
                                                  [Draft of _____________, 1997]







                             _______________ Shares



                       ACTION PERFORMANCE COMPANIES, INC.


                                  COMMON STOCK




                             UNDERWRITING AGREEMENT

                                   Dated [___]
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                       <C>
Section 1.  Representations and Warranties of the Company..................................6

A.  Representations and Warranties of the Company..........................................6
         Compliance with Registration Requirements.........................................6
         Offering Materials Furnished to Underwriters......................................7
         Distribution of Offering Material by the Company..................................7
         The Underwriting Agreement........................................................7
         Authorization of the Common Shares................................................7
         No Applicable Registration or Other Similar Rights................................7
         No Material Adverse Change........................................................8
         Independent Accountants...........................................................8
         Preparation of the Financial Statements...........................................8
         Incorporation and Good Standing of the Company and its Subsidiaries...............8
         Capitalization and Other Capital Stock Matters....................................9
         Stock Exchange Listing............................................................9
         Non-Contravention of Existing Instruments; No Further Authorizations or
         Approvals Required................................................................9
         No Material Actions or Proceedings................................................10
         Intellectual Property Rights......................................................10
         All Necessary Permits, Etc........................................................11
         Title to Properties...............................................................11
         Tax Law Compliance................................................................11
         Company Not an "Investment Company"...............................................11
         Insurance.........................................................................11
         No Price Stabilization or Manipulation............................................12
         Related Party Transactions........................................................12
         No Unlawful Contributions or Other Payments.......................................12
         Company's Accounting System.......................................................12
         Exchange Act Compliance...........................................................12
         Compliance with Environmental Laws................................................13
         ERISA Compliance..................................................................13

B.  Representations and Warranties of the Selling Shareholders.............................14
         The Underwriting Agreement........................................................14
         The Custody Agreement and Power of Attorney.......................................14
         Title to Common Shares to be Sold; All Authorizations Obtained....................15
         Delivery of the Common Shares to be Sold..........................................15
         Non-Contravention; No Further Authorizations or Approvals Required................15
         No Registration or Other Similar Rights...........................................15
         No Further Consents, Etc..........................................................15
</TABLE>
                                       2
<PAGE>
<TABLE>
<S>                                                                                       <C>
         Disclosure Made by Such Selling Shareholder in the Prospectus.....................16
         No Price Stabilization or Manipulation............................................16
         Confirmation of Company Representations and Warranties............................16

Section 2.  Purchase, Sale and Delivery of the Common Shares...............................16
         The Firm Common Shares............................................................16
         The First Closing Date............................................................17
         The Optional Common Shares; The Second Closing Date...............................17
         Public Offering of the Common Shares..............................................18
         Payment for the Common Shares.....................................................18
         Delivery of the Common Shares.....................................................18
         Delivery of Prospectus to the Underwriters........................................19

Section 3.  Additional Covenants of the Company............................................19

A.  Covenants of the Company...............................................................19
         Underwriters' Review of Proposed Amendments and Supplements.......................19
         Securities Act Compliance.........................................................19
         Amendments and Supplements to the Prospectus and Other
         Securities Act Matters............................................................20
         Copies of Any Amendments and Supplements to the Prospectus........................20
         Blue Sky Compliance...............................................................20
         Use Of Proceeds...................................................................20
         Transfer Agent....................................................................20
         Earnings Statement................................................................21
         Periodic Reporting Obligations....................................................21
         Agreement Not to Offer or Sell Additional Securities..............................21
         Future Reports to the Underwriters................................................21
         Exchange Act Compliance...........................................................21

B.  Covenants of the Selling Shareholders..................................................22
         Agreement Not to Offer or Sell Additional Securities..............................22
         Delivery of  Forms W-8 and W-9....................................................22

Section 4.  Payment of Expenses............................................................22

Section 5.  Conditions of the Obligations of the Underwriters..............................23
         Accountants' Comfort Letter.......................................................23
         Compliance with Registration Requirements;
         No Stop Order; No Objection from NASD.............................................24
         No Material Adverse Change or Ratings Agency Change...............................24
         Opinion of Counsel for the Company................................................24
</TABLE>
                                       3
<PAGE>
<TABLE>
<S>                                                                                       <C>
         Opinion of Counsel for the Underwriters...........................................25
         Officers' Certificate.............................................................25
         Bring-Down Comfort Letter.........................................................25
         Opinion of Counsel for the Selling Shareholders...................................25
         Selling Shareholders' Certificate.................................................26
         Selling Shareholders' Documents...................................................26
         Lock-Up Agreement from Certain Shareholders of the Company Other Than 
         Selling Shareholders..............................................................26
         Additional Documents..............................................................26

Section 6.  Reimbursement of Underwriters' Expenses........................................27

Section 7.  Effectiveness of this Agreement................................................27

Section 8.  Indemnification................................................................27
         Indemnification of the Underwriters...............................................27
         Indemnification of the Company, its Directors and Officers........................29
         Notifications and Other Indemnification Procedures................................29
         Settlements.......................................................................30

Section 9.   Contribution..................................................................31

Section 10.  Default of One or More of the Several Underwriters............................32

Section 11.  Termination of this Agreement.................................................33

Section 12.  Representations and Indemnities to Survive Delivery...........................33

Section 13.  Notices.......................................................................34

Section 14.  Successors....................................................................34

Section 15.  Partial Unenforceability......................................................35

Section 16.  Governing Law Provisions......................................................35
         Consent to Jurisdiction...........................................................35
         Waiver of Immunity................................................................35

Section 17.  Failure of One or More of the Selling Shareholders to Sell and Deliver 
         Common Shares.....................................................................36

Section 18.  General Provisions............................................................36
</TABLE>
                                       4
<PAGE>
                             UNDERWRITING AGREEMENT


                                                                [________, 1997]

MONTGOMERY SECURITIES
ADVEST, INCORPORATED
INTERSTATE/JOHNSON LANE CORPORATION 
c/o MONTGOMERY SECURITIES 
600 Montgomery
Street San Francisco, California 94111

Ladies and Gentlemen:

                  Introductory.  Action Performance Companies,  Inc., an Arizona
corporation  (the  "Company"),  proposes  to  issue  and  sell  to  the  several
underwriters  named in Schedule A (the  "Underwriters")  an  aggregate  of [___]
shares of its Common Stock, par value $.01 per share (the "Common  Stock");  and
the shareholders of the Company named in Schedule B (collectively,  the "Selling
Shareholders")  severally  propose to sell to the  Underwriters  an aggregate of
[___] shares of Common Stock. The [___] shares of Common Stock to be sold by the
Company  and the  [___]  shares  of  Common  Stock  to be  sold  by the  Selling
Shareholders are collectively called the "Firm Common Shares". In addition,  the
Company  has  granted  to  the  Underwriters  an  option  to  purchase  up to an
additional  [___] shares (the  "Optional  Common  Shares") of Common  Stock,  as
provided in Section 2.

                  The Company has  prepared  and filed with the  Securities  and
Exchange  Commission  (the  "Commission")  a registration  statement on Form S-3
(File  No.  333-[___]),  which  contains  a form  of  prospectus  to be  used in
connection  with  the  public  offering  and  sale of the  Common  Shares.  Such
registration statement, as amended, including the financial statements, exhibits
and  schedules  thereto,  in the form in which it was declared  effective by the
Commission  under  the  Securities  Act of 1933 and the  rules  and  regulations
promulgated  thereunder  (collectively,  the  "Securities  Act"),  including all
documents incorporated or deemed to be incorporated by reference therein and any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act or the Securities Exchange Act of
1934 and the rules and regulations  promulgated  thereunder  (collectively,  the
"Exchange  Act"),  is called  the  "Registration  Statement."  Any  registration
statement filed by the Company  pursuant to Rule 462(b) under the Securities Act
is called the "Rule 462(b) Registration  Statement," and from and after the date
and  time  of  filing  of  the  Rule  462(b)  Registration  Statement  the  term
"Registration  Statement" shall include the Rule 462(b) Registration  Statement.
Such prospectus,  in the form first used by the Underwriters to confirm sales of
the Common Shares, is called the "Prospectus;" provided, however, if the Company
has,  with the consent of Montgomery  Securities,  elected to rely upon Rule 434
under  the  Securities  Act,  the term  "Prospectus"  shall  mean the  Company's
prospectus subject to completion (each, a "preliminary  prospectus") dated [___]
(such preliminary  prospectus 
                                       5
<PAGE>
is called the "Rule 434 preliminary  prospectus"),  together with the applicable
term  sheet  (the  "Term  Sheet")  prepared  and filed by the  Company  with the
Commission  under  Rules  434  and  424(b)  under  the  Securities  Act  and all
references in this Agreement to the date of the  Prospectus  shall mean the date
of the  Term  Sheet.  All  references  in  this  Agreement  to the  Registration
Statement, the Rule 462(b) Registration Statement, a preliminary prospectus, the
Prospectus or the Term Sheet,  or any  amendments or  supplements  to any of the
foregoing,  shall include any copy thereof filed with the Commission pursuant to
its Electronic  Data Gathering,  Analysis and Retrieval  System  ("EDGAR").  All
references  in this  Agreement to financial  statements  and schedules and other
information  which is  "contained,"  "included" or "stated" in the  Registration
Statement or the Prospectus  (and all other  references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information  which  is or is  deemed  to be  incorporated  by  reference  in the
Registration Statement or the Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration  Statement or
the  Prospectus  shall be deemed to mean and include the filing of any  document
under the Exchange Act which is or is deemed to be  incorporated by reference in
the Registration Statement or the Prospectus, as the case may be.

                  The  Company  and  each  of the  Selling  Shareholders  hereby
confirms their respective agreements with the Underwriters as follows:

         Section 1. Representations and Warranties of the Company.

         A. Representations  and  Warranties of the Company.  The Company hereby
represents, warrants and covenants to each Underwriter as follows:

                  (a)   Compliance   with   Registration    Requirements.    The
     Registration Statement and any Rule 462(b) Registration Statement have been
     declared  effective by the Commission under the Securities Act. The Company
     has  complied to the  Commission's  satisfaction  with all  requests of the
     Commission  for  additional  or  supplemental  information.  No stop  order
     suspending  the  effectiveness  of the  Registration  Statement or any Rule
     462(b)  Registration  Statement  is in effect and no  proceedings  for such
     purpose have been  instituted  or are pending or, to the best  knowledge of
     the Company, are contemplated or threatened by the Commission.

                  Each  preliminary  prospectus  and the  Prospectus  when filed
     complied in all material  respects with the Securities Act and, if filed by
     electronic  transmission  pursuant to EDGAR  (except as may be permitted by
     Regulation S-T under the Securities Act), was identical to the copy thereof
     delivered to the Underwriters for use in connection with the offer and sale
     of the Common Shares. Each of the Registration  Statement,  any Rule 462(b)
     Registration  Statement and any post-effective  amendment  thereto,  at the
     time it became  effective and at all  subsequent  times,  complied and will
     comply in all material  respects  with the  Securities  Act and did not and
     will not contain any untrue statement of a material fact or omit to state a
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements   therein  not  misleading.   The  Prospectus,   as  amended  or
     supplemented, as of its date and at all subsequent times, 
                                       6
<PAGE>
     did not and will not contain  any untrue  statement  of a material  fact or
     omit to state a material  fact  necessary  in order to make the  statements
     therein,  in the light of the circumstances under which they were made, not
     misleading.  The  representations  and  warranties  set  forth  in the  two
     immediately  preceding sentences do not apply to statements in or omissions
     from the Registration Statement, any Rule 462(b) Registration Statement, or
     any post-effective amendment thereto, or the Prospectus,  or any amendments
     or  supplements  thereto,  made in  reliance  upon and in  conformity  with
     information relating to any Underwriter furnished to the Company in writing
     by the  Underwriters  expressly for use therein.  There are no contracts or
     other  documents  required to be described in the Prospectus or to be filed
     as exhibits to the Registration  Statement which have not been described or
     filed as required.

                  (b) Offering Materials Furnished to Underwriters.  The Company
     has delivered to the Underwriters  three complete manually signed copies of
     the  Registration  Statement and of each consent and certificate of experts
     filed as a part thereof, and conformed copies of the Registration Statement
     (without  exhibits) and preliminary  prospectuses  and the  Prospectus,  as
     amended  or  supplemented,  in such  quantities  and at such  places as the
     Underwriters have reasonably requested for each of the Underwriters.

                  (c)  Distribution  of Offering  Material by the  Company.  The
     Company has not distributed and will not distribute,  prior to the later of
     the  Second  Closing  Date (as  defined  below) and the  completion  of the
     Underwriters'  distribution of the Common Shares,  any offering material in
     connection  with the  offering  and sale of the Common  Shares other than a
     preliminary prospectus, the Prospectus or the Registration Statement.

                  (d) The Underwriting  Agreement.  This Agreement has been duly
     authorized, executed and delivered by, and is a valid and binding agreement
     of, the Company, enforceable in accordance with its terms, except as rights
     to indemnification hereunder may be limited by applicable law and except as
     the   enforcement   hereof  may  be  limited  by  bankruptcy,   insolvency,
     reorganization,  moratorium  or other similar laws relating to or affecting
     the rights and remedies of creditors or by general equitable principles.

                  (e)  Authorization of the Common Shares.  The Common Shares to
     be purchased by the Underwriters from the Company have been duly authorized
     for  issuance  and sale  pursuant to this  Agreement  and,  when issued and
     delivered  by the  Company  pursuant  to this  Agreement,  will be  validly
     issued, fully paid and nonassessable.

                  (f) No Applicable  Registration or Other Similar Rights. There
     are no persons with registration or other similar rights to have any equity
     or debt securities registered for sale under the Registration  Statement or
     included in the offering  contemplated  by this  Agreement,  other than the
     Selling  Shareholders  with  respect to the Common  Shares  included in the
     Registration Statement, except for such rights as have been duly waived. 
                                       7
<PAGE>
                  (g) No Material Adverse Change.  Except as otherwise disclosed
     in  the  Prospectus,  subsequent  to  the  respective  dates  as  of  which
     information  is given in the  Prospectus:  (i) there  has been no  material
     adverse  change,  or any development  that could  reasonably be expected to
     result  in a  material  adverse  change,  in the  condition,  financial  or
     otherwise, or in the earnings,  business,  operations or prospects, whether
     or not arising from transactions in the ordinary course of business, of the
     Company and its subsidiaries,  considered as one entity (any such change is
     called a "Material Adverse Change"); (ii) the Company and its subsidiaries,
     considered  as one entity,  have not  incurred  any  material  liability or
     obligation,  indirect, direct or contingent,  not in the ordinary course of
     business nor entered into any material  transaction or agreement not in the
     ordinary  course of  business;  and (iii)  there  has been no  dividend  or
     distribution  of any kind declared,  paid or made by the Company or, except
     for  dividends  paid  to the  Company  or  other  subsidiaries,  any of its
     subsidiaries  on any class of capital  stock or repurchase or redemption by
     the Company or any of its subsidiaries of any class of capital stock.

                  (h)  Independent  Accountants.  Arthur  Andersen LLP, who have
     expressed  their  opinion with respect to the financial  statements  (which
     term as used in this  Agreement  includes the related notes  thereto) filed
     with the Commission as a part of the Registration Statement and included in
     the Prospectus,  are independent  public or certified public accountants as
     required by the Securities Act and the Exchange Act.

                  (i)  Preparation  of the Financial  Statements.  The financial
     statements  filed  with  the  Commission  as a  part  of  the  Registration
     Statement and included in the Prospectus  present  fairly the  consolidated
     financial  position of the Company  and its  subsidiaries  as of and at the
     dates indicated and the results of their  operations and cash flows for the
     periods  specified.   Such  financial  statements  have  been  prepared  in
     conformity  with  generally  accepted  accounting  principles  applied on a
     consistent  basis  throughout  the  periods  involved,  except  as  may  be
     expressly  stated  in  the  related  notes  thereto.   No  other  financial
     statements  or  supporting  schedules  are  required  to be included in the
     Registration  Statement.  The  financial  data set forth in the  Prospectus
     under the  captions  "Prospectus  Summary--Summary  Consolidated  Financial
     Data," "Selected Consolidated  Financial Data" and "Capitalization"  fairly
     present the information  set forth therein on a basis  consistent with that
     of  the  audited  financial   statements   contained  in  the  Registration
     Statement.

                  (j)  Incorporation  and Good  Standing  of the Company and its
     Subsidiaries.  Each of the  Company  and its  subsidiaries  has  been  duly
     incorporated  and is validly  existing as a  corporation  in good  standing
     under the laws of the jurisdiction of its  incorporation  and has corporate
     power and authority to own, lease and operate its properties and to conduct
     its  business  as  described  in the  Prospectus  and,  in the  case of the
     Company,  to enter into and perform its  obligations  under this Agreement.
     Each of the  Company and each  subsidiary  is duly  qualified  as a foreign
     corporation  to  transact   business  and  is  in  good  standing  in  each
     jurisdiction in which such qualification is required,  whether by reason of
     the ownership or leasing of 
                                       8
<PAGE>
     property or the conduct of business,  except for such  jurisdictions  where
     the failure to so qualify or to be in good standing would not, individually
     or in the aggregate, result in a Material Adverse Change. All of the issued
     and  outstanding  capital stock of each subsidiary has been duly authorized
     and validly  issued,  is fully paid and  nonassessable  and is owned by the
     Company,  directly or through subsidiaries,  free and clear of any security
     interest,  mortgage,  pledge, lien,  encumbrance or claim. The Company does
     not own or control, directly or indirectly, any corporation, association or
     other  entity  other  than the  subsidiaries  listed in  Exhibit  22 to the
     [Company's  Annual  Report on Form 10 K for the fiscal year ended  [_____],
     19[__]].

                  (k)  Capitalization  and  Other  Capital  Stock  Matters.  The
     authorized,  issued and outstanding  capital stock of the Company is as set
     forth in the Prospectus under the caption  "Capitalization" (other than for
     subsequent issuances,  if any, pursuant to employee benefit plans described
     in the Prospectus or upon exercise of outstanding  options described in the
     Prospectus). The Common Stock (including the Common Shares) conforms in all
     material  respects to the description  thereof contained in the Prospectus.
     All of the issued and  outstanding  shares of Common Stock  (including  the
     shares  of  Common  Stock  owned by  Selling  Shareholders)  have been duly
     authorized and validly issued,  are fully paid and  nonassessable  and have
     been issued in compliance with federal and state  securities  laws. None of
     the  outstanding  shares of Common  Stock were issued in  violation  of any
     preemptive  rights,  rights of first  refusal  or other  similar  rights to
     subscribe  for  or  purchase  securities  of  the  Company.  There  are  no
     authorized or outstanding options,  warrants,  preemptive rights, rights of
     first  refusal or other  rights to purchase,  or equity or debt  securities
     convertible  into or exchangeable or exercisable  for, any capital stock of
     the  Company  or  any of  its  subsidiaries  other  than  those  accurately
     described in the Prospectus. The description of the Company's stock option,
     stock bonus and other stock plans or arrangements, and the options or other
     rights  granted  thereunder,  set forth in the  Prospectus  accurately  and
     fairly presents the  information  required to be shown with respect to such
     plans, arrangements, options and rights.

                  (l) Stock Exchange  Listing.  The Common Stock  (including the
     Common Shares) is registered  pursuant to Section 12(g) of the Exchange Act
     and is listed on the Nasdaq National  Market,  and the Company has taken no
     action  designed  to, or  likely to have the  effect  of,  terminating  the
     registration  of the Common Stock under the  Exchange Act or delisting  the
     Common Stock from the Nasdaq National Market,  nor has the Company received
     any  notification  that  the  Commission  or the  National  Association  of
     Securities  Dealers,  Inc. (the "NASD") is  contemplating  terminating such
     registration or listing.

                  (m)  Non-Contravention  of  Existing  Instruments;  No Further
     Authorizations  or Approvals  Required.  Neither the Company nor any of its
     subsidiaries  is in  violation  of its  charter or by-laws or is in default
     (or,  with the  giving  of notice  or lapse of time,  would be in  default)
     ("Default") under any indenture,  mortgage, loan or credit agreement, note,
     contract,  franchise, lease or other instrument to which the Company or any
     of its  subsidiaries  is a party or by which it or any of them may be bound
     (including,  without  limitation,  the  Company's  8.05%  
                                       9
<PAGE>
     Senior Notes due January 2, 1999 and Revolving  Credit  Facility with First
     Union National Bank of North Carolina,  as lender),  or to which any of the
     property  or assets of the  Company or any of its  subsidiaries  is subject
     (each,  an "Existing  Instrument"),  except for such Defaults as would not,
     individually or in the aggregate,  result in a Material Adverse Change. The
     Company's  execution,  delivery  and  performance  of  this  Agreement  and
     consummation of the transactions  contemplated hereby and by the Prospectus
     (i) have been duly  authorized by all necessary  corporate  action and will
     not result in any violation of the  provisions of the charter or by-laws of
     the Company or any subsidiary,  (ii) will not conflict with or constitute a
     breach of, or Default under, or result in the creation or imposition of any
     lien,  charge or encumbrance  upon any property or assets of the Company or
     any of its  subsidiaries  pursuant  to, or require the consent of any other
     part to, any  Existing  Instrument,  except for such  conflicts,  breaches,
     Defaults,  liens, charges or encumbrances as would not,  individually or in
     the  aggregate,  result in a  Material  Adverse  Change  and (iii) will not
     result  in  any  violation  of  any  law,   administrative   regulation  or
     administrative or court decree applicable to the Company or any subsidiary.
     No consent,  approval,  authorization or other order of, or registration or
     filing with,  any court or other  governmental  or regulatory  authority or
     agency, is required for the Company's  execution,  delivery and performance
     of this Agreement and consummation of the transactions  contemplated hereby
     and by the  Prospectus,  except  such as have been  obtained or made by the
     Company  and are in  full  force  and  effect  under  the  Securities  Act,
     applicable  state  securities  or blue sky laws and from the NASD.  As used
     herein,  a "Debt Repayment  Triggering  Event" means any event or condition
     which gives,  or with the giving of notice or lapse of time would give, the
     holder of any note,  debenture or other  evidence of  indebtedness  (or any
     person acting on such holder's behalf) the right to require the repurchase,
     redemption  or  repayment of all or a portion of such  indebtedness  by the
     Company or any of its subsidiaries.

                  (n) No Material  Actions or  Proceedings.  Except as otherwise
     disclosed in the Prospectus,  there are no legal or  governmental  actions,
     suits or  proceedings  pending or, to the best of the Company's  knowledge,
     threatened (i) against or affecting the Company or any of its subsidiaries,
     (ii)  which has as the  subject  thereof  any  officer or  director  of, or
     property  owned or leased by, the  Company  or any of its  subsidiaries  or
     (iii) relating to environmental  or  discrimination  matters,  where in any
     such case (A) there is a reasonable  possibility that such action,  suit or
     proceeding might be determined  adversely to the Company or such subsidiary
     and (B) any such action,  suit or proceeding,  if so determined  adversely,
     would  reasonably  be  expected to result in a Material  Adverse  Change or
     adversely affect the consummation of the transactions  contemplated by this
     Agreement.  No material  labor dispute with the employees of the Company or
     any of its subsidiaries, or with the employees of any principal supplier of
     the  Company,  exists  or,  to the  best  of the  Company's  knowledge,  is
     threatened or imminent.

                  (o)  Intellectual   Property   Rights.   Except  as  otherwise
     disclosed  in the  Prospectus,  the  Company  and its  subsidiaries  own or
     possess  sufficient  trademarks,  trade names,  patent rights,  copyrights,
     licenses,  approvals, trade secrets and other similar rights (collectively,
     "Intellectual Property Rights") reasonably necessary to
                                       10
<PAGE>
     conduct their businesses as now conducted;  and the expected  expiration of
     any of such  Intellectual  Property  Rights  would not result in a Material
     Adverse  Change.  Neither  the  Company  nor  any of its  subsidiaries  has
     received any notice of infringement or conflict with asserted  Intellectual
     Property Rights of others,  which infringement or conflict,  if the subject
     of an unfavorable decision, would result in a Material Adverse Change.

                  (p)  All  Necessary   Permits,   Etc.  The  Company  and  each
     subsidiary possess such valid and current  certificates,  authorizations or
     permits  issued by the  appropriate  state,  federal or foreign  regulatory
     agencies or bodies  necessary to conduct their respective  businesses,  and
     neither  the  Company  nor  any  subsidiary  has  received  any  notice  of
     proceedings   relating   to  the   revocation   or   modification   of,  or
     non-compliance  with, any such certificate,  authorization or permit which,
     singly or in the  aggregate,  if the  subject of an  unfavorable  decision,
     ruling or finding, could result in a Material Adverse Change.

                  (q)  Title  to  Properties.   The  Company  and  each  of  its
     subsidiaries has good and marketable title to all the properties and assets
     reflected as owned in the financial statements referred to in Section 1 (A)
     (i) above (or elsewhere in the Prospectus),  in each case free and clear of
     any security interests,  mortgages,  liens, encumbrances,  equities, claims
     and other defects,  except such as do not  materially and adversely  affect
     the value of such  property and do not  materially  interfere  with the use
     made  or  proposed  to be  made of such  property  by the  Company  or such
     subsidiary.  The  real  property,  improvements,   equipment  and  personal
     property held under lease by the Company or any  subsidiary  are held under
     valid and enforceable  leases, with such exceptions as are not material and
     do not  materially  interfere  with the use made or  proposed to be made of
     such real  property,  improvements,  equipment or personal  property by the
     Company or such subsidiary.

                  (r) Tax  Law  Compliance.  The  Company  and its  consolidated
     subsidiaries have filed all necessary federal, state and foreign income and
     franchise tax returns or have  properly  requested  extensions  thereof and
     have paid all  taxes  required  to be paid by any of them  and,  if due and
     payable, any related or similar assessment,  fine or penalty levied against
     any of them. The Company has made adequate  charges,  accruals and reserves
     in the  applicable  financial  statements  referred to in Section 1 (A) (i)
     above in respect of all  federal,  state and foreign  income and  franchise
     taxes for all periods as to which the tax  liability  of the Company or any
     of its consolidated subsidiaries has not been finally determined.

                  (s) Company Not an "Investment  Company." The Company has been
     advised of the rules and requirements  under the Investment  Company Act of
     1940, as amended (the  "Investment  Company Act").  The Company is not, and
     after receipt of payment for the Common Shares will not be, an  "investment
     company" within the meaning of Investment  Company Act and will conduct its
     business in a manner so that it will not become  subject to the  Investment
     Company Act.

                  (t) Insurance.  Each of the Company and its  subsidiaries  are
     insured 
                                       11
<PAGE>
     by recognized,  financially sound and reputable  institutions with policies
     in such amounts and with such  deductibles  and covering  such risks as are
     generally deemed adequate and customary for their businesses including, but
     not limited to,  policies  covering  real and  personal  property  owned or
     leased  by  the  Company  and  its  subsidiaries   against  theft,  damage,
     destruction,  acts of vandalism and earthquakes.  The Company has no reason
     to  believe  that it or any  subsidiary  will not be able (i) to renew  its
     existing  insurance  coverage as and when such  policies  expire or (ii) to
     obtain comparable coverage from similar institutions as may be necessary or
     appropriate  to conduct its  business as now  conducted  and at a cost that
     would not result in a Material  Adverse Change.  Neither of the Company nor
     any subsidiary  has been denied any insurance  coverage which it has sought
     or for which it has applied.

                  (u) No Price  Stabilization or  Manipulation.  The Company has
     not taken and will not take, directly or indirectly, any action designed to
     or that might be reasonably expected to cause or result in stabilization or
     manipulation  of the price of the Common  Stock to  facilitate  the sale or
     resale of the Common Shares.

                  (v)  Related  Party   Transactions.   There  are  no  business
     relationships  or related-party  transactions  involving the Company or any
     subsidiary or any other person  required to be described in the  Prospectus
     which have not been described as required.

                  (w) No Unlawful  Contributions or Other Payments.  Neither the
     Company  nor any of its  subsidiaries  nor,  to the  best of the  Company's
     knowledge, any employee or agent of the Company or any subsidiary, has made
     any contribution or other payment to any official of, or candidate for, any
     federal,  state  or  foreign  office  in  violation  of  any  law or of the
     character required to be disclosed in the Prospectus.

                  (x)  Company's  Accounting  System.  The  Company  maintains a
     system of accounting controls  sufficient to provide reasonable  assurances
     that (i) transactions are executed in accordance with management's  general
     or specific  authorization;  (ii) transactions are recorded as necessary to
     permit  preparation  of financial  statements in conformity  with generally
     accepted  accounting  principles  as applied  in the  United  States and to
     maintain  accountability  for assets;  (iii)  access to assets is permitted
     only in accordance with management's general or specific authorization; and
     (iv) the  recorded  accountability  for assets is  compared  with  existing
     assets at reasonable intervals and appropriate action is taken with respect
     to any differences.

                  (y) Exchange Act  Compliance.  The documents  incorporated  or
     deemed to be incorporated by reference in the Prospectus,  at the time they
     were or hereafter are filed with the  Commission,  complied and will comply
     in all material  respects with the  requirements  of the Exchange Act, and,
     when read together with the other  information  in the  Prospectus,  at the
     time the Registration Statement and any amendments thereto become effective
     and at the First Closing Date and the Second  Closing Date, as the case may
     be,  will not  contain an untrue  statement  of a material  fact or omit to
     state a material  fact  required to be stated  therein or necessary to make
                                       12
<PAGE>
     the fact required to be stated  therein or necessary to make the statements
     therein,  in the light of the circumstances under which they were made, not
     misleading.

                  (z) Compliance with  Environmental  Laws.  Except as otherwise
     disclosed  in  the  Prospectus  or as  would  not,  individually  or in the
     aggregate,  result in a Material Adverse Change (i) neither the Company nor
     any of its  subsidiaries  is in violation of any federal,  state,  local or
     foreign law or  regulation  relating to  pollution or  protection  of human
     health or the  environment  (including,  without  limitation,  ambient air,
     surface water, groundwater, land surface or subsurface strata) or wildlife,
     including without limitation,  laws and regulations  relating to emissions,
     discharges,  releases  or  threatened  releases of  chemicals,  pollutants,
     contaminants, wastes, toxic substances, hazardous substances, petroleum and
     petroleum products (collectively, "Materials of Environmental Concern"), or
     otherwise  relating  to the  manufacture,  processing,  distribution,  use,
     treatment,  storage,  disposal,  transport  or  handling  of  Materials  of
     Environment Concern  (collectively,  "Environmental Laws"), which violation
     includes,  but is not limited to,  noncompliance  with any permits or other
     governmental  authorizations  required for the operation of the business of
     the Company or its  subsidiaries  under applicable  Environmental  Laws, or
     noncompliance with the terms and conditions thereof, nor has the Company or
     any of its subsidiaries received any written communication,  whether from a
     governmental authority, citizens group, employee or otherwise, that alleges
     that  the  Company  or any  of  its  subsidiaries  is in  violation  of any
     Environmental Law; (ii) there is no claim,  action or cause of action filed
     with a court or governmental  authority,  no investigation  with respect to
     which the Company has received written notice, and no written notice by any
     person or entity  alleging  potential  liability for  investigatory  costs,
     cleanup costs,  governmental  responses costs,  natural resources  damages,
     property damages,  personal injuries,  attorneys' fees or penalties arising
     out of,  based on or  resulting  from the  presence,  or  release  into the
     environment,  of any  Material  of  Environmental  Concern at any  location
     owned, leased or operated by the Company or any of its subsidiaries, now or
     in the past (collectively, "Environmental Claims"), pending or, to the best
     of the Company's  knowledge,  threatened  against the Company or any of its
     subsidiaries or any person or entity whose liability for any  Environmental
     Claim the Company or any of its subsidiaries has retained or assumed either
     contractually  or by  operation  of  law;  and  (iii)  to the  best  of the
     Company's  knowledge,  there are no past or  present  actions,  activities,
     circumstances,   conditions,   events  or  incidents,   including,  without
     limitation, the release, emission,  discharge,  presence or disposal of any
     Material  of  Environmental  Concern,  that  reasonably  could  result in a
     violation  of any  Environmental  Law or  form  the  basis  of a  potential
     Environmental  Claim  against  the  Company or any of its  subsidiaries  or
     against any person or entity whose  liability for any  Environmental  Claim
     the  Company or any of its  subsidiaries  has  retained  or assumed  either
     contractually or by operation of law.

                  (aa) ERISA  Compliance.  The Company and its  subsidiaries and
     any  "employee  benefit  plan" (as defined  under the  Employee  Retirement
     Income Security Act of 1974, as amended,  and the regulations and published
     interpretations   thereunder   (collectively,   "ERISA"))   established  or
     maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
     defined  below) are in  compliance  in all  material  
                                       13
<PAGE>
     respects with ERISA.  "ERISA  Affiliate" means, with respect to the Company
     or a  subsidiary,  any member of any group of  organizations  described  in
     Sections  414(b),(c),(m)  or (o) of the Internal  Revenue Code of 1986,  as
     amended, and the regulations and published interpretations  thereunder (the
     "Code") of which the Company or such subsidiary is a member. No "reportable
     event" (as defined under ERISA) has occurred or is  reasonably  expected to
     occur with respect to any "employee benefit plan" established or maintained
     by the  Company,  its  subsidiaries  or any of their ERISA  Affiliates.  No
     "employee  benefit plan"  established  or  maintained  by the Company,  its
     subsidiaries or any of their ERISA  Affiliates,  if such "employee  benefit
     plan"  were  terminated,   would  have  any  "amount  of  unfunded  benefit
     liabilities"   (as  defined   under  ERISA).   Neither  the  Company,   its
     subsidiaries  nor any of their ERISA  Affiliates has incurred or reasonably
     expects to incur any liability  under (i) Title IV of ERISA with respect to
     termination  of, or withdrawal  from,  any "employee  benefit plan" or (ii)
     Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
     established or maintained by the Company,  its subsidiaries or any of their
     ERISA  Affiliates  that is intended to be qualified under Section 401(a) of
     the Code is so  qualified  and nothing has  occurred,  whether by action or
     failure to act, which would cause the loss of such qualification.

                  Any  certificate  signed  by an  officer  of the  Company  and
delivered to the Underwriters or to counsel for the Underwriters shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters set forth therein.


         B.  Representations  and  Warranties  of the Selling  Shareholders.  In
addition to the  representations,  warranties and covenants set forth in Section
1(A),  each  Selling  Shareholder  represents,  warrants  and  covenants to each
Underwriter as follows:

                  (a) The Underwriting  Agreement.  This Agreement has been duly
     authorized,  executed  and  delivered  by  or on  behalf  of  such  Selling
     Shareholder  and  is  a  valid  and  binding   agreement  of  such  Selling
     Shareholder,  enforceable in accordance with its terms, except as rights to
     indemnification  hereunder may be limited by  applicable  law and except as
     the   enforcement   hereof  may  be  limited  by  bankruptcy,   insolvency,
     reorganization,  moratorium  or other similar laws relating to or affecting
     the rights and remedies of creditors or by general equitable principles.

                  (b) The Custody  Agreement and Power of Attorney.  Each of the
     (i) Custody  Agreement  signed by such Selling  Shareholder  and [___],  as
     custodian (the  "Custodian"),  relating to the deposit of the Common Shares
     to be sold by such Selling  Shareholder (the "Custody  Agreement") and (ii)
     Power of Attorney  appointing  certain  individuals  named  therein as such
     Selling Shareholder's  attorneys-in-fact  (each, an  "Attorney-in-Fact") to
     the extent set forth  therein  relating  to the  transactions  contemplated
     hereby and by the  Prospectus  (the "Power of  Attorney"),  of such Selling
     Shareholder  has been  duly  authorized,  executed  and  delivered  by such
     Selling  Shareholder  and is a valid and binding  agreement of such Selling
     Shareholder,  enforceable in accordance with its terms, except as rights to
     indemnification  thereunder  may be limited by applicable law and except as
     the enforcement thereof
                                       14
<PAGE>
     may be limited by  bankruptcy,  insolvency,  reorganization,  moratorium or
     other  similar  laws  relating to or  affecting  the rights and remedies of
     creditors or by general equitable principles.

                  (c) Title to  Common  Shares  to be Sold;  All  Authorizations
     Obtained.  Such Selling  Shareholder has, and on the First Closing Date (as
     defined below) will have,  good and valid title to all of the Common Shares
     which may be sold by such Selling Shareholder pursuant to this Agreement on
     such  date and the  legal  right  and  power,  and all  authorizations  and
     approvals  required by law and under its  charter or  by-laws,  partnership
     agreement,  trust agreement or other organizational documents to enter into
     this  Agreement and its Custody  Agreement and Power of Attorney,  to sell,
     transfer  and  deliver all of the Common  Shares  which may be sold by such
     Selling Shareholder pursuant to this Agreement and to comply with its other
     obligations hereunder and thereunder.

                  (d) Delivery of the Common Shares to be Sold.  Delivery of the
     Common Shares which are sold by such Selling  Shareholder  pursuant to this
     Agreement  will pass good and valid title to such Common  Shares,  free and
     clear of any security  interest,  mortgage,  pledge,  lien,  encumbrance or
     other claim.

                  (e) Non-Contravention;  No Further Authorizations or Approvals
     Required.  The execution and delivery by such Selling  Shareholder  of, and
     the performance by such Selling  Shareholder of its obligations under, this
     Agreement,  the  Custody  Agreement  and the  Power  of  Attorney  will not
     contravene or conflict with, result in a breach of, or constitute a Default
     under,  or  require  the  consent  of any other  party to,  the  charter or
     by-laws,  partnership  agreement,  trust agreement or other  organizational
     documents of such Selling  Shareholder or any other agreement or instrument
     to which  such  Selling  Shareholder  is a party or by which it is bound or
     under  which it is  entitled  to any right or  benefit,  any  provision  of
     applicable law or any judgment,  order, decree or regulation  applicable to
     such Selling  Shareholder  of any court,  regulatory  body,  administrative
     agency,  governmental  body or  arbitrator  having  jurisdiction  over such
     Selling Shareholder. No consent, approval, authorization or other order of,
     or registration or filing with, any court or other  governmental  authority
     or agency, is required for the consummation by such Selling  Shareholder of
     the transactions  contemplated in this Agreement,  except such as have been
     obtained or made and are in full force and effect under the Securities Act,
     applicable state securities or blue sky laws and from the NASD.

                  (f) No  Registration  or Other  Similar  Rights.  Such Selling
     Shareholder  does not have any registration or other similar rights to have
     any equity or debt securities  registered for sale by the Company under the
     Registration  Statement  or included in the offering  contemplated  by this
     Agreement,  except for such rights as are described in the Prospectus under
     "Shares Eligible for Future Sale."

                  (g) No Further  Consents,  Etc. Except for the (i) exercise by
     such Selling  Shareholder of certain  registration  rights  pursuant to the
     Registration Rights
                                       15
<PAGE>
     Agreement  dated as of [___]  (which  registration  rights  have  been duly
     exercised  pursuant thereto),  (ii) consent of such Selling  Shareholder to
     the  respective  number of Common  Shares to be sold by all of the  Selling
     Shareholders  pursuant to this  Agreement and (iii) waiver by certain other
     holders of Common Stock of certain  registration  rights  [pursuant to such
     Registration Rights Agreement],  no consent, approval or waiver is required
     under any  instrument or agreement to which such Selling  Shareholder  is a
     party or by which it is bound or under which it is entitled to any right or
     benefit,  in  connection  with  the  offering,  sale  or  purchase  by  the
     Underwriters  of any of the Common Shares which may be sold by such Selling
     Shareholder  under  this  Agreement  or the  consummation  by such  Selling
     Shareholder of any of the other transactions contemplated hereby.

                  (h)  Disclosure  Made  by  Such  Selling  Shareholder  in  the
     Prospectus.  All  information  furnished  by or on behalf  of such  Selling
     Shareholder in writing expressly for use in the Registration  Statement and
     Prospectus  is, and on the First Closing Date will be, true,  correct,  and
     complete in all material  respects,  and does not, and on the First Closing
     Date and will not,  contain any untrue statement of a material fact or omit
     to  state  any  material  fact  necessary  to  make  such  information  not
     misleading.  Such  Selling  Shareholder  confirms as accurate the number of
     shares of Common Stock set forth opposite such Selling  Shareholder's  name
     in the Prospectus  under the caption  "Principal and Selling  Shareholders"
     (both prior to and after giving effect to the sale of the Common Shares).

                  (i) No  Price  Stabilization  or  Manipulation.  Such  Selling
     Shareholder  has not taken and will not take,  directly or indirectly,  any
     action designed to or that might be reasonably  expected to cause or result
     in  stabilization  or  manipulation  of the  price of the  Common  Stock to
     facilitate the sale or resale of the Common Shares.

                  (j)  Confirmation of Company  Representations  and Warranties.
     Such Selling  Shareholder has no reason to believe that the representations
     and warranties of the Company contained in Section 1(A) hereof are not true
     and correct, is familiar with the Registration Statement and the Prospectus
     and has no knowledge of any material  fact,  condition or  information  not
     disclosed in the Registration  Statement or the Prospectus which has had or
     may have a Material  Adverse  Effect and is not  prompted to sell shares of
     Common Stock by any  information  concerning  the Company  which is not set
     forth in the Registration Statement and the Prospectus.

                  Any  certificate  signed  by  or  on  behalf  of  any  Selling
Shareholder and delivered to the Underwriters or to counsel for the Underwriters
shall be deemed to be a representation and warranty by such Selling  Shareholder
to each Underwriter as to the matters covered thereby.


         Section 2. Purchase, Sale and Delivery of the Common Shares.

                  The Firm Common Shares.  Upon the terms herein set forth,  (i)
the Company agrees to issue and sell to the several Underwriters an aggregate of
[___] Firm 
                                       16
<PAGE>
Common  Shares and (ii) the  Selling  Shareholders  agree to sell to the several
Underwriters an aggregate of [___] Firm Common Shares,  each Selling Shareholder
selling  the  number of Firm  Common  Shares  set forth  opposite  such  Selling
Shareholder's  name  on  Schedule  B.  On  the  basis  of  the  representations,
warranties and agreements  herein  contained,  and upon the terms but subject to
the  conditions  herein set forth,  the  Underwriters  agree,  severally and not
jointly,  to  purchase  from  the  Company  and  the  Selling  Shareholders  the
respective  number of Firm  Common  Shares  set forth  opposite  their  names on
Schedule A. The  purchase  price per Firm Common Share to be paid by the several
Underwriters  to the Company and the  Selling  Shareholders  shall be $[___] per
share.

                  The First Closing Date.  Delivery of certificates for the Firm
Common Shares to be purchased by the  Underwriters and payment therefor shall be
made at the  offices  of  Montgomery  Securities,  600  Montgomery  Street,  San
Francisco,  California  (or such other  place as may be agreed to by the Company
and the  Underwriters)  at 6:00 a.m. San Francisco time, on [___], or such other
time and date not later  than  10:30  a.m.  San  Francisco  time on [___] as the
Underwriters shall designate by notice to the Company (the time and date of such
closing  are called the "First  Closing  Date").  The  Company  and the  Selling
Shareholders  hereby acknowledge that circumstances under which the Underwriters
may provide  notice to postpone the First Closing Date as  originally  scheduled
include,  but are in no way limited to, any  determination  by the Company,  the
Selling  Shareholders or the Underwriters to recirculate to the public copies of
an  amended  or  supplemented  Prospectus  or a  delay  as  contemplated  by the
provisions of Section 10.

                  The  Optional  Common  Shares;  The Second  Closing  Date.  In
addition, on the basis of the representations,  warranties and agreements herein
contained,  and upon the terms but subject to the  conditions  herein set forth,
the Company  hereby  grants an option to the several  Underwriters  to purchase,
severally and not jointly,  up to an aggregate of [___]  Optional  Common Shares
from the Company at the purchase price per share to be paid by the  Underwriters
for the Firm  Common  Shares.  The option  granted  hereunder  is for use by the
Underwriters  solely in covering any over-allotments in connection with the sale
and distribution of the Firm Common Shares.  The option granted hereunder may be
exercised  at any time (but not more than once) upon notice by the  Underwriters
to the  Company,  which  notice may be given at any time within 30 days from the
date of this Agreement.  Such notice shall set forth (i) the aggregate number of
Optional Common Shares as to which the  Underwriters  are exercising the option,
(ii) the names and  denominations  in which the  certificates  for the  Optional
Common Shares are to be registered  and (iii) the time,  date and place at which
such  certificates  will be delivered  (which time and date may be  simultaneous
with,  but not earlier than,  the First Closing Date;  and in such case the term
"First  Closing  Date"  shall  refer  to  the  time  and  date  of  delivery  of
certificates  for the Firm Common Shares and the Optional Common  Shares).  Such
time and date of delivery,  if  subsequent  to the First Closing Date, is called
the "Second Closing Date" and shall be determined by the  Underwriters and shall
not be earlier than three nor later than five full business days after  delivery
of such notice of exercise.  If any Optional  Common Shares are to be purchased,
each Underwriter  agrees,  severally and not jointly,  to purchase the number of
Optional  Common Shares  (subject to such  adjustments  to eliminate  fractional
shares as the Underwriters may determine) that
                                       17
<PAGE>
bears the same  proportion  to the total number of Optional  Common Shares to be
purchased  as the number of Firm Common  Shares set forth on Schedule A opposite
the name of such  Underwriter  bears to the total number of Firm Common  Shares.
The  Underwriters  may cancel the option at any time prior to its  expiration by
giving written notice of such cancellation to the Company.

                  Public Offering of the Common Shares. The Underwriters  hereby
advise the Company and the Selling  Shareholders that the Underwriters intend to
offer for sale to the public,  as described in the Prospectus,  their respective
portions of the Common Shares as soon after this Agreement has been executed and
the Registration  Statement has been declared effective as the Underwriters,  in
their sole judgment, have determined is advisable and practicable.

                  Payment for the Common  Shares.  Payment for the Common Shares
to be sold by the  Company  shall be made at the First  Closing  Date  (and,  if
applicable,  at the  Second  Closing  Date)  by  wire  transfer  of  immediately
available funds to the order of the Company. Payment for the Common Shares to be
sold by the Selling  Shareholders  shall be made at the First Closing Date (and,
if  applicable,  at the Second  Closing  Date) by wire  transfer of  immediately
available funds to the order of the Custodian.

                  Montgomery   Securities,   individually   and   not   as   the
representative  of the  Underwriters,  may (but shall not be obligated  to) make
payment for any Common  Shares to be  purchased by any  Underwriter  whose funds
shall not have been received by Montgomery  Securities by the First Closing Date
or the  Second  Closing  Date,  as the  case  may be,  for the  account  of such
Underwriter, but any such payment shall not relieve such Underwriter from any of
its obligations under this Agreement.

                  Each Selling  Shareholder  hereby  agrees that (i) it will pay
all stock transfer taxes,  stamp duties and other similar taxes, if any, payable
upon  the sale or  delivery  of the  Common  Shares  to be sold by such  Selling
Shareholder  to the several  Underwriters,  or otherwise in connection  with the
performance  of such Selling  Shareholder's  obligations  hereunder and (ii) the
Custodian  is  authorized  to deduct for such  payment any such amounts from the
proceeds to such Selling Shareholder  hereunder and to hold such amounts for the
account  of such  Selling  Shareholder  with the  Custodian  under  the  Custody
Agreement.

                  Delivery  of the Common  Shares.  The  Company and the Selling
Shareholders  shall  deliver,  or cause  to be  delivered,  to the  Underwriters
certificates  for the Firm Common Shares to be sold by them at the First Closing
Date,  against  the  irrevocable  release  of a  wire  transfer  of  immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver,  or cause to be delivered,  to the Underwriters,  certificates for
the Optional Common Shares the Underwriters have agreed to purchase from them at
the First Closing Date or the Second  Closing Date, as the case may be,  against
the  irrevocable  release of a wire transfer of immediately  available funds for
the amount of the  purchase  price  therefor.  The  certificates  for the Common
Shares  shall  be  in  definitive   form  and   registered  in  such  names  and
denominations  as the  Underwriters  shall  have  requested  at  least  two full
business days prior to the First Closing
                                       18
<PAGE>
Date  (or the  Second  Closing  Date,  as the  case  may be) and  shall  be made
available  for  inspection  on the business day preceding the First Closing Date
(or the Second  Closing Date, as the case may be) at a location in New York City
as the Underwriters may designate. Time shall be of the essence, and delivery at
the time and place  specified in this  Agreement  is a further  condition to the
obligations of the Underwriters.

                  Delivery of  Prospectus  to the  Underwriters.  Not later than
12:00 p.m. on the second  business day  following  the date the Common Shares of
released by the Underwriters  for sale to the public,  the Company shall deliver
or cause to be delivered copies of the Prospectus in such quantities and at such
places as the Underwriters shall request.

         Section 3. Additional Covenants of the Company.

         A. Covenants of the Company.  The Company further  covenants and agrees
with each Underwriter as follows:

                  (a)   Underwriters'   Review  of   Proposed   Amendments   and
     Supplements.  During such period beginning on the date hereof and ending on
     the later of the First  Closing  Date or such  date,  as in the  opinion of
     counsel for the  Underwriters,  the Prospectus is no longer required by law
     to be delivered in connection  with sales by an  Underwriter or dealer (the
     "Prospectus  Delivery  Period"),  prior to  amending or  supplementing  the
     Registration  Statement  (including any registration  statement filed under
     Rule 462(b)  under the  Securities  Act) or the  Prospectus  including  any
     amendment or supplement  through  incorporation  by reference of any report
     filed under the Exchange Act, the Company shall furnish to the Underwriters
     for review a copy of each such proposed  amendment or  supplement,  and the
     Company shall not file any such  proposed  amendment or supplement to which
     the Underwriters reasonably object.

                  (b)  Securities  Act  Compliance.   After  the  date  of  this
     Agreement,  the Company shall promptly  advise the  Underwriters in writing
     (i) of the  receipt of any  comments  of, or  requests  for  additional  or
     supplemental information from, the Commission, (ii) of the time and date of
     any filing of any post-effective amendment to the Registration Statement or
     any  amendment  or  supplement  to  any   preliminary   prospectus  or  the
     Prospectus, (iii) of the time and date that any post-effective amendment to
     the Registration  Statement  becomes  effective and (iv) of the issuance by
     the  Commission  of any stop  order  suspending  the  effectiveness  of the
     Registration  Statement or any  post-effective  amendment thereto or of any
     order preventing or suspending the use of any preliminary prospectus or the
     Prospectus,  or of any  proceedings  to remove,  suspend or terminate  from
     listing or quotation  the Common Stock from any  securities  exchange  upon
     which the it is listed for trading or included or designated for quotation,
     or of the  threatening  or  initiation of any  proceedings  for any of such
     purposes.  If the  Commission  shall enter any such stop order at any time,
     the Company  will use its best  efforts to obtain the lifting of such order
     at the earliest possible moment.  Additionally,  the Company agrees that it
     shall  comply  with the  provisions  of  Rules  424(b),  430A  and 434,  as
     applicable, under the Securities Act and 
                                       19
<PAGE>
     will use its  reasonable  efforts to confirm  that any filings  made by the
     Company  under such Rule  424(b) were  received  in a timely  manner by the
     Commission.

                  (c)  Amendments  and  Supplements  to the Prospectus and Other
     Securities Act Matters.  If, during the  Prospectus  Delivery  Period,  any
     event shall occur or  condition  exist as a result of which it is necessary
     to amend  or  supplement  the  Prospectus  in order to make the  statements
     therein, in the light of the circumstances when the Prospectus is delivered
     to a purchaser, not misleading, or if in the opinion of the Underwriters or
     counsel  for  the  Underwriters  it is  otherwise  necessary  to  amend  or
     supplement  the  Prospectus  to comply  with  law,  the  Company  agrees to
     promptly  prepare  (subject  to  Section  3(A)(a)  hereof),  file  with the
     Commission  and  furnish  at its own  expense  to the  Underwriters  and to
     dealers, amendments or supplements to the Prospectus so that the statements
     in the Prospectus as so amended or  supplemented  will not, in the light of
     the  circumstances  when the  Prospectus  is delivered  to a purchaser,  be
     misleading  or so that the  Prospectus,  as amended or  supplemented,  will
     comply with law.

                  (d)  Copies  of  any   Amendments   and   Supplements  to  the
     Prospectus. The Company agrees to furnish the Underwriters, without charge,
     during the Prospectus Delivery Period, as many copies of the Prospectus and
     any   amendments   and   supplements   thereto   (including  any  documents
     incorporated  or  deemed   incorporated   by  reference   therein)  as  the
     Underwriters may request.

                  (e) Blue Sky Compliance.  The Company shall cooperate with the
     Underwriters  and counsel for the  Underwriters  to qualify or register the
     Common Shares for sale under (or obtain exemptions from the application of)
     the or state securities or blue sky laws or Canadian provincial  securities
     laws of those  jurisdictions  designated by the Underwriters,  shall comply
     with such laws and shall continue such  qualifications,  registrations  and
     exemptions in effect so long as required for the distribution of the Common
     Shares.  The  Company  shall  not  be  required  to  qualify  as a  foreign
     corporation or to take any action that would subject it to general  service
     of process in any such jurisdiction where it is not presently  qualified or
     where it would be subject to taxation as a foreign corporation. The Company
     will  advise  the   Underwriters   promptly  of  the   suspension   of  the
     qualification  or registration  of (or any such exemption  relating to) the
     Common  Shares for  offering,  sale or trading in any  jurisdiction  or any
     initiation or threat of any  proceeding  for any such  purpose,  and in the
     event  of  the  issuance  of  any  order  suspending  such   qualification,
     registration or exemption, the Company shall use its best efforts to obtain
     the withdrawal thereof at the earliest possible moment.

                  (f) Use of Proceeds.  The Company shall apply the net proceeds
     from the sale of the Common Shares sold by it in the manner described under
     the caption "Use of Proceeds" in the Prospectus.

                  (g) Transfer Agent. The Company shall engage and maintain,  at
     its expense, a registrar and transfer agent for the Common Stock.
                                       20
<PAGE>
                  (h) Earnings  Statement.  As soon as practicable,  the Company
     will  make  generally   available  to  its  security  holders  and  to  the
     Underwriters an earnings statement (which need not be audited) covering the
     twelve-month  period ending [___] that  satisfies the provisions of Section
     11(a) of the Securities Act.

                  (i)  Periodic  Reporting  Obligations.  During the  Prospectus
     Delivery  Period  the  Company  shall  file,  on a timely  basis,  with the
     Commission  and the  Nasdaq  National  Market  all  reports  and  documents
     required  to be filed under the  Exchange  Act.  Additionally,  the Company
     shall file with the  Commission  all  reports on Form SR as may be required
     under Rule 463 under the Securities Act.

                  (j)  Agreement  Not to  Offer or Sell  Additional  Securities.
     During the period of [___] days following the date of the  Prospectus,  the
     Company  will  not,   without  the  prior  written  consent  of  Montgomery
     Securities  (which  consent  may be  withheld  at the  sole  discretion  of
     Montgomery  Securities),  directly or indirectly,  sell, offer, contract or
     grant any  option  to sell,  pledge,  transfer  or  establish  an open "put
     equivalent position" within the meaning of Rule 16a-1(h) under the Exchange
     Act, or otherwise  dispose of or transfer,  or announce the offering of, or
     file any registration statement under the Securities Act in respect of, any
     shares of Common Stock, options or warrants to acquire shares of the Common
     Stock or securities  exchangeable  or exercisable  for or convertible  into
     shares of Common Stock (other than as  contemplated  by this Agreement with
     respect to the Common  Shares);  provided,  however,  that the  Company may
     issue shares of its Common  Stock or options to purchase its Common  Stock,
     or Common  Stock upon  exercise of options,  pursuant to any stock  option,
     stock bonus or other stock plan or arrangement described in the Prospectus,
     but only if the  holders of such  shares,  options,  or shares  issued upon
     exercise of such options,  agree in writing not to sell, offer,  dispose of
     or  otherwise  transfer  any such  shares or options  during such [___] day
     period without the prior written  consent of Montgomery  Securities  (which
     consent  may  be  withheld  at  the  sole   discretion  of  the  Montgomery
     Securities).

                  (k) Future Reports to the  Underwriters.  During the period of
     five years  hereafter the Company will furnish to the  Underwriters  at 600
     Montgomery  Street,  San Francisco,  CA 94111 Attention:[ ]: (i) as soon as
     practicable  after the end of each fiscal year, copies of the Annual Report
     of the Company  containing the balance sheet of the Company as of the close
     of such fiscal year and statements of income, shareholders' equity and cash
     flows for the year then  ended and the  opinion  thereon  of the  Company's
     independent  public  or  certified  public  accountants;  (ii)  as  soon as
     practicable  after the  filing  thereof,  copies of each  proxy  statement,
     Annual Report on Form 10-K,  Quarterly Report on Form 10-Q,  Current Report
     on Form 8-K or other report filed by the Company with the  Commission,  the
     NASD or any securities exchange; and (iii) as soon as available,  copies of
     any report or  communication  of the Company mailed generally to holders of
     its capital stock.

                  (l) Exchange Act  Compliance.  During the Prospectus  Delivery
                                       21
<PAGE>
     Period,  the Company will file all documents  required to be filed with the
     Commission  pursuant  to Section  13, 14 or 15 of the  Exchange  Act in the
     manner and within the time periods required by the Exchange Act.


         B.  Covenants of the Selling  Shareholders.  Each  Selling  Shareholder
further covenants and agrees with each Underwriter:

                  (a) Agreement Not to Offer or Sell Additional Securities. Such
     Selling  Shareholder  will  not,  without  the  prior  written  consent  of
     Montgomery   Securities   (which  consent  may  be  withheld  in  its  sole
     discretion),  directly or indirectly,  sell,  offer,  contract or grant any
     option to sell  (including  without  limitation  any short  sale),  pledge,
     transfer, establish an open "put equivalent position" within the meaning of
     Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any shares of
     Common Stock,  options or warrants to acquire  shares of Common  Stock,  or
     securities  exchangeable or exercisable  for or convertible  into shares of
     Common Stock  currently or hereafter owned either of record or beneficially
     (as  defined  in Rule  13d-3  under  Securities  Exchange  Act of 1934,  as
     amended)  by  the  undersigned,  or  publicly  announce  the  undersigned's
     intention to do any of the foregoing,  for a period  commencing on the date
     hereof and  continuing  through the close of trading on the date [___] days
     after the date of the Prospectus.

                  (b)  Delivery  of  Forms  W-8  and  W-9.  To  deliver  to  the
     Underwriters  prior to the First  Closing  Date a  properly  completed  and
     executed  United  States  Treasury  Department  Form  W-8 (if  the  Selling
     Shareholder  is a  non-United  States  person) or Form W-9 (if the  Selling
     Shareholder is a United States Person).
                                                                        
                  Montgomery Securities,  on behalf of the several Underwriters,
may, in its sole discretion,  waive in writing the performance by the Company or
any Selling  Shareholder of any one or more of the foregoing covenants or extend
the time for their performance.


         Section  4.   Payment  of   Expenses.   The  Company  and  the  Selling
Shareholders,  jointly and severally,  agree to pay in such  proportions as they
may agree upon  among  themselves  all  costs,  fees and  expenses  incurred  in
connection with the performance of their obligations hereunder and in connection
with the transactions  contemplated hereby, including without limitation (i) all
expenses  incident to the issuance and delivery of the Common Shares  (including
all printing and engraving  costs),  (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue,  transfer and
other stamp taxes in connection  with the issuance and sale of the Common Shares
to the Underwriters, (iv) all
                                       22
<PAGE>
fees and  expenses of the  Company's  counsel,  independent  public or certified
pubic  accountants  and other advisors,  (v) all costs and expenses  incurred in
connection with the preparation,  printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and  certificates  of experts),  each  preliminary  prospectus  and the
Prospectus, and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees,  attorneys'  fees and  expenses  incurred by the Company or the
Underwriters   in  connection  with  qualifying  or  registering  (or  obtaining
exemptions from the  qualification  or  registration  of) all or any part of the
Common Shares for offer and sale under the state  securities or blue sky laws or
the provincial securities laws of Canada, and, if requested by the Underwriters,
preparing and printing a "Blue Sky Survey" or  memorandum,  and any  supplements
thereto,  advising the Underwriters of such  qualifications,  registrations  and
exemptions,  (vii) the filing  fees  incident  to, and the  reasonable  fees and
expenses of counsel for the  Underwriters in connection  with, the NASD's review
and approval of the Underwriters' participation in the offering and distribution
of the Common Shares, (viii) the fees and expenses associated with including the
Common Shares on the Nasdaq National Market,  and (ix) all other fees, costs and
expenses referred to in Item 14 of Part II of the Registration Statement. Except
as provided in this Section 4,  Section 6,  Section 8 and Section 9 hereof,  the
Underwriters shall pay their own expenses,  including the fees and disbursements
of their counsel.

                  The Selling  Shareholders  further agree with each Underwriter
to pay  (directly or by  reimbursement)  all fees and  expenses  incident to the
performance of their  obligations  under this Agreement  which are not otherwise
specifically  provided  for  herein,  including  but not limited to (i) fees and
expenses of counsel and other advisors for such Selling Shareholders,  (ii) fees
and expenses of the Custodian and (iii)  expenses and taxes incident to the sale
and delivery of the Common Shares to be sold by such Selling Shareholders to the
Underwriters  hereunder  (which taxes,  if any, may be deducted by the Custodian
under the provisions of Section 2 of this Agreement).

                  This Section 4 shall not affect or modify any separate,  valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Selling Shareholders, on the other hand.


         Section 5.  Conditions  of the  Obligations  of the  Underwriters.  The
obligations  of the  several  Underwriters  to  purchase  and pay for the Common
Shares as provided  herein on the First  Closing  Date and,  with respect to the
Optional  Common  Shares,  the  Second  Closing  Date,  shall be  subject to the
accuracy of the  representations  and  warranties on the part of the Company and
the Selling Shareholders set forth in Section 1 hereof as of the date hereof and
as of the First  Closing  Date as though  then made  and,  with  respect  to the
Optional Common Shares, to the accuracy of the representations and warranties on
the part of the  Company  set forth in Section  1(A) hereof and as of the Second
Closing Date as though then made, to the timely  performance  by the Company and
the Selling  Shareholders of their  respective  covenants and other  obligations
hereunder, and to each of the following additional conditions:

         (a) Accountants'  Comfort Letter. On the date hereof,  the Underwriters
     shall  have  received  from  Arthur  Andersen  LLP,  independent  public or
     certified  public  accountants  for the  Company,  a letter  dated the date
     hereof addressed to the Underwriters, in form and substance satisfactory to
     the  Underwriters,  containing  statements  and  information  of  the  type
     ordinarily  included in  accountant's  "comfort  letters" to  underwriters,
     delivered according to Statement of Auditing Standards
                                       23
<PAGE>
     No.  72 (or any  successor  bulletin),  with  respect  to the  audited  and
     unaudited financial statements and certain financial  information contained
     in the  Registration  Statement and the  Prospectus  (and the  Underwriters
     shall have received an additional two conformed copies of such accountants'
     letter for each of the several Underwriters).

                  (b) Compliance with Registration Requirements;  No Stop Order;
     No Objection from NASD.For the period from and after  effectiveness of this
     Agreement  and prior to the First  Closing  Date and,  with  respect to the
     Optional Common Shares, the Second Closing Date:

                           (i) the Company shall have filed the Prospectus  with
     the Commission  (including the information  required by Rule 430A under the
     Securities  Act) in the manner and within the time period  required by Rule
     424(b)  under  the  Securities  Act;  or the  Company  shall  have  filed a
     post-effective  amendment  to the  Registration  Statement  containing  the
     information  required by such Rule 430A, and such post-effective  amendment
     shall have become  effective;  or, if the Company elected to rely upon Rule
     434  under  the  Securities  Act and  obtained  the  Underwriters'  consent
     thereto,  the Company shall have filed a Term Sheet with the  Commission in
     the manner and within the time period required by such Rule 424(b);

                           (ii) no stop order  suspending the  effectiveness  of
     the Registration Statement,  any Rule 462(b) Registration Statement, or any
     post-effective amendment to the Registration Statement,  shall be in effect
     and  no  proceedings  for  such  purpose  shall  have  been  instituted  or
     threatened by the Commission; and

                           (iii) the NASD shall have raised no  objection to the
     fairness and reasonableness of the underwriting terms and arrangements.

                  (c) No Material  Adverse Change or Ratings Agency Change.  For
     the period from and after the date of this Agreement and prior to the First
     Closing Date and, with respect to the Optional  Common  Shares,  the Second
     Closing Date:

                           (i) in the judgment of the  Underwriters  there shall
     not have occurred any Material Adverse Change; and

                           (ii) there shall not have  occurred any  downgrading,
     nor  shall  any  notice  have  been  given  of any  intended  or  potential
     downgrading  or of any review for a possible  change that does not indicate
     the direction of the possible change, in the rating accorded any securities
     of the Company or any of its  subsidiaries  by any  "nationally  recognized
     statistical  rating  organization"  as such term is defined for purposes of
     Rule 436(g)(2) under the Securities Act.

                  (d) Opinion of Counsel for the  Company.  On each of the First
     Closing  Date and the Second  Closing  Date,  the  Underwriters  shall have
     received   the   favorable   opinion  of  O'Connor,   Cavanagh,   Anderson,
     Killingsworth & Beshears, counsel for the Company, dated as of such Closing
     Date,  the form of which is  attached  as  Exhibit A (and the  Underwriters
     shall have received an additional two conformed
                                       24
<PAGE>
     copies  of  such   counsel's   legal   opinion  for  each  of  the  several
     Underwriters).

                  (e)  Opinion of Counsel for the  Underwriters.  On each of the
     First Closing Date and the Second Closing Date, the Underwriters shall have
     received the favorable opinion of Fried, Frank, Harris,  Shriver & Jacobson
     (a  partnership  including  professional  corporations),  counsel  for  the
     Underwriters,  dated as of such Closing  Date,  with respect to the matters
     set forth in paragraphs (i), (vii) (with respect to subparagraph  (i) only,
     (viii), (ix), (x) (xi) and (xiv) (with respect to the captions "Description
     of Securities" and "Underwriting"  under subparagraph (i) only), (xii), and
     the next-to-last  paragraph of Exhibit A (and the  Underwriters  shall have
     received an additional two conformed copies of such counsel's legal opinion
     for each of the several Underwriters).

                  (f) Officers'  Certificate.  On each of the First Closing Date
     and the Second Closing Date, the Underwriters shall have received a written
     certificate  executed by the Chairman of the Board, Chief Executive Officer
     or  President  of the  Company  and the Chief  Financial  Officer  or Chief
     Accounting  Officer of the Company,  dated as of such Closing  Date, to the
     effect set forth in subsections  (b)(ii) and (c)(ii) of this Section 5, and
     further to the effect that:

                           (i) for the  period  from and  after the date of this
     Agreement  and  prior to such  Closing  Date,  there has not  occurred  any
     Material Adverse Change;

                           (ii) the representations, warranties and covenants of
     the  Company  set  forth in  Section  1(A) of this  Agreement  are true and
     correct with the same force and effect as though  expressly  made on and as
     of such Closing Date, and

                           (iii)  the   Company  has   complied   with  all  the
     agreements  and satisfied all the conditions on its part to be performed or
     satisfied at or prior to such Closing Date.

                  (g) Bring-Down  Comfort  Letter.  On each of the First Closing
     Date and the Second Closing Date, the Underwriters shall have received from
     Arthur Andersen LLP, independent public or certified public accountants for
     the Company,  a letter dated such date, in form and substance  satisfactory
     to the  Underwriters,  to the effect that they reaffirm the statements made
     in the letter  furnished by them pursuant to subsection (a) of this Section
     5, except that the specified  date referred to therein for the carrying out
     of procedures  shall be no more than three business days prior to the First
     Closing  Date  or  Second  Closing  Date,  as  the  case  may be  (and  the
     Underwriters shall have received an additional two conformed copies of such
     accountants' letter for each of the several Underwriters). .

                  (h) Opinion of Counsel for the  Selling  Shareholders.  On the
     First  Closing  Date,  the  Underwriters  shall have received the favorable
     opinion  of  [O'Connor,  Cavanagh,  Anderson,  Killingsworth  &  Beshears],
     counsel for the Selling  Shareholders,  dated as of such Closing Date,  the
     form of which is attached as
                                       25
<PAGE>
     Exhibit B (and the  Underwriters  shall have  received  an  additional  two
     conformed  copies of such  counsel's  legal opinion for each of the several
     Underwriters).

                  (i) Selling  Shareholders'  Certificate.  On the First Closing
     Date, the Underwriters shall have received a written  certificate  executed
     by the Attorney-in-Fact of each Selling Shareholder,  dated as of the First
     Closing Date, to the effect that:

                           (i) the representations,  warranties and covenants of
     such Selling  Shareholder  set forth in Section 1(B) of this  Agreement are
     true and correct with the same force and effect as though expressly made by
     such Selling Shareholder on and as of the First Closing Date; and

                           (ii) such Selling  Shareholder  has complied with all
     the agreements and satisfied all the conditions on its part to be performed
     or satisfied at or prior to the First Closing Date.

                  (j) Selling Shareholders'  Documents.  On the date hereof, the
     Company and the Selling Shareholders shall have furnished for review by the
     Underwriters  copies  of the  Powers of  Attorney  and  Custody  Agreements
     executed by each of the Selling  Shareholders and such further information,
     certificates and documents as the Underwriters may reasonably request.

                  (k) Lock-Up Agreement from Certain Shareholders of the Company
     Other Than Selling Shareholders. On the date hereof, the Company shall have
     furnished to the  Underwriters an agreement in the form of Exhibit C hereto
     from [___], and such agreement shall be in full force and effect on each of
     the First Closing Date and the Second Closing Date.

                  (l)  Additional  Documents.  On or  before  each of the  First
     Closing Date and the Second Closing Date, the  Underwriters and counsel for
     the  Underwriters  shall have  received  such  information,  documents  and
     opinions as they may  reasonably  require for the purposes of enabling them
     to pass upon the  issuance  and sale of the Common  Shares as  contemplated
     herein, or in order to evidence the accuracy of any of the  representations
     and warranties, or the satisfaction of any of the conditions or agreements,
     herein contained.


                  If any condition  specified in this Section 5 is not satisfied
when and as required to be  satisfied,  this  Agreement may be terminated by the
Underwriters  by notice to the Company and the Selling  Shareholders at any time
on or prior to the First Closing Date and,  with respect to the Optional  Common
Shares,  by the  Underwriters  by notice to the Company at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other  party,  except that  Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
                                       26
<PAGE>
         Section 6. Reimbursement of Underwriters'  Expenses.  If this Agreement
is terminated by the  Underwriters  pursuant to Section 5, Section 7, Section 10
or Section 11 or Section  17, or if the sale to the  Underwriters  of the Common
Shares on the First  Closing  Date is not  consummated  because of any  refusal,
inability or failure on the part of the Company or the Selling  Shareholders  to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the  Underwriters  (or such  Underwriters as have terminated
this  Agreement  with  respect to  themselves),  severally,  upon demand for all
out-of-pocket   expenses  that  shall  have  been  reasonably  incurred  by  the
Underwriters in connection with the proposed  purchase and the offering and sale
of the Common  Shares,  including but not limited to fees and  disbursements  of
counsel,  printing expenses, travel expenses,  postage,  facsimile and telephone
charges.


         Section 7. Effectiveness of this Agreement.

                  This Agreement  shall not become  effective until the later of
(i) the execution of this Agreement by the parties hereto and (ii)  notification
by the Commission to the Company and the  Underwriters of the  effectiveness  of
the Registration Statement under the Securities Act.

                  Prior to such effectiveness,  this Agreement may be terminated
by any  party  by  notice  to each of the  other  parties  hereto,  and any such
termination  shall be without  liability  on the part of (a) the  Company or the
Selling Shareholders to any Underwriter, except that the Company and the Selling
Shareholders  shall be obligated to reimburse  the expenses of the  Underwriters
pursuant to Sections 4 and 6 hereof,  (b) of any  Underwriter  to the Company or
the Selling  Shareholders,  or (c) of any party hereto to any other party except
that the  provisions  of Section 8 and Section 9 shall at all times be effective
and shall survive such termination.


        Section 8. Indemnification.

                  (a)  Indemnification of the Underwriters.  Each of the Company
         and each of the Selling Shareholders,  jointly and severally, agrees to
         indemnify  and  hold  harmless  each  Underwriter,   its  officers  and
         employees, and each person, if any, who controls any Underwriter within
         the  meaning of the  Securities  Act and the  Exchange  Act against any
         loss, claim, damage,  liability or expense, as incurred,  to which such
         Underwriter or such  controlling  person may become subject,  under the
         Securities  Act, the Exchange Act or other  federal or state  statutory
         law  or  regulation,  or at  common  law  or  otherwise  (including  in
         settlement of any  litigation,  if such settlement is effected with the
         written consent of the Company),  insofar as such loss, claim,  damage,
         liability  or expense  (or actions in respect  thereof as  contemplated
         below)  arises  out of or is based  (i) upon any  untrue  statement  or
         alleged   untrue   statement  of  a  material  fact  contained  in  the
         Registration  Statement,  or  any  amendment  thereto,   including  any
         information  deemed to be a part thereof  pursuant to Rule 430A or Rule
         434 under the 
                                       27
<PAGE>
         Securities  Act, or the  omission or alleged  omission  therefrom  of a
         material  fact  required to be stated  therein or necessary to make the
         statements therein not misleading; or (ii) upon any untrue statement or
         alleged   untrue   statement  of  a  material  fact  contained  in  any
         preliminary   prospectus  or  the   Prospectus  (or  any  amendment  or
         supplement thereto), or the omission or alleged omission therefrom of a
         material fact necessary in order to make the statements therein, in the
         light of the circumstances  under which they were made, not misleading;
         or (iii) in whole or in part upon any inaccuracy in the representations
         and  warranties  of the Company or the Selling  Shareholders  contained
         herein;  or (iv) in whole or in part upon any failure of the Company or
         the  Selling  Shareholders  to  perform  their  respective  obligations
         hereunder or under law; or (v) any act or failure to act or any alleged
         act or  failure  to  act by any  Underwriter  in  connection  with,  or
         relating  in  any  manner  to,  the  Common   Stock  or  the   offering
         contemplated hereby, and which is included as part of or referred to in
         any loss,  claim,  damage,  liability or action arising out of or based
         upon any matter covered by clause (i) or (ii) above,  provided that the
         Company  shall not be liable under this clause (v) to the extent that a
         court  of  competent  jurisdiction  shall  have  determined  by a final
         judgment that such loss,  claim,  damage,  liability or action resulted
         directly from any such acts or failures to act undertaken or omitted to
         be  taken  by  such  Underwriter  through  its  bad  faith  or  willful
         misconduct; and to reimburse each Underwriter and each such controlling
         person for any and all expenses  (including the fees and  disbursements
         of  counsel  chosen by  Montgomery  Securities)  as such  expenses  are
         reasonably  incurred by such Underwriter or such controlling  person in
         connection with  investigating,  defending,  settling,  compromising or
         paying  any such loss,  claim,  damage,  liability,  expense or action;
         provided,  however,  that the foregoing  indemnity  agreement shall not
         apply to any loss, claim,  damage,  liability or expense to the extent,
         but  only to the  extent,  arising  out of or  based  upon  any  untrue
         statement or alleged untrue  statement or omission or alleged  omission
         made in  reliance  upon  and in  conformity  with  written  information
         furnished  to  the  Company  and  the  Selling   Shareholders   by  the
         Underwriters  expressly  for  use in the  Registration  Statement,  any
         preliminary   prospectus  or  the   Prospectus  (or  any  amendment  or
         supplement thereto);  and provided,  further,  that with respect to any
         preliminary  prospectus,  the foregoing  indemnity  agreement shall not
         inure to the benefit of any Underwriter  from whom the person asserting
         any loss, claim, damage,  liability or expense purchased Common Shares,
         or any person controlling such Underwriter, if copies of the Prospectus
         were timely  delivered to the  Underwriter  pursuant to Section 2 and a
         copy of the Prospectus (as then amended or  supplemented if the Company
         shall have  furnished any  amendments or  supplements  thereto) was not
         sent or given by or on behalf of such  Underwriter  to such person,  if
         required by law so to have been  delivered,  at or prior to the written
         confirmation  of the sale of the Common  Shares to such person,  and if
         the  Prospectus  (as so amended or  supplemented)  would have cured the
         defect giving rise to such loss, claim,  damage,  liability or expense.
         The  indemnity  agreement  set forth in this  Section  8(a) shall be in
         addition  to  any   liabilities   that  the  Company  and  the  Selling
         Shareholders may otherwise have. 
                                       28
<PAGE>
                  (b)   Indemnification  of  the  Company,   its  Directors  and
         Officers.  Each  Underwriter  agrees,  severally  and not  jointly,  to
         indemnify and hold harmless the Company, each of its directors, each of
         its  officers  who  signed  the  Registration  Statement,  the  Selling
         Shareholders  and each person,  if any, who controls the Company or any
         Selling  Shareholder  within the meaning of the  Securities  Act or the
         Exchange Act, against any loss, claim, damage, liability or expense, as
         incurred, to which the Company, or any such director,  officer, Selling
         Shareholder  or  controlling  person  may  become  subject,  under  the
         Securities  Act, the Exchange Act, or other federal or state  statutory
         law  or  regulation,  or at  common  law  or  otherwise  (including  in
         settlement of any  litigation,  if such settlement is effected with the
         written  consent of such  Underwriter),  insofar  as such loss,  claim,
         damage,  liability  or  expense  (or  actions  in  respect  thereof  as
         contemplated  below)  arises  out of or is  based  upon any  untrue  or
         alleged   untrue   statement  of  a  material  fact  contained  in  the
         Registration  Statement,  any preliminary  prospectus or the Prospectus
         (or any amendment or supplement thereto),  or arises out of or is based
         upon the omission or alleged  omission to state therein a material fact
         required  to be stated  therein  or  necessary  to make the  statements
         therein not  misleading,  in each case to the  extent,  but only to the
         extent,  that such untrue  statement  or alleged  untrue  statement  or
         omission or alleged  omission was made in the  Registration  Statement,
         any  preliminary  prospectus,  the  Prospectus  (or  any  amendment  or
         supplement  thereto),  in reliance upon and in conformity  with written
         information  furnished to the Company and the Selling  Shareholders  by
         the  Underwriters  expressly  for use  therein;  and to  reimburse  the
         Company,  or  any  such  director,   officer,  Selling  Shareholder  or
         controlling person for any legal and other expense reasonably  incurred
         by the Company, or any such director,  officer,  Selling Shareholder or
         controlling  person  in  connection  with   investigating,   defending,
         settling,   compromising  or  paying  any  such  loss,  claim,  damage,
         liability,  expense  or  action.  Each of the  Company  and each of the
         Selling Shareholders hereby acknowledges that the only information that
         the  Underwriters  have  furnished  to  the  Company  and  the  Selling
         Shareholders  expressly  for  use in the  Registration  Statement,  any
         preliminary   prospectus  or  the   Prospectus  (or  any  amendment  or
         supplement  thereto) are the  statements  set forth (A) as the last two
         paragraphs on the inside front cover page of the Prospectus  concerning
         stabilization  and passive market making by the Underwriters and (B) in
         the table in the first paragraph and as the second and [___] paragraphs
         under  the  caption   "Underwriting"   in  the   Prospectus;   and  the
         Underwriters  confirm that such  statements are correct.  The indemnity
         agreement  set forth in this  Section  8(b) shall be in addition to any
         liabilities that each Underwriter may otherwise have.

                  (c)  Notifications  and  Other   Indemnification   Procedures.
         Promptly after receipt by an indemnified  party under this Section 8 of
         notice of the commencement of any action,  such indemnified party will,
         if a claim in  respect  thereof is to be made  against an  indemnifying
         party under this Section 8, notify the indemnifying party in writing of
         the   commencement   thereof,   but  the  omission  so  to  notify  the
         indemnifying  party will not relieve it from any liability which it may
         have to any indemnified  party for contribution or otherwise than under
         the 
                                       29
<PAGE>
         indemnity  agreement contained in this Section 8 or to the extent it is
         not prejudiced as a proximate result of such failure.  In case any such
         action is brought  against any indemnified  party and such  indemnified
         party seeks or intends to seek  indemnity from an  indemnifying  party,
         the indemnifying  party will be entitled to participate in, and, to the
         extent that it shall elect, jointly with all other indemnifying parties
         similarly  notified,  by written  notice  delivered to the  indemnified
         party  promptly  after   receiving  the  aforesaid   notice  from  such
         indemnified   party,   to  assume  the  defense  thereof  with  counsel
         reasonably  satisfactory to such indemnified party; provided,  however,
         if the defendants in any such action include both the indemnified party
         and  the  indemnifying  party  and the  indemnified  party  shall  have
         reasonably concluded that a conflict may arise between the positions of
         the  indemnifying  party and the  indemnified  party in conducting  the
         defense  of any  such  action  or  that  there  may be  legal  defenses
         available to it and/or other  indemnified  parties  which are different
         from or additional to those available to the  indemnifying  party,  the
         indemnified  party or parties  shall have the right to select  separate
         counsel to assume such legal  defenses and to otherwise  participate in
         the  defense  of such  action on behalf  of such  indemnified  party or
         parties.  Upon  receipt of notice from the  indemnifying  party to such
         indemnified  party of such  indemnifying  party's election so to assume
         the defense of such action and  approval  by the  indemnified  party of
         counsel,  the indemnifying party will not be liable to such indemnified
         party under this Section 8 for any legal or other expenses subsequently
         incurred  by such  indemnified  party in  connection  with the  defense
         thereof unless (i) the indemnified  party shall have employed  separate
         counsel in accordance  with the proviso to the next preceding  sentence
         (it being understood, however, that the indemnifying party shall not be
         liable for the  expenses of more than one  separate  counsel  (together
         with local counsel),  approved by the  indemnifying  party  (Montgomery
         Securities in the case of Section 8(b) and Section 9), representing the
         indemnified  parties  who are  parties  to  such  action)  or (ii)  the
         indemnifying party shall not have employed counsel  satisfactory to the
         indemnified   party  to  represent  the  indemnified   party  within  a
         reasonable time after notice of commencement of the action,  in each of
         which cases the fees and expenses of counsel shall be at the expense of
         the indemnifying party.

                  (d) Settlements.  The indemnifying  party under this Section 8
         shall not be  liable  for any  settlement  of any  proceeding  effected
         without its written  consent,  but if settled  with such  consent or if
         there be a final judgment for the  plaintiff,  the  indemnifying  party
         agrees to indemnify  the  indemnified  party  against any loss,  claim,
         damage,  liability or expense by reason of such settlement or judgment.
         Notwithstanding the foregoing  sentence,  if at any time an indemnified
         party shall have  requested  an  indemnifying  party to  reimburse  the
         indemnified  party for fees and expenses of counsel as  contemplated by
         Section 8(c)  hereof,  the  indemnifying  party agrees that it shall be
         liable  for any  settlement  of any  proceeding  effected  without  its
         written  consent if (i) such  settlement  is entered  into more than 30
         days after receipt by such indemnifying  party of the aforesaid request
         and  (ii)  such  indemnifying  party  shall  not  have  reimbursed  the
         indemnified  party in accordance with such request prior to the date of
         such settlement. No indemnifying party 
                                       30
<PAGE>
         shall,  without the prior  written  consent of the  indemnified  party,
         effect any  settlement,  compromise or consent to the entry of judgment
         in any pending or threatened  action,  suit or proceeding in respect of
         which any indemnified party is or could have been a party and indemnity
         was or could have been  sought  hereunder  by such  indemnified  party,
         unless such settlement, compromise or consent includes an unconditional
         release of such indemnified party from all liability on claims that are
         the subject matter of such action, suit or proceeding.


         Section 9. Contribution.

                  If the  indemnification  provided  for in Section 8 is for any
reason held to be unavailable to or otherwise  insufficient  to hold harmless an
indemnified  party in respect of any losses,  claims,  damages,  liabilities  or
expenses referred to therein,  then each indemnifying  party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred,  as
a result of any losses,  claims,  damages,  liabilities or expenses  referred to
therein  (i) in such  proportion  as is  appropriate  to  reflect  the  relative
benefits received by the Company and the Selling Shareholders,  on the one hand,
and the Underwriters,  on the other hand, from the offering of the Common Shares
pursuant  to this  Agreement  or (ii) if the  allocation  provided by clause (i)
above is not permitted by applicable  law, in such  proportion as is appropriate
to reflect not only the  relative  benefits  referred to in clause (i) above but
also the relative fault of the Company and the Selling Shareholders,  on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions or inaccuracies in the  representations and warranties herein which
resulted in such losses,  claims,  damages,  liabilities or expenses, as well as
any other relevant equitable  considerations.  The relative benefits received by
the Company and the Selling Shareholders, on the one hand, and the Underwriters,
on the other hand, in connection with the offering of the Common Shares pursuant
to this Agreement  shall be deemed to be in the same  respective  proportions as
the total net proceeds from the offering of the Common  Shares  pursuant to this
Agreement  (before deducting  expenses)  received by the Company and the Selling
Shareholders,  and the total underwriting discount received by the Underwriters,
in each case as set forth on the front cover page of the Prospectus (or, if Rule
434 under the  Securities Act is used,  the  corresponding  location on the Term
Sheet) bear to the aggregate  initial public offering price of the Common Shares
as set forth on such cover.  The  relative  fault of the Company and the Selling
Shareholders, on the one hand, and the Underwriters, on the other hand, shall be
determined  by  reference  to,  among other  things,  whether any such untrue or
alleged untrue  statement of a material fact or omission or alleged  omission to
state  a  material   fact  or  any  such   inaccurate   or  alleged   inaccurate
representation or warranty relates to information supplied by the Company or the
Selling Shareholders,  on the one hand, or the Underwriters,  on the other hand,
and  the  parties'  relative  intent,  knowledge,   access  to  information  and
opportunity to correct or prevent such statement or omission.

                  The  amount  paid or  payable  by a party as a  result  of the
losses,  claims,  damages,  liabilities and expenses  referred to above shall be
deemed to include,  subject to the  limitations  set forth in Section 8(c),  any
legal or other fees or expenses reasonably
                                       31
<PAGE>
incurred by such party in connection with  investigating or defending any action
or claim.  The  provisions  set forth in Section  8(c) with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this Section 9;  provided,  however,  that no  additional  notice shall be
required  with  respect  to any action  for which  notice  has been given  under
Section 8(c) for purposes of indemnification.

                  The Company,  the Selling  Shareholders  and the  Underwriters
agree that it would not be just and equitable if  contribution  pursuant to this
Section 9 were determined by pro rata allocation (even if the Underwriters  were
treated as one entity for such  purpose)  or by any other  method of  allocation
which does not take account of the equitable  considerations referred to in this
Section 9.

                  Notwithstanding   the   provisions   of  this  Section  9,  no
Underwriter  shall be  required  to  contribute  any  amount  in  excess  of the
underwriting  commissions  received by such  Underwriter in connection  with the
Common Shares underwritten by it and distributed to the public. No person guilty
of  fraudulent  misrepresentation  (within the  meaning of Section  11(f) of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such fraudulent  misrepresentation.  The Underwriters'  obligations to
contribute pursuant to this Section 9 are several,  and not joint, in proportion
to their respective  underwriting  commitments as set forth opposite their names
in Schedule A. For  purposes of this  Section 9, each officer and employee of an
Underwriter  and each person,  if any, who  controls an  Underwriter  within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration  Statement,  and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.


         Section 10. Default of One or More of the Several Underwriters.  If, on
the First  Closing Date or the Second  Closing Date, as the case may be, any one
or more of the  several  Underwriters  shall fail or refuse to  purchase  Common
Shares that it or they have agreed to purchase  hereunder on such date,  and the
aggregate  number  of  Common  Shares  which  such  defaulting   Underwriter  or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate  number of the Common  Shares to be purchased on such date,  the other
Underwriters shall be obligated,  severally,  in the proportions that the number
of Firm Common Shares set forth  opposite their  respective  names on Schedule A
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters,  or in such other proportions as may be
specified  by the  Underwriters,  to  purchase  the  Common  Shares  which  such
defaulting  Underwriter or Underwriters agreed but failed or refused to purchase
on such date.  If, on the First Closing Date or the Second  Closing Date, as the
case  may be,  any  one or more of the  Underwriters  shall  fail or  refuse  to
purchase Common Shares and the aggregate number of Common Shares with respect to
which such default occurs  exceeds 10% of the aggregate  number of Common Shares
to be purchased on such date, and arrangements  satisfactory to the Underwriters
and the  Company for the  purchase of such Common  Shares are not made within 48
hours after such default,  this Agreement shall 
                                       32
<PAGE>
terminate  without  liability  of any party to any other  party  except that the
provisions  of Section 4,  Section 6, Section 8 and Section 9 shall at all times
be effective  and shall  survive such  termination.  In any such case either the
Underwriters  or the Company  shall have the right to postpone the First Closing
Date or the Second  Closing Date, as the case may be, but in no event for longer
than seven days in order that the required changes,  if any, to the Registration
Statement  and the  Prospectus  or any other  documents or  arrangements  may be
effected.

                  As used in this  Agreement,  the term  "Underwriter"  shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section  10.  Any action  taken  under this  Section  10 shall not  relieve  any
defaulting  Underwriter  from  liability  in  respect  of any  default  of  such
Underwriter under this Agreement.


         Section 11.  Termination of this Agreement.  Prior to the First Closing
Date this Agreement maybe  terminated by the Underwriters by notice given to the
Company and the Selling  Shareholders if at any time (i) trading or quotation in
any of the  Company's  securities  shall have been  suspended  or limited by the
Commission or by the Nasdaq Stock Market, or trading in securities  generally on
either the Nasdaq  Stock Market or the New York Stock  Exchange  shall have been
suspended or limited,  or minimum or maximum  prices  shall have been  generally
established on any of such stock exchanges by the Commission or the NASD; (ii) a
general banking moratorium shall have been declared by any of federal, New York,
Arizona or California authorities;  (iii) there shall have occurred any outbreak
or  escalation  of  national  or  international  hostilities  or any  crisis  or
calamity, or any change in the United States or international financial markets,
or any  substantial  change or development  involving a prospective  substantial
change in United  States' or  international  political,  financial  or  economic
conditions,  as in the judgment of the  Underwriters is material and adverse and
makes it  impracticable  to market  the  Common  Shares in the manner and on the
terms  described  in the  Prospectus  or to  enforce  contracts  for the sale of
securities;  (iv) in the judgment of the Underwriters  there shall have occurred
any Material  Adverse Change;  or (v) the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
in the judgment of the Underwriters may interfere materially with the conduct of
the business and  operations  of the Company  regardless  of whether or not such
loss shall have been insured.  Any termination pursuant to this Section 11 shall
be without liability on the part of (a) the Company or the Selling  Shareholders
to any Underwriter,  except that the Company and the Selling  Shareholders shall
be obligated to reimburse the expenses of the Underwriters  pursuant to Sections
4 and 6 hereof, (b) any Underwriter to the Company or the Selling  Shareholders,
or (c) of any party  hereto to any other  party  except that the  provisions  of
Section 8 and Section 9 shall at all times be effective  and shall  survive such
termination.


         Section 12.  Representations  and Indemnities to Survive Delivery.  The
respective  indemnities,  agreements,  representations,   warranties  and  other
statements of the Company, of its officers,  of the Selling  Shareholders and of
the several  Underwriters  set forth in or made pursuant to this  Agreement will
remain in full force and effect,  
                                       33
<PAGE>
regardless of any  investigation  made by or on behalf of any Underwriter or the
Company  or  any  of  its  or  their  partners,  officers  or  directors  or any
controlling  person, or the Selling  Shareholders,  as the case may be, and will
survive  delivery of and payment for the Common  Shares sold  hereunder  and any
termination of this Agreement.


         Section 13. Notices.  All communications  hereunder shall be in writing
and shall be mailed,  hand  delivered or telecopied and confirmed to the parties
hereto as follows:

If to the Underwriters:

         Montgomery Securities
         600 Montgomery Street
         San Francisco, California  94111
         Facsimile:        (415) 249-5558
         Attention:        Richard A. Smith

with a copy to:

         Montgomery Securities
         600 Montgomery Street
         San Francisco, California  94111
         Facsimile:        (415) 249-5553
         Attention:        David A. Baylor, Esq.

If to the Company:

         Action Performance Companies, Inc.
         2401 West First Street
         Tempe, Arizona  85281
         Facsimile:        (602) 967-1403
         Attention:        [___]

If to the Selling Shareholders:
         [Custodian]
         [Address]
         Facsimile:        [___]
         Attention:        [___]

Any party hereto may change the address for receipt of  communications by giving
written notice to the others.


         Section 14. Successors. This Agreement will inure to the benefit of and
be binding  upon the  parties  hereto,  including  any  substitute  Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and 
                                       34
<PAGE>
controlling  persons  referred  to in Section 8 and  Section 9, and in each case
their respective successors,  and personal representatives,  and no other person
will have any right or obligation  hereunder.  The term  "successors"  shall not
include any purchaser of the Common Shares as such from any of the  Underwriters
merely by reason of such purchase.


         Section   15.    Partial    Unenforceability.    The    invalidity   or
unenforceability of any Section,  paragraph or provision of this Agreement shall
not affect the validity or  enforceability  of any other  Section,  paragraph or
provision  hereof.  If any Section,  paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable,  there shall be deemed
to be made such minor changes (and only such minor  changes) as are necessary to
make it valid and enforceable.


         Section 16. (a)  Governing  Law  Provisions.  THIS  AGREEMENT  SHALL BE
GOVERNED BY AND CONSTRUED IN  ACCORDANCE  WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

                  (b)  Consent  to  Jurisdiction.  Any  legal  suit,  action  or
         proceeding  arising  out  of  or  based  upon  this  Agreement  or  the
         transactions   contemplated  hereby  ("Related   Proceedings")  may  be
         instituted  in the  federal  courts of the  United  States  of  America
         located  in the City and County of San  Francisco  or the courts of the
         State of  California in each case located in the City and County of San
         Francisco  (collectively,  the  "Specified  Courts"),  and  each  party
         irrevocably   submits  to  the  exclusive   jurisdiction   (except  for
         proceedings  instituted in regard to the  enforcement  of a judgment of
         any such court (a "Related Judgment"), as to which such jurisdiction is
         non-exclusive)  of such courts in any such suit,  action or proceeding.
         Service of any  process,  summons,  notice or  document by mail to such
         party's  address set forth above shall be effective  service of process
         for any suit, action or other proceeding brought in any such court. The
         parties  irrevocably  and  unconditionally  waive any  objection to the
         laying  of  venue  of any  suit,  action  or  other  proceeding  in the
         Specified  Courts and irrevocably and  unconditionally  waive and agree
         not to plead or claim in any such court  that any such suit,  action or
         other  proceeding  brought  in any such  court has been  brought  in an
         inconvenient  forum.  Each  party  not  located  in the  United  States
         irrevocably appoints CT Corporation System, which currently maintains a
         San Francisco office at 49 Stevenson Street, San Francisco,  California
         94105,  United  States of America,  as its agent to receive  service of
         process or other legal summons for purposes of any such suit, action or
         proceeding  that may be instituted in any state or federal court in the
         City and County of San Francisco.

                  (c)  Waiver  of   Immunity.   With   respect  to  any  Related
         Proceeding,  each  party  irrevocably  waives,  to the  fullest  extent
         permitted by  applicable  law,  all  immunity  (whether on the basis of
         sovereignty or otherwise) from jurisdiction,  
                                       35
<PAGE>
         service of process,  attachment  (both before and after  judgment)  and
         execution  to which it might  otherwise  be entitled  in the  Specified
         Courts, and with respect to any Related Judgment, each party waives any
         such immunity in the  Specified  Courts or any other court of competent
         jurisdiction,  and will not raise or claim or cause to be  pleaded  any
         such  immunity  at or in  respect  of any such  Related  Proceeding  or
         Related Judgment,  including, without limitation, any immunity pursuant
         to the United  States  Foreign  Sovereign  Immunities  Act of 1976,  as
         amended.


         Section 17. Failure of One or More of the Selling  Shareholders to Sell
and Deliver Common Shares. If one or more of the Selling Shareholders shall fail
to sell  and  deliver  to the  Underwriters  the  Common  Shares  to be sold and
delivered by such Selling  Shareholders  at the First  Closing Date  pursuant to
this Agreement,  then the Underwriters shall have the right to, at their option,
by  written  notice to the  Company  and the  Selling  Shareholders,  either (i)
terminate  this Agreement  without any liability on the part of any  Underwriter
or,  except as provided  in  Sections  4, 6, 8 and 9 hereof,  the Company or the
Selling  Shareholders,  (ii)  purchase  the shares  which the  Company and other
Selling  Shareholders  have  agreed to sell and deliver in  accordance  with the
terms hereof,  or (iii)  postpone the First  Closing  Date,  but in no event for
longer  than seven  days in order  that the  required  changes,  if any,  to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.


         Section 18. General Provisions.  This Agreement  constitutes the entire
agreement of the parties to this  Agreement and  supersedes all prior written or
oral and all  contemporaneous  oral agreements,  understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more  counterparts,  each one of which  shall be an  original,  with the same
effect as if the  signatures  thereto and hereto were upon the same  instrument.
This  Agreement  may not be amended or modified  unless in writing by all of the
parties  hereto,  and no  condition  herein  (express or implied)  may be waived
unless  waived in writing by each party whom the  condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.

                  Each  of  the  parties  hereto   acknowledges  that  it  is  a
sophisticated  business person who was adequately  represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the
indemnification  provisions  of  Section 8 and the  contribution  provisions  of
Section 9, and is fully informed regarding said provisions.  Each of the parties
hereto  further  acknowledges  that the  provisions  of  Sections 8 and 9 hereto
fairly  allocate the risks in light of the ability of the parties to investigate
the  Company,  its  affairs and its  business  in order to assure that  adequate
disclosure  has  been  made  in  the  Registration  Statement,  any  preliminary
prospectus and the Prospectus (and any amendments and supplements  thereto),  as
required by the Securities Act and the Exchange Act.
                                       36
<PAGE>
                  If the foregoing is in accordance with your  understanding  of
our  agreement,  kindly sign and return to the Company [and the  Custodian]  the
enclosed copies hereof,  whereupon this instrument,  along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.

                                     Very truly yours,

                                     ACTION PERFORMANCE COMPANIES, INC.



                                      By:___________________________________
                                          Fred W. Wagenhals, Chairman of the
                                          Board, President, and Chief Executive
                                          Officer


                                     SELLING SHAREHOLDERS



                                     By:___________________________________
                                               (Attorney-in-fact)



                  The foregoing  Underwriting  Agreement is hereby confirmed and
accepted by the  Underwriters in San Francisco,  California as of the date first
above written.

MONTGOMERY SECURITIES
ADVEST, INCORPORATED
INTERSTATE/JOHNSON LANE CORPORATION


By MONTGOMERY SECURITIES



By:____________________________
         Richard A. Smith
         Authorized Signatory
                                       37
<PAGE>
                                   SCHEDULE A


                                                                 Number of
                                                                 Firm Common 
  Underwriters                                                   Shares
                                                                 to be Purchased
  Montgomery Securities .............................            [___]

  Advest, Incorporated                                           [___]

  Interstate/Johnson Lane Corporation                            [___]

                                                                 [___]
      Total..........................................
                                       38
<PAGE>
                                   SCHEDULE B


                                                            Number of
            Selling Shareholder                             Firm Common Shares
                                                            to be Sold
            Selling Shareholder #1
            [address]
            Attention: [___] ..........................     [___]


            Selling Shareholder #2

            [address]                                       [___]
            Attention: [___] ..........................


               Total:                                       [___]


                                       39
