PRIME RETAIL, INC. 2002 LONG-TERM INCENTIVE PLAN

     Our board of  directors  approved the Prime  Retail,  Inc.  2002  Long-Term
Incentive  Plan on August 13, 2002.  The following is only a summary of the plan
and is qualified in its entirety by reference to the full text of the plan.

Summary of the Plan

     Purpose.  The  purpose of the plan is to  optimize  our  profitability  and
growth through long term  incentives that are consistent with our objectives and
that  link  participants'  interests  to  those  of our  shareholders.  The plan
authorizes the granting of performance awards payable in stock or cash.

     Eligibility.  Our  executive  officers  and key  employees  are eligible to
participate in the plan. As of September 30, 2002, eight executive  officers and
key employees had been selected to participate in the plan.

     Administration.  The plan shall be  administered  by our board of directors
pursuant  to the  terms  and  conditions  contained  in the  plan.  The board of
directors may delegate its authority to administer the plan to the  compensation
committee at any time. If it does so, the  compensation  committee will have all
the powers of the board of directors with respect to administering the plan.

     Milestone  Bonuses.  Each  participant  shall  have the right to  receive a
portion of the  contributions to be made to the plan upon achievement of the two
milestones described below. A participant's  entitlement to share in one or both
of the milestone  bonuses will vest as follows:  (i) 50% upon achievement of the
applicable  milestone  (provided the participant  remains employed by us on such
achievement date); and (ii) with respect to each milestone that is achieved, the
remaining 50% on December 31, 2005  (provided the  participant is still employed
by us on that  date).  Awards will be payable  within 60 days of the  applicable
vesting date.  Distributions will be made either in cash, shares of common stock
or a combination of cash and shares of common stock,  as determined by the board
of  directors.  Any  distributions  in shares of  common  stock  must be made in
compliance with applicable laws and regulatory provisions.

o        Restructuring/Recapitalization Plan Milestone.  A contribution  of $2.5
         million will be made to the plan  upon  the  completion of a successful
         restructuring/recapitalization plan that is  approved  by  the board of
         directors and that includes the redemption or exchange of our  Series A
         and B Preferred Stock. Such a restructuring/recapitalization may or may
         not occur in conjunction with the transfer of a controlling interest in
         us to a third-party investor, but shall not include a transaction which
         does not benefit the company and our existing shareholders.

o        Mega Deal VI Loan Milestone.  A contribution  of $1.5  million  will be
         made to the plan upon the completion of a successful refinancing of the
         Mega Deal VI Loan (as defined in the plan) and/or  the  sale  of assets
         securing the Mega Deal VI  Loan resulting  in  the  retirement  of  the
         existing  Mega  Deal  VI  Loan  in  a  manner  approved by the board of
         directors.

     Value Bonus.  Each participant shall have the right to receive a portion of
the  contribution to be made to the plan upon achievement of the Net Asset Value
(as  defined in the plan)  target(s)  set forth below on December  31,  2005.  A
contribution  of $1.5 million will be made to the plan if the Net Asset Value is
equal to or greater than $200 million. An additional  contribution equal to 1.5%
of the amount by which the Net Asset Value  exceeds  $200  million  will also be
made to the plan.  The $200  million  dollar  target  shall be  increased by the
amount of any  equity  contributed  to us after the  adoption  of the plan,  and


decreased by the cost to us of any stock  repurchases or reductions  effected by
us after the effective  date of the plan or  distributions  to our  shareholders
(other  than  distributions  paid from  operating  cash flow).  A  participant's
entitlement to share in the value bonus will vest on December 31, 2005 (provided
the  participant is still  employed by us on that date).  Awards will be payable
within 60 days of the vesting date.  Distributions  will be made either in cash,
shares of common stock or a combination  of cash and shares of common stock,  as
determined  by the board of  directors.  Any  distributions  in shares of common
stock must be made in compliance with applicable laws and regulatory provisions.

     Limitations  on Transfer;  Beneficiaries.  No award will be  assignable  or
transferable  by a  participant  other than by will or the laws of  descent  and
distribution.  A  participant  may,  in the  manner  determined  by the board of
directors, designate a beneficiary to exercise the rights of the participant and
to receive any  distribution  with  respect to any award upon the  participant's
death.

     Acceleration  Upon Certain  Events.  With respect to each milestone that is
achieved, if a participant's  employment is terminated as a result of his or her
involuntary termination without cause, death or disability, the remaining 50% of
the  participant's  entitlement to share in the applicable  milestone  bonus(es)
will become immediately vested. With respect to each milestone that is achieved,
if a change in control (as defined in the plan) occurs, the remaining 50% of the
participant's  entitlement to share in the applicable  milestone  bonus(es) will
become  immediately  vested  upon the  effective  date of the  change in control
(provided  the  participant  is  employed  by us on that  date).  In the event a
participant  is  entitled  to a  change  of  control  payment  under  his or her
employment  agreement,  the remaining 50% of the applicable  milestone bonus(es)
payable to such  participant  shall be reduced by an amount  equal to 50% of the
change of control payment payable under such participant's employment agreement.

     Termination and Amendment. Our board of directors may, at any time and from
time to time, terminate,  amend or modify the plan without shareholder approval.
The board of directors may modify, extend or renew outstanding awards, or accept
the surrender of outstanding awards (to the extent not already  distributed) and
grant  new  awards  in   substitution   of  them  (to  the  extent  not  already
distributed).