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                                                                   EXHIBIT 10.12

                              SEVERANCE AGREEMENT
                              -------------------


     THIS AGREEMENT, dated May 8, 1998, is made by and between Einstein/Noah
Bagel Corp., a Delaware corporation (the "Company"), and Gail Lozoff (the
"Executive").

     WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management personnel; and

     WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and

     WHEREAS, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change in Control;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:

     1.   Defined Terms. The definitions of capitalized terms used in this
          -------------  
Agreement are provided in the last Section hereof.

     2.   Term of Agreement. The Term of this Agreement shall commence on the
          -----------------
date hereof and shall continue in effect through May 8, 2000; provided, however,
that commencing on May 8, 2000 and each May 8 thereafter, the Term shall
automatically be extended for one additional year unless, not later than
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December 31 of the preceding year, the Company or the Executive shall have given
notice not to extend the Term; and further provided, however, that if a Change
                                           ------- --------  -------   
in Control shall have occurred during the Term, the Term shall expire twenty-
four (24) months beyond the month in which such Change in Control occurred.

     3.   Company's Covenants Summarized. In order to induce the Executive to
          ------------------------------               
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no Severance Payments shall be payable under this Agreement unless there
shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.

     4.   The Executive's Covenants. The Executive agrees that, subject to the
          -------------------------  
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of the Company
until the earliest of (i) a date which is three (3) months from the date of such
Potential Change of Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.

     5.   Compensation Other Than Severance Pay ments. If the Executive's
          -------------------------------------------      
employment shall be terminated for any reason following a Change in Control and
during the Term, the Company shall pay the Executive's full salary to the
Executive during the period through the Date of Termination at the rate in
effect immediately prior to the Date of Termination or, if higher, the rate in
effect immediately prior

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<PAGE>
 
to the first occurrence of an event or circumstance consti tuting Good Reason,
together with all compensation and benefits payable to the Executive through the
Date of Termination under the terms of the Company's compensation and benefit
plans, programs or arrange ments as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the first occur rence of an event or circumstance constituting Good
Reason.

     6.  Severance Payments.
         ------------------ 

     6.1  If the Executive's employment is terminated following a Change in
Control and during the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason, then
the Company shall pay the Executive the amounts, and provide the Executive the
benefits, described in this Section 6.1 ("Severance Payments"), in addition to
any payments and benefits to which the Executive is entitled under Section 5
hereof. For purposes of this Agreement, the Executive's employment shall be
deemed to have been terminated following a Change in Control by the Company
without Cause or by the Executive with Good Reason, if (i) the Executive's
employment is terminated by the Company without Cause prior to a Change in
Control (whether or not a Change in Control ever occurs) and such termination
was at the request or direction of a Person who has entered into an agreement
with the Company the consummation of which would constitute a Change in Control,
(ii) the Executive terminates his employment for Good Reason prior to a Change
in Control (whether or not a Change in Control ever occurs) and the circumstance
or event which constitutes Good Reason occurs at the request or direction of
such Person, or (iii) the Executive's employment is terminated by the Company
without Cause or by the Executive for Good Reason and such termination or the
circumstance or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Change in Control (whether or not a Change in
Control ever occurs). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Board by clear and

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convincing evidence that such position is not correct.
 
                    (A)  In lieu of any further salary payments to the Executive
     for periods subsequent to the Date of Termination and in lieu of any
     severance benefit otherwise payable to the Executive, the Company shall pay
     to the Executive a lump sum severance payment, in cash, equal to the sum of
     (i) 6 months' base salary, based on the Executive's salary rate as in
     effect immediately prior to the Date of Termination or, if higher, in
     effect immediately prior to the first occurrence of an event or
     circumstance constituting Good Reason, (ii) the amount of the Executive's
     bonus for any completed fiscal year or other completed measuring period
     preceding the Date of Termination which has not yet been paid, assuming the
     achievement of all individual performance goals (including any subjective
     performance goals), and (iii) a pro rata portion of the Executive's bonus
     for the fiscal year or other measuring period in which the Date of
     Termination occurs, obtained by multiplying 90% of the Executive's target
     bonus for such period by the fraction obtained by dividing the number of
     full months and any fractional portion of a month during such period
     through the Date of Termination by the total number of months contained in
     such period.

                    (B)  For the 6 month period immediately following the Date
     of Termination, the Company shall arrange to provide the Executive and his
     dependents life, disability, accident and health insurance benefits
     substantially similar to those provided to the Executive and his dependents
     immediately prior to the Date of Termination or, if more favorable to the
     Executive, those provided to the Executive and his dependents immediately
     prior to the first occurrence of an event or circumstance constituting Good
     Reason, at no greater cost to the Executive than the cost to the Executive
     immediately prior to such date or occurrence; provided, however, that,
                                                   --------  ------- 
     unless the Executive consents to a different method, such health insurance
     benefits shall be provided through a third-party insurer.

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<PAGE>
 
     Benefits otherwise receivable by the Executive pursuant to this Section 6.1
     (B) shall be reduced to the extent benefits of the same type are received
     by or made available to the Executive during the 6 month period following
     the Executive's termination of employment (and any such benefits received
     by or made available to the Executive shall be reported to the Company by
     the Executive); provided, however, that the Company shall reimburse the
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     Executive for the excess, if any, of the cost of such benefits to the
     Executive over such cost immediately prior to the Date of Termination or,
     if more favorable to the Executive, the first occurrence of an event or
     circumstance constituting Good Reason.

                    (C)  Each option to purchase shares of common stock of the
     Company outstanding at the Date of Termination shall become fully vested
     and exercisable on the Date of Termination and shall remain exercisable
     during the term of such option.

                    (D)  The Company shall provide the Executive with
     outplacement services suitable to the Executive's position for a period of
     6 months or, if earlier, until the first acceptance by the Executive of an
     offer of employment.

               6.2  The payments provided in subsection (A) of Section 6.1
hereof shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments to which the Executive is clearly entitled and
shall pay the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make such
payments when due) at the reference rate announced from time to time by Bank of
America National Trust and Savings Association) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the

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<PAGE>
 
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the reference rate announced from time to
time by Bank of America National Trust and Savings Association). At the time
that payments are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations.

          6.3  The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agree ment. Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evi dence of fees and expenses incurred as the Company reasonably may require.

          7.   Termination Procedures and Compensation During Dispute.
               ------------------------------------------------------ 

          7.1  Notice of Termination. After a Change in Control and during the
               ---------------------                                           
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a "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 Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of a
majority of the entire membership of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good

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<PAGE>
 
faith opinion of the Board, the Executive was guilty of conduct set forth in the
definition of Cause herein, and specifying the particulars thereof in detail.

               7.2  Date of Termination. "Date of Termination," with respect to
                    -------------------                            
any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
`the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).

               7.3  Dispute Concerning Termination. If within fifteen (15) days
                    ------------------------------                            
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
--------  -------
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.

               7.4  Compensation During Dispute. If a purported termination
                    ---------------------------
occurs following a Change in Control and during the Term and the Date of Termin
a-

                                       7
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tion is extended in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.

               8.   No Mitigation. The Company agrees that, if the Executive's
                    -------------     
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Section 6 hereof or Section
7.4 hereof. Further, the amount of any payment or benefit provided for in this
Agreement (other than Section 6.1(B) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.

               9.   Successors; Binding Agreement.
                    ----------------------------- 
 
               9.1  In addition to any obligations imposed by law upon any
successor to the Company, 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 to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the

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Executive's employment for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.

               9.2  This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.

               10.  Notices. For the purpose of this Agreement, notices and all
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other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's signature on the final
page hereof and, if to the Company, to the address set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:

                    To the Company:

                    Einstein/Noah Bagel Corp.
                    14103 Denver West Parkway
                    Golden, CO 80401

                    Attention:  General Counsel

               11.  Miscellaneous. No provision of this Agreement may be
                    -------------
modified, waived or discharged uless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time

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of any breach by the other party hereto of, or of any lack of compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any other
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party;
provided, however, that this Agreement shall supersede any agreement setting
forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with the Company is terminated
on or following a Change in Control that has occurred or is deemed to have
occurred pursuant to Section 6.1 hereof, by the Company other than for Cause or
by the Executive other than for Good Reason. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Colorado. All references to sections of the Exchange Act shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.

               12.  Validity. The invalidity or unenforceability of any
                    -------- 
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

               13.  Counterparts. This Agreement may be executed in several
                    ------------                                            
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

               14.  Settlement of Disputes; Arbitration. 14.1 All claims by the
                    -----------------------------------                        
Executive for benefits under this Agreement shall be directed to and determined
by the Board and shall be in writing. Any denial by the

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Board of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied.

               14.2  Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Denver, Colorado in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
                            --------  -------
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.

               15.  Definitions. For purposes of this Agreement, the following
                    ----------- 
terms shall have the meanings indicated below:

               (A)  "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.

               (B)  "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.

               (C)  "Board" shall mean the Board of Directors of the Company.

               (D)  "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure

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after the issuance of a Notice of Termination for Good Reason by the Executive
pursuant to Section 7.1 hereof) after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, (ii) the
misappropriation of funds or other property of the Company, (iii) the commission
of an felony or any crime involving moral turpitude, (iv) the commission of
fraud or theft, or (v) the material breach by the Executive of any obligation of
the Executive under any written confidentiality or noncompete agreement between
the Executive and the Company. For purposes of this definition, (x) no act, or
failure to act, on the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was in the best interest of
the Company and (y) in the event of a dispute concerning the application of this
provision, no claim by the Company that Cause exists shall be given effect
unless the Company establishes to the Board by clear and convincing evidence
that Cause exists.

               (E)  A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have
occurred:

                         (I)   any Person (other than Boston Chicken, Inc.) is
                    or becomes the Beneficial Owner, directly or indirectly, of
                    securities of the Company representing 40% or more of the
                    combined voting power of the Company's then outstanding
                    securities; or

                         (II)  there is consummated a merger or consolidation of
                    the Company or any direct or indirect subsidiary of the
                    Company with any other corporation, other than (i) a merger
                    or consolidation which would result in the voting
                    securities of the Company outstanding immediately prior to
                    such merger or consolidation continuing to represent (either
                    by remaining out-

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<PAGE>
 
                    standing or by being converted into voting securities of the
                    surviving entity or any parent thereof) at least 50% of the
                    combined voting power of the securities of the Company or
                    such surviving entity or any parent thereof outstanding
                    immediately after such merger or consolidation, or (ii) a
                    merger or consolidation effected to implement a
                    recapitalization of the Company (or similar transaction) in
                    which no Person (other than Boston Chicken, Inc.) is or
                    becomes the Beneficial Owner, directly or indirectly, of
                    securities of the Company (not including in the securities
                    Beneficially Owned by such Person any securities acquired
                    directly from the Company or its Affiliates other than in
                    connection with the acquisition by the Company or its
                    Affiliates of a business) representing 40% or more of the
                    combined voting power of the Company's then outstanding
                    securities; or

                              (III) the stockholders of the Company approve a
                    plan of complete liquidation or dissolution of the Company
                    or there is consummated an agreement for the sale or
                    disposition by the Company of all or substantially all of
                    the Company's assets, other than a sale or disposition by
                    the Company of all or substantially all of the Company's
                    assets to an entity, at least 50% of the combined voting
                    power of the voting securities of which are owned by
                    stockholders of the Company in substantially the same
                    proportions as their ownership of the Company immediately
                    prior to such sale; or

                              (IV)  the individuals who, as of the date of any
                    Change in Control of Boston Chicken (as hereinafter defined)
                    are members of the Board, cease for any reason to constitute
                    a majority of the Board. For purposes of

                                       13
<PAGE>
 
                    of paragraph (IV), above a "Change in Control of Boston
                    Chicken" shall mean (i) the acquisition by any Person of
                    beneficial ownership, directly or indirectly, through a
                    purchase, merger or other acquisition transaction or series
                    of transactions, of shares of capital stock or other voting
                    securities of Boston Chicken, Inc. entitling such person to
                    exercise more than 30% of the combined voting power of the
                    outstanding securities of Boston Chicken, Inc., (ii) a sale
                    of all or substantially all of the assets of Boston Chicken,
                    Inc. to any purchaser (a "BCI Purchaser") if any Person is
                    the beneficial owner of shares of capital stock or other
                    voting securities of the BCI Purchaser entitling such person
                    to exercise more than 30% of the combined voting power of
                    the outstanding securities of such BCI Purchaser, or (iii)
                    the individuals who, as of the date of this letter
                    agreement, are members of the board of directors of Boston
                    Chicken, Inc. (the "Incumbent Board") cease for any reason
                    to constitute at least a majority of the board of directors
                    of Boston Chicken, Inc., provided, however, that if either
                    the election of any new director of the nomination for
                    election of any new director by Boston Chicken, Inc.'s
                    stockholders was approved by a vote of at least a majority
                    of the Incumbent Board, such new director shall be
                    considered a member of the Incumbent Board.

               (F)  "Company" shall mean Einstein/Noah Bagel Corp. and, except
in determining under Section 15(E) hereof whether or not any Change in Control
of the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.

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<PAGE>
 
               (G)  "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.

               (H)  "Disability" shall be deemed the reason for the termination
by the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.

               (I)  "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.

               (J)  "Executive" shall mean the individual named in the first
paragraph of this Agreement.

               (K)  "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in para graphs
(I) through (VII) below to a "Change in Control" as references to a "Potential
Change in Con trol"), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to act
described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act
is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:

                    (I)   a substantial adverse alteration in the nature or
               status of the Executive's responsibilities from those in effect
               immediately prior to the Change in Control;

                    (II)  a reduction by the Company in the Executive's annual
               base salary as in effect on the date hereof or as the same may be
               increased from time to time;

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<PAGE>
 
                    (III)  the relocation of the Executive's principal place of
               employment to a location more than 60 miles from the Executive's
               principal place of employment imme diately prior to the Change in
               Control or the Company's requiring the Executive to be based
               anywhere other than such principal place of employment (or
               permitted relocation thereof) except for required travel on the
               Company's business to an extent sub stantially consistent with
               the Executive's present business travel obligations;

                    (IV)   the failure by the Company to pay to the Executive
               any portion of the Executive's current compensation, within seven
               (7) days of the date such compensation is due;

                    (V)    the failure by the Company to continue in effect any
               compensation plan in which the Executive participates immediately
               prior to the Change in Control which is material to the
               Executive's total compensation, unless an equitable arrangement
               (embodied in an ongoing substitute or alternative plan) has been
               made with respect to such plan, or the failure by the Company to
               continue the Executive's participation therein (or in such
               substitute or alternative plan) on a basis not materially less
               favorable, both in terms of the amount or timing of payment of
               benefits provided and the level of the Executive's participation
               relative to other participants, as existed immediately prior to
               the Change in Control;

                    (VI)   the failure by the Company to continue to provide the
               Executive with benefits substantially similar to those enjoyed
               by the Executive under any of the Company's life insurance,
               medical, health and accident, or disability plans in which the
               Executive was participating immediately prior to the Change in
               Control (except for across the board changes similarly affect-

                                       16
<PAGE>
 
               ing all executives of the Company and all executives of any
               Person in control of the Company), the taking of any other action
               by the Company which would directly or indirectly materially
               reduce any of such benefits or deprive the Executive of any
               material fringe benefit enjoyed by the Executive at the time of
               the Change in Control, or the failure by the Company to provide
               the Executive with the number of paid vacation days to which the
               Executive is entitled in accordance with the Company's normal
               vacation policy in effect at the time of the Change in Control;
               or

                    (VII)  any purported termination of the Executive's
               employment which is not effected pursuant to a Notice of
               Termination satisfying the requirements of Section 7.1 hereof;
               for purposes of this Agreement, no such purported termination
               shall be effective.

               The Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.

               For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.

               (L)  "Notice of Termination" shall have the meaning set forth in
Section 7.1 hereof.

               (M)  "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates,

                                       17
<PAGE>
 
(iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

               (N)  "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:

                    (I)   the Company enters into an agreement, the consummation
               of which would result in the occurrence of a Change in Control;

                    (II)  the Company or any Person publicly announces an
               intention to take or to consider taking actions which, if
               consummated, would constitute a Change in Control; or

                    (III) the Board adopts a resolution to the effect that, for
               purposes of this Agreement, a Potential Change in Control has
               occurred.

               (O)  "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.

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<PAGE>
 
               (P)  "Term" shall mean the period of time described in Section 2
hereof (including any extension, continuation or termination described
therein).

                       EINSTEIN/NOAH BAGEL CORP.


                       By: /s/ Robert M. Hartnett
                           ---------------------------------------
                                 Name: Robert M. Hartnett
                                 Title:Chairman, CEO and President


                           /s/ Gail A. Lozoff
                           ---------------------------------------
                               Gail Lozoff
                           Address:

                           _______________________________________
                           _______________________________________
                           _______________________________________
                           (Please print carefully)

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