Michael Foods Inc/MN – ‘PREM14A’ on 1/31/01

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger    140    738K 
                          or Acquisition                                         

Document Table of Contents

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SCHEDULE 14A
(RULE 14A-101)
 INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
 PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the registrant /X/                                                     

Filed by a party other than the registrant / /                                  

Check the appropriate box:                                                      

/X/ Preliminary proxy statement                                                 

/ / Confidential, For Use of the Commission Only (as permitted by Rule          
14a-6(e)(2)                                                             

/ / Definitive proxy statement                                                  

/ / Definitive additional materials                                             

/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12               

 MICHAEL FOODS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Payment of filing fee (Check the appropriate box):                              

/ / No fee required.                                                            

/X/ Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.             

(1)  Title of each class of securities to which transaction applies:  
        Michael Foods, Inc. common stock, par value $0.01 per share ("Common
Stock").                                                    

(2)  Aggregate number of securities to which transaction applies:     
18,311,109.                                                 

(3)  Per unit price or other underlying value of transaction computed 
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
  filing fee is calculated and state how it was determined): The
       proposed maximum aggregate value of the transaction for purposes of
       calculating the filing fee only is $570,742,521. The filing fee was
        determined by adding (a) the product of (i) the 18,311,109 shares of
       Common Stock that are proposed to be retired in the merger and (ii)
          the merger consideration of $30.10 per share of Common Stock, plus (b)
        $19,578,140 expected to be paid upon cancellation of all outstanding
options (the "Total Consideration"). The filing fee equals  
one-fiftieth of one percent of the Total Consideration.     

(4)  Proposed maximum aggregate value of transaction: $570,742,521.   

(5)  Total fee paid: $114,148.50.                                     

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/ /  Fee paid previously with preliminary materials:                            

/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
  0-11(a)(2) and identify the filing for which the offsetting fee was paid
    previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.                   

(1)  Amount previously paid:                                          

(2)  Form, schedule or registration statement no.:                    

(3)  Filing party:                                                    

(4)  Date file:                                                       

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                                                                PRELIMINARY COPY

[LOGO]

Michael Foods, Inc. 
5353 Wayzata Boulevard
Suite 324 
Minneapolis, Minnesota 55416

------------------------

PROPOSED MERGER--YOUR VOTE IS VERY IMPORTANT

To the Shareholders of Michael Foods, Inc.:                                     

You are cordially invited to attend a special meeting of shareholders,  
including any adjournment or postponement of the special meeting, of Michael    
Foods, Inc. to be held on ____________, 2001 at 9:00 a.m., Minneapolis time, at 
_______________.                                                                

At the special meeting you will be asked to consider and vote upon a    
proposal to approve and adopt the merger agreement entered into by Michael Foods
with M-Foods Holdings, Inc. and Protein Acquisition Corp., which were organized 
to effect the merger and related transactions at the direction of Vestar Capital
Partners. The merger agreement provides for the merger of Protein Acquisition   
with and into Michael Foods, with Michael Foods continuing as the surviving     
corporation.                                                                    

   If the merger is completed, each share of Michael Foods common stock issued
and outstanding at the closing of the merger will be canceled and converted into
the right to receive $30.10 in cash, except for shares held by dissenting       
shareholders who have perfected their dissenters' rights under Minnesota law.   
Immediately prior to the merger, certain members of Michael Foods' senior       
management and certain designated shareholders will exchange their shares of    
Michael Foods common stock and option equity value for cash, equity interests in
the ultimate parent company of Michael Foods and, with respect to the members of
Michael Foods' senior management, deferred compensation arrangements with       
M-Foods Holdings. As a result of the merger, all of the outstanding common stock
of Michael Foods will be owned by M-Foods Holdings.                             

    In order to evaluate the advisability of the merger, Michael Foods' board of
directors formed a special committee of the Michael Foods board, consisting of  
three independent directors. The special committee has unanimously recommended  
to the Michael Foods board of directors that the merger and the merger agreement
be approved and adopted. In its evaluation of the merger, the special committee 
and the board considered, among other things, the opinion of U.S. Bancorp Piper 
Jaffray, Inc., one of the independent financial advisors, which states that, as 
of the date of the opinion, the cash merger consideration of $30.10 per share to
be received by the shareholders of Michael Foods, other than the continuing     
investors, is fair to such holders from a financial point of view. U.S. Bancorp 
Piper Jaffray's opinion is subject to the assumptions, limitations and          
qualifications set forth in its written opinion, which is attached as Annex B to
the enclosed proxy statement.                                                   

BOTH THE SPECIAL COMMITTEE AND THE MICHAEL FOODS BOARD OF DIRECTORS HAVE
DETERMINED THAT THE MERGER AGREEMENT IS ADVISABLE AND FAIR TO AND IN THE BEST   
INTERESTS OF MICHAEL FOODS AND ITS SHAREHOLDERS WHO ARE NOT CONTINUING INVESTORS
AND UNANIMOUSLY RECOMMEND THAT YOU APPROVE AND ADOPT THE MERGER AGREEMENT.      

 The attached proxy statement provides you with detailed information about
the proposed merger and merger agreement. We urge you to read the entire        
document carefully. The affirmative vote of holders of a majority of the        
outstanding shares of Michael Foods common stock is required to adopt the merger
agreement and the merger.                                                       

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REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend the meeting, please complete, sign, date and  
mail the enclosed proxy card.                                                   

         [SIG]

                      Gregg A. Ostrander
                                 CHAIRMAN, PRESIDENT AND CHIEF
                     EXECUTIVE OFFICER

--------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES         
COMMISSION HAS APPROVED OR DISAPPROVED THIS TRANSACTION, OR PASSED UPON THE     
FAIRNESS OR MERITS OF THIS TRANSACTION OR THE ADEQUACY OR ACCURACY OF THE       
ENCLOSED PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL      
OFFENSE.                                                                        
--------------------------------------------------------------------------------

The date of this proxy statement is _______________, 2001 

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[LOGO]

MICHAEL FOODS, INC. 
5353 WAYZATA BOULEVARD
SUITE 324 
MINNEAPOLIS, MINNESOTA 55416

------------------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 
TO BE HELD ON             , 2001

------------------------

To Michael Foods, Inc. Shareholders:                                            

We will hold a special meeting of shareholders of Michael Foods, Inc. on
         , 2001 at 9:00 a.m. Minneapolis time, at             , located at
        , Minneapolis, Minnesota. The purpose of the special meeting is:

1.  To consider and vote upon a proposal to approve and adopt the merger
       agreement entered into by Michael Foods with M-Foods Holdings and Protein
Acquisition, which, among other things, provides for the merger of
 Protein Acquisition with and into Michael Foods, with Michael Foods
  continuing as the surviving corporation. The affirmative vote of the
holders of a majority of the shares of Michael Foods common stock 
outstanding as of the record date is required to adopt the merger 
agreement.                                                        

   2.  To transact such other business as may properly come before the special
  meeting or any adjournments or postponements of the special meeting.

   We have described the merger agreement and merger in the accompanying proxy
statement, which you should read in its entirety before voting. A copy of the   
merger agreement is attached as Annex A to the proxy statement. The record date 
to determine who is entitled to vote at the meeting is             , 2001. Only 
holders of Michael Foods common stock at the close of business on the record    
date are entitled to notice of, and to vote at, the meeting.                    

    Under Minnesota law, holders of Michael Foods common stock have the right to
dissent from the merger and to receive payment of the "fair value" of their     
shares upon compliance with the requirements of the Minnesota Business          
Corporation Act. This right is explained more fully under "SPECIAL              
FACTORS--Rights of Dissenting Shareholders" in the accompanying proxy statement.
The dissenters' rights provisions of Minnesota law are attached to this proxy   
statement as Annex C.                                                           

YOUR VOTE IS IMPORTANT.  You should complete, sign, date and return the 
enclosed proxy card as soon as possible to make sure your shares are represented
at the meeting. If you attend the meeting and wish to vote in person, you may   
revoke your proxy and vote in person. If you have instructed a broker to vote   
your shares, you must follow directions received from the broker to change or   
revoke your proxy.                                                              

                                       By Order of the Board of Directors,

         [SIG]

                      Jeffrey M. Shapiro
                                          EXECUTIVE VICE PRESIDENT AND SECRETARY

, 2001                                                  
Minneapolis, Minnesota                                                          

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN, 
DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING SELF-ADDRESSED POSTAGE   
PREPAID ENVELOPE AS SOON AS POSSIBLE.                                           

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SUMMARY TERM SHEET

  THE FOLLOWING SUMMARY BRIEFLY DESCRIBES THE MATERIAL TERMS OF THE PROPOSED
MERGER. THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT 
FOR YOU TO CONSIDER WHEN EVALUATING THE MERGER. WE ENCOURAGE YOU TO READ THIS   
PROXY STATEMENT AND THE DOCUMENTS WE HAVE INCORPORATED BY REFERENCE BEFORE      
VOTING. WE HAVE INCLUDED SECTION REFERENCES TO DIRECT YOU TO A MORE COMPLETE    
DESCRIPTION OF THE TOPICS DESCRIBED IN THIS SUMMARY.                            

    - THE COMPANIES. Michael Foods is a Minnesota corporation that is one of the
 world's largest producers of value-added egg products, which are sold
     through foodservice, industrial and retail distribution channels. Michael
   Foods also is a leading supplier of processed dairy products, including
  aseptic creamers and soft serve ice cream mix, as well as high quality
     refrigerated potato products sold through foodservice distributors and at
retail under the Simply Potatoes-Registered Trademark- and Diner's  
      Choice-Registered Trademark- brand names. In addition, through its Crystal
 Farms subsidiary, Michael Foods provides direct store distribution of
 refrigerated products including butter, cheese and eggs in 30 states.
During the most recent year, Michael Foods generated approximately  
   $1.1 billion in net sales. Protein Acquisition and M-Foods Holdings are
     corporations newly formed at the direction of Vestar Capital Partners for
      the sole purpose of effecting the merger. The purpose of the merger is for
     M-Foods Holdings to acquire, in accordance with Minnesota law, all of the
      common stock of Michael Foods issued and outstanding at the closing of the
 merger. At the closing of the merger, M-Foods Holdings will be wholly
 owned by M-Foods Investors, LLC. Please read "SUMMARY--The Companies"
beginning on page 1.                                                

- REQUIRED VOTE. The merger agreement must be adopted by the affirmative
   vote of the holders of at least a majority of the outstanding shares of
Michael Foods common stock. The merger is not subject to a vote of a
   majority of the unaffiliated shareholders of Michael Foods. Please read
"THE SPECIAL MEETING--Quorum; Required Vote" beginning on page 68.  

 - VOTING AGREEMENTS. Certain members of Michael Foods' senior management,
      including the chief executive officer, and certain designated shareholders
     have agreed with M-Foods Investors to vote all of their shares of Michael
      Foods common stock, which represent approximately 18.9% of the outstanding
shares of Michael Foods common stock, in favor of the approval and  
adoption of the merger agreement. In addition, certain of these     
individuals and entities and other members of Michael Foods' senior 
   management have agreed to exchange all of their shares of Michael Foods
      common stock and option equity value for cash, equity interests in M-Foods
      Investors and, with respect to the members of senior management of Michael
    Foods, deferred compensation arrangements with M-Foods Holdings, and are
     sometimes collectively referred to in this proxy statement as "continuing
     investors." Please read "SPECIAL FACTORS--Interests of Certain Persons in
the Merger" beginning on page 35.                                   

   - MERGER CONSIDERATION. If the merger is completed, you will receive $30.10
   per share in cash for each of your shares of Michael Foods common stock
    unless you are a dissenting shareholder and you perfect your dissenters'
  rights. Immediately prior to the merger, the continuing investors will
 exchange all of their shares of Michael Foods common stock and option
     equity value for cash, equity interests in M-Foods Investors and, for the
     continuing investors who are members of Michael Foods' senior management,
 deferred compensation arrangements with M-Foods Holdings. Please read
    "QUESTIONS AND ANSWERS ABOUT THE MERGER" and "SPECIAL FACTORS--Interests
of Certain Persons in the Merger" beginning on page iii, and 35,    
respectively.                                                       

- EFFECTS OF THE MERGER. As a result of the merger:                     

- Michael Foods will be owned by M-Foods Holdings;                

      - Michael Foods' shareholders, other than the continuing investors, will
no longer have any equity interest in Michael Foods; and      

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 - Michael Foods common stock will no longer be quoted on the Nasdaq
    National Market and the registration of Michael Foods common stock
under the Securities Exchange Act of 1934 will be terminated. 

 Please read "SPECIAL FACTORS--Effects of the Merger" beginning on page 8.

   - RECOMMENDATION. Because certain directors of Michael Foods have actual or
 potential conflicts of interest in evaluating the merger, the Michael
 Foods board of directors appointed a special committee of independent
Michael Foods directors to evaluate the proposed merger. The special
   committee and the Michael Foods board of directors have determined that
      the merger agreement is advisable and fair to and in the best interests of
    Michael Foods and its shareholders, other than the continuing investors,
      and unanimously recommend that you approve and adopt the merger agreement.
  Please read "SPECIAL FACTORS--Recommendation of the Special Committee,
     Disinterested Directors Committee and Board of Directors; Reasons for the
   Merger; Fairness of the Merger" beginning on page 20. The affiliates of
      Michael Foods who are participating in the merger have each concluded that
 the merger is fair to the unaffiliated shareholders of Michael Foods.
    Please read "SPECIAL FACTORS--Position of Participating Affiliates as to
the Fairness of the Merger" beginning on page 32.                   

  - OPINION OF FINANCIAL ADVISOR. The board of directors received an opinion
 from U.S. Bancorp Piper Jaffray, Inc., one of its financial advisors,
which states that as of the date of its opinion and subject to the  
     assumptions, limitations and qualifications set forth in its opinion, the
cash merger consideration of $30.10 per share to be received by     
      shareholders, other than the continuing investors, for their Michael Foods
      common stock is fair to those shareholders from a financial point of view.
    Please read "SPECIAL FACTORS--Opinion of Financial Advisor" beginning on
page 23.                                                            

   - DISSENTERS' RIGHTS. If you do not wish to vote in favor of the merger and
      you fulfill several procedural requirements, including not voting in favor
of the merger agreement, Minnesota law entitles you to a judicial   
appraisal of the fair value of your shares. Please read "SPECIAL    
FACTORS--Rights of Dissenting Shareholders" beginning on page 54.   

- TAX CONSEQUENCES. The receipt of cash in the merger by you will be a  
      taxable transaction to you. Please read "SPECIAL FACTORS--Material Federal
Income Tax Consequences" beginning on page 53.                      

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QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: WHAT WILL HAPPEN IN THE MERGER?                                              

A:  Protein Acquisition will be merged with and into Michael Foods and Michael  
Foods will be the surviving corporation. Protein Acquisition and M-Foods
 Holdings are corporations newly formed by Vestar Capital Partners for the
  sole purpose of effecting the merger. After the merger, Michael Foods will
    become a privately held company wholly owned by M-Foods Holdings, which will
be a subsidiary of M-Foods Investors, LLC.                              

Q: WHAT WILL I RECEIVE IN THE MERGER?                                           

A:  You will receive $30.10 in cash in exchange for each share of common stock  
owned by you at the closing of the merger, unless you are a continuing  
    investor or a dissenting shareholder and you perfect your dissenters' rights
under Minnesota law.                                                    

Q: WHO ARE THE CONTINUING INVESTORS?                                            

A:  The continuing investors are certain members of Michael Foods' senior       
management and certain designated shareholders that are affiliates of   
 Jeffrey J. Michael, a director of Michael Foods. Immediately prior to the
    merger, the continuing investors will exchange their shares of Michael Foods
common stock and option equity value for varying combinations of cash,  
   equity interests in M-Foods Investors and, for the continuing investors who
are members of Michael Foods' senior management, deferred compensation  
   arrangements with M-Foods Holdings; in all cases, the shares, including the
shares underlying the options will be valued at $30.10 per share.       

Q: CAN I CHOOSE TO BE A CONTINUING INVESTOR?                                    

A:  No. The continuing investors will include only the Michael Foods'           
    shareholders who are identified in this proxy statement and described in the
preceding answer.                                                       

Q: WHY WAS THE SPECIAL COMMITTEE FORMED?                                        

A:  Because certain directors of Michael Foods have actual or potential         
conflicts of interest in evaluating the merger, Michael Foods' board of 
  directors appointed a special committee of independent directors to review
  and evaluate the proposed merger. In addition, as required under Minnesota
    law, the board established a committee comprised of all of the disinterested
directors of the board to review the merger transaction. The special    
 committee, the disinterested director committee and the board unanimously
recommend to Michael Foods shareholders that the merger agreement be    
approved and adopted. In arriving at their conclusion, they considered, 
   among other things, the opinion of U.S. Bancorp Piper Jaffray, Inc., one of
the independent financial advisors to Michael Foods' board of directors,
which states that, as of the date of such opinion and based upon the    
 limitations, qualifications and assumptions described in the opinion, the
cash merger consideration of $30.10 per share to be received by the     
shareholders is fair to Michael Foods shareholders, other than the      
continuing investors, from a financial point of view.                   

Q: WHAT AM I BEING ASKED TO VOTE UPON?                                          

A:  You are being asked to vote to approve and adopt the merger agreement which 
    provides for Protein Acquisition to merge with and into Michael Foods. Under
   Minnesota law, the merger agreement must be adopted by the affirmative vote
  of the holders of at least a majority of the outstanding shares of Michael
Foods common stock.                                                     

Q: WHAT DO I NEED TO DO NOW?                                                    

A:  After carefully reading and considering the information contained in this   
  proxy statement, please vote by completing, signing and mailing your proxy
card as soon as possible so that your shares can be represented at the  
   meeting. Whether or not you plan to attend the meeting, you should sign and

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 return your proxy card. If you neither vote at the meeting nor grant your
  proxy as described in this proxy statement, your shares will not be voted,
which will have the effect of voting against adoption of the merger     
agreement.                                                              

Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?                                  

A:  No. If the merger is completed, you will receive written instructions for   
exchanging your Michael Foods stock certificates for cash.              

Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY  
SHARES FOR ME?                                                          

A:  Your broker will vote your shares for you only if you provide instructions  
on how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares.              

Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?               

A:  Yes. You may change your vote by delivering a written notice stating that   
 you would like to revoke your proxy or by executing and submitting a new,
 later dated proxy card to the Corporate Secretary of Michael Foods before
  the meeting. You also may revoke your proxy by attending the Michael Foods
special shareholders meeting and voting your shares in person. If your  
  shares are held in street name, you must follow the directions provided by
your broker to change your voting instructions.                         

Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?                               

A:  We are working toward completing the merger as quickly as possible after the
  Michael Foods special shareholders meeting. We hope to complete the merger
  during the early part of the second quarter of 2001, although there can be
no assurance that we will be able to do so.                             

Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?                                 

A:  The receipt of the cash merger consideration by you will be a taxable       
transaction for federal income tax purposes. To review the possible tax 
   consequences to Michael Foods' shareholders in greater detail, see "SPECIAL
   FACTORS--Material Federal Income Tax Consequences." You also should consult
 your tax advisor as to your particular circumstances and the specific tax
effects of the merger to you.                                           

Q: WHO CAN HELP ANSWER MY QUESTIONS?                                            

A:  If you have any questions about the merger or if you need additional copies 
of this proxy statement or the enclosed proxy card, you should contact: 

MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT) 
E-MAIL: PROXY@MACKENZIEPARTNERS.COM 
OR
CALL TOLL FREE (800) 322-2885 

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TABLE OF CONTENTS 

                                                                [Download Table]
                                                                   
SUMMARY TERM SHEET..........................................      i
QUESTIONS AND ANSWERS ABOUT THE MERGER......................    iii
SUMMARY.....................................................      1
  The Companies.............................................      1
  Effects of the Merger.....................................      1
  What You will Receive in the Merger.......................      2
  Payment for Stock Certificates............................      2
  The Special Meeting.......................................      2
  Vote Required.............................................      2
  Interests of Certain Persons in the Merger................      2
  The Merger Agreement and the Merger.......................      3
    Recommendation of the Special Committee and the Board of       
     Directors..............................................      3
    Opinion of Financial Advisor............................      3
    What We Need to do to Complete the Merger...............      4
    Termination of the Merger Agreement.....................      4
    Termination Fee.........................................      5
    Non-solicitation of Competing Proposals.................      5
    Modifying or Amending the Merger Agreement..............      5
    Expenses................................................      5
  Material Federal Income Tax Consequences..................      6
  Accounting Treatment......................................      6
  Financing of the Merger...................................      6
  Rights of Dissenting Shareholders.........................      6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA.............      7
SPECIAL FACTORS.............................................      8
  Effects of the Merger.....................................      8
  Background of the Merger..................................      9
  Recommendation of the Special Committee, Disinterested           
    Directors Committee and Board of Directors; Reasons for        
    the Merger; Fairness of the Merger......................     20
  Opinion of Financial Advisor..............................     23
  Certain Projections Prepared by Michael Foods'                   
    Management..............................................     30
  Position of Participating Affiliates as to the Fairness of       
    the Merger..............................................     32
  Purposes, Reasons and Plans...............................     34
  Interests of Certain Persons in the Merger................     35
  Financing of the Merger...................................     49
  Repayment of Indebtedness.................................     52
  Material Federal Income Tax Consequences..................     53
  Accounting Treatment......................................     54
  Rights of Dissenting Shareholders.........................     54
  Estimated Fees and Expenses...............................     56
  Provisions for Unaffiliated Security Holders..............     57
THE MERGER AGREEMENT........................................     58
  Structure of the Merger...................................     58
  When the Merger Becomes Effective.........................     58
  Effect of the Merger on the Capital Stock and Stock              
    Options of Michael Foods and Protein Acquisition........     58
  Payment for Michael Foods Common Stock in the Merger......     59
  Dissenters' Rights........................................     59

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                                                                [Download Table]
                                                                   
  Representations and Warranties............................     60
  Agreements Relating to Conduct of Business................     61
  Other Agreements..........................................     61
  Conditions to Completion of the Merger....................     65
  Termination of the Merger Agreement.......................     66
  Termination Fee and Expenses..............................     68
  Modification or Amendment to the Merger Agreement.........     68
THE SPECIAL MEETING.........................................     68
  Purpose, Time and Place...................................     68
  Record Date; Voting Rights................................     69
  Quorum; Required Vote.....................................     69
  Proxies; Solicitation.....................................     69
INFORMATION CONCERNING MICHAEL FOODS........................     70
INFORMATION CONCERNING VESTAR, MARATHON, M-FOODS HOLDINGS,         
  PROTEIN ACQUISITION AND AFFILIATES........................     70
MARKET PRICES AND DIVIDEND INFORMATION......................     75
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND                
  MANAGEMENT................................................     76
TRANSACTIONS IN SHARES OF COMMON STOCK BY CERTAIN PERSONS...     78
CERTAIN PURCHASES OF MICHAEL FOODS COMMON STOCK.............     78
ADDITIONAL INFORMATION......................................     78
  Michael Foods Shareholder Proposals.......................     78
  Other Matters.............................................     79
  Independent Certified Public Accountants..................     79
  Where You Can Find More Information.......................     79
  Forward-Looking Statements................................     81
ANNEX A--Agreement and Plan of Merger.......................    A-1
ANNEX B--Opinion of U.S. Bancorp Piper Jaffray..............    B-1
ANNEX C-- Sections 302A.471 and 302A.473 of the Minnesota          
         Business Corporation Act...........................    C-1

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SUMMARY 

 THIS SUMMARY HIGHLIGHTS SOME OF THE INFORMATION FROM THIS PROXY STATEMENT
AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO         
UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL    
TERMS OF THE MERGER, YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT, INCLUDING  
THE ANNEXES AND OTHER DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "ADDITIONAL  
INFORMATION--WHERE YOU CAN FIND MORE INFORMATION" FOR MORE DETAILS.             

THE COMPANIES                                                                   

Michael Foods, Inc.                                                             
5353 Wayzata Boulevard                                                          
Suite 324                                                                       
Minneapolis, Minnesota 55416                                                    
Telephone: 952-546-1500                                                         

   Michael Foods is a Minnesota corporation that is one of the world's largest
producers of value-added egg products, which are sold through foodservice,      
industrial and retail distribution channels. Michael Foods also is a leading    
supplier of processed dairy products, including aseptic creamers and soft serve 
ice cream mix, as well as high quality refrigerated potato products sold through
foodservice distributors and at retail under the Simply                         
Potatoes-Registered Trademark- and Diner's Choice-Registered Trademark- brand   
names. In addition, through its Crystal Farms subsidiary, Michael Foods provides
direct store distribution of refrigerated products including butter, cheese and 
eggs in 30 states. During the most recent year, Michael Foods generated         
approximately $1.1 billion in net sales.                                        

Protein Acquisition Corp.                                                       
c/o Vestar Capital Partners IV, L.P.                                            
1225 Seventeenth Street, Suite 1660                                             
Denver, CO 80202                                                                
Telephone: 303-292-6300                                                         

Protein Acquisition is a Minnesota corporation that was incorporated on 
December 14, 2000 at the direction of Vestar Capital Partners for the purpose of
engaging in the transactions set forth in the merger agreement, and is not      
engaged in any other business activities. All of the outstanding capital stock  
of Protein Acquisition is owned by M-Foods Holdings.                            

M-Foods Holdings, Inc.                                                          
c/o Vestar Capital Partners IV, L.P.                                            
1225 Seventeenth Street, Suite 1660                                             
Denver, CO 80202                                                                
Telephone: 303-292-6300                                                         

M-Foods Holdings is a Delaware corporation that was incorporated on     
December 13, 2000 at the direction of Vestar Capital Partners for the purpose of
engaging in the transactions set forth in the merger agreement, and is not      
engaged in any other business activities. At the closing of the merger, all of  
the outstanding capital stock of M-Foods Holdings will be owned by M-Foods      
Investors, a Delaware limited liability company organized at the direction of   
Vestar Capital Partners.                                                        

EFFECTS OF THE MERGER                                                           

 If the merger is approved by the shareholders and the other conditions to
the closing of the merger are either satisfied or waived, Protein Acquisition   
will be merged with and into Michael Foods, with Michael Foods being the        
surviving corporation.                                                          

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   If the merger is completed, each share of Michael Foods common stock issued
and outstanding at the closing of the merger will be canceled and converted into
the right to receive $30.10 in cash, except for shares held by dissenting       
shareholders who have perfected their dissenters' rights under Minnesota law.   
Immediately prior to the merger, all of the shares of Michael Foods common stock
and option equity value held by the continuing investors will be exchanged for  
cash, equity interests in M-Foods Investors, and, for the continuing investors  
who are members of Michael Foods' senior management, deferred compensation      
arrangements with M-Foods Holdings. After the merger, Michael Foods' capital    
stock will be held by M-Foods Holdings.                                         

    Upon the closing of the merger, Michael Foods common stock will no longer be
quoted on the Nasdaq National Market and the registration of Michael Foods      
common stock under the Securities Exchange Act of 1934 will be terminated.      

WHAT YOU WILL RECEIVE IN THE MERGER                                             

  If you are not a continuing investor or a dissenting shareholder, you will
receive $30.10 in cash for each share of Michael Foods common stock that you own
at the closing of the merger.                                                   

PAYMENT FOR STOCK CERTIFICATES                                                  

Promptly after the merger, the paying agent for the merger will send a  
letter of transmittal to you to be used for surrendering your Michael Foods     
common stock certificates for $30.10 per share in cash. You should not send in  
your Michael Foods common stock certificates until you receive the letter of    
transmittal.                                                                    

THE SPECIAL MEETING                                                             

The special meeting of Michael Foods' shareholders will take place on   
   , 2001 at             , Minneapolis, Minnesota at 9:00 a.m.
Minneapolis time. At the meeting you will be asked to approve and adopt the     
merger agreement.                                                               

VOTE REQUIRED                                                                   

   Minnesota corporate law requires that Michael Foods' shareholders adopt the
merger agreement before Michael Foods can complete the merger. Each shareholder 
of record on the record date is entitled to one vote on each matter submitted to
a vote at the meeting for each share of Michael Foods common stock held. A      
majority of the shares of Michael Foods common stock outstanding on the record  
date represented in person or by proxy constitutes a quorum for consideration of
such matters at the meeting. The affirmative vote of at least a majority of     
shares of Michael Foods common stock outstanding and entitled to vote is        
required to adopt the merger agreement. The merger is not subject to a vote of a
majority of the unaffiliated shareholders of Michael Foods.                     

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

Gregg A. Ostrander, John D. Reedy, Bill L. Goucher, James D. Clarkson,  
Bradley L. Cook, Max Hoffmann, James Mohr and Harold D. Sprinkle, each a member 
of senior management of Michael Foods, will exchange an aggregate of            
$10 million of option equity value and common stock value of Michael Foods into 
equity interests of M-Foods Investors and deferred compensation arrangements    
with M-Foods Holdings, while 4J2R1C Limited Partnership and 3J2R Limited        
Partnership, which are affiliates of Jeffrey Michael, a director of Michael     
Foods, and are collectively referred to in this proxy statement as the "Michael 
family continuing investors," will convert $38,377,500 of common stock value    
into equity                                                                     

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interests of M-Foods Investors. As of the date of this proxy statement, the     
continuing investors hold the following percentage ownership interests in       
Michael Foods' outstanding common stock:                                        

                                                                [Download Table]
                                                                    
4J2R1C Limited Partnership..................................  8.675%
3J2R Limited Partnership....................................  7.971%
Gregg A. Ostrander..........................................  0.166%
John D. Reedy...............................................  0.148%
Bill L. Goucher.............................................  0.069%
James D. Clarkson...........................................  0.043%
Bradley Cook................................................  0.030%
Max Hoffmann................................................  0.094%
James Mohr..................................................  0.016%
Dean Sprinkle...............................................  0.005%

Upon the closing of the merger, Messrs. Ostrander, Reedy, Goucher and Clarkson  
will enter into employment agreements and Messrs. Hoffmann, Mohr, Sprinkle and  
Cook will enter into severance and deferred compensation agreements with Michael
Foods. These interests are more fully described under "SPECIAL                  
FACTORS--Interests of Certain Persons in the Merger."                           

 Michael Foods' board of directors and the special committee were aware of
these interests and considered them, among other matters, when approving the    
merger agreement.                                                               

THE MERGER AGREEMENT AND THE MERGER                                             

Whenever we refer to the merger agreement in this proxy statement we are
referring to the merger agreement attached as Annex A to this proxy statement.  
You should read the merger agreement because it, and not this proxy statement,  
is the legal document that governs the merger.                                  

RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS.  A  
special committee of independent directors of Michael Foods and Michael Foods'  
board of directors carefully reviewed and considered the terms and conditions of
the merger and the merger agreement and determined that the merger agreement is 
advisable and fair to and in the best interests of Michael Foods and its        
shareholders and the merger consideration to be received by Michael Foods'      
shareholders, other than the continuing investors, in the merger is fair to such
shareholders. By a vote of all directors present and voting at a meeting at     
which a quorum of directors was present (with two directors, Gregg A. Ostrander 
and Jeffrey J. Michael, abstaining), Michael Foods' board of directors approved 
the merger and the merger agreement and concluded that the terms of the merger  
agreement were fair to and in the best interests of the shareholders of Michael 
Foods, other than the continuing investors. Accordingly, the special committee  
and Michael Foods' board of directors unanimously recommend that you vote to    
approve and adopt the merger agreement. See "SPECIAL FACTORS--Background of the 
Merger" and "--Recommendation of the Special Committee, Disinterested Directors 
Committee and Board of Directors; Reasons for the Merger; Fairness of the       
Merger."                                                                        

OPINION OF FINANCIAL ADVISOR.  At a meeting of the board of directors of
Michael Foods held on December 21, 2000, U.S. Bancorp Piper Jaffray, one of its 
financial advisors, delivered a written opinion as to the fairness, from a      
financial point of view, as of the date of such opinion, of the cash            
consideration to be paid in the merger to the Michael Foods shareholders, other 
than the continuing investors. The full text of U.S. Bancorp Piper Jaffray's    
written opinion is attached to this proxy statement as Annex B. We encourage you
to carefully read this opinion in its entirety for a description of the         
procedures followed, assumptions made, matters considered and limitations on the
review undertaken. THE OPINION OF U.S. BANCORP PIPER JAFFRAY IS DIRECTED ONLY TO
THE MATTERS DESCRIBED IN THE OPINION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY SHAREHOLDER AS TO HOW YOU SHOULD VOTE ON ANY MATTER AT THE SPECIAL MEETING. 

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    WHAT WE NEED TO DO TO COMPLETE THE MERGER.  We will complete the merger only
if the conditions set forth in the merger agreement are satisfied or, in some   
cases, waived. These conditions include:                                        

- the approval and adoption of the merger agreement and the merger by   
Michael Foods' shareholders;                                        

- the expiration or termination of the waiting period applicable to the 
completion of the merger under the Hart-Scott-Rodino Antitrust      
Improvements Act of 1976;                                           

  - the absence of any temporary restraining order, preliminary or permanent
  injunction or other order issued by any United States federal or state
court that has the effect of making the merger illegal or otherwise 
prohibiting the consummation of the merger;                         

- no governmental entity enacting any law or issuing any order that     
prohibits completion of the merger or otherwise imposes material    
   limitations on M-Foods Holdings' ability to effectively own and operate
the business or assets of Michael Foods;                            

 - Protein Acquisition's receipt of the debt and equity financing proceeds
  described in the financing commitment letters described in the section
entitled "SPECIAL FACTORS--Financing of the Merger";                

  - the representations and warranties of Michael Foods, Protein Acquisition
     and M-Foods Holdings being true and correct in all material respects; and

    - Michael Foods', Protein Acquisition's and M-Foods Holdings' performance in
   all material respects of all obligations and compliance in all material
respects with all agreements in the merger agreement.               

  At any time before the merger, to the extent legally allowed, the board of
directors of either Michael Foods or Protein Acquisition may waive compliance   
with any of the conditions contained in the merger agreement without the        
approval of their respective shareholders. As of the date of this proxy         
statement, neither Michael Foods nor Protein Acquisition expects that any       
condition will be waived.                                                       

 TERMINATION OF THE MERGER AGREEMENT.  Michael Foods and M-Foods Holdings,
each acting under the direction of their respective board of directors, can     
mutually agree to terminate the merger agreement at any time without completing 
the merger.                                                                     

Also, either board can, without the consent of the other, terminate the 
merger agreement if:                                                            

- the merger is not completed by May 31, 2001;                          

- any governmental order preventing completion of the merger has become 
final and non-appealable; or                                        

    - Michael Foods' shareholders do not approve and adopt the merger agreement.

   In addition, M-Foods Holdings, acting under the direction of its board, can
terminate the merger agreement before the closing of the merger if:             

   - Michael Foods or its board withdraws, modifies or changes its approval of
   the merger agreement in a manner adverse to M-Foods Holdings or Protein
   Acquisition, recommends an alternative acquisition proposal or does not
     recommend rejection of a tender offer or exchange offer for Michael Foods
   common stock within 10 days of the commencement of such tender offer or
exchange offer; or                                                  

   - Michael Foods has breached certain representations, warranties, covenants
   or agreements and such breach is not cured within 20 days after Michael
Foods receives written notice of the breach.                        

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Finally, Michael Foods can terminate the merger agreement if:           

- M-Foods Holdings or Protein Acquisition has breached certain          
   representations, warranties, covenants or agreements and such breach is
  not cured within 20 days after M-Foods Holdings or Protein Acquisition
receives written notice of the breach; or                           

  - Michael Foods' board of directors approves a superior proposal, provided
that Michael Foods has complied with its obligation to give M-Foods 
   Holdings notice and an opportunity to match such superior proposal and,
   concurrently with such termination, pays M-Foods Holdings a termination
fee.                                                                

TERMINATION FEE.  Michael Foods must pay to M-Foods Holdings and Protein
Acquisition a $20 million termination fee if the merger agreement is terminated 
under any of the following circumstances:                                       

   - M-Foods Holdings terminates the merger agreement because Michael Foods or
 its board of directors withdraws, modifies or changes its approval or
 recommendation of the merger agreement in a manner adverse to M-Foods
  Holdings or Protein Acquisition, recommends an alternative acquisition
  proposal or does not recommend rejection of a tender offer or exchange
      offer for Michael Foods common stock within 10 days of the commencement of
such tender offer or exchange offer;                                

- Michael Foods terminates the merger agreement because its board of    
directors approves a superior proposal, as defined in the merger    
agreement, and M-Foods Holdings does not propose a transaction which
    matches or exceeds such superior proposal prior to the end of the fourth
   business day after receipt of Michael Foods' notice of its intention to
terminate the merger agreement; or                                  

   - Michael Foods or M-Foods Holdings terminates the merger agreement because
  the merger has not been consummated by May 31, 2001, or Michael Foods'
  shareholders fail to approve the merger agreement, or M-Foods Holdings
     terminates the merger agreement because Michael Foods is in breach of its
     representations and warranties contained in the merger agreement; and, in
addition,                                                           

  - an alternative acquisition proposal is publicly disclosed or proposed to
     Michael Foods or its shareholders after the date of the merger agreement,
but prior to termination of the merger agreement or the time of the 
special meeting, as the case may be, and                            

- within 12 months after the termination, Michael Foods enters into a   
 definitive agreement with respect to, or consummates, the acquisition
proposal.                                                           

The termination fee, if paid, will be reduced by the amount of any expenses     
previously reimbursed to M-Foods Holdings or Protein Acquisition by Michael     
Foods.                                                                          

NON-SOLICITATION OF COMPETING PROPOSALS.  The merger agreement generally
restricts Michael Foods' ability to initiate, solicit, encourage or otherwise   
facilitate any competing merger or acquisition inquiries, proposals or offers,  
however, Michael Foods may respond to unsolicited offers if the board of        
directors of Michael Foods determines in good faith, after consultation with its
independent legal and financial advisors, that any such offer is reasonably     
likely to be completed, and, if consummated, would result in a transaction more 
favorable to Michael Foods' shareholders.                                       

   MODIFYING OR AMENDING THE MERGER AGREEMENT.  Subject to any applicable law,
Michael Foods, M-Foods Holdings and Protein Acquisition may, by acting through  
their respective boards of directors, at any time prior to the closing of the   
merger, modify or amend the merger agreement by written agreement.              

 EXPENSES.  The merger agreement provides that under certain circumstances
Michael Foods must reimburse M-Foods Holdings and Protein Acquisition for all   
out-of-pocket expenses and fees incurred in connection with or in anticipation  
of the transactions contemplated by the merger agreement in an amount not to    
exceed $5 million, subject to certain exceptions. In addition, letter agreements
signed by certain                                                               

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members of Michael Foods' senior management provide that such individuals will  
receive complete reimbursement from M-Foods Holdings of all legal fees and      
expenses incurred upon either of the closing of the merger or the receipt by    
M-Foods Holdings of a termination fee, as described in the merger agreement;    
under all other circumstances, such individuals will receive expense            
reimbursement from M-Foods Holdings to the same extent, on a proportionate      
basis, as M-Foods Holdings. See "THE MERGER AGREEMENT--Termination Fee and      
Expenses."                                                                      

MATERIAL FEDERAL INCOME TAX CONSEQUENCES                                        

The receipt of cash in the merger will be a taxable transaction for U.S.
federal income tax purposes under the Internal Revenue Code of 1986, as amended,
and may also be a taxable transaction under applicable state, local, foreign and
other tax laws. See "SPECIAL FACTORS--Material Federal Income Tax Consequences."

   TAX MATTERS ARE VERY COMPLICATED. THE TAX CONSEQUENCES OF THE MERGER TO YOU
WILL DEPEND UPON YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISORS FOR A 
FULL UNDERSTANDING OF THE U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE 
MERGER TO YOU.                                                                  

ACCOUNTING TREATMENT                                                            

The merger is intended to be accounted for under the purchase method of 
accounting. See "SPECIAL FACTORS--Accounting Treatment."                        

FINANCING OF THE MERGER                                                         

  The following arrangements are in place to provide the necessary financing
for the merger, including the payment of related transaction fees and expenses, 
and the refinancing, at the same time as the closing of the merger, of all      
existing funded debt of Michael Foods, except for debt which by agreement may   
remain outstanding:                                                             

 - Protein Acquisition has received equity commitment letters from each of
      Vestar Capital Partners IV, L.P., an affiliate of Vestar Capital Partners,
  and Marathon Fund Limited Partnership IV, an affiliate of Goldner Hawn
     Johnson & Morrison Incorporated, in which Vestar and Marathon have agreed
to make capital contributions of up to $133,900,405 and $35,000,000,
 respectively, to M-Foods Holdings in exchange for equity interests in
M-Foods Investors;                                                  

  - Vestar has received a commitment letter from Bank of America, N.A., Banc
      of America Bridge LLC and Banc of America Securities LLC pursuant to which
Bank of America, N.A. has committed to provide up to $470 million in
    senior secured credit facilities, no more than $400 million of which may
be borrowed at the closing of the merger;                           

   - Vestar intends to pursue a private placement of $200 million of unsecured
      senior subordinated notes to be issued by Michael Foods. In the event that
      Michael Foods cannot complete this private placement, pursuant to the bank
      commitment letter, Banc of America Bridge LLC has agreed to purchase up to
      $200 million of unsecured senior subordinated bridge notes to be issued by
Michael Foods; and                                                  

- Messrs. Ostrander, Reedy, Goucher, Clarkson, Cook, Hoffmann, Mohr and 
     Sprinkle will exchange an aggregate of $10 million of option equity value
   and common stock value of Michael Foods for equity interests in M-Foods
 Investors and deferred compensation arrangements of M-Foods Holdings,
      while the Michael family continuing investors will exchange $38,377,500 of
Michael Foods common stock value for equity interests in M-Foods    
Investors.                                                          

See "SPECIAL FACTORS--Financing of the Merger."                         

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RIGHTS OF DISSENTING SHAREHOLDERS                                               

 Michael Foods' shareholders who follow certain procedural requirements of
Minnesota law may be entitled to receive cash in the amount of the "fair value" 
of their shares instead of the merger consideration offered pursuant to the     
merger. The "fair value" of shares of Michael Foods common stock would be       
determined pursuant to Minnesota law.                                           

    ANY MICHAEL FOODS SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS' RIGHTS MUST
NOT VOTE IN FAVOR OF THE MERGER AGREEMENT AND MUST COMPLY WITH ALL OF THE       
PROCEDURAL REQUIREMENTS PROVIDED BY MINNESOTA LAW. THE PROCEDURES ARE SUMMARIZED
IN GREATER DETAIL IN "SPECIAL FACTORS--RIGHTS OF DISSENTING SHAREHOLDERS" AND   
THE RELEVANT TEXT OF THE DISSENTERS' RIGHTS STATUTE IS ATTACHED AS ANNEX C TO   
THIS PROXY STATEMENT. WE ENCOURAGE YOU TO READ THE STATUTE CAREFULLY AND TO     
CONSULT WITH LEGAL COUNSEL IF YOU DESIRE TO EXERCISE YOUR DISSENTERS' RIGHTS.   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 

 Set forth below is a summary of selected consolidated financial data with
respect to Michael Foods excerpted or derived from the information contained in 
Michael Foods Annual Reports on Form 10-K for the years ended December 31, 1999 
and 1998 and its unaudited Quarterly Reports on Form 10-Q for the nine-month    
periods ended September 30, 2000 and 1999, which are incorporated herein by     
reference. More comprehensive financial information is included in such reports 
and other documents filed by Michael Foods with the SEC. The following summary  
is qualified by reference to such reports and other documents and all of the    
financial information, including any related notes, contained therein. Such     
reports and other documents may be inspected and copies may be obtained from the
offices of the SEC. See "ADDITIONAL INFORMATION--Where You Can Find More        
Information." In the opinion of management, the unaudited interim information   
reflects all adjustments, consisting only of normal recurring adjustments,      
necessary for the fair presentation of the results of operations and financial  
condition for the nine-month periods ended September 30, 2000 and 1999. Results 
of the interim periods should not be considered indicative of results for any   
other periods or for the year.                                                  

                                                        [Enlarge/Download Table]

                                                     NINE MONTHS ENDED              YEARS ENDED        
                                                       SEPTEMBER 30,               DECEMBER 31,        
                                                  -----------------------   ---------------------------
                                                     2000         1999          1999           1998    
                                                  ----------   ----------   ------------   ------------
                                                   (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) 
                                                                                                       
Net sales........................................  $795,110     $781,320     $1,053,272     $1,020,484 
Gross profit.....................................   144,238      139,019        193,016        173,101 
Net earnings.....................................    33,582       30,876         44,056         40,257 
Net earnings per common share(1):                                                                      
Basic............................................  $   1.75     $   1.50     $     2.15     $     1.86 
Diluted..........................................      1.73         1.48           2.12           1.83 
Current assets...................................  $193,966     $184,475     $  173,255     $  177,820 
Property, plant and equipment, net...............   280,745      281,966        286,799        250,211 
Other noncurrent assets..........................   132,806      140,841        137,863        123,485 
Current liabilities..............................   117,962      117,225        121,491        116,523 
Noncurrent liabilities...........................   240,877      236,714        211,827        190,844 
Shareholders equity..............................   248,678      253,343        264,599        244,149 
Ratio of earnings to fixed charges...............      5.90x        5.72x          6.11x          6.16x
Book value per share.............................  $  13.60     $  12.51     $    13.03     $    11.57 

------------------------                                                        

(1) Income per common share from continuing operations is equal to the net      
earnings per common share.                                              

Michael Foods has not provided any pro forma data giving effect to the  
proposed merger as it does not believe such information is material to its      
shareholders in evaluating the merger agreement since the proposed merger       
consideration is all cash and, if the proposed merger is completed, Michael     
Foods common stock would cease to be publicly traded.                           

  Michael Foods also has not provided any separate financial information for
Protein Acquisition since it is a special purpose entity formed in connection   
with the proposed merger and has no independent operations.                     

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SPECIAL FACTORS 

EFFECTS OF THE MERGER                                                           

 If the merger is approved by the shareholders and the other conditions to
the closing of the merger are either satisfied or waived, Protein Acquisition   
will be merged with and into Michael Foods, with Michael Foods being the        
surviving corporation. After the merger, M-Foods Investors will indirectly own  
Michael Foods, with M-Foods Investors being owned by the continuing investors,  
Vestar (and affiliates) and Marathon. For a chart describing the equity         
ownership of M-Foods Investors following the merger, see "SPECIAL               
FACTORS--Interests of Certain Persons in the Merger--Post-Merger Capitalization 
of M-Foods Investors, M-Foods Holdings and Michael Foods."                      

When the merger is completed, each share of Michael Foods common stock  
issued and outstanding at the closing of the merger will be canceled and        
converted into the right to receive $30.10 in cash, except for shares held by   
dissenting shareholders who have perfected their dissenters' rights under       
Minnesota law. Immediately prior to the merger, all of the shares of Michael    
Foods common stock and equity option value held by the continuing investors will
be exchanged for cash, equity interests in M-Foods Investors and, for the       
continuing investors who are members of Michael Foods' senior management,       
deferred compensation arrangements with M-Foods Holdings. In each case, such    
shares, including shares underlying the options, will be valued at $30.10 per   
share.                                                                          

 As a result of the merger, Michael Foods will be a privately held company
and there will be no public market for its common stock. Upon the completion of 
the merger, Michael Foods common stock will no longer be quoted on the Nasdaq   
National Market and price quotations for sales of shares in the public market   
will no longer be available. In addition, the registration of Michael Foods     
common stock under the Securities Exchange Act of 1934 will be terminated. After
the termination, Michael Foods will no longer be required to file periodic      
reports with the SEC with respect to its equity securities, and the officers,   
directors and the owners of more than 10% of the common stock will no longer be 
subject to the short-swing profit provisions of Section 16(b) of the Exchange   
Act. Michael Foods will likely be required to resume filing periodic reports    
with the SEC as a result of its issuing debt securities in connection with the  
financing of the merger that may be exchanged for a new issue of identical debt 
securities registered under the Securities Exchange Act of 1933.                

  The primary detriments of the merger to shareholders of Michael Foods that
will not have a continuing interest in Michael Foods include the following:     

  - Michael Foods' shareholders (other than continuing investors) will cease
to have an interest in Michael Foods.                               

  - The receipt of cash in the merger will be a taxable transaction for U.S.
   federal income tax purposes under the Internal Revenue Code of 1986 and
    may also be a taxable transaction under applicable state, local, foreign
and other tax laws.                                                 

   An equity investment in M-Foods Investors following the merger will involve
substantial risk resulting from the limited liquidity of such an investment.    
Nonetheless, if Michael Foods successfully executes its business strategies, the
value of such an equity investment could be considerably greater than the       
original cost. Further benefits to Vestar, Marathon and the continuing investors
are described under "SPECIAL FACTORS--Purposes, Reasons and Plans."             

   The primary detriments of the merger to Vestar, Marathon and the continuing
investors include the following:                                                

- All of the risk of any decrease in the earnings, growth or value of   
    Michael Foods following the merger will be borne by Vestar, Marathon and
the continuing investors;                                           

- Michael Foods will have substantially more debt outstanding after the 
      merger and this may adversely affect the equity value of M-Food Investors.
   In general, higher levels of debt can have the effect of increasing the
  risk to equity holders of losing the entire value of their investment;

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    - Much of the investment interests in M-Foods Investors that will be held by
   the Michael Foods senior management after the merger will be subject to
   vesting restrictions related to their continued employment with Michael
    Foods and to Michael Foods' future operating performance. The failure to
  satisfy the conditions of those vesting restrictions could result in a
significant loss of investment value for those individuals; and     

  - Following the merger, there will be no trading market for Michael Foods'
or M-Foods Investors' equity.                                       

    Based on (1) assumed total equity of Michael Foods of $217,277,905 after the
merger, (2) 18,311,109 shares of Michael Foods common stock issued and          
outstanding, (3) net option value of $19,578,140, (4) the $30.10 per share price
being paid to current holders of Michael Foods common stock and (5) the net     
option value, equal to $30.10 minus the applicable exercise price, being paid to
current holders of Michael Foods options, the effect of the merger on each of   
Vestar's, Marathon's and the continuing investors' interest in the net book     
value and net earnings of Michael Foods in terms of both dollar amounts and     
percentages is set forth below:                                                 

                                                        [Enlarge/Download Table]

                                     IMPLIED VALUE     CURRENT                         PERCENTAGE OF  
                                      OF CURRENT    PERCENTAGE OF    IMPLIED VALUE    MICHAEL FOODS'  
                                      INVESTMENT    MICHAEL FOODS'   OF INVESTMENT        EQUITY      
                                      (STOCK AND      STOCK AND       IMMEDIATELY    IMMEDIATELY AFTER
                                     OPTION VALUE)   OPTION VALUE   AFTER MERGER(1)      MERGER(2)    
                                     -------------  --------------  ---------------  -----------------
                                                                                                      
CONTINUING INVESTORS                                                                                  
Michael family continuing                                                                             
  investors......................... $ 91,744,890      16.07%         $ 38,377,500         17.66%     
Gregg A. Ostrander..................    5,549,458       0.97             4,200,000          1.93      
John D. Reedy.......................    2,280,576       0.40             1,500,000          0.69      
Bill L. Goucher.....................    2,212,289       0.39             1,500,000          0.69      
James D. Clarkson...................    1,452,162       0.25             1,200,000          0.55      
Bradley L. Cook.....................      654,132       0.11               400,000          0.18      
Max Hoffmann........................      811,080       0.14               400,000          0.18      
James Mohr..........................      603,658       0.11               400,000          0.18      
Harold D. Sprinkle..................      429,587       0.08               400,000          0.18      
TOTAL OF CONTINUING INVESTORS....... $105,737,832      18.53%         $ 48,377,500         22.27%     
OTHER INVESTORS                                                                                       
Vestar..............................            0        0            $133,900,405         61.63%     
Marathon............................            0        0              35,000,000         16.11%     
TOTAL OF OTHER INVESTORS............            0        0            $168,900,405         77.73%     
GRAND TOTAL......................... $105,737,832      18.53%         $217,277,905           100%     

------------------------                                                        

(1) Includes amounts invested in M-Foods Holdings deferred compensation         
arrangements.                                                           

(2) Upon certain internal rate of return or multiple of investment hurdles being
 achieved, the management investors' percentages will increase relative to
the non-management investors.                                           

BACKGROUND OF THE MERGER                                                        

    The decision of the special committee, the disinterested directors committee
(a committee of all directors who are not employees of Michael Foods or         
continuing investors required by Minnesota law) and the board of directors to   
approve and recommend the merger agreement was the result of an extended        
evaluation process. Since becoming a public company in 1987, the board of       
directors and management of Michael Foods have from time to time evaluated and  
considered various alternatives for enhancing shareholder value. During the last
few years, the board of directors and management have generally believed that   
the trading prices of Michael Foods common stock (to the extent unaffected by   
the publicity or market rumors concerning Michael Foods' possible sale) have not
reflected the inherent value of Michael Foods. The board of directors and       
management believe, based in part on the advice of their                        

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financial advisors, that the market price of Michael Foods common stock has been
adversely affected by several factors, including:                               

   - a lack of investor appreciation for the value-added nature of the Michael
Foods business model relative to its commodity-based raw materials; 

 - the small market capitalization and low average daily trading volume of
Michael Foods common stock;                                         

- an insufficient number of market makers and investment banking firms  
preparing research reports with respect to Michael Foods; and       

  - the existence of few comparable public companies against which investors
could evaluate Michael Foods' performance.                          

   In July 1999, the board of directors of Michael Foods retained U.S. Bancorp
Piper Jaffray and Merrill Lynch, Pierce, Fenner & Smith Incorporated to assist  
it in evaluating strategic alternatives to enhance shareholder value. With the  
assistance of its financial advisors and management of Michael Foods, the board 
of directors assessed alternatives to continuing to implement Michael Foods'    
stand-alone strategic plan as a public company. The board of directors          
considered, in addition to other less significant alternatives, attempting to   
generate growth through strategic acquisitions, exploring a potential merger    
with a company of approximately equal size, and seeking a sale of Michael Foods 
to a strategic or financial buyer. After extensive discussions with its         
financial advisors and management, Michael Foods' board of directors determined 
that, due to Michael Foods' size, financial and management constraints, industry
consolidation and other competitive factors, it was unlikely to successfully    
execute an acquisition strategy or merger of equals that would significantly    
enhance shareholder value. The Michael Foods board of directors also questioned 
whether the continued successful implementation of Michael Foods' stand-alone   
strategic plan would result in growth sufficient to both maintain and grow its  
market position in consolidating industry segments and achieve a higher         
valuation for its securities in the public markets.                             

  U.S. Bancorp Piper Jaffray and Merrill Lynch recommended that the board of
directors consider a potential sale of Michael Foods to a strategic or financial
buyer. Among the factors that the financial advisors discussed in support of    
their recommendation were:                                                      

- the board's desire to maximize shareholder value;                     

- the inherent risks and probable impact on stock price associated with 
executing management's business plan on a stand-alone basis;        

  - the difficulties, risks and insufficient shareholder benefits associated
  with attempting to build Michael Foods through acquisition and organic
growth;                                                             

- the lack of compelling merger candidates;                             

 - the anticipated receptivity of strategic and financial buyers to a sale
process; and                                                        

- the strong market for acquisition financing and acquisition valuations
existing at that time and the risk that market conditions would     
deteriorate in the future.                                          

   In response to its financial advisors' recommendation, Michael Foods' board
of directors directed U.S. Bancorp Piper Jaffray and Merrill Lynch to identify  
and contact potential acquirers regarding a sale of the company. On August 9,   
1999, Michael Foods publicly announced that investment bankers had been retained
to assist it in exploring alternatives to enhance shareholder value.            

U.S. Bancorp Piper Jaffray and Merrill Lynch identified and contacted   
sixty-one potential acquirers to determine their interest in a possible         
transaction with Michael Foods. Of those contacted, thirty-two parties were     
sufficiently interested to sign a confidentiality agreement in favor of the     
company and review a confidential memorandum regarding Michael Foods and its    
operations prepared by company management and the investment bankers. Michael   
Foods received non-binding preliminary expressions of interest from six         
potential acquirers. Each of the expressions of interest included a preliminary 
valuation for the                                                               

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company expressed as a range of prices per share. The low end of the collective 
range was $28.00 per share and the high end of the collective range was $35.00  
per share.                                                                      

  After reviewing the preliminary expressions of interest with its financial
advisors and management, the board invited five of the potential acquirers,     
including Vestar, to conduct further due diligence and refine their offers. The 
sixth potential acquirer, whose expression of interest was at the low end of the
valuation range, was offered an opportunity to increase the level of its        
preliminary expression of interest and declined to do so, indicating that the   
top of its range would not exceed $30.00 per share. Each of the five remaining  
potential acquirers conducted an extensive due diligence investigation of       
Michael Foods that included presentations by management and a thorough review of
the financial performance and operations of the company.                        

  In November 1999, each of the five potential acquirers declined to make an
offer for the outstanding common stock of Michael Foods. Although not specific  
in their reasoning, the general consensus among all of the potential acquirers  
was that the company would be fully valued at or near its then market price of  
approximately $26.00 per share.                                                 

   After receiving no definitive offers from the five potential acquirers, the
board of directors instructed its investment bankers to contact the sixth party 
that had submitted a preliminary expression of interest and then subsequently   
declined to raise its proposed valuation range for the company. That potential  
acquirer, a publicly held diversified food products company, was invited to     
conduct a due diligence review of Michael Foods and its operations in order to  
refine its valuation for the company.                                           

  Over the next several weeks, the potential strategic acquirer conducted an
extensive due diligence investigation of Michael Foods. During the same period, 
legal counsel and investment bankers for the two companies began discussing the 
terms of a potential stock-for-stock transaction. A number of proposals and     
counter proposals were exchanged regarding an appropriate exchange ratio for    
Michael Foods and the potential acquirer's common stock, protection for Michael 
Foods' shareholders against the price volatility of the potential acquirer's    
stock between the signing of a definitive agreement and closing of the proposed 
transaction, and other transaction terms.                                       

In January 2000, the potential acquirer made what it expressed to be its
final proposal for the acquisition of the company to the Michael Foods board of 
directors. The proposed fixed exchange ratio and the market price of the        
potential acquirer's common stock at that time implied a valuation for Michael  
Foods common stock of less than $28 per share. After extensive discussions with 
its financial advisors regarding, among other things, valuation and stock price 
data for the potential acquirer and relative valuation data for both companies, 
Michael Foods' board of directors determined that the proposed transaction did  
not, and was not reasonably likely to, provide Michael Foods' shareholders with 
adequate value for their equity interests in the company. Thereafter, the board 
of directors and the potential acquirer terminated their discussions.           

On January 20, 2000, Michael Foods publicly announced that its board of 
directors had concluded its formal strategic review process without entering    
into a transaction and indicated that the board might, without further public   
announcement, resume its formal strategic review process or, from time to time, 
respond to follow-on opportunities created by its prior activities.             

    On February 5, 2000, Rabobank International, a member of Michael Foods' bank
lending syndicate, visited with company management to discuss various structured
financing ideas that the bank thought might be of interest to the company.      
During their meeting with Gregg A. Ostrander, Michael Foods' chief executive    
officer, and other members of management, Rabobank suggested that Mr. Ostrander 
and others consider the possibility of a management-led buyout of the company   
with Rabobank as a financing source. Mr. Ostrander indicated that, given the    
results of the recently completed comprehensive strategic review, any           
consideration of a management-led buyout of the company would be untimely.      

In June 2000, Mr. Ostrander and other members of management began to    
seriously consider the possibility of a management-led buyout of Michael Foods. 
On July 6, 2000, Mr. Ostrander met with Jeffrey                                 

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Michael, a director of Michael Foods whose family and related parties           
beneficially own approximately 17% of Michael Foods' common stock, to discuss   
whether Mr. Michael and his family would be interested in remaining as investors
in the company if it became privately held. Mr. Michael expressed a preliminary 
level of interest in continuing some form of investment in the company,         
depending upon the circumstances.                                               

   On July 17, 2000, Messrs. Ostrander and Michael met with representatives of
Rabobank to discuss the possibility of a management-led buyout of the company.  
During that meeting the bankers offered to introduce management to a number of  
financial sponsors who regularly participate in buyout transactions. On         
July 19, 2000, Mr. Ostrander and other members of management retained the law   
firm of Skadden, Arps, Slate, Meagher & Flom LLP to provide legal advice to him 
and other members of the management group.                                      

    On July 25, 2000, Mr. Michael, Mr. Ostrander and other members of management
met with representatives of Banc of America Securities LLC also to discuss the  
feasibility of a management-led buyout and financing alternatives. On August 1, 
2000, Mr. Michael, Mr. Ostrander and other members of management participated   
via conference call with representatives of Banc of America Securities LLC to   
review potential financial sponsors who would be interested in participating in 
a management-led buyout.                                                        

   On August 7, 2000, Mr. Ostrander met with Jack Morrison, a principal in the
Minneapolis-based private equity firm of Goldner, Hawn, Johnson & Morrison, to  
discuss the management buyout process in general and to determine whether       
Mr. Morrison's firm might be interested in participating as a financial sponsor 
in a Michael Foods transaction. Mr. Morrison expressed an interest in exploring 
a transaction, but indicated that, due to the likely size of a Michael Foods    
transaction, his firm's fund would not be in a position to provide all of the   
equity capital necessary to consummate the transaction.                         

    On August 9, 2000, Mr. Ostrander informed members of the Michael Foods board
of directors that he was involved in a preliminary exploration of the           
feasibility of a management-led buyout of Michael Foods. The consensus of the   
board of directors was that Mr. Ostrander was authorized to proceed with the    
understanding that he was not acting on behalf of the board; that the board had 
not decided that a sale of the company was in the best interests of shareholders
nor had it determined a valuation for the company at which it would consider a  
sale of the company to be appropriate; that there could be no assurance that the
board would either accept or negotiate a proposal for a management-led buyout of
the company; and that the board might at any time consider alternative          
transactions.                                                                   

On August 21, 2000, Mr. Ostrander and other members of management made a
presentation about Michael Foods to representatives of Goldner, Hawn, Johnson & 
Morrison. Messrs. Ostrander and Michael also met separately with Goldner Hawn   
Johnson & Morrison on this date.                                                

On August 22, 2000, Mr. Ostrander contacted James P. Kelley, a managing 
director at Vestar with whom he served as a director of another publicly-held   
company, to inquire whether Vestar might have an interest in participating in a 
management-led buyout of Michael Foods and arranged a subsequent meeting to     
discuss the matter.                                                             

On August 28 and 29, 2000, Mr. Ostrander met in New York with two other 
private equity firms to whom he had been introduced by Rabobank to discuss the  
possibility of their participation in a management-led buyout of Michael Foods. 

On August 31, 2000, Mr. Ostrander and representatives of Goldner, Hawn, 
Johnson & Morrison spoke by telephone to discuss that firm's continuing interest
in participating in the contemplated transaction.                               

   On September 5, 2000, Mr. Ostrander and John D. Reedy, Michael Foods' chief
financial officer, met with representatives of Vestar to discuss the possibility
of Vestar participating in the contemplated transaction. During the meeting, the
Vestar representatives expressed a strong interest in exploring a possible      
transaction subject to an extensive due diligence review of the company.        

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On September 7, 2000, Mr. Ostrander updated the Michael Foods board of  
directors on his activities and informed them that a limited number of possible 
financial sponsors would be conducting due diligence on the company.            

 On September 11, September 20, October 4 and October 20, 2000, members of
Michael Foods' management and representatives of Vestar met to discuss the      
business and operations of the company. Throughout this period the company      
responded to numerous requests for information from Vestar.                     

On September 13, September 20 and September 26, 2000, members of Michael
Foods' management met with representatives from the two private equity firms to 
whom they had been introduced by Rabobank to discuss the business and operations
of Michael Foods and their possible participation in the contemplated           
transaction.                                                                    

    On or about September 28, 2000, Mr. Ostrander decided to proceed with Vestar
as the principal equity sponsor and Goldner Hawn Johnson & Morrison as a        
co-investor in the contemplated transaction. In Mr. Ostrander's view, the       
reputation of Vestar and Goldner Hawn for successfully executing transactions,  
their understanding and acceptance of the risks related to the businesses of the
company, his familiarity with certain of the Vestar principals, and other       
cultural issues were significant factors in his decision. Throughout the        
remainder of September and October 2000, the Vestar/Goldner Hawn investor group 
and its advisors continued to conduct a due diligence review of Michael Foods   
and its business and had numerous meetings with financing sources, members of   
management and Mr. Michael in order to structure a preliminary proposal for the 
acquisition of Michael Foods.                                                   

During the week of October 30, 2000, Mr. Ostrander informed members of  
Michael Foods' board of directors and lawyers at Kaplan, Strangis and Kaplan,   
P.A., the law firm that had previously represented the board of directors in its
review of strategic alternatives to enhance shareholder value, that he expected 
Vestar and Goldner Hawn to make a joint proposal for the purchase of the company
at the board's regularly scheduled meeting on November 8 and 9, 2000. At the    
request of the board, Mr. Ostrander informed representatives of U.S. Bancorp    
Piper Jaffray and Merrill Lynch of the possible transaction and requested that  
they be prepared to discuss the matter with the board at its November 9, 2000   
meeting.                                                                        

   On November 3, 2000, Merrill Lynch was contacted by a senior executive from
a privately held diversified agriculture and food company regarding his         
company's preliminary interest in discussing an acquisition of Michael Foods.   
Merrill Lynch had contacted this potential strategic acquirer in 1999 as part of
the board's formal review of alternatives to enhance shareholder value. After   
reviewing the confidential memorandum prepared by Michael Foods, the potential  
strategic acquirer had chosen not to pursue a transaction at that time. Given   
its current interest, however, Merrill Lynch advised the executive to contact an
attorney at Kaplan, Strangis and Kaplan, who they understood continued to       
represent the board of directors of the company.                                

   Later that day, the executive contacted an attorney at Kaplan, Strangis and
Kaplan to discuss his company's preliminary interest in exploring an acquisition
of Michael Foods. During their conversation, he reported that his company was   
considering joining with one of the private equity sponsors that Rabobank had   
previously introduced to Mr. Ostrander in making an offer for Michael Foods. The
attorney informed the executive that Michael Foods' board of directors was not  
soliciting offers for the sale of the company, but would give careful           
consideration to any bona fide proposal for a transaction that the potential    
strategic acquirer addressed to the board. The attorney also informed the       
executive that Michael Foods' board of directors was scheduled to meet on       
November 8 and 9, 2000 and suggested that the potential strategic acquirer      
provide a written expression of interest, in as definitive a form as possible,  
to the Michael Foods board for consideration at its November 9, 2000 meeting.   

   On November 6, 2000, a principal with the private equity firm that had been
identified by the potential strategic acquirer as its joint venture partner     
contacted the Kaplan, Strangis and Kaplan attorney to confirm that the two      
parties intended to make a proposal to the Michael Foods board of directors for 
the acquisition of the company. During that conversation, the attorney was      
informed that the joint venture partners were aware that Mr. Ostrander and      
Vestar intended to make a proposal to acquire Michael Foods                     

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to the company's board. The private equity firm later contacted Mr. Ostrander,  
to whom it had been previously introduced by Rabobank, to inform him that the   
potential strategic acquirer and the private equity firm would be making a      
proposal to acquire Michael Foods for consideration at the company's board      
meeting on November 9, 2000.                                                    

    The Michael Foods board held a regularly scheduled meeting commencing during
the evening of November 8 and continuing on November 9, 2000. Attorneys from    
Kaplan, Strangis and Kaplan and representatives from U.S. Bancorp Piper Jaffray 
and Merrill Lynch attended the November 9, 2000 portion of the meeting. During  
that portion of the meeting, representatives of Merrill Lynch and Kaplan,       
Strangis and Kaplan and Mr. Ostrander reported their conversations with the     
potential strategic acquirer and its joint venture partner and indicated that   
they anticipated that the board of directors would receive an expression of     
interest from those entities during the course of the board meeting.            

Mr. Ostrander then introduced representatives of Vestar and Goldner Hawn
Johnson & Morrison who presented a written proposal to the board to acquire     
Michael Foods for a purchase price of $28.50 per share of Michael Foods common  
stock. During their presentation, the Vestar/Goldner Hawn investor group        
representatives stated that substantially all of their due diligence            
investigation of the company was completed with the exception of certain        
environmental, regulatory and legal matters. The Vestar/Goldner Hawn investor   
group's written proposal included commitment or highly confident letters from   
its lenders and a proposed form of merger agreement. After the Vestar/Goldner   
Hawn investor group presentation, Jeffrey Michael confirmed that he and various 
family members anticipated participating as equity participants in the          
transaction but that the substantive terms of their involvement remained to be  
determined and no agreements as to such participation had been reached.         

  The board then met in executive session without Mr. Ostrander, Mr. Michael
or executives of the company. Legal counsel reviewed for the board the process  
that would be involved in evaluating and negotiating the proposal and the       
board's fiduciary duties and statutory obligations under Minnesota law,         
including the necessity of forming a committee of all "disinterested" directors 
to consider the proposal in order to meet the requirements of the Minnesota     
Business Corporation Act. The board then established the disinterested directors
committee mandated by Minnesota law, consisting of all directors that were      
neither participants in the proposal nor executives or employees of the company,
being Richard Coonrod, Daniel Dillon, Jerome Jenko, Arvid Knudtson, Joseph      
Marshburn and Margaret Moore. Representatives of Kaplan, Strangis and Kaplan    
described the functions and roles of financial and legal advisors to the board  
and any committee formed in response to the proposals. Representatives of the   
financial and legal advisors each then reviewed with the board their            
professional relationship with Michael Foods and its management and other       
matters relating to their qualifications and independence. Each of the advisors 
noted that their professional relationship with the company had been primarily  
limited to providing services to the board with respect to its prior review of  
strategic alternatives and, with respect to legal counsel, the company and its  
management had historically been regularly represented by other outside counsel.
The board then met without attorneys or investment bankers to consider the      
retention of legal and financial advisors. After such discussion, the board and 
the disinterested directors committee each unanimously determined to retain     
Kaplan, Strangis and Kaplan and U.S. Bancorp Piper Jaffray and Merrill Lynch as 
their advisors with respect to the proposal.                                    

The investment bankers then reviewed for the board the process that the 
board had previously undertaken to evaluate strategic alternatives and updated  
certain valuation data regarding the company. The investment bankers informed   
the board that, in their view, the proposed offer price of $28.50 per share of  
Michael Foods common stock was inadequate. Although the board did not establish 
a valuation at which it would be prepared to sell the company, the consensus of 
the board was that it should not give serious consideration to any offer that   
valued the company below $30.00 per share of Michael Foods common stock. The    
board noted that the Vestar/Goldner Hawn investor group intended to obtain a    
portion of the debt financing necessary to acquire the company through the      
issuance and placement of $200 million in senior subordinated notes for which it
had provided the board a highly confident letter                                

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from Banc of America Securities LLC. The board and its financial advisors       
considered the volatility in the high yield debt market as a significant risk to
consummation of the proposed transaction.                                       

   During its meeting, the board received by facsimile a written indication of
interest from the potential strategic purchaser and its financial partner to    
acquire all of the shares of Michael Foods common stock at $30.00 per share. The
indication of interest stated that the valuation implied by the per share price 
was based upon publicly available information and might be increased if a due   
diligence review of the company's non-public records indicated that a greater   
value was warranted. The board discussed a number of aspects of the potential   
transaction, including the possibility that it might be subject to              
time-consuming antitrust review because the potential strategic purchaser and   
the company competed with each other in one of the company's core market        
segments. It was the general consensus of the board that the potential strategic
purchaser and its financial partner should be given a limited time to conduct   
due diligence and determine whether they were interested in making a more       
definitive proposal to acquire Michael Foods.                                   

    The board also decided that the Vestar/Goldner Hawn investor group should be
informed that the board had received another unsolicited expression of interest 
to acquire Michael Foods that the board considered sufficiently interesting to  
require investigation and, furthermore, that the board viewed the Vestar/Goldner
Hawn investor group proposal as financially inadequate and subject to           
unacceptable risk of consummation due to the lack of a firm financing commitment
for $200 million in senior subordinated notes.                                  

  The board then discussed management's conflict of interest as participants
in the Vestar/Goldner Hawn investor group proposal and the formation of a       
special committee of three directors who could dedicate significant time to     
directing and monitoring the process with respect to the two proposals.         
Representatives of Kaplan, Strangis and Kaplan described the functions and      
responsibilities of a special committee and its interaction with the            
disinterested directors committee and the full board of directors. At the       
conclusion of its discussions, the board formed a special committee of          
Mr. Coonrod, Mr. Knudtson and Mr. Jenko, with Mr. Jenko as chairman, to review  
and consider the terms of any revised proposals received from the two groups of 
potential purchasers, to provide guidance to management and the board's legal   
and financial advisors with respect to the two proposals and to inform and make 
recommendations to the disinterested directors committee and the full board with
respect to each proposal. Following further discussion, the compensation of the 
members of the special committee was established at $20,000 per month for the   
chairman and $10,000 per month for each of the other members. The special       
committee also was authorized to retain independent legal counsel and financial 
advisors. The special committee subsequently retained Kaplan, Strangis and      
Kaplan, U.S. Bancorp Piper Jaffray and Merrill Lynch as its legal and financial 
advisors.                                                                       

At the conclusion of the board of directors meeting, Mr. Jenko, at the  
direction of the board, informed Mr. Ostrander and the Vestar/Goldner Hawn      
investor group that the board had decided that their offer was financially      
inadequate and was concerned about the lack of a firm financing commitment for  
the senior subordinated debt required to consummate the proposed transaction. He
also informed them that the board had decided to provide the potential strategic
acquirer and its financial partner with a two week period of time to conduct due
diligence on the company and refine its proposal and that the board was         
requesting each group to provide it with their best proposal by the end of the  
day on November 27, 2000.                                                       

Mr. Jenko informed the potential strategic acquirer that the board would
permit its group and their representatives to conduct a due diligence review of 
Michael Foods, except for the company's businesses that compete with businesses 
of the potential strategic acquirer, in order that the group might submit a more
definitive, fully priced proposal by the end of the day on November 27, 2000.   
The potential strategic acquirer group and its representatives conducted        
substantial due diligence, including a number of management presentations on    
Michael Foods and its businesses, during the weeks of November 13 and           
November 20, 2000.                                                              

 On November 17, 2000 and November 22, 2000, the board, with Mr. Ostrander
and Mr. Michael recused, met telephonically and was updated on the process by   
the special committee and its legal counsel.                                    

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 During the weekend of November 25-26, 2000, Michael Foods and the special
committee were informed that the potential strategic acquirer and its financial 
partner had been unable to reach agreement on several aspects of their proposed 
joint venture arrangement and that the potential strategic acquirer was         
considering whether it wished to make a revised proposal by itself.             

    On November 27, 2000, the special committee received a revised proposal from
the Vestar/Goldner Hawn investor group that valued the company at $30.00 per    
share of Michael Foods common stock. The proposal continued to include a highly 
confident letter rather than a firm commitment for the $200 million in senior   
subordinated financing necessary to consummate the transaction. The financing   
commitments included with the revised Vestar proposal expired in accordance with
their terms if not accepted on or before December 7, 2000.                      

   On November 28, 2000, the potential strategic acquirer informed the special
committee that it would decide whether it was prepared to pursue independently  
an acquisition of Michael Foods by the next day. Later that day, the board, with
Mr. Ostrander and Mr. Michael recused, met telephonically and was informed of   
the revised Vestar/Goldner Hawn investor group proposal and the status of       
discussions with the potential strategic acquirer.                              

    On November 29, 2000, a senior executive of the potential strategic acquirer
informed Mr. Jenko, the special committee chairman, that senior management of   
the potential strategic acquirer had a continuing interest in pursuing the      
acquisition of Michael Foods, but that an additional two-week period would be   
required for the potential strategic acquirer to continue its due diligence and 
determine whether it was prepared to make a binding offer to acquire Michael    
Foods. During their discussion, Mr. Jenko was informed that the potential       
strategic acquirer had been advised by its outside and inside legal counsel that
they did not expect serious antitrust challenges to the contemplated            
transaction, notwithstanding the two companies' competing businesses. Mr. Jenko 
requested that the potential strategic acquirer provide the board with a revised
written expression of interest that included an indication of the upper end of  
its valuation range for the company based on its due diligence to date.         

Later in the day on November 29, 2000, the special committee received a 
letter from the potential strategic acquirer indicating that it continued to be 
interested in acquiring Michael Foods at $30.00 per share of Michael Foods      
common stock and that its valuation for the company could increase to up to     
$32.00 per share of Michael Foods common stock, depending upon the results of a 
further due diligence investigation. The letter included a request for an       
additional two-week period for due diligence.                                   

    On November 30, 2000, the special committee met with its financial and legal
advisors to discuss the two expressions of interest and formulate a             
recommendation to Michael Foods' board of directors. The special committee's    
financial advisors reviewed various matters for the special committee, including
the very poor conditions in the high yield financing market. The financial      
advisors also informed the special committee that in their view, based on their 
understanding of the investment parameters of private equity firms and          
experience in comparable transactions, it would be unlikely that the            
Vestar/Goldner Hawn group would be prepared to increase their offer above $30.00
per share of Michael Foods common stock. The special committee also discussed   
the strengths and weaknesses of each of the two expressions of interest,        
including without limitation, financing risk, antitrust risk, due diligence risk
and proposed pricing. After discussing a number of alternatives, including      
rejecting both proposals, the special committee decided to recommend to the     
board that it consider either providing the potential strategic purchaser with a
two week period to conduct additional due diligence in order to develop a more  
definitive proposal or providing the Vestar/Goldner Hawn investor group with a  
more limited period of time to revise its offer to include a higher price per   
share and fully committed financing.                                            

  Later on November 30, 2000, the board of directors, with Mr. Ostrander and
Mr. Michael recused, met with its financial advisors and legal counsel. The     
special committee reviewed for the board the revisions to the Vestar/Goldner    
Hawn investor group proposal and the revised preliminary expression of interest 
from the potential strategic acquirer. The board then discussed a number of     
matters with its                                                                

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financial advisors, including the current market conditions for high yield and  
senior credit financing and the advisors' view that the Vestar/Goldner Hawn     
investor group was unlikely to be prepared to increase its proposal to above    
$30.00 per share of Michael Foods common stock. After a thorough discussion of  
various alternatives, the board of directors unanimously decided to provide the 
potential strategic acquirer with a two-week period to conduct further due      
diligence in order to develop a more definitive proposal and, at the            
recommendation of Kaplan, Strangis and Kaplan, to engage special legal counsel  
to assist the special committee and the board of directors in evaluating the    
antitrust risk associated with a transaction with the potential strategic       
acquirer. The special committee recommended and the board concurred that the    
potential strategic acquirer should not be permitted access to confidential     
information regarding the company's business in product segments in which the   
two companies compete until special antitrust counsel had an opportunity to     
assess and advise the special committee on the antitrust risk associated with   
the proposed transaction.                                                       

After the board of directors meeting on November 30, 2000, Mr. Jenko    
informed the Vestar/Goldner Hawn investor group of the board's decision to      
continue to explore the proposal of the potential strategic acquirer over the   
next two weeks. Mr. Jenko informed the Vestar/Goldner Hawn investor group that  
its proposed $30.00 per share valuation and the lack of fully committed         
financing were significant factors in the board's decision not to proceed with  
exclusive negotiations with Vestar. Mr. Jenko was informed that Vestar would not
commit to extend its offer beyond December 7, 2000. Later that day, the special 
committee received a letter from the Vestar/Goldner Hawn investor group         
confirming that its offer would terminate at 5:00 p.m. on December 7, 2000.     

    The special committee retained the Washington D.C. office of the law firm of
Piper Marbury Rudnick & Wolfe LLP to provide it with advice with respect to an  
antitrust analysis of the possible acquisition of Michael Foods by the potential
strategic acquirer. Antitrust counsel in that office had previously provided    
advice to the company on related matters. From December 1 through December 7,   
2000, Michael Foods' antitrust counsel and outside antitrust counsel to the     
potential strategic acquirer collected and exchanged relevant data about the two
companies pursuant to the terms of a confidentiality agreement between the two  
law firms that barred disclosure of the data to the firms' respective clients.  
During the same period the potential strategic acquirer continued its due       
diligence of the company.                                                       

  On December 4, 2000, Michael Foods' board of directors, with Mr. Ostrander
and Mr. Michael recused, met telephonically and was updated by the special      
committee and its legal counsel on the due diligence process of both companies. 

  On December 8, 2000, the special committee met by telephone with its legal
counsel to hear and evaluate its antitrust counsel's analysis of the antitrust  
issues associated with a sale of the company to the potential strategic         
acquirer. After an extensive presentation by antitrust counsel, the special     
committee determined that the board of directors should have an opportunity to  
review the full presentation and conclusions of antitrust counsel. Later that   
day, the board of directors, with Mr. Ostrander and Mr. Michael recused, met    
telephonically and after a brief summary of the antitrust counsel's             
presentation, at the special committee's recommendation, decided to meet during 
the afternoon of December 11, 2000 for a full presentation and discussion of the
antitrust analysis of the proposed transaction.                                 

On December 10, 2000, a representative of Vestar informed Mr. Jenko that
Vestar anticipated making a revised proposal to the special committee on        
December 11, 2000.                                                              

 On December 11, 2000, the Vestar /Goldner Hawn investor group delivered a
revised proposal to the special committee to acquire Michael Foods for $30.00   
per share of Michael Foods common stock that included a commitment letter from  
Banc of America Securities LLC, Bank of America, N.A. and Banc of America Bridge
LLC with respect to both the senior secured credit facilities and the unsecured 
senior subordinated bridge notes. In the commitment letter, Banc of America     
Bridge LLC committed, subject to the terms and conditions contained in the      
commitment letter, to purchase $200 million in unsecured senior                 

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subordinated bridge notes required to complete the financing of the proposed    
acquisition in the event that Michael Foods cannot complete the private         
placement of unsecured senior subordinated notes.                               

    During the afternoon of December 11, 2000, the board of directors of Michael
Foods, with Mr. Ostrander and Mr. Michael recused, met in the offices of Kaplan,
Strangis and Kaplan with their legal counsel and financial advisors. Counsel    
from Piper Marbury Rudnick & Wolfe made an extensive presentation of an         
antitrust analysis of the possible acquisition of Michael Foods by the potential
strategic acquirer. He discussed with the board the general review process of   
the Federal Trade Commission in merger transactions, the various aspects of     
transactions that often lead to a higher level of scrutiny by the FTC and       
various solutions to concerns that could be raised by the FTC. After significant
discussion, the unanimous consensus of the board and its antitrust counsel was  
that there was a high probability that the proposed transaction would be        
carefully reviewed by the FTC and that the review process would extend over a   
number of months and would result in substantial expense to the company and     
greater uncertainty in the relationships of the company with its customers,     
suppliers, employees and shareholders; and that if the proposed transaction were
challenged by the FTC, it would significantly increase the risk of completing   
the merger and related transactions. The board determined that the possibility  
of a transaction with the potential strategic acquirer, even at up to $32.00 per
share, would be subject to an unacceptable risk that the transaction could not  
be consummated in a reasonable period of time at the negotiated price.          

  The board of directors then reviewed and discussed the Vestar/Goldner Hawn
investor group revised proposal with its financial and legal advisors. Legal    
counsel from Kaplan, Strangis and Kaplan reviewed the terms of the proposed     
merger agreement and the financing commitments as well as other legal issues    
relating to the proposed transaction. Representatives of U.S. Bancorp Piper     
Jaffray advised the board that, subject to internal procedures and review of a  
definitive merger agreement, it would be prepared to deliver an opinion that the
$30.00 per share of Michael Foods common stock to be received in the proposed   
transaction by Michael Foods' shareholders (other than shareholders that would  
be part of the Vestar/ Goldner Hawn investor group) was fair to such            
shareholders from a financial point of view. Representatives of both U.S.       
Bancorp Piper Jaffray and Merrill Lynch indicated that they did not believe that
the Vestar/Goldner Hawn investor group would be prepared to increase their      
proposed purchase price for the company and advised the board that, absent      
significant disruption in the financial and credit markets, there was a high    
degree of likelihood that the proposed transaction would be consummated. The    
special committee recommended to the board of directors that the special        
committee and its legal counsel proceed to negotiate the terms of an agreement  
with the Vestar/Goldner Hawn investor group, subject to final review by the     
special committee, disinterested directors committee and board. The board       
unanimously concurred with the recommendation of the special committee.         

On December 13, 2000, representatives of Kaplan, Strangis and Kaplan    
provided the Vestar/Goldner Hawn investor group and its legal counsel,          
Kirkland & Ellis, with detailed comments on the proposed form of merger         
agreement. Representatives of the two law firms, with the active participation  
of the special committee, proceeded to negotiate the terms of a definitive      
agreement and the Vestar/Goldner Hawn investor group and its advisors finalized 
their due diligence of regulatory and environmental matters. During these       
negotiations, among other things, the proposed purchase price was increased to  
$30.10 per share of Michael Foods common stock.                                 

During the same period, Mr. Ostrander and other members of company      
management participating in the investor group and representatives of Skadden   
Arps and Mr. Michael and other family members and affiliates and their legal    
counsel negotiated the terms of their participation in the transaction with     
Vestar. In connection with its proposal, the Vestar/Goldner Hawn investor group 
indicated that participation by company management and the Michael family and   
affiliates as continuing investors was a condition to its willingness to        
proceed. Vestar negotiated the terms and conditions of the continuing investors'
participation directly with such investors and neither the special committee nor
the board took part in those negotiations. The special committee and board      
viewed their role as acting on behalf of Michael Foods' shareholders who would  
not be continuing investors. The special committee and the board did, however,  

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review the proposed final terms of the continuing investors' participation to   
satisfy themselves that Vestar's condition was likely to be satisfied and that  
the arrangements would not limit or otherwise preclude the board from           
effectively exercising its fiduciary duties or contractual rights under the     
merger agreement.                                                               

   On December 15, 2000, Michael Foods' board of directors, with Mr. Ostrander
and Mr. Michael recused, met telephonically and was updated by the special      
committee, its legal counsel and its financial advisors on the status of        
negotiations with Vestar and its due diligence process. The special committee   
and its legal counsel reported that significant progress had been made in       
narrowing the issues of disagreement on the proposed form of merger agreement,  
although the drafting of precise terms remained to be completed.                

During the afternoon and evening of December 21, 2000, the special      
committee, together with the full Michael Foods board, met with their legal and 
financial advisors to again consider the transaction. Representatives of Kaplan,
Strangis and Kaplan reviewed with the special committee and the board their     
responsibilities and fiduciary obligations in connection with the proposed      
transaction. U.S. Bancorp Piper Jaffray delivered its oral and written opinion  
that, as of December 21, 2000, the consideration to be received in the merger by
Michael Foods' shareholders, other than the continuing investors, was fair to   
such shareholders from a financial point of view. Representatives of Kaplan,    
Strangis and Kaplan reviewed the proposed final terms of the merger agreement   
and various letter agreements to be delivered by the continuing shareholders as 
well as the process leading to the preparation of various disclosure schedules  
for the merger agreement. In discussing the proposal, legal counsel noted and   
the special committee and board took into account that while the proposed       
purchase price had increased by $1.60 per share from $28.50 to $30.10 per share 
of Michael Foods common stock, the termination fee had decreased from           
$25 million to $20 million or from approximately $1.36 per outstanding share to 
$1.09 per outstanding share and that the $20 million termination fee represented
approximately 2.6% of the proposed transaction value rather than the 3.4% of    
transaction value initially proposed. In addition, the special committee and the
full board relied upon, among other things, U.S. Bancorp Piper Jaffray's opinion
and the financial analyses performed by U.S. Bancorp Piper Jaffray and Merrill  
Lynch in considering the Vestar proposal. The special committee and the full    
board also reviewed the terms of the financing commitment letters for the equity
and debt financing with their financial and legal advisors and found them       
acceptable.                                                                     

 After discussion among the special committee members and other directors,
the special committee unanimously determined that the terms of the merger were  
fair to and in the best interests of Michael Foods' shareholders who would not  
be continuing investors and recommended that the disinterested directors        
committee and the Michael Foods board approve the merger agreement and the      
transactions contemplated thereby.                                              

After receiving the recommendation of the special committee, each of the
disinterested directors committee and the Michael Foods board, with and without 
Mr. Ostrander and Mr. Michael participating in the vote, unanimously determined 
that the terms of the merger agreement were fair to and in the best interests of
Michael Foods' shareholders who would not be continuing investors, approved the 
merger agreement and the transactions contemplated thereby and voted to submit  
the merger agreement to a vote of the shareholders of Michael Foods and to      
recommend that Michael Foods' shareholders approve and adopt the merger         
agreement. In addition, the disinterested directors committee approved the      
participation of Vestar, Marathon and the continuing investors in the           
transactions related to the merger.                                             

 Later that evening, the merger agreement and the various agreements among
Vestar, Marathon and the continuing investors were executed and Michael Foods   
and Vestar issued a news release announcing the execution of the merger         
agreement.                                                                      

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RECOMMENDATION OF THE SPECIAL COMMITTEE, DISINTERESTED DIRECTORS COMMITTEE AND  
BOARD OF DIRECTORS; REASONS FOR THE MERGER; FAIRNESS OF THE MERGER              

    Each of the special committee, the disinterested directors committee and the
full board of directors unanimously recommend that Michael Foods' shareholders  
approve and adopt the merger agreement.                                         

In recommending approval of the merger agreement to the disinterested   
directors committee and the full board of directors, the special committee      
consulted with its legal counsel and financial advisors and considered a number 
of factors which they believed supported its recommendation, including:         

- The historical results of operations, financial condition, assets,    
 liabilities, business strategy and prospects of Michael Foods and the
  nature of the industry in which Michael Foods competes. Based upon its
  consideration of the operations and prospects of Michael Foods and the
      nature of the industry, the special committee concluded that it might take
    a considerable period of time before the trading price of Michael Foods'
  shares would exceed and sustain the $30.10 per share offered, if ever.

  - The limited public float and low average daily trading volume of Michael
Foods common stock, the small number of market makers and investment
   banking firms preparing research reports with respect to Michael Foods,
 and the few comparable public companies against which investors could
      evaluate Michael Foods' performance, which the special committee concluded
    would be reasonably likely to adversely affect the price at which shares
 of Michael Foods common stock would trade for the foreseeable future.

- The challenges, risks and insufficient shareholder benefits associated
with attempting to build Michael Foods through acquisitions.        

   - The recommendation of Michael Foods' investment bankers in August 1999 to
      consider a sale of the company to a strategic or financial acquirer as the
most effective opportunity for enhancing shareholder value.         

    - The extensive auction process conducted in 1999 and 2000 during which over
 sixty potential acquirers, including competitors of Michael Foods and
      equity sponsors of leveraged buyouts, were contacted by U.S. Bancorp Piper
      Jaffray and Merrill Lynch to determine their interest in acquiring Michael
Foods.                                                              

- The fact that the auction process resulted in only six preliminary    
 indications of interest and did not result in any final proposals for
     alternative transactions, other than a proposal that the board considered
financially inadequate.                                             

- The determination of the special committee and the board, after       
    consultation with special antitrust counsel, that a transaction with the
   potential strategic acquirer who might have been prepared to offer more
    than $30.10 per share might lead to antitrust review which would involve
  considerable delay and expense and create significant and unacceptable
     risk that the transaction could not be consummated in a reasonable period
of time at the negotiated price.                                    

    - The potentially disruptive effect on the company's business of engaging in
      another auction process in response to Vestar's expression of interest and
the adverse effect such disruption would have on shareholder value. 

- The fact that, to date, no third party has come forward with an       
alternative transaction proposal.                                   

   - The opinion of U.S. Bancorp Piper Jaffray, dated December 21, 2000, that,
as of that date, the consideration to be received by Michael Foods' 
    shareholders, other than the continuing investors, in the merger is fair
      to such shareholders from a financial point of view. The special committee
     also considered U.S. Bancorp Piper Jaffray's presentation of its fairness
     opinion analyses to the special committee and the board. In its review of
the analyses performed by U.S. Bancorp Piper Jaffray, the           

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     special committee did not weigh each of the separate analyses prepared by
      U.S. Bancorp Piper Jaffray separately, but rather considered them taken as
a whole.                                                            

    - The relationship of the $30.10 per share cash consideration offered in the
      merger to the current market price and the market prices for Michael Foods
      common stock over the previous two years during which the weighted average
     trading price had been $23.08 per share and 84% of the trading volume had
been at prices below $25.00 per share.                              

 - That repurchases of Michael Foods' shares during the last two years had
      been at prices substantially below $30.10 per share and that Michael Foods
   had repurchased a substantial block of its shares during 2000 at $21.77
per share.                                                          

  - The advice of U.S. Bancorp Piper Jaffray and Merrill Lynch that separate
    sales of Michael Foods' individual businesses over an extended period of
    time could result in shareholders receiving between $26.96 per share and
$33.74 per share and the conclusion of the special committee that a 
piecemeal sale of individual business units would be subject to     
   significant and unacceptable execution risk and substantial transaction
expense.                                                            

    - The advice of U.S. Bancorp Piper Jaffray and Merrill Lynch that the $30.10
per share was probably at the high end of purchases prices that a   
financial buyer would pay.                                          

- The reputation and proven experience of Vestar and Goldner Hawn in    
completing similar transactions.                                    

- The arm's-length negotiations between the special committee and the   
    Vestar/Goldner Hawn investor group and their respective representatives,
including negotiations that resulted in:                            

  - an increase in the per share cash purchase price to be received by
Michael Foods' shareholders;                                  

      - Michael Foods having the right, under certain conditions, to engage in
  negotiations with, and supply information to, a person making an
unsolicited proposal for a competing acquisition transaction; 

   - Michael Foods having the right to terminate the merger agreement to
accept a superior proposal;                                   

    - a reduction in the termination fee sought by the Vestar/Goldner Hawn
       investor group in the event that the merger agreement terminated as a
result of a competing transaction; and                        

   - significant changes in the financing commitments that substantially
reduce the risk of consummation of the transaction.           

- The nature of the financing commitments received by the Vestar/Goldner
    Hawn investor group with respect to the merger, including the identities
  of the institutions providing such commitments and their experience in
consummating transactions such as the merger.                       

 - The fact that approval of the merger agreement requires the affirmative
    vote of a majority of outstanding Michael Foods' shares entitled to vote
   thereon and that, under Minnesota law, Michael Foods' shareholders have
 the right to exercise appraisal rights to receive the "fair value" of
their shares if they dissent from the merger.                       

The special committee also considered a variety of risks and other      
potentially negative factors concerning the merger. These factors included:     

  - Michael Foods' only recourse in the event of a wrongful termination or a
   material breach of the merger agreement is against M-Foods Holdings and
Protein Acquisition, companies without assets;                      

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- the obligation of Protein Acquisition to complete the merger is       
 conditioned on financing being made available to Protein Acquisition,
  which financing may not be available for reasons beyond the control of
Protein Acquisition or Michael Foods;                               

  - the cash consideration to be received by shareholders will be taxable to
them;                                                               

  - the conflicts of interest of some Michael Foods' officers, directors and
shareholders; and                                                   

  - following the merger, Michael Foods' shareholders (other than continuing
investors) will cease to have an interest in Michael Foods.         

The special committee believed that the ranges of implied equity values 
generated pursuant to the seven valuation methodologies used by U.S. Bancorp    
Piper Jaffray in connection with the rendering of its fairness opinion were more
reflective of the fair market value of Michael Foods common stock than the net  
book value and liquidation value of Michael Foods common stock. The special     
committee considered that net book value ($13.60 per share at September 30,     
2000) is indicative of historical cost and that the valuation methodologies used
by U.S. Bancorp Piper Jaffray in its fairness opinion analyses better           
incorporate the future expected performance and business prospects of Michael   
Foods. The special committee did not find it practicable to, and did not,       
appraise the assets of Michael Foods to determine a liquidation value for       
Michael Foods. The special committee considers Michael Foods as a viable going  
concern business and did not consider the liquidation value as a relevant       
valuation methodology.                                                          

 The foregoing discussion of the information and factors considered by the
special committee includes all of the material factors considered by the special
committee in reaching its conclusions and recommendations but is not meant to be
exhaustive. In view of the number and variety of factors considered in reaching 
its determination, the special committee did not find it practicable to, and did
not, quantify or otherwise assign relative weights to specific factors          
considered in reaching its conclusions and recommendations. In addition,        
individual members of the special committee may have given different weights to 
different factors.                                                              

  The Michael Foods board consists of ten directors, three of whom served on
the special committee and six of whom served on the disinterested directors     
committee. At the December 21, 2000 meeting of the Michael Foods board, the     
special committee, with its legal and financial advisors participating, reported
to the other members of the Michael Foods board on its review of the merger     
agreement and the related financing commitments and the factors taken into      
account by the special committee in reaching its determination that the merger  
was fair to and in the best interests of Michael Foods' shareholders.           
Accordingly, the same factors considered by the special committee were taken    
into account by the disinterested directors committee and by the Michael Foods  
board. In addition, both the disinterested directors committee and the Michael  
Foods board considered the conclusions and recommendations of the special       
committee and believe that these factors supported the determination of fairness
by the disinterested directors committee and Michael Foods' board. Furthermore, 
the disinterested directors committee and the Michael Foods board considered the
fact that the $30.10 per share cash consideration and the terms and conditions  
of the merger agreement were the result of arm's-length negotiations among the  
special committee and the Vestar/Goldner Hawn investor group and their          
respective advisors and the fact that the Michael Foods board of directors      
received a fairness opinion from U.S. Bancorp Piper Jaffray. The disinterested  
directors committee and Michael Foods' board of directors believes that these   
factors supported its fairness determination.                                   

In addition, the special committee believes that sufficient procedural  
safeguards were and are present to insure the fairness of the merger and to     
permit the special committee to represent effectively the interests of the      
shareholders (other than the continuing investors), including:                  

   - the special committee consisted of non-employee independent directors who
   acted to represent solely the interests of the shareholders, other than
the continuing investors;                                           

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 - the special committee retained and received advice from its independent
legal counsel, Kaplan, Strangis and Kaplan;                         

- the special committee was advised by U.S. Bancorp Piper Jaffray and   
Merrill Lynch and received the opinion of U.S. Bancorp Piper Jaffray
regarding the fairness from a financial point of view of the merger 
   consideration to be received by shareholders, other than the continuing
investors; and                                                      

- the availability of dissenters' rights under Minnesota law for Michael
Foods' shareholders who believe the terms of the merger are unfair. 

  Because the above safeguards were and are in place, the special committee,
the disinterested directors committee and the board of directors did not        
consider it necessary to require approval of the merger agreement and the merger
by at least a majority of the shareholders who are not continuing investors or  
to retain any additional unaffiliated representative to act on behalf of Michael
Foods' unaffiliated shareholders.                                               

OPINION OF FINANCIAL ADVISOR                                                    

The special committee of Michael Foods' board of directors retained U.S.
Bancorp Piper Jaffray to act as its co-financial advisor, and to render to the  
board of directors of Michael Foods an opinion as to the fairness, from a       
financial point of view, of the consideration to be received by Michael Foods'  
shareholders (other than the continuing investors) in the merger. Merrill Lynch 
also was retained as co-financial advisor at the same time pursuant to a        
separate engagement letter, which did not provide that Merrill Lynch would be   
rendering a fairness opinion.                                                   

At the meeting of the board of directors of Michael Foods held on       
December 21, 2000, U.S. Bancorp Piper Jaffray rendered to the board of directors
its oral opinion that, as of that date and based on and subject to the          
assumptions, factors and limitations presented in the opinion and described     
below, the $30.10 per share in cash to be received by the Michael Foods         
shareholders (other than the continuing investors) in the merger was fair, from 
a financial point of view, to those shareholders. The opinion of U.S. Bancorp   
Piper Jaffray was set forth in writing and dated December 21, 2000. The full    
text of U.S. Bancorp Piper Jaffray's written opinion is included in Annex B to  
this proxy statement. YOU ARE URGED TO READ THE ENTIRE OPINION CAREFULLY.       

The opinion of U.S. Bancorp Piper Jaffray to the board of directors of  
Michael Foods, as described above, was among many factors taken into            
consideration by the board of directors of Michael Foods in making its          
determination to approve the merger agreement. You also should consider the     
following when reading the discussion of the opinion of Michael Foods' financial
advisor in this proxy statement:                                                

   - U.S. Bancorp Piper Jaffray's written opinion, which was delivered for use
    and considered by the Michael Foods board of directors, is directed only
to the fairness, from a financial point of view, of the proposed    
   consideration to be received by Michael Foods' shareholders (other than
the continuing investors) in the merger;                            

    - U.S. Bancorp Piper Jaffray's written opinion does not address the value of
a share of Michael Foods common stock;                              

- U.S. Bancorp Piper Jaffray's written opinion does not address Michael 
 Foods' underlying business decision to participate in the merger; and

- U.S. Bancorp Piper Jaffray's written opinion does not constitute a    
   recommendation to any Michael Foods shareholder as to how a shareholder
should vote with respect to the merger or any related matter.       

In arriving at its opinion, U.S. Bancorp Piper Jaffray reviewed:        

- a copy of the final version of the merger agreement;                  

- certain historical and projected financial, operating and business    
information related to Michael Foods;                               

  - certain internal financial information of Michael Foods on a stand-alone
   basis prepared for financial planning purposes and furnished by Michael
Foods' management;                                                  

  - to the extent publicly available, financial terms of certain acquisition
      transactions involving companies operating in industries deemed similar to
those in which Michael Foods operates;                              

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- certain valuation and other financial information on selected public  
companies deemed comparable to Michael Foods;                       

- certain premiums paid in acquisition transactions;                    

    - certain publicly available financial and securities data for Michael Foods
and its common stock; and                                           

    - the results of the strategic alternatives review and potential transaction
   processes stemming from such review undertaken by Michael Foods in 1999
and early 2000.                                                     

In addition, U.S. Bancorp Piper Jaffray engaged in discussions with:    

  - members of Michael Foods' management concerning the financial condition,
current operating results and business outlook of Michael Foods on a
stand-alone basis and each division; and                            

   - members of the Vestar/Goldner Hawn investor group regarding their ability
to finance the aggregate merger price.                              

    In delivering its opinion of December 21, 2000 to the Michael Foods board of
directors, U.S. Bancorp Piper Jaffray prepared and delivered to the board       
written materials containing various analyses and other information material and
germane to the opinion. The following is a summary of those analyses. The       
summary includes information presented in tabular format. In order to understand
fully the financial analyses used by U.S. Bancorp Piper Jaffray, these tables   
must be read together with the text of each analysis summary. The tables alone  
do not constitute a complete summary of the analyses. The order in which the    
analyses are presented below should not be taken as any indication of the       
relative weight given to the analyses by U.S. Bancorp Piper Jaffray in the      
rendering of its opinion.                                                       

PROPOSED CONSIDERATION AND IMPLIED TRANSACTION MULTIPLES.  Based on the 
proposed $30.10 per share merger consideration to be paid for each share of     
Michael Foods common stock and the capitalization data provided by Michael      
Foods' management, U.S. Bancorp Piper Jaffray calculated the implied aggregate  
equity value of Michael Foods to be approximately $570.3 million, consisting of 
approximately $550.3 million in consideration payable to holders of common stock
and approximately $20.0 million in consideration payable to holders of options  
(representing the spread between the proposed merger consideration and the      
exercise price of such options) to purchase Michael Foods common stock. Based on
this implied aggregate equity value and the projected approximately             
$193 million of debt and the projected approximately $1.0 million of cash on    
Michael Foods' balance sheet as of December 31, 2000, U.S. Bancorp Piper Jaffray
then calculated the implied aggregate "enterprise value" or "company value"     
(equity value, plus debt, less cash) of Michael Foods in the proposed           
transaction to be approximately $762.3 million. Based on these implied aggregate
equity and enterprise values for Michael Foods and Michael Foods' projected     
revenue, EBITDA (earnings before interest, taxes, depreciation and              
amortization), operating income and net income for the twelve months ending     
December 31, 2000 ("LTM"), and on management's estimates for                    

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Michael Foods' net income for fiscal year 2001, U.S. Bancorp Piper Jaffray also 
calculated the following implied multiples for the proposed transaction:        

                                                                [Download Table]

                                                                 IMPLIED   
                                                              MICHAEL FOODS
                                                               TRANSACTION 
                                                              MULTIPLES (1)
                                                              -------------
                                                                           
Company Value/LTM Revenue                                         0.71x    
Company Value/LTM EBITDA                                           5.6x    
Company Value/LTM Operating Income                                 8.9x    
Price / Earnings Ratios:                                                   
Calendar 2000 Estimated                                           13.0x    
Calendar 2001 Estimated                                           11.1x    
Premium Paid (based on share price as of                                   
  December 20, 2000 of $26.50)                                    13.6%    

------------------------                                                        

   (1) Based on fully diluted shares outstanding and assuming $30.10 per share
in merger consideration.                                          

THE MARKET FOR MICHAEL FOODS COMMON STOCK.  U.S. Bancorp Piper Jaffray  
reviewed the stock trading history of Michael Foods common stock over the       
two-year period ended December 18, 2000. Among other things, U.S. Bancorp Piper 
Jaffray noted the following with respect to the trading of Michael Foods common 
stock:                                                                          

- The closing stock price on December 20, 2000 was $26.50.              

- Over the past 52 weeks, the stock had traded in a range from $19.13 to
$29.00.                                                             

 - Over the past two years, approximately 84% of the trading volume in the
stock had occurred at $25 or less.                                  

- Since announcing on January 21, 2000 that Michael Foods' review of    
     strategic alternatives had not resulted in any suitable alternatives, the
average stock price was $23.52.                                     

   COMPARABLE COMPANY ANALYSIS.  U.S. Bancorp Piper Jaffray compared financial
information and valuation ratios relating to Michael Foods to corresponding data
and ratios from the following publicly traded companies deemed comparable to    
Michael Foods for purposes of this analysis: American Italian Pasta Company,    
Cal-Maine Foods Inc., Dean Foods Company, Earthgrains Company, Pilgrim's Pride  
Corporation, Ralcorp Holdings Inc., Sanderson Farms Inc., Smithfield            
Foods Inc., Suiza Foods Corporation and Tyson Foods Inc. This group was selected
from food manufacturers with a focus on commodity or non-branded products that  
are heavily dependent on grain as a major raw material input and that had a     
market capitalization greater than $40 million.                                 

   Based on the comparable companies' share prices, U.S. Bancorp Piper Jaffray
derived various valuation multiples for the comparable companies calculated by  
taking the quotient of their respective valuation parameters, such as company   
value and equity value, and their associated operating statistics, such as their
last twelve months revenue, operating income, EBITDA, and net income. U.S.      
Bancorp Piper Jaffray then compared the various low, high and median comparable 
company multiples to the implied Michael Foods transaction multiples assuming   
$30.10 per share in merger consideration on a fully diluted basis.              

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This analysis produced the following valuation data:                    

                                                                [Download Table]

                                                        COMPARABLE COMPANY      
                                       IMPLIED              MULTIPLES           
                                     TRANSACTION  ------------------------------
                                      MULTIPLES     LOW        HIGH      MEDIAN 
                                     -----------  --------   --------   --------
                                                                                
Company Value/LTM Revenue                0.71x      0.3x       2.6x       0.6x  
Company Value/LTM EBITDA                  5.6x      3.8x      13.2x       6.7x  
Company Value/LTM Operating Income        8.9x      5.6x      14.2x      10.3x  
P/E Ratio (Calendar 2000 Estimated)      13.0x      5.5x      22.5x      11.9x  

 COMPARABLE TRANSACTION ANALYSIS.  U.S. Bancorp Piper Jaffray reviewed the
terms of certain recent merger and acquisition transactions reported in SEC     
filings, public company disclosures, press releases, industry and popular press 
reports, data bases and other sources. Among other factors, the transactions    
satisfied the following criteria:                                               

- transactions in which the target company operated in the food         
    manufacturing industry and, generally, produced commodity or non-branded
products that are heavily dependant on grain as a major raw material
input;                                                              

- transactions with an enterprise value of greater than $100 million;   

- transactions not in the nature of repurchases or spinoffs; and        

   - transactions in which the acquiring company purchased at least 50% of the
target company.                                                     

This search yielded 12 transactions deemed to be comparable acquisitions and to 
have sufficient data available for analysis.                                    

U.S. Bancorp Piper Jaffray derived various valuation multiples for the  
acquired companies in the comparable transactions calculated by taking the      
quotient of their respective valuation parameters, such as company value, and   
their associated operating data, such as operating income and EBITDA. U.S.      
Bancorp Piper Jaffray then compared the various low, high and median comparable 
transaction multiples to the implied Michael Foods transaction multiples        
assuming $30.10 per share in merger consideration on a fully diluted basis.     

U.S. Bancorp Piper Jaffray presented the following implied value and    
valuation multiple data based on the food industry merger and acquisition       
transactions:                                                                   

                                                                [Download Table]

                                                     FOOD INDUSTRY MERGER &    
                                                    ACQUISITION TRANSACTION    
                                      IMPLIED              MULTIPLES           
                                    TRANSACTION  ------------------------------
                                     MULTIPLES     LOW        HIGH      MEDIAN 
                                    -----------  --------   --------   --------
                                                                               
Company Value/LTM EBITDA                5.6x       4.9x      11.6x       8.5x  
Company Value/LTM Operating Income      8.9x       8.4x      32.6x      12.0x  

DISCOUNTED CASH FLOW ANALYSIS.  U.S. Bancorp Piper Jaffray performed a  
discounted cash flow analysis on Michael Foods in which it calculated the sum of
the present values of:                                                          

- the projected cash flows of Michael Foods using forecasts prepared by 
Michael Foods' management for internal planning purposes; and       

- the estimated terminal (or perpetual) value of Michael Foods for the  
period of time from the end of the projection period discussed above
forward. The terminal value was estimated by applying an appropriate
      company value to EBITDA multiple to Michael Foods' projected EBITDA in the
last year of the projection period.                                 

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In making these calculations, U.S. Bancorp Piper Jaffray applied a range of     
terminal value EBITDA multiples of 5.0x to 6.0x and a range of discount rates of
13.0% to 15.0%. These discount rates corresponded to Michael Foods' estimated   
weighted average cost of capital. After adjusting for Michael Foods' estimated  
net debt as of December 31, 2000, this analysis yielded the following implied   
per share equity values for Michael Foods common stock:                         

                                                                [Download Table]

TERMINAL           DISCOUNT RATE         
EBITDA     ------------------------------
MULTIPLE    13.0%      14.0%      15.0%  
--------   --------   --------   --------
                                         
 5.0x       $28.84     $27.38     $25.99 
 5.5x       $31.50     $29.92     $28.42 
 6.0x       $34.16     $32.46     $30.86 

PREMIUMS PAID ANALYSIS.  U.S. Bancorp Piper Jaffray analyzed the implied
premiums paid or proposed to be paid in selected public food company merger and 
acquisition transactions. All such premiums were calculated relative to various 
public market pre-announcement trading prices and involved acquisitions since   
January 1, 1993 and targets which had more than $25 million in enterprise value:

                                                                [Download Table]

                                             FOOD INDUSTRY ACQUISITION   
                                IMPLIED          GROUP PREMIUM DATA      
                              TRANSACTION  ------------------------------
                               PREMIUMS      LOW        HIGH      MEDIAN 
                              -----------  --------   --------   --------
                                                                         
Premium to stock price:                                                  
1 day prior to announcement       13.6%      6.3%      105.1%      25.2% 
1 week prior to announcement      11.5%      5.3%      116.2%      29.2% 
90 day average                    17.6%    Negative    250.0%      31.3% 
Average since 1/21/00 (1)         28.0%    Negative    281.8%      26.3% 

------------------------                                                        

(1) January 21, 2000 was the date on which Michael Foods publicly announced the 
cessation of its analysis of strategic alternatives.                    

  PRESENT VALUE OF FUTURE STOCK PRICE.  U.S. Bancorp Piper Jaffray performed
an analysis of the present value of the projected future price of Michael Foods 
common stock under various earnings and valuation multiple scenarios. In        
particular, U.S. Bancorp Piper Jaffray calculated estimated future Michael Foods
share prices by applying a range of price earnings multiples of 10.0x to 13.0x  
to the projected earnings per share of Michael Foods using assumptions prepared 
by Michael Foods' management. The calculated future stock price was discounted  
to December 31, 2000 using an 18% cost of equity capital. This analysis yielded 
the following implied per share equity values for Michael Foods common stock:   

                                                                [Download Table]

                PRESENT VALUE OF ESTIMATED FUTURE SHARE PRICE (1)  
               ----------------------------------------------------
P/E MULTIPLE     2001       2002       2003       2004       2005  
------------   --------   --------   --------   --------   --------
                                                                   
  10.0x         $23.73     $23.56     $22.82     $21.61     $19.76 
  11.0x         $26.10     $25.91     $25.11     $23.77     $21.73 
  12.0x         $28.47     $28.27     $27.39     $25.93     $23.71 
  13.0x         $30.85     $30.62     $29.67     $28.10     $25.68 

------------------------                                                        

(1) Based on 18% cost of equity capital and EPS estimates (per management's     
stand-alone projections) for the fiscal year corresponding to the column
headings.                                                               

   LEVERAGED BUYOUT ANALYSIS.  U.S. Bancorp Piper Jaffray prepared an analysis
as to the consideration a leveraged buyout purchaser might be willing to pay to 
acquire Michael Foods given the expected performance of Michael Foods, current  
capital markets financing constraints and estimated expected return parameters  
for the individual tiers of the post transaction capital structure. This        
analysis was based                                                              

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upon the projections prepared by Michael Foods' management. U.S. Bancorp Piper  
Jaffray assumed capital structures and financing rates consistent with the then 
current capital markets environment. Assuming total debt to EBITDA rates of     
4.0x, a senior debt to EBITDA rate of 3.0x, internal rates of return to equity  
investors of approximately 25% to 35% and an exit multiple of 6.0x EBITDA, the  
per share consideration that a leveraged buyout purchaser might be willing to   
pay for Michael Foods ranged from $25.64 per share to $28.96 per share.         

  BREAK UP VALUE ANALYSIS.  U.S. Bancorp Piper Jaffray performed an analysis
of the aggregate value of Michael Foods in a scenario where the four divisions  
of Michael Foods (Egg Products, Dairy Products, Refrigerated Distribution and   
Potato Products) were sold in separate transactions. The value of each division 
was calculated using four separate approaches: comparable company analysis,     
comparable transaction analysis, discounted cash flow analysis and a leveraged  
buyout analysis. For purposes of the discounted cash flow and leveraged buyout  
analyses, the underlying assumptions for each division were based on projections
prepared by Michael Foods' management. Based on these analyses, U.S. Bancorp    
Piper Jaffray derived a range of possible values that the divisions might be    
sold for in arm's-length transactions. The analysis assumed the assets of the   
three smaller divisions (Dairy Products, Refrigerated Distribution and Potato   
Products) were sold first and that the gains on each such sale were taxed at a  
41% corporate tax rate. Under the assumptions of this analysis, Michael Foods   
would then consist of only the Egg Products Division and the after tax proceeds 
from the sale of the other divisions. The stock of Michael Foods was then       
considered to be sold to an acquirer in a transaction that generated no         
corporate level tax. This analysis yielded implied per share equity values for  
Michael Foods common stock of $26.96 to $33.74.                                 

In reaching its conclusion as to the fairness, from a financial point of
view, of the consideration to be received by Michael Foods' shareholders (other 
than the continuing investors) in the merger, U.S. Bancorp Piper Jaffray did not
rely on any single analysis or factor described above, assign relative weights  
to the analyses or factors considered by it, or make any conclusion as to how   
the results of any given analysis, taken alone, supported its opinion. The      
preparation of an opinion, from a financial point of view, of the consideration 
to be received by shareholders in a merger is a complex process and not         
necessarily susceptible to partial analysis or summary description. U.S. Bancorp
Piper Jaffray believes that its analyses must be considered as a whole and that 
the selection of portions of its analyses and of the factors considered by it,  
without considering all of the factors and analyses, would create a misleading  
view of the processes underlying its opinion.                                   

    The analyses of U.S. Bancorp Piper Jaffray are not necessarily indicative of
actual values or future results, which may be significantly more or less        
favorable than suggested by the analyses. Analyses relating to the value of     
companies do not purport to be appraisals or valuations or necessarily reflect  
the prices at which businesses or securities may actually be sold. No company or
transaction used in any analysis for purposes of comparison is identical to     
Michael Foods or the merger. In addition, in performing its analyses, U.S.      
Bancorp Piper Jaffray made numerous assumptions with respect to industry        
performance, general business, economic, market and financial conditions and    
other matters, many of which are beyond the control of the parties to the merger
and U.S. Bancorp Piper Jaffray. Accordingly, an analysis of the results of the  
comparisons is not mathematical; rather, it involves complex considerations and 
judgments about differences in the companies to which Michael Foods was compared
and other factors that could affect the public trading value of Michael Foods'  
common shares. Because such analyses are inherently subject to uncertainty,     
being based upon numerous factors and events beyond the control of the parties  
to the merger and U.S. Bancorp Piper Jaffray, neither the parties nor U.S.      
Bancorp Piper Jaffray assume responsibility if future results are materially    
different from those forecast.                                                  

For purposes of its opinion, U.S. Bancorp Piper Jaffray relied upon and 
assumed the accuracy, completeness and fairness of the financial statements and 
other information provided to it by Michael Foods or otherwise made available to
U.S. Bancorp Piper Jaffray and did not assume responsibility for the independent
verification of that information. With respect to the financial statement data  
and other internal financial information (including the projected financial     
planning data) provided to U.S. Bancorp                                         

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Piper Jaffray in connection with its review of the financial aspects of the     
merger, U.S. Bancorp Piper Jaffray relied upon the assurances of the management 
of Michael Foods that the information was prepared on a reasonable basis, and,  
with respect to the financial planning data, reflected the best currently       
available estimates, and that management was not aware of any information or    
facts that would make the information provided to U.S. Bancorp Piper Jaffray    
incomplete or misleading.                                                       

    In rendering its opinion, U.S. Bancorp Piper Jaffray assumed that the merger
will be completed on the terms described in the merger agreement. Furthermore,  
in arriving at its opinion, U.S. Bancorp Piper Jaffray was not asked to perform,
did not perform, and was not furnished with, any appraisals or valuations of any
specific assets or liabilities of Michael Foods or any analysis of the impact of
the merger on the solvency, viability or financial condition of Michael Foods or
its ability to satisfy its debts as they become due. U.S. Bancorp Piper Jaffray 
was not requested to opine as to, and its opinion does not address, the basic   
business decision to proceed with or effect the merger or to compare the merger 
to, or to consider, alternative transactions that may have been available to    
Michael Foods. U.S. Bancorp Piper Jaffray analyzed Michael Foods as a going     
concern and accordingly expressed no opinion as to its liquidation value.       

   The opinion is based on information available to U.S. Bancorp Piper Jaffray
and the facts and circumstances as they existed and were subject to evaluation  
on the opinion date. Events occurring after that date could materially affect   
the assumptions used in preparing the opinion. U.S. Bancorp Piper Jaffray has   
not undertaken and is not obligated to affirm or revise its opinion or otherwise
comment on any events occurring after the date it was given.                    

 U.S. Bancorp Piper Jaffray, as a customary part of its investment banking
business, evaluates businesses and their securities in connection with mergers  
and acquisitions, underwritings and secondary distributions of securities,      
private placements and valuations for estate, corporate and other purposes. The 
board of directors of Michael Foods selected U.S. Bancorp Piper Jaffray because 
of its expertise, reputation, historical investment banking relationship and    
familiarity with Michael Foods and the food manufacturing and distributing      
industry in general. U.S. Bancorp Piper Jaffray maintains a market in the common
shares of Michael Foods and provides research coverage for Michael Foods. In    
addition, over the past 14 years, U.S. Bancorp Piper Jaffray has from time to   
time been compensated for providing investment banking services to Michael      
Foods. In the ordinary course of business, U.S. Bancorp Piper Jaffray and its   
affiliates may actively trade securities of Michael Foods for their own accounts
or the accounts of their customers and, accordingly, may at any time hold a long
or short position in those securities.                                          

Under the terms of an engagement letter dated December 20, 2000, Michael
Foods agreed to pay U.S. Bancorp Piper Jaffray the following:                   

    - $350,000 upon the delivery of U.S. Bancorp Piper Jaffray's written opinion
   dated December 21, 2000 (which has already been paid by Michael Foods);

    - a fee equal to 0.4125% of the aggregate purchase price paid in the merger,
  less 50% of the combined amount paid to U.S. Bancorp Piper Jaffray and
     Merrill Lynch upon delivery of the opinion, which fee will be paid at the
closing of the merger.                                              

Under the terms of an engagement letter dated December 20, 2000, Michael
Foods agreed to pay Merrill Lynch the following:                                

    - $150,000 upon the delivery of U.S. Bancorp Piper Jaffray's written opinion
   dated December 21, 2000 (which has already been paid by Michael Foods);

    - a fee equal to 0.4125% of the aggregate purchase price paid in the merger,
  less 50% of the combined amount paid to U.S. Bancorp Piper Jaffray and
     Merrill Lynch upon delivery of the opinion, which fee will be paid at the
closing of the merger.                                              

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  The engagement letters also provide that Michael Foods will reimburse U.S.
Bancorp Piper Jaffray and Merrill Lynch for their reasonable out-of-pocket      
expenses, including fees and disbursements of counsel, and will indemnify U.S.  
Bancorp Piper Jaffray, Merrill Lynch and related parties from and against       
certain liabilities, including liabilities under the federal securities laws,   
arising out of or in connection with the engagement of U.S. Bancorp Piper       
Jaffray and Merrill Lynch.                                                      

CERTAIN PROJECTIONS PREPARED BY MICHAEL FOODS' MANAGEMENT                       

 Management prepared certain projections in October 2000 of Michael Foods'
operating performance for the five-year period ending December 31, 2005 which   
were provided to Michael Foods' board of directors, the board's financial       
advisors and Vestar. Additionally, Vestar prepared a less detailed set of       
projections that were provided by Vestar to Bank of America, N.A., Banc of      
America Bridge LLC and Banc of America Securities LLC in connection with        
arranging financing for the transaction and to the financial advisors to Michael
Foods' board of directors in connection with the financial advisors' review of  
the proposed transaction. Michael Foods does not as a matter of course make     
public forecasts as to future operations and the projections set forth below are
included in this proxy statement only because such information was provided to  
Vestar, its prospective lenders and Michael Foods' board of directors' financial
advisors.                                                                       

PROJECTIONS OF THIS TYPE ARE BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE
INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC, INDUSTRY AND COMPETITIVE            
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY 
OF WHICH ARE BEYOND MICHAEL FOODS' CONTROL. ACCORDINGLY, THERE CAN BE NO        
ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS   
WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE PROJECTED. IN ADDITION,   
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW FOR PUBLIC DISCLOSURE OR          
COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE SEC OR THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS AND ARE        
INCLUDED IN THIS PROXY STATEMENT ONLY BECAUSE SUCH INFORMATION WAS FURNISHED TO 
VESTAR AND MICHAEL FOODS' BOARD OF DIRECTORS' FINANCIAL ADVISORS. THE INCLUSION 
OF THIS INFORMATION SHOULD NOT BE REGARDED AS AN INDICATION THAT ANYONE WHO     
RECEIVED THIS INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE OPERATING
RESULTS AND THIS INFORMATION SHOULD NOT BE RELIED UPON AS SUCH. THE PROJECTIONS 
ARE BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF MICHAEL   
FOODS WHICH, ALTHOUGH CONSIDERED REASONABLE BY MICHAEL FOODS' MANAGEMENT, MAY   
NOT BE REALIZED, AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES,
MANY OF WHICH ARE BEYOND THE CONTROL OF MANAGEMENT. NONE OF MICHAEL FOODS,      
VESTAR, MICHAEL FOODS' BOARD OF DIRECTORS, THE SPECIAL COMMITTEE OR ANY OTHER   
PERSON OR PARTY ASSUMES RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE      
FOLLOWING PROJECTIONS. IN ADDITION, THE PROJECTED FINANCIAL INFORMATION HAS NOT 
BEEN EXAMINED, COMPILED OR OTHERWISE HAD AGREED-UPON PROCEDURES APPLIED TO THEM 
BY GRANT THORNTON LLP AND, ACCORDINGLY, GRANT THORNTON LLP ASSUMES NO           
RESPONSIBILITY FOR SUCH PROJECTED FINANCIAL INFORMATION.                        

 In October 2000, as part of its normal annual budgeting process for 2001,
the management of Michael Foods prepared projections of Michael Foods financial 
performance for the period ending December 31, 2003. These projections were     
reviewed with the Michael Foods board of directors prior to the board's approval
of the 2001 operating budget in November 2000. At Vestar's request, Michael     
Foods' management extended the financial projections reviewed by Michael Foods' 
board of directors to cover the five-year period ending December 31, 2005 and   
provided these five-year projections to Vestar and its                          

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prospective lenders. These extended projections also were subsequently provided 
to the board of directors and its financial advisors. A summary of management's 
projections is as follows:                                                      

MANAGEMENT CASE 
MICHAEL FOODS, INC. 
CONSOLIDATED PROJECTED INCOME STATEMENT 
FOR THE YEARS ENDING DECEMBER 31, 
(000'S, EXCEPT PER SHARE AMOUNTS) 

                                                        [Enlarge/Download Table]

                              2000        2001        2002        2003        2004         2005    
                           ----------  ----------  ----------  ----------  ----------   ---------- 
                                                                                                   
Sales                      $1,076,030  $1,191,596  $1,286,030  $1,358,570  $1,415,780   $1,451,330 

Cost of Goods Sold            882,619     967,753   1,045,186   1,101,488   1,143,122    1,167,530 
                           ----------  ----------  ----------  ----------  ----------   ---------- 

  Gross Profit                193,411     223,843     240,844     257,082     272,658      283,800 

S G & A                       107,311     127,506     133,524     139,638     146,314      152,406 
                           ----------  ----------  ----------  ----------  ----------   ---------- 

  Operating Profit             86,100      96,337     107,320     117,444     126,344      131,394 

Interest Expense (Income)      13,211      10,935       7,400       3,000      (1,600)      (6,368)
                           ----------  ----------  ----------  ----------  ----------   ---------- 

                               72,889      85,402      99,920     114,444     127,944      137,762 

Income Taxes                   28,620      33,520      39,220      44,920      50,220       54,070 
                           ----------  ----------  ----------  ----------  ----------   ---------- 

  Net Earnings             $   44,269  $   51,882  $   60,700  $   69,524  $   77,724   $   83,692 
                           ==========  ==========  ==========  ==========  ==========   ========== 

Net Earnings Per Share:                                                                            

    Basic                  $     2.34  $     2.84  $     3.32  $     3.80  $     4.25   $     4.58 

    Diluted                $     2.31  $     2.80  $     3.28  $     3.75  $     4.19   $     4.52 

EBITDA                     $  135,617  $  148,896  $  162,150  $  172,974  $  181,874   $  185,624 

  The following are the material assumptions relating to the Management Case
projections:                                                                    

1.  Assumed annual sales growth of 3% to 11% for Egg Products Division; 2% to 6%
for the Refrigerated Distribution Division; 3% to 13% for the Potato    
 Products Division; and 3% to 15% for the Dairy Products Division. Assumed
annual sales growth each year on a consolidated basis was estimated at  
between 3% and 11%.                                                     

   Growth is driven by new products and by the assumed conversion of customers
to higher value-added products. It also was assumed that the majority of
this growth could be accommodated from existing plant capacity.         

2.  Assumed operating margin each year of 10% to 12% at the Egg Products        
   Division; 5% to 7% at the Refrigerated Distribution Division; 11% to 14% at
  the Potato Products Division; and 2% to 6% at the Dairy Products Division.
  Estimated operating margin on a consolidated basis was assumed to be 8% to
9% each year.                                                           

The operating margins are assumed to be favorably impacted by improved  
   operating efficiencies and overhead absorption as a result of the increased
sales, synergy cost savings initiatives and benefits from the newly     
 implemented ERP software project are partially offset by increasing labor
costs and inflation.                                                    

3.  Selling, general and administrative expenses were estimated to increase at a
rate of 4% to 19% annually. New selling and marketing activities are    
expected to be required to support the sales growth objectives. In 2000,
    Michael Foods' effective tax rate was estimated to be 39.25% for the periods
2000 through 2005. In 2000, Michael Foods repurchased approximately two 
    million shares of its common stock; therefore, the estimate of fully-diluted
shares outstanding for the periods presented was 18.5 million. Estimated
EBITDA increases annually from 2% to 9%.                                

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  In October 2000, Vestar prepared a set of financial projections of Michael
Foods' financial performance for the five-year period ending December 31, 2005  
for its prospective lenders. Vestar's projections were less detailed than       
management's projections. The Vestar projections were subsequently made         
available to Michael Foods' board of directors' financial advisors. U.S. Bancorp
Piper Jaffray did not rely on the Vestar projections in providing its fairness  
opinion. A summary of those projections is as follows:                          

VESTAR CASE 
Michael Foods, Inc. 
Projected Consolidated Income Statement Information 
For the Years Ending December 31, 
(000's) 

                                                        [Enlarge/Download Table]

                                  2000        2001        2002        2003        2004        2005   
                               ----------  ----------  ----------  ----------  ----------  ----------
                                                                                                     
Sales......................... $1,078,600  $1,178,100  $1,222,900  $1,269,600  $1,318,100  $1,368,600
Operating Profit (EBIT).......     84,900      94,900     103,900     111,500     119,500     125,800
EBITDA........................ $  134,800  $  145,500  $  154,500  $  162,200  $  170,100  $  176,400

The following are the material assumptions relating to the Vestar Case  
projections:                                                                    

1.  Assumed annual sales growth of 3% to 10% for Egg Products Division; 5% to 6%
for the Refrigerated Distribution Division; 5% to 11% for the Potato    
Products Division; and 5% to 9% for the Dairy Products Division. Assumed
    annual sales growth each year on a consolidated basis was estimated at 9% in
2001 and was then held flat at 4% for the subsequent years.             

2.  Assumed operating margin each year of 10% to 12% at the Egg Products        
 Division; 5% at the Refrigerated Distribution Division; 11% to 13% at the
Potato Products Division; and 5% to 6% at the Dairy Products Division.  
  Estimated operating margin on a consolidated basis was assumed to be 8% to
9% each year.                                                           

3.  Estimated EBITDA increases annually from 4% to 8%.                          

POSITION OF PARTICIPATING AFFILIATES AS TO THE FAIRNESS OF THE MERGER           

    For purposes of the discussion under the headings "Position of Participating
Affiliates as to the Fairness of the Merger" and "Purposes, Reasons and Plans," 
the participating Michael Foods affiliates are M-Foods Investors, M-Foods       
Holdings, Protein Acquisition, Vestar Capital Partners IV, L.P., Vestar         
Associates IV, L.P., Vestar Associates Corporation IV, Marathon Fund Limited    
Partnership IV, Miltiades LLC, and the following shareholders who are rolling   
over a portion of their equity position in Michael Foods into equity in M-Foods 
Investors: Gregg A. Ostrander, John D. Reedy, Bill L. Goucher, James D.         
Clarkson, Bradley L. Cook, Max Hoffmann, James Mohr, Harold D. Sprinkle and the 
Michael family continuing investors.                                            

   By virtue of their potential status as a "group" for purposes of Rule 13d-5
of the Exchange Act, each of the participating Michael Foods affiliates may be  
deemed to beneficially own approximately 21.8% of Michael Foods common stock    
and, as a result, may be deemed to be "affiliates" of Michael Foods. Rule 13e-3 
of the Exchange Act governs "going-private" transactions by certain issuers and 
their affiliates. Accordingly, in compliance with Rule 13e-3, the participating 
Michael Foods affiliates are required to consider the fairness of the merger to 
Michael Foods' unaffiliated shareholders.                                       

Each of the participating Michael Foods affiliates has considered the   
factors examined by the special committee, the disinterested directors committee
and the board of directors described in detail above. In particular, the        
participating Michael Foods affiliates considered the following factors:        

    - A special committee of independent directors and, as required by Minnesota
 law, a committee of all disinterested directors, was established. The
special committee retained its own financial and legal              

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    advisors and conducted a vigorous arm's-length process of evaluation and
      negotiation of the merger. Arm's-length negotiations were considered to be
     an important element of a fair bargaining process and the fact that there
    were effective arm's-length negotiations in this case indicated that the
process leading to the merger was fair.                             

- The special committee and the disinterested directors committee       
     unanimously recommended to the board of directors that the merger and the
merger agreement be approved.                                       

  - The special committee, the disinterested directors committee and Michael
    Foods' board of directors have determined that the merger and the merger
     agreement are advisable and in the best interest of Michael Foods and its
shareholders who are not continuing investors and recommend that the
  shareholders approve and adopt the merger agreement. In light of their
   fiduciary duties to the shareholders of Michael Foods and their careful
consideration of the proposed transaction, the fact that the special
     committee, the disinterested directors committee and Michael Foods' board
    of directors reached these conclusions indicated that the merger and the
   consideration offered in the merger are fair to shareholders of Michael
Foods that are not continuing investors.                            

- Michael Foods' shareholders, other than the continuing investors, who 
  object to the merger will obtain "fair value" for their shares if they
exercise and perfect their dissenters' rights under Minnesota law.  

  - The board of directors had, within the last year, completed an extensive
 auction process pursuant to which over sixty potential acquirors were
      contacted to determine their interest, if any, in acquiring Michael Foods.
      The fact that third parties that were likely to have been willing and able
to propose a competing transaction were given an opportunity in that
 process to do so indicated that the process leading to the merger was
fair.                                                               

- The historical results of operations, financial condition, assets,    
 liabilities, business strategy and prospects of Michael Foods and the
nature of the industry in which Michael Foods competes.             

    - The relationship of the $30.10 per share cash consideration offered in the
      merger to the current market price and the market prices for Michael Foods
      common stock over the previous two years during which the weighted average
     trading price had been $23.08 per share and 84% of the trading volume had
been at prices below $25.00 per share.                              

 - That repurchases of Michael Foods' shares during the last two years had
      been at prices substantially below $30.10 per share and that Michael Foods
   had repurchased a substantial block of its shares during 2000 at $21.77
per share.                                                          

   - The $30.10 represents an amount in excess of the net book value per share
of $13.60 as of September 30, 2000.                                 

- During the last two years, other than an expression of interest by a  
 potential strategic acquirer that the special committee and the board
    determined to not pursue and a proposal from another potential strategic
   acquirer that would have nominally valued Michael Foods common stock at
      less than $28.00 per share, Michael Foods has not received any firm offers
     relating to a merger or consolidation, sale or other transfer of all or a
     substantial part of its assets or a purchase of its securities that would
enable the holder to exercise control of Michael Foods.             

- Notwithstanding that the U.S. Bancorp Piper Jaffray opinion, dated    
     December 21, 2000, was provided solely for the information and assistance
of the Michael Foods board and that the participating Michael Foods 
  affiliates are not entitled to rely on such opinion, the fact that the
   Michael Foods board received an opinion from U.S. Bancorp Piper Jaffray
 that the consideration to be received by Michael Foods' shareholders,
other than the continuing investors, in the merger is fair to such  
shareholders from a financial point of view.                        

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In consideration of the fairness of the merger to Michael Foods'        
unaffiliated shareholders, the participating Michael Foods affiliates did not   
find it practicable to, and did not, appraise the assets of Michael Foods to    
determine a liquidation value for Michael Foods. The participating Michael Foods
affiliates consider Michael Foods as a viable going concern business and did not
consider the liquidation value as a relevant valuation methodology.             

  Based on these factors, each of the participating Michael Foods affiliates
believes that the merger, the merger agreement and the transactions contemplated
therein are fair to Michael Foods' unaffiliated shareholders. None of the       
participating Michael Foods affiliates believes it is possible to assign        
specific relative weights to the foregoing factors in reaching its opinion as to
the fairness of the merger, the merger agreement and the transactions           
contemplated therein.                                                           

Many of the participating Michael Foods affiliates are directors and    
executive officers of Michael Foods and have interests in the merger transaction
not shared by other shareholders of Michael Foods. These interests are described
below under the heading "Interests of Certain Persons in the Merger." Each of   
the participating Michael Foods affiliates intends to vote in favor of the      
approval and adoption of the merger agreement at the special shareholders       
meeting. None of the participating Michael Foods affiliates makes any           
recommendation as to how any shareholder of Michael Foods should vote on the    
merger agreement.                                                               

PURPOSES, REASONS AND PLANS                                                     

   PURPOSES.  The purpose of the merger is for M-Foods Holdings to acquire, in
accordance with Minnesota law, all of the common stock of Michael Foods issued  
and outstanding at the closing of the merger.                                   

 Vestar and Marathon believe that Michael Foods' future business prospects
can be improved through operating as a privately held company as well as        
increasing management ownership.                                                

REASONS OF THE PARTICIPATING MICHAEL FOODS AFFILIATES.  Each of the     
participating Michael Foods affiliates believes that it is in Michael Foods'    
best interest to operate as a privately held entity. Despite Michael Foods being
a market leader with what the participating Michael Foods affiliates believe to 
be an excellent management team, Michael Foods' historical stock prices were at 
levels below what the participating Michael Foods affiliates believe to be full 
value. Each of the participating Michael Foods affiliates believes that this    
trend has prevented shareholders from realizing appropriate value for their     
interests in Michael Foods. As a privately held entity, Michael Foods will have 
the flexibility to focus on continuing improvements to its business without the 
constraints and distractions caused by the public equity market's present       
disfavor. In addition, as an entity whose common stock is not publicly traded,  
Michael Foods will be able to make decisions that may negatively affect         
quarterly earnings but that may, in the long-run, increase the value of Michael 
Foods' assets or earnings. In other words, in a public equity market setting, it
is often difficult for a company to make decisions that could negatively affect 
earnings in the short-term when the result of those decisions is often a        
reduction in the per share price of the publicly traded equity securities of    
such company.                                                                   

 In addition, after the merger, Michael Foods will no longer be subject to
the reporting requirements of the Exchange Act with respect to its equity       
securities which will allow Michael Foods to eliminate the time devoted by its  
management and certain other employees to matters relating exclusively to having
equity securities publicly traded.                                              

 These assessments are based upon publicly available information regarding
Michael Foods and the participating Michael Foods affiliates' due diligence,    
investigation or knowledge of Michael Foods and the experience of the           
participating Michael Foods affiliates in investing in or managing public       
companies generally. While the participating Michael Foods affiliates believe   
that there will be significant opportunities associated with their investment in
Michael Foods, and that the value of such an equity investment                  

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could be considerably greater than the original cost thereof, they realize that 
there also are substantial and significant risks that such opportunities may not
ever be fully realized.                                                         

   Each of the participating Michael Foods affiliates believes that the merger
represents an opportunity for Michael Foods' shareholders, as well as the       
continuing investors, to receive full value for their shares while also allowing
the continuing investors to maintain at least a portion of their investment in  
Michael Foods.                                                                  

PLANS FOR MICHAEL FOODS.  It is expected that, following the merger, the
operations and business of Michael Foods will be conducted substantially as they
are currently conducted. None of Michael Foods or any participating Michael     
Foods affiliates has any present plans or proposals that relate to or would     
result in an extraordinary corporate transaction involving Michael Foods'       
corporate structure, business or management, such as a merger, reorganization,  
liquidation, relocation of any operations or sale or transfer of a material     
amount of assets. However, Michael Foods and the participating Michael Foods    
affiliates will continue to evaluate Michael Foods' business and operations     
after the merger from time to time, and may propose or develop new plans and    
proposals which they consider to be in the best interests of Michael Foods and  
its shareholders, including the disposition or acquisition of material assets,  
alliances, joint ventures and other forms of cooperation with third parties or  
other extraordinary transactions.                                               

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

In considering the recommendations of the special committee, of the     
disinterested director committee and of the board of directors with respect to  
the merger, the shareholders of Michael Foods should be aware that certain      
officers and directors of Michael Foods have interests in the merger that are   
different from the interests of the shareholders of Michael Foods in general. As
discussed above, two members of Michael Foods' board of directors, one of whom  
is Michael Foods' chief executive officer and the other of whom is affiliated   
with certain of the continuing investors, were not members of the special       
committee or the disinterested director committee, and the members of Michael   
Foods' board of directors were aware of such directors' interests in the        
proposed transactions when deciding to approve such transactions, as were the   
special committee and the disinterested director committee when deciding to     
recommend such approval. See "SPECIAL FACTORS--Background of the Merger" and    
"--Recommendation of the Special Committee, Disinterested Directors Committee   
and Board of Directors; Reasons for the Merger; Fairness of the Merger." These  
interests include those described below.                                        

CONTINUING INVESTORS' INVESTMENT IN MICHAEL FOODS                       

 As more fully described in this section, "Interests of Certain Persons in
the Merger," in connection with the merger, the continuing investors will       
exchange the common stock value and option equity value of Michael Foods in the 
amounts indicated in the chart below for cash, equity interests in M-Foods      
Investors                                                                       

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and, in the case of Michael Foods' senior management, deferred compensation     
arrangements with M-Foods Holdings:                                             

                                                        [Enlarge/Download Table]

                                         TOTAL COMMON                                    
                                          STOCK AND      COMMON STOCK AND     TOTAL CASH 
NAME                                     OPTION VALUE  OPTION VALUE ROLLOVER   PROCEEDS  
----                                     ------------  ---------------------  -----------
                                                                                         
Michael family continuing investors..... $ 91,744,890       $38,377,500       $53,367,390
Gregg A. Ostrander......................    5,549,458         4,200,000         1,349,458
John D. Reedy...........................    2,280,576         1,500,000           780,576
Bill L. Goucher.........................    2,212,289         1,500,000           712,289
James D. Clarkson.......................    1,452,162         1,200,000           252,162
Bradley L. Cook.........................      654,132           400,000           254,132
Max Hoffmann............................      811,080           400,000           411,080
Harold D. Sprinkle......................      429,587           400,000            29,587
James Mohr..............................      603,658           400,000           203,658
                                         ------------       -----------       -----------
TOTAL CONTINUING INVESTOR ROLLOVER...... $105,737,832       $48,377,500       $57,360,332

LETTER AGREEMENTS                                                       

Certain senior management and certain shareholders associated with a    
director of Michael Foods, each of whom is identified below, owning as of       
January 29, 2001 approximately 19.1% of the outstanding shares of Michael Foods 
common stock (approximately 23.6% after giving effect to the exercise of their  
options to purchase shares of Michael Foods common stock that have exercise     
prices below $30.10 per share), have entered into letter agreements with M-Foods
Investors as described below.                                                   

  - Gregg A. Ostrander, John D. Reedy, Bill L. Goucher and James D. Clarkson
     have each agreed (1) to vote all of his shares in favor of the merger and
     against any acquisition or any amendment to the articles of incorporation
    or by-laws of Michael Foods designed to frustrate the merger, (2) not to
  dispose of or encumber any of his shares or options to purchase shares
   before the consummation of the merger, exercise any options, enter into
      any voting agreement with respect to his shares or to take any action that
     would restrict his ability to perform any and all actions contemplated by
   the merger agreement, (3) to grant an irrevocable proxy coupled with an
interest to M-Foods Investors, and to appoint M-Foods Investors as  
 attorney-in-fact, an act which would supersede all previous grants of
      proxy and (4) to waive any appraisal or dissenters' rights with respect to
the merger he may have under applicable law.                        

    Each of these executives also has agreed to enter into (1) the amended and
    restated limited liability company agreement of M-Foods Investors, (2) the
securityholders agreement, (3) a management stock purchase and unit   
subscription agreement, (4) an employment agreement, (5) certain stock
  option arrangements with M-Foods Holdings and (6) an option cancellation
agreement.                                                            

   Because certain of Mr. Reedy's options may expire prior to the closing of
     the merger, M-Foods Investors and Mr. Reedy have entered into a side letter
   whereby M-Foods Investors agreed that in the event Michael Foods does not
 extend the expiration date of those options, Mr. Reedy may exercise his
options despite the prohibition in his letter agreement.              

    - Bradley L. Cook, Harold D. Sprinkle, James Mohr and Max Hoffmann have each
    agreed (1) not to dispose of or encumber any of his shares or options to
purchase shares before the consummation of the merger, exercise any 
    options or to take any action that would restrict his ability to perform
     any and all actions contemplated by his form of management stock purchase
and unit subscription agreement and (2) to waive any appraisal or   
      dissenters' rights with respect to the merger he may have under applicable
      law. In addition, Mr. Hoffmann has agreed (1) to vote all of his shares in
   favor of the merger and against any acquisition or any amendment to the
articles of incorporation or by-laws of Michael Foods designed to   
frustrate the merger, (2) not to enter into any voting              

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 agreement with respect to his shares or to take any action that would
   restrict his ability to perform any and all actions contemplated by the
  merger agreement and (3) to grant an irrevocable proxy coupled with an
interest to M-Foods Investors, and to appoint M-Foods Investors as  
 attorney-in-fact, an act which would supersede all previous grants of
proxy.                                                              

    Each of these executives also has agreed to enter into (1) the amended and
    restated limited liability company agreement of M-Foods Investors, (2) the
securityholders agreement, (3) a management stock purchase and unit   
subscription agreement, (4) a severance and deferred compensation     
    agreement, (5) certain stock option arrangements with M-Foods Holdings and
(6) an option cancellation agreement.                                 

- Jeffrey M. Shapiro and Norman A. Rodriguez, executives who are not    
   continuing investors, have each agreed (1) to vote all of his shares in
   favor of the merger and against any acquisition or any amendment to the
articles of incorporation or by-laws of Michael Foods designed to   
frustrate the merger, (2) not to take any action with respect to his
    shares and options to purchase shares that would restrict his ability to
     perform any and all actions contemplated by the merger agreement or enter
 into any voting agreement with respect to his shares, (3) to grant an
   irrevocable proxy coupled with an interest to M-Foods Investors, and to
appoint M-Foods Investors as attorney-in-fact, an act which would   
    supersede all previous grants of proxy and (4) to waive any appraisal or
      dissenters' rights with respect to the merger he may have under applicable
law.                                                                

     Messrs. Shapiro and Rodriguez also have each agreed to enter into an option
cancellation agreement.                                               

- The letter agreement of each of Messrs. Ostrander, Reedy, Goucher,    
      Clarkson, Cook, Hoffmann, Sprinkle, Mohr, Shapiro and Rodriguez terminates
 upon the earlier of (1) a termination of the merger agreement, (2) an
    amendment to the merger agreement which materially and adversely affects
his economic interest and was not approved by Mr. Ostrander or      
(3) July 31, 2001.                                                  

- If, pursuant to the terms of the merger agreement, M-Foods Holdings   
   receives an expense payment, see "THE MERGER AGREEMENT--Termination Fee
     and Expenses," M-Foods Investors will cause M-Foods Holdings to reimburse
  Messrs. Ostrander, Reedy, Goucher, Clarkson, Cook, Hoffmann, Sprinkle,
   Mohr, Shapiro and Rodriguez for the legal fees and expenses of Skadden,
    Arps, Slate, Meagher & Flom they incurred in connection with negotiation
     of their letter agreements and the transactions contemplated thereby. The
  reimbursement is limited to the same proportion that M-Foods Holdings'
   fees and expenses are reimbursed by the expense payment, unless M-Foods
     Holdings receives the termination fee, in which case all of the described
  legal fees will be reimbursed. Upon the closing of the merger, M-Foods
 Investors will cause M-Foods Holdings to reimburse Messrs. Ostrander,
 Reedy, Goucher, Clarkson, Cook, Hoffmann, Sprinkle, Mohr, Shapiro and
Rodriguez for all legal fees and expenses of Skadden, Arps, Slate,  
    Meagher & Flom they incurred in connection with the negotiation of their
letter agreements and the transactions contemplated thereby.        

- The Michael family continuing investors and ASTA Enterprises Limited  
      Partnership have each agreed (1) to vote all of its shares in favor of the
  merger and against any acquisition or any amendment to the articles of
incorporation or by-laws of Michael Foods designed to frustrate the 
     merger, (2) not to dispose of or encumber any of its shares or options to
 purchase shares before the consummation of the merger, enter into any
  voting agreement with respect to its shares or to take any action that
     would restrict its ability to perform any and all actions contemplated by
   the merger agreement, (3) to grant an irrevocable proxy coupled with an
interest to M-Foods Investors, and to appoint M-Foods Investors as  
 attorney-in-fact, an act which would supersede all previous grants of
   proxy and (4) waive any appraisal or dissenters' rights with respect to
the merger it may have under applicable law.                        

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The Michael family continuing investors also have agreed to enter into
     (1) the amended and restated limited liability company agreement of M-Foods
     Investors, (2) the securityholders agreement and (3) the stock purchase and
unit subscription agreement.                                          

ASTA Enterprises Limited Partnership also has agreed to enter into the
stock purchase agreement.                                             

    The letter agreement of each of these entities terminates upon the earlier
of (1) a termination of the merger agreement or (2) July 31, 2001.    

- Jeffrey J. Michael, a director of Michael Foods, as well as each of   
  twenty-one other shareholders associated with Jeffrey J. Michael, each
 listed below under "Interests of Certain Persons in the Merger--Stock
     Purchase Agreement," have agreed (1) to waive any dissenters' rights with
      respect to the merger that he, she or it may have under applicable law and
  (2) to enter into the stock purchase agreement with M-Foods Investors.

   The letter agreement of each of these individuals and entities terminates
upon the earlier of (1) a termination of the merger agreement or      
(2) July 31, 2001.                                                    

LIMITED LIABILITY COMPANY AGREEMENT                                     

The amended and restated limited liability company agreement of M-Foods 
Investors, which will amend and restate M-Foods Investors' current limited      
liability company agreement, will authorize M-Foods Investors to issue Class A  
Units, Class B Units and Class C Units. The Class A Units, Class B Units and    
Class C Units will have identical rights and preferences, except as to certain  
distributions as described below. M-Foods Investors also will have the authority
to create and issue preferred units, with the terms and provisions more fully   
described in the management stock purchase and unit subscription agreements, in 
connection with certain repurchases by M-Foods Investors of Class B Units and   
Class C Units held by former executives of Michael Foods and its subsidiaries.  
The allocation of Class A Units, Class B Units and Class C Units is detailed    
below under "--Post Merger Capitalization of M-Foods Investors, M-Foods Holdings
and Michael Foods."                                                             

Distributions of property of M-Foods Investors shall be made in the     
following order:                                                                

- First, holders of Class A Units, Class B Units and Class C Units will 
receive a return of their invested capital.                         

- Second, the holders of the Class A Units will receive an 8% cumulative
preferred return on their invested capital.                         

- Thereafter, holders of the Class A Units and Class B Units, on the one
 hand, and the holders of the Class C Units on the other, will receive
     certain percentages of all remaining distributions, based on satisfaction
of certain minimum internal rate of return or multiple of investment
hurdles.                                                            

A management committee will have the exclusive authority to manage and  
control the business and affairs of M-Foods Investors. The management           
committee's composition will be determined in accordance with the provisions of 
the securityholders agreement described below.                                  

SECURITYHOLDERS AGREEMENT                                               

Pursuant to the securityholders agreement, the units (or common stock   
following a change in corporate form) of M-Foods Investors beneficially owned by
the executives and any other employees of M-Foods Investors and its subsidiaries
who become beneficial owners of securities of M-Foods Investors, Marathon and   
the Michael family continuing investors are subject to certain restrictions on  
transfer as well as the other provisions described below.                       

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 The securityholders agreement provides that Vestar, Marathon, the Michael
family continuing investors, the management continuing investors and all other  
parties to the agreement will vote all of their units to elect and continue in  
office management committees or boards of directors of M-Foods Investors and    
each subsidiary of M-Foods Investors, other than subsidiaries of Michael Foods, 
consisting of up to nine members or directors composed of:                      

- five (5) persons designated by Vestar;                                

- one (1) person designated by Marathon;                                

- one (1) person designated by the Michael family continuing investors; 

- the chief executive officer of Michael Foods, which will be           
Mr. Ostrander; and                                                  

 - one (1) independent person designated by the chief executive officer of
Michael Foods.                                                      

    The securityholders agreement also provides (1) Marathon, the Michael family
continuing investors and the management investors with customary "tag-along"    
rights with respect to transfers of securities of M-Foods Investors beneficially
owned by Vestar, its partners or their transferees and (2) Vestar with          
"drag-along" rights with respect to M-Foods Investors securities owned by       
Marathon, the Michael family continuing investors and the management continuing 
investors in a sale of M-Foods Investors. In addition, Vestar, and, after       
M-Foods Investors' first public offering, Marathon and the Michael family       
continuing investors, have certain rights to require M-Foods Investors to       
register securities of M-Foods Investors held by them under the Securities Act, 
up to four, two and two times, respectively, and Vestar, Marathon, the Michael  
family continuing investors and the management continuing investors have certain
rights to participate in publicly registered offerings of M-Foods Investors     
common equity initiated by M-Foods Investors or other third parties, including  
the right of any of Vestar, Marathon, the Michael family continuing investors   
and the management continuing investors to participate in each others' demands. 
If M-Foods Investors issues or sells any of its securities to Vestar, subject to
certain exceptions, each management continuing investor and Marathon and the    
Michael family continuing investors shall have the right to subscribe for a     
sufficient number of M-Foods Investors securities to maintain its ownership     
percentage in M-Foods Investors.                                                

MANAGEMENT STOCK PURCHASE AND UNIT SUBSCRIPTION AGREEMENTS              

As more fully described in the chart below, under the management stock  
purchase and unit subscription agreements, each of the executives listed (with  
the exception of Max Hoffmann who will, in addition, purchase Class A Units)    
will, immediately prior to the merger, sell to M-Foods Investors a number of    
executive's shares of Michael Foods common stock indicated below for $30.10 per 
share in cash, the same price paid to all holders of Michael Foods common stock 
in connection with the merger, and, in addition, will contribute the remainder  
of his Michael Foods common stock to M-Foods Investors in exchange for the      
number of Class B Units and Class C Units of M-Foods Investors indicated below  
based on $2 per unit price. All units held by the executive will vest 20% each  
year beginning on the first anniversary of the closing of the merger. Following 
the merger, the executives will hold approximately 5% of the Class A and        
Class B Units, combined, and 100% of the Class C Units equity interest in       
M-Foods                                                                         

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Investors. All shares of Michael Foods common stock acquired by M-Foods         
Investors will be canceled in connection with the merger.                       

                                                        [Enlarge/Download Table]

                                                                             NUMBER OF     NUMBER OF     NUMBER OF  
                          NUMBER OF                NUMBER OF                  CLASS A       CLASS B       CLASS C   
                           SHARES       GROSS       SHARES                     UNITS         UNITS         UNITS    
                           SOLD TO      CASH      CONTRIBUTED   VALUE OF    RECEIVED IN   RECEIVED IN   RECEIVED IN 
                           M-FOODS    PROCEEDS    TO M-FOODS     SHARES     EXCHANGE FOR  EXCHANGE FOR  EXCHANGE FOR
          NAME            INVESTORS   FROM SALE    INVESTORS   CONTRIBUTED  CONTRIBUTION  CONTRIBUTION  CONTRIBUTION
          ----            ---------  -----------  -----------  -----------  ------------  ------------  ------------
                                                                                                                    
Gregg A. Ostrander.......  24,811    $746,799.20     5,581      $168,000        0           42,000         42,000   
John D. Reedy............  25,183    $757,997.60     1,993      $ 60,000        0           15,000         15,000   
Bill L. Goucher..........  10,573    $318,236.60     1,993      $ 60,000        0           15,000         15,000   
James D. Clarkson........   6,236    $187,713.10     1,595      $ 48,000        0           12,000         12,000   
Bradley L. Cook..........   4,990    $150,212.20       532      $ 16,000        0            4,000          4,000   
Max Hoffmann.............  13,657    $411,080.00     3,533      $106,339      921.83         3,078.17       4,000   
Harold D. Sprinkle.......     459    $ 13,829.10       532      $ 16,000        0            4,000          4,000   
James Mohr...............   2,447    $ 73,667.90       532      $ 16,000        0            4,000          4,000   

    M-Foods Investors may be required to purchase all of an executive's units in
the event of his termination of employment due to death, disability or          
retirement. In addition, in certain circumstances M-Foods Investors will have   
the right to purchase all or a portion of an executive's units, at a price      
dependent upon the circumstances, if his employment is terminated or he is      
deemed to be engaging in certain competitive activities. However, if M-Foods    
Investors elects or is required to purchase any units pursuant to the call and  
put options described in the preceding sentences, and the payment of the        
purchase price would result in a violation of law applicable to M-Foods         
Investors or certain financing defaults, M-Foods Investors may make the portion 
of the cash payment so affected by the delivery of preferred units of M-Foods   
Investors with a liquidation preference equal to the amount of the cash payment 
affected.                                                                       

   In addition, each management stock purchase and unit subscription agreement
contains customary representations, warranties and covenants.                   

Prior to the closing of the merger, each of the executives listed in the
chart above, as well as other employees of Michael Foods, including             
Messrs. Shapiro and Rodriguez, may receive additional shares of Michael Foods   
common stock pursuant to the Michael Foods executive incentive plan, as defined 
in the merger agreement. In accordance with the merger agreement, each plan     
participant receiving a share award will have the right to receive from Michael 
Foods a cash payment equal to $30.10 per share for each share subject to the    
award (the same price paid to all holders of Michael Foods common stock in      
connection with the merger).                                                    

 The executive incentive plan awards shares if, at the end of a particular
year, Michael Foods' average annual diluted earnings per share, or EPS, growth  
over the prior three fiscal years ending with that particular year is at least  
15%. If the target EPS is met, participants in the plan receive common stock    
with a value equal to a fixed percentage of their base salary dependent upon    
their participation level in the plan (25% of base salary for corporate         
executive officers and operating company presidents, 18.75% of base salary for  
other officers and 12.5% of base salary for key employees). This is an "all or  
nothing" award. That is, if the threshold is not achieved, the share award      
opportunity for that year is forfeited. Fifty percent of the earned share award 
amount vests immediately in the year it is earned, 30% vests the next year if at
least a 15% average annual diluted earnings per share growth has been achieved  
over the three year period ending with that year, and the remaining 20% vests   
the subsequent year if at least a 15% average annual diluted earnings per share 
growth has been achieved over the three year period ending with that year.      

 In addition, upon the closing of the merger, all shares awarded under the
executive incentive plan in prior years that have not vested will become vested 
in accordance with the terms of the executive incentive plan. Therefore, if     
Michael Foods achieves a 15% average annual diluted earnings per share growth   
over the three year period ending December 31, 2000, the executives listed below
will receive the number of shares indicated below, assuming a $30.10 share price
and assuming the closing of the merger. On the                                  

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other hand, if Michael Foods does not achieve that target, the executives listed
below will, instead, receive the amounts indicated below representing the 20%   
amount earned for 1999 performance but not yet vested.                          

The executive incentive plan will be terminated in connection with the  
merger.                                                                         

                                                        [Enlarge/Download Table]

                                         NUMBER OF SHARES VESTED IF  NUMBER OF SHARES VESTED IF
                  NAME                           TARGET MET                TARGET NOT MET      
                  ----                   --------------------------  --------------------------
                                                                                               
Gregg A. Ostrander......................            8,929                       1,180          
John D. Reedy...........................            4,409                         606          
Bill L. Goucher.........................            4,097                         536          
James D. Clarkson.......................            3,574                         452          
Bradley L. Cook.........................            2,079                         272          
Max Hoffmann............................            1,286                         168          
Harold D. Sprinkle......................            1,878                         300          
James Mohr..............................            1,904                         262          
    TOTAL...............................           28,156                       3,776          

STOCK PURCHASE AND UNIT SUBSCRIPTION AGREEMENT                          

The stock purchase and unit subscription agreement requires each of the 
Michael family continuing investors to sell, immediately prior to the merger, to
M-Foods Investors the number of shares indicated below at a price per share     
equal to $30.10, the same price paid to all holders of common stock in          
connection with the merger and to contribute to M-Foods Investors the number of 
shares indicated below, in exchange for the number of Class A Units of M-Foods  
Investors indicated below. Each Class A Unit is valued at $100. All shares of   
Michael Foods common stock acquired by M-Foods Investors will be canceled in    
connection with the merger.                                                     

                                                        [Enlarge/Download Table]

                                                                                                      NUMBER OF  
                                                                                                        CLASS    
                                      NUMBER OF                      NUMBER OF                         A UNITS   
                                        SHARES                         SHARES                         RECEIVED   
                                       SOLD TO                     CONTRIBUTED TO                    IN EXCHANGE 
                                       M-FOODS     GROSS PROCEEDS     M-FOODS      VALUE OF SHARES       FOR     
                NAME                  INVESTORS      FROM SALE       INVESTORS       CONTRIBUTED    CONTRIBUTION 
                ----                 ------------  --------------  --------------  ---------------  -------------
                                                                                                                 
4J2R1C Limited Partnership..........   938,489     $28,248,518.90      650,000       $19,565,000       195,650   
3J2R Limited Partnership............   834,514     $25,118,871.40      625,000       $18,812,500       188,125   

The stock purchase and unit subscription agreement contains customary   
representations, warranties and covenants. There are no put rights or call      
options in the stock purchase and unit subscription agreement.                  

STOCK PURCHASE AGREEMENT                                                

  The stock purchase agreement requires each of the individuals and entities
listed below to sell, immediately prior to the merger, to M-Foods Investors the 
number of shares indicated below at a price per share equal to $30.10, the same 
price paid to all holders of common stock in connection with the merger.        

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These individuals and entities are affiliates and/or associates of Jeffrey J.   
Michael. All shares of Michael Foods common stock acquired by M-Foods Investors 
will be canceled in connection with the merger.                                 

                                                                [Download Table]

                                                 NUMBER OF SHARES                
                                                 SOLD TO M-FOODS   GROSS PROCEEDS
                     NAME                           INVESTORS        FROM SALE   
                     ----                        ----------------  --------------
                                                                                 
ASTA Enterprises Limited Partnership...........      136,867       $4,119,696.70 
Jeffrey J. Michael.............................        5,560       $  167,356.00 
Deanne L. Michael..............................        1,405       $   42,290.50 
Jeffrey J. Michael Custodian, Lauren E. Michael                                  
  UTMA.........................................          730       $   21,973.00 
Janette M. He..................................        1,798       $   54,119.80 
Lei He.........................................        1,405       $   42,290.50 
Janette M. He Custodian, Sophia He UTMA........          730       $   21,973.00 
Janette M. He Custodian, Iris He UTMA..........          730       $   21,973.00 
Jennifer L. Redlin.............................        1,798       $   54,119.80 
Tim Redlin.....................................        1,405       $   42,290.50 
Jennifer L. Redlin Custodian, Justine Redlin                                     
  UTMA.........................................          730       $   21,973.00 
Jennifer L. Redlin Custodian, Erin Redlin                                        
  UTMA.........................................          730       $   21,973.00 
Roxanne C. Miller..............................        1,798       $   54,119.80 
Neal Miller....................................        1,405       $   42,290.50 
Roxanne C. Miller Custodian, Ian Miller UTMA...          730       $   21,973.00 
Roxanne C. Miller Custodian, Colin Miller                                        
  UTMA.........................................          730       $   21,973.00 
Roxanne Miller Custodian, Quinlin Miller                                         
  UTMA.........................................          730       $   21,973.00 
Rosemary G. Bouvier Revocable Trust............        1,798       $   54,119.80 
Gregory S. Bouvier Revocable Trust.............        1,405       $   42,290.50 
Rosemary G. Bouvier Custodian, Emily Bouvier                                     
  UTMA.........................................          730       $   21,973.00 
Rosemary G. Bouvier Custodian, Alexander                                         
  Bouvier UTMA.................................          730       $   21,973.00 
Gregory S. Bouvier and Rosemary G. Bouvier                                       
  JT...........................................        2,250       $   67,725.00 
Jennifer Redlin and Tim Redlin JT..............        1,125       $   33,862.50 

   The stock purchase agreement contains customary representations, warranties
and covenants. There are no put rights or call options in the stock purchase    
agreement.                                                                      

EMPLOYMENT AGREEMENTS                                                   

   GENERAL PROVISIONS.  Mr. Ostrander's employment agreement has a term of two
years, subject to certain termination rights described therein and automatic one
year extensions beginning with the first anniversary of the close of the merger.
The Ostrander employment agreement provides that Mr. Ostrander will receive an  
annual base salary of at least $595,000 and that he will participate in certain 
bonus arrangements, long-term incentive plans, and employee benefit plans of    
Michael Foods. Mr. Ostrander will be subject to a noncompetition covenant, with 
respect to the business of the production, distribution or sales of eggs or egg 
products, and a nonsolicitation covenant period starting with the close of the  
merger and ending on the second anniversary of Mr. Ostrander's termination of   
employment with Michael Foods.                                                  

    Mr. Reedy's employment agreement has a term of two years, subject to certain
termination rights described therein and automatic one year extensions beginning
with the first anniversary of the close of the merger. The Reedy employment     
agreement provides that Mr. Reedy will receive an annual base salary of at least
$275,000 and that he will participate in certain bonus arrangements, long-term  
incentive plans and employee benefit plans of Michael Foods. Mr. Reedy will be  
subject to a noncompetition covenant, with                                      

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respect to the business of the production, distribution or sales of eggs or egg 
products, and a nonsolicitation covenant period starting with the close of the  
merger and ending on the second anniversary of Mr. Reedy's termination of       
employment with Michael Foods.                                                  

 Mr. Goucher's employment agreement provides for a term beginning with the
close of the merger through the second anniversary of a change in control, as   
defined in the Goucher employment agreement, subject to certain termination     
rights described therein. Mr. Goucher's annual base salary will be at least     
$275,000, and he will participate in certain bonus arrangements and employee    
benefit plans of Michael Foods. Mr. Goucher will be subject to a noncompetition 
covenant, with respect to the business of the production, distribution or sales 
of eggs or egg products, and a nonsolicitation covenant period starting with the
close of the merger and ending on the second anniversary of Mr. Goucher's       
termination of employment with Michael Foods.                                   

  Mr. Clarkson's employment agreement provides for a term beginning with the
close of the merger through the second anniversary of a change in control, as   
defined in the Clarkson employment agreement, subject to certain termination    
rights described therein. Mr. Clarkson's annual base salary will be at least    
$250,000, and he will participate in certain bonus arrangements and employee    
benefit plans of Michael Foods. Mr. Clarkson will be subject to a noncompetition
covenant, with respect to the business of the production, distribution or sales 
of refrigerated potato products or specialty dairy products and mixes, and a    
nonsolicitation covenant period starting with the close of the merger and ending
on the second anniversary of Mr. Clarkson's termination of employment with      
Michael Foods.                                                                  

   TERMINATION PROVISIONS.  Mr. Ostrander's employment agreement provides that
if his employment is terminated by death or disability, Mr. Ostrander or his    
estate or beneficiaries will receive within 30 days a payment equal to any      
annual base salary through the date of termination not yet paid, plus the target
bonus for the year prorated for months of employment in that year, plus any     
other eligible unpaid benefits, plus three times the total of Mr. Ostrander's   
current annual base salary and target bonus.                                    

If Mr. Ostrander's employment is terminated for cause or he terminates  
without good reason, as defined below, Mr. Ostrander will receive his annual    
base salary through the date of termination and other benefits not yet paid     
under any plan, program, policy, practice of or contract or agreement with      
Michael Foods. "Good reason" includes, among other things, any diminution in    
position, authority, duties and responsibilities, or any requirement to relocate
or travel extensively. If Mr. Ostrander's employment is terminated for good     
reason or by Michael Foods other than for cause, death or disability,           
Mr. Ostrander will receive a lump sum within 30 days in an amount equal to any  
annual base salary through the date of termination not yet paid, plus the target
bonus for the year prorated for months of employment in that year, plus any     
other eligible unpaid benefits, plus three times the total of Mr. Ostrander's   
then-current annual base salary and target bonus. In addition, Mr. Ostrander    
will receive for three years following the termination date, or until such      
earlier time as Mr. Ostrander becomes eligible to receive comparable benefits,  
certain medical, dental and life insurance benefits for himself and his family. 

   Solely as such may be applicable to any payments or benefits deemed made in
connection with the change in ownership resulting from the merger,              
Mr. Ostrander also may be eligible to receive an additional payment in respect  
of any excise tax imposed by Section 4999 of the Internal Revenue Code, as well 
as a "gross-up payment" such that he will retain an amount equal to the excise  
taxes, after all income taxes, interest and penalties associated with all such  
payments.                                                                       

Mr. Reedy's employment agreement provides that if his employment is     
terminated by death or disability, Mr. Reedy or his estate or beneficiaries will
receive within 30 days a payment equal to any annual base salary through the    
date of termination not yet paid, plus the target bonus for the year prorated   
for months of employment in that year, plus any other eligible unpaid benefits, 
plus two times the total of Mr. Reedy's then-current annual base salary and     
target bonus.                                                                   

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  If Mr. Reedy's employment is terminated for cause or he terminates without
good reason, which term has a meaning substantially similar to the meaning given
such term in the Ostrander employment agreement, Mr. Reedy will receive his     
annual base salary through the date of termination and other benefits not yet   
paid under any plan, program, policy, practice of or contract or agreement with 
Michael Foods. If Mr. Reedy's employment is terminated for good reason or by    
Michael Foods other than for cause, death or disability, Mr. Reedy will receive 
a lump sum within 30 days in an amount equal to any annual base salary through  
the date of termination not yet paid, plus the target bonus for the year        
prorated for months of employment in that year, plus any other eligible unpaid  
benefits, plus two times the total of Mr. Reedy's then-current annual base      
salary and target bonus. In addition, Mr. Reedy will receive for two years      
following the termination date, or until such earlier time as Mr. Reedy becomes 
eligible to receive comparable benefits, certain medical, dental and life       
insurance benefits for himself and his family.                                  

   Solely as such may be applicable to any payments or benefits deemed made in
connection with the change in ownership resulting from the merger, Mr. Reedy    
also may be eligible to receive an additional payment in respect of any excise  
tax imposed by Section 4999 of the Internal Revenue Code, as well as a "gross-up
payment" such that he will retain an amount equal to the excise taxes, after all
income taxes, interest and penalties associated with all such payments.         

Mr. Goucher's employment agreement provides that if he is terminated by 
death or disability, Mr. Goucher or his estate or beneficiaries will receive    
within 30 days a payment equal to any annual base salary through the date of    
termination not yet paid, plus the target bonus for the year prorated for months
of employment in that year, plus any other eligible unpaid benefits, plus an    
amount equal to Mr. Goucher's then-current annual base salary.                  

    If Mr. Goucher is terminated for cause or without good reason, as defined in
the Goucher employment agreement, Mr. Goucher will receive his annual base      
salary through the date of termination and other benefits not yet paid under any
plan, program, policy, practice of or contract or agreement with Michael Foods. 
If Mr. Goucher's employment is terminated prior to a change in control, as      
defined below, by Michael Foods other than for cause, death or disability,      
Mr. Goucher will receive a lump sum within 30 days equal to any annual base     
salary through the date of termination not yet paid, plus any other eligible    
unpaid benefits, plus an amount equal to Mr. Goucher's current annual base      
salary.                                                                         

 If Mr. Goucher is terminated by Michael Foods other than for cause, or by
Mr. Goucher for good reason, in anticipation of or within two years following a 
change in control, Mr. Goucher will receive within 30 days a payment equal to   
any annual base salary through the date of termination not yet paid, plus the   
target bonus for the year prorated for months of employment in that year, plus  
any other eligible unpaid benefits, plus two times Mr. Goucher's then-current   
annual base salary. "Change in control" means a transaction where another party 
acquires voting control of Michael Foods, another party acquires substantially  
all of the assets of Michael Foods, or, prior to an initial public offering of  
Michael Foods, Vestar and its affiliates cease to have the ability to elect a   
majority of the board of Michael Foods.                                         

Mr. Clarkson's employment agreement contains severance provisions       
substantially identical to the severance provisions contained in the Goucher    
employment agreement.                                                           

DEFERRED COMPENSATION.  Each of the employment agreements with          
Messrs. Ostrander, Reedy, Goucher and Clarkson provides that each executive will
receive rights in an unfunded, unsecured, nonqualified deferred compensation    
arrangement, which will be assumed by M-Foods Holdings, in exchange for the     
cancellation of certain of his options in an amount equal to the spread value of
the canceled options. See "SPECIAL FACTORS--Interests of Certain Persons in the 
Merger--Stock Options, Option Cancellation Agreements," for the actual deferred 
compensation amounts of each executive. This amount will be deemed to be        
invested in M-Foods Investors' Class A Units; in other words, an actual         
investment will not be made in the Class A Units. M-Foods Holdings will credit  
each executive's deferred compensation account as if the deferred compensation  
amount were actually invested in M-Foods Investors' Class A Units with respect  
to distributions (whether cash or non-cash) relating only to the return         

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of invested capital and an 8% preferred return on the invested capital, but not 
with respect to any other (including residual) distributions. Accordingly, the  
amount deemed invested in the deferred compensation account plus an 8% preferred
return on the amount will be distributed as described in the next sentence      
unless the fair market value of the Class A Units is less than that amount.     
Actual distributions of each executive's deferred compensation arrangements will
be made upon the earliest of a change in control, the tenth anniversary of the  
closing of the merger or the purchase by M-Foods Investors of that executive's  
Class B Units in accordance with the terms of his employment agreement.         

SEVERANCE AND DEFERRED COMPENSATION AGREEMENTS                          

Michael Foods will maintain its severance plan after the merger in      
substantially the same form as it currently exists and each of Messrs. Cook,    
Sprinkle, Mohr and Hoffmann will receive rights under the severance plan        
pursuant to his severance and deferred compensation agreement. Participants in  
Michael Foods' severance plan are eligible for certain severance arrangements   
should they be terminated without cause within twenty-four months following a   
change in control. Generally, the severance plan defines a change in control as 
occurring when a person acquires the power to elect, appoint or cause the       
election or appointment of at least a majority of the board or purchases all or 
substantially all of the properties and assets of Michael Foods; provided,      
however, that a change in control does not include certain acquisitions pursuant
to a merger, consolidation or sale of properties and assets. Under the severance
plan, certain key employees would be entitled to receive a lump sum payment     
equal to one times total annual compensation, with several key employees being  
entitled to a payment of two times total annual compensation. Annual            
compensation is defined as the employee's highest annual rate of salary,        
excluding bonuses, benefits, allowances, etc., within the three calendar year   
periods prior to the date of termination of employment; provided, however, that 
if the employee has been employed by Michael Foods or a predecessor for less    
than three years, total annual compensation means the highest annualized salary 
during the period of employment.                                                

In addition, each executive that is a party to a severance and deferred 
compensation agreement will receive rights in an unfunded, unsecured,           
nonqualified deferred compensation arrangement, which will be assumed by M-Foods
Holdings, in exchange for the cancellation of certain of his options in an      
amount equal to the spread value of the canceled options. See "SPECIAL          
FACTORS--Interests of Certain Persons in the Merger--Stock Options, Option      
Cancellation Agreements," for the actual deferred compensation amounts of each  
executive. This amount will be deemed to be invested in M-Foods Investors'      
Class A Units; in other words, an actual investment will not be made in the     
Class A Units. M-Foods Holdings will credit each executive's deferred           
compensation account as if the deferred compensation amount were actually       
invested in M-Foods Investors' Class A Units with respect to distributions      
(whether cash or non-cash) relating only to the return of invested capital and  
an 8% preferred return on the invested capital, but not with respect to any     
other (including residual) distributions. Accordingly, the amount deemed        
invested in the deferred compensation account plus an 8% preferred return on the
amount will be distributed as described in the next sentence unless the fair    
market value of the Class A Units is less than that amount. Actual distributions
of each executive's deferred compensation arrangements will be made upon the    
earliest of a change in control, the tenth anniversary of the closing of the    
merger or the purchase by M-Foods Investors of that executive's Class B Units in
accordance with the terms of his severance and deferred compensation agreement. 

STOCK OPTION ARRANGEMENT                                                

   Officers and key employees of Michael Foods or any of its subsidiaries will
be eligible to participate in a new stock option program pursuant to which the  
compensation committee of the board of directors of M-Foods Holdings will be    
authorized to issue options to acquire 5% of the fully-diluted outstanding      
capital stock of M-Foods Holdings as of the closing of the merger, before giving
effect to issuances, if any, of warrants to M-Foods Holdings' and its           
subsidiaries' financing sources.                                                

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 Options to acquire 2.5% of the fully-diluted outstanding capital stock of
M-Foods Holdings as of the closing of the merger before giving effect to        
issuances, if any, of warrants to M-Foods Holdings' and its subsidiaries'       
financing sources will be issued to Messrs. Ostrander, Reedy, Goucher, Clarkson,
Cook, Hoffmann, Sprinkle and Mohr at the closing of the merger with an exercise 
price equal to $30.10 per share. The actual amount to be awarded to each of     
those executives will be determined by the compensation committee of the board  
of directors of M-Foods Holdings.                                               

 In general, the exercise price per share will be the fair market value of
the common stock of M-Foods Holdings on the date of the grant, as determined by 
the compensation committee of the board of directors of M-Foods Holdings in good
faith. The exercise price will be payable (1) in cash, (2) after Michael Foods' 
initial public offering, through simultaneous sales of underlying shares by     
brokers or (3) through the exchange of M-Foods Holdings securities held by the  
optionee for longer than six months.                                            

  Unless otherwise provided in the award agreement, options will vest over a
five-year period, in five equal annual installments, and no vesting schedule    
will be longer than five years. On termination of employment for any reason,    
unvested options are canceled. Vested options not exercised within 90 days after
termination will be canceled, unless the optionee is terminated for cause, in   
which case such vested options will be canceled upon such termination. If the   
employment of a holder of vested options terminates for reasons other than      
cause, M-Foods Holdings will provide a notice setting forth the fair market     
value of the common stock within 90 days after such termination. In the event of
a change of control of M-Foods Holdings or M-Foods Investors, all options which 
have not become vested will automatically become vested. The options will be    
subject to other customary restrictions and repurchase rights.                  

STOCK OPTIONS; OPTION CANCELLATION AGREEMENTS                           

The merger agreement provides that each outstanding option to purchase  
shares of common stock, whether or not then exercisable or vested, that has been
granted under Michael Foods' current option plans, including those granted to   
directors and executive officers of Michael Foods, will become vested and       
exercisable. Each option will be canceled at the closing of the merger, pursuant
to the option cancellation agreements to be entered into with all the holders of
options, and the holders will be paid in consideration of the cancellation of   
the options an amount in cash and/or deferred compensation equal to the         
difference between $30.10 and the exercise price of the option. The terms of the
deferred compensation arrangements are discussed above under "SPECIAL           
FACTORS--Interests of Certain Persons in the Merger--Employment Agreements" and 
"SPECIAL FACTORS--Interests of Certain Persons in the Merger--Severance and     
Deferred Compensation Agreements." Under the merger agreement, Michael Foods has
agreed to use its reasonable best efforts to facilitate the cancellation of the 
options.                                                                        

The following chart indicates those executives, along with the number of
options currently held by them, receiving deferred compensation arrangements    
with M-Foods Holdings, and the respective amount of the deferred compensation,  
and the amount of the cash payment to be received in exchange for cancellation  
of all of such executive's options:                                             

                                                        [Enlarge/Download Table]

                                       NUMBER OF                                         
                                         SHARES                                DEFERRED  
                                       SUBJECT TO  NET OPTION  CASH PAYMENT  COMPENSATION
                 NAME                   OPTIONS      VALUE        AMOUNT        AMOUNT   
                 ----                  ----------  ----------  ------------  ------------
                                                                                         
Gregg A. Ostrander....................  382,500    $4,634,659    $602,659     $4,032,000 
John D. Reedy.........................  118,910     1,462,578      22,578      1,440,000 
Bill L. Goucher.......................  137,800     1,834,053     394,053      1,440,000 
James D. Clarkson.....................  113,000     1,216,449      64,449      1,152,000 
Bradley L. Cook.......................   33,000       487,920     103,920        384,000 
Max Hoffmann..........................   21,000       293,661           0        293,661 
Harold D. Sprinkle....................   44,000       399,758      15,758        384,000 
James Mohr............................   40,000       513,990     129,990        384,000 

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Certain of the executives listed above, as well as Messrs. Shapiro and  
Rodriguez, also may be entitled to additional options pursuant to the executive 
incentive plan, as described in the merger agreement, which would become vested 
and exercisable with respect to all shares subject thereto upon closing of the  
merger. The number of options to be awarded under the executive incentive plan  
is based on Michael Foods' year-over-year diluted earnings per share growth     
rate. Assuming Michael Foods achieves a target of at least 15% growth but less  
than 20%, Mr. Ostrander would be entitled to options for 4,500 shares and       
Messrs. Reedy, Goucher, Clarkson, Shapiro and Rodriguez each would be entitled  
to options for 3,000 shares. These options would have an exercise price equal to
the closing price of Michael Foods common stock on the third business day       
following the announcement of year-end financial results. When granted, these   
options will become subject to the applicable letter agreements and option      
cancellation agreements.                                                        

 Messrs. Shapiro and Rodriguez will receive $1,236,462.96 and $782,551.58,
respectively, pursuant to the cancellation of all of their options (representing
an aggregate of 106,093 and 75,232 shares, respectively) under their respective 
option cancellation agreements. Certain of Messrs. Shapiro's and Rodriguez's    
options may expire prior to the closing of the merger. As indicated above,      
pursuant to their letter agreements, Messrs. Shapiro and Rodriguez are entitled 
to exercise such options if they so choose. The option cancellation agreements  
to be entered into by all other holders of options, other than as described     
above, will be substantially similar to the form of option cancellation         
agreement for Messrs. Shapiro and Rodriguez.                                    

MANAGEMENT AGREEMENT                                                    

 Pursuant to the management agreement, Vestar Capital Partners, affiliated
with Vestar, and Goldner Hawn Johnson & Morrison, affiliated with Marathon,     
will, commencing upon the closing of the merger, render to each of M-Foods      
Investors, M-Foods Holdings and Michael Foods, and their subsidiaries, certain  
advisory and consulting services. In consideration of those services, M-Foods   
Investors, M-Foods Holdings and Michael Foods jointly and severally will agree  
to pay to Vestar Capital Partners and Goldner Hawn Johnson & Morrison,          
semi-annually in advance, an aggregate per annum management fee equal to the    
greater of (1) $1,000,000 and (2) an amount per annum equal to 0.75% of the     
consolidated earnings before depreciation, interest, taxes and amortization of  
M-Foods Investors and its subsidiaries for such fiscal year, but before         
deduction of any such fee, determined as set forth in documents related to      
Michael Foods' senior secured credit facility, commencing at the closing of the 
merger.                                                                         

   M-Foods Investors, M-Foods Holdings and Michael Foods also will jointly and
severally agree to pay to Vestar Capital Partners and Goldner Hawn Johnson &    
Morrison at the closing of the merger an aggregate transaction fee equal to     
1.25% of total transaction value; in other words, approximately $9,700,000, plus
all out-of-pocket expenses incurred by Vestar Capital Partners and Goldner Hawn 
Johnson & Morrison prior to the closing of the merger for services rendered by  
them in connection with the consummation of the merger.                         

   M-Foods Investors, M-Foods Holdings and Michael Foods also will jointly and
severally agree to indemnify Vestar Capital Partners and Goldner Hawn Johnson & 
Morrison and their respective affiliates from and against all losses, claims,   
damages and liabilities arising out of the performance by Vestar Capital        
Partners and Goldner Hawn Johnson & Morrison of their services pursuant to the  
management agreement. The management agreement shall terminate upon the earlier 
to occur of (1) the termination of the merger agreement or (2) such time after  
the closing of the merger as Vestar and Marathon and their respective partners  
and the respective affiliates thereof hold, directly or indirectly in the       
aggregate, less than 20% of the voting power of Michael Foods' outstanding      
voting stock.                                                                   

EMPLOYEE BENEFITS                                                       

    The merger agreement also requires Michael Foods to maintain until the first
anniversary of the closing of the merger employee benefit plans and arrangements
with overall employee benefits which are substantially comparable in the        
aggregate to the benefits provided by "company benefit plans," as defined in the
merger agreement, as of December 21, 2000, not taking into account the value of 
any benefits under any such company benefit plans which are equity-based. See   
"THE MERGER AGREEMENT."                                                         

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INDEMNIFICATION AND DIRECTOR AND OFFICER LIABILITY INSURANCE            

The merger agreement provides that Michael Foods will indemnify and hold
harmless each present and former director and officer of Michael Foods against  
any costs or expenses, together with such person's heirs, executors or          
administrators (including by advancing attorney's fees and expenses in advance  
of the final disposition of any claim, action, suit, proceeding or investigation
to the fullest extent permitted by and subject to the conditions of law),       
judgments, fines, losses, claims, damages, liabilities and amounts paid in      
settlement in connection with any pending, threatened or completed claim,       
action, suit, proceeding or investigation, whether civil, criminal,             
administrative or investigative, arising out of or pertaining to any action or  
omission based upon or arising from his or her capacity as an officer or        
director of Michael Foods occurring prior to the closing of the merger          
(including any claim, action, suit, proceeding or investigation arising out of  
or pertaining to the transactions contemplated by the merger agreement). The    
merger agreement provides that Michael Foods shall maintain the right to        
indemnification and exculpation of officers and directors provided for in the   
certificate of incorporation, by-laws and any other organizational documents of 
Michael Foods as in effect on December 21, 2000, with respect to indemnification
and exculpation for acts and omissions occurring prior to the closing of the    
merger, including, without limitation, the transactions contemplated by the     
merger agreement.                                                               

    Until the sixth anniversary of the closing of the merger, Michael Foods must
maintain officers' and directors' liability insurance covering the officers and 
directors who are covered by Michael Foods' officers' and directors' liability  
insurance policies on December 21, 2000 with respect to actions and omissions   
occurring prior to the closing of the merger, by obtaining tail coverage of such
existing insurance policies on terms which are not less favorable than the terms
of such current insurance in effect for Michael Foods on December 21, 2000 and  
providing coverage only with respect to matters occurring prior to the closing  
of the merger, to the extent that such tail coverage can be maintained at an    
annual cost to Michael Foods of not greater than 200% of the annual premium for 
Michael Foods' insurance policies in effect on December 21, 2000 and, if such   
tail coverage cannot be so maintained at such cost, providing as much of such   
insurance as can be so maintained at a cost equal to 200% of the annual premium 
for Michael Foods' insurance policies.                                          

POST-MERGER CAPITALIZATION OF M-FOODS INVESTORS, M-FOODS HOLDINGS AND   
MICHAEL FOODS                                                         

Following the closing of the merger, Michael Foods will become a wholly 
owned subsidiary of M-Foods Holdings. M-Foods Holdings will be owned by M-Foods 
Investors, other than for shares of M-Foods Holdings granted pursuant to the    
stock option arrangements described above. M-Foods Investors will have the      
following equity capitalization:                                                

                                                        [Enlarge/Download Table]

                                                            % OF CLASS                      
                                   NUMBER OF    NUMBER OF     A AND     NUMBER OF     % OF  
                                    CLASS A      CLASS B     CLASS B     CLASS C    CLASS C 
           UNITHOLDER                UNITS        UNITS       UNITS       UNITS      UNITS  
           ----------             ------------  ----------  ----------  ----------  --------
                                                                                            
Vestar Capital Partners IV, L.P                                                             
  (and affiliates)............... 1,339,004.05       0         61.63%          0        0%  
Marathon Fund Limited                                                                       
  Partnership IV.................   350,000          0         16.11%          0        0%  
Michael family continuing                                                                   
  investors......................   383,775          0         17.66%          0        0%  
Gregg A. Ostrander...............         0     42,000          1.93%     42,000       42%  
John D. Reedy....................         0     15,000          0.69%     15,000       15%  
Bill L. Goucher..................         0     15,000          0.69%     15,000       15%  
James D. Clarkson................         0     12,000          0.55%     12,000       12%  
Bradley L. Cook..................         0      4,000          0.18%      4,000        4%  
Max Hoffmann.....................       921.83   3,078.17       0.18%      4,000        4%  
James Mohr.......................         0      4,000          0.18%      4,000        4%  
Harold D. Sprinkle...............         0      4,000          0.18%      4,000        4%  
                                  ------------  ---------     ------     -------      ---   
      TOTALS..................... 2,073,700.88  99,078.17     100.00%    100,000      100%  
                                  ============  =========     ======     =======      ===   

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FINANCING OF THE MERGER                                                         

    Immediately following the merger, Michael Foods will pay to the shareholders
of Michael Foods, other than the continuing investors, an aggregate amount of   
approximately $522 million to cancel the outstanding shares of Michael Foods    
common stock and stock options, assuming no Michael Foods shareholders exercise 
and perfect their dissenters' rights in connection with the merger. In addition,
Michael Foods expects to extinguish and/or assume existing debt in an aggregate 
amount of approximately $204 million (including breakage costs). Moreover,      
Michael Foods will incur approximately $43 million in fees and expenses in      
connection with the merger and related transactions. In addition to these cash  
expenditures, the transaction contemplates that certain executives will roll    
over an aggregate of $10 million of option equity value and common stock value  
of Michael Foods for cash, equity interests in M-Foods Investors and deferred   
compensation arrangements with M-Foods Holdings, while the Michael family       
continuing investors will exchange $38,377,500 of common stock value into equity
interests of M-Foods Investors. The following arrangements are intended to      
provide the necessary financing for the merger.                                 

EQUITY COMMITMENT LETTERS                                               

 Pursuant to equity commitment letters from each of Vestar and Marathon to
Protein Acquisition dated as of December 21, 2000, Vestar and Marathon have     
agreed to make capital contributions of up to $133,900,405 and $35,000,000,     
respectively, to M-Foods Holdings in exchange for Class A Units of M-Foods      
Investors in order to enable M-Foods Holdings and Protein Acquisition to        
consummate the merger and the other transactions contemplated by the merger     
agreement.                                                                      

These contributions are subject to:                                     

 - each of Vestar and Marathon determining in its good faith judgment that
all conditions to the obligations of M-Foods Holdings and Protein   
  Acquisition pursuant to the merger agreement and all conditions in the
 bank commitment letter, see "Financing of the Merger--Bank Commitment
 Letter" below, have been satisfied or waived by all parties for whose
benefit the conditions exist; and                                   

- the completion of the merger.                                         

BANK COMMITMENT LETTER                                                  

GENERAL.  Vestar has received a commitment letter from Bank of America, 
N.A., Banc of America Bridge LLC and Banc of America Securities LLC dated as of 
December 20, 2000 for Michael Foods to obtain, subject to the conditions set    
forth therein, the following:                                                   

(1) $470 million senior secured credit facilities, no more than         
     $400 million of which may be borrowed at the time of the closing of the
merger; and                                                       

(2) $200 million in gross proceeds from the issuance and sale by Michael
       Foods of unsecured senior subordinated bridge notes (the "bridge notes").

Bank of America, N.A. will act as sole and exclusive administrative and         
collateral agent and Banc of America Securities LLC will act as sole and        
exclusive lead arranger and sole and exclusive book running manager in          
connection with the senior secured credit facilities. In the event that Michael 
Foods cannot complete the private placement of $200 million of unsecured senior 
subordinated notes, Banc of America Bridge LLC has committed to purchase, and   
Banc of America Securities LLC will act as sole and exclusive lead arranger and 
sole and exclusive book running manager with respect to the bridge notes. Banc  
of America Securities LLC will act as sole managing underwriter, sole book      
running manager, sole lead initial purchaser and sole lead manager or placement 
agent and financial advisor with respect to any senior subordinated notes or    
other permanent securities issued by of Michael Foods in connection with the    
merger.                                                                         

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 The proceeds of these financings will be used to provide a portion of the
proceeds required to consummate the merger and, in the case of the senior credit
facilities, to provide for working capital and other general corporate needs,   
including permitted acquisitions, of Michael Foods and its subsidiaries.        

    The commitments described above will expire on April 15, 2001. A copy of the
bank commitment letter is filed as an exhibit to the Schedule 13E-3 filed by    
Michael Foods and its affiliates and is incorporated herein by reference.       

SENIOR SECURED CREDIT FACILITIES                                        

GENERAL.  The senior secured credit facilities will be comprised of the 
following:                                                                      

(1) a $125 million tranche A term loan facility;                        

(2) a $245 million tranche B term loan facility; and                    

   (3) a $100 million revolving credit facility, which will include a sublimit
for the issuance of standby and commercial letters of credit.     

The tranche A term loans will have a maturity of six years and the tranche B    
term loans will have a maturity of seven years; each will be available in a     
single borrowing on the closing of the merger. The revolving credit facility    
will have a term of six years.                                                  

INTEREST AND FEES.  Revolving credit loans under the revolving credit   
facility and the tranche A term loans will initially bear interest at a rate    
equal to LIBOR (London Inter Bank Offer Rate) plus 300 basis points or the      
Alternate Base Rate (to be defined as the higher of (1) the Bank of America,    
N.A. prime rate or (2) the Federal Funds rate plus .50%) plus 200 basis points. 
The tranche B term loans will initially bear interest at a rate equal to LIBOR  
plus 350 basis points or the Alternate Base Rate plus 250 basis points. Starting
six months after the closing of the merger, loans under the senior secured      
credit facilities will bear interest at a fluctuating rate per annum equal to   
the sum of (1) the applicable LIBOR rate and/or the Alternative Base Rate plus  
(2) a margin (A) in the case of tranche A term loans and revolving credit loans,
ranging from 2.00% to 3.00%, depending on the ratio from time to time of Michael
Foods' total funded debt/EBITDA for the trailing four quarters and (B) in the   
case of tranche B term loans, ranging from 3.00% to 3.50%, depending on the     
total funded debt/EBITDA ratio.                                                 

    In addition, Michael Foods has agreed to pay certain fees in connection with
the senior secured credit facilities including, without limitation, commitment  
fees and letter of credit/facing fees. The commitment fees will accrue on the   
unutilized total commitments under the revolving credit facility at a per annum 
rate that will initially be 0.50% and, beginning six months after the closing of
the merger, will range from 0.50% to 0.375% depending on the total funded       
debt/EBITDA ratio.                                                              

VOLUNTARY PREPAYMENTS.  Voluntary prepayments may be made at any time,  
without premium or penalty, subject to requirements as to prior notice and      
minimum amounts and certain other conditions.                                   

    SCHEDULED AMORTIZATION.  A portion of the tranche A and tranche B term loans
will be subject to amortization of principal as follows:                        

 - for the tranche A term loans, $15 million in each of years one and two,
     $20 million in each of years three and four, $25 million in year five and
$30 million in year six,                                            

  - for the tranche B term loans, $2.45 million in each of years one through
six and $230.3 million in year seven.                               

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  MANDATORY PREPAYMENTS.  Subject to exceptions to be agreed upon, mandatory
repayments will be required to be made with the following:                      

  - 100% of the net proceeds from non-ordinary course asset sales (including
   stock of subsidiaries) (subject to reinvestment provisions to be agreed
upon and an annual basket to be agreed upon);                       

   - 75% (if the ratio of total funded debt/EBITDA is equal to or greater than
  3.5:1.0) or 50% (if the ratio of total funded debt/EBITDA is less than
  3.5:1.0) of excess cash flow (to be defined in the loan documentation)
      pursuant to an annual cash sweep arrangement, provided solely with respect
     to the fiscal year ending on December 31, 2001, excess cash flow shall be
 calculated for the period commencing on the closing of the merger and
ending on December 31, 2001;                                        

- 100% of the net cash proceeds from the issuance of any funded debt for
      borrowed money by M-Foods Holdings, Michael Foods or any subsidiary (other
than certain permitted funded debt to be determined or permanent    
      securities of Michael Foods or other subordinated debt issued to refinance
amounts outstanding under the bridge notes); and                    

- 50% of the net cash proceeds from the issuance of equity, subject to  
      customary exceptions, by M-Foods Holdings, Michael Foods or any subsidiary
(other than certain permitted equity to be determined or any equity 
securities issued to refinance amounts outstanding under any bridge 
notes).                                                             

CONDITIONS PRECEDENT TO CLOSING.  The availability of the senior secured
credit facilities will be subject to the satisfaction of customary conditions   
precedent including the following:                                              

 - the absence of any change, occurrence or development since December 31,
1999 that has a material adverse effect on the business, assets,    
   liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of Michael Foods;                           

 - reasonably satisfactory completion of legal, environmental, pension and
regulatory due diligence with respect to Michael Foods and its      
subsidiaries;                                                       

- satisfactory capitalization, shareholders' arrangements, management,  
   ownership structure and corporate structure of M-Foods Holdings and its
subsidiaries; and                                                   

 - the preparation and execution of definitive loan agreements and related
documents.                                                          

    GUARANTORS.  All obligations under the senior secured credit facilities will
be guaranteed by M-Foods Holdings and all of M-Foods Holding's existing and     
future direct and indirect domestic subsidiaries.                               

SECURITY.  The obligations of Michael Foods and the guarantors under the
senior secured credit facilities will be secured by a first priority perfected  
security interest, subject to permitted liens, in the following:                

- 100% of the issued and outstanding capital stock of Michael Foods;    

    - 100% of the issued and outstanding capital stock of each of the direct and
indirect domestic subsidiaries of Michael Foods;                    

- 65% (or such greater percentage allowable which would not result in   
      material adverse tax consequences) of the voting capital stock and 100% of
     the non-voting capital stock of each direct foreign subsidiary of Michael
Foods or any of its domestic subsidiaries; and                      

- substantially all other present and future assets and properties of   
M-Foods Holdings, Michael Foods and the direct and indirect domestic
subsidiaries of Michael Foods.                                      

   FINANCIAL COVENANTS.  The senior secured credit facilities will contain the
following financial covenants: (i) maintenance of a minimum interest coverage   
ratio (EBITDA/cash interest expense) with step-up                               

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provisions to be agreed, (ii) maintenance of a maximum total funded debt/EBITDA 
ratio with step-down provisions to be determined and (iii) maintenance of a     
minimum fixed charge coverage ratio, with step-up provisions to be agreed. All  
of the financial covenants will be calculated on a consolidated basis and for   
each consecutive four fiscal quarter period.                                    

REPRESENTATIONS, WARRANTIES, EVENTS OF DEFAULT AND OTHER COVENANTS.  The
senior secured credit facilities will contain representations and warranties,   
events of default and covenants typical for such types of facilities (subject to
materiality limitations, baskets, carve-outs and grace periods, as applicable,  
to be negotiated).                                                              

SENIOR SUBORDINATED NOTES                                               

Michael Foods expects that it also will issue $200 million of senior    
subordinated notes. The interest rate and other terms of the senior subordinated
notes will depend upon interest rate and market conditions at the time of their 
issuance. However, it is anticipated that the senior subordinated notes will    
have the following features:                                                    

- a maturity of 10 years from the issue date;                           

- be unsecured obligations and rank equally with all unsecured senior   
subordinated indebtedness of Michael Foods;                         

- interest will be paid in cash, semi-annually;                         

    - be subordinated to any senior indebtedness of Michael Foods, including the
senior secured credit facilities; and                               

 - be guaranteed by all domestic and foreign subsidiaries of Michael Foods
which guarantee the senior secured credit facilities.               

  Michael Foods expects that the senior subordinated notes also will contain
covenants that are customary for this type of financing, including, without     
limitation, restrictions on dividends, stock repurchases, liens, indebtedness,  
affiliate transactions, asset sales and mergers. It is expected that the senior 
subordinated notes will be issued in a private offering to be consummated prior 
to or concurrently with the merger. If all or any portion of the $200 million of
senior subordinated notes offering is not completed due to then current market  
conditions, the bank commitment letter contains a bridge loan commitment from   
Banc of America Bridge LLC, to purchase up to $200 million of bridge notes to   
provide this portion of the merger financing.                                   

BRIDGE NOTES                                                            

  The bridge notes, which will be issued by Michael Foods if the offering of
$200 million of senior subordinated notes is not completed on or prior to the   
closing of the merger, generally will have the same terms as the senior         
subordinated notes and terms customarily found in bridge facilities including   
certain covenants similar to, but less restrictive than, those in the senior    
secured facilities. In addition, the bridge notes will be redeemed with 100% of 
the net proceeds from the sale of any subordinated debt securities of Michael   
Foods at par plus accrued and unpaid interest to the date of redemption and the 
availability of the bridge notes will be subject to the satisfaction of         
conditions similar to those described above for the senior secured credit       
facilities. If issued, the bridge notes may be replaced by the sale of          
subordinated debt securities of Michael Foods after the closing of the merger.  

REPAYMENT OF INDEBTEDNESS                                                       

Michael Foods intends to repay the indebtedness incurred to effect the  
merger through cash flow from operations. There are no other specific plans or  
arrangements to refinance or repay the loans.                                   

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MATERIAL FEDERAL INCOME TAX CONSEQUENCES                                        

The following summary of certain United States federal income tax       
consequences relating to the merger is based upon laws, regulations and         
decisions currently in effect, all of which are subject to change, possibly with
retroactive effect, or possible differing interpretations. This summary may not 
be fully applicable to persons in special tax situations, such as financial     
institutions, insurance companies, tax-exempt entities, regulated investment    
companies, dealers in securities or currencies, persons who acquired shares of  
Michael Foods common stock as part of a hedge, "straddle," conversion           
transaction or other integrated transaction, non-U.S. individuals and entities, 
persons who hold Michael Foods common stock through a partnership or other      
pass-through entity, persons holding Michael Foods common stock pursuant to the 
exercise of employee stock options or otherwise as compensation, persons whose  
interests in Michael Foods are not completely terminated in the merger, or      
persons exercising dissenters' rights. In addition, this summary does not       
address the application of any foreign tax laws or tax laws of any state or     
political subdivision of the United States.                                     

This summary is not exhaustive and may not address your individual      
circumstances. You should consult your own tax advisor concerning the           
application of United States federal income tax laws and the application of     
state, local and foreign income tax laws to your own situation.                 

  The receipt of cash for shares of Michael Foods common stock in the merger
will be a taxable transaction for federal income tax purposes under the Internal
Revenue Code of 1986 and also may be a taxable transaction under applicable     
state, local, foreign and other tax laws.                                       

  For United States federal income tax purposes, a Michael Foods shareholder
which receives only cash in exchange for shares of Michael Foods common stock   
will generally recognize gain or loss equal to the difference between the amount
of cash received and the shareholder's tax basis in the shares of Michael Foods 
common stock surrendered. Gain or loss will be capital gain or loss if the      
shares of Michael Foods common stock constitute capital assets in the hands of  
the exchanging holder. The capital gain or loss will be long-term capital gain  
or loss if the shares of Michael Foods common stock surrendered in the merger   
have been held for more than one year at the time of the merger. Under current  
law, net capital gains recognized by an individual are taxable at a maximum     
marginal federal rate of 20 percent or, in the case of a share that has been    
held for one year or less, will be subject to tax at ordinary income rates.     
There are certain limitations on the deductibility of any loss recognized under 
the exchange of shares of Michael Foods common stock for cash.                  

 The tax consequences described in the immediately preceding paragraph may
not apply to a Michael Foods shareholder which, immediately after the merger,   
owns directly or is treated as owning constructively, pursuant to the           
attribution rules of Section 318 of the Internal Revenue Code of 1986, any      
shares of Michael Foods common stock. The cash received by such shareholder may,
in some circumstances, be treated as ordinary dividend income.                  

 Payments of cash to a Michael Foods shareholder in exchange for shares of
Michael Foods common stock owned by the shareholder may be subject to a backup  
withholding tax at a rate of 31%, unless the shareholder:                       

- is a corporation or comes within certain other exempt categories; or  

   - provides a correct taxpayer identification number to the payer, certifies
      as to no loss of exemption from backup withholding, and otherwise complies
with the applicable requirements of the backup withholding rules.   

   A shareholder who does not provide a correct taxpayer identification number
may be subject to penalties imposed by the Internal Revenue Service. Any backup 
withholding tax collected does not constitute additional tax and is creditable  
against the shareholder's United States federal income tax liability, provided  
that certain conditions are met.                                                

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ACCOUNTING TREATMENT                                                            

The merger is expected to be accounted for under the purchase method of 
accounting. Under purchase accounting principles, Michael Foods will record an  
intangible asset equal to the excess, if any, of the purchase price paid by     
Protein Acquisition in the merger over the net fair market value allocated to   
the identifiable assets and liabilities of Michael Foods. Such excess is        
referred to as goodwill. This will result in substantial amortization charges to
the consolidated income of Michael Foods over the useful lives of those assets. 

RIGHTS OF DISSENTING SHAREHOLDERS                                               

   THE FOLLOWING SUMMARY OF THE APPLICABLE PROVISIONS OF SECTIONS 302A.471 AND
302A.473 OF THE MINNESOTA BUSINESS CORPORATION ACT IS NOT INTENDED TO BE A      
COMPLETE STATEMENT OF SUCH PROVISIONS AND IS QUALIFIED IN ITS ENTIRETY, BY      
REFERENCE TO SUCH SECTIONS, THE FULL TEXTS OF WHICH ARE ATTACHED AS ANNEX C TO  
THIS DOCUMENT. THESE SECTIONS SHOULD BE REVIEWED CAREFULLY BY ANY MICHAEL FOODS 
SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS' RIGHTS OR WHO WISHES TO PRESERVE 
THE RIGHT TO DO SO, SINCE FAILURE TO COMPLY WITH THE STATUTORY PROCEDURES       
SUMMARIZED BELOW WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS. ANY HOLDER WHO  
FORFEITS HIS OR HER DISSENTERS' RIGHTS BY FAILURE TO FOLLOW THESE PROCEDURES    
WILL THEN RECEIVE THE MERGER CONSIDERATION DESCRIBED IN THIS DOCUMENT.          

The merger agreement constitutes a plan of merger for which shareholder 
approval is required under the Minnesota Business Corporation Act. Under        
Sections 302A.471 and 302A.473 of the MBCA, holders of Michael Foods common     
stock will have the right, by fully complying with the applicable provisions of 
Sections 302A.471 and 302A.473, to dissent with respect to the merger and to    
obtain payment in cash of the "fair value" of their shares of Michael Foods     
common stock after the merger is completed. The term "fair value" means the     
value of the shares of Michael Foods common stock immediately before the        
effective time.                                                                 

 All references in Sections 302A.471 and 302A.473 and in this summary to a
"shareholder" are to a record holder of the shares of Michael Foods common stock
as to which dissenters' rights are asserted. A person having beneficial         
ownership of shares of Michael Foods common stock that are held of record in the
name of another person, such as a broker, nominee, trustee or custodian, must   
act promptly to cause the record holder to follow the steps summarized below    
properly and in a timely manner in order to perfect whatever dissenters' rights 
such beneficial owner may have.                                                 

    Shareholders of record who desire to exercise their dissenters' rights under
the MBCA must satisfy all of the following conditions:                          

- Before the Michael Foods special meeting, deliver a written notice of 
     intent to demand fair value for shares to the Secretary of Michael Foods,
 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota, 55416. The
     written demand should specify the shareholder's name and mailing address,
     the number of shares owned and that the shareholder intends to demand the
      value of his or her shares. This written demand must be in addition to and
separate from any proxy or vote against the merger. Voting against, 
abstaining from voting or failing to vote on the merger does not    
constitute a demand for appraisal within the meaning of the MBCA.   

- Michael Foods' shareholders that elect to exercise their dissenters'  
rights under the MBCA must not vote for adoption of the merger. A   
  shareholder's failure to vote against the merger will not constitute a
    waiver of dissenters' rights. However, if a shareholder returns a signed
proxy but does not specify a vote against adoption of the merger or 
     direction to abstain, the proxy will be voted for adoption of the merger,
which will have the effect of waiving that shareholder's dissenters'
rights.                                                             

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  - Michael Foods' shareholders may not assert dissenters' rights as to less
than all of the shares registered in such holder's name except where
     certain shares are beneficially owned by another person but registered in
     such holder's name. If a record owner, such as a broker, nominee, trustee
     or custodian, wishes to dissent with respect to shares beneficially owned
   by another person, such shareholder must dissent with respect to all of
      such shares and must disclose the name and address of the beneficial owner
on whose behalf the dissent is made. A beneficial owner of shares of
     Michael Foods common stock who is not the record owner of such shares may
assert dissenters' rights as to shares held on such person's behalf,
provided that such beneficial owner submits a written consent of the
record owner to Michael Foods at or before the time such rights are 
asserted.                                                           

After approval of the merger by the shareholders at the Michael Foods   
special meeting, the surviving corporation will send a written notice to each   
shareholder who filed a written demand for dissenters' rights and who did not   
vote in favor of the merger. The notice will contain the following information: 

 - the address to which the shareholder must send a demand for payment and
   the stock certificates in order to obtain payment and the date by which
they must be received;                                              

- a form to be used to certify the date on which the shareholder, or the
   beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and            

 - a copy of Sections 302A.471 and 302A.473 of the MBCA and a copy of this
     summary describing the procedures to be followed in asserting dissenters'
rights.                                                             

In order to receive fair value for his or her shares, a dissenting      
shareholder must, within 30 days after the date the notice from the surviving   
corporation was given, send his or her stock certificates, and all other        
information specified in the notice, to the address identified in such notice. A
dissenting shareholder will retain all rights as a shareholder until the        
effective time. After a valid demand for payment and the related stock          
certificates and other information are received, or after the effective time,   
whichever is later, the surviving corporation will remit to each dissenting     
shareholder who has complied with statutory requirements the amount that the    
surviving corporation estimates to be the fair value of such shareholder's      
shares, with interest commencing five days after the effective time at a rate   
prescribed by statute. Remittance will be accompanied by the surviving          
corporation's closing balance sheet and statement of income for a fiscal year   
ending not more than 16 months before the effective time, together with the     
latest available interim financial data, an estimate of the fair value of the   
shareholder's shares and a brief description of the method used to reach the    
estimate, a brief description of the procedure to be followed if such holder is 
demanding supplemental payment and copies of Sections 302A.471 and 302A.473 of  
the MBCA.                                                                       

If the dissenting shareholder believes that the amount remitted by the  
surviving corporation is less than the fair value of such holder's shares, plus 
interest, the shareholder may give written notice to the surviving corporation  
of such holder's own estimate of the fair value of the shares, plus interest,   
within 30 days after the mailing date of the remittance and demand payment of   
the difference. Such notice must be delivered to the executive offices of the   
surviving corporation. A shareholder who fails to give such written notice      
within this time period is entitled only to the amount remitted by the surviving
corporation.                                                                    

Within 60 days after receipt of a demand for supplemental payment, the  
surviving corporation must either pay the shareholder the amount demanded or    
agreed to by such shareholder after discussion with the surviving corporation or
petition a court for the determination of the fair value of the shares, plus    
interest. The petition must name as parties all shareholders who have demanded  
supplemental payment and have not reached an agreement with the surviving       
corporation. The court, after determining that the shareholder or shareholders  
in question have complied with all statutory requirements, may use any valuation
method or combination of methods it deems appropriate to use, whether or not    
used by the surviving corporation or the dissenting shareholder, and may appoint
appraisers to recommend the amount of the fair value of the shares. The court's 
determination will be binding on all Michael Foods shareholders                 

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who properly exercised dissenters' rights and did not agree with the surviving  
corporation as to the fair value of the shares. Dissenting shareholders are     
entitled to judgment for the amount by which the court-determined fair value per
share, plus interest, exceeds the amount per share, plus interest, remitted to  
the shareholders by the surviving corporation. The shareholders shall not be    
liable to the surviving corporation for any amounts paid by the surviving       
corporation which exceed the fair value of the shares as determined by the      
court, plus interest. The costs and expenses of such a proceeding, including the
expenses and compensation of any appraisers, will be determined by the court and
assessed against the surviving corporation, except that the court may, in its   
discretion, assess part or all of those costs and expenses against any          
shareholder whose action in demanding supplemental payment is found to be       
arbitrary, vexatious or not in good faith. The court may award fees and expenses
to an attorney for the dissenting shareholders out of the amount, if any,       
awarded to such shareholders. Fees and expenses of experts or attorneys also may
be assessed against any person who acted arbitrarily, vexatiously or not in good
faith in bringing the proceeding.                                               

   The surviving corporation may withhold the remittance of the estimated fair
value, plus interest, for any shares owned by any person who was not a          
shareholder or who is dissenting on behalf of a person who was not a beneficial 
owner on December 21, 2000, the date on which the proposed merger was first     
announced to the public (the "Public Announcement Date"). The surviving         
corporation will forward to any such dissenting shareholder who has complied    
with all requirements in exercising dissenters' rights the notice and all other 
materials sent after shareholder approval of the merger to all shareholders who 
have properly exercised dissenters' rights, together with a statement of the    
reason for withholding the remittance and an offer to pay the dissenting        
shareholder the amount listed in the materials if the shareholder agrees to     
accept that amount in full satisfaction. The shareholder may decline this offer 
and demand payment by following the same procedure as that described for demand 
of supplemental payment by shareholders who owned their shares as of the Public 
Announcement Date. Any shareholder who did not own shares on the Public         
Announcement Date and who fails properly to demand payment will be entitled only
to the amount offered by the surviving corporation. Upon proper demand by any   
such shareholder, rules and procedures applicable in connection with receipt by 
the surviving corporation of the demand for supplemental payment given by a     
dissenting shareholder who owned shares on the Public Announcement Date also    
will apply to any shareholder properly giving a demand but who did not own      
shares of record or beneficially on the Public Announcement Date, except that   
any such shareholder is not entitled to receive any remittance from the         
surviving corporation until the fair value of the shares, plus interest, has    
been determined pursuant to such rules and procedures.                          

  Shareholders considering exercising dissenters' rights should bear in mind
that the fair value of their shares determined under Sections 302A.471 and      
302A.473 of the MBCA could be more than, the same as or, in certain             
circumstances, less than the consideration they would receive pursuant to the   
merger agreement if they do not seek appraisal of their shares.                 

ESTIMATED FEES AND EXPENSES                                                     

 Estimated fees and expenses to be incurred by Michael Foods in connection
with the merger are approximately as follows:                                   

                                                                [Download Table]
                                                                           
Financing Fees and Expenses.................................    $21,400,000
Advisory Fees and Expenses..................................     16,110,000
Legal, Accounting and Consulting Fees and Expenses..........      5,000,000
Depositary and Paying Agent Fees and Expenses...............         30,000
SEC Filing Fee..............................................        114,149
Printing and Mailing Costs..................................        130,000
Other Regulatory Filing Fees................................         45,000
Miscellaneous Expenses......................................        170,851
                                                              -------------
    Total...................................................    $43,000,000

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   Michael Foods, as the surviving company, will be responsible for all of the
foregoing fees and expenses if the merger occurs. If the merger is not          
consummated, each of Michael Foods, on the one hand, and Vestar, Marathon,      
M-Foods Holdings and Protein Acquisition on the other, would pay its own fees   
and expenses, provided that Michael Foods would be obligated under certain      
circumstances to reimburse M-Foods Holdings and Protein Acquisition for its     
expenses or to pay a termination fee. See "THE MERGER AGREEMENT--Termination Fee
and Expenses."                                                                  

PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS                                    

No provision has been made to grant unaffiliated shareholders of Michael
Foods access to the corporate files of Michael Foods or any other party to the  
merger or to obtain counsel or appraisal services at the expense of Michael     
Foods or any other such party.                                                  

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THE MERGER AGREEMENT

 The following is a summary of the material terms of the merger agreement,
and is qualified in its entirety by reference to the merger agreement, a copy of
which is attached as Annex A to this proxy statement. You should read the merger
agreement because it, and not this proxy statement, is the legal document that  
governs the merger.                                                             

STRUCTURE OF THE MERGER                                                         

At the close of the merger, Protein Acquisition will merge with and into
Michael Foods and the separate corporate existence of Protein Acquisition will  
end. Michael Foods will be the surviving corporation in the merger and will     
continue to be a Minnesota corporation after the merger.                        

The articles of incorporation of Michael Foods, as amended and restated 
pursuant to the merger agreement, and the bylaws of Protein Acquisition, as in  
effect immediately prior to the close of the merger, will be the articles of    
incorporation and bylaws of the surviving corporation. The directors of Protein 
Acquisition immediately prior to the close of the merger will, from and after   
the close of the merger, be the directors of the surviving corporation, until   
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified. The officers of Michael Foods immediately prior 
to the close of the merger will, from and after the close of the merger, be the 
officers of the surviving corporation, until the earlier of their resignation or
removal or otherwise ceasing to be an officer.                                  

WHEN THE MERGER BECOMES EFFECTIVE                                               

    The parties to the merger agreement will file with the Secretary of State of
the State of Minnesota the appropriate articles of merger or other appropriate  
documents on or before the fourth business day after the satisfaction or waiver 
of the closing conditions stated in the merger agreement, unless another date is
agreed to in writing by the parties. The merger will become effective at the    
time when the articles of merger or other appropriate documents have been filed 
with the Secretary of State of the State of Minnesota or at such other later    
time as the parties agree upon and set forth in the articles of merger or other 
appropriate documents.                                                          

EFFECT OF THE MERGER ON THE CAPITAL STOCK AND STOCK OPTIONS OF MICHAEL FOODS AND
PROTEIN ACQUISITION                                                         

Following the completion of the transactions set forth in the management
stock purchase and unit subscription agreements, the stock purchase and unit    
subscription agreement and the stock purchase agreement (see "SPECIAL           
FACTORS--Interests of Certain Persons in the Merger"), at the close of the      
merger:                                                                         

- each share of Michael Foods common stock issued and outstanding       
  immediately prior to the close of the merger, other than the shares of
Michael Foods common stock owned by Michael Foods or any direct or  
    indirect wholly owned subsidiary of Michael Foods, the shares of Michael
     Foods common stock owned by Protein Acquisition and the shares of Michael
     Foods common stock held by the dissenting shareholders, will be converted
into the right to receive an amount equal to $30.10 in cash;        

- each share of Michael Foods common stock issued and outstanding       
immediately prior to the close of the merger and owned by Protein   
  Acquisition or by Michael Foods or any direct or indirect wholly owned
  subsidiary of Michael Foods will be canceled, extinguished and retired
without any payment; and                                            

   - each share of capital stock of Protein Acquisition issued and outstanding
   immediately prior to the close of the merger will be converted into one
 share of common stock of Michael Foods, as the surviving corporation.

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Each option to purchase Michael Foods common stock that is outstanding  
immediately prior to the close of the merger will become immediately vested and 
exercisable and each holder of an option will have the right to receive from    
Michael Foods, as the surviving corporation, a payment, net of any applicable   
withholding taxes, in an aggregate amount equal to the difference between $30.10
per share less the exercise price per share applicable to such option for all   
Michael Foods common stock subject to the option. Options with an exercise price
per share equal to or greater than $30.10 will be canceled without any payment. 

PAYMENT FOR MICHAEL FOODS COMMON STOCK IN THE MERGER                            

At or before the close of the merger, M-Foods Holdings will deposit, or 
cause Protein Acquisition to deposit, in trust for the benefit of the holders of
Michael Foods common stock with a bank or trust company, as paying agent,       
designated by M-Foods Holdings and acceptable to Michael Foods, sufficient cash 
to pay to the holders of Michael Foods common stock the amounts due to them     
under the merger agreement. No transfers of common stock of the surviving       
corporation will be made on the stock transfer books of Michael Foods after the 
close of the merger, except in connection with the merger.                      

    Promptly after the closing of the merger, the paying agent will mail to each
record holder, excluding, if applicable, Michael Foods or any direct or indirect
wholly owned subsidiary of Michael Foods, Protein Acquisition, and dissenting   
shareholders, of Michael Foods common stock, a notice and letter of transmittal 
and instructions for use in effecting the surrender of all Michael Foods common 
stock certificates held by each record holder in exchange for payment of $30.10 
for each share of Michael Foods common stock owned. YOU SHOULD NOT SEND IN YOUR 
MICHAEL FOODS COMMON STOCK CERTIFICATES UNTIL YOU RECEIVE THE LETTER OF         
TRANSMITTAL.                                                                    

    If payment is to be made to a person other than the person in whose name the
Michael Foods common stock certificate surrendered is registered, it will be a  
condition of payment that the certificate so surrendered be properly endorsed or
otherwise in proper form for transfer and that the person requesting payment pay
any transfer or other taxes required by reason of the payment to a person other 
than the registered holder of the certificate surrendered of the amount due to  
Michael Foods common stock holders under the merger agreement, or that such     
person establish to the satisfaction of the paying agent that any such taxes    
have been paid or are not applicable.                                           

Any portion of the payment fund held by the paying agent that remains   
unclaimed by the shareholders of Michael Foods 180 days after the close of the  
merger will be transferred to Michael Foods upon demand, and any shareholders of
Michael Foods who have not properly surrendered their stock certificates will   
thereafter look only to Michael Foods for payment of their claim for the amount 
due to them under the merger agreement for their shares of Michael Foods common 
stock.                                                                          

DISSENTERS' RIGHTS                                                              

   The merger agreement provides that any shares of Michael Foods common stock
issued and outstanding immediately prior to the close of the merger held by a   
holder who has not voted in favor of the merger, or consented to the merger in  
writing, and who has demanded and perfected his or her right to dissent from the
merger and to be paid the fair value of his or her shares in accordance with    
Sections 302A.471 and 302A.473 of the MBCA, will not be converted into a right  
to receive cash, and such holder will be entitled to only those rights as are   
granted by the MBCA. "See SPECIAL FACTORS--Rights of Dissenting Shareholders."  
If, after the close of the merger, the holder fails to perfect or withdraws or  
otherwise loses his right to dissent, such shares of Michael Foods common stock 
will be treated as if they had been converted as of the close of the merger into
the right to receive cash, without interest thereon.                            

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REPRESENTATIONS AND WARRANTIES                                                  

The merger agreement contains representations and warranties of each of 
Michael Foods, M-Foods Holdings and Protein Acquisition as to, among other      
things and subject to certain exceptions as set forth in the merger agreement:  

- the corporate organization, existence and good standing of each       
(including, as to Michael Foods, as such apply to its subsidiaries);

- the compliance of each with its charter and bylaws;                   

   - the corporate power and authority of each to execute, deliver and perform
the merger agreement and to complete the merger agreement;          

- the absence of any required governmental approvals other than those   
specified in the merger agreement;                                  

- the filings with the SEC of each in connection with the merger; and   

- the absence of any fees owed to brokers in connection with the merger.

    The merger agreement also contains representations and warranties of Michael
Foods as to, among other things and subject to certain exceptions as set forth  
in the merger agreement:                                                        

- the capitalization of Michael Foods and its subsidiaries;             

  - the accuracy of Michael Foods' financial statements and filings with the
SEC;                                                                

    - the absence of violations by Michael Foods of any foreign or domestic laws
      or regulations, including those governing the production of food products;

- the absence of litigation, arbitration or other action against Michael
Foods or its subsidiaries;                                          

- the payment by Michael Foods and its subsidiaries of taxes due and the
filing of tax returns;                                              

- the absence of certain changes since September 30, 2000;              

- the required vote of Michael Foods' shareholders with respect to the  
merger agreement;                                                   

- the real property owned or leased by Michael Foods;                   

- Michael Foods' employee benefit plans and other agreements with its   
employees;                                                          

- the intellectual property owned or otherwise used by Michael Foods;   

- environmental matters and compliance with environmental laws;         

- the insurance policies owned by Michael Foods and its subsidiaries;   

   - the validity and enforceability of Michael Foods', and its subsidiaries',
material contracts;                                                 

- the merger agreement's compliance or exemption under the Minnesota    
anti-takeover statute; and                                          

- the opinion of Michael Foods' financial advisor.                      

    The merger agreement also contains representations and warranties of M-Foods
Holdings and Protein Acquisition as to, among other things and subject to       
certain exceptions as set forth in the merger agreement:                        

 - the financing arrangements of M-Foods Holdings and Protein Acquisition;

- the arrangements with certain members of Michael Foods' management    
relating to the merger; and                                         

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- the ownership of Protein Acquisition, and the absence of any previous 
business conduct by M-Foods Holdings or Protein Acquisition.        

Some of the representations and warranties in the merger agreement are  
qualified by a "Material Adverse Effect" clause. "Material Adverse Effect"      
means, with respect to any entity, any adverse change, circumstance or effect   
that, individually or aggregated with other changes, circumstances and effects, 
is materially adverse to business operations, cash flow, assets, liabilities,   
condition (financial or otherwise) or results of operations of such entity and  
its subsidiaries taken as whole.                                                

AGREEMENTS RELATING TO CONDUCT OF BUSINESS                                      

The merger agreement provides that, except as permitted by the merger   
agreement or in writing by M-Foods Holdings, during the period from the signing 
of the merger agreement to the close of the merger, Michael Foods, among other  
things:                                                                         

- will, and will cause its subsidiaries to, carry on their respective   
businesses in the ordinary course;                                  

  - will not, and will not permit any of its subsidiaries to, declare or pay
 any dividends on or make other distributions in respect of any of its
capital stock, except in the ordinary course;                       

  - will not, and will not permit any of its subsidiaries to, split, combine
or reclassify any of its capital stock;                             

- will not, and will not permit any of its subsidiaries to, repurchase, 
redeem or otherwise acquire any shares of its capital stock or any  
    securities convertible into or exercisable for any shares of its capital
stock;                                                              

    - will not, and will not permit any of its subsidiaries to, issue any shares
of its capital stock of any class, or any debt or other securities  
    convertible into shares of its capital stock, other than as permitted in
the merger agreement;                                               

    - will not, and will not permit any of its subsidiaries to, amend or propose
      to amend their respective charter documents and bylaws, except as required
by the merger agreement, law or the Nasdaq;                         

- will not, and will not permit any of its subsidiaries to, incur       
indebtedness other than under existing working capital facilities;  

- will not, and will not permit any of its subsidiaries to, make capital
expenditures in excess of $32,000,000 prior to the closing date;    

- will not, and will not permit any of its subsidiaries to, settle or   
      compromise any litigation, other than settlements involving amounts not in
excess of $500,000 over the amounts fully recoverable from insurers;

 - will not, and will not permit any of its subsidiaries to, enter into or
amend, modify, renew or terminate any material agreement or material
transaction; and                                                    

- will not, and will not permit any of its subsidiaries to, establish or
    amend Michael Foods' benefit plans, increase the compensation payable to
 any of its directors or officers, except to the extent required under
   agreements or in the ordinary course, or grant or modify any severance,
     stay, termination, bonus or other incentive arrangement, unless otherwise
permitted by the merger agreement.                                  

OTHER AGREEMENTS                                                                

  COOPERATION.  The merger agreement provides that each of Michael Foods and
M-Foods Holdings must confer on a regular basis with the other party, advise the
other party in writing of any representation or warranty made in the merger     
agreement becoming untrue, inform the other of the failure by it to satisfy     

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any covenant contained in the merger agreement and file all reports required to 
be filed with the SEC. The merger agreement also provides that Michael Foods    
will, and will cause its subsidiaries to, provide all cooperation reasonably    
necessary in connection with the arrangement, at or after the close of the      
merger, of the financing to be used in connection with the transactions         
described in the merger agreement.                                              

    APPROVALS AND CONSENTS.  The merger agreement provides that, each of Michael
Foods, M-Foods Holdings and Protein Acquisition will cooperate with each other  
and use, and will cause their respective subsidiaries to use, its reasonable    
best efforts to take or cause to be taken all actions, and do or cause to be    
done all things, necessary, proper or advisable on their part under the merger  
agreement and applicable laws to make effective the merger and the other        
transactions described in the merger agreement, including (1) preparing and     
filing as promptly as practicable all documentation to effect all necessary     
applications, notices, petitions, filings, tax ruling requests and other        
documents and to obtain as promptly as practicable all consents, waivers,       
licenses, orders, registrations, approvals, permits, tax rulings and            
authorizations necessary or advisable to be obtained from any third party and/or
any governmental entity in order to consummate the merger or any of the         
transactions described in the merger agreement and (2) taking all reasonable    
steps as may be necessary to obtain all such approvals.                         

 SHAREHOLDERS MEETING.  The merger agreement states that Michael Foods, as
soon as practicable following the signing of the merger agreement, will duly    
call, give notice of, convene and hold a special meeting of its shareholders for
the purpose of considering and taking action upon the approval of the merger and
the adoption of the merger agreement. Michael Foods will recommend to its       
shareholders that they adopt the merger agreement. However, Michael Foods may   
withdraw or modify its recommendation, in accordance with the terms of the      
merger agreement, in the event it receives certain superior acquisition         
proposals from other parties. M-Foods Holdings and Protein Acquisition will vote
or cause to be voted all of the shares of Michael Foods common stock owned of   
record or beneficially owned by M-Foods Holdings or any of its subsidiaries in  
favor of the merger agreement and the transactions described therein.           

    PROXY STATEMENT.  The merger agreement provides that, as soon as practicable
following the signing of the merger agreement, Michael Foods will file with the 
SEC, and will use its reasonable good faith efforts to have a proxy statement   
cleared by the SEC and mailed to Michael Foods' shareholders. The proxy         
statement will contain statements of the Michael Foods board that the merger    
agreement and the transactions described therein are fair to and in the best    
interests of the shareholders, that the merger and the merger agreement are     
advisable and that it unanimously recommends that the shareholders vote in favor
of the approval of the merger and the adoption of the merger agreement. The     
proxy statement also will contain the written opinion of U.S. Bancorp Piper     
Jaffray and will comply in all material respects with the federal securities    
laws.                                                                           

 M-Foods Holdings and Protein Acquisition and Michael Foods have agreed to
cooperate with each other in the preparation of the proxy statement. For        
example, each of M-Foods Holdings and Protein Acquisition is obliged to furnish 
to Michael Foods the information relating to it required by the Exchange Act and
the rules and regulations promulgated thereunder to be set forth in the proxy or
information statement. Michael Foods has agreed to use its best efforts, after  
consultation with M-Foods Holdings and Protein Acquisition, to respond promptly 
to any comments made by the SEC with respect to the proxy or information        
statement and any preliminary version thereof filed by it and cause such proxy  
or information statement to be mailed to Michael Foods' shareholders at the     
earliest practicable time.                                                      

SCHEDULE 13E.  Concurrent with the filing of the proxy or information   
statement, the merger agreement states that M-Foods Holdings and Protein        
Acquisition, together with Michael Foods, will prepare and file with the SEC a  
Rule 13E-3 Transaction Statement on Schedule 13E with respect to the            
transactions contemplated by the merger agreement. Michael Foods will furnish to
M-Foods Holdings all information concerning Michael Foods as may reasonably be  
requested in connection with the preparation of the Schedule 13E-3.             

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   ACCESS TO INFORMATION.  Under the merger agreement, upon reasonable notice,
each of Michael Foods and M-Foods Holdings will, and will cause their respective
subsidiaries to, afford to the officers, employees, accountants, counsel,       
financial advisors and other representatives of the other party reasonable      
access during normal business hours, during the period prior to the close of the
merger, to all its properties, books, contracts, commitments and records and its
officers, employees and representatives, and, during this period, each of       
Michael Foods and M-Foods Holdings will, and will cause its subsidiaries to,    
furnish promptly to the other party (1) a copy of each report, schedule,        
registration statement and other document filed, published, announced or        
received by it during such period pursuant to the requirements of federal or    
state securities laws and (2) all other information concerning its business,    
properties and personnel as the other party may reasonably request.             

    NON-SOLICITATION OF COMPETING PROPOSALS.  The merger agreement provides that
neither Michael Foods nor any of its subsidiaries will, whether directly or     
indirectly, (1) solicit, initiate, knowingly encourage, including by way of     
providing non-public information, or take any action knowingly to facilitate the
submission of any inquiries, proposals or offers from any person, other than    
M-Foods Holdings and its affiliates, other than the transactions described in   
the merger agreement, that constitute, or are reasonably likely to lead to an   
"acquisition proposal," as defined below or (2) enter into or participate in any
discussions or negotiations regarding an acquisition proposal; provided that,   
if, at any time during the period following the signing of the merger agreement 
and prior to the close of the merger, Michael Foods receives a proposal or offer
that was not solicited by Michael Foods, and that the Michael Foods board       
determines in good faith (after consultation with its outside legal counsel and 
financial advisors) is a "superior proposal," as defined below (but ignoring    
clause (1) of the definition for this paragraph only), the Michael Foods board  
may (1) furnish information with respect to Michael Foods and its subsidiaries  
to the person making such proposal or offer pursuant to a confidentiality       
agreement on terms not less favorable to Michael Foods than the confidentiality 
agreement between Michael Foods and Vestar and (2) participate in discussions or
negotiations regarding such proposal or offer.                                  

The merger agreement requires that Michael Foods notify M-Foods Holdings
promptly after receipt by Michael Foods of any acquisition proposal or any      
inquiry regarding the making of an acquisition proposal or any request for      
non-public information in connection with an acquisition proposal or for access 
to the properties, books or records of Michael Foods or any of its subsidiaries 
by any person that informs Michael Foods that it is considering making, or has  
made, an acquisition proposal. The notice will be made orally and in writing and
will indicate in reasonable detail the identity of the offeror and the terms and
conditions of the proposal, inquiry or contact.                                 

   Neither Michael Foods nor the Michael Foods board nor any committee thereof
may withdraw or modify, or propose to withdraw or modify, in any manner adverse 
to M-Foods Holdings, the approval or recommendation of the merger agreement or  
the merger, or propose publicly to approve or recommend an acquisition proposal,
unless the withdrawal or modification of such approval or recommendation or such
approval or recommendation is, in the good faith judgment of the Michael Foods  
board or a committee thereof (after consultation with its outside legal         
counsel), necessary to comply with its fiduciary obligations to Michael Foods'  
shareholders under applicable law. Nothing contained in the merger agreement    
prohibits Michael Foods or the Michael Foods board or any committee thereof from
taking and disclosing to its shareholders a position contemplated by Rule 14e-2 
and Rule 14d-9 promulgated under the Exchange Act or from making any disclosure 
to Michael Foods' shareholders if, in the good faith judgment of the Michael    
Foods board or such committee thereof (after consultation with its outside legal
counsel) the failure to make such disclosure would be inconsistent with its     
fiduciary duties to Michael Foods' shareholders or other obligations under      
applicable law.                                                                 

    Michael Foods agreed to immediately cease and cause its advisors, agents and
other intermediaries to cease any and all existing activities, discussions or   
negotiations with any parties conducted before the signing of the merger        
agreement with respect to the transactions described in the merger agreement,   
and will use its reasonable best efforts to cause any such parties in possession
of confidential information about                                               

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Michael Foods to return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of any such party.      

  As used in the merger agreement, the term "acquisition proposal" means any
inquiry, proposal or offer for (1) an acquisition or purchase of 10 percent or  
more of the consolidated assets of Michael Foods and its subsidiaries or of     
10 percent or more of any class of equity securities of Michael Foods or any of 
its subsidiaries, (2) any tender offer, including a self tender offer, or       
exchange offer that if consummated would result in any person beneficially      
owning 10 percent or more of any class of equity securities of Michael Foods or 
any subsidiaries or (3) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar 
transaction involving Michael Foods or any subsidiaries whose assets,           
individually or in the aggregate, constitute 10 percent or more of the          
consolidated assets of Michael Foods.                                           

As used in the merger agreement, the term "superior proposal" means a   
proposal regarding any of the transactions described in the definition of       
acquisition proposal, with all percentages included in the definition of the    
term "acquisition proposal" replaced with the words "all or substantially all"  
for purposes of the definition of superior proposal, with respect to which the  
Michael Foods board has concluded in good faith, after consultation with its    
outside legal counsel and financial advisor, (1) is reasonably likely to be     
completed, taking into account all legal, financial, regulatory and other       
aspects of the acquisition proposal and (2) would, if undertaken, result in a   
transaction more favorable to the shareholders from a financial point of view   
than the transactions described in the merger agreement.                        

   EMPLOYEE BENEFITS.  The merger agreement requires the surviving corporation
to maintain until the first anniversary of the closing of the merger, employee  
benefit plans and arrangements with overall employee benefits that are          
substantially comparable in the aggregate to the benefits provided by Michael   
Foods' benefit plans (as defined in the merger agreement) as of the signing of  
the merger agreement (not taking into account the value of any benefits under   
any Michael Foods benefit plans that are equity-based). For purposes of         
determining eligibility to participate or vesting where length of service is    
relevant under any employee benefit plan or arrangement of the surviving        
corporation, or any of its subsidiaries, employees of Michael Foods and its     
subsidiaries as of the close of the merger will receive service credit for      
service with Michael Foods and its subsidiaries to the same extent such service 
credit was granted under Michael Foods' benefit plans, subject to offsets for   
previously accrued benefits and no duplication of benefits. In addition, upon   
the close of the merger, each share award granted under the Michael Foods       
Executive Incentive Plan outstanding immediately prior to the close of the      
merger will automatically vest and each holder of a share award will have the   
right to receive from Michael Foods, as the surviving corporation, a cash       
payment equal to $30.10 for each share of Michael Foods common stock subject to 
such share award.                                                               

  FEES AND EXPENSES.  Whether or not the merger is consummated, all expenses
incurred in connection with the merger agreement and the transactions described 
therein will be paid by the party incurring such expenses, except (1) if the    
merger is consummated, the surviving corporation will pay all expenses of       
M-Foods Holdings, Protein Acquisition and the management investors incurred in  
connection with the merger and (2) as otherwise set forth in the termination    
expense provisions of the merger agreement.                                     

INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIABILITY INSURANCE.  The 
merger agreement provides that Michael Foods will, and from the closing of the  
merger, Michael Foods, as the surviving corporation will, maintain until the    
sixth anniversary of the close of the merger, the right to indemnification and  
exculpation of officers and directors provided for in the charter documents and 
bylaws of Michael Foods as in effect on the date of the merger agreement with   
respect to indemnification and exculpation for acts and omissions occurring     
prior to the close of the merger, including the transactions described in the   
merger agreement.                                                               

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 Until the sixth anniversary of the close of the merger, Michael Foods, as
the surviving corporation must maintain officers' and directors' liability      
insurance covering the officers and directors who are covered by Michael Foods' 
officers' and directors' liability insurance policies on December 21, 2000 with 
respect to actions and omissions occurring prior to the close of the merger, by 
obtaining tail coverage of such existing insurance policies on terms which are  
not less favorable than the terms of such insurance in effect for Michael Foods 
on December 21, 2000 and providing coverage only with respect to matters        
occurring prior to the close of the merger, to the extent that such tail        
coverage can be maintained at an annual cost to the surviving corporation of not
greater than 200% of the annual premium for Michael Foods' insurance policies in
effect on December 21, 2000 and, if such tail coverage cannot be so maintained  
at such cost, providing as much of such insurance as can be so maintained at a  
cost equal to 200% of the annual premium for Michael Foods' insurance policies. 

Michael Foods will and, from and after the close of the merger, Michael 
Foods, as the surviving corporation will, to the fullest extent permitted under 
applicable law and to the extent such person would have been indemnified under  
the articles of incorporation and bylaws of Michael Foods or any Michael Foods  
subsidiary as such documents were in effect on December 21, 2000, indemnify and 
hold harmless each present and former director and officer of Michael Foods or  
any Michael Foods subsidiary against any costs or expenses, together with such  
person's heirs, executors or administrators (including by advancing attorney's  
fees and expenses in advance of the final disposition of any claim, action,     
suit, proceeding or investigation to the fullest extent permitted by and subject
to the conditions of law), judgments, fines, losses, claims, damages,           
liabilities and amounts paid in settlement in connection with any pending,      
threatened or completed claim, action, suit, proceeding or investigation,       
whether civil, criminal, administrative or investigative, arising out of or     
pertaining to any action or omission based upon or arising from his or her      
capacity as an officer or director of Michael Foods or any Michael Foods        
subsidiary occurring prior to the close of the merger (including any claim,     
action, suit, proceeding or investigation arising out of or pertaining to the   
transactions contemplated by the merger agreement).                             

CONDITIONS TO COMPLETION OF THE MERGER                                          

Each of Michael Foods', M-Foods Holdings' and Protein Acquisition's     
obligation to complete the merger is conditioned on:                            

- the approval of the merger agreement and the transactions described   
      therein by the holders of shares of the capital stock of Michael Foods, as
required under the MBCA;                                            

- the expiration or termination of any waiting period, including any    
   extension thereof, applicable to the completion of the merger under the
HSR Act (as defined in the merger agreement); and                   

  - the absence of any temporary restraining order, preliminary or permanent
      injunction or other order issued by a United States federal or state court
    of competent jurisdiction having the effect of making the merger illegal
or otherwise prohibiting the transactions described in the merger   
agreement.                                                          

    The obligation of M-Foods Holdings and Protein Acquisition to consummate the
merger is subject to the satisfaction or waiver of the following additional     
conditions:                                                                     

- the representations and warranties of Michael Foods set forth in the  
merger agreement being true and correct as of the closing of the    
transactions described in the merger agreement;                     

- Michael Foods' performance of all obligations and compliance in all   
 material respects with all agreements or covenants to be performed or
complied with by Michael Foods under the merger agreement;          

  - the absence of any pending action or proceeding by a domestic federal or
     state governmental entity of competent jurisdiction, or any statute, rule
or regulation promulgated after December 21, 2000                   

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      which would have the effect of, (1) restraining or prohibiting the merger,
(2) prohibiting or restricting the ownership or operation by M-Foods
     Holdings (or any of its affiliates or subsidiaries) of a material portion
      of the business or assets of Michael Foods and its subsidiaries taken as a
whole, or compelling M-Foods Holdings (or any of its affiliates or  
  subsidiaries) to dispose of or hold separate a material portion of the
      business or assets of Michael Foods and its subsidiaries taken as a whole,
    (3) imposing material limitations on the ability of M-Foods Holdings (or
    any of its affiliates or subsidiaries) effectively to acquire or to hold
  or to exercise full rights of ownership of the shares of Michael Foods
      common stock, including, without limitation, the right to vote such shares
    purchased by M-Foods Holdings (or any of its affiliates or subsidiaries)
   on all matters properly presented to the shareholders of Michael Foods,
    (4) imposing any material limitations on the ability of M-Foods Holdings
    (or any of its affiliates or subsidiaries) effectively to control in any
material respect the business and operations of Michael Foods or    
(5) obtaining material damages from M-Foods Holdings or any of its  
      affiliates in connection with the making or consummation of the merger and
   there shall not be in effect any injunction, order, decree, judgment or
ruling issued by a United States federal or state court of competent
jurisdiction having any effect set forth in                         
clauses (1) through (5) above;                                      

- the receipt by Protein Acquisition of the proceeds of the financing   
contemplated by the commitment letters, as defined in the merger    
      agreement, on the terms and conditions set forth in the commitment letters
  and with other material terms satisfactory to M-Foods Holdings, in the
amounts necessary to effect the merger and pay all related fees and 
expenses; and                                                       

- the absence of any event or circumstance that has had or would be     
      reasonably likely to have a material adverse effect on Michael Foods since
the date of the merger agreement.                                   

  The obligation of Michael Foods to consummate the merger is subject to the
satisfaction or waiver of the following additional conditions:                  

- the representations and warranties of M-Foods Holdings and Protein    
      Acquisition set forth in the merger agreement being true and correct as of
  the closing of the transactions described in the merger agreement; and

    - M-Foods Holdings' and Protein Acquisition's performance of all obligations
    and compliance in all material respects with all agreements or covenants
to be performed or complied with by M-Foods Holdings and Protein    
Acquisition under the merger agreement.                             

TERMINATION OF THE MERGER AGREEMENT                                             

  The merger agreement may be terminated at any time prior to the closing of
the merger under the following circumstances:                                   

(a) Termination by either Michael Foods or M-Foods Holdings:            

      (1) by the mutual written consent of M-Foods Holdings and Michael Foods,
by action of their respective boards of directors;        

      (2) if any United States federal or state governmental entity shall have
 issued an order, decree or ruling or taken any other action
     permanently restraining, enjoining or otherwise prohibiting the
        transactions contemplated by the merger agreement, and such order,
decree, ruling or other action shall have become final and
           nonappealable; provided, however, that the party seeking to terminate
      the merger agreement shall have used its commercially reasonable
           efforts to remove or lift such order, decree, ruling or other action;

       (3) if the merger has not been consummated by May 31, 2001, provided that
           the party seeking to exercise such right is not then in breach in any
 material respect of any of its obligations under the merger
agreement; and                                            

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 (4) if, at a duly held shareholders meeting of Michael Foods or any
          adjournment thereof at which the merger agreement and the merger are
           voted upon, the requisite shareholder adoption and approval shall not
have been obtained.                                       

(b) Termination by M-Foods Holdings:                                    

(1) if Michael Foods or the Michael Foods board has (A) withdrawn,
       modified or amended in any respect adverse to M-Foods Holdings or
 Protein Acquisition any of its recommendations described in
          Section 4.1(a) of the merger agreement, (B) approved, recommended or
    entered into an agreement with respect to, or consummated, any
           acquisition proposal from a person other than M-Foods Holdings or any
          of its affiliates, (C) in response to the commencement of any tender
     offer or exchange offer for outstanding shares of Michael Foods
     common stock, not recommended rejection of such tender offer or
          exchange offer within ten (10) business days of commencement of such
      tender offer or exchange offer, or (D) resolved to do any of the
    foregoing or publicly announced its intention to do any of the
foregoing; or                                             

    (2) if (A) any covenant or agreement of Michael Foods contained in the
       merger agreement shall be materially breached, (B) any of Michael
   Foods' representations and warranties contained in the merger
       agreement shall have been inaccurate as of the date of the merger
          agreement such that the condition set forth in Section 5.2(a) of the
       merger agreement would not be satisfied (assuming that the phrase
           "date of this Agreement" is substituted for the phrase "closing date"
         contained in Section 5.2(a)) of the merger agreement, or (C) any of
           Michael Foods' representations and warranties contained in the merger
         agreement shall have become inaccurate after the date of the merger
          agreement such that the condition set forth in Section 5.2(a) of the
           merger agreement would not be satisfied, and any of the circumstances
       described in (A), (B) or (C) shall not have been cured by Michael
        Foods within twenty (20) days of receipt of written notice of such
circumstance.                                             

(c) Termination by Michael Foods:                                       

 (1) if (A) any covenant or agreement of M-Foods Holdings or Protein
           Acquisition contained in the merger agreement is materially breached,
          (B) any of the representations and warranties of M-Foods Holdings or
     Protein Acquisition contained in the merger agreement have been
     inaccurate as of the date of the merger agreement such that the
         condition set forth in Section 5.3(a) of the merger agreement would
         not be satisfied (assuming that the phrase "date of this agreement"
is substituted for the phrase "closing date" contained in 
Section 5.3(a)) of the merger agreement, or (C) any of the
   representations and warranties of M-Foods Holdings or Protein
          Acquisition contained in the merger agreement have become inaccurate
        after the date of the merger agreement such that the condition set
  forth in Section 5.3(a) of the merger agreement would not be
      satisfied, and any of the circumstances described in (A), (B) or
  (C) shall not have been cured by M-Foods Holdings or Protein
         Acquisition within twenty (20) days of receipt of written notice of
such circumstance; or                                     

    (2) if the Michael Foods board approves a superior proposal; provided,
  however, that (A) Michael Foods shall have complied with the
non-solicitation provisions of the merger agreement and   
           (B) concurrently with such termination, Michael Foods pays to M-Foods
      Holdings the termination fee (as defined below) less any expense
        payment (as defined below) previously paid and Michael Foods shall
      have provided M-Foods Holdings with at least five business days'
      advance notice of such termination and M-Foods Holdings does not
      make, within four (4) business days of receipt of Michael Foods'
         notification of its intention to terminate the merger agreement, an
        offer that the Michael Foods board determines, in good faith after
         consultation with its outside legal counsel and financial advisors,
           is at least as favorable to the shareholders of Michael Foods as such
superior proposal.                                        

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TERMINATION FEE AND EXPENSES                                                    

Michael Foods will, provided that neither M-Foods Holdings nor Protein  
Acquisition is then in material breach of its obligations under the merger      
agreement: (1) upon the termination of the merger agreement pursuant to (a)(4)  
above, promptly, but in any event no later than two business days following     
written notice thereof, pay to M-Foods Holdings and Protein Acquisition         
$5 million for its out-of-pocket expenses and fees or (2) upon the termination  
of the merger agreement pursuant to (b)(2) above, promptly, but in any event no 
later than two business days following written notice thereof, together with    
reasonable supporting documentation, reimburse M-Foods Holdings and Protein     
Acquisition in an amount up to $2.5 million for its out-of-pocket expenses and  
fees (either of the payments in clauses (1) and (2) of this paragraph being     
referred to as the "expense payment"). In the event that M-Foods Holdings is    
paid a termination fee, if not previously paid, the expense payment will not be 
paid.                                                                           

In the event that the merger agreement is terminated by M-Foods Holdings
pursuant to (b)(1) above, or by Michael Foods pursuant to (c)(2) above, Michael 
Foods will pay to M-Foods Holdings an amount equal to $20 million (the          
"termination fee"), less any expense payment previously paid.                   

    If all of the following events have occurred: (1)(A) the merger agreement is
terminated pursuant to (a)(3) above (other than on account of a failure of      
certain conditions stated in the merger agreement), (a)(4) above or (b)(2) above
and (B) and an acquisition proposal is publicly disclosed or publicly proposed  
to Michael Foods or its shareholders at any time on or after the date of the    
merger agreement but (x) in the case of a termination pursuant to (a)(3) above  
or (b)(2) above, prior to such termination, or (y) in the case of a termination 
pursuant to (a)(4) above, prior to or at the time of the special meeting of     
shareholders and (2) within 12 months of the date of any such termination,      
Michael Foods enters into a definitive agreement with respect to, or            
consummates, the acquisition proposal, as such term is defined and further      
qualified in the merger agreement, then Michael Foods will pay to M-Foods       
Holdings, an amount equal to the termination fee, less any expense payment      
previously paid.                                                                

MODIFICATION OR AMENDMENT TO THE MERGER AGREEMENT                               

The merger agreement may be amended in writing by Michael Foods, M-Foods
Holdings and Protein Acquisition thereto at any time before or after the        
adoption of the merger agreement by Michael Foods' shareholders, but, after any 
such adoption, no amendment will be made which by law or in accordance with the 
rules of the Nasdaq National Market requires further approval by such           
shareholders without such further approval.                                     

THE SPECIAL MEETING 

PURPOSE, TIME AND PLACE                                                         

    This proxy statement is furnished to you in connection with the solicitation
of proxies by the Michael Foods board of directors for the special meeting of   
shareholders to be held at 9:00 a.m., Minneapolis time, on [DAY OF WEEK],       
            , 2001, at             , Minneapolis, Minnesota, and any adjournment
or postponement thereof.                                                        

   At the special meeting, the shareholders of Michael Foods will consider and
vote upon a proposal to approve and adopt the merger agreement and the merger.  
The shareholders also will be asked to consider and vote upon such other        
business as may properly come before the special meeting.                       

THE BOARD, AFTER RECEIVING THE UNANIMOUS RECOMMENDATION OF THE SPECIAL  
COMMITTEE AND THE DISINTERESTED DIRECTORS COMMITTEE, HAS UNANIMOUSLY APPROVED   
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE   
MERGER, AND HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT   
ARE ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF MICHAEL FOODS            
SHAREHOLDERS, OTHER THAN THE CONTINUING INVESTORS. SEE "SPECIAL                 
FACTORS--RECOMMENDATION OF THE SPECIAL COMMITTEE, DISINTERESTED DIRECTORS       
COMMITTEE AND BOARD OF DIRECTORS; REASONS FOR THE MERGER; FAIRNESS OF THE       
MERGER."                                                                        

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RECORD DATE; VOTING RIGHTS                                                      

The Michael Foods board has fixed the close of business on             ,
2001 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the special meeting. Only the record holders of Michael     
Foods common stock on that date are entitled to vote at the special meeting. On 
the record date, there were             shares of Michael Foods common stock,   
par value $0.01 per share outstanding and entitled to vote at the special       
meeting held by approximately       shareholders of record. Each such share     
entitles the registered holder thereof to one vote.                             

QUORUM; REQUIRED VOTE                                                           

   The holders of a majority of the outstanding shares of Michael Foods common
stock entitled to vote must be present in person or represented by proxy at the 
Michael Foods special meeting in order for a quorum to be present and for       
business to be conducted. Michael Foods intends to count shares of Michael Foods
common stock present in person at the special meeting but not voting, and shares
of Michael Foods common stock for which it has received proxies but with respect
to which holders of such shares have abstained, as present at the Michael Foods 
special meeting for purposes of determining whether a quorum exists for the     
transaction of business. Without specific instructions from their customers,    
brokers holding shares of Michael Foods common stock in nominee or "street" name
for customers who are the beneficial owners of such shares are prohibited from  
giving a proxy to vote shares held for such customers with respect to the       
matters to be considered and voted at the special meeting. Shares of Michael    
Foods common stock represented by proxies returned by a broker holding such     
shares in nominee or "street" name will be counted for purposes of determining  
whether a quorum exists, even if such shares are broker non-votes.              

   Approval and adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Michael Foods common  
stock. The merger is not subject to a vote of a majority of the unaffiliated    
shareholders of Michael Foods. Under applicable Minnesota law, in determining   
whether the merger agreement has received the requisite number of affirmative   
votes, abstentions and broker non-votes will have the effect of a vote against  
the merger agreement. Accordingly, the Michael Foods board urges the Michael    
Foods shareholders to complete, date and sign the accompanying proxy and return 
it promptly in the enclosed, postage-paid envelope.                             

Certain members of senior management and certain shareholders associated
with a director of Michael Foods have agreed to vote 3,456,196 shares           
(constituting approximately 18.87% of the outstanding shares of Michael Foods   
common stock entitled to vote at the special meeting) owned by them in favor of 
the approval and adoption of the merger agreement at the special meeting. See   
"SPECIAL FACTORS--Interests of Certain Persons in the Merger." As of the record 
date, directors and executive officers of Michael Foods and their affiliates    
were the beneficial owners of an aggregate           (approximately     %) of   
the shares then outstanding and eligible to vote.                               

PROXIES; SOLICITATION                                                           

    All shares represented by properly executed proxies for Michael Foods common
stock that are received in time for the special meeting and which have not been 
revoked will be voted in accordance with the instructions indicated in such     
proxies. Proxies which do not contain voting instructions will be voted in favor
of the approval and adoption of the merger agreement. In addition, the persons  
designated in such proxies will have the discretion to vote on matters incident 
to the conduct of the special meeting. If Michael Foods proposes to adjourn the 
special meeting, the persons named in the proxy card will vote all shares for   
which they have authority (other than those that have been voted against the    
approval and adoption of the merger agreement) in favor of such adjournment.    

The grant of a proxy on the enclosed proxy card does not preclude a     
shareholder from voting in person at the special meeting. You may revoke a      
previously submitted proxy at any time before it is voted by (1) delivering     
written notice of revocation to Jeffrey M. Shapiro, Corporate Secretary, Michael

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Foods, Inc., 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota 55416,   
(2) executing and delivering a subsequently dated proxy that is received prior  
to the meeting or (3) voting your shares in person at the meeting. Attendance at
the special meeting will not by itself constitute revocation of a proxy. If you 
have instructed a broker to vote your shares, you must follow directions        
received from the broker to change or revoke your proxy.                        

Michael Foods will bear the cost of the solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and  
employees of Michael Foods may solicit proxies from Michael Foods' shareholders 
by telephone or telegram, or in person, but will receive no additional          
compensation for these services. Arrangements also will be made with brokerage  
houses and other custodians, nominees and fiduciaries for the forwarding of     
solicitation material to the beneficial owners of stock held of record by such  
persons, and Michael Foods will reimburse these custodians, nominees and        
fiduciaries for their reasonable out-of-pocket expenses in connection with the  
solicitation. Michael Foods has retained Mackenzie Partners, Inc. to assist in  
the solicitation of proxies for a fee not to exceed $10,000.                    

INFORMATION CONCERNING MICHAEL FOODS

   Michael Foods is a Minnesota corporation that is one of the world's largest
producers of value-added egg products, which are sold through foodservice,      
industrial and retail distribution channels. Michael Foods also is a leading    
supplier of processed dairy products, including aseptic creamers and soft serve 
ice cream mix, as well as high quality refrigerated potato products sold through
foodservice distributors and at retail under the Simply                         
Potatoes-Registered Trademark- and Diner's Choice-Registered Trademark- brand   
names. In addition, through its Crystal Farms subsidiary, Michael Foods provides
direct store distribution of refrigerated products including butter, cheese and 
eggs in 30 states. During the most recent year, Michael Foods generated         
approximately $1.1 billion in net sales. A detailed description of Michael      
Foods' businesses is contained in its Annual Report on Form 10-K for the year   
ended December 31, 1999, which is incorporated by reference in this proxy       
statement. See "ADDITIONAL INFORMATION--Where You Can Find More Information."   

   The mailing address and telephone number of the principal executive offices
of Michael Foods is 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota   
55416, (952) 546-1500.                                                          

INFORMATION CONCERNING VESTAR, MARATHON, M-FOODS HOLDINGS, PROTEIN ACQUISITION
AND AFFILIATES

 PROTEIN ACQUISITION.  Protein Acquisition is a Minnesota corporation that
was incorporated on December 14, 2000 at the direction of Vestar Capital        
Partners for the purpose of engaging in the transactions set forth in the merger
agreement, and is not engaged in any other business activities. All of the      
outstanding capital stock of Protein Acquisition is owned by M-Foods Holdings.  

M-FOODS HOLDINGS.  M-Foods Holdings is a Delaware corporation that was  
incorporated on December 13, 2000 at the direction of Vestar Capital Partners   
for the purpose of engaging in the transactions set forth in the merger         
agreement, and is not engaged in any other business activities. As of the       
closing of the merger, M-Foods Holdings will be wholly owned by M-Foods         
Investors, LLC.                                                                 

Set forth below are the names of each director and executive officer of 
Protein Acquisition and M-Foods Holdings. Each such person is a citizen of the  
United States, and has held his present position as set forth below since       
Protein Acquisition's and M-Foods Holdings' incorporation.                      

                                                                [Download Table]

NAME                             PRESENT PRINCIPAL POSITION     
----                             --------------------------     
                                                                
James P. Kelley           President and Director                
J. Christopher Henderson  Vice President, Treasurer and Director
Jack M. Feder             Secretary and Director                

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Set forth below is a brief description of each of the above-named       
individuals material employment history:                                        

James P. Kelley, Managing Director of Vestar Associates Corporation IV. 
Mr. Kelley has been with Vestar Capital Partners for each of the last five      
years.                                                                          

    J. Christopher Henderson, Managing Director of Vestar Associates Corporation
IV. Mr. Henderson has been with Vestar Capital Partners for each of the last    
five years.                                                                     

 Jack M. Feder, Managing Director and General Counsel of Vestar Associates
Corporation IV. Mr. Feder joined Vestar Capital Partners in 2000. He was        
formerly a senior corporate partner at the law firm of Kirkland & Ellis.        

M-FOODS INVESTORS.  M-Foods Investors is a Delaware limited liability   
company and wholly owned subsidiary of Vestar that was formed in connection with
the transactions contemplated by the merger agreement and has no principal      
business except in connection with the transactions set forth in the merger     
agreement.                                                                      

  VESTAR.  Vestar is a Delaware limited partnership whose general partner is
Vestar Associates IV, L.P., a Delaware limited partnership. The general partner 
of Vestar Associates IV, L.P. is Vestar Associates Corporation IV, a Delaware   
corporation. The board of directors of Vestar Associates Corporation IV consists
solely of Daniel S. O'Connell, and its officers consists of the following:      
Daniel S. O'Connell, President and Chief Executive Officer, Prakash A. Melwani, 
Managing Director and Secretary, Arthur J. Nagle, Managing Director, James P.   
Kelley, Managing Director, Robert L. Rosner, Managing Director, Norman W.       
Alpert, Managing Director, Sander M. Levy, Managing Director, Nicholas A.       
Dovidio, Managing Director, John R. Woodard, Managing Director, James L. Elrod, 
Jr., Managing Director, Todd N. Khoury, Managing Director, Federico F. Pena,    
Managing Director, J. Christopher Henderson, Managing Director, David M. Hooper,
Managing Director, Steven M. Silver, Managing Director, Jack M. Feder, Managing 
Director and General Counsel, Brian Schwartz, Vice President and Chief Financial
Officer, and Brian Ratzan, Vice President. Vestar, Vestar Associates IV, L.P.   
and Vestar Associates Corporation IV are affiliates of Vestar Capital Partners, 
a New York-based private equity firm principally engaged in the business of     
investing and managing their private equity investments.                        

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    Set forth below is a brief description of the material employment history of
each of the above-named individuals and such individual's title at Vestar       
Associates Corporation IV (excluding Messrs. Kelley, Henderson and Feder, each  
of whose employment description is provided above). Each such person is a       
citizen of the United States.                                                   

Daniel S. O'Connell, President, Chief Executive Officer and Director.   
Mr. O'Connell has been with Vestar Capital Partners for each of the last five   
years.                                                                          

 Prakash A. Melwani, Managing Director and Secretary. Mr. Melwani has been
with Vestar Capital Partners for each of the last five years.                   

  Arthur J. Nagle, Managing Director. Mr. Nagle has been with Vestar Capital
Partners for each of the last five years.                                       

    Robert L. Rosner, Managing Director. Mr. Rosner has been with Vestar Capital
Partners for each of the last five years.                                       

    Norman W. Alpert, Managing Director. Mr. Alpert has been with Vestar Capital
Partners for each of the last five years.                                       

Sander M. Levy, Managing Director. Mr. Levy has been with Vestar Capital
Partners for each of the last five years.                                       

Nicholas A. Dovidio, Managing Director. Mr. Dovidio has been with Vestar
Capital Partners for each of the last five years.                               

 John R. Woodard, Managing Director. Mr. Woodard joined Vestar in 1990. He
re-joined Vestar in 1998 after serving two years as a Managing Director in the  
Principal Investment Group of The Blackstone Group.                             

James L. Elrod, Jr., Managing Director. Mr. Elrod joined Vestar Capital 
Partners in 1998. Previously he was Executive Vice President, Finance and       
Operations, at Physicians Health Services. Prior to that, Mr. Elrod was a       
Managing Director and Partner at Dillon, Read & Co. Inc., where he founded      
Dillon Read's health care investment banking group.                             

  Todd N. Khoury, Managing Director. Mr. Khoury has been with Vestar Capital
Partners for each of the last five years.                                       

    Federico F. Pena, Managing Director. Mr. Pena joined Vestar Capital Partners
in 1998. Previously, he was U.S. Secretary of Energy and the U.S. Secretary of  
Transportation.                                                                 

   David M. Hooper, Managing Director. Mr. Hooper has been with Vestar Capital
Partners for each of the last five years.                                       

    Steven M. Silver, Managing Director. Mr. Silver has been with Vestar Capital
Partners for each of the last five years.                                       

  Brian Ratzan, Vice President. Mr. Ratzan joined Vestar Capital Partners in
1998. Previously he was Vice President at Trace International Holdings, Inc., a 
private investment firm, and prior to that, he was a member of the Corporate    
Finance Group at Donaldson, Lufkin & Jenrette.                                  

    Brian Schwartz, Vice President and Chief Financial Officer. Mr. Schwartz has
been with Vestar Capital Partners for each of the last five years.              

 The business address for each of Protein Acquisition and M-Foods Holdings
is: c/o Vestar Capital Partners IV, L.P., 1225 Seventeenth Street, Suite 1660,  
Denver, CO 80202 and the business telephone number for each of the entities is  
(303) 292-6300. The business address for each of M-Foods Investors, Vestar,     
Vestar Associates IV, L.P., Vestar Associates Corporation IV and each of the    
above-named                                                                     

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individuals is: c/o Vestar Capital Partners IV, L.P., 245 Park Avenue, 41st     
Floor, New York, NY 10167. The telephone number for each of the entities and    
individuals is (212) 351-1600.                                                  

   The following persons are executive officers of Michael Foods or one of its
subsidiaries. The business address of each person identified below is 5353      
Wayzata Boulevard, Suite 324, Minneapolis, Minnesota 55416 and business         
telephone number is (952) 546-1500.                                             

                                                                [Download Table]

NAME                            POSITION IN MICHAEL FOODS             
----                            -------------------------             
                                                                      
Gregg A. Ostrander  President, Chief Executive Officer and Chairman   

John D. Reedy       Executive Vice President, Treasurer and Chief     
                    Financial Officer                                 

Bill L. Goucher     President of M.G. Waldbaum Company, a Nebraska    
                    corporation and wholly owned subsidiary of Michael
                    Foods                                             

James D. Clarkson   President of Northern Star Co. and Kohler Mix     
                    Specialties, Inc., both Minnesota corporations and
                    wholly owned subsidiaries of Michael Foods        

Bradley L. Cook     Executive Vice President and Chief Financial      
                    Officer of M.G. Waldbaum Company                  

Max Hoffmann        Chief Financial Officer of Northern Star Co. and  
                    Kohler Mix Specialties, Inc.                      

James Mohr          Vice President, Distribution of Michael Foods     

Harold D. Sprinkle  Executive Vice President, Sales of Michael Foods  

   Each of these officers has been employed in the position listed above or in
other management positions with Michael Foods for at least five years, and each 
is a citizen of the United States.                                              

MICHAEL FAMILY CONTINUING INVESTORS.  4J2R1C Limited Partnership is a   
Minnesota limited partnership. The general partners of 4J2R1C Limited           
Partnership are James H. Michael, Jeffrey J. Michael and 2JM Enterprises, Inc., 
a Minnesota corporation. The directors of 2JM Enterprises, Inc. are James H.    
Michael and Jeffrey J. Michael, and the officers of 2JM Enterprises, Inc. are   
Jeffrey J. Michael, President and Treasurer, and James H. Michael, Vice         
President and Secretary. 4J2R1C Limited Partnership and 2JM Enterprises, Inc.   
are in the business of real estate, equity and other forms of investment.       

3J2R Limited Partnership is a Minnesota limited partnership. The general
partners of 3J2R Limited Partnership are Jeffrey J. Michael, as managing general
partner, and 2JM Enterprises, Inc. The directors and officers of 2JM            
Enterprises, Inc. are identified in the preceding paragraph. 3J2R Limited       
Partnership is in the business of equity and other forms of investment.         

Set forth below is a brief description of each of the above-named       
individuals material employment history. Each such person is a citizen of the   
United States.                                                                  

Jeffrey J. Michael, President, Chief Executive Officer and director of  
Corstar Holdings, Inc., a holding company owning businesses engaged in voice and
data connectivity and networking products and services. Mr. Michael has held    
this position for each of the last five years. Mr. Michael also is a director of
Michael Foods.                                                                  

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James H. Michael, retired. Prior to his retirement in October 1999, he  
served as Chairman of the Board of ENStar, Inc., a predecessor entity to Corstar
Holdings, Inc. From March 1987 to February 1997 he served as the Chairman of    
Michael Foods board.                                                            

 The business address for each of 4J2R1C Limited Partnership, 3J2R Limited
Partnership, 2JM Enterprises, Inc., Jeffrey J. Michael and James H. Michael is: 
c/o Jeffrey Michael, 10851 Louisiana Avenue, South, Bloomington, MN 55438. The  
telephone number for each of the entities and individuals is (952) 941-3200.    

MARATHON.  Marathon is a Delaware limited partnership whose sole general
partner is Miltiades LLC, a Delaware limited liability company. The managing    
member and secretary of Miltiades is Michael S. Israel. The authorized members  
of Miltiades are Michael D. Goldner, Van Zandt Hawn, Timothy D. Johnson, John L.
Morrison, Michael S. Israel, Edward J. Rieckelman and Michael T. Sweeney.       
Marathon is an affiliate of Goldner Hawn Johnson & Morrison, Incorporated, a    
Minneapolis-based private equity firm principally engaged in the business of    
investing and managing their private equity investments.                        

Set forth below is a brief description of each of the above-named       
individuals material employment history and such individual's title at Goldner  
Hawn Johnson & Morrison, Incorporated. Each such person is a citizen of the     
United States.                                                                  

   Michael S. Israel, Managing Director. Mr. Israel has been with Goldner Hawn
Johnson & Morrison, Incorporated for each of the last five years.               

Michael D. Goldner, Managing Director. Mr. Goldner has been with Goldner
Hawn Johnson & Morrison, Incorporated for each of the last five years.          

Van Zandt Hawn, Managing Director. Mr. Hawn has been with Goldner Hawn  
Johnson & Morrison, Incorporated for each of the last five years.               

Timothy D. Johnson, Managing Director. Mr. Johnson has been with Goldner
Hawn Johnson & Morrison, Incorporated for each of the last five years.          

    John L. Morrison, Managing Director. Mr. Morrison has been with Goldner Hawn
Johnson & Morrison, Incorporated for each of the last five years.               

   Edward J. Rieckelman, Managing Director. Mr. Rieckelman joined Goldner Hawn
Johnson & Morrison, Incorporated in 1997. Previously, he was Vice President and 
Principal at Group One Capital Inc. from 1996 to 1997, and prior to that he was 
Vice President of Metapoint Partners, L.P. from 1993 to 1996.                   

Michael T. Sweeney, Managing Director. Mr. Sweeney joined Goldner Hawn  
Johnson & Morrison, Incorporated in 2000. Previously, he was President of       
Starbucks Coffee Company (U.K.), Ltd., from 1998 to 2000, and prior to that he  
was Chief Executive Officer of Minnesota Pizza Company, L.L.C. from 1995 to     
1998.                                                                           

The business address for each of Marathon, Miltiades and Messrs. Israel,
Goldner, Hawn, Johnson, Morrison, Rieckelman and Sweeney is: 5250 Wells Fargo   
Center, 90 South Seventh Street, Minneapolis, MN 55402. The telephone number for
each of the entities and individuals is (612) 338-5912.                         

 None of the persons or entities discussed above was, during the past five
years, convicted in a criminal proceeding (excluding traffic violations or      
similar misdemeanors) or was, during the past five years, a party to a civil    
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree of final    
order enjoining further violations of, or prohibiting activities subject to,    
federal or state securities laws or finding any violation of such laws.         

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MARKET PRICES AND DIVIDEND INFORMATION

 Michael Foods common stock is traded on the Nasdaq National Market System
under the symbol "MIKL." The following table sets forth the high and low        
reported sale prices of Michael Foods common stock for each quarter of 2000 and 
1999, and the first quarter of 2001 (through January 26).                       

                                                                [Download Table]

1999                                               HIGH           LOW     
----                                            -----------   ------------
                                                                          
First Quarter.................................  28 3/4        16 11/16    
Second Quarter................................  25            18 1/4      
Third Quarter.................................  28 1/16       21 3/8      
Fourth Quarter................................  27 7/16       22 1/2      

                                                                [Download Table]

2000                                               HIGH           LOW     
----                                            -----------   ------------
                                                                          
First Quarter.................................  25 3/4        19 1/8      
Second Quarter................................  25 9/16       19 3/8      
Third Quarter.................................  26 3/4        21 7/16     
Fourth Quarter................................  31            22          

                                                                [Download Table]

2001                                               HIGH           LOW     
----                                            -----------   ------------
                                                                          
First Quarter (through January 26)............  30 9/16       29 11/16    

   On December 21, 2000, the last trading day prior to the public announcement
of the execution of the merger agreement, the high and low reported sales price 
of Michael Foods common stock was $27.75 and $26.50, respectively. The high and 
low reported sales price on             , 2001 (the most recent practicable date
before this proxy statement) was $      and $      , respectively.              

The following table sets forth the regular quarterly cash dividends per 
share paid on Michael Foods common stock in 2000 and 1999.                      

                                                                [Download Table]

                                               2000           1999  
                                             --------       --------
                                                                    
First Quarter..............................   $0.07          $0.06  
Second Quarter.............................    0.08           0.07  
Third Quarter..............................    0.08           0.07  
Fourth Quarter.............................    0.08           0.07  

   There are no known restrictions on Michael Foods' ability to pay dividends,
and Michael Foods expects to pay dividends in the first quarter of 2001. After  
the merger, Michael Foods will be a private company wholly owned by M-Foods     
Holdings and it is not anticipated that it will regularly pay dividends.        

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 
AND MANAGEMENT

The following table sets forth information as of January 29, 2001 with  
respect to the beneficial holdings of each person or entity known by Michael    
Foods to own beneficially more than 5% of Michael Foods' outstanding common     
stock.                                                                          

                                                        [Enlarge/Download Table]

                                                               NUMBER OF SHARES     PERCENT 
NAME AND ADDRESS                                             BENEFICIALLY OWNED(1)  OF CLASS
----------------                                             ---------------------  --------
                                                                                            
M-Foods Investors, LLC(2)...................................       4,056,212         21.45% 
4J2R1C Ltd. Partnership(3)..................................       1,588,489           8.7  
3J2R Ltd. Partnership(3)....................................       1,459,514           8.0  
AXA Financial, Inc., c/o Sanford C. Bernstein & Co., Inc....       1,023,690           5.6  

------------------------                                                        

(1) Owned of record and beneficially, except as otherwise noted.                

(2) M-Foods Investors, certain of its affiliates, Marathon and the continuing   
investors may be deemed to beneficially own the shares of Michael Foods 
common stock indicated above (including 600,016 shares issuable upon the
exercise of options exercisable within 60 days of January 29, 2001) by  
    virtue of the irrevocable proxies granted by the continuing investors (other
than Messrs. Cook, Sprinkle and Mohr) pursuant to the letter agreements 
   described in this proxy statement. Vestar Capital Partners IV, L.P., as the
 sole managing member of M-Foods Investors, Vestar Associates IV, L.P., as
   the general partner of Vestar, and Vestar Associates Corporation IV, as the
  general partner of Associates, each may be deemed to be a beneficial owner
  of the same number of shares of common stock of Michael Foods beneficially
owned by M-Foods Investors. Vestar, Associates and Vestar Associates    
Corporation disclaim such beneficial ownership. The address for M-Foods 
    Investors and Vestar, Associates and Vestar Associates Corporation IV is c/o
Vestar Capital Partners 1225 Seventeenth Street, Suite 1660, Denver,    
Colorado 80202.                                                         

(3) c/o 10851 Louisiana Ave. S., Bloomington, MN 55438.                         

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The following table sets forth information as of January 29, 2001 with  
respect to the beneficial holdings of each director, each named executive       
officer, and all executive officers and directors as a group.                   

                                                        [Enlarge/Download Table]

                                                               NUMBER OF SHARES     PERCENT 
NAME OF BENEFICIAL OWNER                                     BENEFICIALLY OWNED(1)  OF CLASS
------------------------                                     ---------------------  --------
                                                                                            
Directors:                                                                                  
    Richard A. Coonrod......................................          15,250(2)       *     
    Daniel P. Dillon........................................          11,228(3)       *     
    Jerome J. Jenko.........................................           9,450(3)       *     
    Arvid C. Knudtson.......................................          15,000(4)       *     
    Joseph D. Marshburn.....................................          15,750(5)       *     
    Jeffrey J. Michael......................................       3,202,660(6)      16.9%  
    Margaret D. Moore.......................................          14,200(3)       *     
    Gregg A. Ostrander......................................         274,092(7)       1.4   
    Arthur J. Papetti.......................................         739,463(8)       3.9   
    Stephen T. Papetti......................................         376,850(8)       2.0   
Executive Officers:                                                                         
    John D. Reedy...........................................         102,166(9)       *     
    Bill L. Goucher.........................................         101,686(10)      *     
    Norman A. Rodriguez.....................................          88,512(11)      *     
    Jeffrey M. Shapiro......................................         199,964(12)      1.0   
    All Directors and Executive Officers as a Group                                         
      (16 persons)..........................................       5,284,106(13)     27.8   

------------------------                                                        

* Less than 1% of Michael Foods' outstanding common stock.                

(1) Owned of record and beneficially, except as otherwise noted.              

(2) Includes 14,250 shares of common stock as to which Mr. Coonrod has the    
 right to acquire beneficial ownership within 60 days by the exercise of
options granted to non-employee directors.                            

(3) Includes 9,200 shares of common stock as to which Ms. Moore and           
Messrs. Dillon and Jenko each have the right to acquire beneficial    
     ownership within 60 days by the exercise of options granted to non-employee
directors.                                                            

(4) Includes 15,000 shares of common stock as to which Mr. Knudtson has the   
 right to acquire beneficial ownership within 60 days by the exercise of
options granted to non-employee directors.                            

(5) Includes 14,750 shares of common stock as to which Mr. Marshburn has the  
 right to acquire beneficial ownership within 60 days by the exercise of
options granted to non-employee directors.                            

(6) Includes 11,500 shares of common stock as to which Mr. Michael has the    
 right to acquire beneficial ownership within 60 days by the exercise of
options granted to non-employee directors. Also includes three limited
    partnership holdings of 1,588,489; 1,459,514; and 136,867 shares of common
     stock, respectively, two of which are noted in the above Security Ownership
  table, of which Mr. Michael disclaims beneficial ownership except to the
    extent of his pecuniary interest as a partner in the limited partnerships'
assets. Also includes 730 shares held by a minor child.               

(7) Includes 1,000 shares of common stock held in Mr. Ostrander's Individual  
Retirement Account and 243,700 shares of common stock as to which     
    Mr. Ostrander has the right to acquire beneficial ownership within 60 days
by the exercise of options granted.                                   

 (8) Includes 2,000 shares of common stock as to which Messrs. A. Papetti and S.
    Papetti each have the right to acquire beneficial ownership within 60 days
by the exercise of options granted.                                   

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(9) Includes 10,000 shares of common stock held for Mr. Reedy's benefit in a  
     Money Purchase Pension (Keogh) Account and 74,990 shares of common stock as
 to which Mr. Reedy has the right to acquire beneficial ownership within
60 days by the exercise of options granted.                           

(10) Includes 89,120 shares of common stock as to which Mr. Goucher has the   
   right to acquire beneficial ownership within 60 days by the exercise of
options granted.                                                    

(11) Includes 13,696 shares of common stock held by Mr. Rodriguez's spouse,   
      1,668 shares of common stock held in Mr. Rodriguez's Individual Retirement
    Account, and 45,612 shares of common stock as to which Mr. Rodriguez has
    the right to acquire beneficial ownership within 60 days by the exercise
of options granted.                                                 

(12) Includes 3,110 shares of common stock held in Mr. Shapiro's Individual   
     Retirement Account and includes 66,693 shares of common stock as to which
    Mr. Shapiro has the right to acquire beneficial ownership within 60 days
by the exercise of options granted.                                 

(13) Includes 887 shares of common stock held in two other executive officers'
    Individual Retirement Accounts, 384 shares held in a Simplified Employee
  Plan for another executive officer, 72 shares held by a minor child of
     another executive officer, and 686,615 shares of common stock as to which
     the executive officers and directors have the right to acquire beneficial
ownership within 60 days by the exercise of options granted.        

TRANSACTIONS IN SHARES OF COMMON STOCK BY CERTAIN PERSONS 

    There were no transactions in shares of Michael Foods common stock that were
effected during the past 60 days by Michael Foods, M-Foods Investors, Vestar    
Capital Partners IV, L.P., Marathon Fund Limited Partnership IV L.P., Gregg A.  
Ostrander, John D. Reedy, Bill L. Goucher, James D. Clarkson, Bradley L. Cook,  
Max Hoffmann, James Mohr, Harold D. Sprinkle, 4J2R1C Limited Partnership, 3J2R  
Limited Partnership, Miltiades, LLC, Vestar Associates IV, L.P., Vestar         
Associates Corporation IV, or any of their respective subsidiaries, directors,  
executive officers or controlling persons. Max Hoffmann and James Mohr          
participated in the Michael Foods Employee Stock Purchase Plan under which they 
purchased Michael Foods common stock through regular payroll deductions.        

CERTAIN PURCHASES OF MICHAEL FOODS COMMON STOCK 

The following table indicates, with respect to any purchases of Michael 
Foods common stock made by Michael Foods or any executive officer, director or  
affiliate of Michael Foods, since January 1, 1999, the range of prices paid for 
such stock, the number of shares purchased and the average purchase price for   
such shares for each quarterly period since January 1, 1999:                    

                                                        [Enlarge/Download Table]

                                                     NUMBER OF                AVERAGE 
                                        QUARTERLY     SHARES      RANGE OF    PURCHASE
              PURCHASER                  PERIOD      PURCHASED     PRICES      PRICE  
              ---------                  ------      ---------     ------      -----  
                                                                                      
Michael Foods........................ 1/1/99-4/4/99    505,300  $17.64-19.33   $18.47 
                                      4/5/99-7/4/99    414,800   21.32-24.00    23.13 
                                      1/1/00-4/2/00    609,400   21.54-22.61    22.10 
                                      4/3/00-7/2/00  1,500,000         21.77    21.77 
Gregg A. Ostrander................... 1/1/99-4/4/99      4,000         18.50    18.50 

ADDITIONAL INFORMATION

MICHAEL FOODS SHAREHOLDER PROPOSALS                                             

Michael Foods will hold its 2001 annual meeting of Michael Foods'       
shareholders only if the merger is not consummated. In the event that the 2001  
annual meeting is held, shareholders wishing to submit a                        

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proposal to be considered for inclusion in the proxy material for Michael Foods 
2001 annual meeting must send it to the Corporate Secretary, Michael            
Foods, Inc., 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota 55416.   
Under the rules of the SEC, proposals must be received by Michael Foods not less
than 60 nor more than 90 days prior to the scheduled date of the 2001 annual    
meeting to be eligible for inclusion in Michael Foods' annual meeting proxy     
statement, and must comply with all applicable regulations.                     

Under Michael Foods' by-laws, notices of director nominations or other  
shareholder proposals for other business at Michael Foods 2001 annual meeting   
must be delivered to the Corporate Secretary at the address noted above at least
20 days prior to the scheduled date of the meeting.                             

OTHER MATTERS                                                                   

The board of directors of Michael Foods knows of no other matters to be 
presented at the special meeting. However, if any other matters properly come   
before the special meeting, the persons named in the enclosed proxy will vote on
such matters in accordance with their best judgment.                            

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                                        

Michael Foods' consolidated financial statements and financial statement
schedule incorporated by reference in this proxy statement from Michael Food's  
Annual Report on Form 10-K for the year ended December 31, 1999 have been       
audited by Grant Thornton LLP, independent certified public accountants, as     
indicated in their reports with respect thereto, and are incorporated by        
reference herein. Representatives of Grant Thornton expect to be present at the 
special shareholders meeting and while such representatives have stated that    
they do not plan to make a statement at the meeting, they will be available to  
respond to appropriate questions from shareholders in attendance.               

WHERE YOU CAN FIND MORE INFORMATION                                             

   Michael Foods, Protein Acquisition and M-Foods Holdings, among others, have
filed with the SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 under   
the Securities Exchange Act of 1934 with respect to the merger. This document   
does not contain all of the information set forth in the Schedule 13E-3 and its 
exhibits, certain parts of which are omitted in accordance with the rules and   
regulations of the SEC. Michael Foods is subject to the informational           
requirements of the Exchange Act and, accordingly, files reports, proxy         
statements and other information with the SEC. You may read and copy that       
information at the following locations of the SEC:                              

                                                                [Download Table]
                                                                              
Public Reference Room   New York Regional Office  Chicago Regional Office     
450 Fifth Street, N.W.  7 World Trade Center      Citicorp Center             
Room 1024               Suite 1300                500 West Madison Street     
Washington, D.C. 20549  New York, New York 10048  Suite 1400                  
1-800-SEC-0330                                    Chicago, Illinois 60661-2511

You also may obtain copies of this information by mail from the Public  
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,    
D.C. 20549, at prescribed rates.                                                

The SEC also maintains an Internet world wide web site that contains    
reports, proxy statements and other information about issuers, including Michael
Foods, that file electronically with the SEC. The address of that site is       
http://www.sec.gov.                                                             

  You also can inspect reports, proxy statements and other information about
Michael Foods at the offices of the National Association of Securities          
Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.    

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   The SEC allows Michael Foods to "incorporate by reference" information into
this proxy statement. This means that we can disclose important information to  
you by referring you to another document filed separately with the SEC. The     
information incorporated by reference is considered to be a part of this proxy  
statement, except for any information that is superseded by information that is 
included directly in this document.                                             

 This proxy statement incorporates by reference the documents listed below
that Michael Foods has previously filed with the SEC. The documents contain     
important information about Michael Foods and its financial condition. Because  
there is no safe harbor for forward-looking statements under the Private        
Securities Litigation Reform Act of 1995 in connection with a going-private     
transaction such as the proposed merger, the documents incorporated by reference
herein are incorporated exclusive of the language claiming the safe harbor.     

                                                                [Download Table]

MICHAEL FOODS FILINGS WITH THE SEC  PERIOD                                 
----------------------------------  ------                                 
                                                                           
Annual Report on Form 10-K          Year ended December 31, 1999           

Quarterly Reports on Form 10-Q      Quarterly periods ended March 31, 2000,
                                    June 30, 2000 and September 30, 2000   

Current Reports on Form 8-K         Filed for events occurring on          
                                    January 20, 2000, February 17, 2000,   
                                    May 22, 2000 and December 21, 2000     

Michael Foods incorporates by reference additional documents that we may
file with the SEC between the date of this proxy statement and the date of the  
Michael Foods shareholders' meeting. Those documents include periodic reports,  
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current 
Reports on Form 8-K, as well as proxy statements.                               

Michael Foods has supplied all information contained or incorporated by 
reference in this proxy statement relating to Michael Foods and its             
shareholders, M-Foods Holdings has supplied all such information relating to    
M-Foods Holdings, Protein Acquisition has supplied all such information relating
to Protein Acquisition, and Vestar has supplied all such information relating to
Vestar.                                                                         

You can obtain any of the documents incorporated by reference in this   
document through Michael Foods or from the SEC's web site at the address        
described above. Documents incorporated by reference are available from Michael 
Foods without charge, excluding any exhibits to those documents unless the      
exhibit is specifically incorporated by reference as an exhibit in this proxy   
statement. You can obtain documents incorporated by reference in this proxy     
statement by requesting them in writing or by telephone from Michael Foods at   
the following address and telephone number:                                     

Jeffrey M. Shapiro
Corporate Secretary 
5353 Wayzata Boulevard
Suite 324 
Minneapolis, Minnesota 55416
Telephone: (952) 546-1500 

    If you would like to request documents, please do so by,             , 2001,
to receive them before the meeting. Please be sure to include your complete name
and address in your request. If you request any incorporated documents, we will 
mail them to you by first class mail, or another equally prompt means, within   
one business day after we receive your request.                                 

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   Michael Foods has not authorized anyone to give any information or make any
representation about the merger or Michael Foods that is different from, or in  
addition to, that contained in this proxy statement or in any of the materials  
that we have incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a            
jurisdiction where offers to exchange or sell, or solicitations of offers to    
exchange or purchase, the securities offered by this document or the            
solicitation of proxies is unlawful, or if you are a person to whom it is       
unlawful to direct these types of activities, then the offer presented in this  
document does not extend to you. The information contained in this document     
speaks only as of the date of this document unless the information specifically 
indicates that another date applies.                                            

FORWARD-LOOKING STATEMENTS                                                      

This proxy statement, including information included or incorporated by 
reference in this document, contains certain forward-looking statements with    
respect to the financial condition, results of operations, plans, objectives,   
future performance and business of Michael Foods, as well as certain information
relating to the merger, including, without limitation, statements preceded by,  
followed by or that include the words "believes," "expects," "anticipates,"     
"estimates" or similar expressions. These forward-looking statements involve    
certain risks and uncertainties. Actual results may differ materially from those
contemplated by such forward-looking statements due to, among others, the       
following known risks and uncertainties:                                        

- the level of cost reduction achieved through restructuring;           

- success of new product introductions;                                 

- failure to achieve success with new technology;                       

- the timing of, and synergies achieved through, integration of         
acquisitions;                                                       

- changes in market conditions or product demand;                       

- loss of important customers;                                          

- fluctuations in commodities markets;                                  

- fluctuations in raw material costs;                                   

- currency exchange risk;                                               

- general economic and business conditions in the markets Michael Foods 
serves; and                                                         

 - actions of competitors which may affect the ability of Michael Foods to
obtain orders.                                                      

There is no safe harbor for forward-looking statements under the Private        
Securities Litigation Reform Act of 1995 in connection with a going-private     
transaction such as the merger. As a result, the reports which are incorporated 
by reference herein are incorporated exclusive of the language claiming the safe
harbor.                                                                         

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                                                                         ANNEX A

AGREEMENT AND PLAN OF MERGER

DATED AS OF 
DECEMBER 21, 2000 
BY AND AMONG

M-FOODS HOLDINGS, INC., 
PROTEIN ACQUISITION CORP. 
AND 
MICHAEL FOODS, INC. 

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ARTICLE 1 THE MERGER.........................................................     1   
          1.1    The Merger..................................................     1   
          1.2    Closing.....................................................     2   
          1.3    Effective Date and Time.....................................     2   
          1.4    Effects of the Merger.......................................     2   
          1.5    Subsequent Actions..........................................     2   
          1.6    Articles of Incorporation...................................     2   
          1.7    Bylaws......................................................     2   
          1.8    Officers and Directors of Surviving Corporation.............     2   
          1.9    Effect on Capital Stock.....................................     3   
          1.10   Options.....................................................     3   
          1.11   Surrender and Payment.......................................     4   
          1.12   Lost Certificates...........................................     5   
          1.13   Unclaimed Merger Consideration..............................     5   
          1.14   Dissenting Shares...........................................     5   

ARTICLE 2 REPRESENTATIONS AND WARRANTIES.....................................     6   
          2.1    Representations and Warranties of the Company...............     6   
          2.2    Representations and Warranties of Holdings and Merger Sub...    16   

ARTICLE 3 COVENANTS RELATING TO CONDUCT OF BUSINESS..........................    19   
          3.1    Covenants of the Company....................................    19   
          3.2    Advice of Changes; Government Filings.......................    21   
          3.3    Financing Related Cooperation...............................    21   

ARTICLE 4 ADDITIONAL AGREEMENTS..............................................    22   
          4.1    Preparation of the Proxy Statement; Schedule 13E; the                
                   Company Shareholders Meeting..............................    22   
          4.2    Access to Information.......................................    23   
          4.3    Approvals and Consents; Cooperation.........................    23   
          4.4    Acquisition Proposals.......................................    24   
          4.5    Employee Benefits...........................................    25   
          4.6    Fees and Expenses...........................................    25   
          4.7    Indemnification; Directors' and Officers' Insurance.........    26   
          4.8    Public Announcements........................................    27   
          4.9    Further Assurances..........................................    27   
          4.10   Disposition of Litigation...................................    27   
          4.11   Delisting...................................................    27   

ARTICLE 5 CONDITIONS PRECEDENT...............................................    27   
          5.1    Conditions to Each Party's Obligation to Effect the                  
                   Merger....................................................    27   
          5.2    Conditions to the Obligations of Holdings and Merger Sub to          
                   Effect the Merger.........................................    27   
          5.3    Conditions to the Obligations of the Company to Effect the           
                   Merger....................................................    28   

ARTICLE 6 TERMINATION AND AMENDMENT..........................................    29   
          6.1    Termination by Either the Company or Holdings...............    29   
          6.2    Termination by Holdings.....................................    29   
          6.3    Termination by the Company..................................    30   

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          6.4    Effect of Termination.......................................    30   
          6.5    Amendment...................................................    31   
          6.6    Extension; Waiver...........................................    31   

ARTICLE 7 GENERAL PROVISIONS.................................................    32   
          7.1    Non-Survival of Representations, Warranties and Agreements;          
                   No Other Representations and Warranties...................    32   
          7.2    Notices.....................................................    32   
          7.3    Interpretation..............................................    33   
          7.4    Counterparts................................................    33   
          7.5    Entire Agreement; No Third Party Beneficiaries; Liability...    34   
          7.6    Governing Law...............................................    34   
          7.7    Severability................................................    34   
          7.8    Assignment..................................................    34   
          7.9    Enforcement.................................................    34   

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CROSS REFERENCES

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                                                                SECTION  
                                                              -----------
                                                                         
Acquisition Proposal........................................       4.4(e)
Agreement...................................................     Preamble
Articles of Merger..........................................          1.3
Banc of America Bridge......................................       2.2(c)
Bank Commitment Letter......................................       2.2(c)
Bank of America.............................................       2.2(c)
CERCLA......................................................    2.1(n)(i)
Certificate.................................................       1.9(c)
Closing.....................................................          1.2
Closing Date................................................          1.2
Code........................................................       2.1(h)
Commitment Letters..........................................       2.2(c)
Company.....................................................     Preamble
Company Benefit Plans.......................................    2.1(l)(i)
Company Board...............................................     Recitals
Company Common Stock........................................     Recitals
Company Disclosure Schedule.................................          2.1
Company Material Contracts..................................       2.1(r)
Company Participants........................................    2.1(l)(i)
Company Representatives.....................................       4.4(a)
Company SEC Reports.........................................          2.1
Company Shareholders Meeting................................       4.1(a)
Company Voting Debt.........................................  2.1(b)(iii)
Confidentiality Agreement...................................          4.2
Dissenting Shares...........................................         1.14
Effective Date..............................................          1.3
Effective Time..............................................          1.3
Environmental, Health, and Safety Requirements..............   2.1(n)(ii)
ERISA.......................................................    2.1(l)(i)
Exchange Act................................................      1.11(c)
Executive Incentive Plan....................................         1.10
Executive Performance Plan..................................         1.10
Expense Payment.............................................       6.4(b)
Expenses....................................................          4.6
Financing...................................................       2.2(c)
Funds.......................................................      1.11(a)
GAAP........................................................    2.1(d)(i)
Governmental Entity.........................................      1.13(b)
Holdings....................................................     Preamble
Holdings Disclosure Schedule................................          2.2
HSR Act.....................................................  2.1(c)(iii)
Indemnified Parties.........................................       4.7(c)
Indemnified Party...........................................       4.7(c)
Intellectual Property.......................................    2.1(m)(i)
Investors...................................................     Recitals
Leases......................................................    2.1(k)(i)
Liens.......................................................   2.1(b)(ii)
Management Equity Agreements................................     Recitals

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                                                                SECTION  
                                                              -----------
                                                                         
Marathon....................................................       2.2(c)
Marathon Fund Commitment Letter.............................       2.2(c)
Material Adverse Effect.....................................       2.1(a)
MBCA........................................................          1.1
Merger......................................................     Recitals
Merger Sub..................................................     Preamble
NASDAQ......................................................  2.1(c)(iii)
Option(s)...................................................         1.10
Option Plans................................................         1.10
Ordinary Course.............................................   2.1(d)(ii)
Organizational Documents....................................       2.1(a)
Other Equity Agreements.....................................     Recitals
Owned Real Property.........................................    2.1(k)(i)
Paying Agent................................................      1.11(a)
Permits.....................................................       2.1(f)
Person......................................................      1.11(c)
Price Per Share.............................................       1.9(c)
Proxy Statement.............................................    2.1(e)(i)
Required Approvals..........................................          4.3
Schedule 13E-3..............................................       4.1(c)
SEC.........................................................          2.1
Securities Act..............................................  2.1(c)(iii)
Share Awards................................................    2.1(b)(i)
Special Committee...........................................     Recitals
Special Meeting.............................................       6.1(d)
Subsidiary..................................................    2.1(b)(i)
Superior Proposal...........................................       4.4(f)
Surviving Corporation.......................................          1.1
SWDA........................................................    2.1(n)(i)
Tax, Taxes, Taxable.........................................      1.11(c)
Tax Returns.................................................       2.1(h)
Terminating Company Breach..................................       6.2(b)
Terminating Holdings Breach.................................       6.3(a)
Termination Fee.............................................       6.4(c)
U.S. Bancorp Piper Jaffray..................................       2.1(o)
Vestar......................................................       2.2(c)
Vestar Commitment Letter....................................       2.2(c)
Violation...................................................   2.1(c)(ii)

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of December 21, 2000 (this  
"AGREEMENT"), by and among M-Foods Holdings, Inc., a Delaware corporation       
("HOLDINGS"), Protein Acquisition Corp., a Minnesota corporation and a wholly   
owned subsidiary of Holdings ("MERGER SUB"), and Michael Foods, Inc., a         
Minnesota corporation (the "COMPANY").                                          

W I T N E S S E T H:

    WHEREAS, Merger Sub and the Company have each determined that it is in their
respective best interests for Merger Sub to acquire the Company, upon the terms 
and subject to the conditions set forth in this Agreement;                      

   WHEREAS, the respective boards of directors of Holdings, Merger Sub and the
Company each have approved this Agreement, the Merger and the other transactions
contemplated by this Agreement, with each share of the Company's common stock,  
par value $0.01 per share (the "COMPANY COMMON STOCK"), issued and outstanding  
immediately prior to the Effective Time being cancelled, extinguished and       
converted into and becoming a right to receive a price per share equal to the   
Price Per Share, subject to the terms and conditions set forth herein;          

  WHEREAS, as of the date hereof, (1) certain executives of the Company will
enter into letter agreements with M-Foods Investors, LLC, a Delaware limited    
liability company ("INVESTORS"), pursuant to which such persons agree to        
execute, immediately prior to the Closing, certain agreements (the "MANAGEMENT  
EQUITY AGREEMENTS") which will provide for, among other things, (a) the         
cancellation of a portion of their options to purchase Company Common Stock as  
of the Effective Date in exchange for rights under a deferred compensation      
arrangement with Holdings and (b) the purchase of membership interests in       
Investors by such persons and (2) certain beneficial and record shareholders of 
the Company will enter into letter agreements with Investors pursuant to which  
such persons agree to execute, immediately prior to the Closing, certain        
agreements (the "OTHER EQUITY AGREEMENTS") which will provide that, among other 
things, such persons will exchange shares of the Company Common Stock they hold 
for a price per share equal to the Price Per Share and membership interests in  
Investors;                                                                      

WHEREAS, as soon as may be permitted after satisfaction or waiver of the
conditions set forth herein, Merger Sub shall be merged with and into the       
Company (the "MERGER") in accordance with this Agreement and the relevant       
provisions of the MBCA, and the surviving corporation of the Merger shall be the
Company; and                                                                    

WHEREAS, the board of directors of the Company (the "COMPANY BOARD"),   
subsequent to the unanimous recommendation of a special committee of the Company
Board (the "SPECIAL COMMITTEE"), has determined that this Agreement and the     
transactions contemplated hereby, including the Merger, are fair to and in the  
best interests of the shareholders of the Company, has declared the Merger and  
this Agreement to be advisable and has recommended approval of the Merger and   
adoption of this Agreement by the shareholders of the Company.                  

NOW, THEREFORE, in consideration of the foregoing and the respective    
representations, warranties, covenants and agreements set forth herein, and     
intending to be legally bound hereby, the parties hereto agree as follows:      

ARTICLE 1 
THE MERGER

   1.1  THE MERGER.  Upon the terms and subject to the conditions set forth in
this Agreement, Merger Sub shall be merged with and into the Company at the     
Effective Time. Following the Merger, the separate corporate existence of Merger
Sub shall cease and the Company, as a wholly owned subsidiary of Holdings, shall
continue as the surviving corporation (the "SURVIVING CORPORATION"). The Merger 
will be effected pursuant to the provisions of, and with the effect provided in,
the Minnesota Business Corporation Act (the "MBCA").                            

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   1.2  CLOSING.  The closing of the Merger (the "CLOSING") will take place as
soon as practicable, but no later than the fourth business day, after           
satisfaction or waiver (as permitted by this Agreement and applicable law) of   
the conditions (excluding conditions that, by their terms, cannot be satisfied  
until the Closing Date) set forth in ARTICLE 5 (the "CLOSING DATE"), unless     
another time or date is agreed to in writing by the parties hereto. The Closing 
shall be held at the offices of Kirkland & Ellis, 200 East Randolph Drive,      
Chicago, Illinois 60601, unless another place is agreed to in writing by the    
parties hereto.                                                                 

    1.3  EFFECTIVE DATE AND TIME.  Upon the Closing, the parties shall file with
the Secretary of State of the State of Minnesota appropriate articles of merger 
or other appropriate documents (in any such case, the "ARTICLES OF MERGER")     
executed in accordance with the relevant provisions of the MBCA and shall make  
all other filings, recordings or publications required under the MBCA in        
connection with the Merger. The Merger shall become effective as of the date and
time of such filings or such other time after such filings as the parties hereto
shall agree to in the Articles of Merger (the "EFFECTIVE TIME"). The date on    
which the Effective Time shall occur is referred to as the "EFFECTIVE DATE."    

  1.4  EFFECTS OF THE MERGER.  At the Effective Time, the separate corporate
existence of Merger Sub shall cease and the Surviving Corporation shall continue
its corporate existence under the laws of the State of Minnesota. Without       
limiting the generality of the foregoing, and subject thereto, at the Effective 
Time all the property, rights, privileges, powers, immunities and franchises of 
Merger Sub and the Company shall vest in the Surviving Corporation, and all     
debts, liabilities, obligations and duties of Merger Sub and the Company shall  
become the debts, liabilities, obligations and duties of the Surviving          
Corporation.                                                                    

1.5  SUBSEQUENT ACTIONS.  If, at any time after the Effective Time, the 
Surviving Corporation shall consider or be advised that any deeds, bills of     
sale, assignments, assurances or any other actions or things are necessary or   
desirable to vest, perfect or confirm of record or otherwise in the Surviving   
Corporation its right, title or interest in, to or under any of the rights,     
properties or assets of either of the Company or Merger Sub acquired or to be   
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of  
the Surviving Corporation shall be authorized to execute and deliver, in the    
name and on behalf of either the Company or Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take, in the name and on behalf of each 
of such corporations or otherwise, all such other actions and things as may be  
necessary or desirable to vest, perfect or confirm any and all right, title and 
interest in, to and under such rights, properties or assets in the Surviving    
Corporation or otherwise to carry out the transactions contemplated by this     
Agreement.                                                                      

    1.6  ARTICLES OF INCORPORATION.  Subject to SECTION 4.7(a), at the Effective
Time, the articles of incorporation of the Company (as amended and restated in  
substantially the form set forth in EXHIBIT A hereto) shall be the articles of  
incorporation of the Surviving Corporation, until thereafter amended as provided
by the MBCA and the provisions of such articles of incorporation.               

   1.7  BYLAWS.  At the Effective Time, the bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall become the bylaws of the         
Surviving Corporation until thereafter amended as provided by the MBCA, the     
provisions of the articles of incorporation of the Surviving Corporation and    
such bylaws.                                                                    

  1.8  OFFICERS AND DIRECTORS OF SURVIVING CORPORATION.  The officers of the
Company immediately prior to the Effective Time shall be, from and after the    
Effective Time, the officers of the Surviving Corporation, until the earlier of 
their resignation or removal or otherwise ceasing to be an officer. The         
directors of Merger Sub immediately prior to the Effective Time shall be, from  
and after the Effective Time, the directors of the Surviving Corporation, until 
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.                             

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 1.9  EFFECT ON CAPITAL STOCK.  As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the    
Company Common Stock or any shares of capital stock of Merger Sub:              

        (a)  CAPITAL STOCK OF MERGER SUB.  Each share of capital stock of Merger
   Sub issued and outstanding immediately prior to the Effective Time shall be
  converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.          

        (b)  CANCELLATION OF TREASURY STOCK; MERGER SUB-OWNED STOCK.  Each share
    of the Company Common Stock that is issued and outstanding immediately prior
to the Effective Time and owned by Merger Sub or by the Company or any  
direct or indirect wholly owned subsidiary of the Company, shall be     
cancelled, extinguished and retired, and no payment of any consideration
shall be made with respect thereto.                                     

  (c)  COMPANY COMMON STOCK.  Each share of the Company Common Stock
  issued and outstanding immediately prior to the Effective Time (other than
   shares to be cancelled in accordance with SECTION 1.9(b) and any Dissenting
   Shares) will, by virtue of the Merger and without any action on the part of
 the holder thereof, be converted into the right to receive $30.10 in cash
  per share of Company Common Stock without any interest thereon (the "PRICE
PER SHARE"), subject to appropriate adjustment for any stock dividend,  
subdivision, reclassification, recapitalization, split, combination or  
exchange with respect to the Company Common Stock occurring before the  
Effective Time. As of the Effective Time, all such shares of the Company
Common Stock shall no longer be outstanding and shall automatically be  
  cancelled and retired and shall cease to exist, and each holder of a stock
 certificate which immediately prior to the Effective Time represented any
such shares of the Company Common Stock (a "CERTIFICATE") shall cease to
   have any rights with respect thereto, except the right to receive, upon the
 surrender of such Certificates as provided in SECTION 1.11, the Price Per
Share in cash.                                                          

1.10  OPTIONS.  Except as may be otherwise agreed in writing between the
Company and any holder of any Option (as hereinafter defined), upon the         
consummation of the Merger, each option to acquire Company Common Stock         
outstanding immediately prior to the Effective Time under the Company's 1994    
Executive Incentive Plan, as amended (the "EXECUTIVE INCENTIVE PLAN"), the      
Company's 1997 Stock Incentive Plan, as amended, the Company's 1994 Executive   
Performance Stock Award Plan, as amended (the "EXECUTIVE PERFORMANCE PLAN"), the
Company's 1987 Non-Qualified Stock Option Plan, as amended and the Company's    
Stock Option Plan for Non-Employee Directors, as amended (such plans referred to
herein as the "OPTION PLANS"), whether vested or unvested (each, an "OPTION,"   
collectively, the "OPTIONS"), shall automatically become immediately vested and 
exercisable and each holder of an Option shall have the right to receive from   
the Surviving Corporation a cash payment (less applicable federal, state and    
local withholding taxes) in an aggregate amount equal to the difference, if any,
between the Price Per Share less the applicable exercise price per share of     
Company Common Stock applicable to such Option for all Company Common Stock     
subject to the Option as expressly stated in the applicable Option Plan, stock  
option agreement or other agreement. Options with an exercise price equal to or 
greater than the Price Per Share will be cancelled without any consideration.   
The Company shall use its reasonable best efforts (including, without           
limitation, giving requisite notices to holders of Options advising them of such
accelerated vesting and rights pursuant to this SECTION 1.10) to fully advise   
holders of Options of their rights under this Agreement and the Options, to     
facilitate their timely exercise of such rights and to effectuate the provisions
of this SECTION 1.10. From and after the Effective Time, other than as expressly
set forth in this SECTION 1.10, no holder of an Option shall have any other     
rights in respect thereof other than to receive payment for his or her Options  
as set forth in this SECTION 1.10, and the Company shall take all necessary     
actions to terminate effective as of the Effective Time the Company's Option    
Plans, stock option agreements and similar arrangements.                        

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1.11  SURRENDER AND PAYMENT.                                            

 (a)  PAYING AGENT.  Before the Effective Time, Holdings shall designate a
bank or trust company reasonably acceptable to the Company to act as agent for  
the record holders of shares of the Company Common Stock in connection with the 
Merger (the "PAYING AGENT"). At or before the Effective Time, Holdings will     
deposit, or cause Merger Sub to deposit, as applicable, in trust for the benefit
of the holders of Certificates with the Paying Agent immediately available funds
(the "FUNDS") in an amount necessary to make the payments for the shares of the 
Company Common Stock contemplated by this Agreement on a timely basis. The      
Paying Agent will be authorized, at the request of Holdings, to invest any Funds
held by it in (i) investment grade money market instruments, (ii) direct        
obligations of the United States of America, (iii) obligations for which the    
full faith and credit of the United States of America is pledged to provide for 
the payment of principal and interest, (iv) commercial paper rated the highest  
quality by either Moody's Investors Services, Inc. or Standard & Poor's         
Corporation or (v) certificates of deposit, bank repurchase agreements or       
bankers' acceptances of commercial banks with capital exceeding $10 billion, in 
each case having maturities not to exceed 30 days and as designated by Holdings,
with any interest earned thereon being paid to Holdings at the earlier of       
(A) payment in full of the aggregate Price Per Share to all record holders of   
Company Common Stock immediately prior to the Effective Time of the Merger and  
(B) 180 days after the Effective Time; provided that no loss on investments made
pursuant to this SECTION 1.11(a) shall relieve Holdings of its obligations to   
pay the Price Per Share to all record holders of Company Common Stock as        
provided in ARTICLE 1 of this Agreement.                                        

  (b)  SURRENDER OF CERTIFICATES.  Promptly (and in any event not later than
five (5) business days) after the Effective Time, Holdings and the Surviving    
Corporation will cause the Paying Agent to mail and/or make available to each   
record holder of Certificates that immediately prior to the Effective Time      
represented shares of the Company Common Stock (other than holders of           
Certificates representing Dissenting Shares or representing shares covered by   
SECTION 1.9(b)), a notice and letter of transmittal and instructions in standard
form for use in effecting the surrender of all Certificates held by such record 
holder.                                                                         

(c)  PAYMENT PROCEDURES.  Upon surrender to the Paying Agent of a       
Certificate, together with such letter of transmittal duly executed and         
completed, the Paying Agent shall pay to the holder of such Certificate the     
aggregate Price Per Share attributable to the number of shares of the Company   
Common Stock represented by such Certificate, and such Certificate will then be 
cancelled. Until surrendered in accordance with the provisions of this          
SECTION 1.11, each Certificate (other than Certificates representing Dissenting 
Shares and Certificates representing shares covered by SECTION 1.9(b)) will     
represent for all purposes only the right to receive the aggregate Price Per    
Share relating thereto. No interest shall accrue or be paid in respect of cash  
payable upon the surrender of Certificates. After the Effective Time, holders of
Certificates shall cease to have any rights as shareholders of the Company,     
except as provided herein or under applicable state corporation law. If any     
payment of cash in respect of cancelled shares of the Company Common Stock is to
be paid to a Person other than the registered holder of the shares represented  
by the Certificate or Certificates surrendered in exchange therefor, it shall be
a condition to such payment that the Certificate or Certificates so surrendered 
shall be properly endorsed or otherwise be in proper form for transfer and that 
the Person requesting such payment shall pay to the Paying Agent any transfer or
other Taxes required as a result of such payment to a Person other than the     
registered holder of such shares or establish to the satisfaction of the Paying 
Agent that such Tax has been paid or is not payable. Any consideration otherwise
payable pursuant to this Agreement shall be subject to all applicable federal,  
state and local Tax withholding requirements. For purposes of this Agreement,   
"TAX" (including, with correlative meaning, the terms "TAXES" and "TAXABLE")    
means all federal, state, local and foreign income, profits, franchise, gross   
receipts, environmental, customs duty, capital stock, severance, stamp, payroll,
sales, transfer, employment, unemployment disability, use, property,            
withholding, excise, production, value added, occupancy and other taxes, duties 
or assessments of any nature whatsoever, together with all interest, penalties, 
fines and additions to tax imposed with respect to such amounts and any         

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interest in respect of such penalties and additions to tax. For purposes of this
Agreement, "PERSON" means an individual, corporation, partnership, limited      
liability company association, trust, unincorporated organization, entity or    
group (as defined in the Securities and Exchange Act of 1934, as amended (the   
"EXCHANGE ACT")).                                                               

  (d)  NO TRANSFER.  After the Effective Time, there will be no transfers of
shares of the Company Common Stock recorded on the stock transfer books of the  
Surviving Corporation. If, after the Effective Time, Certificates are presented 
to the Paying Agent or the Surviving Corporation for any reason they will be    
cancelled and exchanged for the Price Per Share as provided in SECTION 1.13(a)  
below.                                                                          

1.12  LOST CERTIFICATES.  If any Certificate has been lost, stolen or   
destroyed, upon the making of an affidavit of that fact by the Person claiming  
such Certificate to be lost, stolen or destroyed and, if required by the        
Surviving Corporation, the posting by such Person of a bond in such reasonable  
amount as the Surviving Corporation may direct as indemnity against any claim   
that may be made against it with respect to such Certificate, the Paying Agent  
shall issue in exchange for such lost, stolen or destroyed Certificate the Price
Per Share due to such Person as provided in SECTION 1.13(a) of this Agreement.  

1.13  UNCLAIMED MERGER CONSIDERATION.                                   

(a)  TRANSFER TO SURVIVING CORPORATION.  Any portion of the Funds made  
available to the Paying Agent pursuant to SECTION 1.11(a) that remain unclaimed 
by holders of Certificates that immediately prior to the Effective Time         
represented shares of Company Common Stock for 180 days after the Effective Time
will be transferred to the Surviving Corporation upon demand. Any holder of     
Certificates who has not theretofore complied with this ARTICLE 1 will          
thereafter look only to the Surviving Corporation for payment of the Price Per  
Share in accordance with this Agreement upon surrender of such Certificates.    

(b)  NO ESCHEAT OF REMAINING FUNDS.  None of Holdings, Merger Sub, the  
Company or the Paying Agent will be liable to any Person in respect of any cash 
delivered from the Funds to a public official pursuant to any applicable        
abandoned property, escheat or similar law. If any Certificates have not been   
surrendered before seven years after the Effective Time (or immediately before  
such earlier date on which any payment pursuant to this SECTION 1.13 would      
otherwise escheat to or become the property of any Governmental Entity), the    
aggregate Price Per Share payable in respect to such Certificates will, unless  
otherwise provided by applicable law, become the property of the Surviving      
Corporation, free and clear of all claims or interest of any Person previously  
entitled thereto. For purposes of this Agreement, "GOVERNMENTAL ENTITY" means   
any supranational, foreign, national, state, municipal or local government, any 
instrumentality, subdivision, court, administrative agency or commission or     
other authority thereof, or any quasi-governmental or private body exercising   
any regulatory, taxing or other governmental or quasi-governmental authority.   

  (c)  MERGER CONSIDERATION.  Any portion of the Funds made available to the
Paying Agent pursuant to SECTION 1.11(a) to pay the Price Per Share for shares  
of the Company Common Stock issued and outstanding immediately prior to the     
Effective Time for which appraisal rights have been perfected shall be returned 
to Holdings, upon demand.                                                       

   1.14  DISSENTING SHARES.  Notwithstanding SECTION 1.9 hereof, shares of the
Company Common Stock issued and outstanding immediately prior to the Effective  
Time and held by a holder who has not voted in favor of the Merger or consented 
thereto in writing and who has properly demanded and perfected such holder's    
right to dissent from the Merger and to be paid the fair value of such shares in
accordance with Sections 302A.471 and 302A.473 of the MBCA (and who has neither 
effectively withdrawn nor lost his right to dissent) ("DISSENTING SHARES"),     
shall not be converted into a right to receive cash pursuant to SECTION 1.9, and
the holder thereof shall be entitled to only such rights as are granted by the  
MBCA. If after the Effective Time such holder fails to perfect or withdraws or  
otherwise loses his right to dissent, such shares of Company Common Stock shall 
be treated as if they had been converted as of the Effective Time into the right
to receive cash as provided in SECTION 1.9, without interest thereon. The       
Company shall                                                                   

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give Holdings reasonably prompt notice of any demands for payment received by   
the Company under Sections 302A.471 and 302A.473 of the MBCA, and Holdings shall
have the right to participate in all negotiations and proceedings with respect  
to such demands. The Company shall not, except with the prior written consent of
Holdings, make any payment with respect to, or settle or offer to settle, any   
such demands.                                                                   

ARTICLE 2 
REPRESENTATIONS AND WARRANTIES

   2.1  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  Except as set forth in
the Company Disclosure Schedule delivered by the Company to Holdings at or prior
to the execution and delivery of this Agreement (the "COMPANY DISCLOSURE        
SCHEDULE") (the Company Disclosure Schedule is arranged by sections             
corresponding to the lettered and numbered sections contained in this           
SECTION 2.1 and the disclosure in any one section of the Company Disclosure     
Schedule shall qualify only that particular section of this SECTION 2.1 unless a
cross-reference is made to another lettered or numbered section to which such   
disclosure also qualifies or the context of such disclosure makes it reasonably 
clear, if read in the context of such other lettered or numbered section, that  
such disclosure affects or modifies such other lettered or numbered section) or 
any reports, schedules, forms, statements and other documents required to be    
filed by the Company with the Securities and Exchange Commission (the "SEC")    
since December 31, 1997 through the date of this Agreement, including all       
exhibits thereto (the "COMPANY SEC REPORTS"), the Company represents and        
warrants to Holdings and Merger Sub:                                            

       (a)  ORGANIZATION, STANDING AND POWER.  Each of the Company and each of
   its Subsidiaries (i) has been duly organized and is validly existing and in
 good standing under the laws of its jurisdiction of organization, (ii) is
  duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its     
properties makes such qualification necessary, (iii) has all requisite  
    corporate power and authority to own or lease and operate its properties and
   assets, and to carry on its business as now conducted and (iv) has obtained
all licenses, permits, franchises and other governmental authorizations 
   necessary to the ownership or operation of its properties or the conduct of
its business as now conducted, except, in the cases of clauses (i) (with
    respect to Subsidiaries only), (ii), (iii) and (iv), as would not reasonably
  be expected to have a Material Adverse Effect on the Company. For purposes
of this Agreement, "MATERIAL ADVERSE EFFECT" means, with respect to any 
entity, any adverse change, circumstance or effect that, individually or
aggregated with other changes, circumstances and effects, is materially 
adverse to the business, operations, cash flows, assets, liabilities,   
   condition (financial or otherwise), or results of operations of such entity
and its Subsidiaries taken as a whole. True and complete copies of the  
Organizational Documents, as amended and currently in force, and all    
corporate minute books and records of the Company and each of its       
  Subsidiaries have been furnished by the Company to Holdings for inspection
to the extent requested by Holdings. For purposes of this Agreement,    
"ORGANIZATIONAL DOCUMENTS" means, with respect to any entity, the       
certificate of incorporation, bylaws and/or other similar governing     
documents of such entity.                                               

(b)  CAPITAL STRUCTURE.                                         

        (i) The authorized capital stock of the Company consists solely of
    (A) 40,000,000 shares of the Company Common Stock, of which 18,289,484
       shares are outstanding as of December 20, 2000, and (B) 10,000,000 shares
    of undesignated shares, of which no shares are outstanding. All issued
     and outstanding shares of the Company Common Stock are duly authorized,
  validly issued, fully paid and nonassessable, and were not issued in
       violation of any preemptive rights. No Subsidiary of the Company owns any
      capital stock of the Company. There are no outstanding options, warrants
       or other rights (including preemptive rights) to acquire capital stock of
       the Company other than Options representing in the aggregate the right to
     purchase 1,814,915 shares (all of which have a per share exercise price
that is less than the Price Per Share) of the Company             

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    Common Stock under the Option Plans and share awards outstanding under
     the Executive Incentive Plan and Executive Performance Plan (the "SHARE
AWARDS"). SECTION 2.1(b)(i) OF THE COMPANY DISCLOSURE SCHEDULE    
identifies, as of the date indicated thereon, the holder of each  
       outstanding Option, the number of shares of Company Common Stock issuable
     upon exercise of each Option and the exercise price and expiration date
thereof. SECTION 2.1(b)(i) OF THE COMPANY DISCLOSURE SCHEDULE also
  identifies as of the date indicated thereon, the number of shares of
 Company Common Stock subject to the Share Awards and the recipients
  thereof. For purposes of this Agreement, "SUBSIDIARY" when used with
       respect to any party means any corporation or other organization, whether
  incorporated or unincorporated, (i) of which such party or any other
    Subsidiary of such party is a general partner (excluding partnerships,
  the general partnership interests of which held by such party or any
Subsidiary of such party do not have a majority of the voting and 
    economic interests in such partnership) or (ii) at least a majority of
       the securities or other interests of which having by their terms ordinary
  voting power to elect a majority of the board of directors or others
    performing similar functions with respect to such corporation or other
      organization is directly or indirectly owned or controlled by such party
    or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.                                         

           (ii) All of the issued and outstanding shares of capital stock of the
    Company's Subsidiaries are duly authorized, validly issued, fully paid
   and nonassessable and are owned directly or indirectly by the Company
free and clear of any liens, claims, encumbrances, restrictions,  
 preemptive rights or any other claims of any third party ("LIENS").
    Except for the capital stock of its Subsidiaries, the Company does not
own, directly or indirectly, any capital stock or other ownership 
interest in any Person.                                           

          (iii) No bonds, debentures, notes or other indebtedness of the Company
       having, or convertible into other securities having, the right to vote on
    any matters on which shareholders may vote ("COMPANY VOTING DEBT") are
issued or outstanding.                                            

    (iv) Except for the Options and the Share Awards, there are no
    securities, options, warrants, calls, rights, commitments, agreements,
     arrangements or undertakings of any kind to which the Company or any of
     its Subsidiaries is a party or by which any of them is bound obligating
  the Company or any of its Subsidiaries to issue, deliver or sell, or
       cause to be issued, delivered or sold, additional shares of capital stock
     or other voting securities of the Company or any of its Subsidiaries or
       obligating the Company or any of its Subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right,    
commitment, agreement, arrangement or undertaking. There are no   
  outstanding obligations of the Company or any of its Subsidiaries to
    repurchase, redeem or otherwise acquire any shares of capital stock of
the Company or its Subsidiaries. There is no voting trust or other
agreement or understanding to which the Company or any of its     
       Subsidiaries is a party or is bound, or, to the knowledge of the Company,
  to which any shareholder of such entity is a party or is bound, with
      respect to the voting of the capital stock or other voting securities of
the Company or any of its Subsidiaries, other than agreements     
       contemplated by this Agreement. The Company has the ability to effect any
action requiring the approval of the shareholders of any of its   
Subsidiaries and to designate all of the members of the board of  
directors of each of its Subsidiaries.                            

(c)  AUTHORITY; NO CONFLICTS.                                   

     (i) The Company has all requisite corporate power and corporate
 authority to execute and deliver this Agreement and, subject to the
    adoption of this Agreement by the requisite vote of the holders of the
       Company Common Stock, to consummate the transactions contemplated hereby.
      The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all 
   necessary corporate action on the part of the Company, subject in the
case of the consummation of the Merger to any required adoption of

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       this Agreement by the holders of the Company Common Stock. Subject to the
    adoption of this Agreement by the requisite vote of the holders of the
       Company Common Stock, this Agreement has been duly executed and delivered
    by the Company and (assuming the due authorization and valid execution
      and delivery of this Agreement by Holdings and Merger Sub) constitutes a
   valid and binding agreement of the Company, enforceable against it in
accordance with its terms.                                        

           (ii) The execution and delivery of this Agreement by the Company does
      not or will not, as the case may be, and the consummation by the Company
 of the transactions contemplated hereby will not, conflict with, or
  result in any violation of, or constitute a default (with or without
 notice or lapse of time, or both) under, or give rise to a right of
  termination, amendment, cancellation or acceleration of any material
      obligation or the loss of a material benefit under, or the creation of a
    Lien on any assets pursuant to (any such conflict, violation, default,
    right of termination, amendment, cancellation or acceleration, loss or
creation, a "VIOLATION"): (A) any provision of the Organizational 
   Documents of the Company or any of its Subsidiaries or (B) except for
    such Violations as would not reasonably be expected to have a Material
   Adverse Effect on the Company or impair the ability of the Company to
   perform its material obligations under this Agreement or delay in any
     material respect or prevent the consummation of the Merger, and subject
     to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in            
      SECTION 2.1(c)(iii) below, any loan or credit agreement, note, mortgage,
  bond, indenture, lease, benefit plan or other agreement, obligation,
       instrument, permit, concession, franchise or license binding upon or held
       by the Company or any Subsidiary or any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company, its 
Subsidiaries or their respective properties or assets.            

      (iii) No material consent, approval, order or authorization of, or
  registration, declaration or filing with, any Governmental Entity is
      required by or with respect to the Company or any of its Subsidiaries in
 connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions    
    contemplated hereby, except for those required under or in relation to
      (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"), (B) state securities or "blue sky" laws, (C) the 
Securities Act of 1933, as amended (the "SECURITIES ACT"), (D) the
      Exchange Act, (E) the MBCA with respect to the filing and recordation of
appropriate articles of merger or other documents, (F) rules and  
regulations of the NASDAQ National Market ("NASDAQ") and (G) any  
applicable federal and state laws governing the transfer of food  
   processing and distribution facilities subject to licensing or permit
      requirements, inspection agreements, and similar facility-wide approvals
     (including, but not limited to, the Egg Products Inspection Act and the
Minnesota Consolidated Food Licensing Law).                       

(d)  REPORTS AND FINANCIAL STATEMENTS.                          

         (i) The Company has filed all required Company SEC Reports. None of
      the Company's Subsidiaries is required to file any form, report or other
 document with the SEC. None of the Company SEC Reports, as of their
      respective dates (and, if amended or superseded by a filing prior to the
     date of this Agreement, then on the date of such filing), contained any
     untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements 
    therein, in light of the circumstances under which they were made, not
 misleading. Each of the financial statements (including the related
notes) included in the Company SEC Reports presents fairly, in all
     material respects, the consolidated financial position and consolidated
      results of operations and cash flows of the Company and its Subsidiaries
as of the respective dates or for the respective periods set forth
      therein, all in conformity with generally accepted accounting principles
 ("GAAP") consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and  
exceptions permitted by Form 10-Q                                 

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under the Exchange Act. Since December 31, 1999, there has been no
      material change in the Company's accounting methods or principles except
       as described in the notes to the consolidated financial statements of the
   Company contained in the Company SEC Reports. All of such Company SEC
Reports, as of their respective dates (and as of the date of any  
     amendment to the respective Company SEC Report), complied as to form in
      all material respects with the applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations promulgated
thereunder.                                                       

      (ii) Except as set forth in the consolidated balance sheets (and
      notes thereto) of the Company and its consolidated Subsidiaries included
   in the Company SEC Reports, and except for liabilities or obligations
    incurred in the Ordinary Course or in connection with the transactions
  contemplated by this Agreement since September 30, 2000, neither the
 Company nor any of its Subsidiaries has incurred any liabilities or
    obligations of any nature which would reasonably be expected to have a
     Material Adverse Effect on the Company. For purposes of this Agreement,
       "ORDINARY COURSE" means, with respect to any entity, any actions taken in
      the regular and ordinary course of that entity's business, consistent in
all material respects with past practices.                        

(e)  INFORMATION SUPPLIED.                                      

           (i) None of the information supplied or to be supplied by the Company
    in writing specifically for inclusion or incorporation by reference in
  (A) the proxy or information statement related to the meeting of the
     Company's shareholders to be held in connection with the Merger and the
    transactions contemplated by this Agreement (the "PROXY STATEMENT") or
     (B) the Schedule 13E-3 will, (1) at the respective times such documents
       are filed, and, with respect to the Proxy Statement when first published,
 sent or given to the shareholders of the Company, contain an untrue
     statement of material fact or omit to state a material fact required to
     be stated therein or necessary in order to make the statements therein,
     in light of the circumstances under which they are made, not misleading
   or (2) in the case of the Proxy Statement or any amendment thereof or
     supplement thereto, at the time of the Company Shareholders Meeting and
      at the Effective Time, contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or  
     necessary in order to make the statements made therein, in light of the
     circumstances under which they are made, not misleading or necessary to
    correct any statement in any earlier communication with respect to any
      solicitation of proxies for the Company Shareholders Meeting which shall
  have become false or misleading. The Proxy Statement when filed will
comply as to form in all material respects with the applicable    
       requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.                                

(ii) Notwithstanding the foregoing provisions of this     
       SECTION 2.1(e), no representation or warranty is made by the Company with
      respect to (A) statements made or incorporated by reference in the Proxy
Statement and the Schedule 13E-3 based on information supplied by 
Holdings or Merger Sub for inclusion or incorporation by reference
therein or (B) any forward-looking information which may have been
      supplied by the Company and incorporated into the Proxy Statement or the
Schedule 13E-3.                                                   

      (f)  COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS.  The Company
  and its Subsidiaries hold all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all       
Governmental Entities ("PERMITS") which are necessary to each of them to
own, lease and operate its properties or to carry on its business as now
  being conducted, except for such failures to have received such Permits as
 would not reasonably be expected to have a Material Adverse Effect on the
 Company. The Company and its Subsidiaries and the Owned Real Property and
 the Leases are in compliance with the terms of such Permits, except where
    the failure to so comply would not reasonably be expected to have a Material
Adverse Effect on the Company. The businesses of the Company and its    
  Subsidiaries are not being and have not been conducted in violation of any
law,                                                                    

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ordinance, regulation, judgment, decree, injunction, rule or order of any       
Governmental Entity, except for violations which would not reasonably be        
expected to have a Material Adverse Effect on the Company. No investigation by  
any Governmental Entity with respect to the Company or any of its Subsidiaries  
is pending or, to the knowledge of the Company, threatened, other than          
investigations which would not reasonably be expected to have a Material Adverse
Effect on the Company.                                                          

        (g)  LITIGATION.  There is no litigation, arbitration, grievance, claim,
 suit, action, investigation or proceeding pending or, to the knowledge of
the Company, threatened, against or affecting the Company or any of its 
Subsidiaries or any of their respective assets which would reasonably be
expected to have a Material Adverse Effect on the Company. There is no  
judgment, award, decree, injunction, rule or order of any Governmental  
Entity or arbitrator outstanding against the Company or any of its      
  Subsidiaries which would reasonably be expected to have a Material Adverse
Effect on the Company.                                                  

       (h)  TAXES.  (i) The Company and each of its Subsidiaries have duly and
timely filed (taking into account any extension of time within which to 
   file) all material Tax Returns required to be filed by any of them, and all
  such filed Tax Returns are complete and accurate in all material respects,
  (ii) the Company and each of its Subsidiaries have paid all Taxes that are
required to be paid in respect to the periods covered by such returns   
    whether or not shown on such filed Tax Returns or that the Company or any of
its Subsidiaries are obligated to withhold from amounts owing to any    
shareholder, employee, creditor or third party, except with respect to  
 matters contested in good faith and for which adequate reserves have been
established in accordance with GAAP as reflected in the most recent     
   consolidated balance sheet or for such amounts that would not reasonably be
  expected to have a Material Adverse Effect on the Company, (iii) there are
no pending or, to the knowledge of the Company, threatened audits,      
    examinations, investigations or other proceedings in respect of Taxes or Tax
matters relating to the Company or any of its Subsidiaries which, if    
determined adversely to the Company or any of its Subsidiaries, would   
reasonably be expected to have a Material Adverse Effect on the Company,
(iv) there are no deficiencies or claims for any Taxes that have been   
proposed, asserted or assessed against the Company or any of its        
Subsidiaries which, if such deficiencies or claims were finally resolved
against the Company or any of such Subsidiaries, would reasonably be    
   expected to have a Material Adverse Effect on the Company, (v) there are no
material Liens for Taxes upon the assets of the Company or any of its   
    Subsidiaries, other than Liens for current Taxes not yet due and payable and
Liens for Taxes that are being contested in good faith by appropriate   
proceedings and (vi) none of the Company or its Subsidiaries has made an
election under Section 341(f) of the Internal Revenue Code of 1986, as  
   amended, and the rules and regulations promulgated thereunder (the "CODE").
Neither the Company nor any of its Subsidiaries has been a United States
    real property holding corporation within the meaning of Section 897(c)(2) of
the Code during the past five years. Neither the Company nor any of its 
 Subsidiaries is a party to, bound by or has any obligation under, any Tax
  sharing agreement or similar contract or arrangement or any agreement that
    obligates it to make any payment computed by reference to the Taxes, taxable
income or taxable losses of any other Person (other than contracts or   
arrangements entered into with employees, consultants or independent    
contractors or in connection with purchase or sale agreements or sale   
leasebacks, which contracts and arrangements would not reasonably be    
   expected to have a Material Adverse Effect on the Company). The Company and
  its Subsidiaries (A) are not, and have not been, a member of an affiliated
    group filing a consolidated federal income Tax Return other than a group the
    common parent of which is the Company and (B) have no liability for Taxes of
  any Person under Treasury Regulation 1.1502-6(a) (or any similar provision
of state, local or foreign law), or as a transferee or successor, by    
   contract or otherwise. No claim has ever been made by a taxing authority in
 a jurisdiction where the Company or any of its Subsidiaries does not file
Tax Returns that such Person is or may be subject to taxation by such   
jurisdiction which, if determined adversely to the Company or such      
  Subsidiary, would reasonably be expected to have a Material Adverse Effect
on the Company. None of the Company or its Subsidiaries has consented to
 extend the time, or is the beneficiary of any extension of time, in which
any Tax may                                                             

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    be assessed or collected by any taxing authority. None of the Company or its
  Subsidiaries will be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or   
portion thereof) ending after the Closing Date as a result of any       
  (i) change in method of accounting for a taxable period ending on or prior
to the Closing Date under Code Section 481(c) (or any corresponding or  
   similar provision of state, local or foreign income Tax law), (ii) "closing
agreement" as described in Code Section 7121 (or any corresponding or   
similar provision of state, local or foreign income Tax law),           
(iii) deferred intercompany gain or any excess loss account described in
Treasury Regulations under Code Section 1502 (or any corresponding or   
similar provision of state, local or foreign income Tax law) or         
  (iv) installment sale made prior to the Closing Date. For purposes of this
   Agreement, "TAX RETURN" means all returns and reports (including elections,
 claims, declarations, disclosures, schedules, estimates, computations and
information returns) required to be supplied to a Tax authority in any  
jurisdiction relating to Taxes, including any amendments thereof.       

    (i)  ABSENCE OF CERTAIN CHANGES OR EVENTS.  Since September 30, 2000
other than in connection with or arising out of this Agreement and the  
transactions contemplated hereby, the Company and its Subsidiaries have 
  conducted their respective businesses in the Ordinary Course and there has
not been (i) any condition, event or occurrence which has had or would  
  reasonably be expected to have a Material Adverse Effect on the Company or
(ii) any action which, if it had been taken after the date hereof, would
have required Holdings' consent under SECTION 3.1.                      

      (j)  VOTE REQUIRED.  The affirmative vote of the holders of a majority
 of the voting power of all shares of the Company Common Stock entitled to
  vote is the only vote of the holders of any class or series of the capital
stock of the Company necessary to approve this Agreement and the        
transactions contemplated hereby.                                       

(k)  REAL PROPERTY.                                             

         (i) SECTION 2.1(k)(i) OF THE COMPANY DISCLOSURE SCHEDULE sets forth
     the street address of each parcel of real property owned by the Company
     or one of its Subsidiaries, the "OWNED REAL PROPERTY"). The Company and
     its Subsidiaries have good and marketable fee simple title to the Owned
      Real Property, free and clear of all Liens, except where such impairment
  to title would not reasonably be expected to have a Material Adverse
Effect on the Company. SECTION 2.1(k)(i) OF THE COMPANY DISCLOSURE
    SCHEDULE sets forth a true and complete list of all leases, subleases,
       licenses and other agreements (true and correct copies of which have been
       delivered to Holdings) pursuant to which the Company and its Subsidiaries
     occupy and use any real property (the "LEASES"). The Leases are in full
     force and effect in all material respects, free and clear of all Liens,
      except for such exceptions as would not reasonably be expected to have a
  Material Adverse Effect on the Company. To the best knowledge of the
    Company, no parties to the Leases are in material breach or default of
such leases.                                                      

       (ii) Neither the Company nor any of its Subsidiaries is obligated
       under or bound by any agreement, option, right of first refusal, purchase
   contract, or other contractual right to sell, lease or dispose of any
    Owned Real Property or any portions thereof or interests therein which
     property, portions and interests, individually or in the aggregate, are
material to the conduct of the business of the Company or its     
     Subsidiaries as currently conducted. Neither the Company nor any of its
      Subsidiaries or any affiliates of any of the foregoing has an ownership,
       financial or other interest in the landlord under any of the Leases which
    exceeds a 50% ownership, financial or other interest in such landlord.
      The Owned Real Property and the Leases comprise all of the real property
used in the Company's and its Subsidiaries' business.             

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(l)  EMPLOYEE BENEFIT PLANS; LABOR MATTERS.                     

         (i) SECTION 2.1(l)(i) OF THE COMPANY DISCLOSURE SCHEDULE contains a
  true and complete list of each written material (a) employee benefit
     plan, policy and program (including, without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of the Employee 
   Retirement Income Security Act of 1974, as amended ("ERISA") and each
"multiemployer plan" within the meaning of Section 3(37) of ERISA)
  sponsored, maintained or contributed to by the Company or any of its
  Subsidiaries for the benefit of employees, directors, consultants or
      independent contractors and (b) benefit arrangement and contract between
 the Company or its Subsidiaries and any current or former employees
   (which have or have had an annual base salary of more than $100,000),
      directors, consultants and independent contractors, under which any such
current or former employee, director, consultant or independent   
contractor of the Company or any of its Subsidiaries (the "COMPANY
 PARTICIPANTS") has any present or future right to material benefits
(collectively, the "COMPANY BENEFIT PLANS").                      

      (ii) (a) Each of the Company Benefit Plans has been established,
    operated and administered in compliance with applicable law, including
    but not limited to ERISA and the Code, except where such noncompliance
       would not reasonably be expected to have a Material Adverse Effect on the
       Company, (b) each of the Company Benefit Plans intended to be "qualified"
       within the meaning of Section 401(a) of the Code has received a favorable
       determination letter from the Internal Revenue Service to such effect and
    the Company knows of no event that would cause the disqualification of
 any such Company Benefit Plan, (c) no Company Benefit Plan provides
welfare or insurance benefits (whether or not insured) to Company 
  Participants or their dependents or beneficiaries beyond the Company
  Participant's termination of employment or termination of service of
       non-employees with the Company or any of its Subsidiaries, which benefits
   would reasonably be expected to have a Material Adverse Effect on the
     Company, other than coverage mandated by applicable law or benefits the
   full cost of which is borne by the Company Participant (or his or her
       dependent or beneficiary), (d) neither the Company nor any Subsidiary nor
   any other entity, that together with the Company or any Subsidiary is
    treated as a single employer under Section 414 of the Code, maintains,
contributes to, or has any material liability with respect to a   
       "multiemployer plan," as such term is defined in Section 3(37) or 4001 of
  ERISA, nor does such entity have any pension benefit plan subject to
       Section 412 of the Code or Title IV of ERISA, (e) neither the Company nor
       any of its Subsidiaries have engaged in a transaction with respect to any
 Company Benefit Plan which to the Company's knowledge subjects such
      entity to either a civil penalty assessed pursuant to Sections 502(i) or
      502(e) of ERISA or a Tax imposed pursuant to Section 4975 or 4976 of the
     Code, in each case which penalty or Tax would reasonably be expected to
    have a Material Adverse Effect on the Company, (f) to the knowledge of
the Company, there are no pending or threatened claims (other than
 routine claims for benefits) by, on behalf of or against any of the
Company Benefit Plans or any trusts related thereto, which would  
      reasonably be expected to have a Material Adverse Effect on the Company,
     (g) no event has occurred and no condition exists that to the Company's
   knowledge would subject the Company or any of its Subsidiaries to any
 Tax, fine, lien, penalty or other liability (other than liabilities
incurred in the ordinary course of the plan's operations that are 
  reflected in the Company's financial statements) with respect to any
       Company Benefit Plan imposed by ERISA or the Code, which would reasonably
      be expected to have a Material Adverse Effect on the Company and (h) all
     material contributions or other material amounts payable by the Company
     or any of its Subsidiaries as of the Effective Time with respect to any
      Company Benefit Plan in respect of current or prior plan years which are
required to be reflected in the Company's financial statements in 
       accordance with GAAP have been, in all material respects, paid or accrued
in accordance with GAAP.                                          

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    (iii) Except as provided pursuant to this Agreement, neither the
     execution, delivery or performance of this Agreement by the Company nor
     the consummation by the Company of the transactions contemplated hereby
      shall (a) result in any payment becoming due to any Company Participant,
   (b) increase any benefits otherwise payable under any Company Benefit
       Plan, (c) result in any acceleration of the time of payment or vesting of
       any benefits under any Company Benefit Plan or (d) violate the provisions
      of any agreement between a Company Participant and the Company or any of
 its Subsidiaries, except in each case where such payment, increase,
  acceleration or violation would not reasonably be expected to have a
Material Adverse Effect on the Company.                           

         (iv) (a) Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining or other labor union contract and no 
       collective bargaining agreement is being negotiated by the Company or any
     of its Subsidiaries, (b) there is no pending or to the knowledge of the
  Company, threatened labor dispute, strike, work stoppage, lockout or
      other labor controversy involving the Company or any of its Subsidiaries
which may interfere with the respective business activities of the
      Company or any of its Subsidiaries, except where such dispute, strike or
       work stoppage would not reasonably be expected to have a Material Adverse
  Effect on the Company nor has the Company or any of its Subsidiaries
 experienced any such labor controversy within the past three years,
     (c) there is no pending or, to the knowledge of the Company, threatened
     action, complaint, arbitration, proceeding or investigation against the
       Company or any of its Subsidiaries by or before (or that could be brought
   before) any court, governmental agency, administrative agency, board,
  commission or arbitrator brought by or on behalf of any prospective,
       current or former employee, labor organization or other representative of
employees of the Company or any of its Subsidiaries which would   
     reasonably be expected to have a Material Adverse Effect on the Company
(d) the Company and its Subsidiaries are in compliance with all   
applicable laws, agreements, and policies relating to employment, 
      employment practices and terms and conditions of employment except where
    such noncompliance would not reasonably be expected to have a Material
      Adverse Effect on the Company and (e) neither the Company nor any of its
       Subsidiaries has closed any plant or facility, effectuated any layoffs of
 employees or implemented any early retirement, separation or window
program within the past year, nor has the Company or any of its   
  Subsidiaries planned or announced any such action or program for the
future.                                                           

(m)  INTELLECTUAL PROPERTY.                                     

          (i) The Company or one of its Subsidiaries owns, or has the right to
     use, pursuant to written license agreements set forth on SECTION 2.1(m)
       OF THE COMPANY DISCLOSURE SCHEDULE, free and clear of all liens, security
  interests or other encumbrances, all trademarks, tradenames, service
     marks, Internet domain names, trade dress, patents, patent applications
or other applications for registration of intellectual property,  
     copyrights, technology, software, know-how, trade secrets and processes
used by the Company or any of its Subsidiaries in their respective
businesses as presently conducted or necessary therefor (the      
   "INTELLECTUAL PROPERTY"), except for those the failure to own or have
   such legal right to use as would not reasonably be expected to have a
Material Adverse Effect on the Company.                           

  (ii) No claim has been asserted and is pending by any Person
      challenging the use of any such Intellectual Property or the validity or
      effectiveness of any such Intellectual Property, except for such matters
      as would not reasonably be expected to have a Material Adverse Effect on
the Company.                                                      

       (iii) The conduct of the Company's and its Subsidiaries' businesses
   does not infringe on the intellectual property or other rights of any
Person, except for such claims and infringements that would not   
      reasonably be expected to have a Material Adverse Effect on the Company.

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          (iv) To the Company's knowledge, no third party has infringed any of
   the Intellectual Property, except for such infringements as would not
      reasonably be expected to have a Material Adverse Effect on the Company.

          (v) Except to the extent that it would not reasonably be expected to
have a Material Adverse Effect on the Company, the owners of any  
     Intellectual Property licensed to the Company have taken all reasonably
       necessary and desirable actions to maintain and protect such Intellectual
Property.                                                         

(n)  ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.                 

       (i) Except as would not reasonably be expected to have a Material
     Adverse Effect on the Company, each of the Company and its Subsidiaries
   has complied and is in compliance with all Environmental, Health, and
       Safety Requirements, including, without limitation, all permits, licenses
   and other authorizations that are required pursuant to Environmental,
      Health, and Safety Requirements for the occupation of its facilities and
       the operation of its business. Except as would not reasonably be expected
      to have a Material Adverse Effect on the Company, none of the Company or
   its Subsidiaries has received any notice, report or other information
     regarding any actual or alleged violation of Environmental, Health, and
       Safety Requirements, or any liabilities or potential liabilities (whether
      accrued, absolute, contingent, unliquidated or otherwise), including any
   investigatory, remedial or corrective obligations, relating to any of
    them or its facilities arising under Environmental, Health, and Safety
Requirements. Except as would not reasonably be expected to have a
Material Adverse Effect on the Company, none of the Company, its  
 Subsidiaries, or their respective predecessors has treated, stored,
  disposed of, arranged for or permitted the disposal of, transported,
  handled, or released any substance, including without limitation any
     hazardous substance, or owned or operated any property or facility (and
      no such property or facility is contaminated by any such substance) in a
       manner that has given rise to liabilities or could reasonably be expected
      to give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural
resource damages or attorney fees, pursuant to the Comprehensive  
Environmental Response, Compensation and Liability Act of 1980, as
       amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA"), or
       any other Environmental, Health, and Safety Requirements, except for such
obligations as would not reasonably be expected to have a Material
Adverse Effect on the Company. Neither this Agreement nor the     
   consummation of the transaction that is the subject of this Agreement
  will result in any obligations for site investigation or cleanup, or
 notification to or consent of government agencies or third parties,
      pursuant to any of the so-called "transaction-triggered" or "responsible
       property transfer" Environmental, Health, and Safety Requirements. Except
    as would not reasonably be expected to have a Material Adverse Effect,
      neither the Company nor any of its Subsidiaries has assumed, undertaken,
or otherwise become subject to, any liability, including without  
       limitation any obligation for corrective or remedial action, of any other
person or entity relating to Environmental, Health, and Safety    
Requirements. Except as would not reasonably be expected to have a
    Material Adverse Effect on the Company, no facts, events or conditions
     relating to the past or present facilities, properties or operations of
    the Company, its Subsidiaries, or any of their respective predecessors
    will prevent, hinder or limit continued compliance with Environmental,
       Health, and Safety Requirements, give rise to any investigatory, remedial
     or corrective obligations pursuant to Environmental, Health, and Safety
   Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to      
Environmental, Health, and Safety Requirements, including without 
 limitation any relating to onsite or offsite releases or threatened
     releases of hazardous materials, substances or wastes, personal injury,
property damage or natural resources damage.                      

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          (ii) The Company has provided to Holdings and the Merger Sub, copies
of all material environmental reports, audits, assessments, and   
     investigations, and any other material environmental documents, related
to the past or present facilities, properties or operations of the
    Company, its Subsidiaries, or any of their respective predecessors, to
       the extent the forgoing are in the possession, custody, or control of the
Company or any of its Subsidiaries.                               

For purposes of this Agreement, "ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS"
shall mean all federal, state, local and foreign statutes, regulations,         
ordinances and other provisions having the force or effect of law, all judicial 
and administrative orders and determinations, all contractual obligations and   
all common law concerning public health and safety, worker health and safety,   
and pollution or protection of the environment, including without limitation all
those relating to food or to the presence, use, production, generation,         
handling, transportation, treatment, storage, disposal, distribution, labeling, 
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous materials, substances or wastes, chemical substances or        
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum      
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
each as amended.                                                                

      (o)  BROKERS OR FINDERS.  Except for the engagement of Merrill Lynch &
  Co. and U.S. Bancorp Piper Jaffray Inc. ("U.S. BANCORP PIPER JAFFRAY"), no
   agent, broker, investment banker, financial advisor or other firm or Person
   is or will be entitled to any broker's or finder's fee or any other similar
    commission or fee in connection with any of the transactions contemplated by
   this Agreement based upon arrangements made by or on behalf of the Company.

  (p)  INSURANCE.  SECTION 2.1(p) OF THE COMPANY DISCLOSURE SCHEDULE
 contains a list of all material insurance policies which are owned by the
    Company and any of its Subsidiaries and which name the Company or any of its
Subsidiaries as an insured, including without limitation self-insurance 
programs and those which pertain to the Company's assets, employees or  
    operations. All such insurance policies are in full force and effect and the
Company has not received notice of cancellation of any such insurance   
policies other than those policies the absence or cancellation of which 
 would not reasonably be expected to have a Material Adverse Effect on the
Company.                                                                

  (q)  AFFILIATE TRANSACTIONS.  There are no contracts, commitments,
    agreements, arrangements or other transactions between the Company or any of
  its Subsidiaries, on the one hand, and any (i) present officer or director
  of the Company or any of its Subsidiaries or any of their immediate family
members (including their spouses) or (ii) affiliate of any such officer,
   director, family member or beneficial owner, on the other hand, required to
be disclosed pursuant to Item 404 of Regulation S-K of the SEC.         

  (r)  MATERIAL CONTRACTS.  SECTION 2.1(r) OF THE COMPANY DISCLOSURE
 SCHEDULE sets forth a list of all of the Company Material Contracts as of
 the date of this Agreement and, prior to the date hereof, the Company has
    made available to Holdings true copies of each Company Material Contract and
summaries of all oral Company Material Contracts. For purposes of this  
Agreement, the term "COMPANY MATERIAL CONTRACTS" shall mean: (i) all    
contracts required to be disclosed pursuant to Items 401 or 601 of      
 Regulation S-K of the SEC as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,1999 or any Company SEC 
    Report filed thereafter, in each case under the rules and regulations of the
SEC, (ii) all contracts for the future purchase of materials, supplies, 
merchandise or equipment providing for remaining payments in excess of  
 $3 million in the aggregate, (iii) all contracts for the sale or lease of
 any of the assets of the Company or its Subsidiaries, other than sales of
inventory in the Ordinary Course, providing for payments in excess of   
   $3 million in the aggregate, (iv) all mortgages, pledges, conditional sales
contracts, security agreements, factoring agreements or other similar   
   agreements with respect to any assets of the Company providing for payments
in excess of $1 million in the aggregate, (v) all consulting agreements 
 providing for payments thereunder in excess of $250,000 in the aggregate,
(vi) all non-competition or similar agreements which restrict or may    
hereafter restrict in any material respect the geographic or            

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    operational scope of the business of the Company or any of its affiliates or
   the ability of the Company or any of its affiliates to enter into new lines
  of business, (vii) all agreements or indentures relating to borrowed money
or other indebtedness or the mortgaging, pledging or otherwise placing a
    Lien on any material asset or material group of assets of the Company or its
  Subsidiaries, (viii) all contracts under which the Company has advanced or
    loaned any other Person in the aggregate exceeding $250,000, (ix) all sales,
  distribution or franchise agreements the termination of which would have a
Material Adverse Effect on the Company, (x) all warranty agreements and 
(xi) all agreements by which the Company or its Subsidiaries guarantee, 
endorse or otherwise becomes or is contingently liable for the debt,    
   obligation or other liability of any other Person or guarantees the payment
   of dividends or other distribution upon the shares of any other Person. All
  such written Company Material Contracts are valid, binding and enforceable
in accordance with their respective terms (assuming the other parties   
 thereto are bound) and are in full force and effect, except to the extent
they have previously expired in accordance with their terms, or, except 
  where such invalidity or unenforceability would not reasonably be expected
    to have a Material Adverse Effect on the Company. No payment default, breach
or violation by the Company or its Subsidiaries or to the Company's     
knowledge, by any other party thereto exists under such Company Material
Contracts, except for defaults, breaches or violations which would not  
reasonably be expected to have a Material Adverse Effect on the Company.

        (s)  STATE TAKEOVER STATUTES.  The Company Board and a special committee
    thereof satisfying the requirements of Section 673 Subd. 1(d)(1) of the MBCA
    has approved the execution of this Agreement and authorized and approved the
    Merger prior to the execution by the Company of this Agreement in accordance
with the Section 673 of the MBCA, so that such Section will not apply to
this Agreement or the transactions contemplated hereby (including the   
    Merger). The Company Board has taken all such action required to be taken by
  it to provide that this Agreement and the transactions contemplated hereby
   shall be exempt from the requirements of any "moratorium," "control share,"
"fair price" or other anti-takeover laws or regulations of any state    
(including without limitation Section 671 of the MBCA).                 

(t)  FINANCIAL ADVISORY OPINION.  U.S. Bancorp Piper Jaffray has
delivered to the Company Board its written opinion, subject to the      
qualifications and limitations stated therein, to the effect that the   
consideration to be received by the holders of the Company Common Stock 
 pursuant to the Merger is fair to the holders of the Company Common Stock
   (other than any holders of Company Common Stock who will be shareholders of
  the Surviving Corporation or hold interests in Investors or Holdings after
consummation of the Merger) from a financial point of view.             

(u)  COMPLIANCE WITH APPLICABLE FOOD LAWS.  The Company and its 
Subsidiaries have produced and distributed and are producing and        
distributing food products that are in compliance with the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 321 et seq.), the Federal Egg Products
  Inspection Act (21 U.S.C. 1031 et seq.), the Minnesota Food Law (Minnesota
    Statutes, Ch. 31), all other applicable federal and state laws governing the
production of food, and all applicable regulations and administrative   
    interpretations promulgated under any such laws, except for such failures to
be in compliance as would not reasonably be expected to have a Material 
Adverse Effect on the Company.                                          

  2.2  REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND MERGER SUB.  Except as
set forth in the Holdings Disclosure Schedule delivered by Holdings to the      
Company at or prior to the execution and delivery of this Agreement (the        
"HOLDINGS DISCLOSURE SCHEDULE"), Holdings and Merger Sub each represent and     
warrant to the Company that:                                                    

       (a)  ORGANIZATION, STANDING AND POWER.  Each of Holdings and Merger Sub
  has been duly organized and is validly existing and in good standing under
 the laws of its jurisdiction of organization. Each of Holdings and Merger
Sub is duly qualified and in good standing to do business in each       
    jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such                                            

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   qualification necessary, except as would not reasonably be expected to have
a Material Adverse Effect on Holdings and Merger Sub. True and complete 
  copies of the Organizational Documents of the Holdings and Merger Sub have
been furnished by Holdings to the Company for inspection to the extent  
requested by the Company.                                               

(b)  AUTHORITY; NO CONFLICTS.                                   

     (i) Each of Holdings and Merger Sub has all requisite power and
   authority to execute and deliver this Agreement and to consummate the
  transactions contemplated hereby. The execution and delivery of this
    Agreement and the consummation of the transactions contemplated hereby
       have been duly authorized by all necessary action on the part of Holdings
    and Merger Sub. This Agreement has been duly executed and delivered by
   Holdings and Merger Sub and (assuming the due authorization and valid
    execution and delivery of this Agreement by the Company) constitutes a
 valid and binding agreement of Holdings and Merger Sub, enforceable
against them in accordance with its terms.                        

       (ii) The execution and delivery of this Agreement by Holdings and
       Merger Sub does not or will not, as the case may be, and the consummation
     by Holdings and Merger Sub of the transactions contemplated hereby will
      not, result in any Violation of: (A) any provision of the Organizational
       Documents of Holdings and Merger Sub or (B) except for such Violations as
   would not reasonably be expected to have a Material Adverse Effect on
     Holdings and Merger Sub or impair the ability of Holdings or Merger Sub
    to perform their material obligations under this Agreement or delay in
 any material respect or prevent the consummation of the Merger, and
subject to obtaining or making the consents, approvals, orders,   
    authorizations, registrations, declarations and filings referred to in
  paragraph (iii) below, any loan or credit agreement, note, mortgage,
  bond, indenture, lease, benefit plan or other agreement, obligation,
       instrument, permit, concession, franchise or license binding upon or held
     by Holdings or Merger Sub or any judgment, order, decree, statute, law,
   ordinance, rule or regulation applicable to Holdings or Merger Sub or
their respective properties or assets.                            

      (iii) No material consent, approval, order or authorization of, or
  registration, declaration or filing with, any Governmental Entity is
      required by or with respect to Holdings or Merger Sub in connection with
       the execution and delivery of this Agreement by Holdings or Merger Sub or
the consummation by Holdings or Merger Sub of the transactions    
  contemplated hereby, except for (A) the consents, approvals, orders,
       authorizations, registrations, declarations and filings required under or
 in relation to SECTION 2.1(c)(iii) nd (B) such consents, approvals,
 orders, authorizations, registrations, declarations and filings the
    failure of which to make or obtain would not reasonably be expected to
    have a Material Adverse Effect on Holdings and Merger Sub or impair or
delay the ability of Holdings or Merger Sub to consummate the     
transactions contemplated hereby.                                 

      (iv) Each of Holdings and Merger Sub holds all Permits which are
  material to the operation of their respective businesses, taken as a
whole.                                                            

       (c)  FINANCING COMMITMENTS.  An executed commitment letter from Bank of
America, N.A. ("BANK OF AMERICA"), Banc of America Bridge LLC ("BANC OF 
AMERICA BRIDGE") and Banc of America Securities LLC dated as of         
December 20, 2000 (the "Bank Commitment Letter"), is included in        
SECTION 2.2(c) OF THE HOLDINGS DISCLOSURE SCHEDULE. Pursuant to the Bank
    Commitment Letter and subject to the terms and conditions contained therein,
    (i) Bank of America has committed to provide senior debt financing to Merger
 Sub in the amount of $470,000,000, consisting of a $370,000,000 term loan
   and a $100,000,000 revolving credit facility and Banc of America Bridge has
  committed to purchase unsecured senior subordinated debt securities of the
Company in the aggregate amount of $200,000,000. The Company has also   
   received a copy of a commitment letter, a true and correct copy of which is
   included in SECTION 2.2(b) OF THE HOLDINGS DISCLOSURE SCHEDULE (the "VESTAR
 COMMITMENT LETTER"), dated December 20, 2000 from Vestar Capital Partners
IV, L.P. ("VESTAR") pursuant to which                                   

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    Vestar has committed, subject to the terms and conditions contained therein,
  to purchase equity securities of Investors for an aggregate purchase price
of $133,900,405. The Company has also received a copy of a commitment   
 letter, a true and correct copy of which is included in SECTION 2.2(c) OF
    THE HOLDINGS DISCLOSURE SCHEDULE (the "MARATHON FUND COMMITMENT LETTER" and,
  together with the Bank Commitment Letter and the Vestar Commitment Letter,
 the "COMMITMENT LETTERS" and the financing to be provided thereunder, the
    "FINANCING"), dated December 20, 2000 from Marathon Fund Limited Partnership
IV ("MARATHON") pursuant to which Marathon has committed, subject to the
terms and conditions contained therein, to purchase equity securities of
    Investors for an aggregate purchase price of $35,000,000. The obligations to
fund the commitments under the Commitment Letters are not subject to any
condition other than set forth in the Commitment Letters. Holdings and  
 Merger Sub have no actual knowledge of any fact or occurrence existing on
the date of this Agreement which in their good faith judgment would     
 reasonably be expected to (i) make the material assumptions or statements
set forth in the Bank Commitment Letter inaccurate, (ii) cause the Bank 
Commitment Letter to be ineffective or (iii) preclude in any material   
   respect the satisfaction of the conditions set forth in the Bank Commitment
   Letter. As of the date hereof, the Commitment Letters are in full force and
  effect and have not been amended in any material respect. To the knowledge
of Holdings and Merger Sub, assuming all of the representations and     
   warranties of the Company set forth herein are true, the funds contemplated
to be received pursuant to the Commitment Letters together with the roll
over contributions to be made as set forth in the Management Equity     
   Agreements and the Other Equity Agreements will be sufficient to consummate
    the Merger and to pay all related fees and expenses. The financing and other
    fees that are due and payable under the Commitment Letters have been paid in
full. Holdings and Merger Sub believe that, upon consummation of the    
transactions contemplated by this Agreement, including the Financing,   
(i) the Surviving Corporation will not be insolvent, (ii) the Surviving 
Corporation will not be left with unreasonably small capital, (iii) the 
    Surviving Corporation will not have incurred debts beyond its ability to pay
   such debts as they mature and (iv) the capital of the Surviving Corporation
will not be impaired.                                                   

(d)  INFORMATION SUPPLIED.                                      

       (i) The Schedule 13E-3 and any amendments or supplements thereto,
   will, when filed, comply as to form in all material respects with the
       applicable requirements of the Exchange Act and the rules and regulations
thereunder.                                                       

         (ii) None of the information supplied or to be supplied by Holdings
     or Merger Sub in writing specifically for inclusion or incorporation by
reference in the Proxy Statement, the Schedule 13E-3 and any other
    documents to be filed with the SEC in connection with the transactions
contemplated hereby, including any amendment or supplement to such
     documents, will, at the respective times such documents are filed, and,
      with respect to the Proxy Statement, when first published, sent or given
to shareholders of the Company, contain any untrue statement of a 
    material fact or omit to state any material fact required to be stated
   therein or necessary in order to make the statements made therein, in
      light of the circumstances under which they are made, not misleading or,
       in the case of the Proxy Statement or any amendment thereof or supplement
  thereto, at the time of the Company Shareholders Meeting, and at the
      Effective Time, contain any untrue statement of a material fact, or omit
      to state any material fact required to be stated therein or necessary in
      order to make the statements made therein, in light of the circumstances
   under which they are made, not misleading or necessary to correct any
     statement in any earlier communication with respect to any solicitation
     of proxies for the Company Shareholders Meeting which shall have become
misleading.                                                       

(iii) Notwithstanding the foregoing provisions of this      
  SECTION 2.2(d), no representation or warranty is made by Holdings or
     Merger Sub with respect to statements made or incorporated by reference
    in the Schedule 13E-3 based on information supplied by the Company for
inclusion or incorporation by reference therein.                  

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        (e)  BROKERS OR FINDERS.  No agent, broker, investment banker, financial
 advisor or other firm or Person is or will be entitled to any broker's or
  finder's fee or any other similar commission or fee in connection with any
  of the transactions contemplated by this Agreement based upon arrangements
 made by or on behalf of Holdings or Merger Sub, other than Vestar Capital
Partners and Goldner Hawn Johnson & Morrison Incorporated.              

(f)  OWNERSHIP OF COMPANY CAPITAL STOCK.  As of the date of this
 Agreement, neither Holdings nor, to the best of its knowledge, any of its
   affiliates or associates (as such terms are defined under the Exchange Act)
(i) beneficially owns, directly or indirectly or (ii) is party to any   
agreement, arrangement or understanding for the purpose of acquiring,   
holding, voting or disposing of, in case of either clause (i) or (ii),  
shares of the capital stock of the Company. Holdings has provided the   
Company with true and correct copies of the form of Management Equity   
Agreements and the form of Other Equity Agreements and related letter   
   agreements, which are included in SECTION 2.2(f) OF THE HOLDINGS DISCLOSURE
SCHEDULE.                                                               

  (g)  OTHER INFORMATION REGARDING HOLDINGS AND MERGER SUB.  Each of
    Holdings and Merger Sub is a newly organized corporation, each formed solely
  for the purpose of engaging in the transactions contemplated hereby. Prior
to the date hereof, neither Holdings nor Merger Sub has engaged in any  
business activities or conducted any operations other than in connection
with the transactions contemplated hereby. Merger Sub is a wholly owned 
  Subsidiary of Holdings, and, as of the date hereof, Holdings does not own,
    directly or indirectly, any capital stock or other ownership interest in any
Person other than Merger Sub.                                           

ARTICLE 3 
COVENANTS RELATING TO CONDUCT OF BUSINESS 

3.1  COVENANTS OF THE COMPANY.  During the period from the date of this 
Agreement and continuing until the Effective Time (except as expressly          
contemplated or permitted by this Agreement, as set forth in SECTION 3.1 OF THE 
COMPANY DISCLOSURE SCHEDULE or to the extent that Holdings shall otherwise      
consent in writing):                                                            

      (a)  ORDINARY COURSE.  The Company and its Subsidiaries shall carry on
their respective businesses in the Ordinary Course and shall use all    
  reasonable efforts to preserve intact their present business organizations
    and their relationships with customers, suppliers and others having business
dealings with them.                                                     

     (b)  DIVIDENDS; CHANGES IN SHARE CAPITAL.  The Company shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to,  
  (i) declare or pay any dividends on or make other distributions in respect
of any of its capital stock, except dividends by the Company or its     
  Subsidiaries in the Ordinary Course, (ii) split, combine or reclassify any
 of its capital stock or issue or authorize or propose the issuance of any
    other securities in respect of, in lieu of or in substitution for, shares of
its capital stock or (iii) repurchase, redeem or otherwise acquire any  
shares of its capital stock or any securities convertible into or       
exercisable for any shares of its capital stock.                        

        (c)  ISSUANCE OF SECURITIES.  The Company shall not, and shall cause its
Subsidiaries not to, issue, deliver or sell, or authorize or propose the
    issuance, delivery or sale of, any shares of its capital stock of any class,
 any Company Voting Debt or any securities convertible into or exercisable
for, or any rights, warrants or options to acquire, any such shares or  
   Company Voting Debt, or enter into any agreement with respect to any of the
    foregoing, other than (i) the issuance of shares of the Company Common Stock
   (A) upon the exercise of Options issued in the Ordinary Course prior to the
    date hereof in accordance with the terms of the Option Plans as in effect on
   the date of this Agreement or (B) under the Share Awards outstanding on the
 date of this Agreement and (ii) the issuance of Share Awards in an amount
not to exceed that number of shares of Company Common Stock equal to    

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    $1,025,000 divided by the market price of Company Common Stock as determined
in accordance with the terms of the Executive Performance Plan and the  
Executive Incentive Plan.                                               

       (d)  ORGANIZATIONAL DOCUMENTS.  Except to the extent required to comply
with their respective obligations hereunder, by law or by the rules and 
   regulations of the NASDAQ, the Company and its Subsidiaries shall not amend
or propose to amend their respective Organizational Documents.          

      (e)  INDEBTEDNESS AND OTHER MATTERS.  The Company shall not, and shall
not permit any of its Subsidiaries to, (i) other than incurrence of     
indebtedness under existing working capital facilities in the ordinary  
 course of business consistent with past practices, incur any indebtedness
for borrowed money or guarantee, assume, endorse or otherwise become    
  responsible for any such indebtedness or issue or sell any debt securities
  or warrants or rights to acquire any debt securities of the Company or its
   Subsidiaries or of other Persons, other than indebtedness of the Company or
   its Subsidiaries to the Company or its Subsidiaries, (ii) make any loans or
   advances other than by the Company or its Subsidiaries to or in the Company
   or its Subsidiaries or other than to customers for the purchase of products
from the Company in the ordinary course of business consistent with past
  practices, (iii) make any capital contributions to, or investments in, any
  other Person, other than by the Company or its domestic Subsidiaries to or
 in the Company or its domestic Subsidiaries, (iv) other than the payment,
discharge or satisfaction of claims, liabilities and obligations in the 
   ordinary course of business consistent with past practices not in excess of
 amounts duly accrued or accruable therefor, pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or      
unasserted, contingent or otherwise), (v) make capital expenditures in  
excess of $32,000,000 prior to the Closing Date or enter into binding   
  contracts to make capital expenditures in excess of $46 million during the
2001 fiscal year, (vi) issue, deliver, sell, lease, sell and leaseback, 
    pledge, dispose of or encumber material properties or material assets of the
Company or any of its Subsidiaries other than inventory in the Ordinary 
  Course, except Liens for Taxes not currently due, (vii) (A) make or change
    any Tax election or method of accounting with respect to Taxes, (B) file any
    amended Tax Return or (C) settle or compromise any examination or proceeding
   with respect to any material Tax liability, (viii) settle or compromise any
  litigation (whether or not commenced prior to the date of this Agreement),
other than settlements involving amounts payable by the Company and its 
Subsidiaries that are not in excess of $500,000 in the aggregate over   
    amounts fully recoverable from insurers of the Company and its Subsidiaries,
(ix) enter into any new or amended contract or agreement with any labor 
 unions representing employees of the Company or any Subsidiary, (x) enter
    into or amend, modify, renew or terminate any material agreement or material
transaction, including, without limitation, any material transaction    
involving any merger, consolidation, joint venture, license agreement,  
partial or complete liquidation or dissolution, reorganization,         
recapitalization, restructuring, or a purchase, sale, lease or other    
 acquisition or disposition of any assets or capital stock, (xi) knowingly
    undertake any action or fail to take any action that will result in a breach
    of the representations and warranties set forth in Section 2.1 as if made on
  and as of the Closing Date or (xii) agree, or commit to agree, to take any
action not permitted to be taken pursuant to this SECTION 3.1(e).       

       (f)  BENEFIT PLANS.  The Company shall not, and shall not permit any of
   its Subsidiaries to, (i) establish, adopt, enter into, or amend any Company
   Benefit Plan, or any plan, agreement, program, policy, trust, fund or other
   arrangement that would be a Company Benefit Plan if it were in existence as
   of the date of this Agreement, except as required by law, (ii) increase the
compensation payable or to become payable to (A) any of its directors or
   officers, except to the extent required under agreements existing as of the
 date of this Agreement or as consistent with the Company's 2001 operating
  budget previously provided to Holdings; provided that such increases shall
not exceed, in the aggregate, 5% of current levels, or (B) except in the
  Ordinary Course consistent with the Company's 2001 operating budget, other
  employees or (iii) take any action with respect to the grant, modification
 or amendment of any severance or termination pay, or stay, bonus or other
incentive                                                               

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   arrangement (other than pursuant to benefit plans and policies in effect on
the date of this Agreement).                                            

3.2  ADVICE OF CHANGES; GOVERNMENT FILINGS.  Each of the Company and    
Holdings shall (a) confer on a regular and frequent basis with the other,       
(b) report (to the extent permitted by law, regulation and any applicable       
confidentiality agreement) to the other on operational matters and (c) promptly 
advise the other orally and in writing of (i) any representation or warranty    
made by it contained in this Agreement becoming untrue or inaccurate in any     
respect such that the conditions set forth in SECTION 5.2(a) or 5.3(a) would not
be satisfied, (ii) the failure by it (A) to comply with or satisfy in any       
respect any covenant, condition or agreement required to be complied with or    
satisfied by it under this Agreement that is qualified as to materiality or     
(B) to comply with or satisfy in any material respect any covenant, condition or
agreement required to be complied with or satisfied by it under this Agreement  
that is not so qualified as to materiality or (iii) any change, event or        
circumstance that has had a Material Adverse Effect on such party or materially 
and adversely affects its ability to consummate the transactions contemplated   
hereby in a timely manner; PROVIDED, HOWEVER, that no such notification shall   
affect the representations, warranties, covenants or agreements of the parties  
or the conditions to the obligations of the parties under this Agreement. The   
Company and Holdings and Merger Sub shall file all reports required to be filed 
by each of them with the SEC (and all other Governmental Entities) between the  
date of this Agreement and the Effective Time and shall (to the extent permitted
by law or regulation or any applicable confidentiality agreement) deliver to the
other party copies of all such reports promptly after the same are filed.       
Subject to applicable laws relating to the exchange of information, each of the 
Company and Holdings shall have the right to review in advance, and to the      
extent practicable each will consult with the other, with respect to all the    
information relating to the other party and each of their respective            
Subsidiaries, which appears in any filings, announcements or publications made  
with, or written materials submitted to, any third party or any Governmental    
Entity in connection with the transactions contemplated by this Agreement. In   
exercising the foregoing right, each of the parties hereto agrees to act        
reasonably and as promptly as practicable. Each of the Company and Holdings     
agrees that, to the extent practicable, it will consult with the other party    
with respect to the obtaining of all Permits, consents, approvals and           
authorizations of all third parties and Governmental Entities necessary or      
advisable to consummate the transactions contemplated by this Agreement and each
further agrees to keep the other apprized of the status of matters relating to  
completion of the transactions contemplated hereby.                             

    3.3  FINANCING RELATED COOPERATION.  The Company agrees to provide, and will
cause its Subsidiaries and its and their respective officers, employees and     
advisors to provide, all cooperation reasonably necessary in connection with the
arrangement of any financing to be consummated contemporaneously with or at or  
after the expiration of the Effective Time in respect of the transactions       
contemplated by this Agreement, including participation in meetings, due        
diligence sessions, road shows, the preparation of offering memoranda, private  
placement memoranda, prospectuses and similar documents, the execution and      
delivery of any commitment letters, underwriting or placement agreements, pledge
and security documents, other definitive financing documents, or other requested
certificates or documents, including a certificate of the chief financial       
officer of the Company with respect to solvency matters, comfort letters of     
accountants and legal opinions as may be reasonably requested by Holdings and   
taking such other actions as are reasonably required to be taken by the Company 
in the Commitment Letters, provided that Holdings and Merger Sub shall use      
reasonable efforts not to materially interfere with the duties of such officers,
employees and advisors such that the Company's business and results of          
operations would be materially adversely affected thereby. In addition, in      
conjunction with the obtaining of any such financing, the Company agrees, at the
reasonable request of Holdings, to call for prepayment or redemption, or to     
prepay, redeem and/or renegotiate, as the case may be, any then existing        
indebtedness of the Company and its Subsidiaries; provided that no call for     
redemption or prepayment shall be irrevocably made until contemporaneously with 
or after the Effective Time. Holdings and Merger Sub shall use their            
commercially reasonable best efforts to cause the Financing to be fulfilled in  
accordance with the terms of the Commitment Letters.                            

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ARTICLE 4 
ADDITIONAL AGREEMENTS 

4.1  PREPARATION OF THE PROXY STATEMENT; SCHEDULE 13E; THE COMPANY      
SHAREHOLDERS MEETING.                                                           

 (a)  COMPANY SHAREHOLDERS MEETING.  The Company shall, acting through the
Company's Board, as soon as practicable following execution of this Agreement   
and in accordance with this Agreement, duly call, give notice of, convene and   
hold a special meeting of its shareholders (the "COMPANY SHAREHOLDERS MEETING") 
for the purpose of considering and taking action upon the approval of the Merger
and the adoption of this Agreement, and the Company shall, through the Company  
Board, recommend to its shareholders that they adopt this Agreement; PROVIDED,  
HOWEVER, that the Company Board may withdraw, modify or change such             
recommendation in accordance with the terms of SECTION 4.4 of this Agreement.   
Holdings and Merger Sub shall vote or cause to be voted all the shares of the   
Company Common Stock owned of record or beneficially by Holdings or any of its  
Subsidiaries in favor of this Agreement and the transactions contemplated by    
this Agreement.                                                                 

(b)  PROXY STATEMENT.  As soon as practicable following the execution of
this Agreement, the Company shall prepare and file with the SEC the Proxy       
Statement with respect to the Company Shareholders Meeting, and use its         
reasonable good faith efforts to have a Proxy Statement cleared by the SEC and  
mailed to the Company's shareholders. Holdings and Merger Sub and the Company   
shall cooperate with each other in the preparation of the Proxy Statement. The  
Proxy Statement (i) shall contain (A) subject to the fiduciary duties of the    
Company Board, statements of the Company Board that it has (x) determined that  
this Agreement and the transactions contemplated hereby, including the Merger,  
are fair to and in the best interests of the shareholders of the Company,       
(y) declared the Merger and this Agreement to be advisable and (z) recommended  
unanimously that the shareholders of the Company vote in favor of the approval  
of the Merger and the adoption of this Agreement and (B) the written opinion of 
U.S. Bancorp Piper Jaffray and (ii) shall comply as to form and content in all  
material respects with the applicable provisions of the federal securities laws.
Holdings and its counsel shall be given an opportunity to review and comment    
upon the Proxy Statement and any amendment or supplement thereto prior to the   
filing thereof with the SEC, and the Company shall consider any such comments in
good faith. The Company agrees to provide to Holdings and its counsel any       
comments which the Company or its counsel may receive from the staff of the SEC 
with respect to the Proxy Statement promptly after receipt thereof. Holdings and
Merger Sub will promptly supply to the Company in writing, for inclusion in the 
Proxy Statement, all information concerning Holdings and Merger Sub required by 
law, rule or regulation to be included in the Proxy Statement. The Company,     
Holdings and Merger Sub agree to promptly correct any information provided by   
any of them for use in the Proxy Statement which shall have become false or     
misleading in any respect, and the Company further agrees to take all steps     
reasonably necessary to cause such Proxy Statement as so corrected to be filed  
with the SEC and disseminated to the Company's shareholders, in each case as and
to the extent required by the applicable provisions of the federal securities   
laws. The Company agrees to use its reasonable best efforts, after consultation 
with the other parties hereto, and each of Holdings and Merger Sub agree to use 
its reasonable best efforts to promptly provide the Company with any information
necessary to respond promptly to any comments made by the Commission with       
respect to the Proxy Statement and any preliminary version thereto or amendment 
thereof, filed by it, and each of the Company, Holdings and Merger Sub shall use
reasonable efforts to cause the Proxy Statement to be mailed to the Company's   
shareholders at the earliest practicable time.                                  

(c)  SCHEDULE 13E.  Concurrently with the filing of the Proxy Statement,
Holdings and Merger Sub and their respective affiliates (to the extent required 
by law) shall prepare and file with the SEC, together with the Company, a       
Rule 13E-3 Transaction Statement on Schedule 13E-3 (together with all           
supplements and amendments thereto, the "SCHEDULE 13E-3") with respect to the   
transactions contemplated by this Agreement. The Company shall promptly furnish 
to Holdings all information concerning the Company as may reasonably be         
requested in connection with the preparation of the Schedule 13E-3. The Company 

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shall promptly supplement, update and correct any information provided by it for
use in the Schedule 13E-3 if and to the extent that it is or shall have become  
incomplete, false or misleading. In any such event, Holdings and the Company    
shall take all steps necessary to cause the Schedule 13E-3 as so supplemented,  
updated or corrected to be filed with the SEC and to be disseminated to the     
holders of Company Common Stock, in each case, as and to the extent required by 
applicable federal securities laws. The Company and its counsel shall be given  
an opportunity to review and comment on the Schedule 13E-3 and each supplement, 
amendment or response to comments with respect thereto prior to its being filed 
with or delivered to the SEC and Holdings shall consider any such comments in   
good faith. Holdings agrees to provide the Company and its counsel with any     
comments that Holdings or its counsel may receive from the staff of the SEC     
promptly after receipt thereof.                                                 

    4.2  ACCESS TO INFORMATION.  Upon reasonable notice, each of the Company and
Holdings shall (and shall cause their respective Subsidiaries, to) afford to the
officers, employees, accountants, counsel, financial advisors and other         
representatives of the other party reasonable access during normal business     
hours, during the period prior to the Effective Time, to all its properties,    
books, contracts, commitments and records and its officers, employees and       
representatives and, during such period, each of the Company and Holdings shall 
(and shall cause its Subsidiaries, to) furnish promptly to the other party      
(a) a copy of each report, schedule, registration statement and other document  
filed, published, announced or received by it during such period pursuant to the
requirements of federal or state securities laws, as applicable (other than     
reports or documents which such party is not permitted to disclose under        
applicable law) and (b) consistent with its legal obligations, all other        
information concerning its business, properties and personnel as the other party
may reasonably request. Such information shall be held in confidence to the     
extent required by, and in accordance with, the provisions of the letter dated  
September 9, 1999, between the Company and Vestar (the "CONFIDENTIALITY         
AGREEMENT"), which Confidentiality Agreement shall remain in full force and     
effect.                                                                         

    4.3  APPROVALS AND CONSENTS; COOPERATION.  Each of the Company, Holdings and
Merger Sub shall cooperate with each other and use (and shall cause their       
respective Subsidiaries to use) its reasonable best efforts to take or cause to 
be taken all actions, and do or cause to be done all things, necessary, proper  
or advisable on their part under this Agreement and applicable laws to          
consummate and make effective the Merger and the other transactions contemplated
by this Agreement as soon as practicable, including without limitation          
(i) preparing and filing as promptly as practicable all documentation to effect 
all necessary applications, notices, petitions, filings, Tax ruling requests and
other documents and to obtain as promptly as practicable all consents, waivers, 
licenses, orders, registrations, approvals, Permits, Tax rulings and            
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any of the other   
transactions contemplated by this Agreement (including, but not limited to,     
those approvals, consents, orders, registrations, declarations and filings      
required under SECTION 2.1(c)(iii)) (collectively, the "REQUIRED APPROVALS") and
(ii) taking all reasonable steps as may be necessary to obtain all such Required
Approvals. Without limiting the generality of the foregoing, each of the Company
and Holdings and Merger Sub agree to make all necessary filings in connection   
with the Required Approvals as promptly as practicable after the date of this   
Agreement, and to use its reasonable best efforts to furnish or cause to be     
furnished, as promptly as practicable, all information and documents requested  
with respect to such Required Approvals, and shall otherwise cooperate with any 
applicable Governmental Entity in order to obtain any Required Regulatory       
Approvals in as expeditious a manner as possible. Each of the Company, Holdings 
and Merger Sub shall use its reasonable best efforts to resolve such objections,
if any, as any Governmental Entity may assert with respect to this Agreement and
the transactions contemplated hereby in connection with the Required Approvals. 
In the event that a suit is instituted by a Person or Governmental Entity       
challenging this Agreement and the transactions contemplated hereby as violative
of applicable antitrust or competition laws, each of the Company and Holdings   
shall use its reasonable best efforts to resist or resolve such suit. The       
Company and Holdings each shall, upon request by the other, furnish the other   
with all information concerning itself, its Subsidiaries, affiliates, directors,
officers and shareholders and such other matters as                             

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may reasonably be necessary or advisable in connection with the Proxy Statement,
the Schedule 13E-3 or any other statement, filing, Tax ruling request, notice or
application made by or on behalf of the Company, Holdings or any of their       
respective Subsidiaries to any third party and/or any Governmental Entity in    
connection with the Merger or the other transactions contemplated by this       
Agreement.                                                                      

4.4  ACQUISITION PROPOSALS.                                             

   (a) Neither the Company nor any of its Subsidiaries shall (whether directly
or indirectly through advisors, agents or other intermediaries), nor shall the  
Company or any of its Subsidiaries authorize or permit any of its or their      
officers, directors, agents, representatives or advisors (the "COMPANY          
REPRESENTATIVES") to (a) solicit, initiate, knowingly encourage (including by   
way of furnishing non-public information) or take any action knowingly to       
facilitate the submission of any inquiries, proposals or offers (whether or not 
in writing) from any Person (other than Holdings and its affiliates), other than
the transactions contemplated by this Agreement, that constitute, or are        
reasonably expected to lead to, an Acquisition Proposal (as defined below), or  
(b) enter into or participate in any discussions or negotiations regarding an   
Acquisition Proposal; PROVIDED, HOWEVER, that, at any time during the period    
following the execution of this Agreement and prior to the Effective Time, if   
the Company receives a proposal or offer that was not solicited by the Company  
or a Company Representative, and that the Company Board determines in good faith
(after consultation with its outside legal counsel and financial advisors) is a 
Superior Proposal (as defined below but ignoring, for purposes of this          
SECTION 4.4(a) only, clause (i) of the definition of Superior Proposal), and    
subject to compliance with SECTION 4.4(b), the Company Board may, or may        
authorize any committee thereof or any Company Representatives to, (x) furnish  
information with respect to the Company and its Subsidiaries to the Person      
making such proposal or offer pursuant to a confidentiality agreement on terms  
not less favorable to the Company than the Confidentiality Agreement and        
(y) participate in discussions or negotiations regarding such proposal or offer.

(b) The Company shall notify Holdings promptly (and in any case prior to
providing any information or access referred to below) after receipt by the     
Company (or any Company Representative) of any Acquisition Proposal or any      
inquiry regarding the making of an Acquisition Proposal or any request for      
non-public information in connection with an Acquisition Proposal or for access 
to the properties, books or records of the Company or any of its Subsidiaries by
any Person that informs the Company that it is considering making, or has made, 
an Acquisition Proposal. Such notice shall be made orally and in writing and    
shall indicate in reasonable detail the identity of the offeror and the terms   
and conditions of such proposal, inquiry or contact. The Company shall continue 
to keep Holdings informed, on a reasonably current basis, of the status of any  
such discussions or negotiations and the terms being discussed or negotiated.   

(c) Neither the Company nor the Company Board nor any committee thereof 
shall withdraw or modify, or propose to withdraw or modify, in any manner       
adverse to Holdings, the approval or recommendation of this Agreement or the    
Merger, or propose publicly to approve or recommend an Acquisition Proposal,    
unless the withdrawal or modification of such approval or recommendation or such
approval or recommendation is, in the good faith judgment of the Company Board  
or such committee thereof (after consultation with its outside legal counsel),  
necessary to comply with its fiduciary obligations to the Company's shareholders
under applicable law. Nothing contained in this Agreement shall prohibit the    
Company nor the Company Board nor any committee thereof from taking and         
disclosing to its shareholders a position contemplated by Rule 14e-2 and        
Rule 14d-9 promulgated under the Exchange Act or from making any disclosure to  
the Company's shareholders if, in the good faith judgment of the Company Board  
or such committee thereof (after consultation with its outside legal counsel)   
the failure to make such disclosure would be inconsistent with its fiduciary    
duties to the Company's shareholders or other obligations under applicable law. 
Notwithstanding anything to the contrary contained in this Section 4.4 or       
elsewhere in this Agreement, prior to the Effective Time, the Company may, in   
connection with a possible Acquisition Proposal, refer any third party to this  
SECTION 4.4 and to SECTION 6.2, and make a copy of this SECTION 4.4 and         
SECTION 6.2 available to such third party.                                      

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 (d) The Company will immediately cease and cause its advisors, agents and
other intermediaries to cease any and all existing activities, discussions or   
negotiations with any parties conducted heretofore with respect to any of the   
foregoing, and shall use its reasonable best efforts to cause any such parties  
in possession of confidential information about the Company that was furnished  
by or on behalf of the Company to return or destroy all such information in the 
possession of any such party or in the possession of any agent or advisor of any
such party. The Company agrees not to release any third party from or waive any 
provisions of confidentiality in any confidentiality agreement to which the     
Company is a party.                                                             

  (e) "ACQUISITION PROPOSAL" means any inquiry, proposal or offer for (i) an
acquisition or purchase of 10 percent or more of the consolidated assets of the 
Company and its Subsidiaries or of 10 percent or more of any class of equity    
securities of the Company or any of its Subsidiaries, (ii) any tender offer     
(including a self tender offer) or exchange offer that if consummated would     
result in any Person beneficially owning 10 percent or more of any class of     
equity securities of the Company or any of its Subsidiaries or (iii) any merger,
consolidation, business combination, sale of substantially all assets,          
recapitalization, liquidation, dissolution or similar transaction involving the 
Company or any of its Subsidiaries whose assets, individually or in the         
aggregate, constitute 10 percent or more of the consolidated assets of the      
Company.                                                                        

(f) "SUPERIOR PROPOSAL" means a proposal with respect to any of the     
transactions described in the definition of Acquisition Proposal (with all of   
the percentages included in the definition of such term replaced with "all or   
substantially all" for purposes of this definition) with respect to which the   
Company Board shall have concluded in good faith, after consultation with its   
outside legal counsel and financial advisor, (i) is reasonably likely to be     
completed, taking into account all legal, financial, regulatory and other       
aspects of the Acquisition Proposal, including the status of the financing      
therefor and the Person making the proposal and (ii) would, if consummated,     
result in a transaction more favorable to the Company's shareholders from a     
financial point of view than the transactions contemplated by this Agreement.   

4.5  EMPLOYEE BENEFITS.                                                 

  (a) For a period of one year immediately following the Effective Time, the
Surviving Corporation shall maintain in effect employee benefit plans and       
arrangements with overall employee benefits which are substantially comparable, 
in the aggregate, to the benefits provided by the Company Benefit Plans as of   
the date hereof (not taking into account the value of any benefits under any    
such plans which are equity-based).                                             

   (b) For purposes of determining eligibility to participate or vesting where
length of service is relevant under any employee benefit plan or arrangement of 
the Surviving Corporation or any of their respective Subsidiaries, employees of 
the Company and its Subsidiaries as of the Effective Time shall receive service 
credit for service with the Company and its Subsidiaries to the same extent such
service credit was granted under the Company Benefit Plans, subject to offsets  
for previously accrued benefits and no duplication of benefits.                 

(c) Upon the consummation of the Merger, each Share Award outstanding   
immediately prior to the Effective Time shall automatically become immediately  
vested and each holder of a Share Award shall have the right to receive from the
Surviving Corporation a cash payment (less applicable federal, state and local  
withholding taxes) in an aggregate amount equal to the Price Per Share for each 
share of Company Common Stock subject to such Share Award.                      

4.6  FEES AND EXPENSES.  Whether or not the Merger is consummated, all  
Expenses incurred in connection with this Agreement and the transactions        
contemplated hereby shall be paid by the party incurring such Expenses, except  
(a) if the Merger is consummated, the Surviving Corporation shall pay, or cause 
to be paid, all expenses of Holdings and Merger Sub incurred in connection with 
the transactions contemplated by this Agreement and (b) as set forth in         
SECTION 6.4(b). For purposes of this Agreement, "EXPENSES" includes all         
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, financing sources and their counsel, experts and consultants
to a party hereto and its                                                       

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affiliates) incurred by a party or on its behalf in connection with or related  
to the authorization, preparation, negotiation, execution and performance of    
this Agreement and the transactions contemplated hereby, including the          
preparation, printing, filing and mailing of the Proxy Statement and the        
Schedule 13E-3 and the solicitation of shareholder approvals and all other      
matters related to the transactions contemplated hereby.                        

4.7  INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.               

(a)  CONTINUATION OF ORGANIZATIONAL DOCUMENTS OBLIGATIONS.  The Company 
shall and, from and after the Effective Time until the sixth anniversary of the 
Effective Time, the Surviving Corporation shall maintain the right to           
indemnification and exculpation of officers and directors provided for in the   
Organizational Documents of the Company as in effect on the date hereof, with   
respect to indemnification and exculpation for acts and omissions occurring     
prior to the Effective Time, including, without limitation, the transactions    
contemplated by this Agreement.                                                 

 (b)  CONTINUATION OF DIRECTORS' AND OFFICERS' INSURANCE.  Until the sixth
anniversary of the Effective Time, the Surviving Corporation shall maintain     
officers' and directors' liability insurance covering the Persons who are       
presently covered by the Company's officers' and directors' liability insurance 
policies (copies of which have heretofore been delivered to Holdings) with      
respect to actions and omissions occurring prior to the Effective Time, by      
obtaining tail coverage of such existing insurance policies on terms which are  
not less favorable than the terms of such current insurance in effect for the   
Company on the date hereof and providing coverage only with respect to matters  
occurring prior to the Effective Time, to the extent that such tail coverage can
be maintained at an annual cost to the Surviving Corporation of not greater than
200% of the annual premium for the Company's current insurance policies and, if 
such tail coverage cannot be so maintained at such cost, providing as much of   
such insurance as can be so maintained at a cost equal to 200% of the annual    
premium for the Company's current insurance policies.                           

  (c)  INDEMNIFICATION.  The Company shall and, from and after the Effective
Time, the Surviving Corporation shall, to the fullest extent permitted under    
applicable law and to the extent such Person would have been indemnified under  
the articles of incorporation and bylaws of the Company or any Company          
Subsidiary as such documents were in effect on the date of this Agreement,      
indemnify and hold harmless each present and former director and officer of the 
Company or any Company Subsidiary (each an "INDEMNIFIED PARTY" and collectively,
the "INDEMNIFIED PARTIES") against any costs or expenses, together with such    
person's heirs, executors or administrators (including by advancing attorney's  
fees and expenses in advance of the final disposition of any claim, action,     
suit, proceeding or investigation to the fullest extent permitted by and subject
to the conditions of law), judgments, fines, losses, claims, damages,           
liabilities and amounts paid in settlement in connection with any pending,      
threatened or completed claim, action, suit, proceeding or investigation,       
whether civil, criminal, administrative or investigative, arising out of or     
pertaining to any action or omission based upon or arising from his or her      
capacity as an officer or director of the Company or any Company Subsidiary     
occurring prior to the Effective Time (including, without limitation, any claim,
action, suit, proceeding or investigation arising out of or pertaining to the   
transactions contemplated by this Agreement).                                   

(d)  SURVIVAL.  This SECTION 4.7 shall survive the closing of the       
transactions contemplated hereby, is intended to benefit the Company, Merger Sub
and the Surviving Corporation and each of the Indemnified Parties (each of whom 
shall be entitled to enforce this SECTION 4.7 against the Company, Merger Sub   
and the Surviving Corporation, as the case may be), and shall be binding on all 
successors and assigns of the Surviving Corporation.                            

 (e)  MERGER, ASSIGNMENT, ETC.  If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and 
shall not be the continuing or surviving corporation or entity of such          
consolidation or merger or (ii) transfers all or substantially all of its       
properties and assets to any Person, then, and in each such case, proper        
provision shall be made so that the successors and assigns of the Surviving     
Corporation assume the obligations set forth in this SECTION 4.7.               

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4.8  PUBLIC ANNOUNCEMENTS.  Neither party hereto shall make any press   
release or public announcement with respect to this Agreement, the Merger or the
transactions contemplated hereby without the prior written consent of the other 
party hereto (which consent shall not be unreasonably withheld); PROVIDED,      
HOWEVER, that each party hereto may make any disclosure or announcement which   
such party, after consultation with its legal counsel, determines that it is    
obligated to make pursuant to applicable law or regulation of any national      
securities exchange or in order to discharge its fiduciary duties, in which     
case, the party desiring to make the disclosure shall consult with the other    
party hereto prior to making such disclosure or announcement.                   

  4.9  FURTHER ASSURANCES.  In case at any time after the Effective Time any
further action is reasonably necessary to carry out the purposes of this        
Agreement or the transactions contemplated by this Agreement, the proper        
officers of the Company, Holdings and the Surviving Corporation shall take any  
such reasonably necessary action.                                               

 4.10  DISPOSITION OF LITIGATION.  In connection with any litigation which
may be brought against the Company or its directors relating to the transactions
contemplated hereby, the Company shall keep Holdings, and any counsel which     
Holdings may retain at its own expense, informed of the status of such          
litigation and will provide Holdings' counsel the right to participate in the   
defense of such litigation to the extent Holdings is not otherwise a party      
thereto, and the Company shall not enter into any settlement or compromise of   
any such stockholder litigation without Holdings' prior written consent, which  
consent shall not be unreasonably withheld or delayed.                          

    4.11  DELISTING.  Each of the parties agrees to cooperate with each other in
taking, or causing to be taken, all actions necessary to delist the Company     
Common Stock from NASDAQ and to terminate registration under the Exchange Act,  
provided that such delisting and termination shall not be effective until after 
the Effective Time of the Merger.                                               

ARTICLE 5 
CONDITIONS PRECEDENT

5.1  CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.  The   
respective obligations of Holdings, Merger Sub and the Company to effect the    
Merger are subject to the satisfaction or waiver on or prior to the Closing Date
of the following conditions:                                                    

(a)  SHAREHOLDER APPROVAL.  The Company shall have obtained all 
   approvals of holders of shares of the capital stock of the Company required
  under the MBCA to approve this Agreement and the transactions contemplated
hereby;                                                                 

        (b)  HSR ACT.  Any waiting period applicable to the Merger under the HSR
 Act (including any extension thereof) shall have been terminated or shall
have expired; and                                                       

        (c)  NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY.  No temporary restraining
    order, preliminary or permanent injunction or other order issued by a United
  States federal or state court of competent jurisdiction shall be in effect
 and have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.                                             

   5.2  CONDITIONS TO THE OBLIGATIONS OF HOLDINGS AND MERGER SUB TO EFFECT THE
MERGER.  The respective obligations of Holdings and Merger Sub to effect the    
Merger are subject to the satisfaction or waiver on or prior to the Closing Date
of the following conditions:                                                    

        (a)  REPRESENTATIONS AND WARRANTIES.  The representations and warranties
    of the Company set forth in this Agreement (other than those representations
 and warranties that address matters as of particular dates) shall be true
 and correct as of the Closing Date and any representation and warranty of
the Company set forth in this Agreement that addresses matters as of a  
particular date shall be true and correct as of the date referred to    
therein; it being understood that (i) any inaccuracies in such          

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representations and warranties shall be disregarded if the circumstances
    giving rise to such inaccuracies (considered collectively) do not constitute
a Material Adverse Effect on the Company and (ii) for purposes of       
determining whether such representations and warranties are true and    
correct, all "Material Adverse Effect" qualifications and any other     
  materiality qualifications in such representations and warranties shall be
disregarded;                                                            

       (b)  PERFORMANCE.  The Company shall have performed all obligations and
complied in all material respects with all agreements or covenants to be
performed or complied with by it under this Agreement;                  

      (c)  PROHIBITIONS TO MERGER.  There shall not be pending any action or
proceeding by a United States federal or state Governmental Entity of   
competent jurisdiction nor shall a statute, rule or regulation have been
promulgated or enacted by a United States federal or state Governmental 
Entity of competent jurisdiction after the date of this Agreement which 
   would have the effect of (i) restraining or prohibiting the consummation of
 the Merger, (ii) prohibiting or restricting the ownership or operation by
    Holdings (or any of its affiliates or Subsidiaries) of a material portion of
    the business or assets of the Company and its Subsidiaries taken as a whole,
    or compelling Holdings (or any of its affiliates or Subsidiaries) to dispose
of or hold separate a material portion of the business or assets of the 
Company and its Subsidiaries taken as a whole, (iii) imposing material  
limitations on the ability of Holdings (or any of its affiliates or     
  Subsidiaries) effectively to acquire or to hold or to exercise full rights
  of ownership of the shares of the Company Common Stock, including, without
  limitation, the right to vote such shares purchased by Holdings (or any of
its affiliates or Subsidiaries) on all matters properly presented to the
  shareholders of the Company, (iv) imposing any material limitations on the
  ability of Holdings (or any of its affiliates or Subsidiaries) effectively
to control in any material respect the business and operations of the   
Company or (v) obtaining material damages from Holdings or any of its   
  affiliates in connection with the making or consummation of the Merger and
there shall not be in effect any injunction, order, decree, judgment or 
ruling issued by a United States federal or state court of competent    
  jurisdiction having any effect set forth in clauses (i) through (v) above;

   (d)  FINANCING.  Merger Sub shall have received the proceeds of the
    financing contemplated by the Commitment Letters on the terms and conditions
    set forth therein and with other material terms satisfactory to Holdings, in
   the amounts necessary to consummate the Merger and pay all related fees and
expenses; or                                                            

   (e)  NO MATERIAL ADVERSE EFFECT.  There shall not have occurred any
  event or circumstance that has had or would be reasonably likely to have a
Material Adverse Effect on the Company since the date of the Agreement. 

    5.3  CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER.  The
obligations of the Company to effect the Merger are subject to the satisfaction 
or waiver on or prior to the Closing Date of the following conditions:          

        (a)  REPRESENTATIONS AND WARRANTIES.  The representations and warranties
of Holdings and Merger Sub set forth in this Agreement (other than those
   representations and warranties that address matters as of particular dates)
   shall be true and correct as of the Closing Date and any representation and
warranty of Holdings and Merger Sub set forth in this Agreement that    
 addresses matters as of a particular date shall be true and correct as of
   the date referred to therein; it being understood that (i) any inaccuracies
in such representations and warranties shall be disregarded if the      
   circumstances giving rise to such inaccuracies (considered collectively) do
  not constitute a Material Adverse Effect on Holdings and Merger Sub, taken
    as a whole and (ii) for purposes of determining whether such representations
and warranties are true and correct, all "Material Adverse Effect"      
qualifications and any other materiality qualifications in such         
representations and warranties shall be disregarded; and                

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   (b)  PERFORMANCE.  Holdings and Merger Sub shall have performed all
obligations and complied in all material respects with all agreements or
covenants to be performed or complied with by them under this Agreement.

ARTICLE 6 
TERMINATION AND AMENDMENT 

  6.1  TERMINATION BY EITHER THE COMPANY OR HOLDINGS.  This Agreement may be
terminated at any time prior to the Effective Time by either the Company or     
Holdings, whether before or after adoption of this Agreement by the Company's   
shareholders:                                                                   

        (a) by the mutual written consent of Holdings and the Company, by action
of their respective boards of directors;                                

        (b) if any United States federal or state Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently 
restraining, enjoining or otherwise prohibiting the transactions        
contemplated by this Agreement, and such order, decree, ruling or other 
 action shall have become final and nonappealable; PROVIDED, HOWEVER, that
the party seeking to terminate this Agreement shall have used its       
    commercially reasonably efforts to remove or lift such order, decree, ruling
or other action;                                                        

    (c) if the Merger has not been consummated by May 31, 2001, provided
  that the party seeking to exercise such right is not then in breach in any
material respect of any of its obligations under this Agreement; and    

 (d) if, at a duly held shareholders meeting of the Company or any
 adjournment thereof at which this Agreement and the Merger are voted upon
(the "Special Meeting"), the requisite shareholder adoption and approval
shall not have been obtained.                                           

6.2  TERMINATION BY HOLDINGS.  This Agreement may also be terminated by 
Holdings at any time prior to the Effective Time:                               

 (a) if the Company or the Company Board shall have (i) withdrawn,
   modified or amended in any respect adverse to Holdings or Merger Sub any of
its recommendations described in SECTION 4.1(a) hereof, (ii) approved,  
 recommended or entered into an agreement with respect to, or consummated,
any Acquisition Proposal from a Person other than Holdings or any of its
affiliates, (iii) in response to the commencement of any tender offer or
exchange offer for outstanding shares of Company Common Stock, not      
recommended rejection of such tender offer or exchange offer within ten 
  (10) business days of commencement of such tender offer or exchange offer,
or (iv) resolved to do any of the foregoing or publicly announced its   
intention to do any of the foregoing; or                                

    (b) (i) if (A) any covenant or agreement of the Company contained in
this Agreement shall be materially breached, (B) any of the Company's   
  representations and warranties contained in this Agreement shall have been
inaccurate as of the date of this Agreement such that the condition set 
forth in SECTION 5.2(a) would not be satisfied (assuming that the phrase
"date of this Agreement" is substituted for the phrase "Closing Date"   
 contained in SECTION 5.2(a)), or (C) any of the Company's representations
and warranties contained in this Agreement shall have become inaccurate 
after the date of this Agreement such that the condition set forth in   
SECTION 5.2(a) would not be satisfied (each, a "Terminating Company     
    Breach"); and (ii) such Terminating Company Breach shall not have been cured
   by the Company within twenty (20) days of receipt of written notice of such
Terminating Company Breach.                                             

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  6.3  TERMINATION BY THE COMPANY.  This Agreement may also be terminated by
the Company at any time prior to the Effective Time:                            

      (a) (i) if (A) any covenant or agreement of the Holdings or Merger Sub
contained in this Agreement shall be materially breached, (B) any of the
  representations and warranties of Holdings or Merger Sub contained in this
  Agreement shall have been inaccurate as of the date of this Agreement such
that the condition set forth in SECTION 5.3(a) would not be satisfied   
 (assuming that the phrase "date of this Agreement" is substituted for the
phrase "Closing Date" contained in SECTION 5.3(a)), or (C) any of the   
  representations and warranties of Holdings or Merger Sub contained in this
    Agreement shall have become inaccurate after the date of this Agreement such
    that the condition set forth in SECTION 5.3(a) would not be satisfied (each,
   a "Terminating Holdings Breach"); and (ii) such Terminating Holdings Breach
   shall not have been cured by Holdings or Merger Sub within twenty (20) days
of receipt of written notice of such Terminating Holdings Breach; or    

(b) if the Company Board approves a Superior Proposal; PROVIDED,
HOWEVER, that (A) the Company shall have complied with the terms of     
 SECTION 4.4 and (B) this Agreement may not be terminated pursuant to this
 SECTION 6.3(b) unless (x) concurrently with such termination, the Company
pays to Holdings the Termination Fee (as hereinafter defined) less any  
    Expense Payment (as hereinafter defined) previously paid and (y) the Company
shall have provided Holdings with at least five business days' advance  
notice of such termination and Holdings does not make, within four      
   (4) business days of receipt of the Company's notification of its intention
   to terminate this Agreement, an offer that the Company Board determines, in
  good faith after consultation with its outside legal counsel and financial
advisors, is at least as favorable to the shareholders of the Company as
such Superior Proposal.                                                 

6.4  EFFECT OF TERMINATION.                                             

  (a) In the event of termination of this Agreement by either the Company or
Holdings as provided in this ARTICLE 6, this Agreement shall forthwith become   
void and there shall be no liability or obligation on the part of Holdings,     
Merger Sub or the Company or their respective officers, directors, shareholders,
affiliates, representatives, agents, employees or advisors, except, with respect
to Holdings, Merger Sub and the Company, (i) with respect to SECTION 4.6, this  
SECTION 6.4, ARTICLE 7 and the last sentence of SECTION 4.2 and (ii) with       
respect to any liabilities or damages incurred or suffered by a party as a      
result of the willful breach by the other party or parties of this Agreement.   

   (b) The Company shall (provided that neither Holdings nor the Merger Sub is
then in material breach of its obligations under this Agreement) (i) upon the   
termination of this Agreement pursuant to SECTION 6.1(d), promptly, but in no   
event later than two business days following written notice thereof, pay to     
Holdings and Merger Sub $5 million for its out-of-pocket expenses and fees      
(including fees payable to banks, investment banking firms and other financial  
institutions, and their respective agents and counsel, and fees of counsel,     
accountants, financial printers, advisors, experts and consultants to Holdings  
and its affiliates) or (ii) upon the termination of this Agreement pursuant to  
SECTION 6.2(b), promptly, but in no event later than two business days following
written notice thereof, together with reasonable supporting documentation,      
reimburse Holdings and Merger Sub in an amount up to $2,500,000 for its         
out-of-pocket expenses and fees (including fees payable to banks, investment    
banking firms and other financial institutions, and their respective agents and 
counsel, and fees of counsel, accountants, financial printers, advisors, experts
and consultants to Holdings and its affiliates) (either of the payments in      
clauses (i) or (ii) being referred to herein as the "EXPENSE PAYMENT"). It is   
understood that in the event that Holdings is paid a Termination Fee, to the    
extent not previously paid, the Expense Payment shall not be paid.              

  (c) In the event that this Agreement is terminated by Holdings pursuant to
SECTION 6.2(a) or by the Company pursuant to SECTION 6.3(b), the Company shall  
pay to Holdings, by wire transfer of immediately available funds to an account  
designated by Holdings on the next business day following such termination (or, 
in the case of a termination by the Company pursuant to SECTION 6.3(b), by wire 
transfer of                                                                     

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immediately available funds to an account designated by Holdings, concurrently  
with the effectiveness of such termination), an amount equal to $20 million (the
"TERMINATION FEE"), less any Expense Payment previously paid.                   

(d) If all of the following events have occurred:                       

       (i) (A)  this Agreement is terminated pursuant to SECTION 6.1(c) (other
    than on account of a failure of the conditions set forth in SECTIONS 5.1(a),
   5.1(c), 5.2(c), 5.2(d), 5.3(a) or 5.3(b)), SECTION 6.1(d) or SECTION 6.2(b)
  and (B) an Acquisition Proposal is publicly disclosed or publicly proposed
   to the Company or its shareholders at any time on or after the date of this
    Agreement but (x) in the case of a termination pursuant to SECTION 6.1(c) or
SECTION 6.2(b), prior to such termination, or (y) in the case of a      
termination pursuant to SECTION 6.1(d), prior to or at the time of the  
Special Meeting; and                                                    

      (ii) thereafter, within 12 months of the date of such termination, the
   Company enters into a definitive agreement with respect to, or consummates,
the Acquisition Proposal referred to in clause (i), or any proposal with
respect to any of the transactions described in clause (i), (ii) or     
    (iii) of the definition of Acquisition Proposal (with all of the percentages
  included in the definition of such term raised to 50% for purposes of this
   definition); then, the Company shall pay to Holdings, concurrently with the
    earlier of the execution of such definitive agreement or the consummation of
   such Acquisition Proposal, an amount equal to the Termination Fee (less any
Expense Payment previously paid).                                       

(e) The Company acknowledges that the agreements contained in SECTIONS  
6.4(b), (c) and (d) are an integral part of the transactions contemplated by    
this Agreement, and that, without these agreements, Holdings and Merger Sub     
would not enter into this Agreement.                                            

6.5  AMENDMENT.  This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective boards of directors, at any time 
before or after adoption of this Agreement by the Company's shareholders, but,  
after any such adoption, no amendment shall be made which by law or in          
accordance with the rules of the NASDAQ requires further approval by such       
shareholders without such further approval. This Agreement may not be amended   
except by an instrument in writing signed on behalf of each of the parties      
hereto.                                                                         

6.6  EXTENSION; WAIVER.  At any time prior to the Effective Time, the   
parties hereto, by action taken or authorized by their respective boards of     
directors, may, to the extent legally allowed, (i) extend the time for the      
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained     
herein or in any document delivered pursuant hereto and (iii) waive compliance  
with any of the agreements or conditions contained herein. Any agreement on the 
part of a party hereto to any such extension or waiver shall be valid only if   
set forth in a written instrument signed on behalf of such party. No delay on   
the part of any party hereto in exercising any right, power or privilege        
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party hereto of any right, power or privilege hereunder operate as a waiver 
of any other right, power or privilege hereunder, nor shall any single or       
partial exercise of any right, power or privilege hereunder preclude any other  
or further exercise thereof or the exercise of any other right, power or        
privilege hereunder. Unless otherwise provided, the rights and remedies herein  
provided are cumulative and are not exclusive of any rights or remedies which   
the parties hereto may otherwise have at law or in equity. The failure of any   
party to this Agreement to assert any of its rights under this Agreement or     
otherwise shall not constitute a waiver of those rights.                        

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ARTICLE 7 
GENERAL PROVISIONS

 7.1  NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER
REPRESENTATIONS AND WARRANTIES.  None of the representations, warranties,       
covenants and other agreements in this Agreement or in any instrument delivered 
pursuant to this Agreement, including any rights arising out of any breach of   
such representations, warranties, covenants and other agreements, shall survive 
the Effective Time, except for those covenants and agreements contained herein  
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and/or the provisions of this ARTICLE 7. Each party    
hereto agrees that, except for the representations and warranties contained in  
this Agreement, none of the Company, Holdings or Merger Sub makes any other     
representations or warranties, and each hereby disclaims any other              
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with  
respect to the execution and delivery of this Agreement, the documents and the  
instruments referred to herein, or the transactions contemplated hereby or      
thereby, notwithstanding the delivery or disclosure to the other party or the   
other party's representatives of any documentation or other information with    
respect to any one or more of the foregoing.                                    

 7.2  NOTICES.  All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered 
personally, (b) on the first business day following the date of dispatch if     
delivered by a nationally recognized next-day courier service, (c) on the third 
business day following the date of mailing if delivered by registered or        
certified mail, return receipt requested, postage prepaid or (d) if sent by     
facsimile transmission, with a copy mailed on the same day in the manner        
provided in (a) or (b) above, when transmitted and receipt is confirmed by      
telephone. All notices hereunder shall be delivered as set forth below, or      
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:                                                         

IF TO HOLDINGS OR MERGER SUB:                                     

c/o Vestar Capital Partners IV, L.P.                              
1225 Seventeenth Street                                           
Suite 1660                                                        
Denver, CO 80202                                                  
Attention: James P. Kelley                                        
Facsimile: (303) 292-6639                                         

AND                                                               

c/o Goldner Hawn Johnson & Morrison Incorporated                  
5250 Wells Fargo Center                                           
Minneapolis, MN 55402-4123                                        
Attention: John L. Morrison                                       
Michael T. Sweeney                              

Facsimile: (612) 338-2860                                         

WITH COPIES TO:                                                   

Vestar Capital Partners IV, L.P.                                  
245 Park Avenue                                                   
41st Floor                                                        
New York, NY 10167                                                
Attention: General Counsel                                        
Facsimile: (212) 808-4922                                         

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AND                                                               

Kirkland & Ellis                                                  
200 East Randolph Drive                                           
Chicago, IL 60601                                                 
Attention: Stephen L. Ritchie                                     
Facsimile: (312) 861-2118                                         

AND                                                               

Faegre & Benson                                                   
2200 Wells Fargo Center                                           
90 South Seventh Street Minneapolis, MN 55402-3901                
Attention: Bruce M. Engler                                        
Facsimile: (612) 336-3026                                         

IF TO THE COMPANY:                                                

Michael Foods, Inc.                                               
324 Signal Bank Building                                          
5353 Wayzata Boulevard                                            
Minneapolis, MN 55416                                             
Attention: President                                              
Facsimile: (952) 546-3711                                         

with copies to:                                                   

Kaplan, Strangis & Kaplan, P.A.                                   
90 S. Seventh Street                                              
Suite 5500                                                        
Minneapolis, MN 55402                                             
Attention: James C. Melville                                      
Facsimile: (612) 375-1143                                         

7.3  INTERPRETATION.  When a reference is made in this Agreement to     
Sections, Exhibits or Schedules, such reference shall be to a Section of or     
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of  
contents, cross references and headings contained in this Agreement are for     
reference purposes only and shall not affect in any way the meaning or          
interpretation of this Agreement. Whenever the words "include," "includes" or   
"including" are used in this Agreement, they shall be deemed to be followed by  
the words "without limitation." The parties have participated jointly in the    
negotiation and drafting of this Agreement. In the event an ambiguity or        
question of intent or interpretation arises, this Agreement shall be construed  
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of   
the provisions of this Agreement. Any reference to any federal, state, local or 
foreign statue or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the content requires otherwise. It is understood 
and agreed that neither the specifications of any dollar amount in this         
Agreement nor the inclusion of any specific item in the Schedules or Exhibits is
intended to imply that such amounts or higher or lower amounts, or the items so 
included or other items, are or are not material, and neither party shall use   
the fact of setting of such amounts or the fact of the inclusion of such item in
the Schedules or Exhibits in any dispute or controversy between the parties as  
to whether any obligation, item or matter is or is not material for purposes    
hereof.                                                                         

7.4  COUNTERPARTS.  This Agreement may be executed in two or more       
counterparts (including by means of telecopied signature pages), all of which   
shall be considered one and the same agreement and                              

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shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both     
parties need not sign the same counterpart.                                     

7.5  ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; LIABILITY.         

 (a) This Agreement (including the Schedules and Exhibits) constitutes the
entire agreement and supersedes all prior agreements and understandings, both   
written and oral, among the parties with respect to the subject matter hereof,  
other than the Confidentiality Agreement, which shall survive the execution and 
delivery of this Agreement.                                                     

   (b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is        
intended to or shall confer upon any other Person any right, benefit or remedy  
of any nature whatsoever under or by reason of this Agreement, other than       
SECTION 4.7 (which is intended to be for the benefit of the Persons covered     
thereby and may be enforced by such Persons).                                   

    (c) No affiliate, officer, director or shareholder of any party hereto shall
have any liability hereunder.                                                   

7.6  GOVERNING LAW.  This Agreement shall be governed and construed in  
accordance with the laws of the State of Minnesota, without regard to the laws  
that might be applicable under conflicts of laws principles.                    

7.7  SEVERABILITY.  If any term or other provision of this Agreement is 
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full  
force and effect so long as the economic or legal substance of the transactions 
contemplated hereby is not affected in any manner materially adverse to any     
party. Upon such determination that any term or other provision is invalid,     
illegal or incapable of being enforced, the parties hereto shall negotiate in   
good faith to modify this Agreement so as to effect the original intent of the  
parties as closely as possible in an acceptable manner in order that the        
transactions contemplated hereby are consummated as originally contemplated to  
the greatest extent possible. Any provision of this Agreement held invalid or   
unenforceable only in part, degree or certain jurisdictions will remain in full 
force and effect to the extent not held invalid or unenforceable. To the extent 
permitted by applicable law, each party waives any provision of law which       
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.                                                                        

    7.8  ASSIGNMENT.  Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole  
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment       
without such consent shall be null and void. Subject to the preceding sentence, 
this Agreement will be binding upon, inure to the benefit of and be enforceable 
by the parties and their respective successors and assigns.                     

   7.9  ENFORCEMENT.  The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in    
accordance with their specific terms. It is accordingly agreed that the parties 
shall be entitled to specific performance of the terms hereof, this being in    
addition to any other remedy to which they are entitled at law or in equity.    

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*  *  *  *  * 

    IN WITNESS WHEREOF, the Company and Merger Sub have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of date
first written above.                                                            

                                                                [Download Table]
                                              
M-FOODS HOLDINGS, INC., a Delaware corporation

By:             /s/ JAMES P. KELLEY           
     -----------------------------------------
               Name: James P. Kelley          
                  Title: PRESIDENT            

PROTEIN ACQUISITION CORP., a Minnesota        
corporation                                   

By:             /s/ JAMES P. KELLEY           
     -----------------------------------------
               Name: James P. Kelley          
                  Title: PRESIDENT            

MICHAEL FOODS, INC., a Minnesota corporation  

By:            /s/ GREGG A. OSTRANDER         
     -----------------------------------------
              Name: Gregg A. Ostrander        
        Title: CHAIRMAN, PRESIDENT AND CHIEF  
                 EXECUTIVE OFFICER            

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                                                                         ANNEX B

December 21, 2000                                                               

The Board of Directors                                                          
Michael Foods, Inc.                                                             
5253 Wayzata Boulevard                                                          
Suite 324                                                                       
Minneapolis, MN 55416                                                           

Members of the Board:                                                           

You have requested our opinion (the "Opinion") as to the fairness, from a       
financial point of view, to the shareholders (except as indicated below) of     
Michael Foods, Inc. ("Michael" or the "Company") of the consideration to be     
received in connection with a proposed merger (the "Merger") in which Protein   
Acquisition Corp., a Minnesota corporation and a wholly-owned acquisition       
subsidiary ("Merger Sub") of M-Foods Holdings, Inc., a Delaware corporation     
("MFH") will be merged with and into the Company. It is our understanding that  
Michael and Merger Sub have entered into an Agreement and Plan of Merger (the   
"Merger Agreement") dated December 21, 2000, pursuant to which each share of    
Michael common stock will be converted into the right to receive $30.10 in cash 
(the "Merger Consideration") upon consummation of the Merger. This Opinion is   
not directed to, and may not be relied upon, by any stockholder of Michael who  
is a party to the Management Equity Agreements or the Other Equity Agreement (as
defined in the Merger Agreement), or any other agreement whereby such           
stockholder will own an equity interest in MFH.                                 

U.S. Bancorp Piper Jaffray Inc., as a customary part of its investment banking  
business, is engaged in the valuation of businesses and their securities in     
connection with mergers and acquisitions, underwriting and secondary            
distributions of securities, private placements and valuations for estate,      
corporate and other purposes. We will receive a fee for rendering this Opinion  
which is not contingent upon the consummation of the Merger. U.S. Bancorp Piper 
Jaffray will also receive a fee for advising Michael in connection with the     
Merger which is contingent upon the consummation of the Merger. The Company has 
also agreed to indemnify us against certain liabilities in connection with our  
services. U.S. Bancorp Piper Jaffray makes a market in Michael's common stock   
and provides research coverage for Michael. In addition, we have performed      
investment banking services for Michael from time to time over the past         
14 years. In the ordinary course of our business, we and our affiliates may     
actively trade securities of Michael for our own account or the account of our  
customers and, accordingly, may at any time hold a long or short position in    
such securities.                                                                

In arriving at our opinion, we have undertaken such review, analyses and        
inquiries as we deemed necessary and appropriate under the circumstances. Among 
other things, we have reviewed (i) a copy of the Merger Agreement dated         
December 21, 2000, (ii) certain financial, operating and business information   
related to the Company, (iii) certain internal financial information of the     
Company on a stand-alone basis prepared for financial planning purposes and     
furnished by Michael's management, (iv) to the extent publicly available,       
financial terms of certain acquisition transactions involving companies         
operating in industries deemed similar to that in which the Company operates,   
(v) certain valuation and other financial information on selected public        
companies deemed comparable to the Company, (vi) certain premiums paid in       
acquisition transactions, and (vii) certain publicly available financial and    
securities data for Michael and its common stock. Based on projected financial  
planning data provided to us by Company management, we performed a discounted   
cash flow analysis and leveraged buyout analysis with respect to the Company. In
addition, we had discussions with members of Michael's management concerning the
financial condition, current operating results and business outlook for the     
Company on a stand-alone basis.                                                 

We have, with your consent, relied upon and assumed the accuracy, completeness  
and fairness of the financial statements and other information provided to us by
Michael or otherwise made available to us, and have not assumed responsibility  
for the independent verification of such information. Furthermore, we have      
assumed that Michael is not aware of any information prepared by it or its      
advisors that might be                                                          

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Michael Foods, Inc.                                                             
December 21, 2000                                                               
Page 2                                                                          

material to our Opinion that has not been made available to us. With respect to 
the financial statement data and other internal financial information (including
the projected financial planning data) provided to us in connection with our    
review of the financial aspects of the proposed Merger, we have relied upon the 
assurances of management of the Company that such information has been prepared 
on a reasonable basis, and, with respect to projected financial planning data,  
reflects the best currently available estimates, and that they are not aware of 
any information or facts that would make the information provided to us         
incomplete or misleading. We have relied as to certain legal matters on advice  
of counsel to Michael.                                                          

In arriving at our Opinion, we have assumed that the Merger will be consummated 
on the terms described in the Merger Agreement dated December 21, 2000. We have 
not been requested to perform, and have not performed, any appraisals or        
valuations of any specific assets or liabilities of the Company, and have not   
been furnished with any such appraisals or valuations. In addition, we express  
no opinion regarding the liquidation value of any entity.                       

This Opinion is necessarily based upon the information available to us and facts
and circumstances as they exist and are subject to evaluation on the date       
hereof; events occurring after the date hereof could materially affect the      
assumptions used in preparing this Opinion. This Opinion is directed to the     
Board of Directors of the Company and is not intended to be and does not        
constitute a recommendation to any stockholder with respect to the Merger. We   
were not requested to opine as to, and this Opinion does not address, the basic 
business decision to proceed with or effect the Merger or to compare the Merger 
to, or consider, alternative transactions that may have been available to the   
Company. This Opinion shall not be published or otherwise used, nor shall any   
public references to us be made, without our prior written approval, except as  
expressly contemplated in the engagement letter dated December 20, 2000 between 
Michael and us.                                                                 

Based upon and subject to the foregoing and based upon such other factors as we 
consider relevant, it is our opinion that, as of the date hereof, the Merger    
Consideration to be received by the stockholders (except those stockholders     
excluded in the first paragraph) of Michael Foods, Inc. is fair to such         
stockholders from a financial point of view.                                    

Sincerely,                                                                      

/s/ U.S. Bancorp Piper Jaffray, Inc.                                            

U.S. BANCORP PIPER JAFFRAY, INC.                                                

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                                                                         ANNEX C

SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA 
BUSINESS CORPORATION ACT--DISSENTERS' APPRAISAL RIGHTS

302A.471.  RIGHTS OF DISSENTING SHAREHOLDERS.                           

    SUBDIVISION 1.  ACTIONS CREATING RIGHTS.  A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares 
in the event of, any of the following corporate actions:                        

      (a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:                                                                

 (1) alters or abolishes a preferential right of the shares;

 (2) creates, alters, or abolishes a right in respect of the
       redemption of the shares, including a provision respecting a sinking fund
for the redemption or repurchase of the shares;                   

     (3) alters or abolishes a preemptive right of the holder of the
  shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;                  

    (4) excludes or limits the right of a shareholder to vote on a
  matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an 
      existing or new class or series with similar or different voting rights;
       except that an amendment to the articles of an issuing public corporation
   that provides that section 302A.671 does not apply to a control share
      acquisition does not give rise to the right to obtain payment under this
section;                                                          

(b) A sale, lease, transfer, or other disposition of all or     
substantially all of the property and assets of the corporation, but not
including a transaction permitted without shareholder approval in       
  section 302A.661, subdivision 1, or a disposition in dissolution described
    in section 302A.725, subdivision 2, or a disposition pursuant to an order of
a court, or a disposition for cash on terms requiring that all or       
  substantially all of the net proceeds of disposition be distributed to the
  shareholders in accordance with their respective interests within one year
after the date of disposition;                                          

       (c) A plan of merger, whether under this chapter or under chapter 322B,
  to which the corporation is a constituent organization, except as provided
in subdivision 3;                                                       

   (d) A plan of exchange, whether under this chapter or under chapter
 322B, to which the corporation is a party as the corporation whose shares
will be acquired by the acquiring corporation, except as provided in    
subdivision 3; or                                                       

        (e) Any other corporate action taken pursuant to a shareholder vote with
  respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their 
shares.                                                                 

SUBDIVISION 2.  BENEFICIAL OWNERS.  (a) A shareholder shall not assert  
dissenters' rights as to less than all of the shares registered in the name of  
the shareholder, unless the shareholder dissents with respect to all the shares 
that are beneficially owned by another person but registered in the name of the 
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter     
shall be determined as if the shares as to which the shareholder has dissented  
and the other shares were registered in the names of different shareholders.    

(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial      
owner, and shall be treated as a dissenting shareholder under the terms of this 
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the   
shareholder.                                                                    

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  SUBDIVISION 3.  RIGHTS NOT TO APPLY.  (a) Unless the articles, the bylaws,
or a resolution approved by the board otherwise provide, the right to obtain    
payment under this section does not apply to a shareholder of 1) the surviving  
corporation in a merger with respect to shares of the shareholder that are not  
entitled to be voted on the merger and are not canceled or exchanged in the     
merger or (2) the corporation whose shares will be acquired by the acquiring    
corporation in a plan of exchange with respect to shares of the shareholder that
are not entitled to be voted on the plan of exchange and are not exchanged in   
the plan of exchange.                                                           

    (b) If a date is fixed according to section 302A.445, subdivision 1, for the
determination of shareholders entitled to receive notice of and to vote on an   
action described in subdivision 1, only shareholders as of the date fixed, and  
beneficial owners as of the date fixed who hold through shareholders, as        
provided in subdivision 2, may exercise dissenters' rights.                     

   SUBDIVISION 4.  OTHER RIGHTS.  The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right 
at law or in equity to have a corporate action described in subdivision 1 set   
aside or rescinded, except when the corporate action is fraudulent with regard  
to the complaining shareholder or the corporation.                              

302A.473.  PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.                 

 SUBDIVISION 1.  DEFINITIONS.  (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.                       

   (b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the      
successor by merger of that issuer.                                             

(c) "Fair value of the shares" means the value of the shares of a       
corporation immediately before the effective date of the corporate action       
referred to in section 302A.471, subdivision 1.                                 

   (d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to   
and including the date of payment, calculated at the rate provided in           
section 549.09 for interest on verdicts and judgments.                          

SUBDIVISION 2.  NOTICE OF ACTION.  If a corporation calls a shareholder 
meeting at which any action described in section 302A.471, subdivision 1 is to  
be voted upon, the notice of the meeting shall inform each shareholder of the   
right to dissent and shall include a copy of section 302A.471 and this section  
and a brief description of the procedure to be followed under these sections.   

   SUBDIVISION 3.  NOTICE OF DISSENT.  If the proposed action must be approved
by the shareholders, a shareholder who is entitled to dissent under             
section 302A.471 and who wishes to exercise dissenters' rights must file with   
the corporation before the vote on the proposed action a written notice of      
intent to demand the fair value of the shares owned by the shareholder and must 
not vote the shares in favor of the proposed action.                            

SUBDIVISION 4.  NOTICE OF PROCEDURE; DEPOSIT OF SHARES.  (a) After the  
proposed action has been approved by the board and, if necessary, the           
shareholders, the corporation shall send to all shareholders who have complied  
with subdivision 3 and to all shareholders entitled to dissent if no shareholder
vote was required, a notice that contains:                                      

 (1) The address to which a demand for payment and certificates of
   certificated shares must be sent in order to obtain payment and the date by
which they must be received;                                            

   (2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;                         

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      (3) A form to be used to certify the date on which the shareholder, or
   the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and                

       (4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.                  

(b) In order to receive the fair value of the shares, a dissenting      
shareholder must demand payment and deposit certificated shares or comply with  
any restrictions on transfer of uncertificated shares within 30 days after the  
notice required by paragraph (a) was given, but the dissenter retains all other 
rights of a shareholder until the proposed action takes effect.                 

  SUBDIVISION 5.  PAYMENT; RETURN OF SHARES.  (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,     
whichever is later, the corporation shall remit to each dissenting shareholder  
who has complied with subdivisions 3 and 4 the amount the corporation estimates 
to be the fair value of the shares, plus interest, accompanied by:              

       (1) The corporation's closing balance sheet and statement of income for
 a fiscal year ending not more than 16 months before the effective date of
  the corporate action, together with the latest available interim financial
statements;                                                             

        (2) An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and         

        (3) A copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.      

  (b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from   
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with     
subdivisions 3 and 4, the corporation shall forward to the dissenter the        
materials described in paragraph (a), a statement of the reason for withholding 
the remittance, and an offer to pay to the dissenter the amount listed in the   
materials if the dissenter agrees to accept that amount in full satisfaction.   
The dissenter may decline the offer and demand payment under subdivision 6.     
Failure to do so entitles the dissenter only to the amount offered. If the      
dissenter makes demand, subdivisions 7 and 8 apply.                             

   (c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated    
shares, it shall return all deposited certificates and cancel all transfer      
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.                       

   SUBDIVISION 6.  SUPPLEMENTAL PAYMENT; DEMAND.  If a dissenter believes that
the amount remitted under subdivision 5 is less than the fair value of the      
shares plus interest, the dissenter may give written notice to the corporation  
of the dissenter's own estimate of the fair value of the shares, plus interest, 
within 30 days after the corporation mails the remittance under subdivision 5,  
and demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.                                         

SUBDIVISION 7.  PETITION; DETERMINATION.  If the corporation receives a 
demand under subdivision 6, it shall, within 60 days after receiving the demand,
either pay to the dissenter the amount demanded or agreed to by the dissenter   
after discussion with the corporation or file in court a petition requesting    
that the court determine the fair value of the shares, plus interest. The       
petition shall be filed in the county in which the registered office of the     
corporation is located, except that a surviving foreign corporation that        
receives a demand relating to the shares of a constituent domestic corporation  
shall file the petition in the county in this state in which the last registered
office of the constituent corporation was located. The petition shall name as   
parties all dissenters who have demanded payment under subdivision 6 and who    

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have not reached agreement with the corporation. The corporation shall, after   
filing the petition, serve all parties with a summons and copy of the petition  
under the rules of civil procedure. Nonresidents of this state may be served by 
registered or certified mail or by publication as provided by law. Except as    
otherwise provided, the rules of civil procedure apply to this proceeding. The  
jurisdiction of the court is plenary and exclusive. The court may appoint       
appraisers, with powers and authorities the court deems proper, to receive      
evidence on and recommend the amount of the fair value of the shares. The court 
shall determine whether the shareholder or shareholders in question have fully  
complied with the requirements of this section, and shall determine the fair    
value of the shares, taking into account any and all factors the court finds    
relevant, computed by any method or combination of methods that the court, in   
its discretion, sees fit to use, whether or not used by the corporation or by a 
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash 
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but    
shall not be liable to the corporation for the amount, if any, by which the     
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair  
value of the shares as determined by the court, plus interest.                  

 SUBDIVISION 8.  COSTS; FEES; EXPENSES.  (a) The court shall determine the
costs and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall   
assess those costs and expenses against the corporation, except that the court  
may assess part or all of those costs and expenses against a dissenter whose    
action in demanding payment under subdivision 6 is found to be arbitrary,       
vexatious, or not in good faith.                                                

(b) If the court finds that the corporation has failed to comply        
substantially with this section, the court may assess all fees and expenses of  
any experts or attorneys as the court deems equitable. These fees and expenses  
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party     
injured by those actions.                                                       

    (c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any.         

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 MICHAEL FOODS, INC.

 SPECIAL MEETING OF SHAREHOLDERS

____________, __________, 2001
 9:00 a.m.
 _________________________
 _________________________
Minneapolis, Minnesota

MICHAEL FOODS, INC.                                               
[LOGO] 5353 Wayzata Boulevard                                                   
Suite 324                                                         
Minneapolis, Minnesota  55416                                     
_______________________________________________________________________PROXY    

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS                     

The undersigned hereby appoint Gregg A. Ostrander and Jeffrey M. Shapiro as     
Proxies, each with the power to appoint his substitute, and hereby authorize    
them to represent and to vote, as designated hereon, all the shares of Common   
Stock of Michael Foods, Inc. held of record as shown on the reverse side on     
_______, 2001, at the Special Meeting of Shareholders to be held on ________,   
2001, or any adjournment thereof, and the Proxies are authorized to vote in     
their discretion upon such other business as may properly come before the       
meeting.                                                                        

(CONTINUED AND TO BE SIGNED ON THE REVERSE.)                                    

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 PLEASE VOTE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
V   FOLD AND DETACH HERE   V  

THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS EACH RECOMMEND A VOTE FOR THE  
PROPOSAL.                                                                       

PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.   [  ]     

1.   To approve and adopt the Agreement and Plan of Merger by and among M-Foods 
    Holdings, Inc., Protein Acquisition Corp. and Michael Foods, Inc. dated as
of December 21, 2000, and any amendments thereto:                     

[  ]  FOR         [  ]  AGAINST             [  ]  ABSTAIN     

2.   In their discretion, the proxies are authorized to vote upon such other    
business as may properly come before the meeting.                     

[  ]  FOR         [  ]  AGAINST             [  ]  ABSTAIN     

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR PROPOSALS 1 AND 2.                                  

Address Change? Mark box   [  ]     Check here if you plan to                   
Indicate changes below:                          attend the Special Meeting [  ]

                                        Dated:__________________, 2001

                                          ______________________________________

                                          ______________________________________

                       Signature(s) in Box
                                       Please sign exactly as your name(s)
                                     appear on Proxy. If held in joint
                                   tenancy, all persons must sign.
                                          Trustees, administrators, etc., should
                                include title and authority.
                                         Corporations should provide full name
                                          of corporation and title of authorized
                              officer signing the proxy.

Dates Referenced Herein   and   Documents Incorporated by Reference

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