<PAGE>   1
                                                                  EXHIBIT 10.98

                              MICHAEL FOODS, INC.
                         1994 EXECUTIVE INCENTIVE PLAN
                     (AS AMENDED EFFECTIVE JANUARY 1, 1996)



                                       I.
                                    PURPOSE

A.       The purpose of the Michael Foods, Inc. Executive Incentive Plan (the
         "Plan") is to incent and reward the senior management of Michael
         Foods, Inc. (the "Company") for delivering or exceeding their annual
         operating plan and to motivate those executives to be planning and
         focusing on year-over-year trendline earnings growth.  Corporate
         executives will be rewarded based upon attainment of the Company's EPS
         growth targets.  Operating company executives will be rewarded based
         upon individual operating company growth in profit before taxes
         ("PBT"), as well as overall corporate EPS performance.

B.       The Plan will be effective January 1, 1994, will remain in effect
         until amended or terminated, and supersedes the Michael Foods, Inc.
         Amended and Restated Annual Incentive Compensation Plan, which has
         been terminated.

                                      II.
                                 ADMINISTRATION

A.       The Plan will be administered by the Chief Executive Officer ("CEO")
         and the Chief Financial Officer of the Company under the direction of
         the Compensation Committee of the Board of Directors.

B.       The Board of Directors will have sole authority to establish the
         Plan's terms and conditions.

                                      III.
                                  ELIGIBILITY

A.       Participation in the Plan will be restricted to those positions which
         have a clear impact on the Company's financial and operating
         performance.

B.       Eligible participants will include principal officers and select key
         employees of the Company and the Company's operating companies.

C.       Generally, key employees will be defined as those executive positions
         which report to the President of an operating subsidiary or, in the
         case of corporate level employees, to the CEO of the Company.

D.       Key employees will be recommended by the CEO of the Company and will
         be approved by the Compensation Committee of the Board of Directors.

E.       Participation will also be limited to executives who are not covered
         under another approved incentive plan.
<PAGE>   2


                                      IV.
                             INCENTIVE OPPORTUNITY

The size of the maximum incentive award opportunity level will vary by the
position's responsibility level, as outlined below:

<TABLE>
<CAPTION>
                                                                    MAXIMUM INCENTIVE OPPORTUNITY AS
                                                                        A PERCENT OF BASE SALARY
 LEVEL          POSITION(S)
 <S>            <C>                                                               <C>
 I              Corporate CEO, President, Chief Operating                         100%
                Officer, Executive Vice President, Chief
                Financial Officer and Operating Company
                Presidents

 II             Other Officers                                                     75%

 III            Non-Officer Key Employees                                          50%
</TABLE>

                                       V.
                                PLAN COMPONENTS

COMPONENT A:  CASH AWARD

3/4 of the incentive opportunity for both corporate and operating company
participants will be paid based upon PBT or EPS achievement against target
objectives.

1.  OPERATING COMPANY PARTICIPANTS - CASH AWARD OPPORTUNITY RE:  COMPANY EPS 
    TARGET
A portion of the operating company participants' cash awards will be paid based
upon Michael Foods' EPS achievement against the target objective, in accordance
with the following table:

<TABLE>
<CAPTION>
                    INCENTIVE AWARD OPPORTUNITY AS A PERCENT OF BASE SALARY:
                                      LEVEL I               LEVEL II                LEVEL III
-----------------------------------------------------------------------------------------------
ACHIEVEMENT OF TARGET
---------------------
       <S>                                <C>               <C>                     <C>
       Below 94%                            0.0%              0.0%                    0.0%
         94% -94.99%                        2.9%              2.2%                    1.5%
         95% -95.99%                        5.7%              4.3%                    2.9%
         96% -96.99%                        8.6%              6.5%                    4.3%
         97% -97.99%                       11.4%              8.6%                    5.7%
         98% -98.99%                       14.3%             10.7%                    7.2%
         99% -99.99%                       17.1%             12.8%                    8.6%
        100% -100.99%                      20.0%             15.0%                   10.0%
        101% -101.99%                      24.0%             18.0%                   12.0%
        102% -102.99%                      28.0%             21.0%                   14.0%
        103% -103.99%                      32.0%             24.0%                   16.0%
        104% -104.99%                      36.0%             27.0%                   18.0%
        105% or greater                    40.0%             30.0%                   20.0%
                                                                                         
</TABLE>
<PAGE>   3


2.  OPERATING COMPANY PARTICIPANTS - CASH AWARD OPPORTUNITY RE:  OPERATING 
    COMPANY TARGETS
A portion of the operating company participants' cash awards will be
paid based upon their individual operating company PBT achievement against the
target objective, in accordance with the following table:

<TABLE>
<CAPTION>
                    INCENTIVE AWARD OPPORTUNITY AS A PERCENT OF BASE SALARY:
                                      LEVEL I               LEVEL II                LEVEL III
-----------------------------------------------------------------------------------------------
ACHIEVEMENT OF TARGET
---------------------
       <S>                                <C>               <C>                     <C>
       Below 94%                           0.0%             0.0%                    0.0%
        94% -94.99%                        2.5%             1.9%                    1.3%
        95% -95.99%                        5.0%             3.8%                    2.5%
        96% -96.99%                        7.5%             5.6%                    3.8%
        97% -97.99%                       10.0%             7.5%                    5.0%
        98% -98.99%                       12.5%             9.4%                    6.3%
        99% -99.99%                       15.0%            11.3%                    7.5%
       100% -100.99%                      17.5%            13.1%                    8.8%
       101% -101.99%                      19.3%            14.4%                    9.6%
       102% -102.99%                      21.0%            15.8%                   10.5%
       103% -103.99%                      22.8%            17.1%                   11.4%
       104% -104.99%                      24.5%            18.4%                   12.3%
       105% -105.99%                      26.3%            19.7%                   13.1%
       106% -106.99%                      28.0%            21.0%                   14.0%
       107% -107.99%                      29.8%            22.3%                   14.9%
       108% -108.99%                      31.5%            23.6%                   15.8%
       109% -109.99%                      33.3%            24.9%                   16.6%
       110% or greater                    35.0%            26.3%                   17.5%
</TABLE>

3.  CORPORATE, SALES & DISTRIBUTION PARTICIPANTS CASH AWARD OPPORTUNITY
The corporate, sales and distribution participants' cash awards will be paid
based upon Michael Foods' EPS achievement against the target objective, in
accordance with the following table:

<TABLE>
<CAPTION>
                    INCENTIVE AWARD OPPORTUNITY AS A PERCENT OF BASE SALARY:
-----------------------------------------------------------------------------------------------
                                      LEVEL I               LEVEL II                LEVEL III
ACHIEVEMENT OF TARGET
---------------------
       <S>                                <C>               <C>                     <C>
       Below 94%                           0.0%             0.0%                    0.0%
        94% -94.99%                        6.0%             4.5%                    3.0%
        95% -95.99%                       11.3%             8.5%                    5.7%
        96% -96.99%                       16.5%            12.4%                    8.3%
        97% -97.99%                       21.8%            16.4%                   10.9%
        98% -98.99%                       27.0%            20.3%                   13.5%
        99% -99.99%                       32.3%            24.2%                   16.2%
       100% -100.99%                      37.5%            28.1%                   18.8%
       101% -101.99%                      45.0%            33.8%                   22.5%
       102% -102.99%                      52.5%            39.4%                   26.3%
       103% -103.99%                      60.0%            45.0%                   30.0%
       104% -104.99%                      67.5%            50.6%                   33.8%
       105% or greater                    75.0%            56.3%                   37.5%
                                                                                         
</TABLE>
<PAGE>   4


COMPONENT B:  STOCK AWARD

1/4 of the incentive opportunity for both corporate and operating company
participants will be paid based upon year-over-year trendline earnings growth.
For each Plan year, trendline EPS must increase 15% over the prior year level
to trigger participation in this component of the Plan.  This segment of the
Plan is earned over a period of three years and is paid in the Company's common
stock.

-   Year I earns 50%, Year II earns 30% assuming EPS growth of at least 15% in
    Year II, and Year III earns the balance (20%) assuming EPS growth of at
    least 15% in Year III.  (If at least 15% year-over-year EPS growth is not
    achieved, that yearly portion of the stock award incentive is forfeited.)
    The number of shares of common stock that would be awarded to an individual
    participant is determined by multiplying the appropriate earned percentage
    by the 25% of the maximum incentive opportunity for each individual at the
    appropriate level covered by Component B.  That amount is then divided by
    the closing price of the Company's common stock on the third business day
    following the announcement of year-end financial results to determine the
    number of shares of common stock to be issued to each participant.
    Certificates will be issued as soon as practical following the March Board
    of Directors meeting.  Further aspects of Component B are covered in the
    Michael Foods, Inc. 1994 Executive Performance Stock Award Plan.

COMPONENT C:  OPTION AWARD

Stock options will be awarded to the operating company presidents and executive
corporate officers for achieving EPS growth in excess of 15% annually.

-   Qualified individuals for 1996 and later years:

         Gregg Ostrander          Norman Rodriguez
         Jeffrey Shapiro          JD Clarkson
         John Reedy               James Kohler
         William Goucher          Kevin Kelly

-   Stock option awards will be for a specific number of shares of common stock
    based upon a rising scale which is triggered with a year-over-year increase
    in EPS of at least 15% as follows:

<TABLE>
<CAPTION>
                                                       PRESIDENT /CEO OF
                                                        MICHAEL FOODS,     ALL OTHER
                                                             INC.          PARTICIPANTS
 MAXIMUM STOCK OPTION OPPORTUNITY
 (COMMON STOCK SHARES)...............                     36,000/YR.       24,000/YR.
-----------------------------------------------------------------------------------------
<S>                                                      <C>                 <C>
 Below 15% Earnings Per Share Growth................         0                   0
 15% - 19.99%.......................................      4,500               3,000
 20% - 24.99%.......................................      9,000               6,000
 25% - 29.99%.......................................     13,500               9,000
 30% - 34.99%.......................................     18,000              12,000
 35% - 39.99%.......................................     22,500              15,000
 40% - 44.99%.......................................     27,000              18,000
 45% - 49.99%.......................................     31,500              21,000
 50% or Greater.....................................     36,000              24,000
                                                                                 
</TABLE>
<PAGE>   5

Options will be priced based upon the closing price of the Company's common
stock on the third business day following the announcement of year-end
financial results each year and will be issued following the March Board of
Directors meeting.  The fully diluted earnings per share for each year will be
computed in accordance with Generally Accepted Accounting Principles ("GAAP"),
but before accrual of bonuses and stock option awards under this plan.

                                      VI.
                ORGANIZATION AND INDIVIDUAL PERFORMANCE MEASURES

The following measures of organization performance will be used to determine
actual incentive awards:

    Michael Foods, Inc.  Fully diluted net earnings per share.  Measured by
    actual fully diluted earnings per share for the current year as compared to
    the target level.  Calculated in accordance with GAAP, but before accrual
    of bonuses and stock option awards under this Plan.

    Operating Companies.  A portion of cash award based upon profit before
    taxes (PBT).  Measured by actual pre-tax profits for the Plan year as
    compared to the target level.  For the purposes of the Plan, PBT will be
    defined as operating profits, calculated in accordance with GAAP, before
    federal and state taxes, any interest charges associated with acquisition
    debt, and before accrual of bonuses and stock option awards under this
    Plan.  The remaining portion of the cash award to Operating Company
    participants will be based upon the relative achievement of the Michael
    Foods, Inc. fully diluted net earnings per share target, as defined above.

                                      VII.
                           ADMINISTRATIVE PROCEDURES

A.  Additions of Individuals.  All eligible participants must be designated by
    the CEO of the Company as of the beginning of the Plan year.

B.  Establishment of "Target or Maximum" Goals.  The CEO retains the right to
    set or adjust the operating company and corporate "target or maximum"
    incentive goals based upon an assessment of overall business conditions at
    the beginning of the Plan year.

C.  Adjustments to Targets and/or Goals.  The CEO retains the right to adjust
    the targets and/or goals of the Plan based upon his/her assessment of
    business conditions at the end of the second quarter of the Plan year.

D.  Down Earnings Year.  No cash incentive shall be paid to a participant if
    their operating company or, in the case of corporate level participants,
    the Company has a decline in earnings for the Plan year, except at the
    discretion of the CEO with the approval of the Compensation Committee.
    However, this provision would not preclude an individual from participating
    in a Component B Stock Incentive Award.

E.  Termination/Death/Disability.  Plan participants must be in the employ of
    the Company on the day  the incentive award is actually paid in order
    to be eligible for incentive award payments.  However, should a
    participant die or become disabled, the incentive award for the year
    in which such death or disability occurs shall be prorated by the
    number of months of service during the applicable Plan year and shall
    be paid to the participant or the participant's estate, as the case may be.
<PAGE>   6


F.  Change in Position.  Eligible employees under the Plan who have a change in
    position during a Plan year will have their incentive award calculated
    under the Plan award levels for both positions, prorating the incentive
    award by the months of service at each level.

G.  Interpolation.  When the actual performance figure does not result in a
    whole number, the individual calculating the formula should interpolate to
    the closest percent.

H.  Exceptions.  In each instance, exceptions must be approved in advance by
    the appropriate officer and the CEO of the Company, and must be submitted
    to the Compensation Committee of the Board of Directors for their
    concurrence.

                                     VIII.
                           AMENDMENT AND TERMINATION

The Board of Directors may at any time amend the Plan for the purposes of
satisfying the requirements of any changes in applicable laws or for any
purpose that may be permitted by law.  The Board of Directors may also
terminate the Plan at any time.  No such amendment or termination shall,
however, adversely affect the rights of any participant (without his/her prior
consent) with regard to any award previously made.

                                      IX.
                         RIGHT TO CONTINUED EMPLOYMENT

No participant shall have any claim or right to be granted an incentive (bonus)
award under this Plan and the granting of an incentive (bonus) award shall not
be construed as giving the participant the right of continued employment with
the Company.  The Company further reserves the right to dismiss a participant
at any time, with or without cause, free from any claim or liability other than
provided under this Plan document.

                                       X.
                               CHANGE IN CONTROL

If the Company is merged into, acquired by or consolidated with another
corporation, or if all or substantially all of the assets of the Company are
sold or transferred to another party or if more than fifty percent (50%) of the
outstanding Common Stock is transferred to one or more parties so as to affect
a change in the control of the Company, the Common Stock granted under
Component B of the Plan and the options granted under Component C of the Plan
shall become immediately exercisable.  Accordingly, said immediate vesting
shall not apply to any transaction where the Company stockholders, directly or
indirectly, retain in excess of fifty percent (50%) of the voting control over
the Company.