Pet City Limited

by PetSmart
December 31st, 1996


                                                                   EXHIBIT 10.1


DATED                             24 OCTOBER                               1996
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                                C.G. CLARKE ESQ.


                                    - and -


                                PET CITY LIMITED


                                    - and -


                                  PETsMART INC.




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                                SERVICE AGREEMENT
- -------------------------------------------------------------------------------

                              TAYLOR JOYNSON GARRETT

                                    Carmelite

                               50 Victoria Embankment

                                   Blackfriars

                                 London EC4Y 0DX

                               Tel:  0171 353 1234

                               Fax:  0171 936 2666

                                  DX:  41 LONDON


                                     9/10/96

                                  Ref:  ASH/JEC



THIS SERVICE AGREEMENT is made the 24th day of October 1996

BETWEEN

(1) CHARLES GILES CLARKE of Holt Manor, Holt, Wiltshire BA14 6PR (the
    "Executive");
(2) PET CITY LIMITED of Unit E, The Dorcan Complex, Faraday Road, Swindon SN3
    5HQ ("the Company").
(3) PETsMART INC of 10000 North 31st Avenue Suite C100 Phoenix Arizona 85051
    ("the Parent")

AGREED TERMS
1.  This agreement is conditional upon an office copy of the Order of the Court
    sanctioning the proposed scheme of arrangement to be effected by Pet City
    Holdings Plc pursuant to section 425 of the Companies Act 1985 being
    delivered for registration to and being registered by the Registrar of
    Companies in England and Wales by not later than 31 January 1997 or such
    later date as Pet City Holdings Plc and the Parent shall agree and the High
    Court of Justice in England and Wales shall approve.

2.  ROLE

2.1 The Executive shall be employed as Chief Executive Officer of the Company
    ("the Role").  In connection with the Role and during the term of this
    agreement the Executive shall:

    (a)  be appointed as an Executive Vice President of the Parent with
         particular responsibility for the development of the business of the
         Parent and its subsidiary and associated companies ("the Group") in
         Europe (including for the avoidance of doubt the Republic of Ireland,
         United Kingdom, all other members of the European Union, Switzerland,
         Austria, Iceland and all Central European States,

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         Russia and those states that once formed part of the USSR and Israel 
         ("the Territory").

    (b)  be appointed as Executive Vice President of any company formed to hold
         or manage the Group's business interests within any part of the 
         Territory and;

    (c)  shall report direct to the Chief Executive Officer of the Parent from
         time to time; and

    (d)  in addition and without prejudice to the generality of the foregoing,
         the Executive shall in connection with the Role assume such duties and
         responsibilities, powers, authorities and discretions as shall be
         consistent with such a position and as may be reasonably determined by
         the board of directors of the Company (the "Board") with regard to the
         United Kingdom or the board of directors of the Parent with regard to
         the rest of the Territory from time to time.

3.  NOTICE

    Subject to the provisions of clause 11 below the Executive's employment by
    the Company shall continue from the date of this agreement for a period of
    two years from the date that the condition set out in clause 1 shall be
    satisfied.  Pursuant to Section 197 of the Employment Rights Act 1996 the
    Executive hereby excludes any right to compensation for unfair dismissal or
    to a redundancy payment in the event of the expiry of the fixed term
    without renewal.

    Without prejudice to the above the Executive may terminate this contract
    prior to the expiry of the fixed term by giving not less than 60 days
    written notice.

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4.  CONTINUITY OF EMPLOYMENT

    The Executive's previous employment with Pet City Holdings Plc shall be
    treated as part of his continuous period of employment which accordingly
    began on 9 October 1992 (the "Commencement Date").

5.  HOURS OF WORK/PLACE OF WORK

5.1 Subject to Clause 13.1 below the Executive's employment hereunder is a
    "full-time" commitment to the intent that the Executive shall have no other
    employment or other business interests which will interfere with his
    obligations hereunder.  In any event, the Executive will be required to
    devote such time and attention to the service of the Company and any other
    company which is a subsidiary or holding company of the Company or any
    subsidiary of any such holding company (together "the Group") as may be
    reasonably necessary for the proper discharge of his duties and as directed
    by the Board.

5.2 The Executive's principal place of work will be Unit E, The Dorcan Complex
    aforesaid or such other address as may from time to time be the Company's
    principal place of business as agreed by the Executive and the Board.

6.  SALARY, BONUS, EXPENSES AND OPTIONS

6.1 The Executive's salary shall be L180,000 per annum increasing to L200,000
    per annum on 1 February 1998 provided that, on that date, a Group Company
    has been established and is operating within The Territory outside the
    United Kingdom or the Republic of Ireland.  The Executive's salary shall be
    paid in four-weekly instalments in arrears by direct credit transfer to the
    Executive's nominated bank account.

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6.2 In addition to payment of salary in accordance with clause 6.1 the
    Executive shall be entitled to a bonus payable on the terms and subject to
    the conditions set out in the First Schedule.

6.3 Upon presentation of such receipts and vouchers as are reasonably required
    by the Company, the Company (or another company comprised within the Group)
    shall pay to the Executive the amount of all hotel, travelling,
    entertainment and other out of pocket expenses reasonably and properly
    incurred by him in carrying out his duties under this agreement.  Any
    credit card or charge card supplied to the Executive by the Company shall
    be used solely for expenses incurred by him in carrying out his duties
    under this agreement.

6.4 The Executive shall be entitled to participate in option schemes and
    arrangements established by the Parent for the benefit of other Executive
    Vice Presidents of the Parent and the level, terms, and frequency of such
    grants shall be without prejudice or discrimination to the Executive (in
    comparison with the level, terms and frequency of grants to other Executive
    Vice Presidents).

7.  MOTOR CAR

    The Company shall continue to provide the Executive with a car of a type
    and value appropriate (in the reasonable opinion of the Board) to the
    Executive's position in the Company for the Executive's use in the
    performance of his, duties under this agreement and shall pay all running
    expenses in connection with it including all road tax and it is
    acknowledged that the Executive's current car is so appropriate and that
    any replacement would be a vehicle of equivalent value.  Subject to such
    restrictions and upon such conditions (if any) as the Company may from time
    to time impose, the Executive shall be entitled to use this car for his own
    private use.  The Executive shall return this car to the Company
    immediately after the termination of his employment or if he ceases at any
    time during the period of his employment to hold a valid and current
    license to drive private motor cars.  The Executive shall at all times take
    good care of the car and

                                       4



    procure that it is properly taxed (at the cost of the Company), kept 
    in a roadworthy condition, that the provisions and conditions of any 
    policy of insurance relating thereto are observed and that so far as 
    is reasonably practical such policy is not rendered void or voidable.  
    For the purpose of calculating the value to the Executive of the 
    benefit of using the car for the Executive's private purposes the then 
    current Inland Revenue scales will be used.

8.  HOLIDAYS

8.1 The Executive shall be entitled to 25 working days holiday, with pay in
    each period of 12 months, to be taken at such time or times as the
    Executive shall notify the Board.  This holiday entitlement is in addition
    to statutory and other public holidays.

8.2 The Executive's entitlement to holiday shall accrue pro rata to the nearest
    whole day throughout each period of 12 months of the Executive's
    employment.

8.3 Upon termination of his employment for whatever reason the Executive shall
    either be entitled to holiday pay in lieu of holiday entitlement
    outstanding or shall be required to repay to the Company any salary
    received for holiday taken in excess of his actual entitlement.  The basis
    for calculation of such payment shall be 1/253 x annual basic salary for
    each day.

9.  SICKNESS OR INJURY

9.1 If the Executive shall at any time be incapacitated by illness or accident
    from performing his duties then the Executive shall as soon as possible
    inform the Company Secretary of such illness or accident and of the
    expected date of his return to work.

9.2 Without prejudice to the provisions of the following clause and subject to
    the Executive accounting to the Company for all sickness or other national
    insurance benefit which may be payable to him, the Executive shall continue
    to receive his salary under this agreement

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    in respect of the first 13 weeks of absence through illness or injury (such
    remuneration being deemed to be inclusive of any statutory sick pay to 
    which he may be entitled).

9.3 Immediately following the Executive's return to work after a period of
    absence of seven days or less which or any part of which has not previously
    been authorised by the Company he shall be required on request by the
    Company to complete a self-certification form in the terms of the form
    which shall be provided stating the date of and the reason for his absence,
    including details of sickness on non-working days, as this information is
    required by the Company for calculating statutory sick pay entitlement. 
    Completed self-certification forms will be retained in the Company's
    records.

9.4 The Executive shall, if so required by the Company, produce a doctor's
    certificate verifying that any absence from work is due to accident or 
    ill-health and in default such absence shall be deemed to be unjustified.

9.5 For the purposes of calculation of statutory sick pay the days on which the
    Executive could qualify for payments are Monday, Tuesday, Wednesday,
    Thursday and Friday.

9.6 The Executive may be required during the course of his employment to attend
    a doctor or clinic nominated by the Company for the purpose of a
    comprehensive medical examination to determine his fitness for continued
    employment and shall cooperate in ensuring the prompt delivery of the
    resulting report to the Company.

10. PENSION, MEDICAL COVER, PHI AND LIFE ASSURANCE

10.1 A contracting out certificate is not in force in respect of the Executive's
     employment hereunder.

10.2 The Company agrees to make an annual lump sum contribution equal to 10 per
     cent of the salary payable to the Executive in accordance with clause 6.1
     (or pro rata for any part of a year during which the Executive is employed)
     to an Inland Revenue approved

                                       6



     personal pension scheme nominated by the Executive to be made on 
     4 April 1997 and on 4 April 1998 provided that such contribution shall 
     not exceed the amount permitted by the Inland Revenue.

10.3 Subject to the rules for the time being thereof (including the Executive
     satisfying any eligibility conditions) the Executive, his spouse and his
     dependent children shall be entitled to become and remain throughout the
     period of his employment a member of the Pet City private medical insurance
     scheme at a level appropriate to the Executive's position with the Company,
     details of which are available for inspection from the Company Secretary.

10.4 Subject to the rules for the time being of such schemes (including the
     Executive satisfying any eligibility conditions), the Executive shall be
     entitled to become and remain throughout the period of his employment a
     member of the Pet City Life Assurance and Permanent Health Insurance
     schemes with a level of cover, appropriate to the Executive's position with
     the Company.  The details of the schemes are available for inspection from
     the Company Secretary.


11.1 Notwithstanding any other provisions of this agreement, the Executive's
     employment shall terminate automatically without prior notice upon the
     Executive:

     (a)  reaching the age of 65; or

     (b)  being disqualified from being a director due to an order made by any
          court or under any legislation from time to time in force.

11.2 Notwithstanding any other provision of this agreement, if the Executive
     shall:

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     (a)  fail or neglect efficiently and diligently to carry out his duties or
          be guilty of any material or persistent breach or non-observance of
          any of the provisions of this agreement;

     (b)  be guilty of gross misconduct or any other conduct which is in the
          opinion of the Board calculated or likely to affect prejudicially the
          interests of the Company or the Group, whether or not such misconduct
          or other conduct occurs during or in the context of his employment;

     (c)  be convicted of any criminal offence involving dishonesty;

     (d)  be made the subject of a bankruptcy offer or have a receiving order or
          an administration order made against him or makes any composition with
          his creditors or otherwise takes advantage of any statute from time to
          time in force offering relief for insolvent debtors; or

     (e)  become a patient within the meaning of the Mental Health Act 1983;

     the Company may in any such case by written notice to the Executive
     forthwith terminate his employment without any obligation to pay any
     further sums to him whether by way of compensation, damages or otherwise in
     respect of any notice period or any unexpired period of this agreement,
     provided that any such termination shall be without prejudice to any other
     rights of the Company.

11.3 Upon any termination of the Executive's employment the Company shall be
     entitled to pay the Executive salary in lieu of notice or any unexpired
     period of this agreement which would otherwise have been payable during
     such period of notice or unexpired period in the amounts and at the times
     provided for in this agreement.  In addition, the Company may at any time
     during the Executive's employment require the Executive to carry out no
     duties or to remain away from the office for a period of not more than 6
     months in aggregate.

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11.4 Notwithstanding any other provision of this agreement, if the Executive
     shall become unable properly to perform his duties hereunder by reason of
     ill-health, accident or otherwise for a period or periods aggregating at
     least 180 days in any period of 12 consecutive calendar months then the
     Company may by not less than three month's prior written notice to the
     Executive terminate his employment hereunder provided that no such notice
     shall be given after the expiration of two months from the end of any such
     period or, if more than one, the last of such periods aggregating at least
     180 days.

11.5 In order to investigate a complaint of misconduct made against the
     Executive or otherwise when in the opinion of the Board the interests of
     the Company so require the Company shall be entitled to suspend the
     Executive from his duties on full pay and with full entitlement to all
     other benefits under this agreement for so long as the Board shall
     reasonably consider appropriate (up to a maximum of 4 weeks) and to require
     the Executive to stay away from any premises, employees, officers,
     customers and clients of the Company or of any company within the Group.

11.6 Forthwith upon being requested by the Company and in any event upon
     termination of his employment for whatever reason the Executive shall
     deliver to the Company all books, documents, papers (including copies),
     materials, keys and other property of or relating to the business of the
     Company or of any member of the Group then in his possession or which are
     or were last under his power or control including, without limitation, any
     car, credit card or charge card provided in connection with the Executive's
     employment.

11.7 Upon termination of the Executive's employment for whatever reason the
     Company shall be entitled to deduct from any salary or other payment due to
     him any sums owed by the Executive to any member of the Group under the
     terms of this agreement or on any account whatsoever.

                                      9



12. OTHER BUSINESS INTERESTS AND CONFIDENTIALITY

12.1 Without prejudice to the generality of clause 5.1 above, except with the
     prior written consent of the Board, the Executive shall not during the
     continuance of his employment be engaged or interested in or concerned with
     (in any capacity whatsoever and whether on his own account or in
     conjunction with any other party) any other business which will interfere
     with the Executive's obligations under this agreement save that nothing in
     this clause shall prevent the Executive from:

     (i)   being a director/shareholder of The Foster Rooms Limited provided 
           that this company shall be and remain a reputable company which 
           does not compete with or supply the Company or any company within 
           the Group;
     (ii)  with the written consent of the Chief Executive Officer of the 
           Parent, being an officer of any Quango or other government body;
     (iii) holding or being beneficially interested in shares or securities
           quoted on any recognised investment exchange ("Quoted
           Securities") provided that the principal business of the company
           or group of companies in which the Executive holds such Quoted
           Securities is not a Relevant Business that is competitive with
           that of the Company as both terms are defined in paragraph 13
           below; or
     (iv)  with the written consent of the Chief Executive Officer of the 
           Parent, spending up to 2 business days per month on any other 
           business interests (provided that they are not competitive with 
           the trading interests of the Group.

12.2 The Executive shall not, either during the continuance of his appointment
     under this agreement (except so far as may be necessary in carrying out his
     obligations under this agreement) or thereafter, without the prior consent
     in writing of the Board, divulge to any person or use or exploit except for
     the benefit of the Company or any other member of the Group, and shall use
     his best endeavours to prevent the publication or disclosure of any
     confidential information concerning the business, finances, transactions or
     affairs of the Company or any other member of the Group which has or may
     come to his knowledge-either during the course of his employment under this
     agreement or prior

                                      10



     thereto provided that this restriction shall cease to apply to information 
     or knowledge which may come into the public domain otherwise than through 
     unauthorized disclosure by the Executive.

12.3 For the purposes of this clause "confidential information" shall comprise
     all information which is identified or treated by the Company as
     confidential or which by reason of its character or the circumstances or
     manner of its disclosure is evidently of such a nature and without
     prejudice to the generality of the foregoing shall include the Group's
     store opening plan, business plan, management accounts and other key
     indices including the gross margin, shrinkage rate, store contribution
     percentage and stock turn of the Group.

13. POST TERMINATION COVENANTS

13.1 For the purposes of this clause:

     (a)  all references to the "Company" shall be construed to mean the Company
          and/or any member of the Group with which the Executive has been
          actively concerned during the course of his appointment under this
          agreement or under his previous contract of employment with Pet City
          Holdings Plc;

     (b)  the "Restricted Period" shall mean the period of 12 months from the
          termination of the Executive's employment under this agreement;

     (c)  a "Restricted Employee" shall mean any person employed by any member
          of the Group as a director or in a managerial or technical capacity or
          as a sales representative or in a skilled or supervisory position;

     (d)  "Relevant Business" means the wholesale and retail sale of animals,
          animal food stuffs and products relating to the up-keep of animals
          within the United Kingdom carried out by the Group as at the
          commencement of the Restricted Period.

                                      11



13.2 Except with the prior written consent of the Board, the Executive shall not
     during the Restricted Period be engaged or interested in or concerned with
     (in any capacity whatsoever and whether on his own account or in
     conjunction with any other party) any person, firm or company carrying on
     the Relevant Business in the United Kingdom.

13.3 Except with the prior written consent of the Board, the Executive shall
     not, in competition with the Company, during the Restricted Period (in any
     capacity whatsoever and whether on his own account or in conjunction with
     any other party) canvass or solicit or accept, orders or facilitate the
     canvassing or soliciting or acceptance of orders in respect of the Relevant
     Business from any customer of the Company's Relevant Business as at the
     date of the termination of the Executive's employment under this agreement
     or from any person who was such a customer at any time during the period of
     12 months prior thereto was a person, firm or company with whom the Company
     has or had dealings, such person firm or company being or having been a
     supplier or manufacturer of whom the Executive has knowledge or with whom
     he has dealt at any time during the period of 12 months prior to the
     termination of his appointment under this agreement.

13.4 Except with the prior written consent of the Board, the Executive shall not
     during the Restricted Period (in any capacity whatsoever and whether on his
     own account or in conjunction with any other party) employ or endeavour to
     entice away from the Company any person who is at the date of termination
     of the Executive's employment hereunder a Restricted Employee employed by
     the Company and the Executive shall not discourage any such Restricted
     Employee from continuing to be so employed.

13.5 The Executive hereby agrees that, he will, at the request of the Board of
     Directors of the Parent, execute a deed of restriction in terms similar to
     or in all respects less restrictive than the covenants contained in this
     clause 13 in relation to other parts of the Territory in which the
     Executive is involved in the course of his employment under this agreement.

13.6 The Executive hereby acknowledges and agrees that the covenants contained
     in this clause are separate, severable and enforceable and that, having
     obtained professional

                                      12



     advice, the restrictions contained in such covenants are fair and 
     reasonable in the context of this agreement.  The parties acknowledge, 
     however, that such restrictions are liable to be rendered invalid by 
     changing circumstances or other unforeseen reasons and accordingly:

     (a)  if any one or more of the restrictions contained in this clause shall
          either individually or together be adjudged, for whatever reason, to
          go beyond that which is reasonable in all the circumstances for the
          protection of the legitimate interests of the Company but would be
          adjudged reasonable if any particular restriction or restrictions were
          deleted or limited in any manner (including, without prejudice to the
          generality of the foregoing, any reduction in duration or geographical
          area) the said restrictions shall apply with such deletions or
          limitations; or

     (b)  if at any other time for whatever reason the Company shall consider it
          to be in its best interests it shall be entitled, at its discretion,
          by notice in writing to the Executive to delete or limit in any manner
          any of the restrictions contained in this clause and in such event the
          said restrictions shall apply with such deletions or limitations.

13.7 The Executive hereby acknowledges and agrees that upon the termination of
     his employment hereunder he shall be obliged during the Restricted Period
     to draw the provisions of this clause 13 to the attention of any third
     party who may at any time either before or after the date of termination of
     this agreement offer employment or appointment as a consultant to him.

14. DISCIPLINE AND GRIEVANCE PROCEDURE

    There are no specific disciplinary rules applicable to the Executive's
    employment hereunder and any relevant matters shall be made a subject for
    discussion at the meeting of the Board next following the issue arising and
    any matter that cannot be resolved to

                                      13



    the mutual satisfaction of both parties shall be referred to the Chief 
    Executive Officer of the Parent.

15. PREVIOUS AGREEMENTS

    All previous agreements or arrangements between the Executive and any
    company in the Group relating to the employment of the Executive shall be
    deemed to be cancelled.

16. GENERAL

16.1 No amendment to these terms shall be effective unless made in writing and
     signed by or on behalf of the parties.

16.2 The information in this statement constitutes a written statement of the
     terms of your employment in accordance with the provisions of the
     Employment Rights Act 1996.

16.3 Any notice required to be given by either party to this agreement to the
     other shall be deemed validly served if delivered by hand or sent by first
     class prepaid registered or recorded delivery letter through the post to
     the address of the party to be served herein given or (in the case of the
     Company) the registered office of such party for the time being and any
     notice so served by hand shall be deemed to have been served at the lime of
     delivery and any notice so served through the post shall be deemed to have
     been served forty eight hours after the time it was posted.  In proving
     such service it shall be sufficient to prove that the notice was properly
     delivered, transmitted or (as the case may be) addressed and posted.

16.4 This agreement and the documents to be entered into as provided in this
     agreement shall be governed and construed in accordance with English law
     and the parties submit to the non-exclusive jurisdiction of the English
     courts.

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IN WITNESS WHEREOF THIS AGREEMENT HAS BEEN EXECUTED AS, A DEED ON THE DATE
APPEARING ABOVE.


SIGNED as a Deed by          )
CHARLES GILES CLARKE         )    /s/ Charles Giles Clarke
in the presence of:          )


EXECUTED AS A DEED BY        )
PET CITY LIMITED             )    /s/ Francis Richard Northcott         Director
                                  /s/ Nicholas Harrison       Director/Secretary


EXECUTED AS A DEED BY        )    /s/ C. Donald Dorsey                  Director
PETsMART INC.                )    /s/ Mark S. Hansen          Director/Secretary

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                                FIRST SCHEDULE
                                   THE BONUS

1.  In respect of the period from 1 August 1996 to 31 January 1997 the Company
    will procure that the Executive is paid a bonus of L20,000.  This bonus
    will be paid on or before 31 March 1997.

2.  (a)  In respect of the periods:

         (i)  1 February 1997 to 31 January 1998; and,

         (ii) 1 February 1998 to the date of expiry of the fixed term of this
              agreement,

         the Executive shall be entitled to a bonus of 40% of his salary as
         specified in clause 6.1 of the agreement to which this is a schedule
         in respect of such period if EBIT exceeds Budgeted EBIT.

    (b)  Save as set out in 2(a) above any bonus paid to the Executive by the
         Company shall be at the Board's absolute discretion.

    (c)  "EBIT" for the purposes of 2(a) above shall mean the earnings before
         interest and taxation of the Pet City Holdings Plc, Pet City Limited
         and Pet City Resources Limited (formerly Jollyes Limited) (referred to
         in this Schedule as the "UK Group") as shown:

         (A) in respect of the period specified in 2(a)(i) above, by the audited
         consolidated profit and loss account of the UK Group for that period;
         and

         (B) in respect of the period specified in 2(a)(ii) above the
         management accounts approved by the boards of the UK Group for that
         period,

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    with the following adjustments (to the extent not already taken into
    account in such account):
3.
         (i)   after deducting all expenses (including, without prejudice to the
               generality of the foregoing, the salary payable to the Executive
               under this agreement (but, for the avoidance of doubt not
               deducting any amount in respect of the bonus payable hereunder)
               and salaries and bonuses payable by the Company under any other
               service agreement to which the Company is a party), depreciation
               as charged in the accounts and any revenue expenses charged
               directly against reserves;

         (ii)  before deducting any taxation or interest on borrowed moneys or
               commissions in respect of documentary credits;

         (iii) before taking into account extraordinary items or capital
               profits or capital losses unless provided for in the
               relevant Business Plan;

         (iv)  after deducting any part of the profits and adding any part of
               the losses of any subsidiary undertaking attributable to shares
               in such subsidiary undertaking not owned by the Company or by any
               subsidiary undertaking of the Company; and

         (v)   after making such further adjustments as the auditors for the
               time being of the Company in their absolute discretion (but in
               consultation with the Board and the Executive) shall consider
               appropriate.

    (a)  "Budgeted EBIT" shall mean the figure in the Business Plan of the UK
         Group for the related period that is equivalent to EBIT and, in the
         event of any dispute, as certified by the auditors of the Company,
         acting as experts and in their absolute discretion.

                                      17



    (b)  "Business Plan" shall mean the business plan of the UK Group as
         approved by the Board of the Parent each year and as amended from time
         to time.

    (c)  If any increase in the issued share capital of any company within the
         UK Group shall be effected after the date hereof as a result of which
         the net profits are in the opinion of the Board likely to be
         materially enlarged such adjustment shall be made in the calculation
         of Budgeted EBIT or the rate of bonus payable thereon (or partly one
         and partly the other) as the Company and the Executive may agree or
         failing agreement as the auditors of the Company from time to time in
         their absolute discretion determine to be fair and reasonable for the
         purpose of counteracting an increase in the bonus otherwise resulting
         from the making of additional EBIT (directly or indirectly)
         attributable to such increase of issued share capital.

4.  (a)  The bonus (if any) payable in respect of the period specified in
         2(a)(i) above shall be ascertained following the completion and
         adoption in general meeting of the audited consolidated accounts of
         the UK Group in the year to 31 January 1998 and shall be certified by
         the auditors of the Company from time to time, acting as experts and
         not as arbitrators, whose decision shall be final and binding on the
         parties to this agreement.  Such bonus shall be paid within one month
         after the completion and adoption of such accounts.

    (b)  The bonus (if any) payable in respect of the period specified in
         2(a)(ii) above, or in respect of any period of the term of this
         agreement embracing part only of either period specified in 2 (a) (i)
         or (ii) above, shall be ascertained by reference to the Management
         Accounts as approved by the boards of the UK Group or if required by
         the Company, by the auditors of the Company from time to time, Such
         bonus shall be paid within four months of the end of such period.

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