8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 3, 2005

Keithley Instruments, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Ohio	1-9965	34-0794417
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
28775 Aurora Road, Solon, Ohio		44139
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (440) 248-0400

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

Keithley Instruments, Inc. (the "Company") has adopted the form of option agreement, performance award agreement, and restricted unit award agreement for use in connection with awards granted under the Keithley Instruments, Inc. 2002 Stock Incentive Plan.

The form of the option agreement provides for vesting and expiration terms to be determined as of the date of grant. In addition, the form of the option agreement contains certain expiration, termination, forfeiture and recoupment provisions based upon an Optionee's termination of employment with the Company or violation of certain other terms within the agreement.

The form of the performance award agreement provides for the award of performance units with each unit representing the right to receive one share of the Company's common shares to be issued after the applicable award period. The award is subject to certain performance conditions over a thirty-six month period as specified within the agreement. The final amount of units earned (and shares to be issued) pursuant to an award may range from a maximum of twice the initial award, as specified in the agreement, to a minimum of no units depending upon the level of attainment of performance conditions specified in the performance award agreement. In addition, the form of the performance award agreement contains certain expiration, termination, forfeiture and recoupment provisions based upon a Receipient's termination of employment with the Company or violation of certain other terms within the agreement.

The form of the restricted unit award agreement provides for the award of restricted units with each unit representing one share of the Company's common shares. The award will vest on the fourth anniversary of the award date, subject to certain provisions. In addition, the form of the restricted unit award agreement contains certain expiration, termination, forfeiture and recoupment provisions based upon a Receipient's termination of employment with the Company or violation of certai n other terms within the agreement.

The foregoing description of the form of award agreements is qualifed in its entirety by the full text of the form of option agreement, performance award agreement, and restricted unit award agreement, which are filed as Exhibits 10.1, 10.2 and 10.3, respectively, and are incorporated by reference herein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Keithley Instruments, Inc.
October 3, 2005	By:	Mark J. Plush
		Name: Mark J. Plush
		Title: Vice President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
10.1	Form of Option Agreement between Keithley Instruments, Inc. and Optionee
10.2	Form of Performance Award Agreement between Keithley Instruments, Inc. and Key Employee
10.3	Form of Restricted Unit Award Agreement between Keithley Instruments, Inc. and Key Employee

EX-10.1

Exhibit 10.1

KEITHLEY INSTRUMENTS, INC.
2002 STOCK INCENTIVE PLAN

OPTION AGREEMENT

This option agreement (the “Agreement”) is made as of this      day of      , 20     , between Keithley Instruments, Inc., an Ohio corporation (the “Company”), and the key employee of the Company indicated at the bottom of this Agreement (“Optionee”). Optionee hereby is granted the option to purchase common shares of the Company, based on the number of shares and the exercise price(s) indicated on the attached Notice of Grant of Stock Options attached as Exhibit A hereto and incorporated herein by reference), subject to the vesting and other conditions set forth in said Exhibit. Unless Exhibit A hereto clearly indicates that the Options are “incentive stock options,” the Options shall be treated as non qualified stock options.

The rights described in this Agreement shall expire on      , 20     , subject to early expiration pursuant to paragraph 5 or paragraph 7 hereof, where applicable (the “Expiration Date”). This Agreement (including Exhibit A), and the options being granted hereunder (each, an “Option”; together, the “Options”), are subject to the terms and conditions of the Keithley Instruments, Inc. 2002 Stock Incentive Plan, as amended and then in effect (the “Plan”), except where (and to the extent) this Agreement specifically modifies such terms and conditions. Subject to such modifications, the Plan’s terms and conditions also are incorporated herein by this reference. Additional terms and conditions of this Agreement are as follows:

1. Notice of Exercise: Optionee shall exercise all or any part of his Options at any time after such Options first vest and become exercisable (the “Vesting Date”) and prior to the Expiration Date. To exercise, Optionee shall provide written notice to the Company by delivering a completed copy of the form attached hereto as Exhibit B. Such written notice shall only be effective when received by the Company at its principal offices; such written notice in any event shall—

a. State that Optionee is exercising one (1) or more Options in accordance with this Agreement, indicate the number of Company common shares being purchased, and specify the name(s), address(es) and social security (or other identifying tax) number(s) of those persons or parties in whose name(s) such common shares should be registered on the Company’s books and records;

b. Be signed by Optionee (or other person(s) entitled to exercise such Options and, if being exercised by anyone other than Optionee, be accompanied by proof satisfactory to counsel for the Company demonstrating that such person(s) are entitled to exercise such Option(s)) and be in compliance with all relevant laws and regulations;

c. Be accompanied by a written representation and warranty signed by Optionee (or other exercising person) confirming the investment intent of such person(s), in a form satisfactory to counsel for the Company; and

d. Be accompanied by payment (described in paragraph 2 hereof).

2. Determination and Payment of Purchase Price. Any Optionee or other person exercising Options hereunder shall tender to the Company the stated price for said Options based on the information provided in Exhibit A hereto, plus all applicable federal, state and local withholding taxes and assessments (as determined by the Company, acting in its sole discretion) (together, the “Purchase Price”). Upon request, the Company shall provide Optionee with the information needed to determine the Purchase Price. The Purchase Price shall be paid with cash or check, or with a surrender of Company common shares having a fair market value on the date of exercise equal to that portion of the Purchase Price for which payment in cash or check is not made. The Committee may, in its sole discretion, specify other methods for exercising Options or paying the Purchase Price, but shall only do so in writing.

3. Non-Transferability. Except for transfers that qualify as “Permitted Transfers” (as defined in as provided in Section 7(d) of the Plan) or transfers that are otherwise permitted under the terms of the Plan, Options shall not be transferable by Optionee except as otherwise expressly permitted by the Plan. Likewise, except for Options transferred in accordance with this paragraph (or where applicable, the terms of the Plan), Options shall be exercisable only by Optionee for his own account (except in the event of Optionee’s death or disability, in which event otherwise exercisable Options held by Optionee at death or disability shall be exercisable only by or for Optionee’s estate (in the case of death) or by Optionee’s legal representative (in the case of disability)).

4. Restrictions on Exercise. Options are at all times subject to all restrictions contained in this Agreement (and where not modified herein, in the Plan). As a condition to any exercise of Options, the Company may require Optionee, or his successor, to represent and warrant that he will comply with all applicable laws and regulations or confirm certain factual matters, if requested by the Company’s legal counsel.

5. Specific Option Expiration and Termination Rules. All Options not previously exercised, or terminated as further provided in this paragraph, shall expire no later than on the Expiration Date. Notwithstanding the preceding sentence, all non-vested Options shall automatically terminate and expire on the date Optionee’s employment as a Company employee ends (whether by death, disability, retirement or otherwise). Options that are vested and exercisable on the date Optionee’s employment as a Company employee ends shall nevertheless terminate prior to the Expiration Date on the first to occur of the following:

a) Three (3) years following the date Optionee’s Company employment ends, if such employment ends on account of Optionee’s normal, early or disability retirement under the Keithley Instruments, Inc. Employees’ Pension Plan;

b) One (1) year following the date Optionee dies;

c) Ninety (90) days following the date Optionee’s Company employment ends, if such employment ends involuntarily, as a result of furlough, discharge or comparable event (other than death, as further described in (b) hereof); or

d) Immediately upon termination of Optionee’s Company employment, if such employment ends by quit or discharge rather than by death or retirement (as further described in (a) and (b) hereof, respectively).

In no event shall any of the events described in subparagraphs (a) – (d) hereof extend any Options past their Expiration Date.

6. Coordination With Incentive Stock Option and Other Rules. None of the terms, conditions or provisions found in this Agreement shall be interpreted or applied to cause any Option granted under the Plan as an Incentive Stock Option to not qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or cause any common share issued in connection with the exercise of an Option hereunder not to be a fully paid and non-assessable common share of the Company.

7. Forfeiture; Set Off & Recoupment. Notwithstanding any other provision of this Agreement or the Plan, Optionee’s rights hereunder with respect to the Options evidenced hereby (whether or not then exercised or exercisable) shall immediately terminate, and otherwise be subject to forfeiture, set off, reduction, and recoupment for and against any claims the Company may have or asserts against Optionee. Without limiting the generality of the preceding sentence, any of the following actions by Optionee, taken while employed by the Company or within the three (3)-year period commencing with the cessation of Optionee’s Company employment, shall terminate immediately Optionee’s rights under this Agreement and under the Plan, and shall presumptively be deemed to damage the Company in an amount at least equal to the value of the Options evidenced hereby and thereafter be subject to set off, reduction and recoupment by the Company:

a) Any direct or indirect disclosure or publication (or, during the three (3)-year period commencing with the cessation of Optionee’s Company employment, any use) by Optionee of any Company trade secret or confidential information;

b) Any material violation by Optionee of the terms of any written agreement between Optionee and the Company;

c) Any action by Optionee, taken in direct or indirect competition with the Company (including, without limitation, any solicitation or acceptance by Optionee of any employment, agency, consultation or affiliation agreement, arrangement or understanding, involving any competitor of the Company, or any subsidiary or affiliate thereof, determined as of the earlier of the date of such action or the date of the cessation of Optionee’s Company employment); or

d) Any attempt by Optionee to induce any Company employee or any consultant, agent or sub-agent under contract with the Company to terminate his or her employment or other contractual relationship with the Company; and/or

In the event of any violation by Optionee of any of subparagraphs (a), (b), (c) or (d) hereof, all Options then held by Optionee hereunder (whether or not then vested and exercisable) shall immediately terminate, be extinguished and forfeited, and have no further effect. In addition, with respect to Options already exercised, Optionee shall promptly forfeit, relinquish and surrender to the Company, in cash or in whole shares of the Company (or any combination thereof), all gains, profits, and income Optionee has realized from the exercise of said Options (as reported by the Company for federal tax purposes), net of any amounts withheld by the Company in connection with said exercise of said Options. Any failure by the Company to assert its set off, forfeiture and recoupment rights under this paragraph with respect to specific claims against Optionee shall not waive, or operate to waive, the Company’s right to later assert its rights hereunder with respect to other or subsequent claims against Optionee.

8. Choice of Law; Consent to Jurisdiction. Optionee hereby consents and agrees that Ohio law controls the parties’ procedural and substantive rights and obligations under this Agreement, and also consents and agrees to the jurisdiction of the state court of general jurisdiction sitting in Cuyahoga County, Ohio, as the exclusive forum for resolving all claims and issues arising under, out of, or in respect of, this Agreement.

9. Severability; Survival of Certain Provisions. The unenforceability of one (1) or more of the provisions in this Agreement shall not vitiate or render void or unenforceable the remaining provisions of this Agreement; rather, such remaining provisions will remain fully enforceable to the extent permitted by law. Notwithstanding any contrary provision contained in the Plan or this Agreement, the provisions of paragraph 7 hereof shall specifically survive the termination, lapse or expiration of the Plan and/or this Agreement.

10. Definitions. Unless otherwise defined in this Agreement, capitalized terms will have the same meanings given them in the Plan.

KEITHLEY INSTRUMENTS, INC.

DATE OF GRANT:	By:
	Title: Chairman of the Board, President and Chief Executive Officer

ACCEPTANCE BY OPTIONEE

The undersigned has read and understood, and hereby accepts, the terms, conditions, and obligations and restrictions imposed hereunder, as well as the terms, conditions and limitations of the Plan to which this Agreement is subject and subordinate.

DATE:            
Optionee

Exhibit 10.2

KEITHLEY INSTRUMENTS, INC.
2002 STOCK INCENTIVE PLAN

PERFORMANCE AWARD AGREEMENT

This performance award agreement (the “Agreement”) is made as of this      day of      , 20     (the “Award Date”), between Keithley Instruments, Inc., an Ohio corporation (the “Company”), and that key employee of the Company named at the bottom of this Agreement (“Key Employee”). Subject to the terms, conditions and limitations set forth in this Agreement (including, without limitation, the vesting provisions of paragraph 5 hereof and the performance standards and operative provisions set forth in paragraph 1 hereof and in Exhibits A, B and C hereto), Key Employee hereby is granted and awarded      performance units, each unit representing one common share of the Company (the “Initial Award”). The number of Company common shares issued to or in respect of Key Employee (if any) shall be determined strictly in accordance with this Agreement, based on the number of units contained in any Final Award (as defined herein), subject to the general provisions of the Plan.

The number of units comprising the Initial Award shall be subject to adjustment, expansion or reduction, to take into account the revenue performance of the Company as compared to its relevant competition (while retaining acceptable rates of return) during the thirty-six (36)-month period commencing      , 20     and ending      , 20     (the “Performance Period”), as further provided in paragraph 1 hereof and in Exhibits A, B and C hereto. The actual number of Company common shares issued to Key Employee (if any) will only be determined by applying the performance criteria to the Initial Award, and determining the number of units finally awarded to such Employee (the “Final Award”).

All rights arising under or in connection with this Agreement, except with respect to those Company common shares actually issued to or in respect of Key Employee in respect of such Employee’s Final Award, shall expire on      , 20     , or if earlier, such earlier date as is specified in this Agreement (the “Expiration Date”). This Agreement (including any and all incorporated Exhibits hereto) and any Final Award made hereunder, are subject to the terms and conditions of the Keithley Instruments, Inc. 2002 Stock Incentive Plan, as amended and then in effect (the “Plan”). The Plan’s terms and conditions are incorporated herein by this reference. Additional terms and conditions of this Agreement are as follows:

1. Performance Standards; Determining the Final Award. The size of Key Employee’s Final Award will depend on the Company’s performance during the Performance Period.

(a) General Performance Standards. To determine Key Employee’s Final Award, the number of units comprising Key Employee’s Initial Award are adjusted (ranging from a maximum of twice the number of units comprising the Initial Award, to a minimum of no units), based on program metrics that compare the growth in the Company’s net revenues (if any) occurring during the Performance Period to comparable growth in net revenues being reported by the Company’s principal competitors (as determined by the Compensation Committee of the Company’s board of directors, or its designee (for purposes of this Agreement only, the “Committee”)) during a period comparable to the Performance Period, taking into account the Company’s ability to achieve targeted profitability levels.

(b) Operative Provisions Incorporated By Reference. The operative provisions of the program, and the metrics used to gauge Key Employee’s performance and determine the number of units awarded in such Employee’s Initial Award and Final Award, are set forth in Exhibits A, B and C hereto, all of which are individually and collectively incorporated herein by this reference as if expressly set forth herein.

(c) Committee Determinations. The Committee shall make all operative determinations hereunder, acting in its sole and exclusive discretion, including those required to be made in Exhibits A, B and/or C hereto; provided, that all performance criteria used to gauge Key Employee’s performance during the Performance Period shall be determined and finalized not later than the December 31^st next following the commencement of the Performance Period (the “Census Date”), excepting only those changes directly resulting from events external to the Company, such as mergers, dissolutions and consolidations involving the Company’s competitors.

2. Issuance & Transfer of Common Shares. In the event Key Employee remains employed by the Company throughout the Performance Period and on the Vesting Date (as hereafter defined), and is determined to be entitled to receive Company common shares hereunder in connection with the calculation and making of such Employee’s Final Award, such shares shall be transferred and issued to Key Employee (or such other person as may then be entitled hereunder) on the [December 31^st] next following the Vesting Date set forth in paragraph 6 hereof. In the event said transfer date is a weekend day or a national holiday, the transfer and issuance described in this paragraph 2 shall occur on the business day next following said transfer date.

3. Tax, Withholding Matters. Any Key Employee or other person receiving Company common shares in connection with a Final Award shall provide for the satisfaction of all applicable federal, state and local withholding taxes and assessments arising in respect of such issuance and transfer of shares; the amount of such withholding taxes and assessments shall be determined by the Company, acting in its sole discretion (the “Total Withholding”). Upon request, the Company shall provide Key Employee with the information needed to determine the Total Withholding. The Total Withholding shall be paid with cash or check, or with a surrender of Company common  shares having a fair market value on the date of transfer equal to that portion of the Total Withholding for which payment in cash or check is not made. The Committee may, in its sole discretion, specify other methods for transferring Company common shares in satisfaction of Final Awards, but any such specification shall only be made in writing.

4. Interests Are Not Transferable. Any and all Awards made hereunder shall not be transferable or assignable, or capable of alienation or anticipation, by Key Employee except as otherwise expressly permitted by the Plan. Likewise, except as specifically provided in the Plan, Company common shares issued hereunder shall only be issued to Key Employee or his personal representative (except in the event of Key Employee’s death or disability, in which event otherwise-issuable Company common shares owed to Key Employee at death or disability shall be issued only to or for Key Employee’s estate (in the case of death) or to Key Employee’s legal representative (in the case of disability).

5. Units Carry No Dividend or Voting Rights. Awards made hereunder are at all times subject to all restrictions contained in this Agreement and in the Plan. Key Employee shall not have, or accrue, any shareholder rights as a result of being credited with units hereunder in respect of an Initial Award or a Final Award. The right to receive dividends, and to vote or otherwise assert shareholders’ rights, shall only arise and accrue as and when Company common shares are issued and transferred to Key Employee in accordance with, and in satisfaction of, the Company’s obligations under the terms of the Plan and this Agreement. Key Employee understands and acknowledges that the Committee, acting in its sole discretion, may require Key Employee, or his successor, to represent and warrant that he will comply with all applicable laws and regulations or confirm certain factual matters, if requested by the Company’s legal counsel.

6. Vesting, Expiration and Termination Rules. Key Employee’s right to receive an Award hereunder (subject to determining whether Key Employee qualifies to receive Company common shares in connection with any units awarded as part of his or her Final Award) will fully vest at 11:59 p.m. on the last calendar day of the Performance Period (the “Vesting Date”), subject to application of this paragraph 6 and the provisions of paragraph 8 hereof. Nothing contained in this Agreement, or in the Plan, shall give Key Employee any substantive right to the Company common shares represented by the units that comprise the Initial Award; rather, Key Employee shall only vest in, and have an enforceable right to, those units (if any) that comprise the Final Award. Notwithstanding the preceding two sentences, in the event Key Employee’s employment by the Company terminates (including any employment with Company subsidiaries and affiliates whose financial results are reported on a consolidated basis with the Company) prior to the Vesting Date, regardless of the reason(s) therefor, the Initial Award, and all Key Employee’s rights thereunder, shall terminate immediately and be extinguished, and thereafter shall have no value.

7. Coordination With Other Rules. None of the terms, conditions or provisions in this Agreement shall be interpreted or applied to cause any common share of the Company, issued in connection with this Agreement, not to be a fully paid and non-assessable common share of the Company.

8. Forfeiture; Set Off & Recoupment. Notwithstanding any other provision of this Agreement or the Plan, Key Employee’s rights hereunder with respect to the Award evidenced hereby (whether or not then vested, and regardless of the number of Company common shares represented thereby) shall immediately terminate, and otherwise be subject to forfeiture, set off, reduction, and recoupment for and against any claims the Company may have or asserts against Key Employee. Without limiting the generality of the preceding sentence, any of the following actions by Key Employee, taken while employed by the Company or within the three (3)-year period commencing with the cessation of Key Employee’s Company employment, shall terminate immediately Key Employee’s rights under this Agreement and under the Plan, and shall presumptively be deemed to damage the Company in an amount at least equal to the value of the Company common shares comprising the Final Award and thereafter be subject to set off, reduction and recoupment by the Company:

a) Any direct or indirect disclosure or publication (or, during the three (3)-year period commencing with the cessation of Key Employee’s Company employment, any use) by Key Employee of any Company trade secret or confidential information;

b) Any material violation by Key Employee of the terms of any written agreement between Key Employee and the Company;

c) Any action by Key Employee, taken in direct or indirect competition with the Company (including, without limitation, any solicitation or acceptance by Key Employee of any employment, agency, consultation or affiliation agreement, arrangement or understanding, involving any competitor of the Company, or any subsidiary or affiliate thereof, determined as of the earlier of the date of such action or the date of the cessation of Key Employee’s Company employment); or

d) Any attempt by Key Employee to induce any Company employee or any consultant, agent or sub-agent under contract with the Company to terminate his or her employment or other contractual relationship with the Company; and/or

In the event of any violation by Key Employee of any of subparagraphs (a), (b), (c) or (d) hereof, the Award evidenced herby (whether or not then vested) shall immediately terminate, be extinguished and forfeited, and have no further effect. In addition, with respect to all units awarded hereunder, and with respect to any Company common shares issued or expected to be issued in connection with a Final Award, Key Employee shall promptly forfeit, relinquish and surrender to the Company all gains, profits, and income Key Employee has realized from such Award, without regard to the form(s) such gains, profits and income take(s). Any failure by the Company to assert its set off, forfeiture and recoupment rights under this paragraph with respect to specific claims against Key Employee shall not waive, or operate to waive, the Company’s right to later assert its rights hereunder with respect to other or subsequent claims against Key Employee.

9. Change of Control Consequences. In the event Key Employee’s rights hereunder vest on account of a Change of Control (determined in accordance with Section 11 of the Plan) occurring prior to the Vesting Date, the number of Company common shares Key Employee shall be entitled to receive will be based on the Initial Award, subject only to the remaining terms of this Agreement (which shall continue to apply). In the event such Change in Control (or any event subsequent thereto) satisfies the requirements imposed by Section 409A(a)(2) of the Internal Revenue Code and related regulations (pertaining to changes in ownership or effective control), the issuance and transfer of such shares shall occur as soon as practicable after such Change in Control or subsequent event.

10. Choice of Law; Consent to Jurisdiction. Key Employee hereby consents and agrees that Ohio law controls the parties’ procedural and substantive rights and obligations under this Agreement, and also consents and agrees to the jurisdiction of the state court of general jurisdiction sitting in Cuyahoga County, Ohio, as the exclusive forum for resolving all claims and issues arising under, out of, or in respect of, this Agreement.

11. Severability; Survival of Certain Provisions. The unenforceability of one (1) or more of the provisions in this Agreement shall not vitiate or render void or unenforceable the remaining provisions of this Agreement; rather, such remaining provisions will remain fully enforceable to the extent permitted by law. Notwithstanding any contrary provision contained in the Plan or this Agreement, the provisions of paragraph 8 hereof shall specifically survive the termination, lapse or expiration of the Plan and/or this Agreement.

12. Definitions. Unless otherwise defined in this Agreement, capitalized terms will have the same meanings given them in the Plan.

KEITHLEY INSTRUMENTS, INC.

DATE OF AWARD:	By:
	Title: Chairman of the Board, President and Chief Executive Officer

ACCEPTANCE BY KEY EMPLOYEE

The undersigned has read and understood, and hereby accepts, the terms, conditions, and obligations and restrictions imposed hereunder, as well as the terms, conditions and limitations of the Plan to which this Agreement is subject and subordinate.

DATE:            
Key Employee

Exhibit 10.3

KEITHLEY INSTRUMENTS, INC.
2002 STOCK INCENTIVE PLAN

RESTRICTED UNIT AWARD AGREEMENT

This restricted unit award agreement (the “Agreement”) is made as of this      day of      , 20     (the “Award Date”), between Keithley Instruments, Inc., an Ohio corporation (the “Company”), and that key employee of the Company named at the bottom of this Agreement (“Key Employee”). Subject to the terms, conditions and limitations set forth in this Agreement (including, without limitation, the vesting provisions of paragraph 5 hereof), Key Employee hereby is granted and awarded      restricted units, with each such unit representing the economic value of a common share of the Company (the “Award”). When and whether Company common shares are issued to or in respect of Key Employee (if any) as a result of this Award shall be determined strictly in accordance with this Agreement, subject to the general provisions of the Plan.

All rights arising under or in connection with this Agreement shall expire on      , 20     , or if earlier, such earlier date as is specified in this Agreement (the “Expiration Date”). This Agreement (including any and all incorporated Exhibits hereto) is subject to the terms and conditions of the Keithley Instruments, Inc. 2002 Stock Incentive Plan, as amended and then in effect (the “Plan”). The Plan’s terms and conditions are incorporated herein by this reference. Additional terms and conditions of this Agreement are as follows:

1. Issuance & Transfer of Common Shares and Other Amounts and Rights. In the event the restricted units evidenced by this Award vest as provided in paragraph 5 hereof, then as soon as practicable thereafter the Company shall transfer and issue to Key Employee (or such other person as may then be entitled hereunder) those Company common shares that such units represent.

2. Tax, Withholding Matters. Any Key Employee or other person receiving Company common shares in connection with the vesting of restricted units in accordance with Paragraph 5 hereof shall provide for the satisfaction of all applicable federal, state and local withholding taxes and assessments arising in respect of such issuance and transfer of shares; the amount of such withholding taxes and assessments shall be determined by the Company, acting in its sole discretion (the “Total Withholding”). Upon request, the Company shall provide Key Employee with the information needed to determine the Total Withholding. The Total Withholding shall be paid with cash or check, or with a surrender of Company common shares having a fair market value on the date of transfer equal to that portion of the Total Withholding for which payment in cash or check is not made. The Committee may, in its sole discretion, specify other methods for transferring Company common shares in satisfaction of Final Awards, but any such specification shall only be made in writing.

3. Interests Not Transferable. Any and all Awards made hereunder shall not be transferable or assignable, or capable of alienation or anticipation, by Key Employee except as otherwise expressly permitted by the Plan. Likewise, except as specifically provided in the Plan, Company common shares issued hereunder shall only be issued to Key Employee or his personal representative (except in the event of Key Employee’s death or disability, in which event otherwise-issuable Company common shares owed to Key Employee at death or disability shall be issued only to or for Key Employee’s estate (in the case of death) or to Key Employee’s legal representative (in the case of disability)).

4. Units Carry No Dividend or Voting Rights. Awards made hereunder are at all times subject to all restrictions contained in this Agreement and in the Plan. Key Employee shall not have, or accrue, any shareholder rights as a result of being credited with units hereunder in respect of an Award. The right to receive dividends, and to vote or otherwise assert shareholders’ rights, shall only arise and accrue as and when Company common shares are issued and transferred to Key Employee in accordance with, and in satisfaction of, the Company’s obligations under the terms of the Plan and this Agreement. Key Employee understands and acknowledges that the Committee, acting in its sole discretion, may require Key Employee, or his successor, to represent and warrant that he will comply with all applicable laws and regulations or confirm certain factual matters, if requested by the Company’s legal counsel.

5. Vesting, Expiration and Termination Rules. The units awarded hereunder will fully vest on the fourth (4^th) anniversary of the Award Date, subject to the provisions of Paragraph 7 hereof (the “Vesting Date”). Notwithstanding the preceding sentence, in the event Key Employee’s employment by the Company terminates (including any employment with Company subsidiaries and affiliates whose financial results are reported on a consolidated basis with the Company) prior to the Vesting Date, regardless of the reason(s) therefor, all Key Employee’s rights hereunder shall terminate immediately and be extinguished, and thereafter shall have no value.

6. Coordination With Other Rules. None of the terms, conditions or provisions in this Agreement shall be interpreted or applied to cause any common share of the Company, issued in connection with this Agreement, not to be a fully paid and non-assessable common share of the Company.

7. Forfeiture; Set Off & Recoupment. Notwithstanding any other provision of this Agreement or the Plan, Key Employee’s rights hereunder with respect to the Award evidenced hereby (whether or not then vested, and regardless of the number of units, or Company common shares, represented thereby) shall immediately terminate, and otherwise be subject to forfeiture, set off, reduction, and recoupment for and against any claims the Company may have or asserts against Key Employee. Without limiting the generality of the preceding sentence, any of the following actions by Key Employee, taken while employed by the Company or within the three (3)-year period commencing with the cessation of Key Employee’s Company employment, shall terminate immediately Key Employee’s rights under this Agreement and under the Plan, and shall presumptively be deemed to damage the Company in an amount at least equal to the value of the Company common shares comprising this Award and thereafter be subject to set off, reduction and recoupment by the Company:

a) Any direct or indirect disclosure or publication (or, during the three (3)-year period commencing with the cessation of Key Employee’s Company employment, any use) by Key Employee of any Company trade secret or confidential information;

b) Any material violation by Key Employee of the terms of any written agreement between Key Employee and the Company;

c) Any action by Key Employee, taken in direct or indirect competition with the Company (including, without limitation, any solicitation or acceptance by Key Employee of any employment, agency, consultation or affiliation agreement, arrangement or understanding, involving any competitor of the Company, or any subsidiary or affiliate thereof, determined as of the earlier of the date of such action or the date of the cessation of Key Employee’s Company employment); or

d) Any attempt by Key Employee to induce any Company employee or any consultant, agent or sub-agent under contract with the Company to terminate his or her employment or other contractual relationship with the Company; and/or

In the event of any violation by Key Employee of any of subparagraphs (a), (b), (c) or (d) hereof, the Award evidenced herby (whether or not then vested) shall immediately terminate, be extinguished and forfeited, and have no further effect. In addition, with respect to all units awarded hereunder, and with respect to any Company common shares issued or expected to be issued in connection with this Award, Key Employee shall promptly forfeit, relinquish and surrender to the Company all gains, profits, and income Key Employee has realized from such Award, without regard to the form(s) such gains, profits and income take(s). Any failure by the Company to assert its set off, forfeiture and recoupment rights under this paragraph with respect to specific claims against Key Employee shall not waive, or operate to waive, the Company’s right to later assert its rights hereunder with respect to other or subsequent claims against Key Employee.

8. Choice of Law; Consent to Jurisdiction. Key Employee hereby consents and agrees that Ohio law controls the parties’ procedural and substantive rights and obligations under this Agreement, and also consents and agrees to the jurisdiction of the state court of general jurisdiction sitting in Cuyahoga County, Ohio, as the exclusive forum for resolving all claims and issues arising under, out of, or in respect of, this Agreement.

9. Severability; Survival of Certain Provisions. The unenforceability of one (1) or more of the provisions in this Agreement shall not vitiate or render void or unenforceable the remaining provisions of this Agreement; rather, such remaining provisions will remain fully enforceable to the extent permitted by law. Notwithstanding any contrary provision contained in the Plan or this Agreement, the provisions of paragraph 8 hereof shall specifically survive the termination, lapse or expiration of the Plan and/or this Agreement.

10. Definitions. Unless otherwise defined in this Agreement, capitalized terms will have the same meanings given them in the Plan.

KEITHLEY INSTRUMENTS, INC.

DATE OF AWARD:	By:
	Title: Chairman of the Board, President and Chief Executive Officer

ACCEPTANCE BY KEY EMPLOYEE

The undersigned has read and understood, and hereby accepts, the terms, conditions, and obligations and restrictions imposed hereunder, as well as the terms, conditions and limitations of the Plan to which this Agreement is subject and subordinate.

DATE:            
Key Employee