December 20, 2002

BEI TECHNOLOGIES, INC.
BEI SENSORS & SYSTEMS COMPANY, INC.

         c/o BEI Technologies, Inc.
         One Post Street, Suite 2500
         San Francisco, California 94104
         Attention: Robert R. Corr/Mark Deibert

         Re:      Second Amendment to Note Purchase Agreement and Waiver

Gentlemen:

         Reference is made to the Note Purchase  Agreement  dated as of November
16, 1998, as amended by that certain Amendment to Note Purchase  Agreement dated
March  30,  2002 (as  further  amended  from time to time,  the  "Note  Purchase
Agreement")  between  BEI  Technologies,   Inc.,  a  Delaware  corporation  (the
"Company")  and BEI  Sensors & Systems  Company,  Inc.,  a Delaware  corporation
("Systems"; together with the Company, the "Co-Obligors"),  on the one hand, and
each purchaser named on Schedule A attached to the Note Purchase  Agreement,  on
the other hand.

         Capitalized  terms used herein  without  definition  have the  meanings
ascribed to such terms in Schedule B of the Note Purchase Agreement.

         The  Co-Obligors  have  requested  that the Note holders amend the Note
Purchase  Agreement  and  waive  certain  provisions  thereof,  subject  to  the
conditions  and in  reliance of the  representations  and  warranties  set forth
herein.

         In consideration of the foregoing recitals, the parties hereto agree as
follows:

         1. Amendment to the Note Purchase  Agreement.  Pursuant to Section 17.1
thereof, the Note Purchase Agreement is amended as follows:

                  (a) Section 10.5 of the Note Purchase  Agreement is amended by
adding the following proviso at the end thereof:

                 ":provided,  further,  for the period ending December 28, 2002,
         the Company will not permit the ratio of Earnings  Available  for Fixed
         Charges to Fixed  Charges for the period  comprised of the  immediately
         preceding  four fiscal  quarters of the Company to be less than 0.75 to
         1.00."


<PAGE>

         2. Waiver of Covenant Violation. Co-Obligors' violation of Section 10.5
of the Note  Purchase  Agreement  for the period  ending  September  28, 2002 is
hereby waived.

         3.  Representations  and Warranties.  Each Co-Obligor  hereby certifies
that as of the date hereof the representations and warranties of such Co-Obligor
contained in Section 5 of the Note  Purchase  Agreement  are true and correct in
all  material  respects  as though  made on and as of such date  (except  to the
extent such specifically relate to another date).

         4.  Condition  to  Effectiveness.  The  effectiveness  of  this  letter
agreement  is subject to the  receipt of a fully  executed  counterpart  of this
letter agreement by the Co-Obligors and Required Holders.

         5. No  Waiver.  Each  amendment  and  waiver  set forth in this  letter
agreement  shall be limited  precisely  as written and shall not be deemed to be
(a) an amendment, consent or waiver of any other terms or conditions of the Note
Purchase Agreement or any other document related to the Note Purchase Agreement,
(b) a waiver,  other than as set forth in  paragraph  2 hereof,  of any right or
remedy of the holders of the Notes issued under the Note  Purchase  Agreement or
(c) a consent to any future  amendment,  consent or waiver of the Note  Purchase
Agreement or any future transaction, event or condition which would constitute a
Default  or Event of  Default  under  the Note  Purchase  Agreement.  Except  as
expressly set forth in this letter  agreement,  the Note Purchase  Agreement and
all related documents shall continue in full force and effect.

                  [Remainder of page intentionally left blank.]


<PAGE>

         If you are in  agreement  with the  foregoing,  please sign the form of
acceptance on the enclosed  counterparts  of this letter  agreement,  whereupon,
subject to  satisfaction  of the condition set forth in paragraph 4 above,  this
letter  agreement will become a binding  agreement among the Co-Obligors and the
Note holders as of the date first written above.

                                    Very truly yours,

                                    CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
                                    By CIGNA Investments, Inc.


                                    By:  /s/ Sean M Feeley
                                       -----------------------------------------
                                       Name:  SEAN M FEELEY
                                             -----------------------------------
                                       Title:  VICE PRESIDENT
                                              ----------------------------------


                                    CONNECTICUT GENERAL LIFE
                                    INSURANCE COMPANY,
                                    on behalf of one or more separate accounts
                                    By CIGNA Investments, Inc.


                                    By:  /s/ Sean M Feeley
                                        ----------------------------------------
                                       Name:  SEAN M FEELEY
                                             -----------------------------------
                                       Title:  VICE PRESIDENT
                                              ----------------------------------



                                    ALLSTATE LIFE INSURANCE COMPANY


                                    By: /s/ Rhonda L Hopps
                                        ----------------------------------------
                                       Name:  RHONDA L HOPPS
                                             -----------------------------------
                                       Title:  AUTHORIZED SIGNATORY
                                              ----------------------------------



                                    By: /s/ Patricia W. Wilson
                                        ----------------------------------------
                                       Name:  PATRICIA W. WILSON
                                             -----------------------------------
                                       Title:  AUTHORIZED SIGNATORY
                                              ----------------------------------

<PAGE>


The  foregoing  letter  agreement is hereby  accepted as of the date first above
written.

                                    BEI TECHNOLOGIES, INC.


                                    By:  /s/ John Laboskey
                                        ----------------------------------------
                                        Name: John Laboskey
                                              ----------------------------------
                                        Title: Senior Vice President and
                                                  Chief Financial Officer
                                                --------------------------------


                                    By:  /s/ Robert R. Corr
                                        ----------------------------------------
                                        Name: Robert R. Corr
                                              ----------------------------------
                                        Title: Vice President, Secretary,
                                               ---------------------------------
                                                  Treasurer and Controller


                                    BEI SENSORS & SYSTEMS COMPANY, INC.

                                    By:  /s/ John Laboskey
                                        ----------------------------------------
                                        Name: John Laboskey
                                              ----------------------------------
                                        Title: Chief Financial Officer
                                               ---------------------------------


                                    By:  /s/Robert R. Corr
                                        ----------------------------------------
                                        Name: Robert R. Corr
                                              ----------------------------------
                                        Title: Secretary, Treasurer
                                                and Controller
                                               ---------------------------------