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                                                                    Exhibit 10.7





                              EMPLOYMENT AGREEMENT

                  This Agreement is effective January 1, 2000, by and between
DAIRY MART CONVENIENCE STORES, INC., a Delaware corporation with its principal
offices at 300 Executive Parkway West, Hudson, Ohio 44236 (the "Company"), and
ROBERT B. STEIN, JR., with his residence located at 90 Grey Fox Run,
Bentleyville, OH 44022 (the "Employee").

                              W I T N E S S E T H:
                               - - - - - - - - - -

                  WHEREAS, the Company desires to continue to secure the
services of the Employee in the capacities set forth herein, and the Employee
has agreed to continue to supply his services in such capacities, upon the terms
and conditions set forth in this Agreement.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties hereby agree
as follows:

         1. DEFINITIONS. For purposes of this Agreement, the following
capitalized terms used herein shall have the respective meanings set forth
below. Other capitalized terms used herein are defined elsewhere in this
Agreement.

                  "CAUSE" shall mean (i) the Employee's willful breach of duty
in the course of his employment, or his habitual neglect of his employment
duties, (ii) an act of fraud or theft committed by the Employee against the
Company or (iii) the Employee having been convicted by a court of competent
jurisdiction of a felony. For purposes of this Agreement, no act, or failure to
act, on the Employee's part shall be deemed "willful" unless done, or omitted to
be


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done, by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company and its subsidiaries.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of the entire
membership of the Company's Board of Directors (the "Board") other than
directors who are employees of the Company at a meeting of the Board called and
held for such purpose (after reasonable notice to the Employee and an
opportunity for him, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the such membership of the Board, the
Employee was guilty of conduct set forth above in this definition and specifying
the particulars thereof in detail.

                  "DATE OF TERMINATION" shall mean (i) if the Employee's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Employee shall not have returned to the
full-time performance of his duties during such thirty (30) day period), and
(ii) if the Employee's employment is terminated for Cause or Good Reason or for
any other reason (other than Disability or death), the date specified in the
Notice of Termination (which, in the case of a termination for Cause shall not
be less than thirty (30) days, and in the case of a termination for Good Reason
shall not be less than thirty (30) nor more than ninety (90) days, respectively,
from the date such Notice of Termination is given).

                  "DISABILITY" shall mean permanent and total disability as such
term is defined under Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"). Any questions as to the existence of the Employee's
Disability upon which he and the Company

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cannot agree shall be determined by a qualified independent physician selected
by the Employee (or, if he is unable to make such selection, such selection
shall be made by any adult member of the Employee's immediate family or his
legal representative), and approved by the Company; said approval not to be
unreasonably withheld. The determination of such physician made in writing to
the Company and to the Employee shall be final and conclusive for all purposes
of this Agreement.

                  "GOOD REASON" shall mean the occurrence, without the
Employee's express written consent, of any of the following circumstances:

                           (i) the assignment to the Employee of any duties or
responsibilities inconsistent with his status as Chief Executive Officer and
President of the Company, his removal from that position, or a diminution in the
nature or status of his responsibilities from those in effect immediately prior
to the date hereof or the employment by the Company of an executive officer more
senior to the Employee;

                           (ii) a reduction by the Company in the Employee's
Base Salary (as defined in Paragraph 5 hereof) or fringe benefits as in effect
on the date hereof or as the same may be increased from time to time during the
Employment Term (as hereinafter defined in Paragraph 3 hereof);

                           (iii) any failure by the Board to renominate the
Employee for election as a director of the Company, except in connection with
his death or the termination of this employment by him for other than Good
Reason or by the Company for his death, Disability or for Cause;

                           (iv) a change in the identity of a majority of the
directors that constitutes the Board on the date hereof


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and following such change the Employee is subject to, in the reasonable opinion
of the Employee, (x) unreasonable demands regarding his business time and
efforts to be expended on behalf of the Company, (y) abusive or embarrassing
treatment or (z) other material adverse changes in his working environment and
conditions from those in effect on the date hereof;

                           (v) relocation of the Employee's principal place of
employment by more than 60 miles from its location as of the date hereof;

                           (vi) a material breach of this Agreement by the
Company that remains uncured for a period of 30 days after Employee has provided
the Company's Board of Directors written notice that specifically identifies, in
reasonable detail, the manner in which the Company materially breached the
Agreement; or

                           (vii) notwithstanding the foregoing, the occurrence
of a "Change of Control" and the further occurrence of any event listed in items
(i) through (vi) hereof within two years following a Change of Control.

                  "CHANGE OF CONTROL" shall mean any one or more of the
following:

                           (i) If any "person" (as the terms used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the Company's outstanding
securities;

                           (ii) If the individuals who constitute the Board on
the date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority of the

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Board, PROVIDED, HOWEVER, that any person becoming a director subsequent to the
date hereof whose election or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters of the directors
then comprising the Incumbent Board shall be considered as though he were a
member of the Incumbent Board, but excluding, for this purpose, any such person
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board;

                           (iii) A merger, consolidation, reorganization, sale
of all or substantially all of the assets of the Company or similar transaction
occurs in which the Company is not the resulting entity, other than a
transaction following which (A) at least 51% of the equity ownership interests
of the entity resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the outstanding equity ownership interests in the
Company and (B) at least 51% of the securities entitled to vote generally in the
election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of the Company; or

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                           (iv) A tender offer is completed for 20% or more of
the voting securities of the Company then outstanding.

                  "NOTICE OF TERMINATION" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment under the provision
so indicated.

         2. EMPLOYMENT. The Company shall employ the Employee, and the Employee
shall serve the Company, upon the terms and conditions hereinafter set forth.


         3. TERM. The employment of the Employee by the Company hereunder
commenced as of January 1, 2000 and, unless sooner terminated on an earlier date
in accordance with the provisions hereinafter provided, shall terminate on
December 31, 2002; PROVIDED, HOWEVER, that commencing on January 1, 2001 and
each January 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year such that the remaining unexpired term shall be
three years unless, not later than December 31 of such calendar year, either the
Company or the Employee shall have given notice to the other party that it or he
does not wish to extend the term of this Agreement. The period commencing on
January 1, 2000 and ending on December 31, 2002 or such earlier or later date to
which the term of the Employee's employment hereunder may be shortened or
extended as provided in this Agreement is referred to herein as the "Employment
Term."

         4. DUTIES. During the Employment Term, the Employee shall:

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                          (i) Serve as Chief Executive Officer and President of
the Company, faithfully and to the best of his ability, subject to the direction
and supervision of the Board;

                           (ii) Serve as an officer and/or director of, and
shall perform such services on behalf of, any subsidiary or other affiliate of
the Company as may be designated by the Board, all without further compensation
other than that provided for in this Agreement; and

                           (iii) Devote his full business time, energy and skill
to such employment and shall not, without prior written approval of the Board,
directly or indirectly, engage or participate in, or become employed by, or
become an officer or partner of, or render advisory services to or provide other
services in connection with, any business activity other than that of the
Company or any of its subsidiaries or affiliates as provided above; PROVIDED,
HOWEVER, that the Employee shall be permitted to (x) serve as a board member of
and render services to charitable organizations of his choice and (y) personally
invest in any corporation, partnership or other entity, so long as any such
investment does not require or involve the active participation of the Employee
in the management of the business of any such corporation, partnership or other
entity such as to materially interfere with the execution of the Employee's
duties hereunder and does not otherwise violate any provision of this Agreement.

         5. SALARY. During the term of this Agreement, the Company shall pay to
the Employee a salary for his services (the "Base Salary") at a rate not less
than $400,000 per year, payable in accordance with the regular payroll practices
of the Company. The Base Salary shall be subject to annual review by the Board;
PROVIDED, HOWEVER, that such salary may be increased, but not decreased, in the
sole discretion of the Board.

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         6. BONUS ARRANGEMENTS. In addition to the Base Salary provided for in
Paragraph 5 hereof, the Board, or a duly authorized committee thereof, may
authorize and instruct the Company to pay to the Employee, pursuant to an
incentive compensation plan formally adopted by the Board or a committee thereof
or otherwise, bonus payments ("Discretionary Bonus") dependent upon the
Employee's individual performance and contribution for a given fiscal year, the
Company's financial performance for such fiscal year and/or such other criteria
as the Board, or such designated committee thereof, shall determine. The payment
of any Discretionary Bonus to be made to the Employee shall be in the sole
discretion of the Board, or such designated committee thereof and may be paid in
cash or, if mutually agreeable to the Board (or such designated committee
thereof) and the Employee, in stock, other securities of the Company, or other
assets of the Company and upon such other terms as they may mutually agree.

         7. EXPENSES. It is contemplated that, in connection with his employment
hereunder, the Employee may be required to incur reasonable and necessary
travel, business entertainment and other business expenses. The Company agrees
to reimburse the Employee for all reasonable and necessary travel, business
entertainment and other business expenses incurred or expended by him incident
to the performance of his duties hereunder, upon submission by the Employee to
the Company of vouchers or expense statements (i) satisfactorily evidencing the
incurrence of such expenses and (ii) that would enable the Company to deduct
such expenses from its income under applicable tax laws.

         8. EMPLOYEE BENEFITS, VACATION. (a) The Employee shall be fully vested
and entitled to participate in any and all life insurance,

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medical insurance, disability insurance, pension, incentive and savings and
other employee benefit plans which are made available by the Company during the
Employment Term to executives of the Company of the Employee's rank, to the
extent that the Employee qualifies under the eligibility provisions of such
plans.

                  (b) The Employee shall be entitled to vacations (taken
consecutively or in segments), aggregating four (4) weeks for each fiscal year
of the Company during the Employment Term, to be taken at times consistent with
the effective discharge of the Employee's duties. Unused vacation time shall not
accumulate from year to year and, in the event any such unused vacation time is
remaining at the end of the fiscal year, the Employee shall not be entitled to
be paid for any such remaining time.

         9. AUTOMOBILE. During the Employment Term, the Company will, at the
Company's sole cost and expense (including, without limitation, insurance,
gasoline and upkeep and repairs), provide the Employee with an automobile for
his use in accordance with past practice.

         10. PERMANENT DISABILITY. In the event of the Disability of the
Employee during the Employment Term, the Company shall have the right, following
the sending of a Notice of Termination to the Employee, to terminate his
employment hereunder. Effective on the Date of Termination, the Company shall be
discharged and released from any further obligations under the Agreement
(including, but not limited to, any obligation to pay any bonus in respect of
the fiscal year in which termination occurs, or any fiscal year thereafter),
other than (x) the obligation to continue to make periodic payments to the
Employee of his Base Salary then in effect (reduced by any amounts received by
the Employee pursuant to any temporary disability plan or program

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maintained by the Company and any federal or state disability plan or program)
for the period, if any, from the commencement of the period of Disability
through and, if necessary, after the Date of Termination until the time in
respect of which full payments to the Employee or his representatives are
commenced under the Company's permanent disability plan or program or (y)
pursuant to the next sentence, if applicable. Notwithstanding the foregoing, if
at the time the Employee's employment hereunder is terminated in the event of
Disability the Company does not maintain a permanent disability plan or program
or if the Employee does not participate in a permanent disability plan or
program offered or sponsored by the Company, then the Company shall pay to the
Employee, within 30 days after the Date of Termination, an amount equal to (i)
100% of the annual Base Salary in effect at the time of the Notice of
Termination in accordance with the provisions of Paragraph 5 hereof and (ii) an
amount equal to the highest of the aggregate bonus payments (including
Discretionary Bonus payments pursuant to Paragraph 6 hereof) made to or earned
by the Employee in respect of the last three twelve month periods preceding the
Date of Termination. Notwithstanding the foregoing, the Employee shall have the
continuing obligations provided for in Paragraph 13(b) hereof, but shall be
released from any obligations after the Date of Termination pursuant to
Paragraph 13(a) hereof. Disability benefits, if any, due under applicable plans
and programs of the Company shall be determined under the provisions of such
plans and programs.

         11. DEATH. In the event of the death of the Employee during the
Employment Term, the Base Salary to which the Employee is entitled pursuant to
Paragraph 5 hereof shall continue to be paid through the date of death and the
Company shall pay an additional amount equal to the sum of (i) 100% of the
annual Base Salary in effect at the time of death in accordance with the
provisions

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of Paragraph 5 hereof and (ii) an amount equal to the highest of the aggregate
bonus payments (including Discretionary Bonus payments pursuant to Paragraph 6
hereof) made to or earned by the Employee in respect of the last three twelve
month periods preceding the date of death. Such additional sum shall be paid in
lump sum within 30 days after the date of death to the last beneficiary
designated by the Employee by written notice to the Company, or, failing such
designation, to his estate. The Employee shall have the right to name, from time
to time, any one person as beneficiary hereunder, or with the consent of the
Company to make other forms of designation of beneficiary or beneficiaries. The
Employee's designated beneficiary or personal representative, as the case may
be, shall accept the payments provided for in this Paragraph 11 in full
discharge and release of the Company of and from any further obligations under
this Agreement. Any other benefits due under applicable plans and programs of
the Company shall be determined under the provisions of such plans and programs.

         12. TERMINATION.

                  (a) If the Employee's employment hereunder is terminated by
the Company for Cause or by the Employee other than for Good Reason, the Company
shall pay the Employee his full Base Salary through the Date of Termination and
shall pay any additional amounts to be paid to the Employee pursuant to any
compensation plans or programs then in effect and thereupon the Company shall
have no further obligations under this Agreement (including, but not limited to,
any obligation to pay any bonus in respect of the fiscal year in which
termination occurs, or any fiscal year thereafter), but the Employee shall have
the continuing obligations provided for in Paragraph 13(b) hereof, but shall be
released from any obligations after the Date of Termination

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pursuant to Paragraph 13(a) hereof.

                  (b) If the Employee's employment by the Company shall be
terminated by (x) the Company other than for Cause, his death, or Disability or
(y) the Employee for Good Reason, then the Employee shall be entitled to the
benefits provided below:

                           (i) The Company shall pay the Employee his full Base
      Salary and annual bonus in effect at the time the Notice of Termination is
      given through the Date of Termination, no later than the fifth day
      following the Date of Termination, plus all other amounts to which he is
      entitled under any compensation plan of the Company applicable to him, at
      the time such payments are due. For purposes of this Paragraph 12(b)(i)
      and (ii) and the other provisions of this Agreement, the Employee's
      "annual bonus in effect at the time the Notice of Termination is given"
      shall mean the highest of the aggregate bonus payments (including
      Discretionary Bonus payments pursuant to Paragraph 6 hereof) made to or
      earned by the Employee in respect of the last three twelve month periods
      preceding the date on which the Notice of Termination is given.

                           (ii) The Company shall pay the Employee, on a date
      that is no later than the fifth day following the Date of Termination, as
      severance pay and in consideration of the Employee's continued obligations
      provided for in Paragraph 13(a) and (b) hereof, a payment equal to 3 times
      the sum of (x) his full Base Salary and (y) annual bonus, in each case in
      effect at the time the Notice of Termination is given. The payment to be
      made to the Employee pursuant to this Paragraph 12(b)(ii) shall not be
      reduced by the amount of any other payment or the value of any benefit
      received or to be received by him in

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      connection with his termination of employment (whether payable pursuant to
      the terms of this Agreement or any other agreement, plan or arrangement
      with the Company or an affiliate, predecessor or successor of the
      Company).

                           (iii) In the event that any payment or benefit
      received or to be received by the Employee pursuant to the terms of this
      Agreement (the "Contract Payments") or in connection with his termination
      of employment pursuant to any plan or arrangement or other agreement with
      the Company (or any affiliate) ("Other Payments" and, together with the
      Contract Payments, the "Payments") would be subject to the excise tax (the
      "Excise Tax") imposed by Section 4999 of the Code, as determined below,
      the Company shall pay to the Employee, at the time specified in Paragraph
      12(b)(iv) below, an additional amount (the "Gross-Up Payment") such that
      the net amount retained by the Employee, after deduction of the Excise Tax
      on Contract Payments and Other Payments and any federal, state and local
      income tax and Excise Tax upon the payment provided for by this Paragraph
      12(b) (iii), and any interest, penalties or additions to tax payable by
      him with respect thereto, shall be equal to the total present value of the
      Contract Payments and Other Payments at the time such Payments are to be
      made. For purposes of determining whether any of the Payments will be
      subject to the Excise Tax and the amounts of such Excise Tax, (1) the
      total amount of the Payments shall be treated as "parachute payments"
      within the meaning of Section 280G(b)(2) of the Code, and all "excess
      parachute payments" within the meaning of Section 280G(b)(1) of the Code
      shall be treated as subject to the Excise Tax, except to the extent that,
      in the opinion of independent tax counsel selected by the Company's
      independent auditors and reasonably acceptable to the Employee ("Tax

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      Counsel"), a Payment (in whole or in part) does not constitute a
      "parachute payment" within the meaning of Section 280(b)(2) of the Code,
      or such "excess parachute payments" (in whole or in part) are not subject
      to the Excise Tax, (2) the amount of the Payments that shall be treated as
      subject to the Excise Tax shall be equal to the lesser of (A) the total
      amount of the Payments or (B) the amount of "excess parachute payments"
      within the meaning of Section 280G(b)(1) of the Code (after applying
      clause (1) hereof), and (3) the value of any noncash benefits or any
      deferred payment or benefit shall be determined by Tax Counsel in
      accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
      For purposes of determining the amount of the Gross-Up Payment, the
      Employee shall be deemed to pay federal income tax at the highest marginal
      rates of federal income taxation applicable to individuals in the calendar
      year in which the Gross-Up Payment is to be made and state and local
      income taxes at the highest marginal rates of taxation applicable to
      individuals as are in effect in the state and locality of his residence in
      the calendar year in which the Gross-Up Payment is to be made, net of the
      maximum reduction in federal income taxes that can be obtained from
      deduction of such state and local taxes, taking into account any
      limitations applicable to individuals subject to federal income tax at the
      highest marginal rates.

                           (iv) The Gross-Up Payments provided for in Paragraph
      12(b) (iii) hereof shall be made upon the earlier of (A) the payment to
      the Employee of any Contract Payment or other Payment or (B) the
      imposition upon him or payment by him of any Excise Tax.

                           (v) If it is established pursuant to a final
      determination of a court or an Internal Revenue

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      Service proceeding or the opinion of Tax Counsel that the Excise Tax is
      less than the amount taken into account under Paragraph 12(b)(iii) hereof,
      the Employee shall repay to the Company within five days of his receipt of
      notice of such final determination or opinion the portion of the Gross-Up
      Payment attributable to such reduction (plus the portion of the Gross-Up
      Payment attributable to the Excise Tax and federal, state and local income
      tax imposed on the Gross-Up Payment being repaid by him if such repayment
      results in a reduction in Excise Tax or a federal, state and local income
      tax deduction) plus any interest received by him on the amount of such
      repayment. If it is established pursuant to a final determination of a
      court or an Internal Revenue Service proceeding or the opinion of Tax
      Counsel that the Excise Tax exceeds the amount taken into account
      hereunder (including by reason of any payment the existence or amount of
      which cannot be determined at the time of the Gross-Up Payment), the
      Company shall make an additional Gross-Up Payment in respect of such
      excess within five days of the Company's receipt of notice of such final
      determination or opinion.

                           (vi) On the Date of Termination, the Company shall at
      its sole cost and expense transfer unrestricted ownership and legal title,
      free and clear of any liens or other encumbrances, to the automobile made
      available by the Company for the Employee's use as of the Notice of
      Termination, including, without limitation, payment or reimbursement by
      the Company of any sales or other similar taxes due and owing as a result
      of such transfer.

                           (vii) For the period of time from the Date of
      Termination through the earlier of three years thereafter or the date on
      which the Employee and his dependents become eligible for

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      substantially equivalent coverage provided by a subsequent employer, the
      Company shall provide the Employee and his eligible dependents with
      continued coverage under all health, medical, dental and hospitalization
      plans maintained by the Company or its successor during such time period
      on the same terms and conditions applicable to executive officers of the
      Company.

                           (viii) Upon the Date of Termination all options to
      purchase stock and other rights to purchase or own stock (including grants
      of stock) held by the Employee that are not vested shall immediately vest
      and become exercisable and all options to purchase stock and other rights
      to purchase or own stock (including grants of stock) then held by him
      shall remain in effect and, in the case of rights to purchase stock, be
      exercisable for 18 months after the Date of Termination, notwithstanding
      any other provisions that otherwise would be applicable.

                           (ix) Upon the Date of Termination, the Company shall
      assign and transfer to the Employee, or his designee, all of its right,
      title and interest in and to the life insurance policies covering the
      Employee's life that were held by the Company as of such date for the
      benefit of the Employee. From and after the Date of Termination, the
      Employee shall, at his election, assume and pay any and all premiums and
      other costs associated with the continuation of such policies. The Company
      shall execute and deliver any and all appropriate instruments necessary to
      evidence the foregoing assignment and transfer as promptly as practicable
      after the Date of Termination. For avoidance of doubt, the Company will
      not assign any life insurance policy it owns for its own benefit insuring
      Employee's life or any cash


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      surrender value relating thereto.

                           (x) Upon the Date of Termination, the Company will
      assign to the Employee all of its right, title and interest in and to the
      personal computer of the Company that Employee maintains in his household
      for use for the benefit of the Company.

                           (xi) The Employee shall not be required to mitigate
      the amount of any payment provided for in this Paragraph 12(b) by seeking
      other employment or otherwise, nor, except as otherwise specifically
      provided herein, shall the amount of any payment or benefit provided for
      in the Paragraph 12(b) be reduced by any compensation or benefit earned by
      the Employee as the result of employment by another employer after the
      Date of Termination or otherwise.

                  The Employee shall accept the payments and other benefits
provided for in the Paragraph 12(b) in full discharge and release of the Company
of and from any further obligations under this Agreement but the Employee shall
have the continuing obligations provided for in Paragraphs 13(a) and 13(b)
hereof.

                  (c) In the event that the Company elects to terminate the
Employee's Employment Term hereunder pursuant to the proviso to the first
sentence of Paragraph 3 hereof, the Employee shall be entitled to all of the
payments and benefits provided for in Paragraphs 12(b) (i) - (x) hereof, except
that the payment and consideration provided for in Paragraph 12(b) (ii) hereof
to which the Employee will be entitled will be equal to the sum of (x) his full
Base Salary in effect for the last fiscal year of the Company completed during
the Employment Term and (y) the highest of the aggregate

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bonus payments (including Discretionary Bonus payments pursuant to Paragraph 6
hereof) made to or earned by the Employee in respect of the last three twelve
month periods completed during the Employment Term. All references in Paragraph
12(b) to the date of the "Notice of Termination" or "Date of Termination" shall
for purposes of this Paragraph 12(c) be deemed to be references to the last day
of the Employment Term. The Employee shall accept the payments and other
benefits provided for in this Paragraph 12(c) in full discharge and release of
the Company of and from any further obligations under this Agreement but the
Employee shall have the continuing obligations provided for in Paragraphs 13(a)
and 13(b) hereof.

         13. RESTRICTIVE COVENANTS AND CONFIDENTIALITY: INJUNCTIVE RELIEF.

                  (a) The Employee agrees, as a condition to the performance by
the Company of its obligation hereunder, that during the Employment Term and,
except if the Employee's employment is terminated by the Company for Disability
or for Cause or by the Employee other than for Good Reason, during the further
period of one (1) year after the end of such Employment Term, the Employee shall
not, without the prior written approval of the Company, directly or indirectly
through any other person, firm or corporation, (i) engage or participate or make
any financial investment in or become employed by or render advisory or other
services to or for any person, firm or corporation, or in connection with any
business enterprise, whether for compensation or otherwise, which is in
competition with any of the business operations or activities of the Company and
its subsidiaries then existing in all geographical places where the Company and
its subsidiaries does or did business during the Employment Term, or (ii)
solicit, raid, entice or induce any person who on the Date of Termination of
employment of the Employee is, or within

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the last twelve (12) months of the Employee's employment by the Company was, an
employee of the Company or any of its subsidiaries, to become employed by any
person, firm or corporation, and the Employee shall not approach any such
employee for such purpose or authorize or knowingly approve the taking of such
actions by any other person, or (iii) solicit any person or entity who on the
Date of Termination is a vendor of the Company to terminate its relationship
with the Company. Nothing herein contained, however, shall restrict the Employee
from making any investments in any company, partnership or other entity, so long
as such investment does not require or involve the active participation of the
Employee in the management of any business or enterprise which is in competition
with any of the business operations or activities of the Company.

                  (b) Recognizing that the knowledge, information and
relationship with customers, suppliers, and agents, and the knowledge of the
Company's and its subsidiary companies' business methods, systems, plans and
policies which he shall hereafter establish, receive or obtain as an employee of
the Company or its subsidiary companies, are valuable and unique assets of the
respective businesses of the Company and its subsidiary companies, the Employee
agrees that, during and after the Employment Term he shall not (otherwise than
pursuant to his duties hereunder) disclose, publish, or furnish to any person,
firm or corporation (other than to representatives of the Company and its
affiliates in furtherance of the performance of the Employee's services
hereunder) any confidential or proprietary information, systems, programs, know
how or trade secrets or any other knowledge, information, documents or
materials, the confidentiality of which the Company and its affiliates take
reasonable measures to protect, acquired by the Employee during the term of this
Agreement as a result of the performance of his services

<PAGE>   20
                                      -20-


hereunder.

                  (c) The Employee represents and acknowledges that, in light of
the payments to be made by the Company to the Employee hereunder and for other
good and valid reasons, the restrictions stated in Paragraphs 13(a) and 13(b) on
the activities in which he may engage upon termination of his employment with
the Company are reasonable, the locations designated above are reasonable
because they are limited to the locations in which the Company and its
subsidiaries did business during the Employment Term, and the period of time
designated above is reasonable because it extends only for 12 months following
the termination of his employment with the Company.

                  (d) The Employee acknowledges that the services to be rendered
by him are of a special, unique and extraordinary character and, in connection
with such services, he will have access to confidential information vital to the
Company's and its subsidiary companies' businesses. By reason of this, the
Employee consents and agrees that if he violates any of the provisions of
Paragraphs 13(a) or 13(b) the Company and its subsidiary companies would sustain
irreparable harm and, therefore, in addition to any other remedies which the
Company may have under this Agreement or otherwise, the Company shall be
entitled to apply to any court of competent jurisdiction for an injunction
restraining the Employee from committing or continuing any such violation of
this Agreement, and the Employee shall not object to any such application.

         14. DEDUCTIONS AND WITHHOLDING. The Employee agrees that the Company
shall withhold from any and all payments required to be made to the Employee
pursuant to this Agreement, all federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.

<PAGE>   21
                                      -21-


         15. ATTORNEYS' FEES. The Company shall pay to the Employee all legal
fees and expenses reasonably incurred by him in connection with this Agreement
(including all such fees and expenses, if any, incurred in contesting or
disputing in good faith the nature of any such termination for purposes of this
Agreement or in seeking to obtain or enforce any right or benefit provided by
this Agreement).

         16. NOTICES. All notices or other documents to be given hereunder by
either party hereto to the other shall be in writing and delivered personally or
sent postage prepaid by registered or certified mail, return receipt requested.
Notices shall be deemed to have been received on the date of delivery, or if
sent by certified or registered mail, return receipt requested, shall be deemed
to be delivered on the third business day after the date of mailing. The postal
receipt specifying a mailing date shall be sufficient proof of the date of
notice. Notices shall be sent to the following addresses until a notice of
change of address by like notice has been duly provided:

To the Employee:           Robert B. Stein, Jr.
---------------            90 Grey Fox Run
                           Bentleyville, OH  44022


To the Company:            Dairy Mart Convenience Stores, Inc.
--------------             300 Executive Parkway West
                           Hudson, OH  44236
                           Attn:   Gregory G. Landry

         17. ASSIGNABILITY, BINDING EFFECT AND SURVIVAL. This Agreement shall
inure to the benefit of and shall be binding upon the heirs, executors,
administrators, successors and legal representatives of the Employee, and shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. Notwithstanding the foregoing, the obligations of the Employee may not
be delegated and, except as expressly provided in Paragraph 11 hereof relating
to the designation

<PAGE>   22
                                      -22-



of beneficiaries, the employee may not assign, pledge, encumber, hypothecate or
otherwise dispose of this Agreement, or any of his rights hereunder, and any
such attempted delegation or disposition shall be null and void and without
effect. The provisions of Paragraphs 10, 11, 12, 13 and 15 hereof shall survive
termination of this Agreement. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, within 10 days
of becoming successor, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company is required to
perform it if no such succession had taken place.

         18. COMPLETE UNDERSTANDING; AMENDMENT. This Agreement constitutes the
complete understanding between the parties with respect to the employment of the
Employee hereunder, and no statement, representation, warranty or covenant has
been made by either party with respect thereto except as expressly set forth
herein and this Agreement supersedes all prior oral and written agreements with
respect to the subject matter hereof. This Agreement shall not be altered,
modified, amended or terminated except by written instrument signed by each of
the parties hereto. Waiver by either party hereto of any breach hereunder by the
other party shall not operate as a waiver of any other breach, whether similar
to or different from the breach waived.

         19. GOVERNING LAW. This Agreement shall be governed by the laws of the
state of Ohio without reference to the conflicts of laws principles thereof.

         20. PARAGRAPH HEADINGS. The paragraph headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.

<PAGE>   23
                                      -23-


         21. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable, the remainder
of this Agreement shall not be affected thereby, and each remaining provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.

<PAGE>   24
                                      -24-

                  IN WITNESS WHEREOF, the parties hereto set their hands as of
the day and year first above written.



                                       DAIRY MART CONVENIENCE STORES, INC.


                                       By: /s/ GREGORY G. LANDRY
                                               -----------------------------
                                               Gregory G. Landry, Executive Vice
                                               President


                                       And By: /s/ JOHN W. EVERETS
                                                   -------------------------
                                                   John W. Everets, Chairman of
                                                   the Compensation Committee


Agreed to as of this 16th day
of December, 1999


/s/ ROBERT B. STEIN, JR.
    --------------------
    Robert B. Stein, Jr.