AMENDMENT NO. 1 DATED
                               AS OF MAY 23, 1997
                 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
                          DATED AS OF FEBRUARY 27, 1997


         THIS AMENDMENT NO. 1 (this  "Amendment")  is entered into as of May 23,
1997,  among  MotivePower   Industries,   Inc.,  a  Delaware   corporation  (the
"Borrower"),  the financial  institutions  signatory to the hereinafter  defined
Credit  Agreement  (collectively,  the "Lenders"),  and Bank of America National
Trust and Savings Association, as Agent for the Lenders (the "Agent").

                                    RECITALS:

         A. The  Borrower,  the Agent and the Lenders are party to that  certain
Second Amended and Restated  Credit  Agreement dated as of February 27, 1997 (as
so amended herein, the "Credit  Agreement").  Unless otherwise specified herein,
capitalized  terms used in this  Amendment  shall have the meanings  ascribed to
them in the Credit Agreement.

         B. The  Borrower,  the Agent and the  Lenders  wish to amend the Credit
Agreement pursuant to the terms as set forth herein with respect to a) aggregate
amount of performance  bonds the Borrower may have  outstanding at any time; (b)
the aggregate  amount of letters of credit the Borrower may have  outstanding in
support  of or in  respect  of  any  surety  contracts,  Surety  Instruments  or
performance bonds at any time; and (c) the aggregate amount of letters of credit
the Borrower may have outstanding at any time.

         C.       Now, Therefore, the parties hereto agree as follows:

         1.       AMENDMENTS TO THE CREDIT AGREEMENT.

                  1.1 Section 1.1 of the Credit  Agreement.  The  definition  of
"Unused Letter of Credit  Subfacility" in Section 1.1 of the Credit Agreement is
hereby amended in its entirety to read as follows:

                  "Unused Letter of Credit Subfacility" means an amount equal to
         $20,000,000  minus the sum of (a) the aggregate  undrawn  amount of all
         outstanding   Letters  of  Credit   plus  (b)  the   aggregate   unpaid
         reimbursement obligations with respect to all Letters of Credit.












                  1.2      Section 2.01(c)(ii)(4) of the Credit Agreement.
Section 2.01(c)(ii)(4) of the Credit Agreement is hereby amended in
its entirety to read as follows:

                  "(4) if the stated amount of all Letters of Credit  (including
         the one proposed to be issued)  supporting  or issued in respect of any
         performance  bonds,  surety contracts or Surety Instruments of any kind
         exceeds $10,000,000;"

                  1.3      Section 7.08(e) of the Credit Agreement.  Section
7.08(e) of the Credit Agreement is hereby amended in its entirety
to read as follows:

                  "(e)  Contingent  Obligations  of the Borrower with respect to
         performance  bonds or surety  contracts of any kind  provided that such
         performance  bonds or surety  contracts are issued in  connection  with
         Contractual  Obligations  to  reconstruct  railroad  locomotives  which
         provide aggregate total  consideration and payments to the Borrower and
         its Subsidiaries not in excess of $30,000,000 in the aggregate (whether
         or not progress  payments have been made thereunder or such amounts are
         then due and owing) and are issued pursuant to contracts and agreements
         in  form  and  substance  and  from  an  issuer  or  surety  reasonably
         satisfactory to the Agent, and in any event such issuer or surety shall
         not be  permitted  to  take a Lien on any  property  or  assets  of the
         Borrower or its  Subsidiaries  other than the  Inventory  and  Accounts
         (excluding  cash  payments not made  directly to such issuer or surety)
         directly identifiable to the contract being supported by such surety or
         performance bond; and"

         2.       REPRESENTATION AND WARRANTIES.  To induce the Agent and
the Lenders to enter into this Amendment, the Borrower represents
and warrants that:

                  2.1 Authorization.  The Borrower is duly authorized to execute
and  deliver  this  Amendment  and to perform its  obligations  under the Credit
Agreement, as amended hereby.

                  2.2  No   Conflicts.   The  execution  and  delivery  of  this
Amendment,  and the  performance  by the Borrower of its  obligations  under the
Credit  Agreement,  as amended  hereby,  do not and will not  conflict  with any
provision  of  law or of the  charter  or  by-laws  of  the  Borrower  or of any
agreement binding upon the Borrower.

                  2.3      Validity and Binding Effect.  The Credit Agreement,
as amended hereby, is, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its




                                       -2-







terms,  except as  enforceability  may be limited by  bankruptcy,  insolvency or
other  similar  laws  of  general  application   affecting  the  enforcement  of
creditors'  rights or by general  principles of equity limiting the availability
of equitable remedies.

         3.       CONDITIONS PRECEDENT TO AMENDMENTS.  The amendments
contemplated by Section 1 hereof are subject to the satisfaction of
each of the following conditions precedent:

                  3.1  Documentation.  The Borrower  shall have delivered to the
Agent all of the following,  each duly executed and,  dated the date hereof,  in
form and substance satisfactory to the Agent:

                  (a)  Certificate.  A certificate of the president or
chief financial officer of the Borrower as to the matters set out
in Sections 3.2 and 3.3 hereof.

                  (b)  Other.  Such other documents as the Agent may
reasonably request.

                  3.2  No Default.  As of the closing date hereof, no
Default or Event of Default shall have occurred and be continuing.

                  3.3  Representations  and  Warranties.  As of the closing date
hereof, the  representations and warranties in Article V of the Credit Agreement
and in Section 2 of this  Amendment  shall be true and correct as though made on
such date.



         4.       GENERAL.

                  4.1 Expenses. The Borrower agrees to pay the Agent upon demand
for all reasonable expenses,  including reasonable Attorneys' Costs, incurred by
the Agent in connection with the preparation,  negotiation and execution of this
Amendment, and any document required to be furnished therewith.

                  4.2 Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE  WITH,  THE INTERNAL LAW OF THE STATE OF ILLINOIS;  PROVIDED THAT THE
AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

                  4.3 Successors.  This Amendment shall be binding upon inure to
the benefit of the parties hereto and their respective successors and assigns.





                                       -3-







                  4.4  Confirmation of the Credit  Agreement.  Except as amended
hereby, the Credit Agreement shall remain in full force and effect and is hereby
ratified and confirmed in all respects.

                  4.5 References to the Credit Agreement.  Each reference in the
Credit Agreement to "this Credit Agreement,"  "hereunder," "hereof," or words of
like  import,  and  each  reference  to the  Credit  Agreement  in any  and  all
instruments or documents provided for in the Credit Agreement or delivered or to
be delivered  thereunder or in  connection  therewith,  shall,  except where the
context  otherwise  requires,  be deemed a reference to the Credit  Agreement as
amended hereby.

                                      * * *




                                       -4-







         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first written above.

                                      MOTIVEPOWER INDUSTRIES, INC., as
                                      Borrower


                                      By:

                                      Title:



                                      BANK OF AMERICA NATIONAL TRUST
                                      AND SAVINGS ASSOCIATION, as Agent
                                      and a Lender


                                      By:

                                      Title:



                                      ABN AMRO BANK, N.V., as a Lender


                                      By:

                                      Title:



                                      THE BANK OF NEW YORK, as a Lender


                                      By:

                                      Title:






                                       -5-







                                      CORESTATES BANK, N.A., as a Lender


                                      By:

                                      Title:

   

                                      CREDIT LYONNAIS NEW YORK BRANCH, as
                                      a Lender


                                      By:

                                      Title:



                                      DG BANK DEUTSCHE GENOSSENSCHAFTS
                                      BANK, as a Lender


                                      By:

                                      Title:



                                      MELLON BANK, N.A., as a Lender


                                      By:

                                      Title:



                                      NATIONAL BANK OF CANADA, as a
                                      Lender


                                      By:

                                      Title:


                                      By:

                                      Title:





                                       -6-








                                      NATIONAL CITY BANK, as a Lender


                                      By:

                                      Title:



                                      PNC BANK, N.A., as a Lender


                                      By:

                                      Title:




                                       -7-







                  IN WITNESS  WHEREOF,  the undersigned have accepted and agreed
to this Amendment as of the date first above written.


                                      Motor Coils Manufacturing Company

                                      By:
                                      Title:


                                      Engine Systems Company, Inc.

                                      By:
                                      Title:


                                      Clark Industries Company

                                      By:
                                      Title:


                                      Power Parts Company

                                      By:
                                      Title:


                                      Touchstone Company

                                      By:
                                      Title:


                                      MotivePower Investments Limited

                                      By:
                                      Title:


                                      Boise Locomotive Company

                                      By:
                                      Title:


                                      MotivePower Foreign Sales
                                      Corporation

                                      By:
                                      Title:




                                       -8-