10-K

			SECURITIES AND EXCHANGE COMMISSION
				Washington, DC  20549
				____________________

					FORM 10-K
				___________________

(X)	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
	EXCHANGE ACT OF 1934 

			For the fiscal year ended August 30, 1996

				Commission File Number:  0-45
				____________________

				SHELDAHL, INC.
		(Exact name of registrant as specified in its charter)

	Minnesota					41-0758073
(State or other jurisdiction				(IRS Employer
of incorporation or organization			Identification No.

				1150 Sheldahl Road
				Northfield, MN  55057
		(Address of principal executive offices and zip code)

	Registrant's telephone number, including area code:  (507) 663-8000

	Securities registered pursuant to Section 12(b) of the Act:  None

		Securities registered pursuant to Section 12(g) of the Act:
			Common Stock, par value of $0.25 per share
				Preferred Stock Purchase Rights
					(Title of Class)
				____________________

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports) and (2) has been subject to 
such filing requirements for the past 90 days.  YES: X	  NO:

Indicate by check mark if disclosure of delinquent filers pursuant to Rule 
405 of Regulation S-K is not contained herein, and will not be contained, 
to the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K. YES: X		NO:

The aggregate market value of shares held by non-affiliates was 
approximately $138,146,772 on October 29, 1996, when the last sales price 
of the Registrant's Common Stock, as reported in the Nasdaq National Market
System, was $15.50.

As of October 29, 1996, the Company had outstanding 8,912,695 shares of 
Common Stock.

				____________________

			DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's definitive proxy statement for its annual meeting 
to be held January 8, 1997, are incorporated by reference in Part III of 
this Form 10-K.


PART I

Item 1.	Business

General

	Sheldahl is a leading producer of high quality flexible printed 
	circuitry and flexible laminates principally for sale to the 
	automotive electronics and datacommunications markets.  Flexible 
	circuitry is used to provide 	electrical connections between 
	components and electronic systems and also as a substrate to 
	support electronic devices.  Flexible circuits consist of polyester 
	or polyimide film to which copper foil is laminated and processed 
	through various imaging, etching and plating processes.  

	Flexible circuits can be further processed by surface mount 
	attachment of electronic components to produce an interconnect 
	assembly.  Flexible circuits provide advantages over rigid printed 
	circuit boards by accommodating packaging contour and motion and 
	reducing size and weight.

	The Company recently introduced three high performance products 
	based on proprietary thin film technology:  Novaclad(r), ViaGrid(r) 
	and high density substrates.  These emerging products provide 
	substantial benefits compared to traditional flexible circuits, 
	including the capability for very fine circuit traces (down to 1 
	mil, or .001") as well as greater heat tolerance and dissipation. 
	The Company has designed its Novaclad and ViaGrid products to be 
	used as a base material for high performance printed circuits.  
	The Company has developed its high density substrates to enable 
	integrated circuit ("IC") manufacturers to package future generations
	of ICs economically by attaching the silicon die to a high density 
	substrate manufactured by the Company or other circuitry manufacturers
	using the Company's Novaclad or ViaGrid products.  As ICs are 
	becoming increasingly powerful, they produce more heat and require 
	a greater number of connections to attach the silicon die, placing
	substantially greater demands on IC packaging materials.  The 
	Company is investing approximately $45 million in an advanced 
	production facility in Longmont, Colorado ("Longmont Facility").

Products

	Novaclad.  Novaclad is a thin and flexible adhesiveless copper 
	laminate used in the design and manufacture of flexible 
	interconnects and high density substrates.  Novaclad consists of 
	a polyimide film onto which copper has been deposited on both sides,
	in a vacuum, without an adhesive.  After the vacuum deposition 
	process, additional copper is plated onto the laminate to achieve 
	a desired thickness of copper ranging from 5 microns to 35 microns 
	(a micron is one-millionth of a meter).  Novaclad provides a number 
	of important benefits when compared to traditional adhesive-based 
	laminates, including the capability for finer circuit traces (down 
	to 1 mil, or .001") and corresponding higher circuit density, 
	greater heat tolerance and dissipation, improved signal speed 
	and impedance control, increased dimensional stability, resistance 
	to chemicals and greater durability.  Because of these 
	characteristics, the Company believes that Novaclad is a cost-
	effective, high-performance solution for a broad range of 
	interconnect systems, especially high density substrates for IC 
	packages and multi-chip modules.  In fiscal 1996, the Company sold 
	$15.6 million of Novaclad-based flexible circuits, primarily for 
	harsh, under-the-hood automotive applications where Novaclad's 
	heat tolerance and chemical resistance characteristics provide 
	superior performance.

	ViaGrid.  ViaGrid is a higher-value-added form of Novaclad with 
	pre-drilled small holes, or vias, measuring down to 1 mil (.001") 
	in diameter.  ViaGrid is designed to be sold in rolls or sheets 
	to printed circuit manufacturers as a base material for the 
	manufacture of high density substrates.  The vias, which are 
	plated through with copper, enable the transmission of electrical 
	currents between the two sides of the laminate.  The combination
	of thin copper traces and very small vias permits the design of 
	circuits that are up to six times more dense than current flexible 
	circuitry technology.  Because of its adhesiveless character, 
	ViaGrid provides all of the benefits of Novaclad.  Additionally, 
	ViaGrid is pre-coated with a photoresist.  The combination of 
	these characteristics allow circuit fabricators the opportunity 
	to eliminate several costly processing steps in the manufacture of 
	printed circuits.

	The Company will market ViaGrid in both standard and custom via 
	arrays.  Design software has been developed with Mentor Graphics 
	Corporation through a consortium sponsored by the Advanced Research 
	Projects Agency of the U.S. Government (the "ARPA Consortium").  
	This software, in addition to Mentor Graphics' professional design 
	services, will allow printed circuit manufacturers to design the 
	layout of their circuitry around the standard via array, thus 
	providing a less expensive solution than a custom via array.  
	Custom via arrays can be designed using Mentor Graphics MCM Station(R)
	software and manufactured with the Company's laser via generation 
	process.  The Company believes ViaGrid provides solutions for 
	a variety of applications, including high density interconnects, 
	IC packages and multi-chip modules.  The Company believes there 
	is also an opportunity for rigid printed circuit manufacturers 
	to mount ViaGrid-based circuits to rigid circuit boards and to 
	use ViaGrid as an interlayer in multilayer circuit boards, in a 
	cost effective manner for applications requiring dense circuitry.

	High Density Substrates.  The Company uses ViaGrid in the manufacture
	of high density substrates primarily for IC packages.  The material 
	properties of ViaGrid allow for the design of very dense circuitry 
	patterns which enable IC designers to improve the processing 
	capabilities of ICs by increasing the number of connections to 
	the silicon die in a similar or reduced amounts of physical space,
	while reducing the cost per connection. 

	The Company's high density substrates enhance signal speed as 
	traces are very smooth and fine while the dimensional stability 
	of the substrate is maintained.  These features allow the Company's 
	high density substrates to be designed into ball grid array, pin 
	grid array and other high density IC packages.

	The Company's strategy is to target the high density segment of 
	the market for IC packaging and multichip module applications 
	where circuit densities using ViaGrid can be reduced to as small 
	as 1 mil (.001") traces and vias.  As the market for high density 
	substrates develops and creates a demand for alternate manufacturing 
	capabilities, the Company will consider licensing the manufacturing 
	process of its high density substrates to leverage the market 
	demand for its ViaGrid product.

	Z-Link.  The Company produces a proprietary Z-Link adhesive product 
	that interconnects two electrical layers and is used in the 
	fabrication of multilayer circuits.  The Z-Link adhesive conducts
	electricity in only one direction, the "Z" or vertical direction.
	The Company, through the ARPA Consortium, is working to further 
	develop the Z-Link technology for use in multichip modules.   
	See "Research and Development".

	Flexible Printed Circuitry and Interconnect Systems.  The Company 
	manufactures flexible printed circuitry and interconnect systems 
	using traditional adhesive-based and emerging Novaclad laminates.
	The Company's flexible printed circuitry is typically manufactured 
	in an efficient roll-to-roll process from polyester or polyimide 
	film to which copper is laminated.  The laminate is processed 
	through various imaging, etching and plating processes and then 
	selectively protected with a dielectric covering to produce a 
	flexible printed circuit.  Automated screen printing and photo 
	imaging processes produce single-sided and double-sided flexible
	circuits, with lines and spaces down to 8 mils (.008") in width.
	The Company uses its emerging Novaclad laminate to produce high 
	performance flexible circuits primarily for demanding under-the-
	hood automotive applications which require greater circuit density,
	enhanced heat and chemical resistance and dimensional stability.
	In fiscal 1996, Novaclad-based products represented approximately 
	$15.6 million, or 13.7%, of the Company's net sales.

	All of the Company's flexible printed circuits are electronically 
	tested prior to shipping.  Additionally, the Company offers value-
	added processing, including surface mount assembly, wave soldering,
	connector and terminal staking, custom folding, stiffening, 
	application of pressure-sensitive adhesive and hand soldering, 
	in order to deliver a ready-to-use interconnect system to the end 
	customer.  The Company's targets applications where increased 
	performance, reduced size and weight, ability to accommodate
	packaging contours or a reduction in the number of assembly steps 
	is desired to reduce the customer's overall cost.  Flexible 
	printed circuitry and interconnect systems, including Novaclad-
	based products, accounted for $86.1 million, or 75.5%, of the 
	Company's net sales for fiscal 1996.

	Flexible Laminates.  The Company's flexible laminate products 
	consist of adhesive-based tapes and other flexible laminates used 
	in a variety of applications in the datacommunications market, 
	moisture barrier tape and flat cable tape used in automobile air 
	bag systems, splicing tape used in the manufacture of commercial 
	and industrial sandpaper belts and thermal insulating blankets 
	used primarily in the aerospace/defense market for satellites.
	The Company produces its flexible laminates using coating, 
	laminating and vacuum metalizing processes.  Coating involves 
	applying chemicals or adhesives to a thin flexible material 
	shield laminating consists of combining two or more materials 
	through application of heat and pressure.  Vacuum metalizing 
	typically involves placing a metal onto a thin film, foil or 
	fabric, by evaporation, sputtering or pattern deposition.  The 
	Company's flexible laminates provide extended flexibility, strength,
	conductivity, durability and heat dissipation.  The Company 
	consumes approximately one-half of the flexible laminates it 
	produces in the manufacture of flexible printed circuitry and 
	interconnect systems.
	Flexible laminates accounted for $24.6 million, or 21.6%, of the 
	Company's net sales for fiscal 1996.

	Miscellaneous Fabricated Products.  Based on the Company's 
	historical expertise in developing unique applications for a 
	variety of materials, the Company also designs and manufactures 
	special fabrications employing technical capabilities of 
	thermoforming, embossing, sealing, slitting and sheeting.  The 
	Company's fabricated products include static shielding materials, 
	insulation blankets, environmental closures, space inflatables 
	and multilayer insulation and are primarily for use in the 
	aerospace/defense and datacommunications markets.  Miscellaneous 
	fabricated products accounted for $3.2 million, or 2.8%, of the 
	Company's net sales for fiscal1996.

Sales and Customer Support

	The Company's sales and customer support efforts are directed by 
	nine lead product managers who are responsible for defining target 
	markets and customers, strategic product planning and new product
	introduction.  These product managers supervise a sales force of 
	13 account managers and over 60 engineers, technicians and 
	customer support personnel.  The Company employs a team approach 
	led by account managers who work extensively with the Company's 
	customers at the design stage, seeking to influence product 
	designs and applications, particularly in the automotive and 
	emerging datacommunications product areas.  The Company believes 
	that its close ties with customers at all stages of a project 
	distinguish it from many competitors who manufacture products 
	according to customer specifications without providing significant 
	design, technical or consulting services.  Account managers also 
	coordinate appropriate design, research and development, 
	engineering, order fulfillment and other personnel to support 
	customer needs.  To supplement its direct sales efforts, the 
	Company uses domestic and international distributors.  The 
	cornerstone of the Company's sales and customer support strategy 
	is to provide superior customer service, from prompt and 
	efficient technical support to rapid processing and delivery of 
	prototype and production orders through its electronic data 
	interchange and just-in-time delivery capabilities.

	Automotive Electronics.  In the automotive electronics market, the 
	Company has enjoyed increasing sales through its strategy of working 
	very closely with its customers beginning at the design stage.  In 
	1989, the Company opened a technical design and sales office in 
	Detroit, Michigan, which is currently staffed with 15 engineers, 
	designers and sales personnel in order to provide automotive 
	customers with comprehensive support.  In fiscal 1996, 12.2%, 
	13.6% and 8.6% of the Company's net sales went to multiple 
	sourcing locations of Ford Motor Company, Motorola, Inc. and 
	Molex Corporation, respectively.  The Company also provides 
	products, through first tier suppliers, to Chrysler and the U.S. 
	operation of Honda and Toyota.

	International.  The Company works with European manufacturers 
	and suppliers and has had a sales presence in Europe since 
	February 1992, including its current sales office in Frankfurt, 
	Germany.  The Company supplements its direct sales efforts with 
	independent manufacturers' representatives and distributors in 
	Europe and Asia, principally for flexible laminates.  The 
	Company's export sales during fiscal years 1994, 1995 and 1995 
	were $7.6 million, $11.1 million and $12.0 million, respectively.

Manufacturing

	The Company manufactures and assembles its products in Northfield, 
	Minnesota, Aberdeen and Britton, South Dakota, and Longmont, 
	Colorado.  The Company focuses on quality in its manufacturing 
	efforts, and believes that its vertically-integrated manufacturing 
	capabilities enhance its ability to control product quality.  The 
	Company has been a qualified supplier to various automotive 
	manufacturers for many years and has received ISO 9001 certification
	in our Minnesota facilities and ISO 9002 certification in our South 
	Dakota facilities.

	Current Products.  The Company uses a continuous roll-to-roll 
	manufacturing process to produce a large volume of high-quality 
	flexible laminates efficiently using coating, laminating and 
	vacuum metalizing techniques.  The Company consumes approximately 
	one-half of the flexible laminates it produces for the manufacture 
	of printed circuitry and interconnect systems.  The Company 
	converts flexible laminates into printed circuitry principally 
	by screen printing and etching an image onto a flexible laminate 
	and by photoimaging and developing circuit patterns onto flexible
	laminates.  The Company believes its flexible circuit manufacturing
	equipment at its Northfield, Minnesota, facilities has the capacity 
	to support substantial production increases with only selective 
	incremental capital investment.  The Company processes certain of 
	its flexible printed circuitry into interconnect systems.  Process 
	capabilities include surface mount assembly, wave soldering, 
	connector and terminal staking, custom folding, stiffening, 
	application of pressure-sensitive adhesive and hand soldering.
	Substantially all of these interconnect assembly functions are 
	performed at the Company's facility in Aberdeen and Britton, 
	South Dakota.

	Emerging Products.  To manufacture its emerging products, the 
	Company is constructing and equipping the Longmont facility, based 
	on the results of its testing and production activities at a pilot 
	plant in Longmont established in July 1994.  In August 1995, the 
	Company completed construction of the 102,000 square foot building 
	for the Longmont facility.  The manufacturing process at the 
	Longmont facility includes a series of integrated roll-to-roll 
	processes consisting of metalization, via generation, plating, 
	photoimaging, developing, selective etching and electrical testing.
	The initial annual production capacity of the new facility is 
	expected to be approximately 2.0 million square feet of Novaclad, 
	approximately 250,000 square feet of ViaGrid and approximately 
	500,000 square feet of high density substrates.  The facility 
	has been designed to allow for expansion in increments of 
	approximately 500,000 square feet of finished product, consisting 
	of varying amounts of ViaGrid and high density substrates.  The 
	Company's investment in the Longmont facility, including the site,
	building and equipment purchased or leased by the Company, is 
	expected to total approximately $45 million.

	China Joint Venture.  The Company currently has no foreign 
	manufacturing or assembly operations.  However, in August 1995, 
	the Company entered into various agreements to form a joint venture 
	in Jiujiang Jiangxi, China with Jiangxi Changjiang Chemical Plant 
	and Hong Kong Wah Hing (China) Development Co., Ltd.  Under the 
	agreements, the Company licensed certain technology to the joint 
	venture.  Providing certain technical support, the Company has 
	received a 20% ownership interest in the joint venture and will 
	receive cash payments totaling up to $900,000 upon completion of 
	certain milestones, and a royalty on products sold by the joint
	venture.  The joint venture is being established to manufacture 
	flexible adhesive-based laminates and associated cover film tapes 
	in China.  Under the terms of the agreements, the joint venture 
	will market these products in China, Taiwan, Hong Kong and Macau 
	and the Company will market the products produced by the joint
	venture in all other markets.  The Company expects manufacturing 
	under this joint venture to commence in late fiscal 1997.

Research and Development

	Sheldahl's recent research and development efforts, through its 38-person 
	research and development team, have focused on opportunities presented by 
	the demand for higher density and thinner packaging for electronic devices.
	The Company has also identified within its core technologies other 
	opportunities for participation in the trend towards miniaturization 
	within the electronics industry and has pursued these opportunities 
	independently and through various consortia.

	In fiscal 1994, the ARPA Consortium was organized to develop a 
	high-density, low-cost multichip module utilizing Novaclad as the 
	base material.  The ARPA Consortium is comprised of a vertically-
	integrated team of non-	competing companies, including four 
	systems integrators (Silicon Graphics, Inc., Wireless Access, Inc.,
	Hughes Missile Systems Company and Delco Electronics), a materials 
	manufacturer (Sheldahl) and an assembly company (Jabil Circuit, 
	Inc.).  The ARPA Consortium has achieved various milestones,
	including validation of each of the essential processes for 
	production of the Company's high-density substrates as a base 
	material for low-cost multichip modules.  In September 1995, ARPA 
	agreed to extend its commitment to the consortium for the expansion 
	of development of this technology using the Company's Z-Link 
	adhesive or other multilayering technologies. In addition to the 
	ARPA Consortium, the Company also participates in various other 
	consortia, including consortia managed by National Semiconductor 
	and formed to develop (i) low-cost plastic packaging and (ii) an 
	IC attachment technique for a silicon die without using wires, 
	known as a "flip chip".

	In August 1994, Sheldahl acquired a significant minority ownership 
	interest in Sidrabe Joint Stock Company ("Sidrabe"), a newly 
	privatized vacuum deposition developmental company located in 
	Riga, Latvia for an investment of $453,000.  Sidrabe historically 
	was a developmental agency for the former Soviet Union's military 
	and aerospace programs, specializing in the design and production 
	of vacuum deposition equipment.  With the Company's ownership 
	position in Sidrabe, the Company received worldwide rights to some 
	key elements of Sidrabe technology and the Company has access to 
	Sidrabe's scientific and technical personnel with extensive 
	product and process expertise.  The Company has also purchased 
	certain manufacturing equipment from Sidrabe.

Suppliers

	The Company qualifies strategic suppliers through a Vendor 
	Certification Program which limits the number of suppliers to those
	who provide the Company with the best total value and quality.  The 
	Company closely monitors product quality and delivery schedules.  
	During the last five years, the Company has not experienced 
	significant shortages of raw materials.  The Company currently 
	depends, however, on one supplier for the polyimide film which 
	serves as a base for the Company's Novaclad, ViaGrid and high 
	density substrate products.  This supplier currently manufactures 
	this polyimide film at a single manufacturing facility.  In 
	addition, the Company has experienced delays in delivery of certain 
	laser via generation equipment currently available from only one 
	supplier. Certain other materials and plating processes used by 
	the Company in the manufacture of its products are currently 
	obtained from single sources.

Competition

	The Company's business is highly competitive with principal 
	competitive factors being product quality, performance, price 
	and service.  The Company believes its vertical integration, 
	which allows it to control product quality and manufacturing 
	efficiencies better than many of its competitors, is a competitive 
	advantage.  Sheldahl's competitors include materials suppliers, 
	flexible and rigid circuit manufacturers, as well as electronics
	manufacturers who product their own materials and interconnect 
	systems. Some of the Company's competitors have substantially 
	greater financial and other resources than the Company.  The 
	Company's primary competitors with respect to its flexible printed 
	circuitry and interconnect systems include Pressac Limited (a U.K. 
	company) and Parlex Corp. in the automotive electronics market 
	and Mektec corp., Fujikura Ltd. (a Japanese company) and ADFlex 
	Solutions, Inc. in the datacommunications market.  The Company's
	primary competition for its flexible laminate products include 
	Rogers Corporation and GTS Flexible Materials, Ltd. (a U.K. company).

	The Company's Novaclad, ViaGrid and high density substrates compete 
	with substrates produced through several alternative processes.  
	These competing products include single-sided, polyimide-based, 
	etched copper laminate produced using various methods of production 
	by Minnesota Mining and Manufacturing, Inc., International 
	Business Machines Corporation and several Japanese companies.  
	The Company believes the production processes required for each 
	of these competing substrates, which include copper sputtering, 
	manual drilling and traditional etching techniques, are inherently 
	more expensive than the Company's method of production and result 
	in products that are not as easily utilized as the Company's 
	emerging products in the design and production of higher-density 
	IC packages.  The Company's emerging products also compete with 
	ceramic packaging products produced by companies such as Coors 
	Electronic and Kyocera of Japan, although the Company believes 
	these products are more expensive than the Company's substrate 
	products, and with BTU resin-based substrates supplied by companies 
	such as produced by Amkor Electronics and Tessera, which the 
	Company believes are limited in their ability to accommodate 
	increased circuit densities beyond current levels.  The Company 
	expects these and other competitors will continue to refine their 
	processes or develop new products that will compete on the basis
	of cost and performance with the Company's emerging products.
Backlog

	The Company's backlog consists of those orders for which the Company 
	has delivery dates.  Automotive customers typically provide for 
	four to six weeks of committed shipments while datacommunications 
	customers generally provide for up to eight weeks of committed 
	shipments.  The Company's backlog of unshipped orders as of 
	August 30, 1996, and September 1, 1995, was approximately $26.1 
	million and $26.2 million, respectively.  Generally, most orders 
	in backlog are shipped during the following three months.  Because 
	of the Company's quick turn of orders to work-in-process, the 
	timing of orders, delivery intervals, customer and product mix 
	and the possibility of customer changes in delivery schedules, 
	the Company's backlog at any particular date may not be 
	representative of actual sales for any succeeding period.

Proprietary Technology

	The Company owns three united States patents for Novaclad and the 
	processes for making Novaclad and five additional applications are 
	pending.  Applications are pending for foreign patents on Novaclad 
	in Japan, Canada and the European Patent Office.  In addition, the 
	Company has one United States patent and one Canadian patent 
	elating to its Z-Link adhesive product and has been informed that 
	two additional United States patents relating to Z-Link have been 
	allowed.  Federal trademark registrations have been obtained on 
	Novaclad(r), ViaGrid(r), Flexbase(r), Novaflex(r), and Z-Link(r).
	Sheldahl also relies on internal security and secrecy measures and 
	on confidentiality agreements for protection of trade secrets and 
	proprietary know-how.  There can be no assurance that Sheldahl's
	efforts to protect its intellectual property will be effective 
	to prevent misappropriation or that others may not independently 
	develop similar technology.  The Company believes that it 
	possesses adequate proprietary rights to the technology involved 
	in its products and that its products, trademarks and other 
	intellectual property rights do not infringe upon the proprietary 
	rights of third parties.

	The Company was named as a defendant in a patent infringement 
	matter regarding its Novaclad products which was dismissed for 
	lack of jurisdiction in January 1994 and which has not been 
	commenced elsewhere.  There can be no assurance that this 
	plaintiff or others will not bring other actions again the Company.
	The Company is also aware of a patent which may cover certain 
	plated through holes of double-sided circuits made of the Company's 
	Novaclad materials.  Although no claims have been made against the 
	company under this patent, the owner of the patent may attempt to
	construe the patent broadly enough to cover certain Novaclad 
	products manufactured currently or in the future by the Company.
	The Company believes that prior commercial art and conventional method
	would allow the Company to prevail in the event any such claim is 
	made under this patent. Any action commenced by or against the 
	Company could be time consuming and expensive and could result 
	in requiring the Company to enter into a license agreement or 
	cease manufacture of any products ultimately determined to 
	infringe such patent.

Environmental Regulations

	Sheldahl is subject to various federal, state and local 
	environmental laws relating to the Company's operations.  The 
	Company's manufacturing and assembly facilities are registered 
	with the U.S. Environmental Protection Agency and are licensed, 
	where required, by state and local authorities.  The Company has 
	agreements with licensed hazardous waste transportation and 
	disposal companies for transportation and disposal of its 
	hazardous wastes generated at its facilities.  The Longmont 
	facility has been specifically designed to reduce water usage 
	in the manufacturing process and employs a sophisticated waste 
	treatment system intended to substantially reduce discharge streams.
	Compliance with federal and state environmental laws and regulations
	did not have a material effect on the Company's capital 
	expenditures, earnings or competitive position during fiscal 1996.
	Similarly, fiscal 1997 capital expenditures to comply with such 
	laws and regulations are not expected to be material.  The Company 
	believes it is in material compliance with federal and state 
	environmental laws and regulations.

Employees

	As of October 1996, the Company employed approximately 1,087 people 
	in the United States and Europe, including 910 in production, 80 in 
	sales, marketing, application engineering and customer support, 42 
	in research and development and 55 in administration.  The 
	production staff consists principally of full-time workers employed 
	in the Company's four currently operating manufacturing and assembly 
	plants.  In Northfield, Minnesota, production workers 
	(approximately 427) are represented by the Union of Needletrade, 
	Industrial and Textile Employees, formerly the Amalgamated Clothing 
	and Textile Workers Union (the "Union"), which has been the 
	bargaining agent since 1963.  The Company has a three-year 
	collective bargaining agreement with the Union which expires in 
	November 1997.  The Company has never experienced a work stoppage 
	and believes that its employee relations are good.

Item 2.  Properties.

	The Company owns two manufacturing facilities totaling 305,000 square 
	feet and a 20,000 square foot administration and sales support office 
	in Northfield, Minnesota.  The Company also owns the 102,000 square 
	foot facility in Longmont, Colorado.  The Company leases a 30,000 
	square foot assembly facility in Aberdeen, South Dakota and owns a 
	30,000 square foot assembly facility in Britton, South Dakota.  The
	Company also leases a 3,000 square foot technical sales and design 
	office in Detroit, Michigan.  Management believes that all 
	facilities currently in use are generally in good condition, well-
	maintained and adequate for their current operations. The Company 
	also leases a production facility in Irvine, California which 
	is has subleased.

Item 3.  Legal Proceedings

	The Company's operations expose it to the risk of certain legal and 
	environmental claims in the normal course of business.  The Company 
	believes that these matters will not have a material adverse effect 
	on the Company's results of operations or financial condition.

Item 4.  Submission of Matters to a Vote of Securities Holders

	None

Item 4A.  Executive Officers

	The executive officers of the Company are as follows:

Name			Age		Position

James S. Womack		68		Chairman of the Board and Director

James E. Donaghy	62		President, Chief Executive Officer 
					and Director

Edward L. Lundstrom	46		Executive Vice President

John V. McManus		49		Vice President - Finance and 
					Assistant Secretary

Beverly M. Brumbaugh	61		Vice President - Human Resources 
					and Corporate Excellence

Keith L. Casson		57		Vice President - Micro Products

Gregory D. Closser	44		Vice President - Flexible Interconnects

Roger D. Quam		50		Vice President - Composite Materials

Ronald G. Rumpsa	61		Vice President - Materials

Gerald E. Magnuson	65		Secretary and Director

James S. Womack joined the Company in 1956 and served as President of the 
Company from 1971 to 1988 and as Chief Executive Officer from 1971 to 1991. 
He became a director of the Company in 1968 and was elected Chairman of the 
Board in 1988.  Mr. Womack is a director of General Securities, Inc. and 
Zytec Corp.

James E. Donaghy joined the Company in 1988 as its President and Chief 
Operating Officer.  He has served as President and Chief Executive Officer 
since 1991, and has been a director of the Company since 1988.  Between 
1958 and 1988, Mr. Donaghy held various positions at Dupont Company, most 
recently as Director of Planning and Development for Dupont Electronics 
Group.  Mr. Donaghy's experiences with Dupont Company included worldwide 
responsibility for its connector and electronic materials business.  Mr. 
Donaghy is a director of Hutchinson Technology, Inc. and the Institute of 
Printed Circuitry.

Edward L. Lundstrom joined the Company in 1976 and has served in several 
capacities since that time, including Vice President, Treasurer, General 
Manager of Circuit Division and Vice President - Sales and Marketing.  He 
has been Executive Vice President since September 1995, with 
responsibilities for corporate marketing, core process redesign, information 
systems and new business development, with particular emphasis on geographic
areas outside the United States.  Mr. Lundstrom is a director of Research, 
Inc.

John V. McManus joined the Company in 1972 and has served as Vice President
- - Finance and Assistant Secretary since 1991.  From 1987 to 1991, he served 
as Corporate Controller.

Beverly M. Brumbaugh joined the Company in 1961 and has served in several 
capacities since that time, including Director of Human Resources and 
Industrial Relations.  He has been Vice President - Human Resources and 
Corporate Excellence since 1989.  Mr. Brumbaugh is the former chairman of 
the American Electronics Association Minnesota Council for Quality.  He is 
currently a member of the Manufactures Alliance where he serves on both the 
Human Resources and Quality Councils.

Keith L. Casson joined the Company in 1968 and has served as Vice President
- - Micro Products since September 1996.  He has served as Vice President - 
Research and Development since September 1993, with responsibility since 
September 1995 for deployment of the emerging products in the Longmont 
facility.  Prior to September 1993, he held various positions with the 
Company, including Automotive/Consumer Market Manager, Director of Business
Development and Director of Interconnect Systems Research and Development.
Mr. Casson is a member of the Institute of Printed Circuitry.

Gregory D. Closser joined the Company in 1978 and has served as Vice 
President - Flexible Interconnects since September 1995.  From 1983 to 
1989, he held the position of Quality Director.  From 1989 to 1993, he was 
the General Manager of Interconnect Manufacturing.  From 1993 to 1995 he 
was Vice President - Interconnect Operations.

Roger D. Quam joined the Company in 1969 and has served in several 
capacities since that time, including Business Manager of Engineered 
Products and Vice President of Engineered products.  He has served as 
Vice President - Composite Materials since September 1995, previously 
servicing as Vice President - Materials Operations and Aviation Products 
beginning in 1988.

Ronald G. Rumpsa joined the company in 1989 and has served as Vice President
- - Materials since September 1993.  From 1989 to 1993, he held the position 
of Corporate Director of Materials.

Gerald E. Magnuson has served as Secretary of the Company since 1962 and 
a director since 1975.  Mr. Magnuson is Of Counsel to the law firm of 
Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota, and a director of 
Munsingwear, Inc., Research, Incorporated and Washington Scientific 
Industries, Inc.


Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

	The Common Stock is listed on the Nasdaq National Market under the 
	symbol "SHEL".  The following table sets forth the high and low sales 
	prices of the Common Stock for the period indicated, as reported on 
	the Nasdaq National Market.

							High	Low

	Fiscal Year Ended September 1, 1995:

	First Quarter					14	10 1/4
	Second Quarter					15 1/2	11
	Third Quarter					15 1/4	10 1/2
	Fourth Quarter					19 1/4	11 3/4

	Fiscal Year Ended August 30, 1996:

	First Quarter					21 1/4	14 3/4
	Second Quarter					23 3/8	16 1/4
	Third Quarter					31 1/8	18 1/8
	Fourth Quarter					28 1/2	15 7/8

	On October 24, 1996, the last reported sales price of the Common Stock 
	was $15 1/2.  As of this date, there were approximately 1,500 record 
	holders of the Company's Common Stock and an estimated additional 
	2,600 shareholders who held beneficial interests in shares of 
	Common Stock registered in nominee names of banks and brokerages
	houses.

	Pursuant to its current credit agreement, the Company is restricted 
	from declaring or paying cash dividends without the consent of the 
	Company's lenders.   The Company has never declared or paid any 
	dividends on its Common Stock.  The Company currently intends to 
	retain any earnings for use in its operations and expansion of its 
	business and therefore does not anticipate paying any cash dividends 
	in the foreseeable future.

Item 6.  Selected Financial Data

	The following selected consolidated financial data should be read in 
	conjunction with the Company's Consolidated Financial Statements and 
	notes thereto included elsewhere herein the "Management's Discussion 
	and Analysis of Financial condition and Results of Operations".  The 
	consolidated statements of operations data presented below as of 
	and for the fiscal years ended September 2, 1994, September 1, 1995 
	and August 30, 1996 and the consolidated balance sheet data as of 
	September 1, 1995 and August 30, 1996 have been derived from the 
	Company's Consolidated Financial Statements included elsewhere in 
	this report, which have been audited by Arthur Andersen LLP, 
	independent public accountants.  The statements of operations
	data set forth below for the years ended August 28, 1992 and 
	August 27, 1993 and the balance sheet data set forth below at 
	August 28, 1992, August 27, 1993 and September 2, 1994 are 
	derived from audited financial statements not included herein.

							Fiscal year ended
					(In thousands, except per share data)

					8/28/92	8/27/93	9/2/94	9/1/95	8/30/96

	Statements of Operations Data:
	Net sales			$83,977	$82,102	$88,346	$95,216	$114,120
	Cost of sales			 68,476	 66,360	 69,273	 74,752	  89,171
					 ______	 ______	 ______ ______	  ______
	Gross profit			 15,501	 15,742	 19,073 20,464	  24,949
					______	______	______	______	  ______
	Expenses:
	  Sales and marketing		  7,648	  7,274	  8,014  9,090	   9,254
	  General and administrative	  4,090	  4,029	  4,153	 3,895	   5,129
	  Research and development	  2,171	  1,929	  2,366	 2,270	   2,755
	  Interest	  		  1,366	  1,023	    946	    875	     539
					 ______	 ______	 ______	 ______	  ______
	    Total expenses		 15,275	 14,255	 15,479	 16,130	  17,677
					 ______	 ______	 ______	 ______	  ______
	Income before continuing 
	  operations Before provision
	  for income taxes		    226	1  ,487	  3,594	  4,334	   7,272
	Provision for income taxes	     52	     50	    800	  1,200	   2,500
					 ______	 ______	 ______	 ______	  ______
	Income from continuing 
	  operations			    174	  1,437	  2,794	  3,134	   4,772
					 ======	 ======	 ======	 ======	  ======
	Cumulative effect of change 
	  in method of Accounting for
	  income taxes(1)		      -	     -	  1,422	      -	       -
	Cumulative effect of change 
	  in method of accounting for
	  post retirement benefits(2)	      -	     -	  (875)	      -	       -
	Loss from discontinued 
	  operation(3)	     		      -	     -	  (525)	      -	       -
					 ______	 ______	 ______	 ______	  ______
	Net income (loss)		   $174	 $1,437	 $2,816	 $3,134	  $4,772
					 ______	 ______	 ______	 ______	  ______
	Income (loss) per share:
	  Continuing operations		  $0.04	  $0.29	  $0.52	  $0.45	   $0.55
	  Effect of accounting changes
	   for Income taxes(1)		      -	      -     .26	      -	       -
	  Effect of accounting changes
	   for post retirement 
	   benefits(2)			      -	      -    (.16)      -	       -
	Discontinued operations(3)	      -	      -    (.10)      -	       -
					 ______	 ______	 ______	 ______	  ______
	Net income (loss) per share	  $0.04	  $0.29	  $0.29	  $0.52	   $0.55
					 ======	 ======	 ======	 ======	  ======
	Weighted average common 
	  shares and common share
	  equivalents outstanding	  4,829	 4,950	 5,418	 6,925	  8,686
					 ======	======	======	======	 ======

	Fiscal year ended

					8/28/92	8/27/93	9/2/94	9/1/95	8/30/96

Balance Sheet Data:
	Working capital			$10,708	$11,314	$15,942	$16,332	$ 22,051
	Total assets			 42,425	 44,783	 60,320	 94,186	 115,887
	Long-term debt, excluding
	  current portion		  9,960	 11,433	  7,963	 33,864	  21,858
	Total shareholders'
	  investment			 17,937  19,448	 36,482	 40,952	  75,337
____________________

	(1)	Effective August 28, 1993, the Company adopted Statement of 
		Financial Accounting Standards No. 109, "Accounting for Income 
		Taxes".  See Note 6 of Notes to Consolidated Financial 
		Statements.

	(2)	Effective August 28, 1993, the Company adopted Statement of 
		Financial Accounting Standards no. 106, "Employers' Accounting 
		for Post Retirement Benefits Other Than Pensions".  See Note 7 
		of Notes to consolidated Financial Statements.

	(3)	In fiscal 1994, the Company increased its reserve for 
		discontinued operation by $525,000, net of income tax benefits.
		See Note 8 of Notes to Consolidated Financial Statements.

Item 7.	Management's Discussion and Analysis of Financial Condition and Results 
	of Operations

General

	Sheldahl is a leading producer of advanced laminate materials and 
	materials-based components, primarily for sale to the automotive 
	electronics and datacommunications markets.  The Company's basic 
	materials technology was originally developed for the United States 
	space program.

	In 1989, the Company developed a business strategy focused on achieving 
	a leading position supplying the automotive electronics market with 
	flexible interconnects based on the Company's core materials 
	technologies.  
	Management believed the automotive market provided growth opportunities 
	due to increasing electronic content of automobiles as manufacturers 
	focused on enhancing vehicle performance while reducing weight and 
	overall vehicle costs.  The Company targets specific automotive 
	customers that it has identified as leaders in the drive to increase 
	the electronic content of automobiles.  As a result of this business 
	strategy, the Company's sales to automotive customers increased from 
	$13.9 million in fiscal 1989 to $79.0 million in fiscal 1996, a 
	compound annual growth rate of 27%, while the Company's sales to 
	other markets declined from $57.0 million in fiscal 1989 to $35.1 
	million in fiscal 1996.

	Concurrent with the Company's strategic shift to focus on the 
	automotive electronics market in 1989, Sheldahl began to focus 
	its research and development expenditures on new opportunities.  
	As a result, in 1992 the Company patented its Novaclad high 
	performance adhesiveless flexible laminate.  The features of Novaclad 
	allow circuitry designers to increase circuit density for integrated 
	circuit (IC) packaging and other interconnect solutions.  The Company 
	also developed ViaGrid, a higher-value form of Novaclad with pre-
	drilled small holes that allow printed circuit manufacturers to 
	produce flexible interconnects that are up to six times more dense 
	than current technology.  The Company also uses ViaGrid in the 
	manufacture of chip-carrier substrates primarily for IC packages.

	In fiscal 1994, a consortium was organized by the Advanced Research 
	Projects Agency (ARPA) of the U.S. Department of Commerce to develop 
	a high-density, low-cost multichip module utilizing Novaclad as the 
	substrate material.  The ARPA consortium, comprised of a vertically-
	integrated team of non-competing companies, has achieved various 
	milestones, including validation of each of the essential processes 
	for production of the Company's chip-carrier substrates as the base 
	material for low-cost multichip modules.

	In June 1994, with the assistance of funding from ARPA, the Company 
	established a prototype production facility, and late in calendar year 
	1994, began construction of its new manufacturing facility in 
	Longmont, Colorado, for the production of Novaclad, ViaGrid and chip-
	carrier substrates (micro products) in commercial quantities.  The 
	Company expected commercial production to begin at the Longmont 
	facility by April 1996.  

	However, a variety of factors, including equipment delivery delays, 
	product specification changes, and supporting process issues, resulted 
	in a nine-month delay in the full production ramp-up, which is now 
	expected to commence in the second quarter of fiscal 1997.  During 
	the delay, the Company has been working with leading customers, 
	including Texas Instruments, ASAT, Inc. and Motorola, in production 
	validation and product acceptance.

	The adverse financial impact of the production delay at the Micro 
	Products facility, combined with the resulting need to continue 
	operation of the prototype facility, has been and will continue to 
	be significant.  Net of ARPA consortium funding, the expenses of the 
	Company's Micro Products facility totaled $4.2 million in fiscal 1996.
	Once fully operational, projected expenses, including depreciation, 
	are expected to approach $4 million per quarter.  Therefore, volume 
	production and the related sales revenue upon successful customer 
	acceptance will be essential to reduce the impact of the ongoing 
	operating costs of the Company's Micro Products division.

	In total, the Company used ARPA consortium funding to offset expenses 
	of $3.1 million, $5.0 million, and $3.2 million in fiscal years 1994,
	1995, and 1996, respectively.  Based on remaining milestones, 
	additional funding assistance from the ARPA consortium and another 
	consortium related to low-cost plastic packaging and flip chips is
	expected to total approximately $700,000 through August 1997.

	The Company expects to continue to make substantial investments in 
	production capabilities to support its strategy of increasing 
	penetration of the automotive electronics market and commercializing 
	its emerging Novaclad, ViaGrid and chip-carrier substrate products 
	for the datacommunications market.  During fiscal years 1994, 1995, 
	and 1996, the Company made capital expenditures of approximately 
	$26.0 million to increase the production capabilities of its current 
	operations.  Through fiscal 1996, the Company made capital expenditures 
	exceeding $45.0 million in connection with the Micro Products
	production and pilot facilities.

	The Company has capitalized expenditures related to building, equipping 
	and financing the new production facility; however, costs to operate the 
	pilot facility, net of the ARPA consortium funding, have been charged to 
	operations as incurred.

	On September 5, 1995, the Company sold its aviation lighting product 
	line to The B.F.Goodrich Company for approximately $2.6 million, 
	enabling the Company to focus on its emerging products, flexible 
	interconnects and flexible laminates operations.  The aviation 
	lighting product line generated sales of $3.6 million in fiscal year 
	1995 and was insignificant to the overall operations of the Company.

Results of Operations

	The following table shows the percentage of net sales represented by 
	certain line items from the Company's consolidated statements of 
	operations for the periods indicated:

	Fiscal Years Ended

				August 30,	September 1,	September 2,
				   1996		    1995	   1994

	Net sales			100.0%		100.0%		100.0%
	Cost of sales	    		 78.1	   	 78.5	     	 78.4
					______		______		______
	Gross profit	   		 21.9	   	 21.5	     	 21.6
					______		______		______
	Expenses:
	   S & M			  8.1		  9.5		  9.1
	   G & A			  4.5		  4.1		  4.7
	   R & D			  2.4		  2.4		  2.6
	   Interest 	      		   .5	     	   .9		  1.1
					______		______		______
	Total expenses	  		 15.5	 	 16.9	  	 17.5
					______		______		______
	Income from continuing 
	  operations before provision
	  for income taxes		  6.4		  4.6		  4.1
	Provision for income taxes	  2.2	     	  1.3	     	  1.0
					______		______		______
	Income from continuing 
	  operations	 		  4.2%	  	  3.3%	 	  3.1%
					======		======		======

Net Sales.   The table below shows, for the periods indicated, the Company's 
sales to various markets (in thousands):

						Fiscal Years Ended

				August 30, 1996	Sept 1, 1995	Sept 2, 1994

				Amount	%	Amount	%	Amount	%	

Automotive			$78,984	69.2%	$51,919	 54.5%	$46,737	 52.9%
Datacommunications		 11,193	 9.8%	 16,860	 17.7%	 18,380  20.8%
Aerospace/Defense		 10,585	 9.3%	 12,150	 12.8%	 10,452	 11.8%
Industrial			  8,843	 7.7%	  8,221	  8.6%	  7,438	  8.4%
Consumer	  		  4,515	 4.0%	  6,066	  6.4%	  5,339	  6.1%
				_______	______	______	______	______	______
Net sales		       $114,120	100.0%	$95,216	100.0%	$88,346	100.0%
				=======	======	======	======	======	======

	The Company's net sales increased $18.9 million, or 20%, in fiscal 1996 
	and $6.9 million, or 8%, in fiscal 1995.  These increases resulted 
	primarily from increased sales to automotive customers and were 
	partially offset by decreased sales to datacommunication and aerospace/
	defense customers.  The automotive market sales increased $27.1 million,
	or 52%, in fiscal 1996 and $5.2 million, or 11%, in fiscal 1995.  
	These increases were due to a continued successful effort to penetrate 
	the automotive electronics market through the use of creatively 
	designed flexible interconnects and laminate materials in dashboard 
	instrumentation, on-board computers in the engine compartment, air 
	bags, and power distribution units.  The growth rate of automotive-
	related sales declined in fiscal 1995 from previous years, as the 
	Company's customers delayed production of certain new automotive 
	components.  This caused the Company to delay production start-up of 
	certain	major new flexible interconnect products.  The Company enjoys 
	a favorable position in targeted segments of the automotive market, 
	and has increased sales revenue in that market at an average annually 
	compounded rate of over 27% since 1989.  Automotive market sales 
	represented 69% of Company sales in 1996 compared to 55% in 1995.  

	Datacommunications sales declined $5.7 million, or 34%, in fiscal 1996 
	and $1.5 million, or 8%, in fiscal 1995.  Declining sales to the 
	datacommunications market were primarily due to the Company's decision 
	to focus more of its sales and marketing efforts on automotive 
	applications.  Flexible interconnect sales accounted for 84% of the 
	decline in fiscal 1996 as printer and laptop computer sales slowed.  
	Laminate material sales to the datacommunications market declined 
	$800,000 in fiscal 1996.  After adjusting for the sale of the Company's 
	aviation lighting products line, the Company's sales to the aerospace/
	defense market increased $2.1 million, or 24%, from $8.5 million in 
	fiscal 1995 to $10.6 million in fiscal 1996.  Aerospace/defense sales 
	for fiscal 1995 were up $1.6 million, or 24%, due to an increased 
	demand for multilayer insulation blankets for satellites.  The 
	aerospace sales growth reflects the use of the Company's core 
	materials technology in thermal control applications such as 
	spacecraft and commercial satellite insulation.

	Industrial and consumer market sales for 1996 declined slightly, from 
	$14.3 million in fiscal 1995 to $13.4 million in fiscal 1996, after 
	increasing slightly from $12.8 million in fiscal 1994.  Although 
	Sheldahl has not specifically focused on these markets, the Company's 
	laminate materials and flexible interconnect products have developed 
	small but well-established market niches for specific applications 
	over an extended period of time.  

	The table below shows, for periods indicated, the Company's sales by 
	major product lines (in thousands).

	Fiscal Years Ended

				August 30, 1996	Sept 1, 1995	Sept 2, 1994

				Amount	%	Amount	%	Amount	%	

Flexible interconnects		$86,146	 75.5%	$64,398	 67.6%	$61,566	 69.7%
Laminate materials		 24,627	 21.6%	 24,067	 25.3%	 21,264	 24.1%
Fabricated devices		  3,182	  2.8%	  3,135	  3.3%	  1,963	  2.2%
Aviation components	              -	     -	  3,616	  3.8%	  3,553	  4.0%
Chip-carrier substrates		    165	   .1%	      -	     -	      -	     -
				_______	______	______	______	______	______
Total			       $114,120	100.0%	$95,216	100.0%	$88,346	100.0%
				=======	======	======	======	======	======

	The Company's sales growth in fiscal 1996 reflects a $21.7 million, or 
	34%, increase in flexible interconnect sales.  Flexible interconnect 
	sales comprised 75% of total revenue in 1996, compared with 68% in 
	1995.  Sales of laminate materials remained steady at $24.6 million 
	in fiscal 1996, or 22% of total revenue.  At $3.2 million, sales of 
	fabricated devices also remained relatively constant in fiscal 1996. 
	Sales of chip-carrier substrates totaled $165,000 in fiscal 1996, 
	reflecting sales of prototype and pre-qualification product from 
	the Company's Micro Products pilot facility.

	Gross Profit.  The Company's gross profit increased $4.5 million, or 
	22%, in fiscal 1996 and $1.4 million, or 7%, in fiscal 1995.  As a 
	percent of sales, gross profit for fiscal years 1996, 1995, and 1994 
	was relatively consistent at 22%. In fiscal 1996, gross profit was
	adversely affected by $4.0 million in operating costs for the Micro 
	Products division in Longmont.  Without these costs, which provided 
	virtually no revenues, gross margin would have been $28.9 million, 
	or 25% of sales.  The increase in gross profit in fiscal years 1996 
	and 1995 was related to increased flexible interconnect sales, 
	primarily to the automotive market, as well as improved material 
	yield and labor productivity made possible by the Company's 
	substantial capital investments in its core product lines over the 
	last several years.  The Company's gross profit for its core product 
	lines, including laminate materials and flexible interconnects, 
	increased $8.7 million on a sales increase of $18.7 million.  This 
	means that $0.46 for each added sales dollar contributed to improving 
	gross profit in 1996, compared to $0.26 in fiscal 1995 on sales 
	growth of $6.8 million.

	Funding received by the Company from the ARPA consortium is reflected 
	as a reduction to cost of sales and totaled $1.8 million, $3.8 million,
	and $1.8 million in fiscal years 1996, 1995, and 1994, respectively.
	The awarding of these funds was based on the completion of various 
	milestones, including process validation for each essential process 
	in the production of chip-carrier substrates for IC packages using 
	the Company's patented Novaclad material.

	Sales and Marketing Expenses.  Sales and marketing expenses increased 
	$164,000, or 2%, in fiscal 1996 and $1.1 million, or 13%, in fiscal 
	1995.  The increased costs to support the Company's micro products 
	have been offset by sales expense savings related to the September 
	1995 sale of the Hoskins aviation lighting product line.  As a 
	percentage of net sales, sales and marketing expenses were 8% in 
	fiscal 1996, 10% in fiscal 1995, and 9% in fiscal 1994.

	General and Administrative Expenses.  Gross general and administrative 
	expenses increased $836,000, or 18%, to $5.4 million in fiscal 1996 and 
	decreased $25,000, or 1%, to $4.6 million in fiscal 1995.  ARPA credits 
	applied to general and administrative expenses were $265,000, $663,000, 
	and $430,000 in fiscal years 1996, 1995, and 1994, respectively, 
	resulting in net general and administrative expenses of $5.1 million, 
	$3.9 million, and $4.2 million in fiscal years 1996, 1995, and 1994, 
	respectively.

	The table below shows, for the periods indicated, the Company's general 
	and administrative expenses (in thousands):

						Fiscal Years Ended

				August 30,	September 1,	September 2,
				   1996		    1995	    1994

Gross expense			$ 5,394		$ 4,558		$ 4,583
ARPA funding	   		  (265)	   	  (663)	  	  (430)
				 ______	 	 ______		 ______
Net expense			$ 5,129		$ 3,895		$ 4,153
				 ======		 ======		 ======
Percent of sales		   4.5%		   4.1%		   4.7%

	The increase in general and administrative expenses in fiscal 1996 
	reflects an increase in professional services, miscellaneous employee 
	benefits, and incentive compensation expense.

	Research and Development Expenses.  Gross research and development 
	expenses increased $1.1 million, or 39%, in fiscal 1996 to $4.1 
	million and decreased $237,000, or 8%, in fiscal 1995. ARPA credits 
	applied to research and development expenses were $1.3 million, 
	$611,000, and $752,000 in fiscal years 1996, 1995, and 1994, 
	respectively, resulting in net research and development expenses 
	of $2.8 million, $2.3 million, and $2.4 million in fiscal years 1996,
	1995, and 1994, respectively.  The level of the ARPA consortium 
	funding will be significantly reduced in fiscal 1997 as consortium 
	efforts are completed.

	The table below shows, for the periods indicated, the Company's research 
	and development expenses (in thousands):

						Fiscal Years Ended

				August 30,	September 1,	September 2,
				   1996		    1995	   1994

Gross expense			$ 4,010		$ 2,881		$ 3,118
ARPA funding	 		(1,255)	   	  (611)	   	  (752)
				 ______		 ______	  	 ______
Net expense			$ 2,755		$ 2,270		$ 2,366
				 ======		 ======		 ======
Percent of sales		   2.4%		   2.4%		   2.6%

	The increase in gross research and development expenses in fiscal 1996 
	was principally due to additional staffing, material testing, travel, 
	and consulting and professional costs, primarily supporting the start-
	up of the Company's Micro Products division and related ARPA consortium
	milestones.

	Interest Expense.  Gross interest expense increased to $2.4 million in 
	fiscal 1996 from $2.1 million in fiscal 1995 and $1.4 million in fiscal 
	1994, as the Company's borrowing to support capital expenditures 
	increased.

	The following shows a breakdown of interest expense for the fiscal years 
	indicated (in thousands):

				August 30,	September 1,	September 2,
				   1996		    1995	   1994

Gross interest			$ 2,388		$ 2,090		$ 1,351
Capitalized interest		(1,605)	   	(1,215)		  (405)
Investment income	  	  (244)	              -	              -
				 ______		 ______		 ______
Net expense			$   539		$   875		$   946
				 ======		 ======		 ======
Percent of sales		    .5%		    .9%		   1.1%

	Capitalized interest increased from $405,000 in fiscal 1994 to $1.2 
	million	in fiscal 1995 and $1.6 million in fiscal 1996.  The Company's 
	capitalized interest costs during fiscal years 1995 and 1996 were 
	related to capital investments for production equipment processes to 
	enhance capacity and the construction of the Micro Products plant and 
	equipment.  On November 21, 1995, the Company completed a secondary 
	public offering of common stock from which it received net proceeds 
	of $29.0 million. The net proceeds were used to reduce outstanding 
	indebtedness, with the remainder invested in high-grade, short-term 
	interest bearing debt securities resulting in investment income of 
	$244,000 in fiscal 1996.  The resulting net interest expense in fiscal
	1996 was $539,000.  Net interest expense was $875,000 and $946,000 in 
	fiscal years 1995 and 1994, respectively.

	Income Taxes.  The Company's effective tax rate was 34%, 28%, and 22% 
	for fiscal years 1996, 1995, and 1994, respectively.  The increase in 
	the 1996 effective tax rate resulted from the elimination of the 
	research and development tax credit from July 1995 through June 1996 
	and lower foreign sales corporation (FSC) tax benefits.  In prior 
	years, these rates differed from the federal statutory rate primarily 
	because of state income taxes, benefits from research and development
	credits, and FSC benefits.

Discontinued Operation

	On May 27, 1994, the Company sold its idle Nashua, New Hampshire, 
	facility for an amount less than the recorded value.  In addition, 
	the Company revised its estimate of the costs it expected to incur 
	related to its move from leased facilities in Orange County, 
	California.  The consolidated statement of operations for fiscal 
	1994 reflects a charge of $525,000, net of income tax benefits of 
	$175,000, to reserve for the losses related to these events.  As 
	of September 1, 1995, there were no remaining obligations with 
	respect to the Company's discontinued operation.  See Note 8 of Notes 
	to Consolidated Financial Statements. 

Liquidity and Capital Resources  

	Net capital expenditures in fiscal years 1996, 1995, and 1994 were 
	$24.9 million, $32.2 million and $13.8 million, respectively, of 
	which $45.2 million was for building and equipping the new Micro 
	Products facility.  The remaining capital expenditures were used to 
	expand manufacturing capacity for the Company's core laminate 
	materials and flexible interconnect operations.  Over the past three 
	fiscal years, the Company has financed its capital expenditures 
	through equity proceeds of $45.2 million from public offerings of 
	common stock and stock option exercises, debt financing of $7.7 
	million, and cash flow from operations of $18.1 million.  The 
	Company expects capital expenditures in fiscal 1997 to be approximately
	$25 million.  The Company believes that its cash flow from operations
	and funds available under its current revolving credit agreement
	will be sufficient to meet its operating and investment needs through 
	fiscal 1998.

	During fiscal 1996, the Company amended and restated its revolving 
	credit agreement with Norwest Bank Minnesota, N.A., Harris Trust and 
	Savings Bank, and NBD Bank, N.A.  The amended and restated credit 
	agreement provides the Company with a $35.0 million revolving line 
	of credit.  The line of credit is secured by the Company's 
	inventories, accounts receivable, and fixed assets.  Interest accrued 
	under the line of credit is at the prime or LIBOR rates.  During 
	fiscal 1996, the weighted average interest rate was 8.24%.  As of 
	August 30, 1996, the Company's outstanding borrowings under this
	revolving credit agreement were $15.2 million and the weighted 
	average interest rate was 7.75%.

Financial Derivatives

	The Company has limited foreign currency risks from its international 
	sales. 	Major contracts have "risk sharing" arrangements with the 
	customer, allowing repricing in the event of long-term and/or 
	significant foreign currency fluctuations.

	To deal with short-term fluctuations, the Company will use a variety of 
	natural and contractual hedging techniques from time to time to 
	prudently reduce, but not eliminate, its exposure to foreign 
	currency fluctuations. Historical transactions have not been material
	in nature.  The Company expects its foreign currency contracts to 
	increase during fiscal 1997 and will increase its hedging activities
	accordingly.

Effect of Changes in Accounting Principles  

	The Company adopted Statement of Financial Accounting Standards No. 
	109, "Accounting for Income Taxes" (SFAS No. 109), effective August 
	28, 1993. The adoption of SFAS No. 109 resulted in a cumulative one-
	time favorable adjustment of $1.4 million.  The Company also adopted 
	Statement of Financial Accounting Standards No. 106, "Employers' 
	Accounting for 
	Postretirement Benefits Other Than Pensions" (SFAS No. 106).  The Company 
	provides certain medical and other postretirement benefits to qualified 
	employees.  The adjustment made in the first quarter of fiscal 1994 
	resulted in a cumulative one-time charge against income of $875,000, net 
	of income tax benefits of $525,000.  Effective September 3, 1994, the 
	Company adopted Statement of Financial Accounting Standards No. 112, 
	"Employers' Accounting for Postemployment Benefits" (SFAS No. 112).  The 
	effect of adoption of SFAS No. 112 did not have a significant impact on 
	the Company.  See Notes 6 and 7 of Notes to Consolidated Financial 
	Statements.  

New Accounting Pronouncements

	In March 1995, the Financial Accounting Standards Board issued Statement 
	of Financial Accounting Standards No. 121, "Accounting for Impairment of 
	Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 
	121).  The Company will be required to adopt SFAS No. 121 in fiscal 1997 
	and expects that its adoption will not have a significant impact on the 
	Company's operating results or financial condition.

	In October 1995, the Financial Accounting Standards Board issued 
	Statement of Financial Accounting Standards No. 123, "Accounting 
	for Stock-Based Compensation."  This statement encourages, but does 
	not require, a fair value-based method of accounting for employee 
	stock options, the sale of stock under any company's employee stock
	purchase plan, or similar equity instruments.  The Company has elected 
	to continue to measure compensation cost under Accounting Principles 
	Board Opinion No. 25, "Accounting for Stock Issued to Employees" as 
	was previously required, and to comply with pro forma disclosure of 
	net income and earnings per share as if the fair value-based method 
	of accounting had been applied, beginning in fiscal 1997.

Cautionary Statement  
	
	Statements included in this management's discussion and analysis of 
	financial condition and results of operations, in the letter to 
	shareholders, elsewhere in this annual report, in the Company's Form 
	10-K and in future filings by the Company with the Securities and 
	Exchange Commission, in the Company's press releases, and oral 
	statements made with the approval of an authorized executive officer 
	that are not historical, or current facts are "forward-looking 
	statements" made pursuant to the safe harbor provisions of the 
	Private Securities Litigation Reform Act of 1995.  Certain risks 
	and uncertainties could cause actual results to differ materially 
	from historical earnings and those presently anticipated or projected.
	The Company wishes to caution readers not to place undue reliance on 
	any such forward-looking statements, which speak only as of the date 
	made.  The following important factors, among others, in some cases 
	have affected and in the future could affect the Company's actual 
	results and could cause the Company's actual financial performance 
	to differ materially from that expressed in any forward-looking 
	statement:  (i) the Company's ability to begin full production at 
	its Micro Products facility is dependent upon product validation and 
	product acceptance of the Company's micro products, neither of which 
	has occurred; (ii) delays in achieving full volume production at 
	the Micro Products facility will have a material adverse impact on 
	the Company's results of operations; (iii) a general downturn in the 
	automotive market, the Company's principal market, could have a 
	material adverse effect on the demand for the electronic components 
	supplied by the Company to its customers; and (iv) the extremely 
	competitive conditions that currently exist in the automotive and 
	datacommunications markets are expected to continue, including 
	development of new technologies, the introduction of new products, 
	and the reduction of prices.  The foregoing list should not be 
	construed as exhaustive and the Company disclaims any obligation 
	subsequently to revise any forward-looking statements to reflect
	the events or circumstances after the date of such statements or 
	to reflect the occurrence of anticipated or unanticipated events.

Item 8.  Financial Statements and Supplementary Data

	The Consolidated Financial Statements are listed under Item 14 of 
	this report.  Unaudited quarterly financial data for fiscal 1995 and 
	1996 is set forth in Note 12 to the Consolidated Financial Statements
	included with this report.

Item 9.  Changes in and Disagreements with Accountants

	None


PART III

Pursuant to General Instruction G(3) Registrant omits Part III, Items 10 
(Directors and Executive Officers of Registrant), 11 (Executive Compensation), 
12 (Security Ownership of Certain Beneficial Owners and Management) and 13 
(Certain Relationships and Related Transactions), except that portion of Item 
10 relating to Executive Officers of the Registrant, which is set forth in 
Part I of this report as a definitive proxy statement will be filed with the 
Commission pursuant to Regulation 14(a) within 120 days after August 30, 1996, 
and such information required by such items is incorporated herein by reference
from the proxy statement.


PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)	Documents filed as a part of the report:
								     Form 10-K
								  Page Reference
1.	Consolidated Financial Statements:

	Report of Independent Public Accountants			F-2

	Consolidated Statements of Operations for the Fiscal Years 
	Ended august 30, 1996, September 1, 1995 and September 2, 1994	F-3

	Consolidated Balance Sheets as of august 30, 1996
	and September 1, 1995						F-4

	Consolidated Statements of Changes in Shareholders' Investment
	for the Fiscal Years August 30, 1996, September 1, 1995 and 
	September 2, 1994						F-5

	Consolidated Statements of Cash Flows for the Fiscal Years Ended
	August 30, 1996, September 1, 1995 and September 2, 1994	F-6

	Notes to Consolidated Financial Statements			F-7

2.	Consolidated Financial Statement Schedules
								    Form 10-K
	Description						 Page Reference

	Schedule II - Valuation and Qualifying Accounts			S-1

(b)	Reports on Form 8-K

	None.

(c)	Exhibits and Exhibit Index

Exhibit No.	Description

3.1	Amended and Restated Articles of Incorporation, incorporated by 
	reference from exhibit 3.1 of the Registrant's Form 10-Q for the 
	quarter ended December 2, 1994.

3.2	Bylaws, as amended, incorporated by reference from Exhibit 3.2 of the
	Registrant's Registration Statement on form S-2 (File No. 33-79266).

4.1	Stock Purchase Agreement Relating to Purchase of Sheldahl Stock dated
 	March 12, 1987 between the Registrant and Sumitomo Bakelite Co., Ltd.,
 	as amended through January 9, 1991, incorporated by reference from
 	Exhibit C(4) of Registrant's Form 8-K filed January 22, 1991.

4.2	Amendment No. 4 to Stock Purchase Agreement Relating to Purchase of
 	Sheldahl Stock dated January 3, 1994, incorporated by reference from
	Exhibit 4.2 of the Registrant's Registration Statement on Form S-2
 	(File No. 33-79266).

4.3	Rights Agreement dated as of June 16, 1996 between the Company and
 	Norwest Bank Minnesota, N.A., is incorporated by reference to Exhibit
	1 to the Company's Form 8-A dated June 20, 1996.

10.1	1987 Stock Option Plan, incorporated by reference from Exhibit 10.1 of
 	the Registrant's Form 10-K for the fiscal year ended August 27, 1993.

10.2	1994 Stock Option Plan, incorporated by reference from Exhibit 10.1 of
 	the Registrant's Form 10-Q for the quarter ended December 2, 1994.

10.3	Consulting Agreement dated August 17, 1988 between James S. Womack and
 	Sheldahl, Inc. incorporated by reference from Exhibit 10.2 of the
 	Registrant's Form 10-K for the fiscal year ended August 27, 1993.

10.4	Form of Employment (change of control) Agreement for Executive Officers
 	of the Registrant.

10.5	Employment (change of control) Agreement between James E. Donaghy and
 	the Registrant dated March 1, 1988, as amended August 21, 1996.

10.6	Sales Agreement Relating to Japanese Sales dated March 12, 1987 between
 	the Registrant and Sumitomo Bakelite Co., Ltd., incorporated by
 	reference from Exhibit C(2) of the Registrant's Form 8-K filed March
 	25, 1987.

10.7	Sales Agreement Relating to United States Sales dated March 12, 1987
 	between the Registrant and Sumitomo Bakelite Co., Ltd., incorporated by
 	reference from Exhibit C(3) of the Registrant's Form 8-K filed March 
	25, 1987.

10.8	Amendment Number One to Sales Agreement Relating to Japanese Sales 
	dated January 9, 1991 between the Registrant and Sumitomo Bakelite Co.,
	Ltd., incorporated by reference from Exhibit C(2) of the Registrant's 
	Form 8-K filed January 22, 1991.

10.9	Amendment Number One to Sales Agreement Relating to United States Sales
 	dated January 9, 1991 between Sheldahl, Inc. and Sumitomo Bakelite Co.,
 	Ltd., incorporated by reference from Exhibit C(3) of the Registrant's
 	Form 8-K filed January 22, 1991.

10.10	Amended and Restated Cross License Agreement dated November 1, 1993
 	between the Registrant and Sumitomo Bakelite Co., Ltd. incorporated by
 	reference from Exhibit 10.5 of the Registrant's Form 10-K for the 
	fiscal year ended September 2, 1994.

10.11	Lease dated June 15, 1989 between Aberdeen Development Corporation and
 	the Registrant, incorporated by reference from Exhibit 10.13 of the
 	Registrant's Form 10-K for the fiscal year ended August 27, 1993.

10.12	Lease Agreement dated May 1, 1994 between 345 Partnership and the
 	Registrant, incorporated by reference from Exhibit 10.13 of the
 	Registrant's Registration Statement on Form S-2 (File No. 33-79266).

10.13	Amended and Restated Credit and Security Agreement dated November 24,
 	1993 among the Registrant, Norwest Bank Minnesota, N.A., and Harris
 	Trust and Savings Bank, incorporated by reference from Exhibit 4.1 of
 	the Registrant's Form 10-K for the fiscal year ended August 27, 1993.

10.14	Second Amendment to Amended and Restated Credit and Security Agreement
 	dated May 12, 1994 among the Registrant, Norwest Bank Minnesota, N.A.,
 	Harris Trust and Savings Bank, incorporated by reference from Exhibit
 	10.1 of the Registrant's Form 10-Q for the second quarter ended March 
	3, 1995.

10.15	Third Amendment to Amended and Restated Credit and Security Agreement
 	dated January 24, 1995 	among the Registrant, Norwest Bank Minnesota,
 	N.A., Harris Trust and Savings Bank, and NBD Bank, N.A., incorporated 
	by reference from Exhibit 10.2 of the Registrant's Form 10-Q for the
 	quarter ended March 3, 1995.

10.16	Loan Authorization dated October 1, 1994 between South Dakota Board of
 	Economic Development Registrant, incorporated by reference from 
	Exhibit 10.1 of the Registrant's Form 10-Q for the quarter ended 
	February 25, 1994.

10.17	Agreement Relating to Employment dated October 1, 1994 between the 
	South Dakota Board of Economic Development and the Registrant, 
	incorporated by reference from Exhibit 10.2 of the Registrant's 
	Form 10-Q for the quarter ended February 25, 1994.

10.18	Promissory Note dated October 4, 1993 due to the South Dakota Board of
 	Economic Development, incorporated by reference from Exhibit 10.3 of 
	the Registrant's Form 10-Q for the quarter ended February 25, 1994.

10.19	Note Purchase Agreement dated as of August 31, 1995 between the
 	Registrant and Northern Life Insurance Company, incorporated by
 	reference to Exhibit 10.19 to Registrant's Form 10-K for the fiscal
 	year ended September 1, 1995.

10.20	Agreement dated January 10, 1994 between the MCM-L Consortium and the
 	Advanced Projects Research Agency, incorporated by reference from
 	Exhibit 10.4 of the Registrant's Form 10-Q for the quarter ended
 	February 25, 1994.

10.21	Articles of Collaboration dated November 30, 1993 for the MCM-L
 	Consortium, incorporated by reference from Exhibit 10.5 of the
 	Registrant's Form 10-Q for the quarter ended February 25, 1994.

10.22	Joint Marketing Agreement dated June 14, 1995 between the Registrant 
	and Mentor Graphics Corporation incorporated by reference from 
	Exhibit 10.22 of the Registrant's Form 10-K for the fiscal year 
	ended September 1, 1995.

10.23	Agreement relating to Joint Venture dated August 1, 1995 between
 	Registrant, Jiangxi Changjiang Chemical Plant, Hong Kong Wah Hing
 	(China) Development Co., Ltd. and Jiujiang Flex Co., Ltd. incorporated
 	by reference from Exhibit 10.23 of the Registrant's Form 10-K for the
 	fiscal year ended September 1, 1995.

10.24	Agreement relating to payments dated August 1, 1995 between Registrant
 	and Jiangxi Changjiang Chemical Plant, Hong Kong Wah Hing (China) 
	Development Co., Ltd. and Jiujiang Flex Co., Ltd. incorporated by
 	reference from Exhibit 10.24 of the Registrant's Form 10-K for the
 	fiscal year ended September 1, 1995.

10.25	Manufacturing Agreement dated August 1, 1995 between Registrant and
 	Jiujiang Flex Co., Ltd. incorporated by reference from Exhibit 10.25 
	of the Registrant's Form 10-K for the fiscal year ended
 	September 1, 1995.

10.26	Marketing and License Agreement dated August 1, 1995 between Registrant
 	and Jiujiang Flex Co., Ltd. incorporated by reference from Exhibit 
	10.26 of the Registrant's Form 10-K for the fiscal year ended 
	September 1, 1995.

10.27	Technology Development Agreement dated August 15, 1995 between Low Cost
 	Flip Chip Consortium and the Advanced Projects Research Agency
 	incorporated by reference from Exhibit 10.27 of the Registrant's Form
 	10-K for the fiscal year ended September 1, 1995.

10.28	Articles of Collaboration dated July 10, 1995 for the Low Cost Flip 
	Chip Consortium incorporated by reference from Exhibit 10.28 of the
 	Registrant's Form 10-K for the fiscal year ended September 1, 1995.

10.29	Technology Development Agreement dated March 23, 1995 between Plastic
 	Packaging Consortium and the Advanced Projects Research Agency
 	incorporated by reference from Exhibit 10.29 of the Registrant's Form
 	10-K for the fiscal year ended September 1, 1995.

10.30	Articles of Collaboration dated March 17, 1995 for the Plastic 
	Packaging Consortium incorporated by reference from Exhibit 10.30 
	of the Registrant's Form 10-K for the fiscal year ended September 
	1, 1995.

10.31	License Agreement dated June 20, 1994 between Sidrabe and Registrant
 	incorporated by reference from Exhibit 10.31 of the Registrant's Form
 	10-K for the fiscal year ended September 1, 1995.

10.32	Amendment One to License Agreement dated September 14, 1994 between
 	Sidrabe and Registrant incorporated by reference from Exhibit 10.32 of
 	the Registrant's Form 10-K for the fiscal year ended September 1, 1995.

10.33	Fourth Amendment to Amended and Restated Credit and Security Agreement
 	dated January 29, 1996 	among the Registrant, Norwest Bank Minnesota,
 	N.A., Harris Trust and Savings Bank, and NBD Bank, N.A., incorporated 
	by reference from Exhibit 10.2 of the Registrant's Form 10-Q for the
 	quarter ended March 3, 1995.

10.34	Fifth Amendment to Amended and Restated Credit and Security Agreement
 	dated March 1, 1996 among the Registrant, Norwest Bank Minnesota, 
	N.A., Harris Trust and Savings Bank, and NBD Bank, N.A., incorporated
	by reference from Exhibit 10.2 of the Registrant's Form 10-Q for the
 	quarter ended March 3, 	1995.

11	Statement Regarding Computation of Per Share Earnings.

18	Statement Regarding Accounting Change.

22	Subsidiary of Registrant.

23	Consent of Independent Public Accountants.

27	Financial Data Schedule


SIGNATURES

	Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized.

Dated:  November 5, 1996			SHELDAHL, INC.

					By:	/s/ James E. Donaghy										James E. Donaghy, President
						and Chief Executive Officer

	Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the
Registrant on November 5, 1996 and in the capacities indicated.

(Power of Attorney)

	Each person whose signature appears below constitutes and appoints 
James E. Donaghy and John V. McManus as such person's true and lawful attorneys-
in-fact and agents, each acting alone, with full power of substitution and 
resubmission, for such person and in such person's name, place and stead, in 
any and all capacities, to sign any of all amendments to this Annual Report 
on Form 10-K and to file the same, with all exhibits thereto, and other d
ocuments in connection therewith, with the Securities and Exchange Commission, 
granting unto said attorneys-in-fact and agents, each acting alone, full power 
and authority to do and perform each and every act and thing requisite and 
necessary to be done in and about the premises, as fully to all intents and 
purposes as such person might or could do in person, hereby ratifying and 
confirming all said attorneys-in-fact an agents, each acting alone, or such 
person's substitute or substitutes may lawfully do or cause to be done by 
virtue thereof.

By	/s/ James S. Womack		Chairman of the Board and Director
	James S. Womack

By	/s/ James E. Donaghy		President, Chief Executive Officer 			James E. 
Donaghy	and Director
					(principal executive officer)

By	/s/ John V. McManus		Vice President - Finance
	John V. McManus			(principal financial and accounting 				officer)

By	/s/ John G. Kassakian		Director
	John G. Kassakian

By	/s/ Gerald E. Magnuson		Director
	Gerald E. Magnuson

By	/s/ William B. Miller		Director
	William B. Miller

By	/s/ Kenneth J. Roering		Director
	Kenneth J. Roering

By	/s/ Richard S. Wilcox		Director
	Richard S. Wilcox

By	/s/ Beekman Winthrop		Director
	Beekman Winthrop


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Sheldahl, Inc.:

We have audited the accompanying consolidated balance sheets of Sheldahl, Inc.
(a Minnesota corporation) and Subsidiary as of August 30, 1996 and September 
1, 1995 and the related consolidated statements of operations, changes in 
shareholders' investment and cash flows for each of the three fiscal years in 
the period ended August 30, 1996.  These financial statements are the 
responsibility of the Company's management.  Our responsibility is to express 
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial 
statement presentation. We believe that our audit provide a reasonable basis 
for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Sheldahl, Inc. and Subsidiary 
as of August 30, 1996 and September 1, 1995 and the results of their 
operations and their cash flows for each of the three fiscal years in the 
period ended August 30, 1996 in conformity with generally accepted accounting 
principles.

Our audit was made for the purpose of forming an opinion on the basic 
consolidatedfinancial statements taken as a whole.  The schedule listed in 
the index toconsolidated financial statements is presented for purposes of 
complying with theSecurities and Exchange Commission's rules and are not part 
of the basic financialstatements.  This schedule has been subjected to the 
auditing procedures appliedin the audit of the basic financial statements and, 
in our opinion, fairly statesin all material respects the financial data 
required to be set forth thereinin relation to the basic financial statements 
taken as a whole.
							ARTHUR ANDERSEN LLP


Minneapolis, Minnesota
 October 11, 1996
				Page F-2


			Sheldahl, Inc. and Subsidiary
			Consolidated Statements of Operations
			(in thousands, except per share data)

					For The Fiscal Years Ended
				August 30,	September 1,	September 2,
				  1996		  1995		  1994

Net sales			$114,120	$95,216		$88,346

Cost of sales			  89,171	 74,752	 	 69,273
				  ______	 ______		 ______
Gross profit	 		  24,949	 20,464	 	 19,073
				  ______	 ______		 ______
Expenses:	
	S & M			   9,254	  9,090		  8,014
	G & A			   5,129	  3,895		  4,153
	R & D			   2,755	  2,270		  2,366
	Interest   	 	     539	    875	     	    946
				  ______	 ______		 ______
	Total expenses	 	  17,677	 16,130	 	 15,479
				  ______	 ______		 ______

Income from continuing operations 
	before provision for income 
	taxes and cumulative effect 
	of changes in methods of 
	accounting		  7,272		  4,334		  3,594

Provision for income taxes	  2,500	  	  1,200	   	    800
				 ______		 ______		 ______

Income from continuing operations 
	before cumulative effect 
	of changes in methods of 
	accounting		  4,772		  3,134		  2,794

Cumulative effect of change in 
	method of accounting for 
	income taxes (Note 6)	      -		      -		  1,422

Cumulative effect of change in 
	method of accounting for 
	postretirement benefits
	(Note 7)		      -		      -		  (875)

Loss from discontinued operation
Note 8)		        	      -	              -	 	  (525)
				 ______		 ______		 ______
Net income			$ 4,772		$ 3,134		$ 2,816
				 ======		 ======		 ======
Income per common share:
	Continuing operations	$    .55	$    .45	$  .52
	Accounting change 
	- income taxes		       -	       -	   .26
	Accounting change 
	- postretirement
	  benefits		       -	       -	 (.16)
	Discontinued operation	       -	       -	 (.10)
				 ______		  ______	______
Net income per common share	$   .55		 $   .45	$  .52
				 ======		  ======	======
Weighted average common shares 
	and common share 
	 equivalents outstandin   8,686		   6,925	 5,418
				 ======		  ======	======

				Page F-3


			Sheldahl, Inc. and Subsidiary
			Consolidated Balance Sheets
		(in thousands, except share and per share data)

							August 30,      Sept 1,
							   1996		 1995
Assets
Current assets:
	Cash and cash equivalents			$       904	$ 1,045
	Accounts receivable, net of allowances
		for doubtful accounts of $244 in 1996 
		and $267 in 1995			     21,091	 17,637
	Inventories					     11,525	 12,509
	Deferred taxes	  				      1,660	    849
	Prepaid expenses and other current assets	        390	    732
							     ______	 ______
		Total current assets	 		     35,570	 32,772
							     ______	 ______
Plant and equipment:
	Land and buildings				     24,718	 15,924
	Machinery and equipment				     64,754	 52,748
	Construction in progress			     37,650	 32,654
	Accumulated depreciation			   (47,630)	(41,471)
							     ______	 ______
		Net plant and equipment	   		     79,492	 59,855
							     ______	 ______

Other assets	   	     				  	825	  1,559
							     ______	_ _____
							   $115,887	$94,186
							     ======	 ======
Liabilities and Shareholders' Investment
Current liabilities:
 	Current maturities of long-term debt		   $    466	$ 4,179
	Accounts payable				      9,824	  9,113
	Accrued salaries				      1,390	  1,262
	Other accrued liabilities	  		      1,839	  1,886
							     ______	 ______
		Total current liabilities	   	     13,519	 16,440
							     ______	 ______
Long-term debt	 					     21,858	 33,864
							     ______	 ______
Other non-current liabilities	 			      2,269	  2,683
							     ______	 ______
Deferred taxes	  					      2,904	    247
							     ______	 ______
Commitments and contingencies (Notes 5 and 7)			  -	      -
Shareholders' investment:
	Preferred stock, $1.00 par value, 500,000 shares
		authorized, none outstanding			  -	      -
	Common stock, $.25 par value, 20,000,000 shares 
		authorized; 8,912,695 and 6,831,576 shares 
		outstanding			 	      2,228	  1,708
	Additional paid-in capital			     51,404	 22,311

	Retained earnings	 			     21,705	 16,933
							     ______	 ______
		Total shareholders' investment	   	     75,337	 40,952
							     ______	 ______
							   $115,887	$94,186
							     ======	 ======

				Page F-4


			Sheldahl, Inc. and Subsidiary
	Consolidated Statements of Changes in Shareholders' Investment
For the Fiscal Years Ended Sept 2, 1994, Sept 1, 1995 and August 30, 1996
			(in thousands, except share data)

				 Common Stock		Addtl		  Total
							Paid-In	Retained  Share
				Shares	  Amount	Capital	Earnings Invest


Balance August 27, 1993		4,810,995  $1,203	$ 7,262	$10,983	 $19,448

	Net income			-	-	      -	  2,816	   2,816
	Stock options exercised	   83,124      21	    333	      -	     354
	Net proceeds from
 	 common stock offering	1,696,250     424	 13,440	      -	  13,864
				 ________   _____	  _____	  _____	   _____

Balance September 2, 1994	6,590,369   1,648	 21,035	 13,799	  36,482

	Net income			-	-	      -	  3,134	   3,134
	Stock options exercised	  241,207      60	  1,276	      -	   1,336
				 ________   _____	  _____	  _____	   _____
Balance September 1, 1995	6,831,576   1,708	 22,311	 16,933	  40,952

	Net income			-	-	      -	  4,772	   4,772
	Stock options exercised	   68,619      17	    599	      -	     616
	Net proceeds from common
	   stock offering	2,012,500     503	 28,494	      -	  28,997
				 ________   _____	 ______	  _____	   _____
Balance August 30, 1996		8,912,695  $2,228	$51,404	$21,705	 $75,337
				 ========   =====	 ======	 ======	  ======

				Page F-5


			Sheldahl, Inc. and Subsidiary
			Consolidated Statements of Cash Flows
				(in thousands)

						For The Fiscal Years Ended
					    August 30,	  Sept 1,	Sept 2,
					       1996	    1995	 1994

Operating activities:
	Net income				$ 4,772	  $ 3,134	$ 2,816
	Adjustments to reconcile net income to
	  net cash provided by operating 
	  activities:
		Depreciation and amortization	  6,783	    4,845	  4,014
		Cumulative effect of accounting 
		changes				      -	        -	  (547)
		Deferred income tax provision	  1,846	    1,008	    565
		Loss from discontinued operation      -		-	    525
	Net change in other operating activities:
		Accounts receivable		(3,454)	  (3,174)	(1,029)
		Inventories			    984	  (1,941)	(1,246)
		Prepaid expenses and other 
		  current assets		    342	    (254)	  (175)
		Other assets			    734	    (635)	  (533)
		Accounts payable and accrued 
		  liabilities			  (708)	    (481)	    366
		Other non-current liabilities	  (414)	    (188)	    156
						 ______	   ______	 ______
	Net cash provided by operating 
	  activities				 10,885	    2,314	  4,912
						 ______	   ______	  ______
Investing activities:
	Capital expenditures, net		(24,920)  (32,182)	(13,841)
	Net cash flow used in discontinued 
	   operation	           		      -	     (489)	 (1,044)
						 ______	    ______	  ______
	Net cash used in investing activities	(24,920)  (32,671)	(14,885)

Financing activities:
   	Net borrowings (repayments) under 
	  revolving credit facility		(15,290)    10,533	 (9,233)
	Net proceeds from other long-term debt	       -    23,466	  11,000
	Repayments of other long-term debt	   (429)   (5,941)	 (4,446)
	Net proceeds from of stock offering	  28,997	 -	  13,864
	Net proceeds from stock option exercises     616     1,336	     354
			    			  ______    ______	  ______
 	Net cash provided by financing activities 13,894    29,394	  11,539
						  ______    ______	  ______
	Net increase (decrease) in cash and cash 
	   equivalents				   (141)     (963)	   1,566

Cash and cash equivalents at beginning of period   1,045     2,008	     442
						  ______    ______	  ______
Cash and cash equivalents at end of period	$    904   $ 1,045	 $ 2,008
						  ======    ======	  ======
Supplemental cash flow information:
	Interest paid				$  2,221   $ 2,204	 $ 1,266
						  ======    ======	  ======
	Income taxes paid			$    131   $   114	 $    60
						  ======    ======	  ======

				Page F-6


				Sheldahl, Inc. and Subsidiary
			Notes to Consolidated Financial Statements

(1)	 Business Description and Fiscal Year:

	Sheldahl, Inc. (the Company) is a leading producer advanced laminate 
	materials and materials-based components, primarily for sale to the 
	automotive electronics and datacommunications markets.  The Company 
	primarily sells to original equipment manufacturers in the United 
	States,	Europe, and the Pacific Rim.  The Company's fiscal year ends
	on the Friday closest to August 31.  Fiscal years 1996 and 1995 
	consisted of 52 weeks.  Fiscal year 1994 consisted of 53 weeks.

(2)	Summary of Significant Accounting Policies:

	Basis of Presentation -

	The consolidated financial statements have been prepared in accordance 
	with Generally Accepted Accounting Principles and include the accounts 
	of the Company and its subsidiary.  All significant intercompany 
	accounts have been eliminated.  The preparation of financial statements
	in conformity with generally accepted accounting principles requires 
	management to make estimates and assumptions that affect the reported 
	amounts of assets and liabilities and disclosure of contingent assets 
	and liabilities at the date of the financial statements and the 
	reported amounts of revenues and expenses during the reporting 
	period.  Actual results could differ from those estimates.

	Significant Customers -

	The Company's largest customers accounted for sales of  $15,549,000 
	and $13,944,000 in 1996, $15,053,000 in 1995, and $13,771,000 in 1994.
	No other customers accounted for more than 10% of net sales.

	Export Sales -

	The Company had export sales of $11,968,000 in 1996, $11,100,000 in 
	1995, and $7,592,000 in 1994.

	Revenue Recognition -

	The Company recognizes revenue principally as products are shipped. In 
	addition, the Company grants credit to customers and generally does not 
	require collateral or any other security to support amounts due. 

	Inventories -

	Inventories are stated at the lower of cost or market, with cost 
	determined on the first-in first-out (FIFO) method.  Cost included 
	the cost of materials, direct labor, and applicable manufacturing 
	overhead.  During the fourth quarter of fiscal 1996, the Company 
	changed its method of accounting for inventories from the last-in 
	first-out (LIFO) method to the FIFO method.  Management believes 
	that the change in accounting for inventories is preferable because 
	it will more accurately measure operating results by reflecting the 
	effect of productivity improvements in cost of sales and to better 
	match current costs and revenues.  The impact of the change was not 
	material to the Company.

	The components of inventories are as follows (in thousands):

					August 30,	September 1,
					  1996		    1995

	Raw material			$ 2,599		$  3,930
	Work-in-process			  5,572		   5,205
	Finished goods	  		  3,354	  	   3,374
					 ______		  ______
	Total				$11,525		 $12,509
					 ======		  ======
	Plant and Equipment -

	Plant and equipment are stated at cost and include expenditures that 
	increase the useful lives of existing plant and equipment. The cost of 
	major plant and equipment additions includes interest capitalized 
	during the acquisition period. Interest capitalized totaled $1,605,000 
	in 1996, $1,215,000 in 1995, and $405,000 in 1994. Maintenance, 
	repairs, and minor renewals are charged to operations as incurred. 
	When plant and equipment are disposed of, the related cost and 
	accumulated depreciation are removed from the respective accounts 
	and any gain or loss is reflected in the results of operations. 

	For financial reporting purposes, plant and equipment are depreciated 
	principally on a straight-line basis over the estimated useful lives 
	of 20 to 40 years for buildings and 3 to 15 years for machinery and 
	equipment.For income tax reporting purposes, straight-line and 
	accelerated depreciation methods are used. 

	Income Taxes -

	Deferred income taxes are provided for temporary differences between 
	the financial reporting basis and tax basis of the Company's assets
	and liabilities at currently enacted tax rates.

	Earnings Per Share -

	Earnings per share is computed based on the weighted average number of 
	common and equivalent shares outstanding during each period presented. 

	New Accounting Pronouncements -

	In March 1995, the Financial Accounting Standards Board issued 
	Statement of Financial Accounting Standards No. 121, "Accounting for 
	Impairment of Long-Lived Assets and for Long-Lived Assets to be 
	Disposed of" (SFAS No. 121), adoption of which is required for fiscal 
	years beginning after December 31, 1995.  Although the Company has not 
	fully analyzed the effects of SFAS No. 121, the Company expects that 
	its ultimate adoption will not have a significant impact on the 
	Company's operating results or financial condition.

	In October 1995, the Financial Accounting Standards Board issued 
	Statement of Financial Accounting Standards No. 123, "Accounting for 
	Stock-Based Compensation".  This statement encourages, but does not 
	require, a fair value-based method of accounting for employee stock 
	options, the sale ofstock under the Company's employee stock purchase 
	plan, or similar equity instruments.  The Company has elected to 
	continue to measure compensation cost under Accounting Principles 
	Board Opinion No. 25, "Accounting for Stock Issued to Employees" as 
	was previously required, and to comply with proforma disclosure of 
	net income and earnings per share as if the fair value based method 
	of accounting had been applied, beginning in fiscal 1997.

(3)	Financing:

	Long-term debt consisted of the following (in thousands):

							August 30,	Sept 1,
							  1996		  1995

Revolving credit agreement				$15,243		$30,533

Note payable to insurance company, secured 
  by real estate mortgage interest, at 8.3% 
  with monthly payments of $52, including 
  principal and interest, remaining balance 
  due September 2002					  5,555		  5,700

Note payable to Economic Development Agency,
  secured by $825 standby letter of credit,
  interest at 2.0% with monthly payments of $9,
  including principal and interest, remaining
  balance due October 1998				    728		    833

Note payable to a bank, secured by real estate 
  mortgage, interest at 8.0% with monthly 
  payments of $9, including principal and 
  interest through February 1999			    240		    326

Other	      						    558	       	    651
							 ______		 ______
							 22,324		 38,043
Less current maturities	   				  (466)	 	(4,179)
							 ______		 ______
							$21,858		$33,864
							 ======		 ======

	During fiscal 1996, the Company renegotiated its revolving credit 
	agreement, resulting in a $35 million revolving line of credit.  This 
	line of credit is secured by the Company's inventories, accounts 
	receivable, real estate, and equipment.  Commitment fees are charged at 
	0.25% of the unused portion of the line of credit.  Interest accrues at 
	the prime or LIBOR rates.  During fiscal 1996, the weighted average 
	interest rate under revolving credit agreements was 8.24%.  As of August 
	30, 1996, borrowings under the revolver were $15,243,000 at a weighted 
	average interest rate of 7.75% and $19,757,000 was unused and available. 
	The revolving credit agreement expires on December 31, 1998.

	The Company's debt agreements contain various restrictive covenants 
	which, among other things, require the Company to maintain defined 
	consolidated net worth levels, financial ratios and minimum coverage 
	ratios, and call for the pledging of certain assets. These agreements 
	also restrict additional indebtedness, capital expenditures, and cash 
	dividends. The Company was in compliance, or has obtained waivers, with
	respect to these covenants for the fiscal year ended August 30, 1996.

	Future maturities of debt are as follows (in thousands):

	Fiscal 1997			$   466
	Fiscal 1998			    390
	Fiscal 1999			 16,025
	Fiscal 2000			    220
	Fiscal 2001			    239
	Thereafter	 		  4,984
					 ______
					$22,324
					 ======
(4)	Stock Options:

	The shareholders of the Company have approved stock option plans (the 
	Plans) for officers, other full-time key salaried employees, and non-
	employee directors of the Company, to reward outstanding performance 
	and enable the Company to attract and retain key personnel.  Under the 
	Plans, options are granted at an exercise price equal to the fair 
	market value of the Company's common stock at the date of grant, 
	vest over a six-month to three-year period, and are generally 
	exercisable for five or ten years. The Plans also provide for 
	automatic grants of 1,000 non-qualified stock options to each non-
	employee director of the Company on the date that each such director 
	is elected or re-elected to the Board of Directors, and expire, to 
	the extent not already exercised, 30 days after termination of 
	service as a Director.  As of August 30, 1996, the Plans authorize the 
	future granting of options to purchase up to 118,000 shares of common 
	stock.

Stock option transactions during 1994, 1995, and 1996 are summarized as follows:

	Shares	Price per Share

	Outstanding at August 27, 1993		700,642	$4.875 to $8.750
		Granted				205,777	$9.000 to $12.000
		Exercised		      (150,442)	$5.000 to $7.625
					        _______
	Outstanding at September 2, 1994	755,977	$4.875 to $12.000
		Granted				 84,777	$13.000 to $16.500
						_______
		Exercised	 	      (271,046)	$5.000 to $12.000
	Outstanding at September 1, 1995	569,708	$4.875 to $16.500
		Granted				475,090	$16.500 to $22.125
		Exercised	  	       (68,888)	$4.875 to $16.500
		Lapsed	   			(5,000)	$18.375
						_______
	Outstanding at August 30, 1996	 	970,910	$5.000 to $22.125
			=======

	Options exercisable were 569,660 as of August 30, 1996, 391,931 as of 
	September 1, 1995, and 655,977 as of September 2, 1994.

The options outstanding as of August 30, 1996 expire as follows:

				Number of Options
	Fiscal Years		That Expire

	1997			 48,445
	1998			  7,000
	1999			  7,000
	2000			  7,000
	2001			 58,145
	2002			100,000
	2003			 69,033
	2004			142,284
	2005			 68,913
	2006			463,090
				_______
				970,910
				======
(5)	Commitments and Contingencies:

	Lease Commitments -

	The Company has noncancelable operating lease commitments for certain 
	manufacturing facilities and equipment that expire at various dates 
	through 2001. Minimum rent commitments under operating leases are 
	$2,330,000 in 1997, $2,047,000 in 1998, $1,953,000 in 1999, $1,048,000 
	in 2000, and $257,000 in 2001. In accordance with the terms of the 
	lease agreements, the Company is required to pay maintenance and real 
	estate taxes related to the leased property. Operating lease expense 
	relating to continuing operations was $2,353,000 in 1996, $2,394,000 
	in 1995, and $2,128,000 in 1994.

	Employment Agreements -

	The Company has employment with various officers which are renewable 
	in successive one-year terms after August 21, 1999, requiring minimum 
	severance benefits following a change in control of the Company, as 
	defined.

	Litigation -

	The nature of the Company's operations expose it to the risk of certain 
	legal and environmental claims in the normal course of business.  
	Although the outcome of these matters cannot be determined, management 
	believes that final disposition of these matters will not have a 
	material adverse effect on the Company's operating results or 
	financial condition.

(6)	Income Taxes:

	Effective August 28, 1993, the Company adopted Statement of Financial 
	Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 
	109), under which deferred income tax assets and liabilities are 
	recognized for the differences between financial and income tax 
	reporting bases of assets and liabilities based on enacted tax rates 
	and laws. Net income for 1994 was increased by $1,422,000, or $0.26 
	per share, for the cumulative effect of this accounting change.

	The provision for income taxes from continuing operations consisted of 
	the following (in thousands):

					August 30,	Sept 1,		Sept 2,
					  1996		  1995		 1994

	Currently payable		$   654		$   192		$   235
	Deferred			  1,846	 	  1,008	 	    565
					 ______		 ______		 ______
	   Provision for income taxes	 $2,500		 $1,200		$   800
					 ======		 ======		 ======

	A reconciliation from the provision for income taxes using the 
	statutory federal income tax rate to the provision for income taxes 
	is as follows (in thousands):

					August 30,	Sept 1,		Sept 2,
					 1996		 1995		 1994

	Federal statutory rates		$2,472		$1,474		$1,222
	Tax benefit of foreign sales 
	   corporation			 (182)		 (222)		 (133)
	Research and development tax 
	   credits			     -		 (200)		 (210)
	State income taxes, net of 
	   federal benefit		    90		    37		    42
	Other			           120	   	   111	 	 (121)
					______		______		______
					$2,500		$1,200		$  800
					======		======		======

	As of August 30, 1996, the Company had net operating loss carryforwards 
	of $102,000 and income tax credit carryforwards of approximately 
	$1,309,000 that expire through 2009.

	Temporary differences and carryforwards which result in net deferred 
	income taxes as of August 30, 1996 and September 1, 1995 were as 
	follows (in thousands):

							August 30,	Sept 1,
							   1996		  1995

	Deferred tax assets (liabilities)
		Income tax credit carryforwards		$  1,309	$  1,138
		Post retirement benefits		     499	     494
		Inventories				     436	     433
		Deferred compensation			     411	     349
		Medical reserves			     170	     131
		Vacation reserve			     126	     120
		Net operating loss carryforwards	     102	   1,246
		Bad debts reserve			     100   	      99
		Other	    				     302	     423
							  ______	  ______
		Deferred tax assets	   		   3,455	   4,433
							  ______	  ______
		Deferred tax liabilities - depreciation	 (4,494)	 (3,376)
							  ______	  ______
		Valuation allowance	  		   (205)	   (455)
							  ______	  ______
		Net deferred taxes			$(1,244)	 $   602
			======	======

	A valuation allowance is provided when it is more likely than not that 
	some portion of the deferred tax assets will not be realized. The 
	Company has established a valuation allowance for a portion of the 
	net operating loss and income tax credit carryforwards and other items 
	due to the uncertainty related to their ultimate realization. The 
	reduction in the valuation allowance during 1996 was due to the 
	expiration of certain income tax credit carryforwards.

(7)	Pension and Post Retirement Benefits:

	 Defined Benefit Plan -

	The Company sponsors a defined benefit pension plan covering 
	substantially all hourly employees of the Company's Northfield, 
	Minnesota, facility (the Northfield Plan). Pension costs are funded 
	in compliance with the Employee Retirement Income Security Act of 1974.
	Net periodic pension cost is as follows (in thousands):

					    August 30,	    Sept 1,	Sept 2,
						1996	      1995	  1994

	Service cost				$ 184	     $  164	$  163
	Interest cost on projected benefit
	   obligation				  337		286	   262
	Return on plan assets			(282)	      (232)	  (89)
	Net amortization and deferral	   	   61	         45	  (81)
					       ______	     ______	______
		Net periodic pension cost	$ 300	      $ 263	$  255
					       ======	     ======	======

	Funding information with respect to the Northfield Plan is as follows 
	(in thousands):

						August 30,	September 1,
						  1996		  1995
	Actuarial present value of:
		Vested benefit obligation	$4,217		$4,200
						 =====		 =====
		Accumulated benefit obligation	$4,282		$4,281
						 =====		 =====
		Projected benefit obligation	$4,451		$4,552
						 =====		 =====
		Plan assets at fair value	$4,291		$3,556
						 =====		 =====
	Projected benefit obligation in excess 
	   of plan assets			$  160		$  996
	Unrecognized transition amount		  (60)		  (70)
	Unrecognized prior service cost		 (715)		 (760)
	Unrecognized net gain	  		   915	    	   100
						 _____		 _____
		Accrued pension cost		   300		   266
		Additional minimum liability	        -	   459
						 _____		 _____
			Net pension liability	$  300		$  725
						 =====		 =====

	The accumulated benefit obligation is the actuarial present value of 
	all vested and non-vested benefits for employee service before July 1, 
	1995. The projected benefit obligation is the accumulated benefit 
	obligation increased to include expected increases in the plan's flat 
	dollar benefit. The projected benefit obligation was determined using 
	an assumed discount rate of 8.0% in 1996 and 7.5% in 1995.  The assumed
	long-term rate of return on assets is 8.0% in 1996 and 7.5% in 1995.  
	Plan assets consist principally of cash equivalents, bonds, and common 
	stock. 

	An additional minimum liability is included in other non-current 
	liabilities in the accompanying consolidated balance sheet as of 
	September 1, 1995. This additional liability is an estimate of cash 
	contributions required to be made to the plan in the future. An asset 
	of $459,000 related to this liability is included in other assets in 
	the accompanying consolidated balance sheet as of September 1, 1995. 

	Employee Savings Plan -

	The Company has an employee savings plan covering all employees who 
	meet certain age and service requirements and who are not participants
	in the Northfield Plan. 

	The Company's contribution to the employee savings plan equals 2.0% of 
	the participant's salary. The Company also matches participants' 
	voluntary contributions to the plan. This matching contribution is 
	subject to Company earnings on a quarterly basis and is limited to 
	4.0% of each participant's salary. The Company's expense related to 
	the employee savings plan was $1,014,000 in 1996, $900,000 in 1995, 
	and $674,000 in 1994.

	Postretirement Benefits -

	In December 1990, the Financial Accounting Standard Board issued 
	Statement of Financial Accounting Standards No. 106, "Employers' 
	Accounting for Postretirement Benefits Other than Pensions" (SFAS 
	No. 106). SFAS No. 106 requires that the expected cost of these 
	benefits be charged to expense during the years that the employees 
	render service.

	The Company adopted SFAS No. 106 on August 28, 1993 and recorded a 
	one-time charge of $875,000, or $.16 per share, net of income tax 
	benefits of $525,000 in the accompanying statement of operations.  
	The Company's plan, which is unfunded, provides medical and life 
	insurance benefits for select employees. These employees, who retire 
	after age 40 with 20 years or more service, have access to the same 
	medical plan as active employees. 

	Net periodic postretirement benefit cost is as follows (in thousands):

						August 30,	September 1,
						 1996		 1995

	Service cost				$  33		$  30
	Interest cost on accumulated  
	  benefit obligation	 	 	   66	  	   54
						_____		_____
 		Net periodic postretirement
		  benefit cost			$  99		$  84
						=====		=====

	Funding information related to the Company's plan is as follows 
	(in thousands):

						August 30,	September 1,
						  1996		  1995

	Accumulated benefit obligation		$ 1,347		$ 1,364
	Plan assets at fair value	      	      -	       	      -
						 ______		 ______
	        Projected benefit obligation 
		    in excess of plan assets	  1,347		  1,364
	Unrecognized net gain	        	      -	    	   (28)
						 ______		 ______
		Accrued postretirement benefits	$ 1,347		$ 1,336
						 ======		 ======

	An 11.5% annual rate of increase in the health care cost trend rate 
	was assumed with rates decreasing gradually to 6.0% by 2007, and 
	remaining at that level thereafter. The health care cost trend rate 
	assumption has an effect on the amounts reported. Increasing the 
	assumed health care cost trend rate assumption by one percentage point 
	would increase accumulated postretirement benefit obligation by 3.1% 
	and the net periodic postretirement benefit cost by 2.1% each year. 
	The discount rate used in determining the accumulated postretirement 
	benefit obligation was 8.0% as of August 30, 1996 and 7.5% as of 
	September 1, 1995.

(8)	Discontinued Operation:

	On May 27, 1994, the Company sold its idle Nashua, New Hampshire, 
	facility for an amount less than the recorded value. In addition, 
	the Company revised its estimate of the costs it will incur related 
	to the abandonment of leased facilities in Orange County, California. 
	The consolidated statement of operations for 1994 reflects a charge 
	of $525,000, net of income tax benefits of $175,000, to reserve for 
	the losses related to these events.  As of August 30, 1996, there are 
	no remaining obligations with respect to the Company's discontinued 
	operation.

(9)	Consortium for the Development of Multi-Chip Modules (MCMs):

	On January 10, 1994, the Company entered into a consortium agreement 
	sponsored by the Advanced Projects Research Agency (ARPA), a United 
	States Government Agency. The purpose of the consortium is to 
	accelerate the development and commercialization of the Company's 
	chip-carrier substrates for multi chip modules (MCMs). As a 
	consortium member, the Company expects to receive approximately 
	$12.2 million in funding through August of 1997 from ARPA to further 
	test, design, and develop the manufacturing processes for the Company's
	Novaclad-based chip-carrier substrates and Z-Link(R) products, which 
	are to be used in constructing MCMs.  The Company incurred 
	$3,235,000 in 1996, $5,030,000 in fiscal 1995, and $3,079,000 in 
	fiscal 1994 in costs related to this project that were reimbursable 
	by ARPA.  As of August 30, 1996, $8,333,000 of these costs have been 
	reimbursed by the consortium, with the remaining $3,011,000 included 
	in accounts receivable in the accompanying consolidated balance sheet.

(10)	Joint Venture:

	In August 1995, the Company entered into various agreements to form a 
	joint venture in Juijiang Jiangxi, China with Jiangxi Changjiang 
	Chemical Plant and Hong Kong Wah Hing (China) Development Co., Ltd.
	Under the agreements, the Company has licensed certain technology to 
	the joint venture and is providing certain technical support.  In 
	return, the Company has received a 20% ownership interest in the 
	joint venture and will receive $900,000 in cash over a three-year 
	period, subject to completion of certain milestones; and royalties, 
	based upon a percentage of products sold by the joint venture, as 
	defined.  The joint venture has been established to manufacture 
	flexible adhesive-based copperclad laminates and associated cover 
	film tapes in China.  Under the terms of the agreements, the joint 
	venture will market these products in China, Taiwan, Hong Kong, and 
	Macau, and the Company will market the products produced by the joint 
	venture in all other markets.  The Company has received $545,000 in 
	cash from the joint venture since its inception.

(11)	Quarterly Results of Operations (Unaudited):

	The consolidated results of operations for the four quarters of 1996
	and 1995 are as follows (in thousands, except per share data):

							Fiscal 1996

					First	Second	Third	Fourth	Total

	Net sales			$26,097	$28,954	$29,690	$29,379	$114,120
	Cost of sales 	
	   and expenses			 24,874	 26,630	 27,589	 27,755	 106,848
					 ______	 ______	 ______	 ______	 _______
	Income from continuing 
	   operations before 
	   provision for income 
	   taxes			  1,223	  2,324	  2,101	  1,624    7,272
	Provision for income
	   taxes	  		    365	    700	    630	    805	   2,500
					 ______	 ______	 ______	 ______	 _______
	Net income			$   858	$ 1,624	$ 1,471	$   819	$  4,772
					 ======	 ======	 ======	 ======  =======

	Net income per common 
	   share			$  0.12	$  0.18	$  0.16	$  0.09	 $  0.55
					 ======	 ======	 ======  ======	  ======

							Fiscal 1995

					First	Second	Third	Fourth	Total

	Net sales			$21,088	$21,960	$25,203	$26,965	$95,216
	Cost of sales and 
	   expenses			 20,377	 21,782	 24,123	 24,600	 90,882
					 ______	 ______	 ______	 ______	 ______
	Income from continuing 
	   operations before
	   provision for income
	   taxes			    711	    178	  1,080   2,365	  4,334
	Provision for income 
	   taxes	    		    192	     43	    300	    665	  1,200
					 ______	 ______	 ______	 ______	 ______
	Net income			$   519	$   135	$   780	$ 1,700	$ 3,134
					 ======	 ======	 ======	 ======	 ======

	Net income per common 
	   share			$  0.08	$  0.02	$  0.11	$  0.24	$  0.45
					 ======	 ======	 ======	 ======	 ======

EX-2

[ARTICLE] 5
[LEGEND]
This schedule contains summary financial information extracted from
the August 30, 1996 financial statements and is qualified in its entirety
by reference to such financial statements.
[LEGEND]
                                                  
[PERIOD-TYPE]                   YEAR                   YEAR
[FISCAL-YEAR-END]                          AUG-30-1996             SEP-01-1995
[PERIOD-END]                               AUG-30-1996             SEP-01-1995
[CASH]                                             904                    1045
[SECURITIES]                                         0                       0
[RECEIVABLES]                                    21335                   17904
[ALLOWANCES]                                       244                     267
[INVENTORY]                                      11525                   12509
[CURRENT-ASSETS]                                 35570                   32772
[PP&E]                                          127122                  101326
[DEPRECIATION]                                   47630                   41471
[TOTAL-ASSETS]                                  115887                   94186
[CURRENT-LIABILITIES]                            13519                   16440
[BONDS]                                              0                       0
[PREFERRED-MANDATORY]                                0                       0
[PREFERRED]                                          0                       0
[COMMON]                                          2228                    1708
[OTHER-SE]                                       73109                   39244
[TOTAL-LIABILITY-AND-EQUITY]                    115887                   94186
[SALES]                                         114120                   95216
[TOTAL-REVENUES]                                114120                   95216
[CGS]                                            89171                   74752
[TOTAL-COSTS]                                    17138                   15255
[OTHER-EXPENSES]                                     0                       0
[LOSS-PROVISION]                                     0                       0
[INTEREST-EXPENSE]                                 539                     875
[INCOME-PRETAX]                                   7272                    4334
[INCOME-TAX]                                      2500                    1200
[INCOME-CONTINUING]                               4772                    3134
[DISCONTINUED]                                       0                       0
[EXTRAORDINARY]                                      0                       0
[CHANGES]                                            0                       0
[NET-INCOME]                                      4772                    3134
[EPS-PRIMARY]                                      .55                     .45
[EPS-DILUTED]                                      .55                     .45

EX-10

									Exhibit 10.4

EMPLOYMENT (CHANGE OF CONTROL)  AGREEMENT

	AGREEMENT made as of this ____ day of ______________, ____ by and between 
	Sheldahl, Inc., a Minnesota corporation with its principal offices at 
	Northfield, Minnesota ("Sheldahl") and _________________________________ 
	(the "Executive").

	WHEREAS, Sheldahl considers the establishment and maintenance of a sound and 
	vital management to be essential to protecting and enhancing the best 
 interests of Sheldahl and its shareholders; and

	WHEREAS, the Executive has made and is expected to make, due to Executive's 
	intimate knowledge of the business and affairs of Sheldahl, its policies, 
	methods, personnel and problems, a significant contribution to the 
	profitability, growth and financial strength of Sheldahl; and

	WHEREAS, Sheldahl, as a publicly held corporation, recognizes that the 
	possibility of a Change in Control may exist and that such possibility and the 
	uncertainty and questions which it may raise among management, may result in 
	the departure or distraction of the Executive in the performance of the 
	Executive's duties to the detriment of Sheldahl and its shareholders; and

	WHEREAS, Executive is willing to remain in the employ of Sheldahl upon the 
	understanding that Sheldahl will provide income security if the Executive's 
	employment is terminated under certain terms and conditions; and

	WHEREAS, it is in the best interests of Sheldahl and its stockholders to 
	reinforce and encourage the continued attention and dedication of management 
	personnel, including Executive, to their assigned duties without distraction 
	and to ensure the continued availability to Sheldahl of the Executive in the 
	event of a Change in Control.

	THEREFORE, in consideration of the foregoing and other respective covenants 
 and agreements of the parties herein contained, the parties hereto agree as 
 follows:

	1.	Term of Agreement.  This Agreement shall commence on the date hereof 
		and shall continue in effect until August 21, 1999.  After August 21, 
		1999, this Agreement shall automatically renew for successive one-year 
		periods unless Sheldahl notifies the Executive of termination of the 
		Agreement at least sixty (60) days prior to the end of the initial term 
		or any renewal term.  Notwithstanding the preceding sentence, if a 
		Change in Control occurs, this Agreement shall continue in effect for 
		a period of 36 months from the date of the occurrence of a Change in 
		Control.  Notwithstanding anything herein to the contrary, the 
		Executive's employment shall be at all times at the will of Sheldahl, 
		and nothing in this Agreement shall prohibit or limit the right of 
		Sheldahl or Executive, prior to a Change in Control, to terminate the 
		employment of Executive for any reason or for no reason.

	2.	Change in Control.  No benefits shall be payable hereunder unless there 
		shall have been a Change in Control, as set forth below.

	(a)	For purposes of this Agreement, a "Change in Control" of Sheldahl 
		shall mean a change in control which would be required to be reported 
		in response to Item 1 of Form 8-K promulgated under the Securities 
		Exchange Act of 1934, as amended (the "Exchange Act"), whether or not 
		Sheldahl is then subject to such reporting requirement, including, 
		without limitation, if:

	(i)	any "person" (as such term is used in Sections 13(d) and 14(d) of the 
		Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 
		under the Exchange Act), directly or indirectly, of securities of 
		Sheldahl representing 20% or more of the combined voting power of 
		Sheldahl's then outstanding securities; 

	(ii)	there ceases to be a majority of the Board of Directors comprised of:
		(A) individuals who on the date hereof constituted the Board of 
		Sheldahl, and (b) any new director who subsequently was elected 
		or nominated for election by a majority of the directors who held 
		such office immediately prior to a Change in Control; or

	(iii)	Sheldahl disposes of at least 75% of its assets, other than to an 
		entity owned 50% or greater by Sheldahl or any of its subsidiaries.

	(b)	A Change in Control which arises from a transaction or series of 
		transactions which are not authorized, recommended or approved by 
		formal action taken by the Board of Directors as determined in Section 
		2(a)(ii) above shall be referred to as an "Unapproved Change in 
		Control."  A Change in Control which has been authorized, recommended 
		or approved by the Board of Directors as determined in Section 2(a)
		(ii) above shall be referred to as an "Approved Change in Control."  

	(c)	Executive agrees that, subject to the terms and conditions of this 
		Agreement, in the event of a Change in Control of Sheldahl occurring 
		after the date hereof, Executive will remain in the employ of Sheldahl
		for a period of 12 months from the occurrence of such Change in Control
		of Sheldahl.

	3.	Termination Following Change in Control.  If a Change in Control shall 
		have occurred during the term of this Agreement and Executive's 
		employment is thereafter terminated, Executive shall be entitled to 
		the benefits provided in subsection 4(d) unless such termination is 
		(A) because of Executive's Death or Retirement, (B) by Sheldahl for 
		Cause or Disability, or (C) by Executive other than for Good Reason.

		(a)	Disability; Retirement.  If, as a result of incapacity due to 
		physical or mental illness, the Executive shall have been absent from
		the full-time performance of Executive's duties with Sheldahl for six
		consecutive months, and within 30 days after written Notice of 
		Termination is given the Executive shall not have returned to the full-
		time performance of the Executive's duties, Sheldahl may terminate 
		Executive's employment for "Disability".  Any question as to the 
		existence of Executive's Disability upon which Executive and Sheldahl
	 	cannot agree shall be determined by a qualified independent physician
	 	selected by Executive (or, if the Executive is unable to make such 
		selection, it shall be made by any adult member of the Executive's 
		immediate family), and approved by Sheldahl.  The determination of 
		such physician made in writing to Sheldahl and to Executive shall be 
		final and conclusive for all purposes of this Agreement.  Termination 
		by Executive of Executive's employment based on "Retirement" shall 
		mean retirement at or after the date the Executive has attained age 65.

	(b)	Cause.  Termination by Sheldahl of Executive's employment for "Cause" 
		shall mean: (i) the willful and continued failure of Executive to 
		perform his essential duties; (ii) the willful engaging by Executive 
		in illegal conduct, or (iii) gross misconduct materially injurious to 
		Sheldahl, which, in the case of clause (i) and (iii), the Executive 
		has not cured, in the sole opinion of the Board, determined in good 
		faith, within 10 days of receipt of the Notice of Termination.  

	(c)	Good Reason.  Executive shall be entitled to terminate his employment 
		for Good Reason.  For purposes of this Agreement, "Good Reason" shall 
		mean, without Executive's express written consent, any of the following:

	(i)	the assignment to Executive of any duties inconsistent with Executive's 
		status or position with Sheldahl, or a substantial reduction in the 
		nature or status of Executive's responsibilities from those in effect 
		immediately prior to the Change in Control;

	(ii)	a reduction by Sheldahl in Executive's annual base salary in effect 
		immediately prior to a Change in Control;

	(iii)	the relocation of Sheldahl's principal executive offices to a location 
		more than fifty miles from Northfield, Minnesota or Sheldahl requiring
		Executive to be based anywhere other than Sheldahl's principal 
		executive offices except for required travel on Sheldahl's business 
		to an extent substantially consistent with Executive's prior business 
		travel obligations;

	(iv)	the failure by Sheldahl to continue to provide Executive with benefits 
		a least as favorable to those enjoyed by Executive under any of 
		Sheldahl's pension, life insurance, medical, health and accident, 
		disability, deferred compensation, incentive awards, incentive stock 
		options, or savings plans in which Executive was participating at the 
		time of the Change in Control, the taking of any action by Sheldahl 
		which would directly or indirectly materially reduce any of such 
		benefits or deprive Executive of any material fringe benefit enjoyed 
		at the time of the Change in Control, or the failure by Sheldahl to 
		provide Executive with the number of paid vacation days to which 
		Executive is entitled at the time of the Change in Control, provided, 
		however, that Sheldahl may amend any such plan or programs as long as 
		such amendments do not reduce any benefits to which Executive would 
		be entitled upon termination;

	(v)	the failure of Sheldahl to obtain a satisfactory agreement from any 
		successor to assume and agree to perform this Agreement, as 
		contemplated in Section 5; or

	(vi)	any purported termination of Executive's employment which is not made 
		pursuant to a Notice of Termination satisfying the requirements of 
		subsection (e) below; for purposes of this Agreement, no such purported 
		termination shall be effective.

	(d)	Voluntary Termination Deemed Good Reason.   Notwithstanding anything 
		herein to the contrary, Executive may voluntarily terminate his 
		employment for any reason during the period commencing on the first 
		anniversary of the Change in Control and ending 30 days thereafter. 
		If an Unapproved Change in Control occurs, Executive may, in addition 
		to the opportunity provided in the preceding sentence, voluntarily 
		terminate his employment for any reason during the period commencing 
		on the 91st day following a Change in Control and ending on the 180th 
		day following a Change in Control.   Any such termination shall be 
		deemed "Good Reason" for all purposes of this Agreement.

	(e)	Notice of Termination.  Any purported termination of Executive's 
		employment by Sheldahl or by Executive shall be communicated by written 
		Notice of Termination to the other party hereto in accordance with 
		Section 7.  For purposes of this Agreement, a "Notice of Termination" 
		shall mean a notice which shall indicate the specific termination 
		provision in this Agreement relied upon and shall set forth the facts 
		and circumstances claimed to provide a basis for termination of 
		Executive's employment.

	(f)	Date of Termination.  For purposes of this Agreement, "Date of 
		Termination" shall mean:

	(i)	if Executive's employment is terminated for Disability, 30 days after 
		Notice of Termination is given (provided that the Executive shall not 
		have returned to the full-time performance of the Executive's duties 
		during such 30 day period); and

	(ii)	if Executive's employment is terminated pursuant to subsections (b), 
		(c) or (d) above or for any other reason (other than Disability), the 
		date specified in the Notice of Termination (which, in the case of a 
		termination pursuant to subsection (b) above shall not be less than 
		10 days, and in the case of a termination pursuant to subsection (c) 
		or (d) above shall not be less than 10 nor more than 30 days, 
		respectively, from the date such Notice of Termination is given).

	(g)	Dispute of Termination.  If, within 10 days after any Notice of 
		Termination is given, the party receiving such Notice of Termination 
		notifies the other party in good faith that a dispute exists concerning 
		the termination, the Date of Termination shall be the date on which 
		the dispute is finally determined, either by mutual written agreement 
		of the parties, or by a final judgement, order or decree of a court 
		of competent jurisdiction in accordance with subsection 11(a) (which 
		is not appealable or the time for appeal therefrom having expired and 
		no appeal having been perfected); provided, that the date of Termination
		shall be extended by a notice of dispute only if such notice is given 
		in good faith and the party giving such notice pursues the resolution 
		of such dispute with reasonable diligence.  Notwithstanding the 
		pendency of any such dispute, Sheldahl shall continue to pay Executive 
		full compensation in effect when the notice giving rise to the dispute 
		was given (including, but not limited to, base salary) and continue 
		Executive as a participant in all compensation, benefit and insurance 
		plans in which the Executive was participating when the notice giving 
		rise to the dispute was given, until the dispute is finally resolved 
		in accordance with this subsection.  Amounts paid under this 
		subsection are in addition to all other amounts due under this 
		Agreement and shall not be offset against or reduce any other amounts 
		under this Agreement.

	4.	Compensation Upon Termination or During Disability.  Following a Change
		in Control of Sheldahl, as defined in subsection 2(a), upon termination
		of Executive's employment or during a period of Disability, Executive 
		shall be entitled to the following benefits:

	(a)	During any period that Executive fails to perform full-time duties with 
		Sheldahl as a result of a Disability, Sheldahl shall pay Executive the 
		base salary of the Executive at the rate in effect at the commencement 
		of any such period, until such time as the Executive is determined to 
		be eligible for long term disability benefits in accordance with 
		Sheldahl's insurance programs then in effect.

	(b)	If Executive's employment shall be terminated by Sheldahl for Cause or 
		by Executive other than for Good Reason or Retirement, Sheldahl shall 
		pay to Executive his full base salary through the Date of Termination 
		at the rate in effect at the time Notice of Termination is given and 
		Sheldahl shall have no further obligation to Executive under this 
		Agreement.

	(c)	If Executive's employment shall be terminated by Sheldahl for 
		Disability or by Executive for Retirement, or by reason of Death, 
		Sheldahl shall immediately commence payment to the Executive (or 
		Executive's designated beneficiaries or estate, if no beneficiary is 
		designated) any and all benefits to which the Executive is entitled 
		under Sheldahl's retirement and insurance programs then in effect.

	(d)	If Executive's employment by Sheldahl shall be terminated (A) by 
		Sheldahl other than for Cause or Disability or (B) by Executive for 
		Good Reason, then Executive shall be entitled to the benefits provided 
		below:

	(i)	Sheldahl shall pay Executive the Executive's full base salary through 
		the Date of Termination at the rate in effect at the time the Notice 
		of Termination is given;

	(ii)	In lieu of any further salary payments for periods subsequent to the 
		Date of Termination, Sheldahl shall pay a severance payment (the 
		"Severance Payment") equal to the amount described in (A) or (B) 
		below, whichever is applicable: (A) if an Unapproved Change in Control 
		occurs, 2.99 times the average of the annual compensation paid to 
		Executive by Sheldahl (or any corporation ("Affiliate") affiliated 
		with Sheldahl within the meaning of Section 1504 of the Internal 
		Revenue Code of 1986, as amended (the "Code")) and includable in 
		Executive's gross income for federal income tax purposes for the five 
		calendar years (or, if Executive has been employed by Sheldahl for less
		than five years, the number of complete calendar years of employment) 
		(the "Base Period") preceding the earlier of the calendar year in which
		a Change in Control of Sheldahl occurred or the calendar year of the 
		Date of Termination; or (B) if an Approved Change of Control occurs, 
		1.5 times such compensation.  Such average shall be determined in 
		accordance with the temporary or final regulations promulgated under 
		Section 280G(e) of the Code.  For purposes of this Section 4, except 
		as provided in the next sentence, compensation payable to Executive by 
		Sheldahl (or an Affiliate) shall include every type and form of 
		compensation includable in Executive's gross income for federal income 
		tax purposes. Compensation shall exclude compensation recognized as 
		the result of the exercise of stock options or sale of the stocks 
		acquired or any payments actually or constructively received with
		respect to a plan of deferred compensation between Sheldahl and 
		Executive.  The Severance Payment shall be made within 60 days after 
		the Date of Termination.  

	(iii)	For the period of time after the Date of Termination on which the 
		Severance Payment is determined in accordance with paragraph (ii) 
		above, Executive shall be entitled to continue participation in the 
		life, disability, accident and health insurance benefit plans of 
		Sheldahl substantially similar to those which the Executive is 
		receiving or entitled to receive immediately prior to the Notice of 
		Termination.  Sheldahl and Executive shall share the cost associated 
		with such coverage as if Executive were still actively employed by 
		Sheldahl. If Executive cannot be covered under any of Sheldahl's group 
		plans or policies, Sheldahl shall reimburse Executive for his full cost 
		of obtaining comparable alternative group or individual coverage 
		elsewhere, less any contribution that Executive would have been 
		required to make under Sheldahl's group plans or policies. Benefits 
		otherwise receivable by Executive pursuant to this paragraph (iii) 
		shall be reduced to the extent comparable benefits are actually 
		received by Executive during such period, and any such benefits 
		actually received by Executive shall be reported to Sheldahl.

	(iv)	The Severance Payment shall be reduced by the value of benefits 
		actually provided in (iii) above and by the amount of any other 
		payment or the value of any benefit received or to be received by 
		Executive in connection with the termination of employment or 
		contingent upon a Change in Control of Sheldahl (whether payable 
		pursuant to the terms of this Agreement, any other plan, agreement 
		or arrangement with Sheldahl or an Affiliate) unless (1) Executive 
		shall have effectively waived receipt or enjoyment of such payment or 
		benefit prior to the date of payment of the Severance Payment, (2) in 
		the opinion of tax counsel selected by Sheldahl and acceptable to 
		executive, such other payment or benefit does not constitute a 
		"parachute payment" within the meaning of section 280G(b)(2) of the 
		Code, or (3) in the opinion of such tax counsel, the Severance Payment 
		(in its full amount or as partially reduced, as the case may be) plus 
		all other payments or benefits which constitute "parachute payments" 
		within the meaning of section 280G(b)(2) of the Code are reasonable 
		compensation for services actually rendered, within the meaning of 
		section 290G(b)(4) of the Code, and such payments are deductible by 
		Sheldahl.  The value of any non-cash benefit or any deferred cash 
		payment shall be determined by Sheldahl in accordance with the 
		principles of sections 280G(d)(3) and (4) of the Code.

	(v)	If it is established pursuant to a final determination of a court or 
		an Internal Revenue Service proceeding that, notwithstanding the good 
		faith of Executive and Sheldahl in applying the terms of this 
		Subsection 4(d), the aggregate "parachute payments" paid to or for 
		Executive's benefit are in an amount that would result in any portion 
		of such "parachute payments" not being deductible by Sheldahl or its 
		Affiliates by reason of section 280G of the Code, then Executive 
		shall have an obligation to pay Sheldahl upon demand an amount equal 
		to the sum of (1) the excess of the aggregate "parachute payments" paid 
		to or for the Executive's benefit over the aggregate "parachute 
		payments" that would have been paid to or for the Executive's benefit 
		without any portion of such "parachute payments" not being deductible 
		by reason of section 280G of the Code; and (2) interest on the amount 
		set forth in clause (1) of this sentence at the applicable Federal 
		rate (as defined in section 1274(d) of the Code) from the date of 
		Executive's receipt of such excess until the date of such payment.

	(vi)	The Severance Payment shall be in lieu of and offset the amount of 
		any payment to which the Executive may be entitled to in connection 
		with the termination of employment pursuant to the provisions of 
		Sheldahl's Severance Pay Plan, Document No. HR04.14, as amended from 
		time to time, or any successor to such policy.  

	(e)	Executive shall not be required to mitigate the amount of any payment 
		provided for in this Section 4 by seeking other employment or 
		otherwise, nor shall the amount of any payment or benefit provided 
		for in this Section 4 be reduced by any compensation earned by 
		Executive as the result of employment by another employer or by 
		retirement benefits after the Date of Termination, or otherwise 
		except as specifically provided in this Section 4.

	(f)	In addition to all other amounts payable to Executive under this 
		Section 4, Executive shall be entitled to receive all benefits payable 
		to the Executive under the Sheldahl, Inc. Employee Savings Plan and 
		any other plan or agreement relating to retirement benefits or 
		otherwise generally applicable to executive employees.

	5.	Employee Agreement.  Executive entered into an Employee Agreement with 
		Sheldahl in May 1996.  The Employee Agreement contains certain 
		provisions regarding confidentiality and assignment of inventions 
		and non-compete provisions.  If there is an Unapproved Change in 
		Control and thereafter Executive's employment with Sheldahl shall be 
		terminated (A) by Sheldahl other than for Cause or Disability, or (B) 
		by Executive for Good Reason (other than under Section 3(d) of this 
		Agreement), then the Executive shall be released from his non-compete 
		obligations under Section IV.B of the Employee Agreement.   If there 
		is an Approved Change in Control and thereafter Executive's employment 
		with Sheldahl shall be terminated (A) by Sheldahl other than for Cause 
		or Disability, or (B) by Executive for Good Reason (other than under 
		Section 3(d) of this Agreement), then the Executive shall be released 
		from his non-compete obligations under Section IV.B of the Employee 
		Agreement following 12 months from the Date of Termination. All other 
		obligations of Executive under the Employee Agreement shall continue.
		The Severance Payment shall constitute an offset against payments to 
		which Executive may be entitled to in connection with the Employee 
		Agreement and acceptance of such Severance Payment shall constitute 
		a waiver of such payments required under the Employee Agreement but 
		only up to the amount of the Severance Payment.

	6.	Funding of Payments.  In order to assure the performance by Sheldahl 
		or its successor of its obligations under this Agreement, Sheldahl may 
		deposit in trust an amount equal to the maximum payment that will be
		due the Executive under the terms hereof.  Under a written trust 
		instrument, the Trustee shall be instructed to pay to the Executive 
		(or the Executive's legal representative, as the case may be) the 
		amount to which the Executive shall be entitled under the terms hereof,
		and the balance, if any, of the trust not so paid or reserved for 
		payment shall be repaid to Sheldahl.  If Sheldahl deposits funds in 
		trust, any payment therefrom shall be made within five days after the 
		occurrence of any event giving rise to Sheldahl's obligation to make 
		such payment hereunder.  If and to the extent there are not amounts 
		in trust sufficient to pay Executive under this Agreement, Sheldahl 
		shall remain liable for any and all payments due to Executive.  In 
		accordance with the terms of such trust, at all times during the term 
		of this Agreement Executive shall have no rights, other than as an 
		unsecured general creditor of Sheldahl, to any amounts held in trust 
		and all trust assets shall be general assets of Sheldahl and subject 
		to the claims of creditors of Sheldahl.

	7.	Successors; Binding Agreement.

	(a)	Sheldahl will require any successor (whether direct or indirect, by 
		purchase, merger, consolidation or otherwise) to all or substantially 
		all of the business and/or assets of Sheldahl to expressly assume and 
		agree to perform this Agreement in the same manner and to the same 
		extent that Sheldahl would be required to perform it if no such 
		succession had taken place.  Failure of Sheldahl to obtain such 
		assumption and agreement prior to the effectiveness of any such 
		succession shall be a breach of this Agreement and shall entitle 
		Executive to compensation from Sheldahl in the same amount and on the 	
		same terms as he would be entitled hereunder if he terminated his
		employment for Good Reason following a Change in Control, except that
		for purposes of implementing the foregoing, the date on which any 
		such succession becomes effective shall be deemed the Date of 
		Termination.

	(b)	This Agreement shall inure to the benefit of and be enforceable by 
		Executive's personal or legal representatives, successors, heirs, and 
		designated beneficiaries.  If executive should die while any amount 
		would still be payable to Executive hereunder if the Executive had 
		continued to live, all such amounts, unless otherwise provided herein,
		shall be paid in accordance with the terms of this Agreement to the 
		Executive's designated beneficiaries, or, if there is no such 
		designated beneficiary, to the Executive's estate.

	8.	Notice.  For the purpose of this Agreement, notices and all other 
		communications provided for in the Agreement shall be in writing and 
		shall be deemed to have been duly given when delivered or mailed by 
		United States registered or certified mail, return receipt requested,
		postage pre-paid, addressed to the last known residence address of the
		Executive or in the case of Sheldahl, to its principal office to the 
		attention of each of the then directors of Sheldahl with a copy to 
		its Secretary, or to such other address as either party may have 
		furnished to the other in writing in accordance herewith, except that 
		notice of change of address shall be effective only upon receipt.

	9.	Miscellaneous.  No provision of this Agreement may be modified, waived
		or discharged unless such waiver, modification or discharge is agreed 
		to in writing and signed by the parties.  No waiver by either party 
		thereto at anytime of any breach by the other party to this Agreement 
		of, or compliance with, any condition or provision of this Agreement 
		to be performed by such other party shall be deemed a waiver of similar
		or dissimilar provisions or conditions at the same or at any prior or 
		similar time.  No agreements or representations, oral or otherwise, 
		express or implied, with respect to the subject matter hereof have 
		been made by either party which are not expressly set forth in this 
		Agreement.  The validity, interpretation, construction and performance 
		of this Agreement shall be governed by the laws of the State of 
		Minnesota.

	10.	Validity.  The invalidity or unenforceability of any provision of this 
		Agreement shall not affect the validity or enforceablity of any other 
		provision of this Agreement, which shall remain in full force and 
		effect.

	11.	Arbitration and Award of Attorneys' Fees.  

	(a)	Any dispute arising between the parties relating to this Agreement 
		shall be resolved by binding arbitration held in the City of 
		Minneapolis pursuant to the Rules of the American Arbitration 
		Association, except as hereinafter expressly modified.  If the 
		disputing and responding parties are unable to agree upon a resolution 
		within forty-five business days after the responding party's receipt 
		of written notice from the disputing party setting forth the nature 
		of the dispute, within the following ten business days the disputing 
		and responding parties shall select a mutually acceptable single 
		arbitrator to resolve the dispute or, if the parties fail or are 
		unable to do so, each shall within the following ten business days 
		select a single arbitrator, and the two so selected shall select a 
		third arbitrator within the following ten business days.  Such single 
		arbitrator or, as the case may be, panel of three arbitrators acting 
		by majority decision, shall resolve the dispute within sixty days 
		after the date such arbitrator, or the last of them so selected, is 
		selected, or as soon thereafter as practicable.  If either party 
		refuses or fails to select an arbitrator within the time therefor, 
		the other party may do so on such refusing or failing party's behalf.
		The arbitrators shall have no power to award any punitive or exemplary
		damages but may construe or interpret but shall not ignore or vary 
		the terms of this Agreement and shall be bound by controlling law.  
		The parties acknowledge the Executive's failure to comply with any 
		confidentiality, non-solicit, and non-compete provisions of any 
		agreement to which the Executive is bound will cause immediate and 
		irreparable injury to Sheldahl and that therefore the arbitrators, 
		or a court of competent jurisdiction if an arbitration panel cannot 
		be immediately convened, will be empowered to provide injunctive 
		relief, including temporary or preliminary relief, to restrain any 
		such failure to comply.  The arbitration award or other resolution 
		may be entered as a judgment at the request of the prevailing party 
		by any court of competent jurisdiction in Minnesota or elsewhere.

	(b)	In the event Sheldahl fails to pay Executive any amounts owing to 
		Executive under this Agreement or to provide Executive any benefits
		to which Executive is ultimately determined, by settlement, mediation, 
		arbitration, or by any court or other decision making body with 
		jurisdiction, to be entitled to under this Agreement, Sheldahl shall 
		pay the legal expenses (including reasonable attorneys' fees, court 
		costs and other out-of-pocket expenses), incurred by Executive to 
		enforce his rights under this Agreement and collect or obtain such 
		amounts or benefits.

	12.	Prior Agreement.  This Agreement supersedes and replaces in its 
		entirety all prior agreements related to a change in control of 
		Sheldahl, including any prior Employment Agreement between Sheldahl 
		and Executive.  

							SHELDAHL, INC.
							By	/S/ James E. Donaghy
		President and Chief Executive 		Officer

EX-10

								Exhibit 10.5

EMPLOYMENT (CHANGE OF CONTROL)  AGREEMENT

	AGREEMENT made as of this 21st day of August, 1996 by and between Sheldahl,
	Inc., a Minnesota corporation with its principal offices at Northfield, 
	Minnesota ("Sheldahl") and James E. Donaghy (the "Executive").

	WHEREAS, Sheldahl considers the establishment and maintenance of a sound 
	and vital management to be essential to protecting and enhancing the best 
	interests of Sheldahl and its shareholders; and

	WHEREAS, the Executive has made and is expected to make, due to Executive's 
	intimate knowledge of the business and affairs of Sheldahl, its policies, 
	methods, personnel and problems, a significant contribution to the 
	profitability, growth and financial strength of Sheldahl; and

	WHEREAS, Sheldahl, as a publicly held corporation, recognizes that the 
	possibility of a Change in Control may exist and that such possibility and 
	the uncertainty and questions which it may raise among management, may 
	result in the departure or distraction of the Executive in the performance 
	of the Executive's duties to the detriment of Sheldahl and its shareholders;
	and

	WHEREAS, Executive is willing to remain in the employ of Sheldahl upon the 
	understanding that Sheldahl will provide income security if the Executive's 
	employment is terminated under certain terms and conditions; and

	WHEREAS, it is in the best interests of Sheldahl and its stockholders to 
	reinforce and encourage the continued attention and dedication of management 
	personnel, including Executive, to their assigned duties without distraction
	and to ensure the continued availability to Sheldahl of the Executive in the
	event of a Change in Control.

	THEREFORE, in consideration of the foregoing and other respective covenants 
	and agreements of the parties herein contained, the parties hereto agree as 
	follows:

	1.	Term of Agreement.  This Agreement shall commence on the date hereof
		and shall continue in effect until August 21, 1999.  After August 21,
		1999, this Agreement shall automatically renew for successive one-
		year periods unless Sheldahl notifies the Executive of termination 
		of the Agreement at least sixty (60) days prior to the end of the 
		initial term or any renewal term.  Notwithstanding the preceding 
		sentence, if a Change in Control occurs, this Agreement shall 
		continue in effect for a period of 36 months from the date of the 
		occurrence of a Change in Control.  Notwithstanding anything herein 
		to the contrary, the Executive's employment shall be at all times at
		the will of Sheldahl, and nothing in this Agreement shall prohibit 
		or limit the right of Sheldahl or Executive, prior to a Change in 
		Control, to terminate the employment of Executive for any reason or 
		for no reason.

	2.	Change in Control.  No benefits shall be payable hereunder unless 
		there shall have been a Change in Control, as set forth below.

	(a)	For purposes of this Agreement, a "Change in Control" of Sheldahl 
		shall mean a change in control which would be required to be reported
		in response to Item 1 of Form 8-K promulgated under the Securities 
		Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
		Sheldahl is then subject to such reporting requirement, including, 
		without limitation, if:

	(i)	any "person" (as such term is used in Sections 13(d) and 14(d) of 
		the Exchange Act) becomes a "beneficial owner" (as defined in Rule 
		13d-3 under the Exchange Act), directly or indirectly, of securities
		of Sheldahl representing 20% or more of the combined voting power 
		of Sheldahl's then outstanding securities; 

	(ii)	there ceases to be a majority of the Board of Directors comprised 
		of :  (A) individuals who on the date hereof constituted the Board 
		of Sheldahl, and (b) any new director who subsequently was elected 
		or nominated for election by a majority of the directors who held 
		such office immediately prior to a Change in Control; or

	(iii)	Sheldahl disposes of at least 75% of its assets, other than to an 
		entity owned 50% or greater by Sheldahl or any of its subsidiaries.

	(b)	A Change in Control which arises from a transaction or series of 
		transactions which are not authorized, recommended or approved by 
		formal action taken by the Board of Directors as determined in 
		Section 2(a)(ii) above shall be referred to as an "Unapproved Change
		in Control."  A Change in Control which has been authorized, 
		recommended or approved by the Board of Directors as determined in
		Section 2(a)(ii) above shall be referred to as an "Approved Change 
		in Control."

	(c)	Executive agrees that, subject to the terms and conditions of this
		Agreement, in the event of a Change in Control of Sheldahl occurring
		after the date hereof, Executive will remain in the employ of Sheldahl
		for a period of 12 months from the occurrence of such Change in 
		Control of Sheldahl.

	3.	Termination Following Change in Control.  If a Change in Control 
		shall have occurred during the term of this Agreement and Executive's
		employment is thereafter terminated, Executive shall be entitled to 
		the benefits provided in subsection 4(d) unless such termination is	
		(A) because of Executive's Death or Retirement, (B) by Sheldahl for 
		Cause or Disability, or (C) by Executive other than for Good Reason.

		(a)	Disability; Retirement.  If, as a result of incapacity due 
		to physical or 	mental illness, the Executive shall have been 
		absent from the full-time performance of Executive's duties with 
		Sheldahl for six consecutive months, and within 30 days after
	 	written Notice of Termination is given the Executive shall not have 
		returned to the full-time performance of the Executive's duties, 
		Sheldahl may terminate Executive's employment for "Disability".
		Any question as to the existence of Executive's Disability upon 
		which Executive and Sheldahl cannot agree shall be determined by
		a qualified independent physician selected by Executive (or, if the 
		Executive is unable to 	make such selection, it shall be made by 
		any adult member of the Executive's immediate family), and approved 
		by Sheldahl.  The determination of such physician made in writing 
		to Sheldahl and to Executive shall be final and conclusive for all
	 	purposes of this Agreement.  Termination by Executive of Executive's
		employment based on "Retirement" shall mean retirement at or after 
		the date the Executive has attained age 65.

	(b)	Cause.  Termination by Sheldahl of Executive's employment for "Cause"
		shall mean: (i) the willful and continued failure of Executive to 
		perform his essential duties; (ii) the willful engaging by Executive 
		in illegal conduct, or (iii) gross misconduct materially injurious 
		to Sheldahl, which, in the case of clause (i) and (iii), the 
		Executive has not cured, in the sole opinion of the Board, 
		determined in good faith, within 10 days of receipt of the Notice 
		of Termination.  

	(c)	Good Reason.  Executive shall be entitled to terminate his employment
		for Good Reason.  For purposes of this Agreement, "Good Reason" shall
		mean, without Executive's express written consent, any of the 
		following:

	(i)	the assignment to Executive of any duties inconsistent with 
		Executive's status or position with Sheldahl, or a substantial 
		reduction in the nature or status of Executive's responsibilities 
		from those in effect immediately prior to the Change in Control;

	(ii)	a reduction by Sheldahl in Executive's annual base salary in effect 
		immediately prior to a Change in Control;

	(iii)	the relocation of Sheldahl's principal executive offices to a 
		location more than fifty miles from Northfield, Minnesota or 
		Sheldahl requiring Executive to be based anywhere other than 
		Sheldahl's principal executive offices except for required travel 
		on Sheldahl's business to an extent substantially consistent with 
		Executive's prior business travel obligations;

	(iv)	the failure by Sheldahl to continue to provide Executive with 
		benefits a least as favorable to those enjoyed by Executive under 
		any of Sheldahl's pension, life insurance, medical, health and 
		accident, disability, deferred compensation, incentive awards, 
		incentive stock options, or savings plans in which Executive was 
		participating at the time of the Change in Control, the taking of 
		any action by Sheldahl which would directly or indirectly materially
		reduce any of such benefits or deprive Executive of any material 
		fringe benefit enjoyed at the time of the Change in Control, or the
		failure by Sheldahl to provide Executive with the number of paid 
		vacation days to which Executive is entitled at the time of the 
		Change in Control, provided, however, that Sheldahl may amend any 
		such plan or programs as long as such amendments do not reduce any 
		benefits to which Executive would be entitled upon termination;

	(v)	the failure of Sheldahl to obtain a satisfactory agreement from any 
		successor to assume and agree to perform this Agreement, as 
		contemplated in Section 5; or

	(vi)	any purported termination of Executive's employment which is not 
		made pursuant to a Notice of Termination satisfying the requirements
		of subsection (e) below; for purposes of this Agreement, no such 
		purported termination shall be effective.

	(d)	Voluntary Termination Deemed Good Reason.   Notwithstanding anything
		herein to the contrary, Executive may voluntarily terminate his 
		employment for any reason during the period commencing on the first 
		anniversary of the Change in Control and ending 30 days thereafter.
		If an Unapproved Change in Control occurs, Executive may, in addition
		to the opportunity provided in the preceding sentence, voluntarily 
		terminate his employment for any reason during the period commencing
		on the 91st day following a Change in Control and ending on the 180th
		day following a Change in Control.   Any such termination shall be 
		deemed "Good Reason" for all purposes of this Agreement.

	(e)	Notice of Termination.  Any purported termination of Executive's 
		employment by Sheldahl or by Executive shall be communicated by 
		written Notice of Termination to the other party hereto in 
		accordance with Section 7.  For purposes of this Agreement, a 
		"Notice of Termination" shall mean a notice which shall indicate 
		the specific termination provision in this Agreement relied upon 
		and shall set forth the facts and circumstances claimed to provide 
		a basis for termination of Executive's employment.

	(f)	Date of Termination.  For purposes of this Agreement, "Date of 
		Termination" shall mean:

	(i)	if Executive's employment is terminated for Disability, 30 days 
		after Notice of Termination is given (provided that the Executive 
		shall not have returned to the full-time performance of the 
		Executive's duties during such 30 day period); and

	(ii)	if Executive's employment is terminated pursuant to subsections 
		(b), (c) or (d) above or for any other reason (other than Disability),
		the date specified in the Notice of Termination (which, in the case 
		of a termination pursuant to subsection (b) above shall not be 
		less than 10 days, and in the case of a termination pursuant to 
		subsection (c) or (d) above shall not be less than 10 nor more than 
		30 days, respectively, from the date such Notice of Termination is 
		given).

	(g)	Dispute of Termination.  If, within 10 days after any Notice of 
		Termination is given, the party receiving such Notice of Termination
		notifies the other party in good faith that a dispute exists 
		concerning the termination, the Date of Termination shall be the 
		date on which the dispute is finally determined, either by mutual 
		written agreement of the parties, or by a final judgement, order or
		decree of a court of competent jurisdiction in accordance with 
		subsection 11(a) (which is not appealable or the time for appeal 
		therefrom having expired and no appeal having been perfected); 
		provided, that the date of Termination shall be extended by a 
		notice of dispute only if such notice is given in good faith and 
		the party giving such notice pursues the resolution of such dispute 
		with reasonable diligence.  Notwithstanding the pendency of any 
		such dispute, Sheldahl shall continue to pay Executive full 
		compensation in effect when the notice giving rise to the dispute 
		was given (including, but not limited to, base salary) and continue 
		Executive as a participant in all compensation, benefit and 
		insurance plans in which the Executive was participating when 
		the notice giving rise to the dispute was given, until the dispute 
		is finally resolved in accordance with this subsection.  Amounts 
		paid under this subsection are in addition to all other amounts 
		due under this Agreement and shall not be offset against or reduce 
		any other amounts under this Agreement.

	4.	Compensation Upon Termination or During Disability.  Following a 
		Change in Control of Sheldahl, as defined in subsection 2(a), upon 
		termination of Executive's employment or during a period of 
		Disability, Executive shall be entitled to the following benefits:

	(a)	During any period that Executive fails to perform full-time duties
		with Sheldahl as a result of a Disability, Sheldahl shall pay 
		Executive the base salary of the Executive at the rate in effect at 
		the commencement of any such period, until such time as the Executive
		is determined to be eligible for long term disability benefits in 
		accordance with Sheldahl's insurance programs then in effect.

	(b)	If Executive's employment shall be terminated by Sheldahl for Cause 
		or by Executive other than for Good Reason or Retirement, Sheldahl 
		shall pay to Executive his full base salary through the Date of 
		Termination at the rate in effect at the time Notice of Termination 
		is given and Sheldahl shall have no further obligation to Executive 
		under this Agreement.

	(c)	If Executive's employment shall be terminated by Sheldahl for
		Disability or by Executive for Retirement, or by reason of Death, 
		Sheldahl shall immediately commence payment to the Executive (or 
		Executive's designated beneficiaries or estate, if no beneficiary 
		is designated) any and all benefits to which the Executive is 
		entitled under Sheldahl's retirement and insurance programs then 
		in effect.

	(d)	If Executive's employment by Sheldahl shall be terminated (A) by 
		Sheldahl other than for Cause or Disability or (B) by Executive for 
		Good Reason, then Executive shall be entitled to the benefits 
		provided below:

	(i)	Sheldahl shall pay Executive the Executive's full base salary 
		through the Date of Termination at the rate in effect at the time 
		the Notice of Termination is given;

	(ii)	In lieu of any further salary payments for periods subsequent to 
		the Date of Termination, Sheldahl shall pay a severance payment (the
		"Severance Payment") equal to the amount described in (A) or (B) 
		below, whichever is applicable: (A) if an Unapproved Change in 
		Control occurs, 2.99 times the average of the annual compensation 
		paid to Executive by Sheldahl (or any corporation ("Affiliate") 
		affiliated with Sheldahl within the meaning of Section 1504 of 
		the Internal Revenue Code of 1986, as amended (the "Code")) and 
		includable in Executive's gross income for federal income tax 
		purposes for the five calendar years (or, if Executive has been 
		employed by Sheldahl for less than five years, the number of 
		complete calendar years of employment) (the "Base Period") preceding
		the earlier of the calendar year in which a Change in Control of 
		Sheldahl occurred or the calendar year of the Date of Termination;
		or (B) if an Approved Change of Control occurs, 1.5 times such 
		compensation.  Such average shall be determined in accordance with 
		the temporary or final regulations promulgated under Section 280G(e)
		of the Code.  For purposes of this Section 4, except as provided in
		the next sentence, compensation payable to Executive by Sheldahl 
		(or an Affiliate) shall include every type and form of compensation
		includable in Executive's gross income for federal income tax 
		purposes. Compensation shall exclude compensation recognized as 
		the result of the exercise of stock options or sale of the stocks 
		acquired or any payments actually or constructively received with 
		respect to a plan of deferred compensation between Sheldahl and 
		Executive.  The Severance Payment shall be made within 60 days 
		after the Date of Termination.  

	(iii)	For the period of time after the Date of Termination on which the 
		Severance Payment is determined in accordance with paragraph (ii) 
		above, Executive shall be entitled to continue participation in the 
		life, disability, accident and health insurance benefit plans of 
		Sheldahl substantially similar to those which the Executive is 
		receiving or entitled to receive immediately prior to the Notice 
		of Termination.  Sheldahl and Executive shall share the cost 
		associated with such coverage as if Executive were still actively 
		employed by Sheldahl. If Executive cannot be covered under any of 
		Sheldahl's group plans or policies, Sheldahl shall reimburse 
		Executive for his full cost of obtaining comparable alternative 
		group or individual coverage elsewhere, less any contribution that 
		Executive would have been required to make under Sheldahl's group
		plans or policies. Benefits otherwise receivable by Executive 
		pursuant to this paragraph (iii) shall be reduced to the extent 
		comparable benefits are actually received by Executive during such 
		period, and any such benefits actually received by Executive shall 
		be reported to Sheldahl.

	(iv)	The Severance Payment shall be reduced by the value of benefits 
		actually provided in (iii) above and by the amount of any other 
		payment or the value of any benefit received or to be received by 
		Executive in connection with the termination of employment or 
		contingent upon a Change in Control of Sheldahl (whether payable 
		pursuant to the terms of this Agreement, any other plan, agreement 
		or arrangement with Sheldahl or an Affiliate) unless (1) Executive 
		shall have effectively waived receipt or enjoyment of such payment 
		or benefit prior to the date of payment of the Severance Payment, 
		(2) in the opinion of tax counsel selected by Sheldahl and acceptable
		to executive, such other payment or benefit does not constitute a 
		"parachute payment" within the meaning of section 280G(b)(2) of the 
		Code, or (3) in the opinion of such tax counsel, the Severance 
		Payment (in its full amount or as partially reduced, as the case 
		may be) plus all other payments or benefits which constitute 
		"parachute payments" within the meaning of section 280G(b)(2) of 
		the Code are reasonable compensation for services actually rendered,
		within the meaning of section 290G(b)(4) of the Code, and such 
		payments are deductible by Sheldahl.  The value of any non-cash 
		benefit or any deferred cash payment shall be determined by Sheldahl
		in accordance with the principles of sections 280G(d)(3) and (4) of 
		the Code.

	(v)	If it is established pursuant to a final determination of a court 
		or an Internal Revenue Service proceeding that, notwithstanding 
		the good faith of Executive and Sheldahl in applying the terms 
		of this Subsection 4(d), the aggregate "parachute payments" paid 
		to or for Executive's benefit are in an amount that would result 
		in any portion of such "parachute payments" not being deductible 
		by Sheldahl or its Affiliates by reason of section 280G of the Code, 
		then Executive shall have an obligation to pay Sheldahl upon demand
		an amount equal to the sum of (1) the excess of the aggregate 
		"parachute payments" paid to or for the Executive's benefit over 
		the aggregate "parachute payments" that would have been paid to 
		or for the Executive's benefit without any portion of such 
		"parachute payments" not being deductible by reason of section 
		280G of the Code; and (2) interest on the amount set forth in 
		clause (1) of this sentence at the applicable Federal rate (as 
		defined in section 1274(d) of the Code) from the date of 
		Executive's receipt of such excess until the date of such payment.

		(vi)	The Severance Payment shall be in lieu of and offset the amount
		of any payment to which the Executive may be entitled to in connection 
		with the termination of employment pursuant to the provisions of 
		Sheldahl's Severance Pay Plan, Document No. HR04.14, as amended 
		from time to time, or any successor to such policy.  

	(e)	Executive shall not be required to mitigate the amount of any 
		payment provided for in this Section 4 by seeking other employment 
		or otherwise, nor shall the amount of any payment or benefit provided
		for in this Section 4 be reduced by any compensation earned by 
		Executive as the result of employment by another employer or by 
		retirement benefits after the Date of Termination, or otherwise 
		except as specifically provided in this Section 4.

	(f)	In addition to all other amounts payable to Executive under this 
		Section 4, Executive shall be entitled to receive all benefits 
		payable to the Executive under the Sheldahl, Inc. Employee Savings 
		Plan and any other plan or agreement relating to retirement benefits
		or otherwise generally applicable to executive employees.

	5.	Employee Agreement.  Executive entered into an Employee Agreement 
		with Sheldahl in May 1996.  The Employee Agreement contains certain 
		provisions regarding confidentiality and assignment of inventions 
		and non-compete provisions.  If there is an Unapproved Change in 
		Control and thereafter Executive's employment with Sheldahl shall 
		be terminated (A) by Sheldahl other than for Cause or Disability, 
		or (B) by Executive for Good Reason (other than under Section 3(d) 
		of this Agreement), then the Executive shall be released from his 
		non-compete obligations under Section IV.B of the Employee 
		Agreement.   If there is an Approved Change in Control and 
		thereafter Executive's employment with Sheldahl shall be terminated
		(A) by Sheldahl other than for Cause or Disability, or (B) by 
		Executive for Good Reason (other than under Section 3(d) of this 
		Agreement), then the Executive shall be released from his non-compete
		obligations under Section IV.B of the Employee Agreement following 
		12 months from the Date of Termination. All other obligations of 
		Executive under the Employee Agreement shall continue.  The 
		Severance Payment shall constitute an offset against payments to 
		which Executive may be entitled to in connection with the Employee 
		Agreement and acceptance of such Severance Payment shall constitute 
		a waiver of such payments required under the Employee Agreement but 
		only up to the amount of the Severance Payment.

	6.	Funding of Payments.  In order to assure the performance by Sheldahl
		or its successor of its obligations under this Agreement, Sheldahl 
		may deposit in trust an amount equal to the maximum payment that will 
		be due the Executive under the terms hereof.  Under a written trust 
		instrument, the Trustee shall be instructed to pay to the Executive
		(or the Executive's legal representative, as the case may be) the 
		amount to which the Executive shall be entitled under the terms 
		hereof, and the balance, if any, of the trust not so paid or 
		reserved for payment shall be repaid to Sheldahl.  If Sheldahl 
		deposits funds in trust, any payment therefrom shall be made within 
		five days after the occurrence of any event giving rise to Sheldahl's
		obligation to make such payment hereunder.  If and to the extent 
		there are not amounts in trust sufficient to pay Executive under 
		this Agreement, Sheldahl shall remain liable for any and all payments
		due to Executive.  In accordance with the terms of such trust, at all
		times during the term of this Agreement Executive shall have no 
		rights, other than as an unsecured general creditor of Sheldahl, 
		to any amounts held in trust and all trust assets shall be general 
		assets of Sheldahl and subject to the claims of creditors of Sheldahl.

	7.	Successors; Binding Agreement.

	(a)	Sheldahl will require any successor (whether direct or indirect, by 
		purchase, merger, consolidation or otherwise) to all or substantially 
		all of the business and/or assets of Sheldahl to expressly assume 
		and agree to perform this Agreement in the same manner and to the 
		same extent that Sheldahl would be required to perform it if no 
		such succession had taken place.  Failure of Sheldahl to obtain 
		such assumption and agreement prior to the effectiveness of any 
		such succession shall be a breach of this Agreement and shall 
		entitle Executive to compensation from Sheldahl in the same amount 
		and on the same terms as he would be entitled hereunder if he 
		terminated his employment for Good Reason following a Change in 
		Control, except that for purposes of implementing the foregoing, 
		the date on which any such succession becomes effective shall be 
		deemed the Date of Termination.

	(b)	This Agreement shall inure to the benefit of and be enforceable by 
		Executive's personal or legal representatives, successors, heirs, 
		and designated beneficiaries.  If executive should die while any 
		amount would still be payable to Executive hereunder if the Executive
		had continued to live, all such amounts, unless otherwise provided 
		herein, shall be paid in accordance with the terms of this Agreement 
		to the Executive's designated beneficiaries, or, if there is no 
		such designated beneficiary, to the Executive's estate.

	8.	Notice.  For the purpose of this Agreement, notices and all other 
		communications provided for in the Agreement shall be in writing 
		and shall be deemed to have been duly given when delivered or 
		mailed by United States registered or certified mail, return 
		receipt requested, postage pre-paid, addressed to the last known 
		residence address of the Executive or in the case of Sheldahl, to 
		its principal office to the attention of each of the then directors 
		of Sheldahl with a copy to its Secretary, or to such other address 
		as either party may have furnished to the other in writing in 
		accordance herewith, except that notice of change of address shall 
		be effective only upon receipt.

	9.	Miscellaneous.  No provision of this Agreement may be modified, 
		waived or discharged unless such waiver, modification or discharge 
		is agreed to in writing and signed by the parties.  No waiver by 
		either party thereto at anytime of any breach by the other party 
		to this Agreement of, or compliance with, any condition or provision 
		of this Agreement to be performed by such other party shall be 
		deemed a waiver of similar or dissimilar provisions or conditions 
		at the same or at any prior or similar time.  No agreements or 
		representations, oral or otherwise, express or implied, with 
		respect to the subject matter hereof have been made by either 
		party which are not expressly set forth in this Agreement.  The 
		validity, interpretation, construction and performance of this 
		Agreement shall be governed by the laws of the State of Minnesota.

	10.	Validity.  The invalidity or unenforceability of any provision of 
		this Agreement shall not affect the validity or enforceablity of 
		any other provision of this Agreement, which shall remain in full 
		force and effect.

	11.	Arbitration and Award of Attorneys' Fees.  

	(a)	Any dispute arising between the parties relating to this Agreement 
		shall be resolved by binding arbitration held in the City of 
		Minneapolis pursuant to the Rules of the American Arbitration 
		Association, except as hereinafter expressly modified.  If the 
		disputing and responding parties are unable to agree upon a 
		resolution within forty-five business days after the responding 
		party's receipt of written notice from the disputing party setting 
		forth the nature of the dispute, within the following ten business 
		days the disputing and responding parties shall select a mutually 
		acceptable single arbitrator to resolve the dispute or, if the 
		parties fail or are unable to do so, each shall within the following 
		ten business days select a single arbitrator, and the two so 
		selected shall select a third arbitrator within the following ten 
		business days.  Such single arbitrator or, as the case may be, panel
		of three arbitrators acting by majority decision, shall resolve the
		dispute within sixty days after the date such arbitrator, or the 
		last of them so selected, is selected, or as soon thereafter as 
		practicable.  If either party refuses or fails to select an 
		arbitrator within the time therefor, the other party may do so 
		on such refusing or failing party's behalf.  The arbitrators 
		shall have no power to award any punitive or exemplary damages 
		but may construe or interpret but shall not ignore or vary the 
		terms of this Agreement and shall be bound by controlling law.  
		The parties acknowledge the Executive's failure to comply with 
		any confidentiality, non-solicit, and non-compete provisions of 
		any agreement to which the Executive is bound will cause immediate 
		and irreparable injury to Sheldahl and that therefore the arbitrators,
		or a court of competent jurisdiction if an arbitration panel cannot 
		be immediately convened, will be empowered to provide injunctive 
		relief, including temporary or preliminary relief, to restrain any 
		such failure to comply.  The arbitration award or other resolution 
		may be entered as a judgment at the request of the prevailing party
		by any court of competent jurisdiction in Minnesota or elsewhere.

	(b)	In the event Sheldahl fails to pay Executive any amounts owing to 
		Executive under this Agreement or to provide Executive any benefits
		to which Executive is ultimately determined, by settlement, 
		mediation, arbitration, or by any court or other decision making 
		body with jurisdiction, to be entitled to under this Agreement, 
		Sheldahl shall pay the legal expenses (including reasonable attorneys'
		fees, court costs and other out-of-pocket expenses), incurred by 
		Executive to enforce his rights under this Agreement and collect 
		or obtain such amounts or benefits.

	12.	Prior Agreement.  This Agreement supersedes and replaces in its 
		entirety all prior agreements related to a change in control of 
		Sheldahl, including the Employment Agreement between Sheldahl 
		and Executive, except the provisions of Section 7 of the First 
		Amendment to Employment Agreement related to deferred compensation 
		shall remain in full force and effect and shall continue in effect 
		so long as Executive is employed by Sheldahl, even if this Agreement
		terminates in accordance with the provisions of Section 1.

							SHELDAHL, INC.


						By	/s/ James S. Womack
							James S. Womack

					

EX-11

	Exhibit 11



SHELDAHL, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)


	FOR THE FISCAL YEARS ENDED

	Sept 2,	Sept 1,	August 30,
	1994	1995	1996

Primary Earnings Per Share:

Weighted average number of issued
	share outstanding	5,155	6,692	8,414

Effect of exercise of stock options
	under the treasury stock method	  263	  233	  272
		_____	_____	_____

Weighted average shares outstanding used to
	compute primary earnings per share	5,418	6,925	8,686
		=====	=====	=====

Net income	$2,816	$3,134	$4,772
		=====	=====	=====

Net income per share	$ 0.52	$ 0.45	$ 0.55
		=====	=====	=====

Fully Diluted Earnings Per Share:

Weighted average number of issued
	share outstanding	5,155	6,692	8,414

Effect of exercise of stock options
	under the treasury stock method	  278	  279	  223
		_____	_____	_____

Weighted average shares outstanding used to
	compute primary earnings per share	5,433	6,971	  8,637
		=====	=====	=====

Net income	$2,816	$3,134	$4,772
		=====	=====	=====

Net income per share	$ 0.52	$ 0.45	$ 0.55
		=====	=====	=====

EX-18

						Exhibit 18


October 11, 1996


Mr. John V. McManus
Vice President, Finance
Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN  55057

	Re:   Form 10-K Report for the Year Ended August 30, 1996

Dear Mr. McManus:

This letter is written to meet the requirements of Regulation S-K calling for a 
letter from a registrant's independent accountants whenever there has been a 
change in accounting principle or practice.

We have been informed that, effective August 30, 1996, the Company changed from 
the LIFO cost method of accounting for inventories to the FIFO cost method of 
accounting for inventories.  According to management of the Company, this change
was made as management believes FIFO will more accurately measure operating 
results by reflecting the effect of productivity improvements in cost of sales 
and to better match current costs and revenues.

A complete coordinated set of financial and reporting standards for determining 
the preferability of accounting principles among acceptable alternative 
principles has not been established by the accounting profession.  Thus, we 
cannot make an objective determination of whether the change in accounting 
described in the preceding paragraph is to a preferable method.  However, we 
have reviewed the pertinent factors, including those related to financial 
reporting, in this particular case on a subjective basis, and our opinion 
stated below is based on our determination made in this method.

We are of the opinion that the Company's change in method of accounting is to 
an acceptable alternative method of accounting, which, based upon the reasons 
stated for the change and our discussions with you, is also preferable under 
the circumstances in this particular case.  In arriving at this opinion, we 
have relied on the business judgment and business planning of your management.

We have not audited the application of this change to the financial statements 
of any period subsequent to August 30, 1996, nor as of any interim period within
the three years ended August 30, 1996.

Very truly yours,

Arthur Andersen L.L.P.

EX-22

						Exhibit 22


				Sheldahl, Inc.

			Subsidiary of Registrant



State or Jurisdiction of Incorporation			Name of Subsidiary

	U.S. Virgin Islands			Sheldahl International Sales, Inc.

EX-23

							Exhibit 23


	CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation of 
our reports included or incorporated by reference in this Form 10-K, into the 
Company's previously filed Registration Statement Nos. 2-75088, 2-96293, 
33-22154, 33-33703, 33-40729 and 33-57888.


							Arthur Andersen LLP



Minneapolis, Minnesota,
November 11, 1996