LOAN AGREEMENT

This Loan Agreement ("Loan Agreement") is made and given as of this 
twenty-sixth (26th) day of February, 1998, by SHELDAHL INC., a Minnesota 
corporation (hereinafter called "Sheldahl" or "Borrower"), with its chief 
executive office at 1150 Sheldahl Road, Northfield, Minnesota  55057-9444, in 
favor RELATIONAL FUNDING CORPORATION, whose address is 3701 Algonquin Road, 
Suite 450, Rolling Meadows, Illinois 60008-3118 (hereinafter called "Lender").

RECITALS

A. 	Sheldahl is requesting that Lender lend the principal sum of 
$2,334,764.13 to Sheldahl on a full recourse basis (the "Sheldahl Loan") and 
Lender desires to make such loan on the terms and conditions provided herein.

B.	Sheldahl has entered into that certain Software License and Services 
Agreement (the "Software License Agreement"), dated April 1, 1997, between 
Sheldahl and Oracle Corporation ("Oracle") as amended by Amendment One to 
Software License and Service Agreement, dated April 1, 1997, pursuant to which 
Oracle has licensed to Sheldahl certain software and related products 
including the disks and all other media on which it is contained and all 
printed matter relating thereto (the "Software") and provided to Sheldahl 
certain related services (the "Services").  A full and complete list of the 
Software and Services is attached hereto as Exhibit A.

C.	As a condition for making the Sheldahl Loan, Lender has required that 
Borrower execute and deliver to Lender this Agreement granting certain rights 
to Lender with respect to the Software.  In addition, Lender has required that 
Borrower execute and deliver a Security Agreement (the "Security Agreement") 
granting a first priority security interest in certain personal computers as 
identified in the Security Agreement (the "PC's") to Lender as additional 
security for the Sheldahl Loan.

D.	In order to grant a first priority security interest in the PC's to 
Lender, Sheldahl has obtained a Subordination Agreement (the "Subordination 
Agreement") from Norwest Bank  Minnesota, N.A. ("Norwest"), pursuant to 
which Norwest has subordinated its interest in the PC's to the interest 
granted to the Lender pursuant to the Security Agreement.

TERMS AND CONDITIONS

NOW, THEREFORE, for good and valuable consideration, the receipt and 
adequacy of which are hereby acknowledged by Borrower, it is agreed as 
follows:

1. Recourse Loan.  Subject to the terms and conditions set forth in 
this Agreement, Lender shall lend to Sheldahl the original 
principal amount of the Sheldahl Loan. 

2. Promissory Note.  The obligation of Sheldahl to repay the Sheldahl 
Loan shall be evidenced by the Promissory Note of Sheldahl to 
Lender of even date herewith in the principal amount of 
$2,334,764.13 (the "Note"). The Note, this Loan Agreement, the 
Security Agreement, the Subordination Agreement and any other 
instruments or documents given as security for the Sheldahl Loan 
are herein referred to as the "Loan Documents."

3.	Representations, Warranties and Covenants of Borrower.  Borrower 
represents, warrants, covenants and agrees:

(a)	Incorporation.  Borrower is a corporation duly organized, validly 
existing and in good standing under the laws of the State of 
Minnesota and has all requisite power and authority to execute, 
deliver and perform the Loan Documents.

(b)	Authorization.  The execution, delivery and performance of the 
Loan Documents have been duly authorized by all necessary 
corporate action and will not (i) require any consent or approval 
of any entity which has not been obtained; (ii) violate any 
provision of any indenture, agreement or instrument to which it is 
a party or by which it is bound.

(c)	Certifications.  The representations and warranties of Borrower 
contained in the Acceptance Certificate of Borrower, of even date, 
are true and correct and are incorporated herein by reference.

(d)	Title to Software.  Borrower has a valid and enforceable license 
to the Software and none of the Borrower's interest in the 
Software is subject to any sublicense, lien, security interest or 
other right, except for the rights granted under this Loan 
Agreement or to Norwest.  Except for the rights granted under this 
Loan Agreement and to Norwest, Borrower has not granted, and will 
not grant or permit to exist, any sublicense, lien or security 
interests in all or a portion of the Borrower's interest in the 
Software.  Borrower shall not sell, assign, transfer or otherwise 
dispose of the Borrower's interest in the Software prior to 
payment in full of the Note without Lender's prior written 
consent.  Borrower shall defend its interest in the Software 
against all claims and demands of all and any other persons at any 
time claiming any interest therein adverse to Lender.

(e) Title To PC's and Priority of Lien.  Borrower has granted to 
Lender, pursuant to the Security Agreement, a security interest in 
the PC's.  Except for the security interest of Norwest, which has 
been subordinated to the security interest granted pursuant to the 
Security Agreement, the PC's are free and clear of liens, security 
interests and encumbrances (except for the interest of Lender 
granted hereunder).  Other than the liens to Norwest and the 
Lender, the Borrower has not granted, and will not grant or permit 
to exist, any lien or security interest in all or a portion of the 
PC's.  The Borrower shall defend the PC's against all claims and 
demands of all and any other person at any time claiming any 
interest therein adverse to the Lender.

(f)	Actions and Proceedings.  There are no actions at law, suits in 
equity or by other proceedings before any governmental agency, 
commission, bureau, tribunal or other arbitration proceedings 
against or affecting Borrower that if adversely determined would 
adversely affect the rights of Borrower to enter into the Loan 
Documents.  

(g)	Insurance.  Borrower agrees it will keep the Software and the PC's 
insured at all times against loss by fire and/or other hazards 
concerning which, in the judgment of Lender, insurance protection 
is reasonably necessary, in a company or companies reasonably 
satisfactory to Lender and in amounts sufficient to protect 
against loss or damage of the Software and the PC's and will pay 
the premiums therefor. A Certificate of Insurance, and other 
reasonable evidence of insurable coverage in form acceptable to 
Lender which names Lender as loss payee and additional insured 
shall be delivered to Lender.

(h)	Costs of Collection.  In the event of any action or proceeding to 
enforce any of Lender's rights hereunder, Borrower shall pay 
Lenders reasonable attorneys' fees and legal expenses incurred by 
Lender in connection with or arising out of such action or 
proceeding.

(i)	Location of Software and PC's.  The Software and the majority of 
the PC's are located at the Borrower's facilities at the following 
address:

801 North Highway 3
Northfield, Minnesota 55057

and will not be moved without 30 days prior written notice to 
Lender.

The remainder of the PC's are located at the Borrower's facilities 
at the following addresses:

1150 Sheldahl Road	     805 North Highway 3       	1285 S. Fordham 
Northfield, MN 55057	   Northfield, MN 55057      	Longmont, CO 80501

East Hwy. 10,		         715 N. County Road 19	     6060 Dixie Hwy.
Britton, SD 57430	     	Aberdeen, SD 57401	        Clarkston, MI 48346

and will not be moved without 30 days prior written notice to 
Lender.

(j)	Certificates and Opinions.  The Borrower has delivered herewith a 
Certificate of Officer of Sheldahl certifying as to the truth of 
the representations and warranties contained herein and the 
performance of the covenants contained herein and certifying as to 
the Articles of Incorporation and Bylaws of Sheldahl, the 
resolutions of the Board of Directors approving the transactions 
contemplated herein and the incumbency of the signatories hereto. 
 The Borrower shall cause to be delivered to Lender an opinion of 
counsel to the Borrower with respect to the good standing of 
Sheldahl, the authorization and enforceability of the Loan 
Documents, the creation and priority of the security interest 
granted under the Security Agreement, and that the transactions 
contemplated herein do not violate the Articles, Bylaws or any 
agreement to which Sheldahl is a party.  All such certifications 
and opinions shall be as are reasonably acceptable to Lender.  

4.	Event of Default.  It shall be an Event of Default under the Loan 
Documents upon the happening of any of the following:

(a)	failure to make any payment on the Note, whether principal or 
interest, or any other payment under the Loan Documents, when and 
as the same becomes due (whether at the stated maturity or at a 
date fixed for any installment payment or any accelerated payment 
date or otherwise) and such failure shall continue unremedied for 
a period of five (5) days after written notice from Lender to 
Sheldahl;

(b)	failure to comply with or perform any of the terms, conditions or 
covenants of the Loan Documents and such failure shall continue 
unremedied for a period of thirty (30) days after written notice 
from Lender to Sheldahl;

(c)	any material representation or warranty made by Borrower herein or 
in any document, instrument, certificate, financial statements or 
reports given in connection with the Note shall be false or 
misleading when made;

(d)	Borrower shall fail to pay its respective debts as they become 
due, shall make an assignment for the benefit of its creditors, 
shall admit in writing its respective inability to pay its 
respective debts as they become due, shall file a petition under 
any chapter of the Federal Bankruptcy Code or any similar law, 
state or federal, now or hereafter existing, shall become 
"insolvent" as that term is generally defined under the Federal 
Bankruptcy Code, shall have any involuntary bankruptcy case 
commenced against it or be the subject of an order for relief in 
such bankruptcy case, or be adjudicated a bankrupt or insolvent, 
or shall have a custodian, trustee or receiver appointed for, or 
have any court take jurisdiction of its property, or any part 
thereof, in any proceeding for the purpose of reorganization, 
arrangement, dissolution or liquidation, and such custodian, 
trustee or receiver shall not be discharged, or such jurisdiction 
shall not be relinquished, vacated or stayed within thirty (30) 
days of the appointment;

(e)	Borrower shall be dissolved, liquidated or wound up or shall fail 
to maintain its existence as a going concern in good standing 
(excepting, however, reorganizations, consolidations and/or 
mergers into or with affiliates owned by, owning or under common 
control of or with such entity or into the parent of such entity, 
providing the succeeding organization assumes and accepts such 
entity's obligations hereunder); or

(f)	An event of default occurs under any other lease or any other 
agreement between Borrower and Lender.

5.	Remedies.  Upon an Event of Default, Lender may declare all 
obligations of Borrower under the Loan Documents immediately due and 
payable, and may, at its option, do any one or more of the following:

(a)	notify Borrower that Borrower must discontinue use of the 
Software.  Within thirty (30) days of receipt of such notice, 
Borrower will discontinue use of the Software throughout its 
entire organization and all copies of the Software, including all 
disks and all other media on which it is contained and all printed 
matter relating thereto will be delivered to Oracle;

(b)	exercise any of the remedies available to it under applicable 
state law;

(c)	proceed immediately to exercise each and all of the powers, rights 
and privileges reserved or granted to Lender under the Loan 
Documents;

(d)	proceed to protect and enforce the Loan Documents by suits or 
proceedings or otherwise, and  for the enforcement of any other 
legal or equity available to Lender.

6.	Further Assurances.  Borrower shall execute and deliver to Lender, 
promptly and at Borrower's expense, such other documents and assurances, and 
take such further action as Lender may reasonably require, in order to 
effectively carry out the intent and purpose of the Loan Documents, and to 
establish and protect the rights, interest and remedies of Lender under the 
Loan Documents.

7.	Cumulative Remedies.  All of Borrower's rights and remedies herein 
are cumulative and in addition to any rights or remedies available at law or 
in equity, and may be exercised concurrently or separately.  Borrower shall 
pay all costs, expenses, losses, damages and legal costs (including reasonable 
attorneys' fees) incurred by Lender as a result of enforcing any terms or 
conditions of the Loan Documents.

8.	No Liability Imposed on Lender.  Lender shall not be obligated to 
perform or discharge, nor does it hereby undertake to perform or discharge any 
obligation, duty or liability under the Software License Agreement, nor shall 
this Agreement operate to place responsibility for control, care, management 
or repair of the Software upon Lender nor for the carrying out of any of the 
terms and conditions of the Software License Agreement, nor shall it operate 
to make Lender responsible for any dangerous or defective condition of the 
Software.

9.	Indemnification.  Borrower shall and does hereby agree to 
indemnify against and to hold Lender harmless from any and all liability, loss 
or damage which it may or might incur under the Software License Agreement or 
under or by reason of this Agreement and of and from any and all claims and 
demands whatsoever which may be asserted against it by reason of any alleged 
obligations or undertakings on its part to perform or discharge any of the 
terms, covenants or agreements contained in the Software License Agreement.  
Should Lender incur any such liability, should Lender be required to defend 
against any such claims or demand or should a judgment be entered against 
Lender, the amount hereof, including costs, expenses and reasonable attorney's 
fees, shall bear interest thereon at the rate then in effect on the Note, 
shall be secured hereby, shall be added to the obligations of Borrower 
hereunder and Borrower shall reimburse Lender for the same immediately upon 
demand, and upon the failure of Borrower so to do, Lender may declare all 
obligations of Borrower immediately due and payable.  In no event shall 
Sheldahl have any indemnification or other obligations to Lender with respect 
to the Software License Agreement for actions taken by Lender in connection 
with the sale or possession of the PC's.

10.	Attorney-in-Fact.  Upon the occurrence of any Event of Default and 
at any time during the continuance thereof, Borrower hereby irrevocably 
appoints Lender and its successors and assigns as its agent and attorney-in-
fact, irrevocable, which appointment is coupled with and interest, to exercise 
any rights or remedies with respect to the Software and the PC's.

11.	Expenses of Lender.  All expenses of Lender, not to exceed five 
thousand dollars ($5,000.00), in connection with the execution and delivery 
of, and the closing with respect to, the Loan Documents and instruments 
executed and delivered therewith, including Lender's attorneys' fees and 
expenses, shall be paid upon demand by Borrower.  All expenses in protecting, 
storing, warehousing, insuring, handling and shipping of the Software and the 
PC's, all costs of keeping the Borrower's interest in the Software and the 
PC's free of liens, encumbrances and security interests, except for those of 
Norwest and the Lender, and the removing of the same and all excise, property, 
sales and use taxes imposed by state, federal or local authority on any of the 
Software or with respect to the sale thereof, shall be borne and paid for by 
Borrower and if Borrower fails to promptly pay any amounts thereof when due, 
Lender may, at its option, but shall not be required to pay the same, or upon 
the same shall constitute obligations of the Borrower hereunder and shall bear 
interest at the rate specified in the Note.

12.	Continuing Rights.  The rights and powers of Lender or receiver 
hereunder shall continue and remain in full force and effect until all 
obligations of Borrower to Lender are paid in full.

13.	Books and Records.  Borrower will permit Lender and its 
representatives to examine Borrower's books and records (including data 
processing records and systems), with respect to the Software and the PC's and 
make copies thereof, to the extent permitted under the Software License 
Agreement, at any reasonable time and from time to time and Borrower will 
furnish such information reports to Lender and its representatives regarding 
the Software and the PC's as Lender and its representatives may from time to 
time request.  Lender shall have the authority, at any time, to require 
Borrower to place upon Borrower's books and records relating to the Software 
and the PC's a notation stating that any such Software or the PC's are subject 
to certain rights in favor of the Lender and cannot be sublicensed, 
transferred, sold, assigned or otherwise disposed of without the Lender's 
prior written consent.  

14.	Chief Executive Office.  The location of the chief executive 
office of Borrower is set forth in the preamble hereto and will not be changed 
without thirty (30) days' prior written notice to Lender.  Borrower represents 
that its books and records concerning accounts and chattel paper are located 
at its chief executive office.

15.	Name of Borrower.  Borrower's true name is as set forth in the 
preamble hereto.  Borrower has not used any other name within the past five 
(5) years.  Borrower agrees that it will not change its name without thirty 
(30) days' written notice to Lender.

16.	Annual and Quarterly Statements.  Borrower shall deliver or cause 
to be delivered to Lender, within one hundred twenty (120) days following the 
end of Borrower's fiscal years, an annual audited financial statement for 
Borrower prepared in accordance with generally accepted accounting principles 
certified by the certified public accountants of Borrower, and quarterly 
financial statements within 45 days of the end of Borrower's fiscal quarters. 
 Lender agrees that Borrower's timely filing of Securities and Exchange 
Commission forms 10K (annual) and forms 10Q (quarterly) through the "EDGAR" 
filing system as satisfactory delivery of financial statements in accordance 
with this paragraph.

17.	Successors and Assigns.  This Agreement and each and every 
covenants, agreement and provision hereof shall be binding upon Borrower and 
its successors and assigns and shall inure to the benefit of Lender and its 
successors and assigns.  Borrower acknowledges that Lender intends to assign 
its rights under the Loan Documents to Miller & Schroeder Investments 
Corporation ("M&S") and shall execute a Notice and Acknowledgment of 
Assignment in the form acceptable to M&S. 

18.	Governing Law.  This Agreement is executed pursuant to and shall 
be governed by the laws of the State of Minnesota.

19.	Severability.  It is the intent of this Agreement to confer to 
Lender the rights and benefits hereunder to the full extent allowable by law. 
 The unenforceability or invalidity of any provisions hereof shall not render 
any other provision or provisions herein contained unenforceable or invalid.  
Any provisions found to be unenforceable shall be severable from this 
Agreement.

20.	Notices.  Any notices and other communications permitted or 
required by the provisions of this Agreement (except for telephonic notice 
expressly permitted) shall be in writing and shall be deemed to have been 
properly given or served by depositing the same with the United States Postal 
Service, or any official successor thereto, designated as Registered or 
Certified Mail, Return Receipt Requested, bearing adequate postage or delivery 
by reputable private carrier such as Federal Express, Airborne, DHL or similar 
overnight delivery service, and addressed as hereinafter provided.  Each such 
notice shall be effective upon being deposited as aforesaid.  The time period 
within which a response to any such notice must be given, however, shall 
commence to run from the date of receipt of the notice by the addressee 
thereof.  Rejection or other refusal to accept or the inability to deliver 
because of changed address of which no notice was given shall be deemed to be 
receipt of the notice sent.  By giving to the other party hereto at least ten 
(10) days' notice thereof, either party hereto shall have the right from time 
to time and at any time during the term of this Agreement to change its 
address and shall have the right to specify as its address any other address 
within the United States of America.  Each notice shall be addressed to the 
address of the recipient as set forth in the preamble to this Agreement.

21.	Captions and Headings.  The captions and headings of the various 
sections of this Agreement are for convenience only and are not to be 
construed as confining or limiting in any way the scope or intent of the 
provisions hereof.  Whenever the context requires or permits, the singular 
shall include the plural, the plural shall include the singular and the 
masculine, feminine and neuter shall be freely interchangeable.


IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be 
executed as of the date first above written.

SHELDAHL, INC.			             	RELATIONAL FUNDING  CORPORATION


By: _________________________		By: _________________________

Its: _________________________	Its: _________________________
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