Exhibit 10.32

KNOWLES ELECTRONICS HOLDINGS, INC.
2004 STOCK OPTION PLAN

  1.   Purpose

          The purpose of this Knowles Electronics Holdings, Inc. 2004 Stock
Option Plan (the “Plan”) established by Knowles Electronics Holdings, Inc., a
Delaware corporation (the “Corporation”), is to advance the interests of the
Corporation’s shareholders by enhancing the Corporation’s ability to attract,
retain and motivate persons who are expected to make important contributions to
the Corporation and its Affiliates by providing such persons with equity
ownership opportunities and performance-based incentives through the grant of
options (“Options”) to purchase the Corporation’s Stock and thereby better
aligning the interests of such persons with those of the Corporation’s
shareholders.

  2.   Eligibility and Options

          Eligibility for participation in the Plan from among the employees of
the Corporation and its Affiliates, the granting of Options under the Plan, and
the establishment of the aggregate number of shares of Stock which may be issued
under Options granted under the Plan will be recommended by the Chief Executive
Officer of the Corporation’s Affiliate, Knowles Electronics, LLC (“Company”) for
approval by the Board of Directors (“Board”) of the Corporation. The Board, in
its discretion, will determine the employees eligible to participate in the
Plan, the number of shares of stock granted to each Participant in each Option
and the aggregate number of shares of stock which may be issued under Options
granted under the Plan. Each person who has been granted an Option under the
Plan shall be deemed a “Participant.”

  3.   Administration

      Administration. Except as provided in Section 2 above, the Plan will be
administered by the CEO of the Company. The CEO may adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan, as he shall
deem advisable. The CEO may correct any defect or omission or reconcile any
inconsistency in the Plan or any Option in the manner and to the extent he shall
deem necessary or advisable to carry out the terms and purposes of the Plan.
However, no such amendment shall in any manner adversely affect any
Participant’s rights with respect to Options previously granted under the Plan
without the written consent of the Participant. Any decisions under the Plan
with respect to just the CEO as a Participant shall be made by the Board. The
CEO may delegate to one or more other executive officers of the Company, the
power to exercise such of his duties under the Plan as the CEO may determine,
except as provided in Section 2 above.

  4.   Stock to be Issued Under the Plan.

      (a) Stock. The stock to be issued upon the exercise of Options granted
under the Plan shall be shares of the $.01 par value per share Common Stock of
the Corporation

 

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(“Stock”) which may either be authorized and unissued shares or issued shares
held in or hereafter acquired for the Corporation’s treasury. In the event that
any outstanding Option under the Plan expires or is terminated, the shares of
Stock allocable to the unexercised portion of such Option may again be subject
to an Option under the Plan.

      (b) Certificates. The Corporation shall not be required to issue or
deliver any certificate for shares of Stock purchased upon the exercise of all
or any part of an Option before completion of any registration or other
qualification of such shares under any state or federal law or ruling or
regulation of any governmental regulatory body that the Board shall, in its sole
discretion, determine is necessary or advisable.

  5.   Terms and Conditions of Options.

          Each Option granted under the Plan is intended to be a “non-qualified”
stock option and shall be subject to the following terms and conditions:

      (a) Term and Exercise of Options. The Option shall only be exercisable on
the date prior to the date of the occurrence of a Liquidity Event; provided,
however, that anything contained herein to the contrary notwithstanding, no
Option granted hereunder shall be exercisable after the expiration of ten
(10) years from the date of grant of such Option (the “Final Exercise Date”).
Subject to the terms of the Plan, any Option may be exercised, in whole or in
part, as to one or more whole shares of Stock covered by the Option. In the case
of any fractional share resulting from any calculation under the Plan, the
shares available for exercise shall be determined to the nearest lower number of
whole shares. Each election to exercise an Option shall be made in writing on
such form and at such time and in such manner as shall be provided in the
agreement governing such Option. The exercise of any Option and the issuance of
shares of Stock pursuant thereto, shall be subject to any rules and restrictions
imposed thereon by any applicable Federal or state security laws or by any
restrictions or contractual obligations established by or in connection with the
Liquidity Event.

      (b) Exercise Price. The price per share at which Stock may be acquired
pursuant to exercise of an Option, will be $1.00 per share.

      (c) Execution of Executive Stock Purchase Agreement. An Option may only be
exercised by a Participant, if the Participant has entered into the Executive
Stock Purchase Agreement attached to the Plan as Exhibit A prior to the exercise
of the Option.

      (d) Medium and Time of Payment. The Option price shall be payable to the
Corporation in United States dollars upon the exercise of the Option, and the
exercise of any Option and the delivery of the optioned shares shall be
contingent upon receipt by the Corporation of the full purchase price paid in
cash or by check.

      (e) Vesting. Each Option shall become and remain exercisable for 100% of
the shares covered thereby as of the date of grant of the Option, except as
otherwise specifically provided in the Plan.

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      (f) Termination of Employment.

  (i)   Continuous Relationship with the Company Required.

              Except as otherwise provided in this paragraph (f), no Option may
be exercised unless the Participant, at the time he or she exercised the Option,
is, and has been at all times since the date of the grant of the Option, an
employee of the Corporation or an Affiliate (an “Eligible Participant”).

  (ii)   Termination of Relationship with the Company.

              If a Participant ceases to be an Eligible Participant for any
reason, then, except as provided in subparagraph (iii) below, the right of such
Participant to exercise any Option shall terminate immediately upon such
cessation.

  (iii)   Exercise Period Upon Death, Disability or Retirement.

              If the Participant dies, becomes disabled (within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (“Code”), or
retires (voluntarily terminates employment with the Company while eligible for
an early or normal retirement benefit under a defined benefit pension plan
sponsored by the Corporation or any of its Affiliates) prior to the Final
Exercise Date while he or she is an Eligible Participant, such Participant’s
Option shall remain exercisable by the Participant (the Participant’s estate in
the event of his death) until the date preceding the date of the Liquidity
Event, provided, however, that an Option shall be exercisable only to the extent
that such Option was exercisable by the Participant on the date of his or her
death, disability or retirement and provided further that no Option shall be
exercisable after the Final Exercise Date. All determinations with respect to a
Participant’s disability or retirement shall be made in good faith by the CEO.

      (g) Transfer of Option. Neither the whole nor any part of any Option shall
be transferable by a Participant or by operation of law during said
Participant’s lifetime and at said Participant’s death an Option or any part
thereof shall only be transferable by said Participant’s Will or by the laws of
descent and distribution. An Option may be exercised during the lifetime of the
Participant only by the Participant. Any Option, and any and all rights granted
to a Participant thereunder, to the extent not theretofore effectively exercised
shall automatically terminate and expire upon any sale, transfer or
hypothecation or any attempted sale, transfer or hypothecation of such Option or
rights, or upon the bankruptcy or insolvency of the Participant.

  6.   Adjustments for Changes in Stock or Capitalization.

          In the event of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, reclassification of shares, spin-off or
other similar change in capitalization or event, or any distribution to holders
of Stock other than a normal cash dividend, (i) the number and class of
securities available under this Plan, (ii) the number and class of securities
and exercise price per share subject to each outstanding Option, and (iii) the
terms of

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each other outstanding Option shall be appropriately adjusted by the Corporation
(or substituted Options may be awarded, if applicable) to the extent the Board
shall determine, in good faith, that such an adjustment (or substitution) is
necessary and appropriate. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.

  7.   General Provisions Applicable to Options

      (a) Documentation. Each Option shall be evidenced by a written agreement
in such form as the CEO shall determine which shall be signed by the Corporation
and the Participant. Each Option may contain terms and conditions in addition to
those set forth in the Plan. Upon the grant of an option hereunder to a
Participant, there shall be delivered to the Participant such other information
or documents as the CEO shall deem necessary or advisable.

      (b) Discretion. Except as otherwise provided by the Plan, each Option may
be made alone or in addition or in relation to any other Option. The terms of
each Option need not be identical, and all Participants need not be treated
uniformly.

      (c) Withholding. Each Participant shall pay to the Corporation, or make
provision satisfactory to the Corporation for payment of, any taxes required to
be withheld in connection with Options granted to or exercised by such
Participant. The Corporation or the Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to a
Participant.

      (d) Conditions on Delivery of Stock. The Corporation shall not be
obligated to deliver any shares of Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Option have been met or removed to the satisfaction of the
Corporation, (ii) in the opinion of the Corporation’s counsel, all other legal
matters in connection with the issuance and delivery of such shares have been
satisfied, including any applicable securities laws and any applicable stock
exchange or stock market rules and regulations, and (iii) the Participant has
executed and delivered to the Corporation such representations or agreements as
the Corporation may consider appropriate to satisfy the requirements of any
applicable laws, rules or regulations.

      (e) Notice of Intent to Exercise Options. An Optionee desiring to exercise
an Option granted hereunder as to one or more of the shares covered thereby
must, in order to so exercise the Option, notify the Corporation in writing to
that effect, specifying the number of shares to be purchased in a form
satisfactory to the CEO.

  8.   Special Definitions

     The following words and phrases as used herein shall have the following
meanings, unless a different meaning is plainly required by the context.
Pronouns shall be interpreted so that the masculine pronoun shall include the
feminine and the singular shall include the plural:

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      (a) “Affiliate” means any corporation, organization, or entity which is
under common control with the Corporation or which is otherwise required to be
aggregated with the Corporation pursuant to paragraphs (b), (c), (m), or (o) of
Code Section 414.

      (b) “Initial Public Offering” means an initial public offering and sale of
the Corporation’s equity securities pursuant to an effective registration
statement under the Securities Act of 1933, as amended.

      (c) “Liquidity Event” means the occurrence of:

  (i)   an Initial Public Offering; or     (ii)   the Sale of the Corporation.

      (d) “Sale of the Corporation” means the sale of the Corporation, other
than an Initial Public Offering, in a single transaction or a series of
transactions, to a purchaser who is not affiliated with the Corporation pursuant
to which such purchaser acquires all or a material portion of the outstanding
capital stock (whether by merger, consolidation, recapitalization,
reorganization, purchase of the outstanding capital stock or otherwise) or all
or a material portion of the consolidated assets of the Corporation.

  9.   Miscellaneous

      (a) No Right to Employment or Other Status. No person shall have any claim
or right to be granted an Option, and the grant of an Option shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Corporation or the Company. The Corporation and the
Company expressly reserves the right at any time to dismiss or otherwise
terminate its relationship with a Participant free from any liability or claim
under the Plan.

      (b) No Rights as Shareholder. No Participant shall have any rights as a
shareholder with respect to any Option until becoming the record holder of such
shares.

      (c) Amendment of Plan.

     (1) The Board hereby reserves the right to amend, modify, and/or terminate
the Plan at any time. However, no such amendment or termination shall in any
manner adversely affect any Participant’s rights with respect to Options
previously granted under the Plan without the written consent of the
Participant.

     (2) In addition, the CEO, by written instrument may (i) make any amendment
which may be necessary or desirable to ensure any compliance of the Plan may be
necessary to comply with the requirements of any applicable law or regulation,
and (ii) may make any another amendment to the Plan which in the CEO’s
discretion is necessary or desirable to carry out the purposes of the Plan, as
long as the cost of such amendment to he Corporation is not material in the
judgment of the CEO. However, no such amendment shall in any manner

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adversely affect any Participant’s rights with respect to Options previously
granted under the Plan without the written consent of the Participant.

      (d) Compliance with Securities Exchange Act. Notwithstanding anything
herein to the contrary, options shall always be granted and exercised in such a
manner as to conform to the provisions of Rule 16b-3, or any replacement rule,
adopted pursuant to the provisions of the Securities Exchange Act of 1934 as the
same now exists or may, from time to time, be amended.

      (e) Government Regulations. This Plan and the granting and exercise of any
Option hereunder and the obligations of the Corporation to sell and deliver
shares under any such Option shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies as may be
required.

      (f) Proceeds form Sale of Stock. Proceeds of the purchase of optioned
shares by any Participant shall be for the general business purposes of the
Corporation.

      (g) Reporting Requirements. The Board shall furnish each Participant
hereunder with such information relating to the exercise of any Option granted
hereunder to said Participant as is required under applicable State and Federal
Tax and Security laws.

      (h) Governing Law. The provisions of the Plan and all Options made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Illinois, without regard to any applicable conflicts of law.

      (i) Effective Date. The Plan shall become effective as of November 1,
2004.

     IN WITNESS WHEREOF, the Corporation has caused the Plan to be signed by its
duly authorized officer as of the aforesaid Effective Date.

             

      KNOWLES ELECTRONICS HOLDINGS, INC.    
 
           

  By:   /s/ John J. Zei    

     

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      John J. Zei    

  Title:   President and CEO    

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