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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For fiscal year ended, SEPTEMBER 30, 1999 Commission file number 1-9965
------------------ ---------
KEITHLEY INSTRUMENTS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-0794417
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(State of incorporation or organization) (I.R.S. Employer Identification No.)
28775 AURORA ROAD, SOLON, OHIO 44139
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (440) 248-0400
--------------
Securities registered pursuant to Section 12(b) of the Act:
COMMON SHARES, WITHOUT PAR VALUE NEW YORK STOCK EXCHANGE
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(Title of each class) (Name of exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 14, 1999 there were outstanding 4,354,386 Common Shares, without
par value, and 2,692,028 Class B Common Shares, without par value. At that date,
the aggregate market value of the Common Shares of the Registrant held by
non-affiliates was $71,394,046 and the aggregate market value of the Class B
Common Shares of the Registrant held by non-affiliates was $748,040 for a total
aggregate market value of all classes of Common Shares held by non-affiliates of
$72,142,086. While the Class B Common Shares are not listed for public trading
on any exchange or market system, shares of that class are convertible into
Common Shares at any time on a share-for-share basis. The market values
indicated were calculated based upon the last sale price of the Common Shares as
reported by the New York Stock Exchange on December 14, 1999, which was $17.625.
For purposes of this information, the 303,660 Common Shares and 2,649,586 Class
B Common Shares which were held by the officers and Directors of the Company
were deemed to be voting stock held by affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the registrant's Annual Meeting
to Shareholders to be held on February 12, 2000 (the "2000 Annual Meeting") are
incorporated by reference in Part III in this Annual Report on Form 10-K (this
"Annual Report") and are identified under the appropriate items in this Annual
Report.
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KEITHLEY INSTRUMENTS, INC.
10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I: PAGE
----
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II:
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk 17
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III.
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management 18
Item 13. Certain Relationships and Related Transactions 18
PART IV:
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 19
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PART I.
ITEM 1 - BUSINESS.
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General
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Keithley Instruments, Inc. is a corporation that was founded in 1946
and organized under the laws of the State of Ohio on October 1, 1955. Its
principal executive offices are located at 28775 Aurora Road, Solon, Ohio 44139;
telephone (440) 248-0400. References herein to the "Company" or "Keithley" are
to Keithley Instruments, Inc. and its subsidiaries unless the context indicates
otherwise.
Keithley's business is to develop, manufacture and sell measurement
systems geared to the specialized needs of electronics manufacturers for
high-performance production testing, process monitoring, product development and
research. The Company's primary products are computer-based systems or employ
computer technology for control, data storage, display or analysis purposes. The
Company's customers are engineers, technicians and scientists engaged in
manufacturing, product development and research functions within a range of
industries. Although the Company's products vary in capability, sophistication,
use, size and price, they generally test, measure, and analyze electrical and
physical properties. As such, the Company considers its business to be in a
single industry segment.
Strategy of Focus
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Several years ago, the Company formulated a strategy to focus its
product and market development efforts toward growing markets including the
telecommunications, semiconductor, automotive and the electronic components
industries, and basic and applied research. In July of fiscal 1998 and November
of fiscal 1999, the Company sold two businesses which no longer fit this core
strategy. By pruning the organization of these non-strategic businesses, the
Company was better able to leverage resources and greatly improve the quality of
earnings.
The Company's strategy for sales growth consists of a few key points.
First, the Company has focused its efforts on identifying specific production
test applications within the targeted industries mentioned above. The Company
works closely with customers in these industries not only to determine what
their measurement needs are today, but also what their new emerging needs might
be. A thorough understanding of their applications coupled with the Company's
precision measurement technology enables us to add value to our customers'
processes; improving the quality, throughput and yield of their products.
Forming consultative relationships with customers where the Company can add
value is a key part of the strategy. Additionally, the Company recognizes the
importance of our traditional research customers. Whether they are doing basic
or applied research in a university or an industrial laboratory, these customers
give the Company a first-hand look at new industry trends and technologies, as
well as establish relationships that last a career.
Second, sales growth also requires a steady stream of innovative new
products. These products may be designed for very specific production test
applications driven by the target industry approach discussed above, or may be
used in applications that cross over a variety of industries. The Company refers
to its products as "computer-based solutions" because
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regardless of the form factor, they are designed for usage with industry-leading
computer hardware and software. The Company utilizes open-architecture software
based-on Microsoft's(TM) Component Object Model technology, thus drastically
decreasing the start-up time for customers. By continuing to develop new
software and computer-based solutions, the Company believes it can capture a
greater share of purchases from the broader segments of the overall test and
measurement market.
Third, with the growth in popularity of the Internet and expanding role
of E-commerce, there is a greater opportunity to offer the Company's production
test applications knowledge to a wider range of its customers and prospects
worldwide. The Company's web site, www.keithley.com, is globally accessible 24
hours a day, and is an excellent, cost effective way to interact with current
and potential customers. Additionally, advances in database management allow the
Company to do a better job of reaching those people who are more likely to
benefit from its product offerings.
Product Offerings
- -----------------
The Company has more than 1,000 products that basically test, measure,
and analyze electrical and physical properties. The products come in three basic
form factors: benchtop instruments, PC plug in boards and integrated measurement
solution systems. Benchtop instruments generally range in price from $1,000 to
$10,000 and PC plug-in boards generally range in price from $100 to $4,000. The
price of the Company's integrated measurement solution systems is dependent upon
the type of system purchased and can range from $10,000 to $400,000.
The major specific product groups are described below:
DIGITAL MULTIMETERS. This product line includes a range of
instruments that are designed to cover measurements of voltage,
resistance, current and temperature for production test, design and
development, and research applications. Each digital multimeter has
a computer interface for integration into automated test and
measurement systems. Typical applications include testing
electrical components such as resistors and thermistors, and end
products which include cellular telephones, computer disk drives,
and pace makers. These products are marketed primarily through
direct marketing and personal selling.
SENSITIVE INSTRUMENTS. This product group includes electrometers,
picoammeters, sensitive digital voltmeters, micro-ohmmeters, and
certain other instruments which are distinguished by their extreme
sensitivity, resolution and accuracy as compared to the
capabilities of conventional meters. Sensitive instruments are used
by scientists, engineers, and researchers for the study of
materials, semiconductors, and superconductors. Typical customers
are industrial and government research laboratories, educational
institutions, and electronics manufacturers. These products are
marketed primarily through direct marketing and catalog mailings.
SWITCHES AND SOURCES. Switching instruments are used to route
electrical signals in test systems to measurement and source
instrumentation. This allows many devices or test points to be
measured with a minimum number of instruments. Switch
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products together with Sensitive, Digital Multimeter, Source, I-V
and C-V instruments can be integrated into computer-based systems
to provide flexible, automated testing and measurement. The
switching product line allows Keithley to provide a complete
measurement solution to customers in production test,
semi-conductor characterization, and materials research
applications.
Sources generate the precise voltage and currents needed to test
electronic devices and investigate properties of materials. Source
products are sold to scientists and engineers in research,
semiconductor and electronic manufacturing markets, especially
where stable signals of low level current and voltage are needed.
These sources can be interfaced with computers as part of an
automated test system, or used manually on the laboratory bench.
Switches and Sources are marketed primarily through personal
selling.
PLUG-IN BOARDS. The qualities of these boards include data
acquisition capabilities in the form of a board that is installed
into a slot of the computer, boards that essentially contain an
instrument allowing benchtop engineering and automatic production
testing through an expansion slot of almost any personal computer,
and IEEE-488 bus interfaces and software for interfacing computers
with programmable measurement instrumentation. The boards are
marketed worldwide to researchers and scientists engaged in
laboratory automation and experimentation, engineers involved with
process control and data collection applications, and machine
builders and systems integrators involved in production test
applications. These products are marketed primarily through direct
marketing, catalog mailings, and personal selling.
APT PRODUCTS. The Company is one of the leading suppliers of
automated parametric test systems (APT) for semiconductor
production applications. In production, the systems allow
manufacturers to monitor quality control parameters during
fabrication of integrated circuits to improve manufacturing yields.
In research, the systems are used to analyze the characteristics of
semiconductor materials in the development of integrated circuit
devices. The systems can also be used to develop integrated circuit
manufacturing processes. A typical system incorporates Keithley
instrumentation and software, and computer hardware manufactured by
others. The system's major components are integrated, and in most
cases, customized to customer specification. The systems can also
incorporate wafer test structures used for determining the
reliability of semiconductor devices at various stages of
manufacturing. These test structures allow the Company's APT
systems to determine the quality of both the wafer and the
manufacturing process much earlier than with previous test methods.
Installation and servicing of the equipment and software, and
customer training are also provided. Selling prices for these
products generally range from $125,000 to $400,000.
C-V (CAPACITANCE VERSUS VOLTAGE). C-V systems include
high-frequency and quasistatic C-V meters, measurement and analysis
software, and computer-based test systems. C-V products are used by
scientists and engineers in semiconductor development and
manufacturing facilities, industrial and governmental research
laboratories, and educational institutions to research, develop,
and characterize semiconductor devices, materials and manufacturing
processes.
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AGENCY PRODUCTS. The Company markets and distributes certain
hardware and software products manufactured by other test and
measurement companies. These agency products can be combined with
other Company products to meet a wide range of application needs.
The agency products are complementary to, but not competitive with,
products manufactured by the Company.
New Products During Fiscal Year 1999
- ------------------------------------
The Company has shifted its new product development process from a
product focus to a market focus. Several new products were introduced for
specific targeted markets during fiscal 1999 including the following:
The Model 6514 Electrometer was created through a long-standing
relationship with the Company's important research customers. This customer
group required an electrometer that offered a much more cost-effective means of
making fast, low-current measurements. The Model 2430 was developed for
production testing of active or passive components for targeted electronic
component customers. The area of telecommunications is one of the Company's
fastest growing markets and the Model 2306 Battery Simulator/Charger designed to
accurately simulate the performance of wireless devices under battery control
was introduced to serve those customers. The newest product addition for the
telecommunications area is System 41 Microwave Switching which allows RF
switching and signal routing over a higher bandwidth and provides more data
carrying capability. The Model 5201 Universal Serial Bus-Based Data Acquisition
System was designed for invehicle development test applications for the
automotive industry. New product offerings directed for the semiconductor
industry include the Model S630 APT System, the latest in the Company's award
winning S600 series. Additional introductions included the new Wafer Level
Reliability (WLR) Software Toolkit that provides semiconductor fabs with a solid
foundation for implementing a WLR monitoring program, and upgraded KTE
application software for the Company's APT systems that permits customers to
decrease their software development time. The Company also introduced new,
latest-technology versions of PCI plug-in data acquisition boards for those
customers with high performance requirements that demand this method of
measurement.
A key customer requirement for all the measurement alternatives that
the Company offers is ease of installation and usage, and that requires
cost-effective software. During the course of 1999, the Company introduced new
32-bit DriverLINX(R) software drivers. This software will gives customers a
hardware independent way to write their software and makes it easier for them to
migrate to the Company's future hardware. Customers also can take advantage of
standard Microsoft Windows 95/NT, visual basic and Active X Controls available
through Windows. The Company's data acquisition boards also include LabVIEW(TM)
VIs which allow usage with LabVIEW, a proprietary closed software environment
that is commonly used in the data acquisition industry.
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Geographic Markets and Distribution
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During fiscal 1999, all of the Company's products were manufactured in
Ohio and were sold throughout the world in over 80 countries. The Company's
principal markets are the United States, Europe and the Pacific Basin.
In the United States, the Company's products are sold by the Company's
sales personnel, independent sales representatives and through direct marketing
and catalog mailings. United States sales offices are located in Solon, Ohio and
Santa Clara, California. The Company markets its products directly in countries
in which it has a sales office and through distributors in other countries.
European subsidiaries have sales and service offices located in or near London,
Munich, Paris, Amsterdam, Zurich and Milan. The Company also has sales offices
in Belgium, China, Taiwan and India. Sales in markets outside the above named
locations are made through independent sales representatives and distributors.
Sources and Availability of Raw Materials
- -----------------------------------------
The Company's products require a wide variety of electronic and
mechanical components, most of which are purchased. The Company has multiple
sources for the vast majority of the components and materials it uses; however,
there are some instances where the components are obtained from a sole-source
supplier. If a sole-source supplier ceased to deliver, the Company could
experience a temporary adverse impact on its operations; however, management
believes alternative sources could be developed quickly. Although shortages of
purchased materials and components have been experienced from time to time,
these items have generally been available to the Company as needed.
Patents
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Electronic instruments of the nature the Company designs, develops and
manufactures cannot generally be patented in their entirety. Although the
Company holds patents with respect to certain of its products, it does not
believe that its business is dependent to any material extent upon any single
patent or group of patents, because of the rapid rate of technological change in
the industry.
Seasonal Trends and Working Capital Requirements
- ------------------------------------------------
Although the Company is not subject to significant seasonal trends, its
business is cyclical and is somewhat dependent upon the semiconductor industry
in particular. The Company does not have any unusual working capital
requirements.
Customers
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The Company's customers generally are involved in engineering research
and development, product testing, electronic service or repair, and educational
and governmental research. During the fiscal year ended September 30, 1999 no
one customer accounted for more than 10% of the Company's sales. Management
believes that the loss of any one of its customers would not materially affect
the sales or net income of the Company.
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Backlog
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The Company's backlog of unfilled orders amounted to approximately
$19,341,000 as of September 30, 1999 and approximately $9,049,000 as of
September 30, 1998. Included in the backlog at September 30, 1998 is $3,015,000
for products relating to the Quantox business which was sold in November 1998.
It is expected that the majority of the orders included in the 1999 backlog will
be delivered during fiscal 2000; however, the Company's past experience
indicates that a small portion of orders included in the backlog may be
canceled.
Competition
- -----------
The Company competes on the basis of quality, performance, service,
warranty and price, with quality and performance frequently being dominant.
There are many firms in the world engaged in the manufacture of electronic
measurement instruments, some of which are larger and have greater financial
resources than the Company. The Company's competitors vary between product lines
and certain manufacturers compete with the Company in multiple product lines.
The Company's principal competitors are Agilent Technologies, Inc. and National
Instruments, Inc.
Research and Development
- ------------------------
The Company's engineering development activities are directed toward
the development of new products that will complement, replace or add to the
products currently included in the Company's product line. The Company does not
perform basic research, but on an ongoing basis utilizes new component and
software technologies in the development of its products. The highly technical
nature of the Company's products and the rapid rate of technological change in
the industry require a large and continuing commitment to engineering
development efforts. Product development expenses were $10,745,000 in 1999,
$13,139,000 in 1998 and $17,233,000 in 1997, or approximately 11%, 11% and 14%
of net sales, respectively, for each of the last three fiscal years.
Government Regulations
- ----------------------
The Company believes that its current operations and its current uses
of property, plant and equipment conform in all material respects to applicable
laws and regulations. The Company has not experienced, nor does it anticipate,
any material claim or material capital expenditure in connection with
environmental laws and other regulations.
Employees
- ---------
As of September 30, 1999, the Company employed 526 persons, 109 of whom
were located outside the United States. None of the Company's employees are
covered under the terms of a collective bargaining agreement and the Company
believes that relations with its employees are good.
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Foreign Operations and Export Sales
- -----------------------------------
Information related to foreign and domestic operations and export sales
is contained in Note K of the Notes to the Consolidated Financial Statements
included in a separate section at the end of this Form 10-K Annual Report.
The Company has significant revenues from outside the United States
which increase the complexity and risk to the Company. These risks include
increased exposure to the risk of foreign currency fluctuations and the
potential economic and political impacts from conducting business in foreign
countries. With the exception of changes in the value of foreign currencies,
which is not possible to predict, the Company believes that its foreign
subsidiaries and other larger international markets are in countries where the
economic and political climate is generally stable.
ITEM 2 - PROPERTIES.
----------
The Company's principal administrative, sales, marketing, manufacturing
and development activities are conducted at two Company-owned buildings in
Solon, Ohio. The two buildings total approximately 200,000 square feet and sit
on approximately 33 acres of land. The Company also owns another 50,000 square
foot building on 5.5 acres of land adjacent to its executive offices. This
facility is current being leased to others, but is available for expansion
should the Company require additional space. The Company also maintains a number
of sales and service offices in the United States and overseas. The Company
believes that the facilities it owns and leases by it are well maintained,
adequately insured and suitable for their present and intended uses.
ITEM 3 - LEGAL PROCEEDINGS.
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The Company is not a party to any material litigation.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT:
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The description of executive officers is included pursuant to
Instruction 3 to Section (b) of Item 401 of Regulation S-K under the Securities
and Exchange Act of 1934.
The following table sets forth the names of all executive officers of
the Company and certain other information relating to their position held with
the Company and other business experience.
Executive Officer Age Recent Business Experience
- ----------------- --- --------------------------
Joseph P. Keithley 51 Chairman of the Board of Directors since 1991, Chief
Executive Officer since November 1993 and President
since May 1994.
Philip R. Etsler 49 Vice President Human Resources of the Company since
1990.
John M. Gherlein 44 Secretary of the Company since July 1999; partner in
the law firm of Baker & Hostetler LLP from 1990 to
present.
David H. Patricy 50 Vice President and General Manager of Test and
Measurement of the Company since 1997. Previously
General Manager of the Instrument Division from 1994
to 1997.
Mark J. Plush 50 Vice President and Chief Financial Officer of the
Company since October 1998. Previously, Controller
since 1982 and an Officer of the Company since 1989.
Gabriel A. Rosica 59 Senior Vice President and General Manager of
Semiconductor since February 1996. Previously Chief
Operating Officer of Bailey Controls Company from
August 1994 to January 1996.
D. Sherman Willows 63 Vice President Worldwide Sales since February 1999.
Previously General Manager of World Wide Sales from
1997 to 1999 and Eastern Regional Sales Manager from
1993 to 1997.
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PART II.
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
------------------------------------------------------
STOCKHOLDER MATTERS.
--------------------
The Company's Common Shares trade on the New York Stock
Exchange under the symbol KEI. The high and low prices shown below are sales
prices of the Company's Common Shares as reported on the NYSE. There is no
established public trading market for the Company's Class B Common Shares;
however, they are readily convertible on a one-for-one basis into Common Shares.
Cash Dividends
Cash Dividends Per Class B
Fiscal 1999 High Low Per Common Share Common Share
- ----------- ---- --- ---------------- ------------
First Quarter $9 1/4 $3 3/4 $ .033 $ .0264
Second Quarter 9 11/16 6 1/2 .033 .0264
Third Quarter 9 6 9/16 .033 .0264
Fourth Quarter 14 15/16 8 3/16 .041 .0328
Fiscal 1998
- -----------
First Quarter $12 3/8 $8 1/8 $ .031 $ .025
Second Quarter 9 1/2 7 1/2 .031 .025
Third Quarter 8 9/16 7 5/16 .031 .025
Fourth Quarter 7 6/16 5 .031 .025
The approximate number of shareholders of record of Common Shares and
Class B Common Shares, including those shareholders participating in the
Dividend Reinvestment Plan, as of December 14, 1999 was 2,394 and 12,
respectively.
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ITEM 6 - SELECTED FINANCIAL DATA.
------------------------
The following table sets forth consolidated selected financial data for
the Company. The financial data should be read in conjunction with the Financial
Statements and Notes thereto, included in a separate section at the end of this
Annual Report, and with Management's Discussion and Analysis of Financial
Condition and Results of Operations, included in Item 7 of this Annual Report.
<TABLE>
<CAPTION>
For the years ended September 30,
(In thousands, except for per share data) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results
Net sales $100,938 $117,776 $123,295 $118,946 $109,574
Income (loss) before income taxes 16,717 8,189 1,211 (6,324) 6,422
Net income (loss) 13,708 5,004 790 (5,440) 4,914
Basic earnings (loss) per share 1.84 0.64 0.10 (0.74) 0.68
Diluted earnings (loss) per share 1.79 0.62 0.10 (0.74) 0.66
Common Stock Information
Cash dividends per Common Share 0.140 0.125 0.125 0.125 0.106
Cash dividends per Class B Common Share 0.112 0.100 0.100 0.100 0.085
Weighted average number of shares
outstanding- diluted 7,657 8,065 7,867 7,360 7,476
At fiscal year-end:
Dividend payout ratio (a) 7.6% 19.5% 125.0% -- 15.6%
Price/earnings ratio (a) 7.9 8.2 120.0 -- 23.3
Shareholders' equity per share 6.16 4.92 4.26 4.26 5.11
Closing market price 14.188 5.063 12.000 8.875 14.938
Balance Sheet Data
Total assets 74,751 71,017 79,113 73,834 66,109
Current ratio 2.0 1.9 1.9 1.7 2.0
Total debt 3,000 6,099 17,458 13,369 6,113
Total debt-to-capital 6.4% 13.6% 34.8% 29.6% 14.2%
Shareholders' equity 43,781 38,742 32,683 31,756 36,902
Other Data
Return on average shareholders' equity 33.2% 14.0% 2.5% -15.8% 14.3%
Return on average total assets 18.8% 6.7% 1.0% -7.8% 8.2%
Return on net sales 13.6% 4.2% 0.6% -4.6% 4.5%
Number of employees 526 564 693 716 659
Sales per employee 185.2 187.4 175.0 173.0 170.7
Cash flow
Noncash charges to income (b) 3,580 4,709 3,390 7,064 2,573
Net cash provided by (used in) operating activities 9,659 13,033 (1,011) 2,600 2,457
Ten-year compound annual growth rate
Net sales 1.3% 5.0% 7.9% 9.6% 8.8%
Net income (a) 12.7% -0.8% -13.3% -- 5.7%
</TABLE>
(a) These ratios are not meaningful in 1996 due to reported net losses.
(b) Noncash charges to income include depreciation, amortization, deferred
compensation, deferred taxes and noncash special charges.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
-------------------------------------------------
The following discussion should be read in conjunction with the
Financial Statements and related Notes included in a separate section at the end
of this Annual Report.
Overview
- --------
The Outlook section of Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Actual results could differ materially from those projected in the
forward-looking statements throughout this documents as a result of a number of
important factors. For a discussion of important factors that could affect the
Company's results, please refer to the risk factors set forth below in the
section entitled Factors That May Affect Future Results.
Results of Operations (In Thousands of Dollars Except for Per-Share Data)
- -------------------------------------------------------------------------
Percent of net sales for the years ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0 100.0 100.0
Cost of goods sold 39.6 42.7 42.1
Selling, general and administrative expenses 38.5 39.7 41.4
Product development expenses 10.6 11.2 14.0
Gain on sale of business (5.1) (2.4) --
Special charges -- 1.0 0.6
Net financing (income) expenses (0.2) 0.9 0.9
----- ----- -----
Income before income taxes 16.6 6.9 1.0
Income taxes 3.0 2.7 0.4
----- ----- -----
Net income 13.6 4.2 0.6
===== ===== =====
</TABLE>
Net income was $13,708, or $1.79 per share on a diluted basis, in 1999
compared to $5,004, or $.62 per share, in 1998, and $790, or $.10 per share, in
1997. Excluding gains on sales of businesses in 1999 and 1998, a favorable tax
adjustment in 1999, and special charges and other personnel cost reduction in
1998 and 1997, net income was $8,201, or $1.08 per share, in 1999, $4,679, or
$.58 per share, in 1998 and $1,614, or $.20 per share, in 1997. 1999's adjusted
net income of $8,201 is a new record high.
Net sales were $100,938 in 1999, $117,776 in 1998 and $123,295 in 1997.
Excluding sales from divested businesses in all periods, net sales were $100,321
in 1999, $96,840 in 1998 and $105,201 in 1997. (See Note B.) The increase in
sales from current businesses in 1999 over 1998 is due to recoveries in the
semiconductor industry and Asian markets, as well as continued good growth for
the Company's products serving the telecommunications industry. The Company
believes it has gained market share for its products serving both the
semiconductor industry and the telecommunications industry. The decrease in
sales from current businesses in 1998 over 1997 was primarily due to weakness in
the semiconductor
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capital equipment industry and the Asian financial situation. Geographically,
domestic and export sales from current businesses increased somewhat in 1999
from 1998, but decreased in 1998 from 1997. Net sales from current businesses in
Europe were essentially flat in all three years.
Cost of goods sold as a percentage of net sales was 39.6 in 1999, 42.7
in 1998 and 42.1 in 1997. The decrease from 1998 to 1999 was due to the absence
during all or most of 1999 of the Quantox product line and the Radiation
Measurements Division (RMD), whose margins were lower. Further, margins in the
remaining businesses improved largely in connection with higher sales. The
increase in 1998 from 1997 was due to increased sales of Quantox and a
strengthening of the U.S. dollar by 5 percent in 1998. The U.S. dollar had no
impact in 1999. Foreign exchange hedging had a minimal effect on cost of goods
sold in 1999, 1998 and 1997.
Selling, general and administrative expenses decreased 17 percent in
1999 to 38.5 percent of net sales, and decreased 8 percent in 1998 to 39.7
percent of sales from 41.4 percent of sales in 1997. The majority of the
decrease in 1999 can be attributed to the absence of RMD and only one month's
cost for Quantox. Lower expenses resulting from the cost reduction actions taken
over the last two years contributed to the three-year decline. Additionally,
1998 and 1997 expenses include approximately $1,210 pretax, or $.09 per share,
and $512 pretax, or $.04 per share, respectively, for personnel cost reductions
and officer retirement expenses.
Product development expenses decreased $2,394, or 18 percent in 1999
from 1998 and $4,094, or 24 percent, in 1998 from 1997. As a percentage of
sales, they were 10.6, 11.2 and 14.0 in 1999, 1998 and 1997, respectively. The
decrease in 1999 from 1998 was due to the absence of RMD and only one month's
costs for Quantox in 1999. Excluding costs for these divested businesses,
product development costs were flat in 1999 compared to 1998 and down 15 percent
in 1998 from 1997. The decrease in 1998 from 1997 (excluding the divested
businesses) was due primarily to the completion of the Company's new business
development efforts for the SmartLink(TM) product line and Model S600 parametric
test system, which were notable expenses in 1997.
On August 10, 1998, the Company sold certain assets used in the
operation of its Radiation Measurements Division to Inovision Radiation
Measurements, L.L.C. The sale was effective July 31, 1998, and resulted in a
gain of $2,852 pretax, or $.22 per share, recorded in the fourth quarter of
fiscal 1998. On November 9, 1998, the Company sold certain assets used in the
operation of its Quantox product line to KLA-Tencor Corporation for $9,147 in
cash. The agreement was effective October 31, 1998, and resulted in a pretax
gain of $4,808, or $.39 per share, recorded in the first quarter of fiscal 1999.
During the fourth quarter of fiscal 1999, an additional pretax gain of $345, or
$.03 per share, was recorded for the above mentioned sales of businesses. At the
time of the sales of these businesses, the Company established liabilities for
certain items that were to be settled at future dates. The additional adjustment
recorded in the fourth quarter of fiscal 1999 represents the settlement of
certain of these issues. (See Note B.)
12
<PAGE> 15
An analysis of special charges is as follows:
<TABLE>
<CAPTION>
Accrued at
Expense September 30,
Description: 1998 1997 1999 1998
<S> <C> <C> <C> <C>
Write off of goodwill $ 519 $ -- $ -- $ --
Severance, outplacement and
other personnel costs 290 (291) 2 24
Lease and related costs 280 (525) 180 248
Impaired inventory and equipment 122 49 -- --
Relocation of facility and employees 25 1,073 -- --
Recruiting and consulting costs -- 187 -- --
Manufacturing start-up costs -- 282 -- --
European operating subleases (64) (4) 474 540
------- ------- ------- -------
Totals $ 1,172 $ 771 $ 656 $ 812
======= ======= ======= =======
</TABLE>
The Company did not record any special charges during 1999. Due to
continued weakness in the semiconductor capital equipment industry throughout
1998, the Company incurred special charges in 1998 for cost reduction actions
taken in the second quarter relative to its semiconductor business. Also, the
Company decided to change the methodology of pursuing its WLR business, which
was part of the 1996 acquisition of Turner Engineering Technology. As a result
of this decision, the Company reviewed the carrying value of the goodwill using
the estimated future cash flow method and determined that the goodwill was
impaired. 1998 special charges include $519 for the write-off of the remaining
balance of the goodwill. Additionally, the Company decided to further
consolidate its manufacturing operations. As a result, special charges in 1998
include lease costs accrued on a leased facility the Company will no longer
occupy. The reversal of European operating subleases represents a change in
circumstances in 1998. The special charges recorded during 1998 of $1,172
pretax, or $.09 per share, include $551 in noncash charges. Special charges of
$771 pretax, or $.06 per share, recorded in 1997 include gross costs of $1,902
primarily for the relocation of the Keithley MetraByte operation from Taunton,
Massachusetts to Cleveland, Ohio, net of a reversal of $1,131 of expense
(noncash) recorded during 1996 primarily for closing the Taunton facility. The
reversal of this 1996 expense relates to changes in circumstances that occurred
during 1997. $256 of the gross expense represents a noncash charge to reserve
for additional impaired inventory. In September 1996, management made the
decision to relocate the Keithley MetraByte operation to its Cleveland, Ohio
facility due to a lack of growth in sales and poor earnings. The relocation was
completed in July 1997, and during 1998, the Keithley MetraByte operation was
combined with the Company's Instruments group to form the Test and Measurement
business unit. At September 30, 1999 and 1998, $257 and $272, respectively, were
accrued in the Consolidated Balance Sheets under the category "Other accrued
expenses" and $399 and $540, respectively, were accrued under the category
"Other long-term liabilities."
The Company generated net financing income of $179 in 1999 compared to
expenses of $1,040 and $1,145 in 1998 and 1997, respectively. The improvement
was the result of lower interest expense due to lower average debt levels,
combined with higher interest income earned on significantly higher cash and
cash equivalents during 1999.
13
<PAGE> 16
The effective tax rate for 1999 was 18.0 percent and was the
combination of several factors: the gain on the sale of businesses recorded at
the statutory rate including state and local taxes, a tax benefit resulting from
the release of certain valuation reserves due to the settlement of prior years'
tax liabilities and improved profitability in the Company's U.S. operations,
which enabled the Company to utilize a number of tax credits. The effective tax
rate for 1998 was 38.9 percent and reflects an unfavorable adjustment for prior
years' taxes. The effective tax rate for 1997 was 34.7 percent. In 1997, foreign
sales corporation (FSC) benefits and benefits derived from the remittance of
foreign dividends were offset by a deferred tax charge resulting from the
Company's decision to terminate corporate owned life insurance policies. At
September 30, 1999, the Company had tax credit carryforwards of $1,216.
The Company's financial results are affected by foreign exchange rate
fluctuations. Generally, a weakening U.S. dollar causes the price of the
Company's product to be more attractive in foreign markets and favorably impacts
the Company's sales and earnings. A strengthening U.S. dollar has an unfavorable
effect. This foreign exchange effect cannot be precisely isolated since many
other factors affect the Company's foreign sales and earnings. These factors
include product offerings and pricing policies of the Company and its
competition, whether competition is foreign or U.S. based, changes in
technology and local and worldwide economic conditions.
The Company utilizes hedging techniques designed to mitigate the
short-term effect of exchange rate fluctuations on operations and balance sheet
positions by entering into forward and option currency contracts and by
borrowing in foreign currencies. The Company's foreign borrowings are used as a
hedge of its net investments and for specified transactions. The Company does
not speculate in foreign currencies or derivative financial instruments, and
hedging techniques do not increase the Company's exposure to foreign exchange
rate fluctuations.
Liquidity and Capital Resources
- -------------------------------
In 1999, net cash provided by operating activities was $9,659 and cash
received from the sale of a business was $9,147. Cash was used to buy back
$8,366, or 942,803 shares, of the Company's common stock through its stock
repurchase programs, pay down debt by $3,056, purchase $1,545 of property, plant
and equipment and pay $955 in dividends. Total cash of $13,426 at September 30,
1999, increased $4,105 from September 30, 1998. The Company plans to use the
cash to continue to fund its stock repurchase program. Total debt of $3,000 at
September 30, 1999 decreased from $6,099 at September 30, 1998, and the
debt-to-capital ratio at year-end was 6.4 percent versus 13.6 percent at the end
of fiscal 1998.
The Company's credit agreement, which expires March 28, 2002, is a
$25,000 debt facility ($3,000 outstanding at September 30, 1999) that provides
unsecured, multi-currency revolving credit at various interest rates based on
Prime, LIBOR or FIBOR. The Company is required to pay a facility fee of between
.175% and .25% on the total amount of the commitment. Additionally, the Company
has a number of other credit facilities in various currencies aggregating
$5,281.
At September 30, 1999, the Company had total unused lines of credit
with domestic and foreign banks aggregating $27,281, including short-term and
long-term lines of credit of $5,281
14
<PAGE> 17
and $22,000, respectively. Under certain long-term debt agreements, the Company
is required to comply with various financial ratios and covenants. Principal
payments on long-term debt are due in 2002.
During 2000, the Company expects to finance capital spending, working
capital requirements and the stock repurchase program with cash on hand and cash
provided by operations. Capital expenditures in fiscal 2000 are expected to be
somewhat higher than they were in 1999.
Outlook
- -------
Throughout 1999, the Company recognized increasing sales, earnings
(before gains on sales and a favorable tax adjustment), orders and backlog.
Additionally, order levels and backlog for fiscal 1999's fourth quarter were at
record levels. Although there continues to be good activity, order levels for
the first quarter of fiscal 2000 will be dependent on continued investment from
the Company's customers in the semiconductor, telecommunications and other key
electronics industries. However, due to the record backlog level, management
does believe that sales and earnings before taxes for the first quarter of
fiscal 2000 will be similar to or slightly better than those of the fourth
quarter.
The effective tax rate for fiscal 1999 was 18.0 percent; however,
management expects the Company's effective tax rate will approximate the
statutory rate in fiscal 2000.
Factors That May Affect Future Results
- --------------------------------------
Information included in the Letter to Shareholders and in the Outlook
section of Management's Discussion and Analysis of Financial Condition and
Results of Operations relating to expectations as to financial performance,
revenues, earnings, expenses, the tax rate, annual sales growth, pretax return
on sales and return on equity constitute "forward-looking" statements, as that
term is defined in the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Some of the factors
that may affect future results are discussed below.
Although the Company operates in a single industry segment, certain of
its products and product lines are sold into the semiconductor industry. Growth
in demand for semiconductors, new technology and pricing drive the demand for
new semiconductor capital equipment. Historically, sales and order levels for
this business have been volatile which can affect revenue and earnings for the
Company.
The Company's business relies on the development of new high technology
products and services to provide solutions to customer's complex measurement
needs. This requires anticipation of customers' changing needs and emerging
technology trends. The Company must make long-term investments and commit
significant resources before knowing whether its expectations will eventually
result in products that achieve market acceptance. The Company incurs
significant expenses developing new products that may or may not result in
significant sources of revenue and earnings in the future.
15
<PAGE> 18
In many cases the Company's products compete directly with those
offered by other manufacturers. If any of the Company's competitors were to
develop products or services that are more cost-effective or technically
superior, demand for the Company's product offerings could slow.
The Company's cost structure is comprised of costs that are directly
related to the level of sales, as well as costs that are fixed and do not
fluctuate based on quarterly sales levels. The Company's ability to maintain its
cost structure or to further improve its cost structure depends on its ability
to control those costs that are fixed or semi-variable.
The Company pays taxes in several jurisdictions throughout the world.
The Company utilizes available tax credits and other tax planning strategies in
an effort to minimize the Company's overall tax liability. The Company's actual
tax rate for fiscal 2000 could change from what is currently anticipated due to
changes in various country's tax laws or changes in the Company's overall tax
planning strategy.
The Company currently has ten subsidiaries or sales offices located
outside the United States, and non-U.S. sales made up half of the Company's
revenue in fiscal 1999. The Company's future results could be adversely affected
by several factors, including changes in foreign currency exchange rates,
changes in a country's or region's political or economic conditions, trade
protection measures, import or export licensing requirements, unexpected changes
in regulatory requirements and natural disasters.
The Company recognizes the need to ensure that Year 2000 hardware and
software issues will not adversely impact its operations. With regard to the
Company's own information systems, a substantial portion of Year 2000
information technology compliance has been achieved in connection with the
Company's ongoing program to upgrade its key information and operational
systems. The Company completed the replacement of one remaining key system that
was not Year 2000 compliant on October 1, 1999. These costs and any anticipated
related costs will not have a material impact on the results of operations,
financial condition or cash flows of future periods. With regard to the
Company's own products, all products currently being sold have been evaluated
for Year 2000 compliance. Most have been found to be ready for the Year 2000
change. Any exceptions have been identified and alternative solutions for
continuing use of these products have been noted. The cost of identifying and
modifying products for Year 2000 compliance did not have a material effect on
the results of operations, financial condition or cash flows of future periods
and any future costs are not expected to have a material impact. Lastly, the
Company has surveyed its base of key suppliers to determine if their systems
(insofar as they relate to the Company's business) comply with Year 2000
requirements. The Company is now monitoring their performance to process orders
and deliver products as the Year 2000 approaches. There can be no assurance that
the systems of other companies with which Keithley Instruments, Inc. does
business will be able to adequately address the Year 2000 issue. If it is
determined that any third party may not be ready, the Company will develop a
contingency plan. While management does not expect that the failure of any third
party to be fully compliant by January 1, 2000 would significantly affect
results of operations, financial condition or cash flows of future periods,
there can be no assurance that any such failure will not have an adverse effect
on the Company's operations.
16
<PAGE> 19
The Company has modified its systems to accommodate the Euro. The cost
of these modifications was immaterial to the Company's results of operations.
Although difficult to predict, any competitive implications and any impact on
existing financial instruments are expected to be immaterial to the Company's
results of operations, financial condition or cash flows of future periods.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Response to this item is included in "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations" above.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
The response to this Item 8 is included in a separate section at the
end of this Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
------------------------------------
None.
17
<PAGE> 20
PART III.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
---------------------------------------------------
See the table listing the nominees for directors under the caption
"Election of Directors" in the Company's Proxy Statement to be used in
conjunction with the February 12, 2000 Annual Meeting of Shareholders and filed
with the Securities and Exchange Commission pursuant to Section 14(a) of the
Securities Exchange Act of 1934, which table is incorporated herein by this
reference. The information required with respect to the executive officers of
the Company is included under the caption "Executive Officers of the Registrant"
of this Form 10-K Annual Report and incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION.
-----------------------
See the caption "Executive Compensation and Benefits" in the Company's
Proxy Statement to be used in conjunction with the February 12, 2000 Annual
Meeting of Shareholders and filed with the Securities and Exchange Commission
pursuant to Section 14(a) of the Securities Exchange Act of 1934, which section
is incorporated herein by this reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------
See the caption "Principal Shareholders" in the Company's Proxy
Statement to be used in conjunction with the February 12, 2000 Annual Meeting of
Shareholders and filed with the Securities and Exchange Commission pursuant to
Section 14(a) of the Securities Exchange Act of 1934, which section is
incorporated herein by this reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
James B. Griswold, a Director and nominee for Director, is a partner in
the law firm of Baker & Hostetler LLP. Baker & Hostetler LLP served as general
legal counsel to the Company during the fiscal year ended September 30, 1999,
and is expected to render services in such capacity to the Company in the
future.
18
<PAGE> 21
PART IV.
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a)(1) FINANCIAL STATEMENTS OF THE COMPANY
See Index to Consolidated Financial Statements at page F-1 of this Form
10-K Annual Report and the Financial Statements and Notes thereto which are
included at Pages F-2 to F-27 of this Annual Report.
(a)(2) FINANCIAL STATEMENT SCHEDULES
The following additional information should be read in conjunction with the
Consolidated Financial Statements of the Company described in Item 14(a)(1):
Schedule II Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are not
required or not applicable, or because the information is furnished elsewhere in
the consolidated financial statements or the notes thereto.
19
<PAGE> 22
(a)(3) INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
3(a) Code of Regulations, as amended on February 11, 1985.
(Reference is made to Exhibit 3(b) of the Company's Form
10 Registration Statement (File No. 0-13648) as declared
effective on July 31, 1985, which Exhibit is
incorporated herein by reference.)
3(b) Amended Articles of Incorporation, as amended on
February 10, 1996. (Reference is made to Exhibit 3(c) of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1996 (File No. 1-9965),
which Exhibit is incorporated herein by reference.)
4(a) Specimen Share Certificate for the Common Shares,
without par value.
4(b) Specimen Share Certificate for the Class B Common
Shares, without par value. (Reference is made to Exhibit
4(b) of the Company's Form 10 Registration Statement
(File No. 0-13648) as declared effective on July 31,
1985, which Exhibit is incorporated herein by
reference.)
10(a) 1984 Stock Option Plan, adopted in February 1984.
(Reference is made to the appropriate Exhibits of the
Company's Form 10 Registration Statement (File No.
0-13648) as declared effected on July 31, 1985, which
Exhibits are incorporated herein by reference.)
10(b) Keithley Instruments, Inc. Supplemental Deferral Plan
as amended.
10(c) Employment Agreement with Mark J. Plush dated April 7,
1994. (Reference is made to Exhibit 10(k) of the
Company's Annual Report on Form 10-K for the year ended
September 30, 1998 (File No. 1-9965), which Exhibit is
incorporated herein by reference.)
10(d) Employment Agreement, as amended, with Joseph P.
Keithley.
20
<PAGE> 23
Exhibit
Number Description
------ -----------
10(e) Supplemental Executive Retirement Plan.
10(f) 1992 Stock Incentive Plan, as amended.
10(g) 1992 Directors' Stock Option Plan.
10(h) Credit Agreement dated as of May 31, 1994 by and among
Keithley Instruments, Inc. and certain borrowing
subsidiaries and the Banks named herein, and NBD Bank,
N.A., as Agent. (Reference is made to Exhibit 10(u) of
the Company's Quarterly Report on form 10-Q for the
quarter ended June 30, 1994 (File No. 1-9965) which
Exhibit is incorporated herein by reference.)
10(i) 1996 Outside Directors Deferred Stock Plan.
(Reference is made to Exhibit 10(x) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996 (File No. 1-9965), which Exhibit
is incorporated herein by reference.)
10(j) First Amendment dated March 28, 1997, to the Credit
Agreement dated May 31, 1994. (Reference is made to
Exhibit 10(y) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1997
(File No. 1-9965), which Exhibit is incorporated
herein by reference.)
10(k) 1997 Directors' Stock Option Plan, adopted in February
1997. (Reference is made to Exhibit 10(z) of the
Company's Annual Report on form 10-K for the fiscal year
ended September 30, 1997 (File No. 1-9965), which
Exhibit is incorporated herein by reference.)
11 Statement Re Computation of Per Share Earnings.
21 Subsidiaries of the Company.
23 Consent of Experts.
27 Financial Data Schedule (EDGAR version only).
ITEM 14(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarterly period ended September
30, 1999.
ITEM 14(c) EXHIBITS: See "Index to Exhibits" at Item 14(a)(3) above.
ITEM 14(d) FINANCIAL STATEMENT SCHEDULES: Schedules required to be filed in
response to this portion of Item 14 are listed above in Item 14(a)(2).
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Keithley Instruments, Inc.
(Registrant)
By: /s/ Joseph P. Keithley
------------------------------
Joseph P. Keithley, (Chairman, President and Chief
Executive Officer)
Date: December 3, 1999
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Joseph P. Keithley Chairman of the Board of Directors, 12/3/99
- -------------------------------- President and Chief Executive Officer
Joseph P. Keithley (Principal Executive Officer)
/s/ Brian R. Bachman Director 12/3/99
- --------------------------------
Brian R. Bachman
/s/ James T. Bartlett Director 12/3/99
- --------------------------------
James T. Bartlett
/s/ Arden L. Bement, Jr. Director 12/3/99
- --------------------------------
Dr. Arden L. Bement, Jr.
/s/ James B. Griswold Director 12/3/99
- --------------------------------
James B. Griswold
/s/ Leon J. Hendrix, Jr. Director 12/3/99
- --------------------------------
Leon J. Hendrix, Jr.
/s/ William J. Hudson, Jr. Director 12/3/99
- --------------------------------
William J. Hudson, Jr.
/s/ R. Elton White Director 12/3/99
- --------------------------------
R. Elton White
</TABLE>
22
<PAGE> 25
KEITHLEY INSTRUMENTS, INC.
INDEX TO FINANCIAL STATEMENTS
Financial Statements: Page No.
- --------------------- --------
Report of Independent Accountants F-2
Consolidated Statements of Income F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Shareholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Financial Statement Schedule:
For the Three Years Ended September 30, 1999
Schedule II - Valuation and Qualifying Accounts F-28
F-1
<PAGE> 26
Report of Independent Accountants
To the Board of Directors and Shareholders
of Keithley Instruments, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Keithley Instruments, Inc. and its subsidiaries at September 30, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1999 in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and the financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
November 5, 1999
F-2
<PAGE> 27
Consolidated Statements of Income
For the years ended September 30, 1999, 1998 and 1997
(In Thousands of Dollars Except for Per-Share Data)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 100,938 $ 117,776 $ 123,295
--------- --------- ---------
Cost of goods sold 39,923 50,332 51,924
Selling, general and administrative expenses 38,885 46,756 51,011
Product development expenses 10,745 13,139 17,233
Gain on sale of businesses (5,153) (2,852) --
Special charges -- 1,172 771
Net financing (income) expenses (179) 1,040 1,145
--------- --------- ---------
Income before income taxes 16,717 8,189 1,211
Income taxes 3,009 3,185 421
--------- --------- ---------
Net income $ 13,708 $ 5,004 $ 790
========= ========= =========
Basic earnings per share $ 1.84 $ .64 $ .10
========= ========= =========
Diluted earnings per share $ 1.79 $ .62 $ .10
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 28
Consolidated Balance Sheets
As of September 30, 1999 and 1998
(In Thousands of Dollars Except for Share Data)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,426 $ 9,321
Accounts receivable and other, net of allowances
of $679 and $704 as of September 30, 1999
and 1998, respectively 19,633 17,586
Inventories:
Raw materials 4,853 5,997
Work in process 4,009 3,163
Finished products 2,187 2,490
-------- --------
Total inventories 11,049 11,650
Deferred income taxes 3,074 3,267
Prepaid expenses 519 503
-------- --------
Total current assets 47,701 42,327
-------- --------
Property, plant and equipment, at cost:
Land 1,325 1,325
Buildings and leasehold improvements 15,090 14,984
Manufacturing, laboratory and office equipment 21,878 23,025
-------- --------
38,293 39,334
Less-Accumulated depreciation and amortization 25,617 24,723
-------- --------
Total property, plant and equipment, net 12,676 14,611
-------- --------
Deferred income taxes 7,801 8,087
Other assets 6,573 5,992
-------- --------
Total assets $ 74,751 $ 71,017
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 8,119 $ 6,191
Accrued payroll and related expenses 5,872 4,203
Other accrued expenses 6,046 6,902
Income taxes payable 3,382 4,591
-------- --------
Total current liabilities 23,419 21,887
-------- --------
Long-term debt 3,000 6,099
Other long-term liabilities 4,543 4,277
Deferred income taxes 8 12
Shareholders' equity:
Common Shares, stated value $.025:
Authorized - 30,000,000; issued and outstanding -
4,415,349 in 1999 and 5,092,903 in 1998 132 127
Class B Common Shares, stated value $.025:
Authorized - 9,000,000; issued and outstanding -
2,692,528 in 1999 and 2,785,378 in 1998 67 70
Capital in excess of stated value 9,071 8,877
Earnings reinvested in the business 42,623 29,870
Accumulated other comprehensive income 112 429
Unamortized portion of restricted stock plan (239) (283)
Common Shares held in treasury, at cost (7,985) (348)
-------- --------
Total shareholders' equity 43,781 38,742
-------- --------
Total liabilities and shareholders' equity $ 74,751 $ 71,017
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 29
Consolidated Statements of Shareholders' Equity
For the years ended September 30, 1999, 1998 and 1997
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Accumulated other
comprehensive income
---------------------
Capital Earnings Minimum Unamortized Common
Class B in excess reinvested pension Cumulative portion of Shares Total
Common Common of stated in the liability translation restricted held in shareholders
Shares Shares value business adjustment adjustment stock plan treasury equity
--------- ------- --------- ---------- ---------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SEPTEMBER 30, 1996 116 70 5,293 25,865 -- 562 (14) (136) 31,756
Comprehensive Income:
Net Income 790
Translation adjustment (550)
Total comprehensive income 240
Cash dividends:
Common Shares ($.125 per
share) (603) (603)
Class B Common Shares
($.10 per share) (279) (279)
Shares issued under stock
plans 6 2,004 (742) 1,268
Repurchase of Common Shares (124) (124)
Gains from hedging net
investments in foreign
subsidiaries 238 238
Amortization 187 187
--------- ------- -------- ---------- ---------- ----------- --------- ---------- ----------
BALANCE SEPTEMBER 30, 1997 122 70 7,297 25,773 250 (569) (260) 32,683
Comprehensive Income:
Net Income 5,004
Translation adjustment 146
Total comprehensive income 5,150
Cash dividends:
Common Shares ($.125 per (629) (629)
share)
Class B Common Shares ($.10 (278) (278)
per share)
Shares issued under stock
plans 5 1,580 1,585
Repurchase of Common Shares (88) (88)
Gains from hedging net
investments in foreign
subsidiaries 33 33
Amortization 286 286
--------- ------- -------- ---------- ---------- ---------- ----------- ---------- ----------
BALANCE SEPTEMBER 30, 1998 127 70 8,877 29,870 -- 429 (283) (348) 38,742
Comprehensive Income:
Net Income 13,708
Translation adjustment (281)
Minimum pension
liability adj. (39)
Total comprehensive income 13,388
Cash dividends:
Common Shares ($.14 per
share) (653) (653)
Class B Common Shares
($.112 per share) (302) (302)
Shares issued under stock plans 2 194 1,077 1,273
Conversion to Common Shares 3 (3) --
Repurchase of Common Shares (8,714) (8,714)
Gains from hedging net
investments in foreign
subsidiaries 3 3
Amortization 44 44
========= ======= ======== ========== =========== =========== =========== ========== ==========
BALANCE SEPTEMBER 30, 1999 132 67 9,071 42,623 (39) 151 (239) (7,985) 43,781
========= ======= ======== ========== =========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 30
Consolidated Statements of Cash Flows
For the years ended September 30, 1999, 1998 and 1997
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 13,708 $ 5,004 $ 790
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation 2,923 3,653 3,823
Amortization of intangible assets -- 196 222
Deferred income taxes 475 (22) (1,140)
Deferred compensation 183 331 229
Special charges -- 551 (771)
Gain on sale of businesses (5,153) (2,852) --
Change in current assets and liabilities:
Accounts receivable and other (2,488) 6,625 (6,969)
Inventories (1,581) 3,670 486
Prepaid expenses 156 (648) 29
Other current liabilities 2,205 (3,320) 1,427
Other operating activities (769) (155) 863
-------- -------- --------
Net cash provided by (used in) operating activities 9,659 13,033 (1,011)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (1,545) (2,753) (5,849)
Proceeds received from sale of assets 9,147 8,683 --
Cash expenditures for sale of assets (1,636) (759) --
Other investing activities 58 96 202
-------- -------- --------
Net cash provided by (used in) investing activities 6,024 5,267 (5,647)
-------- -------- --------
Cash flows from financing activities:
Net decrease in short-term debt -- (16) (45)
Borrowing (payment) of long-term debt (3,056) (11,314) 4,520
Proceeds from sale of Common Shares 925 1,458 1,144
Purchase of Treasury Shares (8,366) -- --
Cash dividends (955) (907) (882)
-------- -------- --------
Net cash provided by (used in) financing activities (11,452) (10,779) 4,737
-------- -------- --------
Effect of changes in foreign currency exchange
rates on cash and cash equivalents (126) 73 (347)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 4,105 7,594 (2,268)
Cash and cash equivalents at beginning of period 9,321 1,727 3,995
-------- -------- --------
Cash and cash equivalents at end of period $ 13,426 $ 9,321 $ 1,727
======== ======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Income taxes $ 3,641 $ 972 $ 1,981
Interest 179 891 1,140
</TABLE>
Disclosure of accounting policy
For purposes of this statement, the Company considers all highly liquid
investments with maturities of three months or less when purchased to be
cash equivalents. Cash flows resulting from hedging transactions are
classified in the same category as the cash flows from the item being
hedged.
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars Except for Per-Share Data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of Keithley
Instruments, Inc. and its subsidiaries. Intercompany transactions have been
eliminated. Certain amounts in prior years have been reclassified to be
consistent with the current year's presentation.
REVENUE RECOGNITION
- -------------------
Sales are recognized at time of shipment for all products.
NATURE OF OPERATIONS
- --------------------
The Company operates in a single industry segment and is engaged in the
design, development, manufacture and marketing of complex electronic instruments
and systems. Its products provide electrical measurement-based solutions to the
telecommunications, semiconductor and electronic components industries.
Engineers and scientists around the world use the Company's advanced hardware
and software for process monitoring, production test and basic research.
PRODUCT DEVELOPMENT EXPENSES
- ----------------------------
Expenditures for product development are charged to expense as incurred.
These expenses include the cost of computer software, an integral part of
certain products. Costs defined by Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed," are immaterial to the financial statements and have been
expensed as incurred. The Company continually reviews the materiality and
financial statement classification of computer software expenditures.
INVENTORIES
- -----------
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Property, plant and equipment are stated at cost. Depreciation is provided
over periods approximating the estimated useful lives of the assets.
Substantially all manufacturing, laboratory and office equipment is depreciated
by the double declining balance method over periods of 3 to 10 years. Buildings
are depreciated by the straight-line method over periods of 23 to 45 years.
Leasehold improvements are amortized over the shorter of the asset lives or the
terms of the leases.
OTHER ACCRUED EXPENSES
- ----------------------
Included in the "Other accrued expenses" caption of the Consolidated
Balance Sheets at September 30, 1999 and 1998, were $1,476 and $1,599,
respectively, for commissions payable to outside sales representatives of the
Company.
F-7
<PAGE> 32
CAPITAL STOCK
- -------------
The Company has two classes of stock. The Class B Common Shares have ten
times the voting power of the Common Shares but are entitled to cash dividends
of no more than 80% of the cash dividends on the Common Shares. Holders of
Common Shares, voting as a class, elect one-fourth of the Company's Board of
Directors and participate with holders of Class B Common Shares in electing the
balance of the Directors and in voting on all other corporate matters requiring
shareholder approval. Additional Class B Common Shares may be issued only to
holders of such shares for stock dividends or stock splits. These shares are
convertible at any time to Common Shares on a one-for-one basis.
Included in the "Common shares held in treasury, at cost" caption of the
Consolidated Balance Sheets at September 30, 1999 and 1998, were Common Shares
repurchased to settle non-employee Directors' fees deferred pursuant to the
Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan. At
September 30, 1999, the caption also included shares repurchased through the
Company's share repurchase programs. (See Note D.)
INCOME TAXES
- ------------
Provision has been made for estimated United States and foreign
withholding taxes, less available tax credits, for the undistributed earnings of
the non-U.S. subsidiaries as of September 30, 1999, 1998 and 1997.
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the reported
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
EARNINGS PER SHARE
- ------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Acccounting Standards No. 128, "Earnings Per Share." The
Company adopted this standard in 1998. All per share amounts have been restated
in accordance with the new standard.
Both Common Shares and Class B Common Shares are included in calculating
earnings per share. The weighted average number of shares outstanding used in
the calculation is set forth below:
<TABLE>
<CAPTION>
1999 1998 1997
--------- ----------- ---------
<S> <C> <C> <C>
Basic 7,447,081 7,799,507 7,588,094
Diluted 7,657,425 8,065,289 7,866,750
</TABLE>
HEDGING AND RELATED FINANCIAL INSTRUMENTS
- ------------------------------------------
The Company utilizes foreign currency borrowings and foreign exchange
forward contracts to hedge foreign exchange risks for sales denominated in
foreign currencies and net equity or unremitted foreign earnings.
F-8
<PAGE> 33
To hedge sales, the Company purchases foreign exchange forward contracts
or option contracts to sell foreign currencies to fix the exchange rates related
to near-term sales and the Company's margins. Underlying hedged transactions are
recorded at hedged rates, therefore realized and unrealized gains and losses are
recorded when the operating revenues and expenses are recorded.
To hedge equity or unremitted earnings, the Company borrows foreign
currencies or purchases foreign exchange forward contracts. Realized and
unrealized after-tax gains or losses on the hedging instruments are reflected in
the cumulative translation adjustment component of shareholders' equity.
The Company has entered into a swap instrument to mitigate the risk of
interest rate changes. The amount exchanged under the swap agreement is included
in the "Net financing (income) expenses" caption of the Consolidated Statements
of Income. The estimated fair value of the swap instrument is determined through
quotes from the related financial institutions.
The Company is exposed to credit loss in the event of nonperformance by
the counterparties to these financial instruments. Because the counterparties
are major financial institutions, the Company does not expect such
nonperformance.
OTHER ACCOUNTING PRONOUNCEMENTS
- -------------------------------
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" (SOP 98-1). This Statement requires
expenses incurred during the application development stage of a software
implementation project to be capitalized and amortized over the useful life of
the project. SOP 98-1 is required to be adopted in the Company's fiscal year
ending September 30, 2000. Application of this standard is not expected to have
a material impact on the consolidated results of financial position of the
Company.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This Statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. In June 1999,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" (SFAS 137). SFAS 137 deferred the effective
date of SFAS 133 for one year, therefore, SFAS 133 will be required to be
adopted in the Company's first quarter of its fiscal year ending September 30,
2001. The Company has not yet determined the financial statement impact of this
Statement.
F-9
<PAGE> 34
NOTE B - SALE OF ASSETS
On August 10, 1998, the Company sold certain assets used in the
operation of its Radiation Measurements Division (RMD) to Inovision Radiation
Measurements, L.L.C. for $8,215 in cash. Additionally, the Company received $468
for certain liabilities incurred in the operation of RMD that were not assumed
by the buyer. The agreement, which was effective July 31, 1998, included the
sale of RMD's inventory, accounts receivable, machinery, equipment and other
tangible personal property, and intangible assets including patents and
technology. The sale resulted in a pretax gain of $2,852, or $.22 per share,
recorded in the fourth quarter of fiscal 1998.
On November 9, 1998, the Company sold certain assets used in the
operation of its Quantox product line to KLA-Tencor Corporation for $9,147 in
cash. The agreement, which was effective October 31, 1998, included the sale of
the Quantox inventory, certain machinery, equipment and other tangible personal
property. The Company retained the accounts receivable. The sale resulted in a
pretax gain of $4,808, or $.39 per share, recorded in the first quarter of
fiscal 1999.
During the fourth quarter of fiscal 1999, an additional pretax gain of
$345, or $.03 per share, was recorded for the above mentioned sales of
businesses. At the time of the sales of these businesses, the Company
established liabilities for certain items that were to be settled at future
dates. The additional adjustment recorded in the fourth quarter of fiscal 1999
represents the settlement of certain of these issues.
F-10
<PAGE> 35
NOTE C - SPECIAL CHARGES
An analysis of special charges recorded in the Consolidated Statements
of Income in 1998 and 1997, and the amount accrued in the Consolidated Balance
Sheets at September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Accrued at
Expense September 30,
------- -------------
Description: 1998 1997 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Write off of goodwill $ 519 $ -- $ -- $ --
Severance, outplacement and
other personnel costs 290 (291) 2 24
Lease and related costs 280 (525) 180 248
Impaired inventory and equipment 122 49 -- --
Relocation of facility and employees 25 1,073 -- --
Recruiting and consulting costs -- 187 -- --
Manufacturing start-up costs -- 282 -- --
European operating subleases (64) (4) 474 540
------- ------- --- ---
Totals $1,172 $ 771 $656 $812
====== ====== ==== ====
</TABLE>
The Company did not record any special charges during fiscal 1999. Due
to continued weakness in the semiconductor capital equipment industry throughout
1998, the Company incurred special charges in 1998 for cost reduction actions
taken in the second quarter relative to its semiconductor business. Also, the
Company decided to change the methodology of pursuing its WLR business, which
was part of the 1996 acquisition of Turner Engineering Technology. As a result
of this decision, the Company reviewed the carrying value of the goodwill using
the estimated future cash flow method and determined that the goodwill was
impaired. 1998 special charges include $519 for the write-off of the remaining
balance of the goodwill. Additionally, the Company decided to further
consolidate its manufacturing operations. As a result, special charges in 1998
include lease costs accrued on a leased facility the Company will no longer
occupy. The reversal of European operating subleases represents a change in
circumstances in 1998. The special charges recorded during 1998 of $1,172
pretax, or $.09 per share, include $551 in noncash charges.
Special charges of $771 pretax, or $.06 per share, recorded in 1997
include gross costs of $1,902 primarily for the relocation of the Keithley
MetraByte operation from Taunton, Massachusetts to Cleveland, Ohio, net of a
reversal of $1,131 of expense (noncash) recorded during 1996 primarily for
closing the Taunton facility. The reversal of 1996 expense relates to changes in
circumstances that occurred during 1997. $256 of the gross expense represents a
noncash charge to reserve for additional impaired inventory. In September 1996,
management made the decision to relocate the Keithley MetraByte operation to its
Cleveland, Ohio facility due to a lack of growth in sales and poor earnings. The
relocation was completed in July 1997, and during 1998, the Keithley MetraByte
operation was combined with the Company's Instruments group to form the Test and
Measurement business unit.
At September 30, 1999 and 1998, $257 and $272, respectively, were
accrued in the Consolidated Balance Sheets under the category "Other accrued
expenses" and $399 and $540, respectively, were accrued under the category
"Other long-term liabilities."
F-11
<PAGE> 36
NOTE D - SHARE REPURCHASE PROGRAMS
On November 11, 1998, the Company commenced a tender offer to
repurchase up to 2,000,000 of its Common Shares, or approximately 25 percent of
the outstanding Common Shares and Class B Common Shares combined. The offer was
conducted through a procedure commonly known as a "Dutch Auction" in which
shareholders could tender their shares at prices not in excess of $7.00 nor less
than $5.75 per share. The offer expired on December 10, 1998, and resulted in
the purchase of 405,733 Common Shares at $7.00 per share plus expenses of
approximately $1.00 per share.
At the conclusion of the Dutch Auction, the Company's Board of
Directors approved a program to repurchase up to 1,000,000 Common Shares on the
open market over a two-year period. The shares repurchased under both the Dutch
Auction and the stock repurchase program are expected to be held as treasury
stock, and from time to time, may be reissued in settlement of stock options and
the Company's employee stock purchase plan. During fiscal 1999 the Company
purchased 537,070 Common Shares at an average price of $9.54 per share including
commissions. Since commencing the tender offer in November 1998, the Company has
purchased under both buy back plans a total of 942,803 Common Shares, which
constitutes 12 percent of the combined Common and Class B Common Shares at the
start of the buy back programs, at an average price of $8.87 per share including
commissions. During fiscal 1999, the Company reissued 100,427 treasury shares in
settlement of shares purchased through the Company's stock option plans and
employee stock purchase plan.
F-12
<PAGE> 37
NOTE E - FINANCING ARRANGEMENTS
<TABLE>
<CAPTION>
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
Long-term debt:
Revolving loans with various banks with interest
due monthly; principal due
March 28, 2002:
U.S. dollar denominated loans with an interest
rate of 6.3% and 6.4% based on LIBOR at $ 3,000 $ 5,500
September 30, 1999 and 1998, respectively
Deutsche mark denominated loans with an interest
rate of 3.8% based on FIBOR -- 599
------- -------
3,000 6,099
Less-current installments on long-term debt -- --
------- -------
Total long-term debt $ 3,000 $ 6,099
======= =======
</TABLE>
The Company's credit agreement, which expires March 28, 2002, is a $25,000
debt facility ($3,000 outstanding at September 30, 1999) that provides
unsecured, multi-currency revolving credit at various interest rates based on
Prime, LIBOR or FIBOR. The Company is required to pay a facility fee of between
.175% and .25% on the total amount of the commitment. Additionally, the Company
has a number of other credit facilities in various currencies aggregating
$5,281.
At September 30, 1999, the Company had total unused lines of credit with
domestic and foreign banks aggregating $27,281, including short-term and
long-term lines of credit of $5,281 and $22,000, respectively. Under certain
long-term debt agreements, the Company is required to comply with various
financial ratios and covenants. Principal payments on long-term debt are due in
2002.
The three-month LIBOR interest rate was 6.1 and 5.3 percent at September
30, 1999 and 1998.
The Company has an interest rate swap agreement with a commercial bank to
effectively fix its interest rate on $3,000 of variable rate debt. The agreement
effectively fixes the interest rate on a notional $3,000 of variable LIBOR rate
debt at 6.8 percent, and expires September 19, 2005. The interest differential
to be paid or received on the notional amount of the swap is recognized over the
life of the agreement. At September 30, 1999 interest rate levels, the swap
requires the Company to make payments to the bank and would cost the Company
approximately $24 to terminate.
Following is an analysis of net financing (income) expenses:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Interest expense $ 220 $ 1,137 $ 1,315
Investment income (399) (97) (170)
------- ------- -------
$ (179) $ 1,040 $ 1,145
======= ======= =======
</TABLE>
F-13
<PAGE> 38
NOTE F - FOREIGN CURRENCY
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Income and expenses are translated into U.S. dollars
at average exchange rates for the period. Assets and liabilities are translated
at the rates in effect at the end of the period. Translation gains and losses
are recognized in the cumulative translation component of shareholders' equity.
Certain transactions of the Company and its foreign subsidiaries are
denominated in currencies other than the functional currency. The Consolidated
Statement of Income includes gains (losses) from such foreign exchange
transactions of $40, $(138) and $95 for 1999, 1998 and 1997, respectively.
At September 30, 1999, the Company had obligations under foreign exchange
forward contracts to sell 1,800,000 Euros and 180,000 British pounds at various
dates through December 1999. The total U.S. dollar equivalent amount of these
foreign exchange contracts of $2,189 includes an unrecognized loss of $32 at
September 30, 1999.
F-14
<PAGE> 39
NOTE G - EMPLOYEE BENEFIT PLANS
The Company has noncontributory defined benefit pension plans covering
all of its eligible employees in the United States and certain non-U.S.
employees. Pension benefits are based upon the employee's length of service and
a percentage of compensation above certain base levels. A summary of components
of net periodic pension cost is shown below:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 1,011 $ 945 $ 733
Interest cost on projected benefit obligation 1,443 1,356 1,192
Actual return on assets (2,141) (3,791) (3,470)
Net amortization and deferral 92 2,073 2,115
------- ------- -------
Net periodic pension cost $ 405 $ 583 $ 570
======= ======= =======
</TABLE>
The following table sets forth the funded status of the Company's plans
and the related amounts recognized in the Consolidated Balance Sheet at
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Non-U.S.
United States Plan Plan
Overfunded Underfunded*
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATIONS:
Benefit obligation at beginning of year $ 16,999 $ 15,219 $ 4,098 $ 2,777
Service cost 831 780 180 165
Interest cost 1,213 1,186 229 170
Actuarial (gain) loss (397) 188 (321) 805
Benefits paid (611) (421) (84) (41)
Plan amendment -- 457 -- --
Curtailment gain -- (410) -- --
Foreign currency exchange rate changes -- -- (358) 222
-------- -------- -------- --------
Benefit obligation at year end $ 18,035 $ 16,999 $ 3,744 $ 4,098
======== ======== ======== ========
</TABLE>
F-15
<PAGE> 40
<TABLE>
<CAPTION>
Non-U.S.
United States Plan Plan
Overfunded Underfunded*
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning
of year $ 23,500 $ 19,474 $ 655 $ 498
Actual return on pension assets 2,130 3,718 10 72
Employer contributions 157 728 50 54
Benefits paid (611) (420) (11) (4)
Foreign currency exchange rate changes -- -- (59) 35
Fair value of plan assets at end of year 25,176 23,500 645 655
-------- -------- -------- --------
Funded status - over (under) funded 7,141 6,501 (3,099) (3,443)
Unrecognized actuarial gains (5,582) (5,146) 151 474
Unrecognized prior service cost 1,329 1,470 53 63
Unrecognized initial net (asset) obligation (270) (314) 165 201
-------- -------- -------- --------
Prepaid pension assets (pension liability)
recognized in the Consolidated Balance
Sheets $ 2,618 $ 2,511 $ (2,730) $ (2,705)
======== ======== ======== ========
</TABLE>
*The Company has purchased indirect insurance of $2,634 which is expected to be
available to the Company as non-U.S. pension liabilities of $2,730 mature. The
caption, "Other assets," on the Company's Consolidated Balance Sheets includes
$2,634 and $2,776 at September 30, 1999 and 1998, respectively, for this asset.
In accordance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions," this Company asset is not included in the
non-U.S. plan assets.
The significant actuarial assumptions as of the year-end measurement
date were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
UNITED STATES PENSION PLAN:
Discount rate 7.25% 7.5% 7.5%
Expected long-term rate of return on plan assets 8.25% 8.25% 8.5%
Rate of increase in compensation levels 5.0% 5.0% 5.5%
NON-U.S. PENSION PLAN:
Discount rate 6.0% 6.0% 6.25%
Expected long-term rate of return on plan assets 7.0% 7.0% 7.0%
Rate of increase in compensation levels 4.0% 4.0% 3.5%
</TABLE>
The "Projected Unit Credit" Actuarial Cost Method is used to determine the
Company's annual expense.
For the United States plan, the Company uses the "Entry Age Normal"
Actuarial Cost Method to determine its annual funding requirements. United
States plan assets are invested primarily in common stocks and fixed-income
securities.
Although there are no requirements for the Company to fund the non-U.S.
pension plan, the Company has made contributions in the past. Non-U.S. plan
assets represent employee and Company contributions and are invested in a direct
insurance contract payable to the individual participants.
F-16
<PAGE> 41
The sale of the Radiation Measurements Division's assets resulted in the
termination of essentially all the Division's employees. As a result, the
Company recognized a gain for pension curtailment of $410 in 1998. The gain is
included in the "Gain on sale of businesses" caption on the Company's
Consolidated Statement of Income. (See Note B.)
In addition to the defined benefit pension plan, the Company also
maintains a retirement plan for all of its eligible employees in the United
States under Section 401(k) of the Internal Revenue Code. The Company makes
contributions to the 401(k) plan, and expense for this plan amounted to $932,
$443 and $403 in 1999, 1998 and 1997, respectively.
The Company also has an unfunded supplemental executive retirement plan
(SERP) for former key employees which includes retirement, death and disability
benefits. Expense (income) recognized for these benefits was $37, $12 and $(3),
for 1999, 1998 and 1997, respectively. The income recognized during 1997 was due
to an officer taking early retirement causing a reversal of previously accrued
expense. Liabilities of $190 and $170 were accrued in the "Other long-term
liabilities" caption on the Company's Consolidated Balance Sheets to meet all
SERP obligations at September 30, 1999 and 1998, respectively.
F-17
<PAGE> 42
NOTE H - STOCK PLANS
Stock Option Plans
- ------------------
Under the 1984 Stock Option Plan and the 1992 Stock Incentive Plan,
675,000 and 1,900,000 of the Company's Common Shares, respectively, were
reserved for the granting of options to officers and other key employees. After
February 11, 1994, no new grants could be issued from the 1984 Stock Option
Plan. The Compensation and Human Resources Committee of the Board of Directors
administers the plans. Incentive stock options granted under the plans can not
be less than the fair market price at the date of the grant with an exercise
period not to exceed ten years. Such grants generally become exercisable over a
four year period. The option price under nonqualified stock options is
determined by the Committee on the date the option is granted. The 1992 Stock
Incentive Plan also provides for restricted stock awards and stock appreciation
rights. This plan will expire on February 8, 2002. All options outstanding at
the time of termination of either plan shall continue in full force and effect
in accordance with their terms.
The 1997 Directors' Stock Option Plan provides for the issuance of
200,000 of the Company's Common Shares to non-employee Directors. Under the
terms of the plan, each non-employee Director is automatically granted an option
to purchase 5,000 Common Shares at the close of each annual shareholders'
meeting. The plan will expire on February 15, 2007. On February 15, 1997, the
Company's Board of Directors terminated the 1992 Directors' Stock Option Plan.
Prior to its termination, this plan provided for the issuance of 60,000 of the
Company's Common Shares to non-employee Directors, with each non-employee
Director automatically granted an option to purchase 600 Common Shares at the
close of each annual shareholders' meeting. All options outstanding at the time
of termination of the plans shall continue in full force and effect in
accordance with their terms. The option price for grants under both plans is the
fair market value of a Common Share on the date of grant. The options under both
plans are exercisable six months and one day after the date of grant and will
expire after ten years.
F-18
<PAGE> 43
The activity under all option plans was as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
--------- ----- --------- -----
<S> <C> <C> <C> <C>
September 30, 1996 1,171,989 $ 8.24 400,044 $ 5.45
Options granted at fair market value 310,000 11.18
Options granted above fair market value 1,100 11.54
Options granted below fair market value 82,528 -
Options exercised (124,873) 1.70
Options forfeited (37,212) 9.23
-------------------------------------------------------------
September 30, 1997 1,403,532 8.97 593,607 7.01
Options granted at fair market value 280,050 5.70
Options granted above fair market value 38,204 10.18
Options granted below fair market value 30,322 4.83
Options exercised (111,228) 5.37
Options forfeited (264,011) 9.47
-------------------------------------------------------------
September 30, 1998 1,376,869 8.44 707,844 7.93
Options granted at fair market value 313,200 8.20
Options granted above fair market value 45,658 5.65
Options granted below fair market value 33,184 7.23
Options exercised (157,919) 5.11
Options forfeited (97,677) 7.53
-------------------------------------------------------------
September 30, 1999 1,513,315 $8.69 785,169 $9.42
=============================================================
</TABLE>
The options outstanding at September 30, 1999 have been segregated into
ranges for additional disclosure as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- ----------------------------------
Outstanding Exercisable
- ------------------------ ----------------- ---------------- ----------------- ----------------- ----------------
Weighted Average
Remaining Weighted Average Weighted Average
Range of Exercise Number of Shares Contractual Exercise Number of Shares Exercise
Prices Outstanding Life Price Exercisable Price
- ------------------------ ----------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$4.13 - $5.06 405,583 6.76 years $ 4.96 179,433 $ 4.83
$5.19 - $8.81 408,032 9.17 years $ 8.09 85,832 $ 7.66
$9.06 - $10.00 290,300 5.96 years $ 9.27 227,100 $ 9.23
$11.44 - $15.69 409,400 6.46 years $12.56 292,804 $12.89
1,513,315 7.18 years $ 8.69 785,169 $ 9.42
- ------------------------ ----------------- ---------------- ----------------- ----------------- ----------------
</TABLE>
1993 Employee Stock Purchase Plan
- ---------------------------------
On February 5, 1994, the Company's shareholders approved the 1993
Employee Stock Purchase and Dividend Reinvestment Plan. The plan offers eligible
employees the opportunity to acquire the Company's Common Shares at a discount
and without transaction costs. Eligible employees can only participate in the
plan on a year-to-year basis, must enroll prior to the commencement of each plan
year, and in the case with U.S. employees, must authorize monthly payroll
F-19
<PAGE> 44
deductions. Non-U.S. employees submit their contribution at the end of the plan
year. The purchase price of the Common Shares is 85 percent of the lower market
price at the beginning or ending of the calendar plan year. A total of 750,000
Common Shares are available for purchase under the plan. Total shares may be
increased with shareholder approval or the plan may be terminated when the
shares are fully subscribed. No compensation expense is recorded in connection
with the plan. During 1999 and 1998, 58,393 and 108,602 shares, respectively,
were purchased by employees at a price of $7.38 per share.
Pro Forma Disclosure
- --------------------
As of September 30, 1999, the Company had various stock-based
compensation plans that are described above. The Company has elected to continue
to account for stock issued to employees according to APB Opinion 25,
"Accounting for Stock Issued to Employees" and its related interpretations.
Under APB No. 25, no compensation expense is recognized in the Company's
consolidated financial statements for employee stock options except in certain
cases when stock options are granted below the market price of the underlying
stock on the date of grant. During 1999 and 1998, $44 and $260, respectively,
was recognized in compensation expense for such grants. Alternatively, under the
fair value method of accounting provided for under Statement of Financial
Accounting Standards No 123, "Accounting for Stock-Based Compensation" (SFAS
123), the measurement of compensation expense is based on the fair value of
employee stock options or purchase rights at the grant or right date and
requires the use of option pricing models to value the options.
The weighted average fair value of options granted under stock options
plans in 1999, 1998 and 1997 was $3.52, $2.29 and $4.97, respectively. The fair
value of options at the date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected life (years) 4.6 4.4 5.0
Risk-free interest rate 5.5% 4.8% 6.0%
Volatility 46.0% 41.5% 41.5%
Dividend yield 1.3% 1.3% 1.3%
</TABLE>
The weighted average fair value of purchase rights granted under the 1993
Employee Stock Purchase Plan in 1999, 1998 and 1997 was $2.93, $3.05 and $5.49,
respectively. The fair value of employees' purchase rights was estimated using
the Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected life (years) 1.0 1.0 1.0
Risk-free interest rate 5.0% 5.1% 5.5%
Volatility 42.7% 41.5% 41.5%
Dividend yield 1.3% 1.3% 1.3%
</TABLE>
F-20
<PAGE> 45
The pro forma impact to both net income and earnings per share from
calculating stock-related compensation expense consistent with the fair value
alternative of SFAS 123 is indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pro forma net income $ 12,706 $ 4,226 $ 214
Pro forma earnings per share:
Basic $ 1.71 $ 0.54 $ 0.03
Diluted $ 1.66 $ 0.52 $ 0.03
</TABLE>
For purposes of the pro forma disclosures, the estimated fair value of
the stock-based awards is amortized over the vesting period. The effects of
applying SFAS 123 in this pro forma disclosure are not indicative of future
amounts.
SFAS 123 is applicable only to awards made after fiscal 1995.
F-21
<PAGE> 46
NOTE I - INCOME TAXES
For financial reporting purposes, income (loss) before income taxes
includes the following components:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
United States $ 14,130 $ 4,923 $ (892)
Non-U.S 2,587 3,266 2,103
-------- -------- --------
$ 16,717 $ 8,189 $ 1,211
======== ======== ========
The provision (benefit) for income
taxes is as follows:
1999 1998 1997
-------- -------- --------
Current:
Federal $ 1,143 $ 1,416 $ 275
Non-U.S 1,191 1,622 1,091
State and local 200 169 195
-------- -------- --------
Total current 2,534 3,207 1,561
-------- -------- --------
Deferred:
Federal 275 310 (1,124)
Non-U.S 200 (332) (16)
-------- -------- --------
Total deferred 475 (22) (1,140)
-------- -------- --------
Total provision $ 3,009 $ 3,185 $ 421
======== ======== ========
</TABLE>
Differences between the statutory United States federal income tax and
the effective income tax rates are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal income tax at statutory rate $ 5,684 $ 2,784 $ 412
State and local income taxes 133 111 129
Tax on non-U.S. income and tax credits (72) (333) (945)
Change in valuation allowance (1,928) -- --
Terminated life insurance contract -- -- 877
Adjustment for prior years' taxes (168) 480 --
Tax credits (685) -- --
Other 45 143 (52)
-------- -------- --------
Effective income tax $ 3,009 $ 3,185 $ 421
======== ======== ========
</TABLE>
F-22
<PAGE> 47
Significant components of the Company's deferred tax assets and
liabilities as of September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Deferred tax assets: 1999 1998
- ------------------- ---- ----
<S> <C> <C>
Capitalized research and development $ 4,824 $ 5,707
Depreciation 980 949
Warranty 367 627
Intangibles 181 965
State and local taxes 1,196 1,685
Alternative minimum tax credit carryforwards 1,148 1,151
Deferred compensation 784 693
Inventory 1,402 1,673
General business credit carryforwards 68 1,013
Other 1,123 1,203
-------- --------
Total deferred tax assets 12,073 15,666
-------- --------
Valuation allowance for deferred tax assets -- (3,127)
-------- --------
12,073 12,539
-------- --------
Deferred tax liabilities:
- ------------------------
Pension contribution 890 768
Other 316 429
-------- --------
Total deferred tax liabilities 1,206 1,197
-------- --------
Net deferred tax assets $ 10,867 $ 11,342
======== ========
</TABLE>
The valuation allowance at the end of 1998 related to tax credit
carryforwards and certain state tax benefits which in the opinion of management
would likely not be realized. The current year decrease relates primarily to the
utilization of tax credits and in managements' opinion, the remaining tax
credits will be utilized in the future based upon improved profitability in the
Company's U.S. operations during 1999.
At September 30, 1999, the Company had tax credit carryforwards as
follows:
Year Expiration
Commences
---------
General business credit $ 68 2012
Alternative minimum tax credit 1,148 Indefinite
F-23
<PAGE> 48
NOTE J - LEASES
The Company leases certain equipment under capital leases. Manufacturing,
laboratory and office equipment includes $495 of leased equipment at September
30, 1999 and 1998, respectively. Accumulated depreciation includes $494 and $483
at September 30, 1999 and 1998, respectively, related to these leases. The
Company also leases certain office and manufacturing facilities and office
equipment under operating leases. Rent expense under operating leases (net of
sublease income of $211 in 1999, $95 in 1998 and $84 in 1997) for 1999, 1998 and
1997 was $1,657, $2,165 and $2,658, respectively. Future minimum lease payments
under operating leases are:
<TABLE>
<S> <C>
2000 $1,953
2001 1,444
2002 883
2003 599
2004 528
After 2004 1,542
------
Total minimum operating lease payments $6,949
======
</TABLE>
F-24
<PAGE> 49
NOTE K - SEGMENT AND GEOGRAPHIC INFORMATION
The Company adopted FASB Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
for the fiscal year ended September 30, 1999. This statement designated the
internal organization, that is used by management, for making operating
decisions and assessing performance as the source of the Company's reportable
segments. It also required disclosures about products and service, geographic
areas and major customers.
The Company's business is to develop measurement-based solutions to
verify customers' product performance. All the Company's products are computer
based (multi-point) systems operating under software control. The Company's
customers are engineers, technicians and scientists in manufacturing, product
development and research functions within a range of industries. Keithley's
advanced hardware and software is used for process monitoring, production test
and basic research. Although the Company's products vary in capability,
sophistication, use, size and price, they basically test, measure and analyze
electrical and physical properties. As such, the Company's management determined
the Company operates in a single industry segment. The operations by geographic
area are presented below. The basis for attributing revenues from external
customers to a geographic area is the location of the customer.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
NET SALES:
United States $ 50,672 $ 60,653 $ 67,503
Europe 31,986 33,694 31,606
Pacific Basin 12,513 17,253 18,291
Other 5,767 6,176 5,895
-------- -------- --------
$100,938 $117,776 $123,295
======== ======== ========
LONG-LIVED ASSETS:
United States $ 15,898 $ 17,075 $ 20,670
Germany 3,017 3,136 2,791
Other 334 392 312
-------- -------- --------
$ 19,249 $ 20,603 $ 23,773
======== ======== ========
</TABLE>
F-25
<PAGE> 50
NOTE L - CONTINGENCIES
The Company is engaged in various legal proceedings arising in the
ordinary course of business. The ultimate outcome of these proceedings is not
expected to have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
F-26
<PAGE> 51
Unaudited Quarterly Results of Operations
(In Thousands of Dollars Except for Per-Share Data)
<TABLE>
<CAPTION>
First Second Third Fourth
----- ------ ----- ------
Fiscal 1999
<S> <C> <C> <C> <C>
Net sales $20,881 $24,387 $25,947 $29,723
Gross profit 12,075 14,635 15,985 18,320
Gain on sale of business 4,808 -- -- 345
Income before income taxes (1) 5,772 2,756 3,357 4,832
Net income (2) 3,783 1,984 4,612 3,329
Diluted earnings per share (1) (2) .48 .26 .61 .44
Fiscal 1998
Net sales $31,623 $29,696 $28,578 $27,879
Gross profit 18,584 16,688 16,443 15,729
Gain on sale of business -- -- -- 2,852
Income before income taxes (1) (3) 1,636 1,162 996 4,395
Net income (2) (3) 1,096 779 667 2,462
Diluted earnings per share (1) (2) (3) .14 .10 .08 .31
</TABLE>
(1) The first and fourth quarter of fiscal 1999 include pretax income of
$4,808, or $.39 per share, and $345, or $.03 per share, for the gain on the
sales of businesses, respectively. The fourth quarter of fiscal 1998
includes pretax income of $2,852, or $.22 per share, for the gain on the
sale of a business.
(2) The third quarter of fiscal 1999 includes a favorable adjustment of $2,195,
or $.29 per share, from settlements of prior years' tax liabilities and the
release of certain valuation reserves due to improved profitability from U.
S. operations. The fourth quarter of fiscal 1998 includes a charge for
prior years' taxes of $480, or $.06 per share.
(3) The second and fourth quarters of fiscal 1998 include pretax charges of
$335, or $.03 per share, and $837, or $.06 per share, in special charges,
respectively. The third and fourth quarter of fiscal 1998 include pretax
charges of $663, or $.06 per share, and $547, or $.03 per share for
severance and other officer retirement expenses, respectively.
F-27
<PAGE> 52
SCHEDULE II
KEITHLEY INSTRUMENTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Balance at Charged to
Beginning of Costs and Balance at End
Description Period Expenses Deductions (1) of Period
- ----------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
For the Year Ended
September 30, 1999:
Valuation allowance for
deferred tax assets $3,127 $ -- $3,127 $ --
For the Year Ended
September 30, 1998:
Valuation allowance for
deferred tax assets $3,166 $ 54 $ 93 $3,127
For the Year Ended
September 30, 1997:
Valuation allowance for
deferred tax assets $2,994 $172 -- $3,166
</TABLE>
(1) Represents utilization of tax credits, capital loss carryovers and
release of valuation reserve.
F-28
<PAGE> 1
EXHIBIT 4(A)
Exhibit 4(a) - Specimen Share Certificate
for the Common Shares, without par value
[Logo of woman,
NUMBER man and globe] SHARES
THIS CERTIFICATE IS CUSIP 487584 10 4
TRANSFERABLE IN NEW YORK
KEITHLEY INSTRUMENTS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
THIS CERTIFES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES WITHOUT PAR VALUE OF
Keithley Instruments, Inc. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
In Witness Whereof, the said Corporation has cause this Certificate to
be signed by its duly authorized officers and its corporate seal to be hereunto
affixed.
Dated:
[Company Seal]
/s/ James B. Griswold /s/ Joseph P. Keithley
- --------------------- ----------------------
SECRETARY CHAIRMAN OF THE BOARD
Countersigned and registered:
First Chicago Trust Company of New York
Transfer Agent and Registrar,
By:
Authorized Signature
<PAGE> 2
REVERSE SIDE OF CERTIFICATE
KEITHLEY INSTRUMENTS, INC. WILL FURNISH WITHOUT CHARGE TO EACH
SHAREHOLDER WHO SO REQUESTS, WITHIN FIVE DAYS AFTER RECEIPT OF SUCH REQUEST, A
STATEMENT OF THE EXPRESS TERMS OF EACH CLASS OF SHARES WHICH KEITHLEY
INSTRUMENTS, INC. IS AUTHORIZED TO ISSUE. ANY SUCH REQUEST IS TO BE IN WRITING
AND ADDRESSED TO THE PRESIDENT OF KEITHLEY INSTRUMENTS, INC., 28775 AURORA ROAD,
SOLON, OHIO 44139.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT-- Custodian
------- --------
(Cust) (Minor)
under Uniform Gift to
Minors Act
------------
(State)
Additional abbreviations may also be used
though not in the above list.
For Value Received, hereby sell, assign and transfer unto
------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT __________________ ATTORNEY, TO TRANSFER THE SAID STOCK
ON THE BOOKS OF THE WITHIN- NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN
THE PREMISES.
Dated: , 19
----------------- -----
------------------------------
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 10(B)
-------------
KEITHLEY INSTRUMENTS, INC.
SUPPLEMENTAL DEFERRAL PLAN
THIS PLAN is made and entered into this September 1, 1999, by Keithley
Instruments, Inc., a corporation with principle offices and place of business in
the State of Ohio, hereinafter referred to as the "Corporation."
WITNESSETH:
WHEREAS, the Corporation wishes to establish and maintain an unfunded
deferred compensation plan primarily for the purpose of providing additional
deferred compensation benefits for a select group of management or highly
compensated employees; and
WHEREAS, the Corporation intends that the Plan at all times shall be
administered and interpreted in such a manner as to qualify for the limited
exemption available under section 201(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") from selected provisions of ERISA
Title I;
NOW, THEREFORE, in consideration of the premises, the Corporation
hereby establishes and maintains the Keithley Instruments, Inc. Supplemental
Deferral Plan, upon and subject to the following terms and conditions.
DEFINITIONS:
ACCOUNT. A bookkeeping account, established by the Corporation in the
name of a Participant and kept as part of the Corporation's regular books and
records, that indicates such Participant's interest in the Plan. Each individual
participating in the Plan as a Participant shall have an Account established and
maintained in his or her name, and the Corporation (or its designee) shall
credit or charge to such Account (i) any and all amounts deferred hereunder by
or on behalf of such Participant, (ii) any and all amounts credited by the
Corporation pursuant to paragraph 1.03 hereof, (iii) any interest or dividends
credited thereto in accordance with this Plan and (iv) any investment earnings
or gains credited, or losses charged, thereto in accordance with Article Four of
this Plan, (v) any distributions directly or indirectly charged to such
Participant or his or her beneficiaries hereunder (including direct transfers,
and tax withholdings and remittances); and (vi) any Plan and Plan-related costs
or expenses charged thereto. The existence of such Account shall not create, and
shall not be deemed to create, a trust of any kind, or a fiduciary relationship
between the Corporation and the Participant, his or her designated beneficiary,
or other beneficiaries under the Plan.
AFFILIATE. Any corporation, partnership, limited liability company,
joint venture, association, or similar organization or entity, which is a member
of a controlled group of corporations that includes, or which is under common
control with, the Corporation. For purposes of determining the presence of a
"controlled group of corporations, or "common control," the standards set forth
in Section 414(b) and 414(c) of the Code and related regulations, as interpreted
and applied by the Corporation acting in its sole discretion, shall apply.
CALENDAR YEAR. January 1 to December 31.
<PAGE> 2
CODE. The Internal Revenue Code of 1986, as amended or re-codified, and
in effect from time to time.
COMPENSATION. As applicable, the total salary, bonuses and commissions,
or director's and meeting fees, paid or due to be paid by the Corporation to a
Participant in a Calendar Year, including any amount deferred pursuant to
Article One hereof.
CORPORATION. Keithley Instruments, Inc., an Ohio corporation. The
Corporation shall act through its board of directors (the "Board"), which may
delegate some or all of its rights, duties and responsibilities to committees of
the Board and employees of the Corporation; provided, that any delegation by the
Board shall be in writing.
EARLY RETIREMENT DATE. The date the Participant attains 55 years of
age.
EFFECTIVE DATE. July 1, 1999.
ELECTION TO DEFER. A written notice filed by the Participant with the
Corporation in substantially the form attached hereto as Exhibit A, specifying
the amount (if any) of Compensation to be deferred.
ELIGIBLE INDIVIDUAL. Any individual employed by the Corporation or an
Affiliate (or both) who satisfies the Minimum Eligible Compensation Level and
has been selected by the President of the Corporation (acting in his sole
discretion) to participate herein. Such term shall include any individual who
serves as a non-employee director of the Corporation without regard to the
Minimum Eligible Compensation Level. Any individual who qualifies as an Eligible
Individual shall be entitled to participate herein in accordance with the
provisions of paragraph 1.01 hereof.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and then in effect.
MINIMUM ELIGIBLE COMPENSATION LEVEL. Compensation of at least $80,000
per Calendar Year, as determined for the preceding Calendar Year. The
Compensation needed to satisfy the Minimum Eligible Compensation Level each Plan
Year shall be adjusted to reflect changes in the Consumer Price Index for All
Urban Consumers ("CPI-U").
NORMAL RETIREMENT DATE. The date a Participant attains 65 years of age.
PARTICIPANT. An Eligible Individual who participates in the Plan.
PARTICIPANT ANNUAL DEFERRAL. The portion of a Participant's
Compensation that he or she elects to defer for a Calendar Year.
PLAN. This Plan, together with any and all amendments or supplements
thereto.
PLAN ADMINISTRATOR. The Corporation.
PLAN YEAR. The Calendar Year.
<PAGE> 3
ARTICLE ONE
1.01 ELIGIBILITY. (a) Any individual who is an Eligible Individual may
become a Participant in the Plan as of the first day of the Plan Year next
following the date such individual becomes an Eligible Individual. As a
condition of participation, each Eligible Individual shall be required to
execute a participation agreement in the form annexed hereto as Exhibit B. (b)
Once an Eligible Individual becomes a Participant, he or she shall remain a
Participant until death, or if earlier, until his or her Account is fully
distributed; however, an individual shall only be an active Participant while an
Eligible Individual. (C) In the case of any Eligible Individual who first
becomes a Participant after the Effective Date, the Plan Administrator shall
specify the date as of which such Individual commences participation hereunder.
1.02 DEFERRAL ELECTION. Commencing on the Effective Date, and
continuing through the date on which an Eligible Individual ceases to qualify as
an Eligible Individual, an Eligible Individual shall be entitled to elect to
defer, and have credited to his or her Account, up to 100% of his or her
Compensation. Any amounts not paid to an Eligible Individual because it has been
deferred shall be credited to such Individual's Account within (30 days) of the
date such amounts otherwise would have been paid to such Individual.
1.03 CREDITING CORPORATE AMOUNTS. From time to time, the Corporation
may credit each Participant's Account, in amounts and using such methods,
allocation criteria and standards as the Corporation shall determine in its sole
discretion. Any amounts so credited shall be credited to each Participant's
Account within (30 days) following the date such amounts are declared.
ARTICLE TWO
2.01 RESPONSIBILITY FOR ADMINISTRATION OF THE PLAN. (a) The Plan
Administrator shall be responsible for the management, operation and
administration of the Plan. The Plan Administrator may employ others to render
advice with regard to its responsibilities under this Plan. It may also allocate
its responsibilities to others and may exercise any other powers necessary for
the discharge of its duties. (b) The primary responsibility of the Plan
Administrator is to administer the Plan for the benefit of the Participants and
their beneficiaries, subject to the specific terms of the Plan. The Plan
Administrator shall administer the Plan in accordance with its terms and shall
have the power to determine all questions arising in connection with its
administration, interpretation and application. Any such determination shall be
conclusive and binding upon all persons. The Plan Administrator shall have all
powers necessary or appropriate to accomplish its duties.
2.02 INFORMATION FROM CORPORATION. The Corporation and each Affiliate
shall provide to the Plan Administrator, on an accurate and timely basis, the
information needed to properly administer the Plan. The Plan Administrator may
rely upon the correctness of all such information as is so supplied and shall
have no duty or responsibility to verify such information. The Plan
Administrator shall also be entitled to rely conclusively upon all tables,
valuations, certifications, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by the Plan
Administrator with respect to the Plan.
<PAGE> 4
2.03 INVESTMENT. The Corporation shall determine, in its sole
discretion, whether to dedicate or encumber corporate assets, or engage in
investment activities, to place the Corporation in a position to discharge and
otherwise satisfy its liabilities under the Plan. Notwithstanding the preceding
sentence to the contrary, each Participant with an interest in the Plan
acknowledges, consents and agrees that his or her rights under the Plan are
defined by, and limited to, such Participant's Account, and that he or she has
no right, title or interest to, or any interest in or claim to (whether at law
or in equity) any investments made or funds established by the Corporation to
facilitate the discharge of the Company's Plan liabilities.
ARTICLE THREE
3.01 VESTING OF PLAN INTERESTS. Regardless of the circumstances under
which a Participant's relationship with the Corporation terminates, that portion
of the Participant's Account attributable to deferrals made pursuant to
Paragraph 1.02, including any investment gains or losses on such Deferrals,
shall be 100% vested. Contributions by the Corporation credited to said
Participant's Account (whether pursuant to paragraph 1.03, or otherwise),
including any investment gains or losses on such contributions, will vest in
accordance with the following schedule:
COMPLETED YEARS OF PLAN PARTICIPATION VESTED PERCENTAGE
------------------------------------- -----------------
Less than 1 0%
1 but less than 2 33%
2 but less than 3 67%
3 or more 100%
provided, that if a Participant's relationship with the Corporation and all
Affiliates terminates prior to the completion of three (3) Completed Years of
Plan Participation, such Participant shall forfeit the forfeitable portion of
his or her Account; and provided, further, that if a Participant's relationship
with the Corporation and all Affiliates terminates or is terminated "for cause,"
no benefits of any kind will be payable under the terms of this Plan, other than
such Participant's interest in deferrals made pursuant to paragraph 1.02 hereof
3.02 VESTING UPON CHANGE IN CONTROL. Immediately upon any Change in
Control (as defined below), notwithstanding any other contrary provisions herein
(including, without limitation, paragraph 3.01 hereof), each Participant's
interest in all amounts credited to his Account under this Plan shall fully and
immediately vest and become nonforfeitable, and all forfeiture provisions
otherwise imposed hereunder (including those set forth in paragraph 3.01 hereof)
shall be null, void and unenforceable and have no further force or effect.
For purposes of this paragraph, a Change in Control shall be deemed to
have occurred if and when: (a) any tender offer is made and consummated for the
ownership of 25% or more of the outstanding voting securities of the
Corporation; (b) the Corporation is merged or consolidated with another entity
and, as a result of such merger, reorganization or consolidation, less than 75%
of the outstanding voting interests of the surviving or resulting entity is
owned in the aggregate by the Corporation, or by the former shareholders of the
Corporation, as determined immediately prior to such merger, reorganization or
consolidation; (c) the Corporation sells substantially all of its assets to
another entity (including one or more Affiliated Companies, as defined below if
applicable) which is not at least eighty percent (80%) owned by the Corporation;
or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3)
(as in effect on the date hereof) of the Securities Exchange Act of 1934 (the
<PAGE> 5
"Exchange Act"), acquires, other than by reason of inheritance, twenty-five
percent (25%) or more of the outstanding voting securities of the Corporation
(whether directly, indirectly, beneficially or of record). In making any such
determination, transfers made by a person to an affiliate of such person (as
determined by the Board prior to such transfer), whether by gift, devise or
otherwise, shall not be taken into account. For purposes of this Plan, ownership
of voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the
date hereof pursuant to the Exchange Act.
For purposes of this paragraph, "Affiliated Company" or "Affiliated Companies"
means the Corporation, any and all corporations, limited and/or general
partnerships, limited liability companies, business trusts, or other trades or
businesses, in which the Corporation holds a direct or indirect ownership
interest, or a profits or beneficial interest, in excess of fifty percent (50%).
ARTICLE FOUR
4.01 EARNINGS OR LOSSES ON DEFERRED AMOUNTS. The Corporation hereby
agrees that it will credit the Participant's Account in an amount equal to the
investment earnings or losses attributable to such Participant's Account. For
this purpose, a Participant's Account shall be assumed to have been invested in
the fund or funds selected by the Participant on the first day of the month
following the income deferral. Each Participant shall have the right to select,
from the funds made available by the Plan Administrator, the fund or funds in
which his or her Account shall be deemed to be invested and, prior to the
beginning of each calendar quarter, to designate a different fund or funds, in
writing.
ARTICLE FIVE
5.01ELECTION TO DEFER COMPENSATION. The Participant may defer all or a
portion of his or her Compensation by filing an Election of Deferral. An
Election of Deferral must be filed prior to the beginning of the Calendar Year
to which it pertains and shall be effective on the first day of such Calendar
Year; however, for the Plan Year in which an Eligible Individual first becomes
eligible to participate in the Plan, such election must be made before the
effective date of participation, and only Compensation earned after the date of
election shall be taken into account. Each Election of Deferral shall be
effective only in the Calendar Year to which the Election of Deferral applies.
Any subsequent Election of Deferral, to be effective must be filed prior to the
beginning of the Calendar Year in which deferral is sought.
5.02TRANSFER, CONSOLIDATION OF CORPORATE INTERESTS. A Participant with
a vested interest in one (1) or more other unfunded, elective deferred
compensation plans maintained by the Corporation (including, without limitation,
interests held under the Keithley Instruments, Inc. Deferred Compensation Plan
(as amended)) may effect a transfer of interests between such plans and this
Plan by accepting an interest in the Plan in lieu of some or all of the
interest(s) then held under such other deferred compensation plan. To do so,
however, such Participant and the Corporation must agree to compromise and
extinguish outright such Participant's interest under such other Plan, in full
accord and satisfaction of such other plan interest, and in addition consent and
agree to each of the following terms and conditions: (a) extinguishment of the
interest held under the other Keithley-maintained plan shall be a condition
precedent to the creation of the indicated Plan interest; (b) a Plan interest
created as a result of this paragraph shall only be created (and other plan
interests are only extinguished) as of the last day of a calendar month selected
by the Participant, based on the interests then held under such other plan; (c)
both the Participant and the Corporation must consent and agree to such transfer
of
<PAGE> 6
interest; (d) the extinguishment of such other deferred compensation plan
interests must not be prohibited under the terms of such other plan(s); (e) any
such transfer of interest must not materially accelerate the date such other
plan interest(s) otherwise would be paid to (or in respect of) the Participant;
and (f) any such transfer of interest must not have the effect of accelerating
the interest held under such other plan(s) for federal tax purposes (including,
without limitation, the economic benefit and constructive receipt income tax
doctrines).
ARTICLE SIX
6.01 RETIREMENT AND TERMINATION BENEFIT. Following the date the
Participant terminates his or her relationship with the Corporation and all
Affiliates, or if later, attains his or her Normal Retirement Date or Early
Retirement Date, the Corporation shall thereafter pay to the Participant, his or
her Account. Such Account shall be payable in substantially equal monthly
installments for the period of time selected by the Participant in Exhibit A
(Election Deferral Form) attached hereto. The amount of each monthly installment
shall be determined at the sole discretion of the Plan Administrator based on
the value of the Participant's Account at the date payment is due, based on the
interest rates prevailing at that time. Such payments shall commence on or about
the first day of the first month following the Participant's termination or
retirement date (as applicable).
6.02 ACCELERATED PAYMENTS. The Plan Administrator shall make payment of
all or a part of the Participant's Account balance before any payments would
otherwise be due, if (a) the Plan Administrator reasonably determines that a
change in the federal tax or revenue laws, a published ruling or similar
announcement issued by the Internal Revenue Service, a regulation issued by the
Secretary of the Treasury, a decision by a court of competent jurisdiction
involving a Participant or a beneficiary, or a closing agreement made under 7121
of the Code that is approved by the Internal Revenue Service and involves a
Participant, causes or likely will cause a Participant to recognize income under
the Plan for federal income tax purposes with respect to amounts that are or
will be payable under the Plan before they are to be paid to the Participant; or
(b) a Plan interest is awarded or otherwise becomes payable to a former spouse
of a Participant, by court order as part of a division or partition of marital
property; or (c) there occurs a Change in Control (as defined in paragraph 3.02
hereof). In the event any such accelerated payment is determined to be
necessary, distributions will be made as soon as practicable after such
determination is made, and all Participants will receive such accelerated
payments in the same form of distribution.
ARTICLE SEVEN
7.01 DISABILITY BENEFIT. The Participant shall be entitled to receive
payments hereunder prior to his or her Normal Retirement Date if it is
determined by a duly licensed physician selected by the Corporation that,
because of ill health, accident, or disability, the Participant is no longer
able properly and satisfactorily perform his or her regular duties for the
Corporation. If the Participant's relationship with the Corporation terminates
pursuant to this paragraph, the benefit payable hereunder shall be the vested
value of the Participant's Account on the date of the physician's disability
determination. The Disability Benefit payable under this Article shall be
payable in equal monthly installments for the period of time selected by the
Participant in Exhibit A (Election Deferral Form) attached hereto, with the
first payment due on or about the first day of the third month following the
determination of disability.
<PAGE> 7
ARTICLE EIGHT
8.01 DEATH BENEFIT PRIOR TO COMMENCEMENT OF BENEFITS. In the event of
the Participant's death prior to commencement of benefit payments, the
Corporation shall distribute such Participant's Account as soon as practicable
following the date of such Participant's death. The benefit payable under this
Article shall be distributed to the Participant's beneficiary in a single
payment (less any applicable withholding) and will be paid according to the last
beneficiary designation received by the Corporation from the Participant prior
to his or her death. If no such designation has been received by the
Corporation, such payment shall be made to the Participant's surviving legal
spouse. If the Participant is not survived by a legal spouse, or if such spouse
shall fail to so appoint, the said payment shall be made to the then living
children of the Participant, if any, in equal shares. If there are no surviving
children, the payment will be made to the estate of the later to die of the
Participant and (if any) his or her legal spouse. Such payment shall be made on
or about the first day of the third month following the Participant's death;
provided, that the Plan Administrator in its sole discretion may delay payment
of the benefit described in this paragraph for a period not to exceed one
hundred eighty (180) days, in order to resolve any dispute arising over the
proper identity of the parties entitled to receive such payment.
8.02 DEATH BENEFIT AFTER COMMENCEMENT OF BENEFITS. In the event a
Participant dies after the commencement of benefit payments, but prior to the
completion of all such payments due and owing hereunder, the Corporation shall
continue to make such payments, in installments over the remainder of the period
specified in Exhibit A hereof, as if the Participant had survived. Such
continuing payments shall be made to the Participant's designated beneficiary in
accordance with the last such designation received by the Corporation from the
Participant prior to his or her death. If no such designation has been received
by the Corporation, such payments shall be made to the Participant's surviving
legal spouse. If such spouse dies before receiving all payments to which he or
she is entitled hereunder, then payments shall continue, for the remainder of
the payment period, to such person or persons, including his or her estate, as
he or she may designate in the last beneficiary designation received by the
Corporation from such spouse prior to his or her death. If the Participant is
not survived by a legal spouse, or is such spouse shall fail to so appoint, then
said payments shall be made to the then living children of the Participant, if
any, in equal shares. If there are no surviving children, the payments will be
made to the estate of the later to die of the Participant and (if any) his or
her legal spouse. Such continuing payments shall commence as of the first day of
the first month following the Participant's death.
ARTICLE NINE
9.01 TERMINATION BENEFITS. In the event the Participant's relationship
with the Corporation and all Affiliates terminates for any reason other than
death, disability or for cause, the Corporation shall pay to the Participant a
Termination Benefit. The amount payable shall be equal to the Participant's
vested Account as of the date of termination and shall be payable in equal
monthly installments for the period of time selected by the Participant in
Exhibit B (Participation Agreement) attached hereto.
<PAGE> 8
9.02 TERMINATION FOR CAUSE. Termination "for cause" shall mean (i)
conviction of robbery, bribery, extortion, embezzlement, fraud, grand larceny,
burglary, perjury, income tax evasion, misapplication of company funds, false
statements in violation of 18 U.S.C. Sec. 1001, and any other felony that is
punishable by a term of imprisonment of more than one year, or (ii) any breach
of the participant's duty of loyalty to the corporation, any acts of omission in
the performance of his company duties not in good faith or which involve
intentional misconduct or a knowing violation of law, or any transaction in the
performance of his company duties from which the participant derived an improper
personal benefit. In the event the Participant's relationship with the
Corporation and all Affiliates is terminated for cause, no benefits of any kind
will be due or payable under the terms of the Plan and such Participant's
Account (less such Participant's interest in the Account attributable to
deferrals) shall be forfeited.
ARTICLE TEN
10.01 APPLICATION FOR HARDSHIP DISTRIBUTION. In the event a Participant
incurs a financial hardship, as hereinafter defined, such Participant may apply
to the Plan Administrator for a hardship distribution. After a Participant's
death, his or her beneficiary may apply for a hardship distribution, and
references herein to the Participant shall include the beneficiary. The Plan
Administrator shall consider the circumstances of each such case, and the best
interests of the Participant and his or her family, and shall have the right, in
its sole discretion, to allow such application, in full or in part, or to refuse
to make a hardship distribution.
10.02 AMOUNT OF DISTRIBUTION. In no event shall the amount of any
hardship distribution exceed the lesser of: (a) The portion of the Participant's
Account attributable to his or her deferrals pursuant to paragraph 1.02 hereof
(exclusive of any investment earnings or losses thereon) or (b) that amount
determined by the Plan Administrator to be necessary to alleviate the hardship,
including any taxes payable by the Participant as a result of receiving such
hardship distribution, and which is not reasonably available from other
resources of the Participant.
10.03 FINANCIAL HARDSHIP. For purposes of this Article, a "financial
hardship" means an immediate and heavy financial need of the Participant.
10.04 FURTHER DEFERRALS. A Participant who receives a hardship
distribution shall be prohibited from making deferrals under paragraph 1.02 for
the remainder of the Calendar Year in which the distribution is made and for the
next succeeding Calendar Year
10.05 RULES ADOPTED BY PLAN ADMINISTRATOR. The Plan Administrator shall
have the authority to adopt additional rules relating to hardship distributions.
In administering these rules, The Plan Administrator shall act in accordance
with the principle that the primary purpose of this Plan is to provide
additional retirement income, not additional funds for current consumption.
10.06 LIMIT ON NUMBER OF HARDSHIP DISTRIBUTIONS. No Participant may
receive more than one hardship distribution in any Calendar Year.
10.07 IN-SERVICE DISTRIBUTION. At the time of completing an "Election
of Deferral", a Participant may elect to receive an In-Service Distribution.
<PAGE> 9
10.08 TIMING OF DISTRIBUTION. An In-Service Distribution shall commence
on the date elected by the Participant. In all cases, such date elected must be
before the Normal Retirement Date.
10.09 AMOUNT OF IN-SERVICE DISTRIBUTION. The amount of an In-Service
Distribution may be specified by the Participant, up to one hundred percent
(100%) of the amounts deferred by the Participant under Paragraph 1.02 hereof,
plus any investments gains or losses attributable thereto.
ARTICLE ELEVEN
11.01 BENEFICIARY DESIGNATION. The Participant shall have the right, at
any time, to submit in substantially the form attached hereto as Exhibit C, a
written designation of primary and secondary beneficiaries to whom payment under
this Plan shall be made in the event of his or her death prior to complete
distribution of the benefits payable. Each beneficiary designation shall become
effective only when receipt there of is acknowledge in writing by the
Corporation. The Corporation shall have the right, in its sole discretion, to
reject any beneficiary designation which is not in substantially the form
attached hereto as Exhibit C. Any attempt to designate a beneficiary, otherwise
than as provided in this Article, shall be ineffective.
ARTICLE TWELVE
12.01 NO TRUST CREATED. Nothing contained in this Plan, and no action
taken pursuant to its provisions by any individual shall create, or be construed
to create, a trust of any kind, or a fiduciary relationship between the
Corporation and any other individual.
12.02 BENEFITS PAYABLE ONLY FROM GENERAL CORPORATE ASSETS: (UNSECURED
GENERAL CREDITOR STATUS OF PARTICIPANT). (a) Payments to the Participant or any
beneficiary hereunder shall be made from assets which shall continue, for all
purposes, to be part of the general, unrestricted assets of the Corporation; and
no individual shall have any interest in any such asset by virtue of any
provision of this Plan. The Corporation's obligation hereunder shall be an
unfunded and unsecured promise to pay money in the future. To the extent that
any individual acquires a right to receive payments from the Corporation under
the provisions hereof, such right shall be no greater than the right of any
unsecured general creditor of the Corporation; no such individual shall have or
acquire any legal or equitable right, interest or claim in or to any property or
assets of the Corporation. (b) In the event that, in its discretion, the
Corporation purchases an insurance policy or policies insuring the life of a
Participant (or any other property), to allow the Corporation to recover or meet
the cost of providing benefits, in whole or in part, hereunder, no Participant
or beneficiary shall have any rights whatsoever therein or in the proceeds
therefrom. The Corporation shall be the sole owner and beneficiary of any such
insurance policy or property and shall possess and may exercise all incidents of
ownership therein.
12.03 NO CONTRACTUAL RELATIONSHIP. Nothing contained herein shall be
construed to be a contract for personal services for any term of years, nor as
conferring upon the Participant the right to continue to render services to the
Corporation in his or her present capacity or in any capacity. It is expressly
understood that this Plan relates to the payment of deferred compensation for
the Participant's services, payable after such Participant's relationship with
the Corporation terminates, and is not intended to be a personal services
contract.
<PAGE> 10
12.04 INTERESTS NOT TRANSFERABLE. No Participant or beneficiary under
this Plan shall have any power or right to transfer, assign, anticipate,
hypothecate or otherwise encumber any part of all of the interest otherwise
distributable hereunder. No such Plan interest shall be subject to seizure by
any creditor of any such Participant or beneficiary, by any proceeding at law or
in equity, nor shall such interest be transferable by operation of law in the
event of bankruptcy, insolvency or death of the Participant or beneficiary. Any
such attempted assignment shall be void. No such right, benefit or interest
shall be liable for or subject to the debts, contracts, liabilities, or torts of
the individual entitled to such benefits, including claims for alimony, support,
or separate maintenance by the spouse or ex-spouse of the Participant. If a
Participant should become insolvent or bankrupt, or attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge any right to benefits under
this Plan, such Participant's interest in the Plan, in the discretion of the
Plan Administrator, shall be extinguished. In such event, the Plan Administrator
in its sole discretion may hold or apply the interest at issue, or any part
thereof, for the benefit of such Participant, such Participant's spouse, or such
Participant's beneficiary, in such manner as the Plan Administrator in its sole
discretion may deem proper. Notwithstanding the generality of the foregoing, the
Corporation shall have the unrestricted right to set off against or recover out
of any payments or benefits becoming payable to or for the benefit of a
Participant, at the time such payments or benefits otherwise become payable
hereunder, any amounts owed or owing to the Corporation by such Participant.
12.05 INDEMNIFICATION AGAINST THIRD PARTY CLAIMS. Each Participant, by
executing a Participation Agreement and becoming a Participant hereunder,
acknowledges and agrees to indemnify and hold the Corporation harmless from and
against any damages, losses and expenses (including without limitation
litigation costs incurred by the Corporation in connection with the
administration of the Plan) arising from third-party claims disputes involving
such Participant's Plan interest (including without limitation, tax liens and
levies, creditors' claims, garnishment and bankruptcy proceedings, and
proceedings in domestic relations court).
12.06 HOLD HARMLESS OF CORPORATE AGENTS. The Corporation, and its
directors, officers and employees, shall be free from liability, joint or
several, for personal acts, omissions, and conduct, and for the acts, omissions
and conduct of duly appointed agents, in the administration of this Plan so long
as taken in good faith.
12.07 TAXES; NO GUARANTEE OF TAX CONSEQUENCES. The Corporation shall be
entitled to withhold and remit any federal, state and local taxes from any
distribution made hereunder which such Corporation believes are necessary,
appropriate, or required by relevant law, regulation or ruling. The Corporation
makes no representation, warranty or guarantee of any federal, state or local
tax consequences of participation in the Plan to any Participant or beneficiary
thereof, or any personal representative or attorney-in-fact for any such
Participant or beneficiary. .
ARTICLE THIRTEEN
13.01 CLAIM PROCEDURE. A person who believes that he or she is being
denied a benefit to which he or she is entitled under the Plan (hereinafter
referred to as a "Claimant") may file a written request for such benefit with
the Corporation, setting forth his or her claim. The request must be addressed
to the Board.
<PAGE> 11
13.02 CLAIM DECISION. Upon receipt of a claim, the Corporation shall
advise the Claimant that a reply will be forthcoming within 90 days and the Plan
Administrator shall, in fact, deliver such reply within such period. The Plan
Administrator may, however, extend the reply period for an additional 90 days
for reasonable cause. If the claim is denied in whole or in part, the Plan
Administrator shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth:
i. The specific reason or reasons for such denial;
ii. Specific reference to pertinent provisions of this Plan on
which such denial is based;
iii. A description of any additional material or information
necessary for the Claimant to perfect his or her claim and an
explanation why such material or such information is
necessary;
iv. Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
v. The time limits for requesting a review under subsection iii
and for review under subsection iv hereof.
13.03 REQUEST FOR REVIEW. Within 60 days after receipt by the Claimant
of the written opinion described above, the Claimant may request in writing that
the Corporation review the Plan Administrator's determination. Such request must
be addressed to the Secretary of the Corporation at its then principal place of
business. The Claimant or his or her duly authorized representative may, but
need not, review the pertinent documents and submit issues and comments in
writing for consideration by the Corporation. If the Claimant does not request a
review of the determination within such 60 day period, he or she shall be bared
and estopped from challenging the determination.
13.04 REVIEW OF DECISION. Within 60 days after the Corporation's
receipt of a request for review, it will review the Plan Administrator's
determination. After considering all materials presented by the Claimant, the
Corporation will render a written opinion, written in a manner calculated to be
understood by the Claimant, setting forth the specific reasons for the decision
and containing specific references to the pertinent provisions of this Plan on
which the decision is based. If special circumstances require that the 60 day
time period be extended, the Corporation will so notify the Claimant and will
render the decision as soon as possible, but no later than 120 days after
receipt of the request for review.
13.05 EFFECT OF REVIEWED DECISION. A final decision by the Corporation,
made following a review conducted in accordance with the provisions of paragraph
13.04 hereof, shall be final, conclusive and binding on the Claimant, such
Claimant's dependents and/or beneficiaries, and such Claimants heirs and
assigns.
<PAGE> 12
ARTICLE FOURTEEN
14.01 AMENDMENT. This Plan may be amended or terminated by the
Corporation at any time, without notice to or consent of any person. Any such
amendment or termination shall take effect as of the date specified therein and,
to the extent permitted by law, may have retroactive effect. However, no such
amendment or termination shall reduce (i) the amount then credited to the
Participant's Account, or (ii) his or her vested percentage under paragraph
3.01. If the Plan is terminated, benefits will be distributed in accordance with
Article Six hereof. Any other provision of this Plan to the contrary
notwithstanding, the Plan may be amended by the Corporation at any time, and
retroactively if required to the extent that, in the opinion of the Corporation,
such amendment is needed to ensure that the Plan will be characterized as a plan
maintained principally for a select group of management or highly compensated
employees, as described in sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, or
to conform the Plan to the requirements of any applicable law, including ERISA
and the Code. No such amendment shall be considered prejudicial to any interest
of a Participant or beneficiary hereunder.
ARTICLE FIFTEEN
15.01 NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of this Plan shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent or demand is
mailed, it shall be sent by United States certified mail, postage prepaid,
addressed to the addressee's last known address as shown on the records of the
Corporation. The date of such mailing shall be deemed the date of notice consent
or demand. Any person may change the address to which notice is to be sent by
giving notice of the change of address in the manner aforesaid.
ARTICLE SIXTEEN
16.01 FACILITY OF PAYMENT. If a distribution is to be made to a minor,
or to a person who is otherwise incompetent, then the Plan Administrator may, in
its discretion, make such distribution (i) to the legal guardian, or if none, to
a parent of a minor payee with whom the payee maintains his or her residence, or
(ii) to the conservator or committee or, if none, to the person having custody
of an incompetent payee. Any such distribution shall fully discharge the Plan
Administrator, the Corporation and Plan from further liability on account
thereof.
ARTICLE SEVENTEEN
17.01 BOARD AUTHORITY. The Board shall have full power and authority to
interpret, construe, and administer this Agreement and the Board's
interpretations and constructions thereof, and actions thereunder, including any
valuation of a Participant's Account or the amount or recipient of any
distribution to be made therefrom, shall be binding and conclusive on all
persons for all purposes, subject to the terms and conditions of Article 12. No
member of the Board shall be liable to any person for any action taken or
admitted in connection with the interpretation and administration of this
Agreement unless attributable to their willful misconduct or lack of good faith.
<PAGE> 13
ARTICLE EIGHTEEN
18.01 GOVERNING LAW. The Plan and the right and obligations of all
persons hereunder shall be governed by and construed in accordance with the laws
of the State of Ohio, other than its laws regarding choice of law, to the extent
that such state law is not preempted by federal law.
18.02 ENTIRE AGREEMENT. This Plan instrument, and Exhibits A, B and C
(incorporated herein by reference) represent the entire agreement and
understanding between the Corporation and those individuals having or acquiring
an interest hereunder. Accordingly, all prior or contemporaneous oral statements
and writings hereby are superseded.
IN WITNESS WHEREOF, the Corporation has executed this Plan as of the
day and year above first written.
ATTEST: KEITHLEY INSTRUMENTS, INC.
___________________________ By:_____________________________
Title:__________________________
___________________________ By: ____________________________
(Participant)
<PAGE> 14
KEITHLEY INSTRUMENTS, INC.
SUPPLEMENTAL DEFERRAL PLAN
AMENDMENT 1
SECTION 10.07- IN-SERVICE DISTRIBUTION - At the time of completing an "Election
of Deferral", a Participant may elect to receive an In-Service Distribution, for
purposes of meeting all or a part of his children's or grandchildren's
educational expenses, or a purchase of a future residence
IS HEREBY AMENDED AS FOLLOWS EFFECTIVE OCTOBER 1, 1999:
10.07. At the time of completing an "Election of Deferral", a
Participant may elect to receive an In-Service Distribution.
<PAGE> 1
EXHIBIT 10(D)
-------------
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated this 26th day of September, 1988 between
Keithley Instruments, Inc., an Ohio corporation, (hereinafter called the
"Company"), and Joseph P. Keithley (hereinafter called the "Employee").
WHEREAS, the Company considers the establishment and maintenance of
sound and vital management to be essential to protecting and enhancing the best
interest of the Company and its shareholders; and
WHEREAS, the Company wishes to assure itself of the Employee's
full-time employment during the period specified herein; and
WHEREAS, the Employee is prepared to enter into an employment agreement
with the Company and to give the Company the assurances it desires;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements herein set forth, the parties hereto have agreed and do hereby
mutually agree as follows:
I) TERM OF AGREEMENT
The term of this Agreement shall commence on the date first above written,
and shall continue through and including the fifth (5th) anniversary of the date
hereof, unless sooner terminated pursuant to Section VI or XII hereinbelow.
II) RESPONSIBILITY
It is agreed that the Employee is hereby employed by the Company with
responsibility to perform such duties, consistent with his position, as Vice
Chairman of the Board of Directors, member of the Office of Chairman of the
Company, and Director of Marketing as shall be assigned to him by the Board of
Directors of the Company.
III) ACCOUNTABILITY
It is agreed that in exercising his responsibilities as a member of the
Office of Chairman and Vice Chairman of the Board of Directors, the Employee
will be accountable to the Company's Board of Directors and as Director of
Marketing, the Employee will be accountable to the President and Chief Executive
Officer of the Company. The Employee agrees to: (i) devote his business time and
efforts full-time to the affairs of the Company and its affiliates, and (ii) use
his best efforts to promote the interests of the Company and its affiliates.
IV) REMUNERATION
A) BASE SALARY. The Employee will be employed during the term of this
Agreement at an annual base salary of not less than One Hundred Twenty
Thousand Dollars ($120,000), paid on a monthly basis. This base salary
may be increased, but not decreased, without the Employee's consent, at
the discretion of the Compensation Committee of the Board of Directors
of the Company.
B) ADDITIONAL COMPENSATION. The Employee shall be eligible to participate
in incentive, stock option, profit-sharing, annual cash bonus, deferred
compensation, supplemental retirement and similar plans maintained by
the Company for the benefit of its executives.
C) PAYMENT OF COMPENSATION. The annual base salary described in Section
IV, A hereof shall be paid throughout the term of this Agreement
subject to the following:
<PAGE> 2
i) Such compensation shall terminate up the death or resignation
without "Good Reason" as described in Section VI, A, and C
hereof, respectively, of the Employee;
ii) Such compensation shall not terminate, but rather shall be
increased by 25% upon the resignation for "Good Reason" as
described in Section VI, D hereof, of the Employee;
iii) Such compensation shall terminate upon the termination of the
Employee's employment by the Company "For Cause" as described in
Section VI, E hereof; and
iv) Such compensation shall not terminate, but rather shall be
increased by 25%, upon the termination of the Employee's
employment by the Company other than "For Cause" as described in
Section VI, E hereof.
The Employee's right to receive the foregoing payments shall be subject to the
covenant not to compete set forth in Section VIII hereof.
V) OTHER EMPLOYEE FRINGE BENEFITS
The Employee shall be included to the extent eligible thereunder (at the
expense of the Company, if provided at Company expense for other executives of
the Company) under any and all existing plans or arrangements (and any plans or
arrangements which may be adopted) providing benefits for its employees,
including but not limited to group life insurance, hospitalization, medical,
pension, automobile, financial services and any and all other similar or
comparable benefits at least to the extent they may be in effect for other
executives of the Company from time to time during the term of this Agreement.
Additional or improved fringe benefits are to be calculated for and awarded to
the Employee in at least as beneficial a manner as they are calculated for and
awarded to such other executive.
Nothing in this Agreement shall adversely affect the rights of the Employee
or his beneficiaries under the present or any future retirement, profit-sharing,
insurance, or other fringe benefit or compensation plans or arrangements which
the Company now has or may adopt for its employees, and no rights or the
Employee thereunder shall be forfeited by any action set forth in this Agreement
unless so provided in such plans or arrangements.
VI) TERMINATION OF EMPLOYMENT
A) DEATH. If the Employee shall die during the term of this Agreement,
the duties of the Company and the Employee, one to the other, under
this Agreement shall terminate as of the date of the Employee's death.
Notwithstanding the sentence immediately preceding, the death of the
Employee shall not adversely affect the rights of this beneficiaries
to any benefits under the Company's employee benefit plans or
arrangements in which he may be a participant, in accordance with the
terms thereof, including but not limited to those referred to in
Section VI, G hereof.
B) DISABILITY. During the term hereof, compensation hereunder shall
continue during any period of disability irrespective of the nature
and extent of such disability; the Employee shall render services as
he is able to render consistent with any such disability. During the
term hereof, the Company hereby acknowledges its agreement to continue
the Employee's status as an employee during any period of disability
and to continue the Employee's salary and benefits during such period,
less any payments or benefits under any disability program or plan
maintained by the Company.
C) RESIGNATION WITHOUT GOOD REASON. If the Employee voluntarily leaves
the employ of the Company during the term of this Agreement without
"Good Reason", as described below, the duties of the Company and the
Employee, one to the other, under this Agreement
<PAGE> 3
shall terminate as of the date of the Employee's termination of
employment. Notwithstanding the sentence immediately preceding, such
voluntary termination of employment by the Employee shall not
adversely affect his rights to any benefits under the Company's
employee benefit plans or arrangements in which he may be a
participant, in accordance with the provisions thereof, including but
not limited to those referred to in Section VI, G hereof.
D) RESIGNATION FOR GOOD REASON. The Employee may terminate his employment
at any time for Good Reason which maybe any of the following:
i) the assignment tot he Employee, without his consent, of any
substantial duties inconsistent with his positions, duties,
responsibilities and status with the Company;
ii) a reduction by the Company without the Employee's consent in his
base salary as in effect on the date hereof or as the same may be
increased from time to time;
iii) a failure by the Company to continue the Employee as a
participant in the Company's bonus plan, as the same may be
modified from time to time but substantially in the form
currently in effect, on at least as favorable of a basis as the
present basis without otherwise compensating the Employee for the
amounts which he would otherwise have been entitled to receive
based on the Company's performance in accordance with such plan;
iv) the Company's requiring the Employee, without his consent, to be
permanently based anywhere other than the Company's principal
executive offices, or in the event he consents to any such
relation, the failure by the Company to pay (or reimburse the
Employee for) all reasonable moving expenses actually incurred by
the Employee or to indemnify the Employee against any loss
realized in the sale of his principal residence in connection
with any such relocation. Travel required with respect to the
Company's business to an extent substantially consistent with the
Employee's present business travel obligations or consistent with
his duties or position with the Company shall not be deemed a
relocation;
v) the failure by the Company to continue the Employee as
participant in or to designate the Employee as a participant in
any benefit plan or arrangement, including any retirement plan,
compensation plan, savings and profit sharing plan, stock
ownership plan, stock purchase plan, stock option plan, life
insurance plan, health-and-accident plan, dental plan or
disability plan in which he is currently participating or in any
similar plan or arrangement adopted or maintained by the Company
for its executives without otherwise compensating him for such
loss in benefits.
In no event shall the discontinuance of any compensation or other fringe
benefit plan or arrangement or the restructuring of the Company's compensation
or fringe benefit plans or arrangements constitute Good Reason unless the
Employee is not otherwise compensated and the net result is a substantial
economic loss for the Employee and unless the Employee notifies the Company in
writing of the existence and extent of such loss and grants the Company thirty
(30) days to cure the loss.
E) TERMINATION BY COMPANY. The Company may terminate the Employee's
employment at any time, without cause, subject to providing the
benefits hereinafter specified in accordance with the terms
hereof. The Company may terminate the Employee's employment at
any time "For Cause". In the event the Company shall terminate
the Employee's employment "For Cause," the duties of the Company
and the Employee, one to the other, under this Agreement shall
terminate as of the date of the Employee's termination of
employment. Notwithstanding the sentence immediately preceding,
such
<PAGE> 4
termination of employment of the Employee by the Company For Cause
shall not adversely affect his rights to any benefits under the
Company's employee benefit plans or arrangements in which he may be a
participant, in accordance with the provisions thereof, including but
not limited to those referred to in Section VI, G hereof.
As used herein the words "For Cause" shall be deemed to mean and include
(i) the Employee's conviction of either a felony involving moral turpitude or
any crime in connection with his employment by the Company which causes the
Company or any affiliated company a substantial detriment; or (ii) the
Employee's refusal to submit to a medical examination if directed to do so by
the Board to determine whether the Employee is disabled under subsection VI(B)
hereof; or (iii) the Employee's willful failure to take actions permitted by law
and necessary to implement policies of the Board which the Board has
communicated to him in writing, provided that minutes of a Board meeting
attended in its entirety by the Employee shall be deemed communicated to the
Employee; or (iv) the Employee's continued failure to perform his duties as an
executive officer of the Company (provided that the Employee shall not be deemed
to have continued to fail to perform his duties unless such a continued failure
shall have been attested to in writing by a majority of the Board of Directors
of the Company who are neither employees of the Company nor members of the
Keithley family not attorneys at law representing either the Company or members
of the Keithley family); or (v) any condition which either resulted from the
Employee's habitual drunkenness or addiction to narcotics, or resulted from any
intentionally self-inflicted injury; or (vi) acting in breach or contravention
of any material obligation, covenant or agreement of the Employee contained in
this Agreement, expressly including without limitation, the non-competition and
non-solicitation covenants set forth in Section VIII hereof or the provision of
the "Employee Agreement" or any similar agreement regarding confidentiality.
F) NOTICE OF TERMINATION. Any termination of the Employee's employment by
the Company or by the Employee shall be communicated by written Notice
of Termination to the other party hereto which notice shall set forth
the effective date of such termination which shall not be earlier than
the date of mailing, or delivery by other means, of the notice.
G) CONTINUATION OF EMPLOYEE BENEFITS. The death, disability or
termination of employment of the Employee, whether or not voluntary
and whether or not For Cause or for a Good Reason shall not result in
the loss by the Employee or his beneficiaries of any benefits under
any life insurance, death benefit, pension, profit sharing, stock
option, medical, deferred compensation, supplemental executive
retirement plan or other employee benefit plan or arrangement except
as provided for in such plan or arrangement.
VII) COMPENSATION UPON INVOLUNTARY TERMINATION FOR A GOOD REASON OR INVOLUNTARY
TERMINATION OTHER THAN FOR CAUSE
If the Employee's employment with the Company shall be terminated, during
the term of this Agreement, by the Employee for Good Reason or by the
Company other than For Cause, then the Employee shall be entitled to the
benefits provided below:
i) the Company shall pay the Employee, on a monthly basis, the amount
described in Section IV, C, ii or iv hereof, whichever shall be
applicable, which amount is one hundred twenty-five percent (125%) of
his full monthly base salary, determined as of the date of his
termination of employment, through the fifth (5th) anniversary of the
date hereof;
ii) full participation in the annual Extra Compensation Plan if his
termination of employment is on or subsequent to June 30 of the
respective fiscal year;
<PAGE> 5
iii) full participation in any performance award if the performance
measuring period ends within six months follow his termination of
employment;
iv) the choice of exercising all vested stock options up to thirty days
after his termination of employment, provided this provision shall not
extend the term of his options beyond their terms as initially
granted, and the Company agrees to request the Compensation Committee
of its Board of Directors to permit such exercise pursuant to Section
6(g) of the Keithley Instruments, Inc. 1984 Stock Option Plan or the
comparable provision of any future plan;
v) the Employee shall be deemed to have vested in his stock, if any,
required under the Company's restricted stock plan at a rate of 20%
per year of service subsequent to the date of sale of such stock to
the Employee;
vi) the Company shall maintain in full force and effect, following the
cessation of the Employee's active employment by the Company, for the
Employee's continued benefit through the fifth (5th) anniversary of
the date hereof, all employee fringe benefit plans and arrangement in
which he was entitled to participate immediately prior to the date of
the Notice of Termination, provided that if such continued coverage
would jeopardize the tax qualified status of such plan or arrangement
with respect to any other employee or the Company, the Company may
elect to provide the said benefit on an individual basis or provide
cash compensation equivalent to the benefit which otherwise would have
been provided so that the Employee shall suffer no financial loss
whatsoever due to such substitution;
vii) in addition to the retirement benefits to which the Employee is
entitled under the Company's Employees' Pension Plan, as amended from
time to time (the "Pension Plan"), the Employee shall be eligible to
participate in the Company's supplemental retirement program ; and
viii) reimbursement of fees for outplacement services actually used up to
$10,000.
Nothing in this Agreement shall be construed as amending any compensation
or fringe benefit plan or arrangement of the Company. All rights of the
Employee under any such plan or arrangement upon his termination of
employment must be determined under the terms of such plans or arrangements
at the time of the Employee's termination of employment.
VIII) COVENANT NOT TO COMPETE
The Employee agrees that during his employment with the Company, and after
his termination of employment for as long as payments hereunder are made by
the Company, the Employee shall remain in full compliance with the
following conditions:
i) He must not accept employment either directly or indirectly, with any
competitor of the Company.
ii) He must not allow the use of his name by or in any competitive
business.
iii) He must not employ for himself the services of any other employee of
the Company without the written permission of the Company.
iv) He must keep himself at all times reasonably available for
consultation (by telephone only after termination of employment) by
the officers and directors of the Company; provided that no such
consultation shall be required after the Employee attains age
sixty-five (65). In the event he is called upon to render any such
substantial consulting services (consistent with his other
activities),
<PAGE> 6
he shall receive additional compensation in a reasonable amount, and
any travel or other expenses which may be required in connection with
such services shall be paid by the Company.
The Company shall make payments under this Agreement only so long as the
Employee complies with the above conditions except to the extent expressly
waived in writing by the Board of Directors. In the event that the Employee
shall be determined to be guilty of violation of any of the foregoing
conditions by agreement or by the reasonable determination of the Board of
Directors and the Employee does not correct such violation within a
reasonable time, as determined by the Board after notice to him in writing,
the Company may thereafter suspend or terminate in whole or in part any
further payments under this Agreement.
This Agreement shall not be deemed to modify in any way any agreement
between the Company and the Employee concerning the protection of Company
secrets.
IX) DISSOLUTION, MERGER OR CONSOLIDATION
If the Company shall at any time be merged or consolidated into or with any
other corporation or corporations or if substantially all the assets of the
Company are sold or otherwise transferred to another corporation or party,
the provisions of this Agreement shall be binding upon and inure to the
benefit of the corporation surviving or resulting from such merger or
consolidation or to which such assets shall be sold or transferred, and
this provision shall apply in the event of any subsequent sale, merger,
consolidation or transfer.
X) NON-ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and to their successors. The Employee may not assign, pledge
or otherwise encumber any rights or interest hereunder without the written
consent of the Company. The Company may not assign this Agreement other
than as set forth in IX above.
IX) ENTIRE AGREEMENT OF THE PARTIES
This Agreement expresses the entire agreement of the parties, and all
promises, representations, understandings, arrangement and prior agreements
are merged herein and superseded hereby.
X) AMENDMENTS, TERMINATION
Except as herein provided, this Agreement cannot be terminated by
unilateral action of either party. However, this Agreement can be changed,
modified or terminated by mutual written agreement. No person, other than
pursuant to a resolution of the Board of Directors of the Company, shall
have any authority on behalf of the Company to agree to modify, change or
terminate this Agreement or anything in reference thereto, and any such
modification, change or termination must be in writing and signed by both
parties.
XI) LAWS GOVERNING
This Agreement has been entered into in the State of Ohio, and shall be
construed, interpreted and governed in accordance with the laws of the
State of Ohio.
<PAGE> 7
XII) TERMINATION OF PRIOR AGREEMENT
By execution of this Agreement, the parties hereto agree that any prior
agreement or understanding with respect to the Employee's employment by the
Company is terminated as of the date hereof and this Agreement shall be
effective, as of the date hereof, in lieu of any such prior agreement or
understanding.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officers thereunto duly authorized, and the Employee has hereunto set his hand,
as of the day and year first above written.
KEITHLEY INSTRUMENTS, INC.
("Company")
By /s/ Joseph F. Keithley
------------------------------
(Chairman, Board of Directors)
And /s/ Mark J. Plush
-----------------------------
(Corporate Secretary - Assistant)
JOSEPH P. KEITHLEY
("Employee")
/s/ Joseph P. Keithley
---------------------------------
<PAGE> 1
Exhibit 10(e)
KEITHLEY INSTRUMENTS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective: January 1, 1988
<PAGE> 2
TABLE OF CONTENTS
-----------------
ARTICLE NUMBER
- ------- ------
DEFINITIONS I
ELIGIBILITY AND PARTICIPATION II
ACCRUED RETIREMENT BENEFIT III
RETIREMENT BENEFITS IV
DISABILITY BENEFITS V
SPOUSE'S BENEFITS VI
FORFEITURE OF BENEFITS VII
FINANCING OF BENEFITS VIII
ADMINISTRATION IX
AMENDMENT AND TERMINATION X
MISCELLANEOUS XI
ii
<PAGE> 3
KEITHLEY INSTRUMENTS, INC.
--------------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
THIS AGREEMENT is made by KEITHLEY INSTRUMENTS, INC., an Ohio
corporation (hereinafter referred to as the "Company") on behalf of certain of
its senior executive employees;
W I T N E S S E T H
WHEREAS, it is necessary for the Company to attract, retain and
motivate highly competent senior management executives so that it may compete
effectively; and
WHEREAS, in order to attract, retain and motivate such senior
management executives, the Company has duly authorized the establishment of a
Supplemental Executive Retirement Plan in order to provide certain retirement,
death and disability benefits for its senior executives and their spouses
commensurate with those offered by other companies;
NOW, THEREFORE, the Company hereby establishes the KEITHLEY
INSTRUMENTS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, effective as of
January 1, 1988, as follows:
(iii)
<PAGE> 4
ARTICLE I
---------
DEFINITIONS
-----------
1.1 The words "Accrued Retirement Benefit" shall mean an amount
computed with respect to each Participant in accordance with Article III hereof.
1.2 The words "Actuarial Equivalent" shall mean the benefit having the
same value as the benefit which the actuarial equivalent replaces. The
determination of an actuarial equivalent shall be based on the actuarial
assumptions and methods which are set forth in the Pension Plan, except as
otherwise expressly provided in this Plan or as otherwise designated by the
Compensation Committee.
1.3 The word "Affiliate" shall mean any corporation or business
organization that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the Company, and
particularly shall mean any corporation or business organization during any
period during which it is a member of a controlled group of corporations or
trades or businesses which includes the Company within the meaning of Sections
414(b) and 414(c) of the Internal Revenue Code.
1.4 The words "Benefit Service" shall mean for any Participant his
credited service under the Pension Plan, together with any comparable service
with any Affiliate of the Company, but excluding any period of such service
after a Participant first becomes a Senior Executive and during which period the
Participant is not a Senior Executive due to action of the Compensation
Committee pursuant to Section 2.4 hereof.
1-1
<PAGE> 5
1.5 The word "Company" shall mean Keithley Instruments, Inc. and any
Affiliate, or any successor corporation or other business organization which
shall assume the obligations of this Plan as provided herein with respect to
Participants.
1.6 The word "Compensation" shall mean compensation as defined in the
Pension Plan specifically including employee elective deferral contributions
made pursuant to Sections 125 and 401(k) of the Internal Revenue Code, but
including such Compensation only during a period when the Participant was a
Senior Executive or at any time prior thereto.
1.7 The words "Compensation Committee" shall mean the Compensation
Committee of the Board of Directors of Keithley Instruments, Inc.
1.8 The words "Disability Plan Offset" shall mean the total amounts, if
any, actually payable to a Totally and Permanently Disabled Participant on the
date specified herein for their calculation under any short-term disability or
long-term disability plan, program, or insurance contract of the Company, or the
amount which would be payable thereunder upon application therefor. The words
"Disability Plan Offset" shall not include any amounts representing benefits
which might have been payable to a Totally and Permanently Disabled Participant
under such a plan, program, or contract if he had been "disabled" as defined
therein but which are not actually payable to the Totally and Permanently
Disabled Participant because he is not "disabled" as so defined.
1.9 The words "Earned Income" shall mean the total remuneration which a
Participant or Totally and Permanently Disabled Participant shall receive as
compensation or profit from the performance of services as an employee of any
corporation, partnership, organization, govern-
1-2
<PAGE> 6
mental agency or as a self-employed individual, including amounts contributed to
a qualified retirement plan pursuant to such Participant's or Spouse's election
under a qualified cash or deferred arrangement (described in Section 401(k) of
the Internal Revenue Code of 1986) or a cafeteria plan (described in Section 125
of the Internal Revenue Code of 1986).
1.10 The words "Final Average Earnings" shall mean the total of a
Participant's Compensation during the three (3) consecutive Plan Years falling
within the ten (10) Plan Years inclusive of and next preceding the earlier of
the date he ceased to be a Senior Executive or his date of termination of
employment by the Company or an Affiliate, during which his Compensation was
highest, divided by thirty-six (36); provided, however, that if he has
Compensation for fewer than three (3) consecutive Plan Years, his Final Average
Earnings shall be determined based upon the number of months of Compensation
that he has.
1.11 The words "Life Annuity Basis" shall mean, with respect to a
Participant, that a benefit is payable monthly to a Participant during his life
and that no further benefits are payable after the death of the Participant.
1.12 The words "Normal Retirement Date" shall mean the first day of the
month coinciding with or next following a Participant's attainment of age
sixty-five (65).
1.13 The words "Other Retirement Plan Benefits" shall mean any benefits
provided by employer contributions, including benefits previously distributed or
to be distributed in the future, under:
(a) the Pension Plan;
1-3
<PAGE> 7
(b) the Keithley Instruments, Inc. Netirement Savings Trust and Plan;
(c) any pension, profit sharing, stock bonus or retirement plan,
practice or program of any other corporation, or any partnership,
organization, government or governmental agency, other than Federal
Social Security, which provides benefits to a Participant upon his
retirement or attainment of a stated retirement age, by reason of
his employment with or his performance of services for any such
entity excluding, however, any such plan, practice or program under
which a Participant accrues or accumulates benefits
contemporaneously with and during his participation in this Plan;
and
(d) any agreement entered into between the Participant and any other
corporation, partnership, organization, government or governmental
agency, with which he was employed or for which he performed
services, that provides for the nonvoluntary deferral of
compensation or remuneration until the Participant's attainment of
a stated retirement age, excluding, however, any such agreement
under which a Participant accrues or accumulates benefits
contemporaneously with and during his participation in this Plan.
The words "Other Retirement Plan Benefits" shall not include
any voluntary employee contributions or amounts contributed to a qualified
retirement plan as employee elective deferrals pursuant to a Participant's
election under a qualified cash or deferred arrangement (described in Section
401(k) of the Internal Revenue Code of 1986) and earnings on said contributions
and amounts.
1.14 The word "Participant" shall mean any eligible Senior Executive of
the Company who has performed all the acts required by this Plan to become a
Participant, who has become a Participant in accordance with Article II hereof,
and who remains a Participant hereunder.
1.15 The words "Pension Plan" shall mean the Keithley Instru-
ments, Inc. Employees' Pension Plan.
1.16 The word "Plan" shall mean the Keithley Instruments, Inc.
Supplemental Executive Retirement Plan.
1-4
<PAGE> 8
1.17 The words "Plan Year" shall mean the twelve (12) month period
ending on September 30 in each calendar year.
1.18 The words "Projected Accrued Retirement Benefit" shall mean in the
case of a Participant who becomes Totally and Permanently Disabled prior to his
Normal Retirement Date and prior to his termination of employment, the Accrued
Retirement Benefit he would have had at his Normal Retirement Date calculated on
the assumptions that between such date and his Normal Retirement Date:
(a) he would have remained employed by the Company;
(b) he would have had Compensation during each Plan Year ending in such
period in an amount equal to the greater of:
(i) his Compensation during the Plan Year immediately prior to such
date; and
(ii) his Compensation during the Plan Year in which such date
occurs;
(c) he would have remained a Senior Executive if he was a Senior
Executive on such date; and
(d) he would not have become a Senior Executive during such period if
he was not a Senior Executive on such date.
1.19 The words "Senior Executive" shall mean any executive employee of
the Company who shall be so designated as such by the Compensation Committee
pursuant to Article II hereof, but only while he remains so designated. A
Participant who becomes Totally and Permanently Disabled at a time when he is a
Senior Executive shall be deemed to continue to be a Senior Executive during the
period he remains Totally and Permanently Disabled.
1.20 The words "Social Security Offset" shall mean for a Participant,
who is eligible for retirement benefits under Article IV hereof, the monthly
amount of the primary and family old age insurance
1-5
<PAGE> 9
benefits under the Federal Social Security Act which are payable, or which upon
application thererfor would be payable, to the Participant on the dates
specified herein for computation thereof.
The words "Social Security Offset" shall mean for a Totally and
Permanently Disabled Participant, who is eligible for disability benefits under
Article V hereof, either: (a) the monthly amount of the primary disability
insurance benefits under the Federal Social Security Act which are payable, or
which upon application therefor would be payable, to the Totally and Permanently
Disabled Participant or (b) if old age, as opposed to primary disability
insurance benefits are payable under the Federal Social Security Act, the amount
specified in the first paragraph of this Section, on the dates specified herein
for the computation thereof.
The "Social Security Offset" of a Participant or Totally and Permanently
Disabled Participant shall be computed without regard to any reduction in his
Social Security benefits by reason of his Earned Income.
1.21 The word "Spouse" shall mean the person to whom a Participant is
married on the earliest of the date the Participant dies, the date of his
termination of employment or the date he becomes Totally and Permanently
Disabled; provided, however, that in the case of a person married to a
Participant who terminates his employment or becomes Totally and Permanently
Disabled, such person shall cease to be considered to be a "Spouse" if she shall
thereafter cease to be married to such Participant for any reason other than the
death of such Participant.
1-6
<PAGE> 10
1.22 The words "Termination of Employment" shall mean for any employee,
the occurrence of any one of the following events:
(a) his discharge;
(b) his voluntary termination of employment;
(c) his retirement;
(d) his failure to return to work:
(i) at the end of any leave of absence authorized by the
Company; or
(ii) within ninety (90) days following such employee's release
from military service or within any other period following
military service in which such employee's right to
reemployment with the Company is guaranteed by law; or
(iii) after the cessation of disability income payments under
this Plan and under any sick leave, short-term disability
program or long-term disability program of the Company.
1.23 The words "Totally and Permanently Disabled" shall mean for any
Participant that he has a total and permanent disability as defined in the
Pension Plan.
1-7
<PAGE> 11
ARTICLE II
----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
2.1 An employee of the Company shall be qualified to become a
Participant under this Plan when the Compensation Committee shall, at its
discretion, designate him a Senior Executive.
2.2 The Compensation Committee shall, upon designating an employee a
Senior Executive, notify such employee in writing of his eligibility and of the
actions necessary to become a Participant hereunder, and shall provide him with
the opportunity to become a Participant. If such eligible employee desires to
become a Participant, he shall, within such time as the Compensation Committee
shall determine:
(a) furnish to the Compensation Committee all information requested by
it;
(b) execute such documents and such instruments as the Compensation
Committee may require to facilitate the administration of this Plan;
(c) agree in such form and manner as the Compensation Committee may
require to be bound by the terms of this Plan and by the terms of
such Amendments as may be made hereto; and
(d) truthfully and fully answer any questions and supply any information
which the Compensation Committee deems necessary or desirable for
the proper administration of this Plan, without any reservations
whatsoever.
The agreement with a Senior Executive may contain special provisions applicable
only to such Senior Executive and approved by the Compensation Committee.
2.3 An eligible employee who shall have timely done all acts required of
him to become a Participant shall become a Participant on or as of such date as
shall be specified by the Compensation Committee.
<PAGE> 12
2.4 At any time after the effective date of this Plan, the Compensation
Committee may, in its sole discretion, determine that any employee, who has not
attained his Normal Retirement Date, terminated his employment, become Totally
and Permanently Disabled or died, and who shall have previously been designated
by it as a Senior Executive, is no longer entitled to be so designated and may
withdraw such designation with respect to such employee. The withdrawal of the
designation of an employee as a Senior Executive shall become effective as of
the date specified by the Compensation Committee which date may not be earlier
than the date upon which the Compensation Committee determines such employee is
no longer a Senior Executive. Such employee shall continue to be a Participant
in this Plan but shall not accrue any further Benefit Service.
2.5 A Participant shall automatically cease to be a Senior Executive on
his date of termination of employment.
2-2
<PAGE> 13
ARTICLE III
-----------
ACCRUED RETIREMENT BENEFIT
--------------------------
3.1 The Accrued Retirement Benefit of a Participant wrio remains a
Senior Executive until his Normal Retirement Date shall be an amount equal to
sixty percent (60%) of his Final Average Earnings, reduced, in the case of a
Participant who has completed less than fifteen (15) years of Benefit Service at
the time he retires, by one-one hundred eightieth (1/180) thereof for each month
that his Benefit Service is less than one hundred eighty (180) months.
3.2 The Accrued Retirement Benefit of a Participant who ceases to be a
Senior Executive prior to his Normal Retirement Date shall be an amount equal to
(a) multiplied by (b) below, where:
(a) equals the amount his Accrued Retirement Benefit would have been on
his Normal Retirement Date if he had remained a Senior Executive
until his Normal Retirement Date, computed on the basis of his Final
Average Earnings determined as of the date he ceased to be a Senior
Executive; and
(b) equals a fraction, the numerator of which shall be the number of
years (computed to the nearest one-twelfth (1/12th) year) of such
Participant's Benefit Service, and the denominator of which shall be
the number of years (computed to the nearest one-twelfth (1/12th)
year) of Benefit Service which such Participant would have had if he
had remained a Senior Executive until his Normal Retirement Date.
3-1
<PAGE> 14
ARTICLE IV
----------
RETIREMENT BENEFITS
-------------------
4.1 Each Participant who continues in the employ of the Company until
his Normal Retirement Date shall be entitled to retire on such date or at any
time thereafter and shall be eligible for retirement benefits under this Plan
commencing on the first day of the month after his termination or employment.
4.2 Each Participant who continues in the employ of the Company until
(a) his completion of fifteen (15) years of Benefit Service and his attainment
of age sixty (60), or (b) his completion of thirty (30) years of Benefit
Service, shall be entitled to retire at any time thereafter, prior to his Normal
Retirement Date, and shall be eligible for retirement benefits under this Plan
commencing on the first day of any month on or after his termination of
employment but not later than his Normal Retirement Date, as such Participant
shall designate in writing to the Compensation Committee.
4.3 Retirement benefits payable to a Participant pursuant to this
Article IV shall be payable commencing on the date specified in Section 4.1 or
4.2 hereof in a form of benefit provided under the Pension Plan other than the
lump sum form. If the benefit under this Plan commences at the same time or
after the benefit under the Pension Plan, it shall be payable in the same form
with the same designation of beneficiary as under the Pension Plan; provided,
however, that if the Participant is to receive a lump sum payment under the
Pension Plan, his benefit hereunder will be paid on the basis of another form
provided under the Pension Plan and selected by the Participant. If the benefit
4-1
<PAGE> 15
under this Plan commences before the benefit under the Pension Plan, or if there
i.s no benefit under the Pension Plan, the benefit under this Plan need not be
payable in the same form or with the same beneficiary as under the Pension Plan,
but shall be payable in such form as shall be selected by the Participant.
4.4 Subject to adjustments pursuant to Section 4.6 hereof, the monthly
amount of retirement benefits payable commencing on his Normal Retirement Date
on a Life Annuity Basis to a Participant eligible therefor pursuant to this
Article IV shall be equal to his Accrued Retirement Benefit reduced by the total
of:
(a) his Social Security Offset; plus
(b) the amount specified in Section 4.5 hereof.
Furthermore, if the benefit payable hereunder is payable other than on a
Life Annuity Basis or if it commences prior to the Partici- pant's Normal
Retirement Date, the reduced Accrued Retirement Benefit shall be further reduced
as follows:
(i) if payment commences prior to the Participant's Normal Retirement
Date, such benefit shall be reduced by one-half of one percent
(0.5%) thereof for each complete month, if any, that the date
retirement benefits commence to said Participant precedes his
Normal Retirement Date; plus
(ii) if payment is in a form other than on a Life Annuity Basis, such
benefit shall be reduced so that it is the actuarial equivalent of
a benefit payable on a Life Annuity Basis.
4.5 The amount of the reduction specified in Subsection
4.4(b) above shall be equal to the total Other Retirement Plan Benefits payable,
or which would be payable upon application therefor, to the Participant on a
Life Annuity Basis commencing on the date retirement benefits commence to the
Participant pursuant to this Article IV. In the event that the Participant is
entitled to nonforfeitable Other
4-2
<PAGE> 16
Retirement Plan Benefits, but such benefits are not payable and would not be
payable upon application on a Life Annuity Basis or are not payable commencing
on the date retirement benefits commence to the Participant pursuant to this
Article IV, or both, the amount of the reduction specified in Subsection 4.4(b)
above shall be equal to the amount which, if such amount were payable on a Life
Annuity Basis commencing on the date retirement benefits commence to the
Participant pursuant to this Article IV, would be the actuarial equivalent of
his nonforfeitable Other Retirement Plan Benefits. Such reduction shall be
computed on the date retirement benefits commence to the Participant under this
Article IV and shall not thereafter be subject to adjustment by reason of any
change in the Other Retirement Plan Benefits payable to the Participant.
4.6 The amount of retirement benefits payable to a Participant who is
not eligible for primary Social Security Benefits on the date his retirement
benefits commence for a reason other than a limit on his maximum Earned Income,
shall be recomputed to reflect the change in his Social Security Offset on the
date he first becomes eligible to receive such benefits or would become eligible
to receive such benefits except for a limit on his maximum Earned Income.
4-3
<PAGE> 17
ARTICLE V
---------
DISABILITY BENEFITS
-------------------
5.1 Each Participant who, prior to his Normal Retirement Date and while
he is in the employ of the Company, becomes Totally and Permanently Disabled
shall be eligible for disability benefits under this Plan commencing on the
earlier of:
(a) the first day of the first (1st) month following his attainment
of age sixty-five (65); or
(b) the date his benefit begins under the Pension Plan;
but not earlier than the date which would allow him to receive
unreduced benefits under the Company's short-term or long-term
disability plan. Such benefits shall be payable as of the first day
of each month thereafter in the same form as the Participant is
receiving or is to receive benefits under the Pension Plan;
provided, however, that if he is to receive a lump sum payment under
the Pension Plan, his benefit hereunder will be paid on a Life
Annuity Basis. Payment of disability benefits hereunder shall be in
lieu of payment of retirement benefits under Article IV hereof.
5.2 The monthly amount of disability benefits payable to a Participant
pursuant to this Article V shall be equal to his Projected Accrued Retirement
Benefit reduced by the total of:
(a) his Social Security Offset; plus
(b) his Disability Plan Offset; plus
(c) the amount specified in Section 5.3 hereof; plus
5-1
<PAGE> 18
(d) if payment commences prior to the Participant's Normal Retirement
Date, such benefit shall be reduced by one-half of one percent
(0.5%) thereof for each complete month, if any, that the date
retirement benefits commence to said Participant precedes his Normal
Retirement Date; plus
(e) if payment is in a form other than on a Life Annuity Basis, such
benefit shall be reduced so that it is the actuarial equivalent of a
benefit payable on a Life Annuity Basis.
The amount of disability benefits shall be recomputed to
reflect changes in either the Participant's Disability Plan Offset or his Social
Security Offset as of each of the following dates:
(i) the date payments to the Totally and Permanently Disabled
Participant under any long-term or short-term disability plan of
the Company shall cease;
(ii) the date the waiting period for disability benefits under the
Federal Social Security Act ends, if the Totally and Permanently
Disabled Participant is eligible for such disability benefits; and
(iii) the date upon which there is any change in the definition of
disability contained in any long-term disability plan of the
Company under which he is eligible to receive disability benefits.
In any such recomputation, increases in the rate of the Totally and Permanently
Disabled Participant's disability benefits under the Federal Social Security Act
as a result of amendments to such Act or increases in the cost of living shall
be disregarded. Disability benefits payable pursuant to this Article V after the
date of the recomputation shall be paid in accordance with the amount as
recomputed.
5-2
<PAGE> 19
5.3 The amount of the reduction specified in Subsection 5.2(c) above
shall be equal to the total monthly Other Retirement Plan Benefits payable to
the Totally and Permanently Disabled Participant, and any such benefits which
would be payable upon application therefor, which benefits commence on the date
the Participant is entitled to receive disability benefits under this Article V.
5.4 A Participant shall become entitled to disability benefits under
this Article V only if the Compensation Committee finds that he is Totally and
Permanently Disabled as that term is defined in this Plan. In any case, where
the Compensation Committee makes a determination with respect to the disability
of any Participant applying for disability benefits, or of any Totally and
Permanently Disabled Participant during the period he is receiving such
benefits, the Participant shall be required to submit to such examinations and
reexaminations by a clinic, physician or physicians selected by the Compensation
Committee as the Compensation Committee deems necessary to establish his
eligibility for such disability benefits or his continued eligibility therefor;
provided that, in the case of any Totally and Permanently Disabled Participant
while he is receiving such disability benefits, reexamina- tions shall not be
made more frequently than twice in any twelve (12) month period nor shall any
such examination or reexamination be required after attainment of age sixty-five
(65). The Compensation Committee may substitute other equally conclusive
evidence, if it so decides, in place of such examination by a clinic, physician
or physicians. Fees of any clinic, physician or physicians making such
examinations shall be paid by the Company.
5-3
<PAGE> 20
5.5 In the event a Totally and Permanently Disabled Partici pant dies
prior to commencement of benefits under this Article V, a monthly benefit equal
to fifty percent (50%) of the amount determined pursuant to Section 5.2 hereof
will be paid to his Spouse commencing on the first day of the month next
following the death of the Participant. Such benefits shall be payable until the
earlier to occur of the death of the Spouse or her remarriage. Payment of a
death benefit hereunder shall be in lieu of payment of a Spouse's benefit under
Article VI hereof.
5-4
<PAGE> 21
ARTICLE V I
-----------
SPOUSE'S BENEFITS
-----------------
6.1 In the event that a Participant shall die after (a) his Normal
Retirement Date (b) his completion of fifteen (15) years of Benefit Service, or
(c) his completion of thirty (30) years of Benefit Service, but prior to the
date retirement benefits commence to the Participant pursuant to Article IV
hereof, his Spouse, if then living, shall be entitled to receive a Spouse's
benefit payable in accordance with Section o.2 hereof. The monthly amount of her
Spouse's benefit shall be equal to fifty percent (50%,) of the benefit which
would have been payable to the Participant pursuant to Section 4.4 hereof if
such Participant had commenced receiving retirement benefits on the first day of
the month following his date of death on a Life Annuity Basis. Solely for
purposes of calculating the amount of the Spouse's benefit payable with respect
to a Participant who dies after completion of fifteen (15) years of Benefit
Service but before he has attained age sixty (60) or completed thirty (30) years
of Benefit Service, such Participant's benefit hereunder shall be calculated as
if Section 4.2(a) of this Plan did not require attainment of age sixty (60) for
benefit entitlement.
6.2 Spouse's benefits payable pursuant to this Article VI shall be
payable monthly commencing on the first day of the month next following the
death of the Participant. Such benefits shall be payable until the earlier to
occur of the death of the Spouse or her remarriage.
6-1
<PAGE> 22
ARTICLE VII
-----------
FORFEITURE OF BENEFITS
----------------------
7.1 In the event the Compensation Committee shall receive a written
confession by a Participant, or retired or terminated Participant, or proor
satisfactory to the Compensation Committee, of the commission by such a
Participant of a felony against the Company or an Affiliate, the rights of such
Participant, and the rights of such Participant's Spouse, to receive retirement
benefits and/or death benefits provided herein shall immediately be forfeited
and the Company's obligation to pay or provide any such benefits shall thereupon
cease and terminate.
7.2 A Participant, during his employment with the Company or an
Affiliate, or a retired or terminated Participant who shall be entitled to
receive retirement benefits provided herein, must remain in full compliance with
the following conditions:
(a) He must not accept employment, either directly or indirectly,
with any competitor of the Company or any Affiliate;
(b) He must not allow the use of his name by or in any competitive
business;
(c) He must not employ for himself the services of any other
employee of the Company or any Affiliate without the written
permission of the Company; and
(d) He must keep himself at all times reasonably available for
consultation by the officers and directors of the Company;
provided that no such consultation shall be required after the
Participant attains age sixty-five (65). In the event he is
called upon to render any such substantial consulting services,
he shall receive additional compensation in a reasonable amount,
and any travel or other expenses which may be required in
connection with such services shall be paid by the Company.
7-1
<PAGE> 23
The Company shall make payments under this Plan only so long as the
retired or terminated Participant complies with the above conditions except to
the extent expressly waived in writing by the Compensation Committee. In the
event that a Participant or a retired or terminated Participant shall be
determined to be guilty of violation of any of the foregoing conditions by
agreement or by the reasonable determination of the Compensation Committee and
such Participant does not correct such violation within a reasonable time, as
determined by the Committee after notice to him in writing, the Company may
thereafter expel a Participant from this Plan or suspend or terminate in whole
or in part any further payments to a retired or former Participant under this
Plan and, if so expelled or to the extent such payments are suspended or
terminated, the Participant or retired or former Participant shall forfeit his
right and the right of his Spouse to receive any or any further retirement
benefit payments or any death benefits hereunder.
This Plan shall not be deemed to modify in any way any agreement between
the Company and the Participant concerning the protection ot Company secrets.
In the event of a disagreement between the retired or terminated
Participant, or his Spouse, and the Compensation Committee with respect to the
administration of this Section 7.2, appeal may be made for review by the Board
of Directors pursuant to Section 9.3 hereof.
7.3 In the event that, upon a date specified in Articles IV, V and VI
hereof for the commencement or recomputation of benefits payable under said
Articles, a Participant shall fail or refuse to
7-2
<PAGE> 24
provide the Compensation Committee with full, complete and accurate information
with respect to the amount of benefits, the commencement date of benet its and
the method of payment of benefits payable to the Participant under a retirement
plan which provides Other Retirement Plan Benefits, other than such a retirement
plan administered by the Company or an Affiliate, or under the Federal Social
Security Act, such Participant shall forreit all rights to receive any
retirement or disability benefits under this Pian and he shall forfeit the right
of his Spouse to receive any Spouse's benefits or other death benefits under
this Plan.
7-3
<PAGE> 25
ARTICLE VIII
------------
FINANCING OF BENEFITS
---------------------
8.1 The benefits provided under this Plan shall not be funded or
financed by the Company in any manner, and no escrow, trust fund, insurance
contract or contracts or other funding medium shall be established or purchased
by the Company for the benefit of the Participants or their Spouses. :\1l such
benefits shall be payable solely from the general funds of the Company. The
undertakings of the Company herein constitute merely the unsecured promise of
the Company to make the payments and provide the benefits set forth herein.
8.2 Notwithstanding the provisions of Section 8.1 hereof and any other
apparently contrary provisions of this Plan, the Company may set aside, in one
or more separate accounts, "Rabbi Trusts", annuity contracts or similar
vehicles, amounts intended to be used for payment of benefits hereunder. Such
setting aside shall not, however, result in this Plan being considered as
"funded" either for Federal income tax purposes or under the Employee Retirement
Income Security Act of 1974, as amended.
8-1
<PAGE> 26
ARTICLE IX
----------
ADMINISTRATION
--------------
9.1 The Compensation Connnittee shall be responsible for the general
administration of the Plan and shall have all such powers as may be necessary to
carry out the provisions of the Plan and may, from time to time, establish rules
for the administration of the Plan and the transaction of the Plan's business.
The Compensation Committee shall have the following powers and duties:
(a) To enact such rules, regulations, and procedures and to
prescribe the use of such forms as it shall deem advisable.
(b) To appoint or employ such agents, attorneys, actuaries, and
assistants at the expense of the Company, as it may deem
necessary to keep its records or to assist it in taking any
other action.
(c) To interpret the Plan, and to resolve ambiguities,
inconsistencies, and omis,ions, to determine any question of
fact, to determine the right to benefits of, and the amount of
benefits, if any, payable to, any person in accordance with the
provisions of the Plan.
9.2 If any Participant, any beneficiary, or the authorized
representative of a Participant or beneficiary shall file an application for
benefits hereunder and such application is denied by the Compensation Committee,
in whole or in part, he shall be notified in writing of the specific reason or
reasons for such denial. The notice shall also set forth the specific Plan
provisions upon which the denial is based, an explanation of the provisions of
Section 9.3 hereof, and any other information deemed necessary or advisable by
the Compensation Committee.
9-1
<PAGE> 27
9.3 Any Participant, any beneficiary, or any authorized representative
of a Participant or beneficiary whose application for benefits hereunder has
been denied, in whole or in part, by the Compensation Committee may, upon
written notice to the Compensation Committee, request a review by the Board of
Directors of Keithley Instruments, Inc. of such denial of his application. Such
review may be made by written briefs submitted by the applicant and the
Compensation Committee or at a hearing, or by both, as shall be deemed necessary
by the Board of Directors. Any hearing conducted by the Board of Directors shall
be held In such location as shall be reasonably convenient to the applicant. The
date and time of any such hearing shall be designated by the Board of Directors
upon not less than seven (7) days' notice to the applicant and the Compensation
Committee unless both of them accept shorter notice. The Board of Directors
shall make every effort to schedule the hearing on a day and at a time which is
convenient to both the applicant and the Compensation Committee. If the
applicant does not request a hearing, the Board of Directors shall review the
denial of such benefits without a hearing. Such hearing or review shall be made
on a DE NOVO basis rather than merely determining whether the decision of the
Compensation Committee was reasonable. After the review has been completed, the
Board of Directors shall render a decision in writing, a copy of which shall be
sent to both the applicant and the Compensation Committee. Such decision shall
set forth the specific reason or reasons for the decision and the specific Plan
provisions upon which the decision is based. When the Board of Directors shall
be called upon to render a decision pursuant to this Section 9.3, including a
decision as to whether it shall grant a request for a hearing, such decision
shall
9-2
<PAGE> 28
be in writing and shall be made by majority vote of the Board of Directors,
provided that no such decision may be adverse to the applicant unless it is
approved by a majority of those members of the Board of Directors who are
neither employees of the Company nor members of the Keithley family nor
attorneys at law representing either the Company or members of the Keithley
family. There shall be no further appeal from a decision rendered by the Board
of Directors.
9.4 The interpretations, determinations and decisions of the
Compensation Committee and Board of Directors shall, except to the extent
provided in Section 9.3 hereof and in this Section 9.4, be final and binding
upon all persons with respect to any right, benefit and privilege hereunder. The
review procedures of said Section 9.3 shall be the sole and exclusive remedy and
shall be in lieu of all actions at law, in equity, pursuant to arbitration or
otherwise.
9.5 The Company, Compensation Committee, Board of Directors, and their
respective officers, members, employees and agents shall have no duty or
responsibility under the Plan other than the duties and responsibilities
expressly assigned to them herein or delegated to them pursuant hereto. None of
them shall have any duty or responsibility with respect to the duties or
responsibilities assigned or delegated to another of them.
9.6 The Compensation Committee, Board of Directors, and their respective
officers, employees, members and agents shall incur no personal liability of any
nature whatsoever in connection with any act done or omitted to be done in good
faith in the administration of the Plan. The Compensation Committee, Board of
Directors, and their
9-3
<PAGE> 29
respective officers, employees, members and agents shall be indemnified and
saved harmless by the Company from and against any and all liabilities to which
they may be subjected by reason of any act or conduct in their respective
capacities under this Plan, including all expenses reasonably incurred in their
defense.
9-4
<PAGE> 30
ARTICLE X
---------
AMENDMENT AND TERMINATION
-------------------------
10.1 Subject to the provisions of Sections 10.2 and 10.3 hereof, this
Plan may be amended by Keithley Instruments, Inc. at any time, or from time to
time, and may be terminated by Keithley Instruments, Inc. at any time, but no
such amendment or termination will
(a) deprive any Participant or any terminated or retired Participant
of his right to receive his Accrued Retirement Benefit as determined
as of the date of such amendment or termination, or reduce the
amount of such Accrued Retirement Benefit, unless such Participant
consents in writing to such deprivation or reduction; or
(b) deprive the Spouse of any terminated or retired Participant of
her rights to receive the payments provided by Article VI hereof, or
reduce the amount of any such payments, unless such Participant
consents in writing to such deprivation or reduction; or
(c) deprive any Totally and Permanently Disabled Participant or his
Spouse of his or her right to receive disability benefits as
provided in Article V hereof, or reduce the amount of such
disability benefits.
10.2 Notwithstanding any provision of this Article X to the contrary,
Keithley Instruments, Inc. may amend or modify this Plan in any respect which
shall be necessary or advisable in order that the benefits provided by this Plan
shall constitute unfunded deferred compensation for a select group of management
or highly-compensated employees as described in Sections 201(2), 301(a)(3), and
401(a)(1) of the Employee Retirement Income Security Act of 1974.
10-1
<PAGE> 31
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1 Neither anything contained herein, nor any acts done in pursuance
of this Plan, shall be construed as entitling any Participant to be continued in
the employ of the Company or an Affiliate for any period of time nor as obliging
the Company or an Affiliate to keep any Participant in its employ for any period
of time, nor shall any employee of the Company or an Affiliate nor anyone else
have any rights whatsoever, legal or equitable, against the Company or an
Affiliate as a result of this Plan except those expressly granted to him
hereunder.
11.2 The undertakings of the Company herein constitute merely the
unsecured promise of the Company to make the payments and provide the benefits
as provided for herein. No property of the Company is or shall, by reason of
this Plan, be held in trust, except as otherwise provided in Section 8.2 hereof,
for any Participant, any Spouse, or any other person, and neither the
Participants nor any Spouse or any other person shall have by reason of this
Plan, any rights, title or interest of any kind in or to any property of the
Company.
11.3 Whenever any pronoun is used herein, it shall be construed to
include the masculine pronoun, the feminine pronoun or the neuter pronoun as
shall be appropriate.
11.4 This Plan shall be construed under and in accordance with the laws
of the State of Ohio and of the United States of America.
11.5 In the event that any provision or term of this Plan, or any
agreement or instrument required by the Compensation Committee hereunder, is
determined by judicial, quasi-judicial or administrative
11-1
<PAGE> 32
body to be void or not enforceable for any reason, all other provisions or terms
of this Plan or such agreement or instrument shall remain in full force and
effect and shall be enforceable as if such void or nonenforceable provision or
term had never been a part of this Plan, or such agreement or instrument.
11.6 No benefits under this Plan shall be subject in any manner to be
anticipated, alienated, sold, transferred, assigned, pledged encumbered or
charged, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void; nor shall any such benefits
in any manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of the person entitled to such benefits as are herein
provided for him.
11.7 Any payment to or for the benefit of any Participant, retired
Participant, terminated Participant, or Totally and Permanently Disabled
Participant, or to his Spouse or beneficiary, in accordance with the provisions
of this Plan, shall to the extent thereof be in full satisfaction of all claims
hereunder against the Plan, the Compensation Committee and the Company, any of
whom may require such Participant, retired Participant, terminated Participant,
Totally and Permanently Disabled Participant, Spouse or beneficiary, as a
condition precedent to such payment, to execute a receipt and release therefor
in such form as shall be determined by the Compensation Committee or the
Company, as the case may be.
11.8 If the monthly benefits payable hereunder to a retired, terminated
or Totally and Permanently Disabled Participant or to a Spouse shall be less
than Twenty-Five Dollars ($25) per month, the Compensation Committee may direct
that said Participant's or Spouse's
11-2
<PAGE> 33
benefits be paid quarterly, semiannually or annually in amounts equal to 3, 6 or
12, respectively, times the monthly amount otherwise payable, or it may, in its
sole discretion, direct payment, in full discharge of all the Plan's liability
in respect to such benefits, of an amount equal to the lump-sum actuarial
equivalent value of such benefits.
11.9 If the Company shall at any time be merged or consolidated into or
with any other corporation or corporations or if substantially all the assets of
the Company are sold or otherwise transferred to another corporation or party,
the provisions of this Plan shall be binding upon and inure to the benefit of
the corporation surviving or resulting from such merger or consolidation or to
which such assets shall be sold or transferred, and this provision shall apply
in the event of any subsequent sale, merger, consolidation or transfer.
IN WITNESS WHEREOF, KEITHLEY INSTRUMENTS, INC., by its duly authorized
officers, has caused this Supplemental Executive Retirement Plan, to be executed
as of the 27 day of January , 1989.
KEITHLEY INSTRUMENTS, INC.
("Company")
By
---------------------------------
And
--------------------------------
11-3
<PAGE> 1
EXHIBIT 10(F)
-------------
KEITHLEY INSTRUMENTS, INC.
1992 STOCK INCENTIVE PLAN
1. General. This Stock Incentive Plan (the "Plan") provides eligible
employees of Keithley Instruments, Inc. (the "Company") with the opportunity to
acquire or expand their equity interest in the Company by making available for
award or purchase Common Shares, without par value, of the Company ("Common
Shares"), through the granting of nontransferable options to purchase Common
Shares ("Stock Options"), the granting of Common Shares subject to temporal
restrictions on transfer and substantial risks of forfeiture ("Restricted
Stock"), and the granting of nontransferable options to receive payments based
on the appreciation of Common Shares ("SARs"). Stock Options, Restricted Stock
and SARs shall be collectively referred to herein as "Grants"; an individual
grant of Stock Options, Restricted Stock or SARs shall be individually referred
to herein as a "Grant". It is intended that key employees may be granted,
simultaneously or from time to time, Stock Options that qualify as incentive
stock options ("Incentive Stock Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or Stock Options that do not so
qualify ("Non-qualified Stock Options"). No provision of the Plan is intended or
shall be construed to grant employees alternative rights in any Incentive Stock
Option granted under the Plan so as to prevent such Option from qualifying under
Section 422 of the Code.
2. Purpose of the Plan. The purpose of the Plan is to provide
continuing incentives to key employees of the Company and of any subsidiary
corporation of the Company, by encouraging such key employees to acquire new or
additional share ownership in the Company, thereby increasing their proprietary
interest in the Company's business and enhancing their personal interest in the
Company's success.
For purposes of the Plan, a "subsidiary corporation" consists of any
corporation fifty percent (50%) of the stock of which is directly or indirectly
owned or controlled by the Company.
3. Effective Date of the Plan. The Plan shall become effective upon its
adoption by the Board of Directors, subject to approval by holders of a majority
of the outstanding shares of voting capital stock of the Company. If the Plan is
not so approved within twelve (12) months after the date the Plan is adopted by
the Board of Directors, the Plan and any Grants made hereunder shall be null and
void. However, if the Plan is so approved, no further shareholder approval shall
be required with respect to the making of Grants pursuant to the Plan, except as
provided in Section 12 hereof.
4. Administration of the Plan. The Plan shall be administered by the
Compensation and Human Resources Committee of the Board of Directors of the
Company, however described, or by any other committee selected by such Board of
Directors by majority vote and composed of no fewer than two (2) members of such
Board of Directors (the "Committee"). No person shall be appointed to the
Committee who, during the one-year period immediately preceding such person's
appointment to the Committee, has received any Grants under the Plan or any
similar stock option or stock incentive plan, other than a formula-based plan,
maintained by the Company or any subsidiary corporation. A member of the
Committee shall not be eligible to participate in this Plan while serving on the
Committee.
A majority of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present (or
acts unanimously approved in writing by the members of the Committee) shall
constitute binding acts of the Committee.
<PAGE> 2
Subject to the terms and conditions of the Plan, the Committee shall be
authorized and empowered:
(a) To select the key employees to whom Grants may be made;
(b) To determine the number of Common Shares to be covered by any
Grant;
(c) To prescribe the terms and conditions of any Grants made under
the Plan, and the form(s) and agreement(s) used in connection
with such Grants, which shall include agreements governing the
granting of Restricted Stock, Stock Options and/or SARs;
(d) To determine the time or times when Stock Options and/or SARs
will be granted and when they will terminate in whole or in
part;
(e) To determine the time or times when Stock Options and SARs
that are granted may be exercised;
(f) To determine, at the time a Stock Option is granted under the
Plan, whether such Option is an Incentive Stock Option
entitled to the benefits of Section 422 of the Code;
(g) To establish any other Stock Option agreement provisions not
inconsistent with the terms and conditions of the Plan or,
where the Stock Option is an Incentive Stock Option, with the
terms and conditions of Section 422 of the Code; and
(h) To determine whether SARs will be made part of any Grants
consisting of Stock Options, and to approve any SARs made part
of any such Grants pursuant to Section 9 hereof.
5. Employees Eligible for Grants. Grants may be made from time to time
to those key employees of the Company or a subsidiary corporation, who are
designated by the Committee in its sole and exclusive discretion. Key employees
may include, but shall not necessarily be limited to, members of the Board of
Directors (excluding members of the Committee), and officers, of the Company and
any subsidiary corporation; however, Stock Options intended to qualify as
Incentive Stock Options shall only be granted to key employees while actually
employed by the Company or a subsidiary corporation. The Committee may grant
more than one Stock Option, with or without SARs, to the same key employee. No
Stock Option shall be granted to any key employee during any period of time when
such key employee is on a leave of absence.
6. Shares Subject to the Plan. The shares to be issued pursuant to any
Grant made under the Plan shall be Common Shares. Either Common Shares held as
treasury stock, or authorized and unissued Common Shares, or both, may be so
issued, in such amount or amounts within the maximum limits of the Plan as the
Board of Directors shall from time to time determine. In the event a SAR is
granted in tandem with a Stock Option pursuant to Section 9 and such SAR is
thereafter exercised in whole or in part, then such Stock Option or the portion
thereof to which the duly exercised SAR relates shall be deemed to have been
exercised for purposes of such Option, but may be made available for reoffering
under the Plan to any eligible employee.
Subject to the provisions of the next succeeding paragraph of this
Section 6 and the provisions of Section 7(h), the aggregate number of Common
Shares that can be actually issued under the Plan (exclusive of Restricted Stock
forfeited under the Plan before the holder thereof received any
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benefits of ownership, such as dividends) shall be three hundred fifty thousand
(350,000) Common Shares.
If, at any time subsequent to the date of adoption of the Plan by the
Board of Directors, the number of Common Shares are increased or decreased, or
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation (whether as a result
of a stock split, stock dividend, combination or exchange of shares, exchange
for other securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or otherwise): (i) there shall automatically be
substituted for each Common Share subject to an unexercised Stock Option or SAR
(in whole or in part) granted under the Plan, the number and kind of shares of
stock or other securities into which each outstanding Common Share shall be
changed or for which each such Common Share shall be exchanged; (ii) the option
price per Common Share or unit of securities shall be increased or decreased
proportionately so that the aggregate purchase price for the securities subject
to a Stock Option or SAR shall remain the same as immediately prior to such
event; and (iii) any outstanding Restricted Stock that is converted, exchanged
or otherwise changed into a different number or kind of stock or security, shall
continue to be subject to any and all terms, conditions and restrictions
originally applicable to such Restricted Stock. In addition to the foregoing,
the Committee shall be entitled in the event of any such increase, decrease or
exchange of Common Shares to make other adjustments to the securities subject to
a Stock Option or SAR, the provisions of the Plan, and to any related Stock
Option or SAR agreements (including adjustments which may provide for the
elimination of fractional shares), where necessary to preserve the terms and
conditions of any Grants hereunder.
7. Stock Option Provisions.
(a) General. The Committee may grant to key employees (also referred to
as "optionees") nontransferable Stock Options that either qualify as Incentive
Stock Options under Section 422 of the Code or do not so qualify. However, any
Stock Option which is an Incentive Stock Option shall only be granted within 10
years from the earlier of (i) the date this Plan is adopted by the Board of
Directors of the Company; or (ii) the date this Plan is approved by the
shareholders of the Company.
(b) Stock Option Price. The option price per Common Share which may be
purchased under an Incentive Stock Option under the Plan shall be determined by
the Committee at the time of Grant, but shall not be less than one hundred
percent (100%) of the fair market value of a Common Share, determined as of the
date such Option is granted; however, if a key employee to whom an Incentive
Stock Option is granted is, at the time of the grant of such Option, an "owner,"
as defined in Section 422(b)(6) of the Code (modified as provided in Section
424(d) of the Code) of more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any subsidiary corporation (a
"Substantial Shareholder"), the price per Common Share of such Option, as
determined by the Committee, shall not be less than one hundred ten percent
(110%) of the fair market value of a Common Share on the date such Option is
granted. The option price per Common Share under each Stock Option granted
pursuant to the Plan which is not an Incentive Stock Option shall be determined
by the Committee at the time of Grant. Except as specifically provided above,
the fair market value of a Common Share shall be determined in accordance with
procedures to be established by the Committee. The day on which the Committee
approves the granting of a Stock Option shall be considered the date on which
such Option is granted.
(c) Period of Stock Option. The Committee shall determine when each
Stock Option is to expire. However, no Incentive Stock Option shall be
exercisable for a period of more than ten (10) years from the date upon which
such Option is granted. Further, no Incentive Stock Option granted to an
employee who is a Substantial Shareholder at the time of the grant of such
Option shall be exercisable after the expiration of (5) years from the date of
grant of such Option.
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(d) Limitation on Exercise and Transfer of Stock Options. Only the key
employee to whom a Stock Option is granted may exercise such Option, except
where a guardian or other legal representative has been duly appointed for such
employee, and except as otherwise provided in the case of such employee's death.
No Stock Option granted hereunder shall be transferable by an optionee other
than by will or the laws of descent and distribution. No Stock Option granted
hereunder may be pledged or hypothecated, nor shall any such Option be subject
to execution, attachment or similar process.
(e) Employment, Holding Period Requirements For Certain Options. The
Committee may condition any Stock Option granted hereunder upon the continued
employment of the optionee by the Company or by a subsidiary corporation, and
may make any such Stock Option immediately exercisable. However, the Committee
will require that, from and after the date of grant of any Incentive Stock
Option granted hereunder until the day three (3) months prior to the date such
Option is exercised, such optionee must be an employee of the Company or of a
subsidiary corporation, but always subject to the right of the Company or any
such subsidiary corporation to terminate such optionee's employment during such
period. Each Stock Option shall be subject to such additional restrictions as to
the time and method of exercise as shall be prescribed by the Committee. Upon
completion of such requirements, if any, a Stock Option or the appropriate
portion thereof may be exercised in whole or in part from time to time during
the option period; however, such exercise right(s) shall be limited to whole
shares.
(f) Payment for Stock Option Price. A Stock Option shall be exercised
by an optionee giving written notice to the Company of his intention to exercise
the same, accompanied by full payment of the purchase price in cash or by check,
or, with the consent of the Committee, in whole or in part with a surrender of
Common Shares having a fair market value on the date of exercise equal to that
portion of the purchase price for which payment in cash or check is not made.
The Committee may, in its sole discretion, approve other methods of exercise for
a Stock Option or payment of the option price, provided that no such method
shall cause any option granted under the Plan as an Incentive Stock Option to
not qualify under Section 422 of the Code, or cause any Common Share issued in
connection with the exercise of an option not to be a fully paid and
non-assessable Common Share.
(g) Certain Reissuances of Stock Options. To the extent Common Shares
are surrendered by an optionee in connection with the exercise of a Stock Option
in accordance with Section 7(f), the Committee may in its sole discretion grant
new Stock Options to such optionee (to the extent Common Shares remain available
for Grants), subject to the following terms and conditions:
(i) The number of Common Shares shall be equal to the number of Common
Shares being surrendered by the optionee;
(ii) The option price per Common Share shall be equal to the fair
market value of Common Shares, determined on the date of exercise of
the Stock Options whose exercise caused such Grant; and
(iii) The terms and conditions of such Stock Options shall in all other
respects replicate such terms and conditions of the Stock Options whose
exercise caused such Grant, except to the extent such terms and
conditions are determined to not be wholly consistent with the general
provisions of this Section 7, or in conflict with the remaining
provisions of this Plan.
(h) Cancellation and Replacement of Stock Options and Related Rights.
The Committee may at any time or from time to time permit the voluntary
surrender by an optionee who is the holder of any outstanding Stock Options
under the Plan, where such surrender is conditioned upon the
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granting to such optionee of new Stock Options for such number of shares as the
Committee shall determine, or may require such a voluntary surrender as a
condition precedent to the grant of new Stock Options. The Committee shall
determine the terms and conditions of new Stock Options, including the prices at
and periods during which they may be exercised, in accordance with the
provisions of this Plan, all or any of which may differ from the terms and
conditions of the Stock Options surrendered. Any such new Stock Options shall be
subject to all the relevant provisions of this Plan. The Common Shares subject
to any Stock Option so surrendered, and/or any Common Shares subject to any
Stock Option that has lapsed, been forfeited, or been cancelled and extinguished
in connection with the exercise of an SAR, shall no longer be charged against
the limitation provided in Section 6 of this Plan and may again become shares
subject to the Plan. The granting of new Stock Options in connection with the
surrender of outstanding Stock Options under this Plan shall be considered for
the purposes of the Plan as the granting of new Stock Options and not an
alteration, amendment or modification of the Plan or of the Stock Options being
surrendered.
(i) Limitation on Exercisable Incentive Stock Options. The aggregate
fair market value of the Common Shares first becoming subject to exercise as
Incentive Stock Options by a key employee during any given calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate
fair market value shall be determined as of the date such Option is granted,
taking into account, in the order in which granted, any other incentive stock
options granted by the Company, or by a parent or subsidiary thereof.
8. Restricted Stock.
(a) Grant. The Committee shall determine the key employees to whom, and
the time or times at which, Grants of Restricted Stock will be made, the number
of shares of Restricted Stock to be granted, the price (if any) to be paid by
such key employees (subject to Section 8(b)), the time or times within which
such Restricted Stock grants may be subject to forfeiture, and the other terms
and conditions of the grants in addition to those set forth in Section 8(b). The
Committee may condition the grant of Restricted Stock upon the attainment of
specified performance goals or such other factors as the Committee may determine
in its sole discretion.
(b) Terms and Conditions. Restricted Stock granted under the Plan shall
contain any terms and conditions, not inconsistent with the provisions of the
Plan, which are deemed desirable by the Committee. A key employee who receives a
grant of Restricted Stock shall not have any rights with respect to such Grant,
unless and until such key employee has executed an agreement evidencing such
Grant in the form approved from time to time by the Committee, has delivered a
fully executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such Grant. In addition, Restricted Stock
granted under the Plan shall be subject to the following terms and conditions:
(i) The purchase price for Common Shares consisting of Restricted
Stock, if any, will be specified by the Committee.
(ii) Grants of Restricted Stock shall only be accepted by executing a
Restricted Stock agreement and paying, in cash or by check, whatever
price (if any) is required under Section 8(b)(i).
(iii) Each key employee granted Restricted Stock shall be issued a
stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such key employee, and
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Grant.
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(iv) Any stock certificates evidencing Common Shares consisting of
Restricted Stock shall either (A) be held in custody by the Company
until the employment and other restrictions thereon shall all have
lapsed; or (B) be affixed with a legend, identifying such Shares as
Restricted Stock and expressly prohibiting the sale, transfer, tender,
pledge, assignment or encumbrance of such Shares, as the Committee
shall determine. With respect to any Restricted Stock held in custody
by the Company, the key employee granted such Restricted Stock shall
deliver to the Company a stock power, endorsed in blank, relating to
the Common Shares represented by such Stock. With respect to any
Restricted Stock held by a key employee under legend, the key employee
granted such Restricted Stock shall deliver to the Company an
acknowledgement that such Stock remains subject to a substantial risk
of forfeiture in the event of termination of employment under certain
circumstances, and that the certificates representing ownership of such
Stock will be surrendered to the Company immediately upon any such
termination of employment.
(v) Subject to the provisions of the Plan and the Restricted Stock
agreement, during a temporal period set by the Committee and commencing
with the date of such Grant (the "Restriction Period"), a key employee
shall not be permitted to sell, transfer, tender, pledge, assign or
otherwise encumber any Restricted Stock granted under the Plan.
However, the Committee, in its sole discretion, may provide for the
lapse of such transfer or other restrictions in installments, or
accelerate or waive such restrictions in whole or in part, based on
service, performance or other factors and criteria selected by the
Committee.
(vi) Except as provided in this Section 8(b)(vi) and Section 8(b)(v), a
key employee shall have, with respect to shares of Restricted Stock
granted to him, all of the rights of a shareholder of the Company,
including the right to vote such Stock and the right to receive any
dividends thereon. The Committee, in its sole discretion and as
determined at the time of a Grant of Restricted Stock, may permit or
require cash dividends otherwise due and payable to be deferred and, if
the Committee so determines, reinvested either in additional Restricted
Stock (to the extent Common Shares are available), or otherwise. Stock
dividends issued with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock. As Restricted Stock, such
additional Common Shares will be subject to the same restrictions,
terms and conditions applicable to the Restricted Stock with respect to
which such additional Common Shares were issued.
(vii) No Restricted Stock shall be transferable by a key employee other
than by will or by the laws of descent and distribution.
(viii) In the event Restricted Stock is forfeited by a key employee,
the Company will refund to such key employee any payment(s) made by
such key employee to purchase such Stock, promptly upon such forfeiture
(and any corresponding surrender of stock certificates).
(c) Minimum Value Provisions. To ensure that Grants of Restricted Stock
actually reflect the performance of the Company and service of the key employee,
the Committee may provide, in its sole discretion, for a tandem
performance-based award, or other grant, designed to guarantee a minimum value,
payable in cash or Common Shares, to the recipient of a Restricted Stock Grant,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
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9. Stock Appreciation Rights. A key employee may be granted the right
to receive a payment based on the increase in the value of Common Shares
occurring after the date of such Grant; such rights shall be known as Stock
Appreciation Rights ("SARs"). SARs may (but need not) be granted to a key
employee in tandem with, and exercisable in lieu of exercising, a Grant of Stock
Options. SARs will be specifically granted upon terms and conditions specified
by the Committee, if the Company is the employer of the key employee, or by a
subsidiary corporation subject to the Committee's approval, if such subsidiary
corporation is the employer of the key employee. No optionee shall be entitled
to SAR rights solely as a result of the grant of a Stock Option to him. Any such
rights, if granted, may only be exercised by the holder thereof, either with
respect to all, or a portion, of the Stock Option to which it applies. When
granted in tandem with a Stock Option, an SAR shall provide that the holder of a
Stock Option shall have the right to receive an amount equal to one hundred
percent (100%) of the excess, if any, of the fair market value of the Common
Shares covered by such Option, determined as of the date of exercise of such SAR
by the Committee (in the same manner as such value is determined for purposes of
the granting of Stock Options), over the price to be paid for such Common Shares
under such Option. Such amount shall be payable by either the Company or the
subsidiary corporation, whichever such corporation is the employer of the key
employee, in one or more of the following manners, as determined by the
Committee:
(a) cash (or check);
(b) fully paid Common Shares having a fair market value equal to
such amount; or
(c) a combination of cash (or check) and Common Shares.
In no event may any person exercise any SARs granted hereunder unless (i) such
person is then permitted to exercise the Stock Option or the portion thereof
with respect to which such SARs relate, and (ii) the fair market value of the
Common Shares covered by the Stock Option, determined as provided above, exceeds
the option price of such Common Shares. Upon the exercise of any SARs, the Stock
Option, or that portion thereof to which such SARs relate, shall be canceled and
automatically extinguished. A SAR granted in tandem with a Stock Option
hereunder shall be made a part of the Stock Option agreement to which such SAR
relates, in a form approved by the Committee and not inconsistent with this
Plan. The granting of a Stock Option or SAR shall impose no obligation upon the
optionee to exercise such Stock Option or SAR. The Company's or a subsidiary
corporation's obligation to satisfy SARs shall not be funded or secured in any
manner. No SAR granted hereunder shall be transferable by the key employee
granted such SAR, other than by will or the laws of descent and distribution.
After the Grant of an SAR, an optionee intending to rely on an
exemption from Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") shall be required to hold such SAR for six (6) months from the
date the price for such SAR is fixed to the date of cash settlement.
Additionally, in order to remain exempt from Section 16(b) of the Exchange Act,
an SAR must be exercised by an optionee subject to such Section only during the
period beginning on the third business day following the release of a summary
statement of the Company's quarterly or annual sales and earnings and ending on
the twelfth business day following said date.
10. Termination of Employment. If a key employee ceases to be an
employee of the Company and every subsidiary corporation, for a reason other
than death, retirement, or permanent and total disability, his Grants shall,
unless extended by the Committee on or before his date of termination of
employment, terminate on the effective date of such termination of employment.
Neither the key employee nor any other person shall have any right after such
date to exercise all or any part of his Stock Options or SARs, and all
Restricted Stock which is not vested or otherwise subject to restriction shall
thereupon be forfeited, and/or declared void and without value.
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If termination of employment is due to death or permanent and total
disability, then outstanding Stock Options and SARs may be exercised within the
one (1) year period ending on the anniversary of such death or permanent and
total disability. In the case of death, such outstanding Stock Options and SARs
shall be exercised by such key employee's estate, or the person designated by
such key employee by will, or as otherwise designated by the laws of descent and
distribution. Notwithstanding the foregoing, in no event shall any Stock Option
or SAR be exercisable after the expiration of the option period, and in the case
of exercises made after a key employee's death, not to any greater extent than
the key employee would have been entitled to exercise such Option or SAR at the
time of his death. Restricted Stock held by a key employee whose employment by
the Company or any subsidiary corporation terminates by reason of death shall
thereupon vest and all restrictions and risks of forfeiture thereon shall
thereupon lapse.
Subject to the discretion of the Committee, in the event a key employee
terminates employment with the Company and all subsidiary corporations because
of normal or early retirement under the Keithley Instruments, Inc., Employees'
Pension Plan (or any successor pension plan), or (in the case of Restricted
Stock) permanent and total disability, (a) any then-outstanding Stock Options
and/or SARs held by such key employee shall lapse at the earlier of the end of
the term of such Stock Option or SAR, or three (3) months after such retirement
or permanent and total disability; and (b) any Restricted Stock held by such key
employee shall thereafter vest and any applicable restrictions shall lapse, to
the extent such Restricted Stock would have become vested or no longer subject
to restriction within one year from the time of termination had the key employee
continued to fulfill all of the conditions of the Restricted Stock during such
period (or on such accelerated basis as the Committee may determine at or after
date of Grant).
In the event an employee of the Company or one of its subsidiary
corporations is granted a leave of absence by the Company or such subsidiary
corporation to enter military service or because of sickness, his employment
with the Company or such subsidiary corporation shall not be considered
terminated, and he shall be deemed an employee of the Company or such subsidiary
corporation during such leave of absence or any extension thereof granted by the
Company or such subsidiary corporation.
11. Change of Control. Upon the occurrence of a Change of Control (as
defined below), notwithstanding any other provisions hereof or of any agreement
to the contrary, all Stock Options and SARs granted under this Plan shall become
immediately exercisable in full and all Restricted Stock grants shall become
immediately vested and any applicable restrictions shall lapse.
For purposes of this Plan, a Change of Control shall be deemed to have
occurred if: (i) a tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of the Company; (ii) the
Company shall be merged or consolidated with another corporation and, as a
result of such merger or consolidation, less than 75% of the outstanding voting
securities of the surviving or resulting corporation shall be owned in the
aggregate by the former shareholders of the Company as the same shall have
existed immediately prior to such merger or consolidation; (iii) the Company
shall sell substantially all of its assets to another corporation which is not a
wholly owned subsidiary; or (iv) a person, within the meaning of Section 3(a)(9)
or of Section 13(d)(3) (as in effect on the date hereof) of the Exchange Act,
shall acquire, other than by reason of inheritance, twenty-five percent (25%) or
more of the outstanding voting securities of the Company (whether directly,
indirectly, beneficially or of record). In making any such determination,
transfers made by a person to an affiliate of such person (as determined by the
Board of Directors of the Company), whether by gift, devise or otherwise, shall
not be taken into account. For purposes of this Plan, ownership of voting
securities shall take into account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof
pursuant to the Exchange Act.
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12. Amendments to Plan. The Committee is authorized to interpret this
Plan and from time to time adopt any rules and regulations for carrying out this
Plan that it may deem advisable. Subject to the approval of the Board of
Directors of the Company, the Committee may at any time amend, modify, suspend
or terminate this Plan. In no event, however, without the approval of
shareholders, shall any action of the Committee or the Board of Directors result
in:
(a) Materially amending, modifying or altering the eligibility
requirements provided in Section 5 hereof;
(b) Materially increasing, except as provided in Section 6 hereof,
the maximum number of shares subject to Grants; or
(c) Materially increasing the benefits accruing to participants
under this Plan;
except to conform this Plan and any agreements made hereunder to changes in the
Code or governing law.
13. Investment Representation, Approvals and Listing. The Committee
may, if it deems appropriate, condition its grant of any Stock Option hereunder
upon receipt of the following investment representation from the optionee:
"I agree that any Common Shares of Keithley Instruments, Inc. which I
may acquire by virtue of this Stock Option shall be acquired for
investment purposes only and not with a view to distribution or resale,
and may not be transferred, sold, assigned, pledged, hypothecated or
otherwise disposed of by me unless (i) a registration statement or
post-effective amendment to a registration statement under the
Securities Act of 1933, as amended, with respect to said Common Shares
has become effective so as to permit the sale or other disposition of
said shares by me; or (ii) there is presented to Keithley Instruments,
Inc. an opinion of counsel satisfactory to Keithley Instruments, Inc.
to the effect that the sale or other proposed disposition of said
Common Shares by me may lawfully be made otherwise than pursuant to an
effective registration statement or post-effective amendment to a
registration statement relating to the said shares under the Securities
Act of 1933, as amended."
The Company shall not be required to issue any certificate or
certificates for Common Shares upon the exercise of any Stock Option or a SAR
granted under this Plan prior to (i) the obtaining of any approval from any
governmental agency which the Committee shall, in its sole discretion, determine
to be necessary or advisable; (ii) the admission of such shares to listing on
any national securities exchange on which the Common Shares may be listed; (iii)
the completion of any registration or other qualifications of the Common Shares
under any state or federal law or ruling or regulations of any governmental body
which the Committee shall, in its sole discretion, determine to be necessary or
advisable or the determination by the Committee, in its sole discretion, that
any registration or other qualification of the Common Shares is not necessary or
advisable; and (iv) the obtaining of an investment representation from the
optionee in the form stated above or in such other form as the Committee, in its
sole discretion, shall determine to be adequate.
14. General Provisions. The form and substance of Stock Option
agreements, Restricted Stock agreements, and SAR agreements made hereunder,
whether granted at the same or different times, need not be identical. Nothing
in this Plan or in any agreement shall confer upon any employee any right to
continue in the employ of the Company or any of its subsidiary corporations, to
be entitled to any remuneration or benefits not set forth in this Plan or such
Grant, or to interfere with or limit the right of the Company or any subsidiary
corporation to terminate his employment at any time, with or without cause.
Nothing contained in this Plan or in any Stock Option agreement or SAR shall be
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construed as entitling any optionee to any rights of a shareholder as a result
of the grant of a Stock Option or an SAR, until such time as Common Shares are
actually issued to such optionee pursuant to the exercise of such Option or SAR.
This Plan may be assumed by the successors and assigns of the Company. The
liability of the Company under this Plan and any sale made hereunder is limited
to the obligations set forth herein with respect to such sale and no term or
provision of this Plan shall be construed to impose any liability on the Company
in favor of any employee with respect to any loss, cost or expense which the
employee may incur in connection with or arising out of any transaction in
connection with this Plan. The cash proceeds received by the Company from the
issuance of Common Shares pursuant to this Plan will be used for general
corporate purposes. The expense of administering this Plan shall be borne by the
Company. The captions and section numbers appearing in this Plan are inserted
only as a matter of convenience. They do not define, limit, construe or describe
the scope or intent of the provisions of this Plan.
15. Termination of This Plan. This Plan shall terminate on February 8,
2002, and thereafter no Stock Options or Restricted Stock or SARs shall be
granted hereunder. All Stock Options and SARs outstanding at the time of
termination of this Plan shall continue in full force and effect according to
their terms and the terms and conditions of this Plan.
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KEITHLEY INSTRUMENTS, INC.
Amendment To The 1992 Stock Incentive Plan
To Increase Number of Shares Available for Grant
In accordance with action duly taken by the Board of Directors
of Keithley Instruments, Inc. (the "Company"), Section 6 of the Keithley
Instruments, Inc. 1992 Stock Incentive Plan (the "1992 Plan") is hereby amended
to increase the number of common shares subject to issuance under the 1992 Plan
to a total of 1,900,000 common shares (after taking into account the effects of
the 2-for-1 stock split), subject to approval by an affirmative vote by a
majority of the Company's shareholders.
Accordingly, the second paragraph in Section 6 of the 1992
Plan is hereby amended, effective December 9, 1995, so as to provide in its
entirety as follows:
Subject only to the provisions of the next succeeding
paragraph of this Section 6, the aggregate number of Common
Shares made subject to all Grants under the Plan shall be one
million nine hundred thousand (1,900,000) Common Shares. Such
aggregate number of Common Shares shall not include any Common
Shares reacquired or never issued due to a forfeiture,
exchange or relinquishment of rights under a Grant made
hereunder.
The Plan in all other respects remains unchanged.
KEITHLEY INSTRUMENTS, INC.
By /s/ Joseph P. Keithley
----------------------
Its Chairman
---------------------
<PAGE> 12
KEITHLEY INSTRUMENTS, INC.
1992 STOCK INCENTIVE PLAN
1997 AMENDMENT
In accordance with Section 12 of the Keithley Instruments, Inc. 1992
Stock Incentive Plan (the "Plan"), Compensation Committee of the Board of
Directors of Keithley Instruments, Inc., an Ohio corporation (the "Committee")
hereby amends the Plan, effective February 15, 1997, in the following respects:
1. Section 4 of the Plan is amended so as to provide in its entirety as
follows:
"4. Administration of the Plan. The Plan shall be administered
by the Compensation Committee of the Board of Directors of the Company,
however described, or by any other committee selected by such Board of
Directors by majority vote and composed of no fewer than two (2)
members of such Board of Directors who are "non-employee directors" as
defined under Rule 16b-3(b)(3) of the Securities Exchange Act of 1934
(the "Committee"). A member of the Committee shall not be eligible to
participate in this Plan while serving on the Committee.
A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any
meeting at which a quorum is present (or acts unanimously
approved in writing by the members of the Committee) shall
constitute binding acts of the Committee.
Subject to the terms and conditions of the Plan, the
Committee shall be authorized and empowered:
(a) To select the key employees to whom Grants may be
made;
(b) To determine the number of Common Shares to be
covered by any Grant;
(c) To prescribe the terms and conditions of any Grants
made under the Plan, and the form(s) and agreement(s)
used in connection with such Grants, which shall
include agreements governing the granting of
Restricted Stock, Stock Options and/or SARs;
(d) To determine the time or times when Stock Options
and/or SARs will be granted and when they will
terminate in whole or in part;
(e) To determine the time or times when Stock Options and
SARs that are granted may be exercised;
(f) To determine, at the time a Stock Option is granted
under the Plan, whether such Option is an Incentive
Stock Option entitled to the benefits of Section 422
of the Code;
(g) To establish any other Stock Option agreement
provisions not inconsistent with the terms and
conditions of the Plan or, where the Stock Option is
an Incentive Stock Option, with the terms and
conditions of Section 422 of the Code;
<PAGE> 13
(h) To determine whether SARs will be made part of any
Grants consisting of Stock Options, and to approve
any SARs made part of any such Grants pursuant to
Section 9 hereof; and
(i) To delegate to one (1) or more Company officers
limited authority to make de minimis Grants of Stock
Options or Incentive Stock Options (not to exceed
2,500 Common Shares per individual), to select
individuals to whom offers of Company employment are,
or are expected to be made, at Fair Market Value and
otherwise under terms and conditions approved in
advance by the Committee, subject to ratification by
the Committee."
2. Section 5 of the Plan is amended so as to provide in its entirety as
follows:
"5. Employees Eligible for Grants. Grants may be made from
time to time to those key employees of the Company or a subsidiary
corporation, who are designated by the Committee in its sole and
exclusive discretion (or by its delegee(s) in accordance with Section
4(i) hereof). Key employees may include, but shall not necessarily be
limited to, members of the Board of Directors (excluding members of the
Committee), and officers, of the Company and any subsidiary
corporation; however, Stock Options intended to qualify as Incentive
Stock Options shall only be granted to key employees while actually
employed by the Company or a subsidiary corporation. The Committee may
grant more than one Stock Option, with or without SARs, to the same key
employee. No Stock Option shall be granted to any key employee during
any period of time when such key employee is on a leave of absence."
The Plan otherwise remains unchanged.
<PAGE> 14
KEITHLEY INSTRUMENTS, INC.
1992 STOCK INCENTIVE PLAN
1999 AMENDMENT
In accordance with Section 12 of the Keithley Instruments, Inc. 1992
Stock Incentive Plan (the "Plan"), the Compensation Committee of the Board of
Directors of Keithley Instruments, Inc., an Ohio corporation (the "Committee")
hereby amends the Plan, effective September 30, 1999, in the following respects:
Section 10 of the Plan is amended so as to provide in its entirety as
follows:
"10. Termination of Employment. If a key employee ceases to be
an employee of the Company and every subsidiary corporation, for a
reason other than death, retirement, or permanent and total disability,
his Grants shall, unless extended by the Committee on or before his
date of termination of employment, terminate on the effective date of
such termination of employment. Neither the key employee nor any other
person shall have any right after such date to exercise all or any part
of his Stock Options or SARs, and all Restricted Stock which is not
vested or otherwise subject to restriction shall thereupon be
forfeited, and/or declared void and without value.
If termination of employment is due to death or permanent and
total disability, then outstanding Stock Options and SARs may be
exercised within the one (1) year period ending on the anniversary of
such death or permanent and total disability. In the case of death,
such outstanding Stock Options and SARs shall be exercised by such key
employee's estate, or the person designated by such key employee by
will, or as otherwise designated by the laws of descent and
distribution. Notwithstanding the foregoing, in no event shall any
Stock Option or SAR be exercisable after the expiration of the option
period, and in the case of exercises made after a key employee's death,
not to any greater extent than the key employee would have been
entitled to exercise such Option or SAR at the time of his death.
Restricted Stock held by a key employee whose employment by the Company
or any subsidiary corporation terminates by reason of death shall
thereupon vest and all restrictions and risks of forfeiture thereon
shall thereupon lapse.
Subject to the discretion of the Committee, in the event a key
employee terminates employment with the Company and all subsidiary
corporations because of normal, early or disability retirement under
the Keithley Instruments, Inc., Employees' Pension Plan (or any
successor pension plan), (a) any then outstanding Stock Options and/or
SARs held by such key employee shall lapse at the earlier of (i) the
end of the term of such Stock Option or SAR, or (ii) twelve (12) months
after such retirement or permanent and total disability (subject only
to the three (3) month exercise limitation
<PAGE> 15
applicable to Incentive Stock Options); and (b) any Restricted Stock
held by such key employee shall thereafter vest and any applicable
restrictions shall lapse, to the extent such Restricted Stock would
have become vested or no longer subject to restriction within twelve
(12) months from the time of termination had the key employee continued
to fulfill all of the conditions of the Restricted Stock during such
period (or on such accelerated basis as the Committee may determine at
or after date of Grant).
In the event an employee of the Company or one of its
subsidiary corporations is granted a leave of absence by the Company or
such subsidiary corporation to enter military service or because of
sickness, his employment with the Company or such subsidiary
corporation shall not be considered terminated, and he shall be deemed
an employee of the Company or such subsidiary corporation during such
leave of absence or any extension thereof granted by the Company or
such subsidiary corporation."
The Plan otherwise remains unchanged.
IN WITNESS WHEREOF, the undersigned members of the Committee
have set their hand this 10th day of September, 1999.
/s/ James B. Griswold
------------------------
James B. Griswold
/s/ James T. Bartlett
------------------------
James T. Bartlett
/s/ R. Elton White
------------------------
R. Elton White
/s/ Arden L. Bement, Jr.
------------------------
Arden L. Bement, Jr.
<PAGE> 16
KEITHLEY INSTRUMENTS, INC.
Amendment To The 1992 Stock Incentive Plan
To Increase Number of Shares Available for Grant
In accordance with action duly taken by the Board of Directors of
Keithley Instruments, Inc. (the "Company"), Section 6 of the Keithley
Instruments, Inc. 1992 Stock Incentive Plan (the "1992 Plan") is hereby amended
to increase the number of common shares subject to issuance under the 1992 Plan
to a total of 2,700,000 common shares, subject to approval by an affirmative
vote by a majority of the Company's shareholders.
Accordingly, the second paragraph in Section 6 of the 1992 Plan is
hereby amended, effective December 3, 1999, so as to provide in its entirety as
follows:
Subject only to the provisions of the next succeeding
paragraph of this Section 6, the aggregate number of Common Shares made
subject to all Grants under the Plan shall be two million seven hundred
thousand (2,700,000) Common Shares. Such aggregate number of Common
Shares shall not include any Common Shares reacquired or never issued
due to a forfeiture, exchange or relinquishment of rights under a Grant
made hereunder.
The Plan in all other respects remains unchanged.
<PAGE> 1
EXHIBIT 10(G)
-------------
KEITHLEY INSTRUMENTS, INC.
1992 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of this Directors' Stock Option Plan (the
"Plan") is to enable Keithley Instruments, Inc. (the "Company") to attract,
retain and reward directors of the Company and strengthen the mutuality of
interest between such directors and the Company's shareholders by offering such
directors options ("Options") to purchase shares of the Company's no par value
Common Shares ("Common Shares").
2. GRANT AND ELIGIBILITY. All directors of the Company who are not
employees of the Company or not otherwise eligible to participate in other
employee benefit plans permitting a direct or indirect investment in Common
Shares ("Outside Directors") shall be granted Options under the Plan. From and
after the Effective Date, so long as the Plan remains in effect and has Common
Shares available for grants hereunder, each individual who qualifies as an
Outside Director at the close of any annual meeting of the shareholders of the
Company (an "Optionee") shall automatically be granted an Option to purchase
three hundred (300) Common Shares. In the event Common Shares are available for
grants hereunder, but the number of such Shares is insufficient to provide an
Outside Director with an Option to purchase three hundred (300) Common Shares,
such Outside Director shall receive an Option to purchase the lesser of (i) the
number of Common Shares remaining available for grant under the Plan; or (ii)
the number of Common Shares being granted to any other Outside Director
concurrently entitled to a grant of Options hereunder, so that Options are
granted to all such Outside Directors on a pro rata basis. The maximum aggregate
number of Common Shares available for issuance under the Plan is thirty thousand
(30,000); such Common Shares may be treasury shares or authorized but unissued
shares or a combination of the foregoing. If an Option granted under the Plan
shall expire, terminate or become forfeited for any reason other than its
exercise, the shares subject to, but not delivered under, such Option shall be
available for the grant of other Options pursuant to the Plan. The maximum
number of shares of Common Shares that an Outside Director shall be entitled to
receive as result of the exercise of Options granted under the Plan shall be
three thousand (3,000), subject to any adjustment required in accordance with
Section 6 hereof.
3. TERM OF OPTION, EXERCISE AND TRANSFERABILITY. The term of each
Option granted under the Plan shall be ten years. An Optionee who has
continuously served as a director of the Company from the date of the grant of
an Option through the date of vesting may first exercise such Option after the
date of vesting for all or part of the number of Common Shares in accordance
with the Plan. For this purpose, the "date of vesting" for any Option granted
under the Plan shall be that date which is six months and one day after the
later to occur of: (i) the effective date of the Plan; or (ii) the date such
Optionee is elected as a director; or (iii) the date such Option is granted. An
Outside Director who resigns or is removed before the date of vesting for any
Options held by such Director shall forfeit such Options.
No Option shall be transferable by the Optionee other than by will or the laws
of descent and distribution. Options shall be exercisable during the Optionee's
lifetime only by an Optionee or by his or her legal guardian or legal
representative. Notwithstanding the first and second sentences of this paragraph
or the preceding paragraph, if any Optionee dies while holding unexercised
Options, any Option held by such Optionee at the time of his or her death shall
thereafter be exercised, to the extent such Option was exercisable at the time
of death, by the estate of the Optionee (acting through its fiduciary), within a
<PAGE> 2
period of one year from the date of such death regardless of the term of the
Option remaining at the Optionee's death.
4. OPTION PRICE AND PAYMENT. The option price for each Common Share
purchasable under an Option shall be the fair market value of a Common Share on
the date such Option is granted in accordance with Section 2. The option price
shall be payable (i) in cash; (ii) by check acceptable to the Company; (iii) by
delivery of shares of the same class of stock subject to such Option; or (iv) a
combination of the above, so long as the sum of the fair market value of any
such cash, check or Common Shares equals the option price. The Company shall
have the right to require an Optionee who is entitled to receive Common Shares
pursuant to the exercise of an Option to pay to the Company the amount of any
taxes which the Company is required to withhold with respect to such Common
Shares. Such amount shall be payable (i) in cash; (ii) by check acceptable to
the Company; (iii) by delivery of shares of the same class of stock subject to
the Option; or (iv) a combination of the above.
5. CHANGE IN CONTROL.
(a) IMPACT OF EVENT. In the event of a "Change in Control" as defined
in Section 5(b), all Options granted under the Plan shall vest upon the later to
occur of (i) such Change in Control; or (ii) six months and one day after the
date of grant of such Options.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of Section 5(a), a
"Change in Control" shall be deemed to have occurred if: (i) a tender offer
shall be made and consummated for the ownership of 25% or more of the
outstanding voting securities of the Company; (ii) the Company shall be merged
or consolidated with another corporation and, as a result of such merger or
consolidation, less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company as the same shall have existed immediately prior to
such merger or consolidation; (iii) the Company shall sell substantially all of
its assets to another corporation which is not a wholly owned subsidiary; or
(iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as
in effect on the date hereof) of the Securities Exchange Act of 1934 (the
"Exchange Act"), shall acquire, other than by reason of inheritance, twenty-five
percent (25%) or more of the outstanding voting securities of the Company
(whether directly, indirectly, beneficially or of record). In making any such
determination, transfers made by a person to an affiliate of such person (as
determining by the Board of Directors of the Company), whether by gift, devise
or otherwise, shall not be taken into account. For purposes of this Plan,
ownership of voting securities shall take into account and shall include
ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) as in
effect on the date hereof pursuant to the Exchange Act.
6. ADJUSTMENTS. (a) If, at any time subsequent to the date of adoption
of the Plan, the number of Common Shares are increased or decreased, or changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether as a result of a
stock split, stock dividend, combination or exchange of shares, exchange for
other securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or otherwise): (i) there shall automatically be
substituted for each Common Share subject to an unexercised Option (in whole or
in part) granted under the Plan, the number and kind of shares of stock or other
securities into which each outstanding Common Share shall be changed or for
which each such Common Share shall be exchanged; and (ii) the option price per
Common Share or unit of securities shall be increased or decreased
proportionately so that the aggregate purchase price for the securities subject
to an Option shall remain the same as immediately prior to such event.
(b) No adjustment pursuant to this Section 6 shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such number or price; however, any
Page 2
<PAGE> 3
adjustments which by reason of this Section 6 are not required to be made shall
be carried forward. Calculations under this Section 6 shall be made to the
nearest cent or to the nearest full share, as the case may be. Anything in this
Section 6 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the option price, in addition to those required by this
Section 6, as it, in its discretion shall determine to be advisable in order
that any stock dividends, subdivisions or splits of shares, distribution of
rights to purchase stock or securities, or a distribution of securities
convertible into or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
7. OTHER TERMS. Each grant of Options hereunder shall be evidenced by a
Shares Option Agreement in substantially the form attached hereto as Exhibit A.
When exercisable in accordance with Section 3, Options may be exercised, in
whole or in part, by giving written notice of exercise to the Company specifying
the number of Common Shares to be purchased. Such notice shall be accompanied by
payment of the option price of the Common Shares for which the Option is
exercised in accordance with Section 4.
8. AMENDMENT. The Board of Directors of the Company (the "Board") may
at any time amend, modify, suspend or terminate this Plan. In no event, however,
without the approval of shareholders, shall any action of the Board of Directors
result in:
(a) Materially amending, modifying or altering the eligibility
requirements provided in Section 2 hereof;
(b) Increasing, except as provided in Section 2 hereof, the
maximum number of Common Shares available for purchase with
Options; or
(c) Increasing the benefits accruing to Optionees under this Plan;
except to conform this Plan and any agreements made hereunder to changes in the
Internal Revenue Code of 1986, as amended (the "Code") or governing law. In any
event, the Board of Directors shall not make any amendment or alteration which
would amend or alter the method by which the number or kind of securities to be
granted to any Optionee is determined, where such amendment or alteration is
made less than six months and one day after the previous such amendment or
alteration was made, unless such amendment or alteration is made to comport with
changes in the Code.
9. TERMINATION OF PLAN. The Plan shall be terminated and no further
Options shall be granted hereunder as of the tenth (10th) anniversary of the
date this Plan is adopted by the Board. Options granted prior to such tenth
anniversary may extend beyond that date.
10. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODY. No Option
shall be exercisable and no Common Shares will be delivered under this Plan
except in compliance with all applicable federal and state laws and regulations,
including, without limitation, compliance with applicable withholding tax
requirements, if any, and with the rules of all domestic stock exchanges on
which the Company's stock may be listed. Any stock certificates issued to
evidence Common Shares as to which an Option is exercised may bear such legends
and statements as the Company shall deem advisable to assure compliance with
federal and state laws and regulations; the Company may, if it deems
appropriate, condition its grant of any Options hereunder upon receipt of the
following investment representation from the Optionee:
"I agree that any Common Shares of Keithley Instruments, Inc. which I
may acquire by virtue of this Stock Option shall be acquired for
investment purposes only and not with a view to distribution or resale,
and may not be transferred, sold, assigned, pledged, hypothecated or
Page 3
<PAGE> 4
otherwise disposed of by me unless (i) a registration statement or
post-effective amendment to a registration statement under the
Securities Act of 1933, as amended, with respect to said Common Shares
has become effective so as to permit the sale or other disposition of
said shares by me; or (ii) there is presented to Keithley Instruments,
Inc. an opinion of counsel satisfactory to Keithley Instruments, Inc.
to the effect that the sale or other proposed disposition of said
Common Shares by me may lawfully be made otherwise than pursuant to an
effective registration statement or post-effective amendment to a
registration statement relating to the said shares under the Securities
Act of 1933, as amended."
No Option shall be exercisable, and no stock will be delivered under this Plan,
until the Company has obtained such consent or approval from the regulatory
body, federal or state, having jurisdiction over such matters as the Company may
deem advisable. In the case of the exercise of an Option by a person or estate
acquiring the right to exercise such Option by bequest or inheritance, the
Company may require reasonable evidence as to the ownership of such Option and
may require such consents and releases of taxing authorities as the Committee
may deem advisable.
11. EFFECTIVE DATE. The Plan shall be effective as of February 8, 1992;
or if later, the date the Plan is approved by the Company's shareholders.
12. GOVERNING LAW. The Plan, all options and actions taken thereunder
and any agreements relating thereto shall be governed by and controlled in
accordance with Ohio law.
Page 4
<PAGE> 1
EXHIBIT 11
----------
Statement re computation of per share earnings
<TABLE>
<CAPTION>
Year ended Year ended Year ended
September 30, September 30, September 30,
1999 1998 1997
<S> <C> <C> <C>
Net income in thousands $13,708 $5,004 $790
Weighted average shares outstanding 7,447,081 7,799,507 7,588,094
Assumed exercise of stock options,
weighted average of incremental shares 206,410 171,758 260,895
Assumed purchase of stock under stock
purchase plan, weighted average 3,934 94,024 17,761
Diluted shares - adjusted weighted-average shares
and assumed conversions 7,657,425 8,065,289 7,866,750
Basic earnings per share $1.84 $ .64 $ .10
Diluted earnings per share $1.79 $ .62 $ .10
</TABLE>
<PAGE> 1
EXHIBIT 21
----------
WHOLLY OWNED SUBSIDIARIES
-------------------------
Keithley International Investment Corporation
28775 Aurora Road, Cleveland, Ohio 44139, U.S.A.
Keithley Foreign Sales Corporation
5 Norre Gade, Charlotte Amalie
St. Thomas, U.S. Virgin Islands 00801
FRANCE: Keithley Instruments SARL
3 Allee des Garays, BP 60
91122 Palaiseau Cedex
GERMANY: Keithley Instruments GmbH
Landsberger Strasse 65
D-82110 Germering (Munich)
GREAT BRITAIN: Keithley Instruments Ltd.
The Minister, 58 Portman Road
Reading (London), Berkshire RG30 1EA
ITALY: Keithley Instruments SRL
Viale San Gimignano 38
20146 Milano
NETHERLANDS: Keithley Instruments BV
Avenlingen West 49
4202 MS Gorinchem (Amsterdam)
SWITZERLAND: Keithley Instruments SA
Kriesbachstrasse 4
8600 Dubendorf (Zurich)
<PAGE> 1
EXHIBIT 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-2496) of Keithley Instruments, Inc. of our report
dated November 5, 1999 relating to the financial statements and the financial
statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
December 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 13,426
<SECURITIES> 0
<RECEIVABLES> 20,312
<ALLOWANCES> 679
<INVENTORY> 11,049
<CURRENT-ASSETS> 47,701
<PP&E> 38,293
<DEPRECIATION> 25,617
<TOTAL-ASSETS> 74,751
<CURRENT-LIABILITIES> 23,419
<BONDS> 3,000
0
0
<COMMON> 199
<OTHER-SE> 43,582
<TOTAL-LIABILITY-AND-EQUITY> 43,781
<SALES> 100,938
<TOTAL-REVENUES> 100,938
<CGS> 39,923
<TOTAL-COSTS> 39,923
<OTHER-EXPENSES> 10,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (179)
<INCOME-PRETAX> 16,717
<INCOME-TAX> 3,009
<INCOME-CONTINUING> 13,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,708
<EPS-BASIC> 1.84
<EPS-DILUTED> 1.79
</TABLE>
