ALLEN GROUP INC, DEF 14A, 1996-03-15

ALLEN GROUP INC
DEF 14A, 1996-03-15
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:

<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

THE ALLEN GROUP INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:

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[ALLEN GROUP LOGO]

Philip Wm. Colburn
Chairman of the Board

March 15, 1996

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
The Allen Group Inc. which will be held at the Cleveland Marriott Society
Center, 127 Public Square, Cleveland, Ohio on Tuesday, April 23, 1996 at 9:30
A.M. The purposes of the meeting are set forth in the accompanying notice and
proxy statement.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.

Sincerely,

/s/ Philip Wm. Colburn
PHILIP WM. COLBURN
Chairman of the Board
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THE ALLEN GROUP INC.
25101 CHAGRIN BOULEVARD
BEACHWOOD, OHIO 44122

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 23, 1996

March 15, 1996

To the Common Stockholders of
THE ALLEN GROUP INC.

Notice is hereby given that the Annual Meeting of Stockholders of The Allen
Group Inc. will be held at the Cleveland Marriott Society Center, 127 Public
Square, Cleveland, Ohio, on Tuesday, April 23, 1996, at 9:30 A.M., local time,
for the following purposes:

1. To elect a Board of 10 directors;

2. To ratify the appointment of Coopers & Lybrand L.L.P. as auditors
for the Company for the year ending December 31, 1996; and

3. To transact such other business as may properly come before the
meeting or any adjournment thereof.

The close of business on Friday, March 1, 1996 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the meeting or any adjournment thereof.

PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. The
giving of such proxy will not affect your right to revoke the proxy or to vote
in person if you attend the meeting.

By order of the Board of Directors

MCDARA P. FOLAN, III
Secretary
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THE ALLEN GROUP INC.
25101 CHAGRIN BOULEVARD
BEACHWOOD, OHIO 44122
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PROXY STATEMENT

March 15, 1996

The accompanying proxy is solicited on behalf of the Board of Directors of
The Allen Group Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held on April 23, 1996, or at any adjournment thereof. Any
proxy received pursuant to this solicitation may be revoked by the stockholder
executing it by notifying the Secretary of the Company before it is voted at the
Annual Meeting, by duly executing a proxy bearing a later date or by attending
the Annual Meeting and voting in person.

The Board of Directors has fixed March 1, 1996 as the record date for the
determination of holders of Common Stock, $1.00 par value, of the Company
("Common Stock") entitled to vote at the meeting. At the close of business on
that date, the Company had outstanding 26,577,795 shares of Common Stock
(exclusive of 3,019,750 shares held in its treasury). Each share of Common Stock
will be entitled to one vote at the meeting. Presence in person or by proxy of a
majority of the outstanding shares of Common Stock will constitute a quorum.

At the Annual Meeting, the results of stockholder voting will be tabulated
by the inspectors of election appointed for the Annual Meeting. Under Delaware
law and the Company's Restated Certificate of Incorporation, as amended, and
By-Laws, as amended, properly executed proxies that are marked "abstain" or are
held in "street name" by brokers that are not voted on one or more particular
proposals (if otherwise voted on at least one proposal) will be counted for
purposes of determining whether a quorum has been achieved at the Annual
Meeting. Abstentions will have the same effect as a vote against the proposal to
which such abstention applies. Broker non-votes will not be treated as a vote
for or a vote against any of the proposals to which such broker non-vote
applies.

This proxy statement and the accompanying proxy are first being mailed on
or about March 15, 1996.

ELECTION OF DIRECTORS

Ten directors are to be elected at the Annual Meeting to hold office until
the next annual meeting and until their successors have been elected and
qualified. The Board of Directors proposes election of the persons listed below,
all of whom are currently directors. It is not contemplated that any of the
nominees will be unable or unwilling to serve as a director; however, if that
should occur, the proxies will be voted for the election of such other person or
persons as are nominated by the Board of Directors, unless the Board reduces the
number of directors. The 10 nominees for director receiving a plurality of the
votes cast at the Annual Meeting in person or by proxy shall be elected.

INFORMATION REGARDING NOMINEES

<TABLE>
<CAPTION>
NAME, AGE AND DATE PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
FIRST BECAME A DIRECTOR AND OTHER DIRECTORSHIPS
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<S> <C>
Philip Wm. Colburn (67)....... Chairman of the Board, The Allen Group Inc., since December
April 29, 1975 6, 1988 and a consultant to the Company since December 31,
1991. Mr. Colburn was also Chief Executive Officer of the
Company from March 9, 1988 to February 26, 1991 and
President from March 9, 1988 to December 5, 1989. Mr.
Colburn was President, PWC Associates, management
consulting, Los Angeles, California, from June 1981 to
March 9, 1988. He had been Executive Vice President of the
Company from February 1976 to June 1981 and thereafter
until March 9, 1988 was a consultant to the Company. Mr.
Colburn is also a director of Earl Scheib, Inc., Superior
Industries International, Inc. and TransPro, Inc.
Dr. Jill K. Conway (61)....... Visiting Scholar, Program in Science, Technology and Society,
April 28, 1987 Massachusetts Institute of Technology, Cambridge,
Massachusetts, since July 1985. Dr. Conway was President of
Smith College, Northampton, Massachusetts, from July 1975
to July 1985. Dr. Conway is also a director of Arthur D.
Little, Inc., Colgate-Palmolive Company, Merrill Lynch &
Co. and Nike Inc.
Albert H. Gordon (94)......... Advisory Director, Investment Banking Division of PaineWebber
December 6, 1971 Incorporated, investment bankers, New York, New York, since
January 1995. Mr. Gordon was Honorary Chairman, Kidder,
Peabody Group Inc., investment bankers, New York, New York,
from October 1986 to January 1995, and Chairman of the
Board of Kidder, Peabody & Co. Incorporated, the
predecessor of Kidder, Peabody Group Inc., from 1957 to
October 1986.
William O. Hunt (62).......... Chairman of the Board, Chief Executive Officer, President and
September 10, 1992 director, Intellicall, Inc., a manufacturer of privately
owned pay telephones, automated operator systems and call
processing systems, Dallas, Texas, since December 1992, and
Vice Chairman of the Board and director, Hogan Systems,
Inc., a designer of integrated online application software
products for financial institutions, Dallas, Texas, since
August 1990. Mr. Hunt was Chairman of the Board, Chief
Executive Officer and President of Alliance
Telecommunications Corporation, a manufacturer of wireless
telecommunications products, Dallas, Texas, from July 1989
until its acquisition by the Company on July 30, 1992, and
Chairman of the Board and Chief Executive Officer from
February 1986 to October 1988. Mr. Hunt is also a director
of American Homestar Corporation and Dr. Pepper Bottling
Holdings, Inc.
J. Chisholm Lyons (68)........ Counsel, Smith Lyons, barristers and solicitors, Toronto,
October 27, 1969 Canada. Mr. Lyons was a partner of the law firm for 31 years
until May 1, 1993 and has been counsel to the law firm
since that date. Mr. Lyons has been Vice Chairman of the
Board of the Company since September 1979. He was an
employee of the Company from September 1979 to September
30, 1989 and is presently a consultant to the Company.
John F. McNiff (53)........... Vice President-Finance, Dover Corporation, a manufacturer of
June 14, 1995 industrial products and equipment, New York, New York, since
1983. Mr. McNiff is also a director of the Haven Fund, a
public mutual fund.
Robert G. Paul (54)........... President and Chief Executive Officer, The Allen Group Inc.,
March 6, 1990 since February 26, 1991. Mr. Paul was President and Chief
Operating Officer of the Company from December 5, 1989 to
February 26, 1991, Senior Vice President-Finance from April
1987 to December 5, 1989, Vice President-Finance from
January 1987 to April 1987 and a Vice President from 1974
to January 1987. He was also President of the Antenna
Specialists Company division of the Company from 1978 to
June 1990. Mr. Paul is also a director of Dynatech
Corporation.
</TABLE>

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INFORMATION REGARDING BOARD OF DIRECTORS

The business and affairs of the Company are managed under the direction of
its Board of Directors, whose members are elected annually by the stockholders.
During 1995, the Board of Directors of the Company had Audit, Management
Compensation and Nominating Committees. Messrs. Chandler, Robinson and McNiff
are the members of the Audit Committee; Dr. Conway and Messrs. Gordon and Weaver
are the members of the Management Compensation Committee; and Dr. Conway and
Messrs. Lyons and Weaver are the members of the Nominating Committee.

The Audit Committee recommends to the Board of Directors the appointment of
the independent auditors and reviews the degree of their independence from the
Company; approves the scope of the audit engagement, including the cost of the
audit; reviews any non-audit services rendered by the auditors and the fees
therefor; reviews with the auditors and management the Company's policies and
procedures with respect to internal accounting and financial controls and, upon
completion of an audit, the results of the audit engagement; and reviews
internal accounting and auditing procedures with the Company's financial staff
and the extent to which recommendations made by the internal audit staff or by
the independent auditors have been implemented.

The Management Compensation Committee recommends to the Board salaries and
incentive compensation awards for officers of the Company and its subsidiaries;
reviews and approves guidelines for the administration of incentive compensation
programs for other management employees; makes recommendations to the Board with
respect to major compensation programs; administers the Company's 1982 Stock
Plan, as amended (the "1982 Stock Plan"), the Company's 1992 Stock Plan, as
amended (the "1992 Stock Plan"), and the Company's Key Management Deferred Bonus
Plan (the "KMDB Plan") and grants stock options and restricted shares of the
Company's Common Stock under the 1992 Stock Plan; and issues the Report on
Executive Compensation required to be included in the Company's proxy statement
by the rules of the Securities and Exchange Commission. The Management
Compensation Committee's Report on Executive Compensation for 1995 is set forth
on pages 6 to 9 of this proxy statement.

The Nominating Committee selects and recommends to the Board nominees for
election as directors and considers the performance of incumbent directors in
determining whether to recommend them for nomination for re-election. The
Nominating Committee has recommended all incumbent directors for re-election at
the Annual Meeting. The Nominating Committee will consider nominees recommended
by stockholders for election at the 1997 Annual Meeting of Stockholders that are
submitted prior to the end of 1996 to the Secretary of the Company at the
Company's offices, 25101 Chagrin Boulevard, Beachwood, Ohio 44122. Any such
recommendation must be in writing and must include a detailed description of the
business experience and other qualifications of the recommended nominee as well
as the signed consent of such person to serve if nominated and elected.

During 1995, the Board of Directors of the Company held six meetings, the
Audit Committee held three meetings, the Management Compensation Committee held
five meetings, and the Nominating Committee held two meetings. All of the
directors attended 75 percent or more of the meetings held by the Board of
Directors and by the Committees on which they served during 1995.

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COMPENSATION OF DIRECTORS

Each director of the Company (other than Messrs. Colburn and Lyons, who are
consultants to the Company, and Mr. Paul, who is an employee of the Company) is
paid $15,000 per year for his or her services as a director and $1,000 for each
meeting of the Board of Directors attended. Each member of the Audit Committee
is paid $2,000 per year, each member of the Management Compensation Committee is
paid $3,000 per year, and each member of the Nominating Committee (other than
Mr. Lyons) is paid $1,000 per year, for his or her services as such member, and
each such Committee member (other than Mr. Lyons) is paid $500 for each meeting
of a Committee attended. Directors are not paid fees for their participation in
meetings by conference telephone or for actions by unanimous written consent.
Each director and Committee member is reimbursed for travel and related expenses
incurred in attending meetings.

The stockholders approved The Allen Group Inc. 1994 Non-Employee Directors
Stock Option Plan (the "Directors Option Plan") at the Company's 1994 Annual
Meeting of Stockholders. The Directors Option Plan provides that each year, on
the first Friday following the Company's Annual Meeting of Stockholders, each
individual elected, re-elected or continuing as a director who is not a current
or former employee of the Company automatically receives a nonqualified stock
option for 1,000 shares of Common Stock of the Company. The Directors Option
Plan also permits discretionary grants to directors who are not current
employees of, but were previously employed by, the Company. On April 28, 1995,
Dr. Conway and Messrs. Chandler, Gordon, Hunt, Robinson and Weaver each received
a non-qualified stock option for 1,000 shares of Common Stock of the Company
under the Directors Option Plan at an exercise price of $22.00 per share. (The
number of shares was adjusted to 1,114 and the exercise price was adjusted to
$19.75 to prevent dilution resulting from the spinoff distribution (the "Spinoff
Distribution") of all of the oustanding shares of common stock of TransPro,
Inc., a former wholly owned subsidiary of the Company, to the Company's
stockholders on September 29, 1995.) On June 13, 1995, upon his election to the
Board of Directors, Mr. McNiff, a former employee of the Company for 14 years
ending in 1983, received a non-qualified stock option for 4,000 shares of Common
Stock of the Company under the Directors Option Plan at an exercise price of
$24.375 per share. (The number of shares was adjusted to 4,456 and the exercise
price was adjusted to $21.88 to prevent dilution resulting from the Spinoff
Distribution.) Each of the foregoing options expires 10 years from date of grant
and is exercisable 50 percent after two years from date of grant, 75 percent
after three years from date of grant and 100 percent after four years from date
of grant. In addition, each of the foregoing options becomes immediately
exercisable upon the death of the optionholder prior to the expiration of such
option or upon the cessation of such optionholder's service as a director of the
Company six months or more after the date of grant and prior to the expiration
of such option.

The Company maintains a Matching Gift Program for the benefit of the
directors of the Company. Pursuant to the Matching Gift Program, in 1995, the
Company matched gifts to charitable organizations made by the directors in
amounts up to $2,500 for each director.

Mr. Colburn was employed as Chief Executive Officer of the Company until
February 26, 1991, and as Chairman of the Board of the Company until December
31, 1991, pursuant to an employment agreement that was entered into in 1988. On
December 31, 1991, Mr. Colburn elected to terminate his status as an employee of
the Company (although he continues as Chairman of the Board of the Company) and
to provide post-employment consulting services to the Company pursuant to his
consulting agreement described below. Mr. Colburn's employment agreement
provides that the Company will continue to provide Mr. Colburn and his spouse
medical and hospitalization benefits for their lives at least equal to the
benefits they were entitled to while he was an employee of the Company and will
provide life insurance coverage on Mr. Colburn for his life in an amount equal
to five times his 1991 salary, which is the amount of life insurance that the
Company provided to Mr. Colburn while he was an employee of the Company and the
same level of life insurance that the Company provides to all its officers and
key employees. The Company is fulfilling its obligations to provide such life
insurance benefits to Mr. Colburn pursuant to the terms of a Split Dollar
Insurance Agreement between the Company and Mr. Colburn.

Mr. Colburn's employment agreement provides for mandatory arbitration of
all disputes relating to his employment agreement, his post-employment
consulting agreement described below or his supplemental

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pension benefit agreement described on page 15 hereof and requires the Company
to pay all reasonable legal expenses incurred by Mr. Colburn in connection with
resolution of disputes under the agreements.

Pursuant to an agreement entered into in 1976, and subsequently amended,
Mr. Colburn provided post-employment consulting services to the Company for
several years prior to March 9, 1988, when he became Chief Executive Officer of
the Company, and has provided and will continue to provide post-employment
consulting services to the Company for an additional period that commenced upon
termination of his employment, which was December 31, 1991, through October 31,
1997. The agreement provides for the payment by the Company to Mr. Colburn
annually, during the consulting period, of $248,605, increased each June 30
during the consulting period for increases in the consumer price index, and,
except after a "Change in Control" of the Company (which is defined as it is in
the severance agreements described on pages 16 to 17 of this proxy statement),
reduced to the extent of any benefits paid to him prior to January 1, 1994 under
his supplemental pension benefit agreement described on page 15 hereof but not
reduced by any benefits paid to him under The Allen Group Inc. Corporate
Retirement Plan. During 1995, the Company paid Mr. Colburn $273,765 in
consulting fees and furnished him an automobile at the Company's expense. In
addition, during the consulting period, the Company provides Mr. Colburn with
furnished office space and support services while he is performing consulting
services. During the consulting period, Mr. Colburn is required to furnish
consulting services to the Company for up to 34 percent of his time each year,
except when he is engaged in governmental service or charitable work, during
which periods consulting services and compensation will be suspended, and he has
agreed not to engage in or be employed by any business in competition with the
Company during the term of his agreement. If the Company breaches any material
provision of the consulting agreement and such breach continues for at least 30
days after notice to the Company, all benefits under the consulting agreement
become nonforfeitable, and the Company will pay Mr. Colburn an amount equal to
the present value of all remaining consulting compensation for the remaining
consulting period.

Pursuant to an agreement entered into in September 1989, as amended in
1990, Mr. Lyons provides post-employment consulting services to the Company for
the period that commenced upon termination of his employment, which was
September 30, 1989, through September 30, 1992 and continuing thereafter for
successive periods of 12 months each, unless either the Company or Mr. Lyons
gives at least three months' notice to the contrary. No such notice was given by
either party in 1995. The agreement provides for the payment by the Company to
Mr. Lyons annually, during the consulting period, of $25,000. In addition,
during the consulting period, the Company includes Mr. Lyons in the Company's
life, medical and hospitalization and disability insurance benefit plans and
furnishes him an automobile at the Company's expense. During the consulting
period, Mr. Lyons is required to furnish consulting services to the Company for
up to 10 percent of his time each year, and he has agreed not to engage in or be
employed by any business in competition with the Company during the term of his
agreement.

The Company also has entered into supplemental pension benefits agreements
with Messrs. Colburn and Lyons. For a description of the terms of these
agreements, see "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT --
Retirement Plans -- Other Supplemental Pension Benefits Agreements" on pages 15
to 16 of this proxy statement.

For additional information with respect to the directors of the Company,
see "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT -- Transactions
with Executive Officers and Directors" on page 19 and "STOCK OWNERSHIP --
Directors and Officers" on pages 20 to 21, of this proxy statement.

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EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Pursuant to the proxy rules promulgated by the Securities and Exchange
Commission designed to enhance disclosure of corporations' policies toward
executive compensation, Mr. Weaver (Chairman), Dr. Conway and Mr. Gordon, as
members of the Management Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee"), submit the following report
outlining the Company's compensation plans and policies as they pertain to
Robert G. Paul, President and Chief Executive Officer of the Company, and the
other executive officers of the Company:

The Company's executive compensation plans have been designed to attract,
retain and reward high caliber executives who will formulate and execute the
business plans of the Company in a manner that will provide the stockholders of
the Company with a satisfactory return while assuring that the Company's
executive compensation levels are fair and appropriate to both its executives
and its stockholders. With these goals in mind, the Company's compensation plans
and policies have been designed to ensure that total executive compensation is
linked significantly to the performance of the Company, as measured by both the
operating performance of the Company and the increase in the value of its
shares. Although the Compensation Committee recognizes that improvement in
operating performance and higher stock prices do not necessarily move in tandem
over the short term, we expect that the two measurements will correlate over the
long term.

The Compensation Committee regards stock ownership by the Company's
executive officers, encouraged by equity-based compensation plans, as an
effective way to align the interests of the executive officers with those of the
stockholders of the Company. Accordingly, the Compensation Committee does not
plan to pay above-average base salaries to its executive officers. The Committee
does expect to utilize performance-oriented and equity-based compensation to
reward outstanding performance.

By receiving some equity-based compensation during their term of employment
by the Company, executive officers of the Company should become larger holders
of Company stock. The use of equity-based compensation is intended to strengthen
their identification with the stockholders of the Company and make increasing
stockholder value a continuing focus for the Company's management group. The
Compensation Committee considers that equity-based compensation, combined with a
focus on the operating performance of the Company, will have a long-term impact
on improving the Company's financial results and increasing its stockholder
value.

STOCK OWNERSHIP GUIDELINES

In early 1994, the Compensation Committee established stock ownership
guidelines for key executives of the Company. These guidelines provide that
executive officers should hold shares of the Company's Common Stock in varying
amounts as a multiple of salary, ranging from a minimum of five times annual
salary for the Chief Executive Officer to one times annual salary for key
executives below the Vice President level.

The Compensation Committee recognizes that newer employees or those
recently promoted may require some period of time to achieve these levels. Even
though the guidelines have provided for a transition period of from three to 10
years for the suggested levels to be met, we note that during 1995 each of the
key executives continued to accumulate shares of the Company's Common Stock and
either exceeded or moved closer to their guideline amount. The Compensation
Committee intends to continue to monitor each executive's progress towards these
guidelines and will consider the executives' progress towards achieving these
guidelines when deciding on future stock option awards and equity grants.

MEASURING PERFORMANCE

The evaluation of the performance of the key executive officer group, and
the Chief Executive Officer in particular, is primarily based on measurable
criteria and, to a lesser extent, certain subjective criteria. The measurable
criteria include both the total return to stockholders, determined by changes in
the stock price and any dividends which may be paid, and the financial
performance of the business, determined by the amount of earnings per share, the
return on equity and the rate of increase in earnings per share.

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Because of the dynamic nature of many of the Company's businesses and the
desire to focus on long-term objectives, these criteria are measured over
one-year, three-year and five-year periods. When evaluating performance with
regard to an increase in base salary, the Compensation Committee assigns more
weight to longer-term results, i.e., three and five-year comparisons, than to
the results of a single year. It also considers comparisons of salaries for
similar positions in companies of comparable size, as well as changes in the
cost of living. When determining an annual incentive bonus, the Compensation
Committee places more weight on the performance of the year just completed, with
significantly less weight on the three and five-year results.

Through 1993, the Company had a significant tax-loss carryforward which was
fully utilized during 1993. Therefore, the Company's earnings performance is
reviewed on both pre-tax earnings per share and after-tax earnings per share
when evaluating the Company's and the Chief Executive Officer's performance. For
comparative purposes, the Compensation Committee plans to review the after-tax
earnings per share for 1994 and future years against pro forma fully taxed
earnings per share for pre-1994 years. The after-tax earnings from continuing
operations in 1995 of $25.5 million and $.95 per share were 33% and 28%,
respectively, higher than 1994 results. The Company's return on equity from
continuing operations of 13.5% increased from the past year's 12.1%.

At the end of 1995, the Company's Common Stock price was $22.375,
representing a one-year increase in stockholder value based on stock price and
dividends (including the TransPro Spinoff Distribution) of 6.4%. The longer-term
performance saw the three-year average annual increase in stockholder value
equal 24% and the five-year average annual increase equal 39% as shown on the
performance graph set forth on page 18 of this proxy statement.

The subjective criteria utilized by the Board and Compensation Committee in
evaluating the performance of the Company, the Chief Executive Officer and all
other key executives of the Company, include but are not necessarily limited to:

(i) the success of the Company in implementing and achieving its
corporate strategic goals and the strategic goals of its
individual businesses;

(ii) the success in the development of management depth; and

(iii) the development and maintenance of timely communication and
credibility with its stockholders, financial analysts and other
outside audiences.

The corporate executives are paid annual incentive bonuses commensurate
with the Compensation Committee's evaluation of the Company's performance as
described above. Based on the results achieved in 1995, the corporate executives
were all awarded annual incentive bonuses somewhat below the maximum for their
positions, and in most cases, below 1994 bonuses. These bonuses averaged 46% of
salary.

The annual performance bonuses for the senior managers who are responsible
for specific operating businesses and subsidiaries within the Company are based
primarily on the annual operating profits of their individual businesses as
measured against their profit plans. Some non-financial objectives, mutually
established by those executives and the Company's senior officers at the
beginning of each year, are also evaluated. Consistent with previous years,
bonuses for 1995 could have ranged from zero to 75% of salary. The largest bonus
in 1995 was 58% of salary, and the average bonus for this group was 32% of
salary.

RECENT DEVELOPMENTS

During late 1994 and early 1995, the Compensation Committee engaged William
M. Mercer Incorporated, a nationally recognized executive compensation
consulting firm, to review the Company's executive compensation practices. This
review included an examination of the Company's practices and their consistency
with general corporate practices and with the Compensation Committee's
philosophy. Mercer utilized a number of national compensation surveys and
private databases for companies of similar size to the Company as well as
specific analysis of the compensation information contained in proxy statements
of a number of companies in similar industries.

Based on this evaluation, the Compensation Committee decided to
discontinue, effective January 1, 1995, the Key Management Deferred Bonus Plan.
The Committee felt that the KMDB Plan, which was designed to

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focus on the return on equity of the Company, had the desired impact of
significantly increasing the return on equity of the Company over the past seven
years. Although the KMDB Plan awards are paid out over a five-year period, each
annual award was based on the return on equity in a particular year. The
Compensation Committee concluded that this Plan, when combined with the annual
incentive bonus, based too large a percentage of total executive compensation on
one year's results. The compensation study indicated that the Company's annual
incentive bonus formulas, as a percent of salary, were in line with the 50th
percentile of the broad base of companies, so no changes were adopted to the
annual incentive bonus plan. Incentive bonus awards in recent years have been
above the 50th percentile, which was expected because the performance of the
Company has been significantly above the average performance of similarly sized
companies.

The compensation study also indicated that the Company was below the 50th
percentile in the use of stock options as a means of long-term compensation and
in the levels of executive retirement benefits. As a result, the Compensation
Committee moved to annual stock option grants for most senior employees starting
in 1995 with average annual grants being at higher levels than was previously
the case and expanded the pool of employees participating in the 1992 Stock
Plan. In addition, the Company has adopted and implemented expanded
supplementary restoration and target executive retirement arrangements for
senior employees.

BASIS FOR CHIEF EXECUTIVE OFFICER'S COMPENSATION

Mr. Paul received a salary increase of $30,000 on January 1, 1995, which
was based on the objective and subjective criteria discussed above, peer
comparisons and cost of living factors. He did not receive a salary increase in
1993 and 1994 as a result of his receipt in 1992 of a performance-oriented
restricted stock grant.

Mr. Paul's performance bonus of $255,000 for 1995, which was paid in cash
in late February 1996, was 67% of his base salary. His employment agreement
states that his performance bonus can range from 0% to 80% of base salary. Half
of the maximum bonus for 1995 was based on a formula utilizing growth in
earnings per share which was adopted at the beginning of 1995. The earnings per
share from continuing operations was a record for the Company, but slightly
below the maximum formula amount. Thus, Mr. Paul earned $127,500 for this
portion, or 33.5% of salary. The remaining $127,500 or 33.5% of salary was based
on the continued progress during 1995 in the other financial performance
measures and the subjective criteria mentioned above.

In April 1995, Mr. Paul was granted a non-qualified option for 16,712
shares at $20.76, the market price on the date of grant (as adjusted to reflect
the effects of the Spinoff Distribution). This option was based on the
recommendations of the above-mentioned compensation study, but was reduced
because a larger than normal option had been granted to Mr. Paul in 1994.

COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE

Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to a public corporation for compensation over $1
million paid to the corporation's chief executive officer and four other most
highly compensated executive officers. Qualifying performance-based compensation
will not be subject to the cap if certain requirements are met. The Compensation
Committee and the Board of Directors intend to structure the compensation of its
executive officers in a manner that should ensure that the Company does not lose
any tax deductions because of the $1 million compensation limit in the
foreseeable future.

The Company's salaries for its highest paid executives will be set, based
on independent studies, at levels approximating the average for companies of
comparable size in similar industries and, when added to annual bonus targets,
are not expected to approach $1 million in the foreseeable future. The Company
has been an early proponent of using more equity-based compensation, which can
often be designed to ensure that tax deductibility is not compromised.

In February 1995, the Company's Board of Directors amended the 1992 Stock
Plan incorporating maximum limitations on individual annual stock option and
restricted stock grants so as to meet the requirements of Section 162(m). They
also amended the 1992 Stock Plan to identify the performance measures to be used
if the Compensation Committee decides to use performance-based vesting
restricted stock in the future to meet the requirements of Section 162(m). These
amendments were approved by the Company's stockholders at the Company's 1995
Annual Meeting.

8
<PAGE> 12

The November 30, 1993 incentive restricted stock grants to seven
individuals contain both time-based vesting and provisions for performance-based
acceleration, and therefore are subject to the $1 million cap. These restricted
stock grants, however, include provisions to ensure that the amount vested in
any one year will not place the individual's earnings over the $1 million cap.
The 1992 incentive restricted stock grants were grandfathered under Section
162(m). Thus, no tax deduction will be lost to the Company as a result of these
restricted stock grants.

Respectfully submitted,

William M. Weaver, Jr., Chairman
Dr. Jill K. Conway
Albert H. Gordon

ANNUAL AND LONG-TERM COMPENSATION

The following table sets forth the annual and long-term compensation paid
or accrued by the Company and its subsidiaries to those persons who were (i) the
Chief Executive Officer and (ii) the other four most highly compensated
executive officers of the Company (collectively, the "Named Executive
Officers"), for services rendered by them in all capacities in which they served
the Company and its subsidiaries during 1993, 1994 and 1995. The number of
restricted shares and options reported in the Summary Compensation Table set
forth below (and the footnotes thereto), the Option/SAR Grants In Last Fiscal
Year Table set forth on page 11 of this proxy statement, and the Aggregated
Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End Option/SAR Values
Table set forth on page 12 of this proxy statement have been adjusted, to the
extent applicable, for the two-for-one stock split declared by the Board of
Directors of the Company on September 9, 1993 and paid October 18, 1993 to the
holders of the Company's Common Stock of record on September 30, 1993, and for
the Spinoff Distribution declared by the Board of Directors of the Company on
September 8, 1995 and paid to the holders of the Company's Common Stock of
record on September 29, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION SECURITIES
---------------------------------------- RESTRICTED UNDERLYING
NAME AND BONUS OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) ($)(A) COMPENSATION($) AWARDS($)(C) SARS(#) COMPENSATION($)(G)
- ------------------------ ---- --------- -------- --------------- ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert G. Paul 1995 $380,000 $255,000 (b) $ -0- 16,712 $ 96,563
President and Chief 1994 350,000 374,490 (b) 91,804(d) 89,129 66,404
Executive Officer 1993 350,000 355,597 (b) 80,780(e) -0- 66,615
Robert A. Youdelman 1995 232,000 124,000 (b) -0- 8,913 58,409
Senior Vice
President--Finance 1994 222,000 186,481 (b) 51,754(d) 55,706 51,294
and Chief Financial
Officer 1993 210,000 166,327 (b) 42,810(e) -0- 40,065
McDara P. Folan, III 1995 135,000 45,000 (b) -0- 5,571 13,466
Vice President, 1994 125,000 69,064 (b) 24,586(d) -0- 13,616
Secretary and 1993 125,000 63,990 (b) 328,823(e)(f) -0- 1,380
General Counsel
James L. LePorte, III 1995 151,000 66,000 (b) -0- 8,913 20,242
Vice President,
Treasurer 1994 144,000 104,411 (b) 31,462(d) 5,571 13,174
and Controller 1993 135,000 91,805 (b) 25,800(e) -0- 13,270
Erik H. van der Kaay 1995 240,000 65,000 (b) -0- 17,826 64,924
Vice President 1994 200,000 128,897 (b) 41,674(d) -0- 45,999
1993 186,667 59,362 (b) 27,990(e) 8,913 31,768
</TABLE>

- ---------------

(a) Amounts listed as bonuses for each of the respective fiscal years include
(i) annual performance bonuses earned by the Named Executive Officers with
respect to such fiscal year and (ii) the cash portion of bonuses awarded
under the Company's KMDB Plan to the Named Executive Officers for such
fiscal year, even though the payment of the cash portion of such bonuses is
paid in five equal annual

9
<PAGE> 13

installments on September 15 of each year commencing in the year following
the year with respect to which such award is made and even though the right
to any unpaid portions of such bonuses will be forfeited upon termination of
employment for certain reasons enumerated in the Plan. The KMDB Plan was
discontinued as of December 31, 1994. Accordingly, no bonuses were awarded
under the Company's KMDB Plan to the Named Executive Officers for fiscal
year 1995.

(b) Aggregate amount of such compensation is less than the lesser of $50,000 or
10 percent of the total annual salary and bonus reported for such Named
Executive Officer under "Salary" and "Bonus" for such fiscal year.

(c) The dollar values of the restricted stock awards are based on the closing
market price of the Company's Common Stock on the date of such awards. At
December 31, 1995, the Named Executive Officers held 152,688 restricted
shares of the Company's Common Stock in the aggregate, which are subject to
forfeiture under certain circumstances for periods up to 10 years with an
aggregate value (calculated by multiplying the number of restricted shares
held by $22.375, the closing market price of the Company's Common Stock on
December 29, 1995) of $3,416,395 as follows: Mr. Paul (53,287 shares with a
value of $1,192,297), Mr. Youdelman (32,128 shares with a value of
$718,864), Mr. Folan (20,114 shares with a value of $450,051), Mr. LePorte
(20,184 shares with a value of $451,617) and Mr. van der Kaay (26,975 shares
with a value of $603,566). Dividends are paid on restricted shares of the
Company's Common Stock at the same rate as paid on other outstanding shares
of the Company's Common Stock.

(d) On February 22, 1995, the Named Executive Officers were awarded the
following numbers of restricted shares of the Company's Common Stock under
the 1992 Stock Plan, which restricted shares constitute 50 percent of the
bonuses awarded for 1994 to each Named Executive Officer under the Company's
KMDB Plan: Mr. Paul (4,464), Mr. Youdelman (2,516), Mr. Folan (1,196), Mr.
LePorte (1,529) and Mr. van der Kaay (2,026). These restricted shares of the
Company's Common Stock will vest in five equal annual installments on
September 15 of each year commencing in 1995, provided that the right to
receive any such restricted shares which are not vested will be forfeited
upon termination of employment for certain reasons enumerated in the KMDB
Plan.

(e) On February 23, 1994, the Named Executive Officers were awarded the
following numbers of restricted shares of the Company's Common Stock under
the 1992 Stock Plan, which restricted shares constituted 60 percent of the
bonus awarded for 1993 to each Named Executive Officer under the Company's
KMDB Plan: Mr. Paul (5,681), Mr. Youdelman (3,030), Mr. Folan (1,522), Mr.
LePorte (1,826) and Mr. van der Kaay (1,981). These restricted shares of the
Company's Common Stock will vest in five equal annual installments on
September 15 of each year commencing in 1994, provided that the right to
receive any such restricted shares which are not vested will be forfeited
upon termination of employment for certain reasons enumerated in the KMDB
Plan.

(f) On November 30, 1993, Mr. Folan was awarded 18,190 restricted shares of the
Company's Common Stock under the 1992 Stock Plan. These restricted shares of
the Company's Common Stock will vest 25 percent on December 31 in each of
the years 2000, 2001, 2002 and 2003, unless accelerated vesting is achieved.
Accelerated vesting based on achieving certain stock price and earnings per
share targets cannot begin until the year 1997, and such shares will then
vest only when the following targets have been reached:

<TABLE>
<CAPTION>
90-DAY AVERAGE
STOCK PRICE THREE-YEAR
- ------------------------------- AVERAGE EARNINGS PER SHARE
VESTING ----------------------------------
PERCENT VESTING TARGET VESTING PERCENT VESTING TARGET
- ------------ -------------- --------------- --------------
<S> <C> <C> <C>
12 1/2% $36.09 12 1/2% $ 1.57
12 1/2 40.09 12 1/2 1.82
12 1/2 44.09 12 1/2 2.07
12 1/2 49.09 12 1/2 2.32
</TABLE>

(g) All Other Compensation includes $1,200 made as matching Company
contributions for each of the Named Executive Officers under the Company's
Employee Before-Tax Savings Plan for each of 1995, 1994 and 1993, as
applicable. In addition, All Other Compensation includes (i) the following
insurance premiums paid by the Company with respect to term life insurance
for the benefit of the Named Executive Officers during each of 1995, 1994
and 1993, respectively, as applicable: Mr. Paul ($156, $156

10
<PAGE> 14

and $180), Mr. Youdelman ($156, $156 and $180), Mr. Folan ($156, $156 and
$180), Mr. LePorte ($156, $156 and $180) and Mr. van der Kaay ($156, $156
and $180), and (ii) the following amounts equal to the full dollar value of
the remainder of the premiums paid by the Company in connection with life
insurance policies issued pursuant to the Split Dollar Insurance Agreements
between the Company and the following Named Executive Officers during 1995,
1994 and 1993, respectively, as applicable: Mr. Paul ($95,207, $65,048 and
$65,235), Mr. Youdelman ($57,053, $49,938 and $38,685), Mr. Folan ($12,110
for 1995 and $12,260 for 1994), Mr. LePorte ($18,886, $11,848 and $11,890)
and Mr. van der Kaay ($63,568, $44,643 and $30,388). The premiums paid by
the Company in connection with the life insurance policies issued pursuant
to such Split Dollar Insurance Agreements set forth in the preceding
sentence generally will be recovered in full by the Company upon the
cancellation or purchase by a Named Executive Officer of any such life
insurance policy or the payment of any death benefits under any such life
insurance policy.

OPTIONS GRANTED IN 1995

The following table sets forth information with respect to grants of
options to purchase shares of the Company's Common Stock to the Named Executive
Officers during 1995 pursuant to the Company's 1992 Stock Plan.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(B)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Paul 16,712(a) 5.54% $ 20.76 4/29/05 $218,150 $ 552,841
Robert A. Youdelman 8,913(a) 2.95 20.76 4/29/05 116,346 294,847
McDara P. Folan, III 5,571(a) 1.85 20.76 4/29/05 72,721 184,291
James L. LePorte, III 8,913(a) 2.95 20.76 4/29/05 116,346 294,847
Erik H. van der Kaay 17,826(a) 5.91 20.76 4/29/05 232,692 589,693
</TABLE>

- ---------------

(a) Each of these options was granted on April 27, 1995. Each of these options
is exercisable 50 percent after two years from date of grant, 75 percent
after three years from date of grant and 100 percent after four years from
date of grant. If the optionee's employment by the Company or any of its
subsidiaries terminates for any reason, this option may be exercised to the
extent exercisable at the time of such termination of employment within
three months after such termination of employment. If the optionee dies
within such three-month period or if the termination of his employment is
due to his death, this option may be exercised within one year after his
death. Each of these options contains a tandem stock appreciation right
providing that the Company will, if requested by the optionee prior to the
exercise thereof and if approved by the Compensation Committee, purchase
that portion of the option which is then exercisable at a price equal to the
difference between the exercise price and the market price of the shares.
The purchase price may be paid by the Company in either cash or Common Stock
of the Company, or any combination thereof, as the Compensation Committee
may determine. In addition, each of these options contains a tandem limited
stock appreciation right exercisable six months after grant and immediately
after a " Change in Control" of the Company (which is defined as it is in
the severance agreements described on pages 16 to 17 of this proxy
statement). Pursuant to this tandem limited stock appreciation right, the
Company will purchase the option for cash at a price equal to the difference
between the exercise price and the "market value" (as defined in the 1992
Stock Plan) of the shares covered by the option. Such market value generally
is defined to relate to the highest market value of the Company's Common
Stock during the period in which the circumstances giving rise to the
exercise of the limited stock appreciation right occurred.

11
<PAGE> 15

(b) The dollar amounts set forth in the columns are the result of calculations
of the 5% and 10% rates set forth in the Securities and Exchange
Commission's rules regarding the disclosure of executive compensation, and
therefore are not intended to forecast possible future appreciation of the
Company's Common Stock. Actual gains, if any, on the exercise of this option
is dependent on the future performance of the Company's Common Stock, as
well as the applicable Named Executive Officer's continued employment
throughout the vesting period.

OPTION EXERCISES AND 1995 YEAR-END VALUES

The following table sets forth information with respect to (i) options to
purchase shares of the Company's Common Stock granted under the Company's 1982
Stock Plan and 1992 Stock Plan, respectively, which were exercised by the Named
Executive Officers during 1995, and (ii) unexercised options to purchase shares
of the Company's Common Stock granted under the Company's 1982 Stock Plan and
1992 Stock Plan, respectively, to the Named Executive Officers and held by them
at December 31, 1995.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS MONEY OPTIONS/SARS AT FISCAL
SHARES AT FISCAL YEAR-END (#) YEAR-END($)(B)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED($)(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Paul (a) -- 208,338 105,841 $3,486,156 $ 676,017
Robert A. Youdelman (a) -- 51,471 64,619 845,970 420,110
McDara P. Folan, III (a) -- 6,685 5,571 77,236 8,738
James L. LePorte, III (a) -- 39,216 14,484 674,125 59,597
Erik H. van der Kaay (a) -- 31,752 22,283 458,554 66,955
</TABLE>

- ---------------

(a) Named Executive Officer did not exercise any options to purchase shares of
the Company's Common Stock during 1995.

(b) The dollar values are calculated by determining the difference between the
fair market value of the shares of the Company's Common Stock underlying the
options and the exercise price of such options at exercise or at December
31, 1995, as applicable.

RETIREMENT PLANS

Corporate Retirement Plan

Participants in The Allen Group Inc. Corporate Retirement Plan (the
"Retirement Plan") consist of a majority of the full-time employees of the
Company and its subsidiaries in the United States, including the Named Executive
Officers, and Messrs. Colburn and Lyons as former employees of the Company. The
Retirement Plan generally provides a retirement benefit based upon the
participant's years of credited service (not in excess of 30 years) and his or
her final average earnings, with final average earnings consisting of the sum of
(i) the average of the salaries of the participant during the five years of
highest salaries of the participant in the 10 years preceding the participant's
retirement or termination date, and (ii) the average of the performance bonuses
and overtime earnings of the participant during the five years of highest
aggregate bonuses and overtime earnings of the participant in the 10 years
preceding the participant's retirement or termination date. Retirement benefits
are payable either as a straight life annuity, a joint and survivor annuity or
in other optional forms. Normal retirement is at age 65, but certain early
retirement benefits may be payable to participants who have attained age 55 and
completed 10 years of continuous service, and survivor benefits may be payable
to the surviving spouse of a vested participant who dies prior to early or
normal retirement. A participant's benefit under the Retirement Plan vests after
five years of credited service, all benefits funded by the Company are based
upon actuarial computations, and no contributions are made by participants.

12
<PAGE> 16

Restoration Plan

The Internal Revenue Code (the "IRC") imposes a maximum limit on annual
retirement benefits payable under tax-qualified retirement plans, such as the
Retirement Plan. For 1996, that annual limit is $120,000. In addition, the IRC
limits the amount of annual compensation that may be taken into account for
benefit calculation purposes under tax-qualified retirement plans. For 1996,
that annual limit is $150,000. Effective January 1, 1996, the Company adopted
The Allen Group Inc. Restoration Plan (the "Restoration Plan"). Under the
Restoration Plan, each employee whose Retirement Plan benefit is limited by
these IRC restrictions or as a result of his deferral of income under the
Company's Deferred Compensation Plan will be entitled to a supplemental
restoration benefit equal to the difference between the full amount of his
pension benefits determined under the Retirement Plan (calculated without regard
to these IRC restrictions or to deferral of income under the Company's Deferred
Compensation Plan) and the maximum amount payable from the Retirement Plan. If
(i) the Company breaches any material provision of the Plan and such breach
continues for at least 30 days after notice to the Company, or (ii) the Company
makes a general assignment for the benefit of creditors, or (iii) any proceeding
under the U.S. Bankruptcy Code is instituted by or against the Company and, if
instituted against the Company, is consented to or acquiesced in by it or the
Company fails to use its best efforts to obtain the dismissal thereof for 60
days, or (iv) a receiver or trustee in bankruptcy is appointed for the Company,
the Company will pay each employee affected thereby an amount equal to the
present value of his benefits under the Restoration Plan. Except as specified
above, the vesting of benefits, the timing of payments and the form of payments
under the Restoration Plan are determined in accordance with the terms of the
Retirement Plan. The Restoration Plan is unfunded. All of the Named Executive
Officers are participants in the Restoration Plan.

Pension Benefits Table

The following table shows estimated annual benefits payable under the
Retirement Plan and the Restoration Plan to participants in specified
compensation (final average earnings) and years-of-service classifications on a
straight life annuity basis, assuming normal retirement at age 65 on January 1,
1996 and application of the current U.S. social security covered compensation
base. The benefits payable under the Retirement Plan and the Restoration Plan
are not subject to any deduction for U.S. social security or other offset
amounts.

<TABLE>
<CAPTION>
YEARS OF SERVICE(B)
FINAL AVERAGE -----------------------------------------------------------------------
EARNINGS(A) 5 10 15 20 25 30
- ----------------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000.............. $ 7,748 $15,496 $ 23,244 $ 30,992 $ 38,741 $ 46,489
150,000.............. 9,436 18,871 28,307 37,742 47,178 56,614
175,000.............. 11,123 22,246 33,369 44,492 55,616 66,739
200,000.............. 12,811 25,621 38,432 51,242 64,053 76,864
225,000.............. 14,498 28,996 43,494 57,992 72,491 86,989
250,000.............. 16,186 32,371 48,557 64,742 80,928 97,114
300,000.............. 19,561 39,121 58,682 78,242 97,803 117,364
350,000.............. 22,936 45,871 68,807 91,742 114,678 137,614
400,000.............. 26,311 52,621 78,932 105,242 131,553 157,864
450,000.............. 29,686 59,371 89,057 118,742 148,428 178,114
500,000.............. 33,061 66,121 99,182 132,242 165,303 198,364
600,000.............. 39,811 79,621 119,432 159,242 199,053 238,864
700,000.............. 46,561 93,121 139,682 186,242 232,803 279,364
</TABLE>

- ---------------

(a) The current final average earnings for the Named Executive Officers during
1995 are $596,458 for Mr. Paul, $342,640 for Mr. Youdelman, $170,338 for Mr.
Folan, $206,400 for Mr. LePorte and $273,170 for Mr. van der Kaay. The
calculation of the foregoing amounts includes the amounts shown under
"Salary" and "Bonus" (exclusive of bonuses awarded under the Company's KMDB
Plan) in the Summary Compensation Table set forth on page 9 of this proxy
statement.

(b) Years of credited service as of January 1, 1996 under the Retirement Plan
for the Named Executive Officers are 25.6 for Mr. Paul, 18.9 for Mr.
Youdelman, 3.3 for Mr. Folan, 14.8 for Mr. LePorte and 5.5 for Mr. van der
Kaay.

13
<PAGE> 17

Target Benefit Agreements

Effective January 1, 1996, the Company entered into separate Supplemental
Target Pension Benefit Agreements (each, a "Target Agreement") with five
executives of the Company, including Messrs. Paul, Youdelman, LePorte and van
der Kaay (collectively, the "Target Officers"). Pursuant to each Target
Agreement, the Company will provide annual pension benefits to a Target Officer
supplemental to the annual benefits paid to him under the Retirement Plan and
the Restoration Plan if warranted by the formula under the Target Agreement. For
all Target Officers but Mr. van der Kaay, the target benefit is 1.733% of the
Target Officer's five-year average earnings (as defined in the Retirement Plan
but without regard to IRC limitations or to deferral of income under the
Company's Deferred Compensation Plan), multiplied by his years of credited
service, but not in excess of 30 years. For Mr. van der Kaay, the 1.733
multiplier is increased to 2.733
for each year after 1995 (for purposes of the Target Benefits Table set forth
below, this 2.733 multiplier equates to crediting Mr. van der Kaay with 1.577
years of service for each year of service he completes after 1995). The target
benefit is reduced by an amount, expressed as a single life annuity, equal to
the sum of the Target Officer's Retirement Plan benefit, Restoration Plan
benefit, Employee Before-Tax Savings Plan matching benefit and social security
benefit. For this purpose, the Employee Before-Tax Savings matching benefit
assumes the Company contributed each year to the Company's Employee Before-Tax
Savings Plan for the Target Officer the maximum permissible matching
contribution (currently $1,200 per year) and such amounts accumulated at the
rate of 8% compounded annually. Each target benefit may not exceed an annual
amount of $250,000 reduced by four-twelfths of one percent ( 4/12%) for each
month (if any) by which the applicable Target Officer's target benefit commences
before such Target Officer's attainment of age 65. Each Target Agreement is
unfunded.

Under each Target Agreement, if, after the Target Officer ceases to be a
senior executive officer, (i) the Company's bank indebtedness is accelerated, or
(ii) the Company breaches any material provision of the Target Agreement and
such breach continues for at least 30 days after notice to the Company, or (iii)
the consolidated tangible net worth of the Company falls below $90 million
(provided that such tangible net worth at the time the affected Target Officer
ceases to be a senior executive officer is at least $130 million, or if such
tangible net worth at the time he ceases to be a senior executive officer is
less than $130 million, the tangible net worth of the Company declines by $40
million), or (iv) the Company makes a general assignment for the benefit of
creditors, or (v) any proceeding under the U.S. Bankruptcy Code is instituted by
or against the Company and, if instituted against the Company, is consented to
or acquiesced in by it or the Company fails to use its best efforts to obtain
the dismissal thereof for 60 days, or (vi) a receiver or trustee in bankruptcy
is appointed for the Company, the Company will pay the affected Target Officer
an amount equal to the present value of his target benefits under his Target
Agreement. Similarly, under each Target Agreement, if the Target Officer's
employment is terminated within the two-year period following a "Change in
Control" of the Company either by the Company other than for "Cause" or because
the Target Officer is disabled or by the Target Officer for "Good Reason" (as
such terms are defined in the employment agreement or severance agreement
applicable to the Target Officer described on pages 16 to 17 of this proxy
statement), the Company will pay the affected Target Officer an amount equal to
the present value of his target benefits under his Target Agreement. In
addition, a Target Officer's benefit under the Restoration Plan is required to
be transferred to his Target Agreement in the event of a "Change in Control" of
the Company.

14
<PAGE> 18

The following table shows the estimated annual target benefits payable
under the Target Agreements to the Target Officers, assuming normal retirement
at age 65 on January 1, 1996.

<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE(B)
AVERAGE -------------------------------------------------------------------
EARNINGS(A) 5 10 15 20 25 30
--------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000.. $ 0 $ 0 $ 74 $ 663 $ 1,252 $ 1,841
150,000.. 407 504 1,511 2,580 3,648 4,716
175,000.. 886 1,462 2,949 4,496 6,044 7,591
200,000.. 1,365 2,420 4,386 6,413 8,440 10,466
225,000.. 1,844 3,379 5,824 8,330 10,835 13,341
250,000.. 2,324 4,337 7,261 10,246 13,231 16,216
300,000.. 3,282 6,254 10,136 14,080 18,023 21,966
350,000.. 4,240 8,170 13,011 17,913 22,815 27,716
400,000.. 5,199 10,087 15,886 21,746 27,606 33,466
450,000.. 6,157 12,004 18,761 25,580 32,398 39,216
500,000.. 7,115 13,920 21,636 29,413 37,190 44,966
600,000.. 9,032 17,754 27,386 37,080 46,773 56,466
700,000.. 10,949 21,587 33,136 44,746 56,356 67,966
</TABLE>

- ---------------

(a) For benefit calculation purposes under the Target Agreements, the current
final average earnings for Messrs. Paul, Youdelman, LePorte and van der Kaay
are the same as those listed in footnote (a) to the Pension Benefits Table
on page 13 of this proxy statement.

(b) For benefit calculation purposes under the Target Agreements, years of
credited service as of January 1, 1996 for the applicable Target Officers
are as follows: Mr. Paul (25.6), Mr. Youdelman (18.9), Mr. LePorte (14.8)
and Mr. van der Kaay (5.5).

Other Supplemental Pension Benefits Agreements

Pursuant to an agreement entered into in 1983, and subsequently amended,
with Mr. Colburn, the Company currently provides annual pension benefits to Mr.
Colburn, supplemental to the annual benefits paid to him under the Retirement
Plan and as social security benefits, in an amount equal to $189,528, with an
equivalent annual benefit payable to Mr. Colburn's spouse for her life after his
death. Pursuant to such agreement, this amount is based upon (i) his final
average earnings, as defined in the Retirement Plan but during the year of
highest salary and performance bonus in the four years preceding his termination
date, which was December 31, 1991 when Mr. Colburn elected not to extend his
employment agreement with the Company, and (ii) 36 years of service as an
employee and as a director of the Company. If the consolidated tangible net
worth of the Company falls below $90 million, if the Company's bank indebtedness
is accelerated or if the Company breaches any material provision of Mr.
Colburn's supplemental pension benefit agreement or post-employment consulting
agreement described on pages 4 to 5 hereof and such breach continues for at
least 30 days after notice to the Company, the Company will pay him or his
spouse, as applicable, an amount equal to the present value of his supplemental
pension benefits under his agreement.

Pursuant to an agreement entered into in 1983, as amended, with Mr. Lyons,
the Company provides annual pension benefits to Mr. Lyons, supplemental to the
annual benefits paid to him under the Retirement Plan, in an amount based upon
(i) his final average earnings, as defined in the Retirement Plan but during the
three years of highest salaries and performance bonuses in the 10 years
preceding his termination date, which was September 30, 1989 (when his
employment as an officer of the Company terminated), and (ii) his number of
years of service as a director, prior to becoming an officer, of the Company
plus his number of years of credited service under the Retirement Plan. The
annual supplemental pension benefit is reduced by the amount paid to Mr. Lyons
annually under the Retirement Plan and his annual social security offset as
defined in such Plan. If the consolidated tangible net worth of the Company
falls below $90 million, if the Company's bank indebtedness is accelerated or if
the Company breaches any material provision of Mr. Lyons' supplemental pension
benefit agreement or his post-employment consulting agreement described on page
5 hereof and such breach continues for at least 30 days after notice to the
Company, the Company will pay him an amount equal to the present value of his
supplemental pension benefits under his agreement. The annual benefit payable to
Mr. Lyons under his supplemental pension benefit agreement, exclusive of amounts
payable

15
<PAGE> 19

under the Retirement Plan and social security benefits, is $34,064, based upon
his final average earnings and 20 years of service under his agreement, with an
annual benefit of $17,032 payable to Mr. Lyons' spouse for her life after his
death.

EMPLOYMENT, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS

Robert G. Paul is employed as President and Chief Executive Officer of the
Company pursuant to an employment agreement entered into in June 1991, which
provides for a term of employment extending through December 31, 1993 and
thereafter continuing for successive periods of 12 months each, unless either
the Company or Mr. Paul gives at least three months' notice to the contrary. No
such notice was given by either party in 1995. The agreement provides for an
annual salary of $300,000 commencing February 26, 1991, which amount was
increased to $405,000 effective as of January 1, 1996, and is subject to such
further future increases as the Board of Directors deems appropriate. The
Company may terminate Mr. Paul's employment for "Cause" (as defined in such
agreement), or in the event of his disability, and he may terminate his
employment for "Good Reason" (as defined in such agreement), such as his not
being elected, or his being assigned duties other than those of, President and
Chief Executive Officer of the Company, a significant adverse alteration in the
nature or status of his responsibilities or the conditions of his employment, a
reduction of his salary (except for across-the-board salary reductions similarly
affecting all management personnel of the Company), a relocation of Mr. Paul by
more than 25 miles, the failure by the Company to continue any material
compensation or benefit plan or the Company giving notice to Mr. Paul that his
employment agreement is not continuing for any period of 12 months after
December 31, 1993.

In the event of Mr. Paul's disability, the Company will continue to pay him
his salary and estimated bonus until the expiration of the term of his
employment agreement and, thereafter, will pay him benefits equal to the maximum
amount currently provided by the Company's executive long-term disability plan,
which is 60 percent of salary and estimated bonus up to a maximum of $420,000
per year, until the earlier of his normal retirement date or commencement of
benefits under the Retirement Plan.

If the Company terminates Mr. Paul's employment other than for "Cause" or
his disability, or if Mr. Paul terminates his employment for "Good Reason", the
Company will pay him an amount equal to his salary for two years, plus all
awards made to him under the Company's KMDB Plan, and will provide his life,
disability, accident, medical and hospitalization insurance benefits for a
period of two years after such termination. In addition, if termination of Mr.
Paul's employment is disputed and the dispute is ultimately resolved in his
favor, the Company may be obligated to pay his salary through the date of final
resolution of the dispute.

If the Company terminates Mr. Paul's employment other than for "Cause" or
his disability, or if Mr. Paul terminates his employment for "Good Reason"
following a "Change in Control" of the Company (which is defined as it is in the
severance agreements described below), the Company will pay him an amount equal
to 2.99 times his average annual taxable compensation from the Company during
the five years preceding termination of employment, plus all awards made to him
under the Company's KMDB Plan, and will pay him an amount equal to the excess of
the "Fair Market Value" (as defined in Mr. Paul's employment agreement), on the
date of termination, over the option price of the shares subject to each stock
option held by him, whether or not exercisable at the time, in exchange for
surrender of the option.

Mr. Paul's employment agreement provides for mandatory arbitration of all
disputes relating to Mr. Paul's employment agreement and requires the Company to
pay all reasonable legal expenses incurred by Mr. Paul in connection with
resolution of disputes under his employment agreement.

The Company has severance agreements with each of the Named Executive
Officers, other than Mr. Paul whose severance arrangements are contained in his
employment agreement described above, which provide severance benefits if the
Company terminates the employee's employment other than for "Cause" (as defined
in such severance agreements) or disability before or after a "Change in
Control" of the Company or if the employee terminates his employment for "Good
Reason" after a "Change in Control". A "Change in Control" of the Company is
defined as (i) the acquisition of more than 30 percent of the outstanding Common
Stock of the Company by any person or group of related persons, (ii) the change
in a majority of the directors of the Company during a consecutive two-year
period, unless the election of each new director was approved by at least
two-thirds of the directors then still in office who were directors at the
beginning of such

16
<PAGE> 20

period, (iii) the stockholders approve a merger or consolidation of the Company
with any other corporation, other than (a) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 80 percent
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
(b) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than 30
percent of the combined voting power of the Company's then outstanding
securities, or (iv) the stockholders approve a plan of complete liquidation or
an agreement for the sale or disposition of all or substantially all of the
Company's assets. "Good Reason" includes the assignment of duties inconsistent
with the employee's position with the Company, a significant adverse alteration
in the nature or status of the employee's responsibilities or the conditions of
his employment, a reduction of the employee's salary (except for
across-the-board salary reductions similarly affecting all management personnel
of the Company), a relocation of the employee by more than 25 miles or the
failure by the Company to continue any material compensation or benefit plan.
Severance payments under the agreements will be six months' salary plus an
additional month for each full year of service but in no event more than 18
months' salary, and will be paid in normal pay periods, except that upon
termination after a "Change in Control", the Company will pay the employee in a
lump sum six months' salary plus an additional month for each full year of
service with a maximum of 18 months' salary plus 50 percent (except Mr. van der
Kaay who will receive 100 percent so long as his severance payments do not
exceed an amount in excess of 27 months' salary), plus all awards under the
Company's KMDB Plan and an amount equal to the excess of the "Fair Market Value"
(as defined in such severance agreements), on the date of termination, over the
option price of the shares subject to each stock option held by him, except
previously issued incentive stock options, whether or not exercisable at the
time, in exchange for surrender of the option. Life, disability, accident and
health insurance benefits will continue during the period of severance payments.
Severance payments in excess of the base amount of six months' salary will be
reduced by any compensation received by the employee from other employment
(other than self employment) prior to a "Change in Control", and all severance
payments and all insurance benefits will be discontinued if the employee engages
in competition with the Company or engages in conduct which is injurious to the
Company, prior to a "Change in Control."

The Company also has entered into separate Supplemental Target Pension
Benefit Agreements with five executives of the Company, including Messrs. Paul,
Youdelman, LePorte and van der Kaay, which contain "Change in Control"
provisions. For a description of the terms of these Target Agreements, see
"EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT -- Retirement Plans --
Target Benefit Agreements" on pages 14 to 15 of this proxy statement.

17
<PAGE> 21

PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return of the Company's Common Stock against
the cumulative total return of (i) the S&P SmallCap 600 Index, (ii) the S&P
Automobile Parts -- After Market Index, and (iii) the S&P Communications --
Equipment/Manufacturers Index for the period of five fiscal years ended December
31, 1995. Commencing with next year's proxy statement, the Company will no
longer include a comparison with the S&P Automobile Parts -- After Market Index.
As a result of the Spinoff Distribution, the Company no longer derives a
significant portion of its revenues from this industry group. The comparisons in
this graph are required by the proxy rules promulgated by the Securities and
Exchange Commission and are not intended to forecast future performance of the
Company's Common Stock.

<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN*

COMPANY'S COMMON STOCK, S&P SMALLCAP 600 INDEX,
S&P AUTOMOBILE PARTS - AFTER MARKET INDEX AND S&P COMMUNICATIONS - EQUIPMENT/MANUFACTURERS INDEX

<CAPTION>
S&P COM-
S&P AUTO- MUNICATIONS -
MOBILE PARTS EQUIP-
MEASUREMENT PERIOD THE ALLEN S&P SMALLCAP -AFTER MAR MENT/MANUFACTURERS
(FISCAL YEAR COVERED) GROUP INC. 600 INDEX KET INDEX INDEX
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 195 148 183 155
1992 271 180 231 167
1993 366 213 268 161
1994 487 203 234 183
1995 518 264 289 274
</TABLE>

* Assumes that the value of the investment in the Company's Common Stock and
each index was $100 on December 31, 1990 and that all dividends on the
Company's Common Stock and on each stock included in each index were
reinvested.
Included in the dividends reinvested is the Spinoff Distribution by the
Company to its stockholders of all of the common stock of the Company's former
wholly owned subsidiary, TransPro, Inc. For purposes of this graph, it is
assumed that the shares of TransPro, Inc. common stock received in the Spinoff
Distribution were sold at the when issued closing market price on October 3,
1995, and the proceeds reinvested in shares of the Company's Common Stock at
the when issued closing market price on October 3, 1995. Such date is the
first day both TransPro, Inc. common stock and the Company's Common Stock
traded on a when issued basis after the Spinoff Distribution.

18
<PAGE> 22

TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS

On July 30, 1992, the Company acquired Alliance Acquisition Corporation
("Alliance"). Pursuant to the Amended and Restated Agreement for Merger dated as
of July 7, 1992 (the "Merger Agreement"), between the Company, Allen
Telecommunications Corporation, a newly formed Delaware corporation and wholly
owned subsidiary of the Company ("Allensub"), and Alliance, Allensub was merged
with Alliance to accomplish this acquisition. Alliance is the surviving
corporation of the merger and remains in existence as a wholly owned subsidiary
of the Company under the name "Allen Telecom Group, Inc." Immediately after the
consummation of the acquisition of Alliance by the Company, and pursuant to the
terms of the Merger Agreement, William O. Hunt entered into a Noncompetition
Agreement with the Company and Alliance (the "Noncompetition Agreement"). In
exchange for his agreement not to compete with the Company and Alliance in their
"Core Business" (as defined in the Noncompetition Agreement) for a period of
five years, the Company agreed to pay Mr. Hunt an aggregate consideration of
$1,017,500. Pursuant to the terms of the Noncompetition Agreement, Mr. Hunt
received $203,500 on each of July 30, 1992, 1993, 1994, and 1995 and will
receive the balance of $203,500, without interest, on July 30, 1996.

PaineWebber Incorporated, of which firm Albert H. Gordon is an Advisory
Director, has been retained by the Company for several years, including 1995 and
1996, to perform investment banking services for the Company and its
subsidiaries. The Company paid $492,117 in fees and expenses to PaineWebber
Incorporated in 1995 for the performance of investment banking services for the
Company and its subsidiaries, primarily in connection with the Spinoff
Distribution.

Smith Lyons, of which firm J. Chisholm Lyons formerly was a partner and
currently is counsel, has been retained by the Company for many years, including
1995 and 1996, to perform legal services for the Company and its Canadian
subsidiaries.

Benesch, Friedlander, Coplan & Aronoff, of which firm Margaret Kennedy, the
spouse of Robert G. Paul, is a partner, has been retained by the Company for
several years, including 1995 and 1996, to perform legal services for the
Company and its subsidiaries. The Company paid $124,907 in fees and expenses to
Benesch, Friedlander, Coplan & Aronoff in 1995 for the performance of legal
services for the Company and its subsidiaries.

19
<PAGE> 23

STOCK OWNERSHIP

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of December 31, 1995 with
respect to the only persons known to the Company to be the beneficial owners
(for purposes of the rules of the Securities and Exchange Commission) of more
than 5% of the outstanding shares of the Company's Common Stock as of that date.

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP OF CLASS
- ----------------------------------------------- ---------- --------
<S> <C> <C>
The State Teachers Retirement System of Ohio... 1,371,900 (a) 5.2%
275 East Broad Street
Columbus, Ohio 43215
State of Wisconsin Investment Board............ 1,565,600 (b) 5.9
P.O. Box 7842
Madison, Wisconsin 53707
</TABLE>

- ---------------

(a) The State Teachers Retirement System of Ohio held sole investment power and
sole voting power over all of such shares as of December 31, 1995, based on
its Schedule 13G filed under the Securities Exchange Act of 1934 on January
31, 1996.

(b) State of Wisconsin Investment Board held sole investment power and sole
voting power over all of such shares as of December 31, 1995, based on its
Schedule 13G filed under the Securities Exchange Act of 1934 on January 29,
1996.

DIRECTORS AND OFFICERS

The following table sets forth information as of March 1, 1996 with respect
to shares of Common Stock of the Company beneficially owned (for purposes of the
rules of the Securities and Exchange Commission) by each director and each Named
Executive Officer and by all directors and current executive officers of the
Company as a group, except that the information with respect to shares held by
the trustee under the Employee Before-Tax Savings Plan is as of December 31,
1995 (the most recent practicable date for such information).

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------------------------------- ---------- --------
<S> <C> <C>
George A. Chandler........................... 14,813 (a) *
Philip Wm. Colburn........................... 224,304 (b) *
Dr. Jill K. Conway........................... 8,573 (c) *
McDara P. Folan, III......................... 31,249 (d) *
Albert H. Gordon............................. 22,661 (a) *
William O. Hunt.............................. 40,557 (e) *
James L. LePorte, III........................ 92,116 (f) *
J. Chisholm Lyons............................ 37,918 (g) *
John F. McNiff............................... 3,062 (h) *
Robert G. Paul............................... 412,922 (i) 1.6%
Charles W. Robinson.......................... 13,541 (a) *
Erik H. van der Kaay......................... 80,925 (j) *
William M. Weaver, Jr........................ 14,757 (k) *
Robert A. Youdelman.......................... 151,018 (l) *
All directors and executive officers as a
group
(14 persons)............................... 1,148,416 (m) 4.3%
</TABLE>

- ---------------

* Less than 1%.

20
<PAGE> 24

<TABLE>
<S> <C>
(a) Includes shares owned directly and 10,361 shares issuable upon exercise of stock options
that are exercisable as of March 1, 1996 or become exercisable within 60 days thereafter.
(b) Includes 101,752 shares owned directly and 122,552 shares issuable upon exercise of stock
options that are exercisable as of March 1, 1996 or become exercisable within 60 days
thereafter.
(c) Includes 440 shares owned directly and 8,133 shares issuable upon exercise of stock
options that are exercisable as of March 1, 1996 or become exercisable within 60 days
thereafter.
(d) Includes 914 shares owned directly; 1,308 shares held by the trustee under the Company's
Employee Before-Tax Savings Plan; 20,114 restricted shares of Common Stock awarded under
the Company's 1992 Stock Plan; and 8,913 shares issuable upon exercise of stock options
that are exercisable as of March 1, 1996 or become exercisable within 60 days thereafter.
(e) Includes 40,000 shares owned directly by B&G Partnership Ltd., a Texas limited
partnership, which is owned jointly by Mr. Hunt and his spouse, and 557 shares issuable
upon exercise of stock options that are exercisable as of March 1, 1996 or become
exercisable within 60 days thereafter.
(f) Includes 23,885 shares owned directly; 8,831 shares held by the trustee under the
Company's Employee Before-Tax Savings Plan; 20,184 restricted shares of Common Stock
awarded under the 1982 Stock Plan and 1992 Stock Plan; and 39,216 shares issuable upon
exercise of stock options that are exercisable as of March 1, 1996 or become exercisable
within 60 days thereafter.
(g) Includes 10,054 shares owned directly; 24,510 shares issuable upon exercise of stock
options that are exercisable as of March 1, 1996 or become exercisable within 60 days
thereafter; and 3,354 shares owned by Mr. Lyons' spouse, of which Mr. Lyons disclaims
beneficial ownership.
(h) All shares owned directly.
(i) Includes 133,717 shares owned directly; 11,180 shares held by the trustee under the
Company's Employee Before-Tax Savings Plan; 53,287 restricted shares of Common Stock
awarded under the Company's 1982 Stock Plan and 1992 Stock Plan; 208,338 shares issuable
upon exercise of stock options that are exercisable as of March 1, 1996 or become
exercisable within 60 days thereafter; and 6,400 shares owned by Mr. Paul's spouse, of
which Mr. Paul disclaims beneficial ownership.
(j) Includes 18,399 shares owned directly; 1,570 shares held by the trustee under the
Company's Employee Before-Tax Savings Plan; 26,976 restricted shares of Common Stock
awarded under the Company's 1982 Stock Plan and 1992 Stock Plan; 33,980 shares issuable
upon exercise of stock options that are exercisable as of March 1, 1996 or become
exercisable within 60 days thereafter.
(k) Includes 14,200 shares owned directly and 557 shares issuable upon exercise of stock
options that are exercisable as of March 1, 1996 or become exercisable within 60 days
thereafter.
(l) Includes 60,339 shares owned directly; 7,080 shares held by the trustee under the
Company's Employee Before-Tax Savings Plan; 32,128 restricted shares of Common Stock
awarded under the Company's 1982 Stock Plan and 1992 Stock Plan; and 51,471 shares
issuable upon exercise of stock options that are exercisable as of March 1, 1996 or
become exercisable within 60 days thereafter.
(m) Includes 436,448 shares owned by directors and executive officers; 29,969 shares held for
executive officers by the trustee under the Company's Before-Tax Savings Plan; 152,689
restricted shares of Common Stock awarded under the Company's 1982 Stock Plan and 1992
Stock Plan; 529,310 shares issuable to directors and executive officers upon exercise of
stock options that are exercisable as of March 1, 1996 or become exercisable within 60
days thereafter.
</TABLE>

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has appointed the firm of Coopers & Lybrand L.L.P.
as the independent auditors to audit the books and accounts of the Company for
the year ending December 31, 1996, and is requesting ratification of such
appointment by the stockholders at the Annual Meeting. Coopers & Lybrand L.L.P.
has served in this capacity since 1967. Should this appointment not be ratified
by the holders of a majority of the shares voting in person or by proxy at the
meeting, the Board of Directors will consider appointing other auditors to audit
the books and accounts of the Company. Representatives of Coopers & Lybrand
L.L.P. are

21
<PAGE> 25

expected to be present at the meeting with the opportunity to make a statement,
if they desire to do so, and to be available to respond to appropriate
questions.

OTHER MATTERS

Management of the Company knows of no matters other than those referred to
above to be voted upon at the Annual Meeting. However, if any other matters are
properly presented to the meeting, it is the intention of the persons named in
the accompanying proxy to vote such proxy in accordance with their judgment on
such matters.

MISCELLANEOUS

The Company will bear the expense of proxy solicitation. Directors,
officers and employees of the Company and its subsidiaries may solicit proxies
by telephone, telegraph or in person (but will receive no additional
compensation for such solicitation). The Company also has retained W. F. Doring
& Co. Inc., Jersey City, New Jersey, to assist in the solicitation of proxies in
the same manner at an anticipated fee of approximately $2,500, plus
out-of-pocket expenses. In addition, brokerage houses and other custodians,
nominees and fiduciaries will be requested to forward the soliciting material to
beneficial owners and to obtain authorizations for the execution of proxies, and
if they in turn so request, the Company will reimburse such brokerage houses and
other custodians, nominees and fiduciaries for their expenses in forwarding such
material.

The Charles Schwab Trust Company, as trustee under the Company's Employee
Before-Tax Savings Plan, will vote shares of the Company's Common Stock held in
the Plan in accordance with the written instructions, which it is required to
request, received from the participants in whose accounts the shares are held,
whether or not vested, and, in accordance with the terms of the Plan, it will
vote all shares for which it does not receive voting instructions in the same
proportions as it votes the shares for which it does receive instructions.

ANNUAL REPORT

The Annual Report, including financial statements, of the Company for the
year 1995 is enclosed herewith but is not a part of the proxy soliciting
material.

STOCKHOLDERS' PROPOSALS

Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company for inclusion in its
proxy statement relating to that meeting no later than November 16, 1996. Such
proposals should be directed to the Secretary of the Company at the Company's
offices, 25101 Chagrin Boulevard, Beachwood, Ohio 44122.

By order of the Board of Directors

MCDARA P. FOLAN, III
Secretary
Dated: March 15, 1996

22
<PAGE> 26
PROXY PROXY
THE ALLEN GROUP INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING TO BE HELD ON APRIL 23, 1996

The undersigned hereby appoints Philip Wm. Colburn, William M. Weaver, Jr. and
George A. Chandler, and each of them (with full power of substitution), as
proxies of the undersigned to vote all stock of The Allen Group Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders to be
held on April 23, 1996 at 9:30 A.M., and at any adjournment thereof, as
designated on the reverse side hereof, and in their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Annual Meeting.

[ ] CHECK HERE FOR ADDRESS CHANGE.

NEW ADDRESS: ____________________________

_________________________________________

PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN
THE ACCOMPANYING ENVELOPE.

<PAGE> 27

THE ALLEN GROUP INC.

PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.

<TABLE>
<S> <C> <C> <C>
For Withheld For All (Except Nominee(s) written below)
1. Election of Directors, Nominees: G.A. Chandler,
P.Wm. Colburn, J.K. Conway, A.H. Gordon, W.O. Hunt,
J.C. Lyons, J.F. McNiff, R.G. Paul, C.W. Robinson and
W.M. Weaver, Jr. [ ] [ ] [ ] ___________________________________

For Against Abstain
2. Ratification of appointment of Coopers & Lybrand L.L.P.
as auditors for the year ending December 31, 1996. [ ] [ ] [ ]

</TABLE>

This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR proposals 1 and 2.

Dated _____________________________________, 1996

Signature(s) ___________________________________________

________________________________________________________

Please sign exactly as name appears hereon, Joint owners should each sign
personally. Executors, administrators, trustees, attorneys, guardians and
officers signing for corporations or partnerships should give full title as
such.