FIRST AMENDMENT TO
                     TAX ALLOCATION AND INDEMNITY AGREEMENT

     This First Amendment to Tax Allocation and Indemnity Agreement is entered
into this 15th day of December 1998, by and between BEI Electronics, Inc., a
Delaware corporation ("Electronics"), and BEI Technologies, Inc., a Delaware
corporation ("Technologies").

                                    RECITALS

     1. Electronics and Technologies entered into a Tax Allocation and Indemnity
Agreement on September 26, 1997, in connection with the distribution of
Technologies stock to Electronics' shareholders (the "Agreement").

     2. In order better to reflect the parties' original intentions, the parties
to the Agreement wish to amend and restate certain provisions of the Agreement
as if they had been originally incorporated therein.

     3. All defined terms used below shall have the same meaning as defined in
the agreement.

                                   AMENDMENTS

     A.   Article III Section 3.1(a) is hereby amended and restated to read as
          follows:

          3.1  Federal Income Taxes:

               (a) For each taxable year (or portion thereof) in which
          Technologies and any other members of the Technologies Subgroup are
          included in the Electronics Affiliated Group consolidated federal
          income tax return, the Technologies Subgroup (1) shall be allocated
          and Technologies shall be responsible for the payment of 100% of the
          Electronics Affiliated Group's federal income tax liability for the
          year (including any alternative minimum tax or environment tax, as
          determined under this Section 3.1), subject to the Subsequent
          Adjustments provisions of Article V of this agreement, and (2) shall
          be entitled to the receipt of any federal income tax refunds
          (including any alternative minimum tax or environment tax, as
          determined under this Section 3.1) received by Electronics for the
          taxable year.

     B.   Article III Section 3.2(a) is hereby amended and restated to read as
          follows:

          3.2  State Income and Franchise Taxes:

               (a) For each taxable year (or portion thereof) for which
          Technologies and/or any other members of the Technologies Subgroup are
          included in any combined state income or franchise tax return filed by
          the Electronics Unitary Group, the Technologies Subgroup (1) shall be
          allocated and Technologies shall be responsible for the payment of all
          state


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          income and franchise taxes (including any alternative minimum tax) per
          any state income and franchise tax returns in Technologies and/or any
          other members of the Technologies Subgroup are included, subject to
          Subsequent Adjustments provisions of Article V of this agreement, and
          (2) shall be entitled to the receipt of any state income and franchise
          tax refunds (including any alternative minimum tax) received by
          Electronics for the taxable year in which Technologies and/or any
          other members of the Technologies Subgroup are included in any
          combined state income or franchise tax return filed by Electronics
          Unitary Group.

               IN WITNESS WHEREOF, the parties hereto have caused this Tax
          Allocation and Indemnity Agreement to be executed by their duly
          authorized representatives.


                                        Electronics


                                        By: /s/ Thomas W. Fry
                                            ------------------------------------

                                        Name:   Thomas W. Fry
                                              ----------------------------------

                                        Title:  Vice President of Finance and
                                                Administration
                                                Secretary & Treasurer
                                               ---------------------------------




                                        Technologies


                                        By: /s/ Robert R. Corr
                                            ------------------------------------

                                        Name:   Robert R. Corr
                                              ----------------------------------

                                        Title:  Secretary, Treasurer and
                                                Controller
                                               ---------------------------------