                  to Exhibit 4.1 to the 1994
                                                     Registration Statement.   
                                                     

4.2         Form of Underwriter's Common Stock       Incorporated by reference 
            Purchase Warrant.                        to Exhibit 4.2 to the 1994
                                                     Registration Statement.   
                                                     



                                      -20-


<PAGE>


Number                 Description of Exhibit             Method of Filing
- ------                 ----------------------             ----------------

4.3         1994 Stock Option Plan.                  Incorporated by reference 
                                                     to Exhibit 4.3 to the 1994
                                                     Registration Statement.

4.4         Form of Incentive Stock Option           Incorporated by reference
            Agreement.                               to Exhibit 4.4 to the 1994
                                                     Registration Statement.

4.5         1994  Non-Employee Director Stock        Incorporated  by reference
            Option Plan.                             to Exhibit 4.5 to the  
                                                     Company's Annual Report on 
                                                     Form 10-KSB for the fiscal
                                                     year ended March 31, 1995.

4.6         1996 Stock Option Plan.                  Incorporated  by reference
                                                     to Exhibit 4.6 to the 
                                                     Company's Registration
                                                     Statement on Form  S-2 (No.
                                                     333-37977) declared 
                                                     effective on November 18,
                                                     1997 (the "1997 
                                                     Registration Statement").

4.7         Executive and Key Employee               Incorporated by reference
            Incentive Bonus Plan.                    to Exhibit 4.6 to the 1995 
                                                     Registration Statement.  

4.8         Rights Agreement, dated as               Filed herewith.
            of February 24, 1998, by 
            and between the Company and 
            Continental Stock Transfer & 
            Trust Company, as rights agent. 

  
10.1        Credit  Agreement, dated as of           Incorporated by reference
            June 1, 1996, by and between the         to Exhibit 10.4  to  the
            Company and Wells Fargo Bank, N.A.       Company's Quarterly Report
                                                     on Form 10-Q for the
                                                     quarter ended December 31,
                                                     1996 (the "December 31,
                                                     1996 Form 10-Q").

10.2        First Amendment to Credit Agreement,     Incorporated by reference
            dated as of November 1, 1996, by and     to Exhibit 10.2 to the 1997
            between the Company and Wells Fargo      Form 10-K.
            Bank, N.A.  
 

                                      -21-


<PAGE>


Number                 Description of Exhibit             Method of Filing
- ------                 ----------------------             ----------------

10.3        Second Amendment to Credit Agreement,    Incorporated  by reference
            dated as of August 8, 1997, by and       to Exhibit 10.3 to the 1997
            between the Company and Wells Fargo      Registration Statement.
            Bank, N.A.     

10.4        Third Amendment to Credit Agreement,     Filed herewith.
            dated as of February 10, 1998,  
            by and between the Company and Wells 
            Fargo Bank, N.A.

10.5        Lease Agreement, dated March 9, 1993,    Incorporated by reference  
            by and between the Company and Maricopa  to Exhibit 10.3 to the 1994
            Enterprises, Ltd., relating to the       Registration Statement.    
            Company's initial facility located in    
            Torrance, California.

10.6        Second Amendment to Lease, dated         Incorporated by reference
            October 1, 1996, by and between the      to Exhibit 10.5 to the 1997
            Company and Maricopa  Enterprises, Ltd., Form 10-K.
            relating to the Company's initial 
            facility located in Torrance, 
            California.  
 
10.7        Amendment to Lease, dated October 3,     Incorporated by reference
            1996, by and between the Company and     to Exhibit 10.17 to the 
            Golkar Enterprises, Ltd. relating        December 31, 1996 
            to additional property in Torrance,      Form 10-Q.
            California. 

10.8        Amended and Restated Employment          Incorporated by reference  
            Agreement, dated as of September 1,      to Exhibit 10.7 to the 1995
            1995, by and between the Company and     Registration Statement.    
            Mel Marks.                               

10.9        First Amendment to Amended and           Incorporated by reference  
            Restated Employment Agreement,           to Exhibit 10.8 to the 1997
            dated as of April 1, 1997,               Form 10-K.                 
            by and between the Company and           
            Mel Marks.  

10.10       Amended and Restated Employment          Incorporated by reference  
            Agreement, dated as of September 1,      to Exhibit 10.8 to the 1995
            1995, by and between the Company and     Registration Statement.    
            Richard Marks.                           

                                                     
                                      -22-


<PAGE>


Number                 Description of Exhibit             Method of Filing
- ------                 ----------------------             ----------------

10.11       First Amendment to Amended and           Incorporated by reference
            Restated Employment Agreement, dated     to Exhibit 10.10 to the  
            as of April 1, 1997, by and between      1997 Form 10-K.          
            the Company and Richard Marks.           

10.12       Employment Agreement, dated as of        Incorporated by reference  
            February 1, 1994, by and between         to Exhibit 10.7 to the 1994
            the Company and Steven Kratz.            Registration Statement.    

10.13       First Amendment to Employment            Exhibit 10.12 to the 1995
            Agreement, dated as of September 1,      Registration  Statement. 
            1995, by and between the Company         
            and Steven Kratz. 

10.14       Second Amendment to Employment           Incorporated  by reference
            Agreement,  dated as of April 1,         to Exhibit 10.13 to the 
            1997, by and between the Company and     1997 Form 10-K.
            Steven Kratz.  

10.15       Employment Agreement, dated as of        Incorporated by reference
            March 1, 1994, by and between the        to Exhibit 10.12 to the
            Company and Peter Bromberg.              1994 Registration 
                                                     Statement.

10.16       First Amendment to Employment            Incorporated by reference
            Agreement, dated as of September 1,      to Exhibit 10.12 to the 
            1995, by and between the Company         1995 Registration 
            and Peter Bromberg.                      Statement.

10.17       Second Amendment to Employment           Incorporated by reference
            Agreement, dated as of April 1,          to Exhibit 10.16 to the
            1997, by and between the Company         1997 Form 10-K.
            and Peter Bromberg. 

10.18       Employment Agreement, dated as of        Incorporated by reference
            September 1, 1995, by and between        to Exhibit 10.13 to the
            the Company and Eli Markowitz.           1995 Registration 
                                                     Statement.

10.19       Employment Agreement, dated as of        Incorporated by reference
            April 1, 1997, by and among MVR,         to Exhibit 10.18 to the
            Unijoh and Vincent Quek.                 1997 Form 10-K. 

10.20       Form of Consulting Agreement, dated      Incorporated by reference
            as of September 1, 1995, by and          to Exhibit 10.14
            between the Company and Selwyn Joffe.    to the 1995 Registration 
                                                     Statement.

                                      -23-


<PAGE>


Number                 Description of Exhibit             Method of Filing
- ------                 ----------------------             ----------------

10.21       Form of  Employment  Agreement,          Incorporated by reference
            dated as of October 1, 1997, by and      to Exhibit 10.20 to the 
            between the Company and Karen  Brenner.  1997 Registration
                                                     Statement. 

10.22       Lease Agreement, dated March 28,         Incorporated by reference
            1995, by and between the Company         to Exhibit 10.11 to the
            and Equitable Life Assurance             Company's Annual Report on
            Society of the United States,            Form 10-KSB for the fiscal
            relating to the Company's facility       year ended March 31, 1995.
            located in Nashville, Tennessee. 

10.23       Lease Agreement, dated September 19,     Incorporated by reference
            1995, by and between Golkar              to Exhibit 10.18 to the 
            Enterprises, Ltd. and the Company        1995 Registration 
            relating to the Company's facility       Statement.
            located in Nashville, Tennessee. 

10.24       Agreement and Plan of Reorganization,    Incorporated by reference
            dated as of April 1, 1997, by and        to Exhibit 10.22 to the
            among the Company, Mel Marks,            1997 Form 10-K.
            Richard  Marks and Vincent Quek 
            relating to the acquisition of MVR 
            and Unijoh.
  
10.25       Form of Indemnification Agreement        Incorporated by reference
            for officers and directors.              to Exhibit 10.25 to the 
                                                     1997 Registration 
                                                     Statement.  

21.1        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, 1998.


                                      -24-


<PAGE>




                                   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 29, 1998

                                              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 and             June 29, 1998
- -------------------------    Chief Executive Officer              
  Mel Marks                  (principal executive officer)        
                                                                  
/s/ Richard Marks            President, Chief Operating            June 29, 1998
- -------------------------    Officer and Director
  Richard Marks

/s/ Peter Bromberg           Chief Financial Officer               June 29, 1998
- -------------------------    (principal financial officer and     
  Peter Bromberg             principal accounting officer)

/s/  Karen Brenner           Director                              June 29, 1998
- -------------------------
  Karen Brenner                                                   

                             Director                              June 29, 1998
- -------------------------
  Selwyn Joffe                                                    

/s/ Mel Moskowitz            Director                              June 29, 1998
- -------------------------
  Mel Moskowitz                                                   


/s/ Murray Rosenzweig        Director                              June 29, 1998
- -------------------------
  Murray Rosenzweig                                               


/s/ Gary Simon               Director                              June 29, 1998
- -------------------------
  Gary Simon       

                                                             


<PAGE>



MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

CONTENTS

                                                                            PAGE

CONSOLIDATED FINANCIAL STATEMENTS

    Independent auditors' report                                             F-2

    Consolidated balance sheets as of March 31, 1998 and March 31, 1997      F-3

    Consolidated statements of income for the years ended March 31, 1998, 
      1997 and 1996                                                          F-4

    Consolidated statements of changes in shareholders' equity for the
      years ended March 31, 1998, 1997 and 1996                              F-5

    Consolidated statements of cash flows for the years ended March 31,
      1998, 1997 and 1996                                                    F-6

    Notes to consolidated financial statements                               F-7




                                       F-1


<PAGE>




INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Motorcar Parts & Accessories, Inc.
Torrance, California


We have audited the accompanying consolidated balance sheets of Motorcar Parts &
Accessories, Inc. and subsidiaries as of March 31, 1998 and 1997 and the related
consolidated  statements  of income,  changes in  shareholders'  equity and cash
flows for each of the years in the three-year period ended March 31, 1998. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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 consolidated  financial statements  enumerated above present
fairly,  in all material  respects,  the financial  position of Motorcar Parts &
Accessories, Inc. and subsidiaries as of March 31, 1998 and 1997 and the results
of its  operations  and its cash  flows for each of the years in the  three-year
period ended March 31, 1998, in conformity  with generally  accepted  accounting
principles.



/s/ Richard A. Eisner & Company, LLP

Richard A. Eisner & Company, LLP

New York, New York
May 19, 1998





                                       F-2


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(dollars in thousands)


<TABLE>
<CAPTION>
                                                                        MARCH 31,
                                                                  --------------------
                                                                    1998        1997
                                                                  --------    --------
<S>                                                               <C>         <C>     
ASSETS
Current assets:
    Cash and cash equivalents                                     $  3,108    $  3,539
    Accounts receivable - net of allowance for doubtful
        accounts of $250 and $200, respectively                     29,591      22,328
    Inventory                                                       54,736      41,862
    Prepaid expenses and other current assets                        1,862         593
    Deferred income tax asset                                         --           142
                                                                  --------    --------

             Total current assets                                   89,297      68,464

Long-term investments                                                 --         1,874
Plant and equipment - net                                            7,141       4,291
Other assets                                                         1,807         881
                                                                  --------    --------
                                                                  $ 98,245    $ 75,510
                                                                  ========    ========
LIABILITIES
Current liabilities:
    Current portion of capital lease obligations                  $    395    $    743
    Accounts payable and accrued expenses                           11,816      13,777
    Income taxes payable                                             1,592       2,005
    Deferred income tax liability                                      161        --
    Due to affiliate                                                  --           139
                                                                  --------    --------

             Total current liabilities                              13,964      16,664

Long-term debt                                                      13,983      17,496
Capitalized lease obligations - less current portion                   602         343
Other liabilities                                                    1,163         570
Deferred income tax liability                                          406         329
                                                                  --------    --------

                                                                    30,118      35,402
                                                                  --------    --------
Commitments and other matters

SHAREHOLDERS' EQUITY
Preferred stock; par value $.01 per share, 5,000,000
    shares authorized; none issued
Series A Junior participating  preferred stock; par
    value $.01 per share, 20,000 shares authorized; none issued
Common stock; par value $.01 per share, 20,000,000 shares
    authorized; 6,428,000 and 4,868,000 shares issued
    and outstanding                                                     64          49
Additional paid-in capital                                          50,927      28,973
Unearned portion of compensatory stock options                         (48)       --
Accumulated foreign currency translation adjustment                    (57)       --
Retained earnings                                                   17,241      11,086
                                                                  --------    --------

Total shareholders' equity                                          68,127      40,108
                                                                  --------    --------

                                                                  $ 98,245    $ 75,510
                                                                  ========    ========
</TABLE>



See notes to financial statements

                                       F-3


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)



<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                                             ------------------------------
                                                               1998       1997       1996
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>     
Income:
    Net sales                                                $112,952   $ 86,872   $ 64,358
                                                             --------   --------   --------
Operating expenses:
    Cost of goods sold                                         91,317     69,255     50,965
    Research and development                                      549        185       --
    Selling expenses                                            2,417      2,305      1,984
    General and administrative expenses                         6,298      4,974      4,577
                                                             --------   --------   --------

        Total operating expenses                              100,581     76,719     57,526
                                                             --------   --------   --------

Operating income                                               12,371     10,153      6,832
Interest expense (net of interest income of $101, $218 and
    $219 for 1998, 1997 and 1996, respectively)                 1,577      1,090        833
                                                             --------   --------   --------

Income before income taxes                                     10,794      9,063      5,999
Provision for income taxes                                      4,192      3,529      2,353
                                                             --------   --------   --------

NET INCOME                                                   $  6,602   $  5,534   $  3,646
                                                             ========   ========   ========

BASIC INCOME PER SHARE                                       $   1.20   $   1.14   $    .96
                                                             ========   ========   ========

DILUTED INCOME PER SHARE                                     $   1.16   $   1.11   $    .93
                                                             ========   ========   ========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC
    INCOME PER SHARE                                            5,521      4,859      3,812
Effect of potential common shares                                 172        148        127
                                                             --------   --------   --------

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED            5,693      5,007      3,939
    INCOME PER SHARE                                         ========   ========   ========
</TABLE>



See notes to financial statements

                                       F-4


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)


<TABLE>
<CAPTION>
                                                                                      UNEARNED     ACCUMULATED
                                                     COMMON STOCK                    PORTION OF     FOREIGN
                                                 -------------------   ADDITIONAL  COMPENSATORY     CURRENCY
                                                 NUMBER OF              PAID-IN        STOCK      TRANSLATION    RETAINED
                                                  SHARES      AMOUNT    CAPITAL       OPTIONS      ADJUSTMENT    EARNINGS    TOTAL
                                                 --------   --------    --------      --------     --------     --------   --------
<S>                                                 <C>     <C>         <C>                                     <C>        <C>     
BALANCE - MARCH 31, 1995                            3,208   $     32    $  8,078          --           --       $  1,906   $ 10,016
Proceeds from exercise of warrants and options        112          1         867          --           --           --          868
Proceeds from public offering (net of costs of                                                                 
   $ 1,874)                                         1,500         15      19,486          --           --           --       19,501
Net income                                           --         --          --            --           --          3,646      3,646
                                                 --------   --------    --------                                --------   --------
                                                                                                               
BALANCE - MARCH 31, 1996                            4,820         48      28,431          --           --          5,552     34,031
Proceeds from exercise of options                      48          1         355          --           --           --          356
Tax benefit from exercise of options                 --         --           187          --           --           --          187
Net income                                           --         --          --            --           --          5,534      5,534
                                                 --------   --------    --------                                --------   --------
                                                                                                               
BALANCE - MARCH 31, 1997                            4,868         49      28,973          --           --         11,086     40,108
Issuance of shares for MVR and Unijoh                 145          1         679          --           --           (447)       233
Proceeds from public offering (net of costs of                                                                 
   $ 1,806)                                         1,300         13      19,794          --           --           --       19,807
Proceeds from exercise of warrants and options        115          1         910          --           --           --          911
Tax benefit from exercise of stock options           --         --           381          --           --           --          381
Compensatory stock options issued                    --         --           190      $    (48)        --           --          142
Translation adjustment                               --         --          --            --       $    (57)        --          (57)
Net income                                           --         --          --            --           --          6,602      6,602
                                                 --------   --------    --------      --------     --------     --------   --------
                                                                                                               
BALANCE - MARCH 31, 1998                            6,428   $     64    $ 50,927      $    (48)    $    (57)    $ 17,241   $ 68,127
                                                 ========   ========    ========      ========     ========     ========   ========
</TABLE>
                                                               


See notes to financial statements

                                       F-5


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


<TABLE>
<CAPTION>
                                                                                    YEAR ENDED MARCH 31,
                                                                             --------------------------------
                                                                               1998        1997        1996
                                                                             --------    --------    --------
<S>                                                                          <C>         <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                               $  6,602    $  5,534    $  3,646
    Adjustments to reconcile net income to net cash used in operating
        activities:
    Depreciation and amortization                                               1,237         717         429
    Noncash charge for compensatory stock options issued                          142        --          --
    Changes in:
        Accounts receivable                                                    (7,263)     (5,064)     (6,589)
        Inventory                                                             (12,850)    (13,311)    (16,434)
        Prepaid expenses and other current assets                              (1,195)         44        (300)
        Other assets                                                             (926)       (732)        (50)
        Deferred income taxes                                                     380         314         (82)
        Accounts payable and accrued expenses                                  (2,295)      5,134       3,094
        Income taxes payable                                                      (32)        861         785
        Due to affiliate                                                            7         (45)        157
        Other liabilities                                                         577         570        --
                                                                             --------    --------    --------
             Net cash used in operating activities                            (15,616)     (5,978)    (15,344)
                                                                             --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property, plant and equipment                                  (3,241)     (2,085)       (657)
    Change in investments                                                       1,874       8,855     (10,113)
                                                                             --------    --------    --------
             Net cash (used in) provided by investing activities               (1,367)      6,770     (10,770)
                                                                             --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in borrowings under line of credit                 (3,513)      2,955       5,552
    Payments on capital lease obligation                                         (774)       (728)       (254)
    Proceeds from public offerings                                             19,807        --        19,501
    Proceeds from exercise of warrants and options                                911         356         868
                                                                             --------    --------    --------
             Net cash provided by financing activities                         16,431       2,583      25,667
                                                                             --------    --------    --------
Effect of exchange rate change on cash                                             (3)       --          --
                                                                             --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                             (555)      3,375        (447)
Cash and cash equivalents - beginning of year                                   3,539         164         611
Beginning cash balance of pooled entity                                           124        --          --
                                                                             --------    --------    --------
CASH AND CASH EQUIVALENTS - END OF YEAR                                      $  3,108    $  3,539    $    164
                                                                             ========    ========    ========

SUPPLEMENTAL  DISCLOSURES  OF CASH FLOW  INFORMATION:
    Cash paid during the year for:
        Interest                                                             $  1,717    $  1,262    $  1,035
        Income taxes                                                            3,844       2,354       1,590
    Noncash investing and financing activities:
        Property acquired under capital lease                                     685         454         707
        Property acquired included in accounts payable and accrued expense
             at March 31, 1996 and financed through a capitalizable lease
             during fiscal 1997                                                  --           212         212
</TABLE>




See notes to financial statements

                                       F-6


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES


NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997





NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

Motorcar  Parts  &  Accessories,   Inc.  and   subsidiaries   (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]        PRINCIPLES OF CONSOLIDATION:

           The  accompanying   consolidated  financial  statements  include  the
           accounts of the Company and its wholly owned subsidiaries as of March
           31, 1998 and for the year then ended.  All  significant  intercompany
           accounts and transactions have been eliminated in consolidation.  The
           Company had no subsidiaries at March 31, 1997.

[2]        CASH EQUIVALENTS:

           The  Company  considers  all  highly  liquid  short-term  investments
           purchased  with a  maturity  of  three  months  or  less  to be  cash
           equivalents.

[3]        INVESTMENTS:

           The   Company's    marketable    securities    are    classified   as
           available-for-sale  and reported at fair value.  Unrealized  gains or
           losses  are  classified  as a  separate  component  of  shareholders'
           equity.

[4]        INVENTORY:

           Inventory  is  stated  at the  lower  of  cost  or  market;  cost  is
           determined by the average cost method.

[5]        INCOME TAXES:

           The Company accounts for income taxes in accordance with Statement of
           Financial  Accounting  Standards  ("SFAS") No. 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.

[6]        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 lives or the term of the lease.

                                      F-7


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[7]        FOREIGN CURRENCY TRANSLATION:

           Results of the Company's  foreign  operations  are  translated  using
           average  exchange  rates during the period,  while the related assets
           and  liabilities are translated at the exchange rate in effect at the
           balance sheet date. Gains or losses from translating foreign currency
           financial  statements  are  accumulated  in a separate  component  of
           stockholders' equity.

[8]        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").  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 year
           ended March 31, 1996 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.  Accordingly,  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.

[9]        EARNINGS PER SHARE:

           The Company  calculates  its income per share under the provisions of
           SFAS No.  128,  "Earnings  Per Share".  SFAS No. 128  requires a dual
           presentation of "basic" and "diluted" income per share on the face of
           the statements of  operations.  Basic income per share is computed by
           dividing the net income by the weighted  average  number of shares of
           common stock outstanding during each period. Diluted income per share
           includes  the  effect,  if  any,  from  the  potential   exercise  or
           conversion of securities,  such as stock options and warrants,  which
           would result in the issuance of incremental shares of common stock.


                                       F-8


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[10]       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.

[11]       IMPAIRMENT OF LONG-LIVED ASSETS:

           The Company  adopted SFAS No. 121,  "Accounting for the Impairment of
           Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during
           the year  ended  March  31,  1997.  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.

[12]       FINANCIAL INSTRUMENTS:

           The  carrying  amounts  of cash  and cash  equivalents,  investments,
           accounts  receivable,   accounts  payable,  accrued  expenses,  other
           liabilities,   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.

[13]       STOCK-BASED COMPENSATION:

           The Financial Accounting Standards Board (the "FASB") has issued SFAS
           No. 123, "Accounting for Stock-Based Compensation", which encourages,
           but does not  require,  companies  to  record  compensation  cost for
           stock-based  employee  compensation  under a fair value based method.
           The Company  has  elected to continue to account for its  stock-based
           employee  compensation 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
           such compensation 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.


                                       F-9


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[14]       RECENT ACCOUNTING PRONOUNCEMENTS:

           In June 1997, the FASB issued SFAS No. 130, "Reporting  Comprehensive
           Income."  SFAS No. 130  establishes  standards  for the reporting and
           display of  comprehensive  income and its components in a full set of
           general purpose financial statements. Comprehensive income is defined
           as the  change in equity of a  business  enterprise  during a period,
           resulting from transactions and other events and  circumstances  from
           nonowner  sources.  The Company is  reviewing  the impact of adopting
           SFAS No. 130,  which will be  effective  for the Company for the year
           ending March 31, 1999.

           In June  1997,  the FASB  issued  SFAS  No.  131,  "Disclosure  about
           Segments  of an  Enterprise  and Related  Information."  SFAS No. 131
           requires  publicly-held  companies  to  report  financial  and  other
           information  about key  revenue-producing  segments of the entity for
           which such  information  is  available  and is  utilized by the chief
           operating  decision  maker.  Specific  information to be reported for
           individual  segments  includes  profit or loss,  certain  revenue and
           expense items and total assets. A reconciliation of segment financial
           information to amounts reported in the financial  statements would be
           provided.  SFAS No. 131 is  effective  for the  Company  for the year
           ending March 31, 1999. The Company currently evaluates its operations
           as one segment.

           In April 1998, the American Institute of Certified Public Accountants
           issued  Statement of Position  98-5 ("SOP  98-5"),  "Reporting on the
           Costs of  Start-Up  Activities,"  which  requires  costs of  start-up
           activities  and  organization  costs to be expensed as incurred.  The
           Company  believes  that SOP 98-5 would not have a material  effect on
           its  financial  statements  as of March 31,  1998.  SOP 98-5  becomes
           effective for the Company during the year ending March 31, 2000.




                                      F-10


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE B - INVESTMENTS

The estimated fair value of available-for-sale investments at March 31, 1997 was
$1,874,000 and consisted of  mortgage-backed  securities and municipal bonds due
after one year.

The  estimated  fair value of each  investment  was  approximately  equal to the
amortized cost at March 31, 1997 and, therefore,  there were no unrealized gains
or losses at that date.  The Company did not hold any  investments  at March 31,
1998.


NOTE C - INVENTORY

Inventory is comprised of the following (in thousands):


                                                              MARCH 31,
                                                     ---------------------------
                                                       1998                1997
                                                     -------             -------

Raw material                                         $28,609             $24,046
Work-in-process                                        7,066               4,270
Finished goods                                        19,061              13,546
                                                     -------             -------

                                                     $54,736             $41,862
                                                     =======             =======

NOTE D - PLANT AND EQUIPMENT

Plant and equipment, at cost, are summarized as follows (in thousands):


                                                               MARCH 31,
                                                       ------------------------
                                                         1998            1997
                                                       --------        --------

Machinery and equipment                                $  7,346        $  4,362
Office equipment and fixtures                             2,031           1,272
Leasehold improvements                                    1,211             472
                                                       --------        --------
                                                         10,588           6,106

Less accumulated depreciation and
    amortization                                         (3,447)         (1,815)
                                                       --------        --------

                                                       $  7,141        $  4,291
                                                       ========        ========



                                      F-11


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES


NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE E - OBLIGATIONS UNDER CAPITAL LEASES

The Company has various capital leases for machinery and computer equipment. The
gross amount of such assets  recorded  under capital  leases was  $2,240,000 and
$2,338,000 at March 31, 1998 and 1997, respectively.

Future minimum lease payments at March 31, 1998 for the  capitalized  leases are
as follows (in thousands):


           1999                                                $     478
           2000                                                      233
           2001                                                      172
           2002                                                      172
           2003                                                      135
                                                               ---------
                                                                   1,190
           Amount representing imputed interest                      193
                                                               ---------
           
           Present value of future minimum lease payments            997
           Less current maturities                                   395
           
                                                               ---------
           Long-term obligation at March 31, 1998              $     602
                                                               =========


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, 1998 balances due under this
agreement amounted to $13,983,000.

In August  1997,  the  Company  further  amended  its  revolving  line of credit
agreement.  The  agreement  provides  for a  credit  facility  in  an  aggregate
principal amount not exceeding  $30,000,000 until December 31, 1997, reducing to
$25,000,000 on January 1, 1998, and is collateralized by a lien on substantially
all of the  assets of the  Company.  The  agreement  expires on June 1, 1999 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 1.25%  above  LIBOR,  as further
amended in February 1998. The agreement also amends the  requirements of certain
financial ratios.


                                      F-12


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES


NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE G - RELATED PARTIES

In April 1997, MVR Products Co. PTE, Ltd. ("MVR") and Unijoh Sdn, Bhd ("Unijoh")
became  wholly owned  subsidiaries  of the Company in a  stock-for-stock  merger
which has been  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
its 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 $399,000,
respectively, at the date of combination.

Prior to the merger,  the Company conducted  business with MVR, which operates a
shipping  warehouse and which conducts  business with 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 owned 70% of both MVR and Unijoh,
with the  remaining  30% owned by an  unrelated  third  party.  All of the cores
processed by Unijoh were produced for the Company on a contract  remanufacturing
basis.  The cores and other raw  materials  used in  production  by Unijoh  were
supplied by the Company and were included in the Company's inventory.  Inventory
owned by the Company and held by MVR and Unijoh was  $762,000 at March 31, 1997.
The Company incurred costs of  approximately  $1,574,000 and $1,432,000 from the
affiliates for the years ended March 31, 1997 and 1996, respectively. The amount
reported as due to affiliate at March 31, 1997 was due to MVR.


NOTE H - EMPLOYMENT AGREEMENTS AND BONUS PLAN

The Company has employment  agreements with eight officers,  expiring at various
dates  through  September  1,  2000,  which  provide  for annual  base  salaries
aggregating  $1,473,000.  In addition,  six of the officers were granted options
pursuant to the Company's  stock option plans for the purchase of 270,000 shares
of common stock (88,000,  92,000 and 90,000  granted in fiscal years 1998,  1997
and 1996,  respectively).  Of these  options,  49,000,  25,000 and  10,000  were
exercised during the years ended March 31, 1998, 1997 and 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 14% to 50%. The bonus  percentage  varies  according to the
percentage  increase in earnings  before  income  taxes and other  predetermined
parameters.



                                      F-13


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES


NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



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  $1,175,000,
$819,000  and  $609,000  for the  years  ended  March 31,  1997,  1996 and 1995,
respectively.  Certain leases contain  escalation  clauses for real estate taxes
and operating expenses.

Effective  December 31, 1996, the Company amended a lease to acquire  additional
space at one of its existing warehouse facilities.

The Company also leases  office  equipment and  machinery  under  noncancellable
operating leases having remaining terms in excess of one year.

At March 31, 1998, the future minimum rental  payments under the above operating
leases are as follows (in thousands):


                                   REAL
                TOTAL             ESTATE           MACHINERY
             ------------    ---------------    ---------------

1999            $1,464            $1,339            $  125
2000             1,393             1,321                72
2001             1,381             1,352                29
2002             1,364             1,348                16
2003                 5              --                   5
                ------            ------            ------

                $5,607            $5,360            $  247
                ======            ======            ======

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                               1998           1997           1996
      --------                               ----           ----           ----
         A                                     17%            18%            21%
         B                                     15             18             11
         C                                     43             29             20
         D                                      5              8             18


                                      F-14


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997




NOTE J - MAJOR CUSTOMERS AND CREDIT CONCENTRATION (CONTINUED)

Customer A accounted  for  approximately  17% and 13%,  customer B accounted for
approximately 18% and 11% and customer C accounted for approximately 49% and 57%
of the accounts receivable at March 31, 1998 and 1997, respectively.


NOTE K - INCOME TAXES

The provision for income taxes consists of the following (in thousands):


                                                 YEAR ENDED MARCH 31,
                                        ---------------------------------------
                                          1998            1997            1996
                                        -------         -------         -------
Current:
     Federal                            $ 3,100         $ 2,750         $ 1,913
     State                                  712             465             522
     Deferred                               380             314             (82)
                                        -------         -------         -------

                                        $ 4,192         $ 3,529         $ 2,353
                                        =======         =======         =======

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 (in thousands):


                                                    YEAR ENDED MARCH 31,
                                             ----------------------------------
                                               1998         1997          1996
                                             -------      -------       -------
Income tax provision at 34%                  $ 3,628      $ 3,081       $ 2,040
State and local taxes, net of
     federal benefit                             469          307           345
Permanent differences                             23          (20)           18
Other                                             72          161           (50)
                                             -------      -------       -------

                                             $ 4,192      $ 3,529       $ 2,353
                                             =======      =======       =======

The  deferred  income tax asset of $142,000 at March 31,  1997 is  comprised  of
temporary  differences in tax and financial  reporting  resulting primarily from
capitalization  of  certain  inventory  costs  for tax  purposes.  Deferred  tax
liabilities  of $567,000 and $329,000 at March 31, 1998 and 1997,  respectively,
are comprised of differences resulting from using accelerated depreciation rates
for tax  purposes and from  certain  expenses  for tax purposes  which have been
capitalized in the Company's financial statements.



                                      F-15


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997



NOTE L - SHAREHOLDERS' EQUITY

[1]        COMMON STOCK:

           In  November  1995,  the  Company  effected a public  offering of its
           common  stock.  The Company  issued  1,500,000  shares for $14.25 per
           share,  yielding  net  proceeds  of  $19,501,000  after  underwriting
           commissions  and expenses  totalling  $1,874,000.  In  addition,  two
           principal  shareholders  sold  an  aggregate  of  344,500  shares  in
           connection with this offering.

           In  November  1997,  the  Company  effected a public  offering of its
           common stock.  The Company  issued  1,300,000  shares for $16.625 per
           share,  yielding  net  proceeds  of  $19,807,000  after  underwriting
           commissions  and expenses  totalling  $1,806,000.  In  addition,  two
           principal  stockholders  sold  an  aggregate  of  250,000  shares  in
           connection with this offering.

[2]        PREFERRED STOCK:

           In a Rights  Agreement,  dated as of February 24,  1998,  between the
           Company and Continental  Stock Transfer & Trust Company,  the Company
           authorized 20,000 shares of Series A Junior  Participating  Preferred
           Stock,  par value $.01 per share.  The Series A Junior  Participating
           Preferred  Stock has  preferential  voting,  dividend and liquidation
           rights over the Common Stock.

           On February 24, 1998, the Company declared a dividend distribution to
           the  holders of record at the close of  business on March 12, 1998 of
           one  Right  on  each  share  of  Common  Stock.   Each  Right,   when
           exercisable,  entitles the registered holder thereof to purchase from
           the  Company  one  one-thousandth  of a  share  of  Series  A  Junior
           Participating   Preferred   Stock   at  a   price   of  $65  per  one
           one-thousandth of a share (subject to adjustment).

           The Rights will not be  exercisable  or  transferable  apart from the
           Common  Stock  until an  Acquiring  Person,  as defined in the Rights
           Agreement,  without  the  prior  consent  of the  Company's  Board of
           Directors,  acquires  20% or more of the  outstanding  shares  of the
           Common  Stock or  announces a tender  offer that would  result in 20%
           ownership. The Company is entitled to redeem the Rights, at $.001 per
           Right,  any  time  until  ten  days  after a 20%  position  has  been
           acquired.  Under certain circumstances,  including the acquisition of
           20%  of the  Common  Stock,  each  Right  not  owned  by a  potential
           Acquiring  Person will entitle its holder to receive,  upon exercise,
           shares of Common  Stock  having a value  equal to twice the  exercise
           price of the Right.

           Holders  of a Right  will be  entitled  to buy stock of an  Acquiring
           Person at a similar discount if, after the acquisition of 20% or more
           of the Company's  outstanding  shares of Common Stock, the Company is
           involved in a merger or other business  combination  transaction with
           another person in which it is not the surviving  company,  its common
           shares are changed or converted,  or the Company sells 50% or more of
           its assets or earning power to another  person.  The Rights expire on
           March 12, 2008 unless earlier redeemed by the Company.

                                      F-16


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997





NOTE L - SHAREHOLDERS' EQUITY (CONTINUED)

[3]        STOCK OPTION PLAN:

           In January 1994, the shareholders approved the 1994 Stock Option Plan
           (the "1994 Plan"),  which was amended in October 1996, to provide for
           the granting of options to purchase a total of 720,000  common shares
           to key  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 1994  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 1995,  the  shareholders  approved a  Nonemployee  Director
           Stock  Option Plan (the  "Directors  Plan")  which  provides  for the
           granting  of options to purchase a total of 15,000  common  shares to
           directors.  The  Directors  Plan  is  administered  by the  Board  of
           Directors.

           In September  1997, the  shareholders  approved the 1996 Stock Option
           Plan (the "1996 Plan") which  provides for the granting of options to
           purchase  a  total  of  30,000  common   shares  to  key   employees,
           consultants and directors. The 1996 Plan is administered by the Board
           of Directors.

           The following  table  summarizes  the activity  under these Plans (in
           thousands, except for per share data):


<TABLE>
<CAPTION>
                                                     YEAR ENDED MARCH 31,
                               ---------------------------------------------------------------
                                     1998                   1997                   1996
                               ----------------       -----------------      -----------------
                                        WEIGHTED               WEIGHTED               WEIGHTED
                                        AVERAGE                AVERAGE                AVERAGE
                                        EXERCISE               EXERCISE               EXERCISE
                               SHARES   PRICE         SHARES   PRICE         SHARES   PRICE
                               ------   --------      ------   --------      ------   --------
<S>                              <C>    <C>             <C>    <C>             <C>    <C>   
Options outstanding at
      beginning of year          489    $10.31          335    $ 9.23          250    $ 7.40
Granted                          117     17.34          382     12.98          109     12.96
Exercised                       (101)     7.99          (48)     7.46          (23)     7.19
Cancelled                        --       --           (180)    14.69           (1)     8.13
                               -----                  -----                  -----        

Options outstanding at           505     12.40          489     10.31          335      9.23
      end of year              =====                  =====                  =====          
                               
Options exercisable at           383     11.95          290      9.34          278      8.83
      end of year              =====                  =====                  =====
</TABLE>



                                      F-17


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997





NOTE L - SHAREHOLDERS' EQUITY (CONTINUED)

[3]        STOCK OPTION PLAN: (CONTINUED)

           The following  table presents  information  relating to stock options
           outstanding at March 31, 1998 (in thousands, except per share data):


                        OPTIONS OUTSTANDING           OPTIONS EXERCISABLE
                  ---------------------------------   -------------------
                           WEIGHTED      WEIGHTED               WEIGHTED
                           AVERAGE       AVERAGE                AVERAGE
   RANGE OF                EXERCISE     REMAINING               EXERCISE
EXERCISE PRICE    SHARES    PRICE     LIFE IN YEARS   SHARES     PRICE
- ---------------   ------   --------   -------------   ------    ---------
                                                               
$ 6.00 - $ 8.13      96     $  7.66         6             96       $  7.66
$ 9.00 - $10.63     174       10.60         8            125         10.59
$11.88 - $13.44      58       12.48         8             37         12.75
$14.69 - $19.13     177       16.72         9            125         16.41
                  -----                               ------   
                                                               
                    505       12.40         8            383         11.95
                  =====                               ======   
                                                             
           As of March 31, 1998,  66,000  options are available for future grant
           under the 1994 Plan,  7,500  options are  available  for future grant
           under the Directors  Plan and 15,000 options are available for future
           grant under the 1996 Plan.

           The weighted-average  fair value at date of grant for options granted
           during the years ended March 31, 1998, 1997 and 1996 was $9.68, $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,
                                        ------------------------------
                                        1998         1997         1996
                                        ----         ----         ----
                                                             
Risk-free interest rates                6.5%      5.8%-6.5%    6.1%-6.9%
Expected option life in years            5            5            5
Expected stock price volatility         55%          36%          38%
Expected dividend yield                  0%           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,  1998,  1997 and 1996
           would have been approximately  $5,952,000,  $5,180,000 and $3,425,000
           or $1.04 per share, $1.03 per share and $.87 per share, respectively.


                                      F-18


<PAGE>


MOTORCAR PARTS & ACCESSORIES, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997





NOTE L - SHAREHOLDERS' EQUITY (CONTINUED)

           The effect of applying  SFAS 123 for providing  proforma  disclosures
           for each of the years in the  three-year  period ended March 31, 1998
           is not likely to be representative of the effect on future years.

[4]        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 per share.  In connection with a public
           offering in November 1995,  90,000  warrants were  exercised.  14,000
           additional  warrants were  exercised  during the year ended March 31,
           1998.


                                      F-19











                         CERTIFICATE OF AMENDMENT OF THE
                          CERTIFICATE OF INCORPORATION

                                       of

                       MOTORCAR PARTS & ACCESSORIES, INC.

                Under Section 805 of the Business Corporation Law
                            of the State of New York


            We the undersigned,  Richard Marks,  President,  and Peter Bromberg,
Assistant  Secretary  of  Motorcar  Parts &  Accessories,  Inc.,  a  corporation
organized  and existing  under the laws of the State of New York,  in accordance
with the provisions of Section 104 of the Business  Corporation Law of the State
of New York, DO HEREBY CERTIFY:

      1.    The name of the  corporation is Motorcar  Parts & Accessories,  Inc.
(hereinafter called the "Corporation"). The name under which the Corporation was
formed was Motorcar Parts Associates, Inc.

      2.    The  Certificate  of  Incorporation  was filed by the  Department of
State of the State of New York on April 2, 1968.

      3.    The  Certificate  of  Incorporation  of  the  Company,   as  amended
heretofore  (the  "Certificate  of  Incorporation"),  is further  amended by the
addition of the following provisions stating the number,  designation,  relative
rights,  preferences  and  limitations  of a series of  Preferred  Shares of the
Company designated as "Series A Junior Participating Preferred Stock."

      4.    To accomplish the foregoing amendment,  a new section (c) of Article

FOURTH  is added to the  Certificate  of  Incorporation,  which  section  (c) of
Article FOURTH reads in its entirety as follows:

            "(c) SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

            (1)   Designation  and Amount.  The shares of such  series  shall be
designated as "Series A Junior Participating  Preferred Stock" and the number of
shares constituting such series shall be 20,000.

            (2)   Dividends and Distributions.

                  (A)   The  holders of shares of Series A Junior  Participating
Preferred  Stock shall be entitled to receive,  when,  as and if declared by the
Board of Directors  out of funds legally  available  for the purpose,  quarterly
dividends payable in cash on the last day of March, June, September and December
in each year (each such date being referred to herein as a



<PAGE>



"Quarterly  Dividend Payment Date"),  commencing on the first Quarterly Dividend
Payment  Date  after the first  issuance  of a share or  fraction  of a share of
Series A Junior  Participating  Preferred Stock, in an amount per share (rounded
to the  nearest  cent)  equal to the  greater of (a) $0.01 or (b) subject to the
provision for adjustment  hereinafter  set forth,  1,000 times the aggregate per
share  amount of all cash  dividends,  and 1,000 times the  aggregate  per share
amount (payable in kind) of all non-cash dividends or other  distributions other
than a dividend  payable in Common  Stock or a  subdivision  of the  outstanding
Common Stock (by  reclassification  or otherwise),  declared on the Common Stock
since the  immediately  preceding  Quarterly  Dividend  Payment  Date,  or, with
respect to the first Quarterly  Dividend  Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior  Participating  Preferred
Stock.  In the event the  Corporation  shall at any time after February 24, 1998
(the "Rights Declaration Date") (i) declare any dividend on Common Stock payable
in Common Stock,  (ii) subdivide the outstanding  Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares,  then in each such
case the  amount to which  holders  of  shares of Series A Junior  Participating
Preferred Stock were entitled  immediately  prior to such event under clause (b)
of the  preceding  sentence  shall be adjusted by  multiplying  such amount by a
fraction  the  numerator  of which is the  number  of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

                  (B)   The Corporation shall declare a dividend or distribution
on the Series A Junior  Participating  Preferred  Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend  payable in Common  Stock);  provided  that, in the
event no dividend or  distribution  shall have been declared on the Common Stock
during the period  between  any  Quarterly  Dividend  Payment  Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series A Junior  Participating  Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.

                  (C)   Dividends  shall  begin to accrue and be  cumulative  on
outstanding  shares of Series A Junior  Participating  Preferred  Stock from the
Quarterly  Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior  Participating  Preferred Stock,  unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such  shares,  or unless the date of issue is a  Quarterly  Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such  dividends  shall begin to accrue and be cumulative  from such
Quarterly  Dividend  Payment Date.  Accrued but unpaid  dividends shall not bear
interest.  Dividends  paid  on the  shares  of  Series  A  Junior  Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time  accrued  and  payable  on such  shares  shall be  allocated  pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of


                                       -2-


<PAGE>



shares of Series A Junior  Participating  Preferred  Stock  entitled  to receive
payment of a dividend or distribution declared thereon,  which record date shall
be no more than 30 days prior to the date fixed for the payment thereof.

            (3)   Voting  Rights.  The  holders  of  shares  of  Series A Junior
Participating Preferred Stock shall have the following voting rights:

                  (A)   Subject to the provision for adjustment  hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder  thereof to 1,000  votes on all  matters  submitted  to a vote of the
shareholders of the Corporation.  In the event the Corporation shall at any time
after the Rights  Declaration  Date (i)  declare any  dividend  on Common  Stock
payable in Common Stock,  (ii) subdivide the outstanding  Common Stock, or (iii)
combine the  outstanding  Common Stock into a smaller number of shares,  then in
each such case the  number  of votes  per  share to which  holders  of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event  shall be  adjusted  by  multiplying  such  number by a fraction  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

                  (B)   Except  as  otherwise  provided  herein  or by law,  the
holders  of  shares  of Series A Junior  Participating  Preferred  Stock and the
holders  of  Common  Stock  shall  vote  together  as one  class on all  matters
submitted to a vote of shareholders of the Corporation.

                  (C)   (i) If at any  time  dividends  on any  Series  A Junior
Participating  Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly  dividends thereon,  the occurrence of such contingency shall mark the
beginning  of a period  (herein  called a "default  period")  which shall extend
until such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly  dividend period on all shares of
Series A Junior  Participating  Preferred Stock then outstanding shall have been
declared and paid or set apart for  payment.  During each  default  period,  all
holders  of  Preferred  Stock   (including   holders  of  the  Series  A  Junior
Participating  Preferred  Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class,  irrespective of series,
shall have the right to elect two (2) directors.

                        (ii)  During any default  period,  such voting  right of
the holders of Series A Junior  Participating  Preferred  Stock may be exercised
initially at a special  meeting called  pursuant to  subparagraph  (iii) of this
Section 3(C) or at any annual meeting of shareholders,  and thereafter at annual
meetings of shareholders, provided that such voting right shall not be exercised
unless the holders of ten percent  (10%) in number of shares of Preferred  Stock
outstanding  shall be present in person or by proxy.  The absence of a quorum of
the  holders of Common  Stock  shall not affect the  exercise  by the holders of
Preferred  Stock of such  voting  right.  At any meeting at which the holders of
Preferred  Stock shall exercise such voting right  initially  during an existing
default period, they shall have the right, voting as a class, to elect


                                       -3-


<PAGE>



directors to fill such vacancies,  if any, in the Board of Directors as may then
exist up to two (2)  directors  or,  if such  right is  exercised  at an  annual
meeting,  to elect two (2)  directors.  If the number which may be so elected at
any special meeting does not amount to the required  number,  the holders of the
Preferred  Stock  shall  have the right to make such  increase  in the number of
directors  as shall be  necessary to permit the election by them of the required
number.  After the holders of the  Preferred  Stock shall have  exercised  their
right to elect  directors in any default  period and during the  continuance  of
such period,  the number of directors shall not be increased or decreased except
by vote of the holders of Preferred  Stock as herein provided or pursuant to the
rights of any equity securities  ranking senior to or pari passu with the Series
A Junior Participating Preferred Stock.

                        (iii) Unless  the  holders  of  Preferred  Stock  shall,
during an existing  default  period,  have  previously  exercised their right to
elect directors, the Board of Directors may order, or, subject to the provisions
of the Certificate of Incorporation, as amended, any stockholder or shareholders
owning in the  aggregate  not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding,  irrespective of series, may request, the
calling of special  meeting of the holders of  Preferred  Stock,  which  meeting
shall thereupon be called by the President, a Vice-President or the Secretary of
the  Corporation.  Notice of such  meeting  and of any  annual  meeting at which
holders of  Preferred  Stock are  entitled to vote  pursuant  to this  Paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing a
copy of such notice to him or her at his or her last address as the same appears
on the books of the  Corporation.  Such  meeting  shall be called for a time not
earlier  than 20 days and not later  than 60 days after such order or request or
in default of the  calling  of such  meeting  within 60 days after such order or
request,  such  meeting may be called on similar  notice by any  shareholder  or
shareholders  owning in the  aggregate  not less than ten  percent  (10%) of the
total  number of shares of  Preferred  Stock  outstanding.  Notwithstanding  the
provisions of this Paragraph  (C)(iii),  no such special meeting shall be called
during the period  within 60 days  immediately  preceding the date fixed for the
next annual meeting of the shareholders.

                        (iv)  In any  default  period,  the  holders  of  Common
Stock,  and other  classes  of stock of the  Corporation  if  applicable,  shall
continue to be entitled to elect the whole number of directors until the holders
of Preferred  Stock shall have exercised  their right to elect two (2) directors
voting as a class,  after the  exercise  of which  right  (x) the  directors  so
elected by the holders of Preferred  Stock shall  continue in office until their
successors  shall have been elected by such holders or until the  expiration  of
the default period, and (y) any vacancy in the Board of Directors may (except as
provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining  directors  theretofore  elected by the holders of the class of
stock  which  elected  the  Director  whose  office  shall have  become  vacant.
References  in  this  Paragraph  (C) to  directors  elected  by the  holders  of
particular class of stock shall include  directors  elected by such directors to
fill vacancies as provided in clause (y) of the foregoing sentence.



                                       -4-


<PAGE>



                        (v)   Immediately  upon  the  expiration  of  a  default
period,  (x) the right of the  holders  of  Preferred  Stock as a class to elect
directors shall cease,  (y) the term of any directors  elected by the holders of
Preferred  Stock as a class  shall  terminate,  and (z) the number of  directors
shall be such number as may be provided for in the Certificate of  Incorporation
or By-laws  irrespective  of any increase  made  pursuant to the  provisions  of
Paragraph  (C)(ii) of this  Section 3 (such number being  subject,  however,  to
change  thereafter  in any  manner  provided  by law  or in the  Certificate  of
Incorporation or By-Laws).  Any vacancies in the Board of Directors  effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled by
a majority of the remaining directors.

                  (D)   Except as set forth  herein,  holders of Series A Junior
Participating  Preferred  Stock  shall have no special  voting  rights and their
consent  shall not be required  (except to the extent they are  entitled to vote
with  holders of Common  Stock as set forth  herein)  for  taking any  corporate
action.

            (4)   Certain Restrictions.

                  (A)   Whenever  quarterly  dividends  or  other  dividends  or
distributions  payable on the Series A Junior  Participating  Preferred Stock as
provided in Section 2 of this Section (c) are in arrears,  thereafter  and until
all accrued and unpaid dividends and distributions,  whether or not declared, on
shares of Series A Junior  Participating  Preferred Stock outstanding shall have
been paid in full, the Corporation shall not

                        (i)   declare  or  pay  dividends  on,  make  any  other
distributions  on, or redeem or purchase or otherwise  acquire for consideration
any shares of stock ranking junior (either as to dividends or upon  liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock;

                        (ii)  declare  or pay  dividends  on or make  any  other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon  liquidation,  dissolution  or  winding  up)  with  the  Series A Junior
Participating  Preferred  Stock,  except  dividends paid ratably on the Series A
Junior  Participating  Preferred  Stock  and all  such  parity  stock  on  which
dividends  are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

                        (iii) redeem  or  purchase  or  otherwise   acquire  for
consideration shares of any stock ranking on a parity (either as to dividends or
upon  liquidation,   dissolution  or  winding  up)  with  the  Series  A  Junior
Participating  Preferred  Stock,  provided that the  Corporation may at any time
redeem,  purchase  or  otherwise  acquire  shares  of any such  parity  stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or



                                       -5-


<PAGE>



                        (iv)  purchase or  otherwise  acquire for  consideration
any shares of Series A Junior  Participating  Preferred  Stock, or any shares of
stock  ranking  on a parity  with the  Series A Junior  Participating  Preferred
Stock,  except  in  accordance  with a  purchase  offer  made in  writing  or by
publication  (as  determined  by the Board of  Directors) to all holders of such
shares upon such terms as the Board of  Directors,  after  consideration  of the
respective  annual  dividend rates and other relative  rights and preferences of
the respective series and classes,  shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

                  (B)   The  Corporation  shall not permit any subsidiary of the
Corporation  to purchase or otherwise  acquire for  consideration  any shares of
stock of the Corporation  unless the Corporation  could,  under Paragraph (A) of
this Section 3,  purchase or  otherwise  acquire such shares at such time and in
such manner.

            (5)   Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever  shall be  retired  and  cancelled  promptly  after  the  acquisition
thereof.  All such shares shall upon their  cancellation  become  authorized but
unissued  shares of Preferred  Stock and may be reissued as part of a new series
of Preferred  Stock to be created by resolution or  resolutions  of the Board of
Directors,  subject to the  conditions  and  restrictions  on issuance set forth
herein.

            (6)   Liquidation, Dissolution or Winding Up.

                  (A)   Upon   any   liquidation   (voluntary   or   otherwise),
dissolution or winding up of the Corporation,  no distribution  shall be made to
the holders of shares of stock  ranking  junior  (either as to dividends or upon
liquidation,  dissolution  or winding  up) to the Series A Junior  Participating
Preferred Stock unless,  prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received an amount equal to 1,000 times
the Exercise  Price,  plus an amount equal to accrued and unpaid  dividends  and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference").  Following the payment of the full amount of
the Series A Liquidation Preference,  no additional  distributions shall be made
to the  holders  of  shares  of Series A Junior  Participating  Preferred  Stock
unless, prior thereto, the holders of Common Stock shall have received an amount
per share (the "Common  Adjustment")  equal to the quotient obtained by dividing
(i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted
as set forth in  subparagraph  (C) below to reflect such events as stock splits,
stock  dividends and  recapitalizations  with respect to the Common Stock) (such
number in clause (ii), the  "Adjustment  Number").  Following the payment of the
full amount of the Series A Liquidation  Preference and the Common Adjustment in
respect of all  outstanding  shares of Series A Junior  Participating  Preferred
Stock and Common Stock,  respectively,  holders of Series A Junior Participating
Preferred  Stock and holders of Common  Stock shall  receive  their  ratable and
proportionate  share of the remaining  assets to be  distributed in the ratio of
the  Adjustment  Number to 1 with  respect  to such  Preferred  Stock and Common
Stock, on a per share basis, respectively.


                                       -6-


<PAGE>



                  (B)   In the event,  however,  that  there are not  sufficient
assets  available  to  permit  payment  in  full  of the  Series  A  Liquidation
Preference  and the  liquidation  preferences  of all other  series of preferred
stock,  if any,  which rank on a parity  with the Series A Junior  Participating
Preferred Stock, then such remaining assets shall be distributed  ratably to the
holders of such parity  shares in  proportion  to their  respective  liquidation
preferences.  In the  event,  however,  that  there  are not  sufficient  assets
available  to  permit  payment  in  full of the  Common  Adjustment,  then  such
remaining assets shall be distributed ratably to the holders of Common Stock.

                  (C)   In the event the Corporation shall at any time after the
Rights  Declaration  Date (i) declare any  dividend on Common  Stock  payable in
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the  Adjustment  Number  in  effect  immediately  prior to such  event  shall be
adjusted by multiplying  such  Adjustment  Number by a fraction the numerator of
which is the number of Common Stock outstanding immediately after such event and
the  denominator  of which is the number of Common  Stock that were  outstanding
immediately prior to such event.

            (7)   Consolidation,  Merger,  etc.  In case the  Corporation  shall
enter into any consolidation,  merger, combination or other transaction in which
the Common Stock are  exchanged  for or changed into other stock or  securities,
cash  and/or  any other  property,  then in any such case the shares of Series A
Junior  Participating  Preferred  Stock  shall  at the  same  time be  similarly
exchanged  or changed  in an amount  per share  (subject  to the  provision  for
adjustment  hereinafter set forth) equal to 1,000 times the aggregate  amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be,  into  which or for which  each  share of  Common  Stock is  changed  or
exchanged.  In the  event the  Corporation  shall at any time  after the  Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the  preceding  sentence with respect to the exchange or
change  of  shares of Series A Junior  Participating  Preferred  Stock  shall be
adjusted by multiplying  such amount by a fraction the numerator of which is the
number of shares of Common Stock  outstanding  immediately  after such event and
the  denominator  of which is the  number of shares  of Common  Stock  that were
outstanding immediately prior to such event.

            (8)   No  Redemption.  The  shares of Series A Junior  Participating
Preferred Stock shall not be redeemable.

            (9)   Ranking. The Series A Junior Preferred Stock shall rank junior
to all other series of the  Corporation's  Preferred  Stock as to the payment of
dividends and the  distribution  of assets,  unless the terms of any such series
shall provide otherwise.



                                       -7-


<PAGE>


            (10)  Amendment.  The Certificate of Incorporation,  as amended,  of
the  Corporation  shall  not be  further  amended  in  any  manner  which  would
materially  alter or change the  powers,  preferences  or special  rights of the
Series A Junior  Participating  Preferred  Stock so as to affect them  adversely
without  the  affirmative  vote  of the  holders  of a  majority  or more of the
outstanding  shares of Series A Junior  Participating  Preferred  Stock,  voting
separately as a class.

            (11)  Fractional  Shares.  Series A Junior  Participating  Preferred
Stock may be issued in fractions of a share which shall  entitle the holder,  in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends,  participate  in  distributions  and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock."

      5.    The manner in which the foregoing  amendment of the  Certificate  of
Incorporation  was  authorized  is a  follows:  The  Board of  Directors  of the
Corporation  authorized the amendment  under the authority  vested in said Board
under the provisions of the Certificate of  Incorporation  and of Section 502 of
the Business Corporation Law.

            IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite  each of our names below and do hereby  affirm,  under the penalties of
perjury,  that the statements contained therein have been examined by us and are
true and correct.

Date:    February 24, 1998


                                              /S/ RICHARD MARKS
                                            -------------------------------
                                            Name:    Richard Marks
                                            Title:   President

                                              /S/ PETER BROMBERG
                                            -------------------------------
                                            Name:    Peter Bromberg
                                            Title:   Chief Financial Officer
                                                     and Assistant Secretary



                                       -8-










                       MOTORCAR PARTS & ACCESSORIES, INC.

                                       and

                   CONTINENTAL STOCK TRANSFER & TRUST COMPANY

                                  Rights Agent


                                RIGHTS AGREEMENT

                          Dated as of February 24, 1998








<PAGE>


                                Table of Contents

                                                                            Page
                                                                            ----

Section 1.     Certain Definitions........................................... 1

Section 2.     Appointment of Rights Agent................................... 4

Section 3.     Issue of Rights Certificates.................................. 4

Section 4.     Form of Rights Certificates................................... 6

Section 5.     Countersignature and Registration............................. 7

Section 6.     Transfer, Split Up, Combination and Exchange of 
               Rights Certificates; Mutilated, Destroyed, Lost or 
               Stolen Rights Certificates.................................... 7

Section 7.     Exercise of Rights; Purchase Price; Expiration Date of 
               Rights........................................................ 8

Section 8.     Cancellation and Destruction of Rights Certificates...........10

Section 9.     Reservation and Availability of Capital Stock.................10

Section 10.    Preferred Stock Record Date...................................12

Section 11.    Adjustment of Purchase Price, Number and Kind of Shares
               or Number of Rights...........................................12

Section 12.    Certificate of Adjusted Purchase Price or Number of Shares....20

Section 13.    Consolidation, Merger or Sale or Transfer of Assets
               or Earning Power. ............................................21

Section 14.    Fractional Rights and Fractional Shares.......................23

Section 15.    Rights of Action..............................................24

Section 16.    Agreement of Rights Holders...................................25

Section 17.    Rights Certificate Holder Not Deemed a Shareholder............25

Section 18.    Concerning
 the Rights Agent...................................26



                                       -i-


<PAGE>


Section 19.    Merger or Consolidation or Change of Name of Rights Agent.....26

Section 20.    Duties of Rights Agent........................................27

Section 21.    Change of Rights Agent........................................29

Section 22.    Issuance of New Rights Certificates...........................30

Section 23.    Redemption and Termination....................................30

Section 24.    Notice of Certain Events......................................31

Section 25.    Notices.......................................................31

Section 26.    Supplements and Amendments....................................32

Section 27.    Successors....................................................33

Section 28.    Determinations and Actions by the Board of Directors, etc.....33

Section 29.    Benefits of this Agreement....................................33

Section 30.    Severability..................................................33

Section 31.    Governing Law.................................................34

Section 32.    Counterparts..................................................34

Section 33.    Descriptive Headings..........................................34


Exhibit A --   Certificate of Amendment

Exhibit B --   Form of Rights Certificate

Exhibit C --   Form of Summary of Rights


                                      -ii-


<PAGE>




                                RIGHTS AGREEMENT

            RIGHTS AGREEMENT,  dated as of February 24, 1998 (the  "Agreement"),
between  Motorcar  Parts  &  Accessories,  Inc.,  a New  York  corporation  (the
"Company"),  and  Continental  Stock  Transfer  &  Trust  Company,  a  New  York
corporation (the "Rights Agent"), as Rights Agent.

                               W I T N E S S E T H

            WHEREAS,  on February  24, 1998 (the  "Rights  Dividend  Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution  of one Right for each share of common  stock,  par value $0.01 per
share, of the Company (the "Common Stock")  outstanding at the close of business
on March 12, 1998 (the "Record  Date"),  and has  authorized the issuance of one
Right (as such number may hereinafter be adjusted  pursuant to the provisions of
Section  11(p)  hereof)  for each share of Common  Stock of the  Company  issued
between  the  Record  Date  (whether  originally  issued or  delivered  from the
Company's treasury) and the Distribution Date, each Right initially representing
the  right  to  purchase  one  one-thousandth  of a share  of  Series  A  Junior
Participating  Preferred Stock (the "Preferred Stock") of the Company having the
rights, powers and preferences set forth in the form of Certificate of Amendment
attached  hereto as  Exhibit  A, upon the terms and  subject  to the  conditions
hereinafter set forth (the "Rights");

            NOW,  THEREFORE,  in  consideration  of the  premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

            Section 1.  Certain definitions. For purposes of this Agreement, the
following terms have the meanings indicated:

            (a)   "Acquiring  Person"  shall  mean  any  Person  who  or  which,
together  with  all  Affiliates  and  Associates  of such  Person,  shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then  outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee  benefit plan of the Company or of any  Subsidiary  of the Company,
(iv) any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan or (v) an Exempted Person.

            (b)   "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Section 912 of the New York Business  Corporation Law,
as amended and in effect on the date of this Agreement.

            (c)   A Person shall be deemed the "Beneficial  Owner" of, and shall
be deemed to "beneficially own," any securities:

                  (i) which such Person or any of such  Person's  Affiliates  or
            Associates,  directly  or  indirectly,  has  the  right  to  acquire
            (whether


                                       -1-


<PAGE>



            such right is  exercisable  immediately or only after the passage of
            time)  pursuant  to  any  agreement,  arrangement  or  understanding
            (whether  or not in  writing)  or upon the  exercise  of  conversion
            rights,   exchange  rights,   warrants  or  options,  or  otherwise;
            provided, however, that a Person shall not be deemed the "Beneficial
            Owner"  of,  or  to  "beneficially  own,"  (A)  securities  tendered
            pursuant to a tender or exchange offer made by such Person or any of
            such  Person's   Affiliates   or  Associates   until  such  tendered
            securities are accepted for purchase or exchange,  or (B) securities
            issuable upon exercise of Rights at any time prior to the occurrence
            of a Triggering  Event, or (C) securities  issuable upon exercise of
            Rights from and after the  occurrence  of a  Triggering  Event which
            Rights  were  acquired  by  such  Person  or  any of  such  Person's
            Affiliates or Associates prior to the Distribution  Date or pursuant
            to Section  3(a) or Section 22 hereof  (the  "Original  Rights")  or
            pursuant to Section  11(i) hereof in  connection  with an adjustment
            made with respect to any Original Rights;

                  (ii) which such Person or any of such  Person's  Affiliates or
            Associates,  directly or indirectly,  has the right to vote pursuant
            to any agreement,  arrangement or  understanding,  whether or not in
            writing;  provided,  however,  that a Person shall not be deemed the
            "Beneficial Owner" of, or to "beneficially  own," any security under
            this subparagraph  (ii) as a result of an agreement,  arrangement or
            understanding  to vote such security if such agreement,  arrangement
            or  understanding:  (A)  arises  solely  from a  revocable  proxy or
            consent given in response to a proxy or consent solicitation made in
            accordance  with the applicable  provisions of the General Rules and
            Regulations  under the Exchange Act, and (B) is not then  reportable
            by such  Person  on  Schedule  13D under  the  Exchange  Act (or any
            comparable or successor report); or

                  (iii) which are beneficially owned, directly or indirectly, by
            any other Person (or any Affiliate or Associate  thereof) with which
            such Person (or any of such Person's  Affiliates or Associates)  has
            any  agreement,  arrangement  or  understanding  (whether  or not in
            writing),  for the purpose of  acquiring,  holding,  voting  (except
            pursuant to a revocable proxy or consent as described in the proviso
            to  subparagraph  (ii) of this  paragraph  (c)) or  disposing of any
            voting securities of the Company; provided, however, that nothing in
            this  paragraph  (c) shall cause a Person  engaged in business as an
            underwriter  of  securities to be the  "Beneficial  Owner" of, or to
            "beneficially  own," any securities  acquired  through such person's
            participation in good faith in a firm commitment  underwriting until
            the


                                       -2-


<PAGE>



            expiration  of forty  days after the date of such  acquisition;  and
            provided further, however, that any shareholder of the Company, with
            Affiliates,   Associates  or  other  person(s)  who  may  be  deemed
            representatives  of it serving as  director(s)  or officer(s) of the
            Company,  shall not be deemed to beneficially own securities held by
            other  Persons as a result of (i) persons  affiliated  or  otherwise
            associated   with  such   shareholder   serving  as  director(s)  or
            officer(s)  or taking  any  action  in  connection  therewith,  (ii)
            discussing  the  status  of its  shares  with the  Company  or other
            shareholders  of the Company  similarly  situated or (iii) voting or
            acting  in  a  manner  similar  to  other  shareholder(s)  similarly
            situated,  absent a specific finding by the Board of Directors of an
            express agreement among such shareholders to act in concert with one
            another as  shareholders  so as to cause, in the good faith judgment
            of  the  Board  of  Directors,  each  such  shareholder  to  be  the
            Beneficial Owner of the shares held by the other shareholder(s).

            (d)   "Business  Day"  shall  mean any day  other  than a  Saturday,
Sunday  or a day on  which  banking  institutions  in the  State of New York are
authorized or obligated by law or executive order to close.

            (e)   "Close of  business"  on any given  date shall mean 5:00 P.M.,
New York City time, on such date; provided,  however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.

            (f)   "Common  Stock"  shall  mean the  Common  Stock,  except  that
"Common  Stock" when used with  reference  to any Person  other than the Company
shall mean the capital stock of such Person with the greatest  voting power,  or
the equity securities or other equity interest having power to control or direct
the management, of such Person.

            (g)   "Exempted Person" shall mean Mel Marks,  Richard Marks and any
Affiliate or Associate thereof.

            (h)   "Person"  shall  mean  any  individual,   firm,   corporation,
partnership or other entity.

            (i)   "Preferred  Stock"  shall  mean  shares  of  Series  A  Junior
Participating  Preferred Stock, par value $0.01 per share, of the Company,  and,
to the  extent  that  there  are not a  sufficient  number of shares of Series A
Junior  Participating  Preferred Stock authorized to permit the full exercise of
the Rights,  any other series of Preferred  Stock, par value $0.01 per share, of
the Company designated for such purpose containing terms  substantially  similar
to the terms of the Series A Junior Participating Preferred Stock.


                                       -3-


<PAGE>



            (j)   "Section  11(a)(ii)  Event" shall mean any event  described in
Section 11(a)(ii) hereof.

            (k)   "Section 13 Event"  shall mean any event  described in clauses
(x), (y) or (z) of Section 13(a) hereof.

            (l)   "Stock  Acquisition  Date" shall mean the first date of public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation,  a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.

            (m)   "Subsidiary"  shall mean,  with  reference to any Person,  any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned,  directly
or indirectly, by such Person, or otherwise controlled by such Person.

            (n)   "Triggering  Event" shall mean any Section  11(a)(ii) Event or
any Section 13 Event.

            Section 2.  Appointment of Rights Agent. The Company hereby appoints
the Rights  Agent to act as agent for the  Company and the holders of the Rights
(who, in accordance with Section 3 hereof,  shall prior to the Distribution Date
also be the  holders  of the  Common  Stock)  in  accordance  with the terms and
conditions  hereof,  and the Rights Agent hereby accepts such  appointment.  The
Company  may from  time to time  appoint  such  co-Rights  Agents as it may deem
necessary or desirable.

            Section 3.  Issue of Rights Certificates.

            (a)   Until the  earlier of (i) the close of  business  on the tenth
day  after  the Stock  Acquisition  Date  (or,  if the tenth day after the Stock
Acquisition  Date occurs  before the Record  Date,  the close of business on the
Record Date),  or (ii) the close of business on the tenth  business day (or such
later  date as the  Board  shall  determine)  after  the date  that a tender  or
exchange  offer by any Person  (other than the Company,  any  Subsidiary  of the
Company,  any employee  benefit plan of the Company or of any  Subsidiary of the
Company,  or any Person or entity  organized,  appointed or  established  by the
Company  for or pursuant  to the terms of any such plan) is first  published  or
sent or given  within the  meaning of Rule  14d-2(a)  of the  General  Rules and
Regulations under the Exchange Act, if, upon consummation  thereof,  such Person
would be the Beneficial  Owner of 20% or more of the shares of Common Stock then
outstanding  (the  earlier  of (i) and  (ii)  being  herein  referred  to as the
"Distribution  Date"),  (x)  the  Rights  will  be  evidenced  (subject  to  the
provisions  of  paragraph  (b) of this  Section 3) by the  certificates  for the
Common Stock  registered  in the names of the holders of the Common Stock (which
certificates  for  Common  Stock  shall be deemed  also to be  certificates  for
Rights)  and  not  by  separate  certificates,   and  (y)  the  Rights  will  be
transferable  only in connection  with the transfer of the underlying  shares of
Common Stock (including a transfer to the


                                       -4-


<PAGE>



Company).  As soon as practicable after the Distribution  Date, the Rights Agent
will send by first-class,  insured,  postage prepaid mail, to each record holder
of the Common Stock as of the close of business on the Distribution Date, at the
address of such holder  shown on the records of the  Company,  one or more right
certificates,  in  substantially  the  form of  Exhibit  B hereto  (the  "Rights
Certificates"),  evidencing  one Right for each  share of Common  Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights  per share of Common  Stock has been made  pursuant  to Section
11(p)  hereof,  at the time of  distribution  of the  Rights  Certificates,  the
Company  shall make the  necessary  and  appropriate  rounding  adjustments  (in
accordance with Section 14(a) hereof) so that Rights  Certificates  representing
only whole  numbers of Rights  are  distributed  and cash is paid in lieu of any
fractional  Rights.  As of and after the  Distribution  Date, the Rights will be
evidenced solely by such Rights Certificates.

            (b)   As promptly as  practicable  following  the Record  Date,  the
Company  will send a copy of a Summary  of  Rights,  in  substantially  the form
attached hereto as Exhibit C (the "Summary of Rights"), by first-class,  postage
prepaid  mail,  to each  record  holder of the  Common  Stock as of the close of
business on the Record Date,  at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered  holders of the Common
Stock shall also be the registered holders of the associated  Rights.  Until the
earlier of the Distribution Date or the Expiration Date (as such term is defined
in Section 7 hereof),  the transfer of any certificates  representing  shares of
Common Stock in respect of which  Rights have been issued shall also  constitute
the transfer of the Rights associated with such shares of Common Stock.

            (c)   Rights  shall be issued  in  respect  of all  shares of Common
Stock  which  are  issued  (whether  originally  issued  or from  the  Company's
treasury)  after the Record  Date but prior to the  earlier of the  Distribution
Date or the Expiration  Date.  Certificates  representing  such shares of Common
Stock shall also be deemed to be  certificates  for  Rights,  and shall bear the
following legend:

                  This certificate also evidences and entitles the holder hereof
            to  certain  Rights as set  forth in the  Rights  Agreement  between
            Motorcar Parts & Accessories,  Inc. (the  "Company") and Continental
            Stock  Transfer & Trust  Company  (the "Rights  Agent")  dated as of
            February 24, 1998 (the "Rights  Agreement"),  the terms of which are
            hereby  incorporated  herein by reference  and a copy of which is on
            file at the principal offices of Motorcar Parts & Accessories,  Inc.
            Under certain  circumstances,  as set forth in the Rights Agreement,
            such Rights will be evidenced by separate  certificates  and will no
            longer  be  evidenced  by  this   certificate.   Motorcar   Parts  &
            Accessories, Inc. will mail to the holder of this certificate a copy
            of the  Rights  Agreement,  as in  effect  on the  date of  mailing,
            without charge promptly after receipt of a written request therefor.
            Under  certain  circumstances  set  forth in the  Rights  Agreement,
            Rights issued to, or held by, any Person who is,


                                       -5-


<PAGE>



            was or becomes an  Acquiring  Person or any  Affiliate  or Associate
            thereof (as such terms are defined in the Rights Agreement), whether
            currently  held by or on behalf of such Person or by any  subsequent
            holder,  may become null and void. With respect to such certificates
            containing  the  foregoing  legend,  until  the  earlier  of (i) the
            Distribution Date or (ii) the Expiration Date, the Rights associated
            with the Common  Stock  represented  by such  certificates  shall be
            evidenced  by such  certificates  alone and  registered  holders  of
            Common Stock shall also be the registered  holders of the associated
            Rights,  and the  transfer  of any of such  certificates  shall also
            constitute  the  transfer of the Rights  associated  with the Common
            Stock represented by such certificates.

            Section 4.  Form of Rights Certificates.

            (a)   The Rights Certificates (and the forms of election to purchase
and  of  assignment  to be  printed  on  the  reverse  thereof)  shall  each  be
substantially  in the form set forth in Exhibit B hereto and may have such marks
of  identification  or designation  and such legends,  summaries or endorsements
printed thereon as the Company may deem  appropriate and as are not inconsistent
with the provisions of this Agreement,  or as may be required to comply with any
applicable law or with any rule or regulation made pursuant  thereto or with any
rule or  regulation  of any stock  exchange on which the Rights may from time to
time be listed, or to conform to usage.  Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates,  whenever distributed,  shall be
dated as of the Record Date and on their face shall entitle the holders  thereof
to purchase such number of one  one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such  exercise  price
per one  one-thousandth  of a share, the "Purchase  Price"),  but the amount and
type of securities  purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.

            (b)   Any Rights  Certificate  issued  pursuant  to Section  3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring  Person,  (ii) a transferee
of an Acquiring  Person (or of any such  Associate or  Affiliate)  who becomes a
transferee  after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring  Person  (or of  any  such  Associate  or  Affiliate)  who  becomes  a
transferee prior to or concurrently  with the Acquiring Person becoming such and
receives  such  Rights  pursuant  to either (A) a transfer  (whether  or not for
consideration)  from the Acquiring Person to holders of equity interests in such
Acquiring  Person  or to any  Person  with whom such  Acquiring  Person  has any
continuing  agreement,  arrangement or  understanding  regarding the transferred
Rights or (B) a  transfer  which  the  Board of  Directors  of the  Company  has
determined  is part of a  plan,  arrangement  or  understanding  which  has as a
primary  purpose or effect  avoidance  of Section  7(e)  hereof,  and any Rights
Certificate  issued  pursuant to Section 6 or Section 11 hereof  upon  transfer,
exchange,  replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:

                                       -6-


<PAGE>




            The  Rights  represented  by  this  Rights  Certificate  are or were
            beneficially owned by a Person who was or became an Acquiring Person
            or an Affiliate  or Associate of an Acquiring  Person (as such terms
            are  defined  in the Rights  Agreement).  Accordingly,  this  Rights
            Certificate  and the Rights  represented  hereby may become null and
            void  in  the  circumstances  specified  in  Section  7(e)  of  such
            Agreement.

            Section 5.  Countersignature and Registration.

            (a)   The Rights  Certificates  shall be  executed  on behalf of the
Company by its Chairman of the Board,  its Vice  Chairman,  its President or any
Vice  President,  either  manually  or by  facsimile  signature,  and shall have
affixed  thereto  the  Company's  seal or a  facsimile  thereof  which  shall be
attested by the  Secretary  or an Assistant  Secretary  of the  Company,  either
manually  or  by  facsimile   signature.   The  Rights   Certificates  shall  be
countersigned by the Rights Agent, either manually or by facsimile signature and
shall not be valid for any purpose unless so countersigned.  In case any officer
of the Company who shall have signed any of the Rights  Certificates shall cease
to be such officer of the Company  before  countersignature  by the Rights Agent
and  issuance  and   delivery  by  the   Company,   such  Rights   Certificates,
nevertheless,  may be countersigned by the Rights Agent and issued and delivered
by the  Company  with the same  force and effect as though the person who signed
such Rights  Certificates had not ceased to be such officer of the Company;  and
any  Rights  Certificates  may be signed on behalf of the  Company by any person
who, at the actual date of the execution of such Rights Certificate,  shall be a
proper officer of the Company to sign such Rights  Certificate,  although at the
date of the  execution of this Rights  Agreement any such person was not such an
officer.

            (b)   Following the Distribution Date, the Rights Agent will keep or
cause  to be  kept,  at  its  principal  office  or  offices  designated  as the
appropriate  place  for  surrender  of  Rights  Certificates  upon  exercise  or
transfer,  books for registration and transfer of the Rights Certificates issued
hereunder.  Such books  shall  show the names and  addresses  of the  respective
holders of the Rights  Certificates,  the number of Rights evidenced on its face
by  each  of the  Rights  Certificates  and  the  date  of  each  of the  Rights
Certificates.

            Section 6.  Transfer,  Split Up,  Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

            (a)   Subject to the  provisions of Section  4(b),  Section 7(e) and
Section 14 hereof,  at any time after the close of business on the  Distribution
Date,  and at or prior to the close of  business  on the  Expiration  Date,  any
Rights  Certificate or Certificates  may be  transferred,  split up, combined or
exchanged  for  another  Rights  Certificate  or  Certificates,   entitling  the
registered holder to purchase a like number of one one-thousandths of a share of
Preferred  Stock  (or,  following  a  Triggering  Event,  Common  Shares,  other
securities,  cash or other assets, as the case may be) as the Rights Certificate
or Certificates  surrendered  then entitled such holder (or former holder in the
case of a transfer) to


                                       -7-


<PAGE>



purchase.  Any  registered  holder  desiring to transfer,  split up,  combine or
exchange  any Rights  Certificate  or  Certificates  shall make such  request in
writing   delivered  to  the  Rights  Agent,  and  shall  surrender  the  Rights
Certificate or Certificates  to be transferred,  split up, combined or exchanged
at the  principal  office or  offices of the Rights  Agent  designated  for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action  whatsoever with respect to the transfer of any such  surrendered  Rights
Certificate  until the  registered  holder shall have  completed  and signed the
certificate  contained  in the form of  assignment  on the reverse  side of such
Rights  Certificate  and shall have  provided  such  additional  evidence of the
identity of the Beneficial Owner (or former  Beneficial  Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent  shall,  subject  to Section  4(b),  Section  7(e) and  Section 14 hereof,
countersign and deliver to the Person entitled  thereto a Rights  Certificate or
Rights  Certificates,  as the case may be,  as so  requested.  The  Company  may
require payment of a sum sufficient to cover any tax or governmental charge that
may be  imposed  in  connection  with any  transfer,  split up,  combination  or
exchange of Rights Certificates.

            (b)   Upon  receipt by the Company and the Rights  Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate,  and, in case of loss, theft or destruction,  of indemnity
or security  reasonably  satisfactory to them, and  reimbursement to the Company
and the Rights Agent of all reasonable  expenses  incidental  thereto,  and upon
surrender  to the Rights Agent and  cancellation  of the Rights  Certificate  if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for  countersignature  and delivery to the  registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

            Section 7.  Exercise of Rights;  Purchase Price;  Expiration Date of
Rights.

            (a)   Subject to Section 7(e) hereof,  the registered  holder of any
Rights  Certificate  may  exercise  the  Rights  evidenced  thereby  (except  as
otherwise  provided herein including,  without  limitation,  the restrictions on
exercisability  set forth in Section 9(c),  Section 11(a)(iii) and Section 23(a)
hereof)  in  whole or in part at any  time  after  the  Distribution  Date  upon
surrender of the Rights  Certificate,  with the form of election to purchase and
the  certificate on the reverse side thereof duly executed,  to the Rights Agent
at the  principal  office or  offices of the Rights  Agent  designated  for such
purpose,  together with payment of the aggregate  Purchase Price with respect to
the total number of one one-thousandths of a share (or other securities, cash or
other assets,  as the case may be) as to which such surrendered  Rights are then
exercisable,  at or prior to the  earlier of (i) the close of  business on March
12, 2008 (the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as  provided  in Section 23 hereof  (the  earlier of (i) and (ii) being
herein referred to as the "Expiration Date").

            (b)   The Purchase Price for each one  one-thousandth  of a share of
Preferred  Stock pursuant to the exercise of a Right shall  initially be $65.00,
and shall be subject to adjustment  from time to time as provided in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.


                                       -8-


<PAGE>




            (c)   Upon receipt of a Rights Certificate  representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one  one-thousandth  of a share of Preferred  Stock (or other  shares,
securities,  cash or other  assets,  as the case may be) to be  purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights Agent
shall,  subject to Section 20(k) hereof,  thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or make available,  if
the Rights Agent is the transfer  agent for such  shares)  certificates  for the
total  number  of one  one-thousandths  of a  share  of  Preferred  Stock  to be
purchased and the Company  hereby  irrevocably  authorizes its transfer agent to
comply  with all such  requests,  or (B) if the  Company  shall have  elected to
deposit the total number of shares of Preferred  Stock issuable upon exercise of
the Rights  hereunder with a depositary  agent,  requisition from the depositary
agent depositary  receipts  representing such number of one one-thousandths of a
share of Preferred Stock as are to be purchased (in which case  certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer  agent with the  depositary  agent) and the Company will direct the
depositary agent to comply with such request,  (ii) requisition from the Company
the  amount  of  cash,  if any,  to be paid in  lieu  of  fractional  shares  in
accordance with Section 14 hereof,  (iii) after receipt of such  certificates or
depositary  receipts,  cause the same to be delivered  to, or upon the order of,
the  registered  holder of such Rights  Certificate,  registered in such name or
names as may be  designated  by such  holder,  and (iv) after  receipt  thereof,
deliver such cash,  if any, to, or upon the order of, the  registered  holder of
such Rights  Certificate.  The payment of the Purchase Price (as such amount may
be reduced  pursuant to Section  11(a)(iii)  hereof) shall be made in cash or by
certified  bank check or bank draft payable to the order of the Company.  In the
event that the Company is obligated to issue other securities  (including shares
of Common  Stock) of the  Company,  pay cash and/or  distribute  other  property
pursuant  to  Section  11(a)  hereof,  the  Company  will make all  arrangements
necessary  so that  such  other  securities,  cash  and/or  other  property  are
available for  distribution  by the Rights Agent, if and when  appropriate.  The
Company  reserves the right to require  prior to the  occurrence of a Triggering
Event that, upon any exercise of Rights, a number of Rights be exercised so that
only whole shares of Preferred Stock would be issued.

            (d)   In case the registered holder of any Rights  Certificate shall
exercise less than all the Rights evidenced  thereby,  a new Rights  Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the  Rights  Agent and  delivered  to, or upon the order of,  the  registered
holder of such Rights  Certificate,  registered  in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.

            (e)   Notwithstanding  anything in this  Agreement to the  contrary,
from and after the first  occurrence of a Section  11(a)(ii)  Event,  any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring  Person,  (ii) a  transferee  of an  Acquiring  Person (or of any such
Associate or  Affiliate)  who becomes a transferee  after the  Acquiring  Person
becomes  such,  or (iii) a  transferee  of an  Acquiring  Person (or of any such
Associate or Affiliate) who becomes a transferee  prior to or concurrently  with
the Acquiring  Person  becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person


                                       -9-


<PAGE>



to holders of equity  interests in such  Acquiring  Person or to any Person with
whom  the  Acquiring  Person  has  any  continuing  agreement,   arrangement  or
understanding  regarding  the  transferred  Rights  or (B) a  transfer  which  a
majority of the Board of  Directors of the Company has  determined  is part of a
plan,  arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section  7(e),  shall become null and void without any further
action  and no holder of such  Rights  shall  have any  rights  whatsoever  with
respect  to such  Rights,  whether  under any  provision  of this  Agreement  or
otherwise.  The  Company  shall use all  reasonable  efforts to insure  that the
provisions of this Section 7(e) and Section 4(b) hereof are complied  with,  but
shall have no liability to any holder of Rights  Certificates or other Person as
a result of its failure to make any determinations  with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.

            (f)   Notwithstanding  anything in this  Agreement to the  contrary,
neither the Rights Agent nor the Company  shall be  obligated  to undertake  any
action with respect to a registered  holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i)  completed and signed the  certificate  contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial  Owner (or  former  Beneficial  Owner) or  Affiliates  or  Associates
thereof as the Company shall reasonably request.

            Section 8.  Cancellation  and  Destruction  of  Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer, split
up,  combination or exchange  shall, if surrendered to the Company or any of its
agents,  be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent,  shall be cancelled by it, and no Rights
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement,  and the Rights Agent shall so cancel and
retire,  any other  Rights  Certificate  purchased  or  acquired  by the Company
otherwise  than upon the exercise  thereof.  The Rights Agent shall  deliver all
cancelled Rights  Certificates to the Company,  or shall, at the written request
of the Company,  destroy such cancelled  Rights  Certificates,  and in such case
shall deliver a certificate of destruction thereof to the Company.

            Section 9.  Reservation and Availability of Capital Stock.

            (a)   The  Company  covenants  and  agrees  that it will cause to be
reserved  and kept  available  out of its  authorized  and  unissued  shares  of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury),  the number of shares of
Preferred  Stock (and,  following the occurrence of a Triggering  Event,  Common
Shares and/or other  securities)  that, as provided in this Agreement  including
Section 11(a)(iii) hereof,  will be sufficient to permit the exercise in full of
all outstanding Rights.

            (b)   So long as the shares of Preferred  Stock (and,  following the
occurrence  of  a  Triggering  Event,   shares  of  Common  Stock  and/or  other
securities) issuable and deliverable upon the


                                      -10-


<PAGE>



exercise of the Rights may be listed on any national  securities  exchange,  the
Company  shall use its best  efforts  to cause,  from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.

            (c)   The Company shall use its best efforts to (i) file, as soon as
practicable  following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the  consideration  to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof,  a registration  statement under the Securities Act of 1933 (the "Act"),
with respect to the  securities  purchasable  upon  exercise of the Rights on an
appropriate form, (ii) cause such registration  statement to become effective as
soon as  practicable  after  such  filing,  and (iii)  cause  such  registration
statement  to remain  effective  (with a  prospectus  at all times  meeting  the
requirements  of the Act)  until  the  earlier  of (A) the date as of which  the
Rights are no longer  exercisable for such  securities,  and (B) the date of the
expiration  of the  Rights.  The  Company  will also take such  action as may be
appropriate  under, or to ensure  compliance  with, the securities or "blue sky"
laws of the various states in connection with the  exercisability of the Rights.
The Company may temporarily  suspend,  for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first  sentence  of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration  statement  and  permit  it to  become  effective.  Upon  any  such
suspension,  the Company  shall  issue a public  announcement  stating  that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the  Company  shall  determine  that a  registration  statement  is  required
following  the  Distribution  Date,  the  Company  may  temporarily  suspend the
exercisability  of the Rights until such time as a  registration  statement  has
been declared effective.  Notwithstanding any provision of this Agreement to the
contrary,  the  Rights  shall  not be  exercisable  in any  jurisdiction  if the
requisite  qualification in such jurisdiction shall not have been obtained,  the
exercise  thereof shall not be permitted under  applicable law or a registration
statement shall not have been declared effective.

            (d)   The  Company  covenants  and agrees that it will take all such
action as may be necessary to ensure that all one  one-thousandths of a share of
Preferred Stock (and,  following the occurrence of a Triggering Event, shares of
Common Stock and/or other  securities)  delivered upon exercise of Rights shall,
at the time of delivery of the  certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.

            (e)   The Company further covenants and agrees that it will pay when
due and payable any and all federal and state  transfer  taxes and charges which
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any  certificates  for a  number  of one  one-thousandths  of a share  of
Preferred Stock (or shares of Common Stock and/or other securities,  as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any  transfer  tax which may be payable in  respect  of any  transfer  or
delivery  of Rights  Certificates  to a Person  other than,  or the  issuance or
delivery of a number of one  one-thousandths  of a share of Preferred  Stock (or
shares of Common Stock and/or other  securities,  as the case may be) in respect
of a name other than that of, the registered  holder of the Rights  Certificates
evidencing Rights


                                      -11-


<PAGE>



surrendered for exercise or to issue or deliver any certificates for a number of
one  one-thousandths  of a share of  Preferred  Stock (or shares of Common Stock
and/or  other  securities,  as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time  of  surrender)  or  until  it  has  been   established  to  the  Company's
satisfaction that no such tax is due.

            Section 10.  Preferred Stock Record Date.  Each person in whose name
any  certificate  for a number of one  one-thousandths  of a share of  Preferred
Stock (or shares of Common Stock and/or other securities, as the case may be) is
issued  upon the  exercise  of Rights  shall for all  purposes be deemed to have
become the holder of record of such  fractional  shares of  Preferred  Stock (or
shares of Common Stock and/or other securities,  as the case may be) represented
thereby on, and such certificate  shall be dated, the date upon which the Rights
Certificate  evidencing  such  Rights was duly  surrendered  and  payment of the
Purchase Price (and all applicable transfer taxes) was made; provided,  however,
that if the  date  of such  surrender  and  payment  is a date  upon  which  the
Preferred Stock (or Common Shares and/or other  securities,  as the case may be)
transfer  books of the Company are closed,  such Person  shall be deemed to have
become the record holder of such shares  (fractional  or otherwise) on, and such
certificate  shall be  dated,  the next  succeeding  Business  Day on which  the
Preferred Stock (or shares of Common Stock and/or other securities,  as the case
may be)  transfer  books of the Company are open.  Prior to the  exercise of the
Rights  evidenced  thereby,  the  holder  of a Rights  Certificate  shall not be
entitled to any rights of a  shareholder  of the Company  with respect to shares
for which the Rights shall be exercisable,  including,  without limitation,  the
right to vote, to receive  dividends or other  distributions  or to exercise any
preemptive  rights,  and shall not be  entitled  to  receive  any  notice of any
proceedings of the Company, except as provided herein.

           Section 11.  Adjustment  of Purchase Price, Number and Kind of Shares
or Number of Rights.  The Purchase Price,  the number and kind of shares covered
by each Right and the number of Rights  outstanding  are  subject to  adjustment
from time to time as provided in this Section 11.

                  (a) (i) In the event the  Company  shall at any time after the
            date of this Agreement (A) declare a dividend on the Preferred Stock
            payable in shares of Preferred  Stock, (B) subdivide the outstanding
            Preferred Stock, (C) combine the outstanding  Preferred Stock into a
            smaller  number of shares,  or (D) issue any  shares of its  capital
            stock in a  reclassification  of the Preferred Stock  (including any
            such  reclassification  in connection with a consolidation or merger
            in which the Company is the  continuing  or surviving  corporation),
            except as otherwise  provided in this Section 11(a) and Section 7(e)
            hereof,  the Purchase Price in effect at the time of the record date
            for such  dividend  or of the  effective  date of such  subdivision,
            combination or  reclassification,  and the number and kind of shares
            of Preferred Stock or capital stock, as the case may be, issuable on
            such date, shall be  proportionately  adjusted so that the holder of
            any Right  exercised  after such time shall be  entitled to receive,
            upon payment of the


                                      -12-


<PAGE>



            Purchase  Price then in  effect,  the  aggregate  number and kind of
            shares of  Preferred  Stock or  capital  stock,  as the case may be,
            which,  if such Right had been exercised  immediately  prior to such
            date and at a time when the Preferred  Stock  transfer  books of the
            Company were open, he or she would have owned upon such exercise and
            been  entitled to receive by virtue of such  dividend,  subdivision,
            combination  or  reclassification.  If an event  occurs  which would
            require an adjustment  under both this Section  11(a)(i) and Section
            11(a)(ii)  hereof,  the  adjustment  provided  for in  this  Section
            11(a)(i)  shall be in  addition  to, and shall be made prior to, any
            adjustment required pursuant to Section 11(a)(ii) hereof.

                  (ii) In the event that any Person (other than the Company, any
            Subsidiary of the Company,  any employee benefit plan of the Company
            or of any Subsidiary of the Company, any Person or entity organized,
            appointed or established by the Company for or pursuant to the terms
            of any such plan, or an Exempted Person), alone or together with its
            Affiliates  and  Associates,  shall,  at any time  after the  Rights
            Dividend  Declaration  Date,  become the Beneficial  Owner of 20% or
            more of the  shares of Common  Stock  then  outstanding,  unless the
            event causing the 20%  threshold to be crossed is a transaction  set
            forth in Section 13(a)  hereof,  or is an  acquisition  of shares of
            Common Stock pursuant to a tender offer or an exchange offer for all
            outstanding  shares  of  Common  Stock  at  a  price  and  on  terms
            determined  by at least a  majority  of the  members of the Board of
            Directors  who  are  not  officers  of the  Company  and who are not
            representatives,  nominees, Affiliates or Associates of an Acquiring
            Person,  after receiving advice from one or more investment  banking
            firms,  to be (a) at a price which is fair to  shareholders  (taking
            into  account  all  factors  which  such  members  of the Board deem
            relevant   including,   without   limitation,   prices  which  could
            reasonably  be achieved if the Company or its assets were sold on an
            orderly basis  designed to realize  maximum value) and (b) otherwise
            in  the  best   interests  of  the  Company  and  its   shareholders
            (hereinafter,  a "Qualifying  Offer"),  then, promptly following the
            occurrence of any such event, proper provision shall be made so that
            each holder of a Right (except as provided below and in Section 7(e)
            hereof) shall  thereafter  have the right to receive,  upon exercise
            thereof at the then current  Purchase  Price in accordance  with the
            terms of this Agreement,  in lieu of a number of one one-thousandths
            of a share of Preferred Stock, such number of shares of Common Stock
            of the Company as shall equal the result obtained by (x) multiplying
            the  then  current   Purchase  Price  by  the  then  number  of  one
            one-thousandths of


                                      -13-


<PAGE>



            a share  of  Preferred  Stock  for  which a  Right  was  exercisable
            immediately  prior to the first  occurrence  of a Section  11(a)(ii)
            Event,  and (y) dividing that product  (which,  following such first
            occurrence,  shall thereafter be referred to as the "Purchase Price"
            for each Right and for all purposes of this Agreement) by 50% of the
            current market price  (determined  pursuant to Section 11(d) hereof)
            per share of Common Stock on the date of such first occurrence (such
            number of shares, the "Adjustment Shares").

                  (iii) In the event that the  number of shares of Common  Stock
            which are authorized by the Company's  Certificate of Incorporation,
            as  amended,  but not  outstanding  or  reserved  for  issuance  for
            purposes  other than upon exercise of the Rights are not  sufficient
            to permit the exercise in full of the Rights in accordance  with the
            foregoing subparagraph (ii) of this Section 11(a), the Company shall
            (A) determine the value of the Adjustment  Shares  issuable upon the
            exercise of a Right (the "Current  Value"),  and (B) with respect to
            each Right (subject to Section 7(e) hereof), make adequate provision
            to  substitute  for the  Adjustment  Shares,  upon the exercise of a
            Right and payment of the applicable  Purchase Price, (1) cash, (2) a
            reduction in the Purchase Price, (3) shares of Common Stock or other
            equity  securities of the Company  (including,  without  limitation,
            shares,  or  units  of  shares,  of  preferred  stock,  such  as the
            Preferred Stock,  which the Board has deemed to have essentially the
            same value or  economic  rights as shares of shares of Common  Stock
            (such shares of preferred  stock being  referred to as "Common Share
            Equivalents")),  (4)  debt  securities  of the  Company,  (5)  other
            assets, or (6) any combination of the foregoing, having an aggregate
            value equal to the Current  Value (less the amount of any  reduction
            in  the  Purchase  Price),  where  such  aggregate  value  has  been
            determined  by the  Board  based  upon the  advice  of a  nationally
            recognized investment banking firm selected by the Board;  provided,
            however,  that if the Company shall not have made adequate provision
            to deliver  value  pursuant to clause (B) above  within  thirty (30)
            days  following  the later of (x) the first  occurrence of a Section
            11(a)(ii)  Event  and (y) the date on which the  Company's  right of
            redemption  pursuant to Section  23(a) expires (the later of (x) and
            (y)  being  referred  to herein as the  "Section  11(a)(ii)  Trigger
            Date"),  then the Company  shall be obligated  to deliver,  upon the
            surrender for exercise of a Right and without  requiring  payment of
            the Purchase Price, shares of Common Stock (to the extent available)
            and then,  if  necessary,  cash,  which  shares  and/or cash have an
            aggregate  value equal to the Spread.  For purposes of the preceding
            sentence, the term "Spread" shall mean the excess of (i) the


                                      -14-


<PAGE>



            Current Value over (ii) the Purchase Price. If the Board  determines
            in good faith that it is likely that sufficient additional shares of
            Common Stock could be authorized  for issuance upon exercise in full
            of the  Rights,  the thirty  (30) day period set forth  above may be
            extended to the extent necessary, but not more than ninety (90) days
            after the Section  11(a)(ii) Trigger Date, in order that the Company
            may  seek  shareholder   approval  for  the  authorization  of  such
            additional  shares  (such  thirty  (30)  day  period,  as it  may be
            extended, is herein called the "Substitution Period"). To the extent
            that  action  is to be taken  pursuant  to the  first  and/or  third
            sentences of this Section 11(a)(iii), the Company (1) shall provide,
            subject  to  Section  7(e)  hereof,  that such  action  shall  apply
            uniformly  to all  outstanding  Rights,  and  (2)  may  suspend  the
            exercisability   of  the  Rights   until  the   expiration   of  the
            Substitution  Period in order to seek such shareholder  approval for
            such  authorization  of  additional  shares  and/or  to  decide  the
            appropriate  form of  distribution to be made pursuant to such first
            sentence and to  determine  the value  thereof.  In the event of any
            such  suspension,  the  Company  shall  issue a public  announcement
            stating that the  exercisability  of the Rights has been temporarily
            suspended,  as well as a  public  announcement  at such  time as the
            suspension  is no longer in effect.  For  purposes  of this  Section
            11(a)(iii),  the value of each Adjustment Share shall be the Current
            Market  Price  per share of Common  Stock on the  Section  11(a)(ii)
            Trigger  Date and the per  share or per unit  value of any  share of
            Common Stock  Equivalent shall be deemed to equal the Current Market
            Price per share of Common Stock on such date.

            (b)   In case the Company  shall fix a record date for the  issuance
of rights,  options or warrants to all holders of Preferred Stock entitling them
to subscribe  for or purchase  (for a period  expiring  within  forty-five  (45)
calendar days after such record date) Preferred Stock (or shares having the same
rights, privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities  convertible into Preferred Stock or equivalent
preferred  stock  at a price  per  share  of  Preferred  Stock  or per  share of
equivalent  preferred  stock  (or  having a  conversion  price per  share,  if a
security  convertible  into Preferred Stock or equivalent  preferred stock) less
than the current market price (as  determined  pursuant to Section 11(d) hereof)
per share of Preferred  Stock on such record date,  the Purchase  Price to be in
effect after such record date shall be  determined by  multiplying  the Purchase
Price  in  effect  immediately  prior to such  record  date by a  fraction,  the
numerator of which shall be the number of shares of Preferred Stock  outstanding
on such  record  date,  plus the number of shares of  Preferred  Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent  preferred  stock so to be  offered  (and/or  the  aggregate  initial
conversion price of the convertible  securities so to be offered) would purchase
at such current market price,  and the  denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or


                                      -15-


<PAGE>



equivalent  preferred stock to be offered for  subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such  subscription  price may be paid by delivery of consideration  part or
all of which may be in a form other than cash,  the value of such  consideration
shall be as  determined  in good faith by the Board of Directors of the Company,
whose  determination  shall be  described  in a statement  filed with the Rights
Agent and shall be binding on the Rights  Agent and the  holders of the  Rights.
Shares of Preferred  Stock owned by or held for the account of the Company shall
not be  deemed  outstanding  for  the  purpose  of any  such  computation.  Such
adjustment shall be made successively  whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued,  the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.

            (c)   In case the Company shall fix a record date for a distribution
to all holders of  Preferred  Stock  (including  any such  distribution  made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness,  cash (other than a regular quarterly
cash dividend out of the earnings or retained  earnings of the Company),  assets
(other than a dividend  payable in Preferred  Stock,  but including any dividend
payable in stock other than Preferred Stock) or subscription  rights or warrants
(excluding those referred to in Section 11(b) hereof),  the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price  in  effect  immediately  prior to such  record  date by a  fraction,  the
numerator of which shall be the current market price (as determined  pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as  determined in good faith by the Board of Directors of the
Company,  whose  determination  shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed  or of such  subscription  rights or warrants  applicable to a
share of  Preferred  Stock and the  denominator  of which shall be such  current
market  price (as  determined  pursuant  to Section  11(d)  hereof) per share of
Preferred Stock.  Such adjustments  shall be made  successively  whenever such a
record date is fixed,  and in the event that such  distribution  is not so made,
the Purchase  Price shall be adjusted to be the Purchase  Price which would have
been in effect if such record date had not been fixed.

            (d)   (i) For the purpose of any computation  hereunder,  other than
computations  made pursuant to Section  11(a)(iii)  hereof,  the Current  Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily  closing  prices  per such share of Common  Stock for the thirty  (30)
consecutive  Trading Days  immediately  prior to such date,  and for purposes of
computations  made pursuant to Section  11(a)(iii)  hereof,  the Current  Market
Price per share of Common Stock on any date shall be deemed to be the average of
the  daily  closing  prices  per such  share of  Common  Stock  for the ten (10)
consecutive  Trading Days immediately  following such date;  provided,  however,
that in the event that the  Current  Market  Price per share of Common  Stock is
determined  during a period  following  the  announcement  by the issuer of such
share of Common Stock of (A) a dividend or  distribution on such share of Common
Stock  payable in such shares of Common Stocks or  securities  convertible  into
shares of such Common  Stock (other than the  Rights),  or (B) any  subdivision,
combination  or  reclassification  of  such  shares  of  Common  Stock,  and the
ex-dividend date for such dividend or distribution,  or the record date for such
subdivision, combination or


                                      -16-


<PAGE>



reclassification  shall  not  have  occurred  prior to the  commencement  of the
requisite  thirty (30) Trading Day or ten (10) Trading Day period,  as set forth
above,  then,  and in each such case, the Current Market Price shall be properly
adjusted to take into account  ex-dividend  trading.  The closing price for each
day shall be the last sale price,  regular  way,  or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal  consolidated  transaction reporting
system with respect to securities  listed or admitted to trading on the New York
Stock  Exchange  or, if the shares of Common Stock are not listed or admitted to
trading  on  the  New  York  Stock  Exchange,   as  reported  in  the  principal
consolidated  transaction  reporting system with respect to securities listed on
the principal national  securities  exchange on which the shares of Common Stock
are  listed or  admitted  to trading  or, if the shares of Common  Stock are not
listed or  admitted to trading on any  national  securities  exchange,  the last
quoted  price or, if not so  quoted,  the  average of the high bid and low asked
prices in the  over-the-counter  market, as reported by the National Association
of Securities  Dealers,  Inc. Automated  Quotation System (the "NASDAQ") or such
other system then in use, or, if on any such date the shares of Common Stock are
not quoted by any such  organization,  the  average of the closing bid and asked
prices as furnished by a professional market maker making a market in the shares
of Common  Stock  selected by the Board.  If on any such date no market maker is
making a market in the Common Shares, the fair value of such shares on such date
as determined  in good faith by the Board shall be used.  The term "Trading Day"
shall mean a day on which the principal  national  securities  exchange on which
the Common Stock is listed or admitted to trading is open for the transaction of
business  or, if the Common  Stock is not listed or  admitted  to trading on any
national  securities  exchange,  a  Business  Day.  If the  Common  Stock is not
publicly held or not so listed or traded,  Current  Market Price per share shall
mean the fair value per share as  determined  in good faith by the Board,  whose
determination  shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

                  (ii)  For  the  purpose  of  any  computation  hereunder,  the
Current  Market Price per share of Preferred  Stock shall be  determined  in the
same  manner  as set  forth  above for the  Common  Stock in clause  (i) of this
Section  11(d) (other than the last  sentence  thereof).  If the Current  Market
Price per share of Preferred  Stock cannot be determined in the manner  provided
above or if the  Preferred  Stock is not publicly  held or listed or traded in a
manner  described in clause (i) of this Section 11(d),  the Current Market Price
per share of Preferred Stock shall be conclusively  deemed to be an amount equal
to 1,000 (as such number may be appropriately  adjusted for such events as stock
splits, stock dividends and  recapitalizations  with respect to the Common Stock
occurring  after the date of this  Agreement)  multiplied by the Current  Market
Price per shares of Common Stock.  If neither the Common Stock nor the Preferred
Stock is publicly held or so listed or traded, Current Market Price per share of
the  Preferred  Stock shall mean the fair value per share as  determined in good
faith by the Board, whose  determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.

            (e)   Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment  would require an
increase  or  decrease  of at least  one  percent  (1%) in the  Purchase  Price;
provided, however, that any adjustments which by reason of this


                                      -17-


<PAGE>



Section  11(e) are not  required  to be made shall be carried  forward and taken
into account in any subsequent  adjustment.  All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common  Stock or other  share or one-ten  millionth  of a share of  Preferred
Stock,  as the case may be.  Notwithstanding  the first sentence of this Section
11(e),  any  adjustment  required by this Section 11 shall be made no later than
the earlier of three (3) years from the date of the  transaction  which mandates
such adjustment, or (ii) the Expiration Date.

            (f)   If as a result  of an  adjustment  made  pursuant  to  Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter  exercised
shall  become  entitled  to  receive  any  shares of  capital  stock  other than
Preferred  Stock,  thereafter the number of such other shares so receivable upon
exercise  of any  Right and the  Purchase  Price  thereof  shall be  subject  to
adjustment  from time to time in a manner and on terms as nearly  equivalent  as
practicable to the provisions  with respect to the Preferred  Stock contained in
Sections  11(a),  (b),  (c),  (e),  (g),  (h),  (i),  (j),  (k) and (m), and the
provisions  of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.

            (g)   All Rights originally issued by the Company  subsequent to any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock  purchasable  from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

            (h)   Unless  the  Company  shall have  exercised  its  election  as
provided in Section  11(i),  upon each  adjustment  of the  Purchase  Price as a
result  of  the  calculations  made  in  Sections  11(b)  and  (c),  each  Right
outstanding  immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase,  at the adjusted  Purchase Price, that number of
one  one-thousandths  of a share of Preferred  Stock  (calculated to the nearest
one-ten   millionth)   obtained  by  (i)  multiplying  (x)  the  number  of  one
one-thousandths  of a  share  covered  by a  Right  immediately  prior  to  this
adjustment,  by (y) the  Purchase  Price  in  effect  immediately  prior to such
adjustment of the Purchase  Price,  and (ii) dividing the product so obtained by
the Purchase Price in effect  immediately  after such adjustment of the Purchase
Price.

            (i)   The Company  may elect on or after the date of any  adjustment
of the Purchase Price to adjust the number of Rights,  in lieu of any adjustment
in the number of one  one-thousandths  of a share of Preferred Stock purchasable
upon  the  exercise  of a  Right.  Each  of the  Rights  outstanding  after  the
adjustment  in the number of Rights shall be  exercisable  for the number of one
one-thousandths  of a share of Preferred Stock for which a Right was exercisable
immediately  prior to such  adjustment.  Each Right held of record prior to such
adjustment  of  the  number  of  Rights  shall  become  that  number  of  Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase
Price in effect  immediately  prior to adjustment  of the Purchase  Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights,  indicating  the record  date for the  adjustment,  and, if known at the
time, the amount of the adjustment to be made.  This record date may be the date
on which the  Purchase  Price is  adjusted  or any day  thereafter,  but, if the
Rights


                                      -18-


<PAGE>



Certificates  have been  issued,  shall be at least ten (10) days later than the
date of the public  announcement.  If Rights Certificates have been issued, upon
each  adjustment  of the number of Rights  pursuant to this Section  11(i),  the
Company shall, as promptly as practicable, cause to be distributed to holders of
record  of  Rights   Certificates  on  such  record  date  Rights   Certificates
evidencing,  subject to Section 14 hereof,  the additional  Rights to which such
holders shall be entitled as a result of such  adjustment,  or, at the option of
the  Company,  shall  cause to be  distributed  to such  holders  of  record  in
substitution  and replacement for the Rights  Certificates  held by such holders
prior to the date of adjustment,  and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall  be  entitled  after  such  adjustment.   Rights  Certificates  so  to  be
distributed  shall be issued,  executed and countersigned in the manner provided
for herein (and may bear,  at the option of the Company,  the adjusted  Purchase
Price) and shall be  registered  in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

            (j)   Irrespective of any adjustment or change in the Purchase Price
or the number of one one- thousandth of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights  Certificates  theretofore and thereafter
issued may continue to express the Purchase  Price per one  one-thousandth  of a
share and the number of one  one-thousandth  of a share which were  expressed in
the initial Rights Certificates issued hereunder.

            (k)   Before  taking  any  action  that  would  cause an  adjustment
reducing the Purchase  Price below the then stated value,  if any, of the number
of one  one-thousandths  of a share of Preferred Stock issuable upon exercise of
the  Rights,  the  Company  shall take any  corporate  action  which may, in the
opinion of its  counsel,  be necessary in order that the Company may validly and
legally issue fully paid and nonassessable  such number of one one-thousandth of
a share of Preferred Stock at such adjusted Purchase Price.

            (l)   In any case in which  this  Section 11 shall  require  that an
adjustment  in the  Purchase  Price be made  effective as of a record date for a
specified  event,  the Company may elect to defer until the  occurrence  of such
event the issuance to the holder of any Right  exercised  after such record date
the  number  of one  one-thousandths  of a share of  Preferred  Stock  and other
capital stock or securities of the Company,  if any, issuable upon such exercise
over and above the number of one  one-thousandths  of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such  adjustment;
provided,  however,  that the Company shall deliver to such holder a due bill or
other  appropriate  instrument  evidencing  such holder's  right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.

            (m)   Anything in this Section 11 to the  contrary  notwithstanding,
the Company shall be entitled to make such  reductions in the Purchase Price, in
addition to those adjustments  expressly  required by this Section 11, as and to
the extent  that in their  good faith  judgment  the Board of  Directors  of the
Company shall determine to be advisable in order that any (i)  consolidation  or
subdivision of the Preferred Stock,  (ii) issuance wholly for cash of any shares
of Preferred Stock at


                                      -19-


<PAGE>



less than the current market price,  (iii) issuance wholly for cash of shares of
Preferred  Stock or  securities  which by their  terms are  convertible  into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the  Company  to  holders of its  Preferred  Stock  shall not be taxable to such
shareholders.

            (n)   The  Company  covenants  and agrees  that it shall not, at any
time after the  Distribution  Date, (i) consolidate with any other Person (other
than a Subsidiary  of the Company in a transaction  which  complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction  which complies with Section 11(o)  hereof),  or
(iii) sell or transfer (or permit any  Subsidiary to sell or  transfer),  in one
transaction,  or a series  of  related  transactions,  assets or  earning  power
aggregating  more than 50% of the assets or earning power of the Company and its
Subsidiaries  (taken as a whole) to any other Person or Persons  (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof),  if (x) at the time of or immediately after
such  consolidation,  merger or sale  there are any  rights,  warrants  or other
instruments  or  securities  outstanding  or  agreements  in effect  which would
substantially  diminish  or  otherwise  eliminate  the  benefits  intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such  consolidation,  merger  or  sale,  the  shareholders  of  the  Person  who
constitutes,  or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution  of Rights  previously  owned by
such Person or any of its Affiliates and Associates.

            (o)   The Company  covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 hereof,  take
(or permit  any  Subsidiary  to take) any  action if at the time such  action is
taken it is reasonably  foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.

            (p)   Anything in this Agreement to the contrary notwithstanding, in
the  event  that the  Company  shall  at any  time  after  the  Rights  Dividend
Declaration  Date and prior to the  Distribution  Date (i) declare a dividend on
the outstanding  shares of Common Stock payable in shares of Common Stock,  (ii)
subdivide  the  outstanding  shares  of  Common  Stock,  or  (iii)  combine  the
outstanding  shares of Common Stock into a smaller number of shares,  the number
of Rights associated with each share of Common Stock then outstanding, or issued
or  delivered   thereafter  but  prior  to  the  Distribution   Date,  shall  be
proportionately adjusted so that the number of Rights thereafter associated with
each  share of Common  Stock  following  any such event  shall  equal the result
obtained  by  multiplying  the  number of Rights  associated  with each share of
Common  Stock  immediately  prior to such event by a fraction  the  numerator of
which  shall  be  the  total  number  of  shares  of  Common  Stock  outstanding
immediately  prior to the  occurrence of the event and the  denominator of which
shall be the total  number of shares  of Common  Stock  outstanding  immediately
following the occurrence of such event.

            Section 12.  Certificate  of  Adjusted  Purchase  Price or Number of
Shares.  Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate  setting forth such
adjustment and a brief statement of the facts


                                      -20-


<PAGE>




accounting  for such  adjustment,  (b) promptly file with the Rights Agent,  and
with each transfer agent for the Preferred Stock and the Common Stock, a copy of
such certificate, and (c) mail or cause the Rights Agent to mail a brief summary
thereof to each holder of a Rights Certificate (or, if prior to the Distribution
Date,  to each holder of a certificate  representing  shares of Common Stock) in
accordance with Section 25 hereof.  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.

            Section 13. Consolidation,  Merger or Sale or Transfer of Assets
                        or Earning Power.

            (a)   In the  event  that,  following  the Stock  Acquisition  Date,
directly or indirectly,  (x) the Company shall  consolidate  with, or merge with
and into,  any  other  Person  (other  than a  Subsidiary  of the  Company  in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving  corporation of such consolidation or merger, (y)
any Person  (other  than a  Subsidiary  of the  Company in a  transaction  which
complies with Section 11(o)  hereof)  shall  consolidate  with, or merge with or
into,  the  Company,  and the  Company  shall  be the  continuing  or  surviving
corporation  of such  consolidation  or  merger  and,  in  connection  with such
consolidation or merger,  all or part of the outstanding  shares of Common Stock
shall be changed into or exchanged  for stock or other  securities  of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise  transfer),
in one transaction or a series of related transactions,  assets or earning power
aggregating  more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any  Subsidiary  of the  Company  in one or more  transactions  each of which
complies with Section 11(o) hereof),  then, and in each such case (except as may
be  contemplated  by Section 13(d) hereof),  proper  provision  shall be made so
that:  (i) each holder of a Right,  except as provided in Section  7(e)  hereof,
shall  thereafter  have the right to receive,  upon the exercise  thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued,  fully paid,  non-assessable and freely
tradeable  shares  of  Common  Stock of the  Principal  Party  (as such  term is
hereinafter defined),  not subject to any liens,  encumbrances,  rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section  11(a)(ii) Event
has occurred  prior to the first  occurrence of a Section 13 Event,  multiplying
the  number  of such  one  one-thousandths  of a  share  for  which a Right  was
exercisable  immediately  prior to the first  occurrence of a Section  11(a)(ii)
Event  by  the  Purchase  Price  in  effect  immediately  prior  to  such  first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event,  shall be referred to as the "Purchase Price" for each Right
and for all purposes of this  Agreement) by (2) 50% of the Current  Market Price
per  share  of  the  Common  Stock  of  such  Principal  Party  on the  date  of
consummation  of  such  Section  13  Event;  (ii)  such  Principal  Party  shall
thereafter be liable for, and shall assume,  by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement;  (iii)
the term "Company" shall  thereafter be deemed to refer to such Principal Party,
it being  specifically  intended that the  provisions of Section 11 hereof shall
apply only to such Principal


                                      -21-


<PAGE>



Party following the first occurrence of a Section 13 Event;  (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient  number  of  shares  of its  Common  Stock)  in  connection  with the
consummation  of any such  transaction  as may be  necessary  to assure that the
provisions  hereof shall  thereafter be applicable,  as nearly as reasonably may
be, in relation to its shares of Common Stock  thereafter  deliverable  upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.

            (b)   "Principal Party" shall mean

                  (i) in the case of any transaction  described in clause (x) or
            (y) of the first sentence of Section  13(a),  the Person that is the
            issuer of any  securities  into which  shares of Common Stock of the
            Company are  converted  in such merger or  consolidation,  and if no
            securities are so issued, the Person that is the other party to such
            merger or consolidation; and

                  (ii) in the case of any transaction described in clause (z) of
            the first  sentence of Section  13(a),  the Person that is the party
            receiving  the  greatest  portion  of the  assets or  earning  power
            transferred pursuant to such transaction or transactions;

provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect  Subsidiary of another  Person the Common Stock of which is
and has been so registered,  "Principal Party" shall refer to such other Person;
and (2) in case such Person is a  Subsidiary,  directly or  indirectly,  of more
than one Person,  the Common  Stock of two or more of which are and have been so
registered,  "Principal  Party"  shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.

            (c)   The  Company  shall  not  consummate  any such  consolidation,
merger,  sale or transfer  unless the  Principal  Party shall have a  sufficient
number of  authorized  shares of its Common  Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this  Section 13 and unless  prior  thereto the Company and such  Principal
Party shall have  executed  and  delivered  to the Rights  Agent a  supplemental
agreement  providing for the terms set forth in  paragraphs  (a) and (b) of this
Section 13 and further  providing that, as soon as practicable after the date of
any  consolidation,  merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will

                        (i) prepare and file a registration  statement under the
                  Act, with respect to the Rights and the securities purchasable
                  upon exercise of the Rights on an  appropriate  form, and will
                  use its best efforts to


                                      -22-


<PAGE>



                  cause such  registration  statement to (A) become effective as
                  soon as practicable after such filing and (B) remain effective
                  (with a prospectus  at all times meeting the  requirements  of
                  the Act) until the Expiration Date; and

                        (ii) will  deliver to  holders of the Rights  historical
                  financial  statements for the Principal  Party and each of its
                  Affiliates  which comply in all respects with the requirements
                  for registration on Form 10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section  11(a)(ii)  Event, the
Rights  which  have not  theretofore  been  exercised  shall  thereafter  become
exercisable in the manner described in Section 13(a).

            (d)   Notwithstanding  anything in this  Agreement to the  contrary,
Section 13 shall not be applicable to a transaction  described in  subparagraphs
(x) and (y) of  Section  13(a) if (i) such  transaction  is  consummated  with a
Person or Persons who acquired  shares of Common Stock  pursuant to a Qualifying
Offer (or a wholly owned  subsidiary  of any such Person or  Persons),  (ii) the
price per share of Common Stock offered in such transaction is not less than the
price per share of Common  Stock paid to all  holders of shares of Common  Stock
whose shares were purchased  pursuant to such tender offer or exchange offer and
(iii) the form of consideration being offered to the remaining holders of shares
of  Common  Stock  pursuant  to such  transaction  is the  same  as the  form of
consideration  paid  pursuant  to such  tender  offer or  exchange  offer.  Upon
consummation of any such  transaction  contemplated  by this Section 13(d),  all
Rights hereunder shall expire.

            Section 14.  Fractional Rights and Fractional Shares.

            (a)   The  Company  shall  not be  required  to issue  fractions  of
Rights,  except  prior to the  Distribution  Date as provided  in Section  11(p)
hereof, or to distribute Rights  Certificates which evidence  fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights  Certificates  with regard to which such  fractional  Rights would
otherwise  be  issuable,  an amount in cash  equal to the same  fraction  of the
current market value of a whole Right.  For purposes of this Section 14(a),  the
current  market value of a whole Right shall be the closing  price of the Rights
for the  Trading  Day  immediately  prior to the date on which  such  fractional
Rights would have been otherwise  issuable.  The closing price of the Rights for
any day  shall be the last sale  price,  regular  way,  or, in case no such sale
takes  place on such day,  the  average  of the  closing  bid and asked  prices,
regular  way,  in  either  case  as  reported  in  the  principal   consolidated
transaction  reporting  system with respect to securities  listed or admitted to
trading  on the New York  Stock  Exchange  or, if the  Rights  are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated  transaction  reporting system with respect to securities listed on
the  principal  national  securities  exchange on which the Rights are listed or
admitted to  trading,  or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price


                                      -23-


<PAGE>



or, if not so quoted,  the  average of the high bid and low asked  prices in the
over-the-counter  market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization,  the
average of the  closing  bid and asked  prices as  furnished  by a  professional
market maker making a market in the Rights selected by the Board of Directors of
the Company.  If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as  determined in good faith by
the Board of Directors of the Company shall be used.

            (b)   The Company shall not be required to issue fractions of shares
of Preferred  Stock (other than  fractions  which are integral  multiples of one
one-thousandth  of a share of Preferred Stock) upon exercise of the Rights or to
distribute  certificates  which evidence  fractional  shares of Preferred  Stock
(other than fractions which are integral  multiples of one  one-thousandth  of a
share of Preferred  Stock). In lieu of fractional shares of Preferred Stock that
are not integral  multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction  of the  current  market  value  of one  one-thousandth  of a share  of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one  one-thousandth of a share of Preferred Stock shall be one one-thousandth of
the  closing  price of a share of  Preferred  Stock (as  determined  pursuant to
Section  11(d)(ii)  hereof) for the Trading Day immediately prior to the date of
such exercise.

            (c)   Following the  occurrence of a Triggering  Event,  the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute  certificates which evidence fractional shares of
Common Stock. In lieu of fractional  shares of Common Stock, the Company may pay
to the  registered  holders of Rights  Certificates  at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current  market  value of one (1) shares of Common  Stock.  For purposes of this
Section  14(c),  the current  market value of one share of Common Stock shall be
the  closing  price of one share of  Common  Stock (as  determined  pursuant  to
Section  11(d)(i)  hereof) for the Trading Day immediately  prior to the date of
such exercise.

            (d)   The  holder  of a  Right  by  the  acceptance  of  the  Rights
expressly  waives  his or her  right to  receive  any  fractional  Rights or any
fractional shares upon exercise of a Right,  except as permitted by this Section
14.

            Section 15.  Rights of  Action.  All  rights of action in respect of
this  Agreement are vested in the  respective  registered  holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution  Date, of the Common Stock),  without the consent of the Rights
Agent  or of the  holder  of any  other  Rights  Certificate  (or,  prior to the
Distribution  Date, of the Common Stock),  may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or  proceeding  against the Company to enforce,  or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights  Certificate in
the


                                      -24-


<PAGE>



manner  provided  in such  Rights  Certificate  and in this  Agreement.  Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically  acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.

            Section 16. Agreement of Rights Holders.  Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

            (a)   prior  to  the   Distribution   Date,   the  Rights   will  be
transferable only in connection with the transfer of Common Stock;

            (b)   after the  Distribution  Date,  the  Rights  Certificates  are
transferable  only on the registry  books of the Rights Agent if  surrendered at
the  principal  office  or  offices  of the  Rights  Agent  designated  for such
purposes,  duly endorsed or accompanied  by a proper  instrument of transfer and
with the appropriate forms and certificates fully executed;

            (c)   subject to Section 6(a) and Section  7(f) hereof,  the Company
and the  Rights  Agent  may deem and treat  the  person  in whose  name a Rights
Certificate  (or, prior to the  Distribution  Date, the associated  Common Stock
certificate)  is  registered  as the  absolute  owner  thereof and of the Rights
evidenced thereby  (notwithstanding any notations of ownership or writing on the
Rights  Certificates or the associated  Common Stock  certificate made by anyone
other than the Company or the Rights  Agent) for all  purposes  whatsoever,  and
neither  the  Company  nor the Rights  Agent,  subject to the last  sentence  of
Section  7(e)  hereof,  shall be  required  to be  affected by any notice to the
contrary; and

            (d)   notwithstanding  anything in this  Agreement to the  contrary,
neither the Company nor the Rights Agent shall have any  liability to any holder
of a Right or other  Person as a result of its  inability  to perform any of its
obligations  under this  Agreement  by reason of any  preliminary  or  permanent
injunction  or other  order,  decree  or ruling  issued by a court of  competent
jurisdiction  or by a  governmental,  regulatory  or  administrative  agency  or
commission,  or any statute,  rule, regulation or executive order promulgated or
enacted by any  governmental  authority,  prohibiting  or otherwise  restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise  overturned
as soon as possible.

            Section 17. Rights Certificate  Holder Not Deemed a Shareholder.  No
holder, as such, of any Rights  Certificate  shall be entitled to vote,  receive
dividends   or  be  deemed  for  any   purpose  the  holder  of  the  number  of
one-thousandths  of a share of Preferred  Stock or any other  securities  of the
Company  which  may at any  time  be  issuable  on the  exercise  of the  Rights
represented  thereby,  nor shall  anything  contained  herein  or in any  Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any


                                      -25-


<PAGE>



right to vote for the  election of  directors  or upon any matter  submitted  to
shareholders  at any  meeting  thereof,  or to give or  withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
shareholders  (except as provided in Section 24 hereof), or to receive dividends
or subscription  rights,  or otherwise,  until the Right or Rights  evidenced by
such  Rights  Certificate  shall  have been  exercised  in  accordance  with the
provisions hereof.

            Section 18. Concerning the Rights Agent.

            (a)   The  Company  agrees  to pay to the  Rights  Agent  reasonable
compensation  for all services  rendered by it hereunder and, from time to time,
on demand of the Rights  Agent,  its  reasonable  expenses  and counsel fees and
disbursements  and  other  disbursements  incurred  in  the  administration  and
execution  of this  Agreement  and the exercise  and  performance  of its duties
hereunder.  The Company  also agrees to  indemnify  the Rights Agent for, and to
hold it harmless  against,  any loss,  liability,  or expense,  incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection  with the  acceptance
and administration of this Agreement,  including reasonable  attorneys' fees and
expenses and the costs and expenses of defending  against any claim of liability
in the  premises.  In no case  will the  Rights  Agent be  liable  for  special,
indirect,  incidental  or  consequential  loss or damage of any kind  whatsoever
(including but not limited to lost  profits),  even if the Rights Agent has been
advised of the  possibility  of such damages.  Any liability of the Rights Agent
will be  limited  to the  amount of fees  paid by the  Company  hereunder.  This
Section 18(a) shall survive the termination of this Agreement.

            (b)   The  Rights  Agent  shall  be  protected  and  shall  incur no
liability  for or in respect of any action  taken,  suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate  or  certificate  for Common  Stock or for other  securities  of the
Company,  instrument of assignment or transfer, power of attorney,  endorsement,
affidavit, letter, notice, direction, consent, certificate,  statement, or other
paper or document  believed by it to be genuine and to be signed,  executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.

            Section 19.  Merger  or  Consolidation  or  Change of Name of Rights
Agent.

            (a)   Any  corporation  into which the Rights Agent or any successor
Rights  Agent  may be  merged  or  with  which  it may be  consolidated,  or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder  services business of the Rights Agent or any
successor  Rights  Agent,  shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties  hereto;  provided,  however,  that such  corporation
would be  eligible  for  appointment  as a  successor  Rights  Agent  under  the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall  succeed  to the  agency  created  by this  Agreement,  any of the  Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature


                                      -26-


<PAGE>



of  a  predecessor  Rights  Agent  and  deliver  such  Rights   Certificates  so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned,  any successor Rights Agent may countersign such Rights
Certificates  either  in the  name  of the  predecessor  or in the  name  of the
successor  Rights Agent;  and in all such cases such Rights  Certificates  shall
have the full force provided in the Rights Certificates and in this Agreement.

            (b)   In case at any  time  the name of the  Rights  Agent  shall be
changed  and at  such  time  any of the  Rights  Certificates  shall  have  been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights  Certificates so  countersigned;  and in
case  at  that  time  any  of  the  Rights  Certificates  shall  not  have  been
countersigned,  the Rights Agent may countersign such Rights Certificates either
in its prior name or in its  changed  name;  and in all such  cases such  Rights
Certificates  shall have the full force provided in the Rights  Certificates and
in this Agreement.

            Section 20. Duties of Rights Agent.  The Rights Agent undertakes the
duties and  obligations  imposed by this Agreement upon the following  terms and
conditions,  by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

            (a)   The Rights  Agent may consult  with legal  counsel (who may be
legal  counsel for the  Company),  and the opinion of such counsel shall be full
and complete  authorization  and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.

            (b)   Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it  necessary  or desirable  that any fact or matter
(including,  without  limitation,  the identity of any Acquiring  Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action  hereunder,  such fact or matter (unless
other  evidence in respect  thereof be herein  specifically  prescribed)  may be
deemed to be conclusively  proved and established by a certificate signed by the
Chairman of the Board,  the President,  any Vice President,  the Treasurer,  any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full  authorization
to the Rights  Agent for any action  taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

            (c)   The Rights  Agent shall be liable  hereunder  only for its own
negligence, bad faith or willful misconduct.

            (d)   The Rights  Agent  shall not be liable for or by reason of any
of the  statements  of fact or recitals  contained  in this  Agreement or in the
Rights  Certificates  or be  required  to  verify  the  same  (except  as to its
countersignature  on such  Rights  Certificates),  but all such  statements  and
recitals are and shall be deemed to have been made by the Company only.



                                      -27-


<PAGE>



            (e)   The  Rights  Agent  shall not be under any  responsibility  in
respect of the validity of this  Agreement or the execution and delivery  hereof
(except  the due  execution  hereof by the  Rights  Agent) or in  respect of the
validity or execution  of any Rights  Certificate  (except its  countersignature
thereof);  nor shall it be  responsible  for any  breach by the  Company  of any
covenant or condition  contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment  required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner,  method or amount
of any such adjustment or the  ascertaining of the existence of facts that would
require  any such  adjustment  (except  with  respect to the  exercise of Rights
evidenced by Rights  Certificates  after actual notice of any such  adjustment);
nor  shall it by any act  hereunder  be  deemed  to make any  representation  or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred  Stock  to  be  issued  pursuant  to  this  Agreement  or  any  Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.

            (f)   The Company agrees that it will perform, execute,  acknowledge
and deliver or cause to be performed,  executed,  acknowledged and delivered all
such further and other acts,  instruments  and  assurances as may  reasonably be
required by the Rights Agent for the carrying  out or  performing  by the Rights
Agent of the provisions of this Agreement.

            (g)   The Rights Agent is hereby  authorized  and directed to accept
instructions  with respect to the  performance of its duties  hereunder from the
Chairman of the Board,  the President,  any Vice President,  the Secretary,  any
Assistant  Secretary,  the Treasurer or any Assistant  Treasurer of the Company,
and to apply to such officers for advice or  instructions in connection with its
duties,  and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.

            (h)   The Rights  Agent and any  shareholder,  director,  officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the  Company  may be  interested,  or  contract  with or lend money to the
Company or otherwise  act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

            (i)   The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder  either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the  Company  resulting  from any such  act,  default,
neglect or misconduct;  provided,  however, reasonable care was exercised in the
selection and continued employment thereof.

            (j)   No provision of this Agreement  shall require the Rights Agent
to expend or risk its own funds or otherwise  incur any  financial  liability in
the performance of any of its duties  hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that


                                      -28-


<PAGE>



repayment  of such  funds  or  adequate  indemnification  against  such  risk or
liability is not reasonably assured to it.

            (k)   If, with respect to any Right  Certificate  surrendered to the
Rights Agent for exercise or transfer,  the certificate  attached to the form of
assignment  or form of election to purchase,  as the case may be, has either not
been  completed  or  indicates  an  affirmative  response  to  clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.

            Section 21.  Change  of  Rights  Agent.  The  Rights  Agent  or  any
successor  Rights Agent may resign and be discharged  from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer  agent of the Common Stock and Preferred  Stock,  by registered or
certified  mail,  and to the holders of the Rights  Certificates  by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days'  notice in writing,  mailed to the Rights  Agent or  successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred  Stock, by registered or certified mail, and to the holders of the
Rights  Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a  successor  to the  Rights  Agent.  If the  Company  shall  fail to make  such
appointment  within a period of thirty  (30) days  after  giving  notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Rights  Certificate (who shall, with such notice,  submit his Rights Certificate
for  inspection  by the  Company),  then any  registered  holder  of any  Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent.  Any successor  Rights  Agent,  whether  appointed by the
Company or by such a court,  shall be a  corporation  or any affiliate of such a
corporation  organized and doing business under the laws of the United States or
of the State of New York (or of any other state of the United  States so long as
such  corporation  is authorized to do business as a banking  institution in the
State of New York),  in good  standing,  which is authorized  under such laws to
exercise  corporate trust powers and is subject to supervision or examination by
federal  or state  authority  and  which has at the time of its  appointment  as
Rights  Agent a combined  capital  and surplus of at least  $100,000,000.  After
appointment,  the  successor  Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent  without  further  act or deed;  but the  predecessor  Rights  Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance,  conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment,  the  Company  shall  file  notice  thereof  in  writing  with  the
predecessor  Rights  Agent and each  transfer  agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered  holders
of the Rights  Certificates.  Failure to give any  notice  provided  for in this
Section 21,  however,  or any defect  therein,  shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.



                                      -29-


<PAGE>



            Section 22. Issuance of New Rights Certificates. Notwithstanding any
of the  provisions  of this  Agreement  or of the  Rights to the  contrary,  the
Company may, at its option,  issue new Rights Certificates  evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change  in the  Purchase  Price and the  number or kind or class of shares or
other securities or property  purchasable under the Rights  Certificates made in
accordance  with the provisions of this  Agreement.  In addition,  in connection
with the issuance or sale of shares of Common Stock  following the  Distribution
Date and prior to the  redemption or  expiration of the Rights,  the Company (a)
shall,  with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement,  granted or
awarded  as of the  Distribution  Date,  or upon  the  exercise,  conversion  or
exchange of securities  hereinafter  issued by the Company,  and (b) may, in any
other case, if deemed  necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale;  provided,  however,  that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel  that such  issuance  would create a  significant  risk of
material  adverse  tax  consequences  to the  Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that,  appropriate  adjustment shall otherwise have
been made in lieu of the issuance thereof.

            Section 23. Redemption and Termination.

            (a)   The Board of Directors  of the Company may, at its option,  at
any time  prior to the  earlier  of (i) the close of  business  on the tenth day
following the Stock  Acquisition  Date (or, if the Stock  Acquisition Date shall
have occurred  prior to the Record Date,  the close of business on the tenth day
following the Record Date), or (ii) the Final  Expiration  Date,  redeem all but
not less than all the then  outstanding  Rights at a redemption  price of $0.001
per Right,  as such  amount may be  appropriately  adjusted to reflect any stock
split,  stock dividend or similar  transaction  occurring  after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption  hereunder has expired. The
Company may, at its option,  pay the Redemption Price in cash,  shares of Common
Stock  (based on the  "current  market  price",  as defined in Section  11(d)(i)
hereof,  of the  Common  Stock at the time of  redemption)  or any other form of
consideration deemed appropriate by the Board of Directors.

            (b)   Immediately  upon the action of the Board of  Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights  Agent and  without  any  further  action and  without any
notice,  the right to  exercise  the Rights  will  terminate  and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights,  the Company shall give notice of such  redemption
to the Rights  Agent and the holders of the then  outstanding  Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry  books of the Rights Agent or, prior to the  Distribution  Date, on
the registry books of the transfer agent for the Common Stock.  Any notice which
is mailed in the manner herein


                                      -30-


<PAGE>



provided shall be deemed given,  whether or not the holder  receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made.

            Section 24. Notice of Certain Events.

            (a)   In case the  Company  shall  propose,  at any time  after  the
Distribution  Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred  Stock or to make any other  distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company),  or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any  additional  shares
of  Preferred  Stock or shares  of stock of any  class or any other  securities,
rights or  options,  or (iii) to effect any  reclassification  of its  Preferred
Stock  (other  than  a  reclassification   involving  only  the  subdivision  of
outstanding  shares of Preferred  Stock), or (iv) to effect any consolidation or
merger into or with any other Person  (other than a Subsidiary of the Company in
a transaction  which complies with Section 11(o) hereof),  or to effect any sale
or other  transfer (or to permit one or more of its  Subsidiaries  to effect any
sale or other transfer), in one transaction or a series of related transactions,
of  more  than  50% of the  assets  or  earning  power  of the  Company  and its
Subsidiaries  (taken as a whole) to any other Person or Persons  (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies  with  Section  11(o)  hereof),  or  (v)  to  effect  the  liquidation,
dissolution  or winding up of the Company,  then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such  reclassification,  consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation  therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record  date for  determining  holders  of the shares of  Preferred
Stock for purposes of such action,  and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such  proposed  action
or the date of  participation  therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.

            (b)   In case  any of the  events  set  forth in  Section  11(a)(ii)
hereof shall occur,  then,  in any such case,  (i) the Company  shall as soon as
practicable  thereafter  give to each  holder  of a Rights  Certificate,  to the
extent  feasible  and in  accordance  with  Section 25  hereof,  a notice of the
occurrence of such event,  which shall specify the event and the consequences of
the event to holders of Rights  under  Section  11(a)(ii)  hereof,  and (ii) all
references  in the  preceding  paragraph  to  Preferred  Stock  shall be  deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.

            Section 25. Notices. Notices or demands authorized by this Agreement
to be  given  or  made  by the  Rights  Agent  or by the  holder  of any  Rights
Certificate to or on the Company shall be sufficiently  given or made if sent by
first-class mail, postage prepaid,  addressed(until  another address is filed in
writing with the Rights Agent) as follows:



                                      -31-


<PAGE>



                         Motorcar Parts & Accessories, Inc.
                         2727 Maricopa Street
                         Torrance, California  90503
                         Attention:  President

            Subject  to the  provisions  of  Section  21,  any  notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights  Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail,  postage prepaid,  addressed (until another
address is filed in writing with the Company) as follows:

                         Continental Stock Transfer & Trust Company
                         Two Broadway
                         New York, New York  10004
                         Attention:  Compliance Department

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights  Agent to the holder of any  Rights  Certificate  (or,  if
prior to the  Distribution  Date,  to the  holder of  certificates  representing
shares  of  Common  Stock)  shall  be  sufficiently  given  or  made  if sent by
first-class  mail,  postage prepaid,  addressed to such holder at the address of
such holder as shown on the registry books of the Company.

            Section 26.  Supplements and Amendments.  Prior to the  Distribution
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights  Agent  shall,  if the  Company so directs,  supplement  or amend any
provision of this Agreement  without the approval of any holders of certificates
representing  shares of Common Stock.  From and after the Distribution  Date and
subject to the  penultimate  sentence  of this  Section  26, the Company and the
Rights  Agent  shall,  if the  Company  so  directs,  supplement  or amend  this
Agreement  without the approval of any holders of Rights  Certificates  in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions  herein,
(iii) to shorten or  lengthen  any time period  hereunder,  or (iv) to change or
supplement  the  provisions  hereunder  in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights  Certificates  (other than an Acquiring Person or an Affiliate
or  Associate of an  Acquiring  Person);  provided,  this  Agreement  may not be
supplemented or amended to lengthen,  pursuant to clause (iii) of this sentence,
(A) a time  period  relating  to when the Rights may be redeemed at such time as
the Rights are not then  redeemable,  or (B) any other time  period  unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of,  and/or the  benefits  to, the  holders of Rights.  Upon the  delivery  of a
certificate  from an  appropriate  officer of the Company  which states that the
proposed supplement or amendment is in compliance with the terms of this Section
26, the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase  Price or the  number of one  one-thousandths  of a share of  Preferred
Stock for which a Right is exercisable.


                                      -32-


<PAGE>



Prior to the Distribution  Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.

            Section 27.  Successors.  All the covenants  and  provisions of this
Agreement  by or for the benefit of the  Company or the Rights  Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

            Section 28.  Determinations  and Actions by the Board of  Directors,
etc. For all purposes of this Agreement, any calculation of the number of shares
of Common Stock  outstanding at any particular  time,  including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial  Owner,  shall be made in accordance  with
the last sentence of Rule  13d-3(d)(1)(i)  of the General Rules and  Regulations
under the Exchange  Act.  The Board of  Directors of the Company  shall have the
exclusive  power and authority to administer  this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the  administration  of this Agreement,  including,
without limitation,  the right and power to (i) interpret the provisions of this
Agreement,  and (ii) make all  determinations  deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the  Agreement).  All such actions,  calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith,  shall (x) be final,  conclusive and binding on the Company,  the
Rights  Agent,  the  holders of the Rights  and all other  parties,  and (y) not
subject the Board to any liability to the holders of the Rights.

            Section 29.  Benefits of this  Agreement.  Nothing in this Agreement
shall be  construed  to give to any Person  other than the  Company,  the Rights
Agent and the registered  holders of the Rights  Certificates (and, prior to the
Distribution  Date,  registered  holders  of the  Common  Stock)  any  legal  or
equitable right, remedy or claim under this Agreement;  but this Agreement shall
be for the sole and exclusive  benefit of the Company,  the Rights Agent and the
registered  holders of the Rights  Certificates  (and, prior to the Distribution
Date, registered holders of the Common Stock).

            Section 30.  Severability.  If  any  term,  provision,  covenant  or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected,  impaired or invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors of the Company determines in its good faith judgment that severing the
invalid  language  from this  Agreement  would  adversely  affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be  reinstated  and shall not expire  until the close of  business  on the
tenth day following the date of such determination by the Board of Directors.



                                      -33-


<PAGE>



            Section 31.  Governing  Law.  This  Agreement,  each  Right and each
Rights  Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes  shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.

            Section 32.  Counterparts.  This  Agreement  may be  executed in any
number of counterparts and each of such  counterparts  shall for all purposes be
deemed to be an original,  and all such counterparts  shall together  constitute
but one and the same instrument.

            Section  33.  Descriptive  Headings.  Descriptive  headings  of  the
several  Sections of this Agreement are inserted for convenience  only and shall
not  control or affect  the  meaning or  construction  of any of the  provisions
hereof.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

Attest:                                       MOTORCAR PARTS & ACCESSORIES, INC.

By     /s/ Peter Bromberg                     By     /s/ Richard Marks
Name:  Peter Bromberg                         Name:  Richard Marks
Title: Chief Financial Officer                Title: President
       & Assistant Secretary               
                                           
                                           
                                           
Attest:                                       CONTINENTAL STOCK TRANSFER &
                                              TRUST COMPANY
                                           
By     /s/ Tuulikki Huovinen                  By     /s/ William F. Seegraber
Name:  Tuulikki Huovinen                      Name:  William F. Seegraber
Title: Assistant Secretary                    Title: Vice President
                                      





                                      -34-


<PAGE>




                                                                       Exhibit A


                         CERTIFICATE OF AMENDMENT OF THE
                          CERTIFICATE OF INCORPORATION

                                       of

                       MOTORCAR PARTS & ACCESSORIES, INC.

                Under Section 805 of the Business Corporation Law
                            of the State of New York


            We the undersigned,  Richard Marks,  President,  and Peter Bromberg,
Assistant  Secretary  of  Motorcar  Parts &  Accessories,  Inc.,  a  corporation
organized  and existing  under the laws of the State of New York,  in accordance
with the provisions of Section 104 of the Business  Corporation Law of the State
of New York, DO HEREBY CERTIFY:

      1.    The name of the  corporation is Motorcar  Parts & Accessories,  Inc.
(hereinafter called the "Corporation"). The name under which the Corporation was
formed was Motorcar Parts & Associates, Inc.

      2.    The  Certificate  of  Incorporation  was filed by the  Department of
State of the State of New York on April 2, 1968.

      3.    The  Certificate  of  Incorporation  of  the  Company,   as  amended
heretofore  (the  "Certificate  of  Incorporation"),  is further  amended by the
addition of the following provisions stating the number,  designation,  relative
rights,  preferences  and  limitations  of a series of  Preferred  Shares of the
Company designated as "Series A Junior Participating Preferred Stock."

      4.    To accomplish the foregoing amendment,  a new section (c) of Article
FOURTH  is added to the  Certificate  of  Incorporation,  which  section  (c) of
Article FOURTH reads in its entirety as follows:

            "(c) SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

            (1)   Designation  and Amount.  The shares of such  series  shall be
designated as "Series A Junior Participating  Preferred Stock" and the number of
shares constituting such series shall be 20,000.

            (2)   Dividends and Distributions.



                                       -1-


<PAGE>



                  (A)   The  holders of shares of Series A Junior  Participating
Preferred  Stock shall be entitled to receive,  when,  as and if declared by the
Board of Directors  out of funds legally  available  for the purpose,  quarterly
dividends payable in cash on the last day of March, June, September and December
in each year (each such date being  referred to herein as a "Quarterly  Dividend
Payment Date"),  commencing on the first Quarterly  Dividend  Payment Date after
the  first  issuance  of a share  or  fraction  of a share  of  Series  A Junior
Participating  Preferred  Stock,  in an amount per share (rounded to the nearest
cent)  equal to the  greater of (a) $0.01 or (b)  subject to the  provision  for
adjustment  hereinafter set forth, 1,000 times the aggregate per share amount of
all cash  dividends,  and 1,000 times the aggregate per share amount (payable in
kind) of all  non-cash  dividends or other  distributions  other than a dividend
payable in Common Stock or a  subdivision  of the  outstanding  Common Stock (by
reclassification  or  otherwise),   declared  on  the  Common  Stock  since  the
immediately  preceding  Quarterly Dividend Payment Date, or, with respect to the
first Quarterly  Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior  Participating  Preferred  Stock.  In the
event the  Corporation  shall at any time after  February  24, 1998 (the "Rights
Declaration  Date") (i) declare any dividend on Common  Stock  payable in Common
Stock,  (ii)  subdivide  the  outstanding  Common  Stock,  or (iii)  combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were  entitled  immediately  prior to such event  under  clause (b) of the
preceding  sentence shall be adjusted by  multiplying  such amount by a fraction
the  numerator  of which is the  number of shares  of Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

                  (B)   The Corporation shall declare a dividend or distribution
on the Series A Junior  Participating  Preferred  Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend  payable in Common  Stock);  provided  that, in the
event no dividend or  distribution  shall have been declared on the Common Stock
during the period  between  any  Quarterly  Dividend  Payment  Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series A Junior  Participating  Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.

                  (C)   Dividends  shall  begin to accrue and be  cumulative  on
outstanding  shares of Series A Junior  Participating  Preferred  Stock from the
Quarterly  Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior  Participating  Preferred Stock,  unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such  shares,  or unless the date of issue is a  Quarterly  Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such  dividends  shall begin to accrue and be cumulative  from such
Quarterly  Dividend  Payment Date.  Accrued but unpaid  dividends shall not bear
interest.  Dividends  paid  on the  shares  of  Series  A  Junior  Participating
Preferred Stock in an amount less than the total amount of such


                                       -2-


<PAGE>



dividends at the time accrued and payable on such shares shall be allocated  pro
rata on a  share-by-share  basis among all such shares at the time  outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A Junior  Participating  Preferred  Stock  entitled  to receive
payment of a dividend or distribution declared thereon,  which record date shall
be no more than 30 days prior to the date fixed for the payment thereof.

            (3)   Voting  Rights.  The  holders  of  shares  of  Series A Junior
Participating Preferred Stock shall have the following voting rights:

                  (A)   Subject to the provision for adjustment  hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder  thereof to 1,000  votes on all  matters  submitted  to a vote of the
shareholders of the Corporation.  In the event the Corporation shall at any time
after the Rights  Declaration  Date (i)  declare any  dividend  on Common  Stock
payable in Common Stock,  (ii) subdivide the outstanding  Common Stock, or (iii)
combine the  outstanding  Common Stock into a smaller number of shares,  then in
each such case the  number  of votes  per  share to which  holders  of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event  shall be  adjusted  by  multiplying  such  number by a fraction  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

                  (B)   Except  as  otherwise  provided  herein  or by law,  the
holders  of  shares  of Series A Junior  Participating  Preferred  Stock and the
holders  of  Common  Stock  shall  vote  together  as one  class on all  matters
submitted to a vote of shareholders of the Corporation.

                  (C)   (i) If at any  time  dividends  on any  Series  A Junior
Participating  Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly  dividends thereon,  the occurrence of such contingency shall mark the
beginning  of a period  (herein  called a "default  period")  which shall extend
until such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly  dividend period on all shares of
Series A Junior  Participating  Preferred Stock then outstanding shall have been
declared and paid or set apart for  payment.  During each  default  period,  all
holders  of  Preferred  Stock   (including   holders  of  the  Series  A  Junior
Participating  Preferred  Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class,  irrespective of series,
shall have the right to elect two (2) directors.

                        (ii)  During any default  period,  such voting  right of
the holders of Series A Junior  Participating  Preferred  Stock may be exercised
initially at a special  meeting called  pursuant to  subparagraph  (iii) of this
Section 3(C) or at any annual meeting of shareholders,  and thereafter at annual
meetings of shareholders, provided that such voting right shall not be exercised
unless the holders of ten percent  (10%) in number of shares of Preferred  Stock
outstanding  shall be present in person or by proxy.  The absence of a quorum of
the  holders of Common  Stock  shall not affect the  exercise  by the holders of
Preferred Stock of such voting right. At any meeting at which


                                       -3-


<PAGE>



the holders of Preferred Stock shall exercise such voting right initially during
an existing  default  period,  they shall have the right,  voting as a class, to
elect directors to fill such vacancies, if any, in the Board of Directors as may
then exist up to two (2)  directors  or, if such right is exercised at an annual
meeting,  to elect two (2)  directors.  If the number which may be so elected at
any special meeting does not amount to the required  number,  the holders of the
Preferred  Stock  shall  have the right to make such  increase  in the number of
directors  as shall be  necessary to permit the election by them of the required
number.  After the holders of the  Preferred  Stock shall have  exercised  their
right to elect  directors in any default  period and during the  continuance  of
such period,  the number of directors shall not be increased or decreased except
by vote of the holders of Preferred  Stock as herein provided or pursuant to the
rights of any equity securities  ranking senior to or pari passu with the Series
A Junior Participating Preferred Stock.

                        (iii) Unless  the  holders  of  Preferred  Stock  shall,
during an existing  default  period,  have  previously  exercised their right to
elect directors, the Board of Directors may order, or, subject to the provisions
of the Certificate of Incorporation, as amended, any stockholder or shareholders
owning in the  aggregate  not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding,  irrespective of series, may request, the
calling of special  meeting of the holders of  Preferred  Stock,  which  meeting
shall thereupon be called by the President, a Vice-President or the Secretary of
the  Corporation.  Notice of such  meeting  and of any  annual  meeting at which
holders of  Preferred  Stock are  entitled to vote  pursuant  to this  Paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing a
copy of such notice to him or her at his or her last address as the same appears
on the books of the  Corporation.  Such  meeting  shall be called for a time not
earlier  than 20 days and not later  than 60 days after such order or request or
in default of the  calling  of such  meeting  within 60 days after such order or
request,  such  meeting may be called on similar  notice by any  shareholder  or
shareholders  owning in the  aggregate  not less than ten  percent  (10%) of the
total  number of shares of  Preferred  Stock  outstanding.  Notwithstanding  the
provisions of this Paragraph  (C)(iii),  no such special meeting shall be called
during the period  within 60 days  immediately  preceding the date fixed for the
next annual meeting of the shareholders.

                        (iv)  In any  default  period,  the  holders  of  Common
Stock,  and other  classes  of stock of the  Corporation  if  applicable,  shall
continue to be entitled to elect the whole number of directors until the holders
of Preferred  Stock shall have exercised  their right to elect two (2) directors
voting as a class,  after the  exercise  of which  right  (x) the  directors  so
elected by the holders of Preferred  Stock shall  continue in office until their
successors  shall have been elected by such holders or until the  expiration  of
the default period, and (y) any vacancy in the Board of Directors may (except as
provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining  directors  theretofore  elected by the holders of the class of
stock  which  elected  the  Director  whose  office  shall have  become  vacant.
References  in  this  Paragraph  (C) to  directors  elected  by the  holders  of
particular class of stock shall include  directors  elected by such directors to
fill vacancies as provided in clause (y) of the foregoing sentence.

                        (v)   Immediately  upon  the  expiration  of  a  default
period,  (x) the right of the  holders  of  Preferred  Stock as a class to elect
directors shall cease, (y) the term of any


                                       -4-


<PAGE>



directors  elected by the holders of Preferred Stock as a class shall terminate,
and (z) the number of  directors  shall be such number as may be provided for in
the Certificate of  Incorporation  or By-laws  irrespective of any increase made
pursuant to the  provisions of Paragraph  (C)(ii) of this Section 3 (such number
being subject, however, to change thereafter in any manner provided by law or in
the  Certificate  of  Incorporation  or By-Laws).  Any vacancies in the Board of
Directors  effected by the  provisions  of clauses (y) and (z) in the  preceding
sentence may be filled by a majority of the remaining directors.

                  (D)   Except as set forth  herein,  holders of Series A Junior
Participating  Preferred  Stock  shall have no special  voting  rights and their
consent  shall not be required  (except to the extent they are  entitled to vote
with  holders of Common  Stock as set forth  herein)  for  taking any  corporate
action.

            (4)   Certain Restrictions.

                  (A)   Whenever  quarterly  dividends  or  other  dividends  or
distributions  payable on the Series A Junior  Participating  Preferred Stock as
provided in Section 2 of this Section (c) are in arrears,  thereafter  and until
all accrued and unpaid dividends and distributions,  whether or not declared, on
shares of Series A Junior  Participating  Preferred Stock outstanding shall have
been paid in full, the Corporation shall not

                        (i)   declare  or  pay  dividends  on,  make  any  other
distributions  on, or redeem or purchase or otherwise  acquire for consideration
any shares of stock ranking junior (either as to dividends or upon  liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock;

                        (ii)  declare  or pay  dividends  on or make  any  other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon  liquidation,  dissolution  or  winding  up)  with  the  Series A Junior
Participating  Preferred  Stock,  except  dividends paid ratably on the Series A
Junior  Participating  Preferred  Stock  and all  such  parity  stock  on  which
dividends  are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

                        (iii) redeem  or  purchase  or  otherwise   acquire  for
consideration shares of any stock ranking on a parity (either as to dividends or
upon  liquidation,   dissolution  or  winding  up)  with  the  Series  A  Junior
Participating  Preferred  Stock,  provided that the  Corporation may at any time
redeem,  purchase  or  otherwise  acquire  shares  of any such  parity  stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or

                        (iv)  purchase or  otherwise  acquire for  consideration
any shares of Series A Junior  Participating  Preferred  Stock, or any shares of
stock  ranking  on a parity  with the  Series A Junior  Participating  Preferred
Stock, except in accordance with a purchase offer made in


                                       -5-


<PAGE>



writing or by  publication  (as  determined  by the Board of  Directors)  to all
holders  of such  shares  upon  such  terms  as the  Board of  Directors,  after
consideration of the respective  annual dividend rates and other relative rights
and  preferences of the respective  series and classes,  shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.

                  (B)   The  Corporation  shall not permit any subsidiary of the
Corporation  to purchase or otherwise  acquire for  consideration  any shares of
stock of the Corporation  unless the Corporation  could,  under Paragraph (A) of
this Section 3,  purchase or  otherwise  acquire such shares at such time and in
such manner.

            (5)   Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever  shall be  retired  and  cancelled  promptly  after  the  acquisition
thereof.  All such shares shall upon their  cancellation  become  authorized but
unissued  shares of Preferred  Stock and may be reissued as part of a new series
of Preferred  Stock to be created by resolution or  resolutions  of the Board of
Directors,  subject to the  conditions  and  restrictions  on issuance set forth
herein.

            (6)   Liquidation, Dissolution or Winding Up.

                  (A)   Upon   any   liquidation   (voluntary   or   otherwise),
dissolution or winding up of the Corporation,  no distribution  shall be made to
the holders of shares of stock  ranking  junior  (either as to dividends or upon
liquidation,  dissolution  or winding  up) to the Series A Junior  Participating
Preferred Stock unless,  prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received an amount equal to 1,000 times
the Exercise  Price,  plus an amount equal to accrued and unpaid  dividends  and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference").  Following the payment of the full amount of
the Series A Liquidation Preference,  no additional  distributions shall be made
to the  holders  of  shares  of Series A Junior  Participating  Preferred  Stock
unless, prior thereto, the holders of Common Stock shall have received an amount
per share (the "Common  Adjustment")  equal to the quotient obtained by dividing
(i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted
as set forth in  subparagraph  (C) below to reflect such events as stock splits,
stock  dividends and  recapitalizations  with respect to the Common Stock) (such
number in clause (ii), the  "Adjustment  Number").  Following the payment of the
full amount of the Series A Liquidation  Preference and the Common Adjustment in
respect of all  outstanding  shares of Series A Junior  Participating  Preferred
Stock and Common Stock,  respectively,  holders of Series A Junior Participating
Preferred  Stock and holders of Common  Stock shall  receive  their  ratable and
proportionate  share of the remaining  assets to be  distributed in the ratio of
the  Adjustment  Number to 1 with  respect  to such  Preferred  Stock and Common
Stock, on a per share basis, respectively.

                  (B)   In the event,  however,  that  there are not  sufficient
assets  available  to  permit  payment  in  full  of the  Series  A  Liquidation
Preference  and the  liquidation  preferences  of all other  series of preferred
stock,  if any,  which rank on a parity  with the Series A Junior  Participating
Preferred Stock, then such remaining assets shall be distributed  ratably to the
holders of such parity


                                       -6-


<PAGE>



shares in proportion to their respective liquidation preferences.  In the event,
however,  that there are not  sufficient  assets  available to permit payment in
full of the Common  Adjustment,  then such remaining assets shall be distributed
ratably to the holders of Common Stock.

                  (C)   In the event the Corporation shall at any time after the
Rights  Declaration  Date (i) declare any  dividend on Common  Stock  payable in
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the  Adjustment  Number  in  effect  immediately  prior to such  event  shall be
adjusted by multiplying  such  Adjustment  Number by a fraction the numerator of
which is the number of Common Stock outstanding immediately after such event and
the  denominator  of which is the number of Common  Stock that were  outstanding
immediately prior to such event.

            (7)   Consolidation,  Merger,  etc.  In case the  Corporation  shall
enter into any consolidation,  merger, combination or other transaction in which
the Common Stock are  exchanged  for or changed into other stock or  securities,
cash  and/or  any other  property,  then in any such case the shares of Series A
Junior  Participating  Preferred  Stock  shall  at the  same  time be  similarly
exchanged  or changed  in an amount  per share  (subject  to the  provision  for
adjustment  hereinafter set forth) equal to 1,000 times the aggregate  amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be,  into  which or for which  each  share of  Common  Stock is  changed  or
exchanged.  In the  event the  Corporation  shall at any time  after the  Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the  preceding  sentence with respect to the exchange or
change  of  shares of Series A Junior  Participating  Preferred  Stock  shall be
adjusted by multiplying  such amount by a fraction the numerator of which is the
number of shares of Common Stock  outstanding  immediately  after such event and
the  denominator  of which is the  number of shares  of Common  Stock  that were
outstanding immediately prior to such event.

            (8)   No  Redemption.  The  shares of Series A Junior  Participating
Preferred Stock shall not be redeemable.

            (9)   Ranking. The Series A Junior Preferred Stock shall rank junior
to all other series of the  Corporation's  Preferred  Stock as to the payment of
dividends and the  distribution  of assets,  unless the terms of any such series
shall provide otherwise.

            (10)  Amendment.  The Certificate of Incorporation,  as amended,  of
the  Corporation  shall  not be  further  amended  in  any  manner  which  would
materially  alter or change the  powers,  preferences  or special  rights of the
Series A Junior  Participating  Preferred  Stock so as to affect them  adversely
without  the  affirmative  vote  of the  holders  of a  majority  or more of the
outstanding  shares of Series A Junior  Participating  Preferred  Stock,  voting
separately as a class.

            (11)  Fractional  Shares.  Series A Junior  Participating  Preferred
Stock may be issued in fractions of a share which shall  entitle the holder,  in
proportion to such holders fractional shares,


                                       -7-


<PAGE>



to exercise voting rights,  receive dividends,  participate in distributions and
to have  the  benefit  of all  other  rights  of  holders  of  Series  A  Junior
Participating Preferred Stock."

      5.    The manner in which the foregoing  amendment of the  Certificate  of
Incorporation  was  authorized  is a  follows:  The  Board of  Directors  of the
Corporation  authorized the amendment  under the authority  vested in said Board
under the provisions of the Certificate of  Incorporation  and of Section 502 of
the Business Corporation Law.

            IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite  each of our names below and do hereby  affirm,  under the penalties of
perjury,  that the statements contained therein have been examined by us and are
true and correct.

Date:  February 24, 1998


                                            Name:    Richard Marks
                                            Title:   President


                                            Name:    Peter Bromberg
                                            Title:   Chief Financial Officer
                                                     and Assistant Secretary





                                       -8-


<PAGE>





                                                                       Exhibit B

[Form of Rights Certificate]

Certificate No. R-                                                  _____ Rights

NOT EXERCISABLE AFTER MARCH 12, 2008 OR EARLIER IF REDEEMED BY THE COMPANY.  THE
RIGHTS ARE SUBJECT TO  REDEMPTION,  AT THE OPTION OF THE COMPANY,  AT $0.001 PER
RIGHT  ON  THE  TERMS  SET  FORTH  IN  THE  RIGHTS   AGREEMENT.   UNDER  CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS  AGREEMENT) AND ANY  SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS  REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY  OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING  PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS  AGREEMENT).   ACCORDINGLY,   THIS  RIGHTS  CERTIFICATE  AND  THE  RIGHTS
REPRESENTED  HEREBY MAY BECOME NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]1

Rights Certificate

MOTORCAR PARTS & ACCESSORIES, INC.

            This certifies that _______________________ , or registered assigns,
is the registered  owner of the number of Rights set forth above,  each of which
entitles the owner thereof,  subject to the terms,  provisions and conditions of
the Rights  Agreement,  dated as of February 24, 1998 (the "Rights  Agreement"),
between  Motorcar  Parts  &  Accessories,  Inc.,  a New  York  corporation  (the
"Company"),  and  Continental  Stock  Transfer  &  Trust  Company  , a New  York
corporation (the "Rights Agent"), to purchase from the Company at any time prior
to 5:00 P.M. (New York City time) on March 12 , 2008 at the office or offices of
the Rights Agent designated for such purpose, or its successors as Rights Agent,
one  one-thousandth  of a fully  paid,  non-assessable  share of Series A Junior
Participating  Preferred  Stock (the  "Preferred  Stock") of the  Company,  at a
purchase  price of  $65.00  per one  one-thousandth  of a share  (the  "Purchase
Price"),  upon  presentation  and surrender of this Rights  Certificate with the
Form of Election to Purchase and related  Certificate duly executed.  The number
of Rights  evidenced by this Rights  Certificate (and the number of shares which
may be purchased upon exercise  thereof) set forth above, and the Purchase Price
per share set forth  above,  are the number and  Purchase  Price as of March 12,
1998 based on the  Preferred  Stock as  constituted  at such date.  The  Company
reserves the right to require prior to the occurrence of a Triggering

- --------

1     The portion of the legend in brackets shall be inserted only if applicable
      and shall replace the preceding sentence.


                                       -1-


<PAGE>



Event (as such term is defined in the Rights  Agreement) that a number of Rights
be exercised so that only whole shares of Preferred Stock will be issued.

            Upon the  occurrence of a Section  11(a)(ii)  Event (as such term is
defined  in the  Rights  Agreement),  if the  Rights  evidenced  by this  Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring  Person (as such terms are defined in the Rights
Agreement),  (ii) a  transferee  of any  such  Acquiring  Person,  Associate  or
Affiliate,  or  (iii)  under  certain  circumstances  specified  in  the  Rights
Agreement,  a  transferee  of a person  who,  after  such  transfer,  became  an
Acquiring  Person,  or an Affiliate or  Associate of an Acquiring  Person,  such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the  occurrence of such Section  11(a)(ii)
Event.

            As  provided in the Rights  Agreement,  the  Purchase  Price and the
number and kind of shares of Preferred Stock or other  securities,  which may be
purchased upon the exercise of the Rights  evidenced by this Rights  Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.

            This Rights  Certificate is subject to all of the terms,  provisions
and conditions of the Rights Agreement,  which terms,  provisions and conditions
are hereby  incorporated herein by reference and made a part hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned  office of the
Rights Agent and are also available upon written request to the Rights Agent.

            This Rights Certificate,  with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose,  may be exchanged  for another  Rights  Certificate  or Rights
Certificates  of like tenor and date evidencing  Rights  entitling the holder to
purchase a like aggregate number of one  one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights  Certificate or Rights  Certificates
surrendered  shall  have  entitled  such  holder  to  purchase.  If this  Rights
Certificate  shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights  Certificates for the
number of whole Rights not exercised.

            Subject  to the  provisions  of the  Rights  Agreement,  the  Rights
evidenced by this  Certificate may be redeemed by the Company at its option at a
redemption  price of $0.001  per Right at any time  prior to the  earlier of the
close of business on (i) the tenth day following the Stock  Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. In addition, the Rights may be exchanged,  in whole or in
part,  for shares of Common Stock,  or shares of preferred  stock of the Company
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the


                                       -2-


<PAGE>



Company  authorizing  any such  exchange,  and without any further action or any
notice,  the Rights  (other than Rights which are not subject to such  exchange)
will  terminate  and the Rights will only  enable  holders to receive the shares
issuable upon such  exchange.  No fractional  shares of Preferred  Stock will be
issued upon the  exercise of any Right or Rights  evidenced  hereby  (other than
fractions  which are  integral  multiples  of one  one-thousandth  of a share of
Preferred  Stock,  which may, at the  election of the  Company,  be evidenced by
depositary  receipts),  but in lieu  thereof  a cash  payment  will be made,  as
provided in the Rights Agreement.

            No holder of this  Rights  Certificate  shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock  or of any  other  securities  of the  Company  which  may at any  time be
issuable on the  exercise  hereof,  nor shall  anything  contained in the Rights
Agreement or herein be construed to confer upon the holder hereof,  as such, any
of the  rights  of a  stockholder  of the  Company  or any right to vote for the
election  of  directors  or upon any matter  submitted  to  shareholders  at any
meeting thereof,  or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions  affecting  shareholders  (except as
provided  in the Rights  Agreement),  or to receive  dividends  or  subscription
rights,  or  otherwise,  until  the  Right or Rights  evidenced  by this  Rights
Certificate shall have been exercised as provided in the Rights Agreement.

            This Rights  Certificate  shall not be valid or  obligatory  for any
purpose until it shall have been countersigned by the Rights Agent.

            WITNESS  the  facsimile  signature  of the  proper  officers  of the
Company and its corporate seal.

Dated:

ATTEST:                                       MOTORCAR PARTS & ACCESSORIES, INC.

_____________________________                 By________________________________
    Assistant Secretary                                     Title:

Countersigned:

CONTINENTAL STOCK TRANSFER
           & TRUST COMPANY

By___________________________
      Authorized Officer


[Form of Reverse Side of Rights Certificate]



                                       -3-


<PAGE>



FORM OF ASSIGNMENT

(To be executed by the registered  holder if such holder desires to transfer the
Rights Certificate.)

FOR VALUE RECEIVED

hereby sells, assigns and transfer unto

                  (Please print name and address of transferee)

this Rights  Certificate,  together with all right,  title and interest therein,
and does hereby irrevocably constitute and appoint  _________________  Attorney,
to  transfer  the within  Rights  Certificate  on the books of the  within-named
Company, with full power of substitution.

Dated: ___________________, 19__


                                                     ___________________________
                                                              Signature


Signature Guaranteed:



                                       -4-


<PAGE>




                                   Certificate

The undersigned hereby certifies by checking the appropriate boxes that:

            (1) this Rights  Certificate [ ] is [ ] is not being sold,  assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an  Affiliate  or  Associate  of any such  Acquiring  Person  (as such terms are
defined pursuant to the Rights Agreement);

            (2) after due inquiry and to the best knowledge of the  undersigned,
it [ ] did [ ] did not acquire the Rights  evidenced by this Rights  Certificate
from any Person who is, was or  subsequently  became an  Acquiring  Person or an
Affiliate or Associate of an Acquiring Person.

Dated: __________________, 19__                           ______________________
                                                                 Signature

Signature Guaranteed:

                                     NOTICE

            The  signature to the  foregoing  Assignment  and  Certificate  must
correspond  to the name as written upon the face of this Rights  Certificate  in
every particular, without alteration or enlargement or any change whatsoever.



                                       -5-


<PAGE>



                          FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise  Rights  represented by the Rights
Certificate.)

To:  MOTORCAR PARTS & ACCESSORIES, INC.:

The  undersigned  hereby  irrevocably  elects  to  exercise   __________  Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable  upon the  exercise  of the  Rights (or such  other  securities  of the
Company or of any other  person  which may be issuable  upon the exercise of the
Rights) and requests that  certificates for such shares be issued in the name of
and delivered to:

Please insert social security
or other identifying number


                         (Please print name and address)


            If such number of Rights  shall not be all the Rights  evidenced  by
this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number


                         (Please print name and address)


Dated:  _______________, 19__                             ______________________
                                                                 Signature

Signature Guaranteed:




                                       -6-


<PAGE>



                                   Certificate

The undersigned hereby certifies by checking the appropriate boxes that:

            (1) the Rights evidenced by this Rights  Certificate [ ] are [ ] are
not  being  exercised  by or on behalf  of a Person  who is or was an  Acquiring
Person or an Affiliate or Associate of any such Acquiring  Person (as such terms
are defined pursuant to the Rights Agreement);

            (2) after due inquiry and to the best knowledge of the  undersigned,
it [ ] did [ ] did not acquire the Rights  evidenced by this Rights  Certificate
from any Person who is, was or became an  Acquiring  Person or an  Affiliate  or
Associate of an Acquiring Person.


Dated: ___________, 19__                             ___________________________
                                                             Signature

Signature Guaranteed:

                                     NOTICE

            The signature to the foregoing  Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights  Certificate
in every particular, without alteration or enlargement or any change whatsoever.





                                       -7-


<PAGE>



                                                                       Exhibit C

                     DETAILED SUMMARY OF RIGHTS TO PURCHASE
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

            On February  24, 1998,  the Board of  Directors of Motorcar  Parts &
Accessories,  Inc. (the "Company") adopted a Shareholder Rights Plan,  providing
that one Right shall be attached to each share of Common Stock,  par value $0.01
per share  (the  "Common  Stock"),  of the  Company.  Each  Right  entitles  the
registered  holder to purchase from the Company a unit (a "Unit")  consisting of
one one-thousandth of a share of Series A Junior Participating  Preferred Stock,
par value  $0.01 per share (the  "Preferred  Stock"),  at a purchase  price (the
"Purchase Price") of $65.00 per one one-thousandth of a share of Preferred Stock
(a "Unit"),  subject to adjustment.  The description and terms of the Rights are
set forth in the Rights Agreement (the "Rights Agreement"), dated as of February
24, 1998,  between the Company and Continental Stock Transfer & Trust Company, a
New York corporation, as Rights Agent (the "Rights Agent").

            Initially,   the  Rights  will  be  attached  to  all  Common  Stock
certificates  representing  shares  then  outstanding,  and no  separate  Rights
Certificate will be distributed.  The Rights will separate from the Common Stock
upon the earlier of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring  Person") has acquired,
or has obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding  shares of Common Stock (the "Stock  Acquisition  Date") or (ii) ten
business days  following the  commencement  of a tender offer or exchange  offer
that would result in a person or group  beneficially  owning 20% or more of such
outstanding   shares  of  Common  Stock  (the  earlier  of  (i)  and  (ii),  the
"Distribution  Date").  The definition of Acquiring  Person,  subject to certain
limitations set forth in the Rights Agreement, excludes Mel Marks, Richard Marks
and their Affiliates or Associates.  Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock  certificates and will be transferred with
and only with such Common Stock certificates, (ii) new Common Stock certificates
will contain a notation  incorporating  the Rights  Agreement  by reference  and
(iii)  the  surrender  for  transfer  of  any   certificates  for  Common  Stock
outstanding will also constitute the transfer of the Rights  associated with the
Common Stock represented by such certificate.

            The Rights are not exercisable  until the Distribution Date and will
expire at the close of business on March 12, 2008 unless earlier redeemed by the
Company as described below. At no time will the Rights have any voting power.

            As  soon  as  practicable   after  the  Distribution   Date,  Rights
Certificates  will be mailed to holders of record of the Common  Stock as of the
close of business on the Distribution Date and, thereafter,  the separate Rights
Certificates alone will represent the Rights.  Except as otherwise determined by
the  Board of  Directors,  only  shares  of  Common  Stock  issued  prior to the
Distribution Date will be issued with Rights.



                                       -1-


<PAGE>



            In the event that an Acquiring  Person becomes the beneficial  owner
of 20% or more of the then  outstanding  shares of  Common  Stock  (unless  such
acquisition is made pursuant to a tender or exchange  offer for all  outstanding
shares of the Company,  at a price  determined by a majority of the  independent
directors of the Company who are not  representatives,  nominees,  Affiliates or
Associates of an Acquiring  Person to be fair and otherwise in the best interest
of the  Company and its  shareholders  after  receiving  advice from one or more
investment  banking firms (a "Qualifying  Offer")),  each holder of a Right will
thereafter have the right to receive, upon exercise, shares of Common Stock (or,
in certain  circumstances,  cash,  property or other securities of the Company),
having a value equal to two times the Exercise Price of the Right.  The Exercise
Price is the  Purchase  Price  times  the  number  of  shares  of  Common  Stock
associated  with  each  Right  (initially,  one).  Notwithstanding  any  of  the
foregoing,  following  the  occurrence  of any of the  events  set forth in this
paragraph  (the  "Flip-in  Events"),  all  Rights  that are,  or (under  certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring  Person  will be null and void.  However,  Rights are not  exercisable
following the occurrence of any of the Flip-in Events set forth above until such
time as the Rights are no longer redeemable by the Company as set forth below.

            In the event that  following  the Stock  Acquisition  Date,  (i) the
Company  engages in a merger or business  combination  transaction  in which the
Company  is not the  surviving  corporation  (other  than a  merger  consummated
pursuant  to a  Qualifying  Offer);  (ii) the  Company  engages  in a merger  or
business  combination   transaction  in  which  the  Company  is  the  surviving
corporation  and the Common  Stock of the  Company is changed or  exchanged;  or
(iii)  more  than  50% of the  Company's  assets  or  earning  power  is sold or
transferred,  each holder of a Right (except Rights which have  previously  been
voided as set forth  above)  shall  thereafter  have the right to receive,  upon
exercise of the Right,  common  stock of the  acquiring  company  having a value
equal to two times the Exercise Price of the Right.

            The  Purchase  Price  payable,  and the number of Units of Preferred
Stock or other  securities or property  issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent  dilution (i) in the event of
a stock dividend on, or a subdivision,  combination or reclassification  of, the
Preferred  Stock,  (ii) if holders of the  Preferred  Stock are granted  certain
rights or warrants to subscribe for Preferred Stock or convertible securities at
less than the current  market price of the  Preferred  Stock,  or (iii) upon the
distribution  to holders of the Preferred  Stock of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).

            With certain  exceptions,  no adjustments in the Purchase Price will
be required until cumulative  adjustments  amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the  Preferred  Stock on the last
trading date prior to the date of exercise.

            At any time until ten days following the Stock Acquisition Date, the
Company  may redeem the Rights in whole,  but not in part,  at a price of $0.001
per Right. Immediately upon the


                                       -2-


<PAGE>



action of the Board of Directors  ordering  redemption of the Rights, the Rights
will  terminate  and the only right of the  holders of Rights will be to receive
the $0.001 redemption price.

            Until a Right is exercised,  the holder thereof,  as such, will have
no rights as a shareholder of the Company,  including,  without limitation,  the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company,  shareholders  may,  depending
upon the  circumstances,  recognize  taxable income in the event that the Rights
become  exercisable for shares of Common Stock (or other  consideration)  of the
Company as set forth above or in the event that the Rights are redeemed.

            Other than those provisions relating to the principal economic terms
of the Rights,  any of the provisions of the Rights  Agreement may be amended by
the Board of Directors of the Company prior to the Distribution  Date. After the
Distribution  Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any  ambiguity,  to make changes  which do not  adversely
affect the  interests  of  holders  of Rights  (excluding  the  interest  of any
Acquiring  Person),  or to shorten or lengthen  any time period under the Rights
Agreement;  provided,  however,  that no  amendment  to adjust  the time  period
governing  redemption  shall  be  made  at  such  time  as the  Rights  are  not
redeemable.

            A copy of the Rights  Agreement  is being filed with the  Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.  This
Summary  Description  of the  Rights  does not  purport  to be  complete  and is
qualified  in its  entirety  by  reference  to the  Rights  Agreement,  which is
incorporated herein by reference.




                                       -3-








                       THIRD AMENDMENT TO CREDIT AGREEMENT


           THIS  THIRD  AMENDMENT  TO CREDIT  AGREEMENT  (this  "Amendment")  is
entered  into  as of  February  10,  1998,  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  1.2(d)  is  hereby  deleted  in its  entirety,  and  the
following substituted therefor:

                               "(d) UNUSED COMMITMENT FEE. Borrower shall pay to
                     Bank a fee equal to  one-fifth  of one percent  (0.20%) per
                     annum (computed on the basis of a 360-day year, actual days
                     elapsed) on the average  daily unused amount of the Line of
                     Credit, which fee shall be calculated on an annual basis
 by
                     Bank and shall be due and  payable by  Borrower  in arrears
                     within five (5) days after each billing is sent by Bank."

           2. 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.

           3. Buyer 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.




<PAGE>


           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/ PETER BROMBERG                               By: /S/ JOHN P. MANNING
   ---------------------                                -----------------------
Title: CFO                                               John P. Manning
                                                         Vice President

By: /S/ RICHARD MARKS
   ---------------------
Title: PRESIDENT



                                       -2-








                                  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 19, 1998 which is included
in the annual report on Form 10-K for the year ended March 31, 1998.





/s/ Richard A. Eisner & Company, LLP

Richard A. Eisner & Company, LLP

New York, New York
June 25, 1998







<TABLE> <S> <C>


<ARTICLE>                     5
<CIK>                         0000918251
<NAME>                        MOTORCAR PARTS & ACCESSORIES, INC.
       
<S>                            <C>
<PERIOD-TYPE>                  YEAR
<FISCAL-YEAR-END>              MAR-31-1998
<PERIOD-END>                   MAR-31-1998
<CASH>                           3,108,000
<SECURITIES>                             0
<RECEIVABLES>                   29,841,000
<ALLOWANCES>                       250,000
<INVENTORY>                     54,736,000
<CURRENT-ASSETS>                89,297,000
<PP&E>                          10,588,000
<DEPRECIATION>                   3,447,000
<TOTAL-ASSETS>                  98,245,000
<CURRENT-LIABILITIES>           13,964,000
<BONDS>                                  0
<PREFERRED-MANDATORY>                    0
<PREFERRED>                              0
<COMMON>                            64,000
<OTHER-SE>                      68,063,000
<TOTAL-LIABILITY-AND-EQUITY>    98,245,000
<SALES>                        112,952,000
<TOTAL-REVENUES>               112,952,000
<CGS>                           91,317,000
<TOTAL-COSTS>                  100,581,000
<OTHER-EXPENSES>                         0
<LOSS-PROVISION>                         0
<INTEREST-EXPENSE>               1,577,000
<INCOME-PRETAX>                 10,794,000
<INCOME-TAX>                     4,192,000
<INCOME-CONTINUING>              6,602,000
<DISCONTINUED>                           0
<EXTRAORDINARY>                          0
<CHANGES>                                0
<NET-INCOME>                     6,602,000
<EPS-PRIMARY>                         1.20
<EPS-DILUTED>                         1.16
        


</TABLE>