Filed by Bowne Pure Compliance





Exhibit 10.4




KEITHLEY INSTRUMENTS, INC.

2002 STOCK INCENTIVE PLAN




(as Amended and Restated January 1, 2007)




1. General. This Stock Incentive Plan (the “Plan”) provides key 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, which may or may not be subject to temporal
restrictions on transfer and substantial risks of forfeiture (“Restricted Stock”); and/or 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”; and 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 key 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. Grants which are made under this Plan after December 31, 2004, or previously-made Grants
which vest after such date (to the extent of such vesting) are intended to be exempt, and remain
exempt, from the requirements of Code Section 409A and related Treasury regulations.



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 originally became effective upon its adoption
by the Board of Directors on December 7, 2001, and was approved by the Company’s stockholders on
February 16, 2002 by holders of a majority of the outstanding shares of voting capital stock of the
Company. The Plan was subsequently amended by the Board of Directors on September 8, 2005 and
December 28, 2006. 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. The Plan is now further
amended on December 31, 2008; such amendments shall become effective January 1, 2007, unless
otherwise specified.


 


 









 





4. Administration of the Plan. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company or by a committee selected by such Board of
Directors by majority vote and comprised of no fewer than two (2) members of such Board of
Directors (the “Committee”). No person shall be appointed to, or serve on, the Committee who is not
both an “outside director,” within the meaning of 26 C.F.R. §1.162-27(e)(3), and a “non-employee
director” as defined under Rule 16b-3(b)(3) of the Securities Exchange Act of 1934. Notwithstanding
the foregoing, Grants made to members of the Board of Directors, which may include members of the
Committee, must be approved and granted by the Board of Directors (in connection to Grants made to
members of the Board of Directors, references to the “Committee” in the Plan shall mean the Board
of Directors).



A majority of the Committee shall constitute quarom. The acts of the 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;



(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 authority to make Grants of Stock Options
or Restricted Stock to key employees (other than executive officers) and to individuals to whom
offers of Company employment are, or are expected to be made.


 


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Notwithstanding the preceding provisions of this Section 4, any Grants of Stock Options or
SARs, made by the Committee after December 31, 2004, shall be limited to Grants involving Common
Stock which qualifies as “service recipient stock” (within the meaning of Treasury Regulations
Section 1.409A-1(b)(5)(iii)(A), where the Company can function as an eligible issuer” (within the
meaning of Treasury Regulations Section 1.409A-1(b)(5)(iii)(E)).



5. Key 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 (or by
the Committee’s delegee(s) in accordance with Section 4(i) hereof or by the Board in the case of
grants to members of the Board of Directors), acting in its sole and exclusive discretion. Key
employees may include, but shall not necessarily be limited to, members of the Board of Directors,
and officers, of the Company and any subsidiary corporation; and other salaried employees that the
Committee identifies as strategically or financially important to preserving and enhancing
shareholder value. Notwithstanding any contrary Plan provision, 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; provided, however, that such Common Shares must satisfy the
definition of “service recipient stock” under Treasury Regulation Section 1.409A-1(b)(5)(iii).
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 re-offering under the
Plan to any eligible employee.



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 three million
(3,000,000) Common Shares and the maximum number of Common Shares made subject to Grants under the
Plan to any one (1) key employee during any one (1)-year period shall be two hundred thousand
(200,000) Common Shares. Such aggregate number(s) 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.


 


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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 or converted into or exchanged for a
different number or kind of shares of stock or other securities of the Company or of another
corporation or other property, including cash (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 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 or
property into which each outstanding Common Share shall be changed or for which each such Common
Share shall be exchanged and, in the case of a merger, reorganization, consolidation or similar
transaction, the Committee may cancel an unexercised Stock Option or SAR in exchange for a payment
equal to the amount, if any, by which the price being paid to holders of Common Shares in the
merger, reorganization, consolidation or similar transaction exceeds the applicable exercise price
of the Stock Option or SAR; (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. 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. The option price per Common
Share under each Stock Option granted pursuant to the Plan which is not an Incentive Stock Option
shall be the closing price of the Common Shares on the New York Stock Exchange on the date the
Stock Option is approved by the Committee (or the next trading day if the approval date is not a
trading day), unless the Committee establishes a different option price or method for determining
the option price at the time of approval.


 


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(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.



(d) Limitations on Exercise and Transfer of Stock Options. Except as otherwise
provided herein, only the key employee to whom a Stock Option is granted may exercise such Option,
and no Stock Option granted hereunder shall be transferable by an optionee, other than by will or
the laws of descent and distribution. Notwithstanding the preceding sentence, an optionee may
transfer and assign Stock Options (other than Incentive Stock Options) if (and then, only to the
extent) the optionee obtains the prior consent of the Committee and otherwise complies with the
requirements of this Section 7(d) (a “Permitted Transfer”). For this purpose, a Permitted Transfer
consists of either (i) an irrevocable transfer by an optionee to a family member (or a trust or
partnership whose beneficiaries or partners are comprised of family members), if made by without
payment of consideration (as further defined in 17 C.F.R. §240.16b-3); or (ii) an irrevocable
transfer by an optionee to an alternate payee, made under a qualified domestic relations order (as
defined in 29 C.F.R. §240.16a-12 and 26 U.S.C. § 414(p)(1)(B)). Also for this purpose, a “family
member” of an optionee includes the optionee’s spouse, children, grandchildren, nieces and nephews.
Following a Permitted Transfer, the Grants transferred shall be exercisable only by the transferee.
Except as specifically provided in this Section 7(d), no Stock Option granted hereunder can 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 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 together with any federal, state and local income and employment
taxes required to be withheld by the Company from the optionee’s wages as a result of such
exercise. Such purchase price shall be paid with cash or check, or 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 a Stock Option not to be a fully paid and non-assessable Common Share.


 


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(g) Certain Reissuances of Stock Options. In the discretion of the Committee and 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), new Stock Options shall be granted to such optionee (to the
extent Common Shares remain available for Grants). If granted, such Stock Options will have 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 he
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 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. Any surrender of Stock Options conditioned upon the granting of new Stock Options, made
after December 31, 2004, shall be effected in strict compliance with Treasury Regulation Section
1.409A-1(b)(5) to prevent such surrender from constituting a “modification,” “extension,” or
“renewal,” of a stock right for Code Section 409A purposes. The Common Shares subject to any Stock
Option so surrendered 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 corporation thereof.


 


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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 (if any) 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, other than a grant that
does not include restrictions or a risk of forfeiture, 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 equal to their stated value.




(ii) Grants of Restricted Stock, other than a grant that does not include
restrictions or a risk of forfeiture, shall only be accepted by executing a
Restricted Stock agreement and paying whatever price (if any) is required under
Section 8(b)(i).




(iii) Each key employee granted Restricted Stock will 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(if any) applicable to such Grant.




(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
acknowledgment that such Stock remains subject to a substantial risk of forfeiture
in the event of termination of employment under certain circumstances.


 


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(v) Subject to the provisions of the Plan and the Restricted Stock agreement, during a
temporal period (if any) 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; provided that any such lapse of
transfer or restriction satisfy they requirement of Code Section 409A and the
relevant regulation unless the key employee and the Committee otherwise agree.




(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 so long as any restrictions or risk of
forfeiture remain applicable.



(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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(d) 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. With regard to any Grant of an SAR
made (or vesting) after December 31, 2004, in no event shall the Committee base the right to
payment of such SAR on an amount less than one hundred percent (100%) of the fair market value of a
Common Share (determined in accordance with the method described in Section 7(b) hereof for
identifying the fair market value of Common Shares). 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, if the Company
is the employer of the key employee, or by the subsidiary corporation subject to the Committee’s
approval, if such subsidiary corporation is the employer of the key employee:



(e) cash (or check);



(f) fully paid Common Shares having a fair market value equal to such amount; or



(g) 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.


 


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9. 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, such key employee’s Grants shall terminate on the effective date of such
termination of employment, unless (and then, only to the extent) such Grants by their terms
specifically provide otherwise, or unless (and then, only to the extent) the Committee extends such
Grants on or before such key employee’s date of 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.



In the absence of specific Grant provisions prescribing a longer period, if termination of
employment is due to death or disability, 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 by that person designated by such key employee by will, or as
otherwise indicated 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 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).



For purposes of this Plan and all Grants made hereunder, if 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 serve in the uniformed services (within the meaning of chapter 43, title 38 of the
United States Code) or for any other reason approved by the Company, his employment with the
Company or such subsidiary corporation shall not be considered to have terminated and he shall be
deemed an employee of the Company or such subsidiary corporation during such leave of absence. The
provisions of this paragraph shall apply with equal force to any extension of any such leave of
absence granted by the Company or such subsidiary corporation.


 


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10. 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). 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.



11. 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 the
Company’s 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;



(c) Materially increasing the benefits accruing to optionees under this Plan; or



(d) Retroactively altering the material terms of any Grants made to individuals described in
the flush language at the end of Section 4 hereof;



except to conform this Plan and any agreements made hereunder to changes in the Code or governing
law.


 


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12. 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 Company 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 Company shall, in its sole discretion, determine
to be necessary or advisable or the determination by the Company, 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 Company, in its sole discretion, shall determine to be adequate.



13. 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 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. Ohio law controls the enforcement and interpretation of this Plan, and any Grants or
other contractual agreements made pursuant to this Plan.


 


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14. Code Section 409A Exemption. It is intended that any Grants made under this Plan
after December 31, 2004, or vesting (in whole or in part) after such date be exempt from the
requirements of Code Section 409A, and that any and all restricted stock, stock option and/or SAR
agreement(s) used to document such Grants be revised, as and to the extent necessary, to comply
with such requirements.



15. Termination of This Plan. This Plan shall terminate on February 11, 2012;
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.



IN WITNESS WHEREOF, the Company, by order of its Board of Directors, has caused the
undersigned, duly authorized officers to execute this Plan on this 31st day of December, 2008



	 	 	 	 	 
	 	KEITHLEY INSTRUMENTS, INC.

 	 
	 	By:  	/s/ Mark J. Plush
 	 
	 	 	Its:   Vice President and Chief Financial Officer 	 




 


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