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                                                                   Exhibit 10.25

                              EMPLOYMENT AGREEMENT
                              --------------------

         This Agreement is effective January 18, 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 WAYNE COLLEY,
with his residence located at 5000 Burnt Store Road, Punta Gorda, Florida 33955
(the "Employee").
                                   WITNESSETH:
                                   -----------

         WHEREAS, the Company desires to secure the services of the Employee in
the capacities set forth herein, and the Employee has agreed 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

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omitted to be 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 cannot agree shall be determined by a qualified
independent physician selected by the

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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 of 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 Executive Vice President and Chief Operating
Officer 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:

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

         (iv) 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

         (v) notwithstanding the foregoing, the occurrence of a "Change of
Control" and

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the further occurrence of any event listed in items (i) through (iii) below
within two years following a Change of Control.

         (i) the assignment to the Employee of any duties or responsibilities
inconsistent with his status as Executive Vice President and Chief Operating
Officer 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:

         (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) a change in the executive officer to whom the Employee reports on
the date hereof 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;

         "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

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"Incumbent Board") cease for any reason to constitute at least a majority of the
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

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in the election of directors of the Company; or,

         (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 18, 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 18, 2000 and ending 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:

         (i) Serve as Executive Vice President and Chief Operating Officer of
the

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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 or 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 $250,000 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

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and all life insurance, medical insurance, disability insurance, pension,
incentive and savings and other employee benefit plans which are 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. The Employee shall be entitled to, at the Employee's
option, either (i) a monthly automobile allowance of $500 (as may be adjusted,
from time to time in accordance with the Company's Fleet and Stipend Policies),
or (ii) a "Director/Vice President level" automobile in accordance with the
Company's Fleet and Stipend Policies.

         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

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disability plan or program 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 of 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

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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 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

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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.

         (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 100% of 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

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other payment or the value of any benefit received or to be received by him in
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 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

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and reasonably acceptable to the Employee ("Tax 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 which 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 of (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

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an Internal Revenue Service proceeding or the opinion of the Tax Counsel that
the Excise Tax is less than the amount taken in to 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) 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 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.

                  (vii) Upon the Date of Termination all options to purchase
stock and

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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.

                  (viii) 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 surrender value relating thereto.

                  (ix) 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.

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         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 in 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) - (viii) 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 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

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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 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

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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 propriety 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 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

<PAGE>   20

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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.

         15. ATTORNEY'S 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

<PAGE>   21

21


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:   Mr. Wayne Colley
---------------    5000 Burnt Store Rd.
                   Punta Gorda, Florida 33955

To the Company:    Dairy Mart Convenience Stores, Inc.
---------------    300 Executive Parkway West
                   Hudson, Ohio  44236
                   Attn:  Robert B. Stein, Jr.

         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 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

<PAGE>   22

22


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 breech 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.

         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.

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

<PAGE>   23

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                                      DAIRY MART CONVENIENCE STORES, INC.


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


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


Agreed to as of this18th day of
January, 2000


/s/ WAYNE COLLEY
    ------------
    Wayne Colley