Exhibit 10.1
KEITHLEY INSTRUMENTS, INC.
CHANGE IN CONTROL AGREEMENT
     THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”) is by and between
Keithley Instruments, Inc., an Ohio corporation (the “Company”), and [Joseph P.
Keithley/Linda C. Rae] (the “Executive”) made this 9th day of August, 2010.
RECITALS
     A. The Executive is presently employed by the Company as a senior executive
or key employee and has made and is expected to continue to make significant
contributions to the short- and long-term success of the Company.
     B. The Company’s Board of Directors has determined that a Change in Control
(as hereinafter defined) or the prospect of a Change in Control of the Company
may result in the distraction or departure of key management personnel to the
detriment of the Company.
     C. In order to encourage continuity of management and to ensure that the
Company’s senior executives and key employees are not distracted from
discharging their duties because of a Change in Control or the prospect of a
Change in Control, the Company desires to provide the benefits provided herein
to encourage the Executive to remain in the employ of the Company.
     D. In consideration of the benefits provided by this Agreement, the
Executive is willing to continue in the Company’s employ as a senior executive
or key employee.
     NOW THEREFORE, the Executive and the Company, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
     When used in this Agreement, the following terms shall have the meanings
set forth in this Article I, unless the context clearly provides otherwise:
     1.1 A “Change in Control” will be deemed to have occurred if during the
term of this Agreement:
          (a) the Board of Directors or shareholders of the Company approve a
plan or agreement providing for a merger or consolidation which, if consummated,
will result in the shareholders of the Company, immediately prior to the
transaction giving rise to the merger or consolidation, owning less than 50% of
the total combined voting power of all classes of equity securities entitled to
vote generally in the election of directors of the surviving entity immediately
after the consummation of the transaction giving rise to the merger or
consolidation;

 

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          (b) the Board of Directors or shareholders of the Company approve a
plan or agreement to sell all or substantially all of the assets of the Company
or to liquidate or dissolve the Company; or
          (c) (i) any Person (other than the Company or a subsidiary of the
Company or any employee benefit plan of the Company (including any trustee of
any such plan acting in its capacity as trustee)) purchases, in one transaction
or a series of transactions, any equity securities of the Company (or securities
convertible into equity securities) pursuant to a tender or exchange offer
without the prior consent of the Board of Directors, or without the prior
consent of the Board of Directors becomes the beneficial owner of securities of
the Company representing (A) 50% or more of the total number of outstanding
Common Shares, without par value, and Class B Common Shares, without par value,
or (B) 80% or more of the Class B Common Shares, without par value, and (ii)
during any two-year period following an event specified in Section 1.1(c)(i),
individuals who at the beginning of such period constitute the entire Board of
Directors cease to constitute a majority of the Board of Directors, unless the
election or the nomination for election of each new director is approved by at
least two-thirds of the directors then still in office who were directors at the
beginning of that period.
     1.2 A “Triggering Event” will be deemed to have occurred if, during the
Protection Period (as hereinafter defined):
          (a) the Company separates the Executive from service with the Company,
other than in the case of a Termination for Cause; or
          (b) The Executive separates from service with the Company for Good
Reason.
The term “Protection Period” shall mean the period beginning on the date of the
Change of Control and ending two years after the date on which the Change in
Control occurred; provided, however, if a Change of Control occurs by reason of
Section 1.1(a) or (b), and the plan or definitive agreement providing for the
applicable transaction giving rise to such Change of Control under
Section 1.1(a) or (b) terminates without the merger, consolidation, sale,
liquidation or dissolution, as applicable, having been completed, then the
Protection Period shall end on the date such plan or agreement terminates.
     1.3 The term “separates from service with the Company” shall mean the
Executive’s Separation from Service, as determined under Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
promulgated thereunder; provided, however, that such Separation from Service
with the Company is not as a result of the Executive’s death, retirement or
disability (as defined in Code Section 409A). If the Executive separates from
service with the Company as a result of death or disability (determined under
the Company’s normal employment policies or procedures) after the Company has
provided written notice to the Executive of the Company’s intent to separate the
Executive from service with the Company at a future date, but in no event later
than two years after the date on which the Change in Control occurred, then
notwithstanding the prior sentence, the Executive or her estate, as applicable,
will be entitled to the benefits provided herein.
     1.4 The Executive’s separation from service with the Company will be deemed
to be for “Good Reason” if the Executive separates from service upon or within
six months after one

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or more of the following occurs without the consent of the Executive (which
consent the Executive shall be under no obligation to give):
          (a) a significant diminution in the Executive’s responsibilities,
power or authority in comparison with the responsibilities, power or authority
the Executive had at or about the time of the Change in Control, other than any
diminution in the Executive’s responsibilities solely as a result of the fact
that the entity for which the Executive is providing services no longer has
securities that are listed or publicly traded (such as the elimination of any
responsibility for Securities and Exchange Commission reporting or investor
relations activities);
          (b) the assignment of the Executive to duties that are inconsistent
with the duties assigned to the Executive on the date on which the Change in
Control occurred, and which duties the Company persists in assigning to the
Executive for a period of fifteen days following the prompt written objection of
the Executive;
          (c) (i) a material reduction in the Executive’s base salary or
incentive or bonus opportunity as a percentage of base salary, (ii) a material
reduction in the aggregate value of equity grants under the Company’s
equity-based award plans or any substitute therefor (using the same methodology
for valuing equity grants as the Compensation and Human Resources Committee of
the Company’s Board of Directors used for the equity grants most recently
awarded to the Executive as of the date of the Change in Control), (iii) a
material reduction in group health, life, disability or other insurance programs
(including any such benefits provided to the Executive’s family) or pension,
retirement or profit-sharing plan benefits (other than pursuant to a general
amendment or modification affecting all plan-covered employees), (iv) the
establishment of criteria or factors to be achieved for the payment of incentive
or bonus compensation that are substantially more difficult than the criteria or
factors established for other similar executive officers or key employees of the
Company, (v) the failure to promptly pay the Executive any incentive or bonus
compensation to which the Executive is entitled through the achievement of the
criteria or factors established for the payment of such incentive or bonus
compensation, (vi) the exclusion of the Executive from any plan, program or
arrangement in which similarly situated executives or key employees of the
Company are included, or (vii) a material breach by the Company of the terms of
this Agreement or any other material written agreement between the Company and
the Executive;
          (d) the Company requires the Executive to be based at or generally
work from any location more than fifty (50) miles from the Company’s
headquarters in Solon, Ohio or the Company, over the course of any calendar
month, requires the Executive to be away from the Company’s headquarters in
Solon, Ohio for more than 50% of the business days during that month; or
          (e) the failure of any successor to the Company to expressly adopt
this Agreement as provided in Section 6.3.
     1.5 A “Termination for Cause” will be deemed to have occurred if, and only
if, the Board of Directors of the Company, or its designee, in good faith
determines that the Executive’s separation from service with the Company is
because of any one or more of the following:

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          (a) commission of an act or series of acts of intentional dishonesty
that are materially detrimental to the best interests of the Company;
          (b) willful and repeated failure to perform the duties associated with
the Executive’s position, which failure has not been cured within thirty
(30) days after the Company gives written notice thereof to the Executive; or
          (c) failure to cooperate with any internal investigation conducted by
the Company or with any investigation, inquiry, hearing or similar proceedings
by any governmental authority having jurisdiction over the Company or the
Executive.
     1.6 “Executive’s Target Bonus” means an amount equal to the greater of
(a) the Executive’s Annual Salary multiplied by the bonus target percentage set
forth on Exhibit A hereto, or (b) the average bonus amount actually received by
the Executive from the Company for the preceding three fiscal years (or for such
fewer number of full fiscal years that Executive has been employed by the
Company).
     1.7 “Executive’s Annual Salary” means the Executive’s annual base salary at
the time of a Triggering Event or at the time of the occurrence of a Change in
Control, whichever is higher.
     1.8 “Executive’s Pro Rata Current Year Bonus” means an amount equal to
(a) the Executive’s Target Bonus, multiplied by (b) a fraction, the numerator of
which is the number of days elapsed in the fiscal quarter during which a
Triggering Event occurs to the date of the Triggering Event, the denominator of
which is the total number of days in the fiscal quarter during which a Trigger
Event occurs.
     1.9 “Person” means an individual, corporation, partnership, limited
liability company or other entity and one or more Persons acting as group (as
determined under Section 409A of the Code).
ARTICLE II
TRIGGERING EVENT PAYMENTS
     2.1 After the occurrence of a Triggering Event, the Company shall pay the
amounts or shall commence providing the benefits set forth herein, provided the
release required and described in Article III has been executed and delivered by
the Executive to the Company and, as applicable, such release has not been
timely revoked.
     (a) The Company shall pay a lump sum severance benefit to the Executive
(the “Severance Payment”) which will be in addition to any other compensation or
remuneration to which the Executive is, or becomes, entitled to receive from the
Company (including any earned but unpaid bonus for any prior completed fiscal
period) in an amount equal to the sum of (i) 1.5 times the Executive’s Annual
Salary, plus (ii) 1.5 times the Executive’s Target Bonus, plus (iii) the
Executive’s Pro Rata Current Year Bonus, less the amount of any bonus actually
received by the Executive for the current fiscal year. The payment of the
benefit shall be made

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in one lump sum cash payment on or about the ninetieth (90th) day after the
Triggering Event, subject, however, to Section 2.2.
          (b) The Company shall, at its expense, provide the Executive, and the
Executive’s family, with life, medical, hospitalization, vision, dental/health
(the “Company Health and Welfare Benefits”) in an amount not less than that
provided on the date on which the Change in Control occurred until the earlier
of (i) in the event that the Executive shall become employed by another employer
after a Triggering Event, the date on which the Executive shall be eligible to
receive benefits from such employer which are substantially equivalent to or
greater than the benefits the Executive and the Executive’s family received from
the Company or (ii) the 18-month anniversary of the date of the Triggering
Event; provided, however, that if the Executive’s continuation in some or all of
the Company Health and Welfare Benefits is not available, then the Company shall
make monthly payments to the Executive commencing the first day of the month
after the Company makes the payments described in Section 2.1(a) above equal to
the actual cost to the Executive on a pre-tax basis, of the coverage for such
Executive, over a period of 18 months with respect to those benefits among the
Company Health and Welfare Benefits not available. To the extent permitted by
law and the applicable benefit plan, the Company’s health insurance continuation
obligation otherwise available under the COBRA rules will begin to run at the
expiration of the period for which the Company Health and Welfare Benefits are
provided to the Executive under this Section 2.1(c).
          (c) The Company shall, at its expense, provide the Executive with the
reasonable services of an outplacement firm mutually agreed upon between the
Company and the Executive and suitable to the Executive’s position until the
first acceptance by the Executive of an offer of employment; provided, however,
that the cost of such outplacement shall not exceed $25,000; provided, further,
that the Company will not be required to provide such services to the Executive
beyond December 31st of the first calendar year following the calendar year in
which the Triggering Event occurs.
          (d) Except as provided in Section 2.1(e) below, the awards granted to
the Executive under the Company’s 1992 Stock Incentive Plan, 2002 Stock
Incentive Plan, as amended, and 2009 Stock Incentive Plan (collectively, the
“Plans” and each, a “Plan”) shall be treated in the manner provided in the
applicable Plan and award agreements thereunder, including with respect to those
awards outstanding immediately prior to a “Change of Control” as defined in the
applicable Plan, becoming fully vested and, in the case of stock options, fully
exercisable, upon such Change of Control (as defined in the applicable Plan).
          (e) The number of common shares of the Company that the Executive
shall be entitled to receive under each award of performance award units granted
to the Executive under the Plans that is outstanding immediately prior to a
Change of Control (as defined in the applicable Plan) that occurs prior to the
Vesting Date (as defined in the applicable Performance Award Agreement) shall be
determined based on the greater of (i) the Initial Award set forth in the
Performance Award Agreement or (ii) the number of shares that the Executive
would be entitled to receive if the Company’s actual performance through the
date of a Change of Control (as defined in the applicable Plan) event was deemed
to have occurred at the Vesting Date, but not in excess of 1.5 times the Initial
Award level.

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     2.2 All payments pursuant to this Agreement shall be made less standard
required deductions and withholdings. Notwithstanding the above, if the
Executive is a “specified employee” (within the meaning of Section 409A of the
Code), benefits or payments to the Executive pursuant to this Article II shall
be made or commence, as applicable, on the date which is the earlier of (a) the
Executive’s death or (b) on the one hundred eighty-first (181st) day following
the date of the Executive’s separation from service with the Company.
     2.3 Notwithstanding anything in this Agreement to the contrary, in the
event that it shall be determined (as hereinafter provided) that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement, or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, any stock option, restricted stock, stock
appreciation right or similar right, or the lapse or termination of any
restriction on, or the vesting or exercisability of, any of the foregoing
(individually and collectively, a “Payment”), would be subject, but for the
application of this Section 2.3, to the excise tax imposed by Code Section 4999
(or any successor provision thereto) (the “Excise Tax”) by reason of being
considered “contingent on a change in ownership or control” of the Company and
as being considered an “excess parachute payment,” both within the meaning of
Code Section 280G (or any successor provision thereto), then:
          (a) if the After-Tax Payment Amount (as defined below) would be
greater by reducing the amount of the Severance Payment otherwise payable under
Section 2.1 to the Executive to the minimum extent necessary (but in no event to
less than zero) so that, after such reduction, no portion of the Payment would
be subject to the Excise Tax, then the Severance Payment shall be so reduced;
and
          (b) if the After-Tax Payment Amount would be greater without the
reduction referred to in Section 2.3(a), then there shall be no reduction in the
Severance Payment by application of this Section 2.3.
As used in this Agreement, the “After-Tax Payment Amount” means the difference
of (x) the amount of the Payment, less (y) the amount of the Excise Tax, if any,
imposed upon the Payment.
Any reduction under Section 2.3(a) shall be made consistent with the
requirements of Section 409A of the Code, to the extent applicable.
     2.4 The Executive shall determine, in the first instance, whether any
reduction in the amount of the Severance Payment is required pursuant to
Section 2.3. If the Executive determines that such a reduction may be required,
or if reasonably requested by the Company, then an accounting firm selected by
the Executive and reasonably acceptable to the Company (the “Accounting Firm”)
shall determine whether any such reduction is required pursuant to Section 2.3
and, if required, the amount of such reduction, and Section 2.5 shall apply.
     2.5 If Section 2.3 applies pursuant to Section 2.4, the Executive shall
direct the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and the Executive within thirty (30) calendar
days after the date of the Triggering Event. The Company and the Executive shall
each provide the Accounting Firm access to and

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copies of any books, records and documents in the possession of the Company or
the Executive, as the case may be, reasonably requested by the Accounting Firm,
and otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determination and calculations. Any
determination by the Accounting Firm as to whether any reduction in the amount
of the Severance Payment is required, and the amount of the reduction if
required, pursuant to Sections 2.3 through 2.5 shall be binding upon the Company
and the Executive. The fees and expenses of the Accounting Firm for its services
in connection with the determination and calculations contemplated by
Sections 2.3 through 2.5 shall be borne by the Company. The federal, state and
local income or other tax returns filed by the Executive and the Company shall
be prepared and filed on a basis consistent with such determination and
calculations. The Company shall pay the Severance Payment, as reduced or not
reduced pursuant to the final determination of the Accounting Firm, to the
Executive no later than the time otherwise required hereunder.
ARTICLE III
RELEASE
     3.1 As a condition to the payment of the benefits by the Company to the
Executive pursuant to this Agreement, as described in Article II, the Executive
shall deliver a signed release of claims against the Company. Such release shall
be delivered to the Company no later than sixty (60) days following a Triggering
Event, shall be in a form and substance as determined by the Company, and, as
applicable, shall not be timely revoked by the Executive, and will include among
its terms the operative language substantially similar to the following:
In exchange for the payments set forth in the Change in Control Agreement by and
between Keithley Instruments, Inc. (the “Company”) and me (the “CIC Agreement”),
I and my heirs, personal representatives, successors and assigns, hereby forever
release, remise and discharge the Company and each of its past, present, and
future officers, directors, shareholders, members, employees, trustees, agents,
representatives, affiliates, successors and assigns (collectively the “Company
Released Parties”) from any and all claims, claims for relief, demands, actions
and causes of action of any kind or description whatsoever, known or unknown,
whether arising out of contract, tort, statute, treaty or otherwise, in law or
in equity, which I now have, have had, or may hereafter have against any of the
Company Released Parties from the beginning of my employment with the Company to
the date of this release, arising from, connected with, or in any way growing
out of, or related to, directly or indirectly, (i) my employment by the Company,
(ii) my service as an officer or key employee, as the case may be, of the
Company, (iii) any transaction prior to the date of this release and all
effects, consequences, losses and damages relating thereto, (iv) the services
provided by me to the Company, or (v) my termination of employment with the
Company under the common law or any federal or state statute, including, but not
limited to, all claims arising under the Civil Rights Acts of 1866 and 1964, the
Fair Labor Standards Act of 1938, the Equal Pay Act of 1963, the Age
Discrimination in Employment Act of 1967, the Rehabilitation Act of 1973, the
Older Workers Benefit Protection Act of 1990, the Americans with Disabilities
Act of 1990, the

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Civil Rights Act of 1991, the Family and Medical Leave Act of 1993, the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”), Title 4112 of the Ohio
Revised Code, and all other federal or state laws governing employers and
employees; provided, however, that nothing in this release will bar, impair or
affect the obligations, covenants and agreements of the Company (x) to pay
compensation and benefits through the date of termination, (y) to fulfill its
obligations set forth in the CIC Agreement and any stock option, restricted
share or performance share agreement, or (z) to satisfy any indemnification,
expense advancement or other obligation under applicable law, the Company’s Code
of Regulations, or any indemnification agreement to which the Company and I are
a party.
     3.2 If the release described in this Article III has not been delivered by
the Executive to the Company thirty (30) days after a Triggering Event, the
Company shall promptly provide the Executive or her estate, as applicable,
written notice that the release must be timely delivered in order for the
Executive to receive the benefits hereunder, which notice, however, shall in no
event modify any otherwise applicable time periods. Notwithstanding any other
provision of this Agreement, if the release described in this Article III is not
timely delivered by the Executive to the Company or, as applicable, is timely
revoked by the Executive, then this Agreement shall terminate and be of no
further force or effect; provided, however, the restrictive covenants set forth
in Article IV shall remain operative and shall not terminate until the
expiration of the term set forth therein.
ARTICLE IV
NON-SOLICITATION AND CONFIDENTIAL INFORMATION
     4.1 For a period of one (1) year following the Executive’s separation from
service with the Company, if the Executive has received or is receiving benefits
under this Agreement, the Executive shall not, directly or indirectly, on her
own behalf or on behalf of any person or entity (a) solicit the employment of
any employee who has been employed by the Company or its subsidiaries at any
time during the six (6) months immediately preceding such date of hiring or
solicitation or (b) solicit customers, business, patronage or orders for, or
sell, any products and services in competition with, or for any business,
wherever located, that, as of the date of such separation from service, competes
with, the business of the Company.
     4.2 The Executive shall not use, disclose or make accessible to any other
person, firm, partnership, corporation or any other entity any Confidential
Information (as defined below) pertaining to the business of the Company or any
entity controlling, controlled by, or under common control with the Company
(each an “Affiliate”) except when required to do so by a court of competent
jurisdiction; provided, however, that the foregoing restrictions shall not apply
to the extent that such information (a) is obtainable in the public domain,
(b) becomes obtainable in the public domain, except by reason of the breach by
the Executive of the terms hereof, (c) was not acquired by the Executive in
connection with her employment or affiliation with the Company, (d) was not
acquired by the Executive from the Company or its representatives, or (e) is
required to be disclosed by rule of law or by order of a court or governmental
body or agency. For purposes of this Agreement, “Confidential Information” shall
mean non-public information

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concerning the Company’s financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer and
supplier lists, customer and supplier information, pricing data, information
relating to governmental relations, discoveries, practices, processes, methods,
trade secrets, developments, marketing plans and other non-public, proprietary
and confidential information of the Company or its Affiliates, that, in any
case, is not otherwise generally available to the public and has not been
disclosed by the Company, or its Affiliates, as the case may be, to others not
subject to confidentiality agreements. In the event the Executive’s employment
is terminated for any reason, the Executive immediately shall return to the
Company all Confidential Information in her possession.
ARTICLE V
TERM
     The term of this Agreement shall be three (3) years from the date hereof
and shall be automatically renewed for successive one-year periods unless the
Company notifies the Executive in writing that this Agreement will not be
renewed at least sixty (60) days prior to the end of the current term; provided,
however, that (a) from and after a Change in Control during the term of this
Agreement, this Agreement shall remain in effect until the end of the Protection
Period, (b) this Agreement shall terminate if, before a Change in Control, the
employment of the Executive with the Company or any of its subsidiaries, as the
case may be, shall terminate for any reason and (c) if a Protection Period ends
by reason of the proviso in Section 1.2, this Agreement shall not terminate and
shall remain in full force and effect until it otherwise terminates or expires
in accordance with this Article V. The termination this Agreement shall not
affect the parties’ respective rights and obligations established prior to the
termination date.
ARTICLE VI
MISCELLANEOUS
     6.1 No amounts otherwise due or payable under this Agreement will be
subject to setoff or counterclaim by either party hereto.
     6.2 All attorney’s reasonable fees and related expenses incurred in good
faith by the Executive in connection with or relating to the enforcement by her
of her rights under this Agreement will be paid for by the Company.
     6.3 This Agreement will be binding upon and will inure to the benefit of
the Company and its successors and assigns, including, without limitation, any
corporation or other person which acquires, directly or indirectly, by purchase,
merger, consolidation or otherwise, all or substantially all of the business or
assets of the Company. Without limitation of the foregoing, the Company will
require any such successor, by agreement in form and substance satisfactory to
the Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that it is required to be performed by the
Company. This Agreement will be binding upon and will inure to the benefit of
the Executive, her heirs at law and her personal representatives.

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     6.4 Neither this Agreement nor any benefits payable hereunder will be
subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge or to execution, attachment, levy or similar process at
law, whether voluntary or involuntary.
     6.5 This Agreement will not in any way constitute an employment agreement
between the Company and the Executive and it will not oblige the Executive to
continue in the employ of the Company, nor will it oblige the Company to
continue to employ the Executive, but it will merely require the Company to pay
benefits hereunder to the Executive under the agreed upon circumstances. The
Executive and the Company acknowledge and confirm that the Executive’s
employment by the Company is employment-at-will, and is subject to termination
by the Executive or the Company at any time.
     6.6 The benefits herein provided will be in addition to, and are not
intended to reduce, restrict or eliminate any benefit to which the Executive may
otherwise be entitled by virtue of her termination of employment or otherwise.
     6.7 All notices and other communications required to be given hereunder
shall be in writing and will be deemed to have been delivered or made when
mailed, by certified mail, return receipt requested, if to the Executive, to the
last address which the Executive shall provide to the Company, in writing, for
this purpose, but if the Executive has not then provided such an address, then
to the last address of the Executive then on file with the Company; and if to
the Company, then to the last address which the Company shall provide to the
Executive, in writing, for this purpose, but if the Company has not then
provided the Executive with such an address, then to:
Secretary
Keithley Instruments, Inc.
28775 Aurora Road
Cleveland, Ohio 44139
     6.8 This Agreement will be governed by, and construed in accordance with,
the laws of the State of Ohio, except for the laws governing conflict of laws.
If either party institutes a suit or other legal proceedings, whether in law or
equity, the Executive and the Company hereby irrevocably consent to the
jurisdiction of the Common Pleas Court of the State of Ohio (Cuyahoga County) or
the United States District Court for the Northern District of Ohio.
     6.9 This Agreement constitutes the entire understanding between the Company
and the Executive concerning the subject matter hereof and supersedes all prior
written or oral agreements or understandings between the parties hereto,
including any prior change in control agreements or arrangements by and between
the Company and the Executive. Nothing in this Agreement is intended to affect
the Executive’s rights, including rights to indemnification, if applicable,
under applicable law, the Company’s Code of Regulations or any separate
indemnification agreement. No term or provision of this Agreement may be
changed, waived, amended or terminated except by a written instrument. The
Company reserves the right, in its sole discretion, to amend this Agreement to
comply with Code Section 409A (which amendment may be retroactive to the extent
permitted by Code Section 409A and may be made by the Company without the
consent of the Executive). In particular, to the extent the Executive

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becomes entitled to receive payments subject to Code Section 409A upon an event
that does not constitute a permitted distribution event under Code
Section 409A(a)(2), then notwithstanding anything to the contrary in this
Agreement, the timing of payment to the Executive will be adjusted accordingly.
     Notwithstanding anything in this Agreement to the contrary, any
reimbursements or in-kind benefits provided under this Agreement shall be made
or provided in accordance with the requirements of Section 409A of the Code,
including, where applicable, the requirements that (a) any reimbursement is for
expenses incurred during the period of time specified in this Agreement, (b) the
amount of expenses eligible for reimbursement, or in-kind benefits provided,
during any taxable year of the Executive may not affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other taxable year
of the Executive, (c) the reimbursement of an eligible expense will be made no
later than the last day of the Executive’s taxable year following the year in
which the expense is incurred, and (d) the right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another benefit.
     This Agreement is intended, and shall be construed and interpreted, to
comply with Section 409A of the Code and if necessary, any provision shall be
held null and void to the extent such provision (or part thereof) fails to
comply with Section 409A of the Code or the Treasury Regulations thereunder. For
purposes of Section 409A of the Code, each payment of compensation under the
Agreement shall be treated as a separate payment of compensation. Any amounts
payable solely on account of an involuntary termination shall be excludible from
the requirements of Section 409A of the Code, either as separation pay or as
short-term deferrals to the maximum possible extent.
[Signature Page Follows]

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     IN WITNESS WHEREOF, and as conclusive evidence of the adoption of this
Agreement, the parties have hereunto set their hands as of the date and year
first above written.

            KEITHLEY INSTRUMENTS, INC.
      By:           Name:           Title:                                     
    [Joseph P. Keithley/Linda C. Rae]    

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EXHIBIT A
TARGET BONUS PERCENTAGE
[80 percent (for Mr. Keithley)]
[60 percent (for Ms. Rae)]

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