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

Northfield, MN, August 30, 2000 – Sheldahl, Inc. (NasdaqNM: SHEL) 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.

Morgenthaler is a private equity investment firm with offices in Cleveland, Ohio and Menlo Park, California, with approximately $1 billion under management.

Sheldahl is a leading producer of high-density substrates, high-quality flexible printed circuitry, and flexible laminates primarily for sale to the automotive electronics and data communications markets. The Company, which is headquartered in Northfield, Minnesota, has operations in Northfield; Longmont, Colorado; South Dakota; Toronto, Ontario, Canada; and Chihuahua, Chih., Mexico. Its sales offices are located in Detroit, Michigan; Hong Kong, China; Singapore; and Mainz, Germany. Currently, Sheldahl employs approximately 800 people. Sheldahl’s common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol: SHEL. In its fiscal year ended August 27, 1999, Sheldahl reported revenues of $122.1 million. Sheldahl news and information can be found on the World Wide Web at http://www.sheldahl.com

The discussion above contains statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements by their nature involve substantial risks and uncertainties as described by Sheldahl’s periodic filings. Actual results may differ materially depending on a variety of factors, including but not limited to the following: the achievement of Sheldahl’s projected operating results, the ability of Sheldahl to successfully obtain waivers from its lenders for any defaults on its debt covenants, the achievement of efficient volume production and related sales revenue results at Longmont, the ability of Sheldahl to identify and successfully pursue other business opportunities, and Sheldahl not entering into an agreement with respect to a transaction or any such transaction not being consummated. Additional information with respect to the risks and uncertainties faced by Sheldahl may be found in, and the prior discussion is qualified in its entirety by, the Risk Factors contained in the Company’s filings with the Securities and Exchange Commission, including Sheldahl’s Annual Report, Form 10-K for the fiscal year ended August 27, 1999, Forms 10-Q for the quarters ended November 26, 1999; February 25, 2000, May 26, 2000 and other SEC filings. Sheldahl does not undertake any obligation to update any such factors or to publicly announce developments or events relating to the matters described herein.

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