Filed by Bowne Pure Compliance

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MnzhYyrO381allh8mZOe1i/0RJLqRoH8VmPo2uvMYvqBC9pODe25asS0vbFdgji2 dK24klsYWAtsh5i683jKlQ== 0001362310-09-001463.txt : 20090209 0001362310-09-001463.hdr.sgml : 20090209 20090209163625 ACCESSION NUMBER: 0001362310-09-001463 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090209 DATE AS OF CHANGE: 20090209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEITHLEY INSTRUMENTS INC CENTRAL INDEX KEY: 0000054991 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 340794417 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09965 FILM NUMBER: 09581693 BUSINESS ADDRESS: STREET 1: 28775 AURORA RD CITY: SOLON STATE: OH ZIP: 44139 BUSINESS PHONE: 2162480400 10-Q 1 c80368e10vq.htm 10-Q Filed by Bowne Pure Compliance

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended December 31, 2008

Commission File Number 1-9965

KEITHLEY INSTRUMENTS, INC.

(Exact name of registrant as specified in its charter)


Ohio		34-0794417
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if smaller reporting company.)

Indicate by check whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

As of February 3, 2009 there were outstanding 13,452,469 Common Shares (net of shares repurchased and held in treasury), without par value; and 2,150,502 Class B Common Shares, without par value.

Forward-Looking Statements

Statements and information included in this Quarter Report on Form 10-Q that are not purely historical are forward-looking statements intended to be covered by the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements in this Report on Form 10-Q include statements regarding Keithley’s expectations, intentions, beliefs, and strategies regarding the future, including recent trends, cyclicality, growth in the markets Keithley sells into, conditions of the electronics industry and the economy in general, deployment of our own sales employees throughout the world, investments to develop new products, the potential impact of adopting new accounting pronouncements, our future effective tax rate, liquidity position, ability to generate cash, expected growth, and obligations under our retirement benefit plans.

When used in this report, the words “believes,” “expects,” “anticipates,” “intends,” “assumes,” “estimates,” “evaluates,” “opinions,” “forecasts,” “may,” “could,” “future,” “forward,” “potential,” “probable,” and similar expressions are intended to identify forward-looking statements.

These forward-looking statements involve risks and uncertainties. We may make other forward-looking statements from time to time, including in press releases and public conference calls and webcasts. All forward-looking statements made by Keithley are based on information available to us at the time the statements are made, and we assume no obligation to update any forward-looking statements. It is important to note that the forward looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those included in such forward-looking statements. Some of these risks and uncertainties are discussed in our Securities and Exchange Commissions reports, including but not limited to our Form 10-K for the fiscal year ended September 30, 2008.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

KEITHLEY INSTRUMENTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
(Unaudited)


	December 31, 2008,			September 30, 2008,
Assets
Current assets:
Cash and cash equivalents	$	29,160		$	22,073
Short-term investments		—			5,700
Accounts receivable and other, net		14,755			17,265
Inventories:
Raw materials		11,290			12,325
Work in process		1,141			1,261
Finished products		5,614			6,237

Total inventories		18,045			19,823
Deferred income taxes		771			5,483
Prepaid expenses		2,471			2,079

Total current assets		65,202			72,423

Property, plant and equipment, at cost		55,375			54,326
Less-Accumulated depreciation		42,054			41,174

Property, plant and equipment, net		13,321			13,152

Deferred income taxes		861			26,097
Intangible assets		1,120			1,190
Other assets		18,776			25,116

Total assets	$	99,280		$	137,978


Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt	$	559		$	23
Accounts payable		5,240			7,325
Accrued payroll and related expenses		4,530			7,073
Other accrued expenses		6,114			6,142
Income taxes payable		813			1,174

Total current liabilities		17,256			21,737

Long-term deferred compensation		2,088			2,561
Deferred income taxes		72			65
Long-term income taxes payable		2,823			2,919
Other long-term liabilities		7,495			7,394
Shareholders’ equity:
Common Shares, stated value $.0125:
Authorized - 80,000,000; issued and outstanding - 14,830,117 at December 31, 2008 and 14,722,585 at September 30, 2008		185			184
Class B Common Shares, stated value $.0125:
Authorized - 9,000,000; issued and outstanding - 2,150,502 at December 31, 2008 and September 30, 2008		27			27
Capital in excess of stated value		38,519			38,930
Retained earnings		47,831			80,759
Accumulated other comprehensive loss		(1,444	)		(1,873	)
Common shares held in treasury, at cost		(15,572	)		(14,725	)

Total shareholders’ equity		69,546			103,302

Total liabilities and shareholders’ equity	$	99,280		$	137,978

The accompanying notes are an integral part of these financial statements.

KEITHLEY INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars Except for Per Share Data)
(Unaudited)


	For the Three Months
	Ended December 31,
	2008			2007

Net sales	$	31,070		$	38,438

Cost of goods sold		13,295			15,734


Gross profit		17,775			22,704

Selling, general and administrative expenses		14,015			16,061

Product development expenses		6,053			6,163

Adjustments to severance and related charges		(3	)		—


Operating (loss) income		(2,290	)		480

Investment income		175			528

Interest expense		(20	)		(20	)


(Loss) income before income taxes		(2,135	)		988

Provision for income taxes		30,224			99


Net (loss) income	$	(32,359	)	$	889


Basic (loss) earnings per share	$	(2.07	)	$	0.06


Diluted (loss) earnings per share	$	(2.07	)	$	0.05


Cash dividends per Common Share	$	.0375		$	.0375


Cash dividends per Class B Common Share	$	.0300		$	.0300

The accompanying notes are an integral part of these financial statements.

KEITHLEY INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)


	For the Three Months
	Ended December 31,
	2008			2007
Cash flows from operating activities:
Net (loss) income	$	(32,359	)	$	889
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation		911			977
Non-cash stock compensation (income) expense		(471	)		646
Deferred income taxes		30,137			(103	)
Other non-cash items		(20	)		27
Changes in working capital		(1,348	)		(4,485	)
Other operating activities		(495	)		124

Net cash used in operating activities		(3,645	)		(1,925	)


Cash flows from investing activities:
Capital expenditures		(1,076	)		(1,195	)
Purchase of investments and other		—			(8,796	)
Proceeds from maturities and sales of investments		12,500			13,135

Net cash provided by investing activities		11,424			3,144


Cash flows from financing activities:
Net borrowing (payment) of short-term debt		536			(379	)
Proceeds from employee stock option plans		—			36
Cash dividends		(569	)		(584	)
Repurchase of Common Shares		(787	)		(2,365	)
Other		—			9

Net cash used in financing activities		(820	)		(3,283	)


Effect of exchange rate changes on cash		128			146


Increase (decrease) in cash and cash equivalents		7,087			(1,918	)
Cash and cash equivalents at beginning of period		22,073			12,888

Cash and cash equivalents at end of period	$	29,160		$	10,970

The accompanying notes are an integral part of these financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except for share data)

A. Nature of Operations

Keithley’s business is to design, develop, manufacture and market complex electronic instruments and systems to serve the specialized needs of electronics manufacturers for high-performance production testing, process monitoring, product development and research. Our primary products are integrated systems used to source, measure, connect, control or communicate electrical direct current (DC), radio frequency (RF) or optical signals. Although our products vary in capability, sophistication, use, size and price, they generally test, measure and analyze electrical, RF, optical or physical properties. As such, we consider our business to be in a single industry segment.

B. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements at December 31, 2008 and 2007, and for the three month periods then ended have not been audited by an independent registered public accounting firm, but in the opinion of our management, all adjustments necessary to fairly present the condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows for those periods have been included. All adjustments included are of a normal recurring nature. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The Company’s consolidated financial statements for the three month periods ended December 31, 2008 and 2007 included in this Form 10-Q report have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the year ended September 30, 2008, which were included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008 filed on December 15, 2008 (the “2008 Form 10-K”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the 2008 Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the reported financial statements and the reported amounts of revenues and expenses during the reporting periods. Examples include the allowance for doubtful accounts, estimates of contingent liabilities, inventory valuation, pension plan assumptions, estimates and assumptions relating to stock-based compensation costs, the assessment of the valuation of deferred income taxes and income tax reserves, and estimates and assumptions relating to the value of long-term investments. Actual results could differ materially from those estimates.

C. Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157 (“SFAS No. 157”), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement is applicable to other accounting pronouncements that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. However, the FASB did provide a one year deferral for the implementation of SFAS No. 157 for nonfinancial assets and liabilities. The Company adopted SFAS No. 157 effective October 1, 2008, and the statement did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R).” SFAS No. 158 represents the completion of the first phase in the FASB’s postretirement benefits accounting project and requires an employer that is a business entity and sponsors one or more single employer benefit plans to (1) recognize the over funded or under funded status of the benefit plan in its statement of financial position, (2) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs of credits that arise during the period but are not recognized as components of net periodic benefit cost, (3) measure defined benefit plan assets and obligations as of the end of the employer’s fiscal year, and (4) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The provisions of SFAS No. 158 were effective as of September 30, 2007, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. Effective September 30, 2009, the Company will change its measurement date to September 30th and does not expect that the change in measurement date provision of this Statement will have a material impact on its consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159, (“SFAS No. 159”), “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FAS 115.” SFAS No. 159 allows companies to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 159 effective October 1, 2008, and the statement did not have a material impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 requires, among other things, enhanced disclosure about the volume and nature of derivative and hedging activities and a tabular summary showing the fair value of derivative instruments included in the statement of financial position and statement of operations. SFAS 161 also requires expanded disclosure of contingencies included in derivative instruments related to credit risk. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company will adopt SFAS No. 161 as of our second quarter of fiscal year 2009, and does not expect the adoption to have a material impact on our consolidated financial statements.

D. Earnings Per Share

Both Common Shares and Class B Common Shares are included in calculating earnings per share. The weighted average number of shares outstanding used in the calculation is set forth below:


	For the Three Months
	Ended December 31,
	2008			2007
Net (loss) income	$	(32,359	)	$	889

Weighted averages shares outstanding		15,607,397			16,057,088
Dilutive effect of stock awards		—			162,896
Assumed purchase of stock under stock purchase plan		—			868

Weighted average shares used for dilutive earnings per share		15,607,397			16,220,852

Basic (loss) earnings per share	$	(2.07	)	$	0.06
Diluted (loss) earnings per share	$	(2.07	)	$	0.05

Due to the net loss for the three months ended December 31, 2008, 14,183 shares were excluded from the dilutive calculation related to stock awards and the stock purchase plan.

E. Stock-based Compensation

In December 2008, the Company’s Board of Directors approved the Keithley Instruments, Inc. 2009 Stock Incentive Plan (the “2009 plan”). The approval of 2009 plan will be put before the Company’s shareholders at its annual meeting to be held on February 7, 2009. Until the 2009 plan is approved by shareholders, no awards will be granted from it. The Company has three other equity-based compensation plans that have options currently outstanding. Stock-based compensation awards can be granted to employees and Directors in one of the plans, while the other two plans have been terminated or have expired. The Company also has an employee stock purchase plan (“ESPP”) that provides employees with the opportunity to purchase Common Shares at 95 percent of the fair market value at the end of the one-year subscription period. The provisions of the ESPP are such that measurement of compensation expense is not required by SFAS No. 123(R) — Share-Based Payments. Additionally, no shares were issued pursuant to the ESPP during the first quarter of fiscal year 2009 or 2008.

Compensation costs recorded

Stock-based compensation expense is attributable to the granting of stock options, performance share units, restricted share units and restricted share awards. The Company records the expense using the single approach method on a straight-line basis over the requisite service period of the respective grants. The amount recorded in the period ended December 31, 2008 represents net compensation income, and includes a favorable adjustment of approximately $700 for performance award units granted in fiscal years 2007 and 2008, which we currently expect to settle at zero percent and 50 percent of target, respectively. The table below summarizes stock-based compensation (income) expense recorded under SFAS No. 123(R) for the three months ended December 31, 2008 and 2007, which was allocated as follows:


	2008			2007
Cost of goods sold	$	(75	)	$	49
Selling, general and administrative expenses		(248	)		503
Product development expenses		(148	)		94

Stock-based compensation included in operating expenses		(471	)		646
Estimated tax impact of stock-based compensation		—			210

Stock-based compensation (income) expense	$	(471	)	$	436

Due to the current net operating loss position in the United States, there was no tax impact on stock-based compensation in the 2009 fiscal year period. The excess tax benefits recognized during the first quarter of fiscal year 2009 and 2008 were $0 and $9, respectively.

As of December 31, 2008, there was $1,252 of total pretax unrecognized compensation cost related to nonvested awards. That cost is expected to be recognized over a weighted-average period of 1.8 years.

Stock option activity

No stock options were granted during the first quarter of fiscal year 2009. During the first quarter of fiscal year 2008, the Company granted non-qualified stock options to purchase 145,125 shares to officers and other key employees. These awards have a term of ten years, vest fifty percent after two years, and an additional twenty five percent each after years three and four. The options have an exercise price equal to the $9.12 market value of the shares on the grant date.

The weighted-average fair value for options granted during the first quarter of fiscal year 2008 was $3.00, and was estimated using the Black-Scholes option-pricing model. The following assumptions were applied for options granted during this period:


Expected life (years)	4.75
Risk-free interest rate	3.84	%
Volatility	38	%
Dividend yield	1.64	%

Performance award units

No performance award units were granted during the first quarter of fiscal year 2009. During the first quarter of fiscal year 2008, the Company granted 170,975 performance award units to officers and other key employees. The performance award unit agreements provide for the award of performance units with each unit representing the right to receive one of the Company’s Common Shares to be issued after the applicable award period. The award period for performance award units issued in fiscal 2008 will end on September 30, 2010. The final number of units earned pursuant to an award may range from a minimum of no units to a maximum of twice the initial award, and may be adjusted in 25 percent increments. The number of units earned will be based on the Company’s revenue growth relative to a defined peer group, and the Company’s return on assets or return on invested capital. Each reporting period, the compensation cost of the performance award units is subject to adjustment based upon our estimate of the number of awards we expect will be issued upon completion of the performance period. The awards granted in fiscal year 2008 are being expensed at 50 percent of target level, which represents a change during the quarter from 100 percent of target at September 30, 2008. The performance criteria related to the awards granted during fiscal year 2007 are not expected to be met and none of these awards are expected to vest, therefore all previously recorded expense for these awards was reversed during the first quarter of fiscal year 2009.

The awards that vested on September 30, 2008, were issued to recipients on November 6, 2008 when the fair value of a Common Share of the Company’s was $3.62. These awards totaled 71,487 shares representing 50 percent of the targeted number of shares that were initially granted rounded to the next highest whole share.

Restricted award units

No restricted award units were granted during the first quarter of fiscal year 2009. During the first quarter of fiscal year 2008, the Company granted 19,825 restricted award units with a fair market value per unit on the grant date of $9.12. The restricted unit award agreements provide for the award of restricted units with each unit representing one share of the Company’s Common Shares. Generally, the awards vest on the fourth anniversary of the award date, subject to certain conditions specified in the agreement. The vesting date may be earlier than four years in certain cases to accommodate individuals’ planned retirement dates.

Directors’ equity plans

Each non-employee Director receives an annual grant of Common Shares equal to $58. The Common Shares are issued out of the Keithley Instruments, Inc. 2002 Stock Incentive Plan. During the first quarter of fiscal year 2008, 36,045 shares were issued to non-employee Directors with a fair market value of $3.62 on the date of issuance. During the first quarter of fiscal year 2008, 14,013 shares were issued to non-employee Directors with a fair market value of $9.31 on the date of issuance.

As a result of the Company’s recent low stock price, in December 2008, the Company’s Compensation and Human Resources Committee of the Board of Directors determined that it should limit the number of Common Shares to be issued to each non-employee Director with respect to his or her annual Common Share grant to 3,000 shares per quarter. This will limit the dilution to shareholders and will have the effect of lowering the non-employee Directors total compensation if the Common Share price is below $4.83 per share.

The Board of Directors also may issue restricted stock grants worth $75 to a new non-employee Director at the time of his or her election. These restricted stock grants vest over a 3-year period. There have been no such grants issued since February 2006.

F. Repurchase of Common Shares

In February 2007, the Company’s Board of Directors approved an open market stock repurchase program (the “2007 program”). Under the terms of the 2007 program, the Company may purchase up to 2,000,000 Common Shares, which represented approximately 12 percent of the shares outstanding at the time the program was approved, over a two-year period ending February 28, 2009. The purpose of the 2007 program is to offset the dilutive effect of stock option and stock purchase plans, and to provide value to shareholders. Common Shares held in treasury may be reissued in settlement of stock purchases under the stock option and stock purchase plans.

During the first quarter of fiscal year 2009, the Company purchased 166,733 Common Shares for $787 at an average cost of $4.72 per share including commissions. This includes 11,733 Common Shares withheld for payroll taxes upon the issuance of Common Shares for vested performance award units in November 2008. See Note E. During the first quarter of fiscal year 2008, the Company purchased 241,400 Common Shares for $2,365 at an average cost per share of $9.80 including commissions. At December 31, 2008 and 2007, 1,377,648 and 815,715 Common Shares remained in treasury at an average cost, including commissions, of $9.94 and $9.60, respectively.

Also, included in the “Common shares held in treasury, at cost” caption of the consolidated balance sheets are shares purchased to settle non-employee Directors’ fees deferred pursuant to the Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan. Shares held in treasury pursuant to this plan totaled 208,569 and 172,168 at December 31, 2008 and 2007, respectively.

G. Financing Arrangements

On March 27, 2008, the Company extended the term of its credit agreement, as amended, to March 31, 2011 from March 31, 2010. The agreement is a $10,000 debt facility ($559 of short-term debt and $534 of standby letters of credit outstanding at December 31, 2008) that provides unsecured, multi-currency revolving credit at various interest rates based on Prime or LIBOR. The Company is required to pay a facility fee of 0.125% per annum on the total amount of the commitment. The agreement may be extended annually. Additionally, the Company has a number of other credit facilities in various currencies and for standby letters of credit aggregating $5,000 ($0 outstanding at December 31, 2008). At December 31, 2008, the Company had total unused lines of credit with domestic and foreign banks aggregating $13,907, which was a combination of long-term and short-term depending upon the nature of the indebtedness.

Under certain provisions of the debt agreements, the Company is required to comply with various financial ratios and covenants. We were not in compliance with one of the debt covenants as of December 31, 2008; however, we received a waiver from the lender waiving the violation of the covenant for the quarter ended December 31, 2008. The Company expects the credit agreement will be amended before our second fiscal year 2009 quarter that will end March 31, 2009.

H. Accounting for Derivatives and Hedging Activities

In accordance with the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (as amended), all of the Company’s derivative instruments are recognized on the balance sheet at their fair value. To hedge sales, the Company currently utilizes foreign exchange forward contracts or option contracts to sell foreign currencies to fix the exchange rates related to near-term sales and effectively stabilizes the Company’s margins. Underlying hedged transactions are recorded at hedged rates, therefore realized and unrealized gains and losses are recorded when the hedged transactions occur.

On the date the derivative contract is entered into, the Company designates its derivative as either a hedge of the fair value of a recognized asset or liability (“fair value” hedge), as a hedge of the variability of cash flows to be received (“cash flow” hedge), or as a foreign-currency cash flow hedge (“foreign currency” hedge). Changes in the fair value of a derivative that is highly effective as, and that is designated and qualifies as, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk are recorded in current period earnings. Changes in the fair value of a derivative that is highly effective as, and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income until earnings are affected by the transaction in the underlying asset. Changes in the fair value of derivatives that are highly effective and that qualify as foreign currency hedges are recorded in either current period income or other comprehensive income, depending on whether the hedge transaction is a fair value hedge or a cash flow hedge. At December 31, 2008 and 2007, the foreign exchange forward contracts were designated as foreign currency cash flow hedges.

At December 31, 2008, the Company had obligations under foreign exchange forward contracts to sell 2,275,000 Euros, 265,000 British pounds and 270,000,000 Yen at various dates through March 2009. In accordance with the provisions of SFAS 133, the derivative instruments are recorded on the Company’s Condensed Consolidated Balance Sheets. The fair market value of the foreign exchange forward contracts represented a liability to the Company of $402 and $8, at December 31, 2008 and 2007, respectively. The fair market value was determined by utilizing a valuation received from the foreign currency trader, which we independently verified, and as such, is considered to be derived from level 2 inputs as defined by SFAS 157.

The Company documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The Company also assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge, the Company discontinues hedge accounting prospectively. Cash flows resulting from hedging transactions are classified in the consolidated statements of cash flows in the same category as the cash flows from the item being hedged.

I. Comprehensive Income

Comprehensive (loss) income for the three-month periods ended December 31, 2008 and 2007 is as follows:


	2008			2007
Net (loss) income	$	(32,359	)	$	889
Unrealized (losses) gains on value of derivative securities		(372	)		111
Net unrealized investment gains		442			13
Foreign currency translation adjustments		359			79


Comprehensive (loss) income	$	(31,930	)	$	1,092

J. Geographic Segment Information

The Company reports a single Test and Measurement segment. Net sales and long-lived assets by geographic area are presented below. The basis for attributing revenues from external customers to a geographic area is the location to which the product is shipped.


	For the Three Months
	Ended December,
	2008		2007
Net sales:
United States	$	7,190	$	8,304
Other Americas		457		661
Germany		4,877		6,024
Other Europe		6,908		8,328
Japan		4,004		3,830
China		2,902		4,394
Other Asia		4,732		6,897


	$	31,070	$	38,438


	At December 31,		At September 30,
	2008		2008
Long-lived assets:
United States	$	25,431	$	25,568
Germany		6,612		6,700
Other		1,174		1,070


	$	33,217	$	33,338

K. Guarantor’s Disclosure Requirements

Guarantee of original lease

The Company has assigned the lease of its former office space in Reading, Great Britain to a third party. If the third party defaults on the monthly lease payments, the Company would be responsible for the payments until the lease expires on July 14, 2009. If the third party were to default, the maximum amount of future payments (undiscounted) the Company would be required to make under the guarantee would be approximately $91 through July 14, 2009. The Company has not recorded any liability for this item, as it does not believe that it is probable that the third party will default on the lease payments.

Product Warranties

Generally, the Company’s products are covered under a one-year warranty; however, certain products are covered under a two or three-year warranty. It is the Company’s policy to accrue for all product warranties based upon historical in-warranty repair data. In addition, the Company accrues for specifically identified product performance issues. The Company also offers extended warranties for certain of its products for which revenue is recognized over the life of the contract period. The costs associated with servicing the extended warranties are expensed as incurred. The revenue, as well as the costs related to the extended warranties is immaterial for the three month periods ending December 31, 2008 and 2007.

A reconciliation of the estimated changes in the aggregated product warranty liability for the three-month periods ending December 31, 2008 and 2007 is as follows:


	2008			2007
Balance, beginning of period	$	701		$	722
Accruals for warranties issued during the period		279			315
Accruals related to pre-existing warranties (including changes in estimates and expiring warranties)		(26	)		(22	)
Settlements made (in cash or kind) during the period		(322	)		(235	)


Balance, end of period	$	632		$	780

L. Pension Benefits

The Company has a noncontributory defined benefit pension plan covering all of its eligible employees in the United States and a contributory defined plan covering eligible employees at its German subsidiary. Pension benefits are based upon the employee’s length of service and a percentage of compensation. The Company also has government mandated defined benefit retirement plans for its eligible employees in Japan and Korea; however, these plans are not material to the Company’s consolidated financial statements. A summary of the components of net periodic pension cost based upon a measurement date of June 30 for the U.S. plan and the German plan is shown below:


	United States Plan						German Plan
	For the Three Months						For the Three Months
	Ended December 31,						Ended December 31,
	2008			2007			2008			2007

Service costs-benefits earned during the period	$	389		$	419		$	44		$	56
Interest cost on projected benefit obligation		629			589			106			101
Expected return on plan assets		(961	)		(883	)		(17	)		(19	)
Amortization of net loss		—			21			—			—
Amortization of transition asset		—			—			—			6
Amortization of prior service cost		24			44			1			1


Net periodic benefit cost	$	81		$	190		$	134		$	145

The Company expects to contribute approximately $1,000 to $2,500 to its pension plans in fiscal year 2009.

M. Income Taxes

The Company recorded income tax expense for the three months ended December 31, 2008, of $30,224 on a loss before taxes of $2,135, an effective tax rate of 1,415.7 percent. The tax expense included a $29,967 non-cash expense for a valuation allowance recorded against U.S. deferred tax assets. As a result of the overall downturn in the U.S. economy, our sales and profitability have been adversely impacted resulting in a cumulative loss for the past twelve quarters. This coupled with revised downward projections led us to conclude that it is more likely than not that the deferred tax assets will not be realized; accordingly, we recorded the valuation allowance. In addition, the Company was not able to record a tax benefit on the current quarter’s U.S. loss, and recorded income in certain foreign operations that resulted in tax expense for the quarter. This compares to income tax expense of $99 on income before taxes of $988, or an effective tax rate of 10.0 percent for the prior year’s quarter ended December 31, 2007.

For the first three months of fiscal year 2008, the effective tax rate was less than the U.S. federal statutory tax rate due to the favorable impacts of the research tax credit and tax benefits of foreign income which are taxed at lower rates than the U.S. statutory tax rate. These benefits were partially offset by taxes paid to U.S. state and local jurisdictions and other permanent differences.

As of December 31, 2008, the Company had gross unrecognized tax benefits of $5,290, a decrease of approximately $99 during the quarter. The total amount of unrecognized benefits that, if recognized, would benefit the effective tax rate was $5,116. The Company anticipates a decrease in its unrecognized tax positions of approximately $300 over the next 12 months. The anticipated decrease is primarily due to expiration of statutes in several jurisdictions.

The Company records interest and penalties related to uncertain tax position as income tax expense. As of December 31, 2008, the Company had accrued $1,441 of interest and penalties related to uncertain tax positions.

N. Severance Charges

During the fourth quarter of fiscal year 2008, the Company recorded $1,377 for severance and related charges resulting from a global reduction in force of 25 individuals. During the first quarter of fiscal year 2009, the Company recorded a benefit of $3 for the adjustment of the fourth quarter charges. The accrued severance charges are included in the “Accrued payroll and related expenses” caption on the Condensed Consolidated Balance Sheets. A reconciliation of the change in the aggregated accrued balance for the three-month period ended December 31, 2008 is as follows:


Balance, beginning of period	$	1,252
Adjustment to previously recorded expense		(3	)
Payments made during the period		(919	)


Balance, end of period	$	330

The severance and related costs associated with the reduction in force that took place in January 2009 will be recorded in the Company’s second quarter of fiscal year 2009 and are expected to approximate $1,300.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide investors with an understanding of the Company’s operating performance and financial condition. A discussion of our business, including our strategy, products, and competition is included in Part I of our 2008 Form 10-K.

Business Overview

Our business is to design, develop, manufacture and market complex electronic instruments and systems to serve the specialized needs of electronics manufacturers for high-performance production testing, process monitoring, product development and research. Our primary products are integrated systems used to source, measure, connect, control or communicate electrical direct current (DC), radio frequency (RF) or optical signals. Our customers are engineers, technicians and scientists in manufacturing, product development and research functions. During the first quarter of fiscal year 2009, semiconductor orders comprised approximately 25 percent of our total orders; wireless communications orders were about five percent; precision electronic components/subassembly manufacturers were approximately 25 percent, which includes customers in automotive, computers and peripherals, medical equipment, aerospace and defense, and manufacturers of components; and research and education orders were about 35 percent. The remainder of orders came from customers in a variety of other industries. Although our products vary in capability, sophistication, use, size and price, they generally test, measure and analyze electrical, RF, optical or physical properties. As such, we consider our business to be in a single industry segment.

The most important factors influencing our ability to grow revenue are (i) our customers’ spending patterns as they invest in new capacity or upgrade manufacturing lines for new product offerings, (ii) our ability to offer interrelated products with differentiated value that solve our customers’ most compelling test challenges, and (iii) our success in penetrating key accounts with our globally deployed sales and service team.

Many of the industries we serve, including but not limited to the semiconductor industry, the wireless communications industry, and precision electronic components/subassembly manufacturers, have historically been very cyclical and have experienced periodic downturns. Our customers across all industries and geographies demonstrated reduced order patterns, which began during the later part of our fourth quarter of fiscal 2008 and have continued into fiscal year 2009. In response to the order contraction we experienced, we took action during the fourth quarter of fiscal 2008 to reduce our future operating expenses. Additionally, during November and December of fiscal year 2009, we announced further cost reduction measures including a hiring freeze with the exception of a few critical replacements, a reduction in our capital expenditures, and travel and other discretionary spending, a pay reduction for the majority of U.S. exempt employees and unpaid days off for U.S. non-exempt employees, the suspension of the annual bonus program for management and lower sales commissions payments to the sales force, the suspension of the Company’s 401(k) match for the remainder of fiscal year 2009, and a reduction in force that took place in January 2009.

Our focus during the past several years has been on building long-term relationships and strong collaborative partnerships with our global customers to serve their measurement needs. Toward that end, we rely primarily upon employing our own sales personnel to sell our products, and use sales representatives, to whom we pay a commission, in areas where we believe it is not cost-beneficial to employ our own people. This sales channel strategy allows us to build a sales network of focused, highly trained sales engineers who specialize in measurement expertise and problem-solving for customers and enhances our ability to sell our products to customers with worldwide operations. We believe our ability to serve our customers has been strongly enhanced by deploying our own employees throughout the United States, Europe and Asia. We expect that selling through our own sales force will be favorable to earnings during times of strong sales, but it is unfavorable during times of depressed sales, such as the current economic environment, as a substantial portion of our selling costs are fixed.

Critical Accounting Policies and Estimates

Management has identified the Company’s “critical accounting policies.” These policies have the potential to have a more significant impact on our financial statements, either because of the significance of the financial statement item to which they relate or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events which will be settled in the future. These critical accounting policies and estimates are described in Management’s Discussion and Analysis included in our 2008 Form 10-K, and include use of estimates, revenue recognition, inventories, income taxes, pension plan and stock compensation plans.

Results of Operations

First Quarter Fiscal 2009 Compared with First Quarter Fiscal 2008

Net sales of $31,070 for the first quarter of fiscal 2009 decreased $7,368, or 19 percent, compared to the prior year’s first quarter sales of $38,438. Sales outside of the Americas represented approximately 75 percent of total sales for the current year’s quarter. Two percentage points of the sales decrease was the result of a stronger U.S. dollar. Geographically, sales were down 15 percent in the Americas, 23 percent in Asia, and 18 percent in Europe. Sequentially, sales decreased six percent compared with the fourth quarter of fiscal year 2008, approximately half of which was the result of a stronger U.S. dollar.

Orders of $27,663 for the first quarter decreased 32 percent from last year’s first quarter orders of $40,593. Geographically, orders decreased 28 percent in the Americas, 41 percent in Asia, and 24 percent in Europe when compared to the prior year. Orders from the Company’s semiconductor customers decreased approximately 35 percent, orders from wireless communications customers decreased approximately 80 percent, orders from both precision electronic component/subassembly manufacturers and from research and education customers each decreased approximately 15 percent compared to the prior year’s first quarter. Order backlog decreased $3,371 during the quarter to $15,038 at December 31, 2008. The Company does not track net sales in the same manner as it tracks orders by major customer group. However, sales trends generally correlate to Company order trends, although they may vary between quarters depending upon the orders which remain in backlog.

Cost of goods sold as a percentage of net sales increased to 42.8 percent from 40.9 percent in the prior year’s first quarter. The increase was due primarily to lower sales volume, and a three percent stronger U.S. dollar versus foreign currencies. Nearly all products the Company sells are manufactured in the United States; therefore, cost of goods sold expressed in dollars is generally not affected by changes in foreign currencies. However, as a percentage of net sales, it is affected as net sales dollars fluctuate due to currency exchange rates changes. Foreign exchange hedging decreased cost of goods sold as a percentage of net sales by 0.5 percentage points in the first quarter of fiscal 2009, and increased cost of goods sold as a percentage of net sales by 0.5 percentage points in the first quarter of fiscal 2008.

Selling, general and administrative expenses of $14,015 or 45.1 percent of net sales, decreased $2,046, or 13 percent, from $16,061, or 41.8 percent of net sales, in last year’s first quarter. The decrease was due primarily to the cost-cutting actions the Company has taken. These include lower compensation expenses; including lower salaries and in-house commissions and bonuses; and lower marketing program spending. Additionally, during the current year’s first quarter, we recognized a favorable adjustment for performance award units granted in fiscal years 2007 and 2008, which we currently expect to settle at zero percent and 50 percent of target, respectively. See Note E to the Company’s condensed consolidated financial statements included in this Form 10-Q.

Product development expenses for the quarter were $6,053, or 19.5 percent of net sales, down $110, or two percent, from last year’s $6,163, or 16.0 percent of net sales. The decrease is primarily a result the favorable adjustment for performance award units granted in prior years (see Note E), and lower project consultant costs resulting from our cost-cutting actions. This was partially offset by higher development supplies and pilot production costs as we continue to expand, refresh and enhance our product offering and capabilities.

The Company recognized a favorable adjustment of $3 during the first quarter for severance and related costs, which were recorded in the fourth quarter of fiscal year 2008. The severance and related costs associated with the reduction in force that took place in January 2009 will be recorded in the Company’s second quarter of fiscal year 2009 and are expected to approximate $1,300.

The Company reported an operating loss of $2,290 for the first quarter of fiscal year 2009 compared to operating income of $480 for the prior year’s quarter. Lower net sales accounted for the decrease, which was partially offset by lower operating costs due to the cost-cutting actions, and lower stock-based compensation expense. See Note E.

Investment income was $175 for the quarter compared to $528 in last year’s first quarter. The decrease was due primarily to lower cash and short-term investment balances, lower interest rates, and a reduction to the interest rate on a long-term note receivable.

The Company reported a net loss of $32,359, or $2.07 per share, for the first quarter of fiscal 2009, compared with net income of $889, or $0.05 per diluted share, for the first quarter of fiscal 2008. Included in the current quarter’s results is an unfavorable discrete tax adjustment of approximately $1.92 per share.

Financial Condition, Liquidity and Capital Resources

Working Capital

The following table summarizes working capital as of December 31, 2008 and September 30, 2008:


	December 31		September 30
Current assets:
Cash and cash equivalents	$	29,160	$	22,073
Short-term investments		—		5,700
Accounts receivable and other, net		14,755		17,265
Total inventories		18,045		19,823
Deferred income taxes		771		5,483
Prepaid expenses		2,471		2,079


Total current assets		65,202		72,423

Current liabilities:
Short-term debt		559		23
Accounts payable		5,240		7,325
Accrued payroll and related expenses		4,530		7,073
Other accrued expenses		6,114		6,142
Income taxes payable		813		1,174


Total current liabilities		17,256		21,737


Working capital	$	47,946	$	50,686

Working capital decreased during the quarter by $2,740. Current assets decreased during the quarter by $7,221, while current liabilities decreased $4,481. During the first quarter of fiscal year 2009, we converted $12,500 of investments, including our investments in auction rate securities, to cash. The $12,500 included $6,120 of auction rate securities (net of a valuation allowance of $680), which were classified as long-term at September 30, 2008. As of December 31, 2008, the Company no longer holds any auction rate securities. Accounts receivable and other, net decreased $2,510 during the quarter primarily due to lower net sales. Days sales outstanding were 47 at December 31, 2008 and at September 30, 2008. Inventories decreased $1,778 during the quarter primarily due to inventory management. Inventory turns were 2.7 at December 31, 2008 and at September 30, 2008. Deferred income taxes decreased $4,712 primarily due to the establishment of a valuation reserve against the U.S. deferred tax assets. See Note M. With regard to the decrease in current liabilities, accounts payable decreased $2,085 primarily due to the cost-cutting actions implemented during the quarter. Accrued payroll and related decreased $2,543 primarily due to the payment of severance charges recorded during the fourth quarter of fiscal year 2008 (see Note N), the payment of fiscal year 2008 incentive compensation that was tied to sales levels, lower incentive compensation in the first quarter of fiscal year 2009 resulting from lower sales, and lower payroll costs due to the cost-cutting actions the Company has taken.

Sources and Uses of Cash

The following table is a summary of our Condensed Consolidated Statements of Cash Flows:


	For the Three Months
	Ended December 31,
	2008			2007
Cash (used in) provided by:
Operating activities	$	(3,645	)	$	(1,925	)
Investing activities		11,424			3,144
Financing activities		(820	)		(3,283	)

Operating activities. Cash used in operating activities was $3,645 for the quarter of fiscal year 2008 compared with $1,925 in the same period last year, a decrease of $1,720. The primary cause of the decrease was lower net income, partially offset by higher non-cash charges and lower changes in working capital, which were described in Working Capital above. Adjustments to reconcile net earnings to net cash provided by operating activities are presented on the Condensed Consolidated Statements of Cash Flows.

Investing activities. Cash provided by investing activities was $11,424 during the fiscal year 2009 period compared to $3,144 in the same period last year. As described above in Working Capital, the Company converted $12,500 of investments to cash during the quarter current year’s quarter. During the first quarter of fiscal year 2008, the Company had net sales of investments, including investments in auction rate securities, of $4,339. Short-term investments totaled $0 at December 31, 2008 and $28,019 at December 31, 2007.

Financing activities. Cash used in financing activities was $820 in the first quarter of fiscal year 2009 as compared to $3,283 last year. During the 2009 first quarter, we repurchased 166,733 Common Shares for $787 at an average cost of $4.72 per share including commissions. This includes 11,733 Common Shares withheld for payroll taxes upon the issuance of Common Shares for vested performance award units in November 2008. During the 2008 first quarter, we repurchased 241,400 Common Shares for $2,365, or an average cost per share including commissions of $9.80. See Note F. Short-term debt at December 31, 2008 totaled $559 versus $449 at December 31, 2007, and $23 at September 30, 2008.

We expect to finance capital spending and working capital requirements with cash and short-term investments and our available lines of credit. At December 31, 2008, we had available unused lines of credit with domestic and foreign banks aggregating $13,907, which was a combination of long-term and short-term depending upon the nature of the indebtedness.

Outlook

The Company’s customers’ spending has dramatically decreased as a result of current macroeconomic conditions, and we are particularly uncertain about their future capital spending. We remain focused on executing against our business plan and on aligning our cost structure with the current economic reality.

Based upon current expectations, the Company is estimating sales for the second quarter of fiscal 2009, which will end March 31, 2009, to range between $22,000 and $29,000. The Company expects a loss for the second quarter. For the remainder of fiscal year 2009, the Company expects to record tax expense as a result of taxes generated in foreign jurisdictions.

During the second quarter of fiscal 2009, the Company expects to incur approximately $1,300 for the costs associated with the reduction in its worldwide workforce that was implemented during January 2009. The actions taken were the result of the order decline realized during the latter part of fiscal 2008 and into fiscal 2009. The cost reduction actions that the Company has taken, including pay and benefit reductions, workforce reductions, and discretionary cost reductions, are expected to result in a cost savings during fiscal 2009 of approximately 20 percent of the Company’s operating costs incurred during fiscal 2008.

Recent Accounting Pronouncements

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to a variety of risks, including foreign currency fluctuations, interest rate fluctuations and changes in the market value of its short-term investments. In the normal course of business, we employ established policies and procedures to manage our exposure to fluctuations in foreign currency values and interest rates.

The Company is exposed to foreign currency exchange rate risk primarily through transactions denominated in foreign currencies. We currently utilize foreign exchange forward contracts or option contracts to sell foreign currencies to fix the exchange rates related to near-term sales and effectively fix our margins. Generally, these contracts have maturities of three months or less. Our policy is to only enter into derivative transactions when we have an identifiable exposure to risk, thus not creating additional foreign currency exchange rate risk. In our opinion, a ten percent adverse change in foreign currency exchange rates would not have a material effect on these instruments and therefore our results of operations, financial position or cash flows.

The Company maintains a short-term investment portfolio consisting of United States government backed notes and bonds, corporate notes and bonds, and mutual funds consisting primarily of government notes and bonds. An increase in interest rates would decrease the value of certain of these investments. However, in management’s opinion, a ten percent increase in interest rates would not have a material impact on our results of operations, financial position or cash flows.

ITEM 4. Controls and Procedures.

The Company has evaluated, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the design and operation of the Company’s disclosure controls and procedures as of December 31, 2008 pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, and that information was accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in the internal control over financial reporting that occurred during the first quarter of fiscal 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

As previously disclosed, on August 9, 2006 and August 15, 2006, the Company was named as a nominal defendant in two separate shareholder derivative suits, Nathan Diamond v. Joseph P. Keithley, et al., Cuyahoga County, Ohio, Court of Common Pleas (“Diamond”) and Michael C. Miller v. Joseph P. Keithley, et al, Cuyahoga County, Ohio, Court of Common Pleas (“Miller”). Both suits were removed to the United States District Court for the Northern District of Ohio on September 8, 2006. Miller and Diamond were consolidated and on November 13, 2006, the plaintiffs filed a consolidated Complaint (the “Consolidated Complaint”).

On October 23, 2006 and October 24, 2006, the Company was named as a nominal defendant in two additional shareholder derivative lawsuits, Edward P. Hardy v. Joseph P. Keithley, et al., in the United States District Court for the Northern District of Ohio and Mike Marks v. Joseph P. Keithley, in the United States District Court for the Northern District of Ohio.

The four suits were consolidated in a single action, In re Keithley Instruments, Inc. Derivative Litigation, in the United States District Court for the Northern District of Ohio. Pursuant to the consolidation order, the Consolidated Complaint was the operative complaint in the action. The Consolidated Complaint alleged that various Company officers and/or directors manipulated the dates on which stock options were granted by the Company so as to maximize the value of the stock options. The suits alleged numerous claims, including violations of Sections 10(b), 10b(5) and 20(a) of the Exchange Act, breaches of fiduciary duties, aiding and abetting, corporate waste, unjust enrichment and rescission.

The Company and other defendants filed a motion to dismiss the Consolidated Complaint. After extensive briefing and oral argument, in March 2008, the Court granted the defendants’ motion to dismiss in its entirety. The Court granted plaintiffs leave to amend the Consolidated Complaint within 30 days of the Court’s Order. In April 2008, plaintiffs filed a Second Amended Complaint. The Second Amended Complaint did not include the claims under the Securities Exchange Act of 1934 contained in the Consolidated Complaint. The Second Amended Complaint alleges state law claims for unjust enrichment, fraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and conversion. The Company and the other defendants filed a motion to dismiss the Second Amended Complaint and, on January 20, 2009, the Court granted the defendant’s motion to dismiss in its entirety.

ITEM 1A. Risk Factors.

There have been no material changes to the Company’s risk factors as disclosed in Item 1A — Risk Factors, in the Company’s 2008 Form 10-K, except for the following:

Compliance with NYSE listing standards

Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital markets. External factors that affect our stock price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which, in turn, affect our ability to comply with the NYSE’s listing standards. Under the NYSE’s current listing standards, we are required to have market capitalization or shareholders equity of more than $75 million to maintain continued listing. Our market capitalization and shareholders equity are both now below $75 million. As a result, upon receipt of a notice from the NYSE that we are below the compliance standards, we will have 45 days to submit a plan to the NYSE demonstrating our ability to achieve compliance with these standards within 18 months. Although we intend to submit and implement a plan to cure these deficiencies, we cannot assure you that we will be able to do so.

Regardless of this plan, if our average market capitalization over a 30 trading-day period is below $15 million (this standard was temporarily lowered by the NYSE from $25 million to $15 million until April 22, 2009), the NYSE is expected to start immediate delisting procedures. If our stock price declines to the point where our compliance with the listing standard relating to market capitalization is in jeopardy, we will consider such other actions, including equity issuances, as we deem appropriate under the circumstances. If we are not able to return to and maintain compliance with the NYSE standards, our stock will be delisted from trading on the NYSE, resulting in the need to find another market on which our stock can be listed or causing our stock to cease to be traded on an active market, which could result in a reduction in the liquidity for our stock and a reduction in demand for our stock.

Financial crisis affecting the banking system and financial markets

The recent financial crisis and going concern threats of investment banks and other financial institutions has resulted in a tightening of the credit markets, a reduced level of liquidity in many financial markets, and extreme volatility in fixed income, credit and equity markets. There could be a number of follow-on effects from the credit crisis on our business including inability of customers to obtain credit to finance purchases of our products, insolvency of our customers, and decreased interest income resulting from lower rates on our cash and investments. If our customers cease ordering or are unable to pay for our products, our results of operations, financial position and liquidity may be adversely affected. Additionally, we maintain cash and investments in a number of financial institutions throughout the world. Not all our cash and investments are backed by government guarantees. Our cash or investment position at an individual financial institution may exceed that which is guaranteed by the U.S. government and related agencies. If any of the financial institutions at which we maintain cash and investments were to experience financial difficulties leading to their insolvency, our financial position could be adversely affected.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table sets forth, for the months indicated, our purchases of Common Shares in the first quarter of fiscal year 2009:


						Total number of		Maximum number of
						shares purchased as		shares that may yet
						part of publicly		be purchased under
	Total number of			Average price paid		announced plans or		the plans or
Period	shares purchased			per share (1)		programs		programs
October 1 – 31, 2008		100,700		$	5.48		100,700		1,111,700
November 1 – 30, 2008		66,033	(2)	$	3.56		54,300		1,057,400
December 1 – 31, 2008		—			—		—		1,057,400
Total		166,733	(2)	$	4.72		155,000		1,057,400


(1)		Price includes commissions.

(2)		Includes 11,733 shares withheld for payroll taxes upon the issuance of Common Shares for vested performance award units in November 2008

On February 12, 2007, the Company announced its Board of Directors had approved an open market stock repurchase program (the “2007 Program”). Under the terms of the 2007 Program, the Company may purchase up to 2,000,000 Common Shares, which represented approximately 12 percent of its total outstanding Common Shares at the start of the 2007 Program, through February 28, 2009. The purpose of the 2007 Program is to offset the dilutive effect of stock option and stock purchase plans, and to provide value to shareholders. Common Shares held in treasury may be reissued in settlement of purchases under the stock option and stock purchase plans. See Note F to our condensed consolidated financial statements included in this Form 10-Q.

ITEM 6. Exhibits.

(a) Exhibits. The following exhibits are filed herewith:


Exhibit
Number			Exhibit

	3.1		Restated Articles of Incorporation, adopted August 8, 2008.

	10.1		Amendment dated December 31, 2008 to Employment Agreement with Mark J. Plush dated April 7, 1994.

	10.2		Keithley Instruments, Inc. Amended and Restated 1996 Outside Directors Deferred Stock Plan.

	10.3		Keithley Instruments, Inc. Amended and Restated 1997 Directors’ Stock Option Plan.

	10.4		Keithley Instruments, Inc. Amended and Restated 2002 Stock Incentive Plan.

	10.5		Keithley Instruments, Inc. Amended and Restated Annual Incentive Compensation Plan.

	10.6		Keithley Instruments, Inc. Amended and Restated Supplemental Deferral Plan.

	10.7		Keithley Instruments, Inc. Amended and Restated Deferred Compensation Plan.

	10.8		Keithley Instruments, Inc. 2009 Annual Incentive Compensation Plan (Reference is made to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated October 31, 2008 (File No. 1-9965), which Exhibit is incorporated herein by reference.)

	10.9		Keithley Instruments, Inc. form of management restricted unit award agreement for use in connection with awards granted to management under the Keithley Instruments, Inc. Amended and Restated 2002 Stock Incentive Plan.

	10.10		Keithley Instruments, Inc. 2009 Stock Incentive Plan.

	31.1		Certification of Joseph P. Keithley pursuant to Rule 13a-14(a)-15d-14(a).

	31.2		Certification of Mark J. Plush pursuant to Rule 13a-14(a)-15d-14(a).

	32.1	+	Certification of Joseph P. Keithley pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.

	32.2	+	Certification of Mark J. Plush pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.


+		The certifications furnished pursuant to this item will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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 thereunto duly authorized.


	KEITHLEY INSTRUMENTS, INC. (Registrant)
Date: February 9, 2009	/s/ Joseph P. Keithley
	Joseph P. Keithley
	Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date: February 9, 2009	/s/ Mark J. Plush
	Mark J. Plush
	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX


Exhibit
Number			Exhibit

	3.1		Restated Articles of Incorporation, adopted August 8, 2008.

	10.1		Amendment dated December 31, 2008 to Employment Agreement with Mark J. Plush dated April 7, 1994.

	10.2		Keithley Instruments, Inc. Amended and Restated 1996 Outside Directors Deferred Stock Plan.

	10.3		Keithley Instruments, Inc. Amended and Restated 1997 Directors’ Stock Option Plan.

	10.4		Keithley Instruments, Inc. Amended and Restated 2002 Stock Incentive Plan.

	10.5		Keithley Instruments, Inc. Amended and Restated Annual Incentive Compensation Plan.

	10.6		Keithley Instruments, Inc. Amended and Restated Supplemental Deferral Plan.

	10.7		Keithley Instruments, Inc. Amended and Restated Deferred Compensation Plan.

	10.8		Keithley Instruments, Inc. 2009 Annual Incentive Compensation Plan (Reference is made to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated October 31, 2008 (File No. 1-9965), which Exhibit is incorporated herein by reference.)

	10.9		Keithley Instruments, Inc. form of management restricted unit award agreement for use in connection with awards granted to management under the Keithley Instruments, Inc. Amended and Restated 2002 Stock Incentive Plan.

	10.10		Keithley Instruments, Inc. 2009 Stock Incentive Plan.

	31.1		Certification of Joseph P. Keithley pursuant to Rule 13a-14(a)-15d-14(a).

	31.2		Certification of Mark J. Plush pursuant to Rule 13a-14(a)-15d-14(a).

	32.1	+	Certification of Joseph P. Keithley pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.

	32.2	+	Certification of Mark J. Plush pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.


+		The certifications furnished pursuant to this item will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

EX-3.1 2 c80368exv3w1.htm EXHIBIT 3.1 Filed by Bowne Pure Compliance

Exhibit 3.1

Restated Articles of Incorporation
of
Keithley Instruments, Inc.

Adopted August 8, 2008

ARTICLE I

The name of the Corporation is KEITHLEY INSTRUMENTS, INC.

ARTICLE II

The principal office of the Corporation is located in Solon, Cuyahoga County, Ohio.

ARTICLE III

The purpose or purposes for which, or for any of which, the Corporation is formed are:

To design, manufacture, distribute and sell scientific measuring equipment and software of all types and kinds; to buy sell and deal in such property, both as principal and agent; and to do any and all things appropriate or incidental to such business and any related business;

To enter into, promote or conduct any other kind of business, contract or undertaking permitted for corporations for profit organized under the General Corporation Laws of the State of Ohio, to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive, of the Revised Code of Ohio, and, in connection therewith, to exercise all express and incidental powers normally permitted such corporations.

ARTICLE IV

Classes and Number of Shares. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 89,000,000 shares, consisting of 80,000,000 Common Shares, without par value (hereinafter the “Common Shares”) and 9,000,000 Class B Common Shares, without par value (hereinafter the “Class B Common Shares”).

Powers and Rights of the Common Shares and the Class B Common Shares.

	1.		Voting Rights and Powers. With respect to all matters upon which shareholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding Common Shares and the holders of any outstanding Class B Common Shares shall vote together without regard to class, and every holder of the outstanding Common Shares shall be entitled to cast thereon one (1) vote in person or by proxy for each Common Share standing in his name, and every holder of any outstanding Class B Common Share shall be entitle to cast thereon ten (10) votes in person or by proxy for each Class B Common Share standing in his name, provided that at such time as the Class B Common Shares become outstanding, holders of the Common Shares, voting separately as a class with each holder of the outstanding Common Shares being entitled to one (1) vote in person or by proxy for each Common Share standing in his name, shall have the right to elect that number of directors so that one-forth (calculated to the nearest whole number, rounding a fractional number of five-tenths (.5) to the next highest whole number) of the total number of directors of the Corporation fixed from time to time by, or in the manner provided for in, the Code of Regulations of the Corporation, shall have been elected by the holders of the Common Shares. With respect to any proposed amendment to these Amended Articles of Incorporation which would increase or decrease the authorized number of either the Common Shares or the Class B Common Shares, change the par value of the Common Shares or the Class B Common Shares, or alter or change the powers, preferences, relative voting power or special rights of the Common Shares or the Class B Common Shares so as to affect them adversely, the approval of a majority of the votes entitled to be cast by the holders of the class affected by the proposed amendment, voting separately as a class, shall be obtained in addition to the approval of a majority of the votes entitled to be cast by the holders of the Common Shares and the Class B Common Shares voting together without regard to class as hereinbefore provided.

	2.		Board of Directors.

Number. The Board of Directors shall consist of at least three (3) members, at least one (1) of whom shall be electable by the holders of the Common Shares voting separately as a class as hereinbefore provided.

Standing and Term. All directors, whether elected by the holders of both the Common Shares and Class B Common Shares voting together or the Common Shares voting separately as a class, shall have equal standing, serve terms of equal duration and have equal voting powers.

Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority vote of the remaining directors then in office.

Removal. Directors elected or electable (in the case of vacancies or newly created directorships filled by the remaining directors) by the holders of the Common Shares and the Class B Common Shares voting together without regard to class may be removed, with or without cause, only by the vote or consent of a majority of the votes then entitled to be cast by the holders of the Common Shares and Class B Common Shares, voting together without regard to class. Directors separately elected or electable (in the case of vacancies or newly created directorships filled by the remaining directors) by the holders of the Common Shares may be removed, with or without cause, only by the vote or consent of a majority of the votes then entitled to be cast by the holders of the Common Shares, voting separately as a class.

Dividends and Distributions.

Cash Dividends. At any time any Class B Common Shares are outstanding, when and as cash dividends may be declared by the Board of Directors, the cash dividend payable on Common Shares shall in all cases be a minimum of twenty-five percent (25%) higher on a per share basis than the cash dividend payable on the Class B Common Shares.

Other Dividends and Distribution. Each Common Share and each Class B Common Share shall be equal in respect of rights to dividends (other than cash) and distributions, when and as declared, in the form of shares or other property of the Corporation, except that in the case of dividends or other distributions payable in shares of the Corporation, including distributions pursuant to share split-ups or division, only Common Shares shall be distributed with respect to the Common Shares and only Class B Common Shares shall be distributed with respect to the Class B Common Shares. At any time Class B Common Shares are outstanding, the Board of Directors may issue Common Shares pursuant to a share dividend on or split-up of the Common Shares only to the holders of the then outstanding Common Shares and in conjunction with and in the same ratio as a share dividend on or split-up of the Class B Common Shares.

Other Rights. Except as otherwise required by the Ohio General Corporation Law or as otherwise provided in these Amended Articles of Incorporation, each Common Share and each Class B Common Share shall have identical powers, preferences and rights, including rights in liquidation.

Conversion of the Class B Common Shares. No additional Class B Common Shares may be issued except in the form of a distribution or distributions pursuant to a share dividend on or split-up of the Class B Common Shares and only to the then holders of the outstanding Class B Common Shares in conjunction with and in the same ratio as a share dividend on or split-up of the Common Shares. Each Class B Common Share may at any time be converted at the election of the holder thereof into one (1) fully paid and nonassessable Common Share. Any holder of Class B Common Shares may elect to convert any or all of such shares at one time or at various times in such holder’s discretion. Such right shall be exercised by the surrender of the certificate representing each Class B Common Share to be converted to the agent for the transfer of the Class B Common Shares at its office, or to the Corporation at its principal executive offices, accompanied by a written notice of the election by the holder thereof to convert and (if so required by the transfer agent or by the Corporation) by instruments of transfer, in form satisfactory to the transfer agent and to the Corporation, duly executed by such holder or his duly authorized attorney. The issuance of a certificate or certificates for Common Shares upon conversion of Class B Common Shares shall be made without charge for any stamp or other similar tax in respect of such issuance. As promptly as practicable after the surrender for conversion of a certificate or certificates representing Class B common shares, the Corporation will deliver or cause to be delivered at the office of the transfer agent to, or upon the written order, of the holder of such certificate or certificates, a certificate or certificates representing the number of Common Shares issuable upon such conversion, issued in such name or names as such holder may direct. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate of certificates representing Class B Common Shares (if on such date the transfer books of the Corporation shall be closed, then immediately prior to the close of business on the first date thereafter that said books shall be open), and all rights of such holder arising from ownership of the Class B Common Shares being converted shall cease at such time, and the person or persons in whose name or names the certificate or certificates representing Common Shares are to be issued pursuant to such conversion shall be treated for all purposes as having become the record holder or holders of such Common Shares at such time and shall have and may exercise all the rights and powers appertaining thereto. No adjustments in respect of past cash dividends shall be made upon the conversion of any Class B Common Share. The Corporation shall at all times reserve and keep available, solely for the purpose of issue upon conversion of outstanding Class B Common Shares, such number of Common Shares as may be issuable upon conversion of all such outstanding Class B Common Shares, provided, the Corporation may deliver Common Shares which have previously been exchanged for Class B Common Shares or which are held in the treasury of the Corporation for Class B Common Shares to be converted. If any Common Shares require registration with or approval of any governmental authority under any federal or state law before such Common Shares may be issued upon conversion, the Corporation will cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list Common Shares required to be delivered upon conversion prior to such delivery upon any national securities exchange or national securities exchange or national market system on which the outstanding Common Shares may be listed at the time of such delivery. All Common Shares which may be issued upon conversion of the Class B Common Shares will, upon issue, be fully paid and nonassessable.

ARTICLE V

Upon the filing of these Amended Article of Incorporation with the Secretary of State of Ohio, the aggregate stated capital of the corporation shall remain unchanged.

ARTICLE VI

The Corporation may purchase, from time to time, and to the extent permitted by the laws of the State of Ohio, shares of any class of stock issued by it. Such purchases may be made either in the open market or at private or public sale, and in such manner and amounts, from such holder or holders of outstanding shares of the Corporation and at such prices as the Board of Directors of the Corporation shall from time to time determine, and the Board of Directors is hereby empowered to authorize such purchases from time to time without any vote of the holders of any class of shares now or hereafter authorized and outstanding at the time of any such purchases.

ARTICLE VII

Any director or officer of the Corporation shall not be disqualified by his office from dealing or contracting with the Corporation as a vendor, purchaser, employee, agent, lessor, lessee or otherwise.

No transaction, contract or other act of the Corporation shall be void or voidable or in any way affected or invalidated by reason of the fact that any director or officer, or any firm or corporation in which such director or officer is a member or is a shareholder, director or officer, is in any way interested in such transaction, contract or other act provided the fact that such director, officer, firm or corporation is so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such transaction contract or other act shall be taken; nor shall any such director or officer be accountable or responsible to the Corporation for or in respect of any such transaction, contract or other act of the Corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such transaction, contract or other act; and any such director may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize or take action in respect of any such transaction, contract or other act, and may vote thereat to authorize, ratify of approve any such transaction, contract or other act with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer were not interested in such transaction, contract or other act.

ARTICLE VIII

Notwithstanding any provision of the laws of the State of Ohio now or hereafter in force requiring, for any purpose, the vote of the holders of shares entitling them to exercise two-thirds or any other proportion (but less than all) off the voting power of the Corporation or of any class or classes of shares thereof, such action (unless otherwise expressly prohibited by statute) may be taken by vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation or of such class or classes.

ARTICLE IX

The preemptive right to purchase additional shares of capital stock or any other securities of the Corporation is expressly denied to all shareholders of all classes.

ARTICLE X

These Amended Articles of Incorporation supersede and take place of the Amended Articles of Incorporation of the Corporation in existence immediately prior to the filing hereof with the Secretary of State of Ohio.

EX-10.1 3 c80368exv10w1.htm EXHIBIT 10.1 Filed by Bowne Pure Compliance

Exhibit 10.1

MARK J. PLUSH

AMENDMENT TO EMPLOYMENT AGREEMENT

RECITALS

WHEREAS, Keithley Instruments, Inc., an Ohio corporation (the “Company”) and Mark J. Plush (“Plush”) are party to that certain Employment Agreement dated April 7, 1994 (the “Original Employment Agreement”); and

WHEREAS, the Company, with the consent of Plush, desires to amend the Original Employment Agreement to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code’), and the regulations thereunder applicable to the creation and payment of deferred compensation; and

WHEREAS, Section XII of the Original Employment Agreement permits the Company to change or modify the Agreement by resolution of its Board of Directors, so long as such change or modification is made in writing and signed by both the Company and Plush; and

WHEREAS, Plush consents to such modifications, which conform his rights under the Original Employment Agreement to the requirements now being imposed by Code Section 409A and related regulations upon certain payments and payment rights.

NOW, THEREFORE, the Original Employment Agreement is hereby amended as set forth below, effective January 1, 2009:

1. Section VII, Compensation Upon Involuntary Termination Other Than For Cause, is hereby amended by designating the existing text subsection A and adding thereto the heading, “Certain Payments To Be Made; Certain Rights to Continue,” and adding the following (new) subsection B to the end thereto, as follows:

“B. Certain Payment Restrictions, To Comply With Section 409A.

Notwithstanding the provisions of subsection A hereof, the following restrictions shall be imposed upon certain of the payment and reimbursement rights creating or arising thereunder to conform such payment and reimbursement rights to the requirements imposed by Code Section 409A and related rulings and regulations:

•

A termination of employment by the Company shall entitle the Employee to receive the payment(s) and rights identified in subsection A hereof (as modified by the provisions of this subsection B) only if and when such termination of employment also constitutes a “Separation from Service” (as defined under Code Section 409A and related regulations) from the Company and all those corporations which are part of the controlled group of corporations of which the Company is a member (within the meaning of Code Section 414(b) and related regulations), and all those non-corporate entities which are under common control with the Company (within the meaning of Code Section 414(c) and related regulations) (collectively, the “Related Companies”).

•

In the event the Employee qualifies as a “Specified Employee” (as herein defined) on the date such Employee’s Separation from Service occurs, any payment otherwise scheduled to be paid to the Employee under subsection A, paragraph (i) hereof, prior to the expiration of six (6) months following the date of such Employee’s Separation from Service from the Company and all Related Companies (as defined in this subsection B) shall be held by the Company, and paid to the Employee (or in the event of his intervening death, to his estate) in a single sum on the first business day following the expiration of such six (6) month period.

For this purpose, an employee qualifies as a “Specified Employee” if, as of the date of his Separation from Service, he is a “key employee” of the Company or any Related Company and the Company’s stock (or the stock of any Related Company) is publicly traded on an established securities market. An employee is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5)) at any time during a given 12-month period commencing on January 1^st and ending on the ensuing December 31^st. In the event the employee qualifies as a key employee during such calendar year period, he shall qualify as a Specified Employee throughout the 12-month period commencing on the April 1^st next following the close of such calendar year period and ending on the ensuing March 31^st. For this purpose, the Employee’s compensation (used to determine whether he is a “key employee”) shall be determined using the definition of compensation provided under Treasury Regulation Section 1.415(c)-2(a).

•

Any reimbursement for fringe benefits and arrangements, which needs to be made to the Employee in accordance with subsection A paragraph (vi) hereof, shall be made on or before the last day of the Employee’s taxable year following the taxable year in which such expense was incurred; any cash compensation becoming due and payable to the Employee in accordance with subsection A paragraph (vi) hereof shall be made on or before the last day of the Employee’s taxable year in which the Employee acquires the right to receive such cash compensation. Any such reimbursement or compensation shall be paid to the Employee (or in the event of his intervening death, to his estate).

•

Payment to the Employee of the supplemental retirement benefit described in subsection A paragraph (vii) hereof shall take the form of a single life annuity, commencing on the later of (I) the first day of the first calendar month next following such Employee’s Separation from Service from the Company and all Related Companies, or (II) the date the Employee’s retirement benefit commences under the Pension Plan; provided, that if the Employee is a Specified Employee on the date his Separation from Service occurs (as herein defined), any monthly benefit payments otherwise payable to such Employee during the 180-day period commencing on the date such Employee’s Separates from Service shall be withheld by the Company and paid to the Employee (or in the event of his intervening death, to his estate) on the 181^st day next following the date of his Separation from Service. Any adjustments in the timing or the form of payment, needed to conform the Employee’s supplemental retirement benefit described in subsection A, paragraph (vii) hereof to the preceding sentence, shall employ the actuarial factors used under the Pension Plan to pay different types of annuities (determined as of the date the Employee’s Pension Plan benefits commence).

•

Any Company reimbursement of the Employee’s outplacement expenses in accordance with subsection A paragraph (viii) hereof shall be made on or before the last day of the Employee’s taxable year following the taxable year in which such expenses were incurred.” Any such reimbursement shall be paid to the Employee (or in the event of his intervening death, to his estate).

2. Section XIV, Code Section 409A Compliance, is hereby added to the Agreement which shall provide as follows:

“This Agreement is intended to comply with the provisions of Code Section 409A and related rulings and regulations (the “Section 409A Rules”). In the event that any provision of this Agreement fails to satisfy the Section 409A Rules, such provision shall be modified so as to comply with the Section 409A Rules while preserving as closely as possible the substantive rights of the Company and the Employee hereunder. The Company, acting in its discretion, will identify any further Agreement provisions that need to be modified to conform this Agreement to the requirements imposed by the Section 409A Rules and notify the Employee of such modifications and seek his consent thereto. However, the Company is not acting (and will not be held to have acted) as a guarantor of the federal tax consequences of this Agreement, and _____ in the event that the Company determines that it is not feasible to modify a provision of this Agreement to conform such provision to the Section 409A Rules, such provision shall be apply as theretofore written without regard to the Section 409A Rules.”

IN WITNESS HEREOF, the Company by action of its Board of Directors has caused this Amendment to the Original Employment Agreement to be executed on this 31st day of December, 2008.


		KEITHLEY INSTRUMENTS, INC.

		By:		/s/ Joseph P. Keithley

				Its: Chairman, President and Chief Executive Officer

The undersigned hereby consents and agrees to the above modifications made to the Original Employment Agreement.


		/s/ Mark J. Plush

		Mark J. Plush

EX-10.2 4 c80368exv10w2.htm EXHIBIT 10.2 Filed by Bowne Pure Compliance

Exhibit 10.2

KEITHLEY INSTRUMENTS, INC.
1996 OUTSIDE DIRECTORS DEFERRED STOCK PLAN
(as Amended and Restated)

Keithley Instruments, Inc. (the “Company”) hereby amends and restates, effective as of January 1, 2005, the Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan, originally effective as of February 10, 1996 (the “Plan”).

WITNESSETH:

WHEREAS, the Company established the Plan for the purpose of deferring outside directors’ fees and paying those fees in the form of no par value Common Shares of Keithley Instruments, Inc. (“Shares”); and

WHEREAS, the Company continues to operate the Plan with the intent that Plan shall not be subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and that the Plan continues to be an unfunded plan of deferred compensation for purposes of the Internal Revenue Code of 1986, as amended (the “Code”), and it is intended not to satisfy any qualification requirement of Section 401 of the Code; and

WHEREAS, Section 7.1 of the Plan states that the Company may amend the Plan for any reason by action of the Board of Directors; and

WHEREAS, the Corporation desires to amend and restate the Plan to comply with the requirements of Code Section 409A, and the Treasury Regulations thereunder; and

WHEREAS, any amounts deferred in the calendar years beginning on or after January 1, 2005 under this Plan shall be governed by the terms and conditions of this amended and restated Plan; and

NOW, THEREFORE, in consideration of the premises, the Corporation sets forth that the Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan is hereby amended and restated in full to read as follows, effective January 1, 2005:

ARTICLE 1
DEFERRAL OF FEES

1.1

Method of Deferral.

Each outside director may elect to defer receipt of all or a portion (but not less than 50%) of the director’s fees payable to such director in respect of a given calendar year, by signing a deferral agreement and delivering it to the Committee on or before the July 31^st next preceding the calendar year for which such director’s fees are earned and otherwise become payable. For Plan purposes, the term “director’s fees” shall include all meetings fees (including committee and special meetings fees), but shall not include any paid or reimbursed expenses. In each Deferral Agreement, the director (the “Participant”) will (i) irrevocably elect the percentage of his or her director’s fees to be deferred, and (ii) elect the date or dates on which distribution shall be made of the indicated Shares (or, in the case of any other form of investment made available to such director under Articles 3 and 4 hereof, cash or its equivalent).

ARTICLE 2
DISTRIBUTIONS

2.1

Date of Distribution.

The balance of the Deferral Account of a Participant shall be distributed to the Participant or, in the event of the death of the Participant, the person designated by the Participant as beneficiary (the “Beneficiary”) following (a) the later of (i) the date the Participant terminates his or her service on the Board of Directors of the Company in a termination which qualifies as a “Separation from Service” (as defined under Code Section 409A and related regulations); or (ii) the date elected by the Participant in the Deferral Agreement (which shall not be less than five (5) years following the year in which such fees are earned); or (b) if earlier than the date specified in part (a) hereof, the date such Participant dies.

2.2

Method of Distribution.

Each distribution of the balance of a Deferral Account shall be paid in a single sum or Share certificate or, if elected by the Participant in the Deferral Agreement, in installments. Such distribution(s) shall be made, or shall commence within ninety (90) days following (i) such Participant’s Separation from Service, (ii) the date of distribution elected by such Participant in his or her Deferral Agreement, or (iii) such Participant’s death (as applicable).

2.3

Amount of Distribution.

The amount of any single sum payment or distribution shall be equal to the balance of the Deferral Account or, in the case of a distribution of Shares, the number of whole Shares credited to such Account (any fractional interest to be paid in cash). The amount of each installment payment shall be equal to the balance of the Deferral Account multiplied by a fraction, the numerator of which is one and the denominator of which is the number of installments remaining. Installment distributions to be made in the form of Shares shall be rounded to the nearest whole Share.

ARTICLE 3
ACCOUNTS

3.1

Establishment of Deferral Account.

The Committee shall establish a Deferral Account in the name of each Participant. Such Account shall be established as of the first date that such director’s fees otherwise would have been paid to such Participant. Each Deferral Account shall be credited with the deferred portion of such director’s fees.

3.2

Investment of Account.

The Committee shall establish and communicate to each director the rules by which amounts deferred under the Plan are deemed to be held, invested and paid or distributed. Under such rules, all credits to the Deferral Account established for the benefit of a Participant shall be deemed to be invested in Shares, or in an interest-bearing account, or in one (1) or more other investment forms then made available under the Plan in accordance with Section 3.3 hereof and Article 4 hereof.

3.3		Sub-Accounts.

		In the event a Participant elects to have the amounts deferred under the Plan be treated as having been invested in any combination of Shares, interest-bearing accounts or other investment forms then made available under the Plan pursuant to Article 4 hereof, the Committee shall establish sub-accounts to properly account for such election(s).

3.4		Nature of Accounts.

All credits to a Deferral Account of a Participant shall be recorded as an obligation of the Company on its books and records. However, no Participant or Beneficiary shall have any proprietary rights of any nature with respect to any Account of any Participant or with respect to any funds, securities or other property owned by the Company or any third party beneficially for the Company. All payments and distributions made or due under the Plan shall be made from the Company’s general funds, or from funds or other sources in which the Company has a beneficial interest. In no event shall any Participant or Beneficiary have any claim or right to any payment or any distribution of property hereunder that is superior to any claims or rights of any general unsecured creditor of the Company.

ARTICLE 4
INVESTMENT FUNDS

4.1

Investment Elections.

No more frequently than every six (6) months (but in any event subject to the implementation of a delayed effective date by the Company pursuant to subsection (c) hereof), a Participant may elect the manner in which his/her Deferrals and all other amounts then held under the Plan are to be treated as having been invested and reinvested in one (1) or more of the investments described in, or specified under, Section 4.2 hereof. When implementing this Section, the following rules shall apply:

(a) Any investment election made by a Participant shall be in ten percent (10%) increments and shall apply to any and all amounts held under the Plan, commencing the first of the calendar month next following the date of such election. When implementing a Participant’s investment election, any investment intended to reflect an investment in a registered security (including without limitation, Shares and mutual fund shares or units) shall be rounded down to the nearest whole share or unit and any amounts resulting from such rounding shall be held at interest in accordance with Section 4.2(b) hereof. No market-based change(s) shall be made to the manner in which a Participant has elected to have his or her Deferral Account invested; any such election shall remain in effect until rescinded, revoked or superseded by such Participant (or where applicable, his or her attorney-in-fact).

(b) If a Participant does not elect the form in which his or her Deferral Account is to be invested, such Deferral Account shall be deemed to be held at interest, as though such Participant elected to have such Account held at interest, in accordance with Section 4.2(b) hereof.

(c) If a Participant is found to have made an investment election more frequently than is permitted under 17 C.F.R. § 240.16b-3(f) (whether on account of a contrary election made under another Company-sponsored plan or otherwise), the Committee shall notify such Participant and automatically delay the effective date of the election made hereunder until the first of the first calendar month that is at least six months later than the date of such contrary election.

(d) The Committee shall establish and communicate any other rules, standards and forms necessary or advisable for making and implementing investment elections hereunder.

4.2

Establishing, Accounting for Investment Funds.

The Plan at all times shall have at least two (2) forms of investment in which a Participant’s Deferral Account shall be deemed to be invested: (1) Shares, and (2) an account bearing interest, determined in accordance with subsection (b) hereof. The Committee may in its discretion designate additional investment forms in which amounts held under the Plan can be treated as having been investment. However, the number of such additional investment forms in no event shall exceed two (2) and t the only forms of investment permitted under the Plan (other than Shares or amounts held at interest) shall consist of publicly-registered shares issued by a registered investment company managed by a series open-end management investment company (within the meaning of the Investment Company Act). The following rules shall be used to establish and maintain investment forms under the Plan:

(a) Shares. A Participant shall be entitled to have amounts held under the Plan be deemed to be invested, in whole or in part, in Shares. The number of Shares credited to a Participant’s Deferral Account by virtue of a Participant’s election to invest in Shares shall determined by reference to that number of whole Shares actually purchased in the open market by the Agent determined in accordance with Article 5 hereof, based on the funds provided to the agent as a result of such Participant’s election; provided that any such deemed investment in Shares shall be credited based on such Agent’s purchase activities without discriminating in favor of or against any individual Participant.

(b) Interest. A Participant also shall be entitled to have amounts held under the Plan be deemed to be held by the Company at interest (in whole or in part). The interest rate to be used when crediting such amounts shall be that annual interest rate published by Key Bank, N.A. or its direct successor (“Key”) as its prime or base rate (whether or not publicly announced and without regard to whether such rate is Key’s most borrower-favorable or best interest rate). For this purpose, subject to any minimum or maximum rate limitations specified by applicable law, Key’s prime or base rate will automatically and immediately change from time to time as of the effective date specified by Key for its commercial customers.

(c) Other Investment Forms. To the extent the Committee establishes one (1) or two (2) alternative investments into which a Participant can direct a portion of his or her Deferral Account, such Participant also shall be entitled to have amounts held under the Plan be deemed to be invested in such other investment form(s). Any alternative investment forms established by the Committee shall be maintained for a minimum of three (3) years, and an alternative investment form may only be discontinued after giving each Participant at least seven (7) months’ notice of such discontinuance. Any amounts held under the Plan and deemed invested in an investment fund that has been discontinued automatically shall be transferred to the interest-bearing account described in subsection (b) hereof, if no election form is received by the Committee prior to such discontinuance.

4.3

Nature of Investment Funds.

Notwithstanding any contrary provision in the Plan, or in any trust or agency relationship established by the Company or the Committee (or to which the Company or the Committee is or are parties), or in any Deferral Agreement, each Deferral Account is a mere unsecured promise by the Company to make payments in the future and no Participant shall have any right or interest in any particular funds, securities or property of the Company, or any trust or escrow.

ARTICLE 5
THE AGENT

5.1

Appointment, Replacement of Agent.

The Committee shall select and appoint an agent with limited authority to act on its behalf and for and on behalf of the Plan, with respect to the purchase, holding and accumulation of Shares (the “Agent”). The Agent shall serve at the pleasure of the Committee and may resign, or be removed by the Committee, upon the giving of thirty (30) days prior written notice (which may be waived by mutual written consent of the Committee and the then-incumbent Agent). The Company shall promptly transfer to and deposit with the Agent cash in an amount equal to the deferrals made by participating directors under the Plan. A party shall not be precluded from serving as Agent merely because such party (or an affiliate thereof) otherwise represents or provides services for the Company, or is (or at any time functions as) a “market maker” in the Shares of the Company; provided, that all Shares acquired by the Agent in connection with the Plan shall be acquired strictly in accordance with Section 5.2 hereof, and shall in no event be acquired by the Agent from Shares then held by the Agent for its own account.

5.2

Rights, Duties and Responsibilities of Agent.

The Agent shall have the following rights, duties and responsibilities, in addition to any other duties and responsibilities specified by the Committee in any written agency agreement to which the Agent is a party:

(a) Acting at its discretion with respect to timing, price and broker or dealer, the Agent shall acquire by purchase Shares or other marketable securities in the open market, using any amounts actually received from the Company in respect of deferrals made under the Plan or in respect of any Shares held by the Agent, but in no event buying or trading “on margin” or buying Shares from its own account;

(b) Promptly voting or otherwise exercising all rights capable of being exercised by record-holders of Shares or other marketable securities;

(c) Surrendering, delivering, tendering or transferring Shares, as and when directed by the Committee, to such persons or parties as the Committee may in writing designate; and

(d) Maintaining an appropriate record of all transactions involving Shares or other marketable securities, or any amounts directly or indirectly received from the Company;

provided, that the Agent shall not discriminate or differentiate as between individual participants with respect to the timing and purchase of Shares or other marketable securities.

5.3

Status of Shares, Other Property.

Any Shares or other property held by the Agent, including any earnings, income or accretions on such Shares or other property, shall be held by the Agent and used exclusively for the uses and purposes of the Participants (and their Beneficiaries) and the general creditors of the Company; however, Participants and their Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any Shares or other property directly or indirectly received, acquired or held by the Agent. Any rights created under the Plan and any related agency agreement shall be mere unsecured contractual rights of Participants and their Beneficiaries against the Company. Any assets held by or on behalf of the Agent will be subject to the claims of the Company’s general creditors, as determined under all relevant federal and state law. The Company shall pay directly, or reimburse the Agent for, any and all taxes and related expenses due in respect of any income or gains on assets held or acquired by the Agent.

ARTICLE 6
PLAN OPERATION AND ADMINISTRATION

6.1

Powers of the Committee.

The Plan shall be administered by a committee (the “Committee”), appointed by the Company’s Board of Directors by appropriate resolution and serving at the full Board’s sufferance. The Committee shall be comprised of any two (2) directors not participating in, and not then eligible to participate in, the Plan. The Committee will have plenary authority to administer the Plan, including, without limitation, the following authority:

(a) to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan;

(b) to interpret the Plan and to decide all matters arising thereunder, including the right to resolve or remedy any ambiguities, inconsistencies or omissions;

(c) to compute the amounts payable to any Participant or Beneficiary or other person in accordance with the provisions of the Plan;

(d) to authorize the Agent to make disbursements, or to otherwise authorize disbursements to be made from or under the Plan;

(e) to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Code or other applicable law;

(f) to appoint such agents, counsel, accountants and consultants as may be desirable to assist in administering the Plan, and provide for the payment and appropriate indemnification by the Company of such parties;

(g) to exercise the other powers that are expressly granted to it herein (including the right to vote, or give or tender proxies with respect to, any Shares held by the Agent), or any powers that are impliedly necessary for it to carry out any of its responsibilities hereunder; and

(h) by written instrument, to delegate any of the foregoing powers.

The Committee will be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by any accountant, the Agent, counsel or other expert retained by the Committee to assist it in administering the Plan and all decisions and determinations of the Committee shall be final.

6.2

Indemnification.

In addition to whatever rights of indemnification to which employees, officers and directors of the Company may be entitled under the articles of incorporation, regulations or bylaws of the Company, under any provision of law, or under any other agreement, the Company shall satisfy any liabilities actually and reasonably incurred by any such employee, officer or director, including expenses, attorneys’ fees, judgments, fines and amounts paid in settlement, in connection with any threatened, pending, or completed action, suit, or proceeding which is related to the exercise or failure to exercise by such person or persons of any of the powers, authority, responsibilities, or discretion of the Company or the Committee provided under the Plan or any agreement with the Agent, or reasonably believed by such person or persons to be provided thereunder, and any action taken by such person or persons in connection therewith.

6.3

Notices to Committee.

Notices and other communications to the Committee shall be sent to the Company’s Chief Financial Officer, care of the Company’s world headquarters. No notice or other communication shall be considered to have been given to or received by the Committee until it has been delivered to the Chief Financial Officer.

ARTICLE 7
MISCELLANEOUS

7.1

Amendment.

The Company may amend the Plan, in any respect and for any reason, by action of the Company’s board of directors without liability to any Participant, Beneficiary or other person for any such amendment or for any other action taken pursuant to this Section 7.1; provided, that (a) amendments shall be made no more frequently than once in any six (6)-consecutive month period, except as required to conform to changes made in the Internal Revenue Code and related rules, and (b) no amendment shall retroactively deprive any Participant of any right or benefit accrued as of the effective date of such amendment, except where necessary to comply with applicable law.

7.2

Plan Not Contract of Continuing Service.

The existence of the Plan shall not create, evidence or change any contract for continuing service, or any continuing right to hold office, of any Participant. The right of the Company, or its shareholders, to take any action with respect to a director, including terminating the director’s office or service at any time for any reason, shall not be affected by any provision of this Plan, and neither the Company nor its shareholders will be deemed responsible to provide continuing service for any reason at any time, solely by reason of this Plan.

7.3

Severability.

If any provision of the Plan shall be invalid, such provision shall be fully severable, and the remainder of the Plan and the application thereof shall not be affected thereby.

7.4

Prohibition on Assignment.

No right or interest under the Plan of any Participant or Beneficiary shall be subject at any time or in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrances (as security or otherwise), attachment, garnishment, levy, execution, or other legal or equitable process by creditors of the Participant or Beneficiary, and no Participant or Beneficiary shall have the power at any time or in any manner to anticipate, transfer, assign (either at law or in equity), alienate, or subject to attachment, garnishment, levy, execution or other legal or equitable process, or in any way encumber, such Participant’s or Beneficiary’s rights or interests under the Plan, and any attempt to do so shall be void; provided, however, that the Company shall have the unrestricted right to set off against or recover out of any payments or property due a Participant or Beneficiary at the time such payments or property would have otherwise been payable hereunder, any amounts owed the Company by such Participant or Beneficiary.

7.5

Governing Law.

To the extent not preempted by federal law, the provisions of the Plan shall be construed, regulated and administered under the laws of the State of Ohio.

7.6

Satisfaction of Claims.

Any payment to any Participant or Beneficiary in accordance with the terms of the Plan shall, to the extent thereof, be in full satisfaction of all claims hereunder, whether they be against the Company, the Committee, or the Agent, any of whom may require the Participant or Beneficiary (or legal representative), as a condition precedent to such payment, to execute a release and receipt therefor.

7.7

No Liability.

Participation in the Plan is entirely at the risk of each Participant. Neither the Company, the Committee, the Agent, nor any other person associated with the Plan shall have any liability for any loss or diminution in the value of Deferral Accounts, or for any failure of the Plan to effectively defer recognition of income or to achieve any Participant’s desired tax treatment or financial results.

7.8

Shares Subject to the Plan.

The maximum dollar amount of Shares that may be acquired by the Plan during any calendar year shall not exceed the aggregate directors’ fees eligible to be deferred hereunder by all those persons then eligible to become Participants hereunder. Any Shares acquired by the Plan may consist, in whole or part, of authorized and unissued shares or treasury shares, or Shares purchased in the open market by or on behalf of the Agent from cash or property then held thereby. If there is a merger, reorganization, consolidation, recapitalization, share dividend, share split, combination of shares or other change in corporate structure of the Company affecting the Shares, such substitution or adjustment shall be made in the aggregate number of Shares held for distribution under the Plan as may be approved by the Committee in its sole discretion; provided that the number of Shares to be issued and distributed under the Plan shall always be a whole number. Any fractional Shares shall be eliminated and the value of such fractional Shares shall be deemed to have been transferred to the interest-bearing account as of the effective date of such substitution or adjustment.

7.9

Conditions to Effectiveness of Plan.

Notwithstanding anything in this Plan, any Deferral Agreement or any agency agreement to the contrary, the effectiveness of the Plan, any Deferral Agreements, and any agency agreement shall be conditioned on the Plan being approved by the Company’s shareholders at the Annual Meeting of Shareholders under the Securities Exchange Act of 1934 and other applicable law. If the Plan is not so approved, the Plan, all Deferral Agreements, and any agency agreement, shall be considered void ab initio and all fees and other amounts previously deferred pursuant to those Deferral Agreements shall be paid forthwith to the appropriate Participants, as if the relevant Deferral Agreements had never existed.

7.10		Code Section 409A Compliance.

		This Plan is intended to be operated in compliance with the provisions of Code Section 409A (including any rulings or regulations promulgated thereunder). In the event that any provision of this Plan fails to satisfy the provisions of Code Section 409A, such provision shall be reformed so as to comply with Code Section 409A and to preserve as closely as possible the intention of the Company in maintaining the Plan; provided, however, in the event it is determined not to be feasible to so reform a provision of this Plan as it applies to a payment due to a Participant or his or her Beneficiary(ies), such payment shall be made without complying with Code Section 409A.

IN WITNESS WHEREOF, the Board of Directors of the Company has caused this instrument to be executed by its duly authorized designee as of this 31st day of December, 2008.


	KEITHLEY INSTRUMENTS, INC.
	By:	/s/ Mark J. Plush
		Title: Vice President and Chief Financial Officer

EX-10.3 5 c80368exv10w3.htm EXHIBIT 10.3 Filed by Bowne Pure Compliance

Exhibit 10.3

KEITHLEY INSTRUMENTS, INC.

1997 DIRECTORS’ STOCK OPTION PLAN

(as Amended and Restated)

1. Purpose. The purpose of this 1997 Directors’ Stock Option Plan (the “Plan”) is to enable Keithley Instruments, Inc. (the “Company”) to attract, retain and reward directors of the Company and strengthen the mutuality of interest between such directors and the Company^‘s shareholders by offering such directors options (“Options”) to purchase shares of the Company’s no par value Common Shares (“Common Shares”). This Plan replaces and supersedes the Keithley Instruments, Inc. 1992 Directors’ Stock Option Plan (the “1992 Directors’ Option Plan”), effective as of the date this Plan is adopted by the Board of Directors of the Company. This Plan is amended and restated to conform to the requirements of Section 409A of the Internal Revenue Code Section of 1986, as amended (the “Code”) and the regulations and guidance issued thereunder, effective January 1, 2005.

2. Grant and Eligibility. All directors of the Company who are not employees of the Company (“Outside Directors”) shall be granted Options under the Plan. From and after the Effective Date, so long as the Plan remains in effect and has Common Shares available for grants hereunder, each individual who qualifies as an Outside Director at the close of any annual meeting of the shareholders of the Company (an “Optionee”) shall automatically be granted an Option to purchase five thousand (5,000) Common Shares. In addition to the Options granted at the close of each annual meeting of shareholders, the Board of Directors of the Company, in its sole discretion, may grant additional Options under the Plan to newly-elected Outside Directors, as of the date of their initial election and in such amounts as the Board shall specify. In the event Common Shares are available for grants hereunder, but the number of such Shares is insufficient to provide an Outside Director with an Option to purchase five thousand (5,000) Common Shares, such Outside Director shall receive an Option to purchase the lesser of (i) the number of Common Shares remaining available for grant under the Plan; or (ii) the number of Common Shares being granted to any other Outside Director concurrently entitled to a grant of Options hereunder, so that Options are granted to all such Outside Directors on a pro rata basis. The maximum aggregate number of Common Shares available for issuance under the Plan is two hundred thousand (200,000); such Common Shares may be treasury shares or authorized but unissued shares or a combination of the foregoing. If an Option granted under the Plan shall expire, terminate or become forfeited for any reason other than its exercise, the shares subject to, but not delivered under, such Option shall be available for the grant of other Options pursuant to the Plan.

3. Term of Option, Exercise and Transferability. The term of each Option granted under the Plan shall be ten years. An Optionee who has continuously served as a director of the Company from the date of the grant of an Option through the date of vesting may first exercise such Option after the date of vesting for all or part of the number of Common Shares in accordance with the Plan. For this purpose, the “date of vesting” for any Option granted under the Plan shall be that date which is six months and one day after the later to occur of: (i) the effective date of the Plan; or (ii) the date such Optionee is elected as a director; or (iii) the date such Option is granted. An Outside Director who resigns or is removed before the date of vesting for any Options held by such Director shall forfeit such Options, unless otherwise approved by the Board of Directors.

No Option shall be transferable by the Optionee other than by will or the laws of descent and distribution. Options shall be exercisable during the Optionee’s lifetime only by an Optionee or by his or her legal guardian or legal representative. Notwithstanding the first and second sentences of this paragraph or the preceding paragraph, if any Optionee dies while holding unexercised Options, any Option held by such Optionee at the time of his or her death shall thereafter be exercised, to the extent such Option was exercisable at the time of death, by the estate of the Optionee (acting through its fiduciary), within a period of one year from the date of such death regardless of the term of the Option remaining at the Optionee’s death.

4. Option Price and Payment. The option price for each Common Share purchasable under an Option shall be the fair market value of a Common Share on the date such Option is granted in accordance with Section 2; for this purpose, “fair market value” shall be the average of the highest and lowest price for a Common Share, as quoted on the New York Stock Exchange (or if Common Shares are not then traded on such Exchange, on any other exchange on which Common Shares are then traded) on the date preceding the date of grant. The option price shall be payable (i) in cash; (ii) by check acceptable to the Company; (iii) by delivery of shares of the same class of stock subject to such Option; or (iv) a combination of the above, so long as the sum of the fair market value of any such cash, check or Common Shares equals the option price. The Company shall have the right to require an Optionee who is entitled to receive Common Shares pursuant to the exercise of an Option to pay to the Company the amount of any taxes which the Company is required to withhold with respect to such Common Shares. Such amount shall be payable (i) in cash; (ii) by check acceptable to the Company; (iii) by delivery of shares of the same class of stock subject to the Option; or (iv) a combination of the above.

5. Change In Control.

(a) Impact of Event. In the event of a “Change in Control” as defined in Section 5(b), all Options granted under the Plan shall vest upon the later to occur of (i) such Change in Control; or (ii) six months and one day after the date of grant of such Options.

(b) Definition of Change in Control. For purposes of Section 5(a), a “Change in Control” shall be deemed to have occurred if: (i) a tender offer shall be made and consummated for the ownership of 25% or more of the outstanding voting securities of the Company; (ii) the Company shall be merged or consolidated with another corporation and, as a result of such merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the former shareholders of the Company as the same shall have existed immediately prior to such merger or consolidation; (iii) the Company shall sell substantially all of its assets to another corporation which is not a wholly owned subsidiary; or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the Securities Exchange Act of 1934 (the “Exchange Act”), shall acquire, other than by reason of inheritance, twenty-five percent (25%) or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record). In making any such determination, transfers made by a person to an affiliate of such person (as determined by the Board of Directors of the Company), whether by gift, devise or otherwise, shall not be taken into account. For purposes of this Plan, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof pursuant to the Exchange Act.

6. Adjustments. (a) If, at any time subsequent to the date of adoption of the Plan, the number of Common Shares are increased or decreased, or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall automatically be substituted for each Common Share subject to an unexercised Option (in whole or in part) granted under the Plan, the number and kind of shares of stock or other securities into which each outstanding Common Share shall be changed or for which each such Common Share shall be exchanged; and (ii) the option price per Common Share or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to an Option shall remain the same as immediately prior to such event.

(b) No adjustment pursuant to this Section 6 shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in such number or price; however, any adjustments which by reason of this Section 6 are not required to be made shall be carried forward. Calculations under this Section 6 shall be made to the nearest cent or to the nearest full share, as the case may be. Anything in this Section 6 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the option price, in addition to those required by this Section 6, as it, in its discretion shall determine to be advisable in order that any stock dividends, subdivisions or splits of shares, distribution of rights to purchase stock or securities, or a distribution of securities convertible into or exchangeable for stock hereafter made by the Company to its shareholders shall not be taxable.

7. Other Terms. Each grant of Options hereunder shall be evidenced by a Shares Option Agreement in substantially the form attached hereto as Exhibit A. When exercisable in accordance with Section 3, Options may be exercised, in whole or in part, by giving written notice of exercise to the Company specifying the number of Common Shares to be purchased. Such notice shall be accompanied by payment of the option price of the Common Shares for which the Option is exercised in accordance with Section 4.

8. Amendment. The Board of Directors of the Company (the “Board”) may at any time amend, modify, suspend or terminate this Plan, except with respect to Options already granted.

9. Termination of Plan. The Plan shall be terminated and no further Options shall be granted hereunder as of the tenth (10th) anniversary of the date this Plan is adopted by the Board. Options granted prior to such tenth anniversary may extend beyond that date.

10. Compliance with Law and Approval of Regulatory Body. No Option shall be exercisable and no Common Shares will be delivered under this Plan except in compliance with all applicable federal and state laws and regulations, including, without limitation, compliance with applicable withholding tax requirements, if any, and with the rules of all domestic stock exchanges on which the Company’s stock may be listed. Any stock certificates issued to evidence Common Shares as to which an Option is exercised may bear such legends and statements as the Company shall deem advisable to assure compliance with federal and state laws and regulations; the Company may, if it deems appropriate, condition its grant of any Options hereunder upon receipt of the following investment representation from the Optionee:

“I agree that any Common Shares of Keithley Instruments, Inc. which I may acquire by virtue of this Stock Option shall be acquired for investment purposes only and not with a view to distribution or resale, and may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by me unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to said Common Shares has become effective so as to permit the sale or other disposition of said shares by me; or (ii) there is presented to Keithley Instruments, Inc. an opinion of counsel satisfactory to Keithley Instruments, Inc. to the effect that the sale or other proposed disposition of said Common Shares by me may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to the said shares under the Securities Act of 1933, as amended.”

No Option shall be exercisable, and no stock will be delivered under this Plan, until the Company has obtained such consent or approval from the regulatory body, federal or state, having jurisdiction over such matters as the Company may deem advisable. In the case of the exercise of an Option by a person or estate acquiring the right to exercise such Option by bequest or inheritance, the Company may require reasonable evidence as to the ownership of such Option and may require such consents and releases of taxing authorities as the Committee may deem advisable.

11. Effective Date. The original effective date of the Plan is February 15, 1997. The effective date for this amended and restated plan document is January 1, 2005.

12. Governing Law. The Plan, all options and actions taken thereunder and any agreements relating thereto shall be governed by and controlled in accordance with Ohio law.

13. Code Section 409A Compliance. This Plan is intended to be operated in compliance with the provisions of Code Section 409A (including any applicable rulings or regulations promulgated thereunder). In the event that any provisions of this Plan fails to satisfy the provisions of Code Section 409A, then such provision shall be reformed so as to comply with Code Section 409A and to preserve as closely as possible the intention of the Company in maintaining the Plan.

IN WITNESS WHEREOF, the Board of Directors of the Company has caused this instrument to be executed by its duly authorized designee this 31^st day of December, 2008.


KEITHLEY INSTRUMENTS, INC.
By:	/s/ Mark J. Plush
	Title:	Vice President and Chief Financial Officer

EX-10.4 6 c80368exv10w4.htm EXHIBIT 10.4 Filed by Bowne Pure Compliance

Exhibit 10.4

KEITHLEY INSTRUMENTS, INC.
2002 STOCK INCENTIVE PLAN

(as Amended and Restated January 1, 2007)

1. General. This Stock Incentive Plan (the “Plan”) provides key employees of Keithley Instruments, Inc. (the “Company”) with the opportunity to acquire or expand their equity interest in the Company by making available for award or purchase Common Shares, without par value, of the Company (“Common Shares”) through the granting of nontransferable options to purchase Common Shares (“Stock Options”); the granting of Common Shares, which may or may not be subject to temporal restrictions on transfer and substantial risks of forfeiture (“Restricted Stock”); and/or the granting of nontransferable options to receive payments based on the appreciation of Common Shares (“SARs”). Stock Options, Restricted Stock and SARs shall be collectively referred to herein as “Grants”; and an individual grant of Stock Options, Restricted Stock or SARs shall be individually referred to herein as a “Grant”. It is intended that key employees may be granted, simultaneously or from time to time, Stock Options that qualify as incentive stock options (“Incentive Stock Options”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or Stock Options that do not so qualify (“Non-qualified Stock Options”). No provision of the Plan is intended or shall be construed to grant key employees alternative rights in any Incentive Stock Option granted under the Plan so as to prevent such Option from qualifying under Section 422 of the Code. Grants which are made under this Plan after December 31, 2004, or previously-made Grants which vest after such date (to the extent of such vesting) are intended to be exempt, and remain exempt, from the requirements of Code Section 409A and related Treasury regulations.

2. Purpose of the Plan. The purpose of the Plan is to provide continuing incentives to key employees of the Company and of any subsidiary corporation of the Company by encouraging such key employees to acquire new or additional share ownership in the Company, thereby increasing their proprietary interest in the Company’s business and enhancing their personal interest in the Company’s success.

For purposes of the Plan, a “subsidiary corporation” consists of any corporation fifty percent (50%) of the stock of which is directly or indirectly owned or controlled by the Company.

3. Effective Date of the Plan. The Plan originally became effective upon its adoption by the Board of Directors on December 7, 2001, and was approved by the Company’s stockholders on February 16, 2002 by holders of a majority of the outstanding shares of voting capital stock of the Company. The Plan was subsequently amended by the Board of Directors on September 8, 2005 and December 28, 2006. No further shareholder approval shall be required with respect to the making of Grants pursuant to the Plan, except as provided in Section 12 hereof. The Plan is now further amended on December 31, 2008; such amendments shall become effective January 1, 2007, unless otherwise specified.

4. Administration of the Plan. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company or by a committee selected by such Board of Directors by majority vote and comprised of no fewer than two (2) members of such Board of Directors (the “Committee”). No person shall be appointed to, or serve on, the Committee who is not both an “outside director,” within the meaning of 26 C.F.R. §1.162-27(e)(3), and a “non-employee director” as defined under Rule 16b-3(b)(3) of the Securities Exchange Act of 1934. Notwithstanding the foregoing, Grants made to members of the Board of Directors, which may include members of the Committee, must be approved and granted by the Board of Directors (in connection to Grants made to members of the Board of Directors, references to the “Committee” in the Plan shall mean the Board of Directors).

A majority of the Committee shall constitute quarom. The acts of the majority of the members present at any meeting at which a quorum is present (or acts unanimously approved in writing by the members of the Committee) shall constitute binding acts of the Committee.

Subject to the terms and conditions of the Plan, the Committee shall be authorized and empowered:

(a) To select the key employees to whom Grants may be made;

(b) To determine the number of Common Shares to be covered by any Grant;

(c) To prescribe the terms and conditions of any Grants made under the Plan, and the form(s) and agreement(s) used in connection with such Grants, which shall include agreements governing the granting of Restricted Stock, Stock Options and/or SARs;

(d) To determine the time or times when Stock Options and/or SARs will be granted and when they will terminate in whole or in part;

(e) To determine the time or times when Stock Options and SARs that are granted may be exercised;

(f) To determine, at the time a Stock Option is granted under the Plan, whether such Option is an Incentive Stock Option entitled to the benefits of Section 422 of the Code;

(g) To establish any other Stock Option agreement provisions not inconsistent with the terms and conditions of the Plan or, where the Stock Option is an Incentive Stock Option, with the terms and conditions of Section 422 of the Code;

(h) To determine whether SARs will be made part of any Grants consisting of Stock Options, and to approve any SARs made part of any such Grants pursuant to Section 9 hereof; and

(i) To delegate to one (1) or more Company officers authority to make Grants of Stock Options or Restricted Stock to key employees (other than executive officers) and to individuals to whom offers of Company employment are, or are expected to be made.

Notwithstanding the preceding provisions of this Section 4, any Grants of Stock Options or SARs, made by the Committee after December 31, 2004, shall be limited to Grants involving Common Stock which qualifies as “service recipient stock” (within the meaning of Treasury Regulations Section 1.409A-1(b)(5)(iii)(A), where the Company can function as an eligible issuer” (within the meaning of Treasury Regulations Section 1.409A-1(b)(5)(iii)(E)).

5. Key Employees Eligible for Grants. Grants may be made from time to time to those key employees of the Company or a subsidiary corporation who are designated by the Committee (or by the Committee’s delegee(s) in accordance with Section 4(i) hereof or by the Board in the case of grants to members of the Board of Directors), acting in its sole and exclusive discretion. Key employees may include, but shall not necessarily be limited to, members of the Board of Directors, and officers, of the Company and any subsidiary corporation; and other salaried employees that the Committee identifies as strategically or financially important to preserving and enhancing shareholder value. Notwithstanding any contrary Plan provision, Stock Options intended to qualify as Incentive Stock Options shall only be granted to key employees while actually employed by the Company or a subsidiary corporation. The Committee may grant more than one Stock Option, with or without SARs, to the same key employee. No Stock Option shall be granted to any key employee during any period of time when such key employee is on a leave of absence.

6. Shares Subject to the Plan. The shares to be issued pursuant to any Grant made under the Plan shall be Common Shares; provided, however, that such Common Shares must satisfy the definition of “service recipient stock” under Treasury Regulation Section 1.409A-1(b)(5)(iii). Either Common Shares held as treasury stock, or authorized and unissued Common Shares, or both, may be so issued, in such amount or amounts within the maximum limits of the Plan as the Board of Directors shall from time to time determine. In the event a SAR is granted in tandem with a Stock Option pursuant to Section 9 and such SAR is thereafter exercised in whole or in part, then such Stock Option or the portion thereof to which the duly exercised SAR relates shall be deemed to have been exercised for purposes of such Option, but may be made available for re-offering under the Plan to any eligible employee.

Subject only to the provisions of the next succeeding paragraph of this Section 6, the aggregate number of Common Shares made subject to all Grants under the Plan shall be three million (3,000,000) Common Shares and the maximum number of Common Shares made subject to Grants under the Plan to any one (1) key employee during any one (1)-year period shall be two hundred thousand (200,000) Common Shares. Such aggregate number(s) of Common Shares shall not include any Common Shares reacquired or never issued due to a forfeiture, exchange or relinquishment of rights under a Grant made hereunder.

If, at any time subsequent to the date of adoption of the Plan by the Board of Directors, the number of Common Shares are increased or decreased, or changed or converted into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation or other property, including cash (whether as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall be substituted for each Common Share subject to an unexercised Stock Option or SAR (in whole or in part) granted under the Plan, the number and kind of shares of stock or other securities or property into which each outstanding Common Share shall be changed or for which each such Common Share shall be exchanged and, in the case of a merger, reorganization, consolidation or similar transaction, the Committee may cancel an unexercised Stock Option or SAR in exchange for a payment equal to the amount, if any, by which the price being paid to holders of Common Shares in the merger, reorganization, consolidation or similar transaction exceeds the applicable exercise price of the Stock Option or SAR; (ii) the option price per Common Share or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to a Stock Option or SAR shall remain the same as immediately prior to such event; and (iii) any outstanding Restricted Stock that is converted, exchanged or otherwise changed into a different number or kind of stock or security, shall continue to be subject to any and all terms, conditions and restrictions originally applicable to such Restricted Stock. In addition to the foregoing, the Committee shall be entitled in the event of any such increase, decrease or exchange of Common Shares to make other adjustments to the securities subject to a Stock Option or SAR, the provisions of the Plan, and to any related Stock Option or SAR agreements (including adjustments which may provide for the elimination of fractional shares), where necessary to preserve the terms and conditions of any Grants hereunder.

7. Stock Option Provisions.

(a) General. The Committee may grant to key employees (also referred to as “optionees”) nontransferable Stock Options that either qualify as Incentive Stock Options under Section 422 of the Code or do not so qualify. However, any Stock Option which is an Incentive Stock Option shall only be granted within 10 years from the earlier of (i) the date this Plan is adopted by the Board of Directors of the Company; or (ii) the date this Plan is approved by the shareholders of the Company.

(b) Stock Option Price. The option price per Common Share which may be purchased under an Incentive Stock Option under the Plan shall be determined by the Committee at the time of Grant, but shall not be less than one hundred percent (100%) of the fair market value of a Common Share, determined as of the date such Option is granted; however, if a key employee to whom an Incentive Stock Option is granted is, at the time of the grant of such Option, an “owner,” as defined in Section 422(b)(6) of the Code (modified as provided in Section 424(d) of the Code) of more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (a “Substantial Shareholder”), the price per Common Share of such Option, as determined by the Committee, shall not be less than one hundred ten percent (110%) of the fair market value of a Common Share on the date such Option is granted. Except as specifically provided above, the fair market value of a Common Share shall be determined in accordance with procedures to be established by the Committee. The day on which the Committee approves the granting of a Stock Option shall be considered the date on which such Option is granted. The option price per Common Share under each Stock Option granted pursuant to the Plan which is not an Incentive Stock Option shall be the closing price of the Common Shares on the New York Stock Exchange on the date the Stock Option is approved by the Committee (or the next trading day if the approval date is not a trading day), unless the Committee establishes a different option price or method for determining the option price at the time of approval.

(c) Period of Stock Option. The Committee shall determine when each Stock Option is to expire. However, no Incentive Stock Option shall be exercisable for a period of more than ten (10) years from the date upon which such Option is granted. Further, no Incentive Stock Option granted to an employee who is a Substantial Shareholder at the time of the grant of such Option shall be exercisable after the expiration of (5) years from the date of grant of such Option.

(d) Limitations on Exercise and Transfer of Stock Options. Except as otherwise provided herein, only the key employee to whom a Stock Option is granted may exercise such Option, and no Stock Option granted hereunder shall be transferable by an optionee, other than by will or the laws of descent and distribution. Notwithstanding the preceding sentence, an optionee may transfer and assign Stock Options (other than Incentive Stock Options) if (and then, only to the extent) the optionee obtains the prior consent of the Committee and otherwise complies with the requirements of this Section 7(d) (a “Permitted Transfer”). For this purpose, a Permitted Transfer consists of either (i) an irrevocable transfer by an optionee to a family member (or a trust or partnership whose beneficiaries or partners are comprised of family members), if made by without payment of consideration (as further defined in 17 C.F.R. §240.16b-3); or (ii) an irrevocable transfer by an optionee to an alternate payee, made under a qualified domestic relations order (as defined in 29 C.F.R. §240.16a-12 and 26 U.S.C. § 414(p)(1)(B)). Also for this purpose, a “family member” of an optionee includes the optionee’s spouse, children, grandchildren, nieces and nephews. Following a Permitted Transfer, the Grants transferred shall be exercisable only by the transferee. Except as specifically provided in this Section 7(d), no Stock Option granted hereunder can be pledged or hypothecated, nor shall any such Option be subject to execution, attachment or similar process.

(e) Employment, Holding Period Requirements For Certain Options. The Committee may condition any Stock Option granted hereunder upon the continued employment of the optionee by the Company or by a subsidiary corporation, and may make any such Stock Option immediately exercisable. However, the Committee will require that, from and after the date of grant of any Incentive Stock Option until the day three (3) months prior to the date such Option is exercised, such optionee must be an employee of the Company or of a subsidiary corporation, but always subject to the right of the Company or any such subsidiary corporation to terminate such optionee’s employment during such period. Each Stock Option shall be subject to such additional restrictions as to the time and method of exercise as shall be prescribed by the Committee. Upon completion of such requirements, if any, a Stock Option or the appropriate portion thereof may be exercised in whole or in part from time to time during the option period; however, such exercise right(s) shall be limited to whole shares.

(f) Payment for Stock Option Price. A Stock Option shall be exercised by an optionee giving written notice to the Company of his intention to exercise the same, accompanied by full payment of the purchase price together with any federal, state and local income and employment taxes required to be withheld by the Company from the optionee’s wages as a result of such exercise. Such purchase price shall be paid with cash or check, or with a surrender of 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, approve other methods of exercise for a Stock Option or payment of the option price, provided that no such method shall cause any option granted under the Plan as an Incentive Stock Option to not qualify under Section 422 of the Code, or cause any Common Share issued in connection with the exercise of a Stock Option not to be a fully paid and non-assessable Common Share.

(g) Certain Reissuances of Stock Options. In the discretion of the Committee and to the extent Common Shares are surrendered by an optionee in connection with the exercise of a Stock Option in accordance with Section 7(f), new Stock Options shall be granted to such optionee (to the extent Common Shares remain available for Grants). If granted, such Stock Options will have the following terms and conditions:

(i) The number of Common Shares shall be equal to the number of Common Shares being surrendered by the optionee;

(ii) The option price per Common Share shall be equal to the fair market value of Common Shares, determined on the date of exercise of the Stock Options whose exercise caused such Grant; and

(iii) The terms and conditions of such Stock Options shall in all other respects replicate such terms and conditions of the Stock Options whose exercise caused such Grant, except to the extent such terms and conditions are determined to not he wholly consistent with the general provisions of this Section 7, or in conflict with the remaining provisions of this Plan.

(h) Cancellation and Replacement of Stock Options and Related Rights. The Committee may at any time or from time to time permit the voluntary surrender by an optionee who is the holder of any outstanding Stock Options under the Plan, where such surrender is conditioned upon the granting to such optionee of new Stock Options for such number of shares as the Committee shall determine, or may require such a voluntary surrender as a condition precedent to the grant of new Stock Options. The Committee shall determine the terms and conditions of new Stock Options, including the prices at and periods during which they may be exercised, in accordance with the provisions of this Plan, all or any of which may differ from the terms and conditions of the Stock Options surrendered. Any such new Stock Options shall be subject to all the relevant provisions of this Plan. Any surrender of Stock Options conditioned upon the granting of new Stock Options, made after December 31, 2004, shall be effected in strict compliance with Treasury Regulation Section 1.409A-1(b)(5) to prevent such surrender from constituting a “modification,” “extension,” or “renewal,” of a stock right for Code Section 409A purposes. The Common Shares subject to any Stock Option so surrendered shall no longer be charged against the limitation provided in Section 6 of this Plan and may again become shares subject to the Plan. The granting of new Stock Options in connection with the surrender of outstanding Stock Options under this Plan shall be considered for the purposes of the Plan as the granting of new Stock Options and not an alteration, amendment or modification of the Plan or of the Stock Options being surrendered.

(i) Limitation on Exercisable Incentive Stock Options. The aggregate fair market value of the Common Shares first becoming subject to exercise as Incentive Stock Options by a key employee during any given calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate fair market value shall be determined as of the date such Option is granted, taking into account, in the order in which granted, any other incentive stock options granted by the Company, or by a parent or subsidiary corporation thereof.

8. Restricted Stock.

(a) Grant. The Committee shall determine the key employees to whom, and the time or times at which, Grants of Restricted Stock will be made, the number of shares of Restricted Stock to be granted, the price (if any) to be paid by such key employees (subject to Section 8(b)), the time or times (if any) within which such Restricted Stock grants may be subject to forfeiture, and the other terms and conditions of the grants in addition to those set forth in Section 8(b). The Committee may condition the grant of Restricted Stock upon the attainment of specified performance goals or such other factors as the Committee may determine in its sole discretion.

(b) Terms and Conditions. Restricted Stock granted under the Plan shall contain any terms and conditions, not inconsistent with the provisions of the Plan, which are deemed desirable by the Committee. A key employee who receives a grant of Restricted Stock, other than a grant that does not include restrictions or a risk of forfeiture, shall not have any rights with respect to such Grant, unless and until such key employee has executed an agreement evidencing such Grant in the form approved from time to time by the Committee, has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such Grant. In addition, Restricted Stock granted under the Plan shall be subject to the following terms and conditions:

(i) The purchase price for Common Shares consisting of Restricted Stock, if any, will be equal to their stated value.

(ii) Grants of Restricted Stock, other than a grant that does not include restrictions or a risk of forfeiture, shall only be accepted by executing a Restricted Stock agreement and paying whatever price (if any) is required under Section 8(b)(i).

(iii) Each key employee granted Restricted Stock will be issued a stock certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such key employee, and shall bear an appropriate legend referring to the terms, conditions, and restrictions(if any) applicable to such Grant.

(iv) Any stock certificates evidencing Common Shares consisting of Restricted Stock shall either (A) be held in custody by the Company until the employment and other restrictions thereon shall all have lapsed; or (B) be affixed with a legend, identifying such Shares as Restricted Stock and expressly prohibiting the sale, transfer, tender, pledge, assignment or encumbrance of such Shares, as the Committee shall determine. With respect to any Restricted Stock held in custody by the Company, the key employee granted such Restricted Stock shall deliver to the Company a stock power, endorsed in blank, relating to the Common Shares represented by such Stock. With respect to any Restricted Stock held by a key employee under legend, the key employee granted such Restricted Stock shall deliver to the Company an acknowledgment that such Stock remains subject to a substantial risk of forfeiture in the event of termination of employment under certain circumstances.

(v) Subject to the provisions of the Plan and the Restricted Stock agreement, during a temporal period (if any) set by the Committee and commencing with the date of such Grant (the “Restriction Period”), a key employee shall not be permitted to sell, transfer, tender, pledge, assign or otherwise encumber any Restricted Stock granted under the Plan. However, the Committee, in its sole discretion, may provide for the lapse of such transfer or other restrictions in installments, or accelerate or waive such restrictions in whole or in part, based on service, performance or other factors and criteria selected by the Committee; provided that any such lapse of transfer or restriction satisfy they requirement of Code Section 409A and the relevant regulation unless the key employee and the Committee otherwise agree.

(vi) Except as provided in this Section 8(b)(vi) and Section 8(b)(v), a key employee shall have, with respect to shares of Restricted Stock granted to him, all of the rights of a shareholder of the Company, including the right to vote such Stock and the right to receive any dividends thereon. The Committee, in its sole discretion and as determined at the time of a Grant of Restricted Stock, may permit or require cash dividends otherwise due and payable to be deferred and, if the Committee so determines, reinvested either in additional Restricted Stock (to the extent Common Shares are available), or otherwise. Stock dividends issued with respect to Restricted Stock shall be treated as additional shares of Restricted Stock. As Restricted Stock, such additional Common Shares will be subject to the same restrictions, terms and conditions applicable to the Restricted Stock with respect to which such additional Common Shares were issued.

(vii) No Restricted Stock shall be transferable by a key employee other than by will or by the laws of descent and distribution so long as any restrictions or risk of forfeiture remain applicable.

(c) Minimum Value Provisions. To ensure that Grants of Restricted Stock actually reflect the performance of the Company and service of the key employee, the Committee may provide, in its sole discretion, for a tandem performance-based award, or other grant, designed to guarantee a minimum value, payable in cash or Common Shares, to the recipient of a Restricted Stock Grant, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee.

(d) Stock Appreciation Rights. A key employee may be granted the right to receive a payment based on the increase in the value of Common Shares occurring after the date of such Grant; such rights shall be known as Stock Appreciation Rights (“SARs”). SARs may (but need not) be granted to a key employee in tandem with, and exercisable in lieu of exercising, a Grant of Stock Options. SARs will be specifically granted upon terms and conditions specified by the Committee, if the Company is the employer of the key employee, or by a subsidiary corporation subject to the Committee’s approval, if such subsidiary corporation is the employer of the key employee. No optionee shall be entitled to SAR rights solely as a result of the grant of a Stock Option to him. Any such rights, if granted, may only be exercised by the holder thereof, either with respect to all, or a portion, of the Stock Option to which it applies. With regard to any Grant of an SAR made (or vesting) after December 31, 2004, in no event shall the Committee base the right to payment of such SAR on an amount less than one hundred percent (100%) of the fair market value of a Common Share (determined in accordance with the method described in Section 7(b) hereof for identifying the fair market value of Common Shares). When granted in tandem with a Stock Option, an SAR shall provide that the holder of a Stock Option shall have the right to receive an amount equal to one hundred percent (100%) of the excess, if any, of the fair market value of the Common Shares covered by such Option, determined as of the date of exercise of such SAR by the Committee (in the same manner as such value is determined for purposes of the granting of Stock Options), over the price to be paid for such Common Shares under such Option. Such amount shall be payable by either the Company or the subsidiary corporation, whichever such corporation is the employer of the key employee, in one or more of the following manners, as determined by the Committee, if the Company is the employer of the key employee, or by the subsidiary corporation subject to the Committee’s approval, if such subsidiary corporation is the employer of the key employee:

(e) cash (or check);

(f) fully paid Common Shares having a fair market value equal to such amount; or

(g) a combination of cash (or check) and Common Shares.

In no event may any person exercise any SARs granted hereunder unless (i) such person is then permitted to exercise the Stock Option or the portion thereof with respect to which such SARs relate, and (ii) the fair market value of the Common Shares covered by the Stock Option, determined as provided above, exceeds the option price of such Common Shares. Upon the exercise of any SARs, the Stock Option, or that portion thereof to which such SARs relate, shall be canceled and automatically extinguished. A SAR granted in tandem with a Stock Option hereunder shall be made a part of the Stock Option agreement to which such SAR relates, in a form approved by the Committee and not inconsistent with this Plan. The granting of a Stock Option or SAR shall impose no obligation upon the optionee to exercise such Stock Option or SAR. The Company’s or a subsidiary corporation’s obligation to satisfy SARs shall not be funded or secured in any manner. No SAR granted hereunder shall be transferable by the key employee granted such SAR, other than by will or the laws of descent and distribution.

After the Grant of an SAR, an optionee intending to rely on an exemption from Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) shall be required to hold such SAR for six (6) months from the date the price for such SAR is fixed to the date of cash settlement. Additionally, in order to remain exempt from Section 16(b) of the Exchange Act, an SAR must be exercised by an optionee subject to such Section only during the period beginning on the third business day following the release of a summary statement of the Company’s quarterly or annual sales and earnings and ending on the twelfth business day following said date.

9. Termination of Employment. If a key employee ceases to be an employee of the Company and every subsidiary corporation for a reason other than death, retirement, or permanent and total disability, such key employee’s Grants shall terminate on the effective date of such termination of employment, unless (and then, only to the extent) such Grants by their terms specifically provide otherwise, or unless (and then, only to the extent) the Committee extends such Grants on or before such key employee’s date of termination of employment. Neither the key employee nor any other person shall have any right after such date to exercise all or any part of his Stock Options or SARs, and all Restricted Stock which is not vested or otherwise subject to restriction shall thereupon be forfeited, and/or declared void and without value.

In the absence of specific Grant provisions prescribing a longer period, if termination of employment is due to death or disability, outstanding Stock Options and SARs may be exercised within the one (1) year period ending on the anniversary of such death or permanent and total disability. In the case of death, such outstanding Stock Options and SARs shall be exercised by such key employee’s estate, or by that person designated by such key employee by will, or as otherwise indicated by the laws of descent and distribution. Notwithstanding the foregoing, in no event shall any Stock Option or SAR be exercisable after the expiration of the option period, and in the case of exercises made after a key employee’s death, not to any greater extent than the key employee would have been entitled to exercise such Option or SAR at the time of his death. Restricted Stock held by a key employee whose employment by the Company or any subsidiary corporation terminates by reason of death shall thereupon vest and all restrictions and risks of forfeiture thereon shall thereupon lapse.

Subject to the discretion of the Committee, in the event a key employee terminates employment with the Company and all subsidiary corporations because of normal, early or disability retirement under the Keithley Instruments, Inc., Employees’ Pension Plan (or any successor pension plan), (a) any then outstanding Stock Options and/or SARs held by such key employee shall lapse at the earlier of (i) the end of the term of such Stock Option or SAR, or (ii) twelve (12) months after such retirement or permanent and total disability (subject only to the three (3) month exercise limitation applicable to Incentive Stock Options); and (b) any Restricted Stock held by such key employee shall thereafter vest and any applicable restrictions shall lapse, to the extent such Restricted Stock would have become vested or no longer subject to restriction within twelve (12) months from the time of termination had the key employee continued to fulfill all of the conditions of the Restricted Stock during such period (or on such accelerated basis as the Committee may determine at or after date of Grant).

For purposes of this Plan and all Grants made hereunder, if an employee of the Company or one of its subsidiary corporations is granted a leave of absence by the Company or such subsidiary corporation, to serve in the uniformed services (within the meaning of chapter 43, title 38 of the United States Code) or for any other reason approved by the Company, his employment with the Company or such subsidiary corporation shall not be considered to have terminated and he shall be deemed an employee of the Company or such subsidiary corporation during such leave of absence. The provisions of this paragraph shall apply with equal force to any extension of any such leave of absence granted by the Company or such subsidiary corporation.

10. Change of Control. Upon the occurrence of a Change of Control (as defined below), notwithstanding any other provisions hereof or of any agreement to the contrary, all Stock Options and SARs granted under this Plan shall become immediately exercisable in full and all Restricted Stock grants shall become immediately vested and any applicable restrictions shall lapse.

For purposes of this Plan, a Change of Control shall be deemed to have occurred if: (i) a tender offer shall be made and consummated for the ownership of 25% or more of the outstanding voting securities of the Company; (ii) the Company shall be merged or consolidated with another corporation and, as a result of such merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the former shareholders of the Company as the same shall have existed immediately prior to such merger or consolidation; (iii) the Company shall sell substantially all of its assets to another corporation which is not a wholly owned subsidiary; or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the Exchange Act, shall acquire, other than by reason of inheritance, twenty-five percent (25%) or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record). For purposes of this Plan, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof pursuant to the Exchange Act.

11. Amendments to Plan. The Committee is authorized to interpret this Plan and from time to time adopt any rules and regulations for carrying out this Plan that it may deem advisable. Subject to the approval of the Board of Directors of the Company, the Committee may at any time amend, modify, suspend or terminate this Plan. In no event, however, without the approval of the Company’s shareholders, shall any action of the Committee or the Board of Directors result in:

(a) Materially amending, modifying or altering the eligibility requirements provided in Section 5 hereof;

(b) Materially increasing, except as provided in Section 6 hereof, the maximum number of shares subject to Grants;

(d) Retroactively altering the material terms of any Grants made to individuals described in the flush language at the end of Section 4 hereof;

except to conform this Plan and any agreements made hereunder to changes in the Code or governing law.

12. Investment Representation, Approvals and Listing. The Committee may, if it deems appropriate, condition its grant of any Stock Option hereunder upon receipt of the following investment representation from the optionee:

The Company shall not be required to issue any certificate or certificates for Common Shares upon the exercise of any Stock Option or a SAR granted under this Plan prior to (i) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable; (ii) the admission of such shares to listing on any national securities exchange on which the Common Shares may be listed; (iii) the completion of any registration or other qualifications of the Common Shares under any state or federal law or ruling or regulations of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable or the determination by the Company, in its sole discretion, that any registration or other qualification of the Common Shares is not necessary or advisable; and (iv) the obtaining of an investment representation from the optionee in the form stated above or in such other form as the Company, in its sole discretion, shall determine to be adequate.

13. General Provisions. The form and substance of Stock Option agreements, Restricted Stock agreements, and SAR agreements made hereunder, whether granted at the same or different times, need not be identical. Nothing in this Plan or in any agreement shall confer upon any employee any right to continue in the employ of the Company or any of its subsidiary corporations, to be entitled to any remuneration or benefits not set forth in this Plan or such Grant, or to interfere with or limit the right of the Company or any subsidiary corporation to terminate his employment at any time, with or without cause. Nothing contained in this Plan or in any Stock Option agreement or SAR shall be construed as entitling any optionee to any rights of a shareholder as a result of the grant of a Stock Option or an SAR, until such time as Common Shares are actually issued to such optionee pursuant to the exercise of such Option or SAR. This Plan may be assumed by the successors and assigns of the Company. The liability of the Company under this Plan and any sale made hereunder is limited to the obligations set forth herein with respect to such sale and no term or provision of this Plan shall be construed to impose any liability on the Company in favor of any employee with respect to any loss, cost or expense which the employee may incur in connection with or arising out of any transaction in connection with this Plan. The cash proceeds received by the Company from the issuance of Common Shares pursuant to this Plan will be used for general corporate purposes. The expense of administering this Plan shall be borne by the Company. The captions and section numbers appearing in this Plan are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Plan. Ohio law controls the enforcement and interpretation of this Plan, and any Grants or other contractual agreements made pursuant to this Plan.

14. Code Section 409A Exemption. It is intended that any Grants made under this Plan after December 31, 2004, or vesting (in whole or in part) after such date be exempt from the requirements of Code Section 409A, and that any and all restricted stock, stock option and/or SAR agreement(s) used to document such Grants be revised, as and to the extent necessary, to comply with such requirements.

15. Termination of This Plan. This Plan shall terminate on February 11, 2012; thereafter, no Stock Options or Restricted Stock or SARs shall be granted hereunder. All Stock Options and SARs outstanding at the time of termination of this Plan shall continue in full force and effect according to their terms and the terms and conditions of this Plan.

IN WITNESS WHEREOF, the Company, by order of its Board of Directors, has caused the undersigned, duly authorized officers to execute this Plan on this 31st day of December, 2008


	KEITHLEY INSTRUMENTS, INC.
	By:	/s/ Mark J. Plush
		Its: Vice President and Chief Financial Officer

EX-10.5 7 c80368exv10w5.htm EXHIBIT 10.5 Filed by Bowne Pure Compliance

Exhibit 10.5

KEITHLEY INSTRUMENTS, INC.
Annual Incentive Compensation Plan

(Amended and Restated as of January 1, 2008)

Introduction

Keithley Instruments, Inc. (the “Company”) established an Annual Incentive Compensation Plan (the “Plan”) as part of a competitive compensation program for the officers and key management employees of the Employers (as defined below). This Plan is also referred to as the Short-Term Incentive Compensation Plan. This Plan is modified to conform to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and guidance issued thereunder, effective January 1, 2008.

Plan Objective

The Company desires to attract, retain and incent talented employees to enable the Company to meet its financial and business objectives. The objective of the Plan is to provide an opportunity to those employees whose performance has a significant impact on the Company’s short-term and long-term profitability to earn annual incentive compensation based on such profitability.

Administration

The Plan is administered by the Compensation and Human Resources Committee of the Board of Directors of the Company (the “Committee”). The Committee:

	a.		May amend, modify, or discontinue the Plan.

	b.		Will designate Plan Participants at the officer level.

	c.		Will review and approve the annual performance criteria.

	d.		Will approve individual incentive compensation Awards to Participants who are officers.

	e.		Delegates to the Chief Executive Officer of the Company the power to designate Plan Participants and approve incentive compensation Awards to Participants who are not officers.

	f.		Except as determined by the Committee, a Participant must be employed on September 30 of the Award Term in order to be entitled to receive an Award hereunder. Notwithstanding the foregoing, the Committee may approve a pro rata incentive compensation Award for Participants who terminate employment prior to September 30 of the Award Term, provided those Participants were actively at work for the first one hundred and eighty days in the Award Term and (1) whose employment is terminated due to death, Disability, Retirement or (2) at the recommendation of the Chief Executive Officer.

The Committee shall have complete authority to interpret all provisions of this Plan consistent with law, to prescribe the form of any instrument evidencing any Award granted or paid under this Plan, to adopt, amend and rescind general and special rules and regulations for its administration, and to make all other determinations necessary or advisable for the administration of this Plan. A majority of the Committee shall constitute a quorum, and the action of members of the Committee present at any meeting at which a quorum is present or acts unanimously approved in writing by all Committee members, shall be the act of the Committee. All acts and decisions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Plan, including the severability of any or all of the provisions hereof, shall be conclusive, final and binding upon the Company and all present and former Participants and employees and their respective descendants, successors and assigns. No member of the Committee shall be liable for any such act or decision made in good faith.

Determination of Individual Incentive Compensation Awards

Target incentive percentage for each Participant in the Plan will be established at the beginning of each Award Term and approved by the Committee, if required, or the Chief Executive Officer in cases where he has been delegated power by the Committee and will be established with consideration of competitive market data. Individual target incentive compensation will be calculated at the end of the Award Term based on performance against the criteria. Individual incentive compensation may then be further modified based on a Participant’s performance and contributions for the year by up to 25% either plus or minus of target payout. If a Participant’s performance during the Award Term is determined to be unsatisfactory, the Committee, or the Chief Executive Officer in the case of non-officers, reserves the right to reduce the Participant’s Award for the Award Term to zero. Individual incentive compensation Awards may not exceed three (3) times the Target Incentive Award.

Payment Date/Taxes

Promptly following the Committee’s or the Chief Executive Officer’s approval, as appropriate, of the final Awards, the Participants’ Employer shall pay the amount of such Awards to the Participants in cash, subject to all withholdings and deductions described in the following sentence; provided, however, that (i) no Award shall be payable to a Participant except as determined by the Committee or the Chief Executive Officer, as appropriate and (ii) and Awards earned during the Award Term shall be paid no later than December 15^th of the fiscal year following the Award Term. Any Award paid to a Participant under this Plan shall be subject to all applicable foreign, federal, state and local income tax, social security and other standard withholdings and deductions.

Definitions

(a) “Award” means cash paid to a Participant under the Plan for the applicable Award Term in an amount determined in accordance with the Plan.

(b) “Award Term” means the period corresponding with the Company’s fiscal year beginning October 1 through the following September 30. The initial Award Term is October 1, 2007 through September 30, 2008.

(c) “Disability” means an approved application for disability benefits under an Employer’s long term disability plan or under any applicable government program.

(d) “Employer” means each of the Company and its wholly owned subsidiaries, as applicable.

(e) “Participant” means any person who is classified by an Employer as a salaried employee who in the judgment of the Committee or the Chief Executive Officer, as appropriate occupies a key position in which his efforts may significantly contribute to the profits or growth of the Company; and provided that following the end of the Award Term the Committee, or the Chief Executive Officer, as appropriate, may make one or more discretionary Awards to employees of an Employer who were not previously designated as Participants. Directors of the Company or an Employer who also are employees of the Company are eligible to participate in the Plan. The Committee, or the Chief Executive officer in the case of a non-officer Participant, shall have the power to add Participants at any later date in the Award Term if individuals subsequently become eligible to participate in the Plan. Each Participant shall be notified that he is eligible to receive an Award and the amount of his target Award. All target awards are based the salary in effect on October I of the applicable Award Term, or in the case of a Participant added to the Plan at a later date his starting salary or then current salary.

(f) “Retirement” means a termination of employment with the Company or any Employer at or after age 55 and the completion of 10 or more years of service with the Company or any Employer.

General Plan Provisions

(a) No Right of Employment. Neither the adoption or operation of this Plan, nor any document describing or referring to this Plan, or any part thereof, shall confer upon any employee any right to continue in the employ of the Employer, or shall in any way affect the right and power of an Employer to terminate the employment of any employee at any time with or without assigning a reason therefor to the same extent as the Company might have done if this Plan had not been adopted.

(b) Governing Law. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of Ohio.

(c) Miscellaneous. Headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way material or relevant to the construction of this Plan or any provisions thereof. The use of the masculine gender shall also include within its meaning the feminine. The use of the singular shall also include within its meaning the plural, and vice versa.

(d) Code Section 409A Compliance. It is intended that this Plan be exempt from the requirements of Code Section 409A. In the event the Plan becomes subject to Code Section 409A, any Plan provision that fails to satisfy the provisions of Code Section 409A shall be reformed so as to comply with Code Section 409A while preserving as closely as possible the operative terms of the Plan; however, in the event the Company in its sole discretion determines it is not feasible to reform a provision of this Plan as it applies to a payment due to a Participant or his or her Beneficiary(ies), such payment shall be made without complying with Code Section 409A.

(e) Limitation on Rights of Participants; No trust. No trust has been created by the Company or any Employer for the payment of Awards granted under this Plan; nor have the Participants been granted any lien on any assets of the Company or any Employer to secure payment of such benefits. This Plan represents only an unfunded, unsecured promise to pay by the Company and a Participant hereunder is a mere unsecured creditor of his Employer.

(f) Payment to Guardian. If an Award is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Committee may direct payment of such Award to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Committee may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to the distribution of such Award. Such distribution shall completely discharge the Employers from all liability with respect to such Award.

(g) Effective Date. The original effective date of the Plan is October 1, 2007. The effective date of this republished version is January 1, 2008.

Performance Targets

The performance targets for the Plan are attached as an Addendum to this document.

Addendum
FY2008 Performance Targets


							Individual Maximum
Metric	Threshold			Target			Attained At⁽¹⁾
ROA		19	%		34	%		~40-45	%
Sales Growth		1	%		14	%		~28	%


(1)		The Annual Bonus Plan does not cap the performance measures but rather caps an individual’s payout at 3 times target incentive award. The number provided in this column approximates the level at which maximum payout would be capped and is a range because of the interplay between the two measures.

The officer of the Company named below, hereby attests that the above modifications were made to the Plan this 31st day of December, 2008.


	KEITHLEY INSTRUMENTS, INC.
	By:	/s/ Mark J. Plush
		Title: Vice President and Chief Financial Officer

EX-10.6 8 c80368exv10w6.htm EXHIBIT 10.6 Filed by Bowne Pure Compliance

Exhibit 10.6

KEITHLEY INSTRUMENTS, INC.
SUPPLEMENTAL DEFERRAL PLAN

Amended and Restated January 1, 2008

TABLE OF CONTENTS


	Page

ARTICLE ONE		4
ARTICLE TWO		4
ARTICLE THREE		5
ARTICLE FOUR		6
ARTICLE FIVE		7
ARTICLE SIX		8
ARTICLE SEVEN		9
ARTICLE EIGHT		9
ARTICLE NINE		10
ARTICLE TEN		10
ARTICLE ELEVEN		11
ARTICLE TWELVE		11
ARTICLE THIRTEEN		13
ARTICLE FOURTEEN		14
ARTICLE FIFTEEN		14
ARTICLE SIXTEEN		14
ARTICLE SEVENTEEN		15
ARTICLE EIGHTEEN		15

KEITHLEY INSTRUMENTS, INC.

SUPPLEMENTAL DEFERRAL PLAN

(Amended and Restated January 1, 2008)

THIS AMENDED AND RESTATED KEITHLEY INSTRUMENTS, INC. SUPPLEMENTAL DEFERRAL PLAN (the “Plan”) was originally established effective September 1, 1999, by Keithley Instruments, Inc., a corporation with principal offices and place of business in the State of Ohio, hereinafter referred to as the “Corporation.” The Corporation now amends and restates this Plan, effective January 1, 2008.

WITNESSETH:

WHEREAS, the Corporation currently maintains an unfunded deferred compensation plan primarily for the purpose of providing additional deferred compensation benefits for a select group of management or highly compensated employees; and

WHEREAS, the Corporation intends that the Plan at all times shall be administered and interpreted in such a manner as to qualify for the limited exemption available under section 201(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) from selected provisions of ERISA Title I; and

WHEREAS, the Corporation desires to amend and restate the Plan to comply with the relevant requirements of Section 409A of the Internal Revenue Code of 1986 (the “Code”) and the Treasury Regulations thereunder;

WHEREAS, any amounts deferred in the calendar years beginning on or after January 1, 2005 under this Plan, and any earning thereon shall be governed by the terms and conditions of this amended and restated Plan; and

NOW, THEREFORE, in consideration of the premises, the Corporation hereby amends and restates, and republishes the Keithley Instruments, Inc. Supplemental Deferral Plan as amended and restated effective January 1, 2008:

DEFINITIONS:

Account. A bookkeeping account established by the Corporation in the name of a Participant and kept as part of the Corporation’s regular books and records that indicates such Participant’s interest in the Plan. Each individual participating in the Plan as a Participant shall have an Account established and maintained in his or her name, and the Corporation (or its designee) shall credit or charge to such Account (i) any and all amounts deferred hereunder by or on behalf of such Participant, (ii) any and all amounts credited by the Corporation pursuant to Paragraph 1.03 hereof, (iii) any interest or dividends credited thereto in accordance with this Plan and (iv) any investment earnings or gains credited, or losses charged, thereto in accordance with Article Four of this Plan, (v) any distributions directly or indirectly charged to such Participant or his or her beneficiaries hereunder (including direct transfers, and tax withholdings and remittances); and (vi) any Plan and Plan-related costs or expenses charged thereto. The existence of such Account shall not create, and shall not be deemed to create, a trust of any kind, or a fiduciary relationship between the Corporation and the Participant, his or her designated beneficiary, or other beneficiaries under the Plan.

Affiliate. Any corporation, partnership, limited liability company, joint venture, association, or similar organization or entity, which is a member of a controlled group of corporations that includes, or which is an entity which is under common control with, the Corporation. For purposes of determining the presence of a “controlled group of corporations, or “common control,” the standards set forth in Section 414(b) and 414(c) of the Code and related regulations, as interpreted and applied by the Corporation acting in its sole discretion, shall apply.

Calendar Year. January 1 to December 31.

Compensation. As applicable, the total salary, bonuses and commissions, or director’s and meeting fees, paid or due to be paid by the Corporation to a Participant in a Calendar Year, including any amount deferred pursuant to Article One hereof.

Corporation. Keithley Instruments, Inc. is an Ohio corporation. The Corporation shall act through its board of directors (the “Board”), which may delegate some or all of its rights, duties and responsibilities to one (1) or more committees of the Board, and/or to one (1) or more officers of the Corporation; provided, that any such delegation by the Board shall be in writing.

Early Retirement Date. The date the Participant attains 55 years of age.

Effective Date. July 1, 1999. The effective date of this amendment and restatement, however, is January 1, 2008.

Election to Defer. A written notice filed by the Participant with the Corporation in substantially the form attached hereto as Exhibit A, specifying the amount (if any) of Compensation to be deferred.

Eligible Individual. Any individual employed by the Corporation or an Affiliate (or both) who satisfies the Minimum Eligible Compensation Level and has been selected by the President of the Corporation (acting in his sole discretion) to participate herein. Such term shall include any individual who provides personal services as a non-employee director of the Corporation without regard to the Minimum Eligible Compensation Level. Any individual who qualifies as an Eligible Individual shall be entitled to participate herein in accordance with the provisions of Paragraph 1.01 hereof.

ERISA. The Employee Retirement Income Security Act of 1974, as amended and then in effect.

Minimum Eligible Compensation Level. For the Plan Year starting January 1, 2008, Compensation of at least $120,000 as determined for the preceding Calendar Year.

Normal Retirement Date. The date a Participant attains 65 years of age.

Participant. An Eligible Individual who participates in the Plan, for as long as such Individual maintains an interest in the Plan.

Participant Annual Deferral. The portion of a Participant’s Compensation that he or she elects to defer for a Calendar Year.

Plan. This Plan, together with any and all amendments or supplements thereto.

Plan Administrator. The Corporation, acting by and through the Board or its designee(s).

Plan Year. The Calendar Year.

Separation from Service. Termination of employment with the Corporation and all Affiliates (whether by death, disability, retirement, or otherwise) which ends or substantially reduces the personal services that a Participant performs (or is expected to perform) for the Corporation and all Affiliates. Except in the case of a Participant on a bona fide leave of absence as provided below, a Participant is deemed to have incurred a Separation from Service if the level of services to be performed by the Participant after a date certain is reasonably expected to be reduced to twenty percent (20%) or less of the average services rendered by the Participant during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding period during which such Participant was on a bona fide leave of absence.

A Participant absent from work due to military leave, sick leave, or other bona fide leave of absence shall incur a Separation from Service on the first date immediately following the later of: (a) the six month anniversary of the commencement of the leave, or (b) the expiration of the Participant’s right, if any, to reemployment under statute or contract. Notwithstanding the foregoing, a Participant who is absent from work due to a physical or mental impairment that is expect to result in death or last for a continuous period of at least six months and that prevents the Participant from performing the duties of his or her position of employment or a similar position shall be deemed to have incurred a Separation from Service on the first date immediately following the 29-month anniversary of the commencement of the leave.

Specified Employee. A Participant who, as of the date of his or her Separation from Service, is a “key employee” of the Corporation or any Affiliate, so long as the Corporation’s stock (or the stock of any Affiliate) is publicly traded on an established securities market or otherwise. A Participant is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5)) at any time during the 12-month period ending on a given “specified employee identification date.” Such key employee shall be treated as a key employee for the entire 12-month period beginning on the “specified employee effective date.” For purposes of this paragraph the “specified employee identification date” shall mean December 31. The “specified employee effective date” shall mean the first day of the fourth month following the “specified employee identification date,” or such earlier date as is selected by the Corporation.

For purposes of determining whether a Participant is a Specified Employee, the compensation of the Participant shall be determined in accordance with the definition of compensation provided under Treasury Regulation Section 1.415(c)-2(a) (i.e., wages within the meaning of Code Section 3401(a) for purposes of income tax withholding at the source, plus amounts excludible from gross income under Code Section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b), without regard to rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed). Notwithstanding the foregoing, if a different definition of compensation has been designated by the Corporation with respect to another nonqualified deferred compensation plan in which a key employee participates, the definition of compensation shall be the definition as provided under Treasury Regulation Section 1.415(c)-2(a), unless the Corporation elects (by applicable corporate action) to use a different definition of compensation with respect to all nonqualified deferred compensation plan maintained by the Company.

ARTICLE ONE

1.01 Eligibility. (a) Any individual who is an Eligible Individual may become a Participant in the Plan as of the first day of the Plan Year next following the date such individual becomes an Eligible Individual. As a condition of participation, each Eligible Individual shall be required to execute a participation agreement in the form annexed hereto as Exhibit B. (b) Once an Eligible Individual becomes a Participant, he or she shall remain a Participant until death, or if earlier, until his or her Account is fully distributed; however, an individual shall only be an active Participant while an Eligible Individual. (c) In the case of any Eligible Individual who first becomes a Participant after the Effective Date, the Plan Administrator shall specify the date as of which such Individual commences participation hereunder.

1.02 Deferral Election. Commencing on the Effective Date, and continuing through the date on which an Eligible Individual ceases to qualify as an Eligible Individual, an Eligible Individual shall be entitled to elect to defer, and have credited to his or her Account, up to 100% of his or her Compensation. Any amounts not paid to an Eligible Individual because it has been deferred shall be credited to such Individual’s Account within thirty (30) days of the date such amounts otherwise would have been paid to such Individual.

1.03 Crediting Corporate Amounts. From time to time, the Corporation may credit each Participant’s Account, in amounts and using such methods, allocation criteria and standards as the Corporation shall determine in its sole discretion. Any amounts so credited shall be credited to each Participant’s Account within thirty (30) days following the date such amounts are declared.

ARTICLE TWO

2.01 Responsibility for Administration of the Plan. (a) The Plan Administrator shall be responsible for the management, operation and administration of the Plan. The Plan Administrator may employ others to render advice with regard to its responsibilities under this Plan. It may also allocate its responsibilities to others and may exercise any other powers necessary for the discharge of its duties. (b) The primary responsibility of the Plan Administrator is to administer the Plan for the benefit of the Participants and their beneficiaries, subject to the specific terms of the Plan. The Plan Administrator shall administer the Plan in accordance with its terms and shall have the power to determine all questions arising in connection with its administration, interpretation and application. Any such determination shall be conclusive and binding upon all persons. The Plan Administrator shall have all powers necessary or appropriate to accomplish its duties.

2.02 Information from Corporation. The Corporation and each Affiliate shall provide to the Plan Administrator, on an accurate and timely basis, the information needed to properly administer the Plan. The Plan Administrator may rely upon the correctness of all such information as is so supplied and shall have no duty or responsibility to verify such information. The Plan Administrator shall also be entitled to rely conclusively upon all tables, valuations, certifications, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Plan Administrator with respect to the Plan.

2.03 Investment. The Corporation shall determine, in its sole discretion, whether to dedicate or encumber corporate assets, or engage in investment activities, to place the Corporation in a position to discharge and otherwise satisfy its liabilities under the Plan. Notwithstanding the preceding sentence to the contrary, each Participant with an interest in the Plan acknowledges, consents and agrees that his or her rights under the Plan are defined by, and limited to, such Participant’s Account, and that he or she has no right, title or interest to, or any interest in or claim to (whether at law or in equity) any investments made or funds established by the Corporation to facilitate the discharge of the Company’s Plan liabilities.

ARTICLE THREE

3.01 Vesting of Plan Interests. Regardless of the circumstances under which a Participant’s relationship with the Corporation terminates, that portion of the Participant’s Account attributable to deferrals made pursuant to Paragraph 1.02, including any investment gains or losses on such Deferrals, shall be one hundred percent (100%) vested. Contributions by the Corporation credited to said Participant’s Account (whether pursuant to Paragraph 1.03, or otherwise), including any investment gains or losses on such contributions, will vest in accordance with the following schedule:


Completed Years Of Plan Participation	Vested Percentage
Less than 1		0	%
1 but less than 2		33	%
2 but less than 3		67	%
3 or more		100	%

provided, that if a Participant’s relationship with the Corporation and all Affiliates terminates prior to the completion of three (3) Completed Years of Plan Participation, such Participant shall forfeit the forfeitable portion of his or her Account; and provided, further, that if a Participant’s relationship with the Corporation and all Affiliates terminates or is terminated “for cause,” no benefits of any kind will be payable under the terms of this Plan, other than such Participant’s interest in deferrals made pursuant to Paragraph 1.02 hereof.

3.02 Vesting Upon Change in Control. Immediately upon any Change in Control (as defined below), notwithstanding any other contrary provisions herein (including, without limitation, Paragraph 3.01 hereof), each Participant’s interest in all amounts credited to his Account under this Plan shall fully and immediately vest and become nonforfeitable, and all forfeiture provisions otherwise imposed hereunder (including those set forth in Paragraph 3.01 hereof) shall be null, void and unenforceable and have no further force or effect.

For purposes of this paragraph, a Change in Control shall be deemed to have occurred if and when: (a) any tender offer is made and consummated for the ownership of twenty-five percent (25%) or more of the outstanding voting securities of the Corporation; (b) the Corporation is merged or consolidated with another entity and, as a result of such merger, reorganization or consolidation, less than seventy-five (75%) of the outstanding voting interests of the surviving or resulting entity is owned in the aggregate by the Corporation, or by the former shareholders of the Corporation, as determined immediately prior to such merger, reorganization or consolidation; (c) the Corporation sells substantially all of its assets to another entity (including one or more Affiliated Companies, as defined below if applicable) which is not at least eighty percent (80%) owned by the Corporation; or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the Securities Exchange Act of 1934 (the “Exchange Act”), acquires, other than by reason of inheritance, twenty-five percent (25%) or more of the outstanding voting securities of the Corporation (whether directly, indirectly, beneficially or of record). In making any such determination, transfers made by a person to an affiliate of such person (as determined by the Board prior to such transfer), whether by gift, devise or otherwise, shall not be taken into account. For purposes of this Plan, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof pursuant to the Exchange Act.

For purposes of this paragraph, “Affiliated Company” or “Affiliated Companies” means the Corporation, any and all corporations, limited and/or general partnerships, limited liability companies, business trusts, or other trades or businesses, in which the Corporation holds a direct or indirect ownership interest, or a profits or beneficial interest, in excess of fifty percent (50%).

ARTICLE FOUR

4.01 Earnings or Losses on Deferred Amounts. The Corporation hereby agrees that it will credit the Participant’s Retirement Account in an amount equal to the investment earnings or losses attributable to such Participant’s Retirement Account. For this purpose, contributions to the Retirement Account as defined in Paragraphs 1.02 and 1.03 above shall be assumed to have been invested in the fund or funds selected by the Participant on or about the day the monies would otherwise have been payable were it not for the election to defer. Commencing with the first calendar quarter that follows the Participant’s commencement of participation in the Plan and continuing thereafter for each subsequent calendar quarter in which the Participant participates in the Plan, no later than the next to last business day of the calendar quarter the Participant may (but is not required to) elect, by submitting a new Allocation Election Change Form to the Plan Administrator, to add or delete one or more Investment Option(s) to be used to determine the additional amounts to he credited to his or her Account Balance. If an election is made in accordance with the previous sentence, it shall apply to the next calendar quarter and continue thereafter for each subsequent calendar quarter in which a Participant participates in the Plan, unless changed in accordance with the previous sentence.

ARTICLE FIVE

5.01 Election to Defer Compensation. The Participant may defer all or a portion of his or her Compensation by filing an Election of Deferral. An Election of Deferral must be filed no later than December 31 of the year prior to the Calendar Year in which it pertains and shall be effective on the first day of such Calendar Year; however, for the Plan Year in which an Eligible Individual first becomes eligible to participate in the Plan, such election must be made within thirty (30) days of the date such Individual first becomes eligible and in any event before the effective date of participation, and only Compensation earned after the date of election shall be taken into account. Each Election of Deferral shall be effective only in the Calendar Year to which the Election of Deferral applies. Any subsequent Election of Deferral, to be effective must be filed no later than December 31 of the year prior to the Calendar Year in which deferral is sought.

5.02 Transfer, Consolidation of Corporate Interests. A Participant with a vested interest in one (1) or more other unfunded, elective deferred compensation plans maintained by the Corporation (including, without limitation, interests held under the Keithley Instruments, Inc. Deferred Compensation Plan (as amended)) may effect a transfer of interests between such plans and this Plan by accepting an interest in the Plan in lieu of some or all of the interest(s) then held under such other deferred compensation plan. To do so, however, such Participant and the Corporation must agree to compromise and extinguish outright such Participant’s interest under such other Plan, in full accord and satisfaction of such other plan interest, and in addition consent and agree to each of the following terms and conditions: (a) extinguishment of the interest held under the other Keithley maintained plan shall be a condition precedent to the creation of the indicated Plan interest; (b) a Plan interest created as a result of this paragraph shall only be created (and other plan interests are only extinguished) as of the last day of a calendar month selected by the Participant, based on the interests then held under such other plan; (c) both the Participant and the Corporation must consent and agree to such transfer of interest; (d) the extinguishment of such other deferred compensation plan interests must not be prohibited under the terms of such other plan(s); (e) any such transfer of interest must not materially accelerate the date such other plan interest(s) otherwise would be paid to (or in respect of) the Participant; and (f) any such transfer of interest must not have the effect of accelerating the interest held under such other plan(s) for federal tax purposes (including, without limitation, the economic benefit and constructive receipt income tax doctrines).

5.03 Petition to Cease Deferrals Mid-Year. In the event a Participant incurs an unforeseeable emergency as defined in Paragraph 10.03, the Participant may petition the Plan Administrator to allow for a cessation of the monies being deferred hereunder during the Calendar Year. It shall be at the sole discretion of the Plan Administrator, after considering the circumstances of each such case, to either grant or reject such a request and, if granted, the Participant shall be prohibited from making deferrals under Paragraph 1.02 for the remainder of the Calendar Year in question and for the next succeeding Calendar Year.

ARTICLE SIX

6.01 Retirement and Termination Benefit. Following the date the Participant Separates from Service with the Corporation and all Affiliates, or if later, attains his or her Normal Retirement Date or Early Retirement Date, the Corporation shall thereafter pay to the Participant, his or her Account. A Participant’s Account shall be payable in substantially equal annual installments for the period of time selected by the Participant in Exhibit A (Election Deferral Form) attached hereto. The amount of each annual installment shall be determined at the sole discretion of the Plan Administrator based on the value of the Participant’s Account at the date payment is due, based on the interest rates prevailing at that time. Such payments shall commence on or about the first day of the first month following the Participant’s Separation from Service or retirement date (as applicable).

In the event the Participant is a Specified Employee (as previously defined herein) such payment shall not begin before the date that is six (6) months after the date that the Participant experiences a Separation from Service (other than due to the Participant’s death or Disability). In the event a Participant who is a Specified Employee has elected to receive benefits under this Plan in annual installment payments, such installments that would normally be paid during the six (6) months following the date that the Participant experiences a Separation from Service, shall be accumulated and paid no earlier than the first day of the seventh (7^th) month following the date of Participant’s Separation from Service.

6.02 Accelerated Payments. The Plan Administrator shall make payment of all or a part of the Participant’s Account balance, in accordance with Paragraph 3.02, before any payments would otherwise be due, in each of the following circumstances (subject to the indicated conditions and restrictions): (a) if the Plan fails to meet the requirements of Code Section 409A and the Treasury Regulations thereunder (but limited to the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A and the Treasury Regulations thereunder); or (b) to the extent such Plan interest is awarded or otherwise becomes payable to a former spouse of a Participant, under the terms of a domestic relations order (as defined in Code Section 414(p)(1)(B)); or (c) if there occurs a Change in Control (as defined under Paragraph 3.02 hereof) that also qualifies as a Change in Control within the meaning of Treasury Regulation Section 1.409A-2(i)(5)(i)-(vii) and as described in this Section 6.02.

For purposes of this Paragraph 6.02, a Change in Control under Treasury Regulation Sections 1.409A-2(i)(5)(i)-(vii) occurs if (a) a change in ownership occurs whereby a person, or a group of persons acting together, acquires more than fifty percent (50%) of the stock of the Corporation, measured by voting power or value; (b) a change in effective control occurs if, over a twelve (12) month period: (i) a person or group acquires stock representing thirty percent (30%) of the voting power of the Corporation; (ii) a majority of the members of the Board of Directors of the parent corporation is replaced by directors not endorsed by the persons who were members of the Board before the new directors’ appointment; or (iii) a Change in Control based on the sale of assets occurs if a person or group acquires forty percent (40%) or more of the gross fair market value of the assets of the Corporation over a twelve (12) month period. The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Code Section 409A.

In the event the Participant is a Specified Employee (as previously defined herein) any payment otherwise permitted or required by this Paragraph 6.02 shall not begin before the date that is six (6) months after the date of the Change in Control. In the event a Participant who is a Specified Employee has elected to receive benefits under this Plan in annual installment payments, such installments that would normally be paid during the six (6) months following the Change in Control, shall be accumulated and paid no earlier than the first day of the seventh (7^th) month following the date of the Change in Control.

ARTICLE SEVEN

7.01 Disability Benefit. The Participant shall be entitled to receive payments hereunder following such Participant’s Separation from Service date but prior to his or her Normal Retirement Date or Early Retirement Date (as applicable), if it is determined by a duly licensed physician selected by the Corporation that, because of ill health, accident, or disability, the Participant was no longer able to properly and satisfactorily perform his or her regular duties for the Corporation. If the Participant’s relationship with the Corporation terminated pursuant to this paragraph, the benefit payable hereunder shall be the vested value of the Participant’s Account on the date of the physician’s disability determination. The Disability Benefit payable under this Article shall be payable in equal annual installments for the period of time selected by the Participant in Exhibit A (Election Deferral Form) attached hereto, with the first payment due on or about the first day of the third month following the determination of disability.

ARTICLE EIGHT

8.01 Death Benefit Prior to Commencement of Benefits. In the event of the Participant’s death prior to commencement of benefit payments, the Corporation shall distribute such Participant’s Account as soon as practicable, however, no later than ninety (90) days following the date of such Participant’s death. The benefit payable under this Article shall be distributed to the Participant’s beneficiary in a lump sum payment (less any applicable withholding) and will be paid according to the last beneficiary designation received by the Corporation from the Participant prior to his or her death. If no such designation has been received by the Corporation, such payment shall be made to the Participant^‘s surviving legal spouse. If the Participant is not survived by a legal spouse, or if such spouse shall fail to so appoint, the said payment shall be made to the then living children of the Participant, if any, in equal shares. If there are no surviving children, the payment will be made to the estate of the later to die of the Participant and (if any) his or her legal spouse. Such payment shall be made on or about the first day of the third month following the Participant’s death; provided, that the Plan Administrator in its sole discretion may delay payment of the benefit described in this paragraph for a period not to exceed one hundred eighty (180) days, in order to resolve any dispute arising over the proper identity of the parties entitled to receive such payment.

8.02 Death Benefit After Commencement of Benefits. In the event a Participant dies after the commencement of benefit payments, but prior to the completion of all such payments due and owing hereunder, the Corporation shall continue to make such payments, in installments over the remainder of the period specified in Exhibit A hereof, as if the Participant had survived. Such continuing payments shall be made to the Participant’s designated beneficiary in accordance with the last such designation received by the Corporation from the Participant prior to his or her death. If no such designation has been received by the Corporation, such payments shall be made to the Participant’s surviving legal spouse. If such spouse dies before receiving all payments to which he or she is entitled hereunder, then payments shall continue, for the remainder of the payment period, to such person or persons, including his or her estate, as he or she may designate in the last beneficiary designation received by the Corporation from such spouse prior to his or her death. If the Participant is not survived by a legal spouse, or if such spouse shall fail to so appoint, then said payments shall be made to the then living children of the Participant, if any, in equal shares. If there are no surviving children, the payments will be made to the estate of the later to die of the Participant and (if any) his or her legal spouse. Such continuing payments shall commence as of the first day of the first month following the Participant’s death.

ARTICLE NINE

9.01 Termination Benefits. In the event the Participant’s relationship with the Corporation and all Affiliates terminates for any reason other than death, Disability or for cause, the Corporation shall pay to the Participant a Termination Benefit upon the Separation from Service. The amount payable shall be equal to the Participant’s vested Account as of the date of the Separation from Service and shall be payable in equal annual installments for the period of time selected by the Participant in Exhibit B (Participation Agreement) attached hereto. Such payments shall commence no later than ninety (90) days following the Participant’s Separation from Service.

In the event the Participant is a Specified Employee (as previously defined herein) such payment shall not begin before the date that is six (6) months after the date that the Participant experiences a Separation from Service (other than due to the Participant’s death or Disability). In the event a Participant who is a Specified Employee has elected to receive benefits under this Plan in annual installment payments, such installments that would normally be paid during the six (6) months following the date that the Participant experiences a Separation from Service, shall be accumulated and paid to such Participant (or in the event of his death, to his estate) no earlier than the first day of the seventh (7^th) month following the date of such Participant’s Separation from Service.

9.02 Termination for Cause. Termination “for cause” shall mean (i) conviction of robbery, bribery, extortion, embezzlement, fraud, grand larceny, burglary, perjury, income tax evasion, misapplication of company funds, false statements in violation of 18 U.S.C. Sec. 1001, and any other felony that is punishable by a term of imprisonment of more than one year, or (ii) any breach of the participant^‘s duty of loyalty to the corporation, any acts of omission in the performance of his company duties not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction in the performance of his company duties from which the participant derived an improper personal benefit. In the event the Participant’s relationship with the Corporation and all Affiliates is terminated for cause, no benefits of any kind will be due or payable under the terms of the Plan and such Participant’s Account (less such Participant’s interest in the Account attributable to deferrals) shall be forfeited.

ARTICLE TEN

10.01 Application for Unforeseeable Emergency Distribution. In the event a Participant incurs an unforeseeable emergency, as defined in Paragraph 10.03, such Participant may apply to the Plan Administrator for an unforeseeable emergency distribution. After a Participant’s death, his or her beneficiary may apply for an unforeseeable emergency distribution, and references herein to the Participant shall include the beneficiary. The Plan Administrator shall consider the circumstances of each such case, and the best interests of the Participant and his or her family, and shall have the right, in its sole discretion, to allow such application, in full or in part, or to refuse to make an unforeseeable emergency distribution.

10.02 Amount of Distribution. In no event shall the amount of any unforeseeable emergency distribution exceed the amount that is reasonably necessary to satisfy the emergency need. Whether a Participant is faced with an unforeseeable emergency is to be determined based on the relevant facts and circumstances of each case, but, in any such case, a distribution on account of an unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan. Payment of any such distribution shall be made within thirty (30) days following the determination that a distribution will be permitted under this Article 10.

10.03 Unforeseeable Emergency. For purposes of this Article, an “unforeseeable emergency” means: (a) a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); (b) loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster); or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

10.04 Further Deferrals. A Participant who receives an unforeseeable emergency distribution shall be prohibited from making deferrals under Paragraph 1.02 for the remainder of the Calendar Year in which the distribution is made and for the next succeeding Calendar Year.

10.05 Rules Adopted by Plan Administrator. The Plan Administrator shall have the authority to adopt additional rules relating to unforeseeable emergency distributions. In administering these rules, The Plan Administrator shall act in accordance with the principle that the primary purpose of this Plan is to provide additional retirement income, not additional funds for current consumption.

10.06 Limit on Number of Distributions Due to Unforeseeable Emergency. No Participant may receive more than one unforeseeable emergency distribution in any Calendar Year

10.07 In-Service Distribution. At the time of completing an “Election of Deferral”, a Participant may elect to receive an In-Service Distribution, so long as such Distribution specifies a date of distribution or prescribes a fixed schedule of distributions.

10.08 Timing of Distribution. An In-Service Distribution shall be made (or in the case of a schedule, commence) on the date elected by the Participant. In all cases, such date elected must be before the Normal Retirement Date.

10.09 Amount of In-Service Distribution. The amount of an In-Service Distribution shall in any event be specified by the Participant, up to one hundred percent (100%) of the amounts deferred by the Participant under Paragraph 1.02 hereof, plus any investment gains or losses attributable thereto.

ARTICLE ELEVEN

11.01 Beneficiary Designation. The Participant shall have the right, at any time, to submit in substantially the form attached hereto as Exhibit C, a written designation of primary and secondary beneficiaries to whom payment under this Plan shall be made in the event of his or her death prior to complete distribution of the benefits payable. Each beneficiary designation shall become effective only when receipt there of is acknowledge in writing by the Corporation. The Corporation shall have the right, in its sole discretion, to reject any beneficiary designation which is not in substantially the form attached hereto as Exhibit C. Any attempt to designate a beneficiary, otherwise than as provided in this Article, shall be ineffective.

ARTICLE TWELVE

12.01 No Trust Created. Nothing contained in this Plan, and no action taken pursuant to its provisions by any individual shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Corporation and any other individual.

12.02 Benefits Payable Only From General Corporate Assets: (Unsecured General Creditor Status of Participant). (a) Payments to the Participant or any beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Corporation; and no individual shall have any interest in any such asset by virtue of any provision of this Plan. The Corporation’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that any individual acquires a right to receive payments from the Corporation under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Corporation; no such individual shall have or acquire any legal or equitable right, interest or claim in or to any property or assets of the Corporation. (b) In the event that, in its discretion, the Corporation purchases an insurance policy or policies insuring the life of a Participant (or any other property), to allow the Corporation to recover or meet the cost of providing benefits, in whole or in part, hereunder, no Participant or beneficiary shall have any rights whatsoever therein or in the proceeds therefrom. The Corporation shall be the sole owner and beneficiary of any such insurance policy or property and shall possess and may exercise all incidents of ownership therein.

12.03 No Contractual Relationship. Nothing contained herein shall be construed to be a contract for personal services for any term of years, or as conferring upon the Participant the right to continue to render services to the Corporation in his or her present capacity or in any capacity. It is expressly understood that this Plan relates to the payment of deferred compensation for the Participant’s services, payable after such Participant’s relationship with the Corporation terminates, and is not intended to be a personal services contract.

12.04 Interests Not Transferable. No Participant or beneficiary under this Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part of all of the interest otherwise distributable hereunder. No such Plan interest shall be subject to seizure by any creditor of any such Participant or beneficiary, by any proceeding at law or in equity, nor shall such interest be transferable by operation of law in the event of bankruptcy, insolvency or death of the Participant or beneficiary. Any such attempted assignment shall be void. No such right, benefit or interest shall be liable for or subject to the debts, contracts, liabilities, or torts of the individual entitled to such benefits, including claims for alimony, support, or separate maintenance by the spouse or ex-spouse of the Participant. If a Participant should become insolvent or bankrupt, or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right to benefits under this Plan, such Participant’s interest in the Plan, in the discretion of the Plan Administrator, shall be extinguished. In such event, the Plan Administrator in its sole discretion may hold or apply the interest at issue, or any part thereof, for the benefit of such Participant, such Participant’s spouse, or such Participant’s beneficiary, in such manner as the Plan Administrator in its sole discretion may deem proper. Notwithstanding the generality of the foregoing, the Corporation shall have the unrestricted right to set off against or recover out of any payments or benefits becoming payable to or for the benefit of a Participant, at the time such payments or benefits otherwise become payable hereunder, any amounts owed or owing to the Corporation by such Participant.

12.05 Indemnification Against Third Party Claims. Each Participant, by executing a Participation Agreement and becoming a Participant hereunder, acknowledges and agrees to indemnify and hold the Corporation harmless from and against any damages, losses and expenses (including without limitation litigation costs incurred by the Corporation in connection with the administration of the Plan) arising from third-party claims disputes involving such Participant’s Plan interest (including without limitation, tax liens and levies, creditors’ claims, garnishment and bankruptcy proceedings, and proceedings in domestic relations court).

12.06 Hold Harmless of Corporate Agents. The Corporation, and its directors, officers and employees, shall be free from liability, joint or several, for personal acts, omissions, and conduct, and for the acts, omissions and conduct of duly appointed agents, in the administration of this Plan so long as taken in good faith.

12.07 Taxes; No Guarantee of Tax Consequences. The Corporation shall be entitled to withhold and remit any federal, state and local taxes from any distribution (including any interest earned) made hereunder which such Corporation believes are necessary, appropriate, or required by relevant law, regulation or ruling. The Corporation makes no representation, warranty or guarantee of any federal, state or local tax consequences of participation in the Plan to any Participant or beneficiary thereof, or any personal representative or attorney-in-fact for any such Participant or beneficiary.

ARTICLE THIRTEEN

13.01 Claim Procedure. A person who believes that he or she is being denied a benefit to which he or she is entitled under the Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Corporation, setting forth his or her claim. The request must be addressed to the Board.

13.02 Claim Decision. Upon receipt of a claim, the Corporation shall advise the Claimant that a reply will be forthcoming within ninety (90) days and the Plan Administrator shall, in fact, deliver such reply within such period. The Plan Administrator may, however, extend the reply period for an additional ninety (90) days for reasonable cause. If the claim is denied in whole or in part, the Plan Administrator shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth:

i The specific reason or reasons for such denial;

ii Specific reference to pertinent provisions of this Plan on which such denial is based;

iii A description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary;

iv Appropriate information as to the steps to he taken if the Claimant wishes to submit the claim for review; and

v The time limits for requesting a review under subsection iii and for review under subsection iv hereof.

13.03 Request for Review. Within sixty (60) days after receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Corporation review the Plan Administrator’s determination. Such request must be addressed to the Secretary of the Corporation at its then principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Corporation. If the Claimant does not request a review of the determination within such sixty (60)-day period, he or she shall be barred and estopped from challenging the determination.

13.04 Review of Decision. Within sixty (60) days after the Corporation’s receipt of a request for review, it will review the Plan Administrator’s determination. After considering all materials presented by the Claimant, the Corporation will render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the sixty (60)-day time period be extended, the Corporation will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review.

13.05 Effect of Reviewed Decision. A final decision by the Corporation, made following a review conducted in accordance with the provisions of Paragraph 13.04 hereof, shall be final, conclusive and binding on the Claimant, such Claimant^‘s dependents and/or beneficiaries, and such Claimants heirs and assigns.

ARTICLE FOURTEEN

14.01 Amendment. This Plan may be amended or terminated by the Corporation at any time, without notice to or consent of any person. Any such amendment or termination shall take effect as of the date specified therein and, to the extent permitted by law, may have retroactive effect. However, no such amendment or termination shall reduce (i) the amount then credited to the Participant’s Account, or (ii) his or her vested percentage under Paragraph 3.01. If the Plan is terminated, benefits will be distributed in accordance with Article Six hereof. Any other provision of this Plan to the contrary notwithstanding, the Plan may be amended by the Corporation at any time, and retroactively if required to the extent that, in the opinion of the Corporation, such amendment is needed to ensure that the Plan will be characterized as a plan maintained principally for a select group of management or highly compensated employees, as described in sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, or to conform the Plan to the requirements of any applicable law, including ERISA and the Code. No such amendment shall be considered prejudicial to any interest of a Participant or beneficiary hereunder.

ARTICLE FIFTEEN

15.01 Notice. Any notice, consent or demand required or permitted to be given under the provisions of this Plan shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed, it shall be sent by United States certified mail, postage prepaid, addressed to the addressee’s last known address as shown on the records of the Corporation. The date of such mailing shall be deemed the date of notice consent or demand. Any person may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

ARTICLE SIXTEEN

16.01 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Plan Administrator may, in its discretion, make such distribution (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or committee or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Plan Administrator, the Corporation and Plan from further liability on account thereof.

ARTICLE SEVENTEEN

17.01 Board Authority. The Board shall have full power and authority to interpret, construe, and administer this Agreement and the Board’s interpretations and constructions thereof, and actions thereunder, including any valuation of a Participant’s Account or the amount or recipient of any distribution to be made therefrom, shall be binding and conclusive on all persons for all purposes, subject to the terms and conditions of Article Twelve. No member of the Board shall be liable to any person for any action taken or admitted in connection with the interpretation and administration of this Agreement unless attributable to their willful misconduct or lack of good faith.

ARTICLE EIGHTEEN

18.01 Governing Law. The Plan and the rights and obligations of all persons hereunder shall be governed by and construed in accordance with the laws of the State of Ohio, other than its laws regarding choice of law, to the extent that such state law is not preempted by federal law.

18.02 Entire Agreement. This Plan instrument, and Exhibits A, B and C (incorporated herein by reference) represent the entire agreement and understanding between the Corporation and those individuals having or acquiring an interest hereunder. Accordingly, all prior or contemporaneous oral statements and writings hereby are superseded.

18.03 Transition Relief for Payment Election. A Participant may no later than December 31, 2008, or such date as permitted under Code Section 409A, elect to change the time or form of payment to a date otherwise permitted for such payment; provided, however, that no amount subject to the election shall be otherwise payable in the year in which the election is made and that such election shall not cause an amount to be paid in the year of election what would not otherwise be payable in such year. This Paragraph 18.03 is intended to comply with Internal Revenue Service Notice 2006-79, as modified and superseded by Internal Revenue Service Notice 2007-86, and any other guidance issued under Code Section 409A.

18.04 Pre-2005 Deferrals. Any amounts deferred and any earning thereon in taxable years beginning before January 1, 2005 under the Plan shall be exempt from the application of Section 409A of the Code.

18.05 Code Section 409A Compliance. This Plan is intended to be operated in compliance with the provisions of Code Section 409A (including any rulings or regulations promulgated thereunder). In the event that any provision of this Plan fails to satisfy the provisions of Code Section 409A, such provision shall be reformed so as to comply with Code Section 409A and to preserve as closely as possible the intention of the Corporation in maintaining the Plan; provided that, in the event it is determined not to be feasible to so reform a provision of this Plan as it applies to a payment or benefit due to a Participant or his or her Beneficiary(ies), such payment shall be made without complying with Code Section 409A.

IN WITNESS WHEREOF, the Corporation has executed this Plan as of the day and year above first written.


	KEITHLEY INSTRUMENTS, INC.
	By:	/s/ Mark J. Plush
		Title: Vice President and Chief Financial Officer
		Date: December 31, 2008

EX-10.7 9 c80368exv10w7.htm EXHIBIT 10.7 Filed by Bowne Pure Compliance

Exhibit 10.7

KEITHLEY INSTRUMENTS, INC.

DEFERRED COMPENSATION PLAN

(Amended and Restated January 1, 2005)

This Deferred Compensation Plan is established the 11th day of February, 1984 by Keithley Instruments, Inc. (the “Company”) in accordance with the terms and provisions as set forth below. The Company now amends and restates this Plan, effective January 1, 2005.

Definitions

Whenever used in the Deferred Compensation Plan and the applicable forms under the Plan, namely, the Irrevocable Election to Participate and the Beneficiary Designation, the following terms shall have the respective meanings set forth below unless otherwise expressly provided, and when the defined meaning is intended, the term is capitalized:

	a.		Account — means the bookkeeping liability established to reflect each Participant’s deferred compensation together with interest thereon.

	b.		Affiliate — Any corporation, partnership, limited liability company, joint venture, association, or similar organization or entity, which is a member of a controlled group of corporations that includes, or which is an entity which is under common control with, the Company. For purposes of determining the presence of a “controlled group of corporations,” or “common control,” the standards set forth in Section 414(b) and 414(c) of the Code and related regulations shall apply.

	c.		Board — means the Board of Directors of Keithley Instruments, Inc.

	d.		Bonus — means any cash bonus which may be payable to an Employee.

	e.		Section 409A Change in Control — means a Change in Control that satisfies the conditions imposed by Treasury Regulation Sections 1.409A-2(i)(5)(i)-(vii). Such conditions shall be considered met in any one of the following three circumstances: (i) where a person, or a group of persons acting together, acquires more than fifty percent (50%) of the stock of the Corporation, measured by voting power or value; (ii) where, over a twelve (12) month period: (a) a person or group acquires stock representing thirty percent (30%) of the voting power of the Corporation; or (b) a majority of the members of the Board of Directors of the parent corporation is replaced by directors not endorsed by the persons who were members of the Board before the new directors’ appointment; or (iii) where a person or group acquires forty percent (40%) or more of the gross fair market value of the assets of the Corporation over a twelve (12) month period. The determination as to the occurrence of a Section 409A Change in Control shall be based on objective facts and in accordance with the requirements of Code Section 409A.

	f.		Code — means the Internal Revenue Code of 1986, as amended.

	g.		Committee — means the Compensation Committee of the Board or such other Committee composed of no fewer than three (3) members as may be designated by the Board to administer this Plan.

	h.		Company — means Keithley Instruments, Inc., or any successor thereto.

	i.		Disability — means (i) a Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) a Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.

	j.		Employee — means an individual who is employed by the Company or a Subsidiary on a full-time basis in a managerial or executive capacity.

	k.		Irrevocable Election to Participate or Irrevocable Election Agreement — means the irrevocable election agreement which must be executed by a Participant in order for the Employee to participate in any Year.

	l.		Participant — means an Employee who may receive a Performance Award or other Supplemental Compensation in any Year and who has been designated by the Committee or its designate(s) as eligible for participation in the Plan for that Year.

	m.		Performance Award — means any cash bonus or Performance Award which may be payable to an Employee.

	n.		Plan — means this Deferred Compensation Plan as it may be amended from time to time.

	o.		Retirement — means the date of retirement according to the terms of the Company’s Employees’ Pension Plan or the terms of any Subsidiary’s pension plan.

	p.		Separation from Service — means a termination of employment with the Company and all Affiliates (whether by death, retirement, or otherwise) which ends or substantially reduces the personal services a Participant performs (or is expected to perform) for the Company and all Affiliates. Except in the case of a Participant on a bona fide leave of absence as provided below, a Participant is deemed to have incurred a Separation from Service if the level of services to be performed by the Participant after a date certain is reasonably expected to be reduced to twenty percent (20%) or less of the average services rendered by the Participant during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding period during which such Participant was on a bona fide leave of absence.

			A Participant absent from work due to military leave, sick leave, or other bona fide leave of absence shall incur a Separation from Service on the first date immediately following the later of: (a) the six month anniversary of the commencement of the leave, or (b) the expiration of the Participant’s right, if any, to reemployment under statute or contract. Notwithstanding the foregoing, a Participant who is absent due to a physical or mental impairment that is expect to result in death or last for a continuous period of at least six months and that prevents the Participant from performing personal services for the Company (or its Affiliates, as applicable) shall be deemed to have incurred a Separation from Service on the first date immediately following the 29-month anniversary of the commencement of the leave.

	q.		Specified Employee — A Participant who, as of the date of his or her Separation from Service, is a “key employee” of the Company or any Affiliate, so long as the Company’s stock (or the stock of any Affiliate) is publicly traded on an established securities market or otherwise. A Participant is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5)) at any time during the 12-month period ending on a given December 31st. Such key employee shall be treated as a specified employee for the entire 12-month period beginning on the April 1^st next following the December 31st on which such Participant qualifies as a key employee hereunder.

			For purposes of determining whether a Participant is a Specified Employee, the compensation of the Participant shall be determined in accordance with the definition of compensation provided under Treasury Regulation Section 1.415(c)-2(a). Notwithstanding the foregoing, if a different definition of compensation has been designated by the Company with respect to another nonqualified deferred compensation plan in which a key employee participates, the definition of compensation shall be the definition as provided under Treasury Regulation Section 1.415(c)-2(a), unless the Company elects (by applicable corporate action) to use a different definition of compensation with respect to all nonqualified deferred compensation plan maintained by the Company.

	r.		Subsidiary — means any corporation at least fifty percent (50%) of the voting shares of which is owned by the Company either directly or indirectly and which has been authorized by the Board to participate in the Plan.

	s.		Supplemental Compensation — means compensation payable to an Employee which is in addition to an Employee’s salary and which the Committee, in its sole discretion, may deem to be deferrable, either in whole or in part, under the terms and conditions of the Plan.

	t.		Termination — means termination of employment for any reason other than Retirement including death, disability, resignation or release from employment with the Company or a Subsidiary.

	u.		Year or Plan Year — means the Company’s fiscal year which ends on each September 30 during which the Plan is in effect.

Purpose of the Plan

The purpose of the Plan is to furnish a benefit to those Employees who contribute to the success of the Company and to assist the Company in attracting and retaining such Employees.

Establishment of the Plan

The Plan is established effective as of October 1, 1983. The effective date of this amendment and restatement, however, is January 1, 2005.

Administration of the Plan

The Committee shall manage and implement the provisions of the Plan. The Committee shall have the authority to interpret the Plan, adopt and revise rules and regulations relating to the Plan and make any other determinations which it believes necessary or advisable for the administration of the Plan. Decisions and determinations by the Committee shall be final and binding on Participants and other Employees except as otherwise provided in Paragraph 18.

The Committee may delegate to such persons as they select any powers and duties with respect to the Plan as the Committee shall deem appropriate.

Designation of Participants

The Committee or its delegate(s) shall designate Participants in the Plan in any Year from among those Employees who may be eligible to receive a Bonus, Performance Award or Supplemental Compensation during that Year on the following terms:

	a.		The Committee or its delegate(s) shall notify those Employees whom it has selected as Participants in the Plan no later than the end of the Year in which the Bonus or Supplemental Compensation is earned or the end of the Performance Period with respect to any Performance Award.

	b.		The Committee may from Year to Year, at its discretion, change the eligibility requirements for participation in the Plan.

Requirements for Participation

In order to participate in any Year, the Participant must complete and return the Irrevocable Election Agreement no later than the dates set forth in Section 6(b) and agree to defer a minimum of twenty-five percent (25%) of any Bonus, Performance Award or Supplemental Compensation which the Company or Subsidiary would otherwise pay to the Participant during such Year.

	b.		If a Participant desires to defer any Bonus, Performance Award or Supplemental Compensation, or the required portion thereof, the Irrevocable Election Agreement must be completed and returned (i) prior to the beginning of the Year in which the Bonus or Supplemental Compensation is earned, or (ii) on or before six (6) months before the end of the Performance Period with respect to any Performance Award.

	c.		At the time the Irrevocable Election Agreement is completed, the Participant shall be required to specify the term of deferral and manner of payment in accordance with the options provided in Section 8.

	d.		Completion of the Irrevocable Election Agreement as to any Bonus, Performance Award or Supplemental Compensation shall subject the amount deferred to all the terms and conditions of the Plan.

Deferred Compensation Account

The Company shall establish a bookkeeping liability, an Account, for each Participant in the Plan on the following terms:

	a.		The Account shall serve solely as a device for determining the amount to be paid to the Participant at the time specified for payment. The Account will not be funded by the Company or the Subsidiary and it will not constitute or be treated as funds set aside in trust or escrow and the Participant shall have no proprietary right of any nature with respect to such Account.

	b.		At such time as a Bonus, Performance Award or Supplemental Compensation would otherwise be paid to a Participant, his Account shall be credited with an amount equal to that portion of the Bonus, Performance Award or Supplemental Compensation which the Participant had designated to be deferred and be subject to this Plan reduced by the Employee’s portion of any Social Security taxes which are payable with respect to the deferred amounts.

	c.		As of September 30 in each Year, a Participant’s Account shall be credited with interest. The rate of such interest shall equal the average of the prime rates of interest for large money center banks as reported in the Wall Street Journal for the last day of such September for which such rates are reported and the last day of the December, March and June last preceding such September and for which such rates are reported. Such interest shall be credited on the average daily balance credited to the account during the twelve (12) month period ending on such September 30th.

	d.		Amounts payable to a Participant or beneficiary pursuant to this Plan shall be debited to his Account as of the date of payment. In the event a Participant or beneficiary shall be entitled to receive the full amounts then credited to his Account, he shall also be paid interest for the period from the preceding October 1 until the date of payment. The rate of such interest shall equal the average of the prime rates of interest for large money center banks as reported in the Wall Street Journal for the last day of the December, March, June and September last preceding the date of payment and for which such rates are reported. Payment of such interest shall be in lieu of interest for such Year under paragraph c above.

Payments of Deferred Compensation

The Participant shall specify the end of the deferral term in his Irrevocable Election Agreement which ending date may be:

	1.		a specified date;

	2.		the Participant’s Retirement (or if later, the date of the Participant’s Separation from Service);

	3.		the attainment of a specified age by the Participant; or

	4.		any combination of the foregoing.

	b.		The Participant shall specify in the Irrevocable Election Agreement to have any Year’s deferral, together with interest accrued thereon, paid in a lump sum or in a specified number of approximately equal annual installments. Payment of the first installment or the lump sum shall be made on or before the January 31st coinciding with or next following the end of the deferral term.

	c.		In the event of the Participant’s Separation from Service, other than a Separation from Service upon Retirement, or upon the Participant’s death after Retirement, and prior to the end of the deferral term or before all installments have been paid with respect to any deferral of compensation earned prior to January 1, 2005, the remaining balance as reflected on the Participant’s Account shall be paid as follows:

	1.		if, under the Participant’s Irrevocable Election Agreement, the balance of the Account would have been payable within five (5) years of the date of the Participant’s Termination or death, then the Account shall be payable in accordance with the Irrevocable Election Agreement; or

	2.		if, under the Participant’s Irrevocable Election Agreement, the balance of the Account would not have been payable within five (5) years of the date of the Participant’s Termination or death, then the Account shall be payable in five installments commencing on the January 31st next following the Participant’s Termination or death and on the four (4) succeeding January 31st. Each installment shall equal the balance then credited to the Account divided by the remaining number of unpaid installments.

Notwithstanding the foregoing, with respect to any deferral of compensation earned on or after January 1, 2005, the remaining balance as reflected on the Participant’s Account shall be payable in accordance with the Participant’s Irrevocable Election Agreement.

	d.		Payments shall be made to the Participant, or in the event of the Participant’s death, to the beneficiary according to Section 10 and in no event later than ninety (90) days following the Participant’s Separation from Service or the Participant’s date of death. If no beneficiary has been designated, payment shall be made to the Participant’s spouse, if he or she survives the Participant, or, if the Participant does not have a surviving spouse, payment shall be made to the Participant’s estate.

	e.		The Committee shall accelerate the time and manner of making payments from the Participant’s Account in the event of a Section 409A Change in Control.

	f.		All payments made to a Participant, beneficiary of a deceased Participant or the estate of the Participant pursuant to Section 8 shall be debited to the Participant’s Account as of the date of payment.

	g.		The Company shall have the right to withhold and pay over any and all withholding taxes which it may be required to collect under federal, state or local law with respect to payments hereunder.

	h.		In the event the Participant incurs a Separation from Service (other than on account of death or Disability) while a Specified Employee such payment shall not begin before the date that is six (6) months after the date of such Separation from Service. In the event a Participant who is a Specified Employee has elected to receive benefits under this Plan in annual installment payments, such installments that would normally be paid during the six (6) months following the date that the Participant experiences a Separation from Service, shall be accumulated and paid to such Participant (or in the event of such Participant’s death, to his estate), no earlier than the first day of the seventh (7^th) month following the date of such Participant’s Separation from Service.

Additional Distribution

If Bonuses deferred under this Plan are not considered as pay in determining benefits under the Keithley Instruments, Inc. Employees’ Pension Plan, as such Plan may be amended from time to time hereafter, or the pension plan of a Subsidiary, then, if necessary, a supplemental payment of equivalent actuarial value as determined by the Company’s consulting actuaries for the pension plan shall be made by the Company, or, if applicable, a Subsidiary, with each payment (which will be in addition to the amounts payable under Paragraph 8) to compensate a Participant for any reduction in benefits suffered under the pension plan due to the deferral of a Bonus under this Plan.

Notwithstanding the foregoing, such payment under this Section 9 must conform to the requirements of the Participant’s Irrevocable Election Agreement as provided for under Section 8. In the event payment is scheduled to commence to such Participant an account of a Separation from Service (other than an account of death or Disability) while such Participant is a Specified Employee (as previously defined herein) any payment otherwise permitted or required by this Section 9 shall not begin before the date that is six (6) months after the payment date contained in the Participant’s Irrevocable Election Agreement. In the event a Participant who is a Specified Employee receives benefits under this Section, such payment shall be accumulated and paid to such Participant (or in the event of such Participant’s death, to his estate) no earlier than the first day of the seventh (7^th) month following the date of the Change in Control.

10.

Designation of Beneficiary

Each Participant shall have the right to designate a beneficiary or beneficiaries to receive any amount credited to his Account remaining unpaid at the Participant’s death. Such designation shall be effected by filing written notification with the Committee and may be changed from time to time by similar action. If the Participant fails to make such designation, any such unpaid amount credited to his Account shall be paid to the Participant’s surviving spouse, if any, or, if there is no surviving spouse, to the Participant’s estate in the manner provided in Paragraph 8(c).

11.

Non-Alienation of Payments

Any amount payable from a Participant’s Account shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment, or encumbrance of any kind, by will, or by inter vivos instrument. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such payment, whether presently or thereafter payable, shall not be recognized by the Committee or the Company. Payments under the Plan shall not in any manner be subject to the debts or liabilities of any Participant except that the Company shall have the right to charge the Participant’s Account for any amounts due and owing to the Company by the Participant. If a Participant shall attempt to alienate, sell, transfer, assign, pledge or otherwise encumber payments under the Plan or any part thereof, or if by reason of the Participant’s bankruptcy or other event happening at any time such payments would devolve upon anyone else or would not be enjoyed by the Participant, then the Committee, in its discretion, may terminate the Participant’s interest in any such benefit, and hold or apply it for the benefit of such Participant, the Participant’s spouse, children, or any dependents, or any of them, in such manner as the Committee may deem proper.

12.

Incompetency

Every person receiving or claiming payments under this Plan shall be conclusively presumed to be mentally competent until the date on which the Committee receives a written notice, in form and manner acceptable to the Committee, that such person is incompetent and that a guardian, conservator, or other person legally vested with the care of the person’s estate has been appointed. In the event a guardian or conservator of the estate of any person receiving or claiming payments under this Plan shall be appointed by a court of competent jurisdiction, payments may be made to such guardian or conservator provided that proper proof of appointment and continuing qualification is furnished in form and manner acceptable to the Committee. Any such payment so made shall be a complete discharge of any liability therefor.

13.

Right to Other Benefits

Participation in this Plan shall not disqualify a Participant from the right to participate in other benefits of the Company or a Subsidiary to which the Participant may be entitled. However, deferral of amounts under this Plan may affect the extent of participation depending on the terms of such other plan of the Company or a Subsidiary.

14.

No Right to Continued Employment

In no event shall participation in this Plan give or be deemed to give a Participant any right to be retained in the employ of the Company.

15.

Amendment or Termination of the Plan

The Committee reserves the right to amend, modify or discontinue future deferrals under the Plan at any time; provided, however, no such action shall:

	a.		reduce the then amount credited to any Participant’s account;

	b.		reduce the rate of interest to be credited until the date of payment to amounts deferred prior to the date of such action;

	c.		change the date of payment or the manner of payment of any amounts deferred prior to the date of such action or the interest thereon; or

	d.		provide for any forfeiture of any amounts deferred prior to the date of such action or the interest thereon;

without the express written consent of the Participant or the beneficiary of a deceased Participant. Notice of amendments to or discontinuance of future accruals under the Plan shall be given in writing to each Participant or beneficiary of a deceased Participant.

This Plan shall terminate in the event that:

	a.		the Company shall sell substantially all its assets, the purchaser of such assets shall fail or refuse to assume the obligations of the Company and the Company shall make liquidating distributions to its shareholders; or

	b.		the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Bankruptcy Act or any similar applicable federal or state law or shall make an assignment of its assets for the benefit of creditors.

In the event of termination of this Plan, the Account balances of each Participant and deceased Participant shall be payable immediately in a single lump sum payment.

16.

Change of Control

In the event a Change of Control of the Company has occurred or is about to occur, the Company shall notify each Participant and each beneficiary of a deceased Participant, in writing, that a Change of Control has occurred or is about to occur. In the event of a Change of Control, which also qualifies as a Section 409A Change in Control, the Company shall make payment of the Participant’s vested deferred account balance in a lump sum payment within thirty (30) days following such Change in Control.

For purposes of this Section 16, a Change of Control shall be deemed to have occurred if: (i) a tender offer shall be made and consummated for the ownership of 25% or more of the outstanding voting securities of the Company; (ii) the Company shall be merged or consolidated with another corporation and as a result of such merger or consolidation less than 75% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the former shareholders of the Company as the same shall have existed immediately prior to such merger or consolidation; (iii) the Company shall sell substantially all of its assets to another corporation which is not a wholly-owned subsidiary; or (iv) a person within the meaning of Section 13(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the Securities Exchange Act of 1934, shall acquire, other than by reason of inheritance, twenty-five percent (25%) or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record). For purposes of this Plan, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof pursuant to the Securities Exchange Act of 1934.

17.

Books and Records

The books and records to be maintained for the purpose of the Plan shall be maintained by the Company at its own expense and subject to the supervision and control of the Committee. All expenses of administering the Plan shall be paid by the Company from its own funds.

18.

Review of Claims or Determinations

Any Participant or beneficiary who desires to make a claim for a benefit under the Plan or desires a determination with respect to any provision of the Plan, shall send such claim or request in writing to the Compensation Committee, Keithley Instruments, Inc., 28775 Aurora Rd., Cleveland, Ohio 44139.

Any Participant or beneficiary who claims a benefit under the Plan which is wholly or partially denied, or requests a determination with respect to any provision of the Plan, shall be advised in writing of the denial or determination of the Committee and its reason therefor. Upon receipt of a written request which is filed with the Committee within sixty (60) days after the claim is denied or the determination is made, such Participant or beneficiary will be afforded a full and fair review by the Committee of the claim denied or the determination made. The result of such review by the Committee shall be delivered in writing within sixty (60) days after the request for review is received and shall include specific reasons for the decision.

19.

Governing Law

The Plan shall be construed, administered and governed in all respects under and by the laws of the State of Ohio.

20.

Code Section 409A Compliance

This Plan is intended to be operated in compliance with the provisions of Code Section 409A (including any rulings or regulations promulgated thereunder). In the event that any provision of this Plan fails to satisfy the provisions of Code Section 409A, such provision shall be reformed so as to comply with Code Section 409A and to preserve as closely as possible the intention of the Corporation in maintaining the Plan; provided that, in the event it is determined not to be feasible to so reform a provision of this Plan as it applies to a payment or benefit due to a Participant or his or her Beneficiary(ies), such payment shall be made without complying with Code Section 409A.

IN WITNESS HEREOF, the Company by action of its Board of Directors has caused this Amended and Restated Plan to be executed on this 31st day of December, 2008.


	KEITHLEY INSTRUMENTS, INC.
	By:	/s/ Mark J. Plush
		Its: Vice President and Chief Financial Officer

EX-10.9 10 c80368exv10w9.htm EXHIBIT 10.9 Filed by Bowne Pure Compliance

Exhibit 10.9

KEITHLEY INSTRUMENTS, INC.
2002 STOCK INCENTIVE PLAN

MANAGEMENT RESTRICTED UNIT AWARD AGREEMENT

This restricted unit award agreement (the “Agreement”) is made as of this day of , 200__ (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 the number of which are indicated on the Notice of Grant of Restricted Units attached hereto and incorporated herein by reference (the “Grant Notice”), 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.

This Agreement (including the Grant Notice and 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:

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.

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. At the Company’s discretion, 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.

Management Restricted Share Award Agreement

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)).

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.

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.

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.

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) shall immediately terminate, and otherwise be subject to forfeiture, set off and reduction for and against any claims the Company may have or asserts against Key Employee for any of the following actions by Key Employee, taken while employed by the Company and, with respect to subparagraph (a ), within a three (3)-year period commencing with the cessation of Key Employee’s Company employment:

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

Management Restricted Share Award Agreement

Page 2

Any act of embezzlement, fraud or breach of fiduciary duty during Key Employee’s employment with the Company that contributed to a restatement of the Company’s financial statements;

Any material violation (as determined by the Board of Directors) by Key Employee of the terms of any written agreement between Key Employee of the Company;

Any act of embezzlement, fraud, dishonesty, nonpayment of any obligation to the Company, breach of fiduciary duty or deliberate disregard of Company rules resulting in a loss, damage or injury to the Company.

Any attempt by Key Employee to induce any Company employee or consultant, agent or sub agent under contract with the Company to terminate his or her employment or other contractual relationship with the Company.

In the event of any violation by Key Employee of any subparagraph above, the Award evidenced hereby then held by Key Employee hereunder (whether or not then vested) shall immediately terminate, be extinguished or forfeited, and have no further effect. In addition if there is a violation of subparagraphs (a), (b) and/or (e) above, with respect to all units awarded hereunder, and with respect to any Company common shares issued or expected to be issued in connection with the 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 if the profit or income was realized within thirty-six (36) months of the violations in question. 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.

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.

Management Restricted Share Award Agreement

Page 3

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 GRANT:	By:

		Joseph P. Keithley
		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:
		Name

Management Restricted Share Award Agreement

Page 4

EX-10.10 11 c80368exv10w10.htm EXHIBIT 10.10 Filed by Bowne Pure Compliance

Exhibit 10.10

KEITHLEY INSTRUMENTS, INC.
2009 STOCK INCENTIVE PLAN

1. General. This Stock Incentive Plan (the “Plan”) provides key employees and directors of Keithley Instruments, Inc. (the “Company”) with the opportunity to acquire or expand their equity interest in the Company by making available for award or purchase Common Shares, without par value, of the Company (“Common Shares”) through the granting of nontransferable options to purchase Common Shares (“Stock Options”); the granting of Common Shares, which may be subject to restrictions on transfer and substantial risks of forfeiture (“Restricted Stock”); the granting of units representing Common Shares, which may be settled in Common Shares upon vesting based on time or the attainment of performance goals (“Restricted Stock Units”); the granting of options to receive payments based on the appreciation of Common Shares (“SARs”); and the granting of awards of Common Shares or other awards that are valued, in whole or in part, by reference to, or are otherwise based, on Common Shares (“Other Share-Based Awards”). Stock Options, Restricted Stock, Restricted Stock Units, SARs and Other Share-Based Awards shall be collectively referred to herein as “Grants”; and individually as a “Grant”. It is intended that key employees may be granted, simultaneously or from time to time, Stock Options that qualify as incentive stock options (“Incentive Stock Options”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or Stock Options that do not so qualify (“Non-qualified Stock Options”). No provision of the Plan is intended or shall be construed to grant key employees alternative rights in any Incentive Stock Option granted under the Plan so as to prevent such Option from qualifying under Section 422 of the Code.

2. Purpose of the Plan. The purpose of the Plan is to provide continuing incentives to key employees and directors of the Company and of any subsidiary of the Company by offering key employees and directors equity or equity-based incentives based on the Company’s Common Shares thereby increasing their proprietary interest in the Company’s business and enhancing their personal interest in the Company’s success.

For purposes of the Plan, a “subsidiary” means any corporation or other entity fifty percent (50%) of the stock or voting equity interests of which is directly or indirectly owned or controlled by the Company.

3. Effective Date of the Plan. The Plan was adopted by the Board of Directors on December 31, 2008, and is subject to approval by the Company’s shareholders.

4. Administration of the Plan. The Plan shall be administered by the Compensation and Human Resources Committee of the Board of Directors of the Company or by another committee selected by the Board of Directors of the Company (the “Committee”). It is intended that only directors who are both an “outside director,” within the meaning of Section 162(m) of the Code, and a “non-employee director,” as defined under Rule 16b-3(b)(3) of the Securities Exchange Act of 1934, shall be appointed to the Committee.

A majority of the Committee shall constitute a quorum. The acts of the majority of the members present at any meeting at which a quorum is present (or acts unanimously approved in writing by the members of the Committee) shall constitute binding acts of the Committee.

Subject to the terms and conditions of the Plan, the Committee shall be authorized and empowered:

(a) To select the key employees and directors to whom Grants may be made;

(b) To determine the number of Common Shares to be covered by any Grant;

(c) To prescribe the terms and conditions of any Grants made under the Plan, and the form(s) and agreement(s) used in connection with such Grants; and

(d) To delegate to one or more Company officers authority to make Grants to key employees (other than executive officers) and to individuals to whom offers of Company employment are, or are expected to be made.

The Committee shall have the authority to adopt, alter and repeal such rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any Grants issued under the Plan (and any agreements relating thereto); to direct employees of the Company or other advisors to prepare such materials or perform such analysis as the Committee deems necessary or appropriate; and otherwise to supervise the administration of the Plan.

Any interpretation or administration of the Plan by the Committee, and all actions of the Committee, shall be final, binding and conclusive on the Company, its shareholder, subsidiaries, and all participants in the Plan, their respective legal representatives, successors and assigns, and upon all persons claiming under it through any of them. No member of the Board or of the Committee shall incur any liability for any action taken or omitted, or any determination made, in good faith in connection with the Plan.

5. Individuals Eligible for Grants. Grants may be made from time to time to those key employees and directors of the Company or a subsidiary who are designated by the Committee (or by the Committee’s delegee(s) in accordance with Section 4(d) hereof), acting in its sole and exclusive discretion (each such designated employee or director, a “participant”). Notwithstanding any contrary Plan provision, Stock Options intended to qualify as Incentive Stock Options shall only be granted to employees while actually employed by the Company or a subsidiary. The Committee may grant more than one Stock Option, with or without SARs, to the same employee. No Incentive Stock Option shall be granted to any employee during any period of time when such employee is on a leave of absence.

Subject only to the provisions of the next succeeding paragraph of this Section 6, the aggregate number of Common Shares made subject to all Grants under the Plan shall be one million (1,000,000) Common Shares and the maximum number of Common Shares made subject to Grants under the Plan to any one (1) participant during any one (1)-year period shall be two hundred thousand (200,000) Common Shares. Such aggregate number(s) of Common Shares shall not include any Common Shares reacquired or never issued due to a forfeiture, exchange or relinquishment of rights under a Grant made hereunder.

If, at any time subsequent to the date of adoption of the Plan by the Board of Directors, the number of Common Shares are increased or decreased, or changed or converted into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation or other property, including cash (whether as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall be substituted for each Common Share subject to an unexercised Stock Option or SAR (in whole or in part) granted under the Plan, the number and kind of shares of stock or other securities or property into which each outstanding Common Share shall be changed or for which each such Common Share shall be exchanged and, in the case of a merger, reorganization, consolidation or similar transaction, the Committee may cancel an unexercised Stock Option or SAR in exchange for a payment equal to the amount, if any, by which the price being paid to holders of Common Shares in the merger, reorganization, consolidation or similar transaction exceeds the applicable exercise price of the Stock Option or SAR; (ii) the option price per Common Share or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to a Stock Option or SAR shall remain the same as immediately prior to such event; (iii) there shall be substituted for each Common Share represented by a Restricted Stock Unit or Other Share-Based Award granted under the Plan, the number and kind of shares of stock or other securities or property into which each outstanding Common Share shall be changed or for which each such Common Share shall be exchanged and, in the case of a merger, reorganization, consolidation or similar transaction, the Committee may cancel a Restricted Stock Unit or Other Share-Based Award for a payment equal to the number of Common Shares represented by such award multiplied by the amount per share being paid to holders of Common Shares in the merger, reorganization, consolidation or similar transaction; and (iv) any outstanding Restricted Stock that is converted, exchanged or otherwise changed into a different number or kind of stock or security, shall continue to be subject to any and all terms, conditions and restrictions originally applicable to such Restricted Stock. In addition to the foregoing, the Committee shall be entitled in the event of any such increase, decrease or exchange of Common Shares to make other adjustments to the securities subject to a Grant, the provisions of the Plan, and to any related agreements (including adjustments which may provide for the elimination of fractional shares), where necessary or desirable to preserve the terms and conditions of any Grants hereunder.

7. Stock Option Provisions.

(a) General. The Committee may grant to participants nontransferable Stock Options that either qualify as Incentive Stock Options under Section 422 of the Code or do not so qualify.

(b) Stock Option Price. The option price per Common Share which may be purchased under an Incentive Stock Option under the Plan shall be determined by the Committee at the time of Grant, but shall not be less than one hundred percent (100%) of the fair market value of a Common Share, determined as of the date such Option is granted; however, if a participant to whom an Incentive Stock Option is granted is, at the time of the grant of such Option, an “owner,” as defined in Section 422(b)(6) of the Code (modified as provided in Section 424(d) of the Code) of more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary (a “Substantial Shareholder”), the price per Common Share of such Option, as determined by the Committee, shall not be less than one hundred ten percent (110%) of the fair market value of a Common Share on the date such Option is granted. The day on which the Committee approves the granting of a Stock Option shall be considered the date on which such Option is granted. “Fair market value” shall be the closing price of the Common Shares on the New York Stock Exchange on the date the Stock Option on the date of grant (or the next trading day if the grant date is not a trading day), unless the Committee establishes a different option price or method for determining the option price at the time of approval.

(c) Exercise and Term of Stock Option. Stock Options shall be exercisable, in whole or in part, at such time or times as determined by the Committee at the time of grant; however, except as provided in Section 13, unless otherwise determined by the Committee at the time of grant, no Stock Option shall be exercisable prior to six months and one day following the date of grant. The Committee, in its sole discretion, may accelerate any exercise date, in whole or in part, based on service, performance or other factors and criteria selected by the Committee; provided, however, that any such acceleration must satisfy the requirements of Code Section 409A and the relevant Treasury Regulations unless the participant and the Committee otherwise agree. The Committee shall determine when each Stock Option is to expire. However, no Incentive Stock Option shall be exercisable for a period of more than ten (10) years from the date upon which such Option is granted. Further, no Incentive Stock Option granted to an employee who is a Substantial Shareholder at the time of the grant of such Option shall be exercisable after the expiration of five (5) years from the date of grant of such Option.

(d) Limitations on Exercise and Transfer of Stock Options. Except as otherwise provided herein, only the participant to whom a Stock Option is granted may exercise such Option, and no Stock Option granted hereunder shall be transferable by a participant, other than by will or the laws of descent and distribution. Notwithstanding the preceding sentence, a participant may transfer and assign Stock Options (other than Incentive Stock Options) if (and then, only to the extent) the participant obtains the prior consent of the Committee and otherwise complies with the requirements of this Section 7(d) (a “Permitted Transfer”). For purposes of this Plan, a Permitted Transfer consists of either (i) an irrevocable transfer by an individual to a family member (or a trust or partnership whose beneficiaries or partners are comprised of family members), if made by without payment of consideration (as further defined in 17 C.F.R. §240.16b-3); or (ii) an irrevocable transfer by an individual to an alternate payee, made under a qualified domestic relations order (as defined in 29 C.F.R. §240.16a-12 and 26 U.S.C. § 414(p)(1)(B)). Also for this purpose, a “family member” of an individual includes the participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, any person sharing the participant’s household (other than a tenant or employee). Following a Permitted Transfer, the Grants transferred shall be exercisable only by the transferee.

(e) Employment, Holding Period Requirements For Certain Options. The Committee may condition any Stock Option granted hereunder upon the continued employment of the participant by the Company or by a subsidiary, and may make any such Stock Option immediately exercisable. However, the Committee will require that, from and after the date of grant of any Incentive Stock Option until the day three (3) months prior to the date such Option is exercised, such participant must be an employee of the Company or of a subsidiary, but always subject to the right of the Company or any such subsidiary to terminate such participant’s employment during such period. Each Stock Option shall be subject to such additional restrictions as to the time and method of exercise as shall be prescribed by the Committee. Upon completion of such requirements, if any, a Stock Option or the appropriate portion thereof may be exercised in whole or in part from time to time during the option period; however, such exercise right(s) shall be limited to whole shares.

(f) Payment for Stock Option Price. A Stock Option shall be exercised by a participant giving written notice to the Company of his or her intention to exercise the same, accompanied by full payment of the purchase price together with any federal, state and local income and employment taxes required to be withheld by the Company from the participant’s wages as a result of such exercise. Such purchase price shall be paid with cash or check, or with a surrender of 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, approve other methods of exercise for a Stock Option or payment of the option price, provided that no such method shall cause any option granted under the Plan as an Incentive Stock Option to not qualify under Section 422 of the Code, or cause any Common Share issued in connection with the exercise of a Stock Option not to be a fully paid and non-assessable Common Share.

(g) Limitation on Exercisable Incentive Stock Options. The aggregate fair market value of the Common Shares first becoming subject to exercise as Incentive Stock Options by a participant during any given calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate fair market value shall be determined as of the date such Option is granted, taking into account, in the order in which granted, any other incentive stock options granted by the Company, or by a parent or subsidiary thereof.

8. Restricted Stock.

(a) Grant. The Committee shall determine to whom, and the time or times at which, Grants of Restricted Stock will be made, the number of shares of Restricted Stock to be granted, the price (if any) to be paid (subject to Section 8(b)), the period within which such Restricted Stock grants may be subject to forfeiture, and the other terms and conditions of the grants in addition to those set forth in Section 8(b). The Committee may condition the vesting of Restricted Stock upon the attainment of specified performance goals, including “Qualifying Performance Criteria” as defined in Section 14(a), or such other factors as the Committee may determine in its sole discretion.

(b) Terms and Conditions. Restricted Stock granted under the Plan shall contain any terms and conditions, not inconsistent with the provisions of the Plan, which are deemed desirable by the Committee. A participant who receives a grant of Restricted Stock shall not have any rights with respect to such Grant, unless and until such participant has executed an agreement evidencing such Grant in the form approved from time to time by the Committee, has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such Grant. In addition, Restricted Stock granted under the Plan shall be subject to the following terms and conditions:

(i) Grants of Restricted Stock shall only be accepted by executing a Restricted Stock agreement and paying whatever price (if any) is required under such agreement.

(ii) Restricted Stock may be represented by a stock certificate or uncertificated shares.

(iii) Any stock certificates evidencing Common Shares consisting of Restricted Stock shall be held in custody by the Company until any restrictions thereon shall all have lapsed. With respect to any Restricted Stock held in custody by the Company, the participant granted such Restricted Stock shall deliver to the Company a stock power, endorsed in blank, relating to the Common Shares represented by such Stock. Restricted Shares held in uncertificated form will be registered in the name of the recipient in the Company’s books and records subject to the restrictions set forth in the applicable agreement.

(iv) Subject to the provisions of the Plan and the Restricted Stock agreement, during the period of time set by the Committee and commencing with the date of such Grant (the “Restriction Period”), a participant shall not be permitted to sell, transfer, tender, pledge, assign or otherwise encumber any Restricted Stock granted under the Plan. However, the Committee, in its sole discretion, may provide for the lapse of such transfer or other restrictions in installments, or accelerate or waive such restrictions in whole or in part, based on service, performance or other factors and criteria selected by the Committee; provided, however, that any such lapse of transfer or restriction shall satisfy the requirement of Code Section 409A and the relevant Treasury Regulations unless the participant and the Committee otherwise agree.

(v) Except as provided in this Section 8(b)(vi) and Section 8(b)(v), a participant shall have, with respect to shares of Restricted Stock granted to him, all of the rights of a shareholder of the Company, including the right to vote such Restricted Stock and the right to receive any dividends thereon. The Committee, in its sole discretion and as determined at the time of a Grant of Restricted Stock, may permit or require cash dividends otherwise due and payable to be deferred and, if the Committee so determines, reinvested either in additional Restricted Stock (to the extent Common Shares are available), or otherwise. Stock dividends issued with respect to Restricted Stock shall be treated as additional shares of Restricted Stock. As Restricted Stock, such additional Common Shares will be subject to the same restrictions, terms and conditions applicable to the Restricted Stock with respect to which such additional Common Shares were issued.

(vi) No Restricted Stock shall be transferable by a participant other than by will or by the laws of descent and distribution so long as any restrictions or risk of forfeiture remain applicable, except a Permitted Transfer as defined in Section 7(d).

(c) Minimum Value Provisions. To ensure that Grants of Restricted Stock actually reflect the performance of the Company and service of the participant, the Committee may provide, in its sole discretion, for a tandem performance-based award, or other grant, designed to guarantee a minimum value, payable in cash or Common Shares, to the recipient of a Restricted Stock Grant, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee.

9. Restricted Stock Units.

(a) Grant. Restricted Stock Units may be awarded alone, in addition to or in tandem with other awards granted under the Plan. The Committee shall determine the individuals to whom, and the time or times at which, Restricted Stock Units shall be awarded, the number of Restricted Stock Units to be awarded to any participant, the terms upon which the Restricted Stock Units will vest, which may be based on time or the attainment of specified performance goals, including Qualifying Performance Criteria as defined in Section 14(a), or such other factors as the Committee shall determine in its sole discretion, and the other terms and conditions of the Award in addition to those set forth in Section 9(b).

(b) Terms and Conditions. Restricted Stock Units shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:

(i) Each Restricted Stock Unit will represent the right to receive one Common Share or, if determined by the Committee, an amount of cash equal to the fair market value of a Common Share upon vesting of the Restricted Stock Unit. Subject to the provisions of the Plan and the applicable agreement, Restricted Share Units may not be sold, assigned, transferred, pledged or otherwise encumbered. Upon vesting, share certificates, or, if applicable, cash, shall be delivered to the participant, or the participant’s legal representative, for the Common Shares represented by the Restricted Stock Units.

(ii) Amounts equal to any dividends declared during the period from the grant date to the vesting date may, at the discretion of the Committee at the time of award, be paid to the participant in cash, deferred or deemed to be reinvested in additional Restricted Stock Units that are subject to the same restrictions and other terms and conditions that apply to the Restricted Stock Units.

(iii) No Restricted Stock Units shall be transferable by a participant other than by will or by the laws of descent and distribution prior to vesting and settlement, except a Permitted Transfer as defined in Section 7(d).

10. Stock Appreciation Rights. A participant may be granted the right to receive a payment based on the increase in the value of Common Shares above the price of Common Shares on the date of such Grant (the “Grant Date Price”); such rights shall be known as Stock Appreciation Rights (“SARs”). SARs may (but need not) be granted to a participant in tandem with, and exercisable in lieu of exercising, a Grant of Stock Options. No participant shall be entitled to SAR rights solely as a result of the grant of a Stock Option to him. Any such rights, if granted, may only be exercised by the holder thereof, either with respect to all, or a portion, of the Stock Option to which it applies. In no event shall the Grant Date Price be less than one hundred percent (100%) of the fair market value of a Common Share on the date such SAR is granted. When granted in tandem with a Stock Option, an SAR shall provide that the holder of a Stock Option shall have the right to receive an amount equal to one hundred percent (100%) of the excess, if any, of the fair market value of the Common Shares covered by such Option, determined as of the date of exercise of such SAR by the Committee (in the same manner as such value is determined for purposes of the granting of Stock Options), over the price to be paid for such Common Shares under such Option. Such amount shall be payable by either the Company or the subsidiary, whichever such corporation is the employer of the participant, in one or more of the following manners, as determined by the Committee, if the Company is the employer of the participant, or by the subsidiary subject to the Committee’s approval, if such subsidiary is the employer of the participant:

(a) cash (or check);

(b) fully paid Common Shares having a fair market value equal to such amount; or

In no event may any participant exercise any SARs granted hereunder unless (i) such participant is then permitted to exercise the Stock Option or the portion thereof with respect to which such SARs relate, and (ii) the fair market value of the Common Shares covered by the Stock Option, determined as provided above, exceeds the option price of such Common Shares. Upon the exercise of any SARs, the Stock Option, or that portion thereof to which such SARs relate, shall be canceled and automatically extinguished. A SAR granted in tandem with a Stock Option hereunder shall be made a part of the Stock Option agreement to which such SAR relates, in a form approved by the Committee and not inconsistent with this Plan. The granting of a Stock Option or SAR shall impose no obligation upon the participant to exercise such Stock Option or SAR. The Company’s or a subsidiary’s obligation to satisfy SARs shall not be funded or secured in any manner. No SAR granted hereunder shall be transferable by the participant granted such SAR, other than by will or the laws of descent and distribution or as a Permitted Transfer as defined in Section 7(d).

11. Other Share-Based Awards. The Committee may grant other awards of Common Shares and other awards that are valued, in whole or in part, by reference to, or are otherwise based on, Common Shares, including, without limitation, performance shares, exchangeable securities, dividend equivalent rights and shares or options valued by reference to book value or subsidiary performance (“Other Share-Based Awards”), alone, in addition to or in tandem with other awards granted under the Plan or cash or other awards made outside the Plan. The Committee shall determine the individuals to whom and the time or times at which such Other Share-Based Awards shall be awarded, the number of Common Shares to be used in computing an award or which are to be awarded pursuant to such awards, the consideration, if any, to be paid for such Other Share-Based Awards, and all other terms and conditions of the awards which shall be set forth in an applicable award agreement. The Committee will also have the right, at its sole discretion, to settle such awards in Common Shares, Restricted Shares or cash in an amount equal to the fair market value of the Common Shares or Other Share-Based Awards at the time of settlement. The provisions of Other Share-Based Awards need not be the same with respect to each participant.

12. Termination of Employment. If a participant ceases to be an employee of the Company or one of its subsidiary for a reason other than death, retirement, or permanent and total disability, such participant’s Grants shall terminate on the effective date of such termination of employment, unless (and then, only to the extent) such Grants by their terms specifically provide otherwise, or unless (and then, only to the extent) the Committee extends such Grants on or before such participant’s date of termination of employment. Neither the participant nor any other person shall have any right after such date to exercise all or any part of his Stock Options or SARs, and all awards of Restricted Stock, Restricted Stock Units and Other Share-Based Awards which are not vested or otherwise subject to restriction shall thereupon be forfeited, and/or declared void and without value.

In the absence of specific Grant provisions prescribing a longer period, if termination of employment is due to death or disability, outstanding Stock Options and SARs may be exercised within the one (1) year period ending on the anniversary of such death or permanent and total disability. In the case of death, such outstanding Stock Options and SARs shall be exercised by such participant’s estate, or by that person designated by such participant by will, or as otherwise indicated by the laws of descent and distribution. Notwithstanding the foregoing, in no event shall any Stock Option or SAR be exercisable after the expiration of the option period, and in the case of exercises made after a participant’s death, not to any greater extent than the participant would have been entitled to exercise such Option or SAR at the time of his death. Restricted Stock, Restricted Stock Units and Other Share-Based Awards held by a participant whose employment by the Company or any subsidiary terminates by reason of death shall thereupon vest and all restrictions and risks of forfeiture thereon shall thereupon lapse.

Subject to the discretion of the Committee, in the event a participant terminates employment with the Company and all subsidiaries because of normal, early or disability retirement under the Keithley Instruments, Inc., Employees’ Pension Plan (or any successor pension plan), (a) any then outstanding Stock Options and/or SARs held by such participant shall lapse at the earlier of (i) the end of the term of such Stock Option or SAR, or (ii) twelve (12) months after such retirement or permanent and total disability (subject only to the three (3) month exercise limitation applicable to Incentive Stock Options); and (b) any Restricted Stock, Restricted Stock Units and Other Share-Based Awards held by such participant shall thereafter vest and any applicable restrictions shall lapse, to the extent such Restricted Stock, Restricted Stock Units and Other Share-Based Awards would have become vested or no longer subject to restriction within twelve (12) months from the time of termination had the participant continued to fulfill all of the conditions of the Restricted Stock, Restricted Stock Units and Other Share-Based Awards during such period (or on such accelerated basis as the Committee may determine at or after date of Grant).

For purposes of this Plan and all Grants made hereunder, if an employee of the Company or one of its subsidiaries is granted a leave of absence by the Company or such subsidiary, to serve in the uniformed services (within the meaning of chapter 43, title 38 of the United States Code) or for any other reason approved by the Company, his employment with the Company or such subsidiary shall not be considered to have terminated and he shall be deemed an employee of the Company or such subsidiary during such leave of absence. The provisions of this paragraph shall apply with equal force to any extension of any such leave of absence granted by the Company or such subsidiary.

13. Change of Control. Upon the occurrence of a Change of Control (as defined below), notwithstanding any other provisions hereof or of any agreement to the contrary, all Stock Options and SARs granted under this Plan shall become immediately exercisable in full and all Restricted Stock, Restricted Stock Units and Other Share-Based Awards shall become immediately vested and any applicable restrictions shall lapse.

14. Qualifying Performance Criteria.

(a) For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, affiliate or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the Grant and/or any applicable award agreement: (i) cash flow; (ii) earnings (including gross margin, earnings before interest and taxes, earnings before taxes, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price; (vi) return on equity or average shareholders’ equity; (vii) total shareholder return; (viii) return on capital; (ix) return on assets or net assets; (x) return on investment or invested capital; (xi) revenue; (xii) income or net income; (xiii) operating income or net operating income; (xiv) operating profit or net operating profit (whether before or after taxes); (xv) sales growth; (xvi) economic profit or profit margin; (xvii) operating margin; (xviii) return on operating revenue; (xix) return on tangible capital; (xx) market share; (xxi) contract awards or backlog; (xxii) overhead or other expense reduction; (xxiii) growth in shareholder value relative to the moving average of the S&P 500 Index or a peer group index (which may adjustments during the applicable performance period to take into account mergers, acquisitions, dispositions and other significant changes affecting the companies comprising such index or perr group); (xxiv) credit rating; (xxv) strategic plan development and implementation; (xxvi) improvement in workforce diversity; (xxvii) customer satisfaction; (xxviii) employee satisfaction; (xxix) management succession plan development and implementation; and (xxx) employee retention.

(b) With respect to any Grant that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, the performance criteria must be Qualifying Performance Criteria, and the Committee will (within the first quarter of the performance period, but in no event more than ninety (90) days into that period) establish the specific performance targets (including thresholds and whether to exclude certain extraordinary, non-recurring, or similar items) and award amounts (subject to the right of the Committee to exercise discretion to reduce payment amounts following the conclusion of the performance period) and specify in writing not later than ninety (90) days after the commencement of the period of service (or, if earlier, the elapse of 25% of such period) to which the performance goals relate, provided that the outcome is substantially uncertain at that time.

(c) Prior to the payment of any compensation under an Grant intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee shall certify in writing the extent to which any Qualifying Performance Criteria and any other material terms under such Grant have been satisfied (other than in cases where such criteria relate solely to the increase in the value of the Common Shares).

(d) Notwithstanding satisfaction of any completion of any Qualifying Performance Criteria, to the extent specified as of the Grant Date, the number of Common Shares, Stock Options or other benefits granted, issued, retainable and/or vested under a Grant on account of satisfaction of such Qualifying Performance Criteria may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.

15. Amendments to Plan. The Committee is authorized to interpret this Plan and from time to time adopt any rules and regulations for carrying out this Plan that it may deem advisable. Subject to the approval of the Board of Directors of the Company, the Committee may at any time amend, modify, suspend or terminate this Plan. In no event, however, without the approval of the Company’s shareholders, shall any action of the Committee or the Board of Directors result in:

(a) Materially amending, modifying or altering the eligibility requirements provided in Section 5 hereof;

(b) Materially increasing, except as provided in Section 6 hereof, the maximum number of shares subject to Grants; or

except to conform this Plan and any agreements made hereunder to changes in the Code or governing law.

16. Investment Representation, Approvals and Listing. The Committee may require each participant acquiring Common Shares pursuant to a Grant to represent and agree in writing that such participant is acquiring the Shares without a view to distribution thereof. The certificates for any such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. All Common Shares or other securities delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any certificate for any such Shares to make appropriate reference to those restrictions.

17. General Provisions. The form and substance of Stock Option agreements, Restricted Stock agreements, SAR agreements, Restricted Stock Units Agreements and Other Share-Based Awards agreements made hereunder, whether granted at the same or different times, need not be identical. Nothing in this Plan or in any agreement shall confer upon any employee any right to continue in the employ of the Company or any of its subsidiaries, to be entitled to any remuneration or benefits not set forth in this Plan or such Grant, or to interfere with or limit the right of the Company or any subsidiary to terminate his employment at any time, with or without cause. Nothing contained in this Plan or in any Stock Option agreement, SAR shall be construed as entitling any participant to any rights of a shareholder as a result of the grant of a Stock Option or an SAR, until such time as Common Shares are actually issued to such participant pursuant to the exercise of such Option or SAR. This Plan may be assumed by the successors and assigns of the Company. The liability of the Company under this Plan and any sale made hereunder is limited to the obligations set forth herein with respect to such sale and no term or provision of this Plan shall be construed to impose any liability on the Company in favor of any employee with respect to any loss, cost or expense which the employee may incur in connection with or arising out of any transaction in connection with this Plan. The cash proceeds received by the Company from the issuance of Common Shares pursuant to this Plan will be used for general corporate purposes. The expense of administering this Plan shall be borne by the Company. The captions and section numbers appearing in this Plan are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Plan. Ohio law controls the enforcement and interpretation of this Plan, and any Grants or other contractual agreements made pursuant to this Plan.

18. Code Section 409A Compliance. This Plan is intended to be operated in compliance with the provisions of Code Section 409A (including any applicable rulings or regulations promulgated thereunder). In the event that any provisions of this Plan fails to satisfy the provisions of Code Section 409A, then such provision shall be reformed so as to comply with Code Section 409A and to preserve as closely as possible the intention of the Company in maintaining the Plan.

19. Termination of This Plan. No Grants shall be made pursuant to the Plan on or after February 6, 2019, but Grants made and outstanding prior to that date shall continue in full force and effect according to their terms and the terms and conditions of this Plan.

EX-31.1 12 c80368exv31w1.htm EXHIBIT 31.1 Filed by Bowne Pure Compliance

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a)/15d-14(a)

I, Joseph P. Keithley, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Keithley Instruments, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 9, 2009	/s/ Joseph P. Keithley
	Chairman, President and Chief Executive Officer

EX-31.2 13 c80368exv31w2.htm EXHIBIT 31.2 Filed by Bowne Pure Compliance

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a)/15d-14(a)

I, Mark J. Plush, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Keithley Instruments, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 9, 2009	/s/ Mark J. Plush
	Vice President and Chief Financial Officer

EX-32.1 14 c80368exv32w1.htm EXHIBIT 32.1 Filed by Bowne Pure Compliance

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350

I, Joseph P. Keithley, Chairman, President and Chief Executive Officer of Keithley Instruments, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the period ended December 31, 2008 which this certification accompanies fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Joseph P. Keithley

Joseph P. Keithley
Chairman, President and Chief Executive Officer
February 9, 2009

A signed original of this written statement has been provided to Keithley Instruments, Inc. and will be retained by Keithley Instruments, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 15 c80368exv32w2.htm EXHIBIT 32.2 Filed by Bowne Pure Compliance

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350

I, Mark J. Plush, Vice President and Chief Financial Officer of Keithley Instruments, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, that:

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Mark J. Plush

Mark J. Plush
Vice President and Chief Financial Officer
February 9, 2009

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