-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UPXueUoKUDv0OkdBgIHyV3+XYKnJHJWTh4HxBQppua9KGWR3mCYTUysQov96/PPx CUjdCiPyTnf0YoF8OISDtQ== 0000909518-98-000616.txt : 19980922 0000909518-98-000616.hdr.sgml : 19980922 ACCESSION NUMBER: 0000909518-98-000616 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980921 SROS: NONE GROUP MEMBERS: DANIEL T. LINDSAY GROUP MEMBERS: DENNIS M. MATHISEN GROUP MEMBERS: JACOBS IRWIN L GROUP MEMBERS: MARSHALL FINANCIAL GROUP, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHELDAHL INC CENTRAL INDEX KEY: 0000089615 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 410758073 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-32932 FILM NUMBER: 98712340 BUSINESS ADDRESS: STREET 1: 1150 SHELDAHL RD CITY: NORTHFIELD STATE: MN ZIP: 55057 BUSINESS PHONE: 5076638000 MAIL ADDRESS: STREET 1: 1150 SHELDAHL ROAD CITY: NORTHFIELD STATE: MN ZIP: 55057-0170 FORMER COMPANY: FORMER CONFORMED NAME: SCHJELDAHL G T CO DATE OF NAME CHANGE: 19741017 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JACOBS IRWIN L CENTRAL INDEX KEY: 0000898678 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 100 SOUTH FIFTH ST STE 2500 STREET 2: JACOBS MANAGEMENT CORP CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123399500 MAIL ADDRESS: STREET 1: JACOBS MANAGEMENT CORP STREET 2: 100 SOUTH FIFTH ST STE 2500 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 SC 13D 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 -------------- SHELDAHL, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, $.25 PAR VALUE 822440103 ------------------------------------------ ----------------------------------- (Title of class of securities) (CUSIP number) STEPHEN E. JACOBS, ESQ. WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NEW YORK 10153 (212) 310-8000 - -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) SEPTEMBER 14, 1998 - -------------------------------------------------------------------------------- (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section of the Exchange Act but shall be subject to all other provisions of the Exchange Act. (Continued on following page(s)) (Page 1 of 17 Pages) ================================================================================ NYFS10...:\80\99980\0025\1981\SCH9168C.03C
- -------------------------------------------------------- -------------------------------------- CUSIP No. 822440103 13D Page 2 of 17 - -------------------------------------------------------- -------------------------------------- - --------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: IRWIN L. JACOBS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - --------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - --------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: BK, OO - --------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_] PURSUANT TO ITEM 2(d) OR 2(e): - --------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF UNITED STATES ORGANIZATION: - --------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 376,600 SHARES ---------------------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 0 OWNED BY ---------------------------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 376,600 REPORTING ---------------------------------------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 0 - --------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY 376,600 REPORTING PERSON: - --------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES: - --------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 3.9% - --------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - --------------------------------------------------------------------------------------------------------- - -------------------------------------------------------- -------------------------------------- CUSIP No. 822440103 13D Page 3 of 17 - -------------------------------------------------------- -------------------------------------- - --------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: DANIEL T. LINDSAY S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - --------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - --------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: PF - --------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_] PURSUANT TO ITEM 2(d) OR 2(e): - --------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF UNITED STATES ORGANIZATION: - --------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 208,500 SHARES ---------------------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 0 OWNED BY ---------------------------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 208,500 REPORTING ---------------------------------------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 0 - --------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY 208,500 REPORTING PERSON: - --------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES: - --------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.2% - --------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - --------------------------------------------------------------------------------------------------------- - -------------------------------------------------------- -------------------------------------- CUSIP No. 822440103 13D Page 4 of 17 - -------------------------------------------------------- -------------------------------------- - --------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: DENNIS M. MATHISEN S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - --------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - --------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: PF, BK - --------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_] PURSUANT TO ITEM 2(d) OR 2(e): - --------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF UNITED STATES ORGANIZATION: - --------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 440,683 (1) SHARES ---------------------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 0 OWNED BY ---------------------------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 440,683 (1) REPORTING ---------------------------------------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 0 - --------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY 440,683 (1) REPORTING PERSON: - --------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES: - --------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 4.4% - --------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - --------------------------------------------------------------------------------------------------------- (1) Includes (i) 292,683 shares of common stock issuable to Mr. Mathisen upon conversion of 1,800 shares of Series D Convertible Preferred Stock of Sheldahl, Inc. at the initial conversion price of $6.15 per share of common stock and (ii) 18,000 shares of common stock issuable to Mr. Mathisen upon exercise of outstanding warrants to purchase such common stock at a price of $7.6875 per share of common stock. - -------------------------------------------------------- -------------------------------------- CUSIP No. 822440103 13D Page 5 of 17 - -------------------------------------------------------- -------------------------------------- - --------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: MARSHALL FINANCIAL GROUP, INC. S.S. OR I.R.S. IDENTIFICATION NO. 41-1624808 OF ABOVE PERSON: - --------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - --------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: WC, OO - --------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_] PURSUANT TO ITEM 2(d) OR 2(e): - --------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF MINNESOTA ORGANIZATION: - --------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 65,000 SHARES ---------------------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 0 OWNED BY ---------------------------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 65,000 REPORTING ---------------------------------------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 0 - --------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY 65,000 REPORTING PERSON: - --------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [_] SHARES: - --------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.7% - --------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: CO - ---------------------------------------------------------------------------------------------------------
Item 1. Security and Issuer. ------------------- This Statement on Schedule 13D relates to the common stock, $.25 par value (the "Common Stock"), of Sheldahl, Inc., a Minnesota corporation (the "Company"). The address of the Company's principal executive office is 1150 Sheldahl Road, Northfield, Minnesota 55057. Item 2. Identity and Background. ----------------------- This statement is being filed by Irwin L. Jacobs ("ILJ"), Daniel T. Lindsay ("DTL"), Dennis M. Mathisen ("DMM") and Marshall Financial Group, Inc., a Minnesota corporation ("MFG"). ILJ, DTL, DMM and MFG are collectively referred to herein as the "Reporting Persons". The following information relates to ILJ: (a) Name: Irwin L. Jacobs (b) Business Address: 100 South Fifth Street, Suite 2500, Minneapolis, Minnesota 55402 (c) Principal Occupation: President of Jacobs Management Corporation, a management consulting firm which advises companies in diverse businesses ("JMC"), located at 100 South Fifth Street, Suite 2500, Minneapolis, Minnesota 55402. ILJ is also Chairman of the Board of Directors of Genmar Holdings, Inc., a manufacturer of recreational power boats located at 100 South Fifth Street, Suite 2400, Minneapolis, Minnesota 55402. (d) Criminal Proceedings: None (e) Civil Proceedings: None (f) Citizenship: United States The following information relates to DTL: (a) Name: Daniel T. Lindsay (b) Business Address: 100 South Fifth Street, Suite 2500, Minneapolis, Minnesota 55402 (c) Principal Occupation: Executive Vice President of JMC (d) Criminal Proceedings: None (e) Civil Proceedings: None (f) Citizenship: United States The following information relates to DMM: (a) Name: Dennis M. Mathisen (b) Residence: 7823 Mission Hills Drive, Las Vegas, Nevada 89113 (c) Principal Occupation: Chairman of the Board of Directors, President and Chief Executive Officer of MFG. (d) Criminal Proceedings: None (e) Civil Proceedings: None (f) Citizenship: United States The following information relates to MFG: (i) Name: Marshall Financial Group, Inc. 6 (ii) State of Organization: Minnesota (iii) Principal Business: Merchant banking activities specializing in acquisitions, financial restructurings and providing operating management. (iv) Principal Business and Office Address: 903 North Third Street, Suite 300, Minneapolis, Minnesota 55401 (v) Information required by clauses (d) and (e) of Item 2 of Schedule 13D: None (vi) Information concerning directors and officers: See the information provided above for DMM, MFG's Chairman of the Board, President and Chief Executive Officer. The following information relates to John A. Fischer, a Director and Executive Vice President of MFG: (a) Name: John A. Fischer (b) Business Address: 903 North Third Street, Suite 300, Minneapolis, Minnesota 55401 (c) Principal Occupation: Director and Executive Vice President of MFG (d) Criminal Proceedings: None (e) Civil Proceedings: None (f) Citizenship: United States Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- From May 21, 1998 through September 9, 1998, ILJ purchased an aggregate of 376,600 shares of Common Stock for an aggregate consideration of $2,818,032 (including brokerage commissions). ILJ acquired such shares by using approximately equal amounts of borrowings from his margin account at Jeffries & Company, Inc. and from his existing line of credit with Colorado Community First Bank. From August 10, 1998 through September 18, 1998, DTL purchased an aggregate of 208,500 shares of Common Stock for an aggregate consideration of $1,213,060.29 (including brokerage commissions). DTL acquired such shares by using personal funds. From March 13, 1998 through July 29, 1998, DMM purchased an aggregate of 130,000 shares of the Common Stock for an aggregate consideration of $931,446 (including brokerage commissions). DMM acquired such shares by using personal funds and borrowings from his existing line of credit with Merrill Lynch International Private Finance Limited. On July 30, 1998, 7 pursuant to a certain Convertible Preferred Stock Purchase Agreement by and among the Company, DMM and certain other purchasers named therein (the "Stock Purchase Agreement"), DMM purchased 1,800 shares of the Company's Series D Convertible Preferred Stock, with a par value of $1.00 per share and a stated value of $1,000 per share (the "Series D Stock"), from the Company for an aggregate purchase price of $1,800,000 ($1,000 per share). As partial consideration for the transaction, the Company issued warrants (the "Warrants") to purchase shares of the Company's Common Stock at an exercise price equal to $7.6875 per share (subject to adjustment as provided therein), exercisable at any time from July 30, 1998 through and including July 29, 2001. DMM acquired Warrants to purchase 18,000 shares of the Company's Common Stock pursuant to the Stock Purchase Agreement. DMM acquired such Series D Stock and Warrants using borrowings from his existing line of credit with Merrill Lynch International Private Finance Limited. From April 7, 1998 through June 23, 1998, MFP purchased an aggregate of 65,000 shares of Common Stock for an aggregate consideration of $642,783 (including brokerage commissions). MFP acquired such shares by using working capital and borrowings from its margin account at Piper Jaffray, Inc. In addition, John A. Fischer, a Director and Executive Vice President of MFP, purchased 100 shares of Series D Stock and Warrants to purchase 1,000 shares of Common Stock pursuant to the Stock Purchase Agreement for an aggregate consideration of $100,000. Mr. Fischer acquired his Series D Stock and Warrants using borrowings from MFG. Mr. Fischer is not a Reporting Person, and MFG and the Reporting Persons disclaim beneficial ownership of the Series D Stock and Warrants, and any Common Stock issuable upon the conversion or exercise thereof, owned by Mr. Fischer. Item 4. Purpose of Transaction. ---------------------- The Reporting Persons have acquired the Common Stock described herein in order to obtain an equity position in the Company. The Reporting Persons intend to closely monitor the performance of the Company and its management, and to evaluate their position in order to determine the advisability of further action with respect to the Company. The Reporting Persons believe that the Company's disappointing results and continued underperformance relative to expectations have been due in part to the inability of existing management to effectively take advantage of business opportunities and to manage expectations with respect to the performance of the Company. The Reporting Persons believe that the Board of Directors and management of the 8 Company have failed to maximize shareholder value by producing results commensurate with the prospects of the Company. The Reporting Persons will continually evaluate their position to determine what, if any, actions to take with respect to the Company and their ownership position. The Reporting Persons may explore the feasibility of, and strategies for, seeking control and may explore, among other possibilities, (i) making a proposal to the Company for a merger or business combination; (ii) nominating individuals selected by the Reporting Persons as candidates for the Board of Directors of the Company and soliciting proxies from the Company's shareholders to vote for such nominees at the next meeting of the Company's shareholders, or otherwise taking action to reconstitute the Board of Directors; (iii) acquiring additional shares of Common Stock (subject to the availability of Common Stock at prices deemed favorable) from time to time in the open market, in privately negotiated transactions or otherwise; or (iv) entering into arrangements with third parties who may be interested in joining with the Reporting Persons to acquire control of the Company, which arrangements may contemplate the sale or disposition of portions of the Company's assets to such third parties after control is obtained. The Reporting Persons expect to explore these and, potentially, other alternatives designed to enhance the value of the Common Stock for all of the shareholders of the Company. Depending upon the course of action that the Reporting Persons pursue, the Reporting Persons may attempt to dispose of the Common Stock in the open market, in privately negotiated transactions or otherwise. Although the foregoing represents the range of activities presently contemplated by the Reporting Persons with respect to the Company, it should be noted that the possible activities of the Reporting Persons are subject to change at any time and there is no assurance that the Reporting Persons will actually purchase additional Common Stock or seek to influence or obtain control of the Company. Except as set forth above, the Reporting Persons have no present plans or intentions which would result in or relate to any of the transactions described in Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer ------------------------------------ (a) As of September 9, 1998, the Reporting Persons beneficially owned the amounts of Common Stock respectively set 9 forth below. The percentage set forth below represents the percentage of the outstanding shares of Common Stock (based on 9,660,615 shares outstanding as of July 29, 1998 as set forth in Schedule 2.1(c) to the Stock Purchase Agreement plus, in the case of DMM and the Reporting Persons as a group, 292,683 shares issuable upon conversion of the Series D Stock held by DMM and 18,000 shares issuable upon exercise of the Warrants held by DMM) represented by the shares of Common Stock beneficially owned by the Reporting Persons. Reporting Shares of Percent of Person Common Stock Outstanding Common Stock ------ ------------ ------------------------ ILJ 376,600 3.9% DTL 208,500 2.2% DMM 440,683 4.4% MFG 65,000 0.7% As of September 9, 1998, the Reporting Persons beneficially owned an aggregate of 780,100 shares of Common Stock, 292,683 shares of Common Stock issuable upon conversion of the Series D Stock held by DMM and 18,000 shares of Common Stock issuable upon exercise of the Warrants held by DMM, in aggregate representing approximately 10.94% of the outstanding shares of Common Stock. John A. Fischer, Executive Vice President and Director of MFG beneficially owns 17,260 shares of Common Stock, consisting of 16,260 shares issuable upon conversion of the Series D Stock owned by Mr. Fischer and 1,000 shares issuable upon exercise of the Warrants held by Mr. Fischer, representing, in aggregate, less than .2% of the Common Stock. The Reporting Persons disclaim beneficial ownership of the Series D Stock and Warrants, and any Common Stock issuable upon conversion or exercise thereof, owned by Mr. Fischer. (b) The information set forth in Items 7 through 11 of the cover pages hereto is incorporated herein by reference. (c) The information concerning transactions in the Common Stock effected by the Reporting Persons during the past sixty (60) days is set forth in Appendix A hereto and incorporated herein by reference. All of such transactions were effected through the open market. On July 30, 1998, pursuant to the Stock Purchase Agreement, DMM acquired 1,800 shares of Series D Stock convertible into 292,683 shares of Common Stock at a 10 conversion price of $6.15 per share of Common Stock and Warrants to purchase 18,000 shares of Common Stock at a price of $7.6875 per share of Common Stock. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer ------------------------------------------------------ Stock Purchase Agreement The Stock Purchase Agreement provides, among other things, that if DMM should decide to dispose of any of the Series D Stock, the Warrants or the shares of Common Stock issuable upon conversion of the Series D Stock, exercise of the Warrants or which may be issued as payment of dividends on the Common Stock in accordance with the Certificate of Designation, Preferences and Rights of Series D Convertible Preferred Stock of the Company, dated July 30, 1998 (collectively, the "Securities"), DMM may only do so only pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an available exemption from the registration requirements of the Securities Act. In connection with any transfer of any Securities other than pursuant to an effective registration statement or to the Company or to an affiliate of DMM or pursuant to Rule 144 under the Securities Act, the Company may require DMM to provide the Company with a written opinion of counsel experienced in the area of United States securities laws selected by DMM, the form and substance of which shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. Warrants In connection with the transactions contemplated by the Stock Purchase Agreement, the Company issued Warrants to DMM to purchase, upon the terms and subject to the conditions set forth therein, up to 18,000 shares of Common Stock at an exercise price equal to $7.6875 per share (subject to adjustment as provided therein), exercisable at any time from July 30, 1998 through and including July 29, 2001. Registration Rights Agreement 11 In connection with the transactions contemplated by the Stock Purchase Agreement, the Company, DMM and the other purchasers of the Series D Stock named therein entered into a Registration Rights Agreement dated as of July 30, 1998 (the "Registration Rights Agreement"), pursuant to which the Company agreed to prepare and file with the Securities and Exchange Commission (the "Commission") within 25 days after July 30, 1998 a shelf registration statement (the "Registration Statement") covering all Registrable Securities (as defined below) for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act. The Company has agreed to use commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event within 90 days after the Closing Date and to keep the Registration Statement continuously effective under the Securities Act until the date which is two years after the date that the Registration Statement is declared effective by the Commission or such earlier date when all the Registrable Securities covered by the Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144 under the Securities Act as determined by counsel to the Company pursuant to a written opinion letter addressed to the Company's transfer agent to such effect. Pursuant to the Registration Rights Agreement, DMM has agreed that (i) he will not sell any Registrable Securities under the Registration Statement until he has received copies of the Prospectus (as defined in the Registration Rights Agreement) as then amended or supplemented and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective and (ii) DMM will comply with the Prospectus delivery and any other requirements of the Securities Act applicable to him in connection with sales of Registrable Securities pursuant to the Registration Statement. Pursuant to the Registration Statement, DMM has also agreed, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 3(c)(ii) through 3(c)(v) of the Registration Rights Agreement (generally relating to the issuance of stop orders suspending the effectiveness of the Registration Statement, requests for additional information and related matters), DMM will discontinue disposition of the Registrable Securities under the Registration Statement until DMM's receipt of copies of the supplemented Prospectus and/or amended Registration Statement or until he is advised in writing by the Company that the use of the applicable Prospectus may be resumed and, in either case, has received 12 copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The rights of DMM under the Registration Rights Agreement, including the right to have the Company register the Registrable Securities for resale in accordance with the terms thereof, are automatically assignable by DMM to any assignee or transferee of all or a portion of the Series D Stock, the Warrants or the Registrable Securities, provided that certain conditions set forth in the Registration Rights Agreement are satisfied. "Registrable Securities" means, with respect to the Registration Statement to be filed after the Closing Date, the shares of Common Stock issuable upon (i) conversion of the Series D Stock, (ii) exercise of the Series D Warrants (as defined in the Registration Rights Agreement), including the Warrants and (iii) payment of dividends in respect of such Series D Stock. Item 7. Materials to Be Filed as Exhibits --------------------------------- 1. Agreement, dated as of September 21, 1998, by and among the signatories of this Statement with respect to its filing. 2. Convertible Preferred Stock Purchase Agreement, dated as of July 30, 1998, by and among the Company, DMM and the other purchasers of Series D Stock set forth therein. 3. Warrant, dated as of July 30, 1998, issued by the Company to DMM. 4. Registration Rights Agreement, dated as of July 30, 1998, by and among the Company, DMM and the other purchasers of Series D Stock set forth therein. 13 SIGNATURE --------- After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: September 21, 1998 /s/ Irwin L. Jacobs ----------------------------- Irwin L. Jacobs /s/ Daniel T. Lindsay ----------------------------- Daniel T. Lindsay /s/ Dennis M. Mathisen ----------------------------- Dennis M. Mathisen MARSHALL FINANCIAL GROUP /s/ John A. Fischer ----------------------------- By: John A. Fischer Its: Executive Vice President 14 APPENDIX A Transactions By the Reporting Persons in Sheldahl, Inc. Common Stock During the Past 60 Days IRWIN L. JACOBS Number of Price Per Date Shares Bought Share($) Commission($) Total Cost($) 07/21/98 28,500 6.8730 1,710.00 197,590.50 07/22/98 21,500 6.8930 0.00 148,199.50 07/24/98 100,000 5.4620 0.00 546,200.00 08/31/98 1,600 4.9600 80.00 8,016.00 09/01/98 15,000 5.0479 750.00 76,468.50 09/04/98 25,000 4.8715 1,250.00 123,037.50 9/09/98 35,000 4.8820 1,750.00 172,620.00 DANIEL T. LINDSAY Number of Price Per Date Shares Bought Share($) Commission($) Total Cost($) 08/10/98 3,800 6.7632 190.00 25,890.16 08/11/98 16,200 6.4807 810.00 105,797.34 08/12/98 25,000 6.4875 1,250.00 163,437.50 08/13/98 5,000 6.4719 250.00 32,609.50 09/09/98 50,000 4.8820 2,500.00 246,600.00 09/16/98 59,500 5.6630 2,975.00 339,923.50 09/17/98 9,900 5.6124 495.00 56,057.76 09/18/98 39,100 6.1583 1,955.00 242,744.53 DENNIS M. MATHISEN Number of Price Per Date Shares Bought Share($) Commission($) Total Cost($) 07/29/98 100,000 5.1250 6,258.00 518,758.00 15 EXHIBIT INDEX Exhibit No. Document - ----------- -------- 1. Agreement, dated as of September 21, 1998, by and among the signatories of this Statement with respect to its filing. 2. Convertible Preferred Stock Purchase Agreement, dated as of July 30, 1998, by and among the Company, DMM and the other purchasers of Series D Stock set forth therein. 3. Warrant, dated as of July 30, 1998, issued by the Company to DMM. 4. Registration Rights Agreement, dated as of July 30, 1998, by and among the Company, DMM and the other purchasers of Series D Stock set forth therein. 16 EXHIBIT 1 AGREEMENT This will confirm the agreement by and among all the undersigned that the Schedule 13D filed on or about this date with respect to the beneficial ownership of the undersigned of shares of common stock of Sheldahl, Inc. is being filed on behalf of each of the entities named below. This agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Dated: September 21, 1998 /s/ Irwin L. Jacobs ----------------------------- Irwin L. Jacobs /s/ Daniel T. Lindsay ----------------------------- Daniel T. Lindsay /s/ Dennis M. Mathisen ----------------------------- Dennis M. Mathisen MARSHALL FINANCIAL GROUP /s/ John A. Fischer ----------------------------- By: John A. Fischer Its: Executive Vice President 17 EX-2 2 1 EXHIBIT 2 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT This Convertible Preferred Stock Purchase Agreement (the "Agreement"), dated as of July 30, 1998, among Sheldahl, Inc., a Minnesota corporation (the "Company"), and the individuals and entities listed on Exhibit A hereto (sometimes referred to herein as a "Purchaser" and collectively as the "Purchasers"). WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers and the Purchasers desire to acquire shares of the Company's Series D Convertible Preferred Stock, par value $1.00 per share (the "Series D Preferred"). NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchasers agree as follows: ARTICLE I PURCHASE AND SALE OF PREFERRED SHARES 1.1 Purchase and Sale. (a) Subject to the terms and conditions set forth herein, at the Closing (as defined below), the Company shall issue and sell to the Purchasers and the Purchasers, severally and not jointly, shall purchase 32,917 shares of Series D Preferred (the "Shares"). (b) The Shares shall have the respective rights, preferences and privileges set forth in the Certificate of Designation attached hereto as Exhibit B (the "Certificate of Designation"), which shall be filed on or prior to the Closing Date (as defined below) by the Company with the Secretary of State of Minnesota. The Shares, the Warrants (as defined in Section 3.2) and the Underlying Shares (as defined in Section 2. 1 (d)) are sometimes collectively referred to herein as the "Securities." 1.2 Purchase Price. The purchase price per Share shall be $1,000. 1.3 The Closing. (a) The Closing of the purchase and sale of the Shares (the "Closing") shall take place at the offices of Lindquist & Vennum P.L.L.P., 4200 IDS Center, 80 South 8th Street, Minneapolis, Minnesota, immediately following the execution hereof, or such later date as the parties shall agree. The date of the Closing is hereinafter referred to as the "Closing Date." (b) At the Closing, the Company shall deliver (A) to each Purchaser, a stock certificate registered in the name of such Purchaser for such number of Shares set forth opposite such Purchaser's name on Exhibit A; (B) to each Purchaser, a Warrant to purchase that number of shares of Common Stock of the Company set forth opposite such Purchaser's name on Exhibit A; and (C) all other documents, instruments and writings required to have 2 been delivered at or prior to the Closing by the Company to Purchasers pursuant to this Agreement. At the Closing, each Purchaser shall deliver to the Company the purchase price set forth opposite such Purchaser's name on Exhibit A by wire transfer of same day funds. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchasers: (a) Organization. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement, the Certificate of Designation, the Registration Rights Agreement (defined in Section 4.1(h)) and the Warrants (the "Transaction Documents") and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each Transaction Document by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company. Each Transaction Document has been duly executed by the Company and, when delivered or filed in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (c) Capitalization. The authorized, issued and outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except as specifically disclosed in Schedule 2.1(c), no shares of Common Stock of the Company are entitled to preemptive or similar rights, nor is any holder of the Common Stock of the Company entitled to preemptive or similar rights. Except as disclosed in Schedule 2.1(c), there are no outstanding options, warrants or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the Shares and Warrants hereunder, securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire any shares of Common Stock of the Company, or contracts, commitments, understandings, or arrangements by which the Company is bound to issue additional shares of the Company's Common Stock, or securities or rights convertible or exchangeable into shares of the Company's Common Stock. (d) Issuance of Shares and Warrants. The Shares and the Warrants are duly authorized and, when issued in accordance with the terms hereof, the Certificate of - 2 - 3 Designation or the Warrants, as the case may be, shall be validly issued, fully paid and non-assessable. As of the Closing Date, the Company will have and, at all times while any Shares or any Warrants are outstanding, will maintain, an adequate reserve of duly authorized shares of its Common Stock to enable it to perform its obligations under this Agreement, the Warrants and the Certificate of Designation with respect to the number of Shares and Warrants issued and outstanding at such Closing Date. The shares of Common Stock issuable upon conversion of the Shares and exercise of the Warrants and which may be issued as payment of dividends on the Shares are collectively referred to herein as the "Underlying Shares." When issued in accordance with the terms hereof, the Certificate of Designation or the Warrants, as the case may be, the Underlying Shares will be duly authorized, validly issued, fully paid (except that Underlying Shares issued upon exercise of Warrants shall be fully paid upon delivery of the applicable exercise price therefor) and non-assessable, free and clear of all liens, claims, encumbrances or defects of any kind (collectively, "Liens"), except as set forth in any required legends thereon. (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its Articles of Incorporation or Bylaws; or (ii) subject to obtaining the consents referred to in Section 2.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party; or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (other than (x) a violation of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), as a result of a failure of the representations and warranties of the Purchasers set forth in the first sentence of Section 2.2(h) to be accurate; or (y) a violation of any federal and state securities laws requiring filings with such authorities and the delivery of certain information pursuant to Rule 502(b)(1) promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, to the Purchasers who are deemed not to be accredited investors as a result of a failure of the representations and warranties of the Purchasers set forth in Section 2.2(c) to be accurate), or by which any property or asset of the Company is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as could not reasonably be expected to, individually or in the aggregate, have or result in a material adverse effect on the results of operations, assets or financial condition of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"). (f) Consents and Approvals. Except as specifically set forth in Schedule 2.1(f), and assuming that the representations and warranties of the Purchasers contained in Section 2.2 are true and correct in all respects, the Company is not required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other person in connection with the - 3 - 4 execution, delivery and performance by the Company of the Transaction Documents, except for (i) the filings of the Certificate of Designation with respect to the Shares with the Secretary of State of Minnesota; (ii) the filing of the Underlying Securities Registration Statement(s) (as defined in the Registration Rights Agreement) with the Securities and Exchange Commission (the "Commission"); (iii) the application(s) or any letter(s) acceptable to and approved by the National Association of Securities Dealers, Inc. ("NASD") for the designation of the Underlying Shares for trading on the Nasdaq National Market (and with any other national securities exchange or market on which the Common Stock is then listed); (iv) any filings, notices or registrations under applicable federal or state securities laws and any filing that may be required under the HSR Act as a result of a failure of the representations and warranties of the Purchasers set forth in the first sentence of Section 2.2(h) to be accurate; and (v) other than, in all other cases, where the failure to obtain such consent, waiver, authorization or order, or to give or make such notice or filing, would not materially impair or delay the ability of the Company to effect the Closing and to deliver to the Purchasers the Shares (and, upon conversion of the Shares and exercise of Warrants, the Underlying Shares) in the manner contemplated hereby and by the Registration Rights Agreement (together with the consents, waivers, authorizations, orders, notices and filings referred to in Schedule 2.1(f), the "Required Approvals"). (g) Litigation; Proceedings. There is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (h) No Default or Violation. Neither the Company nor any subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound; or (ii) is in violation of any order of any court, arbitrator or governmental body, except as could not reasonably be expected to, in any such case (individually or in the aggregate) have or result in a Material Adverse Effect. (i) SEC Documents. The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including, pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the date hereof (the foregoing materials being collectively referred to herein as the "SEC Documents"), on a timely basis, or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder. The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto. Such financial statements have been - 4 - 5 prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise indicated in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments. Since the date of the financial statements included in the Company's last filed Quarterly Report on Form 10-Q for the quarter ended February 27, 1998, there has been no event, occurrence or development that has had a Material Adverse Effect which has not been specifically disclosed to the Purchasers by the Company. 2.2 Representations and Warranties of the Purchasers. Each Purchaser, severally and not jointly, hereby represents and warrants to the Company as follows: (a) Organization; Authority. Such Purchaser is a corporation duly incorporated or a limited partnership duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation or an individual, in each case, with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Purchaser of Securities hereunder has been duly authorized by all necessary action on the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by such Purchaser and constitutes the valid and legally binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. (b) Investment Intent. Such Purchaser is acquiring the Securities for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof or interest therein, without prejudice, however, to such Purchaser's right, subject to the provisions of this Agreement and the Registration Rights Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act and in compliance with applicable state securities laws or under an exemption from such registration. (c) Purchaser Status. At the time such Purchaser was offered the Shares and the Warrants, it was and, at the date hereof, it is, and at the Closing Date it will be, an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (4) under the Securities Act. (d) Experience of Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment to its satisfaction. - 5 - 6 (e) Ability of Purchaser to Bear Risk of Investment. On the Closing Date, such Purchaser is able to bear the economic risk of an investment in the Securities and is able to afford a complete loss of such investment. (f) Access to Information. Each Purchaser acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities, and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to its investment. (g) Reliance. Each Purchaser understands and acknowledges that (i) the Securities are being offered and sold to the Purchaser without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act or Regulation D promulgated thereunder; and (ii) the availability of such exemption depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance. (h) No Affiliation. No Purchaser is an Affiliate or Associate (as such terms are defined in Rule 12b-2 under the Exchange Act) of any other Purchaser or is acting in concert with any other Purchaser. No Purchaser beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act) any Securities of any other Purchaser. (i) No Conflicts. The execution, delivery and performance of the Transaction Documents by such Purchaser and the consummation by such Purchaser of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its certificate or articles of incorporation, bylaws, partnership agreement or other governing instrument, as applicable (each as amended through the date hereof), or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which such Purchaser is subject (including foreign, federal and state securities laws and regulations). (j) Consents and Approvals. Except for Schedule 13D and Form 4 filings by Molex Incorporated, such Purchaser is not required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other foreign, federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by such Purchaser of the Transaction Documents. (k) Litigation; Proceedings. There is no action, suit, notice of violation, proceeding or investigation pending, or to the knowledge of such Purchaser, threatened against - 6 - 7 or affecting such Purchaser before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which would adversely affect the legality, validity or enforceability of any of the Transaction Documents in any respect or adversely impair such Purchaser's ability to perform fully on a timely basis its obligations under the Transaction Documents. (l) Beneficial Ownership of Sheldahl Stock. At and after the Closing, no Purchaser shall be a Beneficial Owner of fifteen percent (15%) or more of outstanding shares of the Company's Common Stock. For purposes of this Section 2.2(l), "Beneficial Owner" shall have the meaning set forth in Section 1(d) of the Rights Agreement dated June 16, 1996, as amended effective July 25, 1998, by and between the Company and Norwest Bank Minnesota, N.A., as the same may be amended or modified from time to time (the "Rights Agreement"). Each Purchaser has been provided, upon its request, with a copy of such definition and has had an opportunity to review it with such Purchaser's legal counsel. Each Purchaser acknowledges that the transactions contemplated by the Transaction Documents shall not be deemed to have received any required approval under the terms of such Rights Agreement. Notwithstanding the foregoing, for purposes of Molex Incorporated, such references above to fifteen percent (15%) shall be deemed to refer to twenty-two percent (22%). (m) Residency. Each Purchaser is a resident of the state set forth opposite its name on Exhibit A attached hereto. ARTICLE III OTHER AGREEMENTS OF THE PARTIES 3.1 Transfer Restrictions. (a) If any Purchaser should decide to dispose of any of the Securities held by it, such Purchaser understands and agrees that it may do so only pursuant to an effective registration statement under the Securities Act, to the Company or pursuant to an available exemption from the registration requirements of the Securities Act. In connection with any transfer of any Securities other than pursuant to an effective registration statement or to the Company or to an Affiliate of such Purchaser or pursuant to Rule 144 under the Securities Act ("Rule 144"), the Company may require the transferor thereof to provide to the Company a written opinion of counsel experienced in the area of United States securities laws selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. (b) Each Purchaser agrees to the imprinting, so long as is required by this Section 3.1(b), of the following legend on the Securities: [NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE - 7 - 8 SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]] [THE SECURITIES REPRESENTED HEREBY] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. [FOR SHARES ONLY] SHELDAHL, INC. WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF THE CLASS OF STOCK OR SERIES THEREOF TO WHICH THE SHARES REPRESENTED BY THIS CERTIFICATE ARE A PART AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. The Underlying Shares issuable upon conversion of Shares and exercise of the Warrants, as the case may be, shall not contain the legend set forth above (or any other legend other than those that identify the existence of the Rights Agreement) if the conversion of such Shares or exercise of the Warrants, as the case may be, occurs at any time while the Underlying Securities Registration Statement is effective under the Securities Act or in the event there is not an effective Underlying Securities Registration Statement at such time, if the Underlying Shares have been sold pursuant to Rule 144, or if in the written opinion of counsel to the Company experienced in the area of United States securities laws such legend is not required under applicable requirements of the Securities Act (including judicial interpretation and pronouncements issued by the staff of the Commission). The Company makes no representation, warranty or agreement as to the availability of any exemption from registration under the Securities Act with respect to any resale of any Securities. 3.2 The Warrants. At the Closing, the Company shall issue and deliver Common Stock purchase warrants (the "Warrants") entitling the Purchasers to purchase, on the terms and conditions set forth in Exhibit C hereto, an aggregate of 329,170 shares of Common Stock at a price per share equal to $7.6875, (the "Warrant Exercise Price"). Each Purchaser shall receive that number of Warrants as is set forth opposite the Purchaser's name on Exhibit A. 3.3 Use Of Proceeds. The Company shall use the Net Proceeds from the placement of the Shares and Warrants to enhance the Company's capital structure, provide capital liquidity and repay debt. ARTICLE IV - 8 - 9 CONDITIONS 4.1 Conditions Precedent to the Obligation of the Purchasers to Purchase the Series D Shares. The obligation of each Purchaser hereunder to acquire and pay for the Shares and the Warrants is subject to the satisfaction or waiver by such Purchaser, at or before the Closing, of each of the following conditions: (a) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on and as of such date; (b) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date; (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement; (d) No Suspensions of Trading in Common Stock. The trading in the Common Stock shall not have been suspended by the Commission or on the Nasdaq National Market (except for any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company or any suspension of trading of securities generally); (e) Legal Opinion. The Company shall have delivered to such Purchaser an opinion of outside legal counsel to the Company as to the matters attached hereto as Exhibit D and dated the Closing Date; (f) Required Approvals. All Required Approvals shall have been obtained; (g) Delivery of Stock Certificates and Warrants. The Company shall have delivered to such Purchaser or such Purchaser's designee the stock certificate(s) representing the Shares being purchased at the Closing and the Warrants to be received by each Purchaser, registered in the name of such Purchaser, each in form satisfactory to such Purchaser; (h) Registration Rights Agreement. The Company and the Purchasers shall have entered into the Registration Rights Agreement in the form of Exhibit E. 4.2 Conditions Precedent to the Company's Obligations. The obligations of the Company hereunder are subject to the following conditions: - 9 - 10 (a) Accuracy of the Representations and Warranties of Purchasers. The representations and warranties of the Purchasers contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on and as of such date; (b) Performance by the Purchasers. The Purchasers shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Purchasers at or prior to the Closing Date; (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement; (d) Required Approvals. All Required Approvals shall have been obtained; (e) Payment of Purchase Price. Each Purchaser shall have paid the purchase price set forth opposite the Purchaser's name on Exhibit A. ARTICLE V MISCELLANEOUS 5.1 Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, except as set forth in the Registration Rights Agreement. Each Purchaser shall be responsible for such Purchaser's own tax liability that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement. 5.2 Entire Agreement: Amendments. This Agreement, together with the Exhibits and Schedules hereto, the Registration Rights Agreement, the Certificate of Designation (when filed) and the Warrants referenced in Section 3.2, contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters. 5.3 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered on a business day after during normal business hours where such notice is to be received); or (b) on the business day following the date of mailing by express courier service, fully prepaid, - 10 - 11 addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: Sheldahl, Inc. 1150 Sheldahl Road Northfield, MN 55057-9444 Attn: John V. McManus Fax: (507) 663-8326 or (507) 663-8435 With copies to: Lindquist & Vennum P.L.L.P. 4200 IDS Center 80 South Eighth Street Minneapolis MN 55402 Attn: Charles P. Moorse, Esq. Fax: (612) 371-3207 If to a Purchaser: To the address set forth on Exhibit A or such other address as may be designated in writing hereafter, in the same manner, by such person. 5.4 Amendment; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and each Purchaser; or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 5.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. Neither the Company nor any Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding anything to the contrary contained herein, each Purchaser may assign its rights hereunder in connection with any sale or transfer of such Purchaser's Securities to any Affiliate of such Purchaser as long as the transferee Affiliate agrees in writing to be bound by the applicable provisions of this Agreement, in which case the term "Purchaser" shall be deemed to refer to such transferee as though such - 11 - 12 transferee were an original signatory thereto. 5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 5.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Minnesota without regard to the principles of conflicts of law thereof. 5.9 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become binding with respect to each Purchaser on the date the acceptance form hereto is executed by such Purchaser and with respect to the Company on the date executed by the Company, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 5.10 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its authorized representative and each Purchaser has caused this Agreement to be executed by signing in counterpart the acceptance form attached to this Agreement. COMPANY: SHELDAHL, INC. By /s/John V. McManus ----------------------------------- John V. McManus Its Vice President - Finance - 12 - 13 ACCEPTANCE The undersigned hereby accepts the terms and conditions set forth in the Convertible Preferred Stock Purchase Agreement, dated July 30, 1998, among Sheldahl, Inc., a Minnesota corporation (the "Company") and certain Purchasers listed in Exhibit A thereto as the terms and conditions applicable to the purchase of Shares of Series D Convertible Preferred Stock of the Company by the undersigned. By execution of this Acceptance, the undersigned hereby makes each of the representations contained in Section 2.2 of the Convertible Preferred Stock Purchase Agreement. PURCHASER: By: /s/ Dennis M. Mathisen ------------------------------------ Name: Dennis M. Mathisen EX-3 3 1 EXHIBIT 3 NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. SHELDAHL, INC. WARRANT Warrant No. 1 Dated July 30, 1998 Sheldahl, Inc., a corporation organized and existing under the laws of the State of Minnesota (the "Company"), hereby certifies that, for value received, Dennis M. Mathisen, or its registered assigns ("Holder"), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of 18,000 shares of Common Stock, par value $.25 per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $7.6875 per share (as adjusted from time to time as provided in Section 7, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including July 29, 2001 (the "Expiration Date"), and subject to the following terms and conditions: 1. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary. 2. Registration of Transfers and Exchanges. (a) The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of 2 the rights and obligations of a holder of a Warrant. Holder may not transfer this Warrant or any portion thereof unless such transfer represents the right to purchase at least 10,000 Warrant Shares or such lesser amount as constitutes the entire Warrant. (b) This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified in or pursuant to Section 3(b) for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of exchange. 3. Duration and Exercise of Warrants. (a) This Warrant shall be exercisable by the registered Holder on any business day before 5:00 p.m., Minneapolis time, at any time and from time to time on or after the date hereof to and including the Expiration Date. At 5:00 p.m., Minneapolis time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. This Warrant may not be redeemed by the Company. (b) Subject to Sections 2(b), 5 and 9, upon surrender of this Warrant, with the Form of Election to Purchase attached hereto duly completed and signed, to the Company at its office at 1150 Sheldahl Road, Northfield, MN 55057-9444, Attention: Vice President, Finance, or at such other address as the Company may specify in writing to the then registered Holder, and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, in lawful money of the United States of America, in cash via wire transfer or by certified or official bank check or checks, all as specified by the Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than five business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends other than as required by the Convertible Preferred Stock Purchase Agreement of even date herewith between the Holder and the Company. Any person so designated by the Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant. A "Date of Exercise" means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the holder hereof to be purchased. (c) This Warrant may be exercisable in whole or in part provided a partial exercise shall require a minimum exercise of Warrants to purchase at least 25,000 Warrant Shares. 4. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares upon the exercise of this Warrant; provided, 3 however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder, and the Company shall not be required to issue or cause to be issued or deliver or cause to be delivered the certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 5. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if reasonably satisfactory to it. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable charges as the Company may prescribe. 6. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant. The Company covenants that all Warrant Shares that shall be so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 7. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 7. Upon each such adjustment of the Exercise Price pursuant to this Section 7, the Holder shall thereafter prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock (as defined below) or on any other class of capital stock (and not the Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after 4 such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination, and shall apply to successive subdivisions and combinations. (b) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person pursuant to which the Company will not be the surviving entity, the sale or transfer of all or substantially all of the assets of the Company in which the consideration therefor is equity or equity equivalent securities or any compulsory share exchange pursuant to which the Common Stock is converted into other securities or property, then the Holder shall have the right thereafter to exercise this Warrant only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property equal to the amount of Warrant Shares such Holder would have been entitled to had such Holder exercised this Warrant immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 7(b) upon any exercise following any such reclassification, consolidation, merger, sale, transfer or share exchange. (c) If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to holders of this Warrant) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 7(a), (b) and (d)), then in each such case the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of the record date mentioned above, and of which the numerator shall be such Exercise Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the turn that regularly examines the financial statements of the Company) (an "Appraiser") mutually selected in good faith by the holders of a majority in interest of the Warrants then outstanding and the Company. Any determination made by the Appraiser shall be final. (d) If, at any time while this Warrant is outstanding, the Company shall issue or cause to be issued rights or warrants to acquire or otherwise sell or distribute shares of Common Stock to all holders of Common Stock for a consideration per share less than the Exercise Price then in effect, then, forthwith upon such issue or sale, the Exercise Price shall be reduced to the price (calculated to the nearest cent) determined by dividing (i) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately 5 prior to such issue or sale multiplied by the Exercise Price, and (B) the consideration, if any, received or receivable by the Company upon such issue or sale by (ii) the total number of shares of Common Stock outstanding immediately after such issue or sale. (e) For the purposes of this Section 7, the following clauses shall also be applicable: (i) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in securities convertible or exchangeable into shares of Common Stock, or (B) to subscribe for or purchase Common Stock or securities convertible or exchangeable into shares of Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (g) if: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any Compulsory Share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the dissolution, liquidation or winding up of the affairs of the Company, 6 then the Company shall cause to be mailed to each Holder at their last addresses as they shall appear upon the Warrant Register, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. 8. Payment of Exercise Price. The Holder shall pay the Exercise Price in the manner provided in Section 3(b). 9. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 9, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction; or (ii) round the number of Warrant Shares issuable, up to the next whole number. 10. Notices. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section; (ii) the business day following the date of mailing, if sent by nationally recognized overnight courier service; or (iii) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to Sheldahl, Inc., 1150 Sheldahl Road, Northfield, MN 55057-9444, Attention: Vice President, Finance, or to facsimile no. (507) 663-8326 or (507) 663-8435; or (ii) if to the Holder, to the Holder at the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 10. 11. Warrant Agent. (a) The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days= notice to the Holder, the Company may appoint a new warrant agent. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company 7 or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 12. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only in writing signed by the Company and the Holder. (b) Subject to Section 12(a), above, nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or cause under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. (c) This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of Minnesota without regard to the principles of conflicts of law thereof. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. SHELDAHL, INC. By: /s/ JOHN V. MCMANUS ----------------------------------- Name: John V. McManus Title: Vice President - Finance 9 FORM OF ELECTION TO PURCHASE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To Sheldahl, Inc.: In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ___________ shares of Common Stock ("Common Stock"), par value $.25 per share, of Sheldahl, Inc. and encloses herewith $__________ in cash via wire transfer or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER (Please print name and address) 10 FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________________ the right represented by the within Warrant to purchase __________ shares of Common Stock of Sheldahl, Inc. to which the within Warrant relates and appoints ___________________ attorney to transfer said right on the books of Sheldahl, Inc. with full power of substitution in the premises. Dated: ___________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) Address of Transferee In the presence of: --------------------------- EX-4 4 1 EXHIBIT 4 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of July 30, 1998, among Sheldahl, Inc., a Minnesota corporation (the "Company"), and the individuals and entities listed on Exhibit A hereto (referred to herein as a "Purchaser" and collectively as the "Purchasers"). This Agreement is made pursuant to the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof among the Company and the Purchasers (the "Purchase Agreement"). The Company and the Purchasers hereby agree as follows: 1. Definitions Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have meaning set forth in Section 3(j). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated", "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day except a day on which the Nasdaq National Market, the NYSE or the AMEX, as applicable, if the Common Stock is listed for trading or quoted thereon at such time, is closed, and if the Common Stock is not listed for trading or quoted on any of the Nasdaq National Market, the NYSE or the AMEX at such time, then "Business Day" shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Minnesota generally are authorized or required by law or other government actions to close. "Closing Date" shall have the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's Common Stock, par value $.25 per share. "Effectiveness Date" means (i) with respect to the Registration Statement to be filed with respect to the Series D Shares and the Warrants, the 90th day following the Closing 2 Date. "Effectiveness Period" shall have the meaning set forth in Section 2(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Filing Date" means the 25th day following the Closing Date. "Holder" or "Holders" means the holder or holders, as the case may be, from time to time of Registrable Securities. "Indemnified Party" shall have the meaning set forth in Section 5(c). "Indemnifying Party" shall have the meaning set forth in Section 5(c). "Losses" shall have the meaning set forth in Section 5(a). "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Preferred Stock" means the shares of Series D Preferred Stock, par value $1.00 per share, of the Company issued to the Purchasers pursuant to the Purchase Agreement. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Registrable Securities" means, with respect to the Registration Statement to be filed after the Closing, the shares of Common Stock issuable upon (i) conversion of the Series D Shares; (ii) exercise of the Series D Warrants issued by the Company to the Purchasers; and (iii) payment of dividends in respect of such Preferred Stock. "Registration Statement" means the registration statements contemplated by Section 2(a) (and any additional Registration Statements contemplated in the definition of Registrable Securities), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all - 2 - 3 exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. 2. Shelf Registration. On or prior to the Filing Date, the Company shall prepare and file with the Commission a "Shelf" Registration Statement covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith which form shall be reasonably acceptable to the Holders). The Company shall (i) not permit any securities other than the Registrable Securities to be included in the Registration Statement; and (ii) use its commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and to keep such Registration Statement continuously effective under the Securities Act until the date which is two years after the date that such Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144 as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent to such effect (the "Effectiveness Period"). 3. Registration Procedures. In connection with the Company's registration obligations hereunder, the Company shall: (a) Prepare and file with the Commission, on or prior to the Filing Date, a Registration Statement on Form S-3 (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith which Form shall be reasonably acceptable to the Holders) in accordance with the method or methods of distribution thereof as specified by the Holders, and cause the Registration Statement to become effective and remain effective as provided herein. - 3 - 4 (b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as practicable to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and promptly provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold: (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualifications (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as reasonably practicable. - 4 - 5 (e) Furnish to each Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (f) Promptly deliver to each Holder, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (g) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (h) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as practicable, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (i) Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on The Nasdaq National Market and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement. (j) The Company may require each selling Holder to furnish to the Company such information, including information regarding the distribution of such Registrable Securities, as is required by law to be disclosed in the Registration Statement and the Company may - 5 - 6 exclude from such registration the Registrable Securities of any such Holder who fails to furnish such information within a reasonable time after receiving such request. The failure by the Company to file the Registration Statement by the Filing Date, to cause it to become effective by the Effectiveness Date or to maintain its effectiveness for the Effectiveness Period, if due solely to the breach of a Holder's obligations under this Section, shall not be deemed a breach of the Company's obligations to such Holder under this Agreement or the Purchase Agreement. The rights of Holders that timely supply such information shall not be affected by the preceding sentence and the Company shall remain obligated hereunder to file, and cause and maintain the effectiveness of the Registration Statement on behalf of such Holders. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if 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 in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Purchaser covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c); and (ii) the Purchaser and its officers, directors or Affiliates, if any, will comply with the Prospectus delivery and any other requirements of the Securities Act applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv) or 3(c)(v), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(h), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. 4. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with The Nasdaq National Market and each other securities exchange or market on which Registrable Securities are required hereunder to be listed, and (B) in compliance with state - 6 - 7 securities or Blue Sky laws; (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the holders of a majority of the Registrable Securities included in the Registration Statement but not including printing expenses of a financial printer; (iii) messenger, telephone and delivery expenses incurred by the Company; (iv) fees and disbursements of counsel for the Company; (v) Securities Act liability insurance, if the Company so desires such insurance; and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. The Holders shall bear the expenses and fees of any legal counsel retained by them. 5. Indemnification (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, the directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses - 7 - 8 (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party); provided that if more than one Indemnified Party is seeking indemnification with respect to the same Proceeding, the Indemnifying Party shall not be required to pay for more than one separate counsel for all such Indemnified Parties as a group. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the - 8 - 9 Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), the Purchaser shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by the Purchaser from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that the Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 6. Rule 144. The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, they will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales of its securities pursuant to Rule 144. The Company further covenants that it will take such further action as any Holder may - 9 - 10 reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144; provided, however, that the Company shall not be obligated to provide an opinion to any Holder regarding the sale of Registrable Securities pursuant to exemptions provided by Rule 144. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 7. Miscellaneous (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least two-thirds of the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (c) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 4:30 p.m. (Minneapolis time) on a Business Day; (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in the Purchase Agreement later than 4:30 p.m. (Minneapolis time) on any date and earlier than 11:59 p.m. (Minneapolis time) on such date; (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service; or (iv) upon actual receipt by the party to whom such notice is required to be given. - 10 - 11 If to the Company: Sheldahl, Inc. 1150 Sheldahl Road Northfield, MN 55057-9444 Attn: John V. McManus Fax: (507) 663-8326 or (507) 663-8435 With copies to: Lindquist & Vennum P.L.L.P. 4200 IDS Center 80 South Eighth Street Minneapolis MN 55402 Attn: Charles P. Moorse, Esq. Fax: (612) 371-3207 or such other address as may be designated in writing hereafter, in the same manner, by such Person. (d) Successors and Assigns. This Agreement shall more to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall more to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Purchaser may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. (e) Assignment of Registration Rights. The rights of each Purchaser hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by the Purchaser to any assignee or transferee of all or a portion of the shares of Preferred Stock, the Warrants or the Registrable Securities if: (i) the Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (A) the name and address of such transferee or assignee, and (B) the securities with respect to which such registration rights are being transferred or assigned; (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws to the extent required by the Purchase Agreement; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement; and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. The rights to assignment shall apply to the Purchaser's (and to subsequent) successors and assigns. - 11 - 12 (f) Counterparts. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to principles of conflicts of law. (h) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (k) Shares Held by The Company and its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than the Purchasers or transferees or successors or assigns thereof if such Persons are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. - 12 - 13 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. SHELDAHL, INC. By: /s/ John V. McManus ----------------------------------------- Name: John V. McManus Title: Vice President - Finance PURCHASER By: /s/ Dennis M. Mathisen ----------------------------------------- Name: Dennis M. Mathisen - 13 - -----END PRIVACY-ENHANCED MESSAGE-----