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Sheldahl Announces Discussions With IFT and Morgenthaler

31 August 2000

Sheldahl, Inc. Announces Continued Discussions With IFT and Morgenthaler And Lapse of Exclusivity Period

    NORTHFIELD, Minn., Aug. 30 Sheldahl, Inc.
announced today effective immediately that the exclusivity period as
previously reported with International Flex Technologies, Inc. ("IFT") and its
majority owner Morgenthaler Venture Partners ("Morgenthaler") has expired.
Although the parties remain in discussions, and IFT and Morgenthaler are
continuing their due diligence review and evaluation, no agreement in
principal or definitive agreement has been reached.  Sheldahl will continue
its efforts to maximize shareholder value by seeking suitable strategic
alternatives.
    President Edward L. Lundstrom commented, "We are disappointed that we have
not yet been able to complete a transaction.  The Companies are strategically
aligned in terms of their technology and their production capacities and
capabilities.
    "Sheldahl's foundation is strong although our sales levels are lower than
we originally anticipated.  As we previously stated, our fourth quarter sales
volumes are down from those of the third fiscal 2000 quarter and, we expect to
fall below earnings expectations," Lundstrom said.  "We remain in a difficult
cash position that probably will not improve without the consummation of this
or an alternative transaction.  Our management and Board are focused on
finding a solution.  Meanwhile, our customers have been supportive, placing
orders with confidence that Sheldahl will continue to deliver quality
products."
    A series of announcements have been issued to keep shareholders abreast of
developments as they occur.  On June 26, 2000, the Company announced the
signing of an exclusivity agreement whereby Sheldahl would acquire IFT in
exchange for shares of Sheldahl's common stock.  In addition Morgenthaler
Partners and other potential investors proposed to infuse approximately
$40 million in new capital into Sheldahl in exchange for shares of a new
series of Sheldahl's convertible preferred stock.
    Related to these continuing discussions, on August 15, 2000, Sheldahl
announced that Morgenthaler invested $2 million in the Company through a debt
instrument that is convertible under certain circumstances into common stock.
In the event Morgenthaler and the Company consummate an equity transaction,
then the debt will be convertible into shares of the new series of Sheldahl's
convertible preferred stock to be issued in that transaction.
    In addition, on August 7, 2000 and then again on August 22, 2000, the
Sheldahl announced extensions of the exclusivity agreement.