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Exhibit 10.78  

  
      SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE         

    THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the "Agreement") is entered into by and between NULAID
FOODS, INC., VALLEY FRESH FOODS, INC., and NULAID NEST-BEST, on the one hand, and NORTH CAROLINA STATE UNIVERSITY ("NCSU") and MICHAEL FOODS, INC. ("Michael Foods"),
on the other hand. The "Effective Date" of this Agreement shall be the date by which the last party executes the agreement and the Pre-Settlement Royalties are paid. 

  RECITALS         

    A.  NCSU
is the holder, and Michael Foods is the exclusive licensee, of U.S. Patents Nos. 4,808,425 (the "425 Patent"), 4,957,759 (the "759 Patent"), 4,994,291 (the
"291 Patent"), 5,019,408 (the "408 Patent"), and reissue application, U.S. Serial No. 08/061,985 ("Reissue Application") and the associated re-examination certificates (collectively
the "Patents-In-Suit"), which patents relate to the manufacture of extended shelf life liquid whole egg product (as disclosed in the "425 patent at column 8 lines
45-68) (the "Product"). 

    B.  On
August 12, 1993, Nulaid Foods, Inc. filed a declaratory relief action in the United States District Court, Eastern District of California, Civil
Action No. CIV-S-93-1314 WBS (PAN), seeking a judgment that the Patents-In-Suit are invalid, unenforceable and not infringed by Nulaid
Foods, Inc. NCSU and Michael Foods answered Nulaid Foods, Inc.'s complaint denying the allegations, asserting various affirmative defenses, and asserting a counterclaim against Nulaid
Foods, Inc. for damages and injunctive relief alleging that Nulaid Foods, Inc. infringed the Patents-In-Suit. 

    C.  On
August 13, 1993, Michael Foods and NCSU filed an action for damages and injunctive relief against Nulaid Foods, Inc. alleging that Nulaid
Foods, Inc. infringed the four Patents-In-Suit. Nulaid Foods, Inc. answered Michael Foods' and NCSU's complaint denying the allegations, asserting various
affirmative defenses, and asserting a counterclaim for declaratory judgment that the Patents-In-Suit are invalid, unenforceable and not infringed by Nulaid Foods, Inc. 

    D.  The
two actions were consolidated under Case No. CIV-S-93-1314 WBS (PAN) (the "Pending Litigation"). 

    E.  On
or about July 1, 1994, the pleadings were amended to add Valley Fresh Foods and Nulaid Nest-Best as plaintiffs and cross-defendants. 

    F.  Nulaid
Nest-Best, a general partnership between Nulaid Foods, Inc and Valley Fresh Foods, Inc. was formed on or about February 27, 1994.
Nulaid Nest-Best sold 1,727,144 pounds of the Product. Nulaid Nest-Best ceased doing business, wound-up and dissolved on or about July 31, 1994. 

    G.  The
parties to this Agreement wish to reach full and final settlement of the disputes noted above. 

  AGREEMENT         

    In consideration of the mutual covenants and promises set forth below, and for good and fair consideration, receipt of which is hereby acknowledged, the
parties agree and stipulate as follows: 

    1.  Warranties and Disclosures

    a.  NCSU Warranty.

    NCSU
represents and warrants that it is the owner of the right, title and interest in the Patents-In-Suit and is authorized to enter into this Agreement and
has the right to grant the rights granted herein. 

    b.  Michael Foods Warranty.

    Michael
Foods represents and warrants that it is the holder of an exclusive license to use the Patents-In-Suit and is authorized to enter into this Agreement
and has the right to grant the rights granted herein. 

    c.  Disclosure by Nulaid.

    In
connection with the disclosure requirements as set forth below, the parties agree that the protective order in the Pending Litigation shall remain in full force and effect during
the term of this Agreement. Nulaid Foods, Inc. shall mark all material produced with the appropriate level of confidentiality identifying any claimed trade secret information as such on the
face of the material. 

      i. Within
five days of the execution of this Agreement, Nulaid Foods, Inc. and Valley Fresh Foods shall disclose to counsel for Michael Foods and NCSU in the
Pending Litigation, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, their current and contemplated processes for pasteurizing and packaging liquid whole egg
products with a shelf life in excess of four weeks. 

     ii. Within
five days of the execution of this Agreement, Nulaid Foods, Inc. and Valley Fresh Foods shall disclose to counsel for Michael Foods and NCSU in the
Pending Litigation, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, any and all of their pending patent applications or applications to the United States
Department of Agriculture ("USDA") for pasteurizing and packaging liquid whole egg products with a shelf life in excess of four weeks. 

     iii. Nulaid
Foods, Inc. shall promptly disclose in writing to counsel for Michael Foods and NCSU in the Pending Litigation, on an attorneys' eyes only basis
subject to the protective order in the Pending Litigation, any changes in the process or equipment used by Nulaid Foods, Inc. to pasteurize or package liquid whole egg products with a USDA
approved or requested shelf life in excess of four weeks made at anytime after the date hereof and before expiration of the last of the Patents-in-Suit. Nulaid
Foods, Inc. shall also promptly disclose, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, any additional procedures, processes or equipment used to
pasteurize or package liquid whole egg product with USDA approved shelf life in excess of four weeks made at anytime after the date hereof and before expiration of the last of the
Patents-in-Suit. The written disclosure shall be made within 30 days of implementation of the change and/or addition. 

    2.  Non-exclusive Sublicense.

    a.  Michael
Foods grants to Nulaid Foods, Inc. on the Effective Date a non-exclusive sublicense to make, use and sell, ***. Nulaid Foods, Inc.
will not be precluded from having Michael Foods co-pack the Product. The sublicense granted herein does not extend to the manufacture of Product ***. 

***
Redacted text. 

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    b.  This
non-exclusive sublicense shall apply to all production, use and sale by Nulaid Foods, Inc. of Product prior to and through the term of this
Agreement. 

    c.  After
current inventories of containers of the Product are used up or within 120 days of the Effective Date, whichever is sooner, Nulaid Foods, Inc.
shall mark all containers in the manner prescribed below. 

    The
marking shall include the following in easily legible type: "Covered by one or more of the following U.S. Patents 4,808,425; 4,957,759; 4,994,291; 5,019,408." Should a subsequent
patent issue from the Reissue Application, Nulaid Foods, Inc. shall include that patent number in its patent marking within 120 days of notification of issue 

    d.  This
non-exclusive sublicense granted to Nulaid Foods, Inc. is non-assignable, even with a sale of Nulaid Foods, Inc.'s
business or assets. Nulaid Foods, Inc. may not directly or indirectly assign, license, sublicense, or otherwise convey this non-exclusive sublicense nor any of the rights or
licenses granted herein to any third party without the prior written consent of Michael Foods. A direct or indirect change of new membership or new ownership of greater than 35% of the equity
interests of Nulaid Foods, Inc. (a "Material Change of Membership ") pursuant to a transaction or series of transactions regarding the same Person shall be deemed an assignment. In the event of
a Material Change of Membership of Nulaid Foods, Inc. in respect to a Person who is not engaged in, or subject to the control of a Person engaged in, the manufacture or sale of extended shelf
life liquid whole egg product prior to the proposed assignment, the written consent of Michael Foods shall not be unreasonably
withheld and a determination in respect thereto shall be made and communicated within 5 business days of receiving complete information concerning the proposed assignee. This agreement does not
restrict changes of ownership of a member of Nulaid Foods, Inc. and such a change shall not constitute an assignment unless the new owner of a Nulaid Foods, Inc. member is engaged or is
controlled by a Person who is engaged in the manufacture or sale of extended shelf life liquid whole egg product. ***. 

    3.  Royalty and Reports.

    a.  For
the sales or Transfers, less returns, ("Transfer, Transferred or Transfers" for this agreement means exchange of Product for non-monetary
consideration) of Product prior to January 1, 2000 by Nulaid Foods, Inc., and/or Nulaid Nest-Best, Nulaid Foods, Inc. agrees to pay an amount equal to *** for all
sales or Transfers, less returns, of Product that occurred prior to 1/1/00 (Pre-Settlement Royalties). The number of pounds sold, less returns, on which Pre-Settlement
Royalties are due shall be certified in writing marked appropriately on the face of the document as to confidentiality pursuant to the protective order, including designation as a trade secret if
appropriate, and delivered to Michael Foods' and NCSU's counsel prior to the Effective Date. Nulaid Foods, Inc. shall pay Michael Foods the Pre-Settlement Royalties in one
lump-sum payment on the Effective Date of this Agreement. 

    The
Pre-Settlement Royalties shall not be adjusted, forgiven or returnable if the Patents-in-Suit, or any of them, are subsequently found invalid,
unenforceable or not infringed. 

    b.  For
the sale or Transfer, of all Product on or after January 1, 2000, until the expiration of the last of the Patents-In-Suit, Nulaid
Foods, Inc., on behalf of itself, its brokers, distributors and customers, shall pay a royalty on the number of pounds sold or Transferred, less returns, at the rate of ***: 

    ***

***
Redacted text. 

3

Said
royalties under this Paragraph 3(b) of this Agreement (Paragraph 3(b) Royalties) shall be due and payable with respect to all sales or Transfers of the Product using Nulaid
Foods, Inc.'s current process or any process or product covered by any claim or claims of the Patents-in-Suit. Nulaid Foods, Inc. agrees and acknowledges that its
future manufacture, sale or Transfer of extended shelf life liquid whole egg products is covered by one or more of the Patents-in-Suit. 

    c.  Paragraph 3(b)
Royalties shall be paid solely to Michael Foods, payable on the last day of April, July, October and January for the preceding quarter.
Nonpayment of any such royalty within the 30 day cure period as provided in paragraph 6 below shall constitute breach of this Agreement. Regardless of whether any royalties are due,
Nulaid Foods, Inc. shall report on the last day of April, July, October, and January the amount of Product sold or Transferred in the prior quarter by both pounds and by net sales. Net Sales is
defined as Nulaid Foods Inc.'s billings for the Product less: discounts; sales and/or use taxes; tariff duties or taxes directly imposed on sales of the product; prepaid outbound
transportation; and returns. On the effective date of this agreement, Nulaid Foods, Inc. shall tender the royalty report and check under this section for 1/1/2000-6/30/2000. 

    d.  With
respect to the Paragraph 3(b) Royalties, Nulaid Foods, Inc. shall provide to Michael Foods a certified public accountant's verified audit of each
year's production within six months following the close of the year. Shortages shall be paid with the provision of the CPA's verified audit. Overages shall be posted to the current year. All
information contained in such verified audit shall be kept confidential by Michael Foods and shall not be disclosed to anyone outside Michael Foods. 

    4.  Audit.

    a.  At
Michael Foods' sole cost and expense, and upon reasonable notice, Nulaid Foods, Inc. agrees to allow an independent, certified public accountant selected
by Michael Foods to audit Nulaid Foods, Inc.'s books and records, during Nulaid Foods, Inc.'s normal business hours, to ascertain compliance with Nulaid Foods, Inc.'s reporting
and royalty payment obligations under this Agreement, provided, however, that said certified public accountant shall first agree in writing (1) to retain Nulaid Foods, Inc.'s
confidential customer information in confidence and not disclose it to Michael Foods or any other party and (2) to retain all other information in confidence and not disclose it to any party
other than Michael Foods. All information reviewed during, and all reports based on the audit shall be kept confidential by Michael Foods and shall not be disclosed to anyone outside Michael Foods.
Michael Foods will only audit for the time periods covered by or previous to the last verified audit provided by Nulaid Foods, Inc. pursuant to paragraph 3(d). 

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    b.  Although
allowed to audit, Michael Foods is not required to audit and may rely upon figures and reports submitted on behalf of Nulaid Foods, Inc. Nulaid
Foods, Inc. will report in good faith. Should an audit disclose that Nulaid has underreported annual amounts due by more than 10% or $10,000 of royalties due, Nulaid Foods, Inc. shall
reimburse Michael Foods for the reasonable costs of the audit. If Michael Foods elects to use an accounting firm not located in Northern California, Nulaid Foods, Inc. shall not be required to
pay the travel related expenses incurred by that firm. 

    5.  Adjustment of Royalties.  Royalties shall not be adjusted based on any future license or settlement
absent written consent of each of Nulaid Foods, Inc., Michael Foods and NCSU. 

    6.  Termination of Sublicense.  The sublicense terminates automatically on the filing of bankruptcy by
Nulaid Foods, Inc. or upon the assignment of the license or any rights under it to the benefit of creditors or any pledge or hypothecation of the license. Michael Foods shall have the right to
terminate the sublicense granted by this Agreement by giving written notice upon the failure of Nulaid Foods, Inc. to make any payment required under this agreement when due, provided that
Michael Foods shall first have given written notice of said failure to Nulaid Foods, Inc. and Nulaid Foods, Inc. shall have failed to cure the non-payment within thirty
(30) days of receipt of said notice. In order to preserve its right to contest whether a disputed payment is due, Nulaid Foods, Inc. shall have the right to cure any default in payment
by paying Michael Foods under protest. 

    7.  Cooperation.  Nulaid Foods, Inc. and Valley Fresh Foods will not aid third parties in
subsequent suits or proceedings where those third parties are trying to prove the Patents-in-Suit, or any of them, are invalid, unenforceable or not infringed, except in
accordance with service of process or court order and after notification to Michael Foods and NCSU. 

    8.  Agreement To Have Preclusive Effect.  Nulaid Foods, Inc. and Valley Fresh Foods will not
contest the validity or enforceability of any claim or claims of the Patents-in-Suit in any subsequent suit or proceeding. Nulaid Foods, Inc. and Valley Fresh Foods will
not contest their infringement of the claims of the Patents-in-Suit by its current and previous methods in any subsequent suits or proceedings. The parties intend this
resolution of validity, enforceability, and infringement to be res judicata between the parties and to have preclusive effect so any party is foreclosed from challenging validity, enforceability,
and/or infringement in a subsequent suit under the doctrine of collateral estoppel. 

    9.  Michael Foods' General Release.  In consideration of the promises and covenants set forth in this
Agreement, Michael Foods hereby fully releases and forever discharges Nulaid Foods, Inc., Valley Fresh Foods, Nulaid Nest-Best, their successors, assigns, officers, and directors,
from any and all liabilities, claims, demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or
in any way connected with, or related to the claims alleged in the Pending Litigation, including but not limited to any claim of liability for any alleged past infringement of the
Patents-in-Suit. 

    10.  NCSU's General Release.  In consideration of the promises and covenants set forth in this Agreement,
NCSU hereby fully releases and forever discharges Nulaid Foods, Inc., Valley Fresh Foods, Nulaid Nest-Best, their successors, assigns, officers, and directors, from any and all
liabilities, claims, demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way
connected with, or related to the claims alleged in the Pending Litigation, including but not limited to any claim of liability for any alleged past infringement of the
Patents-in-Suit. 

    11.  Nulaid Foods, Inc.'s General Release.  In consideration of the promises and covenants set
forth in this Agreement, Nulaid Foods, Inc. hereby fully releases and forever discharges Michael Foods, NCSU, their affiliates, successors, assigns, officers, and directors from any and all
liabilities, claims, 

5

demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way connected with, or related
to the claims alleged in the Pending Litigation, including but not limited to any claims for declaratory relief regarding the validity, infringement, or enforceability of the
Patents-in-Suit. 

    12.  Valley Fresh Foods' General Release.  In consideration of the promises and covenants set forth in
this Agreement, Valley Fresh Foods hereby fully releases and forever discharges Michael Foods, NCSU, their affiliates, successors, assigns, officers, and directors from any and all liabilities,
claims, demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way connected with, or
related to the claims alleged in the Pending Litigation, including but not limited to any claims for declaratory relief regarding the validity, infringement, or enforceability of the
Patents-in-Suit. 

    13.  Consent Judgment and Dismissal of the Pending Litigation.  With the execution of this Agreement,
Nulaid Foods, Inc., Valley Fresh Foods, and a representative for the now defunct entity Nulaid Nest-Best shall execute the Consent Judgement and Injunction in the form of Attachment
A and deliver it to
counsel for Michael Foods and NCSU in the Pending Litigation upon receipt of the Agreement executed by Michael Foods and NCSU. Within two (2) business days of the execution of the consent
judgment, Michael Foods and/or NCSU shall file the executed Consent Judgment and Injunction with the Court for entry. 

    14.  No Other Pending Claims.  The parties hereto hereby represent and warrant that they have not filed
or served any claim, demand, suit or legal proceeding against any other party hereto which is now pending, other than the Pending Litigation. 

    15.  No Prior Assignments.  The parties hereto represent and warrant that they have not heretofore
assigned or transferred, or purported to assign or transfer, to any other person, entity, firm or corporation whatsoever, any claim, debt, liability, demand, obligation, expense, action or cause of
action herein released. 

    16.  Confidentiality.  The parties shall have the right to disclose the existence of this Agreement;
however, the parties, including their counsel and employees, shall keep the specific terms of this Agreement confidential and shall not now or hereafter divulge these terms to any third party except
(a) with the prior written consent of the other parties; or (b) to any governmental body having jurisdiction to call therefor; or (c) in confidence to their legal counsel,
accountants, banks and financing sources and their advisors solely in connection with complying with financial transactions; or (d) as otherwise may be required by law or legal process,
including to legal and financial advisors in their capacity of advising a party in such matters, except that if disclosure is sought in any legal proceeding, it shall be pursuant to a court-endorsed
protective order. 

    17.  Advice of Counsel.  The parties hereto have made such investigation of the facts pertaining to the
settlement and this Agreement, and all matters pertaining thereto, as they deem necessary. The parties represent that: (1) they are represented by the attorneys of their choice;
(2) prior to the execution of this Agreement each party's attorney reviewed this Agreement, made all desired changes, and approved this Agreement as to substance and form; (3) the terms
of this Agreement and its consequences (including risks, complications, and costs) have been fully explained to them by their attorneys; (4) they fully understand the terms and consequences of
this Agreement; (5) they are not relying upon any representation or statement made by any other party hereto, or by such other party's employees, agents, representatives or attorneys regarding
this Agreement or its preparation except to the extent such representations are expressly and explicitly incorporated herein; (6) they are not relying upon a legal duty, if one exists, on the
part of any other party, or upon the part of such other party's employees, agents, representatives or attorneys, to disclose any information in connection with the execution of this Agreement or its
preparation; and (7) they have freely signed this Agreement. It is 

6

expressly understood that no party shall ever assert any failure to disclose information by any other party as a ground for challenging this Agreement. 

    18.  Construction.  The language used in this Agreement shall be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction shall be applied against any party. 

    19.  Captions.  The parties acknowledge, agree and understand that the captions of the various portions
of this Agreement are for convenience and organization only, are not intended to constitute the substance of this Agreement, and are not intended to be referred to in construing or interpreting any
provision contained in this Agreement. 

    20.  Terms.  The terms of this Agreement are contractual in nature and not a mere recital. 

    21.  Authority.  Each signer of this Agreement hereby represents and covenants that he or she is
authorized to execute this Agreement on behalf of the party for which he or she is signing and that all necessary approvals have been obtained. 

    22.  Successors Bound.  

    This
Settlement Agreement is binding upon and inures to the benefit of Michael Foods and NCSU, as well as their successors, assigns, officers, directors, agents, servants, employees,
and representatives. 

    23.  Severability.  If any provision of this Agreement is found to be unenforceable in any respect, such
unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if the unenforceable provision had not been contained herein. 

    24.  Integrated Agreement.  This Agreement supersedes all prior agreements, if any, whether oral or
written, pertaining to all or any portion of its provisions. This Agreement may not be changed, modified, altered, interlineated, or supplemented, nor may any covenant, representation, warranty, or
other provision be waived, except by agreement in writing signed by the party against whom enforcement of the change, modification, alteration, interlineation, supplementation or waiver is charged. 

7

    25.  Notices.  All notices required under this Agreement must be in writing, and may be given either
personally or by registered or certified (return receipt requested) mail as follows: 

	For Nulaid:	 	Chief Executive Officer

Nulaid Foods, Inc.

200 W. Fifth St.

Ripon, CA 95366
	For Valley Fresh Foods:	 	Chief Executive Officer

Valley Fresh Foods, Inc.

P.O. Box 910

Turlock, CA 95381
	For Michael Foods:	 	Chief Executive Officer

Michael Foods, Inc.

324 Park National Bank Bldg.

5353 Wayzata Blvd.

Minneapolis, MN 55416
	For NCSU:	 	Associate Vice Chancellor for Technology Transfer

North Carolina State University

Box 7003

Raleigh, North Carolina 27695-7003
	 	 	With copy to:

Office of Legal Affairs

North Carolina State University

Box 7008

Raleigh, North Carolina 27695-7008

    26.  Choice of Law and Forum Selection.  This Agreement shall be governed by and interpreted pursuant to
North Carolina law. The parties hereto submit to venue and personal jurisdiction in North Carolina for any enforcement action under this Agreement. 

    Any
action for violation of the Consent Judgement and Injunction is subject to the full enforcement powers of the Federal Court for the Eastern District of California. 

    27.  Attorneys Fees and Costs.  The parties agree that they will each bear their own attorneys' fees and
cost related to the Pending Agreement and this Agreement. In the event of any dispute under this Agreement in which either the claimed amount or the award is less than One Hundred Thousand dollars
($100,000), the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs, costs of investigation, expert expenses, and other related expenses. 

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    28.  Counterparts.  This Agreement may be executed in one or more counterparts, including by facsimile
copies, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

	DATED: August  , 2000	 	NULAID NEST-BEST, a California partnership

By Nulaid Foods, Inc. Its General Partner
	 

 	 
 	 

By	 
 	 

	 	 	Its	 	

	 

DATED: August  , 2000.	 
 	 
 NULAID FOODS, INC.
	 

 	 
 	 

By	 
 	 

	 	 	Its	 	

	 

DATED: August  , 2000.	 
 	 
 VALLEY FRESH FOODS, INC.
	 

 	 
 	 

By	 
 	 

	 	 	Its	 	

	 

DATED: August  , 2000.	 
 	 
 MICHAEL FOODS, INC.
	 

 	 
 	 

By	 
 	 

	 	 	Its	 	

	 

DATED: August  , 2000.	 
 	 
 NORTH CAROLINA STATE UNIVERSITY
	 

 	 
 	 

By	 
 	 

	 	 	Its	 	

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SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

RECITALS

AGREEMENT<PAGE>

                               SHAREHOLDER AGREEMENT

     This Agreement dated as of  May 22, 2000 (the "Shareholder Agreement") by
and between Michael Foods, Inc., a Minnesota corporation ("Michael") and the
Shareholders of Michael listed on Schedule I (individually "Shareholder" and
collectively "Shareholders").

     WHEREAS, Michael is a publicly-held corporation whose common stock is
traded on the NASDAQ National Market System ("NASDAQ-NMS"); and

     WHEREAS, the Shareholders desire to sell an aggregate of 1,500,000 shares
of common stock of Michael (the "Shares") and Michael desires to purchase such
Shares, in each case subject to the execution and delivery of this Shareholder
Agreement;

     NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions hereinafter set forth, the parties agree as follows:

SECTION 1.          CERTAIN DEFINITIONS

     As used in this Shareholder Agreement, the following terms shall have the
following meanings:

     (a)  "AFFILIATE" shall mean, as applied to a specified Person, any other
Person that directly or indirectly through one or more intermediaries, Controls,
or is Controlled by, or is under common Control with, such specified Person.

     (b)  "BENEFICIALLY OWN  OR "BENEFICIAL OWNERSHIP" with respect to any
securities shall mean having "Beneficial Ownership" of such securities in
accordance with the provisions of Rule 13d-3 under the Exchange Act, except that
a Person shall be deemed to be the Beneficial Owner of a security if that Person
has the right to acquire Beneficial Ownership of such security without giving
effect to the sixty (60) day provision provided under such rule.  Without
duplicative counting of the same securities by the same Holder, Equity
Securities Beneficially Owned by a Person shall include Equity Securities
Beneficially Owned by all other Persons with whom such Person would constitute a
Group.

<PAGE>

     (c)  "BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday, a
bank holiday or any other day on which commercial banking institutions in
Minneapolis, Minnesota, are not generally open for business.

     (d)  "CLOSING" shall have the meaning set forth in Section 4(b) hereof.

     (e)  "CONTROL" shall mean, with respect to a specified Person, the position
or the possession, directly or indirectly, of the power to direct, cause the
direction of, or substantially influence the management and policies of such
Person, whether through the ownership of voting securities, partnership
interests or other ownership interests, or by contract or otherwise; provided
that, in any event, any Person who owns directly or indirectly ten percent (10%)
or more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or ten percent (10%) or more
of the partnership interests or other ownership interests of any other Person
shall be deemed to Control such corporation or other Person.

     (f)  "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect from time to time.

     (g)  "EQUITY SECURITIES" shall mean: (i) any and all shares of capital
stock of Michael; and (ii) any other securities, warrants, options or rights of
any nature (whether or not issued by Michael) that are convertible into any,
exchangeable for, or exercisable for the purchase of, or otherwise give the
Holder thereof any rights in respect of, shares of capital stock of Michael.

     (h)  "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

     (i)  "GROUP" shall mean two or more Persons acting together for the purpose
of acquiring, holding, voting or disposing of Equity Securities, which Persons
would be required to file a statement on Schedule 13D or 13G with the SEC as a
"Person" within the meaning of Section 13(d)(3) of the

                                         -2-
<PAGE>

Exchange Act if such Persons Beneficially Owned sufficient securities to require
such a filing under the Exchange Act.

     (j)  "HOLDER" shall mean any Shareholder that owns common stock of Michael.

     (k)  "PERSON" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture or
other entity of whatever nature.

     (l)  "REGISTRABLE SECURITIES" means any Equity Securities Beneficially
Owned by a Shareholder as of the date of this Shareholder Agreement and any
Equity Securities issued in respect thereof as a result of a stock dividend,
stock split, recapitalization, merger or other similar transaction with respect
to such Equity Securities Beneficially Owned.

     (m)  "REQUIREMENT OF LAW" shall mean, as to any specified Person, any law,
treaty, rule or regulation of any Governmental Authority applicable to such
Person or any of its property or to which such Person or any of its property is
subject.

     (n)  "SEC' shall mean the Securities and Exchange Commission or its
successor.

     (o)  "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time, and a
reference to a particular section thereof shall be deemed to include a reference
to the comparable section, if any, of any similar federal statute.

     (p)  The "TOTAL VOTING POWER" at any measurement date shall mean the total
number of votes which could have been cast in an election of directors of
Michael had a meeting of the shareholders of Michael been duly held based upon a
record date as of the measurement date if all Equity Securities then outstanding
and entitled to vote at such meeting were present and voted to the fullest
extent possible at such meeting.

SECTION 2.          REPRESENTATIONS AND WARRANTIES OF MICHAEL

     Michael represents and warrants to the Shareholders that:

                                         -3-
<PAGE>

     (a)  Michael has been duly incorporated and is validly existing and in good
standing as a corporation under the laws of the State of Minnesota, with
corporate power to transact in all material respects its business as now
conducted by it, to enter into this Shareholder Agreement, and to perform its
obligations hereunder.

     (b)  This Shareholder Agreement has been duly authorized, executed and
delivered by Michael and constitutes a legal, valid and binding agreement of
Michael, enforceable against Michael in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.

     (c)  Except as otherwise contemplated in this Shareholder Agreement, no
consent, approval or authorization of, or filing, registration, qualification,
declaration or designation with, any Governmental Authority is required on the
part of Michael as a condition to the valid execution, delivery and performance
of this Shareholder Agreement by Michael, except where the absence of any such
consent, approval or authorization of, or the failure to make any such filing,
registration, qualification, declaration or designation with any Governmental
Authority would not have a material adverse effect on Michael and its
subsidiaries taken as a whole or materially impair Michael's ability to perform
its obligations hereunder.

     (d)  The execution, delivery and performance by Michael of this Shareholder
Agreement will not: (i) conflict with the Articles of Incorporation or Bylaws of
Michael, as amended; (ii) conflict with, result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third-party right of termination, cancellation, material
modification or acceleration) under, any of the terms, conditions or provisions
of any trust agreement, voting agreement, shareholders agreement, voting trust,
note, bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind affecting
Michael or to which

                                         -4-
<PAGE>

Michael is a party or by which any of its properties or assets are or may be
bound; (iii) violate any Requirement of Law applicable to Michael; or (iv)
violate any order, injunction, judgment or decree of any court or other
Governmental Authority or any determination of an arbitrator applicable to
Michael or any of Michael's properties or assets, except where such conflict,
breach or other default under clause (ii) or any such violation under clauses
(iii) or (iv) would not have a material adverse effect on Michael and its
subsidiaries taken as a whole or materially impair Michael's ability to perform
its obligations hereunder.

SECTION 3.          REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

     Each Shareholder severally represents and warrants to Michael that:

     (a)  Such Shareholder has the legal capacity, power and authority to enter
into and perform all of such Shareholder's obligations under this Shareholder
Agreement.  This Shareholder Agreement has been duly executed and delivered by
each Shareholder and constitutes a legal, valid and binding agreement of each
Shareholder, enforceable against each Shareholder in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.  If such Shareholder is married
and such Shareholder's Equity Securities constitute community property, this
Shareholder Agreement has been duly authorized, executed and delivered by, and
constitutes a legal, valid and binding agreement of such Shareholder's spouse,
enforceable against such Person in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.

     (b)  No consent, approval or authorization of, or filing, registration,
qualification, declaration or designation with, any Governmental Authority is
required on the part of such Shareholder as a

                                         -5-
<PAGE>

condition to the valid execution, delivery and performance of this Shareholder
Agreement by such Shareholder.

     (c)  The execution, delivery and performance by such Shareholder of this
Shareholder Agreement will not: (i) conflict with, result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third-party right of termination, cancellation,
material modification or acceleration) under, any of the terms, conditions or
provisions of any trust agreement, voting agreement, shareholders agreement,
voting trust, note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind affecting such Shareholder or to which such Shareholder is a party or by
which any of such Shareholder's properties or assets are or may be bound; (ii)
violate any Requirement of Law applicable to such Shareholder; or (iii) violate
any order, injunction, judgment or decree of any court or other Governmental
Authority or any determination of an arbitrator applicable to such Shareholder
or any of such Shareholder's properties or assets.

     (d)  Such Shareholder is the sole record and beneficial owner of the Shares
identified in Schedule I as being sold by such Shareholder, and such Shares are
not subject to any claim, option, warrant or other call right, and upon delivery
to Michael at Closing of certificates for such Shares, in transferable form,
Michael will have good legal and beneficial title thereto, free of all liens or
encumbrances of any kind.

SECTION 4.          SALE OF MICHAEL SHARES

     (a)  At the Closing, each of the Shareholders shall sell and deliver to
Michael and Michael shall purchase from each Shareholder, the number of Shares
set forth opposite the Shareholder's name on SCHEDULE I.  The purchase price for
each of the Shares shall be $21.77 per share, that being three percent (3%)
below the average closing price of Michael common stock as reported on the
NASDAQ-NMS for the ten trading days commencing on May 8, 2000 and ending on May
19, 2000.  The purchase price will

                                         -6-
<PAGE>

be paid at Closing by wire transfer of same day funds to the account of each
Shareholder against receipt of certificates for the Shares in transferable form.

     (b)  Closing will be held at the offices of Maun & Simon, PLC in
Minneapolis, Minnesota on the date that this Shareholder Agreement is executed
and delivered by Michael and each of the Shareholders, unless the Shareholders
and Michael agree on a different time, place or manner of Closing.  In addition
to the exchange of the consideration provided in Section 4(a), at the Closing
the Shareholders and Michael will deliver to each other a certificate or
certificates confirming the truth and 'completeness of the representations and
warranties of such party as of the date of Closing and such other documents,
certificates or conveyances as counsel for Michael and the Shareholders shall
reasonably request.

SECTION 5.          COVENANTS OF THE SHAREHOLDERS

     (a)  ACQUISITION OF EQUITY SECURITIES.  Until April 26, 2001 or the first
date that the Shareholders, collectively and in the aggregate, Beneficially Own
Equity Securities representing less than five percent (5%) of the Total Voting
Power, whichever is earlier, no Shareholder shall, directly or indirectly,
acquire, offer to acquire, agree to acquire, become the Beneficial Owner of, or
obtain any rights in respect of, any Equity Securities, by purchase or
otherwise, or take any action in furtherance thereof, if the effect of such
acquisition, agreement or other action would be (either immediately or upon
consummation of any such acquisition, agreement or other action, or expiration
of any period of time provided in any such acquisition, agreement or other
action) to increase the aggregate voting power in the election of directors of
all Equity Securities then Beneficially Owned by all Shareholders (such
aggregate voting power, (the "Aggregate Voting Power") to twenty percent (20%)
or more of the Total Voting Power (such maximum percentage limitation, the
"Maximum Percentage").   Notwithstanding anything to the contrary in this
Section 5(a), the Maximum Percentage may be exceeded if, and solely to the
extent that, the Aggregate Voting Power is or will be increased solely as a
result of a repurchase of any Voting Securities by Michael or any of its
subsidiaries or any other change in Michael's

                                         -7-
<PAGE>

capitalization or by reason of the issuance of stock options by Michael to any
of the Shareholders pursuant to any stock option plan maintained by Michael.

     (b)  NO VOTING TRUSTS. Until April 26, 2001 or the first date that the
Shareholders, collectively and in the aggregate, Beneficially Own Equity
Securities representing less than five percent (5%) of the Total Voting Power,
whichever is earlier, no Shareholder shall deposit any Equity Securities in a
voting trust or subject any Equity Securities to any arrangement or agreement
with respect to the voting of such Equity Securities except for a voting trust
or other arrangement among the Shareholders or any of their Affiliates.

     (c)  NO PROXY SOLICITATION ADVERSE TO BOARD RECOMMENDATION.  Until April
26, 2001 or the first date that the Shareholders, collectively and in the
aggregate, Beneficially Own Equity Securities representing less than five
percent (5%) of the Total Voting Power, whichever is earlier, no Shareholder
shall solicit proxies or become a "participant" in a "solicitation" (as such
terms are defined in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the Board of Directors of Michael with respect to any matter.

     (d)  NO FORMATION OF GROUP.  Until April 26, 2001 or the first date that
the Shareholders, collectively and in the aggregate, Beneficially Own Equity
Securities representing less than five percent (5%) of the Total Voting Power,
whichever is earlier, no Shareholder shall join a partnership, limited
partnership, syndicate or other Group, or otherwise act in concert with any
other Person, for the purpose of acquiring, holding, voting or disposing of
Equity Securities, or otherwise become a "Person" within the meaning of
Section 13(d)(3) of the Exchange Act (in each case other than solely with other
Shareholders or their Affiliates or with such Shareholders' or Affiliates'
representatives for estate planning purposes).

SECTION 6.          ADDITIONAL COVENANTS OF SHAREHOLDERS

     (a) RESTRICTIONS ON DISPOSITION.  Except as otherwise permitted herein, the
Shareholders, individually and collectively, shall not:

                                         -8-
<PAGE>

          (i)   until June 30, 2000, other than the Shares sold pursuant to this
     Shareholder Agreement, sell or offer to sell any Equity Securities; or

          (ii)  during each of the calendar quarters ending September 30, 2000
     and December 31, 2000, sell or offer to sell Equity Securities in excess of
     200,000 shares of Michael common stock, as adjusted for any share dividend,
     stock split or other recapitalization of Equity Securities or;

          (iii) prior to January 1, 2001, pledge, hypothecate or encumber any
     Equity Securities Beneficially Owned by such Shareholder, except to a
     financial institution pursuant to a bona fide pledge, hypothecation or
     encumbrance to secure a bona fide loan for money borrowed to one or more
     Shareholders, provided that, upon foreclosure on such Equity Securities,
     such financial institution has executed and delivered to Michael an
     agreement whereby such financial institution agrees to be legally bound by
     the terms of this Shareholder Agreement as a "Shareholder" as if such
     financial institution were an original signatory hereto.

     (b)  RESTRICTIONS ON DISPOSITION.  Until April 26, 2001 or the first date
that the Shareholders, collectively and in the aggregate, Beneficially Own
Equity Securities representing less than five percent (5%) of the Total Voting
Power, whichever is earlier, the Shareholders, individually or collectively,
shall not:

          (i)   sell or offer to sell Equity Securities having five percent (5%)
     or more of the Total Voting Power of Michael to any Person or Group in any
     single transaction or series of transactions without providing Michael the
     first right to buy such shares as provided in Section 6(c) below; or

          (ii)  sell or offer to sell Equity Securities to any Person or Group
     which the Shareholders have actual knowledge at time of the sale to
     Beneficially Own five percent (5%) or more of the Total Voting Power of
     Michael or, to any Person or Group who, by virtue of the sale or offer,
     would Beneficially Own, five percent (5%) or more of the Total Voting Power
     of

                                         -9-
<PAGE>

     Michael, without in either case, providing to Michael a first right to buy
     such shares as provided in Section 6(c) below.

     (c)  MICHAEL'S FIRST RIGHT TO PURCHASE.  During the period and upon the
occurrence of any event described in Section 6(b)(i) or (ii), the Shareholder or
Shareholders proposing to sell or offer Equity Securities shall provide written
notice thereof to Michael and shall offer to Michael the right to purchase such
Equity Securities.  The notice shall state the number of shares offered and the
price per share and any other conditions of the proposed sale or offer and shall
include a copy of any written document setting forth the terms of the proposed
sale or offer between the Shareholder or Shareholders and the purchaser or
offeree.  Michael shall have twenty (20) days from its receipt of such notice
within which to purchase the Equity Securities so offered.  In the event that
Michael does not complete the purchase within such twenty (20) day period, the
Shareholder or Shareholders sending the notice shall be permitted for a period
of thirty (30) days thereafter to sell Equity Securities equal in number to the
shares offered in such notice free of any restrictions under this Shareholder
Agreement at a price not less than the purchase price per share set forth in
such notice and under terms and conditions no more favorable to the purchaser
than the terms and conditions offered to Michael in such notice.

     (d)  TENDER OFFERS.  The restrictions set forth in Section 6(b) and the
first right to buy set forth in Section 6(c) shall not apply if a tender offer
is made for all or substantially all of the outstanding shares of Michael Common
Stock and the Board of Directors of Michael does not, within seven (7) days of
the commencement of such tender offer, announce its opposition to the tender
offer.  Notwithstanding the foregoing, the following additional terms and
conditions shall apply in the event of the commencement of a tender offer:

          (i)   In the event that one or more of the Shareholders has given
     notice to Michael pursuant to Section 6(c) of this Shareholder Agreement
     and, prior to the exercise of Michael's right to buy, a tender offer is
     commenced for all or substantially all of the outstanding shares of Michael
     Common Stock, Michael shall, within twenty (20) days of the date that such

                                         -10-
<PAGE>

     Shareholder or Shareholders have given such notice, have the right to
     acquire the Equity Securities subject to the notice at the higher of the
     price offered by the Shareholder or Shareholders in the notice or the
     tender offer price, regardless of whether Michael's Board of Directors has
     announced its opposition to such tender offer.

          (ii)  In the event that one or more of the Shareholders has given
     notice to Michael pursuant to Section 6(c) of this Shareholder Agreement
     and, subsequent to the exercise of Michael's right to buy, either a tender
     offer is commenced for all or substantially all of the outstanding shares
     of Michael Common Stock or the Board of Directors rescinds its earlier
     opposition to such tender offer, Michael shall have the option of (A)
     rescinding its agreement to purchase the shares from the Shareholder or
     Shareholders within two (2) days after the commencement of such tender
     offer or the announcement by the Board of the rescission of opposition to
     the tender offer, or (B) acquiring such shares at the higher of the price
     offered by the Shareholder or Shareholders in the notice or the tender
     offer price.

SECTION 7.          LEGEND

     All certificates representing shares of common stock of Michael which are
subject to this Shareholder Agreement shall bear the following legend:

          "The shares represented by this certificate are subject to certain
     restrictions on the transfer, sale or other disposition of the shares
     pursuant to an agreement dated  May 22, 2000, between the issuer and the
     registered owner hereof, a copy of which may be obtained from the secretary
     of the corporation."

     The Shareholders shall promptly deliver all certificates for Equity
Securities to the secretary of Michael who shall place the foregoing legend on
the certificates.  The Secretary of Michael shall promptly return the legended
certificates to the Shareholders.

                                         -11-
<PAGE>

SECTION 8.          DIRECTORS

     For a period of three years from the date of this Agreement, if the
Shareholders collectively own ten percent (10%) or more of the outstanding
common stock of Michael, they shall be entitled to nominate two (2) persons to
stand for election as directors of Michael.  During such three-year period, if
the Shareholders own less than ten percent (10%), but more than five percent
(5%), of the outstanding common stock of Michael, they shall be entitled to
nominate one (1) person to stand for election as a director of Michael.  Within
thirty (30) days following the end of each calendar year the Shareholders shall
give notice to Michael of the nominees of the Shareholders.  No director serving
as a nominee of the Shareholders shall be required to resign as a result of a
decline in the Shareholders' percentage ownership of common stock of Michael.
If either Stephen Papetti or Arthur J. Papetti voluntarily terminate employment
with the Company and its subsidiaries while he is serving as a director of the
Company, he will tender his resignation from the Board but the Board of
Directors shall not be required to accept such resignation.

SECTION 9.          REGISTRATION RIGHTS

     (a)  REQUESTED REGISTRATION.  Until April 26, 2001 or the date that all of
the shares of Michael common stock Beneficially Owned by the Shareholders are
eligible for sale under Rule 144 of the SEC without any volume limitation,
whichever is earlier, subject to the following provisions a Shareholder may
request that Michael register all or a portion of his Registrable Securities.
If Michael shall receive a written request from one or more Shareholders that
Michael effect the registration under the Securities Act of all or a part of
such Shareholders' Registrable Securities, then Michael will, within ten (10)
days after receipt thereof, give notice to all other Shareholders of the receipt
of such request and each such holder may elect by written notice received by
Michael within ten (10) days from the date of the notice by Michael to have all
or part of his Registrable Securities included in such registration.  Upon
receipt of such notice, Michael will, as soon as practicable, use reasonable
efforts to effect the registration on Form S-3 and pursuant to Rule 415 (the
"Resale Registration Statement") under the Securities Act of all

                                         -12-
<PAGE>

Registrable Securities which it has been so requested to register covering
resales from time to time of such Registrable Securities and Michael shall use
its reasonable best efforts to: (i) cause the Resale Registration Statement to
be declared effective by the SEC as soon as practicable thereafter; and (ii)
maintain the effectiveness of the Resale Registration Statement continuously
until the earliest of:  (A) the date on which the Shareholders no longer hold
Registrable Securities registered under the Resale Registration Statement or (B)
the third anniversary of this Shareholder Agreement or such lesser time as may
be permitted under Rule 144 under the Securities Act to enable the Shareholders
to sell the Registrable Securities under the Securities Act without such
registration.  Michael: (i) shall not be obligated to cause any special audit to
be undertaken in connection with any such registration; (ii) shall be entitled
to postpone for a reasonable period of time, but not in excess of ninety (90)
days, the filing of any registration statement otherwise required to be prepared
pursuant to this section if Michael is, at such time, conducting or about to
conduct an underwritten public offering of Equity Securities (or securities
convertible into Equity Securities) and is advised in writing by its managing
underwriter that such underwritten public offer would, in its opinion, be
adversely effected by the registration so requested; and (iii) shall be entitled
to postpone such requested registration for up to ninety (90) days if Michael
determines, in view of the advisability of deferring public disclosure of
material corporate developments or other information, that such registration and
the disclosure required to be made pursuant thereto would not be in the best
interest of Michael at such time.

     (b)  EFFECTIVE REGISTRATION.  A registration pursuant to this Section 9
will not be deemed to have been effected unless the Registration Statement has
been declared effective by the SEC; provided, however, that if after such
Registration Statement has been declared effective, the offering of Registrable
Securities pursuant to such Registration Statement is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
Governmental Authority or court, such Registration Statement will be deemed not
to have been effected during the period of such interference until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume.

                                         -13-
<PAGE>

     (c)  REGISTRATION EXPENSES.  The Shareholders requesting registration shall
bear all expenses incurred in connection with the registration of the
Registrable Securities pursuant to this Section 9.  Such expenses shall include,
without limitation, all printing, legal and accounting expenses (other than
normal audit expenses) incurred by Michael and all registration and filing fees
imposed by the SEC, any state securities commission or the NASDAQ-NMS, any
brokerage fees or commissions and any taxes of any kind (including, without
limitation, transfer taxes) with respect to any disposition, sale or transfer of
Registrable Securities, and any legal, accounting and other expenses incurred by
such Shareholder.

     (d)  SELECTION OF UNDERWRITER AND INVESTMENT MANAGER.  If a requested
registration pursuant to this Section 9 involves an underwritten offering, the
selling Shareholders shall have the exclusive right to select an investment
banker or bankers and managers to administer the offering.

     (e)  REGISTRATION PROCEDURES.  If and whenever Michael is required to use
its reasonable efforts to cause the registration of any Registrable Securities
under the Securities Act as provided in this  Shareholder Agreement, Michael
will, as expeditiously as reasonably possible: (i) prepare and file with the SEC
such amendments and supplements to such Resale Registration Statement and the
prospectus used in connection therewith and shall timely file with the SEC all
required filings under the Exchange Act as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such Resale Registration Statement and to keep
the Resale Registration Statement effective, but only while it shall be required
under the provisions of this Shareholder Agreement to cause the Registration
Statement to remain current; (ii) furnish to each Shareholder seeking
registration hereunder such number of copies of the prospectus included in such
Resale Registration Statement (including each preliminary prospectus and summary
prospectus), and such other documents as each such Shareholder may reasonably
request in order to facilitate the disposition of the Registrable Securities by
such Shareholder but only while it shall be required under the provisions hereof
to cause the Registration Statement to remain current; (iii) use its reasonable
efforts to register or qualify such Registrable Securities covered by such
Resale Registration Statement under such

                                         -14-
<PAGE>

other securities or blue sky laws of such jurisdictions as the Shareholders
shall reasonably request, except that Michael shall not, for any purpose, be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this clause, it would not be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction, or consent to general service of process in any such jurisdiction;
(iv) use its reasonable efforts to list the Registrable Securities on the
NASDAQ-NMS, if such Registrable Securities are not already so listed.

     (f)  POST-REGISTRATION NOTICES.  Michael shall promptly notify the
Shareholders: (i) when a prospectus or any prospectus supplement or
post-effective amendment (including any required filings under the Exchange Act)
has been filed and, with respect to the Resale Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any state securities authority for amendments or
supplements to the Resale Registration Statement and prospectus or for
additional information after the Resale Registration Statement has become
effective; (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Resale Registration Statement; (iv) of the issuance by any
state securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Securities under such state's securities or "blue sky" laws; and (v)
of the happening of any event which makes any statement made in the Resale
Registration Statement or related prospectus untrue or which requires the making
of changes in such Resale Registration Statement or prospectus so that they will
not contain any untrue statement of a material fact or omit to state any
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.  As soon as practicable, following the expiration of the Suspension
Period (as defined below), Michael shall prepare and file with the SEC and
furnish a supplement or amendment to such prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities, such prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact

                                         -15-
<PAGE>

necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

     Upon receipt of any notice (a "Suspension Notice") by the Shareholders from
Michael of the happening of any event of the kind described in this
Section 9(g), the Shareholders shall forthwith discontinue disposition of the
Registrable Securities pursuant to the Resale Registration Statement until the
Shareholders' receipt of the copies of the supplemental or amended prospectus
contemplated by this Section 9(g) or until the Shareholders have been advised in
writing (the "Advice") by Michael that the use of the prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by Michael,
will, or will request any broker or dealer acting as the Shareholders' agent(s)
to deliver to Michael (at Michael's expense) all copies, other than permanent
file copies then in the Shareholders' or their brokers' or dealers' possession
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that in no event shall the period
from the date on which the Shareholders receive a Suspension Notice to the date
which the Shareholders receive either the Advice or copies of the supplemental
or amended prospectus contemplated in this Section 9(g) (the "Suspension
Period") exceed sixty (60) calendar days.

     (g)  INFORMATION.  Michael may require each selling Shareholder to furnish
it with such information regarding such selling Shareholder and pertinent to the
disclosure requirements relating to the registration and the distribution of
such securities as Michael may from time to time reasonably request in writing.

     (h)  UNDERWRITING AGREEMENT.  The selling Shareholders shall execute and
deliver an underwriting agreement in customary form in connection with any
underwritten offering made pursuant to a registration hereunder.

                                         -16-
<PAGE>

SECTION 10.         INDEMNIFICATION AND CONTRIBUTION

     (a)  INDEMNIFICATION BY MICHAEL.  Michael agrees to indemnify and hold
harmless to the full extent permitted by law, each Shareholder from and against
all losses, claims, damages, liabilities and expenses (including, without
limitation, reasonable legal fees and expenses incurred by shareholders
(collectively, the "Damages") to which the Shareholders may become subject under
the Securities Act or otherwise, insofar as such Damages (or proceedings in
respect thereto arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in the Resale Registration Statement (or
any supplement or amendment thereto, including filings under the Exchange Act)
pursuant to which Registrable Securities were registered under the Securities
Act, or caused by any omission or alleged omission to state therein a material
fact necessary to make the statements therein in light of the circumstances
under which they were made, not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any prospectus (as
amended or supplemented if Michael shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, except insofar as such
Damages arise out of or are based upon any such untrue statement or omission
based upon information relating to the Shareholders furnished in writing to
Michael by the Shareholders specifically for use therein; provided, however,
that Michael shall not be liable to the Shareholders under this Section 10(a) to
the extent that any such Damages were caused by the fact that the Shareholders
sold Registrable Securities to a Person as to who it shall be established that
there was not sent or given, at or prior to written confirmation of such sale, a
copy of the prospectus as then amended or supplemented if, but only if:  (i)
Michael has previously furnished copies of such amended or supplemented
prospectus to the Shareholders; and (ii) such Damages were caused by any untrue
statement or omission or alleged untrue statement or omission contained in the
prospectus so delivered which was corrected in such amended or supplemented
prospectus.

                                         -17-
<PAGE>

     (b)  INDEMNIFICATION BY SHAREHOLDERS.  The Shareholders agree to indemnify,
jointly and severally, and hold harmless Michael, its stockholders, directors,
officers and each Person, if any, who Controls Michael within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from Michael to the Shareholders in
Section 10(a) of this Shareholder Agreement but only with reference to
information relating to the Shareholders furnished in writing to Michael by the
Shareholders specifically for use in the Resale Registration Statement (or any
amendment thereto) or any prospectus (or any amendment or supplement thereto);
provided, however, that the Shareholders shall not be obligated to provide such
indemnity to the extent that such Damages result from a failure of Michael to
promptly amend or take action to correct or supplement any such Resale
Registration Statement or prospectus on the basis of corrected or supplemental
information provided in writing by the Shareholders to Michael expressly for
such purpose.  In no event shall the liability of the Shareholders hereunder be
greater in amount than the amount of the proceeds received by the Shareholders
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

     (c)  CONTRIBUTION.  To the extent that the indemnification provided for in
Section 10(a) or (b) is unavailable to an indemnified party or insufficient in
respect of any Damages, then each indemnifying party under such Section, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such Damages in
such proportion as is appropriate to reflect the relative fault of Michael, on
the one hand, and the Shareholders, on the other hand, in connection with the
statements or omissions that resulted in such Damages, as well as any other
relevant equitable considerations.  The relative fault of Michael, on the one
hand, and the Shareholders, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by Michael or by the Shareholders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

                                         -18-
<PAGE>

     If indemnification is available under Section 10(a) or (b), the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in such sections without regard to the relative fault of said
indemnifying party or the indemnified party or any other equitable
considerations provided for in this Section 10(c).  Michael and the Shareholders
agree that it would not be just or equitable if contribution pursuant to this
Section 10(c) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in this section.

SECTION 11.         GENERAL PROVISIONS

     (a)  GOVERNING LAW.  This Shareholder Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Minnesota
without giving effect to any conflicts of law provisions.

     (b)  REMEDIES.  Michael, on the one hand, and the Shareholders, on the
other, acknowledge and agree that the other would not have an adequate remedy at
law for money damages in the event that any of the covenants or agreements in
this Shareholder Agreement of such party were not performed in accordance with
its terms, and it is therefore agreed that in addition to and without limiting
any other remedy or right such party may have, any party will have the right to
an injunction or other equitable relief (including specific performance) in any
court of competent jurisdiction, enjoining any such breach and enforcing
specifically the terms and provisions hereof.  All rights, powers and remedies
provided under this Shareholder Agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not alternative.

     (c)  NOTICES.   All notices, demands and other communications given under
this Shareholder Agreement shall be in writing, shall be given either by
personal delivery or by nationally recognized overnight courier or by
telecopier, and shall be deemed to have been given or made when personally
delivered, one Business Day after delivered to a nationally recognized overnight
courier, postage

                                         -19-
<PAGE>

prepaid, and receipt requested, or one Business Day after transmission by
facsimile, receipt confirmed, addressed as follows:

          (i)   IF TO MICHAEL:

                Gregg A. Ostrander
                Chairman of the Board, President and Chief Executive Officer
                Michael Foods, Inc.
                5353 Wayzata Boulevard
                324 Park National Bank Building
                Minneapolis, Minnesota  55416
                Telephone:  612-546-1500
                Facsimile No.: 612-546-3711

                with a copy to:

                Albert A. Woodward
                Maun & Simon, PLC
                2000 Midwest Plaza Building West
                801 Nicollet Mall
                Minneapolis, Minnesota 55402
                Telephone: 612-904-7400
                Facsimile No.: 612-904-7424

          (ii)  IF TO THE SHAREHOLDERS:

                Arthur J. Papetti
                Alfred Papetti
                Stephen Papetti
                c/o Papetti Holding Company
                877 North Avenue East
                Building 4
                Elizabeth, New Jersey 07206
                Telephone: 908-527-1900
                Facsimile No.: 908-527-1996

                with a copy to:

                Martin B. O'Connor, II            Robert M. LaRose
                O'Connor, Morss & O'Connor        Thompson Coburn LLP
                Liberty Hall Center               One Firstar Plaza
                1085 Morris Avenue                Suite 3400
                Union, New Jersey 07083           St. Louis, Missouri 63101
                Telephone: 908-354-5660           Telephone: 314-552-6068
                Facsimile No.: 908-354-5786       Facsimile No.: 314-552-7068

or to such other address as any such Person  may from time to time designate by
notice to the others.

                                         -20-
<PAGE>

     (d)  SEVERABILITY.  If any term, provision, covenant or restriction of this
Shareholder Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.  The parties agree that they will use
their best efforts at all times to support and defend this Shareholder
Agreement.

     (e)  AMENDMENTS.  This Shareholder Agreement may be amended only by an
agreement in writing signed by all of the parties hereto.

     (f)  DESCRIPTIVE HEADINGS.  Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Shareholder Agreement.

     (g)  COUNTERPARTS.  This Shareholder Agreement shall become binding when
one or more counterparts hereof, individually or taken together, bears the
signatures of each of the parties hereto.  This Shareholder Agreement may be
executed in any number of counterparts, each of which shall be an original as
against the party whose signature appears thereon, or on whose behalf such
counterpart is executed, but all of which when taken together shall be one and
the same statement.

     (h)  SUCCESSORS AND ASSIGNS.  This Shareholder Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto, provided that a Shareholder may not assign any of
his rights or obligations hereunder to any Person without the prior written
consent of Michael.  Notwithstanding the foregoing, the consent of Michael shall
not be required in connection with the assignment of this Shareholder Agreement
to the estate of a Shareholder.

     (i)  This Shareholder Agreement is intended to supercede any earlier-dated
shareholder agreements, including the Shareholder Agreement dated February 26,
1997, as amended February 25, 2000, in their entirety.  From and after the date
of this Shareholder Agreement, all such earlier-dated shareholder agreements
shall terminate and all rights and obligations of the parties thereto shall be
governed solely by this Shareholder Agreement.

                                         -21-
<PAGE>

IN WITNESS WHEREOF, the parties hereto intending to be legally bound have duly
executed this Shareholder Agreement, all as of the day and year first above
written.

                                        MICHAEL FOODS, INC.

                                        By: /s/ Gregg A. Ostrander
                                           -----------------------------------
                                        Its: Chairman/Pres/CEO
                                            ----------------------------------

                                        SHAREHOLDERS:

                                        /s/ Stephen Papetti
                                        --------------------------------------
                                        Stephen Papetti

                                        /s/ Alfred Papetti
                                        --------------------------------------
                                        Alfred Papetti

                                        /s/ Arthur J. Papetti
                                        --------------------------------------
                                        Arthur J. Papetti

                                         -22-
<PAGE>

                                     SCHEDULE I
                               LIST OF SHAREHOLDERS

<TABLE>
<CAPTION>
                                                       NUMBER OF
A.   SHAREHOLDERS                                      SHARES SOLD
     ------------                                      -----------
<S>                                                    <C>
     Stephen Papetti                                   375,000
     Alfred Papetti                                    375,000
     Arthur J. Papetti                                 750,000

</TABLE>

                                         -23-

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