Document:

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                                                                     EXHIBIT 4.6

                              GOVERNANCE AGREEMENT

         This Governance Agreement (this "Agreement"), dated as of ______, 200_
among Sheldahl, Inc., a Minnesota corporation (the "Company"), and the
individuals and entities listed on the signature page of this Agreement under
the caption "Stockholders" (the "Stockholders").

         WHEREAS, (i) certain of the Stockholders have acquired from the Company
pursuant to the Stock Purchase Agreement 4,944,132 shares of Common Stock and
11,303 shares of Series G Preferred Stock convertible into 4,079, 682 shares of
Common Stock, (ii) certain Stockholders and Molex have acquired from the Company
pursuant to the Subordinated Notes and Warrant Purchase Agreement $6,500,000
principal amount of the Company's 12% subordinated debt due on the fifth
anniversary of the Closing Date and Warrants to purchase 988,202 shares of
Common Stock, and certain Stockholders and other parties may acquire from the
Company up to an additional $8,500,000 principal amount of the Company's 12%
subordinated debt due on the fifth anniversary of the Closing Date and Warrants
to purchase 1,292,264 shares of Common Stock, and (iii) certain Stockholders
have acquired from the Company pursuant to the Merger Agreement 6,835,243 shares
of Common Stock; and

         WHEREAS, certain Stockholders have sought Board approval of their
acquisition of shares of Common Stock, Series G Preferred Stock and/or Warrants
(i) pursuant to the Merger Agreement, the Stock Purchase Agreement or the
Subordinated Notes and Warrant Purchase Agreement, (ii) upon conversion of
shares of Series G Preferred Stock, (iii) upon exercise of the Warrants and (iv)
as dividends on the Series G Preferred Stock, in all cases as adjusted for stock
splits, dividends, recapitalization and the like and any other events requiring
adjustment under the anti-dilution provisions of applicable governing
instruments (collectively, the "Shares") for purposes of Section 302A.673 of the
Minnesota Business Corporation Act and under the Rights Agreement dated June 16,
1996, as amended, by and between the Company and Norwest Bank Minnesota, N.A.
(the "Rights Agreement") and have requested that the Company amend the Rights
Agreement so that neither IFT nor any of the Stockholders shall become an
Acquiring Person (as such term is defined in the Rights Agreement) and so that
none of a Distribution Date, a Stock Acquisition Date or an Acquisition Event
(as such terms are defined in the Rights Agreement) shall occur as a result of
the transactions contemplated by the Merger Agreement, the Subordinated Notes
and Warrant Purchase Agreement and the Stock Purchase Agreement; and

         WHEREAS, as a condition to such approval, a special committee formed by
the Board and the Board (i) have required that certain arrangements be put in
place relating to the acquisition and disposition of Securities by the
Stockholders and related provisions concerning the Stockholders' relationship
with the Company, (ii) have

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negotiated the terms of this Agreement, (iii) have concluded that, subject to
execution and delivery of this Agreement, giving its approval under Section
302A.673 of the Minnesota Business Corporation Act, amending the Rights
Agreement as provided above and implementing the arrangements contemplated by
this Agreement are in the best interests of the Company and its stockholders and
(iv) subject to execution and delivery of this Agreement, have given such
approval and put such amendment into effect; and

         WHEREAS, in consideration of such approvals, the Stockholders desire to
establish in this Agreement certain terms and conditions concerning the
acquisition and disposition of Securities by the Stockholders and their
Affiliates and Associates, and related provisions concerning the Stockholders'
relationship with the Company; and

         WHEREAS, the Stockholders required as a condition to their willingness
to enter into and consummate the transactions contemplated by the Merger
Agreement, the Stock Purchase Agreement and the Subordinated Notes and Warrant
Purchase Agreement that the Company agree to the provisions of sections 2 and 4
hereof;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the Company and the Stockholders hereby agree as follows:

1.       STANDSTILL AND VOTING.

         a.       Acquisition of Securities.

                  i.       Each Stockholder covenants and agrees that, until the
                           Standstill Termination Date, it will not, and will
                           not permit its Affiliates or Associates (other than
                           its partners or members) to, Beneficially Own any
                           Securities in excess of the Number of Permitted
                           Shares applicable to such Stockholder; provided that:

                           (1)      this Agreement shall not restrict any
                                    acquisition of Securities in a transaction
                                    directly with the Company and approved in
                                    accordance with the provisions of Section
                                    2(c) hereof (including, without limitation,
                                    the acquisition of Securities by any
                                    director serving at the direction or request
                                    of a Stockholder by reason of the grant of
                                    stock options by the Company); and

                           (2)      if a Business Combination Proposal is made
                                    by any Person (other than the Company, a
                                    Stockholder or an Affiliate of a

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                                    Stockholder, or any Person acting in concert
                                    with a Stockholder or any Affiliate
                                    thereof), then any Stockholder may make a
                                    Business Combination Proposal and this
                                    Agreement shall not prohibit the making of
                                    such Business Combination Proposal, the
                                    acquisition of Securities pursuant to such
                                    Business Combination Proposal or any other
                                    action reasonably connected therewith;
                                    provided, however, that, if a Person who has
                                    not theretofore communicated a Business
                                    Combination Proposal to the Company makes a
                                    Business Combination Proposal to the to the
                                    Board, however communicated, and the Board
                                    unconditionally rejects such Business
                                    Combination Proposal by written notice
                                    delivered to the proposing party (with a
                                    copy to each Stockholder) within five
                                    business days of the date on which the
                                    Business Combination Proposal was first
                                    communicated to the Board, the restrictions
                                    of this section 1(a)(i) shall again apply to
                                    the Stockholders and provided, further, that
                                    the preceding proviso will cease to apply if
                                    such Person delivers to the Board any
                                    further Business Combination Proposal or
                                    modification of any earlier Business
                                    Combination Proposal. If any Business
                                    Combination Proposal made by any Stockholder
                                    in accordance with this section 1(a)(i)(2)
                                    is not consummated prior to nine months
                                    after the Business Combination Proposal made
                                    by such other Person has been effectively
                                    withdrawn, the restrictions of this section
                                    1(a)(i) shall again be applicable to the
                                    Stockholders, subject to any further
                                    Business Combination Proposal being made by
                                    any Person.

                  ii.      Subject to the proviso in Section 1(a)(i) hereof and
                           any waiver or approval in accordance with the
                           provisions of Section 2(c) hereof, if at any time on
                           or prior to the Standstill Termination Date any
                           Stockholder, alone or as part of any group acting
                           together, Beneficially Owns more than the Number of
                           Permitted Shares applicable to such Stockholder,
                           inadvertently or otherwise, then such Stockholder
                           shall promptly take action not inconsistent with
                           applicable law to reduce the amount of Securities
                           Beneficially Owned by such Persons to an amount not
                           greater than the Number of Permitted Shares
                           applicable to such Stockholder.

                  iii.     No Stockholder shall, on or prior to the Standstill
                           Termination Date, permit any Affiliate thereof to
                           Beneficially Own any Securities

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                           unless such Affiliate becomes a Stockholder party to
                           this Agreement, which any such Affiliate may
                           unilaterally do by delivering to the Company an
                           instrument executed by or on behalf of such Affiliate
                           pursuant to which such Affiliate assumes the
                           obligations of a Stockholder hereunder; provided that
                           any partner or member of a Stockholder who becomes a
                           Beneficial Owner of Securities after the date that is
                           one year from the date of this Agreement shall not be
                           obligated to become a party to this Agreement.

         b.       Restrictions on Transfer. For a period of one year from the
                  date of this Agreement, each Stockholder agrees not to
                  Transfer any of the Shares, unless such Transfer is to an
                  Affiliate or Associate and is in compliance with the terms of
                  this Agreement, or is to be effected for the Stockholder's
                  personal estate planning purposes and is in compliance with
                  the terms of this Agreement. After the one-year period, any
                  Stockholder may distribute its Shares to its partners or
                  members. In addition, except as allowed under the immediately
                  preceding sentence, prior to the Standstill Termination Date,
                  the Stockholders, and each Affiliate thereof which acquires
                  Securities in accordance with the terms of this Agreement,
                  will not Transfer Beneficial Ownership of any Securities to
                  any of their Affiliates (other than a partner or member of
                  such Stockholder) unless each such Person becomes a signatory
                  to this Agreement as a "Stockholder" hereunder as provided in
                  section 1(a)(iii) hereof. Each Stockholder agrees to inclusion
                  of the following legend on certificates representing its
                  Shares:

                           The shares represented by this certificate and any
                           transfer thereof are subject to a restriction on
                           transfer as set forth in a Governance Agreement
                           between the holder and the Company dated as of
                           __________________, 200_, a copy of which is on file
                           at the principal executive office of the Company.

                  Such legend shall be placed on all certificates held by a
                  Stockholder during the continuance of this Agreement.

         c.       Further Restrictions on Conduct. Unless waived or approved in
                  advance in accordance with Section 2(c) hereof, and except for
                  a Business Combination Proposal made by a Stockholder in
                  conformity with the requirements of Section 1(a)(i)(2) hereof
                  and any action taken by such Stockholder that is reasonably
                  connected therewith, each Stockholder covenants and agrees
                  that, until the Standstill Termination Date, neither the
                  Stockholder nor any Affiliate or Associate thereof shall:

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                  i.       initiate, propose, make, or in any way participate
                           in, directly or indirectly, any "solicitation" of
                           "proxies" to vote, or seek to influence any Person
                           with respect to the voting of, any Voting Securities,
                           or become a "participant" in a "solicitation" or
                           "election contest" (as such terms are defined or used
                           in Regulation 14A under the Exchange Act, as in
                           effect on the date hereof), in any election contest
                           with respect to the election or removal of any
                           director whose name appears in Exhibit 2 hereof or
                           any replacement thereof, any director of the Board
                           proposed by the specified committee in accordance
                           with Section 2 (other than any individual whose name
                           appears on exhibit 1 hereof or any replacement
                           thereof) or the Molex Director;

                  ii.      solicit, offer, seek or propose to any other Person
                           (including without limitation the Company) any form
                           of merger with, tender or exchange offer for
                           securities of, sale or liquidation of assets of, or
                           similar business combination transaction with or
                           involving the Company or its Affiliates or
                           Associates; provided, however, that the foregoing
                           shall not restrict any such action relating to a
                           merger or similar business combination with the
                           purpose and effect of the Company or its Affiliates
                           and Associates acquiring the business, voting
                           securities or assets of another Person; or

                  iii.     take any other action inconsistent with the foregoing
                           or this Agreement;

                  provided, however, that nothing in this Section 1(c) shall
                  inhibit the free exercise of judgment by any member of the
                  Board in his capacity as such.

         d.       Reports. Until the Standstill Termination Date, each
                  Stockholder shall deliver to the Company, promptly after any
                  acquisition or Transfer of Securities, an accurate written
                  report specifying the amount and class of Securities acquired
                  or Transferred in such transaction and the amount of each
                  class of Securities owned by the Stockholder or any Affiliate
                  or Associate thereof after giving effect to such transaction;
                  provided, however, that no such report need be delivered with
                  respect to any such acquisition or Transfer of Securities by
                  the Stockholder that is reported in a statement on Schedule
                  13D filed with the Commission and delivered to the Company by
                  the Stockholder or any Affiliate or Associate thereof in
                  accordance with Section 13(d) of the Exchange Act and the
                  rules

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                  thereunder. The Company shall be entitled to rely on such
                  reports and statements on Schedule 13D for all purposes of
                  this Agreement.

2.       BOARD OF DIRECTORS.

         a.       Initial Composition of Board of Directors.

                  i.       The number of directors comprising the Board of
                           Directors, effective upon Closing, shall be seven.

                  ii.      The Company shall use its best efforts to cause the
                           by-laws of the Company to be amended at the next
                           meeting of stockholders of the Company so as to set
                           the size of the board of directors of the Company at
                           seven.

                  iii.     Concurrently with the Closing, the Board shall take
                           such action as is required under applicable law to
                           cause to be elected to the Board, effective upon the
                           Closing, the individuals whose names are set forth on
                           Exhibit 1 hereto.

                  iv.      The remaining directors comprising the Board,
                           effective upon the Closing, shall consist of the
                           Molex Director and the individuals whose names are
                           listed on Exhibit 2 hereto.

                  v.       The Company shall use its best efforts to cause the
                           individuals serving as directors of the Company prior
                           to the effective date of the Merger whose names are
                           not listed on Exhibit 2 hereto to resign as of the
                           effective date of the Merger.

         b.       Board Representation; Nominating Committee of the Board.
                  Sections 2(b)(i) and (ii) shall apply until the Applicable
                  Number is zero.

                  i.       Board Representation. At least fifteen (15) days
                           prior to each meeting of the Board at which the Board
                           intends to take action to approve nominees for
                           election to the Board at the next annual meeting of
                           shareholders of the Company, the Company shall
                           provide each of the Stockholders with a notice of
                           such meeting, which notice shall indicate that the
                           Board will take such action at such meeting . Prior
                           to the date of each such Board meeting, the
                           Stockholders shall give the nominating committee of
                           the Board, in writing, the names of the Applicable
                           Number of director candidates. The Company will cause
                           such individual or individuals to be

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                           nominated for election as directors at the next
                           annual meeting of the shareholders of the Company,
                           will include such individual or individual's names as
                           nominees in the proxy or consent statement prepared
                           by the Company in connection with such annual
                           meeting, indicating that the election as directors of
                           such individual or individuals has been recommended
                           by the Board, and will solicit proxies for the
                           election of such individual or individuals as members
                           of the Board at such annual meeting of shareholders.
                           At the first meeting of the Board after the date of
                           this Agreement, three designees of the Stockholders
                           shall be appointed by the Board as Board members. If,
                           at any time that the Applicable Number is greater
                           than zero, any individual so designated by the
                           Stockholders is unable to serve or ceases to serve as
                           a director for any reason, the Company will cause
                           another individual designated by the Stockholders to
                           be appointed to fill the resulting vacancy. Anything
                           herein to the contrary notwithstanding, after
                           termination of this Agreement pursuant to Section 4,
                           the Company shall no longer be obligated to nominate
                           and solicit proxies for the election of such
                           designees of the Stockholders as directors of the
                           Company and such nominees shall, if requested by the
                           Board, resign from the Board.

                  ii.      Nominating Committee of the Board. Subject to the
                           rights of Molex and the Stockholders to designate
                           individuals to serve as directors, the identity of
                           directors to stand for election to the Board at each
                           annual meeting of stockholders following the Closing
                           and until the Standstill Termination Date or to fill
                           a vacancy on the Board, as the case may be, shall be
                           determined by the actions of a nominating committee
                           of the Board. The nominating committee shall have
                           three members and, for purposes of the first annual
                           meeting of the Company's stockholders held after
                           Closing, shall be initially comprised of one director
                           whose name appears on Exhibit 1 hereto, one director
                           whose name appears on Exhibit 2 hereto and the Molex
                           Director.

         c.       Voting. Until the Applicable Number is zero:

                  i.       the Company shall not enter into any Stockholder
                           Interested Transaction unless such Stockholder
                           Interested Transaction has been approved by the
                           affirmative vote of a majority of the members of the
                           Board other than any director or directors who is or
                           are employed by or a partner or a member of the
                           Stockholder or

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                           Affiliate or Associate of the Stockholder who is a
                           party to such Stockholder Interested Transaction, in
                           addition to any other approvals required by
                           applicable law or the Company's articles of
                           incorporation or by-laws.

                  ii.      each Stockholder agrees that such Stockholder shall
                           not, and shall not take any action which would cause
                           the Company or its Board to, enter into or
                           participate in any Stockholder Interested Transaction
                           which has not been so approved.

3.       REPRESENTATIONS AND WARRANTIES.

         a.       Representations and Warranties of the Company.  The Company
                  represents and warrants to the Stockholders that:

                  i.       the Company is a corporation duly incorporated,
                           validly existing and in good standing under the laws
                           of the state of Minnesota and has the corporate power
                           and authority to enter into this Agreement and to
                           carry out its obligations hereunder;

                  ii.      the execution and delivery of this Agreement by the
                           Company and the consummation by the Company of the
                           transactions contemplated hereby have been duly
                           authorized by all necessary corporate action on the
                           part of the Company and no other corporate
                           proceedings on the part of the Company are necessary
                           to authorize this Agreement or any of the
                           transactions contemplated hereby; and

                  iii.     this Agreement has been duly executed and delivered
                           by the Company and constitutes a valid and binding
                           obligation of the Company, and, assuming this
                           Agreement constitutes a valid and binding obligation
                           of the Stockholders, is enforceable against the
                           Company in accordance with its terms.

         b.       Representations and Warranties of the Stockholders. Each of
                  the Stockholders represents and warrants to the Company that:

                  i.       it is an individual and has the power and authority
                           to enter into this Agreement and to carry out its
                           obligations hereunder, or it is an entity and is duly
                           organized, validly existing and in good standing
                           under the laws of the state of its organization and
                           incorporation, and has the corporate power and
                           authority to enter into this Agreement and to carry
                           out its obligations hereunder;

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                  ii.      the execution and delivery of this Agreement by such
                           Stockholder and the consummation by such Stockholder
                           of the transactions contemplated hereby have been
                           duly authorized by all necessary action on the part
                           of such Stockholder and no other proceedings on the
                           part of such Stockholder are necessary to authorize
                           this Agreement or any of the transactions
                           contemplated hereby; and

                  iii.     this Agreement has been duly executed and delivered
                           by such Stockholder and constitutes a valid and
                           binding obligation of such Stockholder, and, assuming
                           this Agreement constitutes a valid and binding
                           obligation of the Company, is enforceable against
                           such Stockholder in accordance with its terms.

4.       NEGATIVE COVENANTS. So long as Morgenthaler, Ampersand, Ampersand
         Companion and Sound Beach and all Affiliates, Associates, partners and
         members thereof hold, in aggregate, at least 15% of the Common Stock
         Equivalents acquired on the Closing Date by Morgenthaler, Ampersand,
         Ampersand Companion and Sound Beach pursuant to the Merger Agreement,
         the Stock Purchase Agreement and the Subordinated Notes and Warrant
         Purchase Agreement, the Company shall not and shall cause its
         Subsidiaries not to, without the consent of whichever of Morgenthaler,
         Ampersand and Ampersand Companion (the two Ampersand entities being
         considered for this purpose as a single entity), and any Affiliates,
         Associates, partners or members thereof, respectively, holds more than
         15% of the number of Common Stock Equivalents acquired by it, on the
         Closing Date, pursuant to the Merger Agreement, Stock Purchase
         Agreement and Subordinated Notes and Warrant Purchase Agreement:

         a.       authorize any reclassification of the Common Stock, any
                  merger, consolidation, recapitalization or reorganization of
                  the Company or approve or effect any plan of liquidation or
                  dissolution whether statutory or otherwise;

         b.       authorize, agree to or consummate any sale, lease, exchange or
                  disposition of all or substantially all of the property or
                  assets of the Company or the effectuation by the Company of a
                  transaction or series of related transactions in which more
                  that 50% of the voting power of the Company is disposed of;

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         c.       increase the number of directors constituting the Board or,
                  after such time as the Company's shareholders take such action
                  as is required to reduce the size of the Board from nine to
                  seven, set the number of directors constituting the Board at a
                  number other than seven;

         d.       repurchase or redeem any equity securities or retire any other
                  equity capital of the Company or of any of its direct of
                  indirect Subsidiaries (except for the repurchases of Common
                  Stock under restricted stock agreements between employees and
                  the Company previously approved by the Board); or

         e.       enter into any agreement with respect to the foregoing.

5.       DEFINITIONS. For purposes of this Agreement, the following terms shall
         have the following meanings:

         a.       Affiliate" or "Associate" shall mean an affiliate or associate
                  of a person, as such terms are defined in Section 302A.011,
                  subdivisions 43 and 45, respectively, of the Minnesota
                  Business Corporation Act.

         b.       Agreement" shall have the meaning set forth in the preamble to
                  this Agreement.

         c.       "Ampersand" shall mean Ampersand IV Limited Partnership, a
                  Delaware limited partnership.

         d.       "Ampersand Companion" shall mean Ampersand IV Companion Fund
                  Limited Partnership, a Delaware limited partnership.

         e.       "Applicable Number" shall mean the following:

                  i.       three, so long as Morgenthaler, Ampersand, Ampersand
                           Companion and Sound Beach and any Affiliate,
                           Associate, partner or member thereof own, in
                           aggregate, at least 69% of the Common Stock
                           Equivalents acquired by them on the Closing Date
                           pursuant to the Merger Agreement, Stock Purchase
                           Agreement and Subordinated Notes and Warrant Purchase
                           Agreement.

                  ii.      two, so long as Morgenthaler, Ampersand, Ampersand
                           Companion and Sound Beach and any Affiliate,
                           Associate, partner or member thereof own, in
                           aggregate, at least 50% but less than 69% of the
                           Common Stock Equivalents acquired by them on the
                           Closing Date pursuant to the Merger Agreement, Stock
                           Purchase Agreement and Subordinated Notes and Warrant
                           Purchase Agreement.

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                  iii.     one, so long as Morgenthaler, Ampersand, Ampersand
                           Companion and Sound Beach and any Affiliate,
                           Associate, partner or member thereof own, in
                           aggregate, at least 15% but less than 50% of the
                           Common Stock Equivalents acquired by them on the
                           Closing Date pursuant to the Merger Agreement, Stock
                           Purchase Agreement and Subordinated Notes and Warrant
                           Purchase Agreement.

                  iv.      zero, so long as Morgenthaler, Ampersand, Ampersand
                           Companion and Sound Beach and any Affiliate,
                           Associate, partner or member thereof own, in
                           aggregate, less than 15% of the Common Stock
                           Equivalents acquired by them on the Closing Date
                           pursuant to the Merger Agreement, Stock Purchase
                           Agreement and Subordinated Notes and Warrant Purchase
                           Agreement.

         f.       "Beneficially Own" or "Beneficial Ownership" with respect to
                  any securities shall mean having "beneficial ownership" of
                  such securities (as determined pursuant to Rule 13d-3 under
                  the Exchange Act), including pursuant to any agreement,
                  arrangement or understanding, whether or not in writing; but
                  shall not include any securities that would otherwise be
                  Beneficially Owned pursuant to this definition solely by
                  virtue of the existence of this Agreement and/or any voting
                  agreement solely among the Stockholders with respect to the
                  election of directors of the Company.

         g.       "Board" shall mean the board of directors of the Company.

         h.       "Business Combination Proposal" shall mean:

                  i.       any bona fide business combination proposal however
                           communicated, including without limitation a "bear
                           hug" letter or other similar communication directed
                           to the Board or any member of the Board, any merger
                           proposal involving the Company or any Subsidiary, any
                           purchase of all or a material portion of the assets
                           of the Company or any Subsidiary, or any tender or
                           exchange offer directed to security holders of the
                           Company, and

                  ii.      any proposal to purchase more than 25% of the Total
                           Voting Power;

                  but shall not include any proposal that intentionally has been
                  induced, in whole or in part and directly or indirectly, by
                  one or more Stockholders in order to cause the termination of
                  the restrictions set forth in section 1(a)(i) hereof.

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         i.       "Closing" shall mean the closing of the transactions
                  contemplated by the Merger Agreement.

         j.       "Closing Date" shall mean the Closing Date as defined in the
                  Merger Agreement.

         k.       "Commission" shall mean the Securities and Exchange
                  Commission.

         l.       "Common Stock" shall mean the Common Stock, par value $0.25
                  per share, of the Company.

         m.       "Common Stock Equivalent" shall mean the following:

                  i.       with respect to shares of Common Stock, each share of
                           Common Stock shall be one Common Stock Equivalent.

                  ii.      with respect to Series G Preferred Stock, each share
                           of Series G Preferred Stock shall be a number of
                           Common Stock Equivalents equal to the number of
                           shares of Common Stock issuable on conversion of such
                           share of Series G Preferred Stock as of the date of
                           determination.

                  iii.     with respect to Warrants, each Warrant shall be a
                           number of Common Stock Equivalents equal to the
                           number of shares of Common Stock issuable on exercise
                           of such Warrant as of the date of determination.

         n.       "Company" shall have the meaning set forth in the preamble of
                  this Agreement.

         o.       "Exchange Act" shall mean the Securities Exchange Act of 1934,
                  as amended.

         p.       "IFH" shall mean International Flex Holdings, Inc., a Delaware
                  corporation.

         q.       "Merger Agreement" shall mean the agreement and plan of
                  merger, dated as of November 10, 2000 among the Company, IFT
                  West Acquisition Company, a wholly owned Subsidiary of the
                  Company, IFH and all of the stockholders of IFH.

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         r.       "Merger" shall mean the merger effected pursuant to the Merger
                  Agreement.

         s.       "Molex" shall mean Molex Incorporated, a Delaware corporation.

         t.       "Molex Director" shall mean the individual nominated by Molex
                  under the terms of the Agreement Relating to Sheldahl, dated
                  as of November 18, 1998, between the Company and Molex, as
                  amended as of November 10, 2000.

         u.       "Morgenthaler" shall mean Morgenthaler Venture Partners V,
                  L.P., a Delaware limited partnership.

         v.       "Number of Permitted Shares" applicable to any Stockholder
                  shall mean the number of shares of Common Stock, shares of
                  Series G Preferred Stock and/or Warrants (i) received by such
                  Stockholder pursuant to the Merger Agreement, the Stock
                  Purchase Agreement or the Subordinated Notes and Warrant
                  Purchase Agreement, (ii) issuable upon conversion of the
                  shares of Series G Preferred Stock acquired by such
                  Stockholder on the Closing Date, (iii) issuable on exercise of
                  the Warrants acquired by such Stockholder on the Closing Date
                  and (iv) received as dividends on the Series G Preferred Stock
                  held by such Stockholder, in all cases as adjusted for stock
                  splits, dividends, recapitalization and the like and any other
                  events requiring adjustment under the anti-dilution provisions
                  of applicable governing instruments.

         w.       "Person" shall mean any individual, partnership, joint
                  venture, corporation, trust, unincorporated organization,
                  government or department or agency of a government.

         x.       "Rights Agreement" shall have the meaning set forth in the
                  recitals of this Agreement.

         y.       "Securities" shall mean at any time shares of any class of
                  capital stock of the Company, including, without limitation,
                  securities convertible into such shares.

         z.       "Series G Preferred Stock" shall mean the shares of Series G
                  Preferred Stock, par value $1.00 per share, of the Company.

         aa.      "Shares" shall have the meaning set forth in the recitals of
                  this Agreement.

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         bb.      "Sound Beach" shall mean Sound Beach Technology Partners, LLC,
                  a Delaware limited liability company.

         cc.      "Standstill Termination Date" shall mean the third anniversary
                  of the Closing.

         dd.      "Stockholders" shall have the meaning set forth in the
                  preamble of this Agreement.

         ee.      "Stockholder Interested Transaction" shall mean:

                  i.       any transaction between the Company or any of its
                           Subsidiaries and any Stockholder or any Affiliates or
                           Associates of a Stockholder, or

                  ii.      any amendment, modification, consent or waiver to, of
                           or under, or the enforcement of the terms of this
                           Agreement, the Stock Purchase Agreement, the
                           Subordinated Notes and Warrant Purchase Agreement or
                           the Merger Agreement, other than any amendment or
                           modification to the Merger Agreement to affect
                           adjustments to the conversion ratios set forth
                           therein.

         ff.      "Stock Purchase Agreement" shall mean the stock purchase
                  agreement, dated as of November 10, 2000 among the Company and
                  certain Stockholders.

         gg.      "Subordinated Notes and Warrant Purchase Agreement" shall mean
                  the Subordinated Notes and Warrant Purchase Agreement, dated
                  as of November 10, 2000 among the Company, certain
                  Stockholders and Molex.

         hh.      "Subsidiary" shall mean, as to any Person, any corporation at
                  least a majority of the shares of stock of which having
                  general voting power under ordinary circumstances to elect a
                  majority of the Board of such corporation (irrespective of
                  whether or not at the time stock of any other class or classes
                  shall have or might have voting power by reason of the
                  happening of any contingency) is, at the time as of which the
                  determination is being made, owned by such Person, or one or
                  more of its Subsidiaries or by such Person and one or more of
                  its Subsidiaries.

                                       14
<PAGE>   15

         ii.      "Total Voting Power" at any time shall mean the total combined
                  voting power in the general election of directors of all the
                  Voting Securities then outstanding.

         jj.      "Transfer" shall mean any sale, transfer, pledge, encumbrance
                  or other disposition, and to "Transfer" shall mean to sell,
                  transfer, pledge, encumber or otherwise dispose of.

         kk.      "Voting Securities" shall mean at any time any Securities
                  (other than the shares of Series G Preferred Stock) which are
                  entitled to vote generally in the election of directors of the
                  Company.

         ll.      "Warrants" shall mean the warrants issued to certain
                  Stockholders under the Subordinated Notes and Warrant Purchase
                  Agreement.

6.       MISCELLANEOUS.

         a.       Notices. All notices, requests and other communications to any
                  party hereunder shall be in writing (including telecopy) and
                  shall be given, if to the Company, to:

                  If to the Company:  Sheldahl, Inc.
                                      1150 Sheldahl Road
                                      Northfield, MN 55057-9444
                                      Attn: Edward L. Lundstrom, President
                                      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 address or telecopy number as such party may hereafter
                  specify for the purpose by notice to the other parties hereto.
                  Each such notice, request or other communication shall be
                  effective when delivered personally, telegraphed or
                  telecopied, or, if mailed, five business days after the date
                  of the mailing.

         b.       Amendments; No Waivers.

                  i.       Any provision of this Agreement may be amended or
                           waived if, and

                                       15
<PAGE>   16

                           only if, such amendment or waiver is in writing and
                           signed, in the case of an amendment, by the
                           Stockholders and the Company, or in the case of a
                           waiver, by the party against whom the waiver is to be
                           effective.

                  ii.      No failure or delay by any party in exercising any
                           right, power or privilege hereunder shall operate as
                           a waiver thereof nor shall any single or partial
                           exercise thereof preclude any other or further
                           exercise thereof or the exercise of any other right,
                           power or privilege. The rights and remedies herein
                           provided shall be cumulative and not exclusive of any
                           rights or remedies provided by law.

         c.       Successors and Assigns. The provisions of this Agreement shall
                  be binding upon and inure to the benefit of the parties hereto
                  and their respective successors and permitted assigns;
                  provided, however, that no party may assign this Agreement
                  without the other party's prior written consent; and provided
                  further that the rights of the Stockholders under sections 2
                  and 4 hereof shall not be assignable other than to Affiliates
                  and Associates of the assigning Person.

         d.       Governing Law. This Agreement shall he construed in accordance
                  with and governed by the internal laws of the State of
                  Minnesota.

         e.       Counterparts; Effectiveness. This Agreement may be signed in
                  any number of counterparts, each of which shall be an
                  original, with the same effect as if the signatures thereto
                  and hereto were upon the same instrument. This Agreement shall
                  become effective when each party hereto shall have received
                  counterparts thereof signed by the other party hereto.

         f.       Specific Performance. The Company and the Stockholders each
                  acknowledge and agree that the parties' respective remedies at
                  law for a breach or threatened breach of any of the provisions
                  of this Agreement would be inadequate and, in recognition of
                  that fact, agrees that, in the event of a breach or threatened
                  breach by the Company or the Stockholders of the provisions of
                  this Agreement, in addition to any remedies at law, the
                  Stockholders and the Company, respectively, without posting
                  any bond shall be entitled to obtain equitable relief in the
                  form of specific performance, a temporary restraining order, a
                  temporary or permanent injunction or any other equitable
                  remedy which may then be available.

                                       16
<PAGE>   17

         g.       Severability. If any term, provision, covenant or restriction
                  of this Agreement is held by a court of competent jurisdiction
                  to be invalid, void or unenforceable, the remainder of the
                  terms, provisions, covenants and restrictions of this
                  Agreement shall remain in full force and effect and shall in
                  no way be affected, impaired or invalidated, provided that the
                  parties hereto shall negotiate in good faith to attempt to
                  place the parties in the same position as they would have been
                  in had such provision not been held to be invalid, void or
                  unenforceable.

         h.       Termination.  This Agreement shall terminate on the later of:

                  i.       the first date as of which the Applicable Number is
                           zero, and

                  ii.      the Standstill Termination Date.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first referred to above.

                                      SHELDAHL, INC.

                                      By:
                                         ---------------------------------------
                                         Name: Edward L. Lundstrom
                                         Title: President

                                      STOCKHOLDERS:

                                      MORGENTHALER VENTURE PARTNERS V, L.P.

                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:

                                      AMPERSAND IV LIMITED PARTNERSHIP

                                      By: AMP-IV MANAGEMENT COMPANY LIMITED
                                          LIABILITY COMPANY, its General Partner

                                      By:
                                         ---------------------------------------
                                         Name:  Stuart A. Auerbach
                                         Title: Managing Member

                                       17
<PAGE>   18

                                      AMPERSAND IV COMPANION FUND LIMITED

                                      PARTNERSHIP

                                      By: AMP-IV MANAGEMENT COMPANY LIMITED
                                          LIABILITY COMPANY, its General Partner

                                      By:
                                         ---------------------------------------
                                         Name:  Stuart A. Auerbach
                                         Title: Managing Member

                                       18
<PAGE>   19

                                      SOUND BEACH TECHNOLOGY PARTNERS, LLC

                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:

                                       19
<PAGE>   20

                                                                       EXHIBIT 1

 NAMES OF INDIVIDUALS DESIGNATED BY THE HOLDERS OF THE SERIES G PREFERRED STOCK
                TO BE ELECTED TO THE COMPANY'S BOARD OF DIRECTORS

Stuart A. Auerbach
Donald R. Friedman
John D. Lutsi

                                       20
<PAGE>   21

                                                                       EXHIBIT 2

NAMES OF INDIVIDUALS WHO HAVE SERVED ON THE COMPANY'S BOARD OF DIRECTORS PRIOR
  TO THE EFFECTIVE DATE OF THE MERGER AND WHO ARE TO CONTINUE TO SERVE ON THE
     COMPANY'S BOARD OF DIRECTORS FOLLOWING THE EFFECTIVE DATE OF THE MERGER

Kenneth J. Roering
William B. Miller
John G. Kassakian

                                       21<PAGE>   1
                                                                    EXHIBIT 4.8

AMENDED AND RESTATED
AGREEMENT RELATING TO SHELDAHL

         This Amended and Restated Agreement Relating to Sheldahl ("Agreement"),
dated as of November 10, 2000, by and between Sheldahl, Inc., a Minnesota
corporation ("Sheldahl"), and Molex Incorporated, a Delaware corporation
("Molex").

                              PRELIMINARY STATEMENT

         Sheldahl and Molex entered into an Agreement Relating to Sheldahl dated
as of November 18, 1998 (the "Original Sheldahl Agreement").

         Under the terms of an Agreement and Plan of Merger, dated the dated
hereof, among Sheldahl, IFT West Acquisition Company ("IFT"), a Delaware
corporation and wholly-owned subsidiary of Sheldahl, International Flex
Holdings, Inc., a Delaware corporation ("IFH"), and the stockholders of IFH (the
"Merger Agreement"), Sheldahl has proposed to issue shares of its common stock,
par value $.25 per share ("Sheldahl Common Stock"), to the stockholders of IFH
in exchange for all outstanding equity securities of IFH.

         Under the terms of a Stock Purchase Agreement, dated the date hereof,
among Sheldahl and the purchasers listed on Exhibit A thereto (the "Stock
Purchase Agreement"), Sheldahl has proposed to issue shares of Sheldahl Common
Stock and its Series G Convertible Preferred Stock ("Series G Preferred Stock")
to the purchasers party thereto.

         Under the terms of a Subordinated Notes and Warrant Purchase Agreement,
dated the date hereof, among Sheldahl and the purchasers listed on Exhibit A
thereto (the "Subordinated Debt Agreement"), Sheldahl has proposed to issue
subordinated notes and warrants to purchase shares of Sheldahl Common Stock
("Warrants") to the purchasers party thereto.

         As an inducement to the foregoing transactions, the parties hereto
desire to amend and restate in its entirety the Sheldahl Agreement as set forth
below.

         NOW THEREFORE, the parties hereto agree that effective as of the
Effective Time (as such term is defined in the Merger Agreement), the Sheldahl
Agreement shall, without any further action by any party, be amended as follows:

                                       2
<PAGE>   2

                                    SECTION 1
                             RIGHT OF FIRST REFUSAL

         1.1 Definitions

                  "Acquisition" shall mean shall mean (i) a transaction
including a merger, consolidation, acquisition, financing transaction, tender
offer or exchange offer involving Sheldahl (other than transactions solely
between Sheldahl and its wholly-owned subsidiaries or between Sheldahl and
Molex) following which any person (as such term is used in Rule 13d-5 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or group (as such term is defined in Section 13(d) of
the 1934 Act) becomes or would become the "Beneficial Owner" (as such term is
defined in Rule 13d-3 of the 1934 Act) of (x) a majority of the Sheldahl Common
Stock, or (y) securities representing a majority of the combined voting power of
all Voting Securities of Sheldahl, or following which persons who were
Beneficial Owners of the Sheldahl Common Stock and Voting Securities of Sheldahl
immediately before such transaction do not, after such transaction, beneficially
own, directly or indirectly, a majority of the issued and outstanding shares of
Sheldahl Common Stock and combined voting power of the Voting Securities of
Sheldahl or (ii) the disposition, by sale, lease, exchange, contribution or
otherwise, of all or substantially all of the assets of Sheldahl. Anything
herein to the contrary notwithstanding, the execution, delivery or performance
under the Merger Agreement, the Stock Purchase Agreement and the Subordinated
Debt Agreement will not constitute an Acquisition, as that term is used herein.

                  "Voting Securities" shall mean securities issued by Sheldahl
entitled to vote in the election of directors of Sheldahl.

                  "Convertible Securities" shall mean equity securities or debt
securities convertible into, or exercisable or exchangeable for, shares of
Sheldahl Common Stock, including options and warrants.

                  "Identified Party" shall mean (i) any of the parties listed on
Schedule I, (ii) any person (as such term is used in Rule 13d-5 of the rules
promulgated by the Securities and Exchange Commission under the 1934 Act, group
(as such term is defined in Section 13(d) of the 1934 Act) or affiliate or
associate (as such terms are defined in Section 302A.011, subdivisions 43 and
45, respectively, of the Minnesota Business Corporation Act) of any party listed
on Schedule I; and (iii) any acquiror of, or successor-in-interest to, any
person set forth in (i) above.

                                       3
<PAGE>   3

         1.2 In the event the Board of Directors of Sheldahl receives a bona
fide offer (which the Board of Directors of Sheldahl is willing to accept) from
an Identified Party for an Acquisition, Sheldahl will advise Molex in writing of
the terms and conditions of such offer (the "Notice").

         1.3 Molex shall, within ten (10) business days following its receipt of
the Notice, advise Sheldahl in writing whether it is willing to consummate the
Acquisition with Sheldahl upon substantially the same terms and conditions
described in the Notice (but in any event on terms not less favorable to
Sheldahl than those described in the Notice), and shall provide Sheldahl
evidence of its ability to finance the Acquisition.

         1.4 If Molex advises Sheldahl that it is willing to consummate the
Acquisition with Sheldahl upon substantially the same terms and conditions
described in the Notice (but in any event on terms not less favorable than those
described in the Notice), Sheldahl and Molex shall, subject to the fiduciary
duties of the Board of Directors of Sheldahl determined in consultation with
Sheldahl's counsel, proceed in good faith to execute a definitive agreement with
respect to the Acquisition within forty-five (45) business days after it advises
Sheldahl that it is willing to consummate the Acquisition and consummate the
Acquisition within ninety (90) days of the date on which Molex advised Sheldahl
that it was willing to consummate the Acquisition upon substantially the same
terms and conditions described in the Notice.

         1.5 If Molex advises Sheldahl that it is not willing to consummate the
Acquisition with Sheldahl upon substantially the same terms and conditions
described in the Notice, or fails to advise Sheldahl of its intentions within
the 10-business day period referred to in Section 1.3 above, or Molex fails to
execute a definitive agreement with respect to the Acquisition within the
45-business day period referred to in Section 1.4 above or Molex fails to
proceed in good faith to consummate the Acquisition within the 90-day period
referred to in Section 1.4 above, Sheldahl shall be free to consummate an
Acquisition with the Identified Party upon terms and conditions that are not
more favorable to the Identified Party than those described in the Notice.

         1.6 If Sheldahl wishes to solicit interests for an Acquisition by any
Identified Party, Sheldahl shall advise Molex in writing of the terms and
conditions upon which it is willing to consummate the Acquisition ("Sheldahl
Notice").

         1.7 Molex shall, within ten (10) business days following its receipt of
the Sheldahl Notice, advise Sheldahl in writing whether it is willing to
consummate an

                                       4
<PAGE>   4

Acquisition with Sheldahl upon substantially the same terms and conditions
described in the Sheldahl Notice (but in any event on terms not less favorable
to Sheldahl than those described in the Sheldahl Notice) and shall provide
Sheldahl with evidence of its ability to finance the Acquisition.

         1.8 If Molex advises Sheldahl that it is willing to consummate an
Acquisition with Sheldahl upon substantially the same terms and conditions
described in the Sheldahl Notice (but in any event on terms not less favorable
to Sheldahl than those described in the Sheldahl Notice), Sheldahl and Molex
shall, subject to the fiduciary duties of the Board of Directors of Sheldahl
determined in consultation with Sheldahl's counsel, proceed in good faith to
execute a definitive agreement with respect to the Acquisition within forty-five
(45) business days after it advises Sheldahl that it is willing to consummate
the Acquisition and to consummate the Acquisition within ninety (90) days of the
date on which Molex advised Sheldahl that it was willing to consummate the
Acquisition upon substantially the same terms and conditions described in the
Sheldahl Notice.

         1.9 Subject to Sections 1.2, 1.3, 1.4 and 1.5, if Molex advises
Sheldahl that it is not willing to consummate the Acquisition with Sheldahl upon
substantially the same terms and conditions described in the Sheldahl Notice, or
fails to advise Sheldahl of its intentions within the 10-business day period
referred to in Section 1.7 above, or Molex fails to execute a definitive
agreement with respect to the Acquisition within the 45-business day period
referred to in Section 1.8 above or Molex fails to proceed in good faith to
consummate the Acquisition within the 90-day period referred to in Section 1.8
above, Sheldahl shall be free to solicit for and consummate the Acquisition with
an Identified Party upon terms and conditions that are not more favorable to an
Identified Party than those described in the Sheldahl Notice, subject to the
terms of Section 1.11.

         1.10 In the event any Identified Party advises Sheldahl, after the date
Molex receives a Notice or a Sheldahl Notice, as the case may be, that such
Identified Party is willing to enter into an Acquisition with Sheldahl on terms
and conditions at least as favorable to Sheldahl as those described in the
Notice or the Sheldahl Notice (the "Second Offer"), Sheldahl shall provide Molex
with a written notice that sets forth the terms and conditions of such Second
Offer and the identity of the Identified Party (the "Second Notice"). Following
receipt of the Second Notice, Molex shall, within five (5) business days
(provided such date is at least 30 days after the date of the Notice or the
Sheldahl Notice, as the case may be) advise Sheldahl in writing whether it is
willing to consummate an Acquisition with Sheldahl upon substantially the same
terms and conditions described in the Second Notice (but in any event on terms
not less favorable

                                       5
<PAGE>   5

to Sheldahl than those described in the Second Notice) and shall provide
Sheldahl with evidence of its ability to finance the Acquisition. If Molex
advises Sheldahl that it is willing to consummate the Acquisition with Sheldahl
upon substantially the same terms and conditions described in the Second Notice
(but in any event on terms not less favorable to Sheldahl than those described
in the Second Notice), Sheldahl and Molex shall, subject to the fiduciary duties
of the Board of Directors of Sheldahl determined in consultation with Sheldahl's
counsel, proceed in good faith to consummate the Acquisition within ninety (90)
days of the date on which Molex advised Sheldahl that it was willing to
consummate the Acquisition upon substantially the same terms and conditions of
the Second Notice. If Molex advises Sheldahl that it is not willing to
consummate the Acquisition upon substantially the same terms and conditions of
the Second Notice, or fails to advise Sheldahl of its intentions within the five
(5) business day period referred to in this section, or Molex fails to proceed
in good faith to consummate the Acquisition within ninety (90) days, Sheldahl
shall be free to consummate the Acquisition with the Identified Party identified
in the Second Notice upon terms and conditions that are not more favorable to
the Identified Party than those described in the Second Notice.

         1.11 If Sheldahl shall receive offers from (i) any Identified Party as
provided in Section 1.9; or (ii) any Identified Party subsequent to the date of
the Second Offer that are more favorable to Sheldahl or its shareholders than
the Second Offer, Sheldahl shall advise Molex in writing of the terms and
conditions of such additional offers prior to accepting any such further offer
and, with respect to clause (i) above, Molex shall receive such notice at least
five business days prior to Sheldahl accepting any such offer. However, in light
of the fiduciary duties of the Board of Directors of Sheldahl in such a
situation, Sheldahl shall be free to accept that offer which the Board of
Directors of Sheldahl determines is most favorable to Sheldahl or its
shareholders. Sheldahl's decision as to which party's terms are most favorable
shall be final and binding.

         1.12 If the Acquisition contemplates payment of consideration
(including any tax deferral benefits and other non-cash items) to Sheldahl or
its shareholders other than cash, and Molex is not able to pay or deliver to
Sheldahl or its shareholders the same form of non-cash consideration, Molex
shall, in its notice to Sheldahl to express its intention to consummate an
Acquisition, set forth in detail the form of consideration Molex is offering in
the Acquisition (the "Substitute Consideration"). Such Substitute Consideration
shall be substantially equivalent in value from a financial point of view to
Sheldahl or its shareholders when compared to the original consideration offered
to Sheldahl by a third party or solicited by Sheldahl from a third party, as the
case may be. If Molex and Sheldahl disagree whether the Substitute Consideration
offered by Molex

                                       6
<PAGE>   6

is "substantially equivalent in value from a financial point of view," the final
determination shall be made by a reputable investment bank mutually acceptable
to Sheldahl and Molex which has not performed services for either Sheldahl or
Molex in the past twelve (12) months, which determination shall be binding upon
Molex and Sheldahl; provided, however, that the Board of Directors of Sheldahl,
after consultation with its counsel, shall be satisfied in good faith that it
has fulfilled its fiduciary duties by accepting the determination of the
investment bank. In the event it is determined that Molex's Substitute
Consideration is not "substantially equivalent in value from a financial point
of view," Sheldahl shall provide written notice to Molex reasonably describing
such deficiency (the "Deficiency Notice"), in which event Molex may provide a
modified offer providing Substitute Consideration which is "substantially
equivalent in value from a financial point of view" in writing within five (5)
business days of Sheldahl's Deficiency Notice. In the event Molex does not
provide the modified offer as provided above within the time period provided
above, Sheldahl shall be entitled to accept the third party offer free of any
rights of Molex under this Agreement.

         1.13 Notwithstanding any other provision contained in this Agreement,
Molex's rights under this Section 1 shall be terminated on the earlier of (a)
the date which is the thirty (30) month anniversary of the Effective Date; or
(b) the date on which Molex and Sheldahl execute a mutually acceptable supply
and technology agreement (Molex and Sheldahl acknowledge and agree that nothing
contained in this Agreement shall require Molex and Sheldahl to enter into to
such supply and technology agreement).

         1.14 So long as Sheldahl shall have satisfied all of its obligations
under the Amended Supply Agreement, arising after the Effective Time, it shall
be a condition to Sheldahl's obligations under section 1 hereof that Molex have
satisfied all of its obligations under the Amended Supply Agreement arising
after the Effective Time. "Amended Supply Agreement" shall mean the Sheldahl and
Molex Agreement, dated January 2, 1997, between Sheldahl and Molex, as amended
as of the date hereof. "Effective Time" shall mean the Effective Time as defined
in the Merger Agreement.

                                    SECTION 2
                                PREEMPTIVE RIGHTS

         2.1 Preemptive Rights. If Sheldahl proposes to issue additional
Sheldahl Common Stock or Convertible Securities other than (i) grants of options
to acquire Sheldahl Common Stock under Sheldahl's employee and consultant
benefit plans

                                       7
<PAGE>   7

adopted by Sheldahl and except for Sheldahl Common Stock issued upon exercise of
such options granted pursuant to such plans; (ii) shares of Sheldahl Common
Stock issued upon conversion of the (a) 15,000 shares of Series B Convertible
Preferred Stock; (b) 32,917 shares of Series D Convertible Preferred Stock; (c)
10,000 shares of Series E Convertible Preferred; (d) 7,000 shares of Series F
Convertible Preferred; and (e) 25,000 shares of Series G Convertible Preferred
of Sheldahl and upon payment of dividends with respect to such shares set forth
in clauses (a) through (e); (iii) shares of preferred stock, Sheldahl Common
Stock or rights of Sheldahl issued pursuant to Sheldahl's Rights Agreement dated
June 16, 1996 with Norwest Bank Minnesota, N.A., as amended (the "Rights
Agreement"); (iv) shares issued upon exercise of warrants outstanding (including
all warrants issued or to be issued with respect to the Series D Convertible
Preferred Stock, Series E Convertible Preferred Stock and Series F Convertible
Preferred Stock) or issued pursuant to the Subordinated Debt Agreement; or (v)
shares issued pursuant to the transactions contemplated by the Merger Agreement
and the Stock Purchase Agreement, Sheldahl will give Molex written notice of its
intention to issue such Common Stock or Convertible Securities in a private or
public equity or debt offering. Molex shall have the right to purchase a portion
of such Sheldahl Common Stock or Convertible Securities in such number which
when combined with the Sheldahl Common Stock owned beneficially by Molex on the
effective date of issuance will equal the percentage of the issued and
outstanding Sheldahl Common Stock after such issuance which Molex beneficially
owned immediately prior to the issuance of such additional Sheldahl Common Stock
or Convertible Securities. Notwithstanding the foregoing, in no event shall (i)
Molex's ownership following any purchase under this Section 2.1 exceed 10% of
the issued and outstanding Sheldahl Common Stock (as determined pursuant to
Section 4.1); or (ii) Molex's Beneficial Ownership (as defined in the Rights
Agreement) following such purchase result in Molex being an "Acquiring Person"
(as defined in the Rights Agreement). Sheldahl covenants that it will amend the
Rights Agreement if necessary in a form reasonably acceptable to Molex to ensure
that the issuance of securities to Molex pursuant to the Subordinated Debt
Agreement will not result in Molex becoming an Acquiring Person (as such term is
defined the Rights Agreement) and will not cause the Rights Agreement to be
amended in such a manner as to cause Molex to be an Acquiring Person.

          2.2 Exercise of Preemptive Rights. In order to exercise its purchase
rights hereunder, Molex must within ten (10) business days after receipt of
written notice from Sheldahl describing in reasonable detail the Sheldahl Common
Stock or Convertible Securities being offered, the purchase price thereof, the
payment and other terms and conditions thereof and Molex's percentage allotment,
deliver a written notice to Sheldahl describing its election hereunder.

                                       8
<PAGE>   8

         2.3 Expiration of Offering Period. Upon the expiration of the ten (10)
day period described above, Sheldahl shall be entitled to sell such Sheldahl
Common Stock or Convertible Securities which Molex has not elected to purchase
for a period of 90 days following such expiration on substantially the same
terms and conditions as those offered to Molex.

         2.4 No Rights in Certain Transactions. Notwithstanding the foregoing
but subject to the following, Molex shall not be entitled to the preemptive
rights set forth in Section 2.1 above in connection with an issuance by Sheldahl
of Sheldahl Common Stock or Convertible Securities in an acquisition of assets
or the business of a third party where Sheldahl is the continuing or surviving
entity, but where such transaction is not an Acquisition, provided however,
Molex shall have the right to purchase a number of shares of Sheldahl Common
Stock necessary to allow Molex to beneficially own, after giving effect to such
transaction described in this Section 2.4, the lesser of (i) the percentage of
issued and outstanding Sheldahl Common Stock which Molex beneficially owned on
the date immediately prior to such transaction; or (ii) 5% of the issued and
outstanding Sheldahl Common Stock (as determined pursuant to Section 4.1). The
purchase price for such shares shall be at a price equivalent to the value of
the Sheldahl Common Stock received by the third party or shareholders of the
third party to such transaction. Molex shall exercise this right within ten (10)
business days after receipt of written notice from Sheldahl and, notwithstanding
clause (ii) in the first sentence of Section 4.1, this Agreement shall not
terminate in the event Molex has exercised such right prior to the termination
of such ten business day period. Notwithstanding clause (ii) in the first
sentence of Section 4.1, this Agreement shall not terminate in the event an
issuance of Sheldahl Common Stock or Convertible Securities resulting from an
event described in this Section 2.4 that causes Molex to beneficially own less
than five percent (5%) of the issued and outstanding Sheldahl Common Stock (a
"Termination Event") if either (i) Sheldahl provides Molex with the right to
purchase shares of Sheldahl Common Stock or Convertible Securities in an amount
necessary to allow Molex to beneficially own five percent (5%) of the issued and
outstanding Sheldahl Common Stock after such issuance and Molex exercises such
purchase rights within ten business days after receipt of written notice from
Sheldahl describing the stock or securities to be offered and the purchase price
thereof; or (ii) Molex purchases shares in the market to increase its beneficial
ownership of Sheldahl Common Stock to five percent (5%) or more within 90 days
of the Termination Event.

                                       9
<PAGE>   9

                                    SECTION 3
                              BOARD REPRESENTATION

         3.1 Board Representation. At least fifteen (15) days prior to the
meeting of the Board of Directors of Sheldahl establishing the slate of
directors for the next scheduled Annual Meeting of Shareholders of Sheldahl,
Sheldahl shall provide Molex with a notice of such meeting. Prior to the date of
such directors' meeting, Molex shall give the nominating committee of Sheldahl's
Board of Directors, in writing, the names of two director candidates selected
from Molex's current or past executive management team. Sheldahl will nominate
and solicit proxies for the election of one such candidate submitted by Molex as
a member of the Board of Directors of Sheldahl at that Annual Meeting of
Shareholders and at each succeeding Annual Meeting of Shareholders of Sheldahl;
provided, however, that after termination of this Agreement pursuant to Section
4, Sheldahl shall no longer be obligated to nominate and solicit proxies for the
election of such designee of Molex as a director of Sheldahl and such nominee
shall, if requested by the Board of Directors of Sheldahl, resign from the
Sheldahl Board of Directors. At the first meeting of the Board of Directors
after the date of this Agreement, Molex's designee (as described above) shall be
appointed by the Board of Directors as a Board member.

                                    SECTION 4
                                  MISCELLANEOUS

         4.1 Term and Termination. This Agreement shall terminate and Molex
shall have no further rights under this Agreement on the earliest to occur of
the following: (i) when Molex first ceases to beneficially own at least 75% of
the number of shares of Sheldahl Common Stock owned beneficially by Molex as of
July 30, 1998, as indicated on Exhibit A; (ii) subject to Section 2.4,when Molex
first ceases to beneficially own at least 5% of the issued and outstanding
Sheldahl Common Stock; or (iii) completion of an Acquisition falling within the
scope of the definition of Acquisition above. For purposes of this Agreement,
when determining the issued and outstanding Sheldahl Common Stock or the
Sheldahl Common Stock owned beneficially by Molex, (i) all issued and
outstanding shares of Series B Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E Convertible Preferred Stock, Series F Convertible
Preferred Stock and Series G Convertible Preferred Stock shall be deemed
converted to Common Stock; (ii) all warrants outstanding (including all warrants
issued or to be issued with respect to the Series D Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series F Convertible Preferred Stock, and
Series G Convertible Preferred Stock) or issued pursuant to that certain
Subordinated Debt Agreement by

                                       10
<PAGE>   10

and among Sheldahl; and (iii) all subsequently issued and outstanding
Convertible Securities (other than options granted to employees or directors and
Convertible Securities that are out of the money) shall be deemed converted to
Common Stock. With respect to (i) and (iii) immediately above, the number of
shares of Sheldahl Common Stock to be issued upon conversion shall be determined
as of the date a determination is to be made pursuant to this Agreement.

         4.2 Governing Law. This Agreement as amended and restated shall be
governed in all respects by the laws of the State of Minnesota as applied to
contracts entered into solely between residents of, and to be performed entirely
within, such state.

         4.3 Successors and Assigns. This Agreement as amended and restated
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. This Agreement as amended and restated
may not be assigned by a party without the prior written consent of the other
party.

         4.4 Effectiveness of Agreement. This Agreement as amended and restated
hereby shall become a binding agreement effective upon execution and delivery by
the parties hereto, but the provisions hereof shall not take effect until the
Effective Time and this Agreement shall be deemed null, void and without effect
without any further action on the part of either party hereto if any of the
Merger Agreement, Stock Purchase Agreement or the Subordinated Debt Agreement is
terminated or the terms thereof are amended or waived in any respect which will
result in a material adverse economic impact on Molex. Anything in this
Agreement or the Original Sheldahl Agreement to the contrary notwithstanding,
the execution, delivery and performance of the Merger Agreement, the Stock
Purchase Agreement and Subordinated Debt Agreement or any agreement contemplated
thereby shall not constitute an "Acquisition," as that term is used herein or in
the Original Sheldahl Agreement, whether or not this Agreement continues in
effect.

         4.5 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersedes all prior agreements and understandings among the parties
relating to the subject matter hereof. Neither this Agreement as amended and
restated nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against which enforcement
of any such amendment, waiver, discharge or termination is sought.

                                       11
<PAGE>   11

         4.6 Notices and Dates. Any notice or other communication given under
this Agreement shall be sufficient if in writing and sent by registered or
certified mail, return receipt requested, postage prepaid, by facsimile, by hand
delivery or overnight mail to a party at its address set forth below (or at such
other address as shall be designated for such purpose by such party in a written
notice to the other party hereto):

               If to Sheldahl:   Sheldahl, Inc.
                                 1150 Sheldahl Road
                                 Northfield MN 55057
                                 Attention: Edward L. Lundstrom
                                 Fax: 507-663-8326

               With a copy to:   Lindquist & Vennum P.L.L.P.
                                 4200 IDS Center
                                 80 South 8th Street
                                 Minneapolis MN 55042
                                 Attention: Charles P. Moorse
                                 Fax: 612-371-3207 7

               If to Molex:      Molex Incorporated
                                 2222 Wellington Court
                                 Lisle IL 60532
                                 Attention: Frederick A. Krehbiel
                                 Fax: 630-512-8632

               With a copy to:   Sonnenschein Nath & Rosenthal
                                 8000 Sears Tower
                                 Chicago IL 60603
                                 Attention: Michael Froy
                                 Fax: 312-876-7934

All such notices and communications shall be effective when received by the
addressee. In the event that any date provided for in this Agreement falls on a
Saturday, Sunday or legal holiday, such date shall be deemed extended to the
next business day.

                                       12
<PAGE>   12

         4.7 Severability. If any term, provision, covenant or restriction of
this Agreement as amended and restated is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restriction of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

         4.8 Costs and Expenses. Sheldahl shall pay its own costs and expenses
and the costs and expenses of Molex, including the fees and out-of-pocket
expenses of legal counsel to Molex, incurred in connection herewith, whether or
not the transactions contemplated herein are consummated.

         4.9 No Third Party Rights. Nothing in this Agreement shall create or be
deemed to create any rights in any person or entity not a party to this
Agreement as amended and restated.

         4.10 Remedies. Sheldahl and Molex acknowledge that a breach of this
Agreement by one party could cause the other party damage that may not be
adequately compensated by damages at law. Therefore, Sheldahl and Molex agree
that, in addition to other relief afforded by law, seeking an injunction for
specific performance shall be a proper mode of relief for violations of this
Agreement.

                           [Signature page to follow]

                                       13
<PAGE>   13

         IN WITNESS WHEREOF, the parties have caused this Agreement as amended
and restated to be executed by their respective authorized officers as of the
date aforesaid.

                               SHELDAHL, INC.

                               By: /s/ EDWARD L. LUNDSTROM
                                  ---------------------------------------------
                               Name:  Edward L. Lundstrom
                               Title: President

                               MOLEX INCORPORATED

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

                                       14
<PAGE>   14

                                    EXHIBIT A

        Issued and Outstanding Sheldahl Common Stock as of July 30, 1998

<TABLE>
<CAPTION>
                                                                     NUMBER OF
                                                                     SHARES OF
                                                                      SHELDAHL
     TYPE OF SECURITY                                               COMMON STOCK
     ----------------                                               ------------
<S>                                                                 <C>
     Common Shares Issued and Outstanding                            9,660,615

     Series B Preferred (including dividends converted at $6.01
     through 7/30/98)                                                1,330,795

     Outstanding Warrants                                              167,812

     Series D Warrants                                                 329,170

     Series D Preferred (converted at $6.15)                         5,352,358
                                                                     ---------

     Total Sheldahl Common Stock (per Section 3.1)                  16,840,750
                                                                    ==========

     Molex Incorporated                                                340,000

     Series D Warrants                                                 120,000

     Series D Preferred $12.0M                                       1,951,219
                                                                     ---------

     Molex Incorporated Ownership                                    2,411,219
                                                                     =========

     Molex Incorporated Percentage Ownership                            14.32%
</TABLE>

                                       15
<PAGE>   15

                                   Schedule I

1.       Tyco International, Ltd./AMP

2.       Hon Hai/FoxConn

3.       Framatome Group/FCI

                                       16

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