KEITHLEY INSTRUMENTS INC, DEF 14A, 1995-12-22

KEITHLEY INSTRUMENTS INC
DEF 14A, 1995-12-22
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934

Filed by the registrant /X/

Filed by a party other than the registrant / /

Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

KEITHLEY INSTRUMENTS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

KEITHLEY INSTRUMENTS, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:

/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:

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KEITHLEY
<TABLE>
<S> <C>
KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139
(216) 248-0400
Fax (216) 248-6168
</TABLE>

December 22, 1995

TO THE SHAREHOLDERS OF KEITHLEY INSTRUMENTS, INC.

This year's Annual Meeting of Shareholders of Keithley Instruments, Inc.
will be held at 12:00 Noon (EST), Saturday, February 10, 1996, at our corporate
headquarters, 28775 Aurora Road, Solon, Ohio.

In addition to acting on the matters outlined in the Proxy Statement, we
look forward to giving you a progress report on the first quarter which will end
on December 31, 1995. As in the past, there will be an informal presentation of
the Company's businesses.

We hope that you are planning to attend the Annual Meeting personally, and
we look forward to seeing you. Whether or not you expect to attend in person,
the return of the enclosed Proxy as soon as possible would be greatly
appreciated and will ensure that your shares will be represented at the Annual
Meeting. If you do attend the Annual Meeting, you may withdraw your Proxy should
you wish to vote in person.

On behalf of the Directors and management of Keithley Instruments, Inc., we
would like to thank you for your continued support and confidence in the
Company.

Sincerely yours,

/S/ Joseph P. Keithley

JOSEPH P. KEITHLEY
Chairman, President and Chief Executive Officer
<PAGE> 3

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KEITHLEY
<TABLE>
<S> <C>
LOGO KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139
(216)248-0400
Fax (216) 248-6168
</TABLE>

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Keithley
Instruments, Inc. will be held at the corporate headquarters of the Company,
28775 Aurora Road, Solon, Ohio, on Saturday, February 10, 1996, at 12:00 Noon
(EST), for the following purposes:

(1) To consider such reports as may be laid before the Annual Meeting;

(2) To elect ten members of the Board of Directors to serve until the
next annual meeting of shareholders and until their successors shall have
been duly elected and qualified, leaving one vacancy to be filled by the
Board of Directors at its discretion;

(3) To vote on a proposal to amend and restate the Company's Amended
Articles of Incorporation to increase the authorized number of shares of
the Company's capital stock to 39,000,000 shares designating 30,000,000
shares of such authorized capital stock as Common Shares and 9,000,000
shares as Class B Common Shares;

(4) To vote on a proposal to approve the Keithley Instruments, Inc.
1996 Outside Directors Deferred Stock Plan;

(5) To vote on a proposal to amend the Keithley Instruments, Inc. 1992
Stock Incentive Plan to increase the number of shares subject to grant to
1,900,000;

(6) To vote on a proposal to approve the Board of Directors' selection
of Price Waterhouse LLP as independent accountants of the Company; and

(7) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.

Only holders of Common Shares and Class B Common Shares of record at the
close of business on Tuesday, December 12, 1995, are entitled to notice of and
to vote at the Annual Meeting or any adjournment thereof.

By Order of the Board of Directors,

/s/ James B. Griswold

JAMES B. GRISWOLD
Secretary

December 22, 1995

PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY. A RETURN ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 4

KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 10, 1996

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Keithley Instruments, Inc. (the "Company")
to be used at the Annual Meeting of Shareholders of the Company to be held on
February 10, 1996, and any postponements or adjournments thereof. The time,
place and purposes of the Annual Meeting are stated in the Notice of Annual
Meeting of Shareholders which accompanies this Proxy Statement.

The expense of soliciting proxies, including the cost of preparing,
assembling and mailing the proxy materials will be borne by the Company. In
addition to solicitation of proxies by mail, solicitation may be made personally
and by telephone, and the Company may pay persons holding shares for others
their expenses for sending proxy materials to their principals. No solicitation
will be made other than by Directors, officers and employees of the Company.

Any person giving a proxy pursuant to this solicitation may revoke it by
giving notice to the Company in writing or in open meeting. All validly executed
Proxies received by the Board of Directors of the Company pursuant to this
solicitation will be voted at the Annual Meeting, and the directions contained
in such Proxies will be followed in each instance. If no directions are given,
the Proxy will be voted FOR the election of the nominees listed in the Proxy and
FOR the proposals set forth in the Notice.

This Proxy Statement and the accompanying President's letter, notice and
Proxy, together with the Company's annual report to shareholders for the fiscal
year ended September 30, 1995, are first being sent to shareholders on or about
December 22, 1995.

VOTING RIGHTS

As of the close of business on December 12, 1995, there were outstanding
4,364,802 Common Shares, without par value, of the Company (the "Common Shares")
and 2,893,796 Class B Common Shares, without par value, of the Company (the
"Class B Common Shares"). The holders of the outstanding Common Shares on that
date will be entitled to one vote for each share held and the holders of the
outstanding Class B Common Shares on that date will be entitled to ten votes for
each share held.

The presence in person or by proxy of a majority of the votes entitled to
be cast by holders of the Common Shares will constitute a quorum for the
election of the three Directors to be elected separately by holders of the
Common Shares (see "Election of Directors"). The presence in person or by proxy
of a majority of the votes entitled to be cast by the holders of outstanding
Common Shares and Class B Common Shares will constitute a quorum for the
election of the remaining seven Directors and for action on other matters
submitted to a vote of the shareholders. The three nominees receiving the
greatest number of votes of the Common Shares voting separately as a class and
the seven other nominees receiving the greatest number of votes of the Common
Shares and the Class B Common Shares voting together without regard to class
will be elected as Directors. The affirmative vote of a majority of the Common
Shares and the Class B Common Shares outstanding and voting together without
regard to class is required for approval of each other matter to be submitted to
a vote of the shareholders. Abstaining votes and broker non-votes will not count
in favor of, or against, election of a nominee or approval of any matter to be
voted upon by the shareholders.

The Ohio Revised Code, as it applies to the Company, provides that if
notice in writing is given by any shareholder to the President, a Vice President
or the Secretary of the Company not less than 48 hours before

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the time fixed for holding the meeting that he or she desires the voting at such
election to be cumulative, and an announcement of the giving of such notice is
made upon the convening of the meeting by the Chairman or the Secretary or by or
on behalf of the shareholder giving such notice, then each shareholder shall
have cumulative voting rights in the election of Directors, enabling him or her
to give one nominee for Director as many votes as is equal to the number of
Directors to be elected multiplied by the number of shares in respect of which
such shareholder is voting, or to distribute his or her votes on the same
principle among two or more nominees, as he or she sees fit. Only shareholders
of record at the close of business on December 12, 1995 are entitled to notice
of and to vote at this meeting.

PRINCIPAL SHAREHOLDERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following persons are known to the Company to be the beneficial owners
of more than 5% of the voting securities of the Company as of December 12, 1995:

<TABLE>
<CAPTION>
CLASS B COMMON SHARES
COMMON SHARES (1)
------------------------ ------------------------
NUMBER OF NUMBER OF PERCENTAGE
SHARES SHARES OF TOTAL
BENEFICIALLY PERCENT BENEFICIALLY PERCENT VOTING
NAME OF BENEFICIAL OWNER OWNED(2) OF CLASS OWNED(2) OF CLASS POWER(3)
- --------------------------- ----------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Joseph P. Keithley......... 81,206(3) 1.8% 2,608,586 (4) 90.1% 78.5%
Lazard Freres & Co.(5)..... 293,000 6.7% -- -- *
The TCW Group, Inc.(6)..... 283,000 6.5% -- -- *
First Pacific Advisors,
Inc.(7).................. 684,000 15.7% -- -- 2.1%

<FN>
- ---------------

* Less than 1%

(1) Pursuant to the Company's Amended Articles of Incorporation, all holders of
Class B Common Shares are entitled to convert any or all of their Class B
Common Shares into Common Shares at any time, on a share-for-share basis.
The Company may not issue any additional Class B Common Shares unless such
issuance is in connection with share dividends or share splits of the Class
B Common Shares.

(2) This information has been furnished by each owner. The number of shares
indicated for each owner includes those shares owned of record and
beneficially by such owner unless otherwise indicated.

(3) Includes Common Shares represented by options exercisable on or before
February 10, 1996 by Joseph P. Keithley (28,498 shares). Such shares are
deemed to be outstanding for the purpose of computing the percentage of
shares outstanding owned by Mr. Keithley and his percentage of total voting
power of the Company's capital stock, but are not deemed outstanding for the
purpose of computing the percentage of shares held by or total voting power
of any other person. Also includes 20,000 shares owned of record by a
partnership of which Joseph P. Keithley serves as the general partner and
1,224 shares owned of record by Joseph P. Keithley's wife. Joseph P.
Keithley disclaims beneficial ownership with respect to the shares owned of
record by his wife.

(4) Includes 2,400,000 shares owned of record by two partnerships of which
Joseph P. Keithley serves as the general partner and 199,586 shares owned of
record by a charitable trust of which Joseph P. Keithley serves as trustee.

(5) Derived from information set forth on a Schedule 13G of Lazard Freres & Co.
dated February 14, 1995.

(6) Derived from information set forth on a Schedule 13G of The TCW Group, Inc.
dated January 21, 1995.

(7) Derived from information set forth on a Schedule 13G of First Pacific
Advisors, Inc. dated January 26, 1995.

</TABLE>

The business address of Mr. Keithley is 28775 Aurora Road, Solon, Ohio
44139. Lazard Freres & Co. address is One Rockefeller Plaza, New York, New York
10020; The TCW Group, Inc.'s address is 865 South

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Figueroa Street, Los Angeles, California 90071; and First Pacific Advisors,
Inc.'s address is 11400 West Olympic Boulevard, Suite 1200, Los Angeles,
California 90064.

SECURITY OWNERSHIP OF MANAGEMENT

The beneficial ownership of Common Shares and Class B Common Shares by each
of the Directors, each of the executive officers named in the Summary
Compensation Table and by the executive officers and Directors of the Company as
a group on December 12, 1995, is set forth in the table below:

<TABLE>
<CAPTION>
CLASS B
COMMON SHARES COMMON SHARES(1)
------------------------ --------------------------
NUMBER OF NUMBER OF PERCENTAGE
SHARES SHARES OF
NAME AND ADDRESS BENEFICIALLY PERCENT BENEFICIALLY PERCENT TOTAL VOTING
OF BENEFICIAL OWNER OWNED(2)(3) OF CLASS OWNED(2) OF CLASS POWER(3)
- ----------------------------------- ----------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Dr. Theodore M. Alfred............. 25,200 * -- -- *
James T. Bartlett.................. 22,950(4) * -- -- *
Dr. Arden L. Bement, Jr............ 7,200 * -- -- *
James B. Griswold.................. 11,890(5) * -- -- *
Leon J. Hendrix, Jr................ 8,400 * -- -- *
Joseph F. Keithley(6).............. 48,372(7) 1.1% 81,244 2.8% 2.6%
Joseph P. Keithley................. 81,206(8) 1.8% 2,608,586(9) 90.1% 78.5%
Ronald M. Rebner................... 49,748(10) 1.1% -- -- *
Gabriel A. Rosica.................. 3,200 * -- -- *
R. Elton White..................... 11,200 * -- -- *
Hermann Hamm....................... 116,708 2.6% -- -- *
Frederick R. Hume.................. 47,966 1.1% -- -- *
Terrence E. Sheridan............... 81,096(11) 1.8% -- -- *
All officers and Directors as a 555,520 12.2% 2,689,830 93.0% 81.9%
group (15 persons including the
above)...........................

<FN>
- ---------------

*Less than 1%

(2) This information has been furnished by each Director and officer. The
number of shares indicated for each such person includes those shares owned
of record and beneficially by him unless otherwise indicated.

(3) Includes Common Shares represented by options exercisable on or before
February 10, 1996 by Dr. Theodore M. Alfred (2,400 shares), James T.
Bartlett (2,400 shares), Dr. Arden L. Bement, Jr. (600 shares), James B.
Griswold (2,400 shares), Leon J. Hendrix, Jr. (2,400 shares), Joseph P.
Keithley (28,498 shares), Ronald M. Rebner (26,246 shares), Gabriel A.
Rosica (1,200 shares), R. Elton White (1,200 shares), Hermann Hamm
(41,462), Frederick R. Hume (42,962), Terrence E. Sheridan (24,764), and
all officers and Directors as a group (208,596 shares). Such shares are
deemed to be outstanding for the purpose of computing the percentage of
shares outstanding owned by each of the individuals and all officers and
Directors as a group and their percentage of total voting power of the
Company's capital stock, respectively, but are not deemed outstanding for
the purpose of computing the percentage of shares held by or total voting
power of any other person.

(4) Includes 10,500 shares owned of record by Mr. Bartlett's children and 2,050
shares owned of record by his wife. Mr. Bartlett disclaims beneficial
ownership with respect to the shares owned of record by his wife.

(5) Includes 4,500 shares owned by a trust, of which Mr. Griswold acts as
advisor.

(6) Joseph P. Keithley's father.

</TABLE>
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(7) Includes 9,000 shares owned of record by Joseph F. Keithley's wife, as to
which shares Joseph F. Keithley disclaims beneficial ownership.

(8) Includes 20,000 shares owned of record by a partnership for which Joseph P.
Keithley serves as the general partner and 1,224 shares owned of record by
Joseph P. Keithley's wife. Joseph P. Keithley disclaims beneficial
ownership with respect to the shares owned of record by his wife.

(9) Includes 2,400,000 shares owned of record by two partnerships for which
Joseph P. Keithley serves as the general partner and 199,586 shares owned
of record by a charitable trust for which Joseph P. Keithley serves as
trustee.

(10) Includes 6,412 shares owned of record by Mr. Rebner's wife, as to which
shares Mr. Rebner disclaims beneficial ownership.

(11) Includes 2,736 shares owned of record by Mr. Sheridan's wife, as to which
shares Mr. Sheridan disclaims beneficial ownership.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's Common Shares to file with the Commission initial reports of ownership
and reports of changes in ownership of Common Shares and other equity securities
of the Company. The Company believes that during the fiscal year ended September
30, 1995, its officers, Directors and holders of more than 10% of the Company's
Common Shares complied with all Section 16(a) filing requirements.

ELECTION OF DIRECTORS

The Proxy holders named in the accompanying Proxy or their substitutes will
vote the Proxies at the Annual Meeting, or any postponements or adjournments
thereof, for the election as Directors of the ten nominees named below unless
the shareholder, by so indicating on the Proxy, instructs that such Proxy be
voted against such proposal or that the authority to vote for any one or more
nominees is withheld. If the ten nominees are elected at the Annual Meeting,
there will be one vacancy on the Board of Directors. The vacancy on the Board
may be filled by the Directors pursuant to the Company's Code of Regulations
without further action by the shareholders. The reason for electing a number of
Directors fewer than the number of Directors fixed pursuant to the Company's
Code of Regulations is that it is believed desirable to have a vacancy available
which could be filled by the Directors without the time and expense involved in
holding a special meeting of shareholders, should a person who could make a
valuable contribution as a Director of the Company become available during the
year. No decision has been made to fill the vacancy, nor have any candidates
been considered and approved by the Board of Directors. Proxies cannot be voted
at the annual meeting for a greater number of persons than the ten nominees
named in this Proxy Statement, although additional nominations can be made by
the shareholders at the meeting.

Each of the Directors to be elected at the meeting is to serve until the
next Annual Meeting and until his successor shall have been elected and
qualified. Joseph P. Keithley, Chairman of the Board of Directors and President
and Chief Executive Officer, is the son of Joseph F. Keithley, a Director and
Founder of the Company. There are no other family relationships among the
remaining members of the executive officers and Directors of the Company.
Pursuant to the Company's Amended Articles of Incorporation, one-fourth
(calculated to the nearest whole number) of the number of authorized directors,
which presently equals three directors, is entitled to be elected by the Common
Shares voting separately as a class. Messrs. Alfred, Bartlett and Rebner have
been nominated as the Directors to be so elected by the holders of the Common
Shares of the Company. The remaining seven nominees are to be elected by the
holders of the Common Shares and the Class B Common Shares voting together.

If cumulative voting is in effect, the Proxy holders will have full
discretion and authority to vote for any one or more of the ten nominees. In the
event of cumulative voting, the Proxy holders will vote the shares represented
by each Proxy so as to maximize the number of nominees that will be elected to
the Board.

Each of the nominees has indicated his willingness to serve as a Director,
if elected. In addition, each of the nominees is presently a member of the Board
of Directors. If any nominee at the time of election is unable or unwilling to
serve or is otherwise unavailable for election (which contingency is not now
contemplated or

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foreseen), it is intended that the shares represented by the Proxy will be voted
for each substitute nominee as may be named by the Board of Directors.

NOMINEES FOR ELECTION

<TABLE>
<CAPTION>
NAME AND AGE
OF NOMINEE BUSINESS EXPERIENCE DIRECTOR SINCE
- --------------------------- --------------------------------------------- --------------
<S> <C> <C>
Joseph P. Keithley Chairman of the Board of Directors since 1986
Age 47 1991, Chief Executive Officer since
November 1993 and President since May 1994.
Previously Vice Chairman of the Board of
Directors from 1988 to 1991 and Executive
Vice President from 1989 to 1991.
Joseph F. Keithley Founder of the business of the Company in 1955
Age 80 1946, President to 1973 and Chairman of the
Board of Directors from 1955 to 1991.
Ronald M. Rebner(1) Vice President and Chief Financial Officer of 1988
Age 51 the Company since 1981.
Dr. Theodore M. Alfred(1) Professor Emeritus of Management Policy since 1974
Age 70 1995, Professor of Management Policy since
1984 of the Weatherhead School of
Management, Case Western Reserve
University. Director of the Acme-Cleveland
Corporation, a holding company with
subsidiaries that manufacture and sell
metal working products, and
telecommunication and electronic products.
James T. Bartlett(1) Managing Director since 1986 of Primus 1983
Age 58 Venture Partners, the fund manager for
Primus Capital Fund and Primus Capital Fund
II, venture capital limited partnerships.
Director of LCI International, a
communications company.
Dr. Arden L. Bement, Jr. Professor of Engineering and Director of 1988
Age 63 Midwest Superconductivity Consortium at
Purdue University since 1993. Previously
Vice President, Science and Technology of
TRW, Inc., a manufacturer of products for
the electronic, defense, space,
information, automotive and energy markets,
from 1980 to 1993.
James B. Griswold(2) Partner in the law firm of Baker & Hostetler 1989
Age 49 since 1982.
Leon J. Hendrix, Jr. Principal, Clayton, Dubilier & Rice, Inc., a 1990
Age 54 private investment firm. Previously Chief
Operating Officer of the Reliance Electric
Company ("Reliance") from September 1992
through October 1993, and Executive Vice
President of Reliance from 1989 to 1992.
Director of NACCO Industries, Inc., a
holding company with subsidiaries that
manufacture forklift trucks, small
electrical appliances, mine and market
lignite coal and operate specialty retail
stores, Cambrex Corp., a manufacturer of
specialty chemicals and commodity chemical
intermediates, WESCO Distribution, Inc., a
distributor of electrical supplies, and
Remington Arms Co., a manufacturer and
marketer of firearms and ammunition and
outdoor clothing.
</TABLE>

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<TABLE>
<CAPTION>
NAME AND AGE
OF NOMINEE BUSINESS EXPERIENCE DIRECTOR SINCE
- --------------------------- --------------------------------------------- --------------
<S> <C> <C>
Gabriel A. Rosica Chief Operating Officer of Bailey Controls 1993
Age 55 Company since August 1994. Previously
Senior Vice President of Systems Operations
of Bailey Controls Company from January
1992 to July 1994, Senior Vice President,
Americas, Pacific & Far East of Elsag
Bailey Inc. from June 1991 to December
1991, and independent business and
management consultant from 1988 to June
1991.
R. Elton White Private Investor. Previously President of NCR 1994
Age 53 Corporation from 1991 to December 1993, a
wholly owned subsidiary of AT&T and
Executive Vice President of Marketing from
1990 to 1991. Director of Conner
Peripherals, a manufacturer of storage
products for computer systems, Kohl's
Corporation, which owns specialty
department stores, Duriron Corporation, a
manufacturer of fluid handling products for
process industries and Verifone, Inc., a
designer and manufacturer of transaction
automation systems used by retail merchants
and others.

<FN>
- ---------------

(1) Elected by holders of Common Shares only.

(2) Baker & Hostetler served as general legal counsel to the Company during the
fiscal year ended September 30, 1995 and is expected to render services in
such capacity to the Company in the future.

</TABLE>

INFORMATION REGARDING MEETINGS AND
COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has an Executive Committee, an Audit Committee, a
Compensation and Human Resources Committee and a Strategy Committee. The Board
of Directors does not have a nominating committee. The Executive Committee
possesses and may exercise all of the powers of the Board of Directors, to the
extent permitted by law, during intervals between meetings of the Board of
Directors. All actions of the Executive Committee are reported to the Board of
Directors at its first meeting following such action or actions. The Audit
Committee reviews the activities of the Company's independent accountants and
various Company policies and practices. The Compensation and Human Resources
Committee approves the grant of stock options and reviews and determines the
compensation of certain key executives. The Strategy Committee reviews the
appropriateness of current business and technical strategies and explores new
business possibilities.

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Set forth below is the current membership of each of the above-described
committees with the number of meetings held during the fiscal year ended
September 30, 1995, in parentheses.

<TABLE>
<CAPTION>
COMPENSATION AND HUMAN
EXECUTIVE AUDIT RESOURCES COMMITTEE STRATEGY
COMMITTEE (TWO) COMMITTEE (TWO) (TWO) COMMITTEE (FOUR)
- ----------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Joseph P. Keithley Leon J. Hendrix, Jr. James T. Bartlett Dr. Arden L. Bement, Jr.
(Chairman) (Chairman) (Chairman) (Chairman)
Dr. Theodore M. Alfred Dr. Theodore M. Alfred Dr. Arden L. Bement, Jr. Dr. Theodore M. Alfred
James T. Bartlett James B. Griswold Gabriel A. Rosica James T. Bartlett
R. Elton White James B. Griswold
Leon J. Hendrix, Jr.
Joseph F. Keithley
Joseph P. Keithley
Ronald M. Rebner
Gabriel A. Rosica
R. Elton White
</TABLE>

The Board of Directors held five meetings during the fiscal year ended
September 30, 1995. During that fiscal year, with the exceptions noted below, no
incumbent Director attended fewer than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors held during the period he served as
a Director and (ii) the total number of meetings held by committees of the Board
on which he served, during the periods that he served. James T. Bartlett and Dr.
Arden L. Bement, Jr. attended 73% of the aggregate of such meetings.

Directors who are not employees of the Company receive a quarterly fee of
$2,500. Unless Chairman of a committee, such Directors receive an additional
$875 for each Board meeting or committee meeting attended, except for Executive
Committee meetings for which no additional monies are paid. Each Committee
Chairman who is not an employee of the Company is paid $1,625 for presiding as
Chairman at a Committee meeting.

EXECUTIVE COMPENSATION AND BENEFITS

The Company's compensation and benefit programs are designed to enable the
Company to attract, retain and motivate the best possible employees to operate
and manage the Company at all levels.

In general, all U.S. based employees receive a base salary, participate in
a Company supported retirement savings plan and are provided with medical and
other welfare benefit coverages. Most U.S. employees also participate in a
Company funded pension plan. Employees outside of the United States are
similarly covered by comprehensive compensation and benefit programs.

EMPLOYMENT AGREEMENTS

Employment Agreement with Named Executive Officers of the Company. Pursuant
to an employment agreement which was entered into on September 26, 1988, Joseph
P. Keithley is required to be compensated at the rate of at least $120,000 per
year initially for a five-year period which ended September 26, 1993 and is
automatically renewable for one-year periods thereafter. Pursuant to employment
agreements which were entered into on December 10, 1986, Mr. Hamm, Mr. Rebner
and Mr. Sheridan are required to be compensated at the rate of at least
$157,573, $105,700 and $78,500 per year, respectively. Mr. Hamm's, Mr. Rebner's
and Mr. Sheridan's agreements initially covered a three-year period, and are
automatically renewable for one-year periods thereafter. Mr. Hamm's compensation
is paid in Deutsche Marks; the dollar amount shown above is based on an average
exchange rate for Deutsche Marks during fiscal 1995.

Employment Agreement for Joseph F. Keithley. The Company entered into an
employment agreement on September 26, 1988, with Joseph F. Keithley. Under the
terms of the agreement, Joseph F. Keithley will

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<PAGE> 11

be compensated at the rate of not less than $5,000 per month until he elects to
voluntarily retire from active employment by the Company. Upon Mr. Keithley's
voluntary retirement, he will be compensated at a consulting rate of not less
than $5,000 per month. The Company will continue to provide group life,
hospitalization, pension plans and other benefit plans throughout the term of
the agreement. Under the provisions of Mr. Keithley's employment agreement, he
is not eligible to participate in the Company's other compensation plans. The
Company may terminate the employment agreement for Reasonable Cause (as defined
in the employment agreement) relating to any failure by Mr. Keithley to perform
his obligations thereunder. The duties of the Company and Mr. Keithley will
terminate upon his death or upon such a termination for Reasonable Cause.

EMPLOYEE BENEFIT PLANS

Retirement Plans. The Company's United States pension plan provides
retirement benefits to eligible participants who terminate employment at or
after age 65, or who terminate employment before age 65 with at least five years
of service. Benefits commence after termination of employment, but generally not
before age 60. Retirement benefits are computed on the basis of pension credits
for each year of the employee's service. Generally, an employee's pension
credits will be equal to the sum of (i) .9% of the employee's high five-year
average annual compensation, not in excess of the employee's Social Security
"covered compensation" (as defined by Section 401(l)(5)(E) of the Internal
Revenue Code) as of September 30, 1991, plus 1.5% of such average annual
compensation in excess of "covered compensation," with such sum multiplied by
the employee's years of credited service (up to 30 years) through September 30,
1991; plus (ii) 1.2% of the employee's annual compensation for each plan year
beginning on or after October 1, 1991. The employee's annual retirement benefit,
when paid as a life annuity commencing at age 65, will equal the total of the
pension credits he has earned. If the individuals listed in the compensation
table (except for Mr. Hamm) were to continue to be employees until their
attainment of age 65 at the rate of compensation they received during fiscal
1995, their annual retirement benefits would be as follows: Joseph P. Keithley,
$76,879; Mr. Hume, $41,569, Mr. Rebner, $55,071 and Mr. Sheridan, $63,425.

As of January 27, 1989, the Company agreed to provide Mr. Hume with a
supplemental retirement plan (SERP). The purpose of the plan is to provide
certain retirement, death and disability benefits to Mr. Hume commensurate with
benefits offered by other companies. The supplemental retirement plan provides
Mr. Hume a retirement benefit equal in amount to 60% of his Final Average
Earnings (defined as the three highest consecutive years of compensation falling
within ten years of his date of termination), commencing at age 65 and payable
in the same form as his retirement benefit under the Company's pension plan. The
retirement benefits payable to Mr. Hume under this plan are to be reduced by the
total of benefits received from all other retirement plans of the Company as
well as benefits provided by the Social Security Act. The plan also provides for
the payment of disability benefits in lieu of payment of retirement benefits
upon the earlier of (i) the first day of the first month following his
attainment of age 65 or (ii) the date his benefits begin under the Company's
pension plan. In the event Mr. Hume shall die after his normal retirement date
but before his benefits begin under the supplemental plan, his spouse, if then
living, will be entitled to an annual survivor's benefit generally equal in
amount to 50% of the annual retirement benefit which would have been payable
jointly to Mr. Hume and his spouse.

Mr. Hamm is not covered by the Company's United States pension plan but is
covered by a pension plan held by the Company's German subsidiary. The pension
obligations under this plan are fully covered by a reinsurance agreement between
the Company's German subsidiary and a life insurance company. If Mr. Hamm were
to continue to be an employee until he attained age 65, his annual retirement
benefit would be $101,629 if calculated at the rate of compensation he received
during fiscal year 1995. Mr. Hamm's pension benefit will be paid in Deutsche
Marks; the dollar amount shown above is based on an average exchange rate of
Deutsche Marks during fiscal 1995.

Keithley Retirement Savings Trust and Plan. Effective January 1, 1988, the
Company implemented the Keithley Instruments, Inc. Retirement Savings Trust and
Plan (the "Plan"). The Plan permits all eligible employees of the Company and
its subsidiaries who elect to participate in the Plan to make payroll deductions
for contribution by the Company or subsidiary to the Plan. Payroll deductions
cannot be less than 1% or more

8
<PAGE> 12

than 15% of a participant's total compensation (excluding certain fringe
benefits and some types of incentive compensation or performance awards) for the
Plan year. The Plan qualifies under Sections 401(a), 401(k) and 501(a) of the
Internal Revenue Code of 1986.

The Plan provides for matching contributions at the Company's discretion
which will not exceed 6% of a participant's compensation during the Plan year.
All contributions under the Plan are directed to the appropriate fund by Hampton
Pension Services, the Account Administrator under the Plan. The investment
options available during fiscal 1995 included (i) a guaranteed fund invested in
annuity contracts providing for a guaranteed rate of return, (ii) a money market
fund invested in U.S. Treasury notes, bills and other direct obligations of the
United States Treasury, (iii) a pooled fixed income account invested primarily
in insurance companies and other investment contracts, and (iv) seven equity
mutual funds: Fidelity Puritan Fund, Aim Charter Fund, Fidelity Magellan Fund,
Twentieth Century Select Investors, Twentieth Century Growth Investors, Vanguard
Index Extended Market and Scudder Global Fund. Each participant designates the
fund or funds in which his contributions, as well as the Company's matching
contributions, shall be invested. Participant's contributions are fully vested
at all times. A participant's interest in the Company's contributions is fully
vested after three years of eligible service with the Company.

1995 Annual Senior Manager Extra Compensation Plan. This plan provides
additional compensation to executive officers based on consolidated corporate
and, in some instances, divisional performance for the fiscal year ended
September 30, 1995. Individual objectives also may be established. Extra
compensation for the group of senior managers, including the executive officers
of the Company, may not exceed 100% of each senior manager's October 1, 1994,
base salary unless approved by the Company's Board of Directors. The additional
compensation is based upon earnings before taxes and return on assets before any
deduction for senior manager extra compensation.

1984 Performance Award Plan. The Performance Award Plan provides long-term
incentive compensation for officers and key management employees of the Company
and its subsidiaries and divisions, with the amount of award based on the level
of achievement of predetermined performance goals during a three-year period.

1984 Stock Option Plan. The 1984 Stock Option Plan provides for the
issuance of "incentive stock options," within the meaning of Section 422 of the
Internal Revenue Code, and nonqualified stock options, for federal income tax
purposes, to key employees. The primary features of the plan are summarized
below.

The 1984 Stock Option Plan is administered by the Compensation and Human
Resources Committee. Incentive stock options and nonqualified stock options are
granted for terms of up to ten years. The option price of an incentive stock
option equals the fair market value of the Common Shares on the date the option
is granted. In the case of a participant owning more than 10% of the voting
power of the Company's voting securities, the term of the incentive stock option
must be no more than five years and the option price must be at least 110% of
the fair market value of the Common Shares on the date the option is granted.
The option price for Common Shares under a nonqualified stock option is
determined by the Committee on the date such option is granted. The Committee
may, at its discretion, grant stock appreciation rights that give the employee
the right to be paid in an amount equal to the excess of the market price of the
Common Shares at the date of the exercise of the option over the option price.
Payment of the stock appreciation right may be made in cash, Common Shares of
the Company, or a combination thereof. The 1984 Stock Option Plan expired by its
terms on February 11, 1994. All options outstanding at the time of termination
of this plan continue in full force and effect in accordance with and subject to
their terms.

1992 Stock Incentive Plan. The 1992 Stock Incentive Plan provides for the
issuance of "incentive stock options," within the meaning of Section 422 of the
Internal Revenue Code, and nonqualified stock options, for federal income tax
purposes, to key employees. The primary features of the plan are summarized
below.

The 1992 Stock Incentive Plan is administered by the Compensation and Human
Resources Committee. Incentive stock options and nonqualified stock options are
granted for terms of up to ten years. The option price of an incentive stock
option is not less than 100% of the fair market value of the Common Shares on
the date the option is granted. In the case of a participant owning more than
10% of the voting power of the

9
<PAGE> 13

Company's voting securities, the term of the incentive stock option must be no
more than five years and the option price must be at least 110% of the fair
market value of the Common Shares on the date the option is granted. The option
price for Common Shares under a nonqualified stock option is determined by the
Committee on the date such option is granted. The Committee may, at its
discretion, grant stock appreciation rights that give the employee the right to
be paid in an amount equal to the excess of the market price of the Common
Shares at the date of the exercise of the option over the option price. Payment
of the stock appreciation right may be made in cash, Common Shares of the
Company, or a combination thereof. The 1992 Stock Incentive Plan will expire by
its terms on February 8, 2002. All options outstanding at the time of
termination of this plan shall continue in full force and effect in accordance
with and subject to their terms.

1992 Directors' Stock Option Plan. The 1992 Directors' Stock Option Plan
(the "Directors' Plan") is intended to enable the Company to attract, retain and
reward nonemployee Directors of the Company and strengthen the mutuality of
interest between such Directors and the Company's shareholders. So long as the
Directors' Plan remains in effect and Common Shares remain available for grants
thereunder, each individual who qualifies as a nonemployee Director at the close
of any annual meeting of the shareholders of the Company shall automatically be
granted an option to purchase 300 Common Shares. The option price for each
Common Share purchasable under an option is the fair market value of a Common
Share on the date such option is granted. The Directors' Plan will expire by its
terms on December 7, 2002. All options outstanding at the time of termination of
the Directors' Plan shall continue in full force and effect in accordance with
and subject to their terms.

1993 Employee Stock Purchase Plan. The 1993 Employee Stock Purchase Plan
offers eligible employees of the Company the opportunity to acquire Common
Shares at a discount and without incurring any material acquisition costs.
Eligible employees can only participate in the Plan on a year-to-year basis,
must enroll prior to the commencement of each Plan year and must authorize
monthly payroll deductions. The purchase price of the Common Shares is 85
percent of the lower of the market price at the beginning or ending of the Plan
year, which is on a calendar basis. Generally, all employees of the Company and
of its United States subsidiaries are eligible to participate in the Plan;
however, temporary employees, employees who are customarily employed for less
than five months in any calendar year, and employees who directly or indirectly
own more than a 5% interest in the Company are not eligible to participate.
There are no executive officers who currently participate in the Plan.

10
<PAGE> 14

The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and the four other named Executive
Officers of the Company as of September 30, 1995, during the fiscal years ended
September 30, 1995, 1994 and 1993.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS
------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
-------------------------------------- RESTRICTED UNDERLYING -------
OTHER STOCK STOCK LTIP ALL OTHER
ANNUAL AWARD(S) OPTION PAYOUTS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION(4) $ #(1) ($)(2) SATION(3)
- ----------------------------- ---- ---------- --------- --------------- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph P. Keithley 1995 $240,545 $265,225 32,000 $ 2,033
Chairman of the Board, 1994 $203,991 $ 42,725 56,000 $ 2,208
President and Chief 1993 $203,306 $ 50,424 15,172 $ 1,799
Executive Officer
Hermann Hamm (4) 1995 $243,051 $167,355 10,000 $ 0
Vice President 1994 $209,280 $ 76,066 22,000 $ 0
European Operations 1993 $215,362 $ 49,532 8,172 $ 0
Frederick R. Hume 1995 $206,000 $167,500 24,000 $ 2,125
Senior Vice President Test 1994 $192,720 $ 69,459 29,000 $ 2,175
Instrumentation Group 1993 $192,533 $ 42,927 $ 26,250 8,214 $ 1,772
Ronald M. Rebner 1995 $160,044 $140,000 12,000 $ 2,129
Vice President and 1994 $148,705 $ 20,000 21,000 $ 2,185
Chief Financial Officer 1993 $146,953 $ 21,645 6,290 $ 1,783
Terrence E. Sheridan 1995 $123,105 $ 59,300 10,000 $27,473 $ 2,041
Vice President Radiation 1994 $112,869 $ 4,643 17,000 $ 2,198
Measurements Division 1993 $109,342 $ 59,645 4,704 $20,820 $ 1,793

<FN>
- ---------------

(1) Share amounts reflect a two-for-one stock split paid December 11, 1995, to
shareholders of record on November 27, 1995.

(2) The amounts included in 1995 and 1993 are payouts of awards earned under the
1984 Performance Award Plan covering the three year periods from October 1,
1991 through September 30, 1994 and October 1, 1989 through September 30,
1992, respectively.

(3) Consists of matching contributions under the Company's Retirement Savings
Trust and Plan which is intended to quality under Section 1.401-1(b)(3) of
the income tax regulations.

(4) Mr. Hamm's compensation is paid in Deutsche Marks and Swiss Francs. The
amounts shown above are based on average exchange rates during the periods
shown.

</TABLE>

OPTION GRANTS IN FISCAL 1995

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- --------------------------------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK
OPTIONS PRICE
GRANTED TO EXERCISE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -----------------
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------- ------- ----------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Keithley................ 32,000 27.2% 13.69 9/9/05 275,456 698,059
Hermann Hamm...................... 10,000 8.5% 13.69 9/9/05 86,080 218,143
Frederick R. Hume................. 24,000 20.4% 13.69 9/9/05 206,592 523,544
Ronald M. Rebner.................. 12,000 10.2% 13.69 9/9/05 103,296 261,772
Terrence E. Sheridan.............. 10,000 8.5% 13.69 9/9/05 86,080 218,143
</TABLE>

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

Share and per share amounts reflect a two-for-one stock split paid December 11,
1995, to shareholders of record on November 27, 1995.

11
<PAGE> 15

AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND
SEPTEMBER 30, 1995 OPTION VALUES

<TABLE>
<CAPTION>
EXERCISED IN FISCAL VALUE OF UNEXERCISED
1995 NUMBER OF IN-THE-MONEY
--------------------- UNEXERCISED OPTIONS AT OPTIONS AT
SHARES SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Keithley........ 4,968 22,791 18,498 97,644 170,212 672,208
Hermann Hamm.............. 2,992 34,221 45,238 37,945 423,479 294,908
Frederick R. Hume......... -- -- 38,460 58,632 334,274 380,405
Ronald M. Rebner.......... 5,844 30,903 22,745 37,297 210,770 270,855
Terrence E. Sheridan...... 8,326 42,446 22,264 30,197 202,438 216,892
</TABLE>

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

Share and per share amounts reflect a two-for-one stock split paid December 11,
1995, to shareholders of record on November 27, 1995.

COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT

The Company's Board of Directors has delegated to the Compensation and
Human Resources Committee (the "Committee") the responsibility of evaluating and
recommending for formal board approval the amounts of compensation paid to
officers. The Committee is composed entirely of outside Directors.

The guiding philosophy of the Company's executive compensation program is
to attract, motivate and retain highly qualified senior managers to direct and
grow the Company. Information is gathered to provide guidelines on a pay for
comparable positions in comparable industries. The pay of the officers is
managed to assure that, in general, it falls between the median and the
seventy-fifth percentiles of market survey averages. Beyond information that is
available to the Company, the consulting firm Towers Perrin is used to analyze
the competitiveness of the Company's compensation program.

The program provides for a salary that is based upon individual
performance, an annual bonus that is based upon the attainment of performance
goals, and long-term incentives in the form of stock options. These programs
were described earlier on pages 9 and 10 of this Proxy Statement.

The salary for each executive officer is set based upon data from
commercially available salary surveys, such as those of the American Electronics
Association, and separate input from Towers Perrin. The information used is the
range of salaries paid to individuals who hold similar positions or have similar
responsibilities within companies or divisions of companies of similar size in
the electronics industry. The median and the seventy-fifth percentiles as well
as the job performance of the individual guide the choice of salary amounts.

The magnitude of the annual bonus that is paid to each officer is
determined as follows. First, the targeted amount of bonus to be paid annually
is determined through the use of salary survey information based on a percentage
of annual salary. An appropriate mix of divisional and/or corporate financial
measures and individual performance measures is then determined and a payout
schedule is set based upon percentage attainment of the performance goals. The
magnitude of these performance goals is set in participation with the Board to
reflect the marketplace conditions and an expectation of continuous improvement.
The bonus payment begins at 70% attainment of financial goals and cannot exceed
the equivalent of annual salary without special Board approval.

Prior to 1995, Incentive Stock Options (ISOs) were used to provide
long-term incentives to officers and other key employees. The ISOs currently
outstanding for all officers other than Joseph P. Keithley's have an option
price equal to the market price at the time of grant, vest in four years and
expire in ten years from the date of grant. Mr. Keithley's outstanding ISOs were
issued at 110% of the market price at the time of grant, vest in four years and
expire five years from the grant date. Joseph P. Keithley's ISOs contain
different provisions than other officers since he controls more than 10% of the
voting power of the Company. In 1995, Non-qualified Stock Options (NSOs) were
used to provide long-term incentives to officers and other key

12
<PAGE> 16

employees. Each year a stock option grant is made for each officer based upon
the future growth in earnings per share as estimated by management and agreed to
by the Committee. NSOs vest in four years and expire in ten years from the date
of grant and have an option price equal to the market price at the time of
grant.

Chief Executive Officer's Compensation.

The Compensation and Human Resources Committee determined Mr. Keithley's
compensation for fiscal 1995 based upon a number of criteria. The major facts
that influenced the Committee's decisions were the median pay levels for CEOs in
electronics firms of similar size, the performance of the Company in sales
growth and level of profits, and the general state of the electronic test and
measurement industry.

Mr. Keithley's salary for 1995 was increased by 17.8% to acknowledge his
new responsibilities. This increase leaves Mr. Keithley's base salary much lower
than the median paid to others in comparable positions in the electronics
industry.

Mr. Keithley earned an annual bonus of $265,225 for fiscal year 1995, which
is payable after September 30, 1995. Mr. Keithley's bonus was based on a
combination of the Company's attaining a certain level of earnings before taxes,
return on assets and other strategic goals.

Compensation and Human Resources Committee
James T. Bartlett, Chairman
Dr. Arden L. Bement, Jr.
Gabriel A. Rosica
R. Elton White

13
<PAGE> 17

COMPANY STOCK PERFORMANCE

The following performance graph compares the five year cumulative return
from investing $100 on September 30, 1990 in each of the Company's Common
Shares, the Standard & Poor's 500 Index and the Standard & Poor's High
Technology Composite Index, with dividends assumed to be reinvested when
received.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG KEITHLEY INSTRUMENTS, INC., THE S & P 500 INDEX
AND THE S & P HIGH TECH COMPOSITE INDEX

<TABLE>
<CAPTION>
KEITHLEY S & P HIGH
MEASUREMENT PERIOD INSTRUMENTS, TECH
(FISCAL YEAR COVERED) INC. S & P 500 COMPOSITE
<S> <C> <C> <C>
9/90 100 100 100
9/91 152 131 123
9/92 115 146 125
9/93 130 165 151
9/94 136 171 176
9/95 401 221 277
</TABLE>

PROPOSAL TO AMEND AND RESTATE
THE COMPANY'S AMENDED ARTICLES OF INCORPORATION

At a meeting held on December 9, 1995, the Board of Directors of the
Company adopted a resolution declaring it advisable and in the best interest of
the Company and its shareholders to amend and restate the Company's Amended
Articles of Incorporation (the "Articles") to increase the number of authorized
shares.

The Company's Articles presently authorize 10,000,000 shares of capital
stock; 7,000,000 Common Shares, without par value, of which 4,364,802 were
issued and outstanding as of December 12, 1995, and 3,000,000 Class B Common
Shares, without par value, of which 2,893,796 were issued and outstanding as of
December 12, 1995. The proposal to amend and restate the Articles (the
"Proposal") will increase the number of shares of the Company's capital stock to
39,000,000 shares, designating 30,000,000 as Common Shares and 9,000,000 as
Class B Common Shares.

The purposes of the Proposal are to provide additional authorized Common
Shares for corporate purposes, such as equity offerings, employee benefit and
stock option plans, future stock splits and possibly acquisitions, and allow for
enough Common Shares to cover the possible conversion of Class B Common Shares.

If the Proposal is adopted by the shareholders, the Board of Directors will
cause the Amended Articles of Incorporation reflecting the Proposal to be filed
promptly with the Secretary of the State of Ohio, which Articles will be
effective upon filing.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.

14
<PAGE> 18

PROPOSAL TO APPROVE THE KEITHLEY INSTRUMENTS, INC.
1996 OUTSIDE DIRECTORS DEFERRED STOCK PLAN

The Board of Directors adopted the 1996 Outside Directors Deferred Stock
Plan (the 1996 Plan) on September 9, 1995 subject to approval by the
shareholders of the Company at their next Annual Meeting. If the 1996 Plan is
approved, the effective date thereof will be February 10, 1996.

The 1996 Plan is designed to permit non-employee directors to defer all or
a portion of their director fees by crediting them to an account rather than
paying them directly to the directors when earned. As such deferred fees are
earned, the Company would credit participant deferrals to each participant's
account (a "Deferral Account"). Each non-employee director may elect to defer
receipt of all or a portion (but not less than 50%) of such director's fees. All
amounts credited to a Deferral Account shall be deemed to be invested in Common
Shares or an interest-bearing account, based on the directors' elections.

The Company believes that the 1996 Plan will help build loyalty to the
Company by more closely aligning the interest of the directors with the
interests of shareholders, thereby promoting the long term profits and growth of
the Company.

The 1996 Plan will be interpreted and administered by a committee appointed
by the Board of Directors (the "1996 Plan Committee"). The 1996 Plan Committee
will appoint an Agent to purchase Common Shares in the open market, to be held
in nominee form, to satisfy the claims of the directors deferring fees and to
provide for the payment of such fees in the form of Common Shares. The number of
shares credited to a Deferral Account will be based on the number of whole
shares of Common Shares actually purchased by the Agent. While the Common Shares
are held by the Agent, the Agent will exercise all shareholder rights, including
voting rights. The Company also will maintain an interest-bearing account, to
satisfy the claims of the directors where the deferrals do not involve Common
Shares. Interest credited to deferrals will be based on the stated annual
interest rate established by Society National Bank.

All assets held in connection with the 1996 Plan will be subject to the
claims of general creditors of the Company. The rights of any participating
director to any assets held in connection with the 1996 Plan will be no greater
than the rights of an unsecured creditor of the Company.

Payment of deferrals made under the 1996 Plan would commence in the year
following the later of (i) the year a deferring director leaves the Board or
(ii) the date specified by the participating director in the Deferral Agreement
(which cannot be less than 5 years following the year in which the fees are
earned). Payments will be made in the form of a lump sum or in equal annual
installments.

Directors would benefit from participating in the 1996 Plan by deferring
the federal income tax otherwise due on the director fees covered by their
election and on any related interest or earnings. The Company may not claim a
deduction for federal income tax purposes until deferred amounts are paid under
the 1996 Plan. When the Company pays deferred amounts, it will be entitled to
claim a federal income tax deduction in respect of the full value of the payment
(i.e. the deferred amount inclusive of any credited interest, or the fair market
value of Common Shares, as applicable). The ultimate financial benefit to
non-employee directors cannot presently be determined, because the amount of
deferrals is not yet known and cannot be reasonably ascertained. The total
amount of director fees that could be deferred by each non-employee director is
$10,000 per year (plus the additional fees the director receives for either
chairing or attending each regular Board, Strategy Committee, Audit Committee
and Compensation and Human Resources Committee meeting). Presently, there are
six non-employee directors who could participate in the 1996 Plan. The extent of
any ultimate financial benefit would also depend upon the rate of return that
could be obtained by an alternative investment.

VOTE REQUIRED

Approval of the 1996 Plan will require the affirmative vote of the holders
of a majority of the outstanding Common Shares and Class B Common Shares
present, in person or by proxy, and entitled to vote at the meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.

15
<PAGE> 19

PROPOSAL TO APPROVE AN AMENDMENT TO THE
KEITHLEY INSTRUMENTS, INC. 1992 STOCK INCENTIVE PLAN
INCREASING THE NUMBER OF COMMON SHARES AVAILABLE
FOR AWARD UNDER THE PLAN FROM 700,000 TO 1,900,000

On December 9, 1995, the Board of Directors approved an amendment (the
"Amendment") to the Keithley Instruments, Inc. 1992 Stock Incentive Plan (the
"1992 Plan") to increase from 700,000 to 1,900,000 the aggregate number of
shares with which awards may be made. Since the Amendment constitutes a material
amendment for purposes of Section 16 ("Section 16") of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), shareholder approval of the
Amendment is being sought so that the granting of certain awards to executive
officers will be exempt from the operation of Section 16(b). Generally, Section
16(b) provides for the forfeiture of any profit realized by executive officers
of the Company from any combination of a purchase and sale of the Company's
Common Shares within a specified period. An exception from the application of
Section 16(b) may be obtained for certain stock transactions under employee
benefit plans upon satisfaction of certain conditions, including shareholder
approval of such plans and certain amendments thereto.

SUMMARY OF THE 1992 STOCK INCENTIVE PLAN

The 1992 Plan was approved by the Company's Board of Directors at a meeting
of the Board of Directors held on December 7, 1991, and by its stockholders at a
shareholders' meeting held on February 8, 1992. As a result of a 2-for-1 stock
dividend declared on November 6, 1995, the aggregate number of shares with which
awards may be made increased from 350,000 to 700,000.

The description herein is a summary of the 1992 Plan and is subject to and
qualified by the complete text of the 1992 Plan. The complete text of the 1992
Plan is filed as an exhibit to the Company's annual report on Form 10-K for the
year ended September 30, 1991, which exhibit is incorporated herein by
reference.

The purpose of the 1992 Plan is to attract and retain individuals who, by
virtue of their ability and qualifications, make important contributions to the
Company. By providing key employees with the opportunity to acquire an equity
interest in the Company over time and because benefit is only received through
improved stock performance, the Company believes that stock options serve to
align the interests of key employees closely with other shareholders. The 1992
Plan is administered by the Company's Compensation and Human Resources Committee
(the "Committee"), which has sole authority to determine and designate persons
to whom grants are to be made under the 1992 Plan and the nature and terms of
such grants.

Under the 1992 Plan, grants of nontransferable options to purchase Common
Shares ("Stock Options"), grants of Common Shares which may be subject to
certain vesting and transfer restrictions ("Restricted Stock"), and grants of
nontransferable options to receive payments based on the appreciation of the
Common Shares may be made to key employees of the Company or its subsidiaries.
The Stock Options provided for under the Plan may be either incentive stock
options ("Incentive Stock Options") intended to qualify for favorable tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), or nonqualified stock options ("Nonqualified Stock Options") which do
not qualify for preferential treatment. Common Shares not purchased under an
option which has terminated or lapsed may be used for the further grant of
options under the 1992 Plan.

Incentive Stock Options granted under the 1992 Plan may not be exercised
more than ten (10) years after the date of grant (or five (5) years in the case
of an option granted to an individual who at the time of the grant owns more
than 10% of the total combined voting power of all classes of stock of the
Company (a "10% Owner")). The aggregate fair market value (determined on the
date of grant) of Common Shares issuable upon exercise of Incentive Stock
Options exercisable for the first time by a key employee in any calendar year
may not exceed $100,000. The 1992 Plan provides that the option price shall not
be less than 100% of the fair market value of the Common Shares on the date such
option is granted, or 110% of such fair market value in the case of an Incentive
Stock Option granted to a 10% Owner. The purchase price must be paid in full by
the optionee at the time of exercise in either cash or Company Common Shares.

16
<PAGE> 20

The 1992 Plan provides that key employees may be granted the
nontransferable right to receive a payment based on the increase in the value of
Common Shares occurring after the date of such grant ("SARs"). SARs may (but
need not) be granted to a key employee in tandem with, and be exercisable in
lieu of exercising, a grant of Stock Options. When granted in tandem with a
Stock Option, a SAR shall provide that the holder of a Stock Option shall have
the right to receive an amount equal to 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 the SAR by the Committee, over the price to be paid for the
Common Shares under the Option.

No cash consideration is received by the Company for granting options under
the 1992 Plan. Options are granted in consideration of the services rendered or
to be rendered to the Company by the employees receiving the options.

FEDERAL INCOME TAX CONSEQUENCES

With respect to nonqualified stock options, in general, for federal income
tax purposes under present law:

(i) The grant of a nonqualified stock option, by itself, will not
result in income to the optionee.

(ii) Except as provided in (v) below, the exercise of a nonqualified
stock option (in whole or in part, according to its terms) will result in
ordinary income to the optionee at that time in an amount equal to the
excess (if any) of the fair market value of the shares on the date of
exercise over the option price.

(iii) Except as provided in (v) below, the tax basis of the shares
acquired upon exercise of a nonqualified stock option, which will be used
to determine the amount of any capital gain or loss on a future taxable
disposition of such shares, will be the fair market value of the shares on
the date of exercise.

(iv) No deduction will be allowable to the employer corporation upon
the grant of a nonqualified stock option but, upon the exercise of a
nonqualified stock option, a deduction will be allowable to the employer
corporation at that time in an amount equal to the amount of ordinary
income realized by the optionee exercising such option if the employer
corporation deducts and withholds appropriate federal withholding tax.

(v) With respect to the exercise of a nonqualified stock option and
the payment of the option price by the delivery of Common Shares, to the
extent that the number of shares received does not exceed the number of
shares surrendered, no taxable income will be realized by the optionee at
that time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered, and the holding period of the optionee in
the shares received will include his holding period in the shares
surrendered. To the extent that the number of shares received exceeds the
number of shares surrendered, ordinary income will be realized by the
optionee at that time in the amount of the fair market value of such excess
shares; the tax basis of such excess shares will be equal to the fair
market value of such shares at the time of exercise; and the holding period
of the optionee in such shares will begin on the date such shares are
transferred to the optionee.

With respect to incentive stock options, in general, for federal income tax
purposes under present law:

(i) Neither the grant nor the exercise of an incentive stock option,
by itself, will result in income to the optionee; however, the excess of
the fair market value of the shares at the time of exercise over the option
price is (unless there is a disposition of the shares acquired upon
exercise of an incentive stock option in the taxable year of exercise)
includable in alterative minimum taxable income which may, under certain
circumstances, result in an alterative minimum tax liability to the
optionee.

(ii) If the shares acquired upon exercise of an incentive stock option
are disposed of in a taxable transaction after the later of two years from
the date on which the option is granted or one year from the date on which
such shares are transferred to the optionee, long-term capital gain or loss
will be realized by the optionee in an amount equal to the difference
between the amount realized by the optionee and the optionee's basis which,
except as provided in (v) below, is the option price.

17
<PAGE> 21

(iii) Except as provided in (v) below, if the shares acquired upon the
exercise of an incentive stock option are disposed of within the two-year
period from the date of grant or the one-year period after the transfer of
the shares to the optionee (a "disqualifying disposition"):

(a) Ordinary income will be realized by the optionee at the time of
such disposition in the amount of the excess, if any, of the fair market
value of the shares at the time of such exercise over the option price,
but not in an amount exceeding the excess, if any, of the amount
realized by the optionee over the option price.

(b) Short-term or long-term capital gain will be realized by the
optionee at the time of any such taxable disposition in an amount equal
to the excess, if any, of the amount realized over the fair market value
of the shares at the time of such exercise.

(c) Short-term or long-term capital loss will be realized by the
optionee at the time of any such taxable disposition in an amount equal
to the excess, if any, of the option price over the amount realized.

(iv) No deduction will be allowed to the employer corporation with
respect to incentive stock options granted or shares transferred upon
exercise thereof, except that if a disposition is made by the optionee
within the two-year period or the one-year period referred to above, the
employer corporation will be entitled to a deduction in the taxable year in
which the disposition occurred in an amount equal to the amount of ordinary
income realized by the optionee making the disposition.

(v) With respect to the exercise of an incentive stock option and the
payment of the option price by the delivery of Common Shares, to the extent
that the number of shares received does not exceed the number of shares
surrendered, no taxable income will be realized by the optionee at that
time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered, and the holding period (except for
purposes of the one-year period referred to in (iii) above) of the optionee
in shares received will include his holding period in the shares
surrendered. To the extent that the number of shares received exceeds the
number of shares surrendered, no taxable income will be realized by the
optionee at that time; such excess shares will be considered incentive
stock option stock with a zero basis; and the holding period of the
optionee in such shares will begin on the date such shares are transferred
to the optionee. If the shares surrendered were acquired as the result of
the exercise of an incentive stock option and the surrender takes place
within two years from the date the option relating to the surrendered
shares was granted or within one year from the date of such exercise, the
surrender will result in a disqualifying disposition and the optionee will
realize ordinary income at that time in the amount of the excess, if any,
of the fair market value at the time of exercise of the shares surrendered
over the basis of such shares. If any of the shares received are disposed
of in a disqualifying disposition, the optionee will be treated as first
disposing of the shares with a zero basis.

VOTE REQUIRED FOR APPROVAL

The affirmative vote of the holders of a majority of the outstanding Common
Shares and Class B Common Shares present, in person or by proxy, and entitled to
vote at the meeting is required for the approval of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.

APPROVAL OF SELECTION OF INDEPENDENT ACCOUNTANTS

Although the Code of Regulations of the Company does not require the
submission of the selection of independent accountants to the shareholders for
approval, the Board of Directors considers it desirable that its appointment of
independent accountants be approved by the shareholders. The firm of Price
Waterhouse LLP, an international firm of public accountants, has audited the
annual financial statements of the Company since 1958. At the Annual Meeting,
the Board of Directors will ask the shareholders to approve the selection of
this firm as independent accountants for the Company for the fiscal year ending
September 30, 1996.

18
<PAGE> 22

A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting, and he will have an opportunity to make a statement if he so
desires. The representative will also be available to respond to appropriate
questions from shareholders.

OTHER MATTERS

Reports will be laid before the meeting, including a letter from the
Chairman of the Board and Chief Executive Officer and the President which
accompanies the financial statements of the Company, and the report of
independent accountants. The Board of Directors does not contemplate and does
not intend to present for consideration the taking of action by shareholders
with respect to any reports to be laid before the meeting or with respect to the
minutes of the Annual Meeting held on February 4, 1995, which will be read at
the meeting on February 10, 1996, unless a motion to dispense with a reading is
adopted.

The Board of Directors of the Company is not aware of any matter to come
before the meeting other than those mentioned in the accompanying Notice.
However, if other matters shall properly come before the meeting, it is the
intention of the persons named in the accompanying Proxy to vote in accordance
with their best judgment on such matters.

Any shareholder proposal intended to be presented at the Annual Meeting of
Shareholders to be held in 1997 must be received by the Company's Chairman and
Chief Executive Officer at its principal executive offices not later than August
22, 1996, for inclusion in the Board of Directors' Proxy Statement and form of
Proxy relating to that meeting. Each proposal submitted should be accompanied by
the name and address of the shareholder submitting the proposal and the number
of Common Shares and/or Class B Common Shares owned. If the proponent is not a
shareholder of record, proof of beneficial ownership should be submitted.

Upon the receipt of a written request from any shareholder entitled to vote
at the forthcoming Annual Meeting, the Company will mail, at no charge to the
shareholder, a copy of the Company's Annual Report on Form 10-K, including the
financial statements and schedules required to be filed with the Securities and
Exchange Commission pursuant to Rule 13a-1 under the Securities Exchange Act of
1934, as amended, for the Company's most recent fiscal year. Requests from
beneficial owners of the Company's voting securities must set forth a good faith
representation that as of the record date for the Annual Meeting, the person
making the request was the beneficial owner of securities entitled to vote at
such Annual Meeting. Written requests for such report should be directed to:

Ronald M. Rebner
Vice President and Chief Financial Officer
Keithley Instruments, Inc.
28775 Aurora Road
Solon, Ohio 44139

You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the Annual Meeting. For your convenience, a
return envelope is enclosed requiring no additional postage if mailed in the
United States.

By Order of the Board of Directors,

/s/ James B. Griswold

JAMES B. GRISWOLD
Secretary

December 22, 1995

19
<PAGE> 23

COMMON SHARES

<TABLE>
<S> <C> <C>
KEITHLEY INSTRUMENTS, INC. P R O X Y ANNUAL MEETING OF SHAREHOLDERS
28775 AURORA ROAD TO BE HELD ON FEBRUARY 10, 1996
SOLON, OHIO 44139 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
</TABLE>

The undersigned hereby appoints (i) JOSEPH P. KEITHLEY and RONALD M.
REBNER, and each of them, as Proxy holders and attorneys, with full power
of substitution, to appear and vote all the Common Shares of Keithley
Instruments, Inc. which the undersigned shall be entitled to vote at the
Annual Meeting of Shareholders of the Company, to be held at the
Company's corporate headquarters, 28775 Aurora Road, Solon, Ohio 44139,
on Saturday, February 10, 1996, at 12:00 o'clock Noon (EST), and at any
postponements or adjournments thereof, hereby revoking any and all
proxies heretofore given, and (ii) authorizes and directs said Proxy
holders to vote all the Common Shares of the Company represented by this
Proxy as follows, with the understanding that if no directions are given
below, said shares will be voted FOR the election of the ten Directors
nominated by the Board of Directors and FOR the proposal set forth below:

1. Election of Directors.
/ / FOR all nominees listed
(except as marked to the contrary)
/ / WITHHOLD AUTHORITY
to vote for all nominees listed

Joseph P. Keithley; Joseph F. Keithley; Ronald M. Rebner*; Dr. Theodore
M. Alfred*; James T. Bartlett*; Dr. Arden L. Bement, Jr.; James B. Griswold;
Leon J. Hendrix, Jr.; Gabriel A. Rosica; and R. Elton White

*Elected by holders of Common Shares only.

(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line.)

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

(Continued, and to be signed on reverse side.)

(Continued from other side.)

2. Proposal to amend and restate the Company's Amended Articles of
Incorporation.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

3. Proposal to approve the Keithley Instruments, Inc. 1996 Outside
Directors Deferred Stock Plan.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

4. Proposal to amend the Keithley Instruments, Inc. 1992 Stock
Incentive Plan.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

5. Proposal to approve the Board of Directors' selection of Price
Waterhouse as independent accountants of the Company.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

6. In their discretion to act on any other business as may properly
come before the Annual Meeting or any adjournments thereof.

PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.

Dated:
Month Day Year

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

Your signature to this Proxy
form should be exactly the same
as the name imprinted hereon.
Persons signing as executors,
administrators, trustees or in
similar capacities should so
indicate. For joint accounts,
the name of each joint owner
must be signed.

Proxy Card
<PAGE> 24

CLASS B COMMON SHARES

The undersigned hereby appoints (i) JOSEPH P. KEITHLEY and RONALD M.
REBNER, and each of them, as Proxy holders and attorneys, with full power
of substitution, to appear and vote all the Class B Common Shares of
Keithley Instruments, Inc. which the undersigned shall be entitled to
vote at the Annual Meeting of Shareholders of the Company, to be held at
the Company's corporate headquarters, 28775 Aurora Road, Solon, Ohio
44139, on Saturday, February 10, 1996, at 12:00 o'clock Noon (EST), and
at any postponements or adjournments thereof, hereby revoking any and all
proxies heretofore given, and (ii) authorizes and directs said Proxy
holders to vote all the Class B Common Shares of the Company represented
by this Proxy as follows, with the understanding that if no directions
are given below, said shares will be voted FOR the election of the seven
Directors nominated by the Board of Directors and FOR the proposal set
forth below:

1. Election of Directors.
/ / FOR all nominees listed
(except as marked to the contrary)
/ / WITHHOLD AUTHORITY
to vote for all nominees listed

Joseph P. Keithley; Joseph F. Keithley; Dr. Arden L. Bement, Jr.; James
B. Griswold; Leon J. Hendrix, Jr.; Gabriel A. Rosica; and R. Elton White

(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line.)

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

(Continued, and to be signed on reverse side.)

(Continued from other side.)

2. Proposal to amend and restate the Company's Amended Articles of
Incorporation.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

3. Proposal to approve the Keithley Instruments, Inc. 1996 Outside
Directors Deferred Stock Plan.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

4. Proposal to amend the Keithley Instruments, Inc. 1992 Stock
Incentive Plan.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN

5. Proposal to approve the Board of Directors' selection of Price
Waterhouse as independent accountants of the Company.

/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN
6. In their discretion to act on any other business as may properly
come before the Annual Meeting or any adjournments thereof.

PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
Dated:
Month Day Year

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

Proxy Card