Sheldahl Inc Form SC 13DA Filing Date

Registration Rights Agreement

This Registration Rights Agreement (this "Agreement") is made and entered into as of , among , a corporation (the "Company"), , and (the "Purchasers").

This Agreement is made pursuant to the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof among the Company and the Purchasers (the "Purchase Agreement").

The Company and the Purchasers hereby agree as follows:

1. Definitions

Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

"Advice" shall have meaning set forth in Section 3(j).

"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person.

"Business Day" means any day except a day on which the Nasdaq National Market, the NYSE or the AMEX, as applicable, is closed.

"Closing Date" shall have the meaning set forth in the Purchase Agreement.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means the Company's Common Stock, par value $.25 per share.

"Effectiveness Date" means the earlier of the 90th day following the Closing Date or five days after a no-review decision of the Commission.

"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 60th day following the Closing Date.

"Holder" or "Holders" means the holder or holders of Registrable Securities.

"Indemnified Party" and "Indemnifying Party" shall have the meanings set forth in Section 5(c).

"Losses" shall have the meaning set forth in Section 5(a).

"Person" means an individual or entity of any kind.

"Preferred Stock" means the shares of Series F Preferred Stock of the Company issued to the Purchasers pursuant to the Purchase Agreement.

"Proceeding" means an action, claim, suit, investigation or proceeding.

"Prospectus" means the prospectus included in the Registration Statement and all amendments and supplements thereto.

"Registrable Securities" means the shares of Common Stock issuable upon conversion of the Series F Shares, exercise of the Series F Warrants, and payment of dividends in respect of such Preferred Stock.

"Registration Statement" means the registration statements contemplated by Section 2(a).

"Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act.

"Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act.

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

2. Shelf Registration. On or prior to the Filing Date, the Company shall prepare and file with the Commission a "Shelf" Registration Statement covering all Registrable Securities.

The Registration Statement shall be on Form S-3 or another appropriate form reasonably acceptable to the Holders.

The Company shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective and to keep it continuously effective during the Effectiveness Period.

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

(a) Prepare and file with the Commission a Registration Statement on Form S-3 in accordance with the method or methods of distribution specified by the Holders.

(b) File amendments and post-effective amendments as necessary and respond to Commission comments promptly.

(c) Notify the Holders of filings, comments, effectiveness, requests for information, stop orders, suspensions, and material events.

(d) Use its best efforts to avoid or obtain withdrawal of any suspension or stop order.

(e) Furnish each Holder, without charge, conformed copies of each Registration Statement and amendment.

(f) Promptly deliver Prospectuses and amendments or supplements thereto as requested.

(g) Register or qualify the Registrable Securities under applicable Blue Sky laws as requested in writing.

(h) Prepare supplements or amendments as necessary after material events.

(i) Use best efforts to list all Registrable Securities on the Nasdaq National Market and any other relevant exchange or market.

(j) Require each selling Holder to furnish information required by law for disclosure in the Registration Statement.

Each Purchaser covenants that it will not sell any Registrable Securities until it has received the Prospectus and notice that the Registration Statement has become effective.

Each Holder agrees to discontinue disposition upon notice of certain events until supplemented filings are received or Advice is given.

4. Registration Expenses. All fees and expenses incident to performance of this Agreement by the Company shall be borne by the Company.

The Company shall be responsible for registration fees, filing fees, printing, messenger, telephone, delivery, counsel fees, insurance, and internal expenses. The Holders shall bear the expenses and fees of any legal counsel retained by them.

5. Indemnification

(a) Indemnification by the Company. The Company shall indemnify and hold harmless each Holder and related persons from and against any and all Losses arising out of untrue statements or omissions in the Registration Statement or Prospectus, except to the extent based solely upon information furnished by such Holder.

(b) Indemnification by Holders. Each Holder shall severally and not jointly indemnify and hold harmless the Company and related persons from and against Losses arising solely out of statements or omissions based upon information furnished by such Holder.

(c) Conduct of Indemnification Proceedings. An Indemnified Party shall notify the Indemnifying Party in writing, and the Indemnifying Party shall assume the defense thereof.

(d) Contribution. If indemnification is unavailable, each Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses.

6. Rule 144. The Company shall file reports required under the Securities Act and Exchange Act in a timely manner and provide other public information as necessary to permit sales pursuant to Rule 144.

7. Miscellaneous

(a) Remedies. In the event of a breach, each Holder or the Company shall be entitled to specific performance and other rights granted by law and under this Agreement.

(b) Amendments and Waivers. The provisions of this Agreement may not be amended except in writing and signed by the Company and the Holders of at least two-thirds of the then outstanding Registrable Securities.

(c) Notices. Notices shall be in writing and delivered by facsimile, courier, or actual receipt.

If to the Company: Sheldahl, Inc., 1150 Sheldahl Road, Northfield, MN 55057-9444, Attn: Jill Burchill, 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.

(d) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their permitted assigns.

(e) Assignment of Registration Rights. The rights of each Purchaser hereunder shall be assignable subject to the stated conditions.

(f) Counterparts. This Agreement may be executed in any number of counterparts, including facsimile signatures.

(g) Governing Law. This Agreement shall be governed by the laws of the State of Minnesota.

(h) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive.

(i) Severability. If any provision is invalid or unenforceable, the remainder shall remain in full force and effect.

(j) Headings. The headings in this Agreement are for convenience only.

(k) Shares Held by The Company and its Affiliates. Certain shares held by the Company or its Affiliates shall not be counted in determining consent percentages.

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