Exhibit 4

                               MK RAIL CORPORATION
                                 THIRD AMENDMENT
                            DATED AS OF JULY 25, 1996
                TO RIGHTS AGREEMENT DATED AS OF JANUARY 19, 1996
                       AND AMENDED AS OF APRIL 5, 1996 AND
                               AS OF JUNE 20, 1996

         AMENDMENT  dated  as of July  25,  1996 to the  Rights  Agreement  (the
"Rights Agreement") dated as of January 19, 1996 and amended as of April 5, 1996
and as of June 20, 1996 between MK Rail Corporation, a Delaware corporation (the
"Company"),  and Chase Mellon Shareholder  Services,  L.L.C.,  formerly known as
Chemical Mellon Shareholder Services, L.L.C. (the "Rights Agent").
         Pursuant  to  resolutions  adopted  by the  Board of  Directors  of the
Company on July 24, 1996 and the  authority  vested in the Board of Directors of
the  Company  by Section 27 of the Rights  Agreement,  the Rights  Agreement  is
hereby amended as follows:
         Subsection  l-3 of Section 1 of the Rights  Agreement is hereby amended
and restated in its entirety to read as follows:
                  (l-3) "MK  Creditors"  shall mean the  creditors of MK who are
         designated  to receive  Common  Shares of the Company in any case under
         Title  11 of the  United  States  Code or as a result  of any  creditor
         foreclosure.  The term MK Creditors  shall also include the Liquidating
         Trust and  equity  holders  of MK who are  designated  or  entitled  to
         receive  Common Shares of the Company in any case under Title 11 of the
         United States Code.

         IN WITNESS  WHEREOF,  the undersigned  have caused this Amendment to be
duly executed and attested, all as of the day and year first above written.

Attest:                                      MK RAIL CORPORATION

By___________________               By: ________________________________
  Name:                             Name:
  Title:                                     Title:

Attest:                                      CHASE MELLON SHAREHOLDER
                                             SERVICES, L.L.C.

By___________________               By: ________________________________
  Name:                             Name:
  Title:                                     Title:


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