<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 3)
Keithley Instruments, Inc.
--------------------------
(Name of Issuer)
Common Shares, without par value
--------------------------------
(Title of Class of Securities)
487584 10 4
-----------
(CUSIP Number)
Joseph P. Keithley
12321 Fairhill Road
Cleveland, Ohio 44120
(216) 229-9695
--------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 15, 1997
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
<PAGE> 2
CUSIP NO. 487584 10 4 SCHEDULE 13D Page 2 of 7
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Joseph P. Keithley
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(a) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,801,096
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,801,096
PERSON WITH 10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,801,096
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
36.8%
14 TYPE OF REPORTING PERSON
IN
<PAGE> 3
CUSIP NO. 487584 10 4 SCHEDULE 13D Page 3 of 7
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Keithley Management Co. Limited Partnership
34-1675253
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(a) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,540,000
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,540,000
PERSON WITH 10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,540,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.0%
14 TYPE OF REPORTING PERSON
PN
<PAGE> 4
CUSIP NO. 487584 10 4 SCHEDULE 13D Page 4 of 7
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Keithley Investment Co. Limited Partnership
34-1581748
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(a) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,604,586
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,604,586
PERSON WITH 10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,604,586
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
34.8%
14 TYPE OF REPORTING PERSON
PN
<PAGE> 5
CUSIP NO. 487584 10 4 SCHEDULE 13D Page 5 of 7
ITEM 1. SECURITY AND ISSUER
This Amendment No. 3 to Schedule 13D (this "Amendment No. 3")
relates to the common shares, without par value (the "Common Shares"), of
Keithley Instruments, Inc., an Ohio corporation (the "Company"). The principal
executive offices of Company are located at 28755 Aurora Road, Solon, Ohio
44139-1891.
ITEM 2. IDENTITY AND BACKGROUND
This Amendment No. 3 is filed jointly by the following
persons: (i) Keithley Investment Co. Limited Partnership, an Ohio limited
partnership (the "Family Partnership"), (ii) Keithley Management Co. Limited
Partnership, an Ohio limited partnership (the "Management Partnership"), and
(iii) Joseph P. Keithley ("JPK"). The Family Partnership, the Management
Partnership and JPK are referred to herein collectively as the "Investors."
JPK is the general partner of the Family Partnership. The
Family Partnership is the general partner of the Management Partnership. Each of
the Family Partnership and the Management Partnership is an Ohio limited
partnership organized for the purposes described in Item 4. JPK, a citizen of
the United States, is the Chairman of the Board, President and Chief Executive
Officer of the Company. The Company's address is set forth in Item 1. The
principal business address of each of the Investors is 12321 Fairhill Road,
Cleveland, Ohio 44120.
The Joseph F. Keithley 1988 Family Trust, an Ohio trust,
listed in the initial Schedule 13D dated April 12, 1988 (the "Original 13D"),
Amendment No. 1 to Schedule 13D dated February 5, 1990 ("Amendment No. 1"), and
Amendment No. 2 to Schedule 13D dated March 9, 1991 ("Amendment No. 2"), is not
a party to this Amendment No. 3 because that trust does not have beneficial
ownership of any shares of the Company. The Joseph F. Keithley 1988 Charitable
Income Trust, an Ohio trust, listed in the Original Schedule 13D, Amendment No.
1 and Amendment No. 2, has not been included because the shares of Company
previously listed as beneficially owned by that trust reverted to the Family
Partnership.
During the last five years, none of the Investors: (i) has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violations with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The transactions described in this Amendment No. 3 reflect a
recapitalization of the Family Partnership to provide for two classes of limited
partnership units with different rights and preferences. No payments were made,
and no shares were purchased or sold, to complete this recapitalization. The
previously disclosed loan to the Family Partnership by National City Bank
remains outstanding.
ITEM 4. PURPOSE OF TRANSACTION
The Family Partnership and the Management Partnership were
formed to provide for the orderly transfer and management of the Company, to
alleviate the adverse effect that the death of Joseph F. Keithley could have on
the Company, and to accomplish certain estate planning objectives for the
Keithley family. As described in Item 6, the Family Partnership may be required
to sell certain of the Class B Common Shares, without par value (the "Class B
Shares"), of the Company owned by the Family Partnership.
<PAGE> 6
CUSIP NO. 487584 10 4 SCHEDULE 13D Page 6 of 7
Except as described in this Amendment No. 3, none of the
Investors has any plans or proposals that relate to, or would result in: (a) the
acquisition by any person of additional securities of the Company, or the
disposition of securities of the Company, (b) any extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries, (c) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries, (d) any change in the board
of directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board of directors of the Company, (e) any material change in the present
capitalization or dividend policy of the Company, (f) any other material change
in the Company's business or corporate structure, (g) any changes in the
Company's articles of incorporation or code of regulations, (h) causing a class
of securities of the Company to be delisted from a national securities exchange
or to cease to be authorized to be quoted in the inter-dealer quotation system
of a registered national securities association, (i) a class of equity
securities of the Company becoming eligible for termination of registration
pursuant to Section12(g)(4) of the Securities Exchange Act of 1934, as amended,
or (j) any action similar to those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The following table shows the number and percentage of Common
Shares beneficially owned by each of the Investors and by the Investors as a
group as of November 10, 1998.
<TABLE>
<CAPTION>
Name Common Shares Percent of Class
---- ------------- ----------------
<S> <C> <C>
Management Partnership 1,540,000(1) 24.0%
Family Partnership 2,604,586(2) 34.8%
Joseph P. Keithley 2,801,096(3) 36.8%
Investors as a group 2,801,096 36.8%
</TABLE>
(1) Includes 1,540,000 Common Shares issuable upon the conversion of
1,540,000 Class B Shares.
(2) Includes 1,540,000 Common Shares issuable upon the conversion of
1,540,000 Class B Shares Class B Shares owned by the Management
Partnership and 1,044,586 Common Shares issuable upon the conversion of
1,044,586 Class B Shares owned by the Family Partnership.
(3) Includes 1,540,000 Common Shares issuable upon the conversion of
1,540,000 Class B Shares owned by the Management Partnership, 20,000
Common Shares owned by the Family Partnership and 1,044,586 Common
Shares issuable upon the conversion of 1,044,586 Class B Shares owned
by the Family Partnership. Also includes 65,000 Common Shares issuable
upon the conversion of 65,000 Class B Shares, 81,672 Common Shares
subject to options that are currently exercisable or that are
exercisable within 60 days from the date of this Amendment No. 3,
16,352 restricted Common Shares that are subject to certain vesting
requirements and 1,224 Common Shares owned by JPK's wife. JPK disclaims
beneficial ownership of the Common Shares owned by his wife.
All holders of Class B Shares are entitled to convert any or
all of their Class B Shares into Common Shares at any time on a share-for-share
basis. Each Class B Share is entitled to ten votes on all matters presented for
a vote to the shareholders of the Company.
JPK has sole voting and dispositive power with respect to all
Class B Shares owned by the Investors, subject to the partnership agreements of
the Management Partnership and the Family Partnership, and is entitled to
exercise 81.4% of the voting power on all matters presented for a vote to the
shareholders of the Company, including the election of directors.
<PAGE> 7
CUSIP NO. 487584 10 4 SCHEDULE 13D Page 7 of 7
Except as described in this Amendment No. 3, the Investors
have not engaged in any transactions in the Common Shares or the Class B Shares
in the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENT, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The Amended and Restated Limited Partnership Agreement of the
Family Partnership dated as of August 1, 1997 which was executed in November
1997 (the "Family Partnership Agreement"), provides for one Class A Limited
Partnership Unit (the "Class A Units") and two Class B Limited Partnership Units
(the "Class B Units").
JPK owns the Class A Unit and his two siblings each own one Class B Unit.
Each Class B Unit is entitled to cumulative minimum annual
payments of $50,000 in 1998, with that amount increasing by $10,000 per year
during the succeeding five years until each Class B Unit is entitled to an
minimum annual payment of $100,000 (the "Minimum Annual Return"). If the
dividends generated by the Common Shares and Class B Shares held by the Family
Partnership are not sufficient to make distributions equal to the Minimum Annual
Return, then the Family Partnership Agreement requires JPK to act in good faith
and to use reasonable efforts to sell a sufficient number of Common Shares at a
price of not less than $7.50 per Common Share to make distributions equal to the
Minimum Annual Return. In no event will each Class B Unit receive less than
$25,000 each per year. After payment of the Minimum Annual Return, including any
shortfalls from prior years, each Class B Unit is entitled to one-third of all
profits of the Family Partnership.
The Class A Unit is not entitled to the Minimum Annual Return.
The Class A Unit is entitled, after the payment of the Minimum Annual Return to
the Class B Units, to a 20% incentive allocation for any Common Share sold above
$12 per share and a 25% incentive allocation for any Common Shares sold above
$30 per share. These incentive allocations are cumulative but will not be paid
until the Minimum Annual Return has been paid. After payment of the Minimum
Annual Return and these incentive allocations, including any shortfalls from
prior years, the Class A Unit is entitled to one-third of all profits of the
Family Partnership.
Except as disclosed in this Item 6, none of the Investors has
any contracts or arrangements, understandings or relationships (legal or
otherwise) with respect to any securities of the Company, including but not
limited to the sharing of fees or expenses, the transfer or voting of Common
Shares or the Class B Shares, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, guarantees against losses,
division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Agreement among the Investors to file a joint
statement on Schedule 13D.
2. Amended and Restated Limited Partnership Agreement
for the Family Partnership.
<PAGE> 8
SIGNATURES
After reasonable inquiry and to the best of its knowledge and
belief, each of the undersigned hereby certifies that the information set forth
in this statement is true, complete and correct as of November 10, 1998.
KEITHLEY INVESTMENT CO. LIMITED
PARTNERSHIP, an Ohio limited partnership
By: /s/ Joseph P. Keithley
---------------------------------------------
Joseph P. Keithley, its sole general partner
KEITHLEY MANAGEMENT CO. LIMITED
PARTNERSHIP, an Ohio limited partnership
By: /s/ Joseph P. Keithley
---------------------------------------------
Joseph P. Keithley, its sole general partner
/s/ Joseph P. Keithley
------------------------------------------------
Joseph P. Keithley
<PAGE> 1
EXHIBIT 1
This Exhibit 1 to Amendment No. 3 to Schedule 13D is filed
pursuant to the requirements of Rule 13d(1)(f)(1)(iii). The undersigned hereby
agree that Amendment No. 3 to Schedule 13D, to which this Exhibit 1 is attached,
is filed on behalf of each of the undersigned.
KEITHLEY INVESTMENT CO. LIMITED
PARTNERSHIP, an Ohio limited partnership
By: /s/ Joseph P. Keithley
---------------------------------------------
Joseph P. Keithley, its sole general partner
KEITHLEY MANAGEMENT CO. LIMITED
PARTNERSHIP, an Ohio limited partnership
By: /s/ Joseph P. Keithley
---------------------------------------------
Joseph P. Keithley, its sole general partner
/s/ Joseph P. Keithley
--------------------------------------------------
Joseph P. Keithley
<PAGE> 1
EXHIBIT 2
KEITHLEY INVESTMENT CO. LIMITED PARTNERSHIP
(An Ohio limited partnership)
Amended and Restated Limited Partnership Agreement
August 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1: ORGANIZATION......................................................................................... 2
Section 1.1 Continuation of the Partnership............................................. 2
Section 1.2 Character and Purpose of Business........................................... 2
Section 1.3 Name of Partnership......................................................... 2
Section 1.4 Principal Place of Business................................................. 2
Section 1.5 Principal Office............................................................ 2
Section 1.6 Agent for Service of Process................................................ 3
Section 1.7 Names and Addresses of the Partners......................................... 3
Section 1.8 Governmental Filings........................................................ 3
Section 1.9 Term of Partnership......................................................... 3
ARTICLE 2: CAPITAL CONTRIBUTIONS............................................................................... 3
Section 2.1 General Partner's Capital Contribution...................................... 3
Section 2.2 Prior Limited Partner's Capital
Contributions............................................................... 4
Section 2.3 Recapitalization of Limited Partnership
Units....................................................................... 4
Section 2.4 Interest on Capital Contributions........................................... 4
Section 2.5 Withdrawal and Return of Capital
Contributions............................................................... 4
Section 2.6 Capital Accounts............................................................ 4
Section 2.7 Additional Capital Contributions............................................ 5
Section 2.8 Fair Market Value of Company Stock ......................................... 5
ARTICLE 3: ALLOCATION OF PROFITS AND LOSSES.................................................................... 5
Section 3.1 Profit and Loss Allocations -- In
General..................................................................... 5
Section 3.2 Profit Allocation -- Special Rules.......................................... 6
Section 3.3 Timing of Allocations....................................................... 7
ARTICLE 4: DISTRIBUTIONS....................................................................................... 7
Section 4.1 Distribution of Net Operating Income........................................ 7
Section 4.2 Timing of Distributions..................................................... 9
Section 4.3 Sales of Company Stock...................................................... 9
Section 4.4 Distributions of Shares in Kind............................................. 9
Section 4.5 Distributions for Taxes..................................................... 9
ARTICLE 5: RIGHTS AND DUTIES OF GENERAL PARTNER................................................................ 9
Section 5.1 Powers of the General Partner............................................... 9
Section 5.2 Duties of the General Partner............................................... 11
Section 5.3 Restrictions on General Partner............................................. 13
Section 5.4 Requirement of Unanimous Consent............................................ 13
Section 5.5 Liability of General Partner................................................ 14
ARTICLE 6: POWERS, RIGHTS AND DUTIES OF LIMITED PARTNER........................................................ 16
Section 6.1 Limitation of Liability..................................................... 16
Section 6.2 No Participation in Management.............................................. 16
Section 6.3 Voting of Limited Partners.................................................. 16
ARTICLE 7: ACCOUNTING AND FISCAL AFFAIRS....................................................................... 16
Section 7.1 Books of Account............................................................ 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 8: TRANSFER OF PARTNERSHIP INTERESTS.................................................................... 17
Section 8.1 General Partner............................................................. 17
Section 8.2 Limited Partner............................................................. 17
Section 8.3 Transferees................................................................. 17
Section 8.4 Absolute Restriction........................................................ 17
ARTICLE 9: DISSOLUTION, WINDING UP AND TERMINATION............................................................. 17
Section 9.1 Dissolution................................................................. 17
Section 9.2 Winding Up and Termination.................................................. 18
Section 9.3 Rights and Obligations of Limited
Partners Upon Dissolution................................................... 19
Section 9.4 Waiver of Partition......................................................... 19
Section 9.5 Final Accounting............................................................ 19
ARTICLE 10: AMENDMENTS......................................................................................... 19
Section 10.1 Authority to Amend.......................................................... 19
ARTICLE 11: POWER OF ATTORNEY.................................................................................. 19
Section 11.1 Power....................................................................... 19
Section 11.2 Survival of Power........................................................... 20
ARTICLE 12: MISCELLANEOUS...................................................................................... 20
Section 12.1 Notices and Addresses....................................................... 20
Section 12.2 Recapitalizations, Etc...................................................... 21
Section 12.3 Pronouns and Plurals........................................................ 21
Section 12.4 Counterparts................................................................ 21
Section 12.5 Applicable Law.............................................................. 21
Section 12.6 Successors.................................................................. 21
Section 12.7 Severability................................................................ 21
Section 12.8 Exhibits.................................................................... 21
EXHIBITS
Exhibit 1 - Capital Accounts and Tax Provisions
Exhibit 2 - Definitions
</TABLE>
<PAGE> 4
KEITHLEY INVESTMENT CO. LIMITED PARTNERSHIP
(An Ohio limited partnership)
Amended and Restated Limited Partnership Agreement
This Amended and Restated Limited Partnership Agreement
(referred to herein as the "Agreement") is entered into as of the 1st day of
August, 1997 (the "date of this Agreement"), among JOSEPH P. KEITHLEY ("General
Partner") and THE 1988 FAMILY TRUST SHARE F/B/O JOSEPH P. KEITHLEY, THE 1988
FAMILY TRUST SHARE F/B/O ROY F. KEITHLEY AND THE 1988 FAMILY TRUST SHARE F/B/O
ELIZABETH M. KEITHLEY (the "Limited Partners"), all as successors in interest to
Joseph P. Keithley, Trustee under the Joseph F. Keithley 1988 Family Trust (the
"Prior Limited Partner"). All capitalized words and phrases used in this
Agreement shall have the meanings set forth herein and in Exhibit 2 attached
hereto and made a part hereof by this reference, as the case may be.
W I T N E S S E T H:
--------------------
WHEREAS, Keithley Investment Co. Limited Partnership, an
Ohio limited partnership, was formed on April 12, 1988 (the
"Partnership") by filing the Certificate of Limited Partnership
with the Ohio Secretary of State;
WHEREAS, the General Partner and the Limited Partners desire
to enter into this Amended and Restated Limited Partnership Agreement to
describe the rights and obligations of the Partners; and to provide for the
operation of the business of the Partnership;
WHEREAS, the Limited Partners are successors in interest to
the Prior Limited Partner as a result of that certain Division of the Joseph F.
Keithley 1988 Family Trust.
WHEREAS, the General Partner and Limited Partners wish to
recapitalize the Partnership to provide for multiple classes of Limited
Partnership Units each with a distinct set of rights. The General Partner and
Limited Partners wish to provide for Class B Limited Partnership Units which are
entitled to a preferential distribution and a Class A Limited Partnership Unit
which is entitled to a special allocation of certain profits related to the sale
of Company Stock, and to amend the agreement, accordingly; provided, however,
they do not intend such amendment to cause or result in any transfer, shift or
assignment of any interest in the Partners' respective Capital Accounts as of
the date of this Agreement.
NOW, THEREFORE, in consideration of capital contributions and
acts of each Partner, the Partners agree as follows:
<PAGE> 5
ARTICLE 1: ORGANIZATION
Section 1.1 CONTINUATION OF THE PARTNERSHIP. The Partners
hereby agree to join together to continue the Partnership pursuant to the Act
and upon the terms and conditions set forth in this Agreement.
Section 1.2 CHARACTER AND PURPOSE OF BUSINESS. The general
character and purpose of the business of the Partnership has been and continues
to be: realizing a return, including through capital appreciation, to the
Partners by receiving, trading, selling, reinvesting and otherwise holding or
disposing of securities, including Company Stock and to hold and dispose of the
Company Stock and invest the profits of the Partnership and the capital
contributions of the Partners as hereinafter provided. The Partners expressly
agree that the primary purpose of the Partnership is to hold and dispose of the
Company Stock and invest any profits of the Partnership and any capital
contributions of the Partners. Subject to Section 4.3, the Limited Partners
hereby relieve the General Partner of any obligation, fiduciary or otherwise, to
maximize the Partnership's profits by disposing of the Company Stock.
To consummate the foregoing and to carry out the obligations
of the Partnership in connection therewith or incidental thereto, the General
Partner shall have the authority, in accordance with and subject to the
limitations set forth in this Agreement, to borrow money and to make and issue
notes, obligations and evidences of indebtedness of all kinds, whether secured
by a pledge of the Company Stock or otherwise, to vote the Partnership's
interest in the Company Stock, to invest the profits of the Partnership and the
capital contributions of the Partners, to make, enter into, perform and carry
out any arrangements, contracts and/or agreements of every kind for any lawful
purpose, without limit as to amount or otherwise, with any corporation,
association, partnership, firm, trustee, syndicate, individual and/or any
political or governmental division or subdivision, domestic or foreign, and
generally to make and perform agreements and contracts of every kind and
description and to do any and all things necessary or incidental to the
foregoing.
Section 1.3 NAME OF PARTNERSHIP. The name of the Partnership
is KEITHLEY INVESTMENT CO. LIMITED PARTNERSHIP.
Section 1.4 PRINCIPAL PLACE OF BUSINESS. The address of the
principal place of business of the Partnership shall be 28775 Aurora Road,
Solon, Ohio 44139, or such other address as may from time to time be selected by
the Partners.
Section 1.5 PRINCIPAL OFFICE. The address of the principal
office of the Partnership shall be 28775 Aurora Road, Solon, Ohio 44139, or such
other address as may from time to time be selected by the Partners.
-2-
<PAGE> 6
Section 1.6 AGENT FOR SERVICE OF PROCESS. General Partner
shall be the Partnership's agent for service of process. General Partner's
address for such purpose shall be 28775 Aurora Road, Solon, Ohio 44139, or such
other address as may from time to time be selected by the Partners.
Section 1.7 NAMES AND ADDRESSES OF THE PARTNERS. The names and
addresses of the Partners are as follows:
Joseph P. Keithley
28775 Aurora Road
Solon, Ohio 44139
The 1988 Family Trust Share
f/b/o Joseph P. Keithley
c/o Joseph P. Keithley
28775 Aurora Road
Solon, Ohio 44139
The 1988 Family Trust Share
f/b/o Roy F. Keithley
c/o Mr. Roy F. Keithley
5605 Courtyard Drive
Austin, TX 78731
The 1988 Family Trust Share
f/b/o Elizabeth M. Keithley
c/o Dr. Elizabeth M. Keithley
19918 Elfin Forest Rd.
Escondido, CA 92029
Section 1.8 GOVERNMENTAL FILINGS. The original Partners have
filed the Certificate of Limited Partnership for the Partnership with the office
of the Ohio Secretary of State. General Partner shall also make all such other
governmental filings as are necessary or appropriate to qualify the Partnership
to do business in any jurisdiction or to otherwise carry out the purposes and
intent of this Agreement.
Section 1.9 TERM OF PARTNERSHIP. The term of the Partnership
began on April 12, 1988, and the Partnership shall continue in existence until
the General Partner attains age 65 on December 12, 2013, unless it is earlier
dissolved and terminated pursuant to the provisions of this Agreement.
ARTICLE 2: CAPITAL CONTRIBUTIONS
Section 2.1 GENERAL PARTNER'S CAPITAL CONTRIBUTION. The
General Partner has made a Capital Contribution to the Partnership of certain
shares of Class A common stock, without par value of the Company.
-3-
<PAGE> 7
Section 2.2 PRIOR LIMITED PARTNER'S CAPITAL CONTRIBUTIONS. The
Prior Limited Partner made a Capital Contribution to the partnership of certain
shares of Company Stock.
Section 2.3 RECAPITALIZATION OF LIMITED PARTNERSHIP UNITS. The
Partnership is authorized to issue one (1) Class A Limited Partnership Unit and
two (2) Class B Limited Partnership Units. By execution and delivery of this
Agreement, each Limited Partner is exchanging such Limited Partner's share of
the Limited Partner Interest such Limited Partner received as a successor in
interest to the Prior Limited Partner for the following:
Limited
Limited Partner Partnership Units
- ---------------- ----------------
The 1988 Family Trust Share 1 Class A Limited
f/b/o Joseph P. Keithley Partnership Unit
The 1988 Family Trust Share 1 Class B Limited
f/b/o Roy F. Keithley Partnership Unit
The 1988 Family Trust Share 1 Class B Limited
f/b/o Elizabeth M. Keithley Partnership Unit
Section 2.4 INTEREST ON CAPITAL CONTRIBUTIONS. No Partner
shall be paid interest on its Capital Contribution.
Section 2.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS. No
Partner shall have the right: (i) to withdraw any part of its Capital
Contribution from the Partnership; or (ii) to demand a return of its Capital
Contribution.
Section 2.6 CAPITAL ACCOUNTS. Except as otherwise provided
herein, the Partnership shall maintain for each Partner a separate capital
account in accordance with Section 1.704-1(b) of the Regulations and the
principles set forth in Exhibit 1 attached hereto and made a part hereof. The
Capital Account of each partner shall, except as otherwise provided herein,
consist of the amount of its Capital Contribution, increased by (a) the fair
market value of any property contributed by it to the Partnership, (b) the
amount of any Partnership liability assumed by such partner or which is secured
by any Partnership Property distributed to such Partner, and (c) its allocable
share of Profits and any items of income or gain specially allocated to it
pursuant to the provisions of this Agreement, and shall be decreased by (w) the
amount of any cash distributed to it, (x) the fair market value of any
Partnership Property distributed to it, (y) the amount of any liability of such
Partner assumed by the Partnership or which is secured by any property
contributed by such Partner to the
-4-
<PAGE> 8
Partnership, and (z) its allocable share of Losses and any items of loss or
deduction specially allocated to it pursuant to the provisions of this
Agreement.
Except as otherwise provided herein, the foregoing provisions
and all other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Section 1.704-1(b) of the
Regulations and shall be interpreted and applied in a manner consistent with
such Regulations.
The Partners agree that immediately preceding the
effectiveness of this Agreement the amount of the Capital Account of each of the
Partners is as follows and that such amount is unchanged as a result of the
execution and delivery and effectiveness of this Agreement such that the amount
of the Capital Account of each of the partners immediately following the
effectiveness of this Agreement is as follows:
<TABLE>
<CAPTION>
<S> <C>
General Partner: $ 55,882;
The 1988 Family Trust Share
f/b/o Joseph P. Keithley $2,138,694;
The 1988 Family Trust Share
f/b/o Roy F. Keithley $2,138,695;
The 1988 Family Trust Share
f/b/o Elizabeth M. Keithley $2,138,695.
</TABLE>
Section 2.7 ADDITIONAL CAPITAL CONTRIBUTIONS. Each Partner may
make additional Capital Contributions, from time to time, only with the consent
of all Partners. Nothing herein shall obligate any Partner to make an additional
Capital Contribution. The amount of any such Capital Contribution shall be the
amount of money and the initial gross asset value of any property (other than
money) contributed to and accepted by the Partnership with respect to the
Interest in the Partnership held by such Partner.
Section 2.8 FAIR MARKET VALUE OF COMPANY STOCK . The Partners
agree and acknowledge that the fair market value per share of the Company Stock
on the date of this Agreement for purposes of this Agreement is $7.6275.
ARTICLE 3: ALLOCATION OF PROFITS AND LOSSES
Section 3.1 PROFIT AND LOSS ALLOCATIONS -- IN GENERAL. Except
as otherwise provided in Section 3.2, Profits and Losses for
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<PAGE> 9
any fiscal year of the Partnership shall be allocated among the Partners in
accordance with the following percentages:
<TABLE>
<CAPTION>
<S> <C>
General Partner 1%
Each Class B Limited Partnership 33%
Unit
Class A Limited Partnership 33%
Unit
Total 100%
</TABLE>
In the event an allocation of Profits is made for any fiscal
year pursuant to Section 3.2, the available Profits to be allocated under this
Section 3.1 shall be adjusted accordingly to reflect the prior allocation under
Section 3.2.
Section 3.2 PROFIT ALLOCATION -- SPECIAL RULES. Effective for
any fiscal year of the Partnership beginning on or after January 1, 1998, the
provisions of this Section 3.2 relating to the allocation of Profits shall be
applied before the provisions of Section 3.1, and the provisions of Section 3.1
shall be applied only after giving effect to and adjusting the Profits in
accordance with the provisions of this Section 3.2. In the event of any
inconsistency between the provisions of this Section 3.2 and any other provision
of this Agreement, the provisions of this Section 3.2 shall control.
(a) That portion of the Profits for a fiscal year
consisting of Portfolio Income not exceeding the Cumulative
Minimum Distribution for Class B Limited Partnership Units for
such fiscal year shall be allocated one-half (1/2) to and in
respect of each Class B Limited
Partnership Unit.
(b) That portion of the Profits for a fiscal year
consisting of Post-Effective Date Gain not exceeding the
EXCESS (if any) OF the Cumulative Minimum Distribution for
Class B Limited Partnership Units for such fiscal year OVER
the amount of the Portfolio Income for such fiscal year shall
be allocated one-half (1/2) to and in respect of each Class B
Limited Partnership Unit.
(c) That portion of Profits for a fiscal year
consisting of the Post-Effective Date Gain remaining after the
allocation set forth in Section 3.2(b) is effected not
exceeding the Preferred Capital Distribution for such fiscal
year shall be allocated to and in respect of the General
Partner Interest and the Class A Limited Partnership Unit as
follows:
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<PAGE> 10
1/34 to the General Partner Interest
33/34 to the Class A Limited Partnership Unit.
(d) In the event the allocations of Portfolio Income
and Post-Effective Date Gain under Section 3.2(a) and Section
3.2(b) amount to less than the Cumulative Minimum
Distributions for the current fiscal year and prior fiscal
years, Portfolio Income, and thereafter to the extent
necessary, Post-Effective Date Gain, arising in subsequent
fiscal years, shall first be allocated to the Class B Limited
Partnership Units until the allocations under Section 3.2(a),
Section 3.2(b) and this Section 3.2(d) equal the Cumulative
Minimum Distributions.
The allocations under this Section 3.2 are determined with respect to the
Partnership's Profits and therefore shall not be treated as guaranteed payments.
Section 3.3 TIMING OF ALLOCATIONS. Except as otherwise
expressly provided herein, all allocations of Profits and Losses shall be made
as of the last day of each fiscal year of the Partnership.
ARTICLE 4: DISTRIBUTIONS
Section 4.1 DISTRIBUTION OF NET OPERATING INCOME. Net
Operating Income in respect of a fiscal year shall be distributed in the
following proportions and order of priority:
(a) First, to and in respect of each Class B Limited
Partnership Unit until there has been distributed to and in
respect of each Class B Limited Partnership Unit aggregate
distributions pursuant to this Section 4.1(a) equal to
one-half (1/2) of the Cumulative Minimum Distribution for
Class B Limited Partnership Units for the fiscal year of such
distribution and all prior fiscal years for which and to the
extent the Cumulative Minimum Distribution for Class B Limited
Partnership Units has not been distributed.
The effect of this Section 4.1(a) shall be that to
the extent that the Cumulative Minimum Distribution for Class
B Limited Partnership Units in respect of any fiscal year is
not distributed to and in respect of the Class B Limited
Partnership Units, such amount not so distributed shall be
distributed to and in respect of the Class B Limited
Partnership Units in subsequent fiscal years,
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<PAGE> 11
and no other distributions shall be made to the Partners until
the Cumulative Minimum Distribution for Class B Limited
Partnership Units in respect of any such fiscal year has
been paid.
(b) Second, in respect of each fiscal year beginning
on or after January 1, 1998, to and in respect of the General
Partner Interest and the Class A Limited Partnership Unit
until there has been distributed to and in respect of the
General Partner Interest and the Class A Limited Partnership
Unit aggregate distributions pursuant to this Section 4.1(b)
equal to the Preferred Capital Distribution with respect to
each share of Company Stock sold by the Partnership during the
fiscal year of such distribution and all prior fiscal years
for which and to the extent the Preferred Capital Distribution
has not been distributed, allocated as follows:
1/34 to the General Partner Interest
33/34 to the Class A limited Partnership Unit
The effect of this Section 4.1(b) shall be that to
the extent that the Preferred Capital Distribution in respect
of sales of shares of Company Stock by the Partnership during
any fiscal year is not distributed to and in respect of the
General Partnership Interest and the Class A Limited
Partnership Unit, such amount not so distributed shall be
distributed to and in respect of the General Partnership
Interest and Class A Limited Partnership Units in subsequent
fiscal years, and no other distributions shall be made to the
Partners, other than as provided in Section 4.1(a), until the
Preferred Capital Distribution in respect of any such fiscal
year has been paid.
(c) Thereafter, and in respect of each fiscal year
beginning before January 1, 1998, Net Operating Income shall
be distributed to the Partners in accordance with the
following percentages:
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<PAGE> 12
<TABLE>
<S> <C>
General Partner 1%
Each Class B Limited Partnership 33%
Unit
Class A Limited Partnership 33%
Unit
----
Total 100%
</TABLE>
Notwithstanding anything else contained in this Agreement, the Partnership shall
make a distribution, in accordance with the provisions of this Article 4, of at
least $50,000 in respect of each fiscal year beginning after January 1, 1998.
Section 4.2 TIMING OF DISTRIBUTIONS. Distributions of Net
Operating Income shall be made at least annually within 90 days after the end of
each fiscal year of the Partnership. [The determination of the amount of Net
Operating Income distributable annually to the Partners under this Article shall
be made based upon the state of facts existing on the last day of each fiscal
year of the Partnership.] Distributions of Net Operating Income may be made
quarterly at the discretion of the General Partner.
Section 4.3 SALES OF COMPANY STOCK. During the fourth fiscal
quarter of each fiscal year the General Partner shall act in good faith and use
reasonable efforts to sell a sufficient number of shares of Company Stock at a
price not less than $7.50 per share in order to generate sufficient funds to
make the distributions set forth in Section 4.1(a).
Section 4.4 DISTRIBUTIONS OF SHARES IN KIND. A distribution by
the Partnership to a Partner of a share of Company Stock in kind shall be
treated for purposes of Section 4.1(b) as if such share of Company Stock had
been sold at the time of such distribution at its fair market value at that
time.
Section 4.5 DISTRIBUTIONS FOR TAXES. Before March 15 of the
year following the end of a fiscal year the accountants employed by the
Partnership shall determine the marginal amount of federal, state and local
income taxes incurred by each Partner on such Partner's allocable share of the
Profits and Losses of the Partnership for such fiscal year. Before March 31
following such March 15 the Partnership shall distribute to each Partner in
respect of such fiscal year, but only after giving priority to the distributions
provided for in Section 4.1(a), an amount equal to the EXCESS (if any) OF such
marginal taxes OVER the aggregate amount otherwise distributed to such Partner
in respect of such fiscal year.
ARTICLE 5: RIGHTS AND DUTIES OF GENERAL PARTNER
Section 5.1 POWERS OF THE GENERAL PARTNER. Subject to the
limitations imposed by law, and/or this Agreement, the General
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<PAGE> 13
Partner shall manage and control the day to day business and affairs of the
Partnership and make all decisions affecting the business and assets of the
Partnership, and, without limiting the generality of the foregoing, shall have
the power on behalf of the Partnership to:
(a) authorize or approve all actions with respect to
distributions out of the Partnership, disposition or acquisition of the
Company Stock, investment and reinvestment of the Partner's capital
contributions, borrowing of funds, execution of notes, pledges and all
other instruments to effect the purposes of this Agreement;
(b) admit substitute Partners to the Partnership solely in
accordance with the terms of this Agreement;
(c) employ such persons, firms or corporations, including any
Partner or affiliate thereof, for the conduct of the business of the
Partnership;
(d) sell, exchange, assign, convey, lease and/or transfer
legal and equitable title to the Partnership Property on terms and
conditions deemed reasonable by the General Partner;
(e) acquire, utilize for Partnership purposes, and operate,
improve, and develop any Partnership Property;
(f) retain, without liability, any property in the form in
which it is received without regard to its productivity or the
proportion that any one asset or class of assets may bear to the whole;
(g) register or take title to Partnership assets in the name
of the Partnership or as Trustee, with or without disclosing the
identity of his principal, or to permit the registration of securities
in "street name" under a custodial arrangement with an established
securities brokerage firm, trust department, or other custodian;
(h) borrow money, finance, refinance or otherwise incur
obligations for the account of the Partnership and pledge, mortgage,
and grant a security interest in the Property;
(i) carry out the purpose of the Partnership through other
partnerships, corporations, limited liability companies, or other
entities;
(j) compromise claims against the Partnership;
(k) make any election under any tax law in the manner the
General Partner deems advisable, the election or failure
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<PAGE> 14
to elect of which shall not result in any cause of action
against the General Partner;
(l) execute and/or accept any instrument, conveyance, or
agreement incident to the Partnership's business or property without
the joinder, ratification, or consent of the Partners;
(m) pay all Partnership debts, obligations, and expenses;
(n) perform the Partnership's obligations, and exercise all of
the Partnership's rights, under any agreement to which the Partnership
or any nominee of the Partnership is a party;
(o) loan funds to any partner on terms and conditions deemed
reasonable by the General Partner;
(p) advance any monies to the Partnership required for the
business of the Partnership, but with no obligation to do so;
(q) to acquire and determine the amounts of insurance coverage
required by the Partnership Property, and/or business;
(r) enter into contracts and business undertakings to further
the purposes of the Partnership;
(s) open and maintain bank and investment accounts and
arrangements, drawing checks and other orders for the payment of money,
and designating individuals with authority to sign or give instructions
with respect to those accounts and arrangements;
(t) maintain the Partnership Property in good order;
(u) collect sums due the Partnership; or
(v) execute and file certificates or instruments as required
or permitted by the Act and any other laws of the State of Ohio or any
other jurisdiction where the Partnership does business.
Section 5.2 DUTIES OF THE GENERAL PARTNER.
(a) The General Partner shall manage or cause to be managed
the affairs of the Partnership in a prudent and businesslike manner,
and shall devote such part of is time to the Partnership affairs as is
reasonably necessary for the conduct of such affairs; provided,
however, that it is expressly understood and agreed that the General
Partner shall not be required to devote his entire time or attention to
the
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<PAGE> 15
business of the Partnership and the General Partner shall not be
restricted in any manner from carrying out or participating in other
businesses or activities despite the fact that the same may be
competitive with the business of the Partnership. Subject to Section
4.3, the General Partner shall have no duty or obligation to sell the
Company Stock.
(b) In carrying out his obligations hereunder, the General
Partner shall, at the cost and expense of the Partnership:
(i) Render or cause to be rendered periodic
reports to all Partners with respect to the
operations of the Partnership;
(ii) Furnish or cause to be furnished to all
Partners, within 90 days after the end of
each fiscal year, annual financial
statements;
(iii) Obtain and maintain, or cause to be
obtained and maintained, such insurance as
may be available and as the General Partner
deems necessary or appropriate;
(iv) Deposit or cause to be deposited the
Partnership's funds in such bank accounts
with such bank or trust companies as the
General Partner may designate (withdrawals
from such bank accounts to be made upon
such signature or signatures as the General
Partner may designate);
(v) Maintain or cause to be maintained complete
and accurate records of all property owned
by the Partnership and complete and
accurate books of account (containing such
information as shall be necessary to record
allocations and distributions), and make
such records and books of account available
for inspection and audit by all Partners or
their respective duly authorized
representatives (at the expense of the
Partner making such inspection) during
regular business hours and at the principal
office of the Partnership;
(vi) Prepare and distribute, or cause to be
prepared and distributed, to all Partners
all reasonable tax reporting information
and cause to be prepared and filed the tax
return of the Partnership within 75 days
after the end of each fiscal year; and
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<PAGE> 16
(vii) Cause to be filed such certificates and do
such other acts as may be required by law
to qualify and maintain the Partnership as
a limited partnership.
Section 5.3 RESTRICTIONS ON GENERAL PARTNER. The General
Partner will NOT have the authority to enter into any of the following
transactions without Unanimous Consent:
(a) incur Partnership indebtedness in excess of a loan to
value ratio of fifty percent (50%) (cumulative of all Partnership
liabilities and the cumulative value of the Property measured at book
value);
(b) compromise any claim or dispute having an amount or value
in issue in excess of fifty percent (50%) of the total value of the
Property;
(c) confess a judgment against the Partnership;
(d) do any act in violation of this Agreement;
(e) possess Property or assign the right of the Partnership or
its Partners in specific Property for other than a purpose of the
Partnership;
(f) make, execute, or deliver any assignments for the benefit
of creditors, or on the Assignee's promise to pay the debts of the
Partnership; or
(g) do any act for which the consent of the Limited Partners
is required by the Act.
Section 5.4 REQUIREMENT OF UNANIMOUS CONSENT. The General
Partner will NOT have the authority to enter into any of the following
transactions without Unanimous Consent:
(a) terminate, liquidate and wind up the Partnership, except
as otherwise provided in Article 9 of this Agreement;
(b) admit additional or substituter partners except as
otherwise provided in Article 8 of this Agreement;
(c) do any act that would make it impossible to carry on the
purpose of the Partnership and business of the Partnership (provide,
however, that the sale or other disposition of all or any Property
shall not be deemed to be an act making it impossible for the
Partnership to carry on its business);
(d) engage in any business activity other than that which is
consistent with the purposes of the Partnership; or
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<PAGE> 17
(e) amend this Agreement except as provided for elsewhere in
this Agreement.
Section 5.5 LIABILITY OF GENERAL PARTNER.
(a) Except as otherwise provided in this Agreement, the
General Partner shall not be personally liable for the return of all or
any part of the capital contributions of any other Partner to the
Partnership. Any such return shall be made solely from the assets of
the Partnership.
(b) In carrying out his duties hereunder, the General Partner
shall not be liable to the Partnership or to any other Partner for any
action taken in good faith and reasonably believed to be in the best
interests of the Partnership, or for errors of judgment, but shall be
liable for willful misconduct or fraud.
(c) The General Partner shall determine, in his sole
discretion, if, as and when to dispose of the Company Stock, if ever,
and shall so dispose of the Company Stock or retain the Company Stock,
without regard to the market price of the Company Stock. Without
limiting the foregoing, it is the express intention of the parties
hereto that the lineal descendants of JOSEPH F. KEITHLEY, (particularly
his son, JOSEPH P. KEITHLEY) control, and that all his lineal
descendants and each of them derive economic benefits from, any Company
Stock held by the Partnership. The Partners do not want the General
Partner to be subject to claims, litigation or demands from
beneficiaries of the Limited Partner simply because the Partnership has
held and continues to hold Company Stock where such retention is
intended to carry out the intent in the Joseph F. Keithley 1988 Family
Trust Agreement (as separated pursuant to that certain Division of the
Joseph F. Keithley 1988 Family Trust) creating the Keithley Family
Trust that the lineal descendants of JOSEPH F. KEITHLEY, particularly
JOSEPH P. KEITHLEY, have a controlling interest in the Company. The
parties here are trying to express in the strongest possible terms and
in the clearest language that they do not want litigation brought to
force the sale by the Partnership of the Company Stock simply because
such Company Stock reaches new highs in market value or because such
Company Stock declines in value. The parties hereto also intend that
income and principal be distributed to the lineal descendants of JOSEPH
F. KEITHLEY from the Partnership, under the foregoing provisions, even
if such distribution substantially depletes or exhausts the
Partnership, without any duty upon the General Partner to retain it for
the persons who might otherwise receive it.
Section 5.6 COMPENSATION OF GENERAL PARTNER. The General
Partner shall not receive any compensation for services rendered to the
Partnership in his capacity as the General Partner,
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<PAGE> 18
except as otherwise expressly provided in this Agreement, but shall be permitted
reimbursement of reasonable expenses incurred on behalf of the Partnership.
Section 5.7 RELIANCE ON ACT OF GENERAL PARTNER. No financial
institution or any other person, firm or corporation dealing with the General
Partner shall be required to ascertain whether the General Partner is acting in
accordance with this Agreement, but such financial institution or such other
person, firm, or corporation shall be protected in relying solely upon the deed,
transfer or assurance of and the execution of such instrument or instruments by
the General Partner.
Section 5.8 OUTSIDE VENTURES OF PARTNERS. Any Partner may
engage in or possess an interest in any other business venture of any type or
description, independently or with others (including, without limitation, any
venture which may be competitive with the business being conducted by the
Partnership) and neither the Partnership nor any Partner will, by virtue of this
Agreement, have any right, title or interest in or to such outside ventures or
the income or other benefits derived therefrom.
Section 5.9 WAIVER OF SELF DEALING.
(a) The General Partner shall have the authority to enter into
any transaction on behalf of the Partnership despite the fact that
another party to the transaction may be (i) a trust of which a Partner
is a trustee or beneficiary; (ii) an estate of which a Partner is a
personal representative or beneficiary; (iii) a business controlled by
one or more Partners or a business of which an partner is also a
director, officer or employee; (iv) any affiliate, employee,
stockholder, associate, manager, partner, or business associate; (v)
any partner, acting individually; or (vi) any relative of a Partner,
provided the terms of the transaction are no less favorable than those
the Partnership could obtain from unrelated third parties.
(b) It is expressly understood that each Partner is entitled
to invest his personal assets for his own account and is entitled to
conduct his personal affairs and investments without regard to whether
they constitute a Partnership "opportunity."
(c) A Partner may engage in or possess an interest in any
other business or venture of any nature and description, independently
or with others, including ones in competition with the Partnership,
with no obligation to offer to the Partnership or any other Partner the
right to participate. Neither the partnership no its Partners shall
have by virtue of this Agreement any right in any independent venture
or its income or Profits.
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<PAGE> 19
ARTICLE 6: POWERS, RIGHTS AND DUTIES OF LIMITED PARTNER
Section 6.1 LIMITATION OF LIABILITY. Except as otherwise
required under the Act (relating to a limited partner's liability under certain
circumstances to refund to the Partnership distributions of cash previously made
to it as a return of capital), the Limited Partners shall not be personally
liable for any loss or liability of the Partnership beyond the amount of each
Limited Partner's Contribution, except as hereinafter set forth.
Section 6.2 NO PARTICIPATION IN MANAGEMENT. Except as
otherwise expressly provided in this Partnership Agreement, the Limited Partners
shall not participate in the operation, management or control of the
Partnership's business, transact any business in the Partnership's name or have
any power to sign documents for or otherwise bind the Partnership. The Limited
Partners may not require partition of any Partnership property or compel any
sale or appraisement of Partnership assets or sale of a deceased Partner's
interests therein, notwithstanding any provisions of law to the contrary.
Section 6.3 VOTING OF LIMITED PARTNERS.
(a) Limited Partners shall have the right to vote upon the
matters listed below:
(i) Election of a successor General Partner;
(ii) Amendment of this Agreement;
(iii) The Extension of the term of the
Partnership; and
(iv) Any matter requiring the vote of the
Limited Partners as set out
elsewhere in this Agreement or in
the Act.
(b) Those matters to be voted on by the Limited Partners can
be done by written consent. Such a written consent may be utilized at
any meeting of the Partners, or it may be utilized in obtaining
approval by the Partners without a meeting.
ARTICLE 7: ACCOUNTING AND FISCAL AFFAIRS
Section 7.1 BOOKS OF ACCOUNT. General Partner shall keep
proper books of account for the Partnership. Such books of account shall be kept
at the principal office of the Partnership and shall be open at all times for
examination and copying by the Limited Partner or its authorized
representatives. The Partnership's tax year shall be the calendar year. All
changes regarding the fiscal year and accounting methods to be used by the
Partnership shall be made only with the prior written consent of each Limited
Partner.
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<PAGE> 20
ARTICLE 8: TRANSFER OF PARTNERSHIP INTERESTS
Section 8.1 GENERAL PARTNER. Without the express written
consent of a majority in interest of the Limited Partners, the interest of the
General Partner in the Partnership shall not be transferable, and any attempted
assignment shall be ineffective to transfer such interest. If the General
Partner shall retire, die, become permanently and totally disabled, become
incompetent, or be adjudicated insane or insolvent, or if any bankruptcy
petition shall be filed by or against the General Partner under any Chapter of
the Bankruptcy Reform Act of 1978, as the same may have been amended (the
"Bankruptcy Code") and if the Limited Partners determine to continue the
Partnership pursuant to Section 9.1 hereof, the successor or trustee of the
General Partner, as the case may be, shall become the assignee of the General
Partner's interest in the Partnership but shall not become a General Partner
hereunder without the consent each of the Limited Partners.
Section 8.2 LIMITED PARTNERS. Without the express written
consent of the General Partner, the interest of the Limited Partners in the
Partnership shall not be transferable, and any attempted assignment shall be
ineffective to transfer such interest.
Section 8.3 TRANSFEREES. Interests transferred pursuant to
Section 8.2 shall be and remain subject to all of the provisions of this
Agreement, and the transferee of any such interest shall, upon the consent of
the General Partner, become, or remain a Limited Partner hereunder, and this
Partnership shall be deemed to continue with the remaining Partners on the same
terms (except as the Partner's percentages may thereby be affected) as in this
Agreement set forth.
Section 8.4 ABSOLUTE RESTRICTION. Notwithstanding any
provision of this Agreement to the contrary, the sale or exchange of an interest
in the Partnership will not be permitted if the interest sought to be sold or
exchanged, when added to the total of all other interests sold or exchanged
within the period of 12 consecutive months ending with the proposed date of the
sale or exchange, results in the termination of the Partnership under Section
708 of the Code, which termination has a material and adverse effect on the
Partnership or Partner.
ARTICLE 9: DISSOLUTION, WINDING UP AND TERMINATION
Section 9.1 DISSOLUTION. The Partnership shall dissolve upon
the retirement, voluntary resignation of the General Partner from employment
with the Company, death, permanent and total disability, incompetence or
adjudication of insanity, bankruptcy or insolvency of the General partner, upon
the filing by the General Partner of a bankruptcy petition under any Chapter of
the Bankruptcy Code or 90 days after the filing against the General Partner of a
bankruptcy petition under any Chapter of the
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<PAGE> 21
Bankruptcy Code (unless said petition shall be dismissed within such 90-day
period), unless the Limited Partners determine, pursuant to a unanimous written
action, to continue the Partnership. The Partnership shall also be dissolved
upon the expiration of the term specified in Section 1.9 or the sale, exchange
or other disposition of substantially all of the assets of the Partnership,
unless the General Partner determines to continue the Partnership and reinvest
all or a portion of the proceeds of such sale, exchange, or other disposition in
the General Partner's sole discretion. Upon dissolution of the Partnership, the
General Partner (or his successor) shall proceed with the winding up of the
Partnership and its assets shall be applied and distributed as herein provided.
Section 9.2 WINDING UP AND TERMINATION. Upon the dissolution
of the Partnership (as defined in Section 9.1), the affairs and business of the
Partnership shall be wound up and terminated, the Partnership's liabilities
shall be discharged, and the Partnership Property shall be liquidated and
distributed in the manner hereinafter described. A reasonable time shall be
allowed for the orderly winding up of the affairs and business of the
Partnership so as to enable the Partnership to minimize any losses attendant to
the winding up and termination period. The winding up and termination of the
affairs and business of the Partnership shall be supervised and conducted by the
General Partner. The Liquidation Manager shall have the exclusive power and
authority to act on behalf of the Partnership to wind up and terminate the
affairs and business of the Partnership, to sell and convey the Partnership
Property to such Persons (including, without limitation, any Partner or any
Affiliate thereof) for such consideration and upon such terms and conditions as
it deems necessary or appropriate, to discharge the Partnership's liabili- ties,
to establish any reserves that it deems necessary or appropriate for any
contingent or unforeseen liabilities or obligations of the Partnership, and to
distribute the liquidation proceeds in the manner hereinafter described.
Upon completion of the winding up of the affairs and business
of the Partnership, the liquidation proceeds shall be distributed by the General
Partner (or his successor) in the following manner and order of priority:
(a) First, such liquidation proceeds shall be applied to the
payment of debts and liabilities of the Partnership (excluding any
loans from any Partner to the Partnership) and the payment of expenses
of the winding up of the affairs and business of the Partnership;
(b) Next, such liquidation proceeds shall be applied to the
repayment of any loans made by any Partner to the Partnership;
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<PAGE> 22
(c) Next, such liquidation proceeds shall be applied to the
setting up of any reserves (to be held by the General Partner in an
interest-bearing account) which the General Partner may deem necessary
or appropriate for any contingent or unforeseen liabilities or
obligation of the Partnership; provided, however, that at the
expiration of such time as the General Partner deems necessary or
appropriate, the balance of such reserves remaining after payment of
such liabilities or obligations shall be distributed by the General
Partner in the manner hereinafter set forth in this Section;
(d) Next, such liquidation proceeds shall be applied to the
payment of accrued but unpaid Cumulative Minimum Distributions.
(e) The remaining assets shall then be distributed to the
Partners in accordance with the Partners' positive capital account
balances, AFTER making the adjustments for allocations under Article 3
and in compliance with the distribution priorities set forth in Article
4.
Section 9.3 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS UPON
DISSOLUTION. The Limited Partners shall look solely to the assets of the
Partnership for the return of its Capital Contribution. The Limited Partners
shall not have any obligation to restore any deficit in its Capital Account upon
the liquidation of the Partnership.
Section 9.4 WAIVER OF PARTITION. Each Partner hereby waives
any right to partition or cause a partition of the Partnership Property.
Section 9.5 FINAL ACCOUNTING. The Liquidation Manager shall
furnish each of the Partners with a statement setting forth the assets and
liabilities of the Partnership as of the date of the completion of the winding
up and termination of the affairs and business of the Partnership. Upon
completion of the distribution plan set forth in this Section 9.2, the General
Partner shall cause to be executed by the appropriate parties and filed in such
public offices as shall be required under the Act a cancellation of the
certificate of limited partnership of the Partnership and any and all other
documents which the General Partner deems necessary or appropriate to effect the
dissolution and termination of the Partnership.
ARTICLE 10: AMENDMENTS
Section 10.1 AUTHORITY TO AMEND. Amendments to this Agreement
shall require the approval of all Partners.
ARTICLE 11: POWER OF ATTORNEY
Section 11.1 POWER. Each Limited Partner irrevocably
constitutes and appoints the General Partner as such Limited
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<PAGE> 23
Partner's true and lawful attorney in its name, place and stead to make,
execute, swear to, acknowledge, deliver and file:
(a) Any certificates or other instruments which may be
required to be filed by the Partnership under the laws of the State of
Ohio or of any other state or jurisdiction in which the General Partner
shall deem it advisable to file:
(b) Any documents, certificates or other instruments,
including but not limited to, any and all amendments and modifications
of this Agreement or of the instruments described herein which may be
required or deemed desirable by the General Partner to effectuate the
provisions of any part of this Agreement, and, by way of extension and
not in limitation, to do all such other things as shall be necessary to
continue and to carry on the business of the Partnership;
(c) All documents, certificates or other instruments which may
be required to effectuate the dissolution and termination of the
Partnership, to the extent such dissolution and termination is
authorized hereby.
The power of attorney granted hereby shall not constitute a waiver of, or be
used to avoid, the rights of each Limited Partner to approve amendments to this
Agreement pursuant to Section 10.1 or be used in any other manner inconsistent
with the status of the Partnership as a limited partnership or inconsistent with
the provisions of this Agreement.
Section 11.2 SURVIVAL OF POWER. It is expressly intended by
each Limited Partner that the foregoing power of attorney is coupled with an
interest, is irrevocable and shall survive the dissolution of such Limited
Partner. The foregoing power of attorney shall survive the delivery of an
assignment by any of the Limited Partners of such Limited Partner's entire
interest in the Partnership, except that where an assignee of such entire
interest has become a Substitute Limited Partner, then the foregoing power of
attorney of the assignor Partner shall survive the delivery of such assignment
for the sole purpose of enabling the General Partner to execute, acknowledge and
file any and all instruments necessary to effectuate such substitution.
ARTICLE 12: MISCELLANEOUS
Section 12.1 NOTICES AND ADDRESSES. All notices, consents,
demands, requests, or other communications which may or are required to be given
hereunder shall be in writing and shall be sent by telefax, overnight courier or
United States mail, registered or certified, return receipt requested, postage
prepaid to the Partnership at the address of the Partnership's principal office
and to the Partners at the addresses set forth after their respective names in
Section 1.7. The Partnership and any Partner may change it or his address for
the giving of notices, consents,
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<PAGE> 24
demands, requests, or other communications by delivering written notice to the
Partnership and to all the Partners of its or his new address for such purpose.
Notices, consents, demands, requests, or other communications shall be deemed
given or served on the day when sent by telefax, one business day after deposit
with an overnight courier or two business days after deposit in the United
States mail.
Section 12.2 RECAPITALIZATIONS, ETC. Int the event of any
change in the number or kind of outstanding shares of Company Stock by reason of
recapitalization, merger, consolidation, reorganization, separation,
liquidation, stock split, stock dividend, combination of shares or any other
change in the corporate structure or shares of stock of the Company an
appropriate adjustment shall be made in the price per share of Company Stock in
Section 4.3 and the definition of Preferred Capital Distribution.
Section 12.3 PRONOUNS AND PLURALS. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identity of the person or persons may require.
Section 12.4 COUNTERPARTS. This Agreement may be executed in
several counterparts all of which shall constitute one agreement, binding on all
parties hereto, notwithstanding that all the parties are not signatories to the
same counterpart.
Section 12.5 APPLICABLE LAW. This Agreement and the rights of
the Partners hereunder shall be interpreted in accordance with the laws of the
State of Ohio.
Section 12.6 SUCCESSORS. This Agreement shall inure to the
benefit of, be binding upon, and be enforceable by and against the parties
hereto, their heirs, executors, administrators, successors, and assigns.
Section 12.7 SEVERABILITY. The invalidity or unenforceability
of any provision of this Agreement in a particular respect shall not affect the
validity and enforceability of any other provisions of this Agreement or of the
same provision in any other respect.
Section 12.8 EXHIBITS. All exhibits attached hereto or
referred to herein are incorporated herein by this reference.
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<PAGE> 25
The Partners have executed this Agreement as of the date first
set forth at the beginning hereof.
GENERAL PARTNER:
/s/ Joseph P. Keithley
Joseph P. Keithley
LIMITED PARTNERS:
THE 1988 FAMILY TRUST SHARE
f/b/o JOSEPH P. KEITHLEY
By: /s/ Joseph P. Keithley
THE 1988 FAMILY TRUST SHARE
f/b/o ROY F. KEITHLEY
By: /s/ Roy F. Keithley
THE 1988 FAMILY TRUST SHARE
f/b/o ELIZABETH M. KEITHLEY
By: /s/ Elizabeth M. Keithley
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<PAGE> 26
EXHIBIT 1
---------
For purposes of interpreting and implementing Article 3 of the
Agreement, the following rules shall apply and shall be treated as part of the
terms of the Agreement:
A. SPECIAL ALLOCATION PROVISIONS.
1. For purposes of determining the amount of gain or loss to
be allocated pursuant to Article 3 of the Agreement, any basis adjustments
permitted pursuant to Section 743 of the Code shall be disregarded.
2. Partnership income, loss, deductions and credits shall be
allocated to the Partners in accordance with the portion of the year during
which the Partners have held their respective interests. All items of income,
loss and deduction shall be considered to have been earned ratably over the
period of the fiscal year of the Partnership, except that gains and losses
arising from the disposition of assets shall be taken into account as of the
date thereof.
3. Notwithstanding any other provision of the Agreement, to
the extent required by law, income, gain, loss and deduction attributable to
property contributed to the Partnership by a Partner shall be shared among the
Partners so as to take into account any variation between the basis of the
property and the fair market value of the property at the time of contribution
in accordance with the requirements of Section 704(c) of the Code and the
applicable regulations thereunder as more fully described in Part B hereof.
4. Notwithstanding any other provision of the Agreement, in
the event the Partnership is entitled to a deduction for interest imputed under
any provision of the Code on any loan or advance from a Partner (whether such
interest is currently deducted, capitalized or amortized), such deduction shall
be allocated solely to such Partner.
5. Notwithstanding any provision of the Agreement to the
contrary, to the extent any payments in the nature of fees paid to a Partner are
finally determined by the IRS to be distributions to a Partner for federal
income tax purposes, there will be a gross income allocation to such Partner in
the amount of such distribution.
6. (a) Notwithstanding any provision of the Agreement to the
contrary and subject to the exceptions set forth in Section 1.704-2(f)(2)-(5) of
the Treasury Regulations, if there is a net decrease in Partnership Minimum Gain
during any Partnership fiscal year, each Partner shall be specially allocated
items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the
-1-
<PAGE> 27
net decrease in Partnership Minimum Gain determined in accordance with Section
1.704-2(g)(2) of the Treasury Regulations. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Section 1.704-2(f) of the Treasury Regulations.
This paragraph 6(a) is intended to comply with the minimum gain chargeback
requirement in such Section of the Regulations and shall be interpreted
consistently therewith. To the extent permitted by such Section of the
Regulations and for purposes of this paragraph 6(a) only, each Partner's
Adjusted Capital Account Balance shall be determined prior to any other
allocations pursuant to Article 3 of the Agreement with respect to such fiscal
year and without regard to any net decrease in Partnership Minimum Gain during
such fiscal year.
(b) Notwithstanding any provision of the Agreement to
the contrary, except paragraph 6(a) of this Exhibit and subject to the
exceptions set forth in Section 1.704-2(i)(4) of the Treasury Regulations, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any
Partnership fiscal year, each Partner who has a share of the Partner Nonrecourse
Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(3) of the
Treasury Regulations, shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain, determined in accordance with Section 1.704-2(i)(5) of the Treasury
Regulations. Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Section 1.704- 2(i)(4) of the Regulations. This paragraph 6(b) is intended
to comply with the minimum gain chargeback requirement in such Section of the
Regulations and shall be interpreted consistently therewith. Solely for purposes
of this paragraph 6(b), each Partner's Adjusted Capital Account Balance shall be
determined prior to any other allocations pursuant to Article 3 of the Agreement
with respect to such fiscal year, other than allocations pursuant to paragraph
6(a) hereof.
7. Notwithstanding any provision of the Agreement to the
contrary, in the event any Partners unexpectedly receive any adjustments,
allocations or distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6),
items of Partnership income and gain shall be specially allocated to such
Partners in an amount and manner sufficient to eliminate the deficits in their
Adjusted Capital Account Balances created by such adjustments, allocations or
distributions as quickly as possible.
8. No loss shall be allocated to any Partner to the extent
that such allocation would result in a deficit in its
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<PAGE> 28
Adjusted Capital Account Balance while any other Partner continues to have a
positive Adjusted Capital Account Balance; in such event losses shall first be
allocated to any Partners with positive Adjusted Capital Account Balances, and
in proportion to such balances, to the extent necessary to reduce their positive
Adjusted Capital Account Balances to zero. Any excess shall be allocated to the
General Partner.
9. Any special allocations of items pursuant to this Part A
shall be taken into account in computing subsequent allocations so that the net
amount of any items so allocated and the profits, losses and all other items
allocated to each such Partner pursuant to Article 3 of the Agreement shall, to
the extent possible, be equal to the net amount that would have been allocated
to each such Partner pursuant to the provisions of Article 3 of the Agreement if
such special allocations had not occurred.
10. Notwithstanding any provision of the Agreement to the
contrary, Nonrecourse Deductions for any fiscal year or other period shall be
specially allocated to the Partners in accordance with the percentages set forth
in Section 4.1.
11. Notwithstanding any provision of the Agreement to the
contrary, any Partner Nonrecourse Deduction for any fiscal year or other period
shall be specially allocated to the Partner who bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i) of the
Treasury Regulations.
B. CAPITAL ACCOUNT ADJUSTMENTS AND 704(c) TAX ALLOCATIONS.
1. For purposes of computing the amount of any item of income,
gain, deduction or loss to be reflected in the Partners' capital accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes; provided, however, that:
(a) Any deductions for depreciation, cost recovery or
amortization (other than depletion under Section 611 of the Code)
attributable to a Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership was equal to the Agreed Value of such property. Upon an
adjustment to the Carrying Value of any Partnership property subject to
depletion under Section 611 of the Code, and further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined as if the adjusted basis of such property
was equal to the Carrying Value of such property immediately following
such adjustment.
-3-
<PAGE> 29
(b) Any income, gain or loss attributable to the taxable
disposition of any property (including any property subject to
depletion under Section 611 of the Code) shall be determined by the
Partnership as if the adjusted basis of such property as of such date
of disposition was equal in amount to the Partnership's Carrying Value
with respect to such property as of such a date.
(c) If the Partnership's adjusted basis in a depreciable or
cost recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is
placed in service and shall be allocated among the Partners pursuant to
Article 3 of the Agreement. Any restoration of such basis pursuant to
Section 48(q)(2) of the Code shall be allocated in the same manner to
the Partners to whom such deemed deduction was allocated.
(d) The computation of all items of income, gain, loss and
deduction shall be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code,
without regard to the fact that such items are not includable in gross
income or are neither currently deductible nor capitalizable for
federal income tax purposes.
2. A transferee of a Partnership interest will succeed to the
capital account relating to the Partnership interest transferred; provided,
however, that if the transfer causes a termination of the Partnership under
Section 708(b)(1)(B) of the Code, the Partnership properties shall be deemed to
have been distributed in liquidation of the Partnership to the Partners
(including the transferee of a Partnership interest) and recontributed by such
Partners and transferees in reconstitution of the Partnership. The capital
accounts of such reconstituted Partnership shall be maintained in accordance
with the principles set forth herein. Upon the occurrence of any of the
following events, the Partnership Property shall be revalued and the Partners'
Capital Accounts adjusted to reflect the gain (or loss) that would have been
allocated to each Partner if all the Partnership Property had been sold at its
fair market value immediately prior to the occurrence of such event:
(i) The acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution;
(ii) The distribution by the Partnership to a Partner
of more than a de minimis amount of property or money in
consideration for an interest in the Partnership; or
-4-
<PAGE> 30
(iii) The "liquidation" of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations.
The revaluation of the Partnership Property referred to in the immediately
preceding sentence shall be made in accordance with Section
1.704-1(b)(2)(iv)(f) of the Regulations.
3. Upon an issuance of additional Partnership interests for
cash or Contributed Property the capital accounts of all Partners (and the
Carrying Value of all Partnership properties) shall, immediately prior to
issuance, be adjusted (consistent with the provisions hereof) upward or downward
to reflect any unrealized gain or unrealized loss attributable to each
Partnership property (as if such unrealized gain or unrealized loss had been
recognized upon an actual sale of such property at the fair market value thereof
immediately prior to such issuance, and had been allocated to the Partners, at
such time, pursuant to Article 3 of the Agreement). In determining such
unrealized gain or unrealized loss attributable to the properties, the fair
market value of Partnership properties shall be determined by the General
Partner using such reasonable methods of valuation as it may adopt.
4. Immediately prior to the distribution of any Partnership
property in liquidation of the Partnership or any Partner's interest in the
Partnership, the capital accounts of all Partners (and the Carrying Values of
all Partnership properties) shall be adjusted (consistent with the provisions
hereof and Section 704 of the Code) upward or downward to reflect any unrealized
gain or unrealized loss attributable to each Partnership property (as if such
unrealized gain or unrealized loss had been recognized upon an actual sale of
each such property, immediately prior to such distribution, and had been
allocated to the Partners, at such time, pursuant to Article 3 of the
Agreement). In determining such unrealized gain or unrealized loss attributable
to the properties, the fair market value of Partnership properties shall be
determined by the General Partner using such reasonable methods of valuation as
it may adopt.
5. In accordance with Section 704(c) and the regulations
thereunder, income, gain, loss and deduction with respect to any Contributed
Property shall, solely for tax purposes, be allocated among the Partners so as
to take account of any variation between the adjusted basis of such property to
the Partnership for federal income tax purposes and its Agreed Value.
6. In the event the Agreed Value of any Partnership asset is
adjusted as described in paragraph 3 or 4 above, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income tax
purposes and its Agreed Value in the same manner as under Section 704(c) of the
Code and the regulations thereunder.
-5-
<PAGE> 31
7. Any elections or other decisions relating to such
allocations shall be made by the General Partner in any manner that reasonably
reflects the purpose and intention of this Agreement.
8. The allocations set forth in Exhibit 1 (the "Regulatory
Allocations") are intended to comply with certain requirements of Treasury
Regulations promulgated under Section 704 of the Code. The Regulatory
Allocations shall be taken into account in allocating other Net Profits, Net
Losses, and items of income, gain, loss, and deduction to each Partner so that,
to the extent possible, and to the extent permitted by Treasury Regulations, the
net amount of such allocations of other Net Profits, Net Losses, and other items
and the Regulatory Allocations to each Partner shall be equal to the net amount
that would have been allocated to each Partner if the Regulatory Allocations had
not been made; provided, however, that in no event shall less than 99% of the
Partnership's depreciation deductions be allocated to the Limited Partner.
For purposes of this Exhibit, all other capitalized terms will
have the same definition as in the Agreement.
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<PAGE> 32
EXHIBIT 2
---------
DEFINITIONS
-----------
The capitalized words and phrases used in the Amended and
Restated Limited Partnership Agreement for Keithley Investment Co. Limited
Partnership, if not specifically defined therein, shall have the following
meanings (such meanings shall be equally applicable to both the singular and
plural forms of such words and phrases):
(1) "Act" means the Ohio Limited Partnership Law, as set forth
in Chapter 1782.01 of the Revised Code of Ohio, as the same may be amended from
time to time (or any corresponding provisions of any successor law).
(2) "Adjusted Capital Account Balance" means the balance in
the capital account of a Partner as of the end of the relevant fiscal year of
the Partnership, after giving effect to the following: (a) credit to such
capital account any amounts the Partner is obligated to restore, pursuant to the
terms of this Agreement or otherwise, or is deemed obligated to restore pursuant
to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704- 2(i)(5) of the
Treasury Regulations, and (b) debit to such capital account the items described
in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
(3) "Affiliate" means, with respect to any Person: (a) any
Person directly or indirectly controlling, controlled by or under common control
with such Person; (b) any Person owning or controlling 10% or more of the
outstanding voting securities of such Person; (c) any officer, director or
general partner of such Person; or (d) any Person who is an officer, director,
general partner, trustee or holder of 10% or more of the voting securities of
any Person described in clauses (a) through (c) of this subparagraph.
(4) "Agreed Value" means the fair market value of Contributed
Properties as agreed to by the contributing Partner and the Partnership, using
such reasonable method of valuation as they may adopt.
(5) "Capital Account" means, with respect to any Partner, the
capital account maintained for such Partner pursuant to Section 2.6.
(6) "Capital Contribution" means, with respect to any Partner,
the amount of money and the fair market value of property contributed to the
Partnership by such Partner.
A-1
<PAGE> 33
(7) "Carrying Value" means (a) with respect to Contributed
Property, the Agreed Value of such property reduced (but not below zero) by all
amortization, depreciation and cost recovery deductions charged to the Partners'
capital accounts with respect to such property, as well as any other charges for
sales, retirements and other dispositions of assets included in a Contributed
Property, as of the time of determination, and (b) with respect to any other
property, the adjusted basis of such property for federal income tax purposes as
of the time of determination. The Carrying Value of any property shall be
adjusted in accordance with the principles set forth herein.
(8) "Class A Limited Partnership Unit" shall mean Limited
Partnership Units of the Partnership entitled to the Incentive Allocation as set
forth in Section 3.2 of this Agreement.
(9) "Class B Limited Partnership Units" shall mean Limited
Partnership Units of the Partnership entitled to the Cumulative Minimum
Distribution for Class B Limited Partnership Units as set forth in Section
4.1(a) of this Agreement.
(10) "Code" means the Internal Revenue Code of 1986, as the
same may be amended from time to time (or any corresponding provisions of any
successor law).
(11) "Company" means Keithley Instruments, an Ohio
corporation.
(12) "Company Stock" means Class B common stock, without par
value, of Keithley Instruments and Class A common stock, without par value, of
Keithley Instruments.
(13) "Cumulative Minimum Distribution for Class B Limited
Partnership Units" shall mean the following:
<TABLE>
<CAPTION>
Cumulative Minimum Distribution
For Fiscal Year for Class B Limited Partnership
--------------- -------------------------------
Units
-----
<S> <C>
Before 1998 -0-
Calendar 1998 $100,000
Calendar 1999 $120,000
Calendar 2000 $140,000
Calendar 2001 $160,000
Calendar 2002 $180,000
Calendar 2003 $200,000
After 2003 $200,000.
</TABLE>
(14) "General Partner" means Joseph P. Keithley.
(15) "Limited Partners" means The 1988 Family Trust Share
f/b/o Joseph P. Keithley, The 1988 Family Trust Share f/b/o Roy F.
A-2
<PAGE> 34
Keithley and The 1988 Family Trust Share f/b/o Elizabeth M. Keithley or any
person who becomes a substituted Limited Partner for any such person pursuant to
Article 8.
(16) "Net Operating Income" means, with respect to any fiscal
year of the Partnership, all revenue derived by the Partnership, reduced by the
sum of the following: (a) all principal and interest payments and other sums
paid on or with respect to any indebtedness of the Partnership; (b) all cash
expenditures incurred incident to the operation of the Partnership's business,
(including, without limitation, any capital expenditures and any repayment of
loans to the Partnership by the General Partner pursuant to Section 5.4(f) and
5.5; and (c) such cash reserves as the Partners shall from time to time agree to
establish for working capital, compensating balance requirements, contingencies
or the funding of any other cash requirements of the Partnership.
(17) "Nonrecourse Deductions" shall have the meaning set forth
in Section 1.704-2(b)(1) of the Treasury Regulations. The amount of Nonrecourse
Deductions for a Partnership fiscal year equals the excess, if any, of the net
increase, if any, in the amount of Partnership Minimum Gain during that fiscal
year over the aggregate amount of any distributions during that fiscal year of
proceeds of a Nonrecourse Liability that are allocable to an increase in
Partnership Minimum Gain, determined according to the provisions of Section
1.704-2(c) of the Treasury Regulations.
(18) "Nonrecourse Liability" shall have the meaning set forth
in Section 1.704-2(b)(3) of the Treasury Regulations.
(19) "Partner" means the General Partner or the Limited
Partners and together the "Partners".
(20) "Partner Nonrecourse Debt Minimum Gain" means an amount,
with respect to each Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i) of the Treasury Regulations.
(21) "Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Treasury Regulations.
(22) "Partner Nonrecourse Deductions" shall have the meaning
set forth in Section 1.704-2(i)(2) of the Treasury Regulations. For any
Partnership taxable year, the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt equal the net increase during the year, if
any, in the amount of Partner Nonrecourse Debt Minimum Gain reduced (but not
below zero) by proceeds of the liability that are both attributable to the
liability and allocable to an increase in the Partner Nonrecourse Debt Minimum
Gain Limited Partner Agreement.
A-3
<PAGE> 35
(23) "Partnership Interest" means the entire ownership
interest of a Partner, including, without limitation, the rights and obligations
of such Partner under this Agreement and the Act.
(24) "Partnership Minimum Gain" shall have the meaning set
forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.
(25) "Partnership Property" means all real and personal
property acquired by the Partnership and any improvements thereto, and shall
include both tangible and intangible property.
(26) "Person" means any individual, partnership, corporation,
trust or other entity.
(27) "Portfolio Income" means income (net of applicable fees
and expenses, including interest expense on indebtedness for borrowed money)
from dividends and interest and other investments not involving the active
conduct by the Partnership of a trade or business but excluding gains from sales
of stocks or debt instruments reflecting economic appreciation.
(28) "Post-Effective Date Gain" means the excess of the
selling price of a share of Company Stock over the fair market value per share
of the Company Stock on the date of this Agreement as set forth in Section 2.8.
(29) "Preferred Capital Distribution" means 20% of the amount
by which the selling price of a share of Company stock is greater than $12.00
but is not greater than $30.00, and 25% of the amount by which the selling price
of a share of Company Stock is greater than $30.00.
(30) "Profits" and "Losses" mean, for each fiscal year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such period from all sources (including gain or loss from the disposition of
Partnership Property), determined in accordance with Section 703(a) of the Code,
adjusted in the following manner: (a) the income of the Partnership that is
exempt from federal income tax shall be added to such taxable income or loss;
(b) any expenditures of the Partnership which are not deductible in computing
its taxable income and not properly chargeable to capital account under either
Section 705(a)(2)(B) of the Code or the Regulations promulgated under Section
704(b) of the Code shall be subtracted from such taxable income or loss; (c) in
the event any Partnership Property is revalued in accordance with Section
1.704-1(b)(2)(iv)(f) of the Regulations, then the amount of any adjustment to
the value of such Partnership Property shall be taken into account as gain or
loss from the disposition of such Partnership Property for purposes of computing
Profits or Losses; (d) gain or loss resulting from any disposition of
Partnership Property which has been revalued pursuant to Section
A-4
<PAGE> 36
1.704-1(b)(2)(iv)(f) of the Regulations and with respect to which gain or loss
is recognized for federal income tax purposes shall be computed by reference to
the adjusted value of such Partnership Property, notwithstanding that the
adjusted tax basis of such Partnership Property differs from the adjusted value;
(e) any depreciation, amortization or other cost recovery deductions taken into
account in computing such taxable income or loss shall be recomputed based upon
the adjusted value of any Partnership Property which has been revalued in
accordance with Section 1.7041(b)(2)(iv)(f) of the Regulations; and (f) any
items of income, gain, loss, deduction or credit which are specially allocated
pursuant to Section 3.2 shall not be taken into account in computing Profits or
Losses.
(31) "Regulations" means the Federal Income Tax Regulations
(including without limitation, Temporary Regulations) promulgated under the
Code, as the same may be amended from time to time (including corresponding
provisions of successor regulations).
(32) "Voluntary Transfer" means any sale, assignment,
transfer, pledge, or hypothecation of any Partnership Interests by a partner,
except for an Involuntary Transfer.
A-5
