<PAGE>   1
                                                                        12/29/97

                                                                   Exhibit 10.26





                       DAIRY MART CONVENIENCE STORES, INC.
                       -----------------------------------

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                     --------------------------------------

                             Effective March 1, 1998



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                       DAIRY MART CONVENIENCE STORES, INC.
                       -----------------------------------

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                     --------------------------------------

                                TABLE OF CONTENTS
                                -----------------

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<S>                                                                                                     <C>
ARTICLE I - ESTABLISHMENT OF PLAN................................................................................1

         1.1      Name of Plan...................................................................................1

         1.2      Effective Date.................................................................................1

         1.3      Purpose........................................................................................1

         1.4      Restricted Coverage............................................................................1

         1.5      Plan Unfunded..................................................................................1

ARTICLE II - DEFINITIONS.........................................................................................1

         2.1      Accrued Benefit................................................................................2

         2.2      Actuarial Equivalent...........................................................................2

         2.3      Actuary........................................................................................2

         2.4      Average Final Compensation.....................................................................2

         2.5      Beneficiary....................................................................................2

         2.6      Benefit Commencement Date......................................................................2

         2.7      Board..........................................................................................2

         2.8      Change in Control..............................................................................3

         2.9      Code...........................................................................................6

         2.10     Company........................................................................................6

         2.11     Compensation...................................................................................7

         2.12     Compensation Committee.........................................................................7

         2.13     Disability.....................................................................................7

         2.14     Early Retirement Date..........................................................................7

         2.15     Effective Date.................................................................................7

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      <S>                                                                                                     <C>
         2.16     Employing Company..............................................................................7

         2.17     Entry Date.....................................................................................8

         2.18     ERISA..........................................................................................8

         2.19     Executive Employee.............................................................................8

         2.20     Good Cause.....................................................................................8

         2.21     Gross-Up Payment...............................................................................8

         2.22     Net Worth Condition............................................................................9

         2.23     Normal Retirement Date.........................................................................9

         2.24     Other Retirement Benefits......................................................................9

         2.25     Participant...................................................................................11

         2.26     Plan..........................................................................................11

         2.27     Plan Administrator............................................................................11

         2.28     Plan Year.....................................................................................11

         2.29     Separation from Service.......................................................................11

         2.30     Service.......................................................................................11

         2.31     Target Retirement Benefit.....................................................................12

         2.32     Trust.........................................................................................12

         2.33     Vested Benefit................................................................................12

         2.34     Vesting Percentage............................................................................12

         2.35     Year of Benefit Service.......................................................................12

ARTICLE III - PARTICIPATION.....................................................................................12

         3.1      Eligibility Requirements......................................................................12

         3.2      Entry and Re-entry Into the Plan..............................................................13

ARTICLE IV - RETIREMENT BENEFITS................................................................................13

         4.1      Amount, Timing and Form of Benefits...........................................................13

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<TABLE>
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<S>                                                                                                          <C>
         4.2      Gross-Up Payments.............................................................................13

                  (a)      Calculation..........................................................................13

                  (b)      Payment..............................................................................15

                  (c)      Adjustment...........................................................................15

ARTICLE V - VESTING AND FORFEITURES.............................................................................16

         5.1      Vesting Percentage............................................................................16

         5.2      Vested Benefit................................................................................16

         5.3      Forfeitures...................................................................................16

         5.4      Amendment of Vesting Provisions...............................................................16

ARTICLE VI - ACCRUED BENEFITS...................................................................................17

         6.1      Determination of Accrued Benefit..............................................................17

         6.2      Adjustment for Early or Postponed Retirement..................................................17

ARTICLE VII - BENEFIT COMMENCEMENT DATE.........................................................................18

         7.1      Eligibility for Payment.......................................................................18

         7.2      Benefit Commencement Date.....................................................................18

                  (a)      Time of Commencement.................................................................18

                  (b)      Benefit Commencement Election........................................................18

         7.3      Hardship Withdrawals..........................................................................19

                  (a)      Definition...........................................................................19

                  (b)      Procedure............................................................................19

ARTICLE VIII - BENEFIT FORMS AVAILABLE..........................................................................20

         8.1      Forms of Benefit for Participants.............................................................20

                  (a)      Normal Form of Benefits..............................................................20

                  (b)      Installment Benefit Election.........................................................20

         8.2      Forms of Benefit for Surviving Spouse Beneficiaries...........................................21

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<S>                                                                                                         <C>
                  (a)      Normal Form of Benefit...............................................................21

                  (b)      Installment Benefit Election.........................................................21

         8.3      Form of Benefit for Other Beneficiaries.......................................................22

ARTICLE IX - BENEFICIARIES......................................................................................22

         9.1      Designation...................................................................................22

         9.2      Failure to Designate a Beneficiary............................................................22

ARTICLE X - PLAN ADMINISTRATION.................................................................................23

         10.1     Administrative Committee......................................................................23

         10.2     Indemnification...............................................................................23

         10.3     Ownership of Assets...........................................................................24

         10.4     Expenses......................................................................................24

ARTICLE XI - TRUST AGREEMENT; LIQUIDITY FUND....................................................................25

         11.1     Trust Fund....................................................................................25

         11.2     Liquidity Fund................................................................................25

ARTICLE XII - AMENDMENT OF THE PLAN.............................................................................25

         12.1     Amendment.....................................................................................25

         12.2     Effect of Amendments on Vesting...............................................................26

ARTICLE XIII - TERMINATION OF THE PLAN..........................................................................26

         13.1     Termination...................................................................................26

         13.2     Benefits After Plan Termination...............................................................26

ARTICLE XIV - MISCELLANEOUS.....................................................................................27

         14.1     Limitations of Rights; Employment Relationship................................................27

         14.2     Determination of Benefits, Claims, Procedure and Administration...............................27

                  (a)      Claim................................................................................27

                  (b)      Decision on Claim....................................................................27

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<S>                                                                                                          <C>

                  (c)      Request for Review...................................................................28

                  (d)      REVIEW OF DECISIONS..................................................................28

         14.3     Arbitration...................................................................................29

         14.4     Non-Assignability of Benefits.................................................................29

         14.5     Facility of Payments..........................................................................29

         14.6     Obligations to Withhold and Pay Taxes.........................................................30

         14.7     Representations...............................................................................30

         14.8     Severability..................................................................................30

         14.9     Applicable Law................................................................................31

</TABLE>


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                       DAIRY MART CONVENIENCE STORES, INC.
                       -----------------------------------

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                     --------------------------------------


                        ARTICLE I - ESTABLISHMENT OF PLAN
                        ---------------------------------

         1.1 NAME OF PLAN. The Plan shall be known as the Dairy Mart Convenience
Stores, Inc. Supplemental Executive Retirement Plan.

         1.2 EFFECTIVE DATE. The Effective Date of the Plan is March 1, 1998.

         1.3 PURPOSE. The Company intends this Plan to provide certain
retirement income benefits (as defined herein) to certain Executive Employees
(as identified from time to time on Schedule 3.1 to the Plan) of the Employing
Companies. Such benefits are intended to supplement the retirement income
benefits provided to a Participant by his or her Employing Company through its
other broad-based retirement programs and Social Security benefit taxes.

         1.4 RESTRICTED COVERAGE. Participation in this Plan shall be limited to
Executive Employees, so that for purposes of Title I of ERISA the Plan will at
all times cover only employees who make up a select group of management or
highly compensated employees whose positions with an Employing Company allow
them to have a significant effect on the Employing Company's results of
operations by the performance of services of major importance in the management,
operation and development of the Employing Company's business.

         1.5 PLAN UNFUNDED. This Plan is intended to be unfunded for purposes of
(i) Title I of ERISA and (ii) taxation of vested, accrued benefits pursuant to
the Code.

                            ARTICLE II - DEFINITIONS
                            ------------------------

         The following terms shall have the meanings specified below unless the
context otherwise requires:
<PAGE>   8

         2.1 ACCRUED BENEFIT. The portion of a Participant's Target Retirement
Benefit that has accrued as of any date pursuant to Section 6.1.

         2.2 ACTUARIAL EQUIVALENT. The lump sum equivalent value of an immediate
life annuity benefit or the immediate life annuity equivalence of a lump sum
benefit, determined in each case by applying the following assumptions:

             (a) Interest, pre- and post-retirement, equal to seven percent
compounded annually.

             (b) Mortality, pre-and post-retirement, as determined under a 50/50
blend of the male and female mortality rates from the 1983 Group Annuity
Mortality Table as published in IRS Revenue Ruling 95-6.

         2.3 ACTUARY. The actuarial consultant designated by the Company from
time to time to make all actuarial computations required in connection with the
Plan.

         2.4 AVERAGE FINAL COMPENSATION. The average of a Participant's
Compensation for the three calendar years in which the Participant's greatest
Compensation is received during his final five Plan Years of Service, provided
that the Participant's Compensation during his final Plan Year of Service shall
be deemed to equal (a) the Participant's annual base salary at the time of his
Separation from Service plus (b) any bonus received during that Plan Year.

         2.5 BENEFICIARY. The individual(s), trust(s), or estate entitled to
receive benefits under this Plan after the death of a Participant or another
Beneficiary.

         2.6 BENEFIT COMMENCEMENT DATE. The date as of which benefits hereunder
first become payable, in accordance with the provisions of Article VII, to or in
respect of a Participant.

         2.7 BOARD. The Board of Directors of the Company.

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         2.8 CHANGE IN CONTROL. A change in control of the Company will occur
upon:

             (a) The acquisition by any individual, entity or group (within the 
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20 percent or more of
either (i) the then outstanding shares of the Company's common stock (the
"Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of the
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions described in clauses (i), (ii), and (iii) of paragraph
(c) of this definition are satisfied; or 

             (b) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") ceasing for any reason to constitute at least two-thirds
of the Board over any period of 24 consecutive months or less; provided,
however, that any individual becoming a director subsequent to the Effective
Date whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote or resolution of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election 

                                      -3-

<PAGE>   10

contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.

             (c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60 percent of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Common Stock and Outstanding
Company Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Common Stock and/or Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such corporation or
other business entity resulting from such consolidation or merger and any Person
beneficially owning, immediately prior to such consolidation or merger, directly
or indirectly, 35 percent or more of the Common Stock and/or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 35 percent or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such consolidation or merger or
the combined voting power of the then outstanding voting securities of such
corporation or business entity entitled to vote generally in the election of its

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<PAGE>   11

directors (or other persons having the general power to direct the affairs of
such entity) and (iii) at least two-thirds of the members of the board of
directors (or other group of persons having the general power to direct the
affairs of the corporation or other business entity) resulting from such
consolidation or merger were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such consolidation or merger;
provided that any right which shall vest by reason of the action of the Board
pursuant to this paragraph (c) shall be divested, with respect to any such right
not already exercised, upon (A) the rejection of such agreement of consolidation
or merger by the stockholders of the Company or (B) its abandonment by either
party thereto in accordance with its terms; or

             (d) Adoption by the requisite majority of the whole Board, or by
the holders of such majority of stock of the Company as is required by law or by
the Certificate of Incorporation or By-Laws of the Company as then in effect, of
a resolution or consent authorizing (i) the dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following such sale or other disposition, (A) more than 60 percent of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the affairs of
such entity) is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in substantially
the same proportions as their ownership, immediately prior to such sale or other
disposition, of the Common Stock and/or Outstanding Company 

                                      -5-
<PAGE>   12


Voting securities, as the case may be, (B) no Person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such corporation
or other business, entity and any Person beneficially owning, immediately prior
to such sale or other disposition, directly or indirectly, 35 percent or more of
the Common Stock and/or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 35 percent or more of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the then outstanding voting securities of
such corporation or other business entity entitled to vote generally in the
election of directors (or other persons having the general power to direct the
affairs of such entity) and (C) at least two-thirds of the members of the board
of directors (or other group of persons having the general power to direct the
affairs of such corporation or other entity) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the Company; provided
that any right which shall vest by reason of the action of the Board or the
stockholders pursuant to this paragraph (d) shall be divested, with respect to
any such right not already exercised, upon the abandonment by the Company of
such dissolution, or such sale or other disposition of assets, as the case may
be.

         A Change in Control shall not occur upon the mere reincorporation of
the Company in another state.

         2.9 CODE. The Internal Revenue Code of 1986, as amended, and including
all regulations thereunder.
         
         2.10 COMPANY. Dairy Mart Convenience Stores, Inc. and, in the event of
a Change in Control, each successor to and assign of Dairy Mart Convenience
Stores, Inc.

                                      -6-
<PAGE>   13

         2.11 COMPENSATION. The total salary plus bonuses and similar types of
remuneration earned by a Participant for personal services rendered to an
Employing Company for any Plan Year, regardless of when such remuneration is
actually paid (or would be paid if not deferred pursuant to any deferred
compensation plan). Compensation shall include (a) amounts deferred under any
deferred compensation plan and (b) amounts contributed from the Participant's
remuneration under any plan maintained by an Employing Company pursuant to Code
Sections 125 or 401(k). Compensation shall not include (a) employer
contributions to any employee benefit plan (including without limitation this
Plan) and all benefits provided under any such plan and (b) the value of or any
income from any types of equity-based compensation programs (including without
limitation stock options, stock appreciation rights and restricted stock).

         2.12 COMPENSATION COMMITTEE. The compensation committee of the Board.

         2.13 DISABILITY. A Participant's inability, on account of a physical or
mental impairment or condition, substantially to perform the material duties of
his position as an Executive Employee despite reasonable accommodations made or
proposed by his Employing Company; provided that such inability and impairment
or condition (a) are established to the satisfaction of the Board and (b) have
been (or are expected by the Board to be) of long or indefinite duration.

         2.14 EARLY RETIREMENT DATE. The first of any month (a) following the
later of (i) a Participant's 55th birthday and (ii) the completion of his sixth
Year of Benefit Service and (b) prior to his Normal Retirement Date.

         2.15 EFFECTIVE DATE. The date specified as such in Section 1.2 above.

         2.16 EMPLOYING COMPANY. The Company and any present or future direct or
indirect subsidiary of the Company, provided that (a) any executive officer of
the Company approves the 

                                      -7-
<PAGE>   14

subsidiary's participation and (b) the board of directors of such subsidiary
accepts this Plan. For this purpose, the term "subsidiary" shall include (a) any
corporation if more than 50% of its capital stock is owned by the Company
(either directly or through any one or more such subsidiaries) and (b) any other
corporation designated as such by the Board.

         2.17 ENTRY DATE. The date that an Executive Employee becomes a
Participant in the Plan as provided in Article III.

         2.18 ERISA. Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as amended, and including all regulations thereunder.

         2.19 EXECUTIVE EMPLOYEE. An Employee who has been designated by his
Employing Company as an officer with senior management responsibilities.

         2.20 GOOD CAUSE. A Participant's (a) willful and continuing failure
substantially to perform duties assigned in good faith from time to time by his
Employing Company (provided that such failure is not solely the result of (i) a
Disability or (ii) a leave of absence either granted in writing by his Employing
Company or guaranteed by applicable law or (iii) some other reason agreed to in
advance by the Board); or (b) willful conduct which is demonstrably and
materially injurious to any Employing Company; or (c) conviction of a felony or
a misdemeanor involving the theft, misappropriation or embezzlement of property
of any Employing Company.

         For purposes of this definition, the term Board shall include the board
of directors (or body with a similar function) of the Company's successor
following a Change in Control.

         2.21 GROSS-UP PAYMENT. A payment made to or on behalf of a Participant
pursuant to Section 4.2 of this Plan.

                                      -8-
<PAGE>   15

         2.22 NET WORTH CONDITION. A decrease in the Company's net worth (as
determined by the Company's independent accountants in accordance with the
methodology used in preparation of the Company's financial statements) below $1
million as of the end of any fiscal quarter.

         2.23 NORMAL RETIREMENT DATE. The first day of the next month following
a Participant's 65th birthday.

         2.24 OTHER RETIREMENT BENEFITS. The Actuarial Equivalent of the sum of
the following amounts paid or payable to or on behalf of a Participant upon or
after his or her Separation from Service: (a) one-half of the Social Security
retirement, survivorship and disability benefits available to or on behalf of
the Participant as of the later of his or her Normal Retirement Date or
Separation from Service (or as projected to be available on the Participant's
Normal Retirement Date if payment under this Plan is made or commences before
the Participant's Normal Retirement Date), as payable pursuant to Title II of
the Social Security Act, as amended, or successor legislation, PLUS (b) the lump
sum benefits available to or on behalf of the Participant as of the first day of
the next month following his or her Separation from Service: (i) under each of
the benefit plans specified below (regardless of whether such plans were adopted
before, on or after the Effective Date of this Plan), (ii) attributable to
Employing Company contributions, and (iii) calculated as specified for each such
benefit plan:

              -  DAIRY MART CONVENIENCE STORES, INC. 401(K) PLAN (and any
                 successor thereto) ("401(k) plan")--the benefit attributable to
                 Employing Company contributions only (including without
                 limitation employer matching contributions), as determined by
                 aggregating all such contributions which could have been
                 obtained by the Participant pursuant to the terms of the 401(k)
                 Plan and applicable law (including without limitation
                 operational 

                                      -9-
<PAGE>   16

                 contribution limits resulting from application of the rules of
                 Code Sections 401(k), 401(m) and 415) regardless of the amount
                 of such contributions actually made, AND ADDING deemed interest
                 at a rate of seven percent compounded annually (but prorated
                 for partial years) over the periods of time between the date of
                 each contribution and the date of the determination of the
                 Participant's Other Retirement Benefits, and without reduction
                 for any hardship withdrawal or other benefit distribution taken
                 by the Participant under the 401(k) plan.

              -  DAILY MART CONVENIENCE STORES, INC. EMPLOYEE STOCK OWNERSHIP
                 PLAN (and any successor thereto) ("ESOP")--the benefit
                 determined by MULTIPLYING all shares of Company stock allocated
                 to the Participant's ESOP account through the date of the
                 determination of his or her Other Retirement Benefits TIMES the
                 share value of such stock on the date of the Participant's
                 initial participation in the ESOP (but adjusted for any stock
                 dividends, stock splits, stock combinations or other
                 recapitalization after such date) AND ADDING deemed interest on
                 such product at a rate of seven percent compounded annually
                 (but prorated for partial years) over the period of time
                 between the date of the Participant's initial participation in
                 the ESOP and the date of the determination of the Participant's
                 Other Retirement Benefits, and without reduction for any
                 benefit distribution taken by the Participant under the ESOP.

              -  DAIRY MART CONVENIENCE STORES, INC. SUPPLEMENTAL EMPLOYEE STOCK
                 OWNERSHIP PLAN AND TRUST (and any successor thereto)
                 ("SESOP")--the 

                                      -10-
<PAGE>   17

                 Participant's SESOP benefit, as determined pursuant to the
                 principles specified above for the ESOP.

              -  OTHER PLANS--the benefits determined pursuant to the principles
                 specified above for the 401(k) plan that are attributable to
                 Employing Company contributions or allocations on the
                 Participant's behalf to or under any other deferred
                 compensation or retirement-type plan, whether or not such plan
                 is tax qualified pursuant to the Code or is deemed to be a
                 "pension plan" pursuant to ERISA.

         2.25 PARTICIPANT. Any Executive Employee who is covered by this Plan in
accordance with the provisions of Article III.

         2.26 PLAN. The Dairy Mart Convenience Stores, Inc. Supplemental
Executive Retirement Plan, as stated herein and as amended or supplemented from
time to time.

         2.27 PLAN ADMINISTRATOR. The committee appointed to administer the plan
pursuant to Section 10.1 of this Plan.

         2.28 PLAN YEAR. The fiscal year, ending on the last day of each
February following the Effective Date while this Plan remains in effect,
provided that for purposes of the definitions of Average Final Compensation and
Year of Benefit Service, "Plan Year" shall include all such periods before or
after the Effective Date of the Plan.

         2.29 SEPARATION FROM SERVICE. The termination of a Participant's
Service for any reason, including the death of the Participant.

         2.30 SERVICE. A Participant's period of employment with an Employing
Company and (for periods prior to the Effective Date only) any period of service
by such Participant as a member of the Board.

                                      -11-
<PAGE>   18

         2.31 TARGET RETIREMENT BENEFIT. The Actuarial Equivalent of a
retirement benefit payable on a Participant's Normal Retirement Date and
continuing for the Participant's life in an amount equal to the excess, if any,
of (a) fifty percent (50%) of the Participant's Average Final Compensation over
(b) his or her Other Retirement Benefits.

         2.32 TRUST. The trust created under the Dairy Mart Convenience Stores,
Inc. Supplemental Executive Retirement Plan Trust Agreement in the event of a
Change in Control.

         2.33 VESTED BENEFIT. The portion of a Participant's Accrued Benefit
calculated in accordance with Section 5.2 of this Plan.

         2.34 VESTING PERCENTAGE. The percentage determined in accordance with
Section 5.1 of this Plan.

         2.35 YEAR OF BENEFIT SERVICE. Except as otherwise specified in Schedule
3.1 to the Plan, a Participant shall be credited with one Year of Benefit
Service for each Plan Year during which the Participant has any Service.
Notwithstanding the foregoing, no Participant shall receive credit for more than
three Years of Benefit Service on account of any Service prior to the Effective
Date of the Plan.

                           ARTICLE III - PARTICIPATION
                           ---------------------------

         3.1 ELIGIBILITY REQUIREMENTS. Only Executive Employees shall be
eligible to become and remain Participants of the Plan. An Executive Employee
shall become a Participant only upon designation as a Participant on Schedule
3.1 to the Plan by the Board after recommendation by the Compensation Committee
of the Board. A Participant shall continue as a Participant for the purpose of
accruing additional benefits under the Plan only so long as he remains in
Service as an Executive Employee.

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<PAGE>   19

         3.2 ENTRY AND RE-ENTRY INTO THE PLAN. An Executive Employee shall
become a Participant on the effective date of his designation as a Participant
on Schedule 3.1. If a Participant's Service is subsequently broken and he is
later reemployed as an Executive Employee, he shall resume his participation in
the Plan only if he is again designated as a Participant by the Board on an
amended Schedule 3.1 and only on the effective date of such new designation.

                        ARTICLE IV - RETIREMENT BENEFITS
                        --------------------------------

         4.1 AMOUNT, TIMING AND FORM OF BENEFITS. A Participant who has a
Separation from Service after his or her Entry Date shall be entitled to receive
the Actuarial Equivalent of his or her Vested Benefit, as determined in
accordance with Articles V and VI, commencing on the Participant's Benefit
Commencement Date as determined in Article VII, and payable in the form provided
in Article VIII.

         4.2 GROSS-UP PAYMENTS.

         (a) CALCULATION. In the event that any payment or benefit received or
to be received by or on behalf of a Participant pursuant to the terms of this
Plan (the "Plan Payments") or to be received by or on behalf of the Participant
in connection with his or her Separation from Service pursuant to any plan or
arrangement or other agreement with the Company (or any affiliate that would be
an Employing Company upon adoption of this Plan) (".Other Payments" and,
together with the Plan Payments, the "Payments") would be subject to the excise
tax (the "Excise tax") imposed by Code Section 4999, as determined below, the
Company shall pay to or on behalf of the Participant at the time specified in
paragraph (b) of this Section 4.2, an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Participant or other recipient

                                      -13-
<PAGE>   20

(the "Payee"), after deduction of the Excise Tax on all Payments and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this paragraph (a), and any interest, penalties or additions to tax payable
by him or her with respect thereto, shall be equal to the total present value
(determined at a discount rate of seven percent compounded annually) of all of
the 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, (i)(I) the total amount of the Payments shall be
treated as "parachute payments" within the meaning of Code Section 280G(b)(2),
and (II) all "excess parachute payments" within the meaning of Code Section
280G(b)(1) 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 Payee ("Tax Counsel"), a
Payment (in whole or in part) does not constitute a "parachute payment" within
the meaning of Code Section 280(b)(2), or such "excess parachute payments" (in
whole or in part) are not subject to the Excise Tax, (ii) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal to
the lesser of (I) the total amount of the Payments or (II) the amount of "excess
parachute payments" within the meaning of Code Section 280(b)(1) (after applying
clause (i) hereof), and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of Code Sections 280G(d)(3) and (4). For purposes of determining the
amount of the Gross-Up Payment, the Payee 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 

                                      -14-

<PAGE>   21

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 or
her 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.

         (b) PAYMENT. The Gross-Up Payments provided for in paragraph (a) of
this Section 4.2 shall be made upon the earlier of (i) the payment to the Payee
of any Payment or (ii) the imposition upon him or her or payment by him or her
of any Excise Tax.

         (c) ADJUSTMENT. 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 is less than the amount taken into account under
paragraph (a) of this Section 4.2, the Payee shall repay to the Company within
five days of his or her 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
or her 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 or her
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
under paragraph (a) of this Section 4.2 (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.

                                      -15-
<PAGE>   22


                       ARTICLE V - VESTING AND FORFEITURES
                       -----------------------------------

         5.1 VESTING PERCENTAGE. A Participant's Vesting Percentage as of any
date shall be the greater of (a) one hundred percent (100%) if such date is on
or after the date on which any of the following events occurs: (i) a Change in
Control unless such Change in Control was approved by a resolution adopted by at
least two-thirds of the members of the Incumbent Board (as defined in Section
2.8), or (ii) the Participant's Separation from Service either involuntarily
without Good Cause or on account of death or Disability and (b) otherwise the
percentage specified in the following table for the number of Years of Benefit
Service credited to the Participant as of such date:


<TABLE>
<CAPTION>
                     Years of
                     --------
                  Benefit Service                Vesting Percentage
                  ---------------                ------------------

                <S>                                <C>
                   Five or Fewer                         0%

                   Six or More                         100%
</TABLE>

         5.2 VESTED BENEFIT. A Participant's Vested Benefit under this Plan
shall be the product of his Accrued Benefit multiplied by his Vesting
Percentage.

         5.3 FORFEITURES. Any portion of a Participant's Accrued Benefit that is
not included in his or her Vested Benefit at the time of his or her Separation
from Service shall be immediately forfeited. Any amounts forfeited by a
Participant shall remain the sole and exclusive property of the Participant's
Employing Company and shall not increase the benefits of any other Participant.

         5.4 AMENDMENT OF VESTING PROVISIONS. No amendment made to the Plan
shall reduce a Participant's Vested Benefit under the Plan. However, an
amendment may increase the Service required and impose or change any other
requirements or conditions that a Participant must meet 

                                      -16-
<PAGE>   23

in order to become vested or further vested in any Accrued Benefit to the extent
not already vested as of the date that the amendment is adopted.

                          ARTICLE VI - ACCRUED BENEFITS
                          -----------------------------

         6.1 DETERMINATION OF ACCRUED BENEFIT. A Participant's Accrued Benefit
as of any date shall be the greater of (a) one hundred percent (100%) of his
Target Retirement Benefit if such date is on or after the date on which either
of the following events occurs: (i) a Change in Control, unless such Change in
Control was approved by a resolution adopted by at least two-thirds of the
members of the Incumbent Board (as defined in Section 2.8), or (ii) the
Participant's involuntary Separation from Service without Good Cause and (b)
otherwise, the percentage of his Target Retirement Benefit determined by
multiplying one hundred percent (100%) times the fraction (not greater than one)
equal to the number of the Participant's credited Years of Benefit Service as of
the determination date divided by the total number of credited Years of Benefit
Service that the Participant would have at his Normal Retirement Date if he
remained in Service until such date.

         6.2 ADJUSTMENT FOR EARLY OR POSTPONED RETIREMENT. Any benefit that is
paid or begun prior to a Participant's Normal Retirement Date or on account of
the Participant's death or is postponed beyond the Participant's Normal
Retirement Date shall equal the Actuarial Equivalent of the amount that would
have been payable if the same benefit were paid on his or her Normal Retirement
Date.

                                      -17-
<PAGE>   24

                    ARTICLE VII - BENEFIT COMMENCEMENT DATE
                    ---------------------------------------

         7.1 ELIGIBILITY FOR PAYMENT. A Participant's benefits shall be paid
from the Plan only after both of the following conditions are met: (a) the
occurrence of the Participant's Separation from Service and (b) the first to
occur of (i) the Participant's attainment of his Early Retirement Date, (ii) the
Participant's death or Disability, (iii) a Change in Control, or (iv) the Net
Worth Condition.

         7.2 BENEFIT COMMENCEMENT DATE.

         (a) TIME OF COMMENCEMENT. Unless a Participant or Beneficiary (as the
case may be) has made a timely election to defer payment with the approval of
the Administrative Committee pursuant to paragraph (b) of this Section 7.2, the
Participant's Vested Benefit under this Plan shall be paid or begin 60 days
after the date on which the conditions of Section 7.1 are first met.
Notwithstanding the foregoing, at any time after a Participant's Separation from
Service and prior to the earlier of (i) payment or commencement of the
Participant's Benefit. pursuant to this Section 7.2 and (ii) the date on which a
Change in Control occurs, the Company may elect unilaterally to defer payment or
commencement of all or any portion of the Participant's Benefit until the next
January following the Participant's Separation from Service if the Participant
was a "covered employee" within the meaning of Code Section 162(m) at the time
of his or her Separation from Service. Any such election by the Company may be
made by either the Board, the Compensation Committee, the Administrative
Committee or the Company's chief executive officer, and shall be evidenced in
writing and sent to the Participant (at his or her last known address).

         (b) BENEFIT COMMENCEMENT ELECTION. Subject to the Administrative
Committee's approval, a Participant or Beneficiary may make a one-time
irrevocable election to defer 

                                      -18-
<PAGE>   25

payment of benefits to a postponed Benefit Commencement Date on any determinable
date beyond the Participant's initial Benefit Commencement Date determined
pursuant to paragraph (a) of this Section 7.2, provided that such election is
made on the form prescribed by the Administrative Committee and is received by
the Administrative Committee not later than 30 days before such initial Benefit
Commencement Date. The Administrative Committee shall have absolute discretion
to approve, disapprove or modify before approving any such election to defer
benefits. Notwithstanding the foregoing, the Participant's benefits shall be
paid immediately in one lump sum if the Net Worth Condition ever occurs and the
Participant fails to confirm his election, subject to the Administrative
Committee's approval, before payment is made.

         7.3 HARDSHIP WITHDRAWALS.

         (a) DEFINITION. A Hardship exists when a Participant has suffered a
severe financial setback resulting from any of the following: (i) a sudden and
unexpected illness or accident of the Participant or of a dependent (within the
meaning of Code Section 152(a)) of the Participant, (ii) loss of or to the
Participant's property due to casualty, or (iii) other similar extraordinary and
unforeseeable circumstances, arising in each case from events beyond the
Participant's control. Whether circumstances constitute an unforeseeable
emergency depends upon the facts of each case. Moreover, in any event, no amount
may be paid to a Participant pursuant to this Section 7.3 to the extent that any
claimed Hardship is or may be relieved (i) through reimbursement or compensation
by insurance or otherwise or (ii) by liquidation of the Participant's assets, to
the extent that such liquidation would not itself cause severe financial
hardship. Hardship shall not include payment of college expenses or the purchase
of a home.

         (b) PROCEDURE. A Participant who has had a Separation from Service or
the Beneficiary of a deceased Participant may request withdrawal of a necessary
portion of the 

                                      -19-
<PAGE>   26

Participant's Vested Benefit under the Plan on account of Hardship if the
Participant or Beneficiary is awaiting payment under Section 7.2 or installment
payments under Sections 8.2 or 8.3. Such request must be in writing to the
Administrative Committee and shall be accompanied by evidence of the existence
of all applicable Hardship conditions specified in paragraph (a) of this Section
7.3. The Administrative Committee shall review each such request and determine
whether payment of any amount is justified. If payment is justified, the amount
shall be limited to an amount reasonably needed to meet the demonstrated
financial Hardship, but including any income and employment taxes reasonably
expected to result from the Hardship distribution itself. The Administrative
Committee shall also determine the form of any payment to be made to a
Participant on account of a demonstrated Hardship. Any remaining amount of the
Participant's Vested Benefit after any such Hardship withdrawal shall continue
to be held subject to the Plan for later distribution in accordance with the
provisions of this Section 7 and of Section 8 of the Plan.

                     ARTICLE VIII - BENEFIT FORMS AVAILABLE
                     --------------------------------------

         8.1 FORMS OF BENEFIT FOR PARTICIPANTS.

         (a) NORMAL FORM OF BENEFITS. Unless a Participant has made a timely
election to receive installment payments with the approval of the Administrative
Committee pursuant to paragraph (b) below, the Participant's Vested Benefit
shall be paid in one lump sum.

         (b) INSTALLMENT BENEFIT ELECTION. Subject to the Administrative
Committee's approval, a Participant who has had no Separation from Service
before attaining his Early Retirement Date or whose Separation from Service was
on account of his Disability may make a one-time irrevocable election to receive
the Actuarial Equivalent of his Vested Benefit in 

                                      -20-
<PAGE>   27

substantially equal annual installments over a period of years not to exceed the
Participant's life expectancy or the joint life expectancies of the Participant
and his spouse, in each case determined as of the date that the installment
payments begin. Any such election shall be made on the form prescribed by the
Administrative Committee and must be received by the Administrative Committee no
later than 30 days before the Benefit is to be paid pursuant to Section 7.2 of
the Plan (after taking into account any election made by the Participant under
paragraph (b) of Section 7.2). The Administrative Committee shall have absolute
discretion to approve, disapprove or modify (including but not limited to
changing the number of installments) before approving any such election to
receive installment payments. Notwithstanding the foregoing, the Actuarial
Equivalent value of the Participant's remaining installment benefits shall be
paid immediately in one lump sum if the Net Worth Condition ever occurs and the
Participant fails to confirm his election, subject to the Administrative
Committee's approval, before payment is made.

         8.2 FORMS OF BENEFIT FOR SURVIVING SPOUSE BENEFICIARIES.

         (a) NORMAL FORM OF BENEFIT. Unless a surviving spouse Beneficiary of a
deceased Participant has made a timely election to receive installment payments
with the approval of the Administrative Committee pursuant to paragraph (b)
below, the Vested Benefit of such surviving spouse Beneficiary shall be paid in
one lump sum.

         (b) INSTALLMENT BENEFIT ELECTION. Subject to the Administrative
Committee's approval, a surviving spouse Beneficiary may make a one-time
irrevocable election to receive the Actuarial Equivalent of the Participant's
Vested Benefit in substantially equal annual installments over a period of years
not to exceed the surviving spouse's life expectancy, as determined on the date
that the installment payments begin. Any such election shall be made on 

                                      -21-
<PAGE>   28

the applicable form prescribed by the Administrative Committee and must be
received by the Administrative Committee no later than 30 days before the
Benefit is to be paid pursuant to Section 7.2 of the Plan (after taking into
account any election made by the surviving spouse Beneficiary under paragraph
(b) of Section 7.2). The Administrative Committee shall have absolute discretion
to approve, disapprove or modify (including but not limited to changing the
number of installments) before approving any such election to receive
installment payments. Notwithstanding the foregoing, the Actuarial Equivalent
value of the Beneficiary's remaining installment benefits shall be paid
immediately in one lump sum if the Net Worth Condition ever occurs and the
Beneficiary fails to confirm his or her election, subject to the Administrative
Committee's approval, before payment is made.

         8.3 FORM OF BENEFIT FOR OTHER BENEFICIARIES. Death benefits to any
Beneficiary who is not the surviving spouse of the Participant shall be paid in
one lump sum.

                           ARTICLE IX - BENEFICIARIES
                           --------------------------

         9.1 DESIGNATION. Each Participant (and each surviving Beneficiary who
is awaiting or receiving payment of a Vested Benefit under the Plan) shall have
the right to designate a Beneficiary, and to amend or revoke such designation at
any time. Each such designation, amendment or revocation shall be made on the
form prescribed by the Administrative Committee, and shall be effective only
upon receipt by the Administrative Committee.

         9.2 FAILURE TO DESIGNATE A BENEFICIARY. If no designated Beneficiary
survives the Participant (or a surviving Beneficiary) and any Vested Benefit is
payable following the Participant's (or surviving Beneficiary's) death, the
Administrative Committee shall direct that 

                                      -22-
<PAGE>   29

payment of such Vested Benefit be made to the person or persons in the first of
the following classes of successive preference Beneficiaries:

         (a)      Spouse
         (b)      Descendants, Per Stirpes
         (c)      Parents
         (d)      Siblings
         (e)      Estate

                         ARTICLE X - PLAN ADMINISTRATION
                         -------------------------------

         10.1 ADMINISTRATIVE COMMITTEE. The Plan shall be administered by an
Administrative Committee of one or more members appointed by the Board, and
shall be the Compensation Committee unless a different appointment is then in
effect under this Plan. Each member shall serve at the pleasure of the Board.
The Administrative Committee shall act by majority decision of its members. The
Committee shall have responsibility for the operation and administration of the
Plan and shall have the power and authority to adopt, interpret, alter, amend or
revoke all forms, rules and regulations necessary to administer the Plan, to
interpret all provisions of the Plan and determine all questions of eligibility
for participation in and benefits under the Plan and all other issues of
administration, and to delegate ministerial duties and employ such outside
professionals as may be required for prudent administration of the Plan. The
Administrative Committee shall also have the authority to enter into agreements
on behalf of any Participating Employer as necessary to implement this Plan. The
members of the Administrative Committee, if otherwise eligible, may participate
in the Plan, but shall not make decisions of the Committee solely with respect
to their own benefits or Hardship withdrawals.

         10.2 INDEMNIFICATION. Each Employing Company shall jointly and
severally indemnify and save harmless any individual acting as a member of the
Administrative Committee or in any 

                                      -23-
<PAGE>   30

other fiduciary capacity from, against, for and in respect of any and all
damages, losses, obligations, liabilities, liens, deficiencies, attorneys' fees,
costs and expenses incident to the performance of such person's duties unless
resulting from the gross negligence, willful misconduct, or lack of good faith
of such individual. Such indemnification shall apply to any such individual even
though at the time liability was imposed the individual was no longer acting in
a fiduciary capacity or as a member of the Administrative Committee.

         10.3 OWNERSHIP OF ASSETS. All amounts accrued under this Plan, all
property and rights purchased with such amounts, and all income attributable to
such amounts, property or rights shall remain (until made available to the
Participant or Beneficiary) solely the property and rights of the relevant
Employing Company (without being restricted to the provision of benefits under
this Plan) and shall be subject to the claims of the general creditors of the
Company and of each Employing Company. Except after a Change in Control, no
trust is created under this Plan and it is not otherwise funded in any manner.
No Participant or Beneficiary shall have any preferred claim on, or any
beneficial ownership interest in, any assets of any Employing Company or any
Accrued Benefit under the Plan prior to the time such assets are distributed as
a Vested Benefit, and all rights created under the Plan shall be mere unsecured
contractual rights. Notwithstanding the foregoing, nothing in this Plan shall be
construed to prohibit any one or more Participants or Beneficiaries from
purchasing insurance to protect against loss on account of the provisions of
this Section 10.3, and the Employing Companies shall reasonably cooperate in any
effort to obtain such insurance; provided that any such insurance shall be
obtained, owned and paid for solely by the insured persons and not by any
Employing Company.

         10.4 EXPENSES. Each Employing Company shall pay (a) its share of all
fees and expenses incurred in administering the Plan, (b) all taxes imposed on
such Employing Company 

                                      -24-
<PAGE>   31

in connection with the Plan, and (c) all costs and expenses (including
reasonable attorneys' fees) incurred by each Participant and Beneficiary to
enforce the terms of the Plan against the Employing Company or to collect a
Vested Benefit under the Plan from the Employing Company.

                  ARTICLE XI - TRUST AGREEMENT; LIQUIDITY FUND
                  --------------------------------------------

         11.1 TRUST FUND. Except after a Change in Control, no assets of any
Employing Company shall be held in trust for any purposes under the Plan. Upon
the occurrence of a Change in Control, and from time to time (but at least once
each Plan Year) thereafter, the Company shall cause each Employing Company to
contribute to the Trust assets sufficient to actuarially meet the Employing
Company's liability for all Vested Benefits under the Plan at each time that
assets are contributed.

         11.2 LIQUIDITY FUND. Any Employing Company at its sole option may from
time to time maintain liquid assets representing all or any portion of the value
of its Participants' Accrued Benefits. Any such liquidity fund shall be invested
at the discretion of the Administrative Committee, shall not be held in trust
for any Participant or Beneficiary, and shall in all respects remain subject to
the provisions of Section 10.3.

                       ARTICLE XII - AMENDMENT OF THE PLAN
                       -----------------------------------

         12.1 AMENDMENT. The Company reserves the right to amend the Plan at any
time and from time to time. Each amendment shall be approved by the Compensation
Committee. No amendment shall diminish or deprive a Participant of any benefit
already accrued. The Company may amend the Plan, and may do so retroactively if
necessary, to conform the Plan to mandatory 

                                      -25-
<PAGE>   32

provisions of applicable laws or regulations or as permitted by the Internal
Revenue Service or the Department of Labor.

         12.2 EFFECT OF AMENDMENTS ON VESTING. Notwithstanding the provisions of
the preceding Section 12. 1, no amendment to the Plan's vesting provisions shall
reduce any Participant's Vested Benefit, determined as of the later of (a) the
date of execution of such amendment or (b) the effective date of such amendment.

                     ARTICLE XIII - TERMINATION OF THE PLAN
                     --------------------------------------

         13.1 TERMINATION. The Company (for itself and each Employing Company)
intends to continue the Plan indefinitely, but it does not assume a contractual
obligation to do so, and the Company may terminate the Plan at any time (or
terminate the participation of one or more Employing Companies), provided that
no such action of the Company shall reduce any Participant's Vested Benefit.
Each Employing Company reserves the right by action of its board of directors to
withdraw from the Plan, provided that no such withdrawal shall reduce any
Participant's Vested Benefit.

         13.2 BENEFITS AFTER PLAN TERMINATION. In the event that the Company
shall terminate the Plan, in whole or in part, the rights of nonvested
Participants to benefits accrued under the Plan as of the date of such
termination shall remain unvested unless the Plan is specifically amended to
provide for additional partial or full vesting. In no event shall any person
have recourse against any Employing Company for any reason upon termination of
the Plan other than for non-payment of Vested Benefits.

                                      -26-
<PAGE>   33

                           ARTICLE XIV - MISCELLANEOUS
                           ---------------------------

         14.1 LIMITATIONS OF RIGHTS; EMPLOYMENT RELATIONSHIP. Neither the
establishment of this Plan nor any modification thereof, nor the accrual or
vesting of any benefits, nor the creation of any fund or account, nor the
payment of any benefits, shall be construed as giving a Participant or any other
person any legal or equitable right against any Employing Company except as
provided in this Plan. In no event shall the terms of employment of any employee
be modified or in any way be affected by the Plan.

         14.2 DETERMINATION OF BENEFITS, CLAIMS, PROCEDURE AND ADMINISTRATION.

         (a) CLAIM. A person who believes that he or she is being denied a
benefit to which he or she is entitled under the Plan (hereinafter referred to
as a "Claimant") may file a written request for such benefit with the Company,
setting forth his or her claim. The request must be addressed to the
Administrative Committee in care of the Company at its then principal place of
business.

         (b) DECISION ON CLAIM. Upon receipt of a claim, the Administrative
Committee shall advise the Claimant that a reply will be forthcoming within 90
days and shall, in fact, deliver such reply within such period. The
Administrative Committee may, however, extend the reply period for an additional
90 days for a reasonable cause.

         If the claim is denied in whole or in part, the Administrative
Committee shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth:

         (i) The specific reason or reasons for such denial;

         (ii) The specific reference to pertinent provisions of the Plan on
which such denial is based;

                                      -27-
<PAGE>   34


         (iii) A description of any additional material or information necessary
for the Claimant to perfect his or her claim and an explanation of why such
material or such information is necessary;

         (iv) Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and

         (v) The time limits for requesting a review and for completing any such
review.

         (c) REQUEST FOR REVIEW. Within 60 days after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the chief executive officer of the Company (or his designee) review
the determination of the Administrative Committee. Such request must be
addressed to the chief executive officer of the Company, at the Company's then
principal place of business. The Claimant or his or her duly authorized.
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the chief executive officer
or his designee. If the Claimant does not request a review of the Administrative
Committee's determination by the chief executive officer of the Company within
such 60-day period, he or she shall be barred and estopped from challenging the
Administrative Committee's determination.

         (d) REVIEW OF DECISIONS. Within 60 days after receipt of a request for
review, the chief executive officer of the Company or his designee shall review
the Administrative Committee's determination. After considering all materials
presented by the Claimant the chief executive officer or his designee shall
render a written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for a decision and containing
specific references to the pertinent provisions of the Plan on which the
decision is based. If special circumstances require that the 60-day time period
be extended, the chief executive officer 

                                      -28-
<PAGE>   35

or his designee shall so notify the Claimant and shall render the decision as
soon as possible, but not later than 120 days after receipt of the request for
review.

         14.3 ARBITRATION. Any dispute between any person claiming benefits or
any other rights under the Plan and the relevant Employing Company as to the
interpretation or application of the provisions of the Plan and amounts payable
hereunder that is not finally resolved under the claims procedure in Section
14.2 of the Plan shall be determined exclusively by binding arbitration in
Cleveland, Ohio in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court of competent jurisdiction. Except as provided in Section 10.4 after a
Change in Control, all fees and expenses of such arbitration shall be paid as
determined by the arbitrator.

         14.4 NON-ASSIGNABILITY OF BENEFITS. Neither the Participant nor his or
her Beneficiary nor any other beneficiary under the Plan shall have any power or
right to transfer, assign, anticipate, hypothecate or otherwise encumber any
part or all of the amounts payable hereunder, which are expressly declared to be
nonassignable and non-transferable. Any such attempted assignment or transfer
shall be void. No amount payable under the Plan shall, prior to actual payment
thereof, be subject to seizure by any creditor of any such person for the
payment of any debt, judgment or other obligation, by a proceeding at law or in
equity, or be transferable by operation of law in the event of the bankruptcy,
insolvency, divorce or death of the Participant, his or her designated
Beneficiary or any other beneficiary under this Plan.

         14.5 FACILITY OF PAYMENTS. In the event that the Administrative
Committee shall determine that any person to whom a benefit is payable under the
Plan is unable to care for his or her affairs because of illness or accident, or
is otherwise mentally or physically incompetent, or unable to give a valid
receipt, the Committee may cause the payment becoming due to be paid to 

                                      -29-
<PAGE>   36

the person's spouse, child, grandchild, parent, brother or sister, or to any
appropriate individual appointed by a court of competent jurisdiction, or to any
person deemed by the Committee to have incurred expense for such person
otherwise entitled to payment.

         14.6 OBLIGATIONS TO WITHHOLD AND PAY TAXES. Each Participant or other
recipient of benefits under the Plan shall be liable for all tax obligations, if
any, with respect to any sum received pursuant to the Plan and for accurately
reporting and paying in full all such taxes to the appropriate federal, state
and local authorities. The relevant Employing Company shall have the right to
deduct and withhold from any payment due under the Plan or from other amounts
owed to or with respect to the Participant all withholding taxes and other
amounts required by law or as necessary to set off amounts owed by the
Participant to such Employing Company.

         14.7 REPRESENTATIONS. No Employing Company hereby represents or
guarantees that any particular federal or state income, payroll, personal
property or other tax consequence will result from participation in this Plan. A
Participant should consult with professional tax advisors to determine the tax
consequences of his or her participation.

         14.8 SEVERABILITY. If a court of competent jurisdiction holds any
provision of this Plan to be invalid or unenforceable, the remaining provisions
of the Plan shall continue to be fully effective.

                                      -30-
<PAGE>   37

         14.9 APPLICABLE LAW. This Plan shall be governed by and construed in
accordance with applicable federal law and, to the extent not preempted by such
federal law, the laws of the State of Ohio applicable to contracts that are made
and to be wholly performed in such jurisdiction.

         IN WITNESS WHEREOF, the Company has caused this Plan to be executed
under seal by its duly authorized representative this 5th day of May, 1998.

                                            DAIRY MART CONVENIENCE STORES, INC.

                                            By: /s/ Greg G. Landry
                                               --------------------------
                                               Title:  Exec. V.P.

                                      -31-

<PAGE>   38



             SCHEDULE 3.1 TO THE DAIRY MART CONVENIENCE STORES, INC.

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

      (Designation of Participants and Retroactive Benefit Service Credits

                         Effective as of March 1, 1998)

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

                      EFFECTIVE DATE           RETROACTIVE CREDIT FOR YEARS OF
PARTICIPANT          OF PARTICIPATION        BENEFIT SERVICE PRIOR TO ENTRY DATE
-----------          ----------------        -----------------------------------

Robert Stein          March 1, 1998           As specified in the Plan document

Gregory Landry        March 1, 1998           As specified in the Plan document