AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE

EXHIBIT 10.q

AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE

          This Amendment No. 1 to Second Amended and Restated Convertible Promissory Note (this “Amendment”) is made effective as of March 25, 2009 and amends that certain Second Amended and Restated Convertible Promissory Note, dated June 13, 2008 (the “Note”) made by Bell Industries, Inc., a California Corporation (the “Maker” or the “Company”), Bell Industries, Inc., a Minnesota corporation (“Bell Minnesota”), and Bell Techlogix, Inc., a Delaware corporation (“Bell Techlogix” and with the Maker and Bell Minnesota, referred to herein collectively as the “Obligors”), in favor of BI Holdings, L.P., a Delaware limited partnership (the successor payee to Newcastle Partners, L.P.), or its assigns (the “Payee”). Bell Techlogix became an Obligor under the Note pursuant to a Joinder Agreement dated as of March 13, 2009.

W I T N E S S E T H:

          WHEREAS, the Obligors intend to enter into Amendment Number Six to Credit Agreement (“Amendment No. 6”) with Wells Fargo Foothill, Inc., as agent for lender (“Wells Fargo”); and

          WHEREAS, the Obligors and the Payee desire to amend the Note as provided herein to reset certain EBITDA covenants set forth in the Note to correspond to those to be set forth in Amendment No. 6;

          NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     A. Amendment to Section 12(a). Section 12(a) of the Note is deleted in its entirety and replaced with the following:

          (a) Minimum Adjusted EBITDA. As of any date of determination from and after April 1, 2008, if Borrowers do not have Net Debt in an amount less than $4,000,000 at all times during the most recently completed fiscal quarter, then Borrowers shall not fail to achieve Adjusted EBITDA, measured on a quarter-end basis, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto (and the failure to do so shall be deemed an Event of Default):

Applicable Amount		Applicable Period
$(1,234,000)		For the 3 month period ending March 31, 2008
$(1,246,000)		For the 6 month period ending June 30, 2008

Applicable Amount		Applicable Period
$   (200,000)		For the 9 month period ending September 30, 2008
$   (839,000)		For the 12 month period ending December 31, 2008
$(2,100,000)		For the 3 month period ending March 31, 2009
$(1,900,000)		For the 6 month period ending June 30, 2009
$   (500,000)		For the 9 month period ending September 30, 2009
$   (500,000)		For the 12 month period ending December 31, 2009
$    350,000		For the 12 month period ending March 31, 2010
$    550,000		For the 12 month period ending June 30, 2010
$    750,000		For the 12 month period ending September 30, 2010
$    950,000		For the 12 month period ending December 31, 2010 and for each 12 month period ending as of the last day of each fiscal quarter thereafter

          B. No Other Amendments. This Amendment shall not be deemed to modify the terms of the Note except as expressly set forth herein.

          C. Defined Terms. Any term in this Amendment that is not defined herein shall have the meaning ascribed thereto in the Note.

          D. Applicable Law; Forum. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AMENDMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF. EACH OF PAYEE AND MAKER CONSENTS TO SUBMIT TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF TEXAS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT,

AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT, AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT IN ANY OTHER COURT. EACH OF THE PARTIES TO THIS AMENDMENT AGREES NOT TO ASSERT IN ANY ACTION OR PROCEEDING ARISING OUT OF RELATING TO THIS AMENDMENT THAT THE VENUE IS IMPROPER, AND WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO.

          E. Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, all such counterparts shall together constitute but one and the same instrument and facsimile and electronic or photostatic copies of such executed counterparts shall be given the same effect as the originals.

[SIGNATURE PAGE TO FOLLOW]

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE

          IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to Second Amended and Restated Convertible Promissory Note as of the date first written above.

THE OBLIGORS:

Bell Industries, Inc., a California Corporation

By:		/s/ Kevin J Thimjon
Name:		Kevin J Thimjon
Title:		President & CFO
Bell Industries, Inc., a Minnesota Corporation
By:		/s/ Kevin J Thimjon
Name:		Kevin J Thimjon
Title:		Treasurer
Bell Techlogix, Inc., a Delaware Corporation
By:		/s/ Kevin J Thimjon
Name:		Kevin J Thimjon
Title:		Treasurer

		THE LENDER:
		BI Holdings, L.P.,
		a Delaware limited partnership
		By:		/s/ Evan Stone
		Name:		Evan Stone
		Title:		General Counsel, Newcastle Management, L.P., its General Partner