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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 (I.R.S. Employer
incorporation or organization) Identification No.)
28775 AURORA ROAD, SOLON, OHIO 44139
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (216) 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 X NO
--- ---
As of April 30, 1996 the Registrant had outstanding 4,590,947 Common
Shares, without par value, and 2,801,278 Class B Common Shares, without
par value.
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PART I. FINANCIAL INFORMATION
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ITEM 1. Financial Statements.
- ------- ---------------------
KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
------------------ -------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 4,289 $ 2,682 $ 3,890
Accounts receivable and other, net 20,297 18,223 20,856
Inventories:
Raw materials 6,908 5,111 4,917
Work in process 5,356 4,340 3,981
Finished products 4,223 3,233 3,762
------- ------- -------
Total inventories 16,487 12,684 12,660
Other current assets 2,851 2,748 2,290
------- ------- -------
Total current assets 43,924 36,337 39,696
------- ------- -------
Property, plant and equipment, at cost 35,843 31,908 32,527
Less-Accumulated depreciation 23,471 21,214 21,984
------- ------- -------
Total property, plant and equipment, net 12,372 10,694 10,543
------- ------- -------
Intangible assets, net 8,108 6,433 6,201
Other assets 8,735 7,732 9,669
------- ------- -------
Total assets $73,139 $61,196 $66,109
======= ======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Short-term debt and current
installments on long-term debt $ 72 $ 85 $ 71
Accounts payable 7,440 6,517 6,759
Accrued payroll and related expenses 5,104 4,168 6,142
Other accrued expenses 5,492 4,018 4,575
Income taxes payable 2,696 1,875 2,580
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Total current liabilities 20,804 16,663 20,127
------- ------- -------
Long-term debt 9,685 7,898 6,042
Other long-term liabilities 3,138 2,828 3,038
Shareholders' equity:
Paid-in-capital 4,789 3,813 4,162
Earnings reinvested in the business 34,365 29,280 32,157
Cumulative translation adjustment and other 439 714 583
Common shares held in treasury, at cost (81) -- --
------- ------- -------
Total shareholders' equity 39,512 33,807 36,902
------- ------- -------
Total liabilities and shareholders' equity $73,139 $61,196 $66,109
======= ======= =======
</TABLE>
2
<PAGE> 3
KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands of Dollars Except for Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $30,019 $27,850 $59,842 $51,375
Cost of goods sold 10,967 10,842 22,802 19,939
Selling, general and administrative expenses 12,336 11,150 24,278 21,562
Product development expenses 4,336 3,691 8,432 6,896
Amortization of intangible assets 159 116 291 232
Financing expenses (net of investment income) 176 313 335 527
------- ------- ------- -------
Income before income taxes 2,045 1,738 3,704 2,219
Income taxes 560 420 1,074 555
------- ------- ------- -------
Net income $ 1,485 $ 1,318 $ 2,630 $ 1,664
======= ======= ======= =======
Net income per share - primary and fully diluted $ 0.19 $ 0.18 $ 0.34 $ 0.23
======= ======= ======= =======
Cash dividends per Common Share $ .031 $ .025 $ .063 $ .050
======= ======= ======= =======
Cash dividends per Class B
Common Share $ .025 $ .020 $ .050 $ .040
======= ======= ======= =======
</TABLE>
3
<PAGE> 4
KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,485 $ 1,318 $ 2,630 $ 1,664
Expenses not requiring outlay of cash 1,084 994 2,202 2,001
Changes in working capital (3,237) (3,174) (3,789) (5,639)
Other operating activities (415) (506) 677 62
------- ------- ------- -------
Net cash provided by (used in) operating activities (1,083) (1,368) 1,720 (1,912)
------- ------- ------- -------
Cash flows from investing activities:
Payments for property, plant, and equipment (2,267) (729) (3,455) (1,307)
Acquisitions (excluding cash of $11) (1,208) -- (1,408) --
Other investing activities-net 3 35 3 53
------- ------- ------- -------
Net cash used in investing activities (3,472) (694) (4,860) (1,254)
------- ------- ------- -------
Cash flows from financing activities:
Net increase (decrease) in short term debt 1 (86) 1 (455)
Net borrowing (repayment) of long term debt 4,256 1,044 3,687 3,551
Cash dividends (213) (164) (422) (327)
Other transactions-net 142 167 349 169
------- ------- ------- -------
Net cash provided by financing activities 4,186 961 3,615 2,938
------- ------- ------- -------
Effect of exchange rate changes on cash (69) 218 (76) 198
------- ------- ------- -------
Increase (decrease) in cash and cash equivalents (438) (883) 399 (30)
Cash and cash equivalents at beginning of period 4,727 3,565 3,890 2,712
------- ------- ------- -------
Cash and cash equivalents at end of period $ 4,289 $ 2,682 $ 4,289 $ 2,682
======= ======= ======= =======
Supplemental disclosures of cash flow information
- -------------------------------------------------
Cash paid during the period for:
Income taxes $ 528 $ 300 $ 686 $ 618
Interest 128 228 347 476
Supplemental schedule of noncash investing activities
- -----------------------------------------------------
The company's acquisitions included the following
noncash transactions (See Notes C and D):
Liabilities assumed $ 359 -- $ 916 --
Common Shares issued 201 -- 201 --
------- ------- ------- -------
Total noncash transactions $ 560 -- $ 1,117 --
======= ======= ======= =======
</TABLE>
Disclosure of accounting policy
- -------------------------------
For purposes of this statement, the Company considers all highly liquid
investments with maturities of three months or less when purchased to be cash
equivalents.
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
A. The consolidated financial statements at March 31, 1996 and 1995 and for
the three month periods then ended have not been examined by independents
accountants, but in the opinion of the management of Keithley Instruments,
Inc., all adjustments necessary to a fair statement of the consolidated
balance sheet, consolidated statement of income and consolidated statement
of cash flows for those periods have been included. All adjustments
included are of a normal, recurring nature.
B. The weighted average number of shares outstanding used in determining net
income per share for the quarter and six month periods are summarized
below:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares used
for primary calculation 7,782,654 7,134,914 7,764,418 7,122,040
Weighted average shares used
for fully diluted calculation 7,782,780 7,134,914 7,764,854 7,122,040
</TABLE>
Prior to the quarter ended June 30, 1995, fully diluted net income per
share had not been materially different from net income per share. Both
Common Shares and Class B Common Shares are included in calculating the
weighted average number of shares outstanding.
C. On December 5, 1995, the company consummated the purchase of the principal
assets of International Sensor Technology, Inc. (IST) of Pullman,
Washington. IST pioneered the development of laser heating technology in
thermoluminescence dosimetry (TLD) systems for personal radiation
protection. The technology has potential uses in radiation therapy, nuclear
waste management, radiation processing, environmental and radiation-hard
electronics applications in government, medicine and the nuclear industry.
D. On February 15, 1996, the company consummated the purchase of certain
assets of Turner Engineering Technology (Turner) of Roanoke, Texas. Turner
specializes in accelerated test methods for determining the quality of
semiconductor wafers at various stages of manufacturing. These test methods
are designed to save semiconductor manufacturers money by providing process
control feedback to allow optimization and continued semiconductor process
improvement.
5
<PAGE> 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations.
----------------------
(In Thousands of Dollars)
Results of Operations
- ---------------------
Second Quarter 1996 Compared with Second Quarter 1995
- -----------------------------------------------------
Net income for the second quarter of fiscal 1996 was $1,485, or $.19 per share,
which increased from $1,318, or $.18 per share, in last year's quarter. The
increase was due to higher sales levels and better gross margins, offset
somewhat by higher operating costs and a higher tax rate.
Record net sales of $30,019 increased 8 percent from $27,850 in the prior year's
second quarter. The increase was fueled by continued strong demand for our
automated parametric test systems used in the semiconductor industry and strong
shipments of the company's bench-top instruments. Geographically, sales within
the United States and to the Pacific Basin increased while European sales were
down. Orders for the second quarter of 1996 of $27,919 increased 7 percent from
the prior year's second quarter. The Instruments business unit continued to have
record orders; however, orders from the company's other divisions were down
slightly. Backlog was reduced $3,059 during the quarter, but remained strong at
$12,621 at March 31, 1996.
Cost of goods sold as a percentage of net sales decreased to 36.5 percent from
38.9 percent. This was primarily due to fixed manufacturing costs spread over
higher sales volume, and favorable sales mix. The effect of the company's
hedging activities on cost of goods sold for the quarter was to decrease cost of
goods sold by 0.2 percentage points of net sales versus an increase of 0.3
percentage points in the prior year's quarter.
Selling, general and administrative expenses of $12,336 for the second quarter
increased $1,186, or 11 percent from $11,150 in the prior year's quarter, due
mainly to higher marketing costs. The higher marketing costs were due to efforts
related to marketing Quantox(TM), the company's first product based on the
process monitoring technology purchased from IBM in 1994, additional costs to
explore other new business opportunities, as well as higher costs related to new
product introductions.
Product development expenses of $4,336, or 14.5 percent of net sales for the
quarter, increased $645, or 17 percent from $3,691, or 13.3 percent of net sales
in the prior year's quarter. This was due primarily to higher personnel and
related costs associated with the development of the company's model S600 next
generation parametric tester introduced during the quarter. The company expects
to begin to ship the S600 during the first quarter of fiscal 1997.
Despite slightly higher debt levels during the quarter, financing expenses (net
of investment income) of $176, decreased $137, or 44 percent from last year's
second quarter. This was due to lower interest rates on the variable rate debt
and the absence of certain fees related to the pay-off a higher interest rate
loan in the prior year's quarter.
6
<PAGE> 7
Six Months Ended March 31, 1996 Compared with Six Months Ended March 31, 1995
- -----------------------------------------------------------------------------
Net income of $2,630, or $.34 per share for the six months ended March 31, 1996,
increased $966, or 58 percent from $1,664, or $.23 per share reported for the
prior year. This was primarily the result of higher sales during the first half
of fiscal 1996 versus 1995.
Net sales of $59,842 increased $8,467, or 16 percent from $51,375 reported for
the six month period last year. The increase was due to increased sales of the
company's bench-top instruments and strong demand for the company's products
serving the semiconductor industry. Orders for the six month period were up 15
percent from last year. The majority of the increase was due to the company's
bench-top instruments, along with $1,662 in orders for Quantox.
Cost of goods sold as a percentage of net sales decreased to 38.1 percent from
38.8 percent for the six month period last year. This was due primarily to fixed
manufacturing costs spread over higher sales volume. The company's hedging
activities had no effect on cost of goods sold for the six months ended March
31, 1996, versus an increase in cost of goods sold by 0.3 percentage points of
net sales in last year's six month period.
Selling, general and administrative expenses of $24,278, or 40.6 percent of net
sales increased $2,716, or 13 percent from $21,562, or 42.0 percent of net sales
in the same period in the prior year, due mainly to higher marketing costs. The
increased marketing costs related to the market development and introduction of
Quantox, increased personnel and related costs, additional costs to explore
other new business opportunities and a 4 percent weaker U.S.
dollar.
Product development expenses of $8,432, or 14.1 percent of net sales for the
first half of fiscal 1996, increased $1,536, or 22 percent from $6,896, or 13.4
percent of net sales in the same period last year. This was due to increased
costs associated with the development of the company's S600 next generation
parametric test system, the development of its new bench-top instruments
products and the exploration of other new business opportunities.
Financing expenses (net of investment income) decreased $192, or 36 percent
despite slightly higher average debt levels during the period. This was due to
lower interest rates on the variable rate debt and the absence of certain fees
related to the pay-off of a higher interest rate loan in the prior year's second
quarter.
The effective tax rate was 29.0 percent for the six month period compared with
25.0 percent for the prior year's period. The effective rate is less than the
statutory rate of 34 percent due to the utilization of foreign tax credits and
foreign sales corporation (FSC) benefits. The effective tax rate was higher in
1996 than in 1995 because most of the foreign tax credit carryforwards were used
in 1995.
7
<PAGE> 8
Liquidity and Capital Resources
- -------------------------------
Cash used in operations was $1,083 for the second quarter. For the first six
months, cash provided by operations was $1,720. Total debt of $9,757 at March
31, 1996, increased $3,644 since the beginning of the year. The increase in debt
supported increased working capital requirements due to higher sales and funded
the company's increase in capital spending. Through interest rate swap
agreements, the company has effectively fixed its long-term interest rate at
under 7 percent for $6,000 of debt. The balance of debt carries variable
interest rates based on U.S. prime, LIBOR or FIBOR. The debt-to-capital ratio at
March 31, 1996, was 19.8 percent.
The company currently expects to increase capital spending during 1996 and
estimates capital spending will total approximately $9,000 for the year. The
increased spending will be used to expand production capacity and facilities.
The Company expects to finance capital spending through cash provided by
operations as well as utilizing its available lines of credit. At March 31,
1996, the Company had available unused lines of credit with domestic and foreign
banks aggregating $21,821 of which $6,452 were short term and $15,369 were long
term.
8
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PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) EXHIBITS. The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
3(c) Amended Articles of Incorporation, as amended on February 10, 1996.
10(x) 1996 Outside Directors Deferred Stock Plan.
27 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during
the quarterly period ended March 31, 1996.
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: May 14, 1996 /s/ Joseph P. Keithley
-------------------------
Joseph P. Keithley
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1996 /s/ Ronald M. Rebner
-----------------------
Ronald M. Rebner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
9
<PAGE> 1
Exhibit 3(c) - Amended Articles of Incorporation.
- -------------------------------------------------
AMENDED
ARTICLES OF INCORPORATION
OF
KEITHLEY INSTRUMENTS, INC.
Adopted February 10, 1996
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:
A. 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;
B. To enter into, promote or conduct any other kind of business, contract
or undertaking permitted to 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
A. 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
39,000,000 shares. The classes and the aggregate number of shares of capital
stock of each class which the Corporation shall have authority to issue are as
follows:
1. 30,000,000 Common Shares, without par value (hereinafter the "Common
Shares"). Upon the filling of these Amended Articles of Incorporation, each
previously issued Common share, without par value, of the Corporation, including
each Common Share held in treasury by the Corporation, shall, without any action
on the part of the respective holders remain an issued Common Share of the
Corporation with the express terms contained in these Amended Articles of
Incorporation.
2. 9,000,000 Class B Common Shares, without par value (hereinafter the
"Class B Common Shares"). Upon the filling of these Amended Articles of
Incorporation, each previously issued Class B Common share, without par value,
of the Corporation, including each Class B Common Share held in treasury by the
Corporation, shall, without any action on the part of the respective holders
remain an issued
B-1
<PAGE> 2
Class B Common Share of the Corporation with the express terms contained in
these Amended Articles of Incorporation.
B. 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.
a. 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.
b. 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.
c. 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.
d. 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
B-2
<PAGE> 3
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.
3. DIVIDENDS AND DISTRIBUTIONS.
a. 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.
b. 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.
4. 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.
5. 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
B-3
<PAGE> 4
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,
B-4
<PAGE> 5
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.
B-5
<PAGE> 1
Exhibit 10(x) - 1996 Outside Directors Deferred Stock Plan.
- -----------------------------------------------------------
KEITHLEY INSTRUMENTS, INC.
1996 OUTSIDE DIRECTORS DEFERRED STOCK PLAN
Keithley Instruments, Inc. (the "Company") hereby establishes
the Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan,
effective as of February 10, 1996 (the "Plan").
The Plan is established for the purposes of deferring outside
directors' fees and paying those fees in the form of no par value Common Shares
of Keithley Instruments, Inc. ("Shares").
The Plan is intended not to be subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), is intended to be
an unfunded plan of deferred compensation for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"), and is intended not to satisfy any
qualification requirements of Section 401 of the Code.
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 31st 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
irrevocably elect (i) the percentage of his or her director's fees to
be deferred, (ii) whether the amount deferred shall take the form of
Shares or cash; and (iii) subject to Section 2.1 hereof, the date or
dates on which the deferred cash or Shares shall be distributed.
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") within thirty (30) days following (a) the later of
(i) the date the Participant terminates his or her service on the Board
of Directors of the Company; 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.
<PAGE> 2
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.
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.
----------------------
All credits to a Deferral Account of a Participant shall be deemed to
be invested in Shares or an interest-bearing account, as such
Participant shall elect. The number of Shares credited to a
Participant's Deferral Account by virtue of such 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 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; and provided further, that a
Participant shall at all times have only a contractual right to receive
cash and/or Shares in the future, and shall not acquire any beneficial
ownership interest in, or have any control over, any Shares actually
acquired or held by such Agent. Any amount of Deferral otherwise
elected by a Participant to be invested in Shares and not credited as
whole Shares shall be credited with interest in accordance with Section
4.2 hereof, until capable of being used to purchase whole Shares.
2
<PAGE> 3
3.3 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.
---------------------
Each Participant shall make an investment election in the manner
prescribed by the Committee, directing the manner in which his/her
Deferrals shall be deemed to be invested. Each investment election must
be made at the time the applicable Deferral Agreement is signed and may
not be revoked or changed. Each Participant may make a separate
investment election for each of his/her Deferral Accounts. Each
investment election shall specify that Deferrals shall be deemed to
either be invested in Shares or deposited in an account bearing
interest at the prime rate. For this purpose, "prime rate" means the
stated annual interest rate established by Society National Bank or its
direct successor ("Society") from time to time as its prime or base
rate, whether or not publicly announced and without regard to whether
such rate is Society's most borrower-favorable or best interest rate.
Subject to any minimum or maximum rate limitations specified by
applicable law, the prime rate will automatically and immediately
change from time to time effective as of the effective date of each
such change in the prime rate.
4.2 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.
3
<PAGE> 4
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
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;
(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 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.
4
<PAGE> 5
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;
5
<PAGE> 6
(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.
6
<PAGE> 7
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
<PAGE> 8
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
8
<PAGE> 9
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.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed by its duly authorized officers as of this 11th day of December,
1995.
KEITHLEY INSTRUMENTS, INC.
By: /s/ Joseph P. Keithley
----------------------------------------------------
Title: Chairman, President and Chief Executive Officer
------------------------------------------------
9
<PAGE> 10
DEFERRAL AGREEMENT
THIS DEFERRAL AGREEMENT is entered into pursuant to the provisions of
Keithley Instruments, Inc. 1996 Outside Directors Deferred Compensation Plan
("Plan"). All capitalized terms in this Agreement shall have the meanings
ascribed to them in the Plan.
1. DEFERRAL ELECTION. I hereby elect to defer receipt of the following
portion of my directors' fees (including all meetings fees, but not
paid or reimbursed expenses) earned in respect of the period commencing
January 1, _____ (enter any desired percentage not less than 50%):
___ I elect to defer ______% of my director's fees.
2. Deferral Period. (The Plan gives you the option of electing a Deferral
Period, the balance of your Deferral Account established pursuant to
this Agreement will be distributed to you within 30 days after the end
of the Deferral Period (minimum, 5 years), or, if later, the date of
cessation of service as a director of Keithley Instruments, Inc. (the
"Company") (unless you die, in which case distribution will be made to
your Beneficiary shortly following your date of death). If you do not
elect a Deferral Period, your Account will be distributed within 30
days of the date of your cessation of service as a director of the
Company, subject only to the special rule noted above in cases where
death occurs prior to distribution.)
Please check one of the following:
___ I elect a Deferral Period ending on ___________ (Must be a date at
least 5 years after the close of the calendar year in which the
director's fees are earned)
OR
___ I do NOT wish to elect a Deferral Period.
3. METHOD OF DISTRIBUTION. I hereby elect distribution of the balance of
the Deferral Account established pursuant to this Agreement: (check
one)
___ in a single sum payment
OR
in _______ annual installments
4. INVESTMENT ELECTION. I direct that the amount I have deferred pursuant
to Section 1 of this Agreement shall be deemed to be invested as
follows, in the percentages indicated: (must be increments of 1%)
10
<PAGE> 11
Shares (in whole Shares) ______%
Cash with interest (prime rate,
as specified in Plan) ______%
I understand that this investment election cannot be changed. I also
understand that this investment election is merely a device used to
determine the amount payable to me under the Plan and does not provide
me with any actual rights or interests in any particular funds,
securities or property of the Company, or any property or assets held
by any agent of the Company or the Committee, or in any Shares of
Keithley Instruments, Inc. I also understand that my right to receive
distributions under the Plan makes me a general unsecured creditor of
the Company with no greater priority than any other general unsecured
creditor of the Company.
5. BENEFICIARY: In the event of my death, I designate the following
individual or entity as beneficiary to receive the balance of my
Deferral Account:
_________________
_________________
_________________
6. MISCELLANEOUS. I understand that all elections made in this Agreement
are irrevocable and that this Agreement is subject to the terms,
conditions and limitations of the Plan, as in effect from time to time,
in all respects. I agree to accept as final and binding all decisions
and interpretations of the Committee relating to the Plan and this
Agreement.
-----------------------------------
Signature of Director
-----------------------------------
Printed Name of Director
-----------------------------------
Social Security Number of Director
-----------------------------------
Date
Received and
accepted on behalf
of the Committee
this ____ day of
__________, 199_.
11
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
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0
0
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