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                                                                  EXHIBIT 10.18

                             STOCKHOLDERS AGREEMENT

          This Stockholders Agreement (this "Agreement") is dated as of June 30,
1999 by and among Knowles Electronics, Inc., a Delaware corporation (the
"Company"), Key Acquisition, L.L.C., a Delaware limited liability company (the
"Investor"), the members of management listed on the signature page attached
hereto (together with all other executives of the Company who execute and
deliver a counterpart of this Agreement on or after the date hereof,
"Management"), the members of the "Vendor Group" listed on the attached Exhibit
A and, solely with respect to Sections 1, 4, 5, 8, 9 and 11 to 18, Morgan
Stanley Senior Funding Inc., Chase Securities Inc., The Chase Manhattan Bank and
their respective successors and assigns as Purchasers pursuant to a Note
Purchase Agreement dated as of the date hereof with respect to Senior
Subordinated Increasing Rate Notes due June 30, 2000 (the "Warrantholders"). The
Investor, Management, the Vendor Group and the Warrantholders are referred to
herein collectively as the "Stockholders," and each individually as a
"Stockholder."

          The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the
Company's board of directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Stockholder Shares may be transferred.

          NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:

          1. Definitions.

          "Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person and any
partner of a Person which is a partnership (so long as all distributions made by
such partnership are made pro rata among its partners based upon the economic
ownership of such partnership).

          "Approved Sale" means the sale of the Company, in a single transaction
or a series of related transactions, to a Person who is not an Affiliate of the
Approving Stockholders (as hereinafter defined) (a) pursuant to which such
Person proposes to acquire all or substantially all of the outstanding capital
stock (whether by merger, consolidation, recapitalization, reorganization,
purchase of the outstanding capital stock or otherwise) or all or substantially
all of the consolidated assets of the Company, (b) which has been approved by
the Board and the holders of a majority of the Investor Shares, voting together
as a single class (the "Approving Stockholders"), and (c) pursuant to which all
holders of each class of capital stock and holders of securities exchangeable or
convertible into such class of capital stock receive with respect thereto
(whether in such transaction or, with respect to an asset sale, upon a
subsequent liquidation) the same form and amount of consideration per share of
capital stock (or underlying Common Stock in the case of an exchangeable or
convertible security and net of any exercise or conversion price in such case)
or, if any such holders are given an option as to the form and amount of
consideration to be received, all holders are given the same option.

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          "Closing Date" has the meaning assigned to that term in the
Recapitalization Agreement among the Investor, the Company, and the stockholders
listed on Schedule 1.1-A thereto dated as of June 23, 1999 (the
"Recapitalization Agreement").

          "Common Stock" means, collectively, (i) the Company's Class A Common
Stock, par value $.001 per share, (ii) the Company's Class B Common Stock, par
value $.001 per share, (iii) any other class of common stock of the Company, and
(iv) any capital stock of the Company issued or issuable with respect to the
securities referred to in clauses (i), (ii) or (iii) by way of stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization.

          "Family Group" means (with respect to an individual) such individual's
spouse, siblings and their collective descendants (whether natural or adopted),
and any trust solely for the benefit of such individual, such individual's
spouse, siblings, their collective descendants (whether natural or adopted)
and/or a charitable organization.

          "Investor Shares" means all Stockholder Shares issued or issuable to
the Investor or any of its Affiliates.

          "Management Shares" means all Stockholder Shares issued or issuable to
any member of Management or any of such member's Affiliates.

          "Officer's Certificate" means a certificate signed on behalf of the
Company by the Company's president or its chief financial officer, in his
capacity as such, stating that, to the best of such officer's knowledge, (i) the
officer signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the accuracy of
the information set forth in such certificate and (ii) such certificate does not
misstate any material fact and does not omit to state any fact necessary to make
the certificate not misleading.

          "Other Stockholders" means, with respect to a Stockholder, all
Stockholders other than such Stockholder.

          "Ownership Ratio" means, at any time, with respect to a particular
Stockholder holding a particular class of the Company's capital stock, the ratio
obtained by dividing (A) the shares of such class of capital stock held by such
Stockholder by (B) the aggregate number of shares of such class of capital stock
held by the Stockholders.

          "Person" means any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization and any governmental entity or any department,
agency or political subdivision thereof.

          "Preferred Stock" means, collectively, (i) the Company's Series A-1
Preferred Stock, par value $.001 per share, (ii) the Company's Series A-2
Preferred Stock, par value $.001 per share, (iii) any other series of preferred
stock of the Company, and (iv) any capital stock of the Company issued or
issuable with respect to the securities referred to in clauses (i), (ii) or
(iii) by way of stock

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split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.

          "Public Sale" means any sale of capital stock to the public pursuant
to an offering registered under the Securities Act, or (except for the purposes
of Sections 4(a) and 4(b) hereof) to the public through a broker, dealer or
market maker pursuant to the provisions of Rule 144 or Rule 144A adopted under
the Securities Act.

          "Qualified Public Offering" means the sale to the public in one or
more underwritten public offerings registered under the Securities Act or Public
Sales of shares of Common Stock in which the Company and the Investor receive an
aggregate value (based on the midpoint of the proposed offering price range
specified in the registration statement used to offer such securities) of not
less than $20 million.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Stockholder Common Shares" means (i) any Common Stock issued or
issuable to the Stockholders on the date hereof, (ii) any other common equity
securities of the Company acquired by, or issued or issuable to the Stockholders
on or after the date hereof, (iii) any equity securities issued or issuable to
the Stockholders directly or indirectly with respect to the securities referred
to in clauses (i) and (ii) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization and (iv) for the purposes of Sections 4(a), 5, 8(a) and
15 includes the shares of Common Stock issuable pursuant to the Warrants.

          "Stockholder Preferred Shares" means (i) any Preferred Stock issued or
issuable to the Stockholders on the date hereof, (ii) any other preferred equity
securities of the Company acquired by, or issued or issuable to the Stockholders
on or after the date hereof and (iii) any equity securities issued or issuable
to the Stockholders directly or indirectly with respect to the securities
referred to in clauses (i) and (ii) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.

          "Stockholder Shares" means (i) any Stockholder Common Shares and (ii)
any Stockholder Preferred Shares. Shares will cease to be Stockholder Common
Shares, Stockholder Preferred Shares and Stockholder Shares, and will no longer
be subject to this Agreement, when they have been sold in a Public Sale. For
purposes of this Agreement, a Person will be deemed to be a holder of
Stockholder Shares whenever such Person has the right to acquire directly or
indirectly such Stockholder Shares (upon conversion or exercise in connection
with a transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and regardless of whether such Stockholder Shares
are subject to possible forfeiture or repurchase by the Company.

          "Subsidiary" means, with respect to any Person, any Person of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is

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at the time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination thereof, or
(ii) if a partnership, association or other business entity, a majority of the
partnership, membership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in
another Person if such Person or Persons shall be allocated a majority of the
gains or losses of or shall be or control the managing director or a general
partner of such other Person.

          "Vendor Group Shares" means all Stockholder Shares issued or issuable
to any member of the Vendor Group or any of such member's Affiliates.

          "Warrants" means the Warrants issued under the Warrant Agreement dated
as of June 30, 1999, between the Company and the Purchaser.

          2. Board of Directors and Other Matters.

          (a) From and after the date hereof and until the provisions of this
Section 2 cease to be effective, each holder of Stockholder Shares shall vote
all of the voting securities of the Company over which such Person has voting
control and shall take all other necessary or desirable actions within his or
its control (whether in his or its capacity as a stockholder, director, member
of a board committee or officer of the Company or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary or desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:

               (i) the authorized number of directors on the Board shall be
     established at no less than three and no more than six directors;

               (ii) the following persons shall be elected to the Board at each
     election of directors:

                    (A) no less than one and no more than three representatives
          designated by the holders of a majority of the Investor Shares from
          time to time (the "Investor Directors"), with Ken Terry and Kevin
          Luzak serving as two of the initial Investor Directors,

                    (B) one representative designated by the holders of a
          majority of the Vendor Group Shares (the "Vendor Directors"), with
          James E. Knowles serving as the initial Vendor Director; and

                    (C) the Chief Executive Officer and Chairman of the Company,
          for so long as they hold those positions;

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               (iii) the composition of the board of directors of each of the
     Company's Subsidiaries (each, a "Sub Board") shall be approved by the
     Company, and each of the persons described in Section 2(a)(ii) above shall
     have the option of serving on each such Sub Board as a member or as an
     observer;

               (iv) any committees of the Board or a Sub Board shall be created
     only upon the approval of a majority of the voting power of the Board, and
     the majority of each such committee (if any) shall consist of Investor
     Directors;

               (v) any director designated hereunder shall be removed from the
     Board (and thereupon from all Sub Boards and all committees of the Board or
     any Sub Board) (with or without cause) at the written request of the Person
     or Persons entitled to designate such director pursuant to subparagraph
     (ii) above, but only upon such written request and under no other
     circumstances; and

               (vi) in the event that any director designated hereunder for any
     reason ceases to serve as a member of the Board or a Sub Board or any
     committee thereof during such director's term of office, the resulting
     vacancy on the Board or such Sub Board or committee shall be filled by a
     representative designated by the Person or Persons entitled to designate
     such director pursuant to subparagraph (ii) above. If any party fails to so
     designate a representative to fill a directorship within 30 days of a
     vacancy, the election of a person to such directorship shall be
     accomplished in accordance with the Company's bylaws and applicable law.

          (b) In lieu of any of the directors whom the Investor or the Vendor
Group is entitled to designate pursuant to Section 2(a)(ii) and Section
2(a)(iii), the Investor or the Vendor Group (as the case may be) may designate
an observer who shall be treated as a director in all respects except that such
observer shall have no voting rights.

          (c) So long as the Investor holds at least 50% of the Company's Class
A Common Stock held by it on the Closing Date, the Company's bylaws shall state
(by providing for two classes of directors or otherwise) that the votes of the
Investor Directors shall constitute a majority for all purposes, and the
affirmative vote of at least one Investor Director shall be required for valid
board approval of any corporate action.

          (d) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director and observer named hereunder in connection with
attending the meetings of the Board, any Sub Board and any committee thereof.

          (e) The provisions of this Section 2 will terminate upon the
completion of a Qualified Public Offering or an Approved Sale.

          (f) In the event that any provision of the Company's bylaws or
certificate of incorporation is inconsistent with any provision of this section,
this Agreement governs and the

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Stockholders shall take such action as may be necessary to amend any such
provision in the Company's bylaws or certificate of incorporation to remedy such
inconsistency.

          3. Conflicting Agreements. Each Stockholder represents that such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement, and no holder of Stockholder Shares shall grant any proxy or
become party to any voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement.

          4. Restrictions on Transfer of Stockholder Shares.

          (a) Tag Along Rights. Subject to Sections 4(b), 4(c)(ii) and 4(d), at
least 15 days prior to any sale, transfer, assignment or other disposal (a
"Transfer") of any Stockholder Shares (other than a Transfer pursuant to a
Public Sale or an Approved Sale), the Person making such a Transfer (the
"Transferring Stockholder") shall deliver a written notice (the "Sale Notice")
to the Company and the Other Stockholders, specifying in reasonable detail the
identity of the prospective transferee(s) and the terms and conditions of the
Transfer. The Other Stockholders may elect to participate in the contemplated
Transfer and sell their Stockholder Shares of the same class by delivering
written notice to the Transferring Stockholder within 10 days after delivery of
the Sale Notice. If any Other Stockholders have elected to participate in such
Transfer, each of the Transferring Stockholder and such Other Stockholders shall
be entitled to Transfer in the contemplated Transfer, at the same price and on
the same terms, a number of Stockholder Shares of the class covered by the
Transfer equal to the product of (i) the quotient determined by dividing (A) the
number of Stockholder Shares of such class owned by such Stockholder by (B) the
aggregate number of Stockholder Shares of such class owned by the Transferring
Stockholder and the Other Stockholders participating in such Transfer, and (ii)
the aggregate number of Stockholder Shares of such class or series to be
Transferred in the contemplated Transfer.

          (b) First Offer Rights. Subject to Section 4(d), at least 60 days
prior to any Transfer of Vendor Shares or Management Shares (other than a
Transfer pursuant to a Public Sale or an Approved Sale), the Person making such
Transfer (the "Offering Stockholder") shall deliver a written notice (the
"Transfer Notice") to the Company and the Investor specifying in reasonable
detail the number of Stockholder Shares proposed to be Transferred, the proposed
purchase price (which shall be payable solely in cash) and the other material
terms and conditions of the Transfer, including the identity of the Transferee.
The Company may elect to purchase all (but not less than all) of such
Stockholder Shares to be Transferred, upon the same terms and conditions as
those set forth in the Transfer Notice by delivering a written notice of such
election to the Offering Stockholder within 30 days after the Transfer Notice
has been delivered to the Company. If the Company has not elected to purchase
all of the Stockholder Shares to be Transferred, the Investor (or any designee
of the Investor) may elect to purchase all (but not less than all) of the
Stockholder Shares to be Transferred, upon the same terms and conditions as
those set forth in the Transfer Notice by giving written notice of such election
to the Offering Stockholder within 45 days after the Transfer Notice has been
given to the Investor (the "Investor Option Period"). If neither the Company nor
the Investor (or any designee of the Investor) elects to purchase all of the
Stockholder Shares specified in the Transfer Notice and if the terms and
conditions of Section 4(a) above have

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been met, then the Offering Stockholder may transfer the Stockholder Shares
specified in the Transfer Notice at a price and on terms no more favorable to
the transferee(s) thereof than specified in the Transfer Notice during the
45-day period immediately following the expiration of the Investor Option
Period. Any Stockholder Shares not transferred within such 45-day period will
continue to be subject to the provisions of this Section 4(b).

          (c) Other Restrictions.

               (i) Subject to Management's right to participate in a
     contemplated Transfer in accordance with Section 4(a) or pursuant to the
     Registration Rights Agreement of even date herewith among the parties
     hereto, no Management Shares (whether or not such shares have vested) may
     be transferred without the prior written consent of the Investor.

               (ii) Notwithstanding Section 4(a) or anything to the contrary
     contained in this Agreement:

                    (A) no Vendor Shares may be transferred until the date that
          is 18 months after the Closing Date without the prior written consent
          of the Investor, other than transfers to members of the Vendor Group;
          and

                    (B) no shares of the Company's Series A-2 Preferred Stock
          may be transferred without the accompanying transfer of a pro rata
          portion of Common Stock held by the initial holders of such Series A-2
          Preferred Stock.

          (d) Permitted Transfers. The restrictions contained in Sections 4(a)
through 4(c), other than the restriction contained in Section 4(c)(ii)(A), shall
not apply with respect to any Transfer of Stockholder Shares by any Stockholder
(i) pursuant to any put or call option in accordance with the terms of any
executive stock purchase agreement, (ii) in the case of a Stockholder that is an
individual or a trust, pursuant to applicable laws of descent and distribution,
or among such individual's Family Group, or (iii) in the case of the Investor
and any Permitted Transferee of the Investor, (A) among their Affiliates,
employees and consultants, (B) among any limited or general partner of any of
the partnerships owning interests in the Investor, (C) to any employee,
prospective employee, director or prospective director of the Company or any
Affiliate of the Company or (D) to any former or prospective employee, director
or prospective director of the Investor or any Affiliate of the Investor;
provided that the restrictions contained in this Section 4 shall continue to be
applicable to the Stockholder Shares after any of the foregoing Transfers, and
provided further that the transferees of such Stockholder Shares shall have
agreed in writing to be bound by the provisions of this Agreement which affect
the Stockholder Shares so transferred. All transferees permitted under this
Section 4(d) are collectively referred to herein as "Permitted Transferees."
Each Permitted Transferee shall be deemed a Stockholder for purposes of this
Agreement.

          (e) Termination of Restrictions. The restrictions set forth in
Sections 4(a) through 4(c) shall continue with respect to each Stockholder Share
until the earlier of (i) the transfer of such Stockholder Share in a Public
Sale, or (ii) the consummation of an Approved Sale or a Qualified Public
Offering.

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          5. Preemptive Right. Prior to any issuance by the Company (other than
pursuant to the Warrants) of any shares of a particular class of capital stock
to any Person (an "Offeree"), after the date hereof (a "Proposed Issuance"), the
Company will offer to sell to each Stockholder a number of such securities (the
"Offered Shares") necessary to ensure that such Stockholder's Ownership Ratio
with respect to such class of capital stock immediately after the Proposed
Issuance (including the Offered Shares) is equal to the Ownership Ratio
immediately prior to the Proposed Issuance; provided that neither (A) the
issuance by the Company of shares to any member of Management within 2 years of
the Closing Date nor (B) the reissuance to Management by the Company of shares
which were repurchased by the Company shall be a Proposed Issuance. The Company
shall give each Stockholder at least 10 business days prior written notice of
any Proposed Issuance, which notice shall disclose in reasonable detail the
proposed terms and conditions of such issuance (the "Issuance Notice"). Each
Stockholder will be entitled to elect to purchase all or any of the Offered
Shares for the same consideration and otherwise on the same terms as the Offeree
by delivery of a written notice to the Company within 5 business days after
delivery of the Issuance Notice (the "Election Notice"). If any such Stockholder
elects to purchase any Offered Shares, the sale of the Offered Shares shall be
consummated at the same time as the Proposed Issuance or 20 business days after
the delivery of the Election Notice, whichever occurs later. The rights granted
in this Section 5 are exercisable by the Stockholders and their Permitted
Transferees alone and are not transferable or assignable in connection with a
sale of capital stock or otherwise. This Section 5 will terminate automatically
with respect to any particular Stockholder, and be of no further force and
effect with respect to such Stockholder, upon the earlier to occur of the
consummation of an underwritten public offering registered under the Securities
Act of the Common Stock or such Stockholder ceasing to own at least 50% of the
capital stock owned by it on the date hereof.

          6. Stockholder Vetoes. So long as the Investor holds at least 50% of
the percentage of the Company's Class A Common Stock held by it on the Closing
Date, the Company shall not, and shall cause its Subsidiaries to not, without
the prior written consent of the Investor:

          (a) issue equity securities or grant equity-based rights of any kind;

          (b) pay dividends on or redeem or repurchase directly or indirectly
any equity;

          (c) become subject to any restriction on its right to pay dividends;

          (d) incur any indebtedness in excess of $500,000;

          (e) enter into any guarantees or joint ventures or any other business;

          (f) make any capital expenditures, acquisitions or investments in
excess of $500,000;

          (g) merge or consolidate with any person;

          (h) sell or dispose of any asset or investment in excess of $500,000,
other than in the ordinary course of business;

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          (i) liquidate, dissolve or affect any recapitalization or
re-organization in any form;

          (j) amend its certificate of incorporation or bylaws;

          (k) grant registration, pre-emptive or similar equity rights to any
other stockholder;

          (l) enter into transactions with Affiliates of the Vendor Group or
Management; or

          (m) engage any financial advisors or other external consultants.

          The provisions set forth in this Section 6 shall continue until the
consummation of an Approved Sale or a Qualified Public Offering.

          7. Covenants. The Company shall, and shall cause its Subsidiaries to:

          (a) maintain satisfactory directors and officers insurance;

          (b) provide copies to the Investor of all reports and communications
received from its accountants, other professional advisors and governmental
agencies;

          (c) advise the Investor of all material developments, whether negative
or positive;

          (d) permit the Investor and its advisors access to premises, books and
records, personnel and professional advisors upon reasonable request.

          The provisions set forth in this Section 7 shall continue until the
consummation of an Approved Sale or a Qualified Public Offering.

          8. Sale of the Company.

          (a) In the event of an Approved Sale each Stockholder will (i) consent
to and raise no objections against the Approved Sale or the process pursuant to
which the Approved Sale was arranged, (ii) waive any dissenter's rights and
other similar rights, and (iii) if the Approved Sale is structured as a sale of
stock, agree to sell its Stockholder Shares on the terms and conditions of the
Approved Sale. Each Stockholder, consistent with applicable law, will take all
necessary and desirable actions as directed by the Board and the Approving
Stockholders in connection with the consummation of any Approved Sale, including
without limitation executing the applicable purchase agreement and, in the case
of each Stockholder, granting identical indemnification rights; provided, that
no Stockholder shall be required to grant any indemnification rights which
provide for liability on the part of that Stockholder other than on a several
basis (and not jointly), pro-rata in accordance with the proportion which its
Stockholder Common Shares bear to the total Stockholder Common

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Shares being sold in the Approved Sale, and no Stockholder shall be required to
assume liability under any such indemnity in excess of the proceeds received by
it in connection with the Approved Sale. Each Stockholder required to make
indemnification payments in connection with any Approved Sale shall have a right
to recover from the Other Stockholders to the extent that the amount required to
be paid by such Stockholder was disproportionate to the proportion of the total
consideration received by all Stockholders, compared to the consideration
actually received by such Stockholder.

          (b) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) under the Securities Act may be available with respect to such
negotiation or transaction (including a merger, consolidation or other
reorganization), the Stockholders will, at the request of the Company, appoint a
purchaser representative (as such term is defined in Rule 501 of the Securities
Act) reasonably acceptable to the Company. If any Stockholder appoints a
purchaser representative reasonably acceptable to the Company, the Company will
pay the fees of such purchaser representative, but if any Stockholder declines
to appoint a purchaser representative reasonably acceptable to the Company, such
Stockholder will appoint another purchaser representative and such holder will
be responsible for the fees of the purchaser representative so appointed.

          (c) All Stockholders will bear their pro rata share (based upon the
number of shares sold) of the reasonable costs of any sale of Stockholder Shares
pursuant to an Approved Sale to the extent such costs are incurred for the
benefit of all selling Stockholders and are not otherwise paid by the Company or
the acquiring party. Costs incurred by any Stockholder on its own behalf will
not be considered costs of the transaction hereunder.

          9. Initial Public Offering. In the event that the Board and the
holders of a majority of the Investor Shares approve an initial public offering
and sale of the Company's equity securities (a "Public Offering") pursuant to an
effective registration statement under the Securities Act, the holders of
Stockholder Shares shall take all necessary or desirable actions in connection
with the consummation of the Public Offering. In the event that such Public
Offering is an underwritten offering and the managing underwriters advise the
Company in writing that in their opinion the Company's capital stock structure
would adversely affect the marketability of the offering, each holder of
Stockholder Shares shall consent to and vote for a recapitalization,
reorganization and/or exchange of the Stockholder Shares into securities that
the managing underwriters, the Board and holders of a majority of the shares of
Investor Shares find acceptable and shall take all necessary or desirable
actions in connection with the consummation of the recapitalization,
reorganization and/or exchange; provided that the resulting securities reflect
and are consistent with the rights and preferences set forth in the Company's
certificate of incorporation as in effect immediately prior to such Public
Offering.

          10. Financial Statements and Other Information. The Company shall,
during such periods of time as any holder of Investor Shares or the Seller's
Representative (as defined in the Recapitalization Agreement) may request,
deliver to such Person:

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          (a) as soon as available but in any event within 30 days after the end
of each monthly accounting period in each fiscal year, unaudited consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning of
the fiscal year to the end of such month, and consolidating and consolidated
balance sheets of the Company and its Subsidiaries as of the end of such monthly
period, setting forth in each case comparisons to the annual budget and to the
corresponding period in the preceding fiscal year, and all such statements shall
be prepared in accordance with generally accepted accounting principles,
consistently applied, subject to the absence of footnote disclosures and to
normal year-end adjustments;

          (b) within 85 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by (a) with respect to the
consolidated portions of such statements, an opinion of an independent
accounting firm of recognized national standing, and (b) a copy of such firm's
annual management letter to the Board;

          (c) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);

          (d) at least 30 days prior to the beginning of each fiscal year, an
annual budget prepared on a monthly basis for the Company and its Subsidiaries
for such fiscal year (displaying anticipated statements of income and cash flows
and balance sheets), and promptly upon preparation thereof any other significant
budgets prepared by the Company and any revisions of such annual or other
budgets, and within 30 days after any monthly period in which there is a
material adverse deviation from the annual budget, an Officer's Certificate
explaining the deviation and what actions the Company has taken and proposes to
take with respect thereto;

          (e) promptly (but in any event within five business days) after the
discovery or receipt of notice of any default under any material agreement to
which it or any of its Subsidiaries is a party or any other material adverse
event or circumstance affecting the Company or any Subsidiary (including the
filing of any material litigation against the Company or any Subsidiary or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;

          (f) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files, or any of its officers or directors file with respect to the Company,
with the Securities

                                      -11-
<PAGE>   12

and Exchange Commission or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's businesses; and

          (g) with reasonable promptness, such other information and financial
data concerning the Company and its Subsidiaries as any Person entitled to
receive information under this Section 10 may reasonably request.

          11. Inspection Rights. The Company shall permit any representatives
designated by the Investor (so long as the Investor holds any Stockholder
Shares), upon reasonable notice and during normal business hours, to (i) visit
and inspect any of the properties of the Company and its Subsidiaries, (ii)
examine the corporate and financial records of the Company and its Subsidiaries
and make copies thereof or extracts therefrom and (iii) discuss the affairs,
finances and accounts of any such corporations with the directors, officers, key
employees and independent accountants of the Company and its Subsidiaries.

          12. Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:

            "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
            REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
            AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
            REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
            REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
            CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER
            AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCKHOLDERS AGREEMENT
            AMONG THE COMPANY AND THE SIGNATORIES THERETO DATED AS OF
            _________________, A REGISTRATION RIGHTS AGREEMENT AMONG THE COMPANY
            AND THE SIGNATORIES THERETO DATED AS OF _________________, AND
            CERTAIN OTHER AGREEMENTS. A COPY OF SUCH AGREEMENTS MAY BE OBTAINED
            BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS
            WITHOUT CHARGE."

The Company shall imprint such legend on certificates evidencing Stockholder
Shares. The legend set forth above shall be removed from the certificates
evidencing any shares which cease to be Stockholder Shares. In addition, upon
consummation of a Qualified Public Offering, the legend set forth above shall be
removed from all the certificates evidencing Stockholder Shares.

          13. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be null and void, and the Company shall not record such Transfer
on its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.

                                      -12-
<PAGE>   13

          14. Transfer of Stockholder Shares.

          (a) Stockholder Shares are transferable only pursuant to (i) public
offerings registered under the Securities Act, (ii) subject to the provisions of
Section 4 above, Rule 144 or Rule 144A (or any similar exemption or rule then in
effect) of the Securities Act if any such rule is available, and (iii) subject
to Sections 4 or 8 above and Section 14(b) below, any other legally available
means of Transfer.

          (b) In connection with the Transfer of any Stockholder Shares other
than a Transfer described in clause (i) or (ii) of Section 14(a) above or
pursuant to Section 8 above, the holder thereof shall deliver written notice to
the Company describing in reasonable detail the Transfer or proposed Transfer,
together with an opinion of counsel reasonably acceptable to the Company to the
effect that such Transfer of Stockholder Shares may be effected without
registration of such Stockholder Shares under the Securities Act. In addition,
if the holder of the Stockholder Shares delivers to the Company an opinion of
counsel that no subsequent Transfer of such Stockholder Shares shall require
registration under the Securities Act, the Company shall promptly upon such
contemplated Transfer deliver new certificates for such Stockholder Shares which
do not bear the first sentence of the legend set forth in Section 12 above. If
the Company is not required to deliver new certificates for such Stockholder
Shares not bearing such legend, the holder thereof shall not consummate a
Transfer of the same until the prospective transferee has confirmed to the
Company in writing its agreement to be bound by the conditions contained in this
Section 14 and Section 12 above.

          (c) Upon the request of a holder of Stockholder Shares, the Company
shall promptly supply to such Person or its prospective transferees all
information regarding the Company required to be delivered in connection with a
Transfer pursuant to Rule 144A (or any similar rule or rules then in effect)
under the Securities Act.

          (d) Upon the request of any holder of Stockholder Shares, the Company
shall remove the first sentence of the legend set forth in Section 12 above from
the certificates for such holder's Stockholder Shares; provided, that such
Stockholder Shares are eligible for sale pursuant to Rule 144(k) (or any similar
rule or rules then in effect) under the Securities Act.

          15. Transfer. Prior to transferring any Stockholder Shares (other than
in a Public Sale or subsequent to a Qualified Public Offering) to any person or
entity, the transferring Stockholder shall cause the prospective transferee to
execute and deliver to the Company and the other Stockholders a counterpart of
this Agreement.

          16. Transaction Fee. In connection with the transactions contemplated
under the Recapitalization Agreement, the Company shall pay to the Investor or
its designee a transaction fee of $5 million.

          17. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be

                                      -13-
<PAGE>   14

deemed to have been given when delivered personally, mailed by certified or
registered mail, return receipt requested and postage prepaid, or sent via a
nationally recognized overnight courier, or sent via facsimile to the recipient.
Such notices, demands and other communications will be sent to the address
indicated below:

                     Notices to the Company:

                     Knowles Electronics, Inc.
                     1151 Maplewood Drive
                     Itasca, IL 60143
                     Fax :       (630) 250-0575
                     Attn.:      Chief Executive Officer

                           with copies (which shall not constitute notice) to:

                           Key Acquisition, L.L.C.
                           c/o Doughty Hanson & Company, Ltd.
                           Times Place
                           45 Pall Hall
                           London SW1Y 5JG
                           Fax:        011-44-171-747-9325
                           Attn.:      Ken Terry

                           and (which shall not constitute notice) to:

                           Kirkland & Ellis
                           Citicorp Center
                           153 East 53rd Street
                           New York, NY 10022-4675
                           Fax:        212-446-4900
                           Attn:       Adrian van Schie

                     To the Investor:

                     Key Acquisition, L.L.C.
                     c/o Doughty Hanson & Company, Ltd.
                     Times Place
                     45 Pall Hall
                     London SW1Y 5JG
                     Fax:        011-44-171-747-9325
                     Attn.:      Ken Terry

                                      -14-
<PAGE>   15

                     with copies (which shall not constitute notice) to:

                     Kirkland & Ellis
                     Citicorp Center
                     153 East 53rd Street
                     New York, NY 10022-4675
                     Fax:        212-446-4900
                     Attn:       Adrian van Schie

               To any member of the Vendor Group:
               John W. Hupp
               200 S. Michigan Avenue, Suite 1100
               Chicago, IL 60604
               Fax:        312-939-5617

                     with copies (which shall not constitute notice) to:

                     Defrees & Fiske
                     200 S. Michigan Avenue, Suite 1100
                     Chicago, IL 60604
                     Fax:        312-939-5617
                     Attn:       Henry J. Underwood

               To any member of Management:

               c/o Knowles Electronics, Inc.
               1151 Maplewood Drive
               Itasca, IL 60143
               Fax :       (630) 250-0575
               Attn.:      [EXECUTIVE]

                        with copies (which shall not constitute notice) to:

                        Latham & Watkins
                        Sears Tower, Suite 5800
                        Chicago, IL 60608
                        Fax :       (312) 993-9767
                        Attn:       Stephen S. Bowen

               To any Warrantholder:

               Morgan Senior Funding Inc.
               1585 Broadway
               New York, New York  10036
               Attn:       [                    ]

                                      -15-
<PAGE>   16

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.

          18. Miscellaneous.

          (a) No Inconsistent Agreements. The Company will not enter into any
agreement which is inconsistent with or violates the rights granted to the
holders of Stockholder Shares in this Agreement.

          (b) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.

          (c) Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of not
less than 51% of the Stockholder Shares, respectively; provided that no
amendment or waiver that would adversely effect a Stockholder's rights hereunder
vis-a-vis or as compared to the rights of the Other Stockholders may be effected
without consent of such Stockholder. The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.

          (d) Waiver of Jury Trial. Each of the parties to this Agreement hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. Each of the parties to this
Agreement hereby agrees and consents that any such claim, demand, action, or
cause of action shall be decided by court trial without a jury and that the
parties to this Agreement may file an original counterpart of a copy of this
Agreement with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.

          (e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Stockholder Shares are also for the benefit of, and
enforceable by, any subsequent holder of Stockholder Shares, unless otherwise
provided herein.

                                      -16-
<PAGE>   17

          (f) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.

          (g) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one and
the same Agreement.

          (h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.

          (i) GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL
OTHER ISSUES CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW
OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS.

                                    * * * * *

                                      -17-
<PAGE>   18

          IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.

                                 KNOWLES ELECTRONICS, INC.

                                 By: /s/ REG GARRATT
                                    --------------------------------------------
                                 Its:CNM/CEO

                                 KEY ACQUISITION, L.L.C.

                                 By: /s/ KEN TERRY
                                    --------------------------------------------
                                 Its:

                                 VENDOR GROUP:

                                 By: /s/ JOHN W. HUPP
                                    --------------------------------------------
                                         John W. Hupp, Seller's Representative

                                 MANAGEMENT:

                                 /s/ REG GARRATT
                                 ---------------------------------
                                 REG GARRATT

                                 /s/ DOUG BRANDER
                                 ---------------------------------
                                 DOUG BRANDER

                                 /s/ PAT CAVANAGH
                                 ---------------------------------
                                 PAT CAVANAGH

                                 /s/ DAVID YANG
                                 ---------------------------------
                                 DAVID YANG

                                 /s/ HERBERT HAFNER
                                 ---------------------------------
                                 HERBERT HAFNER

                                 /s/ PAUL M. BRYANT
                                 ---------------------------------
                                 PAUL M. BRYANT

<PAGE>   19

                                 /s/ STEPHEN D. PETERSEN
                                 ------------------------------------------
                                 STEPHEN D. PETERSEN

                                 /s/ LOUIS T. MORABITO
                                 ------------------------------------------
                                 LOUIS T. MORABITO

                                 /s/ PETER V. LOEPPERT
                                 ------------------------------------------
                                 PETER V. LOEPPERT

                                 /s/ CHRISTOPHER R. NICOL
                                 ------------------------------------------
                                 CHRISTOPHER R. NICOL

                                 /s/ ROBERT A. DRANTER
                                 ------------------------------------------
                                 ROBERT A. DRANTER

                                 /s/ SERGEI KOCHKIN
                                 ------------------------------------------
                                 SERGEI KOCHKIN

                                 /s/ TED J. STANIEC
                                 ------------------------------------------
                                 TED J. STANIEC

                                 /s/ PAUL F. DOLINER
                                 ------------------------------------------
                                 PAUL F. DOLINER

<PAGE>   20

                                                                      EXHIBIT A

--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Marital Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Nancy W. Knowles Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
James E. Knowles Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Margaret Knowles Schink Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Margaret Knowles Schink Sub-Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Katherine Knowles Strasburg Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Katherine Knowles Strasburg Sub-Trust under the Hugh S. Knowles Trust dtd.
8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees of the
Nancy J. Knowles Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
James E. Knowles, Trustee under James E. Knowles d/o/t dated 12/18/96
--------------------------------------------------------------------------------
Margaret Knowles Schink, as Trustee f/b/o Margaret Knowles Schink u/t/a dtd.
10/27/72
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Katherine Knowles Strasburg Separate
Property Revocable Trust UTA dtd. 12/3/88
--------------------------------------------------------------------------------
Nancy W. Knowles, Trustee of The Nancy W. Knowles d/o/t dated 4/18/90
--------------------------------------------------------------------------------
James Hugh Knowles
--------------------------------------------------------------------------------
Charles L. Knowles
--------------------------------------------------------------------------------
Susan Knowles Bates and Richard J.S. Bates, as Tenants in Common
--------------------------------------------------------------------------------
Hugh C. Schink
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, as Trustee f/b/o Theodore Knowles Schink u/t/a dtd.
12/24/79
--------------------------------------------------------------------------------
Margaret Knowles Schink, as Trustee f/b/o Laura Anne Strasburg u/t/a dtd.
12/30/78
--------------------------------------------------------------------------------
Paul A. Strasburg, as Custodian for Gregory Arthur Strasburg under the NY
Uniform Gifts to Minors Act
--------------------------------------------------------------------------------
Paul A. Strasburg, as Custodian for Gregory Arthur Strasburg under the CA
Uniform Transfers to Minors Act
--------------------------------------------------------------------------------
Paul A. Strasburg, as Trustee of the Paul A. Strasburg Revocable Trust UTA
dated 10/27/94
--------------------------------------------------------------------------------

                                     A-1
<PAGE>   21
--------------------------------------------------------------------------------
Susan Knowles Bates and Richard J. S. Bates, as Trustees Under the Bates
Children Trust II dtd. 12/15/92
--------------------------------------------------------------------------------
James Hugh Knowles, as Successor Trustee of the Bates Children 1997 Irrevocable
Trust dtd 12/31/97
--------------------------------------------------------------------------------
James H. Knowles and Robert E. Spellmeyer, Trustees of the James E. Knowles 1998
Gift Trust for James
--------------------------------------------------------------------------------
Charles L. Knowles and Robert J. Nelson, Trustees of the James E. Knowles 1998
Gift Trust for Charles
--------------------------------------------------------------------------------
Susan K. Bates and Richard J. S. Bates, Trustees of the James E. Knowles 1998
Descendants Trust for Susan
--------------------------------------------------------------------------------
James Hugh Knowles and Robert Spellmeyer as Trustees of the Susan Knowles Bates
1998 Family Trust
--------------------------------------------------------------------------------
James Hugh Knowles, as Trustee of the Richard J. S. Bates 1998 Family Trust
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Qualified annuity Trust for Laura Anne Strasburg, dtd
8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Qualified Annuity Trust for Gregory Arthur Strasburg, dtd
8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Irrevocable Trust for Laura Anne Strasburg, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Irrevocable Trust for Gregory Arthur Strasburg, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Laura Anne
Strasburg Irrevocable GST Trust, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Gregory
Arthur Strasburg Irrevocable GST Trust, dtd 8/28/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink 1998 Gift
Trust for Tad U/A/D 8/14/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg and Hugh C. Schink, Trustees of the Margaret Knowles
Schink 1998 Gift Trust for Hugh U/A/D 8/14/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 3
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 5
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 7
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------

                                     A-2
<PAGE>   22
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 12
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink 1998
Descendants Trust U/A/D 8/14/98
--------------------------------------------------------------------------------

                                     A-3<PAGE>   1
                                                                  Exhibit 10.19

                          REGISTRATION RIGHTS AGREEMENT

            This Registration Rights Agreement (this "Agreement") is dated as of
June 30, 1999 by and among Knowles Electronics, Inc., a Delaware corporation
(the "Company"), Key Acquisition, L.L.C., a Delaware limited liability company
(the "Investor"), the members of management listed on the signature page
attached hereto (together with all other executives of the Company who execute
and deliver a counterpart of this Agreement on or after the date hereof,
"Management"), and the members of the "Existing Holder Group" listed on the
attached Exhibit A and Morgan Stanley Senior Funding Inc., Chase Securities
Inc., The Chase Manhattan Bank and their respective successors and assigns as
Purchasers pursuant to a Note Purchase Agreement dated as of the date hereof
with respect to Senior Subordinated Increasing Rate Notes due June 30, 2000 (the
"Warrantholders"). The Investor, Management, the Existing Holder Group and the
Warrantholders are referred to herein collectively as the "Stockholders," and
each individually as a "Stockholder."

            NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:

            1. Definitions. As used herein, the following terms shall have the
following meanings.

            "Common Stock" means, collectively, (i) the Company's Class A Common
Stock, par value $.001 per share, (ii) the Company's Class B Common Stock, par
value $.001 per share, (iii) any other class of common stock of the Company, and
(iv) any capital stock of the Company issued or issuable with respect to the
securities referred to in clauses (i), (ii) or (iii) by way of stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization.

            "Company Registrable Securities" has the meaning set forth in
Section 5(b).

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            "Existing Holder Registrable Securities" means (i) any shares of
Common Stock held by, issued or issuable to or otherwise acquired by the
Existing Holder Group on or after the date hereof and (ii) any shares of capital
stock of the Company issued or issuable with respect to the securities referred
to in clause (i) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. For purposes of this Agreement, a Person will be deemed
to be a holder of Existing Holder Registrable Securities whenever such Person
has the right to acquire directly or indirectly such Existing Holder Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or
<PAGE>   2

                                                                  EXECUTION COPY

otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected.

            "Investor Registrable Securities" means (i) any shares of Common
Stock issued or issuable to or otherwise acquired by the Investor on or after
the date hereof and (ii) any shares of capital stock of the Company issued or
issuable with respect to the securities referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. For
purposes of this Agreement, a Person will be deemed to be a holder of Investor
Registrable Securities whenever such Person has the right to acquire directly or
indirectly such Investor Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.

            "Management Registrable Securities" means (i) any shares of Common
Stock issued or issuable to or otherwise acquired by Management on or after the
date hereof and (ii) any shares of capital stock of the Company issued or
issuable with respect to the securities referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization, and
which in each case are Vested Stock as defined in the Executive Stock Purchase
Agreements between the Company and Management dated the date hereof. For
purposes of this Agreement, a Person will be deemed to be a holder of Management
Registrable Securities whenever such Person has the right to acquire directly or
indirectly such Management Registrable Securities (upon conversion or exercise
in connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected, but in the case of Registrable
Securities subject to vesting, only to the extent that such Person's right to
acquire such Registrable Securities has vested.

            "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

            "Registrable Securities" means, collectively, the Management
Registrable Securities, the Investor Registrable Securities, the Existing Holder
Registrable Securities and the Warrantholder Registrable Securities.

            "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all independent

                                       2
<PAGE>   3

                                                                  EXECUTION COPY

certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company.

            "Rule 144" means Rule 144 under the Securities Act (or any similar
rule then in force).

            "SEC" means the Securities and Exchange Commission.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Warrantholder Registrable Securities" means (i) any shares of
Common Stock issued or issuable to or otherwise acquired by the Warrantholders
on or after the date hereof and (ii) any shares of capital stock of the Company
issued or issuable with respect to the securities referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, a Person will be deemed to be a
holder of Warrantholder Registrable Securities whenever such Person has the
right to acquire directly or indirectly such Warrantholder Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has actually been
effected.

            2. Demand Registrations.

            (a) Requests for Registration. Subject to Section 2(b) and 2(c)
below, (i) at any time and from time to time, the holders of a majority of the
Investor Registrable Securities, and (ii) at any time after the date that is six
months after an underwritten initial public offering registered under the
Securities Act of shares of Common Stock (an "IPO"), the holders of a majority
of the Existing Holder Registrable Securities and the holders of a majority of
the Warrantholder Registrable Securities, may request registration, whether
underwritten or otherwise, under the Securities Act of all or part of their
Registrable Securities on Form S-l or any similar long-form registration
statement ("Long-Form Registrations") or on Form S-2 or S-3 or any similar
short-form registration statement ("Short-Form Registrations"), if available. In
addition, subject to Section 2(g) below, the holders of a majority of the
Investor Registrable Securities may request that the Company file with the SEC a
registration statement under the Securities Act on any applicable form pursuant
to Rule 415 under the Securities Act (a "415 Registration"). Each request for a
Long-Form Registration or Short-Form Registration shall specify the approximate
number of Registrable Securities requested to be registered and the anticipated
per share price range for such offering. Within ten days after receipt of any
such request for a Long-Form Registration or Short-Form Registration, the
Company will give written notice of such requested registration to all other
holders of Registrable Securities and will include (subject to the provisions of
this Agreement) in such registration, all Registrable Securities with respect to
which the Company has received written requests for inclusion therein

                                       3
<PAGE>   4

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within 20 days after the receipt of the Company's notice. All registrations
initially requested pursuant to this Section 2(a) are referred to herein as
"Demand Registrations".

            (b) Long-Form Registrations. The holders of a majority of the
Investor Registrable Securities will be entitled to request up to 5 Long-Form
Registrations in which the Company will pay all Registration Expenses. A
registration will not count as the permitted Long-Form Registration until it has
become effective and unless the holders of Registrable Securities are able to
register and sell at least 90% of the Registrable Securities requested to be
included in such registration.

            (c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Section 2(b), (i) the holders of a majority
of the Investor Registrable Securities will be entitled to request an unlimited
number of, and (ii) the holders of a majority of the Existing Holder Registrable
Securities and the holders of a majority of the Warrantholder Registrable
Securities will each be entitled to request one, Short-Form Registration(s) in
which the Company will pay all Registration Expenses. Demand Registrations
(other than 415 Registrations) will be Short-Form Registrations whenever the
Company is permitted to use any applicable short form. After the Company has
become subject to the reporting requirements of the Exchange Act, the Company
will use its best efforts to make Short-Form Registrations available for the
sale of Registrable Securities.

            (d) Priority on Demand Registrations. The Company will not include
in any Long-Form Registration or Short-Form Registration any securities (other
than Company Registrable Securities) which are not Registrable Securities
without the prior written consent of the holders of at least a majority of the
Registrable Securities included in such registration. If a Long-Form
Registration or a Short-Form Registration is an underwritten offering and the
managing underwriters advise the Company in writing that in their opinion the
number of Registrable Securities (and, if permitted hereunder, other securities
requested to be included in such offering) exceeds the number of Registrable
Securities and other securities, if any, which can be sold therein without
adversely affecting the marketability of the offering, the Company will include
in such registration (i) first, (x) if no Company Registrable Securities are
requested to be included in such registration, the number of Investor
Registrable Securities requested to be included in such registration pro rata,
if necessary, among the holders of Investor Registrable Securities based on the
number of shares of Investor Registrable Securities owned by each such holder,
and (y) if Company Registrable Securities are requested to be included in such
registration (and permitted to be included pursuant to the terms hereof), the
number of Investor Registrable Securities and Company Registrable Securities
requested to be included in such registration pro rata, if necessary, among the
Company Registrable Securities and the holders of Investor Registrable
Securities based on the number of shares of Investor Registrable Securities and
Company Registrable Securities requested to be included therein, and (ii)
second, any other Registrable Securities requested to be included in such

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registration pro rata, if necessary, on the basis of the number of shares of
such other Registrable Securities owned by each such holder.

            (e) Restrictions on Demand Registrations. The Company will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration.

            (f) Selection of Underwriters. In the case of a Demand Registration
for an underwritten offering, the holders of a majority of the Registrable
Securities to be included in such Demand Registration will have the right to
select the investment banker(s) and manager(s) to administer the offering, which
investment banker(s) and manager(s) will be nationally recognized, subject to
the Investor's approval.

            (g) 415 Registrations.

                  (i) The holders of a majority of the Investor Registrable
Securities will be entitled to request one 415 Registration in which the Company
will pay all Registration Expenses. Subject to the availability of required
financial information, within 45 days after the Company receives written notice
of a request for a 415 Registration, the Company shall file with the SEC a
registration statement under the Securities Act for the 415 Registration. The
Company shall use its best efforts to cause the 415 Registration to be declared
effective under the Securities Act as soon as practical after filing and, once
effective, the Company shall (subject to the provisions of clause (ii) below)
cause such 415 Registration to remain effective for such time period as is
specified in such request, but for no time period longer than the period ending
on the earlier of (i) the third anniversary of the date of filing of the 415
Registration, (ii) the date on which all Investor Registrable Securities have
been sold pursuant to the 415 Registration, or (iii) the date as of which there
are no longer any Investor Registrable Securities in existence.

                  (ii) If the holders of a majority of the Investor Registrable
Securities notify the Company in writing that they intend to effect the sale of
all or substantially all of the Investor Registrable Securities held by such
holders pursuant to a single integrated offering pursuant to a then effective
registration statement for a 415 Registration (a "Takedown"), the Company and
each holder of Registrable Securities shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for its equity securities, during the 90-day period
beginning on the date such notice of a Takedown is received.

                  (iii) If in connection with any Takedown, the managing
underwriters (selected in accordance with clause (iv) below) advise the Company
that, in their opinion, the inclusion of any securities in the Takedown would
adversely affect the marketability of the offering, then no such securities
shall be permitted to be included. Additionally, if in connection with such an
offering, the number of Investor Registrable Securities and other securities (if
any) requested to

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be included in such Takedown exceeds the number of Investor Registrable
Securities and other securities which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such Takedown (i) first, the Investor Registrable Securities requested to be
included in such Takedown, pro rata among the holders of such Registrable
Securities on the basis of the number of Investor Registrable Securities owned
by each such holder, and (ii) second, other securities requested to be included
in such Takedown to the extent permitted hereunder.

                  (iv) The holders of a majority of the Investor Registrable
Securities requested to be included in the Takedown shall have the right to
retain and select an investment banker and manager to administer the 415
Registration and any Takedown pursuant thereto, subject to the Company's
approval which will not be unreasonably withheld.

                  (v) In addition to the provisions in Section 6 below, all
expenses incurred in connection with the management of the 415 Registration
(whether incurred by the Company or the holders of the Investor Registrable
Securities) shall be borne by the Company (including out-of-pocket fees and
expenses other than underwriting discounts and commissions).

            (h) Other Registration Rights. Except as provided in this Agreement,
the Company will not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Investor Registrable Securities.

            3. Piggyback Registrations.

            (a) Right to Piggyback. Whenever the Company proposes to register
any of its Common Stock under the Securities Act (other than pursuant to a
Demand Registration (which shall be governed by Section 2(a)), a registration
statement on Form S-8 or S-4 or any similar form, or in connection with a
registration the primary purpose of which is to register debt securities (i.e.,
in connection with a so-called "equity kicker")), including pursuant to a
Takedown, and the registration form to be used may be used for the registration
of Registrable Securities (a "Piggyback Registration"), the Company will give
prompt written notice to all holders of Registrable Securities of its intention
to effect such a registration and will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 20 days after the receipt of the Company's
notice. Notwithstanding the foregoing, in connection only with an IPO, no
Registrable Securities shall be included in such registration without the prior
written consent of the holders of a majority of Registrable Securities.

            (b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.

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            (c) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, the Company
will include in such registration all securities requested to be included in
such registration; provided, that if the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company will include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Investor Registrable Securities and Existing
Holder Registrable Securities requested to be included in such registration pro
rata among the holders of such Investor Registrable Securities and Existing
Holder Registrable Securities on the basis of the number of shares of Investor
Registrable Securities and Existing Holder Registrable Securities owned by each
such holder, (iii) third, the other Registrable Securities requested to be
included in such registration pro rata among the holders of such other
Registrable Securities on the basis of the number of shares of other Registrable
Securities owned by each such holder and (iv) fourth, other securities, if any,
requested to be included in such registration.

            (d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities (which registration was consented to pursuant to Section 2(h) above),
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of the offering, the Company will include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration, (ii) second, the number of Investor
Registrable Securities and Existing Holder Registrable Securities requested to
be included in such registration pro rata, if necessary, among the holders of
Investor Registrable Securities and Existing Holder Registrable Securities based
on the number of shares of Investor Registrable Securities and Existing Holder
Registrable Securities owned by each such holder, (iii) third, the number of
other Registrable Securities requested to be included in such registration, pro
rata among the holders of such other Registrable Securities on the basis of the
number of shares of other Registrable Securities owned by each such holder, and
(iv) fourth, other securities requested to be included in such registration not
covered by clause (i) above.

            (e) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the investment banker(s) and manager(s) for the offering
will be selected by the Company.

            (f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to this
Section 3, and if such previous registration has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Forms S-4 or S-8 or any successor forms), whether on its own
behalf or at the request of any holder or holders of such

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securities, until a period of at least six months has elapsed from the effective
date of such previous registration.

            4. Holdback Agreements.

            (a) Each holder of Registrable Securities hereby agrees not to
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 120-day period beginning on the effective date of any Demand
Registration (other than a 415 Registration) or Piggyback Registration for a
public offering to be underwritten on a firm commitment basis in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree; provided, that neither the Existing Holder Group nor Management
shall receive less favorable treatment than the Investor.

            (b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration (other than a 415 Registration) or Piggyback
Registration (except as part of such underwritten registration or pursuant to
registrations on Forms S-4 or S-8 or any successor forms), unless the
underwriters managing the registered public offering otherwise agree, and (ii)
to cause each holder of Registrable Securities and each other holder of at least
5% (on a fully diluted basis) of Common Stock, or any securities convertible
into or exchangeable or exercisable for Common Stock, purchased from the Company
at any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.

            5. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:

            (a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed);

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            (b) if requested by the holders of a majority of the Investor
Registrable Securities in connection with any Demand Registration, use its best
efforts to cause to be included in such registration statement shares of the
Company's Common Stock having an aggregate value (based on the midpoint of the
proposed offering price range specified in the registration statement used to
offer such securities) of up to $20 million ("Company Registrable Securities")
to be offered in a primary offering of the Company's securities
contemporaneously with such offering of Registrable Securities;

            (c) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
not less than six months and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;

            (d) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;

            (e) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process (i.e., service of
process which is not limited solely to securities law violations) in any such
jurisdiction);

            (f) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will
promptly prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;

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            (g) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the Nasdaq National Market System
("Nasdaq Market") and, if listed on the Nasdaq Market, use its best efforts to
secure designation of all such Registrable Securities covered by such
registration statement as a Nasdaq "National Market System security" within the
meaning of Rule 11Aa2-1 of the SEC or, failing that, to secure Nasdaq Market
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the National
Association of Securities Dealers;

            (h) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;

            (i) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);

            (j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;

            (k) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earning statement covering the period of at
least twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration statement, which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;

            (1) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;

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            (m) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;

            (n) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities;
and

            (o) obtain a "cold comfort" letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by "cold comfort" letters as the holders of a majority of
the Registrable Securities being sold reasonably request.

            (p) obtain an opinion from the Company's outside counsel in
customary form and covering such matters of the type customarily covered by such
opinions, which opinion shall be addressed to the underwriters and the holders
of such Registrable Securities.

If any such registration statement or comparable statement refers to any holder
by name or otherwise as the holder of any securities of the Company and if, in
its sole and exclusive judgment, such holder is or might be deemed to be a
controlling person of the Company, such holder shall have the right to require
(i) the insertion therein of language, in form and substance satisfactory to
such holder and presented to the Company in writing, to the effect that the
holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or
(ii) in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such holder; provided, that with respect to this
clause (ii) such holder shall furnish to the Company an opinion of counsel to
such effect, which opinion and counsel shall be reasonably satisfactory to the
Company.

            6. Registration Expenses.

            (a) All Registration Expenses will be borne by the Company.

            (b) In connection with each Demand Registration, each Piggyback
Registration and each 415 Registration, the Company will reimburse the holders
of Registrable Securities covered by such registration for the reasonable fees
and disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities initially requesting such registration.

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            7. Indemnification and Contribution.

            (a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors, and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses arising out of or
based upon any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such holder, director, officer or
controlling person for any legal or other expenses reasonably incurred by such
holder, director, officer or controlling person in connection with the
investigation or defense of such loss, claim, damage, liability or expense,
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by such holder expressly for use therein or
by such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.

            (b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and certificates as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided, that the obligation to indemnify
will be individual to each holder and will be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.

            (c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification; provided, that the failure to notify the
indemnifying party shall not relieve it from any liability to the indemnified
party hereunder except to the extent the indemnified party is actually
prejudiced thereby, and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit

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such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.

            (d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Section
7(a) or 7(b) above, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in Section 7(a) or 7(b) above in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and the indemnified party on the other in
connection with the statements or omissions which resulted in such losses,
claims, demands or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or parties on the one hand or the
indemnified party on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this Section 7(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this Section 7(d). No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. Notwithstanding the
foregoing, the obligation to make any contributions hereunder shall be
individual to each holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.

            (e) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.

            8. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons

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entitled hereunder to approve such arrangements and (b) completes and executes
all customary questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements; provided, that no holder of Registrable Securities
included in any underwritten registration shall be required to make any
representations or warranties to the Company or the underwriters other than
representations and warranties regarding such holder and such holder's intended
method of distribution.

            9. Rule 144 Reporting. With a view to making available to the
holders of Registrable Securities the benefits of certain rules and regulations
of the SEC which may permit the sale of the Registrable Securities to the public
without registration, the Company agrees to use its best efforts to:

            (a) make and keep current public information available, within the
meaning of Rule 144 or any similar or analogous rule promulgated under the
Securities Act, at all times after it has become subject to the reporting
requirements of the Exchange Act;

            (b) file with the SEC, in a timely manner, all reports and other
documents required of the Company under the Securities Act and Exchange Act
(after it has become subject to such reporting requirements); and

            (c) so long as any party hereto owns any Registrable Securities,
furnish to such Person forthwith upon request, a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time commencing 90 days after the effective date of the first
registration filed by the Company for an offering of its securities to the
general public), the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and documents
as such Person may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.

            10. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally,
mailed by certified or registered mail, return receipt requested and postage
prepaid, or sent via a nationally recognized overnight courier, or sent via
facsimile to the recipient. Such notices, demands and other communications will
be sent to the address indicated below:

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                  Notices to the Company:

                  Knowles Electronics, Inc.
                  1151 Maplewood Drive
                  Itasca, IL 60143
                  Fax: (630) 250-0575
                  Attn.: Chief Executive Officer

                        with copies (which shall not constitute notice) to:

                        Key Acquisition, L.L.C.
                        c/o Doughty Hanson & Company, Ltd.
                        Times Place
                        45 Pall Hall
                        London SW1Y 5JG
                        Fax: 011-44-171-747-9325
                        Attn.: Ken Terry

                              and (which shall not constitute notice) to:

                              Kirkland & Ellis
                              Citicorp Center
                              153 East 53rd Street
                              New York, NY 10022-4675
                              Fax: 212-446-4900
                              Attn: Adrian van Schie

                  To the Investor:

                  Key Acquisition, L.L.C.
                  c/o Doughty Hanson & Company, Ltd.
                  Times Place
                  45 Pall Hall
                  London SW1Y 5JG
                  Fax: 011-44-171-747-9325
                  Attn.: Ken Terry

                             with copies (which shall not constitute notice) to:

                              Kirkland & Ellis
                              Citicorp Center
                              153 East 53rd Street

                                       15
<PAGE>   16

                                                                  EXECUTION COPY

                              New York, NY 10022-4675
                              Fax: 212-446-4900
                              Ann: Adrian van Schie

                  To any member of the Existing Holder Group:
                  John W. Hupp
                  200 S. Michigan Avenue, Suite 1100
                  Chicago, IL 60604
                  Fax: 312-939-5617

                             with copies (which shall not constitute notice) to:

                              Defrees & Fiske
                              200 S. Michigan Avenue, Suite 1100
                              Chicago, IL 60604
                              Fax: 312-939-5617
                                                      Attn: Henry J. Underwood

                  To any member of Management:

                  Knowles Electronics, Inc.
                  1151 Maplewood Drive
                  Itasca, IL 60143
                  Fax:  (630) 250-0575
                  Attn.: [Executive]

                             with copies (which shall not constitute notice) to:

                              Latham & Watkins
                              Sears Tower, Suite 5800
                              Chicago, IL 60608
                              Fax: (312) 993-9767
                              Ann: Stephen S. Bowen

                  To any Warrantholder:

                  Morgan Senior Funding Inc.
                  1585 Broadway
                  New York, New York 10036
                  Attn: [         ]

                                       16
<PAGE>   17

                                                                  EXECUTION COPY

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.

            11. Miscellaneous.

            (a) No Inconsistent Agreements. The Company will not enter into any
agreement which is inconsistent with or violates the rights granted to the
holders of Registrable Securities in this Agreement.

            (b) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.

            (c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities; provided, that no amendment that would adversely affect a holder's
registration rights hereunder vis-a-vis those of another holder may be affected
without the written consent of the affected holder.

            (d) Waiver of Jury Trial. The parties to this Agreement each hereby
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action, or cause of action (i) arising under this Agreement
or (ii) in any way connected with or related or incidental to the dealings of
the parties hereto in respect of this Agreement or any of the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The parties to this Agreement
each hereby agrees and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.

            (e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.

                                       17
<PAGE>   18

                                                                  EXECUTION COPY

            (f) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

            (g) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.

            (h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.

            (i) Governing Law. The corporate law of Delaware will govern all
issues concerning the relative rights of the Company and its stockholders. All
other issues concerning this Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Illinois.

                                   * * * * *

                                       18
<PAGE>   19

            IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first above written.

                                        KNOWLES ELECTRONICS, INC.

                                        By: /s/ Reg Garratt
                                           -------------------------------------
                                        Its: CHM/CEO

                                        KEY ACQUISITION, L.L.C.

                                        By: /s/ Ken Terry
                                           -------------------------------------
                                        Its:

                                        EXISTING HOLDER GROUP

                                        By: /s/ John W. Hupp
                                           -------------------------------------
                                        Its: John W. Hupp, Seller's
                                             Representative

                                        MANAGEMENT:

                                        By: /s/ Reg Garratt
                                           -------------------------------------
                                           REG GARRATT

                                        By: /s/ Doug Brander
                                           -------------------------------------
                                           DOUG BRANDER

                                        By: /s/ Pat Cavanagh
                                           -------------------------------------
                                           PAT CAVANAGH

                                        By: /s/ David Yang
                                           -------------------------------------
                                           DAVID YANG

                                        By: /s/ Herbert Hafner
                                           -------------------------------------
                                           HERBERT HAFNER
<PAGE>   20

                                        By: /s/ Paul M. Bryant
                                           -------------------------------------
                                           PAUL M. BRYANT

                                        By: /s/ Stephen D. Petersen
                                           -------------------------------------
                                           STEPHEN D. PETERSEN

                                        By: /s/ Louis T. Morabito
                                           -------------------------------------
                                           LOUIS T. MORABITO

                                        By: /s/ Peter V. Loeppert
                                           -------------------------------------
                                           PETER V. LOEPPERT

                                        By: /s/ Christopher R. Nicol
                                           -------------------------------------
                                           CHRISTOPHER R. NICOL

                                        By: /s/ Robert A. Dranter
                                           -------------------------------------
                                           ROBERT A. DRANTER

                                        By: /s/ Sergei Kochkin
                                           -------------------------------------
                                           SERGEI KOCHKIN

                                        By: /s/ Ted J. Staniec
                                           -------------------------------------
                                           TED J. STANIEC

                                        By: /s/ Paul F. Dolinar
                                           -------------------------------------
                                           PAUL F. DOLINAR
<PAGE>   21

                                                                       EXHIBIT A

--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Marital Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Nancy W. Knowles Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
James E. Knowles Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Margaret Knowles Schink Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Margaret Knowles Schink Sub-Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Katherine Knowles Strasburg Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees for the
Katherine Knowles Strasburg Sub-Trust under the Hugh S. Knowles Trust dtd.
8/22/74
--------------------------------------------------------------------------------
Nancy W. Knowles, John W. Hupp and Continental Bank N.A., as Trustees of the
Nancy J. Knowles Trust under the Hugh S. Knowles Trust dtd. 8/22/74
--------------------------------------------------------------------------------
James E. Knowles, Trustee under James E. Knowles d/o/t dated 12/18/96
--------------------------------------------------------------------------------
Margaret Knowles Schink, as Trustee f/b/o Margaret Knowles Schink u/t/a dtd.
10/27/72
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Katherine Knowles Strasburg Separate
Property Revocable Trust UTA dtd. 12/3/88
--------------------------------------------------------------------------------
Nancy W. Knowles, Trustee of The Nancy W. Knowles d/o/t dated 4/18/90
--------------------------------------------------------------------------------
James Hugh Knowles
--------------------------------------------------------------------------------
Charles L. Knowles
--------------------------------------------------------------------------------
Susan Knowles Bates and Richard J.S. Bates, as Tenants in Common
--------------------------------------------------------------------------------
Hugh C. Schink
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, as Trustee f/b/o Theodore Knowles Schink u/t/a dtd.
12/24/79
--------------------------------------------------------------------------------
Margaret Knowles Schink, as Trustee f/b/o Laura Anne Strasburg u/t/a dtd.
12/30/78
--------------------------------------------------------------------------------
Paul A. Strasburg, as Custodian for Gregory Arthur Strasburg under the NY
Uniform Gifts to Minors Act
--------------------------------------------------------------------------------
Paul A. Strasburg, as Custodian for Gregory Arthur Strasburg under the CA
Uniform Transfers to Minors Act
--------------------------------------------------------------------------------

                                       A-1
<PAGE>   22

--------------------------------------------------------------------------------
Paul A. Strasburg, as Trustee of the Paul A. Strasburg Revocable Trust UTA dated
10/27/94
--------------------------------------------------------------------------------
Susan Knowles Bates and Richard J. S. Bates, as Trustees Under the Bates
Children Trust II dtd. 12/15/92
--------------------------------------------------------------------------------
James Hugh Knowles, as Successor Trustee of the Bates Children 1997 Irrevocable
Trust dtd 12/31/97
--------------------------------------------------------------------------------
James H. Knowles and Robert E. Spellmeyer, Trustees of the James E. Knowles 1998
Gift Trust for James
--------------------------------------------------------------------------------
Charles L. Knowles and Robert J. Nelson, Trustees of the James E. Knowles 1998
Gift Trust for Charles
--------------------------------------------------------------------------------
Susan K. Bates and Richard J. S. Bates, Trustees of the James E. Knowles 1998
Descendants Trust for Susan
--------------------------------------------------------------------------------
James Hugh Knowles and Robert Spellmeyer as Trustees of the Susan Knowles Bates
1998 Family Trust
--------------------------------------------------------------------------------
James Hugh Knowles, as Trustee of the Richard J. S. Bates 1998 Family Trust
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Qualified annuity Trust for Laura Anne Strasburg, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Qualified Annuity Trust for Gregory Arthur Strasburg, dtd
8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Irrevocable Trust for Laura Anne Strasburg, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Katherine
Knowles Strasburg Irrevocable Trust for Gregory Arthur Strasburg, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Laura Anne
Strasburg Irrevocable GST Trust, dtd 8/28/98
--------------------------------------------------------------------------------
Margaret Knowles Schink and Marsden S. Blois III, co-trustees of the Gregory
Arthur Strasburg Irrevocable GST Trust, dtd 8/28/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink 1998 Gift
Trust for Tad U/A/D 8/14/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg and Hugh C. Schink, Trustees of the Margaret Knowles
Schink 1998 Gift Trust for Hugh U/A/D 8/14/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 3
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 5
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------

                                      A-2
<PAGE>   23

--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 7
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink Annuity 12
Trust U/A/D 9/3/98
--------------------------------------------------------------------------------
Katherine Knowles Strasburg, Trustee of the Margaret Knowles Schink 1998
Descendants Trust U/A/D 8/14/98
--------------------------------------------------------------------------------

                                      A-3

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