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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-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):
[X] No fee required.
[ ] 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:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<TABLE>
<S> <C>
KEITHLEY LOGO KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139
(440) 248-0400
Fax (440) 248-6168
</TABLE>
December 29, 1997
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 14, 1998, at our corporate
headquarters, 28775 Aurora Road, Solon, Ohio.
In addition to acting on the matters outlined in the Proxy Statement, we
look forward to giving you a progress report on the first quarter which will end
on December 31, 1997. As in the past, there will be an informal presentation on
the Company's businesses.
We hope that you are planning to attend the Annual Meeting personally, and
we look forward to seeing you. Whether or not you expect to attend in person,
the return of the enclosed Proxy as soon as possible would be greatly
appreciated and will ensure that your shares will be represented at the Annual
Meeting. If you do attend the Annual Meeting, you may withdraw your Proxy should
you wish to vote in person.
On behalf of the Directors and management of Keithley Instruments, Inc., we
would like to thank you for your continued support and confidence in the
Company.
Sincerely yours,
/s/ Joseph P. Keithley
JOSEPH P. KEITHLEY
Chairman, President and Chief Executive Officer
<PAGE> 3
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<TABLE>
<S> <C>
KEITHLEY LOGO KEITHLEY INSTRUMENTS, INC.
28775 Aurora Road
Solon, Ohio 44139
(440)248-0400
Fax (440) 248-6168
</TABLE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Keithley
Instruments, Inc. will be held at the company's corporate headquarters, 28775
Aurora Road, Solon, Ohio, on Saturday, February 14, 1998, at 12:00 Noon (EST),
for the following purposes:
(1) To consider such reports as may be laid before the Annual Meeting;
(2) To elect eight 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 two vacancies to be filled by
the Board of Directors at its discretion;
(3) To vote on a proposal to approve the Keithley Instruments, Inc.
1997 Directors' Stock Option Plan;
(4) To vote on a proposal to approve the Board of Directors' selection
of Price Waterhouse LLP as independent accountants of the Company; and
(5) 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 16, 1997, 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 29, 1997
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 14, 1998
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 14, 1998, 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, 1997, are first being sent to shareholders on or about
December 29, 1997.
VOTING RIGHTS
As of the close of business on December 16, 1997, there were outstanding
4,885,655 Common Shares, without par value, of the Company (the "Common Shares")
and 2,785,378 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 five 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 five 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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<PAGE> 5
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 16, 1997 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 16, 1997:
<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......... 151,510(3) 3.1% 2,649,586 (4) 95.1% 81.2%
Kennedy Capital Management,
Inc.(5).................. 646,870 10.7% -- -- 1.5%
First Pacific Advisors,
Inc.(6).................. 674,000 14.5% -- -- 2.1%
</TABLE>
- ---------------
(1) Pursuant to the Company's Amended Articles of Incorporation, all holders of
Class B Common Shares are entitled to convert any or all of their Class B
Common Shares into Common Shares at any time, on a share-for-share basis.
The Company may not issue any additional Class B Common Shares unless such
issuance is in connection with share dividends or share splits of the Class
B Common Shares.
(2) This information has been furnished by each owner. The number of shares
indicated for each owner includes those shares owned of record and
beneficially by such owner unless otherwise indicated.
(3) Includes Common Shares represented by options exercisable on or before
February 14, 1998, by Joseph P. Keithley (81,672 shares). Such shares are
deemed to be outstanding for the purpose of computing the percentage of
shares outstanding owned by Mr. Keithley and his percentage of total voting
power of the Company's capital stock, but are not deemed outstanding for the
purpose of computing the percentage of shares held by or total voting power
of any other person. Also includes 16,352 shares of restricted stock which
are subject to certain vesting requirements, 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 184,586 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 10, 1997.
(6) Derived from information set forth on a Schedule 13G of First Pacific
Advisors, Inc. dated February 12, 1997.
The business address of Mr. Keithley is 28775 Aurora Road, Solon, Ohio
44139. Kennedy Capital Management, Inc's. address is 10829 Olive Boulevard, 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 16, 1997, 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>
Brian R. Bachman................... 7,333 * -- -- *
James T. Bartlett.................. 40,106 * -- -- *
Dr. Arden L. Bement, Jr............ 17,640 * -- -- *
James B. Griswold.................. 32,706 * -- -- *
Leon J. Hendrix, Jr................ 20,161 * -- -- *
Joseph F. Keithley(6).............. 48,366 1.0% 25,244 * *
Joseph P. Keithley................. 151,510 3.1% 2,649,586 95.1% 81.2%
Ronald M. Rebner................... 117,242 2.4% -- -- *
R. Elton White..................... 35,795 * -- -- *
Hermann Hamm....................... 124,766 2.5% -- -- *
Frederick R. Hume.................. 75,893 1.5% -- -- *
Gabriel A. Rosica.................. 4,050 * -- -- *
All officers and Directors as a
group (16 persons including the
above)........................... 898,354 17.0% 2,674,830 96.0% 83.4%
</TABLE>
- ---------------
*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 14, 1998 by Brian R. Bachman (5,000 shares), James T. Bartlett
(8,000 shares), Dr. Arden L. Bement, Jr. (6,200 shares), James B. Griswold
(8,000 shares), Leon J. Hendrix, Jr. (8,000 shares), Joseph P. Keithley
(81,672 shares), Ronald M. Rebner (45,790 shares), R. Elton White (6,800
shares), Hermann Hamm (43,944 shares), Frederick R. Hume (70,078 shares),
Gabriel A. Rosica (1,200 shares), and all officers and Directors as a group
(395,367 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
restricted stock shares which are subject to certain vesting requirements
for Joseph P. Keithley (16,352 shares), Mr. Rebner (26,906 shares) and all
officers as a group (82,528 shares). Includes shares owned under the
Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan for
the benefit of Mr. Bachman (2,333 shares), Mr. Bartlett (4,556 shares), Dr.
Bement (4,840 shares), Mr. Griswold (4,491 shares), Mr. Hendrix (4,161
shares), Mr. White (3,995 shares) and Mr. Rosica (850 shares), as to which
such persons do not have current voting rights.
(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.
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(6) Joseph P. Keithley's father.
(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 184,586 shares owned
of record by a charitable trust for which Joseph P. Keithley serves as
trustee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997, 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 eight 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 eight nominees are elected at the Annual Meeting,
there will be two vacancies on the Board of Directors. The vacancies 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 vacancies
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 vacancies, 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
eight 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. 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 five 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 eight 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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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 49 1991, Chief Executive Officer since
November 1993 and President since May 1994.
Director of Brush Wellman, Inc., a
manufacturer of engineered materials
supplying worldwide markets with beryllium
products, alloy products, ceramic prod-
ucts, precious metal products and
engineered material systems.
Ronald M. Rebner(1) Vice President and Chief Financial Officer of 1988
Age 53 the Company since 1981.
Brian R. Bachman Senior Vice President, Semiconductor and 1996
Age 52 Speciality Systems of Eaton Corporation
since January 1996, responsible for
aerospace controls, commercial controls,
Navy controls and Semiconductor Equipment
Operations. 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 60 Venture Partners, the fund manager for
Primus Capital Fund and Primus Capital Fund
II, III and IV, venture capital limited
partnerships. Director of Oglebay Norton
Company, a provider of products and
services to the steelmaking and related
industries and Lamson & Sessions Co., a
provider of products for the construction
and telecommunications industries.
Dr. Arden L. Bement, Jr. Professor of Engineering and Director of 1988
Age 65 Midwest Superconductivity Consortium at
Purdue University since 1993. Previously
Vice President, Science and Technology of
TRW, Inc., a manufacturer of products for
the defense, space and automotive markets,
from 1980 to 1993.
James B. Griswold(2) Partner in the law firm of Baker & Hostetler 1989
Age 51 LLP since 1982.
Leon J. Hendrix, Jr.(1) Principal, Clayton, Dubilier & Rice, Inc., a 1990
Age 56 private investment firm. Previously Chief
Operating Officer of the Reliance Electric
Company from September 1992 through October
1993. Director of NACCO Industries, Inc., a
holding company with subsidiaries that
manufacture forklift trucks, small
electrical appliances, mine and market lig-
nite 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
marketer of firearms and ammunition, and
Riverwood International Corp., a leading
global provider of paperboard and
paperboard packaging systems.
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
NAME AND AGE
OF NOMINEE BUSINESS EXPERIENCE DIRECTOR SINCE
- --------------------------- --------------------------------------------- --------------
<S> <C> <C>
R. Elton White Private Investor. Previously President of NCR 1994
Age 55 Corporation from 1991 to December 1993.
Director of Kohl's Corporation, which owns
specialty department stores, and Flowserve
Corporation, a manufacturer of fluid
handling products for process industries.
</TABLE>
- ---------------
(1) Elected by holders of Common Shares only.
(2) Baker & Hostetler LLP served as general legal counsel to the Company during
the fiscal year ended September 30, 1997 and is expected to render services
in such capacity to the Company in the future.
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.
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, 1997, 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)
James T. Bartlett James B. Griswold Brian R. Bachman Brian R. Bachman
Leon J. Hendrix, Jr. Dr. Arden L. Bement, Jr. James B. Griswold James T. Bartlett
R. Elton White 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 five meetings during the fiscal year ended
September 30, 1997. During that fiscal year, with the exception 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. Joseph F. Keithley
attended 60% of the aggregate of such meetings.
Directors who are not employees of the Company receive an annual fee of
$10,000 paid in five installments. Unless Chairman of a committee, such
Directors receive an additional $1,000 for each Board meeting attended and $575
for each 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 $1,150 for presiding as Chairman at a committee
meeting. Directors may defer their fees under the Keithley Instruments, Inc.
1996 Outside Directors Deferred Stock Plan.
6
<PAGE> 10
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, are provided with medical and other
welfare benefit coverages and 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 $137,655 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 1997. Effective November 1, 1997, Mr. Hamm resigned from his Executive
Officer position with the Company.
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 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. Mr. Keithley plans to retire effective June
1998.
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) 0.9% 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 and Mr. Hume) were to continue to be employees until
their attainment of age 65 at the rate of compensation they received during
fiscal 1997, their annual retirement benefits would be as follows: Joseph P.
Keithley, $76,879; Mr. Rosica, $16,464 and Mr. Rebner, $55,071. Mr. Hume
resigned from his Executive Officer position with the Company effective October
6, 1997. If he elects to begin collecting his benefit at age 55, the estimated
annual retirement benefit would be $9,744. If he waits until age 65, the benefit
would be $21,183 annually.
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
7
<PAGE> 11
reinsurance agreement between the Company's German subsidiary and a life
insurance company. Mr. Hamm resigned from his Executive Officer position with
the Company effective November 1, 1997. His estimated annual retirement benefit
at age 65 is $65,835. 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 1997.
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 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 Schwab
Retirement Services, Inc., the custodian of the Plan. The investment options
available during fiscal 1997 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, (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 , and (iv) a
Personal Choice Retirement Account in which a participant may choose to invest
in any stock listed on a major U.S. exchange, over 800 mutual funds or other
bonds and fixed-income investments. 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.
1997 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, 1997. 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, 1996,
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, nonqualified stock options, for
8
<PAGE> 12
federal income tax purposes, and restricted stock 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 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. On February 15, 1997, the Company's
Board of Directors terminated the 1992 Directors' Stock Option Plan. Prior to
its termination, each individual who qualified as a nonemployee Director at the
close of any annual meeting of the shareholders of the Company automatically was
granted an option to purchase 600 Common Shares. The option price for each
Common Share purchasable under an option was the fair market value of a Common
Share on the date such option was granted. All options currently outstanding
shall continue in full force and effect in accordance with and subject to their
terms. The 1992 Directors' Stock Option Plan has been replaced by the 1997
Directors' Stock Option Plan, which was adopted by the Board of Directors,
subject to shareholder approval. See "Proposal to Approve The Keithley
Instruments, Inc. 1997 Director's Stock Option Plan." Pursuant to the 1997
Director's Stock Option Plan, each nonemployee Director was granted an option to
purchase 5,000 Common Shares on February 15, 1997.
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 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.
9
<PAGE> 13
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, 1997, during the fiscal years ended
September 30, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------ ALL OTHER
NAME AND PRINCIPAL ------------------------ RESTRICTED STOCK COMPEN-
POSITION YEAR SALARY ($) BONUS ($) STOCK $ OPTIONS # SATION(1)($)
- ---------------------------- ---- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Keithley 1997 274,353 0 147,168 60,000 2,124
Chairman of the Board, 1996 259,375 0 0 75,000 4,863
President and Chief 1995 240,545 265,225 0 32,000 2,033
Executive Officer
Hermann Hamm (2) 1997 226,664 6,723 0 0 425,013
1996 245,958 34,942 0 10,000 --
1995 243,051 167,355 0 10,000 --
Frederick R. Hume (3) 1997 220,500 0 0 0 247,856
1996 217,375 100,883 0 18,000 4,843
1995 206,000 167,500 0 24,000 2,125
Ronald M. Rebner 1997 176,375 0 242,154 16,000 2,008
Vice President and 1996 167,900 0 0 20,000 5,296
Chief Financial Officer 1995 160,044 140,000 0 12,000 2,129
Gabriel A. Rosica (4) 1997 216,750 136,880 0 25,000 2,197
Senior Vice President 1996 131,384 50,000 0 50,000 51,971
1995 -- -- -- -- --
</TABLE>
- ---------------
(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. See footnotes (2) and (3) for detailed
information with respect to Mr. Hamm and Mr. Hume.
(2) Mr. Hamm served as the Company's Vice President European Operations until
his resignation from this position effective November 1, 1997. The caption
"All Other Compensation" includes the following items accrued on the
Company's books: $326,539 in salary, $68,196 for company contributions to
his pension plan, $16,042 for social security benefits, $10,656 for the
estimated value of Mr. Hamm's use of his company car and $3,580 for death
insurance premiums. These benefits are payable through October 31, 2000. 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,
and September 30, 1997, exchange rates for the amounts accrued.
(3) Mr. Hume served as the Company's Senior Vice President Strategic Planning
and Technology until his resignation from this position effective October 6,
1997. The caption "All Other Compensation" includes the following items
accrued on the Company's books: $130,000 per the terms of Mr. Hume's
supplemental retirement plan payable in cash in February 1999, $95,244 in
salary and $5,500 for an auto lease payable through February 23, 1998, and
$2,112 for matching contributions under the Company's Retirement Savings
Trust and Plan.
(4) Mr. Rosica became an employee of the company in February 1996. Prior to this
time he was a Director. The salary column includes Mr. Rosica's earnings
since becoming an employee and excludes Director's fees. Stock option awards
include only those which were granted to Mr. Rosica as an employee.
10
<PAGE> 14
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- -------------------- ------- ----------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph P.
Keithley.......... 60,000 21.0 11.4375 9/19/07 431,579 1,093,706
Hermann Hamm........ -- -- -- -- -- --
Frederick R. Hume... -- -- -- -- -- --
Ronald M. Rebner.... 16,000 5.9 11.4375 9/19/07 115,088 291,655
Gabriel A. Rosica... 25,000 8.7 11.4375 9/19/07 179,825 455,711
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND
SEPTEMBER 30, 1997 OPTION VALUES
<TABLE>
<CAPTION>
EXERCISED IN FISCAL VALUE OF UNEXERCISED
1997 NUMBER OF IN-THE-MONEY
--------------------- UNEXERCISED OPTIONS AT OPTIONS AT
SHARES SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Keithley........ -- -- 73,172 165,000 380,062 314,913
Hermann Hamm(1)........... -- -- 23,444 20,500 132,192 67,125
Frederick R. Hume......... 10,014 70,041 67,828 37,250 342,642 101,781
Ronald M. Rebner.......... 4,752 29,890 44,040 47,250 256,580 101,844
Gabriel A. Rosica......... -- -- 1,200 75,000 8,288 82,813
</TABLE>
- ---------------
(1) Mr. Hamm resigned from his Executive Officer position with the Company
effective November 1, 1997. The Company's Board of Directors accelerated the
vesting of Mr. Hamm's options. As of December 5, 1997, all of Mr. Hamm's
options are fully vested and are exercisable through October 31, 2000.
COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT
The Company's Board of Directors has delegated to the Compensation and
Human Resources Committee (the "Committee") the responsibility of evaluating and
recommending for formal board approval the amounts of compensation paid to
officers. The Committee is composed entirely of outside Directors.
The guiding philosophy of the Company's executive compensation program is
to attract, motivate and retain highly qualified senior managers to direct and
grow the Company. Information is gathered to provide guidelines on pay for
comparable positions in comparable industries. The pay of the officers is
managed to assure that, in general, it falls between the median and the
seventy-fifth percentiles of market survey averages. Beyond information that is
available to the Company, the consulting firm iQuantic is used to analyze the
competitiveness of the Company's compensation program.
The program provides for a salary that is based upon individual
performance, an annual bonus that is based upon the attainment of performance
goals, and long-term incentives in the form of stock options. These programs
were described earlier on pages 7 through 9 of this Proxy Statement.
The salary for each executive officer is set based upon data from the
Company's compensation consultant, 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, which include some but not all of the companies
included in the S&P Technology Sector, the Company's peer group identified in
the performance graph on page 13 ("Peer Group").
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
11
<PAGE> 15
percentage of annual salary. An appropriate mix of business unit and/or
corporate financial measures and individual performance measures is then
determined and a payout schedule is set based upon percentage attainment of the
performance goals. The magnitude of these performance goals is set in
participation with the Board to reflect the marketplace conditions and an
expectation of continuous improvement. The bonus payment begins at 70%
attainment of financial goals and cannot exceed the equivalent of annual salary
without special Board approval.
Prior to 1995, Incentive Stock Options (ISOs) were used to provide
long-term incentives to officers and other key employees. The ISOs currently
outstanding for all officers other than Joseph P. Keithley's have an option
price equal to the market price at the time of grant, vest in four years and
expire in ten years from the date of grant. Mr. Keithley's outstanding ISOs were
issued at 110% of the market price at the time of the grant, vest in four years
and expire five years from the grant date. Joseph P. Keithley's ISOs contain
different provisions than other officers since he controls more than 10% of the
voting power of the Company. 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 competitive market
practices. Options vest in four years and expire in ten years from the date of
grant and have an option price equal to the market price at the time of grant.
Chief Executive Officer Compensation.
The Compensation and Human Resources Committee determined Mr. Keithley's
compensation for fiscal 1997 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 (which include some but not all of the
companies included in the Peer Group), the performance of the Company in sales
growth and level of profits, and the general state of the electronic test and
measurement industry.
Mr. Keithley's salary for 1997 was increased by 6%. 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
Brian R. Bachman
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, 1992 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 S & P TECHNOLOGY
(FISCAL YEAR COVERED) INSTRUMENTS, INC. S & P 500 SECTOR
<S> <C> <C> <C>
9/92 100 100 100
9/93 113 113 121
9/94 118 117 140
9/95 350 152 222
9/96 210 183 272
9/97 288 267 442
</TABLE>
*$100 INVESTED ON 09/30/92 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
13
<PAGE> 17
PROPOSAL TO APPROVE THE KEITHLEY INSTRUMENTS, INC.
1997 DIRECTORS' STOCK OPTION PLAN
On February 15, 1997, the Board of Directors adopted the Keithley
Instruments, Inc. 1997 Directors' Stock Option Plan (the "Plan"), subject to
approval by the Company's shareholders within 12 months of such date. The Plan
was effective February 15, 1997, subject to ratification by a majority vote of
the Company's Shareholders (the "Effective Date").
Under the Plan, grants of options to purchase Common Shares ("Options")
will be made to nonemployee directors of the Company ("Eligible Directors") as
specified below. The Options provided for under the Plan are not intended to and
do not quality as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Shareholder approval of the Plan is being sought so that the grants of
Options to Eligible Directors pursuant to the Plan will be exempt from the
operation of Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange
Act"). In the absence of an exemption, Section 16(b) generally would require the
forfeiture of any profit realized by an Eligible Director from any combination
of purchase and sale of Common Shares within a six-month period. If the
Company's shareholders fail to approve the Plan prior to February 15, 1998, the
Plan and all Options granted under it will become null and void and have no
further force or effect.
SHARES SUBJECT TO THE PLAN
The aggregate number of Common Shares subject to grant under the Plan is
200,000. Such maximum number of Common Shares will be subject to appropriate
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, mergers consolidations, reorganizations, recapitalizations, or
other capital adjustments. If any Option granted under the Plan expires,
terminates, or is surrendered or canceled without having been exercised in full,
the Common Shares then subject thereto will be made available for grant under
the Plan.
GRANT OF OPTIONS
From and after the Effective Date, so long as the Plan remains in effect
and Common Shares remain available for grants thereunder, each individual who
qualifies as an Eligible Director at the close of any annual meeting of the
shareholders of the Company shall automatically be granted an Option to purchase
5,000 Common Shares. In addition to the Options granted at the close of each
annual meeting of shareholders, the Board of Directors of the Company, in it
sole discretion, may grant additional Options under the Plan to newly-elected
Outside Directors, as of the date of their initial election and in such amounts
as the Board shall specify. The option price for each Common Share purchasable
under an Option shall be the fair market value of a Common Share on the date
such Option is granted. Fair market value for purposes of the Plan is defined as
the average of the highest and lowest price for a Common Share, as quoted on the
exchange on which Common Shares are then traded, on the date preceding the date
of grant. All Options will be nontransferable. The Option price and the number
of Common Shares subject to Options will be appropriately adjusted in the event
of stock splits, stock dividends, recapitalization, and certain other events
involving a change in the Company's capital structure.
EXERCISE OF OPTIONS
Options granted under the Plan will vest on the date which is six months
and one day after the later to occur of: (i) the Effective Date of the Plan; or
(ii) the date such Optionee is elected as a director; or (iii) the date such
Option is granted. A Director who resigns or is removed before the date of
vesting for any Options held by such Director shall forfeit such Option, unless
otherwise approved by the Board of Directors. If an individual holding
unexercised Options ceases to be an Eligible Director by reason of such
individual's death, any Option held by such Eligible Director at the time of his
or her death shall thereafter be exercised, to the extent such option was
exercisable at the time of death, by the estate of the Eligible Director, within
a period of one year from the date of such death regardless of the term of the
Option remaining at the Optionee's death. No Option under the Plan will be
transferable by an Eligible Director, other than by will or the laws of descent
and distribution.
14
<PAGE> 18
CHANGE IN CONTROL
In the event of a Change in Control as defined in the Plan, all Options
granted under the Plan shall vest upon the later to occur of (i) such Change in
Control; or (ii) six months and one day after the date of grant of such Options.
PAYMENT FOR COMMON SHARES
The Plan permits payment for Common Shares issuable upon the exercise of
Options to be made in cash, by check, by delivery of Common Shares valued at
their then-fair market value, or a combination of the above, so long as the sum
of the fair market value of any cash, check or Common Shares equals the Option
price.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Company may at any time amend, modify,
suspend or terminate the Plan, except with respect to Options already granted.
The Plan shall be terminated and no further Options shall be granted hereunder
as of the tenth anniversary of the Effective Date of this Plan. Options granted
prior to such anniversary may extend beyond the date.
FEDERAL INCOME TAX CONSEQUENCES
The discussion of federal income tax consequences which follows applies
only to certain transactions under the Code, and concerns only the exercise of
Options and disposition of Common Shares occurring during the lifetime of an
Eligible Director. The consequences may differ if an Option is exercised or any
Common Shares are disposed of following the death of an Eligible Director.
An Eligible Director granted an Option generally will not realize taxable
income upon the grant of such Option, nor will the Company become entitled to a
federal income tax deduction at the time of such grant. However, the excess of
the fair market value of Common Shares on the date an Option is exercised over
the option price of such Shares will constitute compensation taxable to the
Eligible Director exercising such Option as ordinary income. If the Company
complies with the applicable withholding requirements, if any, it generally will
be entitled to a federal income tax deduction in an amount equal to the
compensation taxable to the Eligible Director as ordinary income. Such tax
deduction is available in the year in which the income is taxable to such
Eligible Director.
If an Eligible Director uses Common Shares to pay part or all of the Option
price, the federal income tax consequences of the exercise will differ slightly.
The surrender of Common Shares in connection with the exercise will not be
treated as a taxable disposition by the Eligible Director of those Shares.
Instead, the number of Common Shares received by such Eligible Director in the
exchange that equal the number of Shares surrendered will acquire the tax basis
and holding period (for purposes of determining short-term and long-term gain)
of the Common Shares they replace. The rest of the Common Shares received in the
exchange (over and above the number of Shares exchanged for the surrendered
Shares) will be treated as newly-issued Shares: they will have a holding period
that commences on the date of the exercise, and their aggregate tax basis in the
Eligible Directors' hands will be equal to the income recognized by such
Eligible Directors upon exercise, plus any cash paid by such Eligible Directors
as part of the Option price. Capital gain or loss on the sale of a particular
Common Share will depend on whether such Share is deemed exchanged or deemed
acquired; such gain or loss will be measured, based on the difference between
the selling price and the applicable tax basis in such Share. The long-term or
short-term nature of such gain or loss will depend on the applicable holding
period for such Share.
NUMBER OF PERSONS ELIGIBLE
There currently are six Directors eligible to participate in the Plan.
15
<PAGE> 19
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.
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, 1998.
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 15, 1997, which will be read at
the meeting on February 14, 1998, 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 1999 must be received by the Company's Chairman and
Chief Executive Officer at its principal executive offices not later than August
31, 1998, 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
16
<PAGE> 20
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 29, 1997
17
<PAGE> 21
KEITHLEY INSTRUMENTS, INC.
CLASS B COMMON SHARES
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R OF THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
O TO BE HELD ON SATURDAY, FEBRUARY 14, 1998
X
Y 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 14, 1998, 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; Brian R. Bachman; Dr. Arden L. Bement, Jr.;
James B. Griswold; and R. Elton White
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
LOGO
<PAGE> 22
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<S> <C>
____
[X] PLEASE MARK YOUR | | 9658
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 AND ITEM 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1, ITEM 2 AND ITEM 3.
FOR WITHHELD FOR AGAINST ABSTAIN
Item 1. Election of Directors [ ] [ ] Item 2. Proposal to approve the [ ] [ ] [ ]
(see reverse) Keithley Instruments, Inc.
1997 Directors' Stock Op-
tion Plan.
FOR AGAINST ABSTAIN
Item 3. 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 14, 1998
12:00 NOON
KEITHLEY INSTRUMENTS, INC.
CORPORATE HEADQUARTERS
28775 AURORA ROAD
SOLON, OHIO
CLASS B COMMON SHARES
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<PAGE> 23
KEITHLEY INSTRUMENTS, INC.
COMMON SHARES
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R OF THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
O TO BE HELD ON SATURDAY, FEBRUARY 14, 1998
X
Y 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 14, 1998, 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; 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
LOGO
<PAGE> 24
<TABLE>
<S> <C>
____
[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 AND ITEM 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1, ITEM 2 AND ITEM 3.
FOR WITHHELD FOR AGAINST ABSTAIN
Item 1. Election of Directors [ ] [ ] Item 2. Proposal to approve the [ ] [ ] [ ]
(see reverse) Keithley Instruments, Inc.
1997 Directors' Stock Op-
tion Plan.
FOR AGAINST ABSTAIN
Item 3. 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 14, 1998
12:00 NOON
KEITHLEY INSTRUMENTS, INC.
CORPORATE HEADQUARTERS
28775 AURORA ROAD
SOLON, OHIO
COMMON SHARES
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