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                                                                   EXHIBIT 10.26

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT dated as of December 1, 1999, between
MOTORCAR PARTS & ACCESSORIES, INC., a New York corporation currently having an
address at 2727 Maricopa Street, Torrance, California 90503 (the "COMPANY"), and
ANTHONY SOUZA, an individual residing at 16051 Avenida San Miguel, La Mirada, CA
90638 ("EMPLOYEE").

                              W I T N E S S E T H:

         WHEREAS, the Company desires to employ Employee as its President and
chief executive officer and Employee desires to be employed by the Company all
upon the terms and subject to the conditions contained herein.

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

         1. EMPLOYMENT. Subject to and upon the terms and conditions contained
in this Agreement, the Company hereby agrees to employ Employee and Employee
agrees to enter the employ of the Company, for the period set forth in Paragraph
2 hereof, to render the services to the Company, its affiliates and/or
subsidiaries described in Paragraph 3 hereof.

         2. TERM. Employee's term of employment under this Agreement shall
commence on the date hereof (the "COMMENCEMENT DATE") and shall continue for a
period through and including the eighteen-month anniversary of the Commencement
Date (the "EMPLOYMENT TERM") unless extended in writing by both parties or
earlier terminated pursuant to the terms and conditions set forth herein;
provided that this Agreement automatically shall be renewed for successive
one-year Employment Terms unless either the Company or Employee elects not to so
renew by providing written notice of such election to the other party within 90
days prior to the end of the then-current Employment Term.

         3. DUTIES.

            (a) Subject to the authority of the Board of Directors of the
Company, Employee shall be employed as the Company's President and chief
executive officer and shall report to the Board of Directors. It is agreed that
Employee shall perform his services in the Company's Torrance, California
facilities, or any other facilities mutually agreeable to the parties.

            (b) Employee agrees to abide by all By-laws and applicable policies
of the Company promulgated from time to time by the Board of Directors of the
Company.

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         4. EXCLUSIVE SERVICES AND BEST EFFORTS. Employee shall devote
substantially all of his entire working time, attention, best efforts and
ability during regular business hours exclusively to the service of the Company,
its affiliates and subsidiaries during the term of this Agreement; provided that
the Company acknowledges that Employee may devote some time during such hours to
personal investments and may serve on the boards of directors of other entities,
but only so long as such devotion of time or service on any board does not
interfere with Employee's duties and responsibilities hereunder or violate any
other provision hereof, including in particular Paragraph 10.

         5. COMPENSATION. As compensation for his services and covenants
hereunder, the Company shall pay Employee the following:

            (a) BASE SALARY. The Company shall pay Employee a minimum base
salary ("Salary") of Three Hundred Thousand Dollars ($300,000) per year. The
Salary shall be subject to review and adjustment on an annual basis beginning
January 1, 2001 (if this contract is then in effect) or, at the Company's
discretion, on such earlier date as the Company may designate; PROVIDED,
HOWEVER, that in no event shall Employee's Salary be adjusted below the Salary
designated herein.

            (b) STOCK OPTIONS. As additional consideration for the services to
be performed by Employee hereunder, the Company agrees, not later than January
31, 2000, to grant Employee an option to purchase, for a period of ten years
from such date of grant, Sixty Thousand (60,000) shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), pursuant to the terms of
the Company's 1994 Stock Option Plan, as amended to date (the "Plan"), and any
related stock option agreement(s) required to be executed in connection
therewith. Such option shall become exercisable on the date of grant with
respect to one-half of such shares of Common Stock and on the first anniversary
thereof with respect to the remaining such shares.

            (c) BONUS. Employee shall be paid an incentive bonus ("Bonus") equal
to six and two-thirds percent (6 2/3%) of the pre-tax income (without giving
effect to any tax on such income, whether actual or offset by loss carryovers)
earned by the Company in each fiscal year; provided that no bonus shall be
payable for any such year unless and until the amount of such pre-tax income in
such year shall be at least $1.5 million, without carryover from year to year.
The foregoing bonus shall be paid by the Company within 30 days after completion
of the audited financial results of the Company for the applicable fiscal year,
which bonus shall be prorated (as reasonably determined by the Board of
Directors) for any part-year service by the Employee.

         6. BUSINESS EXPENSES. Employee shall be reimbursed for, and entitled to
advances (subject to repayment to the Company if not actually incurred by
Employee) with respect to, only those business expenses incurred by him which
are reasonable and necessary for Employee to


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perform his duties under this Agreement in accordance with policies
established from time to time by the Company.

         7. EMPLOYEE BENEFITS.

            (a) During the Employment Term, Employee shall be entitled to such
insurance, disability and health and medical benefits (or, at the one-time
election of Employee to be made not later than February 29, 2000, in lieu of
such health and medical benefits an annual cash amount equal to the annual
incremental cost to the Company of providing such benefits to Employee) and be
entitled to participate in such retirement plans or programs as generally made
available to executive officers of the Company pursuant to the policies of the
Company; PROVIDED THAT Employee shall be required to comply with the conditions
attendant to coverage by such plans and shall comply with and be entitled to
benefits only in accordance with the terms and conditions of such plans.
Employee shall be entitled to three weeks paid vacation each year during the
Employment Term at such times as does not, in the opinion of the Board of
Directors, interfere with Employee's performance of his duties hereunder. The
Company may withhold from any benefits payable to Employee all federal, state,
local and other taxes and amounts as shall be permitted or required pursuant to
law, rule or regulation. All of the benefits to which Employee may be entitled
may be changed from time to time or withdrawn at any time in the sole discretion
of the Company.

            (b) Employee shall be entitled to receive the sum of Eight Hundred
Dollars ($800) per month as an automobile allowance provided at the expense of
the Company from the Commencement Date and during the Employment Term, which
allowance shall be exclusive of all expenses related to insurance, repairs,
maintenance, fuel and oil for such automobile, which expenses also shall be the
responsibility of the Company. Notwithstanding the foregoing, the Company may,
at its option, elect to provide Employee an automobile of the make, model and
year mutually agreeable to the Company and Employee, all costs of which
associated with insurance, fuel, oil, repairs, maintenance and other expenses
shall be the responsibility of the Company, in lieu of the above described
automobile allowances, all as may be mutually agreed between Employee and the
Company. Employee acknowledges that some or all of the foregoing may be deemed
compensation to him.

         8. DEATH AND DISABILITY.

            (a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's accrued Salary and Bonus, reimbursable expenses
and benefits owing to Employee through the date of Employee's death shall be
paid to his estate. Employee's estate will not be entitled to any other
compensation upon termination of this Agreement pursuant to this Paragraph 8(a).

            (b) If, during the Employment Term, in the opinion of a duly
licensed physician selected by Employee and reasonably acceptable to the
Company, Employee, because


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of physical or mental illness or incapacity, shall become substantially
unable to perform the duties and services required of him under this
Agreement for a period of six consecutive months the Company may, upon at
least twenty (20) days' prior written notice given at any time after the
expiration of such six-month period to Employee of its intention to do so,
terminate this Agreement as of such date as may be set forth in the notice.
In case of such termination, Employee shall be entitled to receive his
accrued Salary and Bonus, reimbursable expenses and benefits owing to
Employee through the date of termination. Employee will not be entitled to
any other compensation upon termination of this Agreement pursuant to this
Paragraph 8(b).

         9. TERMINATION FOR CAUSE.

            (a) The Company may terminate the employment of Employee for Cause
(as hereinafter defined) and Employee may terminate the employment of Employee
at any time for any reason. Upon any such termination, the Company shall be
released from any and all further obligations under this Agreement except that
the Company shall be obligated to pay Employee his Salary, reimbursable expenses
and benefits owing to Employee through the day on which Employee is terminated.
Employee will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Paragraph 9(a).

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

            (c) In the event that the Company terminates the employment of
Employee without Cause, Employee shall be entitled to all of his rights
hereunder, including without limitation accrued Salary and Bonus through the
date of such termination; provided that in no event shall the amount of Salary
to which Employee shall be entitled for such termination be less than six-months
Salary.

         10. DISCLOSURE OF INFORMATION AND RESTRICTIVE COVENANT. Employee
acknowledges that, by his employment, he has been and will be in a confidential
relationship with the Company and will have access to confidential information
and trade secrets of the Company, its subsidiaries and affiliates. Confidential
information and trade secrets include, but are not limited to, customer,
supplier and client lists, price lists, marketing, distribution and sales
strategies and procedures, operational and equipment techniques, business plans
and systems, quality control


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procedures and systems, special projects and technological research,
including projects, research and reports for any entity or client or any
project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information
relating thereto, and any other records, files, drawings, inventions,
discoveries, applications, processes, data and information concerning the
business of the Company which are not in the public domain. Employee agrees
that in consideration of the execution of this Agreement by the Company,
except in any way with respect to foreign affiliates of the Company as of the
date hereof:

            (a) Employee will not, during the term of this Agreement or at any
time thereafter, use, or disclose to any third party, trade secrets or
confidential information of the Company, including, but not limited to,
confidential information or trade secrets belonging or relating to the Company,
its subsidiaries, affiliates, customers and clients or proprietary processes or
procedures of the Company, its subsidiaries, affiliates, customers and clients.
Proprietary processes and procedures shall include, but shall not be limited to,
all information which is known or intended to be known only to employees of the
Company, its respective subsidiaries and affiliates or others in a confidential
relationship with the Company or its respective subsidiaries and affiliates
which relates to business matters.

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

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

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


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

         11. COMPANY PROPERTY.

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

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

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


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         13. REPRESENTATIONS AND WARRANTIES OF EMPLOYEES.

            (a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i)
Employee has the legal capacity and unrestricted right to execute and deliver
this Agreement and to perform all of his obligations hereunder; (ii) the
execution and delivery of this Agreement by Employee and the performance of
his obligations hereunder will not violate or be in conflict with any
fiduciary or other duty, instrument, agreement, document, arrangement or
other understanding to which Employee is a party or by which he is or may be
bound or subject; and (iii) Employee is not a party to any instrument,
agreement, document, arrangement or other understanding with any person
(other than the Company) requiring or restricting the use or disclosure of
any confidential information or the provision of any employment, consulting
or other services, except one confidentiality agreement unrelated to the
Company's industry and having no relationship or impact of any kind
whatsoever with respect to this Agreement and the transactions contemplated
hereby.

            (b) Employee hereby agrees to indemnify and hold harmless the
Company from and against any and all losses, costs, damages and expenses
(including, without limitation, its reasonable attorneys' fees) incurred or
suffered by the Company resulting from any breach by Employee of any of his
representations or warranties set forth in Paragraph 13(a) hereof.

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

         15. BOARD SEAT. Employee shall be considered by the Board of Directors
to fill a vacancy on the Board of Directors at its first meeting following April
30, 2000, and shall be included on management's slate of directors submitted to
the shareholders of the Company for election at the next regular annual meeting
of shareholders.

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

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


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

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

         20. APPLICABLE LAW. This Agreement shall be deemed to have been made,
drafted, negotiated and the transactions contemplated hereby consummated and
fully performed in the State of California and shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the conflicts of law rules thereof. Nothing contained in this Agreement shall
be construed so as to require the commission of any act contrary to law, and
whenever there is any conflict between any provision of this Agreement and any
statute, law, ordinance, order or regulation, contrary to which the parties
hereto have no legal right to contract, the latter shall prevail, but in such
event any provision of this Agreement so affected shall be curtailed and limited
only to the extent necessary to bring it within the legal requirements.

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

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


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

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

                                       MOTORCAR PARTS & ACCESSORIES, INC.



                                       By:
                                           -------------------------------------
                                           Name:  Selwyn Joffe
                                           Title: Board Member



                                           -------------------------------------
                                           Anthony Souza


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