MOTORCAR PARTS & ACCESSORIES INC
EXHIBIT 10.35
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<TYPE>EX-10.35
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<DESCRIPTION>EXHIBIT 10.35
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<P ALIGN="RIGHT"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=2><B>Exhibit 10.35    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1781_third_amended_and_restated_credit_agreement"> </A>
<A NAME="toc_ke1781_2"> </A></FONT> <FONT SIZE=2><B>THIRD AMENDED AND RESTATED<BR>  CREDIT AGREEMENT    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (as amended, modified, supplemented or restated from time to time, this "Agreement") is entered into as of
June&nbsp;28, 2002 by and between MOTORCAR PARTS&nbsp;&amp; ACCESSORIES,&nbsp;INC., a New York corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1781_recitals"> </A>
<A NAME="toc_ke1781_3"> </A>
<BR></FONT><FONT SIZE=2><B>RECITALS    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Borrower
is currently indebted to Bank pursuant to the terms of that certain Second Amended and Restated Credit Agreement between Borrower and Bank dated as of
May&nbsp;31, 2001 (as amended, the "Prior Credit Agreement"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;Borrower
is indebted to Bank under the terms of the Prior Credit Agreement for (i)&nbsp;a line of credit (the "Prior Line of Credit"), which is evidenced by that
certain Revolving Line of Credit Note dated April&nbsp;30, 2002 in the maximum principal amount of Twenty-Four Million Seven Hundred Fifty Thousand Dollars ($24,750,000.00) (the "Prior
Line of Credit Note"), and (ii)&nbsp;a term loan (the "Term Loan"), which is evidenced by that certain Term Note dated April&nbsp;30, 2002 in the principal amount of Nine Million Dollars
($9,000,000.00) (the "Prior Term Note"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;Borrower
has requested that Bank extend the maturity date of its obligations under the Prior Credit Agreement and amend and restate certain other terms of the Prior
Credit Agreement, and Bank has consented to such request on the terms and subject to the conditions set forth herein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows; provided, however, that nothing
herein shall terminate any security interest or warrant granted in favor of Bank and all such security interests and warrants shall remain in full force and effect: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1781_article_i_the_credits"> </A>
<A NAME="toc_ke1781_4"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE I<BR>  THE CREDITS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.1&nbsp;&nbsp;&nbsp;&nbsp;LINE OF CREDIT.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Line of Credit</I></FONT><FONT SIZE=2>. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower
from time to time up to April&nbsp;30, 2003, not to exceed at any time the aggregate principal amount of Twenty-Four Million Seven Hundred Fifty Thousand Dollars ($24,750,000.00) (the
"Line of Credit"). The proceeds of the Line of Credit shall be used solely for Borrower's general corporate and working capital requirements and shall in no event be used to pay any fine levied by the
Securities and Exchange Commission or any other governmental agency or authority. Borrower's obligation to repay advances under the Line of Credit shall be evidenced by a promissory note substantially
in the form of </FONT><FONT SIZE=2><I>Exhibit&nbsp;A</I></FONT><FONT SIZE=2>&nbsp;attached hereto ("Line of Credit Note"), all terms of which are incorporated herein by this reference. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Limitation on Borrowings</I></FONT><FONT SIZE=2>. Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth
above, shall not at any time exceed an aggregate of (i)&nbsp;seventy-five percent (75.0%) of Borrower's Eligible Accounts Receivable (as defined below), </FONT> <FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (ii)&nbsp;the lesser of (A)&nbsp;$14,000,000,
 and (B)&nbsp;eighty percent (80.0%) of the Appraised Net Recovery Value (as defined below) of
Borrower's inventory. The amount calculated pursuant to the preceding sentence is referred to herein as the "Borrowing Base". All of the foregoing shall be determined by Bank upon receipt and review
of all collateral reports required hereunder and such other documents and collateral information as Bank may from time to time require. Borrower acknowledges that the Borrowing Base was </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<P><FONT SIZE=2>
established by Bank with the understanding that if there at any time exists any other matters, events, conditions or contingencies which Bank reasonably believes may affect payment of any portion of
Borrower's accounts, Bank, in its sole discretion, may reduce the foregoing advance rate against Eligible Accounts Receivable to a percentage appropriate to reflect additional dilution and/or
establish additional reserves against Borrower's Eligible Accounts Receivable. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used herein, "Eligible Accounts Receivable" shall consist solely of trade accounts created in the ordinary course of Borrower's business, net of all (x)&nbsp;returned goods
authorizations, and (y)&nbsp;allowances for warranties, and upon which Borrower's right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in
which Bank has a perfected security interest of first priority, and shall not include: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any
account which remains unpaid more than sixty (60)&nbsp;days past the due date thereof; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;that
portion of any account for which there exists any right of setoff (including deposits, loans and warranties), defense or discount (except regular discounts allowed
in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;any
account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof (except
accounts which represent obligations of the United States government and for which the assignment provisions of the Federal Assignment of Claims Act, as amended or recodified from time to time, have
been complied with to Bank's satisfaction); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;any
account which represents an obligation of an account debtor located in a foreign country other than an account debtor located in the Canadian provinces of Alberta,
British Columbia, Manitoba, Ontario, Saskatchewan or the Yukon Territory so long as, in Bank's determination, such Canadian jurisdictions recognize Bank's first priority security interest in and right
to collect such account as a consequence of any security agreements and UCC filings in favor of Bank and except to the extent any such account, in Bank's determination, is supported by a letter of
credit or insured under a policy of foreign credit insurance, in each case in form, substance and issued by a party acceptable to Bank; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;any
account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, director, affiliate, partner, member,
parent or subsidiary of Borrower; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;that
portion of any account which represents interim or progress billings or retention rights on the part of the account debtor; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;any
account which represents an obligation of any account debtor when twenty percent (20%) or more of Borrower's accounts from such account debtor are not eligible
pursuant to (i)&nbsp;above; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)that
portion of any account from an account debtor which represents the amount by which Borrower's total accounts from said account debtor exceeds
twenty-five percent (25%) of Borrower's total accounts; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that this
limitation shall not apply to any accounts owing by
AutoZone so long as the senior unsecured debt rating of AutoZone,&nbsp;Inc. by Standard&nbsp;&amp; Poor's (a division of the McGraw-Hills Companies) is BBB- or better </FONT> <FONT SIZE=2><I>and</I></FONT><FONT SIZE=2> such rating by Moody's
Investors Service is Baa3 or better; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;&nbsp;any
account deemed ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in
which the account debtor is engaged, to be unsatisfactory. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used herein, "Appraised Net Recovery Value" of Borrower's inventory shall mean the amount reflected as the "net recovery value" of Borrower's inventory in the most recent quarterly
appraisal of inventory (performed by the Great American Group or another appraiser acceptable to Bank) required pursuant to Section&nbsp;4.11. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Letter of Credit Subfeature</I></FONT><FONT SIZE=2>. As a subfeature under the Line of Credit, Bank agrees from time to time during the term
thereof to issue or cause to be issued standby letters of credit for the account of Borrower (each, a "Letter of Credit" and collectively, "Letters of Credit") to provide credit support for Borrower's
workmen's compensation obligations; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that the form and substance of each Letter of
Credit shall be subject to approval by Bank, in its sole discretion; and </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>further</I></FONT><FONT SIZE=2>, that the
aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed One Million Six Hundred Thousand Dollars ($1,600,000.00). On March&nbsp;31, 2003, any Letter of Credit with
an expiry date subsequent to April&nbsp;30, 2003 shall be fully cash collateralized. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available
for borrowings thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit Agreement and related documents, if any, required by Bank in connection
with the issuance thereof (each, a "Letter of Credit Agreement" and collectively, "Letter of Credit Agreements"). Each draft paid by Bank under a Letter of Credit shall be deemed an advance under the
Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>,
 that if advances under the Line of Credit are not available, for any reason, at the time any draft is paid by Bank, then Borrower shall
immediately pay to Bank the full amount of such draft, together with interest thereon from the date such amount is paid by Bank to the date such amount is fully repaid by Borrower, at the rate of
interest applicable to advances under the Line of Credit. In such event Borrower agrees that Bank, in its sole discretion, may debit any demand deposit account maintained by Borrower with Bank for the
amount of any such draft. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Borrowing and Repayment</I></FONT><FONT SIZE=2>. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly
repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT
SIZE=2><I>however</I></FONT><FONT SIZE=2>, that the total outstanding borrowings under the Line of Credit shall not at any time
exceed the maximum principal amount available thereunder, as set forth above. The principal amount of the Line of Credit outstanding shall be repaid in accordance with the provisions of the Line of
Credit Note. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.2&nbsp;&nbsp;&nbsp;&nbsp;TERM LOAN.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Term Loan</I></FONT><FONT SIZE=2>. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make a loan to Borrower in the
principal amount of Eight Million Dollars ($8,000,000.00) ("Term Loan"), the proceeds of which shall be used for general corporate and working capital purposes of Borrower; </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2> that no portion of
the Term Loan shall be used to pay any fine levied by the Securities and Exchange Commission or any other governmental
agency or authority. Borrower shall repay the outstanding principal balance of the Term Note at the times and in the amounts set forth in the Term Note. Borrower's obligation to repay the Term Loan
shall be evidenced by a promissory note substantially in the form of </FONT><FONT SIZE=2><I>Exhibit&nbsp;B</I></FONT><FONT SIZE=2> attached hereto ("Term Note"), all terms of which are incorporated
herein by this reference. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Repayment</I></FONT><FONT SIZE=2>. The principal amount of the Term Loan shall be repaid in accordance with the provisions of the Term Note. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Prepayment</I></FONT><FONT SIZE=2>. Borrower may prepay principal on the Term Loan at any time, in any amount and without penalty. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.3&nbsp;&nbsp;&nbsp;&nbsp;INTEREST/FEES.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Interest</I></FONT><FONT SIZE=2>. Subject to Section&nbsp;1.3(b), the outstanding principal balance of the Line of Credit Note shall bear
interest at a per annum rate equal to the Prime Rate </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> One and Three-Quarters Percent (1.75%). Subject to Section&nbsp;1.3(b), the outstanding
principal balance of the Term Note shall bear interest at a per annum rate equal to the Prime Rate </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> Two Percent (2.00%). "Prime Rate" shall mean at
any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof in such internal publication or publications as Bank may
designate. Each change in the rate of interest shall become effective on the date each Prime Rate change is announced within Bank. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Default Interest</I></FONT><FONT SIZE=2>. From and after the maturity date of the Line of Credit Note and/or the Term Note, or such earlier date
as all principal owing under such note becomes due and payable by acceleration or otherwise, the outstanding balance of the Line of Credit and the Term Loan shall bear interest until paid in full at a
rate per annum equal to four percent (4%) above the rate of interest otherwise applicable to such obligations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Computation and Payment</I></FONT><FONT SIZE=2>. Interest shall be computed on the basis of a 360&nbsp;day year, actual days elapsed. Interest
shall be payable on the Line of Credit and on the Term Loan on the first Business Day of each month, commencing July&nbsp;1, 2002. As used herein, the term "Business Day" shall mean any day other
than a Saturday, Sunday or other day on which commercial banks in California are authorized or required by law to close. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Restructuring Fee</I></FONT><FONT SIZE=2>. Borrower shall pay to Bank a restructuring fee equal to three percent (3.00%) of the sum of the Line
of Credit and the Term Loan ($982,500.00) all of which shall be fully earned and non-refundable on the Closing Date. One-third of the restructuring fee ($327,500.00) shall be
paid in cash on the Closing Date. The other two-thirds of the restructuring fee ($655,000.00) shall be fully earned on the Closing Date, but shall be payable on December&nbsp;15, 2002; </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2> that if
the Term Loan is repaid in full, the Line of Credit is repaid in full and terminated and all other fees and expenses reimburseable to
Bank pursuant to this Agreement and any other Loan Document have been paid in full prior to such date, then the portion of the restructuring fee due on December&nbsp;15, 2002 shall be waived by
Bank. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Unused Commitment Fee</I></FONT><FONT SIZE=2>. Borrower shall pay to Bank a fee equal to one and one-half percent (1.50%) 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 (regardless of the amount of the Borrowing Base or any limitations
on borrowing under the Line of Credit based on the amount of the Borrowing Base), which fee shall be calculated on a monthly basis by Bank and shall be due and payable by Borrower in arrears on the
first business day of the following month. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Letter of Credit Fees</I></FONT><FONT SIZE=2>. Borrower shall pay to Bank (i)&nbsp;fees upon the issuance of each Letter of Credit equal to
three percent (3.00%) per annum (computed on the basis of a 360-day year, actual days elapsed) of the face amount thereof, and (ii)&nbsp;fees upon the payment or negotiation of each
draft under any Letter of Credit and fees upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any
Letter of Credit) determined in accordance with Bank's standard fees and charges then in effect for such activity. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.4&nbsp;&nbsp;&nbsp;&nbsp;MANDATORY PREPAYMENTS AND PERMANENT COMMITMENT REDUCTIONS.&nbsp;&nbsp;&nbsp;&nbsp;Borrower shall repay the Line of Credit on any date on which the outstanding balance of
the Line of Credit plus the face amount of all Letters of Credit outstanding exceeds the Borrowing Base. Borrower shall prepay the Credits from time to time in an amount equal to one hundred percent
(100%) of (i)&nbsp;the net proceeds of any sales by Borrower of assets outside the ordinary </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2>
course of business, (ii)&nbsp;the net proceeds of any debt or equity issuance by Borrower, (iii)&nbsp;the net proceeds of any insurance payment received by Borrower, and (iv)&nbsp;any and all
local, state, or federal tax refunds received by Borrower from time to time. Each prepayment of the Credits required by the preceding sentence shall first be applied to payments due under the Term
Loan in the inverse order of maturity, and thereafter shall be applied to the outstanding principal balance of the Line of Credit. Prepayments of the Credits shall not reduce the mandatory monthly
payments required by the following
sentence. Borrower shall prepay the Credits on each date set forth below (or if any such day is not a Business Day, then on the next Business Day thereafter) by the amount set forth opposite such
date: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="47%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=1><B>Date<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="41%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>July 15, 2002</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>500,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
August 15, 2002</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
500,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
September 15, 2002</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
500,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
October 15, 2002</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
500,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
November 15, 2002</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
750,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
December 15, 2002</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
750,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
January 15, 2003</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,000,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
February 15, 2003</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,500,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
March 15, 2003</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,500,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
April 15, 2003</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,500,000</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>Each
prepayment required by the preceding sentence shall be applied to payments due under the Term Loan in the direct order of maturity, and thereafter shall be applied to the outstanding principal
balance of the Line of Credit. On the date that any repayment under the Line of Credit is required pursuant to this Section&nbsp;1.4, the Line of Credit shall be permanently reduced by a
corresponding amount. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.5&nbsp;&nbsp;&nbsp;&nbsp;COLLECTION OF PAYMENTS.&nbsp;&nbsp;&nbsp;&nbsp;Borrower authorizes Bank to collect all principal, interest and fees due under any Loan Document (as defined below) by
charging Borrower's demand deposit account number 4608-043691 with Bank, or any other demand deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be
insufficient funds in any such demand deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower. Borrower authorizes Bank to
(a)&nbsp;apply all amounts on deposit in such account at the close of each business day to the outstanding balance of the Line of Credit, and (b)&nbsp;make advances under the Line of Credit after
the close of business each business day in an amount equal to any overdraft reflected with respect to such demand deposit account; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, that
Borrower acknowledges and agrees that any advance described in this clause&nbsp;(b) shall be subject to all of the terms and conditions applicable to advances under the Line of Credit set forth in
this Agreement and the other Loan Documents. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.6&nbsp;&nbsp;&nbsp;&nbsp;COLLATERAL.&nbsp;&nbsp;&nbsp;&nbsp;As security for all indebtedness of Borrower to Bank or Trade Bank subject hereto, Borrower hereby re-affirms its prior
grant to Bank and Trade Bank of security interests of first priority in all Borrower's accounts, other rights to payment, general intangibles, inventory and equipment. All of the foregoing shall be
evidenced by and subject to the terms of such security agreements, financing statements, deeds of trust and other documents as Bank or Trade Bank shall reasonably require, all in form and substance
satisfactory to Bank (and, as appropriate, Trade Bank). Borrower shall reimburse Bank and Trade Bank immediately upon demand for all costs and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P><FONT SIZE=2>
expenses incurred by Bank or Trade Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals and audits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.7&nbsp;&nbsp;&nbsp;&nbsp;CONSENT TO VENDOR PAYMENT PROGRAM.&nbsp;&nbsp;&nbsp;&nbsp;Bank hereby consents to the sale of accounts receivable owed by AutoZone,&nbsp;Inc. to Borrower on the terms
and subject to the conditions set forth in that certain Consent Agreement among Borrower, Bank and SunTrust Bank ("SunTrust") attached hereto as </FONT><FONT SIZE=2><I>Exhibit
F</I></FONT><FONT SIZE=2> (the "Vendor Payment Program"); </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2> that all proceeds of the Vendor Payment Program shall be paid directly to Bank by
SunTrust to Borrower's account number 4169611266 with Bank for application to the Line of Credit; and </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>further</I></FONT><FONT SIZE=2>, that Bank's consent to sales of
accounts receivable by Borrower to SunTrust shall terminate on the earliest of (a)&nbsp;any payment default
under this Agreement, (b)&nbsp;any default under Section&nbsp;5.9 of this Agreement, and (c)&nbsp;fourteen (14)&nbsp;calendar days after the occurrence of any other Event of Default under this
Agreement that has not been cured by Borrower or waived by Bank. Payments made to Bank pursuant to this Section&nbsp;1.7 shall not result in a reduction of the Line of Credit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.8&nbsp;&nbsp;&nbsp;&nbsp;CERTAIN LOAN DOCUMENTS SUPERSEDED.&nbsp;&nbsp;&nbsp;&nbsp;As of the Closing Date, the Prior Credit Agreement shall be deemed to have been amended and restated in its
entirety by this Agreement, the Prior Line of Credit Note and the Prior Term Note shall be amended and restated in their entirety by the Line of Credit Note and the Term Note, respectively, and the
indebtedness evidenced by the Prior Revolving Note and the Prior Term Note shall be evidenced first by the Term Note, and then, to the extent of the remaining principal amount outstanding thereunder,
by the Line of Credit Note. To the extent that the Prior Credit Agreement provides for costs, expenses, fees and indemnities in favor of Bank, Borrower promises to pay all such costs, expenses, fees
and indemnities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1781_article_ii_representations_and_warranties"> </A>
<A NAME="toc_ke1781_5"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE II<BR>  REPRESENTATIONS AND WARRANTIES    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall
continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.1&nbsp;&nbsp;&nbsp;&nbsp;LEGAL STATUS.&nbsp;&nbsp;&nbsp;&nbsp;Borrower is a corporation, duly organized and existing and in good standing under the laws of the state of New York, and is qualified
or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.2&nbsp;&nbsp;&nbsp;&nbsp;AUTHORIZATION AND VALIDITY.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement, the Line of Credit Note, the Term Note, and each other document, contract and instrument required hereby
or at any time hereafter delivered to Bank in connection herewith (collectively, the "Loan Documents") have been duly authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms. The
Certificate of Incumbency delivered to Bank in connection with the First Amendment to the Prior Credit Agreement remains true and correct as of the date of this Agreement, and the officers of Borrower
identified in such Certificate of Incumbency are duly authorized by all necessary corporate action to execute this Agreement and each other Loan Document to be executed and delivered in connection
herewith. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.3&nbsp;&nbsp;&nbsp;&nbsp;NO VIOLATION.&nbsp;&nbsp;&nbsp;&nbsp;The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or By-Laws of Borrower, or result in any breach of or default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.4&nbsp;&nbsp;&nbsp;&nbsp;LITIGATION.&nbsp;&nbsp;&nbsp;&nbsp;There are no pending, or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings by or
before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed
by Borrower to Bank in writing prior to the date hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.5&nbsp;&nbsp;&nbsp;&nbsp;CORRECTNESS OF FINANCIAL STATEMENT.&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of Borrower dated March&nbsp;31, 2002, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a)&nbsp;is complete and correct and presents fairly the financial condition of Borrower, (b)&nbsp;discloses all liabilities of Borrower that are
required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c)&nbsp;has been prepared in accordance
with generally accepted accounting principles consistently applied. Since the date of such financial statement there has been no material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as disclosed on Schedule&nbsp;5.2. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.6&nbsp;&nbsp;&nbsp;&nbsp;INCOME TAX RETURNS.&nbsp;&nbsp;&nbsp;&nbsp;Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year which
would result in any obligation to pay additional taxes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.7&nbsp;&nbsp;&nbsp;&nbsp;NO SUBORDINATION.&nbsp;&nbsp;&nbsp;&nbsp;There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations subject to this Agreement to any other obligation of Borrower. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.8&nbsp;&nbsp;&nbsp;&nbsp;PERMITS, FRANCHISES.&nbsp;&nbsp;&nbsp;&nbsp;Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights
to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.9&nbsp;&nbsp;&nbsp;&nbsp;ERISA.&nbsp;&nbsp;&nbsp;&nbsp;Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower
(each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA
with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.10&nbsp;&nbsp;&nbsp;&nbsp;OTHER OBLIGATIONS.&nbsp;&nbsp;&nbsp;&nbsp;Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.11&nbsp;&nbsp;&nbsp;&nbsp;ENVIRONMENTAL MATTERS.&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of
Borrower's operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may
be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous waste or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>
substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1781_article_iii_conditions"> </A>
<A NAME="toc_ke1781_6"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE III<BR>  CONDITIONS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.1.&nbsp;&nbsp;&nbsp;&nbsp;CONDITIONS OF INITIAL EXTENSION OF CREDIT.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall become effective as of the date first written above
provided that all of the following conditions are fulfilled to Bank's satisfaction on or before June&nbsp;28, 2002: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Approval of Bank Counsel</I></FONT><FONT SIZE=2>. All legal matters incidental to the granting of each of the credits described in
Article&nbsp;I shall be satisfactory to Bank's counsel. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Documentation</I></FONT><FONT SIZE=2>. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly
executed: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement, the Line of Credit Note, and the Term Note. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;A
Corporate Borrowing Resolution and resolutions of the Board of Directors of Borrower approving the execution and delivery of this Agreement and the execution and
delivery of the Letter of Understanding (as defined below) and all related documentation with respect to the Vendor Payment Program. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;Such
other documents as Bank or Trade Bank may require under any other Section of this Agreement. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Financial Condition</I></FONT><FONT SIZE=2>. There shall have been no material adverse change, as determined by Bank, in the financial condition
or business of Borrower, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Insurance</I></FONT><FONT SIZE=2>. Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower's property, in form,
substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Restructuring Fee; Reimbursement of Expenses</I></FONT><FONT SIZE=2>. Borrower shall have paid Bank the portion of the restructuring fee required
to be paid on the Closing Date as described in Section&nbsp;1.3(d). Borrower shall reimburse Bank for all fees, costs and expenses (including without limitation the allocated cost of
in-house counsel and all audit and appraisal fees) incurred by Bank in connection with the negotiation of documentation of the transaction described herein and in the other Loan Documents
not later than July&nbsp;31, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
date on which all such conditions have been satisfied (or waived by Bank in its sole discretion) and the initial extension of credit is made by Bank hereunder is referred to herein
as the "Closing Date". </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.2&nbsp;&nbsp;&nbsp;&nbsp;CONDITIONS OF EACH EXTENSION OF CREDIT.&nbsp;&nbsp;&nbsp;&nbsp;The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to
the fulfillment to Bank's satisfaction of each of the following conditions: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Compliance</I></FONT><FONT SIZE=2>. The representations and warranties contained herein and in each of the other Loan Documents shall be true on
and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been
made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would
constitute such an Event of Default, shall have occurred and be continuing or shall exist. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Documentation</I></FONT><FONT SIZE=2>. Bank shall have received all additional documents which may be required in connection with such extension
of credit. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1781_article_iv_affirmative_covenants"> </A>
<A NAME="toc_ke1781_7"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE IV<BR>  AFFIRMATIVE COVENANTS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank
under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.1&nbsp;&nbsp;&nbsp;&nbsp;PUNCTUAL PAYMENTS.&nbsp;&nbsp;&nbsp;&nbsp;Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.2&nbsp;&nbsp;&nbsp;&nbsp;ACCOUNTING RECORDS.&nbsp;&nbsp;&nbsp;&nbsp;Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit
any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.3&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL STATEMENTS AND INFORMATION.&nbsp;&nbsp;&nbsp;&nbsp;Provide to Bank all of the following, in form and detail satisfactory to Bank: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;not
later than June&nbsp;30, 2002, Borrower's Form&nbsp;10-K for the fiscal year ended March&nbsp;31, 2002 as filed with the Securities and Exchange
Commission (the "SEC"), and financial statements of Borrower, audited by independent certified public accountants acceptable to Bank, to include a balance sheet, income statement and statement of cash
flows and all footnotes; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;not
later than 45&nbsp;days after and as of the end of each fiscal quarter, Borrower's Form&nbsp;10-Q as filed with the SEC; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;not
later than 30&nbsp;days after the end of each month, monthly financial statements of Borrower, including a balance sheet as of the end of such month and an income
statement and statement of cash flows for such month and for the fiscal year-to-date (to include a narrative explaining the reasons for any variances from the Projections (as
defined below)), together with a duly completed Compliance Certificate substantially in the form of </FONT><FONT SIZE=2><I>Exhibit&nbsp;C</I></FONT><FONT SIZE=2> executed by the Chief Financial
Officer or President of Borrower (and accompanying calculations in form and substance satisfactory to Bank); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;not
later than Wednesday of each calendar week, a cash forecast for Borrower by week for the thirteen week period beginning of the first day of the next calendar week
together with the actual cash flows for the preceding week, a comparison of such cash flows to the most recent cash forecast and an explanation of any material variances; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;not
later than 20&nbsp;days after and as of the end of each month beginning with the month ending June&nbsp;30, 2002, a Borrowing Base Certificate substantially in
the form of </FONT><FONT SIZE=2><I>Exhibit&nbsp;D</I></FONT><FONT SIZE=2>, together with an inventory collateral report, an aged listing of accounts receivable and accounts payable, and a
reconciliation of accounts, and immediately upon each request from Bank, a list of the names and addresses of all Borrower's account debtors; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;not
later than 9:00&nbsp;a.m. on each business day, a Collateral Activity Report substantially in the form of </FONT> <FONT SIZE=2><I>Exhibit&nbsp;E</I></FONT><FONT SIZE=2>, in each case to Collateral Administration as provided in </FONT><FONT
SIZE=2><I>Section&nbsp;7.2</I></FONT><FONT SIZE=2>; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;on
the same business day on which information is received by Borrower from SunTrust pursuant to Section&nbsp;3(b) of the Letter of Understanding and Agreement to be
entered into between SunTrust and Borrower (the "Letter of Understanding") substantially in the form attached hereto as </FONT><FONT SIZE=2><I>Exhibit&nbsp;G</I></FONT><FONT SIZE=2>, any such
information received by e-mail shall be forwarded to Bank by e-mail and any such </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>
information provided by a means other than e-mail shall be provided to Bank by a facsimile transmission, in each case to Collateral Administration as provided in </FONT> <FONT SIZE=2><I>Section&nbsp;7.2</I></FONT><FONT SIZE=2>; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;contemporaneously
with each annual and monthly financial statement of Borrower required hereby, a certificate of the President or Chief Financial Officer of Borrower
that said financial statements are accurate and that there exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an
Event of Default; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;not
later than July&nbsp;31, 2002, a Certificate of Incumbency executed by Borrower; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;within
five business days of receipt by Borrower and in any event not later than September&nbsp;30, 2002, the management letter prepared by Borrower's independent
certified public accountants in connection with their audit for the fiscal year ended March&nbsp;31, 2002; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;promptly,
and in any event within five business days after Borrower has knowledge thereof, a report describing any material development in connection with the pending
investigation by the SEC and Department of Justice (including both favorable and unfavorable developments); and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;from
time to time such other information as Bank may reasonably request. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.4&nbsp;&nbsp;&nbsp;&nbsp;COMPLIANCE.&nbsp;&nbsp;&nbsp;&nbsp;Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its
business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence and with the requirements of all laws, rules,
regulations and orders of any governmental authority applicable to Borrower and/or its business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.5&nbsp;&nbsp;&nbsp;&nbsp;INSURANCE.&nbsp;&nbsp;&nbsp;&nbsp;Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, flood, property damage and workers' compensation, with all such insurance carried with companies and in amounts satisfactory to
Bank, and deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.6&nbsp;&nbsp;&nbsp;&nbsp;FACILITIES.&nbsp;&nbsp;&nbsp;&nbsp;Keep all properties useful or necessary to Borrower's business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.7&nbsp;&nbsp;&nbsp;&nbsp;TAXES AND OTHER LIABILITIES.&nbsp;&nbsp;&nbsp;&nbsp;Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local property taxes and assessments, except such (a)&nbsp;as Borrower may in good faith contest or as to which a bona fide
dispute may arise, and (b)&nbsp;for which Borrower has made provision, to Bank's satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.8&nbsp;&nbsp;&nbsp;&nbsp;LITIGATION.&nbsp;&nbsp;&nbsp;&nbsp;Promptly give notice in writing to Bank of (a)&nbsp;any litigation pending or threatened against Borrower with a claim in excess of
$100,000.00, and (b)&nbsp;the terms of any modifications to the settlement of any pending or threatened litigation and the proposed source of funding for any such settlement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.9&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL CONDITION.&nbsp;&nbsp;&nbsp;&nbsp;Maintain Borrower's financial condition as follows using generally accepted accounting principles consistently applied and used
consistently with prior practices (except to the extent modified by the definitions herein): </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;Quarterly
EBITDA, calculated as of the last day of each fiscal quarter beginning with the fiscal quarter ending June&nbsp;30, 2002, shall not be less than the amount
specified for such fiscal quarter below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Quarter<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Minimum EBITDA</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>April 1, 2002 to June 30, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,500,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2><BR>
July 1, 2002 to September 30, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,000,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2><BR>
October 1, 2002 to December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,500,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2><BR>
January 1, 2003 to March 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,000,000</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>"EBITDA"
shall refer to Borrower's net income, </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> in each case to the extent deducted to arrive at net income, interest expense, taxes, depreciation
expense and amortization expense. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;Net
Operating Income/(Loss), calculated on a monthly basis beginning with the month ending June&nbsp;30, 2002, shall never be more than 10% less than (in the case of
income) or 10% greater than (in the case of loss) the amount of income/loss reflected in the Projections for such month; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that if in any
given month Borrower's Net Operating Income/(Loss) does vary more than such permitted 10% variance from the Projections for such
month, Borrower shall not be in default under this provision so long as the sum of Borrower's Net Operating Income/(Loss) for such month when combined with that of the immediately preceding month is
within such permitted 10% variance from the Projections for such two-month period. "Net Operating Income/(Loss)" as used herein shall mean all income (not including any interest income)
before deducting interest expense and taxes. "Projections" as used herein shall mean those certain financial projections for the fiscal year ending March&nbsp;31, 2003 prepared by Borrower and
delivered to Bank, a copy of which are attached hereto as </FONT><FONT SIZE=2><I>Exhibit&nbsp;H</I></FONT><FONT SIZE=2>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;Gross
sales, calculated on a monthly basis beginning with the month ending June&nbsp;30, 2002, shall never be less than 90% of the amount of gross sales reflected in
the Projections for such month; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that if in any given month Borrower's gross sales are
less than 90% of gross sales as reflected in the Projections for such month, Borrower shall not be in default under this provision so long as the sum of Borrower's gross sales for such month when
combined with that of the immediately two preceding months is at least 90% of the gross sales reflected in the Projections for such three-month period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;Minimum
Tangible Net Worth not at any time less than the sum of (i)&nbsp;$22,500,000, </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (ii)&nbsp;as of each month
end from and after March&nbsp;31, 2002, an amount equal to 50% of Borrower's net income after taxes for such month. "Tangible Net Worth" is defined as the aggregate of total stockholders' equity </FONT> <FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2>
subordinated debt </FONT><FONT SIZE=2><I>minus</I></FONT><FONT SIZE=2> any intangible assets </FONT><FONT SIZE=2><I>minus</I></FONT><FONT SIZE=2>
any non-cash deferred tax benefit, up to a maximum amount of $3,000,000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;Stock
adjustments for the fiscal year ending March&nbsp;31, 2003 shall not exceed $900,000 or 30,000 units. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Maximum
Funded Debt to Adjusted EBITDA Ratio, calculated as of the last day of each fiscal quarter beginning with the quarter ending June&nbsp;30, 2002, less than or
equal to the ratio set forth opposite such date below: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>June 30, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>less than or equal to 3.75</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>September 30, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>less than or equal to 3.50</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>less than or equal to 3.25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>March 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>less than or equal to 3.00</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>"Funded
Debt" shall mean all indebtedness of Borrower outstanding on any date of determination, including capitalized leases, standby letters of credit and the maximum outstanding obligations of
Borrower with respect to any guaranties and contingent obligations; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, that for fiscal quarters beginning September&nbsp;30, 2002 and
thereafter, if Borrower has not received its federal tax refund with respect to the fiscal year ended March&nbsp;31, 2002, then Funded Debt shall be deemed to be reduced by an amount equal to such
tax refund receivable in the amount reflected on Borrower's balance sheet as of the last day of the respective fiscal quarter. "Adjusted EBITDA" shall mean EBITDA </FONT> <FONT SIZE=2><I>less</I></FONT><FONT SIZE=2> interest expense. "Funded Debt to
Adjusted EBITDA Ratio" shall mean, as of any date of determination, the ratio of Funded Debt as of the last day
of the testing period to the total of Borrower's Adjusted EBITDA for the twelve month period ending on the last day of such testing period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.10&nbsp;&nbsp;&nbsp;&nbsp;NOTICE TO BANK.&nbsp;&nbsp;&nbsp;&nbsp;Promptly (but in no event more than five (5)&nbsp;Business Days after the occurrence of each such event or matter) give written
notice to Bank in reasonable detail of: (a)&nbsp;the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or
the passage of time or both would constitute an Event of Default; (b)&nbsp;any change in the name or the organizational structure of Borrower; (c)&nbsp;the occurrence and nature of any Reportable
Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d)&nbsp;any termination or cancellation of any insurance policy which Borrower is
required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower's property in excess of an
aggregate of $100,000.00. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.11&nbsp;&nbsp;&nbsp;&nbsp;QUARTERLY FIELD EXAMINATIONS AND APPRAISALS.&nbsp;&nbsp;&nbsp;&nbsp;Borrower shall permit Bank and its agents, representatives, auditors and appraisers access to its
facilities, books and records, and provide such other assistance as requested by Bank or any such person (a)&nbsp;to enable Bank's appraisers to complete quarterly inventory appraisals, with the
first inventory appraisal after the Closing Date to be completed by August&nbsp;30, 2002 with respect to inventory as of June&nbsp;30, 2002, and to establish the "Appraised Net Recovery Value" of
inventory on a quarterly basis for purposes of Section&nbsp;1.1(b), (b)&nbsp;to enable Bank's auditors to complete quarterly field audit examinations. The results of each field audit examination
must be in form and substance satisfactory to Bank. Such examinations and appraisals shall be in addition to and shall in no way limit any other rights to audit and appraise Bank's collateral provided
to Bank in this Agreement and in the other Loan Documents. Borrower shall reimburse Bank immediately upon demand for all costs and expenses incurred by Bank in connection with such examinations and
appraisals. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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NAME="page_kf1781_1_13"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kf1781_article_v_negative_covenants"> </A>
<A NAME="toc_kf1781_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE V<BR>  NEGATIVE COVENANTS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without
Bank's prior written consent: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.1&nbsp;&nbsp;&nbsp;&nbsp;USE OF FUNDS.&nbsp;&nbsp;&nbsp;&nbsp;Use any of the proceeds of any of the Credits except for the purposes stated in Article&nbsp;I hereof. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.2&nbsp;&nbsp;&nbsp;&nbsp;OTHER INDEBTEDNESS.&nbsp;&nbsp;&nbsp;&nbsp;Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether
secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a)&nbsp;the liabilities of Borrower to Bank, and (b)&nbsp;any other liabilities of Borrower
existing as of the date hereof and identified on </FONT><FONT SIZE=2><I>Schedule&nbsp;5.2</I></FONT><FONT SIZE=2>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.3&nbsp;&nbsp;&nbsp;&nbsp;MERGER, CONSOLIDATION, TRANSFER OF ASSETS.&nbsp;&nbsp;&nbsp;&nbsp;Merge into or consolidate with any other entity; make any substantial change in the nature of Borrower's
business as conducted as of the date hereof; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material
portion of Borrower's assets except in the ordinary course of its business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.4&nbsp;&nbsp;&nbsp;&nbsp;GUARANTIES.&nbsp;&nbsp;&nbsp;&nbsp;Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in
the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or
entity, except any of the foregoing in favor of Bank and except for guaranties of the obligations of Borrower's foreign affiliates identified on Schedule&nbsp;5.4 not to exceed an aggregate of
$100,000.00 outstanding at any time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.5&nbsp;&nbsp;&nbsp;&nbsp;LOANS, ADVANCES, INVESTMENTS.&nbsp;&nbsp;&nbsp;&nbsp;Make any loans or advances to or investments in any person or entity, except (a)&nbsp;any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof, (b)&nbsp;any of the foregoing made in the ordinary course of Borrower's business not to
exceed an aggregate of $100,000.00 outstanding at any time, and (c)&nbsp;any investments made with or through Bank, whether in connection with a Bank deposit account or time deposit or any other
Bank investment product. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.6&nbsp;&nbsp;&nbsp;&nbsp;DIVIDENDS, DISTRIBUTIONS.&nbsp;&nbsp;&nbsp;&nbsp;Declare or pay any dividend or distribution either in cash, stock or any other property on Borrower's stock now or
hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower's stock now or hereafter outstanding. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.7&nbsp;&nbsp;&nbsp;&nbsp;PLEDGE OF ASSETS.&nbsp;&nbsp;&nbsp;&nbsp;Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower's assets now owned
or hereafter acquired, except (a)&nbsp;any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank in writing prior to, the date hereof, (b)&nbsp;liens for taxes and
assessments not yet due, (c)&nbsp;mechanics, warehousemen, carrier, landlord and other statutory liens which arise in the ordinary course of Borrower's business for amounts not yet due,
(d)&nbsp;liens on equipment leased by Borrower, and (e)&nbsp;liens in security deposits made in the ordinary course of Borrower's business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.8&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL EXPENDITURES.&nbsp;&nbsp;&nbsp;&nbsp;Make or incur Capital Expenditures in excess of $1,500,000.00 during the fiscal year ending March&nbsp;31, 2003. "Capital
Expenditures" shall refer to the aggregate cost of all assets which have been (or shall be) classified and accounted for as a capital asset on the Borrower's balance sheet. The limitation on Capital
Expenditures set forth in this Section&nbsp;5.8 shall be tested on the last calendar day of each month, and shall include the portion of the fiscal year ending on such date. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<A NAME="page_kf1781_1_14"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.9&nbsp;&nbsp;&nbsp;&nbsp;SUNTRUST DISCOUNT RATE.&nbsp;&nbsp;&nbsp;&nbsp;Agree to sell AutoZone accounts receivable under the Vendor Payment Program for an amount which will result in net cash
proceeds to Borrower of less than ninety-seven percent (97%) of the face amount of the receivables to be sold (net of all costs and expenses of such program, including interest, fees, charges and
discounts). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kf1781_article_vi_events_of_default"> </A>
<A NAME="toc_kf1781_2"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE VI<BR>  EVENTS OF DEFAULT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.1&nbsp;&nbsp;&nbsp;&nbsp;The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;Borrower
shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;Any
financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement
or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;Any
default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those
referred to in subsections (a)&nbsp;and (b)&nbsp;above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of ten (10)&nbsp;days
from its occurrence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;Any
default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan
Documents) pursuant to which Borrower has incurred any debt or other liability to any person or entity, including Bank, except with respect to any of the foregoing which is contested by Borrower as
permitted hereby, and in accordance with the terms of, Section&nbsp;4.7 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;Any
defined event of default under any of the Loan Documents other than this Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Any
of the following which is not stayed or discharged within thirty (30)&nbsp;days of its occurrence: the filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which Borrower has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution,
or other like process, against the assets of Borrower; or the entry of a judgment against Borrower. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;Borrower
shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its
property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file&nbsp;a voluntary petition in bankruptcy,
or seek reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified
from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower, or Borrower shall file an answer
admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower
by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;There
shall exist or occur any event or condition which Bank in good faith believes impairs, or is substantially likely to impair, the prospect of payment or performance
by Borrower of its obligations under any of the Loan Documents. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;The
dissolution or liquidation of Borrower. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;Any
change in ownership during the term of this Agreement of an aggregate of twenty-five percent (25%) or more of the common stock of Borrower in any single
transaction or series or related transactions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;The
Securities and Exchange Commission (or any other governmental agency) shall have imposed a fine or penalty in excess of $100,000 (individually or in the aggregate)
against Borrower or any current or former officer, director or employee of Borrower if Borrower is required to indemnify or otherwise pay the fine or penalty imposed against such individual. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
6.2&nbsp;&nbsp;&nbsp;&nbsp;REMEDIES.&nbsp;&nbsp;&nbsp;&nbsp;Upon the occurrence of any Event of Default: (a)&nbsp;all indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly
waived by each Borrower; (b)&nbsp;the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c)&nbsp;Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any of the Credits and to
exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after
the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kf1781_article_vii_miscellaneous"> </A>
<A NAME="toc_kf1781_3"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE VII<BR>  MISCELLANEOUS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.1&nbsp;&nbsp;&nbsp;&nbsp;NO WAIVER.&nbsp;&nbsp;&nbsp;&nbsp;No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan
Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default
under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<A NAME="page_kf1781_1_16"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.2&nbsp;&nbsp;&nbsp;&nbsp;NOTICES.&nbsp;&nbsp;&nbsp;&nbsp;All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address: </FONT></P>

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<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>BORROWER:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2>MOTORCAR PARTS &amp; ACCESSORIES, INC.<BR>
2929 California Street<BR>
Torrance, California 90503<BR>
Attention: Anthony Souza, President<BR>
Telephone: (310) 972-4001<BR>
Telecopy: (310) 212-7581</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
BANK:<BR>
(except Borrowing Base and Collateral Activity Reports)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
WELLS FARGO BANK, NATIONAL ASSOCIATION<BR>
Loan Adjustment Group<BR>
333 South Grand Avenue, Suite 940<BR>
Los Angeles, California 90071<BR>
Attention: Edith Lim<BR>
Telephone: (213) 253-6859<BR>
Telecopy: (213) 253-5913</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
BORROWING BASE AND COLLATERAL ACTIVITY REPORTS:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
WELLS FARGO BANK, NATIONAL ASSOCIATION<BR>
Loan Adjustment Group Collateral Administration<BR>
201 Third Street, 8th Floor<BR>
San Francisco, California 94103<BR>
Attention: Sylvia Zaheri<BR>
Telephone: (415) 977-5234<BR>
Telecopy: (888) 411-0950</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>or
to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a)&nbsp;if
sent by hand delivery, upon delivery; (b)&nbsp;if sent by mail, upon the earlier of the date of receipt or three (3)&nbsp;days after deposit in the U.S. mail, first class and postage prepaid; and
(c)&nbsp;if sent by telecopy, upon receipt. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.3&nbsp;&nbsp;&nbsp;&nbsp;COSTS, EXPENSES AND ATTORNEYS' FEES.&nbsp;&nbsp;&nbsp;&nbsp;Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs
and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with
(a)&nbsp;the negotiation and preparation of this Agreement and the other Loan Documents, Bank's continued administration hereof and thereof, and the preparation of any amendments and waivers hereto
and thereto, (b)&nbsp;the enforcement of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c)&nbsp;the prosecution or defense of any
action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to Borrower or any other person or entity. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.4&nbsp;&nbsp;&nbsp;&nbsp;SUCCESSORS, ASSIGNMENT.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that Borrower may not assign
or transfer its interest hereunder without Bank's prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in,
Bank's rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit
extended by Bank to Borrower, Borrower or its business, or any collateral required hereunder; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, that Bank shall obtain a written confidentiality
agreement including standard terms and conditions in connection with any such disclosure of material, non-public information relating to Borrower. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.5&nbsp;&nbsp;&nbsp;&nbsp;ENTIRE AGREEMENT; AMENDMENT.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to
the Credits and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed
by each party hereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.6&nbsp;&nbsp;&nbsp;&nbsp;NO THIRD PARTY BENEFICIARIES.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any
other of the Loan Documents to which it is not a party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.7&nbsp;&nbsp;&nbsp;&nbsp;TIME.&nbsp;&nbsp;&nbsp;&nbsp;Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.8&nbsp;&nbsp;&nbsp;&nbsp;SEVERABILITY OF PROVISIONS.&nbsp;&nbsp;&nbsp;&nbsp;If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.9&nbsp;&nbsp;&nbsp;&nbsp;COUNTERPARTS.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.10&nbsp;&nbsp;&nbsp;&nbsp;GOVERNING LAW.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall be governed by and construed in accordance with the laws of the State of California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.11&nbsp;&nbsp;&nbsp;&nbsp;ARBITRATION. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Arbitration</I></FONT><FONT SIZE=2>. Upon the demand of any party, any Dispute shall be resolved by binding arbitration (except as set forth in
(e)&nbsp;below) in accordance with the terms of this Agreement. A "Dispute" shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law,
legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of the Loan Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or indirectly to any of the Loan Documents, including without limitation, any of the foregoing arising in connection with the
exercise of any self-help, ancillary or other remedies pursuant to any of the Loan Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration
of any Dispute. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Governing Rules</I></FONT><FONT SIZE=2>. Arbitration proceedings shall be administered by the American Arbitration Association ("AAA") or such
other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents. The arbitration shall be conducted at a location in
California selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes
of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated.
Judgment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is
a bank of the protections afforded to it under 12 U.S.C. &sect;91 or any similar applicable state law. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>No Waiver; Provisional Remedies, Self-Help and Foreclosure</I></FONT><FONT SIZE=2>. No provision hereof shall limit the right of any
party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies,
including without </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<P><FONT SIZE=2>
limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the pendency of any arbitration
or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration or reference hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Arbitrator Qualifications and Powers; Awards</I></FONT><FONT SIZE=2>. Arbitrators must be active members of the California State Bar or retired
judges of the state or federal judiciary of California, with expertise in the substantive laws applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary
rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i)&nbsp;shall resolve all Disputes in accordance with the substantive law of the state of California,
(ii)&nbsp;may grant any remedy or relief that a court of the state of California could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award,
and (iii)&nbsp;shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim
to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT
SIZE=2><I>however</I></FONT><FONT SIZE=2>, that all three arbitrators must actively participate in all hearings and
deliberations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Judicial Review</I></FONT><FONT SIZE=2>. Notwithstanding anything herein to the contrary, in any arbitration in which the amount in controversy
exceeds $25,000,000, the arbitrators shall be required to make specific, written findings of fact and conclusions of law. In such arbitrations (i)&nbsp;the arbitrators shall not have the power to
make any award which is not supported by substantial evidence or which is based on legal error, (ii)&nbsp;an award shall not be binding upon the parties unless the findings of fact are supported by
substantial evidence and the conclusions of law are not erroneous under the substantive law of the state of California, and (iii)&nbsp;the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award the right to judicial review of (A)&nbsp;whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B)&nbsp;whether the conclusions of law are erroneous under the substantive law of the state of California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and not based on legal error under the substantive law of the state of California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Real Property Collateral; Judicial Reference</I></FONT><FONT SIZE=2>. Notwithstanding anything herein to the contrary, no Dispute shall be
submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i)&nbsp;the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii)&nbsp;all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single
action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens
and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section&nbsp;638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said
Section&nbsp;638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Miscellaneous</I></FONT><FONT SIZE=2>. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required
to conclude any arbitration proceeding within 180&nbsp;days of the filing of the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2>
existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to
exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the Dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.12&nbsp;&nbsp;&nbsp;&nbsp;GENERAL RELEASE.&nbsp;&nbsp;&nbsp;&nbsp;In consideration of the benefits provided to Borrower under the terms and provisions hereof, Borrower hereby agrees as follows
("General Release"): </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;Borrower,
for itself and on behalf of its successors and assigns, does hereby release, acquit and forever discharge Bank, all of Bank's predecessors in interest, and all
of Bank's past and present officers, directors, attorneys, affiliates, employees and agents, of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of contract,
breaches of duty or of any relationship, acts, omissions, misfeasance, malfeasance, causes of action, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies,
promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though
fully set forth herein at length (each, a "Released Claim" and collectively, the "Released Claims"), that Borrower has as of the Effective Date of this Amendment (hereafter, the "Release Date"),
including without limitation, those Released Claims in any way arising out of, connected with or related to any and all prior credit accommodations, if any, provided by Bank, or any of Bank's
predecessors in interest, to Borrower, and any agreements, notes or documents of any kind related thereto or the transactions contemplated thereby or hereby, or any other agreement or document
referred to herein or therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;Borrower
hereby acknowledges, represents and warrants to Bank as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Borrower
understands the meaning and effect of Section&nbsp;1542 of the California Civil Code which provides: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>"Section&nbsp;1542.
</FONT><FONT SIZE=2><I>GENERAL RELEASE; EXTENT</I></FONT><FONT SIZE=2>. A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;With
regard to Section&nbsp;1542 of the California Civil Code, Borrower agrees to assume the risk of any and all unknown, unanticipated or misunderstood defenses and
Released Claims which are released by the provisions of this General Release in favor of Bank, and Borrower hereby waives and releases all rights and benefits which it might otherwise have under
Section&nbsp;1542 of the California Civil Code with regard to the release of such unknown, unanticipated or misunderstood defenses and Released Claims. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;Each
person signing below on behalf of Borrower acknowledges that he or she has read each of the provisions of this General Release. Each such person fully understands
that this General Release has important legal consequences and each such person realizes that they are releasing any and all Released Claims that Borrower may have as of the Release Date. Borrower
hereby acknowledges that it has had an opportunity to obtain a lawyer's advice concerning the legal consequences of each of the provisions of this General Release. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;Borrower
hereby specifically acknowledges and agrees that: (i)&nbsp;none of the provisions of this General Release shall be construed as or constitute an admission of
any liability on the part of Bank; (ii)&nbsp;the provisions of this General Release shall constitute an absolute bar to any Released Claim of any kind, whether any such Released Claim is based on
contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable; and (iii)&nbsp;any attempt to assert a Released Claim barred by the provisions of this General Release
shall subject Borrower to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or causes of action. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>GUARANTOR:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><B>BORROWER:</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
MOTORCAR PARTS&nbsp;&amp; ACCESSORIES,&nbsp;INC.,<BR>
a New York corporation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
WELLS FARGO BANK, NATIONAL ASSOCIATION</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Anthony P. Souza<BR></FONT> <FONT SIZE=2><I>Chief Executive Officer and President</I></FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Edith R. Lim<BR></FONT> <FONT SIZE=2><I>Vice President</I></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Charles W. Yeagley<BR></FONT> <FONT SIZE=2><I>Chief Financial Officer</I></FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="CENTER"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<BR>
<P><br><A NAME="02BHL1781_2">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_ke1781_1">Exhibit 10.35</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_ke1781_2">THIRD AMENDED AND RESTATED CREDIT AGREEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ke1781_3">RECITALS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ke1781_4">ARTICLE I THE CREDITS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ke1781_5">ARTICLE II REPRESENTATIONS AND WARRANTIES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ke1781_6">ARTICLE III CONDITIONS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ke1781_7">ARTICLE IV AFFIRMATIVE COVENANTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_kf1781_1">ARTICLE V NEGATIVE COVENANTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_kf1781_2">ARTICLE VI EVENTS OF DEFAULT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_kf1781_3">ARTICLE VII MISCELLANEOUS</A></FONT><BR>
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</HTML>

</TEXT>
</DOCUMENT>
