VARLEN CORPORATION
                1998 CONTINGENT STOCK AWARD PLAN
                  (Effective February 2, 1998)
                                
The 1998 Contingent Stock Award Plan (the "Plan"), effective as
of February 2, 1998, is established to promote the longterm
growth and profitability of Varlen Corporation and its
subsidiaries (the "Company") by enabling the Company to attract,
retain, motivate and reward employees of superior ability,
training and experience in positions of substantial
responsibilities.

1.     Administration

     The Plan shall be administered by the Compensation
     Committee of the Board (the "Committee"), or any successor
     as shall be determined by the Board of Directors.  The
     Committee is authorized, subject to the provisions of the
     Plan, to establish such rules as it deems necessary for the
     proper administration of the Plan, and to make such
     determinations and to take such action in connection
     therewith as it deems necessary or advisable, consistent
     with the Plan.
     
2.   Eligibility

     Subject to the provisions of the Plan, the Committee shall
     have exclusive power (i) to select the employees of the
     Company (each a "Participant") entitled to participate in
     the Plan and to receive one or more awards, as deferred and
     conditional incentive compensation under the Plan, of
     contingent shares payable in cash and tracking the
     performance of the Common Stock, $.10 par value per share
     (the "Common Stock"), of the Company (each a share of
     "Contingent Stock"); (ii) to determine the size of the
     grant to be made to each Participant; and (iii) to
     determine the time or times when grants shall be made.
     
3.   Shares Available for Awards

          (a)  The number of shares of Contingent Stock that may
          be awarded under the Plan shall not exceed an
          aggregate of 500,000 shares.  If any shares of
          Contingent Stock granted under the Plan shall expire,
          terminate or be canceled, such shares may again be
          awarded pursuant to the Plan.  Nothing in this Plan
          shall be construed to require the Committee to grant
          all shares of Contingent Stock reserved hereunder or
          any other number of shares of Contingent Stock.
          
          (b)  In the event of a reorganization,
          recapitalization, stock split, stock dividend,
          combination of shares, merger, consolidation, rights
          offering or any other change in the corporate
          structure or capital stock of the Company, the
          Committee shall make such adjustment, if any, as it
          may deem appropriate in the number of shares of
          Contingent Stock authorized by the Plan or granted to
          Participants or in the Initial Value (as defined
          below) of such shares on the award date.
          
4.   Terms and Conditions for Contingent Stock Awards

     Each share of Contingent Stock awarded under this Plan
    shall be subject to the following terms and conditions and such
     other terms and conditions as the Committee may prescribe:
                    (a)  The period of each award of Contingent
               Stock shall be five years from the date of such
               award, except as otherwise provided by the
               Committee.  Subject to Section 8 below, no
               Contingent Stock award may be redeemed before
               the last day of such period (the "Redemption
               Date").
                    (b)  Each award shall be evidenced by a
               written instrument specifying to the Participant
               the number of shares of Contingent Stock awarded
               and the terms and conditions of such award.
                    (c)  No award of Contingent Stock may be
               transferred.  During a Participant's lifetime,
               an award shall be redeemable for cash only by
               such Participant, except as otherwise provided
               herein, or by such Participant's guardian or
               legal representative.
               
5.        Contingent Stock Initial Value
     The "Initial Value" per share with respect to each share
     of Contingent Stock awarded shall be 100% of the fair
     market value of the Common Stock as of the date on which
     the Contingent Stock award is granted (determined as the
     average of the last reported sale prices on each of the
     five trading days prior to and including such date of the
     Common Stock on the NASDAQ National Market System or, if
     then inapplicable, by such other means as the Committee
     shall reasonably determine).
     
6.        Contingent Stock Redemption Value
     The "Redemption Value" per share with respect to each
     share of Contingent Stock awarded shall be 100% of the
     fair market value of the Common Stock as of the Redemption
     Date (determined as the average of the last reported sale
     prices on each of the five trading days prior to and
     including such Redemption Date of the Common Stock on the
     NASDAQ National Market System or, if then inapplicable, by
     such other means as the Committee shall reasonably
     determine).
     
7.        Contingent Stock Award Payments
     The difference between the Initial Value of any Contingent
     Stock award and the Redemption Value of such award shall
     be the redemption amount paid for such award.  The
     Participant will receive the full payment of Contingent
     Stock awards in one lump sum in cash within 30 days of the
     Redemption Date. All payments under the Plan shall be net
     of an amount sufficient to satisfy withholding tax
     requirements of any government or governmental unit having
     tax jurisdiction over the payment.
     
8.        Mandatory Redemption of Contingent Stock Awards
     Upon the termination of a Participant's employment with
     the Company prior to the scheduled Redemption Date of
     any Contingent Stock award previously granted to such
     Participant (for any reason other than such Participant's
     death, disability or retirement or a change in control of
     the Company, each as defined in the Company's Incentive
     Stock Option Plan), such Participant shall forfeit all
     rights to Contingent Stock awards granted to such
     Participant and all rights under the Plan shall be void.

                    (a)  Upon the death, disability or
               retirement of a Participant (in each case as
               defined in the Company's Incentive Stock Option
               Plan), the Participant shall be entitled
               automatically to redeem any Contingent Stock
               awards previously granted at a Redemption Value
               determined by the Committee and calculated as of
               the date of death, disability or retirement
               based on the fair market value of the Common
               Stock as of such date prorated in accordance
               with (i) the number of days elapsed from the
               date of grant to such date over (ii) the number
               of days from the date of grant to the scheduled
               Redemption Date.
          (b)  Upon the termination of a Participant following
               a change in control of the Company (as defined
               in the Company's Incentive Stock Option Plan),
               the Participant shall be entitled automatically
               to redeem any Contingent Stock awards previously
               granted at a Redemption Value determined by the
               Committee and calculated as of the date of such
               termination based on the fair market value of
               the Common Stock as of such date prorated in
               accordance with (i) the number of days elapsed
               from the date of grant to such date over (ii)
               the number of days from the date of grant to the
               scheduled Redemption Date; provided, however,
               that if such Participant's employment is
               terminated (for any reason other than such
               Participant's death, disability or retirement)
               more than one year after the date of such change
               in control but prior to such scheduled
               Redemption Date, such Participant shall forfeit
               all rights to Contingent Stock awards granted to
               such Participant and all rights under the Plan
               shall be void.
                    (c)  So long as the Participant shall
               continue to be an employee of the Company, the
               Contingent Stock held by such Participant shall
               not be affected by any change of duties or
               position or change in control of the Company.
               Nothing in the Plan shall confer upon any
               employee any right to continue in the employ of
               the Company or interfere with the right of the
               Company to terminate his/her employment at any
               time for any reason whatsoever.
               
9.        Amendment, Suspension or Termination of the Plan
     The Committee may at any time terminate, suspend or amend
     this Plan; provided, however, that no amendment,
     suspension or termination of this Plan shall affect shares
     of Contingent Stock already awarded to a Participant
     unless mutually agreed by such Participant and the
     Committee, which agreement must be in writing and signed
     by such Participant and the Company.
     
10.       Effective Date and Duration of the Plan
     The Plan shall become effective as of February 2, 1998.
     Unless previously terminated upon the adoption of a
     resolution of the Committee terminating the Plan, the Plan
     shall terminate at the close of business on February 2,
     2008.
     
11.       Governing Law
     The Plan shall be governed by the corporate laws of the
     State of Delaware, without giving effect to any choice of
     law provisions.
     
This Plan was adopted by the Compensation Committee and the
Board of Directors of Varlen Corporation on February 2,1998.