KEITHLEY INSTRUMENTS, INC. DEFERRED COMPENSATION PLAN

1.

Definitions

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.

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 1 ^st 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.

2.

Purpose of the Plan

3.

Establishment of the Plan

4.

Administration of the Plan

5.

Designation of Participants

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.

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.

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