Filed by Bowne Pure Compliance





Exhibit 10.7




KEITHLEY INSTRUMENTS, INC.




DEFERRED COMPENSATION PLAN




(Amended and Restated January 1, 2005)




This Deferred Compensation Plan is established the 11th day of February, 1984 by Keithley
Instruments, Inc. (the “Company”) in accordance with the terms and provisions as set forth below.
The Company now amends and restates this Plan, effective January 1, 2005.




	1.	 	Definitions







Whenever used in the Deferred Compensation Plan and the applicable forms under the Plan,
namely, the Irrevocable Election to Participate and the Beneficiary Designation, the
following terms shall have the respective meanings set forth below unless otherwise
expressly provided, and when the defined meaning is intended, the term is capitalized:




	 	a.	 	Account — means the bookkeeping liability established to reflect each
Participant’s deferred compensation together with interest thereon.

	 
	 	b.	 	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 an entity which is under
common control with, the Company. 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 shall apply.

	 
	 	c.	 	Board — means the Board of Directors of Keithley Instruments, Inc.

	 
	 	d.	 	Bonus — means any cash bonus which may be payable to an Employee.

	 
	 	e.	 	Section 409A Change in Control — means a Change in Control that satisfies the
conditions imposed by Treasury Regulation Sections 1.409A-2(i)(5)(i)-(vii). Such
conditions shall be considered met in any one of the following three circumstances:
(i) where a person, or a group of persons acting together, acquires more than fifty
percent (50%) of the stock of the Corporation, measured by voting power or value; (ii)
where, over a twelve (12) month period: (a) a person or group acquires stock
representing thirty percent (30%) of the voting power of the Corporation; or (b) a
majority of the members of the Board of Directors of the parent corporation is replaced
by directors not endorsed by the persons who were members of the Board before the new
directors’ appointment; or (iii) where a person or group acquires forty percent (40%)
or more of the gross fair market value of the assets of the Corporation over a twelve
(12) month period. The determination as to the occurrence of a Section 409A Change in
Control shall be based on objective facts and in accordance with the requirements of
Code Section 409A.





 












 





	 	f.	 	Code — means the Internal Revenue Code of 1986, as amended.

	 
	 	g.	 	Committee — means the Compensation Committee of the Board or such other
Committee composed of no fewer than three (3) members as may be designated by the Board
to administer this Plan.

	 
	 	h.	 	Company — means Keithley Instruments, Inc., or any successor thereto.

	 
	 	i.	 	Disability — means (i) a Participant is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months; or (ii) a Participant is, by reason of any
medically determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than twelve (12)
months, receiving income replacement benefits for a period of not less than three (3)
months under an accident and health plan covering employees of the Company.

	 
	 	j.	 	Employee — means an individual who is employed by the Company or a Subsidiary
on a full-time basis in a managerial or executive capacity.

	 
	 	k.	 	Irrevocable Election to Participate or Irrevocable Election Agreement — means
the irrevocable election agreement which must be executed by a Participant in order for
the Employee to participate in any Year.

	 
	 	l.	 	Participant — means an Employee who may receive a Performance Award or other
Supplemental Compensation in any Year and who has been designated by the Committee or
its designate(s) as eligible for participation in the Plan for that Year.

	 
	 	m.	 	Performance Award — means any cash bonus or Performance Award which may be
payable to an Employee.

	 
	 	n.	 	Plan — means this Deferred Compensation Plan as it may be amended from time to
time.

	 
	 	o.	 	Retirement — means the date of retirement according to the terms of the
Company’s Employees’ Pension Plan or the terms of any Subsidiary’s pension plan.

	 
	 	p.	 	Separation from Service — means a termination of employment with the Company
and all Affiliates (whether by death, retirement, or otherwise) which ends or
substantially reduces the personal services a Participant performs (or is expected to
perform) for the Company and all Affiliates. Except in the case of a Participant on a
bona fide leave of absence as provided below, a Participant is deemed to have incurred
a Separation from Service if the level of services to be performed by the Participant
after a date certain is reasonably expected to be reduced to twenty percent (20%) or
less of the average services rendered by the Participant during the immediately
preceding 36-month period (or the total period of employment, if less than 36 months),
disregarding period during which such Participant was on a bona fide leave of absence.





 


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	 	 	 	A Participant absent from work due to military leave, sick leave, or other bona fide
leave of absence shall incur a Separation from Service on the first date immediately
following the later of: (a) the six month anniversary of the commencement of the
leave, or (b) the expiration of the Participant’s right, if any, to reemployment
under statute or contract. Notwithstanding the foregoing, a Participant who is
absent due to a physical or mental impairment that is expect to result in death or
last for a continuous period of at least six months and that prevents the
Participant from performing personal services for the Company (or its Affiliates, as
applicable) shall be deemed to have incurred a Separation from Service on the first
date immediately following the 29-month anniversary of the commencement of the
leave.

	 
	 	q.	 	Specified Employee — A Participant who, as of the date of his or her Separation
from Service, is a “key employee” of the Company or any Affiliate, so long as the
Company’s stock (or the stock of any Affiliate) is publicly traded on an established
securities market or otherwise. A Participant is a key employee if he or she meets the
requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance
with the regulations thereunder and disregarding Section 416(i)(5)) at any time during
the 12-month period ending on a given December 31st. Such key employee shall be
treated as a specified employee for the entire 12-month period beginning on the April
1st next following the December 31st on which such Participant qualifies as
a key employee hereunder.

	 
	 	 	 	For purposes of determining whether a Participant is a Specified Employee, the
compensation of the Participant shall be determined in accordance with the
definition of compensation provided under Treasury Regulation Section 1.415(c)-2(a).
Notwithstanding the foregoing, if a different definition of compensation has been
designated by the Company with respect to another nonqualified deferred compensation
plan in which a key employee participates, the definition of compensation shall be
the definition as provided under Treasury Regulation Section 1.415(c)-2(a), unless
the Company elects (by applicable corporate action) to use a different definition of
compensation with respect to all nonqualified deferred compensation plan maintained
by the Company.

	 
	 	r.	 	Subsidiary — means any corporation at least fifty percent (50%) of the voting
 shares of which is owned by the Company either directly or indirectly and which has
been authorized by the Board to participate in the Plan.

	 
	 	s.	 	Supplemental Compensation — means compensation payable to an Employee which is
in addition to an Employee’s salary and which the Committee, in its sole discretion,
may deem to be deferrable, either in whole or in part, under the terms and conditions
of the Plan.

	 
	 	t.	 	Termination — means termination of employment for any reason other than
Retirement including death, disability, resignation or release from employment with the
Company or a Subsidiary.

	 
	 	u.	 	Year or Plan Year — means the Company’s fiscal year which ends on each September 30
during which the Plan is in effect.





 


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	2.	 	Purpose of the Plan







The purpose of the Plan is to furnish a benefit to those Employees who contribute to the
success of the Company and to assist the Company in attracting and retaining such Employees.




	3.	 	Establishment of the Plan







The Plan is established effective as of October 1, 1983. The effective date of this
amendment and restatement, however, is January 1, 2005.




	4.	 	Administration of the Plan







The Committee shall manage and implement the provisions of the Plan. The Committee shall
have the authority to interpret the Plan, adopt and revise rules and regulations relating to
the Plan and make any other determinations which it believes necessary or advisable for the
administration of the Plan. Decisions and determinations by the Committee shall be final and
binding on Participants and other Employees except as otherwise provided in Paragraph 18.




The Committee may delegate to such persons as they select any powers and duties with respect
to the Plan as the Committee shall deem appropriate.




	5.	 	Designation of Participants







The Committee or its delegate(s) shall designate Participants in the Plan in any Year from
among those Employees who may be eligible to receive a Bonus, Performance Award or
Supplemental Compensation during that Year on the following terms:




	 	a.	 	The Committee or its delegate(s) shall notify those Employees whom it has
selected as Participants in the Plan no later than the end of the Year in which the
Bonus or Supplemental Compensation is earned or the end of the Performance Period with
respect to any Performance Award.

	 
	 	b.	 	The Committee may from Year to Year, at its discretion, change the eligibility
requirements for participation in the Plan.







	6.	 	Requirements for Participation







	 	a.	 	In order to participate in any Year, the Participant must complete and return
the Irrevocable Election Agreement no later than the dates set forth in Section 6(b)
and agree to defer a minimum of twenty-five percent (25%) of any Bonus, Performance
Award or Supplemental Compensation which the Company or Subsidiary would otherwise pay
to the Participant during such Year.





 


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	 	b.	 	If a Participant desires to defer any Bonus, Performance Award or Supplemental
Compensation, or the required portion thereof, the Irrevocable Election Agreement
must be completed and returned (i) prior to the beginning of the Year in which the
Bonus or Supplemental Compensation is earned, or (ii) on or before six (6) months
before the end of the Performance Period with respect to any Performance Award.

	 
	 	c.	 	At the time the Irrevocable Election Agreement is completed, the Participant
shall be required to specify the term of deferral and manner of payment in accordance
with the options provided in Section 8.

	 
	 	d.	 	Completion of the Irrevocable Election Agreement as to any Bonus, Performance
Award or Supplemental Compensation shall subject the amount deferred to all the terms
and conditions of the Plan.







	7.	 	Deferred Compensation Account







The Company shall establish a bookkeeping liability, an Account, for each Participant in the
Plan on the following terms:




	 	a.	 	The Account shall serve solely as a device for determining the amount to be
paid to the Participant at the time specified for payment. The Account will not be
funded by the Company or the Subsidiary and it will not constitute or be treated as
funds set aside in trust or escrow and the Participant shall have no proprietary right
of any nature with respect to such Account.

	 
	 	b.	 	At such time as a Bonus, Performance Award or Supplemental Compensation would
otherwise be paid to a Participant, his Account shall be credited with an amount equal
to that portion of the Bonus, Performance Award or Supplemental Compensation which the
Participant had designated to be deferred and be subject to this Plan reduced by the
Employee’s portion of any Social Security taxes which are payable with respect to the
deferred amounts.

	 
	 	c.	 	As of September 30 in each Year, a Participant’s Account shall be credited with
interest. The rate of such interest shall equal the average of the prime rates of
interest for large money center banks as reported in the Wall Street Journal for the
last day of such September for which such rates are reported and the last day of the
December, March and June last preceding such September and for which such rates are
reported. Such interest shall be credited on the average daily balance credited to the
account during the twelve (12) month period ending on such September 30th.

	 
	 	d.	 	Amounts payable to a Participant or beneficiary pursuant to this Plan shall be
debited to his Account as of the date of payment. In the event a Participant or
beneficiary shall be entitled to receive the full amounts then credited to his Account,
he shall also be paid interest for the period from the preceding October 1 until the
date of payment. The rate of such interest shall equal the average of the prime rates
of interest for large money center banks as reported in the Wall Street Journal for the
last day of the December, March, June and September last preceding the date of payment
and for which such rates are reported. Payment of such interest shall be in lieu of
interest for such Year under paragraph c above.





 


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	8.	 	Payments of Deferred Compensation







	 	a.	 	The Participant shall specify the end of the deferral term in his Irrevocable
Election Agreement which ending date may be:







	 	1.	 	a specified date;

	 
	 	2.	 	the Participant’s Retirement (or if later, the date of the
Participant’s Separation from Service);

	 
	 	3.	 	the attainment of a specified age by the Participant; or

	 
	 	4.	 	any combination of the foregoing.







	 	b.	 	The Participant shall specify in the Irrevocable Election Agreement to have any
Year’s deferral, together with interest accrued thereon, paid in a lump sum or in a
specified number of approximately equal annual installments. Payment of the first
installment or the lump sum shall be made on or before the January 31st coinciding with
or next following the end of the deferral term.

	 
	 	c.	 	In the event of the Participant’s Separation from Service, other than a
Separation from Service upon Retirement, or upon the Participant’s death after
Retirement, and prior to the end of the deferral term or before all installments have
been paid with respect to any deferral of compensation earned prior to January 1, 2005,
the remaining balance as reflected on the Participant’s Account shall be paid as
follows:







	 	1.	 	if, under the Participant’s Irrevocable Election Agreement, the
balance of the Account would have been payable within five (5) years of the
date of the Participant’s Termination or death, then the Account shall be
payable in accordance with the Irrevocable Election Agreement; or

	 
	 	2.	 	if, under the Participant’s Irrevocable Election Agreement, the
balance of the Account would not have been payable within five (5) years of the
date of the Participant’s Termination or death, then the Account shall be
payable in five installments commencing on the January 31st next following the
Participant’s Termination or death and on the four (4) succeeding January 31st.
Each installment shall equal the balance then credited to the Account divided
by the remaining number of unpaid installments.







Notwithstanding the foregoing, with respect to any deferral of compensation earned
on or after January 1, 2005, the remaining balance as reflected on the Participant’s
Account shall be payable in accordance with the Participant’s Irrevocable Election
Agreement.


 


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	 	d.	 	Payments shall be made to the Participant, or in the event of the Participant’s
death, to the beneficiary according to Section 10 and in no event later than ninety
(90) days following the Participant’s Separation from Service or the Participant’s date
of death. If no beneficiary has been designated, payment shall be made to the
Participant’s spouse, if he or she survives the Participant, or, if the Participant
does not have a surviving spouse, payment shall be made to the Participant’s estate.

	 
	 	e.	 	The Committee shall accelerate the time and manner of making payments from the
Participant’s Account in the event of a Section 409A Change in Control.

	 
	 	f.	 	All payments made to a Participant, beneficiary of a deceased Participant or
the estate of the Participant pursuant to Section 8 shall be debited to the
Participant’s Account as of the date of payment.

	 
	 	g.	 	The Company shall have the right to withhold and pay over any and all
withholding taxes which it may be required to collect under federal, state or local law
with respect to payments hereunder.

	 
	 	h.	 	In the event the Participant incurs a Separation from Service (other than on
account of death or Disability) while a Specified Employee such payment shall not begin
before the date that is six (6) months after the date of such Separation from Service.
In the event a Participant who is a Specified Employee has elected to receive benefits
under this Plan in annual installment payments, such installments that would normally
be paid during the six (6) months following the date that the Participant experiences a
Separation from Service, shall be accumulated and paid to such Participant (or in the
event of such Participant’s death, to his estate), no earlier than the first day of the
seventh (7th) month following the date of such Participant’s Separation from
Service.







	9.	 	Additional Distribution







If Bonuses deferred under this Plan are not considered as pay in determining benefits under
the Keithley Instruments, Inc. Employees’ Pension Plan, as such Plan may be amended from
time to time hereafter, or the pension plan of a Subsidiary, then, if necessary, a
supplemental payment of equivalent actuarial value as determined by the Company’s consulting
actuaries for the pension plan shall be made by the Company, or, if applicable, a
Subsidiary, with each payment (which will be in addition to the amounts payable under
Paragraph 8) to compensate a Participant for any reduction in benefits suffered under the
pension plan due to the deferral of a Bonus under this Plan.




Notwithstanding the foregoing, such payment under this Section 9 must conform to the
requirements of the Participant’s Irrevocable Election Agreement as provided for under
Section 8. In the event payment is scheduled to commence to such Participant an account of
a Separation from Service (other than an account of death or Disability) while such
Participant is a Specified Employee (as previously defined herein) any payment otherwise
permitted or required by this Section 9 shall not begin before the date that is six (6)
months after the payment date contained in the Participant’s Irrevocable Election Agreement. In the event a Participant who is a Specified Employee receives benefits under this
Section, such payment shall be accumulated and paid to such Participant (or in the event of
such Participant’s death, to his estate) no earlier than the first day of the seventh
(7th) month following the date of the Change in Control.


 


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	10.	 	Designation of Beneficiary







Each Participant shall have the right to designate a beneficiary or beneficiaries to receive
any amount credited to his Account remaining unpaid at the Participant’s death. Such
designation shall be effected by filing written notification with the Committee and may be
changed from time to time by similar action. If the Participant fails to make such
designation, any such unpaid amount credited to his Account shall be paid to the
Participant’s surviving spouse, if any, or, if there is no surviving spouse, to the
Participant’s estate in the manner provided in Paragraph 8(c).




	11.	 	Non-Alienation of Payments







Any amount payable from a Participant’s Account shall not be subject in any manner to
alienation, sale, transfer, assignment, pledge, attachment, garnishment, or encumbrance of
any kind, by will, or by inter vivos instrument. Any attempt to alienate, sell, transfer,
assign, pledge or otherwise encumber any such payment, whether presently or thereafter
payable, shall not be recognized by the Committee or the Company. Payments under the Plan
shall not in any manner be subject to the debts or liabilities of any Participant except
that the Company shall have the right to charge the Participant’s Account for any amounts
due and owing to the Company by the Participant. If a Participant shall attempt to alienate,
sell, transfer, assign, pledge or otherwise encumber payments under the Plan or any part
thereof, or if by reason of the Participant’s bankruptcy or other event happening at any
time such payments would devolve upon anyone else or would not be enjoyed by the
Participant, then the Committee, in its discretion, may terminate the Participant’s interest
in any such benefit, and hold or apply it for the benefit of such Participant, the
Participant’s spouse, children, or any dependents, or any of them, in such manner as the
Committee may deem proper.




	12.	 	Incompetency







Every person receiving or claiming payments under this Plan shall be conclusively presumed
to be mentally competent until the date on which the Committee receives a written notice, in
form and manner acceptable to the Committee, that such person is incompetent and that a
guardian, conservator, or other person legally vested with the care of the person’s estate
has been appointed. In the event a guardian or conservator of the estate of any person
receiving or claiming payments under this Plan shall be appointed by a court of competent
jurisdiction, payments may be made to such guardian or conservator provided that proper
proof of appointment and continuing qualification is furnished in form and manner acceptable
to the Committee. Any such payment so made shall be a complete discharge of any liability
therefor.




	13.	 	Right to Other Benefits







Participation in this Plan shall not disqualify a Participant from the right to participate
in other benefits of the Company or a Subsidiary to which the Participant may be entitled.
However, deferral of amounts under this Plan may affect the extent of participation
depending on the terms of such other plan of the Company or a Subsidiary.


 


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	14.	 	No Right to Continued Employment







In no event shall participation in this Plan give or be deemed to give a Participant any
right to be retained in the employ of the Company.




	15.	 	Amendment or Termination of the Plan







The Committee reserves the right to amend, modify or discontinue future deferrals under the
Plan at any time; provided, however, no such action shall:




	 	a.	 	reduce the then amount credited to any Participant’s account;

	 
	 	b.	 	reduce the rate of interest to be credited until the date of payment to amounts
deferred prior to the date of such action;

	 
	 	c.	 	change the date of payment or the manner of payment of any amounts deferred
prior to the date of such action or the interest thereon; or

	 
	 	d.	 	provide for any forfeiture of any amounts deferred prior to the date of such
action or the interest thereon;







without the express written consent of the Participant or the beneficiary of a deceased
Participant. Notice of amendments to or discontinuance of future accruals under the Plan
shall be given in writing to each Participant or beneficiary of a deceased Participant.




This Plan shall terminate in the event that:




	 	a.	 	the Company shall sell substantially all its assets, the purchaser of such
assets shall fail or refuse to assume the obligations of the Company and the Company
shall make liquidating distributions to its shareholders; or

	 
	 	b.	 	the Company shall institute proceedings to be adjudicated bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file a petition
or answer or consent seeking reorganization under the Bankruptcy Act or any similar
applicable federal or state law or shall make an assignment of its assets for the
benefit of creditors.







In the event of termination of this Plan, the Account balances of each Participant and
deceased Participant shall be payable immediately in a single lump sum payment.




	16.	 	Change of Control







In the event a Change of Control of the Company has occurred or is about to occur, the
Company shall notify each Participant and each beneficiary of a deceased Participant, in
writing, that a Change of Control has occurred or is about to occur. In the event of a
Change of Control, which also qualifies as a Section 409A Change in Control, the Company
shall make payment of the Participant’s vested deferred account balance in a lump sum
payment within thirty (30) days following such Change in Control.


 


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For purposes of this Section 16, 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 13(a)(9) or of Section 13(d)(3)
(as in effect on the date hereof) of the Securities Exchange Act of 1934, 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 Securities Exchange Act of 1934.




	17.	 	Books and Records







The books and records to be maintained for the purpose of the Plan shall be maintained by
the Company at its own expense and subject to the supervision and control of the Committee.
All expenses of administering the Plan shall be paid by the Company from its own funds.




	18.	 	Review of Claims or Determinations







Any Participant or beneficiary who desires to make a claim for a benefit under the Plan or
desires a determination with respect to any provision of the Plan, shall send such claim or
request in writing to the Compensation Committee, Keithley Instruments, Inc., 28775 Aurora
Rd., Cleveland, Ohio 44139.




Any Participant or beneficiary who claims a benefit under the Plan which is wholly or
partially denied, or requests a determination with respect to any provision of the Plan,
shall be advised in writing of the denial or determination of the Committee and its reason
therefor. Upon receipt of a written request which is filed with the Committee within sixty
(60) days after the claim is denied or the determination is made, such Participant or
beneficiary will be afforded a full and fair review by the Committee of the claim denied or
the determination made. The result of such review by the Committee shall be delivered in
writing within sixty (60) days after the request for review is received and shall include
specific reasons for the decision.




	19.	 	Governing Law







The Plan shall be construed, administered and governed in all respects under and by the laws
of the State of Ohio.


 


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	20.	 	Code Section 409A Compliance







This Plan is intended to be operated in compliance with the provisions of Code Section 409A
(including any rulings or regulations promulgated thereunder). In the event that any
provision of this Plan fails to satisfy the provisions of Code Section 409A, such provision
shall be reformed so as to comply with Code Section 409A and to preserve as closely as
possible the intention of the Corporation in maintaining the Plan; provided that, in the
event it is determined not to be feasible to so reform a provision of this Plan as it
applies to a payment or benefit due to a Participant or his or her Beneficiary(ies), such
payment shall be made without complying with Code Section 409A.



IN WITNESS HEREOF, the Company by action of its Board of Directors has caused this Amended and
Restated Plan to be executed 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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