SECOND AMENDMENT TO CREDIT
                            AND GUARANTY AGREEMENT


      SECOND AMENDMENT TO CREDIT AND GUARANTY AGREEMENT, dated as of December 2,
1997  (this  "Second   Amendment"),   among  IMO  INDUSTRIES  INC.,  a  Delaware
corporation (the "Borrower"),  II ACQUISITION CORP., a Delaware corporation (the
"Parent") as a guarantor,  VHC INC.,  as a  guarantor,  WARREN PUMPS INC.,  as a
guarantor (VHC Inc. and Warren Pumps Inc., collectively, the "Guarantors"),  the
various financial institutions parties hereto (collectively,  the "Lenders") and
THE  BANK OF NOVA  SCOTIA  ("Scotiabank"),  as  administrative  agent  (in  such
capacity, the "Administrative Agent").


                             W I T N E S S E T H:

      WHEREAS,  the Borrower,  the Parent, the Lenders, the Administrative Agent
and NATIONSBANC CAPITAL MARKETS, INC. ("NationsBanc"),  as syndication agent for
the  Lenders  have  heretofore  entered  into  a  certain  Credit  and  Guaranty
Agreement,  dated as of August 29, 1997 (as heretofor  amended,  supplemented or
otherwise  modified,  the "Existing  Credit  Agreement"  and, as amended by, and
together with, this Second Amendment, the "Credit Agreement"); and

      WHEREAS,  the  Borrower,  the Parent and the  Lenders  desire to amend the
Existing Credit Agreement to modify certain provisions thereto;

      NOW, THEREFORE,  in consideration of the premises and the other provisions
herein contained, the parties hereto hereby agree as follows:


                                    ARTICLE I
                                   DEFINITIONS

      SECTION I.1. Use of Defined Terms.  Unless otherwise defined herein or the
context otherwise requires,  terms used in this Second Amendment,  including its
preamble and recitals,  have the respective  meanings  provided  therefor in the
Credit Agreement.


                                  ARTICLE II
                      AMENDMENT TO CERTAIN PROVISIONS OF
                             THE CREDIT AGREEMENT

      Subject to receipt by the  Administrative  Agent of  counterparts  of this
Second Amendment duly executed by the Borrower,  the Parent,  the Guarantors and
the Required  Lenders,  certain  terms and  provisions  of the  Existing  Credit
Agreement are hereby  modified and amended in  accordance  with this Article II.
Except as so amended, the Existing Credit Agreement shall continue in full force
and effect in accordance with its terms.


      SECTION  II.1.  Amendment to Section  4.10(iv)  ("Use of  Proceeds").  The
phrase  "open  market  purchases  in an amount up to  $25,000,000"  contained in
Section  4.10(iv) ("Use of Proceeds") of the Existing Credit Agreement is hereby
amended and  replaced by the phrase  "open  market  purchases in an amount up to
$40,000,000".



                                   ARTICLE III
                        REPRESENTATIONS AND WARRANTIES

      In order to induce the Lenders and the Administrative  Agent to enter into
this Second Amendment,  the Borrower,  the Parent and the Guarantors jointly and
severally  represent and warrant unto the Administrative  Agent, each Issuer and
each Lender as set forth in this Article III.

      SECTION  III.1.  Compliance  with  Warranties.   The  representations  and
warranties set forth herein,  in Article VI of the Credit  Agreement and in each
other Loan Document  delivered in connection  herewith or therewith are true and
correct in all  material  respects  with the same effect as if made on and as of
the date hereof (unless stated to relate solely to an earlier date).

      SECTION III.2. Due Authorization,  Non-Contravention,  etc. The execution,
delivery and performance by the Borrower,  the Parent and the Guarantors of this
Second  Amendment are within the  Borrower's,  the Parent's and the  Guarantors'
corporate powers,  have been duly authorized by all necessary  corporate action,
and do not (i) contravene either the Borrower's, the Parent's or the Guarantors'
Organic Documents,  (ii) contravene or result in a default under any contractual
restriction,  law or governmental regulation or court decree or order binding on
or affecting either the Borrower, the Parent or the Guarantors,  or (iii) result
in, or require the creation or imposition  of, any Lien (except as  contemplated
in or created by the Loan Documents).

      SECTION III.3. Validity, etc. This Second Amendment has been duly executed
and delivered by the Borrower, the Parent and the Guarantors and constitutes the
legal,  valid  and  binding  obligation  of the  Borrower,  the  Parent  and the
Guarantors  enforceable in accordance with its terms,  subject as to enforcement
to  bankruptcy,  insolvency,  reorganization,  moratorium  or other similar laws
affecting  creditors'  rights  generally  and to general  principles  of equity,
regardless of whether enforcement is sought in a proceeding at law or in equity.

      SECTION  III.4.  Compliance  With  Existing  Credit  Agreement.  As of the
execution and delivery of this Second Amendment and as of the date hereof,  each
of the Borrower,  the Parent, the Guarantors and each other Obligor,  if any, is
in compliance with all the terms and conditions of the Existing Credit Agreement
and the other Loan  Documents  to be observed or performed by it, and no Default
has occurred and is continuing.


                                  ARTICLE IV
                           MISCELLANEOUS PROVISIONS


      SECTION  IV.1.  Ratification  of  and  Limited  Amendment  to  the  Credit
Agreement.  This  Second  Amendment  shall be deemed to be an  amendment  to the
Existing Credit Agreement, and the Existing Credit Agreement, as amended hereby,
is hereby ratified,  approved and confirmed in each and every respect. Except as
specifically  amended or modified  herein,  the Existing Credit  Agreement shall
continue in full force and effect in accordance with the provisions  thereof and
except as expressly set forth herein the provisions  hereof shall not operate as
a waiver of or amendment of any right,  power or privilege of the Administrative
Agent and the  Lenders  nor shall the  entering  into of this  Second  Amendment
preclude  the  Lenders  from  refusing  to enter  into  any  further  or  future
amendments.  This Second  Amendment  shall be deemed to be a "Loan Document" for
all purposes of the Credit Agreement.

      SECTION  IV.2.  Consent  and   Acknowledgment  of  Guarantors.   By  their
signatures below,  each of the Parent,  VHC Inc. and Warren Pumps Inc., in their
capacity as a guarantor  and as a grantor of  collateral  security  under a Loan
Document, hereby acknowledges,  consents and agrees to this Second Amendment and
hereby  ratifies  and confirms its  obligations  as a guarantor  under each Loan
Document executed and delivered by it in all respects.

      SECTION IV.3.  Credit  Agreement,  References,  etc. All references to the
Credit Agreement in any other document,  instrument,  agreement or writing shall
hereafter be deemed to refer to the Existing Credit Agreement as amended hereby.
As used in the Credit Agreement, the terms "Agreement", "herein", "hereinafter",
"hereunder", "hereto" and words of similar import shall mean, from and after the
date hereof, the Existing Credit Agreement as amended by this Second Amendment.

     SECTION  IV.4.  Expenses.  The  Borrower  agrees  to pay all  out-of-pocket
expenses   incurred  by  the   Administrative   Agent  in  connection  with  the
preparation, negotiation, execution and delivery of this Second Amendment.

      SECTION IV.5. Headings;  Counterparts. The various headings of this Second
Amendment are inserted for convenience  only and shall not affect the meaning or
interpretation  of this Second Amendment or any provisions  hereof.  This Second
Amendment  may be signed in any number of separate  counterparts,  each of which
shall be an  original,  and all of which taken  together  shall  constitute  one
instrument.

      SECTION IV.6. Governing Law; Entire Agreement. THIS SECOND AMENDMENT SHALL
BE DEEMED TO BE A CONTRACT  MADE UNDER AND  GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK. This Second Amendment  constitutes the entire  understanding among the
parties  hereto with respect to the subject  matter  hereof and  supersedes  any
prior agreements,  written or oral, with respect thereto.  This Second Amendment
and the  provisions  contained  herein may be modified  only by an instrument in
writing  executed by the  Borrower,  the  Administrative  Agent and the Required
Lenders.

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

                                    IMO INDUSTRIES INC.
                                      as Borrower


                                    By:    John A. young
                                    Title: Vice President


                                    II ACQUISITION CORP.
                                      as a Guarantor


                                    By:    John A. Young
                                    Title: Vice President

                                    VHC INC.
                                      as a Guarantor


                                    By:    John A. Young
                                    Title: Vice President

                                    THE BANK OF NOVA SCOTIA
                                      as Administrative Agent


                                    By:     James R. Trimble
                                    Title:  Senior Relationship Manager


                                    LENDERS:

                                    THE BANK OF NOVA SCOTIA


                                    By:   James R. Trimble
                                    Title:Senior Relationship Manager

                                    NATIONSBANK, N.A.


                                    By:    Chittaranjan D. Swamidasan
                                    Title: Vice President


                                    THE FIRST NATIONAL BANK OF CHICAGO


                                    By:    Amy L. Robbins
                                    Title: Vice President

                                    FLEET CAPITAL CORPORATION


                                    By:   Roland J. Robinson
                                    Title:Senior Vice President

                                    COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
                                    EUROPEENNE


                                    By:   Brian O'Leary
                                    Title:Vice President

                                    By:   Sean Mounier
                                    Title:First Vice President

                                    CRESTAR BANK


                                    By:   Christopher B. Werner
                                    Title:Vice President

                                    DRESDNER BANK AG, NEW YORK AND GRAND
                                    CAYMAN BRANCHES


                                    By:   Benjamin Marzouk
                                    Title:Vice President

                                    By:   Anthony Berti
                                    Title:Assistant Treasurer



                                    TRANSAMERICA BUSINESS CREDIT
                                    CORPORATION


                                    By: Perry Vavoules
                                    Title:Senior Vice President

                                    USTRUST


                                    By: Thomas F. Macina
                                    Title:Vice President