AMENDMENT NO. 1 TO
                            ASSET PURCHASE AGREEMENT

     This Amendment No. 1 to the Asset Purchase  Agreement  (this  "Amendment"),
dated as of  August 5,  1997,  is made and  entered  into by and  between  Payne
Fabrics, Inc., a Delaware corporation (the "Seller"), Bell National Corporation,
a California  corporation  ("Shareholder"),  and Westgate Fabrics, Inc., a Texas
corporation ("Purchaser").

                              W I T N E S S E T H:

     WHEREAS,  Seller,  Shareholder and Purchaser have entered into that certain
Asset  Purchase  Agreement,  dated July 17,  1997 (the  "Agreement")(capitalized
terms not otherwise defined herein having the meanings set forth in the Purchase
Agreement); and

     WHEREAS,  two or more New York City Tax  Warrants  (the "Tax  Liens")  were
filed  against the  Purchaser  in New York county (the "Tax Liens") and such Tax
Liens will not in fact be released as of the Closing Date; and

     WHEREAS,  the Seller,  Shareholder and Purchaser  mutually desire to modify
the Purchase  Agreement to provide that Seller and  Shareholder  shall use their
best  efforts to have the Tax Liens  released as soon as  practicable  after the
Closing  Date and to  indemnify  Purchaser  from any  damage it may  suffer as a
result of such Tax Liens;

     NOW,  THEREFORE,  in  consideration of the  representations,  covenants and
agreements contained herein, and certain other good and valuable  consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

     1. A new Section 5.12 will be added to the Purchase Agreement which Section
shall read as follows:

          "5.12.  Tax Liens.  Each of Seller and Shareholder  agrees to use
     its best efforts to release any New York City Tax  Warrants  (the "Tax
     Liens")  filed  against the  Purchaser in New York county,  as soon as
     practicable  after the  Closing  Date.  The parties  acknowledge  that
     Purchaser is not assuming any liability or responsibility with respect
     to the  indebtedness  or other  obligations  underlying  or  otherwise
     relating to the Tax Liens.

     2. A new  paragraph  (b) will be added to Section 10 as set forth below and
the current  paragraphs  (b) and (c) will be renamed as paragraphs  (c) and (d),
respectively.

          "(b) any and all  liabilities,  obligations,  claims and  demands
     arising out of the Tax Liens or any  indebtedness or other  obligation
     related 





     thereto  (to the extent not  compensated  pursuant  to Section  2(d) of the
     Escrow Agreement);"

     3. Except as set forth herein,  the provisions of the Agreement  shall
continue in full force and effect.

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


                                            PAYNE FABRICS, INC.


                                            By:/s/ Thomas R. Druggish
                                               ---------------------------------
                                            Its:     Vice President


                                            BELL NATIONAL CORPORATION


                                            By:/s/ Thomas R. Druggish
                                               ---------------------------------
                                            Its:     Chief Financial Officer


                                            WESTGATE FABRICS, INC.


                                            By:/s/ Floyd W. Collins
                                               ---------------------------------
                                            Its:     Chief Executive Officer







                                    -2-