KEITHLEY INSTRUMENTS INC, DEF 14A, 1996-12-23

KEITHLEY INSTRUMENTS INC
DEF 14A, 1996-12-23
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: $125
------------------------------------------------

(2) Form, schedule or registration statement no.: Schedule 14A Preliminary
--------------------------

(3) Filing party: Keithley Instruments, Inc.
----------------------------------------------------------

(4) Date filed: 12-16-96
------------------------------------------------------------

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

[KEITHLEY LOGO] KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139
(216) 248-0400
Fax (216) 248-6168

December 26, 1996

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 15, 1997, at our newly
expanded Semiconductor Division facility, 30500 Bainbridge Road, Solon, Ohio.
This is a different location from past years, and is located about half a mile
from our headquarters.

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, 1996. As in the past, there will be an informal presentation on
one 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

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

[KEITHLEY LOGO] KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139
(216)248-0400
Fax (216) 248-6168

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 company's Semiconductor Division facility,
30500 Bainbridge Road, Solon, Ohio, on Saturday, February 15, 1997, at 12:00
Noon (EST), for the following purposes:

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

(2) To vote upon a proposal to fix the number of Directors of the
Company at ten;

(3) To elect nine 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;

(4) To vote on a proposal to amend the Keithley Instruments, Inc. 1993
Employee Stock Purchase and Dividend Reinvestment Plan to increase the
number of shares available for purchase to 750,000;

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

(6) 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 17, 1996, 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 26, 1996

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 15, 1997

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 15, 1997, 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, 1996, are first being sent to shareholders on or about
December 26, 1996.

VOTING RIGHTS

As of the close of business on December 17, 1996, there were outstanding
4,656,850 Common Shares, without par value, of the Company (the "Common Shares")
and 2,794,278 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 six 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 six 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 17, 1996 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 17, 1996:

<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
- --------------------------- ----------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Joseph P. Keithley......... 54,716(3) 1.2% 2,657,586 (4) 95.1% 81.7%
Kennedy Capital Management,
Inc.(5).................. 500,000 10.7% -- -- 1.5%
First Pacific Advisors,
Inc.(6).................. 674,000 14.5% -- -- 2.1%

- ---------------
<FN>
(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 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 192,586 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 Kennedy Capital
Management, Inc. dated February 8, 1996.

(6) Derived from information set forth on a Schedule 13G of First Pacific
Advisors, Inc. dated February 13, 1996.
</TABLE>

The business address of Mr. Keithley is 28775 Aurora Road, Solon, Ohio
44139. Kennedy Capital Management, Inc's. address is 425 N. New Ballas Road,
Suite 181, St. Louis, Missouri 63141; and First Pacific Advisors, Inc.'s address
is 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California 90064.

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<PAGE> 6

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 17, 1996, 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............. 27,800 * -- -- *
Brian R. Bachman................... 429 * -- -- --
James T. Bartlett.................. 33,129(4) * -- -- *
Dr. Arden L. Bement, Jr............ 10,478 * -- -- *
James B. Griswold.................. 16,620(5) * -- -- *
Leon J. Hendrix, Jr................ 13,259 * -- -- *
Joseph F. Keithley(6).............. 48,366(7) 1.0% 25,244 * *
Joseph P. Keithley................. 54,716(8) 1.2% 2,657,586(9) 95.1% 81.7%
Ronald M. Rebner................... 60,222 1.3% -- -- *
R. Elton White..................... 17,004 * -- -- *
Hermann Hamm....................... 93,723 2.0% -- -- *
Frederick R. Hume.................. 61,825 1.3% -- -- *
Gabriel A. Rosica.................. 4,030 * -- -- *
All officers and Directors as a
group (16 persons including the
above)........................... 582,188 12.0% 2,682,830 96.0% 83.6%

- ---------------
<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 on or share splits of the
Class B Common Shares.

(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 15, 1997 by Dr. Theodore M. Alfred (3,000 shares), James T.
Bartlett (3,000 shares), Dr. Arden L. Bement, Jr. (1,200 shares), James B.
Griswold (3,000 shares), Leon J. Hendrix, Jr. (3,000 shares), Ronald M.
Rebner (37,720 shares), R. Elton White (1,800 shares), Hermann Hamm (12,901
shares), Frederick R. Hume (58,789 shares), Gabriel A. Rosica (1,200
shares), and all officers and Directors as a group (201,563 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. Also includes shares owned under
the Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan
by Mr. Bachman (429 shares), Mr. Bartlett (2,579 shares), Dr. Bement (2,678
shares), Mr. Griswold (2,505 shares), Mr. Hendrix (2,259 shares), Mr. White
(2,204 shares) and Mr. Rosica (830 shares), as to which such persons
disclaim beneficial ownership.

(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 1,125 shares owned by a trust, of which Mr. Griswold acts as
co-executor.

(6) Joseph P. Keithley's father.
</TABLE>

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(7) Includes 8,994 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 192,586 shares owned
of record by a charitable trust for which Joseph P. Keithley serves as
trustee.

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, 1996, 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 nine 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 nine 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 nine 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. Bartlett, Hendrix and Rebner have
been nominated as the Directors to be so elected by the holders of the Common
Shares of the Company. The remaining six 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 nine 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 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.

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<PAGE> 8

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 48 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 81 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 52 the Company since 1981.
Brian R. Bachman Senior Vice President, Semiconductor and 1996
Age 51 Speciality Systems of Eaton Corporation
since January 1996, responsible for
Semiconductor Equipment Operations,
Commercial and Military Controls Operations
and AIL Systems, Inc., Eaton's defense
electronics subsidiary. Previously Vice
President, Standard Products Business Group
of Philips Semiconductor, one of the
world's largest semiconductor
manufacturers, for Philips Electronics
N.V., from 1991 through 1995.
James T. Bartlett(1) Managing Director since 1986 of Primus 1983
Age 59 Venture Partners, the fund manager for
Primus Capital Fund and Primus Capital Fund
II, venture capital limited partnerships.
Director of Oglebay Norton Company, a
provider of products and services to the
steelmaking and related industries.
Dr. Arden L. Bement, Jr. Professor of Engineering and Director of 1988
Age 64 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 50 since 1982.
</TABLE>

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<PAGE> 9

<TABLE>
<CAPTION>
NAME AND AGE
OF NOMINEE BUSINESS EXPERIENCE DIRECTOR SINCE
- --------------------------- --------------------------------------------- --------------
<S> <C> <C>
Leon J. Hendrix, Jr.(1) Principal, Clayton, Dubilier & Rice, Inc., a 1990
Age 55 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,
Remington Arms Co., a manufacturer and mar-
keter of firearms and ammunition, and
Riverwood International Corp., a leading
global provider of paperboard and
paperboard packaging systems.
R. Elton White Private Investor. Previously President of NCR 1994
Age 54 Corporation from 1991 to December 1993.
Director of 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 man-
ufacturer of transaction automation
systems.

- ---------------
<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, 1996 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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<PAGE> 10

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, 1996, in parentheses.

<TABLE>
<CAPTION>
COMPENSATION AND HUMAN
EXECUTIVE AUDIT RESOURCES COMMITTEE STRATEGY
COMMITTEE (NONE) COMMITTEE (TWO) (THREE) 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 James B. Griswold Brian R. Bachman
R. Elton White James T. Bartlett
James B. Griswold
Leon J. Hendrix, Jr.
Joseph F. Keithley
Joseph P. Keithley
Ronald M. Rebner
R. Elton White
</TABLE>

The Board of Directors held four meetings during the fiscal year ended
September 30, 1996. 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. Dr. Theodore Alfred and
Leon J. Hendrix, Jr. attended 70% 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. Directors may defer their fees under the
Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan.

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 and Mr. Rebner
are required to be compensated at the rate of at least $155,733 and $105,700 per
year, respectively. Mr. Hamm's and Mr. Rebner'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 1996.

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 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

7
<PAGE> 11

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 55. 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
1996, their annual retirement benefits would be as follows: Joseph P. Keithley,
$76,879; Mr. Hume, $41,569, Mr. Rosica, $16,686 and Mr. Rebner, $55,071.

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 $99,706 IF CALCULATED AT THE RATE OF COMPENSATION HE RECEIVED
DURING FISCAL YEAR 1996. 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 1996.

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.

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 than 15% of a participant's total compensation
(excluding certain fringe benefits and some types of incentive

8
<PAGE> 12

compensation) 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 1996 included (i) a money market fund invested
in U.S. Treasury notes, bills and other direct obligations of the United States
Treasury, (ii) a pooled fixed income account invested primarily in insurance
companies and other investment contracts, and (iii) ten equity mutual funds:
Fidelity Puritan Fund, Aim Charter Fund, Fidelity Magellan Fund, Twentieth
Century Select Investors, Twentieth Century Growth Investors, Vanguard Index
Extended Market, T. Rowe Price New Horizons Fund, Pioneer Capital Growth Fund,
T. Rowe Price Science and Technology Fund 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.

1996 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, 1996. 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, 1995,
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 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 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

9
<PAGE> 13

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 600 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.

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, 1996, during the fiscal years ended
September 30, 1996, 1995 and 1994.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION STOCK ALL OTHER
------------------------ OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) # SATION(1)($)
- -------------------------------- ---- ---------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Joseph P. Keithley 1996 259,375 0 75,000 4,863
Chairman of the Board, 1995 240,545 265,225 32,000 2,033
President and Chief 1994 203,991 42,725 56,000 2,208
Executive Officer
Frederick R. Hume 1996 217,375 100,883 18,000 4,843
Senior Vice President 1995 206,000 167,500 24,000 2,125
Strategic Planning and 1994 192,720 69,459 29,000 2,175
Technology
Hermann Hamm (2) 1996 245,958 34,942 10,000 --
Vice President 1995 243,051 167,355 10,000 --
European Operations 1994 209,280 76,066 22,000 --
Gabriel A. Rosica (3) 1996 131,384 50,000 50,000 51,971
Senior Vice President 1995 -- -- -- --
1994 -- -- -- --
Ronald M. Rebner 1996 167,900 0 20,000 5,296
Vice President and 1995 160,044 140,000 12,000 2,129
Chief Financial Officer 1994 148,705 20,000 21,000 2,185
</TABLE>

10
<PAGE> 14

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

(1) 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. Also, see (3) below for Mr. Rosica.

(2) 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.

(3) Mr. Rosica became an employee of the company in February 1996. Prior to this
time he was a Director. The salary column includes Mr. Rosica's earnings
since becoming an employee and excludes Director's fees. Stock option awards
include only those which were granted to Mr. Rosica as an employee. The
other annual compensation column includes a $50,000 signing bonus which MR.
ROSICA HAS ELECTED TO DEFER PAYMENT OF UNTIL HIS RETIREMENT.

OPTION GRANTS IN FISCAL 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO EXERCISE PRICE 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.......... 7,000 1.9% 15.6875 12/9/05 69,060 175,013
68,000 18.6% 9.2500 9/7/06 395,575 1,002,464
Frederick R. Hume... 18,000 5.1% 9.2500 9/7/06 104,711 265,358
Hermann Hamm........ 10,000 2.7% 9.2500 9/7/06 58,173 147,421
Gabriel A. Rosica... 25,000 6.8% 15.5000 2/15/06 243,697 617,575
25,000 6.8% 9.2500 9/7/06 145,432 368,553
Ronald M. Rebner.... 20,000 5.5% 9.2500 9/7/06 116,346 294,842
</TABLE>

AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND
SEPTEMBER 30, 1996 OPTION VALUES

<TABLE>
<CAPTION>
EXERCISED IN FISCAL VALUE OF UNEXERCISED
1996 NUMBER OF IN-THE-MONEY
--------------------- UNEXERCISED OPTIONS AT OPTIONS AT
SHARES SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Keithley(1)..... 4,738 49,541 47,611 138,793 168,493 113,365
Frederick R. Hume......... -- -- 56,539 58,553 174,481 67,077
Hermann Hamm.............. 49,238 449,931 10,901 33,043 44,328 52,664
Gabriel A. Rosica......... -- -- 1,200 50,000 4,538 --
Ronald M. Rebner.......... -- -- 35,970 44,072 126,503 48,868

- ---------------
<FN>
(1) Subsequent to September 30, 1996, the Board of Directors canceled all of
Joseph P. Keithley's Incentive Stock Options and regranted them as
Non-qualified Stock Options. The original option prices remain the same;
however, the terms of the options have been extended from the original 5
years to 10 years. The aggregate number of options canceled and regranted
was 52,611 with prices ranging from $5.2250 to $5.5688. Currently, Mr.
Keithley has no options that are exercisable.
</TABLE>

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
profitably increase sales of the Company. Information is gathered to provide
guidelines on pay for comparable positions in comparable industries. The pay of
the

11
<PAGE> 15

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 iQuantic is used by the
Committee 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 which if achieved increase shareholder worth, 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 iQuantic. 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 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. Since 1995 Non-qualified Stock Options (NSOs) are used to provide
long-term incentives to officers and other key 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 GENERALLY,
have an option price equal to the market price at the time of grant.

Chief Executive Officer Compensation.

The Compensation and Human Resources Committee determined Mr. Keithley's
compensation for fiscal 1996 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, his ability to create transformation and the
general state of the electronic test and measurement industry.

Mr. Keithley's salary for 1996 was increased by 5%. This increase leaves
Mr. Keithley's base salary lower than the median paid to others in comparable
positions in the electronics industry.

Compensation and Human Resources Committee
James T. Bartlett, Chairman
Dr. Arden L. Bement, Jr.
James B. Griswold
R. Elton White

12
<PAGE> 16

COMPANY STOCK PERFORMANCE

The following performance graph compares the five year cumulative return
from investing $100 on September 30, 1991 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 TECHNOLOGY SECTOR INDEX

<TABLE>
<CAPTION>
MEASUREMENT PERIOD KEITHLEY INSTRU- S & P TECHNOLOGY
(FISCAL YEAR COVERED) MENTS, INC. S & P 500 SECTOR
<S> <C> <C> <C>
9/91 100 100 100
9/92 75 111 102
9/93 85 125 123
9/94 89 143 130
9/95 264 226 169
9/96 159 277 203

<FN>
* $100 INVESTED ON 09/30/91 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDED SEPTEMBER 30.
</TABLE>

13
<PAGE> 17

PROPOSAL TO APPROVE AN AMENDMENT TO THE KEITHLEY INSTRUMENTS, INC.
1993 EMPLOYEE STOCK PURCHASE AND DIVIDEND REINVESTMENT PLAN
INCREASING THE NUMBER OF COMMON SHARES AVAILABLE
FOR PURCHASE UNDER THE PLAN FROM 250,000 TO 750,000

On December 7, 1996, the Company's Board of Directors (the "Board")
approved an amendment (the "Amendment") to the 1993 Employee Stock Purchase and
Dividend Reinvestment Plan (the "Plan"), to increase the aggregate number of
shares available under the Plan from 250,000 to 750,000. The Board has
designated that this Amendment be submitted to the Company's shareholders for
approval.

GENERAL INFORMATION

On December 4, 1993, the Board approved the 1993 Employee Stock Purchase
Plan. The Plan was approved by the Company's shareholders on February 5, 1994.
The Plan offers eligible employees of the Company and of the Company's United
States subsidiaries, the opportunity to acquire Common Shares at a discount and
without incurring any material acquisition costs.

A total of 250,000 Common Shares (which amount will be increased to 750,000
Common Shares if this Proposal is approved by the Company's shareholders) are
available for purchase by participating employees under the terms of the Plan.
The number of shares available under the Plan was increased to 250,000 from the
original amount, 125,000, as a result of a stock split which occurred in
December, 1995. The Common Shares may be authorized but unissued shares,
treasury shares, or shares purchased under the Plan in the open market. When all
Common Shares offered for purchase under the Plan are fully subscribed, the Plan
will either be continued by increasing the number of Common Shares available
under the Plan or be terminated. All purchases and sales of Common Shares are
handled by First Chicago Trust Company of New York ("First Chicago"), as agent
for the Company and for participating employees.

The Plan is intended to meet the requirements set forth in Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code") relating to employee
stock purchase plans, so that employees participating in the Plan can defer
having to include in their personal gross incomes the value of the discount at
which Common Shares are being sold to them under the Plan. However, the Plan is
not subject to any of the provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").

ELIGIBLE EMPLOYEES

In general, all employees of the Company, and all employees of the
Company's subsidiaries, are eligible to participate in the Plan. However,
employees in the following categories generally will not be eligible to
participate, so long as they remain in one or more of those categories: (1)
temporary Company employees; (2) Company employees customarily employed for less
than five months in any calendar year; (3) employees who directly or indirectly
own more than a 5% interest in the Company or in a subsidiary of the Company;
and (4) employees with rights to purchase Common Shares under the Plan with an
aggregate fair market value of more than $25,000 (determined as of the date the
right to purchase such Common Shares is first exercisable).

PARTICIPATION IN THE PLAN

Participating employees are able to acquire Common Shares at a discount.
Because Common Shares can be purchased under the Plan only once each year
following the close of the plan year (which commences each January 1 and ends
the following December 31), eligible employees can participate in the Plan only
on a year-to-year basis.

To participate in the Plan for a given plan year, eligible employees must
enroll prior to the commencement of that plan year. An employee enrolls in the
Plan by signing a subscription agreement which applies to the entire plan year.

The minimum monthly withholding allowed is $20.00. The maximum monthly
withholding allowed is 25% of the participating employee's base pay for the
month. The total withholding allowed for any participating employee per plan
year is $21,250.

14
<PAGE> 18

Common Shares acquired through the subscription process are purchased by
First Chicago on a yearly basis. The actual purchase of Common Shares takes
place as of the close of the plan year during which amounts were withheld from
participating employees. Only those Common Shares purchased by First Chicago and
directly attributable to funds withheld from participating employees under a
subscription agreement can be purchased, or offered for purchase, at a discount.
Common Shares purchased with dividends received on Common Shares held under the
Plan can be purchased, and are only being offered for purchase, at fair market
value.

The subscription price for each Common Share being purchased, and offered
for purchase, on a discounted basis is equal to the lesser of (a) 85% of the
fair market value of a Common Share on the last trading day before the first day
of the subscription period in question; or (b) 85% of the fair market value of a
Common Share on the last trading day of that same subscription period.

The fair market value of a Common Share is determined using the last
reported sale price on the New York Stock Exchange Composite Tape (or any other
stock exchange or trading system on which Common Shares are listed on the
trading day in question) or if there is no reported sale on that day, on the
trading day immediately preceding.

All cash dividends and other distributions received by First Chicago on
Common Shares held by it under the Plan are credited to the accounts of
individual employees. As soon as practical after First Chicago receives cash
dividends, those dividends are applied to the purchase of additional Common
Shares, either in the open market or from the Company but in any event at
prevailing market prices (without any adjustment or 15% discount). First Chicago
is entitled to deduct from such amounts any bank service fees, brokerage
charges, or transfer taxes incurred by First Chicago to purchase (or resulting
from the purchase of) such Common Shares, to the extent such fees, charges and
taxes are not otherwise paid by the Company.

ADMINISTRATION OF THE PLAN

A committee composed of at least two employees of the Company administers
the Plan. The committee members, all of whom are appointed by the Company
President, control all administrative matters not delegated to First Chicago,
such as (1) interpreting the Plan; (2) making eligibility determinations; (3)
identifying those eligible employees whose participation rights are limited
under the Plan; and (4) forwarding enrollment, withholding, withdrawal,
suspension and revocation, and similar information, and elections and
directions, to First Chicago. Committee decisions and interpretations, when
made, are final, binding and conclusive on all persons unless specifically
overruled by the Board of Directors. Interpretations and decisions made by the
Board of Directors, or by a committee thereof, are final, binding and
conclusive.

PLAN AMENDMENT, MODIFICATION AND TERMINATION

The Board of Directors can amend, modify or terminate the Plan at any time
without notice. However, shareholder approval is also required for certain
amendments to the Plan.

VOTE REQUIRED FOR APPROVAL

The affirmative vote of holders of a majority of the outstanding shares is
required for the approval of this proposal. THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.

15
<PAGE> 19

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, 1997.

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, 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 10, 1996, which will be read at
the meeting on February 15, 1997, 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 1998 must be received by the Company's Chairman and
Chief Executive Officer at its principal executive offices not later than August
28, 1997, 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 26, 1996

16
<PAGE> 20
<TABLE>
<S> <C>

KEITHLEY INSTRUMENTS, INC.
P
R COMMON SHARES
O
X PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y OF THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SATURDAY, FEBRUARY 15, 1997

The undersigned hereby appoints 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 February 15, 1997, and at any postponements or adjournments
thereof, and directs said proxies to vote as specified herein on
the matters set forth in the notice of the meeting, and to transact
such other business as may properly come before the Annual Meeting
or any adjournment thereof, hereby revoking any and all proxies
heretofore given.

ELECTION OF DIRECTORS, Nominees:

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

*Elected by holders of Common Shares only.

YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES NAMED ABOVE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND
RETURN THIS CARD.

- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *

MAP HERE
</TABLE>

<PAGE> 21

[X] PLEASE MARK YOUR 9625
VOTES AS IN THIS
EXAMPLE.

This Proxy when properly executed will be voted in the manner directed herein by the shareholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ITEM 1, ITEM 2, ITEM 3 AND ITEM 4.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1, ITEM 2, ITEM 3 AND ITEM 4.

FOR WITHHELD FOR AGAINST ABSTAIN

Item 1. Election of Directors [ ] [ ] Item 2. Proposal to fix the [ ] [ ] [ ]
(see reverse) number of Directors
of the Company at ten.

Item 3. Proposal to amend the [ ] [ ] [ ]
Keithley Instruments, Inc.
1993 Employee Stock
Purchase and Dividend
Reinvestment Plan.

Item 4. Proposal to approve the [ ] [ ] [ ]
Board of Directors' selec-
tion of Price Waterhouse
LLP as independent
accountants of the
Company.

The signer hereby revokes all proxies heretofore given by the
signer to vote at said meeting or any adjournments thereof.
NOTE: Please sign name(s) exactly as printed hereon. Joint
owners should each sign. Persons signing as executors,
administrators, trustees or in similar capacities should so
indicate.

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

-----------------------------------------------------------
SIGNATURE(S) DATE

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE

- ----------------------------------------------------------------------------------------------------------------------------------
* FOLD AND DETACH HERE *

[KEITHLEY LOGO]

ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 15, 1997
12:00 NOON
KEITHLEY INSTRUMENTS, INC.
SEMICONDUCTOR DIVISION
30500 BAINBRIDGE ROAD
SOLON, OHIO
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>

P KEITHLEY INSTRUMENTS, INC.
R
O CLASS B COMMON SHARES
X
Y PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SATURDAY, FEBRUARY 15, 1997

The undersigned hereby appoints 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 February 15, 1997, and at any postponements or
adjournments thereof, and directs said proxies to vote as specified
herein on the matters set forth in the notice of the meeting, and
to transact such other business as may properly come before the
Annual Meeting or any adjournment thereof, hereby revoking any and
all proxies heretofore given.