Document:

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                                                                    EXHIBIT 4.11

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS 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.

                                     WARRANT

                               FOR COMMON STOCK OF

                                 SHELDAHL, INC.

WARRANT NO.    4

     THIS CERTIFIES that, for value received, Molex Incorporated, or its
permitted assigns (collectively, the "Holder"), is entitled to purchase from
Sheldahl, Inc., a Minnesota corporation (the "Company"), at any time, and from
time to time, during the exercise period referred to in Section 1 hereof Nine
Hundred Thirty-Nine Thousand Five Hundred Seventy-Eight (939,578) fully paid,
validly issued and nonassessable shares (the "Warrant Shares") of common stock
of the Company, par value $0.25 (the "Common Stock"), at the exercise price of
$0.01 per share (the "Warrant Price"). Securities issuable upon exercise of this
Warrant and the exercise price payable therefor are subject to adjustment from
time to time as hereinafter set forth. As used herein, the term "Warrant" shall
include any warrant or warrants hereafter issued in consequence of the exercise
of this Warrant in part or transfer of this Warrant in whole or in part. This
Warrant is being issued pursuant to that certain Amended and Restated
Subordinated Notes and Warrant Purchase Agreement dated as of December 28, 2000
between the Company, and the Holders and other parties named therein (the
"Purchase Agreement").

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1.   Exercise; Payment for Ownership Interest.

     (a) Upon the terms and subject to the conditions set forth herein, this
Warrant may be exercised in whole or in part by the Holder hereof at any time,
or from time to time, on or after the Closing (as defined in the Purchase
Agreement) and prior to 5 p.m. Minneapolis time on the seventh anniversary of
the date of the Closing, by presentation and surrender of this Warrant to the
principal offices of the Company, or at the office of its Transfer Agent (as
hereinafter defined), if any, together with the Purchase Form annexed hereto,
duly executed, and accompanied by payment to the Company of an amount equal to
the Warrant Price multiplied by the number of Warrant Shares as to which this
Warrant is then being exercised. The Holder of this Warrant shall be deemed to
be a shareholder of the Warrant Shares as to which this Warrant is exercised in
accordance herewith effective immediately after the close of business on the
date on which the Holder shall have delivered to the Company this Warrant in
proper form for exercise and payment of the Warrant Price for the number of
Warrant Shares as to which the exercise is being made, notwithstanding that the
stock transfer books of the Company shall be then closed or that certificates
representing such Warrant Shares shall not then be physically delivered to the
Holder.

     (b) All or any portion of the Warrant Price may be paid by surrendering
Warrants effected by presentation and surrender of this Warrant to the Company,
or at the office of its Transfer Agent, if any, with a Cashless Exercise Form
annexed hereto duly executed (a "Cashless Exercise"). Such presentation and
surrender shall be deemed a waiver by the Company of the Holder's obligation to
pay all or any portion of the aggregate Warrant Price. Except as provided in
Section 3(b) below, in the event of a Cashless Exercise, the Holder shall
exchange its Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares for which the Holder desires to
exercise this Warrant by a fraction, the numerator of which shall be the
difference between the then current market price per share of the Common Stock
and the Warrant Price, and the denominator of which shall be the then current
market price per share of Common Stock. For purposes of any computation under
this Section 1(b), the then current market price per share of Common Stock at
any date shall be deemed to be the average for the ten consecutive business days
immediately prior to the Cashless Exercise of the daily closing prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the closing prices as reported by the Nasdaq National
Market or, if applicable, the Nasdaq SmallCap Market, or if not then included
for quotation on the Nasdaq National Market or the Nasdaq SmallCap Market, the
average of the highest reported bid and lowest reported asked prices as reported
by the OTC Bulletin Board or the

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National Quotations Bureau, as the case may be, or if not then publicly traded,
the fair market price, not less than book value thereof, of the Common Stock as
determined in good faith by the independent members of the Board of Directors of
the Company.

     (c) If this Warrant shall be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder as to which the Warrant has not been
exercised. If this Warrant is exercised in part, such exercise shall be for a
whole number of Warrant Shares. Upon any exercise and surrender of this Warrant,
the Company (i) will issue and deliver to the Holder a certificate or
certificates in the name of the Holder for the largest whole number of Warrant
Shares to which the Holder shall be entitled and, if this Warrant is exercised
in whole, in lieu of any fractional Warrant Share to which the Holder otherwise
might be entitled, cash in an amount equal to the fair value of such fractional
Warrant Share (determined in such reasonable and equitable manner as the Board
of Directors of the Company shall in good faith determine), and (ii) will
deliver to the Holder such other securities, properties and cash which the
Holder may be entitled to receive upon such exercise, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.

2.   Anti-Dilution Provisions. The Warrant Price in effect at any time and the
number and kind of securities issuable upon exercise of this Warrant shall be
subject to adjustment from time to time upon happening of certain events as
follows:

     2.1 Reorganization, Reclassification, Consolidation, Merger or Sale. If any
capital reorganization, reclassification or any other change of capital stock of
the Company, or any consolidation or merger of the Company with another person,
or the sale or transfer of all or substantially all of its assets to another
person shall be effected in such a way that holders of shares of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for their shares of Common Stock, then provision shall be made by the
Company, in accordance with this Section 2.1, whereby the Holder hereof shall
thereafter have the right to purchase and receive, upon the basis and upon the
terms and conditions specified in this Warrant and in addition to or in exchange
for, as applicable, the Warrant Shares subject to this Warrant immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such securities or assets as would have been issued or
payable with respect to or in exchange for the aggregate Warrant Shares
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby if exercise of the Warrant had occurred immediately
prior to such reorganization,

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reclassification, consolidation, merger or sale. The Company will not effect any
such consolidation, merger, sale, transfer or lease unless prior to the
consummation thereof the successor entity (if other than the Company) resulting
from such consolidation or merger or the entity purchasing such assets shall
assume by written instrument (i) the obligation to deliver to the Holder such
securities or assets as, in accordance with the foregoing provisions, the Holder
may be entitled to purchase, and (ii) all other obligations of the Company under
this Warrant; provided, however, that the failure to comply with the foregoing
shall not affect the validity or legality of such consolidation, merger, sale,
transfer or lease. The provisions of this Section 2.1 shall similarly apply to
successive consolidations, mergers, exchanges, sales, transfers or leases. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or transfer, additional shares of
Common Stock shall be issued in exchange, conversion, substitution or payment,
in whole or in part, for a security of the Company other than Common Stock, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of Section 2.2 hereof.

     2.2 Stock Dividends and Securities Distributions. If, at any time or from
time to time after the date of this Warrant, the Company shall distribute to the
holders of shares of Common Stock (i) securities (including rights, warrants,
options or another form of convertible securities), (ii) property, other than
cash, or (iii) cash, without fair payment therefor, then, and in each such case,
the Holder, upon the exercise of this Warrant, shall be entitled to receive such
securities, property and cash which the Holder would hold on the date of such
exercise if, on the date of the distribution, the Holder had been the holder of
record of the shares of Common Stock issued upon such exercise and, during the
period from the date of this Warrant to and including the date of such exercise,
had retained such shares of Common Stock and the securities, property and cash
receivable by the Holder during such period, subject, however, to the Holder
agreeing to any conditions to such distribution as were required of all other
holders of shares of Common Stock in connection with such distribution.

     2.3 Other Adjustments. In addition to those adjustments set forth in
Sections 2.1 and 2.2, but without duplication of the adjustments to be made
under such Sections, if the Company:

          (i) declares or pays a dividend or makes a distribution on its Common
     Stock in shares of its Common Stock;

          (ii) subdivides or reclassifies its outstanding shares of Common Stock
     into a greater number of shares;

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          (iii) combines or reclassifies its outstanding shares of Common Stock
     into a smaller number of shares;

          (iv) makes a distribution on its Common Stock in shares of its capital
     stock other than Common Stock; and/or

          (v) issues, by reclassification of its Common Stock, any shares of its
     capital stock;

then the number and kind of Warrant Shares purchasable upon exercise of this
Warrant shall be adjusted so that the Holder upon exercise hereof shall be
entitled to receive the kind and number of Warrant Shares or other securities of
the Company that the Holder would have owned or have been entitled to receive
after the happening of any of the events described above had this Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this Section 2.3 shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or issuance. If, as a result of an
adjustment made pursuant to this Section 2.3, the Holder of this Warrant
thereafter surrendered for exercise shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and any other
class of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
all holders of Warrants promptly after such adjustment) shall determine the
allocation of the adjusted Warrant Price between or among shares of such classes
of capital stock or shares of Common Stock and such other class of capital
stock.

          The adjustment to the number of Warrant Shares purchasable upon the
     exercise of this Warrant described in this Section 2.3 shall be made each
     time any event listed in paragraphs (i) through (v) of this Section 2.3
     occurs.

          Simultaneously with all adjustments to the number and/or kind of
     securities, property and cash under this Section 2.3 to be issued in
     connection with the exercise of this Warrant, the Warrant Price will also
     be appropriately and proportionately adjusted.

          In the event that at any time, as a result of an adjustment made
     pursuant to this Section 2.3, the Holder of this Warrant thereafter shall
     become entitled to receive any shares of the Company, other than Common
     Stock, thereafter the number of such other shares so receivable upon
     exercise of this Warrant shall be subject to adjustment from time to time
     in a manner and on

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terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Sections 2.1 and 2.2 above.

     2.4 Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Warrant Price pursuant to this Section 2, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant and prepare a certificate setting forth such
adjustment or readjustment, including a statement of the adjusted Warrant Price
or adjusted number of Warrant Shares, if any, issuable upon exercise of each
Warrant, describing the transaction giving rise to such adjustments and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company will forthwith mail, by first class mail, postage prepaid, a copy of
each such certificate to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, and to its Transfer Agent.

     2.5 Other Notices. If at any time:

     (a) the Company shall (i) offer for subscription pro rata to the holders of
shares of the Common Stock any additional equity in the Company or other rights;
(ii) pay a dividend in additional shares of the Common Stock or distribute
securities or other property to the holders of shares of the Common Stock
(including, without limitation, evidences of indebtedness and equity and debt
securities) (other than dividends payable in the form of the Company's Common
Stock to holders of the Company's Series D, E, F and G Convertible Preferred
Stock or other series of preferred stock); or (iii) issue securities convertible
into, or rights or warrants to purchase, securities of the Company;

     (b) there shall be any capital reorganization or reclassification or
consolidation or merger of the Company with, or sale, transfer or lease of all
or substantially all of its assets to, another entity; or

     (c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;

then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, (a) at least 15 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such subscription rights, dividend, distribution or issuance,
and (b) in the case of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, at least 15 days' prior
written notice of the date when the same shall take place if no stockholder vote
is required and at least 15 days' prior written notice of the record date for
stockholders entitled to

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vote upon such matter if a stockholder vote is required. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such subscription rights, the date on which the holders of shares of Common
Stock shall be entitled to exercise their rights with respect thereto, and such
notice in accordance with the foregoing clause (b) shall also specify the date
on which the holders of shares of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Failure to give the notice
referred to herein shall not affect the validity or legality of the action which
should have been the subject of the notice.

     2.6 No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01) in
such price; provided, however, that any adjustments which by reason of this
Section 2.6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 2 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.

3.   No Voting Rights. This Warrant shall not be deemed to confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.

4.   Warrants Transferable. This Warrant and all rights hereunder are
transferable, in whole or in part, at the principal offices of the Company by
the Holder hereof, upon surrender of this Warrant properly endorsed; provided,
that this Warrant and all rights hereunder may be transferred only (i) in a
transaction exempt from registration under the 1933 Act, provided that the
Company receives an opinion of counsel that such transfer may be effected
without registration under the 1933 Act; or (ii) pursuant to the registration of
this Warrant or the Warrant Shares under the 1933 Act or subsequent to one year
from the date hereof pursuant to an available exemption from such registration.
It shall be a condition to transfer of this Warrant that the transferee agrees
to be bound by the restrictions on transfer contained in this Section 4.

5.   Warrants Exchangeable; Assignment; Loss, Theft, Destruction, Etc. This
Warrant is exchangeable, without expense, upon surrender hereof by the Holder
hereof at the principal offices of the Company, or at the office of its Transfer
Agent, if any, for new Warrants of like tenor representing in the aggregate the
right to subscribe for and purchase the Warrant Shares which may be subscribed
for and purchased hereunder, each such new Warrant to represent the right to
subscribe for and purchase such Warrant Shares as shall be designated by such

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Holder hereof at the time of such surrender. Upon surrender of this Warrant to
the Company at its principal office, or at the office of its Transfer Agent, if
any, with an instrument of assignment duly executed and funds sufficient to pay
any transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company, or at the office of its Transfer
Agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of any such loss, theft or destruction, upon delivery of a bond or
indemnity satisfactory to the Company, or, in the case of any such mutilation,
upon surrender or cancellation of this Warrant, the Company will issue to the
Holder hereof a new Warrant of like tenor, in lieu of this Warrant, representing
the right to subscribe for and purchase the Warrant Shares which may be
subscribed for and purchased hereunder. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.

6.   Legend. Any certificate evidencing the securities issued upon exercise of
this Warrant shall bear a legend in substantially the following form:

                  THESE SECURITIES 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.

                  THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST
         AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES,
         LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES
         OF CAPITAL

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         STOCK AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE BEEN
         DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE RELATIVE
         RIGHTS AND PREFERENCES OF THE SUBSEQUENT CLASSES OR SERIES.

                  The shares of Common Stock of Sheldahl, Inc. into which the
         securities represented by this certificate are convertible entitle the
         holder thereof to certain Rights as set forth in the Rights Agreement
         between Sheldahl, Inc. and Wells Fargo Bank, N.A., dated as of June 16,
         1996 and amended on July 25, 1998 and November 10, 2000 (the "Rights
         Agreement"), a copy of which is on file at the principal offices of
         Sheldahl, Inc. Under certain circumstances, such Rights issued to or
         held by an Acquiring Person, or Affiliate or Associate thereof (as
         defined in the Rights Agreement), and any subsequent holder of such
         Rights, may become null and void.

7.   Modifications and Waivers. The terms of the Warrants may be amended,
modified or waived only by the written agreement of the Company and the Holder.

8.   Miscellaneous. The Company shall pay all expenses and other charges payable
in connection with the preparation, issuance and delivery of this Warrant and
all substitute Warrants. The Holder shall pay all taxes (other than any issuance
taxes, including, without limitation, documentary stamp taxes, transfer taxes
and other governmental charges, which shall be paid by the Company) in
connection with such issuance and delivery of this Warrant and the Warrant
Shares.

     The Company shall maintain, at the office or agency of the Company
maintained by the Company, books for the registration and transfer of the
Warrant.

9.   Reservation of Warrant Shares. Subject to an affirmative vote of the
holders of a majority of the outstanding shares of Common Stock of the Company
to amend the Company's Amended and Restated Articles of Incorporation to
increase the authorized shares of Common Stock in sufficient amount to cover
such reservation, the Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury,
solely for the purpose of enabling it to satisfy any obligation to issue Warrant
Shares upon exercise of this Warrant, the maximum number of shares of Common
Stock which may then be deliverable upon the exercise of this Warrant.

     The Company or, if appointed, the Transfer Agent for the Common

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Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Warrant on file with the Transfer
Agent and with every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by this Warrant. The Company will furnish such Transfer Agent a copy of all
notices of adjustments and certificates related thereto transmitted to the
Holder pursuant to Section 2.5 hereof.

     The Company covenants that all Warrant Shares which may be issued upon
exercise of this Warrant will, upon issue, assuming the availability of
sufficient authorized shares of Common Stock of the Company at the time of such
issuance, be fully paid, nonassessable, free of preemptive rights and free from
all taxes, liens, charges and security interests with respect to the issue
thereof.

10.   Registration. The Holder shall be entitled to demand and "piggyback"
registration rights with respect to the Warrant Shares, as set forth in a
Registration Rights Agreement, dated as of December 28, 2000, among the Company
and the other signatories thereto.

11.   Descriptive Headings and Governing Law. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be construed and enforced
in accordance with the laws of the State of Minnesota, and the rights of the
parties shall be governed by, the law of such State.

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     IN WITNESS WHEREOF, this Warrant has been executed as of the 28 day of
December, 2000.

                                            SHELDAHL, INC.

                                            By: /s/ Jill D. Burchill
                                               ---------------------------------
                                                Name: Jill D. Burchill
                                                Title: Vice President and Chief
                                                       Financial Officer

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                                  PURCHASE FORM

                                                          Dated:__________, ____

                  The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing _____ Warrant Shares and hereby makes
payment of $_____________ in payment of the exercise price thereof.

                                            ------------------------------------

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                                CASHLESS EXERCISE

                                                          Dated:__________, ____

                  The undersigned irrevocably elects to exercise the within
Warrant for Warrant Shares and hereby makes payment pursuant to the Cashless
Exercise provision of the within Warrant, and directs that the payment of the
Warrant Price be made by cancellation as of the date of exercise of a portion of
the within Warrant in accordance with the terms and provisions of Section 1(b)
of the within Warrant.

                                            ------------------------------------<PAGE>   1

                                                                    EXHIBIT 4.12

                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 28, 2000, among Sheldahl, Inc., a Minnesota corporation (the
"Company"), and the individuals and entities listed on Schedule I hereto
(referred to herein as a "Purchaser" and collectively as the "Purchasers").

     This Agreement is made pursuant to the Stock Purchase Agreement, dated as
of November 10, 2000, as amended, modified or supplemented from time to time,
(the "Purchase Agreement") among the Company and certain of the Purchasers (the
"Stock Purchasers"), the Agreement and Plan of Merger, dated as of November 10,
2000, as amended, modified or supplemented from time to time, (the "Merger
Agreement") among the Company, IFT West Acquisition Company, International Flex
Holdings, Inc. ("IFH") and the stockholders of IFH (the "IFH Purchasers") and
the Subordinated Notes and Warrant Purchase Agreement, dated as of November 10,
2000, as amended, modified or supplemented from time to time, (the "Subordinated
Notes Purchase Agreement") among the Company and certain of the Purchasers (the
"Warrant Purchasers").

     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

<PAGE>   2

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.

     "Common Shares" means the shares of Common Stock, par value $.25 per share,
of the Company issued to the Stock Purchasers pursuant to the Purchase
Agreement.

     "Effectiveness Date" means, with respect to the Shelf Registration
Statement to be filed pursuant to Section 2(a) hereof, the first anniversary of
the Closing Date, or if the Company is not eligible to file a Registration
Statement covering all of the Registrable Securities on the Filing Date, then
the date which is three months after the date that the Shelf Registration
Statement is filed.

     "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 date which is nine months after 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).

     "Merger Shares" means (a) the shares of Common Stock, par value $.25 per
share, of the Company issued to the IFH Purchasers pursuant to the Merger
Agreement, and (b) the shares of Common Stock issuable upon exercise of (i) the
stock purchase warrant issued to Dublind Investments, LLC in accordance with the
Merger Agreement; and (ii) the stock option issued to Peter Nardin in accordance
with the Merger Agreement.

     "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.

<PAGE>   3

     "Preferred Stock" means the Series G Shares.

     "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 a prospectus included in a 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 a
Registration Statement, and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.

     "Purchase Documents" means the Purchase Agreement, the Merger Agreement,
the Subordinated Notes Purchase Agreement and the Warrants.

     "Registrable Securities" means the (a) the Common Shares, (b) the Merger
Shares, and (c) shares of Common Stock issuable upon (i) conversion of the
Series G Shares; (ii) payment of dividends in respect of such Preferred Stock;
and (iii) exercise of Warrants.

     "Registration Statement" means any registration statement filed by the
Company with the Commission for a public offering and sale of Common Stock
(other than (i) a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, (ii) any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation, or (iii) any
registration statement filed by the Company pursuant to (x) that certain
Registration Rights Agreement dated as of July 30, 1998 by and among the Company
and certain holders of its Series D Convertible Preferred Stock, (y) that
certain Registration Rights Agreement dated as of February 26, 1999 by and among
the Company and certain holders of its Series E Convertible Preferred Stock, or
(z) that certain Registration Rights Agreement dated as of January 11, 2000 by
and among the Company and certain holders of its Series F Convertible Preferred
Stock), including (in each such case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and post-effective
amendments, all 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.

                                       3

<PAGE>   4

     "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.

     "Series G Shares" means the shares of Series G Preferred Stock, par value
$1.00 per share, of the Company issued to the Stock Purchasers pursuant to the
Purchase Agreement.

     "Shelf Registration Statement" shall have the meaning set forth in Section
2(a).

     "Warrants" means the warrants to purchase shares of Common Stock issued to
the Warrant Purchasers pursuant to the Subordinated Notes Purchase Agreement.

     2. Registration.

     (a) Shelf Registration. The Company shall prepare and file with the
Commission a Registration Statement covering all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415 (the "Shelf
Registration Statement") on or prior to the Filing Date, or if the Company is
not eligible to file a Registration Statement covering all of the Registrable
Securities on the Filing Date, then on the earliest date possible following the
Filing Date on which the Company would be eligible to file a Registration
Statement covering all of the Registrable Securities. The Shelf 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 use its
commercially reasonable efforts to cause the Shelf 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 Shelf Registration Statement continuously effective under the Securities
Act until the date which is two years after the date that such Shelf
Registration Statement is declared effective by the Commission or such earlier
date when all Registrable Securities covered by such Shelf 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").

     (b) Incidental Registration. Whenever the Company proposes to file a
Registration Statement, prior to such filing it shall give written notice to
each Holder of its intention to do so, and upon the written request of any
Holder given within 20 days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Securities), the Company shall cause all Registrable Securities which the
Company has been requested to register to be registered under the Securities Act
to the extent necessary to permit their sale or other disposition in accordance
with the intended methods of

                                       4

<PAGE>   5

distribution specified in the request of such Holder(s). In connection with any
offering under this Section 2(b) involving an underwriting, the Company shall
not be required to include any Registrable Securities in such underwriting
unless the holders thereof accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If in the opinion of the managing underwriter
the registration of all, or part of, the Registrable Securities which the
Holders have requested to be included would materially and adversely affect such
public offering, then the Company shall be required to include in the
underwriting only that number of Registrable Securities which the managing
underwriter believes may be sold without causing such adverse effect; provided,
however, that in no such event shall less than 25% of the aggregate amount of
Registrable Securities which the Holders have requested to be included in such
registration be included in such public offering. In the event of such a
reduction in the number of shares to be included in the underwriting, the
Holders of Registrable Securities who have requested registration shall
participate in the underwriting pro rata based upon their total ownership of
Registrable Securities (or in any other proportion as agreed upon by such
Holders) and if any of such Holders would thus be entitled to include more
shares than such Holder requested to be registered, the excess shall be
allocated among such other requesting Holders pro rata based on their ownership
of Registrable Securities. No other securities requested to be included in a
Registration Statement for the account of anyone other than the Company or the
Holders shall be included in a Registration Statement unless all Registrable
Securities requested to be included in such Registration Statement are also
included. No Holder shall be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of distribution and any
other representation required by law.

     3. Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:

     (a) Use its commercially reasonable efforts to prepare and file with the
Commission, on or prior to the Filing Date (or if the Company is not eligible to
file a Registration Statement covering all of the Registrable Securities on the
Filing Date, then on the earliest date possible following the Filing Date on
which the Company would be eligible to file a Registration Statement covering
all of the Registrable Securities), 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 such Shelf
Registration Statement to become effective and remain effective as provided
herein.

     (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement continuously effective as to
the applicable Registrable Securities for

                                       5

<PAGE>   6

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 any Registration Statement covering any Registrable Securities
or any amendment thereto and promptly provide the Holders true and complete
copies of all correspondence from and to the Commission relating to such
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 a Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in such 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 Prospectus supplement covering any Registrable Securities or
post-effective amendment to a Registration Statement covering any Registrable
Securities 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 any such 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 a
Registration Statement or Prospectus covering any Registrable Securities or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any 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 a Registration Statement or Prospectus
covering any Registrable Securities or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or 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 any Registration
Statement covering any Registrable Securities 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.

                                       6

<PAGE>   7

     (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 covering any Registrable Securities (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 such 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 such 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
any 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 Documents.

     (j) The Company may require each selling Holder to furnish to the Company
such information, including information regarding the distribution of such
Registrable Securities,

                                       7

<PAGE>   8

as is required by law to be disclosed in a Registration Statement covering such
Registrable Securities and the Company may 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 Shelf 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 applicable Purchase
Document to which such Holder is a party. 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 Shelf Registration Statement on behalf of such Holders.

     If any 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 such
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 any Registration Statement until it has received
copies of the Prospectus relating thereto 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 such 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 such
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 any Registration Statement covering any Registrable
Securities is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to such a Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i)

                                       8

<PAGE>   9

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 securities or Blue Sky laws; (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses); (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, and the reasonable fees and expenses
of one legal counsel retained by the Holders.

     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 any Registration Statement, any Prospectus or any form of
prospectus covering any Registrable Shares or in any amendment or supplement
thereto or in any preliminary prospectus covering any Registrable Shares, 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 or such Holder's proposed
method of distribution of Registrable Securities furnished to the Company by
such Holder expressly for use therein. 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

                                       9

<PAGE>   10

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 (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 any Registration Statement, any Prospectus, or any form of
prospectus covering Registrable Shares, 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 such
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in such Registration Statement,
such Prospectus or such form of prospectus. 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

                                       10

<PAGE>   11

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 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.

                                       11

<PAGE>   12

     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
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. 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 eighty percent (80%) 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 Documents 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

                                       12

<PAGE>   13

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.

   If to the Company:              Sheldahl, Inc.
                                   1150 Sheldahl Road
                                   Northfield, MN 55057-9444
                                   Attn: Edward L. Lundstrom
                                   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 Documents.

     (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 Documents; (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 Documents. The
rights to assignment shall apply to the Purchaser's (and to subsequent)
successors and assigns.

                                       13

<PAGE>   14

     (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.

                                       14

<PAGE>   15

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

                                 SHELDAHL, INC.

                                 By: /s/ Edward L. Lundstrom
                                    --------------------------------------------
                                 Name: Edward L. Lundstrom
                                 Its: President

                                 PURCHASERS:

                                 MORGENTHALER VENTURE PARTNERS V, L.P.

                                 By: /s/ John D. Lutsi
                                    --------------------------------------------
                                 Name: John D. Lutsi,
                                 its General Partner

                                 AMPERSAND IV LIMITED PARTNERSHIP

                                 BY:  AMP-IV MANAGEMENT COMPANY LIMITED
                                      LIABILITY COMPANY,
                                      ITS GENERAL PARTNER

                                 By: /s/ Richard A. Charpie
                                    --------------------------------------------
                                 Name: Richard A. Charpie
                                 Title: Principal Managing Member

                                 AMPERSAND IV COMPANION FUND LIMITED PARTNERSHIP

                                 BY:  AMP-IV MANAGEMENT COMPANY LIMITED
                                      LIABILITY COMPANY,
                                      ITS GENERAL PARTNER

                                 By: /s/ Richard A. Charpie
                                    --------------------------------------------
                                 Name: Richard A. Charpie
                                 Title: Principal Managing Member

                                       15

<PAGE>   16

                                 SOUND BEACH TECHNOLOGY PARTNERS, LLC

                                 By: /s/ Donald R. Friedman
                                    --------------------------------------------
                                 Name: Donald R. Friedman
                                 Title: President and Chief Executive Officer

                                 MOLEX INCORPORATED

                                 By: /s/ Thomas S. Lee
                                    --------------------------------------------
                                 Name: Thomas S. Lee
                                 Title: Vice President New Ventures
                                 and Acquisitions

                                 DUBLIND INVESTMENTS, LLC

                                 By: /s/ Charles Lindsay
                                    --------------------------------------------
                                 Name: Charles Lindsay
                                 Title: President

                                  /s/ Peter Nardin
                                 -----------------------------------------------
                                  PETER NARDIN

                                       16

<PAGE>   17

                                                                      SCHEDULE I

                               List of Purchasers

Morgenthaler Venture Parnters V, L.P.
Ampersand IV Limited Partnership
Ampersand IV Companion Fund Limited Partnership
Sound Beach Technology Partners, LLC
Molex Incorporated
Dublind Investments, LLC
Peter Nardin

                                       17

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