QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.35

THIRD AMENDED AND RESTATED
CREDIT AGREEMENT

        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 28, 2002 by and between MOTORCAR PARTS & ACCESSORIES, INC., a New York
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITALS

        A.    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 31, 2001 (as amended, the "Prior Credit Agreement").

        B.    Borrower is indebted to Bank under the terms of the Prior Credit
Agreement for (i) a line of credit (the "Prior Line of Credit"), which is
evidenced by that certain Revolving Line of Credit Note dated April 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) a term loan
(the "Term Loan"), which is evidenced by that certain Term Note dated April 30,
2002 in the principal amount of Nine Million Dollars ($9,000,000.00) (the "Prior
Term Note").

        C.    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.

        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:

ARTICLE I
THE CREDITS

        SECTION 1.1    LINE OF CREDIT.    

        (a)  Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to April 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 Exhibit A attached hereto ("Line of Credit Note"),
all terms of which are incorporated herein by this reference.

        (b)  Limitation on Borrowings. 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) seventy-five percent (75.0%) of Borrower's
Eligible Accounts Receivable (as defined below), plus (ii) the lesser of
(A) $14,000,000, and (B) 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

1

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

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.

        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) returned goods authorizations, and (y) 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:

        (i)    any account which remains unpaid more than sixty (60) days past
the due date thereof;

        (ii)  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;

        (iii)  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);

        (iv)  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;

        (v)  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;

        (vi)  that portion of any account which represents interim or progress
billings or retention rights on the part of the account debtor;

        (vii) 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) above;

        (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; provided,
however, that this limitation shall not apply to any accounts owing by AutoZone
so long as the senior unsecured debt rating of AutoZone, Inc. by Standard &
Poor's (a division of the McGraw-Hills Companies) is BBB- or better and such
rating by Moody's Investors Service is Baa3 or better; and

        (ix)  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.

2

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

        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 4.11.

        (c)  Letter of Credit Subfeature. 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; provided, however,
that the form and substance of each Letter of Credit shall be subject to
approval by Bank, in its sole discretion; and provided, further, 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 31, 2003, any Letter of Credit with an expiry date subsequent to April 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; provided, however,
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.

        (d)  Borrowing and Repayment. 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; provided, however,
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.

        SECTION 1.2    TERM LOAN.    

        (a)  Term Loan. 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; provided
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 Exhibit B attached hereto ("Term Note"), all terms
of which are incorporated herein by this reference.

        (b)  Repayment. The principal amount of the Term Loan shall be repaid in
accordance with the provisions of the Term Note.

        (c)  Prepayment. Borrower may prepay principal on the Term Loan at any
time, in any amount and without penalty.

3

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

        SECTION 1.3    INTEREST/FEES.    

        (a)  Interest. Subject to Section 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 plus One and Three-Quarters Percent (1.75%). Subject to
Section 1.3(b), the outstanding principal balance of the Term Note shall bear
interest at a per annum rate equal to the Prime Rate plus 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.

        (b)  Default Interest. 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.

        (c)  Computation and Payment. Interest shall be computed on the basis of
a 360 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 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.

        (d)  Restructuring Fee. 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 15, 2002; provided 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 15, 2002 shall be waived by Bank.

        (e)  Unused Commitment Fee. 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.

        (f)    Letter of Credit Fees. Borrower shall pay to Bank (i) 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) 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.

        SECTION 1.4    MANDATORY PREPAYMENTS AND PERMANENT COMMITMENT
REDUCTIONS.    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) the
net proceeds of any sales by Borrower of assets outside the ordinary

4

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

course of business, (ii) the net proceeds of any debt or equity issuance by
Borrower, (iii) the net proceeds of any insurance payment received by Borrower,
and (iv) 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:

Date

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

  Amount

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

July 15, 2002   500,000
August 15, 2002
 
500,000
September 15, 2002
 
500,000
October 15, 2002
 
500,000
November 15, 2002
 
750,000
December 15, 2002
 
750,000
January 15, 2003
 
1,000,000
February 15, 2003
 
1,500,000
March 15, 2003
 
1,500,000
April 15, 2003
 
1,500,000

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 1.4, the Line of Credit shall be permanently reduced by a corresponding
amount.

        SECTION 1.5    COLLECTION OF PAYMENTS.    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) 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) 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; provided, that Borrower acknowledges and agrees that any
advance described in this clause (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.

        SECTION 1.6    COLLATERAL.    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

5

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

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.

        SECTION 1.7    CONSENT TO VENDOR PAYMENT PROGRAM.    Bank hereby
consents to the sale of accounts receivable owed by AutoZone, 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
Exhibit F (the "Vendor Payment Program"); provided 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
provided, further, that Bank's consent to sales of accounts receivable by
Borrower to SunTrust shall terminate on the earliest of (a) any payment default
under this Agreement, (b) any default under Section 5.9 of this Agreement, and
(c) fourteen (14) 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 1.7 shall not result in a
reduction of the Line of Credit.

        SECTION 1.8    CERTAIN LOAN DOCUMENTS SUPERSEDED.    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.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

        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.

        SECTION 2.1    LEGAL STATUS.    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.

        SECTION 2.2    AUTHORIZATION AND VALIDITY.    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.

        SECTION 2.3    NO VIOLATION.    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.

6

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

        SECTION 2.4    LITIGATION.    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.

        SECTION 2.5    CORRECTNESS OF FINANCIAL STATEMENT.    The financial
statements of Borrower dated March 31, 2002, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) 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) 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 5.2.

        SECTION 2.6    INCOME TAX RETURNS.    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.

        SECTION 2.7    NO SUBORDINATION.    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.

        SECTION 2.8    PERMITS, FRANCHISES.    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.

        SECTION 2.9    ERISA.    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.

        SECTION 2.10    OTHER OBLIGATIONS.    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.

        SECTION 2.11    ENVIRONMENTAL MATTERS.    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

7

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

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.

ARTICLE III
CONDITIONS

        SECTION 3.1.    CONDITIONS OF INITIAL EXTENSION OF CREDIT.    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 28, 2002:

        (a)  Approval of Bank Counsel. All legal matters incidental to the
granting of each of the credits described in Article I shall be satisfactory to
Bank's counsel.

        (b)  Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

        (i)    This Agreement, the Line of Credit Note, and the Term Note.

        (ii)  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.

        (iii)  Such other documents as Bank or Trade Bank may require under any
other Section of this Agreement.

        (c)  Financial Condition. 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.

        (d)  Insurance. 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.

        (e)  Restructuring Fee; Reimbursement of Expenses. Borrower shall have
paid Bank the portion of the restructuring fee required to be paid on the
Closing Date as described in Section 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 31, 2002.

        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".

        SECTION 3.2    CONDITIONS OF EACH EXTENSION OF CREDIT.    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:

        (a)  Compliance. 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.

8

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

        (b)  Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.

ARTICLE IV
AFFIRMATIVE COVENANTS

        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:

        SECTION 4.1    PUNCTUAL PAYMENTS.    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.

        SECTION 4.2    ACCOUNTING RECORDS.    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.

        SECTION 4.3    FINANCIAL STATEMENTS AND INFORMATION.    Provide to Bank
all of the following, in form and detail satisfactory to Bank:

        (a)  not later than June 30, 2002, Borrower's Form 10-K for the fiscal
year ended March 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;

        (b)  not later than 45 days after and as of the end of each fiscal
quarter, Borrower's Form 10-Q as filed with the SEC;

        (c)  not later than 30 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 Exhibit C executed
by the Chief Financial Officer or President of Borrower (and accompanying
calculations in form and substance satisfactory to Bank);

        (d)  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;

        (e)  not later than 20 days after and as of the end of each month
beginning with the month ending June 30, 2002, a Borrowing Base Certificate
substantially in the form of Exhibit D, 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;

        (f)    not later than 9:00 a.m. on each business day, a Collateral
Activity Report substantially in the form of Exhibit E, in each case to
Collateral Administration as provided in Section 7.2;

        (g)  on the same business day on which information is received by
Borrower from SunTrust pursuant to Section 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 Exhibit G, any such
information received by e-mail shall be forwarded to Bank by e-mail and any such

9

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

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
Section 7.2;

        (h)  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;

        (i)    not later than July 31, 2002, a Certificate of Incumbency
executed by Borrower;

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

        (k)  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

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

        SECTION 4.4    COMPLIANCE.    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.

        SECTION 4.5    INSURANCE.    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.

        SECTION 4.6    FACILITIES.    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.

        SECTION 4.7    TAXES AND OTHER LIABILITIES.    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) as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.

        SECTION 4.8    LITIGATION.    Promptly give notice in writing to Bank of
(a) any litigation pending or threatened against Borrower with a claim in excess
of $100,000.00, and (b) the terms of any modifications to the settlement of any
pending or threatened litigation and the proposed source of funding for any such
settlement.

10

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

        SECTION 4.9    FINANCIAL CONDITION.    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):

        (a)  Quarterly EBITDA, calculated as of the last day of each fiscal
quarter beginning with the fiscal quarter ending June 30, 2002, shall not be
less than the amount specified for such fiscal quarter below:

Fiscal Quarter

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

  Minimum EBITDA

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

April 1, 2002 to June 30, 2002   $ 2,500,000
July 1, 2002 to September 30, 2002
 
$
3,000,000
October 1, 2002 to December 31, 2002
 
$
2,500,000
January 1, 2003 to March 31, 2003
 
$
2,000,000

"EBITDA" shall refer to Borrower's net income, plus in each case to the extent
deducted to arrive at net income, interest expense, taxes, depreciation expense
and amortization expense.

        (b)  Net Operating Income/(Loss), calculated on a monthly basis
beginning with the month ending June 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; provided,
however, 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 31, 2003
prepared by Borrower and delivered to Bank, a copy of which are attached hereto
as Exhibit H.

        (c)  Gross sales, calculated on a monthly basis beginning with the month
ending June 30, 2002, shall never be less than 90% of the amount of gross sales
reflected in the Projections for such month; provided, however, 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.

        (d)  Minimum Tangible Net Worth not at any time less than the sum of
(i) $22,500,000, plus (ii) as of each month end from and after March 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
plus subordinated debt minus any intangible assets minus any non-cash deferred
tax benefit, up to a maximum amount of $3,000,000.

        (e)  Stock adjustments for the fiscal year ending March 31, 2003 shall
not exceed $900,000 or 30,000 units.

11

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

        (f)    Maximum Funded Debt to Adjusted EBITDA Ratio, calculated as of
the last day of each fiscal quarter beginning with the quarter ending June 30,
2002, less than or equal to the ratio set forth opposite such date below:

June 30, 2002   less than or equal to 3.75 September 30, 2002   less than or
equal to 3.50 December 31, 2002   less than or equal to 3.25 March 31, 2003  
less than or equal to 3.00

"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; provided, that for fiscal quarters beginning
September 30, 2002 and thereafter, if Borrower has not received its federal tax
refund with respect to the fiscal year ended March 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 less 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.

        SECTION 4.10    NOTICE TO BANK.    Promptly (but in no event more than
five (5) Business Days after the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: (a) 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) any change
in the name or the organizational structure of Borrower; (c) 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) 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.

        SECTION 4.11    QUARTERLY FIELD EXAMINATIONS AND APPRAISALS.    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) to enable Bank's appraisers to
complete quarterly inventory appraisals, with the first inventory appraisal
after the Closing Date to be completed by August 30, 2002 with respect to
inventory as of June 30, 2002, and to establish the "Appraised Net Recovery
Value" of inventory on a quarterly basis for purposes of Section 1.1(b), (b) 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.

12

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

ARTICLE V
NEGATIVE COVENANTS

        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:

        SECTION 5.1    USE OF FUNDS.    Use any of the proceeds of any of the
Credits except for the purposes stated in Article I hereof.

        SECTION 5.2    OTHER INDEBTEDNESS.    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) the liabilities of Borrower to Bank,
and (b) any other liabilities of Borrower existing as of the date hereof and
identified on Schedule 5.2.

        SECTION 5.3    MERGER, CONSOLIDATION, TRANSFER OF ASSETS.    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.

        SECTION 5.4    GUARANTIES.    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 5.4 not to exceed an
aggregate of $100,000.00 outstanding at any time.

        SECTION 5.5    LOANS, ADVANCES, INVESTMENTS.    Make any loans or
advances to or investments in any person or entity, except (a) any of the
foregoing existing as of, and disclosed to Bank prior to, the date hereof,
(b) 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) any
investments made with or through Bank, whether in connection with a Bank deposit
account or time deposit or any other Bank investment product.

        SECTION 5.6    DIVIDENDS, DISTRIBUTIONS.    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.

        SECTION 5.7    PLEDGE OF ASSETS.    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) 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) liens for taxes and assessments not yet due, (c) mechanics,
warehousemen, carrier, landlord and other statutory liens which arise in the
ordinary course of Borrower's business for amounts not yet due, (d) liens on
equipment leased by Borrower, and (e) liens in security deposits made in the
ordinary course of Borrower's business.

        SECTION 5.8    CAPITAL EXPENDITURES.    Make or incur Capital
Expenditures in excess of $1,500,000.00 during the fiscal year ending March 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 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.

13

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

        SECTION 5.9    SUNTRUST DISCOUNT RATE.    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).

ARTICLE VI
EVENTS OF DEFAULT

        SECTION 6.1    The occurrence of any of the following shall constitute
an "Event of Default" under this Agreement:

        (a)  Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.

        (b)  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.

        (c)  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) and (b) 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) days from its occurrence.

        (d)  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 4.7 hereof.

        (e)  Any defined event of default under any of the Loan Documents other
than this Agreement.

        (f)    Any of the following which is not stayed or discharged within
thirty (30) 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.

        (g)  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 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.

        (h)  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.

        (i)    The dissolution or liquidation of Borrower.

14

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

        (j)    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.

        (k)  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.

        SECTION 6.2    REMEDIES.    Upon the occurrence of any Event of Default:
(a) 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) the obligation, if any, of Bank to extend any further credit under
any of the Loan Documents shall immediately cease and terminate; and (c) 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.

ARTICLE VII
MISCELLANEOUS

        SECTION 7.1    NO WAIVER.    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.

15

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

        SECTION 7.2    NOTICES.    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:

BORROWER:   MOTORCAR PARTS & ACCESSORIES, INC.
2929 California Street
Torrance, California 90503
Attention: Anthony Souza, President
Telephone: (310) 972-4001
Telecopy: (310) 212-7581
BANK:
(except Borrowing Base and Collateral Activity Reports)
 
WELLS FARGO BANK, NATIONAL ASSOCIATION
Loan Adjustment Group
333 South Grand Avenue, Suite 940
Los Angeles, California 90071
Attention: Edith Lim
Telephone: (213) 253-6859
Telecopy: (213) 253-5913
BORROWING BASE AND COLLATERAL ACTIVITY REPORTS:
 
WELLS FARGO BANK, NATIONAL ASSOCIATION
Loan Adjustment Group Collateral Administration
201 Third Street, 8th Floor
San Francisco, California 94103
Attention: Sylvia Zaheri
Telephone: (415) 977-5234
Telecopy: (888) 411-0950

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) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

        SECTION 7.3    COSTS, EXPENSES AND ATTORNEYS' FEES.    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) 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) 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) 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.

        SECTION 7.4    SUCCESSORS, ASSIGNMENT.    This Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided, however,
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; provided, 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.

16

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

        SECTION 7.5    ENTIRE AGREEMENT; AMENDMENT.    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.

        SECTION 7.6    NO THIRD PARTY BENEFICIARIES.    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.

        SECTION 7.7    TIME.    Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.

        SECTION 7.8    SEVERABILITY OF PROVISIONS.    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.

        SECTION 7.9    COUNTERPARTS.    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.

        SECTION 7.10    GOVERNING LAW.    This Agreement shall be governed by
and construed in accordance with the laws of the State of California.

        SECTION 7.11    ARBITRATION.

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

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

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

17

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

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

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

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

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

        (g)  Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the

18

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

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.

        SECTION 7.12    GENERAL RELEASE.    In consideration of the benefits
provided to Borrower under the terms and provisions hereof, Borrower hereby
agrees as follows ("General Release"):

        (a)  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.

        (b)  Borrower hereby acknowledges, represents and warrants to Bank as
follows:

        (i)    Borrower understands the meaning and effect of Section 1542 of
the California Civil Code which provides:

"Section 1542. GENERAL RELEASE; EXTENT. 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."

        (ii)  With regard to Section 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 1542 of the
California Civil Code with regard to the release of such unknown, unanticipated
or misunderstood defenses and Released Claims.

        (c)  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.

        (d)  Borrower hereby specifically acknowledges and agrees that: (i) 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) 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) 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.

19

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

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

GUARANTOR:   BORROWER:
MOTORCAR PARTS & ACCESSORIES, INC.,
a New York corporation
 
WELLS FARGO BANK, NATIONAL ASSOCIATION              
By:
 

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

Anthony P. Souza
Chief Executive Officer and President
 
By:
 

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

Edith R. Lim
Vice President
By:
 

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

Charles W. Yeagley
Chief Financial Officer
 
 
 
 

20

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

QuickLinks

Exhibit 10.35

THIRD AMENDED AND RESTATED CREDIT AGREEMENT
RECITALS
ARTICLE I THE CREDITS
ARTICLE II REPRESENTATIONS AND WARRANTIES
ARTICLE III CONDITIONS
ARTICLE IV AFFIRMATIVE COVENANTS
ARTICLE V NEGATIVE COVENANTS
ARTICLE VI EVENTS OF DEFAULT
ARTICLE VII MISCELLANEOUS