EMPLOYMENT AGREEMENT

     BY THIS EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of 
this 1 day of January, 1996, between P.F. CHANG'S CHINA BISTRO,INC., a Delaware 
corporation ("Company") and PAUL M. FLEMING ("Executive"), Company and 
Executive agree as follows:

1.   DEFINITIONS

     For purposes of this Agreement, the following terms shall have the 
following meanings:

     1.1  "Cause" shall mean a termination of the Executive's employment during 
the Term which is a result of (i) violation by Executive of any law carrying 
penalty of imprisonment for more than one (1) year or one thousand dollars 
($1,000) in fines, dishonesty, insubordination, gross misconduct, or aiding a 
competitor, (ii) the Executive's disclosure to third parties of material trade 
secrets or other material confidential information related to the business of 
the Company and its subsidiaries in violation of Section 6, or (iii) the 
Executive's failure to 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 resulting from a 
resignation by the Executive for Good Reason) 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 performed his duties, and which performance is not 
substantially corrected by the Executive within ten (10) days of receipt of 
such demand.

     1.2  "Code" shall mean the Internal Revenue Code of 1986, as amended, and 
any successor provisions thereto.

     1.3  "Common Stock" shall mean the common stock of the Company.

     1.4  "Disability" shall mean (i) the Executive's incapacity due to 
physical or mental illness which causes him to be absent from the full-time 
performance of his duties with the Company for six (6) consecutive months or 
for one hundred eighty (180) days or more in any twelve month (12) period, and 
(ii) the Executive's failure to return to full-time performance of his duties 
for the Company within thirty (30) days after written Notice of Termination due 
to Disability is provided by the Company to the Executive. Any question as to 
the existence of the Executive's Disability upon which he and the Company 
cannot agree shall be determined by a qualified independent physician mutually 
agreed upon by the Executive (or, if the Executive is unable to make such 
selection, such selection shall be made by any adult member of the Executive's 
immediate family) and the Company. The determination of such physician made in 
writing to the Company and to the Executive shall be final and conclusive for 
all purposes of this Agreement.

     1.5  "Good Reason" shall mean a resignation of the Executive's employment 
during the Term as a result of any of the following:

                                       1
  

          (a)  A meaningful and detrimental alteration in the Executive's 
position, his titles, or the nature or status of his responsibilities 
(including the Executive's reporting responsibilities) from those previously in 
effect;

          (b)  A reduction by the Company in the Executive's annual Base 
Salary as set forth herein or as the same may be increased from time to time 
thereafter, except pursuant to a salary reduction program as described in 
Section 3.1;

          (c)  The failure by the Company to provide any compensation plan to 
the Executive consistent with similarly situated senior executives of the 
Company as determined from time to time by the Board of Directors on a 
nondiscriminatory basis;

          (d)  The failure by the Company to provide the Executive with fringe 
benefits (including, without limitation, life insurance, health, medical, 
dental, accident and disability plans and programs, and other fringe benefits) 
consistent with similarly situated senior executives of the Company as 
determined from time to time by the Board of Directors on a nondiscriminatory 
basis; or the failure by the Company to provide the Executive with the number 
of paid vacation days to which the Executive is entitled on the basis of years 
of service with the Company in accordance with the Company's normal vacation 
policy previously in effect.

          (e)  A material breach by the Company of the provisions of this 
Agreement;

provided, however, that an event described in the above clauses, shall not 
constitute Good Reason unless it is communicated by the Executive to the 
Company in writing and is not corrected by the Company in a manner which is 
reasonably satisfactory to the Executive (including full retroactive correction 
with respect to any monetary matter) within sixty (60) days from the date of 
the Company's receipt of such written notice from the Executive.

     1.6  "Retirement" shall mean normal retirement at age 65 or in accordance 
with retirement rules generally applicable to the Company's senior executives.

2.   DUTIES AND TERM

     2.1  Employment.

          (a)  The Executive is employed as the Chief Executive Officer of the
Company. The Executive shall have such duties and responsibilities as shall be
assigned to the Executive from time to time by the Board of Directors of the
Company ("Board") in the Executive's capacity as the Chairman of the Board and
Chief Executive Officer of the Company and as is consistent with the Bylaws of
the Company.

          (b)  The Executive shall serve as a director of the Company.

          (c)  During the period of his employment hereunder, the Executive 
shall devote not less than eighty-five percent (85%) of his normal business 
time, attention, skill and efforts


                                       2


to the faithful performance of his duties hereunder; provided, however, that the
Executive may serve or continue to serve on the board of directors or hold other
offices or positions in companies or organizations if they involve no conflict
of interest with the interests of the Company and may engage in customary
professional activities which in the judgment of the Board will not materially
affect the performance by the Executive of his duties hereunder. The Executive
has disclosed to the Board all material business ventures in which he is
currently involved, Board acknowledges they have no objection to same and, that
Executive may in the future have other business investments and participate in
other business ventures which may, from time to time, require portions of his
time, but shall not interfere with his duties hereunder.

     2.2 Term. The term of this Agreement shall commence on the date first 
written above and shall continue, unless sooner terminated, until the third 
anniversary of the date of this Agreement ("Initial Term"). Thereafter, the 
term of this Agreement shall automatically be extended for successive one (1) 
year periods ("Renewal Terms") unless either the Board or the Executive gives 
written notice to the other at least ninety (90) days prior to the end of the 
Initial Term or any Renewal Term, as the case may be, of its or his intention 
not to renew the term of this Agreement. The Initial Term and any Renewal Terms 
of this Agreement shall be collectively referred to as the "Term."

     2.3 Location. During the Term of this Agreement, the Executive shall be
based in the principal offices of the Company in Phoenix, Arizona, and shall not
be required to be based anywhere other than Phoenix, Arizona except for travel
reasonably required in the performance of his duties hereunder and except as may
be otherwise agreed to by the Executive.

3. COMPENSATION

     3.1 Base Salary. Subject to the further provisions of this Agreement, the
Company shall pay the Executive during the Term of this Agreement a base salary
at an annual rate of not less than $150,000 ("Base Salary"). The Base Salary
shall not be reviewed at least annually by the Board and the Board may, in its
discretion, increase the Base Salary. The Base Salary of the Executive shall not
be decreased at any time during the term of this Agreement from the amount of
Base Salary then in effect, except in connection with across-the-board salary
reductions similarly affecting all senior executives of the Company.
Participation in deferred compensation, discretionary bonus, retirement, stock
option and other employee benefit plans and in fringe benefits shall not reduce
the Base Salary payable to the Executive under this Section 3.1. The Base Salary
under this Section 3.1 shall be payable by the Company to the Executive in
installments not less frequently than twice a month.

     3.2 Discretionary Bonuses. Subject to the further provisions of this 
Agreement, during the Term of this Agreement the Executive shall be entitled to 
participate in an equitable manner with all other senior executives of the 
Company in such discretionary bonuses, including, but not limited to, bonuses 
provided pursuant to any management bonus plan that the Company may adopt 
(based upon the performance of the participant and the Company), as may be 
authorized and declared by the Board to the Company's senior executives. 
Nothing in this section shall be deemed to limit the ability of the Executive 
to be paid and receive discretionary


                                       3

bonuses from the Company, based solely on the Executive's performance, without
regard to the payment of discretionary bonuses to any other officers of the
Company.

     3.3  Participation in Retirement and Employment Benefit Plans; Fringe
Benefits. The Executive shall be entitled to participate in all plans of the
Company relating to stock options, stock purchases, pension, thrift, profit
sharing, life insurance, hospitalization and medical coverage, disability,
travel or accident insurance, education or other retirement or employee benefits
that the Company has adopted or may adopt for the benefit of its senior
executives. Executive shall be entitled to stock options pursuant to a stock
option plan to be adopted by the Company to exercise options to purchase up to
five percent (5%) of the Company Stock of the Company after issuance of the
Series A Convertible Preferred Stock described in that certain Stock Purchase
Agreement ("Stock Purchase Agreement") dated as of even date herewith by and
among the Company and the Purchasers named therein on a fully diluted basis for
an exercise price equal to the purchase price per share of Series A Convertible
Preferred Stock paid by the Purchasers named in the Stock Purchase Agreement.

     3.4  Vacations. The Executive shall be entitled, without loss of pay, to be
absent voluntarily for four (4) weeks from the performance of his duties and
responsibilities under this Agreement. All absences in excess of four (4) weeks
shall not count as paid vacation time, unless the Board otherwise determines.
The timing of paid vacations shall be scheduled in a manner reasonably
acceptable to the Company.

4.   TERMINATION OF EMPLOYMENT

     4.1  Death or Retirement of Executive. This Agreement shall automatically 
terminate upon the death or Retirement of the Executive.

     4.2  By the Executive. The Executive shall be entitled to terminate this 
Agreement by giving written notice to the Company:

          (a)  at least ninety (90) days prior to the end of the Initial Term 
or any Renewal Term of this Agreement;

          (b)  for Good Reason; and

          (c)  at any time without Good Reason.

     4.3  By the Company. The Company shall be entitled to terminate this 
Agreement by giving written notice to the Executive:

          (a)  at least ninety (90) days prior to the end of the Initial Term 
or any Renewal Term of this Agreement;

          (b)  in the event of the Executive's Disability;

          (c)  for Cause; and



                                       4

          (d) at any time without Cause.

     4.4 Date of Termination. Any termination of the Executive's employment by 
the Company or by the Executive during the Term shall be communicated by a 
notice of termination to the other party hereto ("Notice of Termination"). The 
Notice of Termination 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 Executive's 
employment under the provision so indicated. The date of termination of 
employment with the Company and its subsidiaries ("Date of Termination") shall 
be determined as follows: (i) if the Executive's employment is terminated for 
Disability, thirty (30) days after a Notice of Termination is given (provided 
that the Executive shall not have returned to the full-time performance of 
duties during such thirty (30) day period), and (ii) if employment is 
terminated for any other reason, the later of the date specified in the Notice 
of Termination or five (5) days following the date such notice is received by 
the Executive.

5. COMPENSATION UPON TERMINATION OF EMPLOYMENT

     5.1 Upon Termination for Death or Disability, by the Company for Cause or 
by the Executive Without Good Reason. If the Executive's employment is 
terminated by reason of the Executive's death or Disability, by the Company for 
Cause or by the Executive without Good Reason, the Company shall:

          (a) pay the executive (or his estate or beneficiaries) any Base 
Salary which has accrued but which has not been paid as of the termination date 
("Accrued Base Salary");

          (b) reimburse the Executive (or his estate or beneficiaries) for 
expenses incurred by him prior to the date of termination which are subject to 
reimbursement pursuant to applicable Company policies then in effect ("Accrued 
Reimbursable Expenses");

          (c) provide to the Executive (or his estate or beneficiaries) any 
accrued and vested benefits required to be provided by the terms of any 
Company-sponsored benefit plans or programs ("Accrued Benefits"), together with 
any benefits required to be paid or provided in the event of the Executive's 
death or Disability under applicable law;

          (d) pay the Executive (or his estate or beneficiaries) any 
discretionary bonus with respect to a prior fiscal year which has accrued and 
been earned but has not been paid ("Accrued Bonus");

          (e) allow the Executive (or his estate or beneficiaries) to exercise 
all vested, unexercised stock options outstanding at the termination date 
within sixty (60) days from the Date of Termination, in accordance with the 
terms of the plans and agreements pursuant to which such options were issued; 
and 
          (f) at the request of the Executive, to the extent permitted by the 
terms of the policies then in effect, transfer to the Executive all key-man 
life insurance policies maintained

                                       5

by the Company on the Executive to the Executive at the Executive's sole cost 
and expense ("Right of First Refusal").

     5.2  Upon Termination at Expiration of Term. If the Executive's employment 
is terminated upon the expiration of the Term of this Agreement, the Company 
shall:

          (a)  pay the Executive the Accrued Based Salary;

          (b)  pay the Executive the Accrued Reimbursable Expenses;

          (c)  pay the Executive the Accrued Benefits;

          (d)  pay the Executive the Accrued Bonus;

          (e)  allow the Executive the right to exercise all vested, 
unexercised stock options in accordance with Section 5.1(e); and

          (f)  grant the Executive the Right of First Refusal.

     5.3  Upon Termination by the Company Without Cause or by the Executive for 
Good Reason. If the Executive's employment is terminated by the Company without 
Cause or by the Executive for Good Reason the Company shall:

          (a)  pay the Executive the Accrued Based Salary;

          (b)  pay the Executive the Accrued Reimbursable Expenses;

          (c)  pay the Executive the Accrued Benefits;

          (d)  pay the Executive the Accrued Bonus;

          (e)  pay the Executive his Base Salary, as and when the same would 
have been paid to the Executive pursuant to Section 3.1 had the termination not 
occurred, until the expiration of a period equal to the earlier of (i) one (1) 
year or (ii) the Initial Term;

          (f)  pay the Executive on or prior to the thirtieth (30th) day 
following the Date of Termination a lump sum payment equal to the average of 
all annual performance bonuses paid to the Executive for the three (3) fiscal 
years immediately preceding the fiscal year in which the termination occurs (or 
if less than three (3), the average of the two (2) and if less than two (2), 
the amount of his single Annual Bonus) ("Lump Sum Bonus Payment");

          (g)  maintain in full force and effect, for the continued benefit of 
the Executive and his eligible beneficiaries, until the first to occur of (i)
his attainment of comparable benefits upon alternative employment or (ii) twelve
(12) months following the termination date, the employee benefits pursuant to
Company-sponsored benefit plans, programs or other arrangements in which the
Executive was entitled to participate immediately prior to such


                                       6

termination, but only to the extent that the Executive's continued participation
is permitted under the general terms and provisions of such plans, programs and
arrangements;

     (h)  allow the Executive the right to exercise in full all unvested stock
options granted to him in accordance with the terms of the Stock Option Plan
(except the vesting terms with respect to the accelerated options) referred to
in the Letter of Intent dated October 10, 1995, as amended among Catterton
Partners Corporation, Oak Investment Partners and Paul M. Fleming; and

     (i)  grant the Executive the Right of First Refusal.

6.   RESTRICTIVE COVENANTS

     6.1  Confidentiality.

          (a)  The Executive shall keep all trade secrets and/or proprietary
information ("Confidential Information") of the Company in strict confidence and
shall not disclose any Confidential Information to any other person, firm,
association, partnership, corporation or other entity for any reason except as
such disclosure may be required in connection with his employment hereunder. The
Executive shall not use any Confidential Information for any purpose except on
behalf of the Company.

          (b)  For purposes of this Agreement, "Confidential Information" shall
mean any information, concept or idea relating to (i) historical and projected
financial information of the Company and Company Affiliates, (ii) the
development of Chinese food menus by the Company and Company Affiliates, (iii)
the preparation and execution of Chinese food and the operation of the kitchens
with respect thereto by the Company and Company Affiliates, and (iv) any other
concept or idea related to the preparation and sale of Chinese food products,
which is not generally known in the restaurant industry and that the Company
considers confidential, and/or that gives the Company a competitive advantage.
If the Executive is unsure whether certain information or material is
Confidential Information, the Executive shall treat that information or material
as confidential unless the Executive is informed by the Company, in writing, to
the contrary. "Confidential Information" shall not include any information
which: (x) is or becomes publicly available through no act or failure of the
Executive; (y) was or is rightfully learned by the Executive from a source other
than the Company before being received from the Company; or (z) becomes
independently available to the Executive as matter of right from a third party.
If only a portion of the Confidential Information is or becomes publicly
available, then only that portion shall not be Confidential Information
hereunder.

          (c)  Upon termination of his employment with the Company, for whatever
reason, the Executive will surrender to the Company all of the property,
customer lists, notes, manuals, reports, documents and other things in the
Executive's possession, including copies or computerized records thereof, which
relate directly or indirectly to Confidential Information.


                                       7

     6.2 Competition.

         (a) During his employment with the Company and for a period of two (2) 
years following the date of termination of his employment hereunder 
("Non-Competition Period"), for any reason (whether such termination shall be 
voluntary or involuntary), the Executive shall not:

             (i) except as a holder of not more than 3% of the total 
outstanding stock of a publicly-held company, and except for investments in the 
restaurants listed in Section 6.1(b), held as of the date hereof, directly or 
indirectly own, operate, manage, consult with, control, participate in the 
management or control of, be employed by, maintain or continue any interest 
whatsoever in any company in the business of preparation and distribution of 
Chinese food or other food concepts existing during the non-competition period 
within 100 miles of any restaurant then existing or under consideration by the 
Company; or

             (ii) employ, or directly or indirectly solicit, or cause the 
solicitation of, any management level employees of the Company who are in the 
employ of the Company on the termination date of his employment hereunder for 
employment by others.

         (b) The Executive expressly agrees and acknowledges that:

             (i) this covenant not to compete is reasonably necessary for the 
protection of the interests of the Company and is reasonable as to time and 
geographical area and does not place any unreasonable burden upon him;

             (ii) the general public will not be harmed as a result of 
enforcement of this covenant not to compete;

             (iii) his personal legal counsel has reviewed this covenant not to 
compete.

     6.3 Remedies. The Executive expressly acknowledges that the covenant not 
to compete set forth in Section 6.2 is necessary for the Company's and its 
affiliates' protection because of the nature and scope of their business and 
his position with the Company. Further, the Executive acknowledges that, in the 
event of his breach of his covenant not to compete, money damages will not 
sufficiently compensate the Company for its injury caused thereby, and he 
accordingly agrees that in addition to such money damages he may be restrained 
and enjoined from any continuing breach of the covenant not to compete without 
any bond or other security being required. The Executive acknowledges that any 
breach of the covenant not to compete would result in irreparable damage to the 
Company. The Executive acknowledges that the remedy at law for any breach or 
threatened breach of Sections 6.1 and 6.2 will be inadequate and, accordingly, 
that the Company shall, in addition to all other available remedies (including 
without limitation, seeking such damages as it can show it has sustained by 
reason of such breach), be entitled to injunctive relief or specific 
performance. The venue for any litigation to enforce any award in arbitration 
or for injunctive relief shall be Maricopa County, Arizona.

                                       8

7.   MISCELLANEOUS

     7.1  No Assignments.  This Agreement is personal to each of the parties 
hereto. No party may assign or delegate any rights or obligations hereunder 
without first obtaining the written consent of the other party hereto, except 
that this Agreement shall be binding upon and inure to the benefit of any 
successor corporation to the Company.

          (a)  The Company shall use reasonable efforts to 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. As used in this Agreement, "Company" 
shall mean the Company as defined herein and any successor to its business 
and/or assets which assumes this Agreement by operation of law or otherwise.

          (b)  This Agreement shall inure to the benefit of and be enforceable 
by the Executive and his personal or legal representatives, executors, 
administrators, successors, heirs, distributees, devises and legatees. If the 
Executive should die while any amount would still be payable to him hereunder 
had he continued to live, all such amounts, unless otherwise provided herein, 
shall be paid in accordance with the terms of this Agreement to his devisee, 
legates or other designee, or if there is no such designee, to his estate.

     7.2  Notices.  For the purpose of this Agreement, notices and all other 
communications provided for in this Agreement shall be in writing and shall be 
deemed to have been duly given when personally delivered or three (3) days 
after mailing mailed by United States certified or registered mail, return 
receipt requested, postage prepaid, addressed to the respective addresses set 
forth below, or to such other addresses as either party may have furnished to 
the other in writing in accordance herewith, except that notice of a change of 
address shall be effective only upon actual receipt:

          To the Company:          2201 E. Camelback Road
                                   Phoenix, AZ 85016

          To the Executive:        Paul M. Fleming
                                   c/o Ruth's Chris Steakhouse
                                   2201 E. Camelback Road
                                   Phoenix, AZ 85016

Notices pursuant to Article 4 of this Agreement shall comply with the 
provisions thereof.

     7.3  Amendments or Additions.  No amendments or additions to this 
Agreement shall be binding unless in writing and signed by each of the parties 
hereto.

     7.4  Section Headings.  The section headings used in this Agreement are 
included solely for convenience and shall not affect, or be used in connection 
with, the interpretation of this Agreement.


                                       9
   

     7.5  Severability. The provisions of this Agreement shall be deemed 
severable and the invalidity or unenforceability of any provision shall not 
affect the validity or enforceability of the other provisions hereof. If, in 
any judicial proceedings, a court shall refuse to enforce one or more of the 
covenants or agreements contained herein because the duration thereof is too 
long, or the scope thereof is too broad, it is expressly agreed between the 
parties hereto that such scope or duration shall be deemed reduced to the 
extent necessary to permit the enforcement of such covenants or agreements.

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

     7.7  Arbitration and Legal Fees.

          (a)  Any dispute or controversy arising under or in connection with 
this Agreement shall be settled exclusively by arbitration, conducted before a 
panel of three (3) arbitrators in Phoenix, Arizona in accordance with the rules 
of the American Arbitration Association then in effect. The decision of the 
arbitrators shall be final and binding on the parties, and judgment may be 
entered on the arbitrators' award in any court having jurisdiction. The costs 
and expenses including, but not limited to, legal fees of such arbitration 
shall be borne in accordance with the determination of the arbitrators. The 
amounts, if any, determined by the arbitrators to be owed by either party to 
the other shall be paid within five (5) days after the decision by the 
arbitrators is rendered.

          (b)  All papers, documents, briefs, written communication, testimony 
and transcripts, as well as any and all arbitration decisions, shall be 
confidential and not disclosed to anyone other than the arbitrators, the 
parties or the parties' attorneys and expert witnesses (where applicable to 
their testimony) except that upon prior written consent of all parties, such 
information may be disclosed to additional third parties. All third parties 
shall agree in writing to keep such information confidential.

     7.8  No Mitigation or Offset. The Executive shall not be required to 
mitigate the amount of any payment provided for in this Agreement by seeking 
other employment or otherwise, nor shall the amount of any payment or benefit 
provided for in this Agreement be reduced by any compensation earned by the 
Executive as the result of employment by another employer or by pension 
benefits paid by the Company or another employer after the date of termination 
or otherwise, except that on the date that the Executive and his dependents are 
eligible and elect health care coverage under the plans of a subsequent 
employer which provide substantially equivalent or greater benefits to the 
Executive and his dependents, any health care coverage provided by the Company 
shall terminate.

     7.9  Modification and Waivers. No provision of this Agreement may be 
modified, waived or discharged unless such waiver, modification or discharge is 
agreed to in writing and signed by the Executive and such officer of the 
Company as may be specifically designated by the Board. No waiver by either 
party hereto at any time of any breach by the other party hereto of, or 
compliance with, any condition or provision of this Agreement to be performed 
by such


                                       10


other party shall be deemed a waiver of similar or dissimilar provisions or 
conditions at the same or at any prior or subsequent time.

     7.10  Governing Law. The validity, interpretation, construction and 
performance of this Agreement shall be governed by the laws of the State of 
Arizona without regard to its conflicts of law principles.

     7.11  Taxes. Any payments provided for hereunder shall be paid net of any 
applicable withholding or other employment taxes required under federal, state 
or local law.

     7.12  Survival. The obligations of the Company under Article 5 hereof and 
the obligations of the Executive under Article 6 hereof shall survive the 
expiration of this Agreement.

     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement 
as of the date first indicated above.



                                             P.F. CHANG'S CHINA BISTRO, INC.,
                                             a Delaware corporation



                                             By:
                                                --------------------------------
                                             Its:
                                                 -------------------------------

                                             -----------------------------------
                                             PAUL M. FLEMING

   
                                                                    

                     [P.F. CHANG'S CHINA BISTRO LETTERHEAD]

                               September 2, 1998

Mr. Paul M. Fleming
5959 East Edwards Lane
Paradise Valley, Arizona 85252

Dear Paul:

     The purpose of this letter (this "Agreement") is to set forth a binding
agreement between you and P.F. Chang's China Bistro, Inc. (the "Company") with
respect to the transition of your employment position with the Company to
service as a Company consultant.

     1.  Employment Agreement.  Your Employment Agreement with the Company dated
January 1, 1996 (the "Employment Agreement") will expire in accordance with its
terms on December 31, 1998 (the "Expiration Date"). To ensure a smooth
transition, and in consideration of your agreement to continue service to the
Company as a consultant after the Expiration Date, we agree that beginning July
1, 1998, your time commitment to the Company under your Employment Agreement
will be reduced from 85% to 50%. In addition, we agree that beginning July 1,
1998, your base compensation will be reduced from $18,750 per month to $15,000
per month, and your bonus for 1998 (to the extent otherwise earned) will equal
50% of your aggregate base compensation for 1998 (i.e., $101,250, which is equal
to six months at $18,750 per month plus six months at $15,000 per month,
multiplied by 50%). Your vacation and other fringe benefits will remain as
specified in your Employment Agreement, and except as otherwise provided in this
Agreement all other terms and conditions of your Employment Agreement will
remain in full force and effect until the Expiration Date. Before the Expiration
Date, at a time we mutually agree, you will move from the Company's offices to
alternate space that accommodates your needs. The Company will provide
reasonable assistance in connection with this move, but you agree to bear all
rent, utility and other customary office expenses.

     2.  Engagement as a Consultant.  The Company agrees to retain you as a
consultant during the period beginning January 1, 1999 and ending December 31,
2000 (the "Consulting Period"). Your consulting services (the "Services") will
consist of: (a) traveling with Rick Federico each quarter to visit existing
operations, focusing  on operating standards, culinary standards and providing
"Market Partner" feedback; (b) independently visiting the Company's restaurants
for these same purposes as your schedule reasonably permits; (c) visiting and
evaluating the Company's new openings either during role-play or within the
first 30 days of business; (d) attending quarterly design meetings to provide
feedback, direction and guidance; (e) reviewing and providing input on menu
additions, deletions and adjustments and attending  
    

   
formal tastings and presentations of new products; (f) assisting with the
development of Pei Wei's if the Company chooses to pursue that opportunity; 
(g) meeting with Rick Federico and Bert Vivian on a monthly basis to review the
Company's overall business strategies; and (h) performing such other services as
we mutually agree to from time to time. We anticipate that without your prior
consent, your time commitment to the Company under this Agreement will not
exceed 80 hours per month. To enable you to perform the Services, the Company
will provide you with reasonable advance notice of and work with you to schedule
the meetings, tastings, presentations, openings and other events at which your
Services will be performed. In performing your Services, you will report to Rick
Federico (or the Company's president, if Mr. Federico is not then serving in
that capacity).

     3.   No Control by the Company. Unless otherwise agreed, you will not be 
obligated to perform the Services at fixed hours of the day or on particular
days of the week, and this Agreement shall not be construed to obligate you to
devote any particular number of hours to performing the Services. The Company
will not have any right to direct the manner or means by which you provide the
Services, or the hours you work, your time off, your vacations or similar
matters, so long as you fulfill your responsibilities under Section 2 and
elsewhere in this Agreement.

     4.   Compensation as a Consultant. For Services rendered by you under this 
Agreement up to 80 hours per month, the Company will pay you $12,000 per month 
during 1999 and $8,000 per month during 2000, each case on the 1st day of each 
month without deduction for payroll or other employment taxes. If you and the 
Company agree that you will spend more than 80 hours per month rendering 
Services, your additional time will be compensated at a mutually-agreed rate. 
The Company will also reimburse all actual, out-of-pocket expenses you 
reasonably incur in providing Services to the Company upon presentation by you 
from time to time, but no less often than every 30 days, of a reasonably 
itemized statement therefor in accordance with the Company's standard expense 
reimbursement policies. As an "independent contractor," you agree to pay all 
taxes required to be paid on the compensation payable to you hereunder, and 
further agree to indemnify and hold harmless the Company for any liability it 
incurs to taxing authorities if you fail to properly pay your taxes.

     5.   Options. You and the Company are parties to an Immediately 
Exercisable Incentive Stock Option Agreement dated August 2, 1996 (the "Option 
Agreement"). We agree that the Option Agreement shall remain in full force and 
effect notwithstanding the expiration of your Employment Agreement, except that 
at the Expiration Date your options will convert from "Incentive Stock Options" 
to "Nonstatutory Stock Options" (as defined in the Company's 1996 Stock Option 
Plan). More particularly, the Company acknowledges and agrees that your 
"Service" (as defined in the Option Agreement) for option vesting and all other 
purposes shall be deemed to continue without interruption throughout the 
Consulting Period.

     6.   Continuation of Restrictive Covenants. Notwithstanding the expiration 
of your Employment Agreement on the Expiration Date, you acknowledge and agree 
that the covenants you made in Sections 6.2 and 6.3 of the Employment Agreement 
will continue, subject to the following modifications which will become 
effective immediately:
    


          (a) The Non-Competition Period (as defined in your Employment
Agreement) is extended to continue during the Consulting Period and for a period
of two years following the end of the Consulting Period; and

          (b) Section 6.2(a)(i) is amended to restrict the scope of the 
non-competition covenant to cover only "Chinese and Asian foods and Chinese and 
Asian food concepts."

     7. Service as a Director. The Company agrees to nominate you as a Director 
each year during the Consulting Period and to recommend to the stockholders 
that they vote in favor of your election.

     8. Ownership of Property. You agree that all concepts, menu items, 
marketing plans and other information, materials and intangible properties 
developed by you in connection with the performance of Services hereunder shall 
be owned by the Company, and you further agree to execute and deliver such 
documents or instruments reasonably requested from time to time by the Company 
to fully vest in the Company ownership of such properties.

     We are pleased that you have agreed to continue your involvement with the 
Company, and look forward to your continued service. If the foregoing is in 
accordance with your understanding, please sign and return to me the enclosed 
copy of this letter.

                                        Sincerely,

                                        P.F. CHANG'S CHINA BISTRO, INC.


                                        /s/ Rick Federico
                                        --------------------------------
                                        Rick Federico, President


I have read the foregoing
Agreement and agree to be
bound by the same.


/s/ Paul M. Fleming
----------------------------
Paul M. Fleming