SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
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/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ISCO, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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ISCO, INC.
4700 Superior Street
Lincoln, Nebraska 68504

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held December 10, 1998

The annual meeting of shareholders of Isco, Inc. will be held at The Cornhusker
Hotel, 333 South 13th Street, Lincoln, Nebraska on December 10, 1998 at
2:00 p.m. for the purpose of:

1. The election, as Directors, of four persons listed in the accompanying
Proxy Statement dated November 2, 1998.

2. Whatever other business may properly be brought before the meeting or
any adjournment thereof.

Only those shareholders of record at the close of business on October 16, 1998
shall be entitled to notice of the meeting and to vote at the meeting.

In order to assure a quorum, all shareholders are urged to attend the meeting or
to vote by proxy.

SHAREHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE IN PERSON EVEN THOUGH THEY
HAVE VOTED BY PROXY.

IF YOU PLAN TO ATTEND THE ANNUAL MEETING AND YOUR ISCO SHARES ARE HELD BY YOUR
BROKER FOR YOUR ACCOUNT AND YOU DO NOT PERSONALLY HOLD THE CERTIFICATES FOR THE
SHARES, YOU SHOULD MARK THE PROXY TO INDICATE THAT YOU PLAN TO ATTEND THE ANNUAL
MEETING. YOU WILL THEN RECEIVE A "LEGAL PROXY" SHOWING THE NUMBER OF SHARES YOU
OWN. BRING THAT "LEGAL PROXY" TO THE ANNUAL MEETING AND YOU WILL THEN BE
CREDITED WITH VOTING YOUR SHARES IN PERSON AT THE MEETING.

By Order of the Board of Directors

Robert W. Allington
Chairman and Chief Executive Officer

November 2, 1998

PROXY STATEMENT
November 2, 1998
GENERAL INFORMATION.

This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Isco, Inc. (the "Company") for use at the annual
meeting of shareholders to be held on December 10, 1998. Shareholders of record
at the close of business on October 16, 1998 are entitled to notice of and to
vote at the meeting and any adjournment thereof.

This Proxy Statement was first mailed to shareholders on November 12, 1998.

As of the close of business on October 16, 1998, the Company had 5,643,992
shares of common stock outstanding ("Common Stock"), all of which are entitled
to vote at the annual meeting.

As of the record date, Robert W. Allington, 4700 Superior, Lincoln, Nebraska
68504, owned 2,746,243 shares or 47.62 percent of the Company's outstanding
Common Stock plus currently exercisable stock options. On the record date,
Dimensional Fund Advisors, Inc. and UMB Bank, n.a. owned 495,151 and 338,639
shares, respectively, or 8.77 percent and 6.00 percent, respectively, of the
Common Stock outstanding. Neither Dimensional Fund Advisors, Inc., nor UMB
Bank, n.a. hold any stock options.

Each shareholder is entitled to one vote for each share on each matter
presented, except that in the election of Directors each shareholder shall have
the right to vote the number of shares owned by him or her for as many persons
as there are Directors to be elected, or to cumulate such shares and give one
candidate as many votes as the number of Directors multiplied by the number of
his or her shares, or to distribute them on the same principle among as many
candidates as he or she shall determine.

Proxies which are properly signed and returned will be voted at the annual
meeting. Shareholders may specify their preference by marking the appropriate
boxes on the proxy and the proxy will then be voted in accordance with such
specifications. In the absence of such specifications the proxy will be voted
for the election of the four nominees for Director and in accordance with the
instructions of the Board of Directors as to any other matters. A proxy is
revocable at any time before it is voted and a proxy is automatically revoked
upon the giving of a subsequent proxy. The Company will bear the cost of
solicitation of proxies, including the charges and expenses of brokers and
others for forwarding solicitation material to shareholders. In addition to the
use of mail, proxies may be solicited by personal interview, telephone,
facsimile or telegraph.

SHAREHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE IN PERSON EVEN THOUGH THEY
HAVE VOTED BY PROXY.

SHAREHOLDER PROPOSALS.

In the event that any shareholder desires to submit a proposal for action at the
1999 annual meeting of shareholders, such proposal must be received at the
Company's office at 4700 Superior Street, Lincoln, Nebraska 68504-1398, marked
to the attention of the President or Secretary of the Company, no later than
July 12, 1999. It is suggested that any shareholder desiring to submit a
proposal, do so by Certified Mail, Return Receipt Requested. Shareholders should
also note that, in addition to the requirement of timely receipt by the Board of
Directors of a proposal as stated above, such proposal will not be included in
the proxy solicitation material for the 1999 annual meeting of shareholders
unless it otherwise complies with the requirements of Section 14(a) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated and in
effect thereunder.

1. ELECTION OF DIRECTORS.

The Bylaws of the Company provide that the number of Directors shall be not more
than nine, such number to be set annually by the Board of Directors. The Board
of Directors has set such number at seven for 1999 and has nominated the four
persons listed below for election as Directors to serve until the adjournment of
the 2000 annual meeting of shareholders, currently scheduled for December 14,
2000, or until their successors are duly elected and qualified.

The Bylaws also provide that the Directors shall be divided into classes and
that there be two classes if the number of Directors is less than nine. The
first class has a term expiring December 9, 1999 and the second class has a term
expiring upon the adjournment of the 2000 annual meeting of shareholders,
currently scheduled for December 14, 2000. The Board of Directors has nominated
John J. Brasch, James L. Carrier, Douglas M. Grant, and Philip M. Wittig for
election to the second class to serve a two-year term.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOUR NOMINEES.

The proxy holders named in the proxy intend to vote "FOR" the election of the
four nominees listed above unless authority to so vote is withheld. In the
unexpected event that any of the nominees are unable to serve or for good cause
will not serve as a Director, the proxy holders reserve the right to vote for
such substitute nominees as are designated by the Board of Directors.

Following is a list of the names and ages of the four nominees, each of whom is
presently serving as a Director. Also listed are the three Directors whose terms
expire in 1999. Included is the past five-year business history of each nominee
and each Director, the year in which each became a Director of the Company, and
the number and the percentage of outstanding shares of Common Stock of the
Company beneficially owned by each as of October 16, 1998.

- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
BENEFICIALLY OWNED AS OF
OCTOBER 16, 1998
------------------------
NUMBER
DIRECTOR OF
NAME OF INDIVIDUAL AGE EMPLOYMENT HISTORY SINCE SHARES(1) PERCENT(2)
- ------------------ --- ------------------------------------------------ -------- --------- ----------

NOMINEES FOR ELECTION TO THE SECOND CLASS (TERM EXPIRING DECEMBER 14, 2000):

John J. Brasch 58 President, Senior Technologies, Inc. since 1985. 1997 1,250 .02

James L. Carrier 49 President and Chief Executive Officer, Lester 1997 1,417 .02
Electrical, Inc., since 1979.

Douglas M. Grant 52 President and Chief Operating Officer since 1988 35,841 .62
October 6, 1995; Vice President August 31, 1989
to October 5, 1995; Environmental Division
General Manager May 26, 1987 to July 15, 1996.

Philip M. Wittig 64 Chief Financial Officer and Treasurer since 1967. 1967 42,895(4) .74

FIRST CLASS (TERM EXPIRING DECEMBER 9, 1999):

Robert W. Allington 63 Chairman of the Board and Chief Executive 1959 2,746,243 47.62
Officer since 1959; President 1959 to
October 5, 1995.

James L. Linderholm 60 Chairman and President since 1986 and 1984, 1994 4,500 .08
respectively, of HWS Consulting Group, Inc.

Dale L. Young 70 Corporate Secretary since 1991; Retired Executive 1966 50,420(3) .87
Vice President and Cashier of FirsTier Bank, NA,
Lincoln, NE.
- ---------------------------------------------------------------------------------------------------------------

Executive Officers of the Company collectively hold 2,847,890 shares or 49.38
percent of the outstanding Common Stock plus currently exercisable options.

Executive Officers and Directors collectively hold 2,905,477 shares or 50.38
percent of the outstanding Common Stock plus currently exercisable options.

(1) Unless otherwise noted, all shares are held with sole investment and voting
power.
(2) Percentage computed by dividing the number of shares beneficially owned,
including options currently exercisable, by the total shares outstanding on
October 16, 1998, including currently exercisable options.
(3) Includes 20,000 shares as to which Dale L. Young has shared voting rights
and investment power
(4) Includes 644 shares as to which Philip M. Wittig has shared voting rights
and investment power.

ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS.

The Company's Board of Directors has not established a Nominating Committee.

The Audit Committee, during fiscal 1998, was comprised of Directors James L.
Linderholm, Chairman; James L. Carrier, Secretary and John J. Brasch. All are
independent members of the Board. The Audit Committee assists the Board in
fulfilling its fiduciary responsibilities with respect to accounting policies,
reporting practices, and the sufficiency of the Company's annual audit. The
Committee met twice during fiscal year 1998.

The Compensation Committee, during fiscal 1998, was comprised of Directors James
L. Linderholm, Chairman; Dale L. Young, Secretary; John J. Brasch; and Robert W.
Allington (a non-voting member). The Committee recommends to the Board the
compensation programs and salaries for the officers and also acts as the stock
option committee. The Committee met twice during fiscal 1998.

The Board of Directors met 14 times in fiscal 1998. None of the directors
attended fewer than 75 percent of the total meetings held by the Board and its
committees in fiscal 1998.

LIST OF CURRENT EXECUTIVE OFFICERS OF THE COMPANY.

The following is a list of the names and ages of the current executive officers
of the Company and their business history for the last five years.

- ---------------------------------------------------------------------------------------------------------------------------
YEAR FIRST BECAME
POSITION AND PRINCIPAL OCCUPATION EXECUTIVE OFFICER
NAME OF INDIVIDUAL AGE SINCE JULY 30, 1993 OF THE COMPANY
- ------------------ --- ----------------------------------------------------------------- -----------------

Robert W. Allington 63 Chairman of the Board and Chief Executive Officer since 1959; 1959
President 1959 to October 5, 1995.

Vicki L. Benne 37 Controller and Chief Accounting Officer since October 21, 1989. 1991

Alfred G. Craske 55 Vice President, Sales and Marketing since July 18, 1996; Director, 1996
Sales and Marketing, May 20, 1996 to July 18, 1996; Vice President,
Marketing, Gelman Science, Inc. 1994-1996; Vice President, Sales
and Marketing, Difco Laboratories 1993-1994; Vice President, Sales
and Marketing, Hitachi Instruments, Inc. 1991-1993.

Douglas M. Grant 52 President and Chief Operating Officer since October 6, 1995; Vice 1987
President August 31, 1989 to October 5, 1995; Environmental
Division General Manager May 26, 1987 to July 15, 1996.

John J. Korab, Jr. 49 Vice President, Corporate Development since December 11, 1989. 1989

Philip M. Wittig 64 Chief Financial Officer and Treasurer since 1967. 1967
- ---------------------------------------------------------------------------------------------------------------------------

EXECUTIVE COMPENSATION.

The following table sets forth a summary of the compensation paid to the chief
executive officer and the four other executive officers of the Company whose
compensation exceeded $100,000 for the fiscal years ended, July 31, 1998,
July 25, 1997, and July 26, 1996.

- ---------------------------------------------------------------------------------------------------------------------------
Long-term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ----------------------- --------- ---------------
Other Restricted Options/ LTIP All Other
Name and Principal Fiscal Salary Bonus Annual Stock SARs Payouts Compensation
Position Year ($) ($) Compensation(1) Awards (#) ($) ($) (5)
- -------------------------- ------- ---------- ---------- ----------------- ------------ ---------- --------- ---------------

Robert W. Allington 1998 205,521 -- 45,169 -- 49,474(4) -- 91
Chairman and Chief 1997 205,520 -- 27,541 -- -- -- 1,583
Executive Officer 1996 200,300 -- 29,929(2) -- -- -- 1,230
- -------------------------- ------- ---------- ---------- ----------------- ------------ ---------- --------- ---------------
Douglas M. Grant 1998 172,307 -- 7,192 -- 46,259(4) -- 2,219
President and Chief 1997 160,002 -- 6,229 -- -- -- 3,173
Operating Officer 1996 145,498 -- 11,564(2) -- -- -- 3,498
- -------------------------- ------- ---------- ---------- ----------------- ------------ ---------- --------- ---------------
Alfred G. Craske 1998 127,452 -- 940 -- 21,224(4) -- 2,701
Vice President, Sales 1997 124,279 18,750 7,767(3) -- 10,000(4) -- 511
and Marketing 1996 21,635 -- -- -- -- -- --
- -------------------------- ------- ---------- ---------- ----------------- ------------ ---------- --------- ---------------
Philip M. Wittig 1998 115,519 -- 5,073 -- 21,224(4) -- 2,118
Chief Financial Officer 1997 114,365 -- 4,629 -- -- -- 3,490
and Treasurer 1996 100,300 8,000 12,644(2) -- -- -- 2,957
- -------------------------- ------- ---------- ---------- ----------------- ------------ ---------- --------- ---------------
John J. Korab, Jr. 1998 99,002 -- 75 -- 9,796(4) -- 1,607
Vice President, 1997 99,002 12,000 75 -- -- -- 2,933
Corporate Development 1996 96,699 -- 75 -- -- -- 2,302
- -------------------------- ------- ---------- ---------- ----------------- ------------ ---------- --------- ---------------

(1) During fiscal 1996, the Company modified its vacation policy to limit the
number of accrued vacation hours an employee could have on each anniversary
of his or her employment. Those hours in excess of the established limit
related to length of service were valued, frozen, and scheduled for payment
over a period of six years. In addition, the policy included a future
paid-in-lieu-of provision whereby following the employee's anniversary he
or she would be paid for hours of accrued vacation which were in excess of
the established limit provided, however, that the employee had actually
taken a minimum number of vacation hours during the preceding year. These
combined payment amounts are included in "Other Annual Compensation" and
for fiscal 1996, 1997, and 1998, respectively, were as follows: Mr.
Allington, $24,054, $23,446, and $37,888; Mr. Grant, $5,525, $6,154, and
$6,923; and Mr. Wittig, $6,769, $4,554, and $4,998.

(2) Includes payment of directors' fees of $5,800. The current Deferred
Directors' Compensation Plan is described on page 11.

(3) Includes reimbursed moving and transition expenses of $7,692.

(4) Options granted pursuant to the 1996 Stock Option Plan.

(5) The amounts set forth under "All Other Compensation", include
profit-sharing contributions, and forfeitures plus 401(k) matching
contributions and forfeitures. Profit sharing contributions including
forfeitures and 401(k) matching contributions including forfeitures,
respectively, for fiscal 1998 were as follows: Mr. Allington, $91 and $0;
Mr. Grant, $91 and $2,128; Mr. Craske, $85 and $2,616; Mr. Wittig, $69 and
$2,049; and Mr. Korab, $57 and $1,550.

The following table sets forth information with respect to exercised and
unexercised options and SARs, if any, during fiscal 1998 and exercised and
unexercised options and SARs, if any, held by the chief executive officer and
the four other most highly compensated executive officers of the Company during
fiscal 1998.

- --------------------------------------------------------------------------------------------------------------------
Number of securities Value of unexercised
Shares underlying unexercised in-the-money
Acquired options/SARs at options/SARs
on Value fiscal year end (#) at fiscal year end ($)
Exercise Realized Exercisable ("Ex") Exercisable ("Ex")
Name (#) ($) Unexercisable ("Un") Unexercisable ("Un")
- ----------------------------- --------------------- ------------ ------------------------- -------------------------

Robert W. Allington -- -- 9,895 shares ("Ex") *
39,579 shares ("Un") *
- ----------------------------- --------------------- ------------ ------------------------- -------------------------
Douglas M. Grant -- -- 5,750 shares ("Ex") *
5,750 shares ("Un") *
16,000 shares ("Ex") *
24,000 shares ("Un") *
9,252 shares ("Ex") *
37,007 shares ("Un") *
- ----------------------------- --------------------- ------------ ------------------------- -------------------------
Philip M. Wittig -- -- 1,916 shares ("Ex") *
384 shares ("Un") *
4,245 shares ("Ex") *
16,979 shares ("Un") *
- ----------------------------- --------------------- ------------ ------------------------- -------------------------
Alfred G. Craske -- -- 7,000 shares ("Ex") *
3,000 shares ("Un") *
4,245 shares ("Ex") *
16,979 shares ("Un") *
- ----------------------------- --------------------- ------------ ------------------------- -------------------------
John J. Korab, Jr. -- -- 2,070 shares ("Ex") *
2,070 shares ("Un") *
1959 shares ("Ex") *
7,837 shares ("Un") *
- ----------------------------- --------------------- ------------ ------------------------- -------------------------

* Share option price is not in-the-money.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.

The Compensation Committee ("Committee") for fiscal 1998 was comprised of
Directors James L. Linderholm, Chairman; Dale L. Young, Secretary; John J.
Brasch; and Robert W. Allington (a non-voting member). Messrs. Linderholm,
Young, and Brasch are non-employee directors. The committee reviews and
recommends to the Board the direct and indirect compensation and employee
benefits of the Chairman of the Board, the President, and other elected officers
of the Company. The Committee also acts as the stock option committee.

Compensation Principles. The philosophy of the Company with regard to executive
compensation is to design executive compensation programs in a manner intended
to enhance Company performance and shareholder value by achieving the following
objectives:

- Provide reasonable and appropriate levels of compensation that will
attract, motivate, and retain highly qualified executives;

- Integrate compensation with the Company's business and strategic
plans;

- Reward both business and individual performance; and

- Encourage stock ownership by executives, thereby aligning executive
compensation with shareholder value.

Executive Officer Compensation Program. The Company's compensation program for
executive officers consists of annual salary, bonuses, and periodic grants of
options to purchase the Company's Common Stock. In addition, executives are
entitled to customary benefits, including medical, vacation, and retirement
benefits as well as participation in the Company's 401(k) matching contributions
plan, that are generally available to employees of the Company. Salary and bonus
payments are designed to reward current and past performance, while the stock
options are intended to provide incentives for long-term future performance and
are directly linked to the interests of the shareholders because the value of
options will increase or decrease based directly upon the future price of the
Company's Common Stock.

In 1997, the Company, upon the recommendation of the Compensation Committee,
engaged Burgess & Associates, a management consulting firm, to review the entire
executive compensation system of the Company and to 1) recommend a market-based
salary and short-term incentive program for all elected officers and 2) develop
a long-term incentive program for the officer group. In January, 1998, the
Compensation Committee adopted the recommendations from the Burgess report and
those recommendations were subsequently adopted by the Board of Directors. The
new compensation plan, based upon the Burgess report, is designed to require
specific performance in revenues and operating income for annual incentive or
bonus compensation as well as for the granting of stock options.

Base Salary. The base salary levels of the Company's executives are evaluated
periodically by the Committee in view of specific job responsibilities and
prevailing salary levels of companies of comparable size and complexity. The
Burgess report contains such an evaluation and based upon the recommendations
from the Burgess report the Committee recommended a mid-year adjustment to the
salary of one officer, Douglas Grant, the Company's President and Chief
Operating Officer. The Committee, in addition to the Burgess report, also
utilizes the Ernst & Young National Survey of Executive Compensation, the Wyatt
Data Service ECS survey, and Compensation in the Accounting/Financial Field
published by Abbott, Langer & Associates as aids in determining whether
executive salaries are appropriate and competitive.

Annual Bonus Compensation. The Committee believes and the Burgess report also
concluded that cash incentives, in the form of bonuses and stock options, are
warranted for the achievement of Company goals and corporate and individual
performance. The short-term incentive bonus and stock option plan adopted by the
Committee and the Board of Directors in January, 1998 are based upon the
achievement of certain targeted revenue and operating income goals. The target
goals were set for fiscal years 1998, 1999, and 2000. Depending upon a covered
executive's area of responsibility, the executive could receive 100% of the
incentive compensation of the maximum revenue goal was met or if the maximum
operating income goal was met. If both maximum goals were met, the executive
could receive a maximum of 150% of the targeted incentive compensation. No
benefits under the short-term incentive bonus plan were earned during fiscal
1998.

The Board also adopted a change in control plan which offers certain financial
benefits in the case of a change or control of the Company. Currently, the
President, Vice President of Sales and Marketing, and the Chief Financial
Officer are covered under the change in control plan.

Stock Option Compensation. The six executive officers of the Company were
granted options totaling 154,595 shares in fiscal 1998, all of which are
performance based under the new plan described above. Twenty percent of the
options vest and are exercisable on the date of grant and twenty percent of the
remaining eligible options will vest and will become exercisable for each year
that the Company achieves 100 percent of the targeted revenue and operating
income goals, as described earlier. A proportional amount of the twenty percent
will vest and become exercisable based upon the extent to which the revenue and
operating income goals are met, so long as revenue and operating incomes are at
least 40% of the targeted goals for the particular fiscal year. If revenue and
operating income exceed the targeted goals for the fiscal year by any percent up
to 150%, a proportional amount of the option greater than 20% will vest and will
become exercisable. The revenue and operating income targeted goals are the same
for each covered executive as those set for the incentive bonus compensation.

As described earlier, one of the executive officers received a salary adjustment
in fiscal 1998 based upon the recommendations contained in the Burgess report.
No other executive officer received a salary increase in fiscal 1998.

Overall Review. Fiscal 1998 has been an important year for this Company with the
construction of the major addition to and the renovation of the Superior Street
facility to effect the consolidation of the two Lincoln operating divisions at
one site. The acquisition of Geomation, Inc., STIP Siepmann und Teutscher GmbH
in Germany, and the limited partnership agreement negotiated with AMJ Equipment
Corporation should strengthen and expand several of our product lines. The
Committee believes that the executive officers of the company are positively
addressing this Company's problems and opportunities and that the compensation
for the executive officers is fair and reasonable for both the officers and the
shareholders of the Company.

Submitted by the Compensation Committee of the Company's Board of Directors.

James L. Linderholm, Chairman
Dale L. Young, Secretary
John J. Brasch
Robert W. Allington (non-voting member)

PERFORMANCE GRAPH.

The following performance graph compares the performance of the Company's Common
Stock to the Standard and Poor's 500 Stock Index and the NASDAQ peer group. The
industry peer group, selected by the Company, is comprised of the 98 companies
whose stock is traded on NASDAQ and are included in the Standard Industrial Code
Classification No. 382 entitled "Measuring and Controlling Devices". The graph
assumes that $100 was invested on July 31, 1993 in the Company's stock and the
indices. It, also, is assumed that dividends were reinvested when paid and that
the fiscal year ends July 31.

Data Points for Graph.

Cumulative Total Return
- ---------------------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------

Isco, Inc. 100.00 86.65 98.04 91.49 81.07 66.34
PEER Group 100.00 108.66 188.89 138.95 225.85 149.02
S&P 500 100.00 105.16 132.62 154.60 235.20 280.55
- ---------------------------------------------------------------------------------------------------------------------------

RETIREMENT PLAN.

The Company's defined contribution retirement plan includes a 401(k) provision
that covers all employees meeting age and service requirements. Significant
provisions of the plan include the following: (i) an employee may reduce his or
her salary by up to 12 percent, and the Company will match the reduction, up to
10 percent, with a 20 percent matching contribution; (ii) the Company's profit
sharing contribution to the plan is equal to approximately 7 percent of its net
earnings before income taxes; (iii) the Company's aggregate contribution to the
plan is limited to 15 percent of the aggregate compensation of the plan
participants; (iv) participants vest 20 percent of employer profit sharing and
employer 401(k) matching contributions after three years of service and 20
percent per year thereafter until 100 percent vested. Management and
administrative costs of the plan are borne by the Company. For fiscal year 1998,
amounts contributed to the plan for the chief executive officer and the four
other most highly compensated executive officers of the Company are set forth as
part of the table appearing in the Executive Compensation section.

COMPENSATION OF DIRECTORS FOR FISCAL 1998.

The Directors' Deferred Compensation Plan has been in effect since January 1996.
Under the Directors' Deferred Compensation Plan, all Directors receive 35
Deferred Stock Units for each Board and Committee meeting attended, and 240
Deferred Stock Units for the annual Board retainer. In addition, the Corporate
Secretary receives an additional 250 Deferred Stock Units annually for serving
as Corporate Secretary. At the time the Director ceases to be a member of the
Board, the Director's accumulated Deferred Stock Units are converted to shares
of the Company's Common Stock at a ratio of 1 to 1 and distributed. Inside
Directors do not receive compensation for attending committee meetings.

The number of Deferred Stock Units earned by each of the directors during fiscal
1998 are as follows: Mr. Allington 660, Mr. Brasch 550, Mr. Carrier 765, Mr.
Grant 730, Mr. Linderholm 870, Mr. Wittig 730, and Mr. Young 1,015.

ADDITIONAL INFORMATION.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934. Section
16(a) of the Securities Exchange Act of 1934 requires the Company's executive
officers and directors, and persons who beneficially own more than 10 percent of
the Company's stock, to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors, and greater than 10 percent beneficial owners are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.

INDEPENDENT PUBLIC ACCOUNTANTS. Deloitte & Touche LLP, certified public
accountants, are the independent public accountants for the Company.

Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting and will be given the opportunity to make any statement they
might desire and will also be available to respond to appropriate questions from
shareholders. Deloitte & Touche LLP has been selected as independent public
accountants for the Company for fiscal year 1999.

OTHER MATTERS. The Board of Directors does not know of any other matters to be
presented at the annual meeting. In the event that other business is properly
brought before the meeting, it is the intention of the proxy holders named in
the proxy to vote the proxies in accordance with the recommendation of the Board
of Directors.

Robert W. Allington
Chairman and Chief Executive Officer