-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RR5m4o1VHE8sgxsj2xNCFXxZckmCL6i+T/ADkTJ0XgTh9xinAOh0hcXwScGcYOfG 13mGDyVju2E2j0Ah8ibG8w== 0000912057-01-511430.txt : 20010501 0000912057-01-511430.hdr.sgml : 20010501 ACCESSION NUMBER: 0000912057-01-511430 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIME RETAIL INC/BD/ CENTRAL INDEX KEY: 0000911708 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 382559212 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-13301 FILM NUMBER: 1616334 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST STREET 2: 1900 FLOOR CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4102340782 MAIL ADDRESS: STREET 1: 100 EAST PRATT STREET STREET 2: 1900 FLOOR CITY: BALTIMORE STATE: MD ZIP: 21202 10-K/A 1 a2047292z10-ka.txt 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------- FORM 10-K/A (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from __________ to _________________ COMMISSION FILE NUMBER: 001-13301 PRIME RETAIL, INC. (Exact name of registrant as specified in its charter) MARYLAND 38-2559212 ----------------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 EAST PRATT STREET BALTIMORE, MD 21202 (410) 234-0782 -------------------------------- --------------- (Address of principal executive offices, (Registrant's telephone, number including zip code) including area code) ------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED: ------------------- ------------------------------------------ Common Stock, $0.01 par value New York Stock Exchange 10.5% Series A Cumulative Preferred Stock, New York Stock Exchange $0.01 par value 8.5% Series B Cumulative Participating Convertible New York Stock Exchange Preferred Stock, $0.01 par value
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None ------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / / No /X/ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $18,738.504 on March 26, 2001 (based on the closing price per share as reported on the New York Stock Exchange - Composite Transactions). The number of shares of the registrant's Common Stock outstanding as of March 26, 2001 was 43,577,916. 2 PRIME RETAIL, INC. FORM 10-K/A DECEMBER 31, 2000 TABLE OF CONTENTS PART III Item 10. Directors and Executive Officers of the Registrant.....................................2 Item 11. Executive Compensation.................................................................6 Item 12. Security Ownership of Certain Beneficial Owners and Management........................16 Item 13. Certain Relationships and Related Transactions........................................19 PART IV Item 14. Exhibits, Financial Schedules and Reports on Form 8-K.................................21 Signatures..............................................................................................22
1 PART III ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names, position and, as of March 31, 2001, ages of the directors of the Company.
- ----------------------------------------------------------------------------------------------------------- NAME POSITION AGE - ----------------------------------------------------------------------------------------------------------- William H. Carpenter, Jr. Director 50 William P. Dickey Director 58 Norman Perlmutter Director 67 Robert Perlmutter Director 39 Kenneth A. Randall Director 73 Glenn D. Reschke Chairman of the Board, President and Chief 49 Executive Officer, and Director Michael W. Reschke Director 45 Sharon Sharp Director 61 Governor James R. Thompson Director 64 Marvin Traub Director 75
The following is a biographical summary, as of March 31, 2001, of each director of the Company. WILLIAM H. CARPENTER, JR. William H. Carpenter, Jr. has been a Director of Prime Retail, Inc. since its inception in 1994. Mr. Carpenter is President of Qode.com and also serves as Senior Vice President of New Media Technology. Mr. Carpenter served as President and Chief Operating Officer of Prime Retail, Inc. from the Company's inception through October 6, 1999. Beginning October 6, 1999, Mr. Carpenter served as President and Chief Executive Officer of primeoutlets.com inc., a subsidiary of Prime Retail, Inc., which ceased operations on April 12, 2000. Prior to joining Prime Retail, Inc., Mr. Carpenter was Senior Vice President and then an Executive Vice President of The Prime Group, Inc. ("PGI") from 1989 to 1994. Prior to joining PGI, Mr. Carpenter was President of D.I. Realty, Inc. (a division of Design International) from 1988 to 1989. Before joining D.I. Realty, Inc., Mr. Carpenter was senior regional leasing director with The Rouse Company and a partner with Cordish/Embry and Associates in Baltimore, Maryland. Mr. Carpenter is also a director of Shopping Mall on Line.com and Qode.com. Mr. Carpenter attended the University of Baltimore and is a member of the International Council of Shopping Centers, a member of Developers of Outlet Centers, and a full member of the Urban Land Institute. WILLIAM P. DICKEY. William P. Dickey has been a Director of Prime Retail, Inc. since 1998. Mr. Dickey is Chairman of the Compensation Committee of the Board of Directors of 2 the Company. Mr. Dickey is the owner and President of The Dermot Company, Inc., a California real estate investment and advisory firm. Prior to forming The Dermot Company, Inc. in October 1991, Mr. Dickey was a Managing Director at The First Boston Corporation, a New York investment banking firm (now CS First Boston) from February 1986 to November 1990. Prior to joining First Boston, Mr. Dickey was a partner with the New York law firm of Cravath, Swaine & Moore from May 1980 to February 1986. From 1964 to 1970, Mr. Dickey was an officer in the U.S. Air Force and during that time served tours in the Philippines and Vietnam as an intelligence officer, and at the U.S. Air Force Academy as an instructor. Mr. Dickey is a Director of Mezzanine Capital Property Investors, Inc., Kilroy Realty Corporation, and Burnham Pacific Properties, Inc. Mr. Dickey previously served on the board of Horizon Group, Inc., which merged with Prime Retail, Inc. Mr. Dickey holds a J.D. degree from Columbia Law School, an M.A. degree in International Affairs from Georgetown University, and a B.S. degree from the U.S. Air Force Academy. Mr. Dickey is a Trustee of the Vera Institute of Justice (N.Y.) and a member of the Urban Land Institute. NORMAN PERLMUTTER. Norman Perlmutter has been a Director of Prime Retail, Inc. since 1998. Mr. Perlmutter is Chairman of the Executive Committee of the Board of Directors of the Company. Mr. Perlmutter is Chairman of the Board of Managers of Perlmutter Investment Company, Managing Partner of the Snowmass Land Company, Chairman of the Board of Managers of International Airport Centers, and Chairman of the Board of Managers of BellPIC. From 1966 until 1999 Mr. Perlmutter served as Chairman of the Board of Heitman Financial Ltd., one of the largest full service real estate companies and real estate investment managers for employee benefit plans in the United States. Mr. Perlmutter is also a director of Chris-Craft Industries, Inc. and United Television, Inc. Mr. Perlmutter previously served on the boards of United Asset Management; Warner Communications, Inc.; Horizon Group, Inc., which merged with Prime Retail, Inc.; and Horizon Group Properties, Inc. Mr. Perlmutter is an Adjunct Professor of Real Estate at the University of Wisconsin. Mr. Perlmutter holds a B.S. degree from the University of Illinois. Mr. Perlmutter is the father of Robert D. Perlmutter. ROBERT D. PERLMUTTER. Robert D. Perlmutter, a Director of Prime Retail, Inc. since 1998, is a principal of Davis Street Land Company, a real estate development firm focused on the development and ownership of retail properties in suburban downtown areas. From 1990 to 1998, Mr. Perlmutter was President and Chief Executive Officer of Heitman Retail Properties, a subsidiary of Heitman Properties, Ltd. Mr. Perlmutter previously served on the board of Horizon Group, Inc., which merged with Prime Retail, Inc. Mr. Perlmutter is a member of the ICSC, the Illinois ICSC Committee and a licensed salesperson. Mr. Perlmutter received a Bachelor of Science degree from the University of Colorado in Boulder. Mr. Perlmutter is the son of Norman Perlmutter. KENNETH A. RANDALL. Kenneth A. Randall has been a Director of Prime Retail, Inc. since its inception in 1994. Mr. Randall is Chairman of the Audit Committee of the Board of Directors. Mr. Randall was the Chairman of ICL Inc. from 1980 to 1982, Vice Chairman of Northeast Bancorp, Inc. from 1977 to 1987, the Chairman and Chief Executive Officer of United Virginia Bankshares Incorporated from 1970 to 1976 and the Chairman of the FDIC from 1965 to 1970. Mr. Randall was President and Chief Executive Officer of The Conference Board, Inc. from 1976 to 1982. Mr. Randall currently serves on the board of directors of Dominion Resources, Inc., Dominion Energy, Inc., Lumbermans Mutual Casualty Company, American Motorist Insurance Company, American Manufacturers Mutual Insurance Company and Virginia Electric and Power Company. Mr. Randall also serves as trustee of the principal Oppenheimer mutual funds. Mr. Randall attended Weber State University and received a B.A. degree and an M.S. degree from Brigham Young University. 3 GLENN D. RESCHKE. Glenn D. Reschke is President, Chief Executive Officer and Chairman of the Board of Directors of Prime Retail, Inc. Reporting to the Board of Directors, Mr. G. Reschke is responsible for all aspects of the Company, its 46 outlet centers and all its employees, including the leasing, operations, marketing, development, finance and administrative functions. In addition, Mr. G. Reschke is responsible for developing and implementing the long-term strategic goals and objectives of the Company as approved by the Board of Directors. Mr. G. Reschke has been a member of the Board of Directors since 1997. Mr. G. Reschke became President and Chief Operating Officer of the Company on October 6, 1999; acting Chief Executive Officer of the Company on February 25, 2000; and Chief Executive Officer and Chairman of the Board of Directors of the Company on July 19, 2000. From the inception of the Company in 1994 through October 6, 1999, Mr. G. Reschke served as Executive Vice President - Development and Acquisitions. Prior to his employment by the Company, Mr. G. Reschke worked for The Prime Group, Inc. ("PGI"), which he joined in 1983 and served as Vice President, Senior Vice President and Executive Vice President. Mr. G. Reschke was responsible for PGI's multi-family, senior housing, single family and land development divisions. Mr. G. Reschke received a Masters in Business Administration from Eastern Michigan University with a specialization in finance after receiving a Bachelor of Science degree with honors in Chemical Engineering from Rose Hulman Institute of Technology in Terre Haute, Indiana. Mr. G. Reschke is the brother of Michael W. Reschke. MICHAEL W. RESCHKE. Michael W. Reschke has been a Director of Prime Retail, Inc. since its inception in 1994. Mr. M. Reschke was Chairman of the Board of Directors of Prime Retail, Inc. from the Company's inception until July 19, 2000. On April 5, 2000, Mr. M. Reschke relinquished his responsibilities as an executive officer and became the non-executive Chairman of the Board of Prime Retail, Inc. Mr. M. Reschke founded The Prime Group, Inc. ("PGI") in 1981 and, since that time, has acted as PGI's Chairman, Chief Executive Officer, and President. Mr. M. Reschke is Chairman of the Board of Trustees of Prime Group Realty Trust (NYSE: PGE) and a member of the Board of Directors of Horizon Group Properties, Inc. (NASDAQ: HGPI). Mr. M. Reschke received a Juris Doctorate degree (summa cum laude) from the University of Illinois after having received a B.A. degree (summa cum laude) in Accounting from Northern Illinois University. Mr. M. Reschke is licensed to practice law in the State of Illinois and is a certified public accountant. Mr. M. Reschke is a board member of World Business Chicago and a member of the National Real Estate Roundtable, the Chicago Development Council, and the Urban Land Institute. Mr. M. Reschke is the brother of Glenn D. Reschke, Chairman of the Board, President and Chief Executive Officer of Prime Retail, Inc. SHARON SHARP. Sharon Sharp, a Director of Prime Retail, Inc. since November 1997, is a director of the Public Gaming Research Institute ("PGRI"), where she serves as publisher of Public Gaming International, the leading magazine of the worldwide lottery industry, and manages their international career placement service specializing in lottery and gaming personnel. Prior to joining PGRI, Ms. Sharp served as director of the Illinois and California Lotteries from 1987-1993. Ms. Sharp attended Holy Cross Central School of Nursing, and received an A.A.S. in Journalism from Harper College. GOVERNOR JAMES R. THOMPSON. Governor James R. Thompson, a Director of Prime Retail, Inc. since its inception in 1994, is the Chairman of the law firm of Winston & Strawn and has been a partner with the firm since 1991. Prior to joining Winston & Strawn, Governor Thompson served as the Governor of Illinois from 1977-1991. Governor Thompson serves on the board of directors of FMC Corporation, Jefferson Smurfit Group plc, Prime Group Realty Trust, Navigant Consulting, Inc., Maximux, Inc., Hollinger International, Inc. and Metal 4 Management, Inc. Governor Thompson received his Juris Doctorate degree from the Northwestern University Law School. MARVIN S. TRAUB. Marvin S. Traub, a Director of Prime Retail, Inc. since its inception in 1994, has been President of Marvin Traub & Associates ("MTA") since 1992. MTA is an international consulting firm with clients in France, Italy, the United Kingdom and the United States. In addition, Mr. Traub joined Financo, Inc. in 1994 as Senior Advisor. Prior to establishing MTA, Mr. Traub was Chairman of Bloomingdales from 1978-1992 and was Vice Chairman of Federated Department Stores from 1988-1992. Mr. Traub was a director and Chairman of the Executive Committee of The Conran Stores, Inc. Mr. Traub is Chairman of the Home Co., in which Prime Retail, Inc. owns an interest, and the Johnnie Walker Collection, a men's sportswear collection. Mr. Traub received an M.B.A. degree (with distinction) from Harvard Business School after receiving a B.A. degree (magna cum laude) from Harvard University. COMPENSATION OF DIRECTORS Directors who are not employees of, or affiliated with, the Company will receive a fee for their services as Directors. Such persons will receive annual compensation of $35,000 plus a fee of $1,000 for attendance in person at each meeting of the Board of Directors, a fee of $500 for participating by telephone in each substantial meeting of the Board of Directors or of any committee of the Board of Directors, a fee of $500 for attending any meeting of any committee of the Board of Directors, and an annual fee of $1,000 for each committee on which such member serves. Such persons also will receive reimbursement of all travel and lodging expenses related to their attendance at both board and committee meetings. Pursuant to the Prime Retail, Inc. Nonemployee Director Stock Plan (the "Directors Plan") adopted at the 1999 annual meeting, the Company grants each outside director of the Company restricted stock awards of 1,000 shares of Common Stock each year. Such shares of restricted stock fully vest upon the date of grant. In consideration for service on the Board of Directors' Executive Committee in 1999, pursuant to the Directors Plan, the Company granted options to purchase an aggregate of 60,000 shares of Common Stock to Mr. N. Perlmutter. Such options vested immediately and will terminate on July 28, 2009. The exercise price of such options is $8.50. In consideration for service on the Board of Directors' Executive Committee in 2000, Governor James R. Thompson and Messrs. N. Perlmutter and W. Dickey each received restricted stock awards of 60,000 shares of Common Stock, which awards were made pursuant to the Directors Plan and which shares vest on a monthly basis beginning May 1, 2000 and which fully vested on September 1, 2000. As additional consideration for service on the Board of Director's Executive Committee, pursuant to the Prime Retail, Inc. 1994 Stock Incentive Plan, the Company granted options to purchase an aggregate of 420,000 shares of Common Stock to outside directors of the Company as follows (with the number of Common Shares to be issued upon exercise thereof indicated parenthetically): Norman Perlmutter (140,000), William P. Dickey (140,000) and Governor James R. Thompson (140,000). Such options vest on a monthly basis beginning May 1, 2000 and fully vested on February 1, 2001 and will terminate upon the earlier to occur of (a) the expiration of ten years from the date of grant or (b) the expiration of one year from the date of termination of services of the optionee as a Director of the Company. The exercise price of such options is $1.6875 per share. 5 OTHER INFORMATION SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of the ownership and changes in the ownership (Forms 3, 4 and 5) with the Securities and Exchange Commission (the "Commission") and the NYSE. Officers, directors and beneficial owners of more than ten percent of the Company's equity securities are required by Commission regulations to furnish the Company with copies of all such forms which they file. Based solely on the Company's review of the copies of Forms 3, 4 and 5 and the amendments thereto received by it for the year ended December 31, 2000, or written representations from certain reporting persons that no Forms 3, 4 or 5 were required to be filed by those persons, to the Company's knowledge no transactions were reported late during the year ended December 31, 2000. ITEM 11 -- EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation for services in all capacities to the Company for the years ended December 31, 1998, 1999 and 2000 with respect to the Chief Executive Officer of the Company and the four other persons who were the most highly compensated executive officers of the Company during 2000, as well as two other persons who performed Chief Executive Officer-related duties during 2000 (the "Named Executives"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS ------------------------- -------------------------------------------- PAYOUTS ------------------------------- ----------- RESTRICTED SECURITIES LTIP STOCK AWARDS UNDERLYING PAYOUTS NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(2) OPTIONS/SARS(#) ($) - --------------------------- ------- --------- ------------ ------------- ---------------- ----------- Glenn D. Reschke 2000 $350,707 $175,203 -- 300,000(4) -- Chairman of the Board, 1999 266,288 -- -- -- -- President and Chief 1998 225,961 252,500 $138,292 50,000(4) -- Executive Officer (3) Robert A. Brvenik (5) 2000 115,588 250,000 -- 200,000(4) -- Executive Vice President- 1999 -- -- -- -- -- Chief Financial Officer 1998 -- -- -- -- -- and Treasurer C. Alan Schroeder 2000 237,207 236,703 -- 200,000(4) Executive Vice President - 1999 239,971 107,000 -- -- -- General Counsel and 1998 200,000 280,000 138,242 50,000(4) -- Secretary Steven S. Gothelf 2000 200,707 200,203 -- 100,000(4) -- Executive Vice President- 1999 188,572 90,000 -- -- -- Finance 1998 148,846 185,000 69,125 25,000(4) -- John S. Mastin 2000 200,707 156,203 -- 100,000(4) -- Executive Vice President- 1999 194,668 90,000 -- -- -- Leasing 1998 156,635 90,000 69,125 25,000(4) -- Michael W. Reschke 2000 86,539 -- -- -- -- Director (6) 1999 $259,255 -- -- -- -- 1998 259,615 225,000 368,636 300,000(4) --
6 Abraham Rosenthal (7) 2000 77,569 -- -- -- -- 1999 419,904 -- -- -- 628,928(8) 1998 415,384 360,000 -- 300,000(4) 628,925(8)
- ----------------- NOTES: (1) Reflects bonus paid for performance in year indicated. (2) The total number of restricted Common Shares held by each person listed above (which number excludes restricted Common Share awards which vested prior to December 31, 2000 and includes all unvested restricted Common Share awards) and the value of such restricted Common Shares, based on the closing price ($0.4688) as listed on the New York Stock Exchange on December 29, 2000 (the last day of trading in 2000), were as follows:
NUMBER OF RESTRICTED COMMON SHARES HELD AT VALUE AT NAME DECEMBER 31, 2000 (#) DECEMBER 31, 2000 ($) ---- --------------------- --------------------- Glenn D. Reschke 7,844 $3,677 Robert A. Brvenik 0 0 C. Alan Schroeder 7,844 3,677 Steven S. Gothelf 3,922 1,839 John S. Mastin 3,922 1,839 Michael W. Reschke 20,915 9,805 Abraham Rosenthal 0 0
(3) Mr. G. Reschke was promoted to President and Chief Operating Officer on October 6, 1999, to President and acting Chief Executive Officer on February 25, 2000, and then to Chairman of the Board, President and Chief Executive Officer on July 19, 2000. Formerly, Mr. G. Reschke served as Executive Vice President - Development and Acquisitions. (4) Options granted pursuant to the 1998 Long-Term Stock Incentive Plan. (5) Mr. Brvenik joined the Company during June, 2000 and therefore received no compensation in 1998 and 1999. (6) On April 5, 2000, Mr. M. Reschke relinquished his responsibilities as an executive officer and became non-executive Chairman of the Board of Directors of Prime Retail, Inc. In connection with the relinquishment of his responsibilities as an executive officer and related termination of his employment agreement Mr. Reschke received a payment of $389,812 from the Company on January 29, 2001. (7) On February 25, 2000, Mr. Rosenthal resigned as Chief Executive Officer of the Company. For a description of the terms of his severance arrangement, see "--Employment Agreements and Change of Control Agreements." (8) As part of his 1998 and 1999 compensation Mr. Rosenthal received special distributions in the amount of $628,925 and $628,928, respectively, which were used to repay certain indebtedness owed by an affiliate of Mr. Rosenthal to the Company. See "Item 13. Certain Relationships and Related Transactions - Loan to Mr. Rosenthal." 7 OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth certain information with respect to options granted in 2000 to the Named Executives by the Company.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR OPTION TERM BASED ON GRANT INDIVIDUAL GRANTS DATE STOCK PRICE ------------------------------------------------------ --------------------------- PERCENT OF TOTAL NUMBER OF OPTIONS SECURITIES GRANTED TO EXERCISE UNDERLYING EMPLOYEES OR BASE OPTIONS (1) IN FISCAL PRICE EXPIRATION NAME GRANTED (#) YEAR (2) ($/SH) (3) DATE 5%($) 10%($) ----------- -------- ---------- ---- ----- ------ Glenn D. Reschke 300,000 21.6% $2.00 5/11/10 $377,337 $956,245 Robert A. Brvenik 200,000 14.4% 2.00 5/11/10 251,558 637,497 C. Alan Schroeder 200,000 14.4% 2.00 5/11/10 251,558 637,497 Steven S. Gothelf 100,000 7.2% 2.00 5/3/10 125,779 318,748 John S. Mastin 100,000 7.2% 2.00 5/3/10 125,779 317,748 Michael W. Reschke 0 0 - - - - Abraham Rosenthal 0 0 - - - -
- ------------------ (1) Except as otherwise noted, the exercise price for the options is generally payable in cash or, in certain circumstances, by the surrender, at the fair market value on the date on which the option is exercised, of Common Shares. (2) Reflects the percent of total options to purchase Common Shares granted to employees in the last fiscal year pursuant to the 1998 Long-Term Stock Incentive Plan and the Nonemployee Director Stock Plan (together, the "Plans"). A total of 1,387,600 options were granted to employees during 2000 pursuant to the Plans. (3) The exercise price for each share is equal to at least one hundred percent of Fair Market Value of a share on the date the option was granted. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table sets forth information with respect to the number of Common Shares underlying Stock Options held by each of the Named Executives and the value of such officers' exercisable and unexercisable options on December 31, 2000. None of the Named Executives exercised any Stock Options during 2000. 8
VALUE OF UNEXERCISED IN-THE- NUMBER OF UNEXERCISED OPTIONS AT 2000 MONEY OPTIONS AT 2000 YEAR YEAR END (#) END ($)(1) ----------------------------------------- ------------------------------------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------- ------------- ----------- ------------- Glenn D. Reschke 130,000 250,000 $0.00 $0.00 Robert A. Brvenik 33,320 166,680 0.00 0.00 C. Alan Schroeder 100,320 166,680 0.00 0.00 Steven S. Gothelf 64,500 75,000 0.00 0.00 John A. Mastin 57,500 75,000 0.00 0.00 Michael W. Reschke 425,000 0 0.00 0.00 Abraham Rosenthal 343,648 0 0.00 0.00
- ---------- Note: (1) Based on the market price of $0.4688 per share, which was the closing selling price per share of Common Stock on the NYSE on December 29, 2000, the last trading day in 2000, less the option exercise price of unexercised, in-the-money options held by the Named Executives at December 31, 2000. EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS The Company has entered into employment agreements (the "Employment Agreements") with each of Messrs. G. Reschke, Robert Brvenik, C. Alan Schroeder, Steven S. Gothelf and John S. Mastin. The agreements generally provide that such executive officers shall devote substantially all of their business time to the operation of the Company. The Employment Agreement for Mr. G. Reschke provides for a term expiring on July 24, 2003. The Employment Agreements with Messrs. Brvenik, Schroeder, Gothelf and Mastin provide for terms expiring on June 11, 2003, May 3, 2003, May 3, 2002 and May 3, 2002, respectively. In the case of Mr. G. Reschke, such term is automatically extended for successive one year periods unless either the Company or Mr. G. Reschke provides the other with prior written notice that such term shall not be extended. With regard to Messrs. Brvenik, Schroeder, Gothelf and Mastin, the respective terms, if not affirmatively terminated or extended for a specific duration by the parties, will continue on a month-to-month basis. Each of the Employment Agreements set forth the base salary for the executive and provide that the employees covered thereby are eligible to receive discretionary bonuses as determined in the sole discretion of the Compensation Committee of the Board of Directors of the Company. In the case of Mr. G. Reschke, such bonus may not exceed 100% of his then-current base salary. During 2000 the Company granted options to acquire 300,000 shares of Common Stock to Glenn D. Reschke. Pursuant to the Employment Agreements with Messrs. Gothelf, Mastin, Brvenik and Schroeder, the Company granted options to acquire 100,000 shares of 9 Common Stock to each of Mr. Gothelf and Mr. Mastin and options to acquire 200,000 shares of Common Stock to each of Mr. Brvenik and Mr. Schroeder. If the Employment Agreements are terminated by the Company "without cause" or are terminated by the executive after a "change in control" or for "good reason" (as such terms are defined in the Employment Agreements), the executive will be entitled to a lump sum payment. With regard to Messrs. Brvenik, Schroeder, Gothelf and Mastin, such payment in the event of termination by the Company without cause or by the executive for good reason will be an amount equal to the product of (x) the number of full and partial years remaining in the initial term of his Employment Agreement and (y) the sum of (A) his then current base salary and (B) a bonus equal to 100% of the average bonus paid to him for the two most recent calendar years, or if no such bonuses were paid, a bonus equal to 50% of his then current base salary (the amounts in clauses (A) and (B), together, the "One-Year Pay Equivalent"). If the Company terminates any of Messrs. Brvenik's, Schroeder's, Gothelf's or Mastin's employment due to disability, the applicable executive will receive one and one-half times the One-Year Pay Equivalent if the Company has terminated or materially reduced the executive's long-term disability coverage as in effect on the date the agreement became effective. With regard to Mr. G. Reschke such amount for termination (i) by the Company "without cause" or by the Company upon Mr. G. Reschke's disability will be equal to the sum of (x) one times the amount of his annual base salary plus (y) one times the average of the amounts payable to such executive for the prior two years under the terms of his "performance bonus" (as such term is defined in Mr. G. Reschke's Employment Agreement) or (ii) by the executive for "good reason" will be equal to one times the amount of his annual base salary. In addition, if the Company terminates any of Messrs. G. Reschke, Brvenik, Schroeder, Gothelf or Mastin without cause or, in the case of Messrs. Brvenik, Schroeder, Gothelf and Mastin, if the executive resigns for good reason and within twelve months from such termination or resignation there is a "change of control" of the Company, the applicable executive will be entitled to receive the amounts set forth in the first sentence of the following paragraph if and to the extent such amount exceeds the amount payable to him pursuant to this paragraph. The Employment Agreements also provide that if, (x) with respect to Messrs. Brvenik, Schroeder, Gothelf and Mastin, the executive terminates the Employment Agreement for any reason simultaneously with a change of control, (y) with respect to Messrs. Brvenik, Schroeder, Gothelf and Mastin, within six months following a change of control the executive terminates the Employment Agreement for any reason, or (z) within twenty-four months following a "change of control" of the Company, the Company terminates the Employment Agreement (during its initial term with respect to Messrs. Brvenik, Schroeder, Gothelf and Mastin and at any time with respect to Mr. G. Reschke) "without cause" or the executive terminates the Employment Agreement (during its initial term with respect to Messrs. Brvenik, Schroeder, Gothelf and Mastin and at any time with respect to Mr. G. Reschke) with "good reason," such executive will be entitled to receive: (i) any amount of base salary accrued but undistributed; (ii) other vested benefits through the effective date of the termination and health and life insurance benefits for a period of two years, plus (iii) in the case of Mr. G. Reschke, a distribution of $1,600,000, and in the case of Messrs. Brvenik, Schroeder, Gothelf and Mastin, a distribution equal to the product of the number of full and partial years remaining in the initial term (or if greater, two years) times the One-Year Pay Equivalent and health and life insurance benefits for twenty-four months. Additionally, if the Employment Agreement with Mr. G. Reschke is so terminated, certain restrictions on the transfer of stock held by Mr. G. Reschke (or obtained by Mr. G. Reschke upon exercise of Common Units) may terminate, and any stock awards under the Company's 1998 Long-Term Stock Incentive Plan will be vested. Finally, if the Employment 10 Agreement with Mr. G. Reschke is terminated, Mr. G. Reschke will be fully vested in any amount accrued on his behalf under any qualified or nonqualified retirement plans of the Company and will also receive the benefits of a $4,000,000 life insurance policy for a period of two years. With regard to Mr. G. Reschke, the Employment Agreement contains certain non-compete provisions restricting the executive from directly or indirectly competing with the Company's business, including (i) performing services for a competitor of the Company similar to the services he provides to the Company, (ii) soliciting or attempting to solicit any competing business from any entity or person that is a vendor, customer or tenant that is actively being pursued by the Company and the executive knows it is being actively pursued, (iii) induce or attempt to persuade any employee or customer, vendor or tenant of the Company being actively pursued by the Company to terminate its business relationship with the Company for a period of up to two years following termination of employment. The Employment Agreement provides that if the Company terminates the executive's employment without cause or within two years of a change of control or the executive terminates his employment with good reason then, so long as the executive is in compliance with these non-compete provisions, the Company will pay the executive an amount equal to $66,666.66 per calendar month for a period of two years, beginning with the first calendar month after termination of the executive's employment; provided that, either the Company or the executive may elect to limit the non-compete period, and the $66,666.66 monthly payments, to one year. With regard to Messrs. Brvenik, Schroeder, Gothelf and Mastin, during and until the later of the term of his employment or, in the case of Messrs. Gothelf and Mastin, May 3, 2002, and in the case of Mr. Brvenik, June 11, 2003, and in the case of Mr. Schroeder, May 3, 2003 (but only if such executive resigns other than for good reason or is terminated by the Company with cause), the applicable executive may not hire, cause to be hired, induce or attempt to induce any officer, employee, agent, consultant, independent contractor, tenant or customer of the Company to discontinue such affiliation with the Company or to refrain from entering into new business relationships with the Company. In addition, during such time, such executives may not perform or solicit services for certain named entities. Each of the Employment Agreements also contain a non-disclosure provision which prohibits each of the executives from disclosing or using any "trade secret" (as such term is defined in the Employment Agreements). On April 5, 2000, the Company and Mr. M. Reschke agreed to terminate Mr. M. Reschke's employment agreement with the Company as a result of Mr. M. Reschke relinquishing his responsibilities as an executive officer of the Company and becoming a non-executive Chairman of the Board of Directors of Prime Retail, Inc. In connection with such termination, the Company agreed to make a payment to Mr. M. Reschke of $389,812, which payment was made on January 29, 2001. The Company entered into a separation agreement (the "Separation Agreement") with Mr. Rosenthal effective as of February 25, 2000. Pursuant to such Separation Agreement, Mr. Rosenthal resigned as Chief Executive Officer and as a member of the Company's Board of Directors. Pursuant to his Separation Agreement, Mr. Rosenthal is entitled to receive separation payments which include: (i) accrued but undistributed amounts of his Base Distribution (as defined in his employment agreement) through March 1, 2000; (ii) a special distribution of $628,927.85 (previously approved by the Board of Directors of the Company in connection with his 1999 compensation) to be used by Mr. Rosenthal as payment in full of the remaining outstanding obligations under a recourse loan of $2.375 million made by the Operating 11 Partnership to Mr. Rosenthal in connection with the Company's IPO (See "Item 13, Certain Relationships and Related Transactions--Loan to Mr. Rosenthal"); and (iii) a severance distribution in an amount equal to $1,750,000 of which $600,000 was paid in March 2000 and the balance of which has been paid and is payable, without interest, in eighteen equal monthly installments of $63,888.89 commencing March 31, 2000. Under the terms of the Separation Agreement with Mr. Rosenthal, the Company provided health and life insurance benefits will be maintained for eighteen months following the date of the Separation Agreement. Mr. Rosenthal's option awards under the Company's 1998 Long-Term Stock Incentive Plan became fully vested. The Separation Agreement with Mr. Rosenthal also included non-competition, non-solicitation and non-disclosure provisions which generally prohibited Mr. Rosenthal for a period of one year from the date of the Separation Agreement from (i) competing with the "business" (as such term is defined in the Separation Agreement) within a defined geographic area, (ii) soliciting employees, customers, vendors or tenants to terminate their relationship with the Company, and (iii) disclosing or using any "trade secret" (as such term is defined in the Separation Agreement). COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Board of Directors, which is required to have a majority of outside Directors who are neither employees nor officers of the Company, is charged with determining compensation for the Company's executive officers. Messrs. Dickey and Randall and Ms. Sharp currently serve on the Compensation Committee. Mr. Dickey is Chairman of the Compensation Committee. No executive officer of the Company served as a director or member of (i) the compensation committee of another entity which has an executive officer who is a Director of the Company or member of the Company's Compensation Committee, (ii) the Board of Directors of another entity in which one of the executive officers of such entity served on the Company's Compensation Committee, or (iii) the compensation committee of any other entity in which one of the executive officers of such entity served as a member of the Company's Board of Directors, during the year ended December 31, 2000. REPORT OF THE COMPENSATION COMMITTEE RESPONSIBILITIES OF THE COMMITTEE The Compensation Committee consists of three independent, non-employee directors: Messrs. Dickey and Randall and Ms. Sharp. It is the Compensation Committee's responsibility to: o Recommend and report to the Board of Directors concerning matters of compensation relating to the Company's senior executive officers, including the Named Executives; o Administer the Company's executive incentive plans; and o Monitor the performance and compensation of the Company's senior executive officers. 12 THE STRUCTURE AND BASIS OF THE COMPANY'S COMPENSATION PROGRAM The Company's compensation programs are based on the following guiding principles: o Competitiveness - Offering competitive levels of total compensation, commensurate with performance, to attract critical executive talent. o Pay for Performance - Fostering a culture that motivates and rewards high-performing executives and emphasizes incentive based compensation. o Retention - Retaining exceptional executive talent and promoting management stability for the long-term benefit of the Company and its shareholders. o Shareholder Interests - Maintaining a compensation program that rewards the achievement of strategic objectives that enhance shareholder value. The Company's executive compensation programs consist of the following components: BASE SALARY The Compensation Committee has the discretion (except as otherwise restricted by any employment agreements) to adjust the salaries of the Named Executives and other senior executive officers of the Company. The Compensation of the Named Executives in 2000 is set forth above under the caption entitled "--Summary Compensation Table." On February 25, 2000, Mr. G. Reschke was promoted from President and Chief Operating Officer to President and Chief Executive Officer of the Company. On July 19, 2000, he was further promoted to Chairman of the Board, President and Chief Executive Officer. As a result of the increase in Mr. G. Reschke's responsibilities, his base salary increased from $350,000 per year to $400,000 per year, effective January 1, 2001. ANNUAL PERFORMANCE BONUS The annual performance bonus for senior officers is determined by the Compensation Committee based on a variety of criteria related to individual and company performance. In reviewing these criteria, the Compensation Committee noted that although the Company did not achieve certain performance or operating objectives, key members of the senior management team were instrumental in the Company's efforts to complete certain financings, financing amendments and sales transactions that helped stabilize the Company's financial position. In December of 2000, the Company completed a series of transactions that provided the Company an aggregate of $174 million net proceeds, including $120 million from financings and $54 million from the sale of four outlet centers. In addition, simultaneously with the closing of the financings, certain financing amendments which allowed the Company to cure defaults were finalized. The Compensation Committee noted that the financial condition of the Company during 2000 made it difficult to achieve certain performance and operating objectives. As a result of Mr. G. Reschke's performance in connection with the operation of the Company and such 13 refinancings and sales, he received a compensatory bonus in 2000 equivalent to 50% of his then-current base salary. See "--Summary Compensation Table." STOCK INCENTIVE PLANS During 2000, in order to provide greater equity interests to the Company's Chief Executive Officer and President and other senior executives, the Compensation Committee, pursuant to the Prime Retail, Inc. 1998 Long-Term Stock Incentive Plan (the "1998 Stock Incentive Plan"), approved the grant of options to purchase common shares to the Chief Executive Officer and President, other senior executives, and other employees of the Company, as set forth above in "Option Grants in Last Fiscal Year." LONG TERM COMPENSATION On February 25, 2000, Mr. Rosenthal resigned his position as Chief Executive Officer and a director of the Company. The terms of his departure are set forth in the Separation Agreement (as defined above). The economic terms of the Separation Agreement generally reflect the severance arrangements contained in Mr. Rosenthal's prior employment agreement with the Company. Further, on April 5, 2000, Mr. M. Reschke and the Company terminated Mr. Reschke's employment agreement with the Company. For a discussion of the terms of the Separation Agreement and the termination of Mr. M. Reschke's employment with the Company, see "--Employment Agreements and Change of Control Agreements." POLICY WITH RESPECT TO THE $1 MILLION DOLLAR DEDUCTION LIMIT One of the factors the Compensation Committee considers when developing compensation programs is the anticipated tax treatment to the Company and to the executives of various payments and benefits. Generally, the Compensation Committee intends to comply with Section 162(m) of the Internal Revenue Code. Section 162(m) limits the ability of a publicly-held corporation such as the Company to deduct compensation in excess of $1 million paid to each named executive officer reported in the Summary Compensation Table, other than performance-based compensation. The Compensation Committee may, however, determine that it is necessary to exceed the limit on deductibility under Section 162(m) to insure executive officers are compensated in a manner consistent with the Company's best interests and those of its shareholders. COMPENSATION COMMITTEE William P. Dickey Kenneth A. Randall Sharon J. Sharp 14 STOCK PERFORMANCE GRAPH The following graph compares the cumulative shareholder return of the Company's Common Stock ("PRT") to its peer group, the National Association of Real Estate Investment Trust's Equity Shopping Center Index (the "Shopping Center Index") and the S&P 500 Index over a five-year period, beginning December 31, 1995 and ending December 31, 2000. The total shareholder return assumes an initial investment of $100 at the beginning of the period in the Company's Common Stock, the Shopping Center Index and the S&P 500 Index. It also assumes reinvestment of all dividends. Past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. [GRAPH] COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- PRT 100 116.25 143.83 117.44 77.49 6.46 Shopping Center Index 100 133.55 162.19 150.85 134.69 155.02 S&P 500 Index 100 122.96 163.99 210.86 255.20 231.96
15 ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of shares of Common Stock ("Common Shares") and of common units of limited partnership interests ("Common Units") in Prime Retail, L.P., a Delaware limited partnership in which the Company is the sole general partner (the "Operating Partnership"), as of April 30, 2001 for (a) each stockholder of the Company holding more than 5% of the voting securities of the Company, (b) each named executive officer listed in the Summary Compensation Table presented above, (c) the Directors of the Company and (d) the Directors and executive officers of the Company as a group. Unless otherwise indicated in the footnotes, all of such interests are owned directly, and the indicated person or entity has sole voting and investment power. The number of shares represents the number of Common Shares the person holds, the number of Common Shares the person has the right to acquire upon exercise of certain stock options ("Stock Options") granted pursuant to the Company's 1994 Stock Incentive Plan, the Company's 1995 Stock Incentive Plan, the Consulting Agreement between the Operating Partnership and Marvin Traub Associates, Inc. ("MTA"), the Company's 1998 Long-Term Stock Incentive Plan and the Company's Amended and Restated Nonemployee Director Stock Plan (collectively, the "Stock Incentive Plans"), the number of Common Shares into which Common Units held by the person are exchangeable (if, as discussed below, the Company elects to issue Common Shares rather than pay cash upon such exchange) and the number of Common Shares into which shares of the Company's 8.5% Series B Cumulative Participating Convertible Preferred Stock, $0.01 par value per share (the "Series B Preferred Shares"), held by the person are convertible. The extent to which a person directly holds Common Shares, Stock Options, Common Units or Series B Preferred Stock is set forth in the notes. The Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership (as amended, the "Operating Partnership Agreement") provides that Common Units may be exchanged, subject to certain limitations, into Common Shares or, at the option of the Company, cash equal to the fair market value of a Common Share at the time of exchange. Holders of Series B Preferred Shares have the right, subject to ownership and transfer restrictions in the Company's charter intended to allow the Company to maintain its status as a REIT, to convert all or any of their Series B Preferred Shares into Common Shares at the conversion price of $20.90 per Common Share, subject to certain adjustments. 16
NUMBER OF PERCENT OF ALL COMMON SHARES/ COMMON COMMON UNITS PERCENT OF SHARES/ NAME AND ADDRESS OF BENEFICIALLY OWNED ALL COMMON SHARES COMMON UNITS BENEFICIAL OWNER (1) (2) (3) (4) - ----------------------------------------- ------------------ ------------------ ---------------- Glenn D. Reschke (5) 699,587 (20) (20) Robert A. Brvenik (6) 116,680 (20) (20) C. Alan Schroeder (7) 249,487 (20) (20) Steven S. Gothelf (8) 123,269 (20) (20) John A. Mastin (9) 90,344 (20) (20) Michael W. Reschke (10) 8,231,901 16.0% 15.1% The Prime Group, Inc. (11) 7,595,929 14.9% 14.0% William H. Carpenter, Jr. (12) 521,090 (20) (20) William P. Dickey (13) 312,192 (20) (20) Norman Perlmutter (14) 1,032,603 2.3% 1.9% Robert D. Perlmutter (15) 57,596 (20) (20) Kenneth A. Randall (16) 13,500 (20) (20) Sharon J. Sharp 3,000 (20) (20) James R. Thompson (17) 213,000 (20) (20) Marvin S. Traub(18) 98,000 (20) (20) Directors and officers of the Company 11,757,249 21.7% 21.6% as a group (14 persons) Maurice A. Halperin (19) 4,115,709 9.3% 7.6%
- ---------- Notes: (1) All of the Directors of the Company and the Named Executives may be contacted c/o Prime Retail, Inc., 100 East Pratt Street, Baltimore, Maryland 21202. (2) The beneficial ownership of Common Shares and of Series B Preferred Shares reported herein is based upon filings with the Commission and is subject to confirmation by the Company that such ownership did not violate the ownership restrictions in the Company's charter. The ownership of Common Units reported herein is derived from the transfer records maintained by the Operating Partnership based on information provided by the Operating Partnership's limited partners. Information presented includes Common Shares issuable upon exercise of Stock Options which have vested or will vest within 60 days of April 30, 2001 as follows: Mr. G. Reschke 180,000; Mr. Brvenik 66,680; Mr. Schroeder 133,680; Mr. Mastin 82,500; Mr. Gothelf 89,500; Mr. Dickey 149,192; Mr. N. Perlmutter 319,508; Mr. R. Perlmutter 4,596; Mr. M. Reschke 450,000; Mr. Randall 10,000; Governor Thompson 150,000; and Mr. Traub, including Marvin Traub Associates, Inc. ("MTA") 55,000. Information presented also includes Common Shares issued pursuant to a Restricted Stock Award Plan which have vested or will vest within 60 days of April 30, 2001 as follows: Mr. N Perlmutter 63,000; Mr. Dickey 63,000; Governor Thompson 63,000; Mr. G. Reschke 15,687; Mr. Schroeder, 15,687; Mr. Gothelf 7,844; and Mr. Mastin 7,844. (3) Information presented assumes exchange or conversion only of Common Units and Series B Preferred Shares owned by such beneficial owner for Common Shares. Information presented also includes Common Shares issuable upon exercise of Stock Options of such beneficial owner which have vested or will vest within 60 days of April 30, 2001. (4) Information presented assumes exchange or conversion of all outstanding Common Units and Series B Preferred Shares for Common Shares and also includes Common Shares issuable upon exercise of Stock Options which have vested or will vest within 60 days of 17 April 30, 2001. The Common Units may be exchanged on a one-for-one basis for Common Shares (or, at the Company's election, cash of an equivalent value) at any time. (5) Information presented includes 251,300 Common Units which are held by Reschke I LLC, 68,287 Common Shares owned by Mr. G. Reschke, 180,000 Common Shares which Mr. G. Reschke has the right to acquire upon the exercise of Stock Options. (6) Information presented includes 50,000 Common Shares owned by Mr. Brvenik and 66,680 Common Shares which Mr. Brvenik has the right to acquire upon exercise of Stock Options. (7) Information presented includes 115,687 Common Shares owned by Mr. Schroeder, 120 Common Shares issuable to Mr. Schroeder upon conversion of the 100 Series B Preferred Shares owned by him and 133,680 Common Shares which Mr. Schroeder has the right to acquire upon exercise of certain Stock Options. (8) Information presented includes 33,769 Common Shares owned by Mr. Gothelf and 89,500 Common Shares which Mr. Gothelf has the right to acquire upon exercise of Stock Options. (9) Information presented includes 7,844 Common Shares owned by Mr. Mastin and 82,500 Common Shares which Mr. Mastin has the right to acquire upon exercise of Stock Options. (10) Information presented includes 7,344,629 Common Units and 251,300 Common Shares held by PGI (Mr. M. Reschke is the Chairman and Chief Executive Officer of PGI) and certain limited partnerships affiliated with PGI, 199,548 Common Shares owned by Mr. M. Reschke, 11,424 Common Shares issuable to Mr. M. Reschke upon conversion of the 9,552 Series B Preferred Shares owned by him, and 450,000 Common Shares which Mr. M. Reschke has the right to acquire upon exercise of Stock Options. Mr. M. Reschke's address is c/o PGI, 77 West Wacker Drive, Suite 4200, Chicago, Illinois 60601. (11) Information presented includes 7,344,629 Common Units and 251,300 Common Shares owned by The Prime Group, Inc. ("PGI") and certain limited partnerships affiliated with PGI. The address of PGI is 77 West Wacker Drive, Suite 4200, Chicago, Illinois 60601. Certain of the Common Units and Common Shares held by PGI have been pledged to certain unaffiliated third parties to secure certain indebtedness of PGI and its affiliates (collectively, the "Pledgees"). Unless and until the Pledgees foreclose on the pledged Common Units or have given notice of an event of default under the operative pledge or loan agreement, such entities will not have the direct or indirect power to vote or dispose of the Common Units so pledged. The Pledgees disclaim beneficial ownership of these pledged Common Units pursuant to Section 13d-4 of the Exchange Act. (12) Information presented includes 100,000 Common Shares owned by Mr. Carpenter, 371,090 Common Units owned by Mr. Carpenter, 125,000 of which are held by a limited liability company controlled by Mr. Carpenter, and 50,000 Common Units which Mr. Carpenter has the right to acquire upon exercise of certain options granted by PGI. (13) Information presented includes 163,000 Common Shares owned by Mr. Dickey and 149,192 Common Shares which Mr. Dickey has the right to acquire upon exercise of Stock Options. 18 (14) Information presented includes 89,742 Common Shares, 176 of which are owned by Mr. N. Perlmutter's wife and 764 of which are held in trust for Mr. Perlmutter's children, 2,700 Common Shares of which 320 are issuable to Mr. N. Perlmutter upon conversion of the 268 Series B Preferred Shares owned by him, 2,074 of which are issuable to Mr. N. Perlmutter's wife upon conversion of her 1,734 Series B Preferred Shares, and 306 of which are issuable to Mr. N. Perlmutter's children upon conversion of their 256 Series B Preferred Shares, 620,653 Common Units owned by Mr. N. Perlmutter's wife, and 319,508 Common Shares which Mr. N. Perlmutter has the right to acquire upon exercise of Stock Options. (15) Information presented includes 53,000 Common Shares owned by Mr. R. Perlmutter and 4,596 Common Shares which Mr. R. Perlmutter has the right to acquire upon exercise of Stock Options. (16) Information presented includes 3,500 Common Shares, 500 of which are owned by Mr. Randall's wife, and 10,000 Common Shares which Mr. Randall has the right to acquire upon exercise of Stock Options (17) Information presented includes 63,000 Common Shares owned by Governor Thompson and 150,000 Common Shares which Governor Thompson has the right to acquire upon exercise of Stock Options. (18) Information presented includes 43,000 Common Shares owned by Mr. Traub, 10,000 Common Shares which Mr. Traub has the right to acquire upon the exercise of Stock Options, and 45,000 Common Shares which MTA, an affiliate of Mr. Traub, has the right to acquire upon exercise of Stock Options. (19) Information presented is based on a Schedule 13D/A filed with the Commission on February 15, 2001 by Maurice A. Halperin. The amounts set forth represent 3,418,309 Common Shares and 697,400 Series B Preferred Shares currently convertible into 834,229 Common Shares. Mr. Halperin's business address is 17890 Deauville Lane, Boca Raton, Florida 33496. (20) Amount represents less than 1%. ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CONSULTING AGREEMENTS WITH AFFILIATES OF MR. TRAUB. The Company has entered into a consulting agreement with MTA, an entity owned and controlled by Mr. Traub. The consulting agreement provides that for so long as Mr. Traub remains a Director of the Company, MTA will provide consulting and advisory services in connection with the Company's merchant relations and MTA will receive a monthly fee of $8,333 for such services. LOAN TO MR. ROSENTHAL. In connection with the IPO, the Operating Partnership made a recourse loan of $2.375 million for the benefit of Mr. Rosenthal. Mr. Rosenthal used such loan proceeds to acquire 125,000 Common Units at a price of $19.00 per unit, reflecting the IPO price per share of Common Stock. Mr. Rosenthal incurred such loan and made such purchases through the Executive LLC that he controls and which was the borrower under such loan. The loan was secured by a pledge of 125,000 Common Units acquired with the proceeds thereof and was guaranteed by Mr. Rosenthal. As a part of the severance package included in Mr. Rosenthal's 19 Separation Agreement (see "Item 11. Executive Compensation--Employment Agreements and Change of Control Agreements"), Mr. Rosenthal received a special distribution in 2000 in the amount of $628,927.85 which was used as payment in full of the remaining outstanding obligations under the loan. SEPARATION AGREEMENT WITH, AND LOAN TO, MR. CARPENTER. The Company entered into a separation agreement (the "Carpenter Separation Agreement") with Mr. Carpenter dated as of August 24, 2000. On the same day primeoutlets.com inc. entered into a separation agreement (the "primeoutlets.com Carpenter Separation Agreement") with Mr. Carpenter. Pursuant to the primeoutlets.com Carpenter Separation Agreement, Mr. Carpenter resigned as President and Chief Executive Officer of primeoutlets.com inc. and resigned as a member of primeoutlets.com inc.'s Board of Directors. Pursuant to the Carpenter Separation Agreement, Mr. Carpenter is entitled to receive separation payments which include (i) a special distribution of $628,896.16 (previously approved by the Board of Directors in connection with his 1999 compensation) to be used by Mr. Carpenter as payment in full of the remaining outstanding obligations under a recourse loan of $2.375 million made by the Operating Partnership to Mr. Carpenter in connection with the Company's IPO, and (ii) a severance distribution in an amount equal to $1,600,000 which was to have been paid in monthly installments until July 31, 2001, without interest. Under the Carpenter Separation Agreement, the Company agreed to provide health and life insurance benefits for the 12-month period beginning on the date of the Carpenter Separation Agreement. Under the Carpenter Separation Agreement, Mr. Carpenter agreed to surrender to the Company all of Mr. Carpenter's options to purchase the Company's stock. The Carpenter Separation Agreement also includes non-competition, non-solicitation and non-disclosure provisions which generally prohibit Mr. Carpenter for a period of one year from the date of the Carpenter Separation Agreement from (i) providing services to, or be employed by, certain named companies, (ii) soliciting employees, customers, vendors or tenants to terminate their relationship with the Company, and (iii) disclosing or using any "trade secret" (as such term is defined in the Carpenter Separation Agreement.) Pursuant to the primeoutlets.com Carpenter Separation Agreement, Mr. Carpenter forfeited all primeoutlets.com inc. stock options and interest in primeoutlets.com inc. In addition, the primeoutlets.com Carpenter Separation Agreement included non-competition, non-solicitation and non-disclosure provisions similar to the provisions in the Carpenter Separation Agreement discussed in the prior paragraph. In connection with the IPO, the Operating Partnership made a recourse loan of $2.375 million for the benefit of Mr. Carpenter. Mr. Carpenter used such loan proceeds to acquire 125,000 Common Units at a price of $19.00 per unit, reflecting the IPO price per share of Common Stock. Mr. Carpenter incurred such loan and made such purchase through the Executive LLC that he controls and which was the borrower under such loan. The loan was secured by a pledge of 125,000 Common Units acquired with the proceeds thereof and was guaranteed by Mr. Carpenter. As described above, as a part of his severance package, Mr. Carpenter received a special distribution during 2000 in the amount of $628,896.16 which was used as payment in full of the remaining outstanding obligations under the loan. OBLIGATIONS WITH RESPECT TO HORIZON GROUP PROPERTIES, INC. ("HGP") CREDIT FACILITIES. As of December 31, 2000, the Company is a guarantor or otherwise obligated with respect to an aggregate of approximately $12.7 million of the indebtedness of HGP and its affiliates, including a $10 million obligation under HGP's secured credit facility which bears a 20 rate of interest of LIBOR plus 1.90%, matures in July, 2001 and is collateralized by seven properties located throughout the United States. HGP is a publicly traded company which was formed in connection with the Company's merger with Horizon in June 1998. Mr. M. Reschke, Director of the Company, is a member of the board of directors of HGP. In the event HGP is unable to make debt service payments under such facility, the Operating Partnership may be required by the lenders to make payments under such guarantee. OTHER TRANSACTIONS. Governor James R. Thompson, a Director of the Company, is Chairman of the law firm of Winston & Strawn, which has provided, and continues to provide, legal services to the Company. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 3. EXHIBITS
EXHIBIT NUMBER DESCRIPTION -------- ----------- 10.8A Amendment to Employment Agreement dated June 11, 2000 by and between Prime Retail, Inc. and Robert A. Brvenik dated as of April 2, 2001. 10.9A Amendment to Employment Agreement dated May 3, 2000 by and between Prime Retail, Inc. and C. Alan Schroeder dated as of April 2, 2001. 10.10A. Amendment to Employment Agreement dated May 3, 2000 by and between Prime Retail, Inc. and Steven S. Gothelf dated as of April 2, 2001. 10.11A. Amendment to Employment Agreement dated May 3, 2000 by and between Prime Retail, Inc. and John S. Mastin dated as of April 2, 2001. 10.13. Employment Agreement dated as of July 24, 2000 by and between Prime Retail, Inc. and Glenn D. Reschke.
21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PRIME RETAIL, INC. Dated: April 30, 2001 /s/ C. Alan Schroeder ---------------------------------------- By: C. Alan Schroeder Title: Executive Vice President - General Counsel & Secretary 22 EX-10.8A 2 a2047292zex-10_8a.txt EXHIBIT 10.8A AMENDMENT TO EMPLOYMENT AGREEMENT The EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 11, 2000, by and between Prime Retail, Inc., a Maryland corporation ("Prime"), and the sole general partner of Prime Retail, L.P., a Delaware limited partnership (the "Operating Partnership"), and Robert Brvenik (the "Executive"), is hereby amended by this Amendment, effective April 2, 2001, in the following respects: 1. Section 3(b) of the Agreement is hereby amended as follows: (b) PERFORMANCE BONUS. In addition to the Base Salary, Executive shall have the right to receive, and the Company agrees to pay to Executive, a performance bonus for each calendar year during the Term of this Agreement, in such amounts as the Committee, in its sole discretion, may determine (the "Performance Bonus"). If the Board, either directly or through the Committee, establishes performance measures for senior officers (which term is intended to include Executive), those established criteria will be used to determine Executive's entitlement to a Performance Bonus. Notwithstanding the foregoing, nothing in this Agreement obligates the Board to establish such performance measures, and the lack of established performance measures will not constitute a breach of this Agreement in any manner. In lieu of established performance measures, the Board will determine Executive's Performance Bonus solely in its discretion. The parties hereto acknowledge that any corporate or individual performance objectives established pursuant to this Section 3(b) will be determined prior to, or as soon as possible after, the beginning of each calendar year and that such objectives may objectively be met by Executive. The aggregate Performance Bonus for a calendar year payable in accordance with the provisions of this Section 3(b) is expected to be up to 100% or more of the Base Salary for such calendar year. Further, Executive shall only be entitled to receive a Performance Bonus for a calendar year if Executive has been and continues to be retained by the Company as an executive officer of the Company for the full calendar year or if (i) the Company terminates Executive's employment without Cause (as defined below), (ii) Executive terminates his employment for Good Reason (as defined below), (iii) Executive terminates his employment for any reason simultaneously with, or within six months following, a Change of Control, or (iv) if Executive does not terminate his employment simultaneously with, or within six months following, a change of control, and Executive's employment ends for any reason within 24 months following a Change of Control. Any amount of Performance Bonus required to be paid to Executive for a calendar year during the Term of this Agreement shall be paid by the Company to Executive during the pay period of the Company following finalization of the audit for such calendar year and final review and approval of the bonus calculation by the Committee, and, in all events, on or before March 31 of the year immediately following the end of the calendar year for which such Performance Bonus is attributable. 2. Section 4(d) of the Agreement is hereby amended as follows: (d) TERMINATION FOLLOWING A CHANGE OF CONTROL. If (i) Executive terminates this Agreement for any reason simultaneously with a Change of Control (in which event notice under Section 2 above shall not be necessary and the termination payments to be made under Sections 4(d)(1), 4(d)(2) and 4(d)(3) shall be paid simultaneously with, and as a part of, the Change of Control), (ii) within six (6) months following a Change of Control Executive terminates this Agreement for any reason, subject to the notice provisions of Section 2 hereof, or (iii) within 24 months following a Change of Control, the Company terminates this Agreement during its original term other than for Cause or Executive terminates this Agreement during its original term with Good Reason, the Company shall pay Executive (and Executive's eligible dependents with respect to paragraph (D) below) the following benefits and payments: (1) all accrued but unpaid amounts of Base Salary and vacation through the effective date of termination, payable in accordance with the provisions of Sections 3(a) and 3(d) above; (2) a termination payment in an amount equal to the product of (x) the number of full and partial years remaining in the Original Term (or, if greater, 2 years) and (y) the One-Year Pay Equivalent, which amount shall be payable within thirty (30) days of the effective date of termination; (3) any vested benefits or amounts pursuant to Section 3(c), 3(e), 3(f) and 3(g) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); and (4) the health insurance benefits described in Section 3(c)(1) above for the maximum period permitted under COBRA at the Company's sole expense, together with either (i) additional benefits equivalent to those in effect at the date of termination, such that Executive will receive Company-paid coverage for a total of 24 months or (ii) if providing such benefits is not permitted by the tax laws or applicable benefit plans, the after-tax equivalent of the premiums paid by the Company for such coverage. 3. This Amendment may be executed in one or more counterparts which taken together shall constitute one and the same instrument. 2 EXECUTIVE: /s/ Robert A. Brvenik - ------------------------------------ Robert Brvenik PRIME RETAIL, INC., a Maryland PRIME RETAIL, L.P., a Delaware limited corporation partnership By: /s/ Glenn D. Reschke By: Prime Retail, Inc. -------------------------------- Its: Sole General Partner Name: Glenn D. Reschke Title: President & Chief Executive By: /s/ Glenn D. Reschke Officer ------------------------------------- Name: Glenn D. Reschke Title: President & Chief Executive Officer 3 EX-10.9A 3 a2047292zex-10_9a.txt EXHIBIT 10.9A AMENDMENT TO EMPLOYMENT AGREEMENT The EMPLOYMENT AGREEMENT (the "Agreement"), dated as of May 3, 2000, by and between Prime Retail, Inc., a Maryland corporation ("Prime"), and the sole general partner of Prime Retail, L.P., a Delaware limited partnership (the "Operating Partnership"), and C. Alan Schroeder (the "Executive"), is hereby amended by this Amendment, effective April 2, 2001, in the following respects: 1. Section 3(b) of the Agreement is hereby amended as follows: (b) PERFORMANCE BONUS. In addition to the Base Salary, Executive shall have the right to receive, and the Company agrees to pay to Executive, a performance bonus for each calendar year during the Term of this Agreement, in such amounts as the Committee, in its sole discretion, may determine (the "Performance Bonus"). If the Board, either directly or through the Committee, establishes performance measures for senior officers (which term is intended to include Executive), those established criteria will be used to determine Executive's entitlement to a Performance Bonus. Notwithstanding the foregoing, nothing in this Agreement obligates the Board to establish such performance measures, and the lack of established performance measures will not constitute a breach of this Agreement in any manner. In lieu of established performance measures, the Board will determine Executive's Performance Bonus solely in its discretion. The parties hereto acknowledge that any corporate or individual performance objectives established pursuant to this Section 3(b) will be determined prior to, or as soon as possible after, the beginning of each calendar year and that such objectives may objectively be met by Executive. The aggregate Performance Bonus for a calendar year payable in accordance with the provisions of this Section 3(b) is expected to be up to 100% or more of the Base Salary for such calendar year. Further, Executive shall only be entitled to receive a Performance Bonus for a calendar year if Executive has been and continues to be retained by the Company as an executive officer of the Company for the full calendar year or if (i) the Company terminates Executive's employment without Cause (as defined below), (ii) Executive terminates his employment for Good Reason (as defined below), (iii) Executive terminates his employment for any reason simultaneously with, or within six months following, a Change of Control, or (iv) if Executive does not terminate his employment simultaneously with, or within six months following, a change of control, and Executive's employment ends for any reason within 24 months following a Change of Control. Any amount of Performance Bonus required to be paid to Executive for a calendar year during the Term of this Agreement shall be paid by the Company to Executive during the pay period of the Company following finalization of the audit for such calendar year and final review and approval of the bonus calculation by the Committee, and, in all events, on or before March 31 of the year immediately following the end of the calendar year for which such Performance Bonus is attributable. 2. Section 4(d) of the Agreement is hereby amended as follows: (d) TERMINATION FOLLOWING A CHANGE OF CONTROL. If (i) Executive terminates this Agreement for any reason simultaneously with a Change of Control (in which event notice under Section 2 above shall not be necessary and the termination payments to be made under Sections 4(d)(1), 4(d)(2) and 4(d)(3) shall be paid simultaneously with, and as a part of, the Change of Control), (ii) within six (6) months following a Change of Control Executive terminates this Agreement for any reason, subject to the notice provisions of Section 2 hereof, or (iii) within 24 months following a Change of Control, the Company terminates this Agreement during its original term other than for Cause or Executive terminates this Agreement during its original term with Good Reason, the Company shall pay Executive (and Executive's eligible dependents with respect to paragraph (D) below) the following benefits and payments: (1) all accrued but unpaid amounts of Base Salary and vacation through the effective date of termination, payable in accordance with the provisions of Sections 3(a) and 3(d) above; (2) a termination payment in an amount equal to the product of (x) the number of full and partial years remaining in the Original Term (or, if greater, 2 years) and (y) the One-Year Pay Equivalent, which amount shall be payable within thirty (30) days of the effective date of termination; (3) any vested benefits or amounts pursuant to Section 3(c), 3(e), 3(f) and 3(g) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); and (4) the health insurance benefits described in Section 3(c)(1) above for the maximum period permitted under COBRA at the Company's sole expense, together with either (i) additional benefits equivalent to those in effect at the date of termination, such that Executive will receive Company-paid coverage for a total of 24 months or (ii) if providing such benefits is not permitted by the tax laws or applicable benefit plans, the after-tax equivalent of the premiums paid by the Company for such coverage. 3. This Amendment may be executed in one or more counterparts which taken together shall constitute one and the same instrument. 2 EXECUTIVE: /s/ C. Alan Schroeder - ------------------------------- C. Alan Schroeder PRIME RETAIL, INC., a Maryland PRIME RETAIL, L.P., a Delaware corporation limited partnership By: /s/ Glenn D. Reschke By: Prime Retail, Inc. ---------------------------------- Its: Sole General Partner Name: Glenn D. Reschke Title: President & Chief Executive By: /s/ Glenn D. Reschke Officer -------------------------------- Name: Glenn D. Reschke Title: President & Chief Executive Officer 3 EX-10.10A 4 a2047292zex-10_10a.txt EXHIBIT 10.10A AMENDMENT TO EMPLOYMENT AGREEMENT The EMPLOYMENT AGREEMENT (the "Agreement"), dated as of May 3, 2000, by and between Prime Retail, Inc., a Maryland corporation ("Prime"), and the sole general partner of Prime Retail, L.P., a Delaware limited partnership (the "Operating Partnership"), and Steven Gothelf (the "Executive"), is hereby amended by this Amendment, effective April 2, 2001, in the following respects: 1. Section 3(b) of the Agreement is hereby amended as follows: (b) PERFORMANCE BONUS. In addition to the Base Salary, Executive shall have the right to receive, and the Company agrees to pay to Executive, a performance bonus for each calendar year during the Term of this Agreement, in such amounts as the Committee, in its sole discretion, may determine (the "Performance Bonus"). If the Board, either directly or through the Committee, establishes performance measures for senior officers (which term is intended to include Executive), those established criteria will be used to determine Executive's entitlement to a Performance Bonus. Notwithstanding the foregoing, nothing in this Agreement obligates the Board to establish such performance measures, and the lack of established performance measures will not constitute a breach of this Agreement in any manner. In lieu of established performance measures, the Board will determine Executive's Performance Bonus solely in its discretion. The parties hereto acknowledge that any corporate or individual performance objectives established pursuant to this Section 3(b) will be determined prior to, or as soon as possible after, the beginning of each calendar year and that such objectives may objectively be met by Executive. The aggregate Performance Bonus for a calendar year payable in accordance with the provisions of this Section 3(b) is expected to be up to 100% or more of the Base Salary for such calendar year. Further, Executive shall only be entitled to receive a Performance Bonus for a calendar year if Executive has been and continues to be retained by the Company as an executive officer of the Company for the full calendar year or if (i) the Company terminates Executive's employment without Cause (as defined below), (ii) Executive terminates his employment for Good Reason (as defined below), (iii) Executive terminates his employment for any reason simultaneously with, or within six months following, a Change of Control, or (iv) if Executive does not terminate his employment simultaneously with, or within six months following, a change of control, and Executive's employment ends for any reason within 24 months following a Change of Control. Any amount of Performance Bonus required to be paid to Executive for a calendar year during the Term of this Agreement shall be paid by the Company to Executive during the pay period of the Company following finalization of the audit for such calendar year and final review and approval of the bonus calculation by the Committee, and, in all events, on or before March 31 of the year immediately following the end of the calendar year for which such Performance Bonus is attributable. 2. Section 4(d) of the Agreement is hereby amended as follows: (d) TERMINATION FOLLOWING A CHANGE OF CONTROL. If (i) Executive terminates this Agreement for any reason simultaneously with a Change of Control (in which event notice under Section 2 above shall not be necessary and the termination payments to be made under Sections 4(d)(1), 4(d)(2) and 4(d)(3) shall be paid simultaneously with, and as a part of, the Change of Control), (ii) within six (6) months following a Change of Control Executive terminates this Agreement for any reason, subject to the notice provisions of Section 2 hereof, or (iii) within 24 months following a Change of Control, the Company terminates this Agreement during its original term other than for Cause or Executive terminates this Agreement during its original term with Good Reason, the Company shall pay Executive (and Executive's eligible dependents with respect to paragraph (D) below) the following benefits and payments: (1) all accrued but unpaid amounts of Base Salary and vacation through the effective date of termination, payable in accordance with the provisions of Sections 3(a) and 3(d) above; (2) a termination payment in an amount equal to the product of (x) the number of full and partial years remaining in the Original Term (or, if greater, 2 years) and (y) the One-Year Pay Equivalent, which amount shall be payable within thirty (30) days of the effective date of termination; (3) any vested benefits or amounts pursuant to Section 3(c), 3(e), 3(f) and 3(g) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); and (4) the health insurance benefits described in Section 3(c)(1) above for the maximum period permitted under COBRA at the Company's sole expense, together with either (i) additional benefits equivalent to those in effect at the date of termination, such that Executive will receive Company-paid coverage for a total of 24 months or (ii) if providing such benefits is not permitted by the tax laws or applicable benefit plans, the after-tax equivalent of the premiums paid by the Company for such coverage. 3. This Amendment may be executed in one or more counterparts which taken together shall constitute one and the same instrument. 2 EXECUTIVE: /s/ Steven S. Gothelf - --------------------------- Steven Gothelf PRIME RETAIL, INC., a Maryland PRIME RETAIL, L.P., a Delaware limited corporation partnership By: /s/ Glenn D. Reschke By: Prime Retail, Inc. ------------------------------ Its: Sole General Partner Name: Glenn D. Reschke Title: President & Chief Executive Officer By: /s/ Glenn D. Reschke ----------------------------------- Name: Glenn D. Reschke Title: President & Chief Executive Officer 3 EX-10.11A 5 a2047292zex-10_11a.txt EXHIBIT 10.11A AMENDMENT TO EMPLOYMENT AGREEMENT The EMPLOYMENT AGREEMENT (the "Agreement"), dated as of May 3, 2000, by and between Prime Retail, Inc., a Maryland corporation ("Prime"), and the sole general partner of Prime Retail, L.P., a Delaware limited partnership (the "Operating Partnership"), and John Mastin (the "Executive"), is hereby amended by this Amendment, effective April 2, 2001, in the following respects: 1. Section 3(b) of the Agreement is hereby amended as follows: (b) PERFORMANCE BONUS. In addition to the Base Salary, Executive shall have the right to receive, and the Company agrees to pay to Executive, a performance bonus for each calendar year during the Term of this Agreement, in such amounts as the Committee, in its sole discretion, may determine (the "Performance Bonus"). If the Board, either directly or through the Committee, establishes performance measures for senior officers (which term is intended to include Executive), those established criteria will be used to determine Executive's entitlement to a Performance Bonus. Notwithstanding the foregoing, nothing in this Agreement obligates the Board to establish such performance measures, and the lack of established performance measures will not constitute a breach of this Agreement in any manner. In lieu of established performance measures, the Board will determine Executive's Performance Bonus solely in its discretion. The parties hereto acknowledge that any corporate or individual performance objectives established pursuant to this Section 3(b) will be determined prior to, or as soon as possible after, the beginning of each calendar year and that such objectives may objectively be met by Executive. The aggregate Performance Bonus for a calendar year payable in accordance with the provisions of this Section 3(b) is expected to be up to 100% or more of the Base Salary for such calendar year. Further, Executive shall only be entitled to receive a Performance Bonus for a calendar year if Executive has been and continues to be retained by the Company as an executive officer of the Company for the full calendar year or if (i) the Company terminates Executive's employment without Cause (as defined below), (ii) Executive terminates his employment for Good Reason (as defined below), (iii) Executive terminates his employment for any reason simultaneously with, or within six months following, a Change of Control, or (iv) if Executive does not terminate his employment simultaneously with, or within six months following, a change of control, and Executive's employment ends for any reason within 24 months following a Change of Control. Any amount of Performance Bonus required to be paid to Executive for a calendar year during the Term of this Agreement shall be paid by the Company to Executive during the pay period of the Company following finalization of the audit for such calendar year and final review and approval of the bonus calculation by the Committee, and, in all events, on or before March 31 of the year immediately following the end of the calendar year for which such Performance Bonus is attributable. 2. Section 4(d) of the Agreement is hereby amended as follows: (d) TERMINATION FOLLOWING A CHANGE OF CONTROL. If (i) Executive terminates this Agreement for any reason simultaneously with a Change of Control (in which event notice under Section 2 above shall not be necessary and the termination payments to be made under Sections 4(d)(1), 4(d)(2) and 4(d)(3) shall be paid simultaneously with, and as a part of, the Change of Control), (ii) within six (6) months following a Change of Control Executive terminates this Agreement for any reason, subject to the notice provisions of Section 2 hereof, or (iii) within 24 months following a Change of Control, the Company terminates this Agreement during its original term other than for Cause or Executive terminates this Agreement during its original term with Good Reason, the Company shall pay Executive (and Executive's eligible dependents with respect to paragraph (D) below) the following benefits and payments: (1) all accrued but unpaid amounts of Base Salary and vacation through the effective date of termination, payable in accordance with the provisions of Sections 3(a) and 3(d) above; (2) a termination payment in an amount equal to the product of (x) the number of full and partial years remaining in the Original Term (or, if greater, 2 years) and (y) the One-Year Pay Equivalent, which amount shall be payable within thirty (30) days of the effective date of termination; (3) any vested benefits or amounts pursuant to Section 3(c), 3(e), 3(f) and 3(g) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); and (4) the health insurance benefits described in Section 3(c)(1) above for the maximum period permitted under COBRA at the Company's sole expense, together with either (i) additional benefits equivalent to those in effect at the date of termination, such that Executive will receive Company-paid coverage for a total of 24 months or (ii) if providing such benefits is not permitted by the tax laws or applicable benefit plans, the after-tax equivalent of the premiums paid by the Company for such coverage. 3. This Amendment may be executed in one or more counterparts which taken together shall constitute one and the same instrument. 2 EXECUTIVE: /s/ John S. Mastin - ------------------------------- John Mastin PRIME RETAIL, INC., a Maryland PRIME RETAIL, L.P., a Delaware limited corporation partnership By: /s/ Glenn D. Reschke By: Prime Retail, Inc. ---------------------- Its: Sole General Partner Name: Glenn D. Reschke Title: President & Chief Executive By: /s/ Glenn D. Reschke Officer -------------------------------------- Name: Glenn D. Reschke Title: President & Chief Executive Officer 3 EX-10.13 6 a2047292zex-10_13.txt EXHIBIT 10.13 STRICTLY CONFIDENTIAL EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of July 24, 2000, by and between Prime Retail, Inc., a Maryland corporation ("Prime") and the sole general partner of Prime Retail, L.P., a Delaware limited partnership (the "Operating Partnership"), the Operating Partnership, (Prime and the Operating Partnership are sometimes hereinafter together referred to as the "Company"), and Glenn D. Reschke, an individual domiciled in the State of Maryland ("Executive"). WITNESSETH WHEREAS, the Company is engaged primarily in the ownership, development, construction, acquisition, leasing, marketing and management of factory outlet centers throughout the United States; WHEREAS, Prime believes that it would benefit from the application of Executive's particular and unique skill, experience, and background to the management and operation of the Company; WHEREAS, Executive wishes to commit himself to serve the Company in the positions set forth herein on the terms herein provided; WHEREAS, the parties wish by this Agreement to amend and restate in entirety the terms and conditions of the relationship between the Company and Executive; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the Company and Executive hereby agree as follows: 1. DUTIES. During the Term hereof (as defined in Section 2 hereof), the Company agrees to retain Executive, and Executive agrees to be retained by the Company, as the Chief Executive Officer and, at the determination of the Board of Directors, President and/or Chairman of the Board, on the terms and conditions provided in this Agreement. Executive shall serve in such positions and his duties shall include oversight and responsibility for Employer's sales, marketing, operations, finance and administrative functions. Furthermore, Executive shall exercise such other powers and authority as are customarily inherent in a similar positions in a comparable publicly-held entity or as provided by the By-laws of Prime ("By-laws") and the Agreement of Limited Partnership of the Operating Partnership, as amended (the "Partnership Agreement"). Prime, in its capacity as sole general partner of the Operating Partnership, may, from time to time, in its sole discretion, by action of its Board of Directors (the "Board") further define and clarify Executive's duties and services hereunder or under the By-laws or Partnership Agreement in a manner consistent with the offices for which he has been retained hereunder and the scope of work set forth herein. Executive agrees to devote his best efforts and substantially all of his business time, attention, energy, and skill to performing his duties to the Company under this Agreement. 2. TERM. Unless earlier terminated in accordance with the terms of this Agreement, the term of this Agreement shall be a period commending on the date hereof and ending on the third anniversary of such date. On such third anniversary and each succeeding anniversary, the Term of this Agreement shall automatically be extended for an additional one year period unless, not later than one hundred eighty (180) days prior to any such anniversary, either party to this Agreement gives notice to the other that the Term of this Agreement shall not be extended or further extended beyond its then automatically extended Term. 3. COMPENSATION AND RELATED MATTERS. (a) BASE SALARY. For the period of the Term of this Agreement beginning July 24, 2000, and extending through December 31, 2000, the Operating Partnership agrees to pay to Executive a base salary in an aggregate amount of Three Hundred Fifty Thousand Dollars ($350,000) per calendar year, payable in accordance with the general policies and procedures for payment of salaries to any other executive personnel of the Company but in all events payable no less frequently than monthly. During the remainder of the Term of this Agreement, the Executive's annual base salary will be Four Hundred Thousand Dollars ($400,000). The yearly base salary payable to Executive pursuant to the provisions of this Section 3(a) shall be subject to periodic review by the Executive Committee of the Board of Directors of Prime (the "Committee") based upon periodic review of the Executive's performance conducted on at least an annual basis and may be periodically increased or decreased as a result thereof; provided, however, that the yearly base salary payable to the Executive pursuant to the provisions of this Section 3(a) shall in no event be less than Three Hundred Fifty Thousand Dollars ($350,000). The then applicable amount of yearly base salary payable to the Executive pursuant to the provisions of this Section 3(a) shall herein be referred to as the "Base Salary." (b) PERFORMANCE BONUS. (1) In addition to the Base Salary, the Executive shall have the right to receive, and the Operating Partnership agrees to pay to the Executive, a performance bonus for each calendar year during the Term of this Agreement, in such amounts as the Committee, in its sole discretion, may determine. The aggregate Performance Bonus for a calendar year payable in accordance with the provisions of this Section 3(b) shall in no event exceed 100% of the Base Salary for such calendar year. Further, the Executive shall only be entitled to receive a Performance Bonus for a calendar year if the Executive has been and continues to be retained by the Company as an Executive Officer of the Company for the full calendar year or if the Company terminates Executive's employment without cause (as defined below) or Executive terminates his employment for good reason (as defined below). Any amount of Performance Bonus to be paid to the Executive for a calendar year during the Term of this Agreement shall be paid by the Company to the Executive during the pay period of the Company following finalization of the audit for such calendar year and final review and approval of the bonus by the Committee, and, in all events, on or before March 31 of the year immediately following the end of the calendar year for which such Performance Bonus is attributable. -2- (2) In the event of a disagreement with regard to the determination of the Performance Bonus amount, the Committee shall be the final arbiters of such amount, and their determination shall be final and binding on the Company and the Executive. (c) HEALTH INSURANCE AND OTHER BENEFITS. (1) During the Term of this Agreement and subject to the limitations and affirmative rights set forth in this Section 3(c), Executive and his eligible dependents shall have the right to participate in any health, dental, vision and other medical insurance benefit plans or programs that have been or are hereafter adopted or maintained by the Company (or in which the Company participates) according to the terms of such plan or program with all of the benefits, rights and privileges as are enjoyed by any other senior executive officer of the Company. (2) During the Term of this Agreement and subject to the limitations and affirmative rights set forth in this Section 3(c), Executive and his eligible dependents shall have the right to participate in any retirement, pension, or other similar benefit plan or program that has been or is hereafter adopted by the Company (or in which the Company participates) according to the terms of such plan or program with all the benefits, rights and privileges as are enjoyed by any other senior executive officer of the Company. (3) If the participation of Executive under a plan described in subsection (2) above would adversely affect the qualification of a plan intended to be qualified under the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the Company shall have the right to exclude Executive from that plan in return for his participation in (x) a non-qualified deferred compensation plan or (y) an arrangement providing substantially comparable benefits under a plan that is either a qualified or non-qualified plan under the Code at the Company's option. (d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to four (4) weeks of paid vacation leave during each twelve (12) month calendar period and paid holidays in accordance with the Company's established policies. Executive may accrue unused vacation time if not used in any calendar year or years, however, the maximum cumulative amount of vacation time that Executive may accrue and carry over to the next year is four weeks. In addition to the foregoing, Executive may be granted leaves of absence with or without pay for such other reasons as shall be mutually agreed upon by the Board and Executive. (e) EXPENSES. Executive shall be reimbursed, subject to the Company's receipt of invoices or similar records as the Company may reasonably request in accordance with its policy and procedures, for all reasonable and necessary expenses incurred by the Executive in the performance of his duties hereunder. (f) LIFE INSURANCE. The Company shall provide $4,000,000 of term life insurance for the benefit of the Executive during the Term of this Agreement. -3- 4. TERMINATION AND TERMINATION BENEFITS. (a) TERMINATION BY PRIME. (1) WITHOUT CAUSE. The Company may terminate this Agreement and Executive's services at any time for any reason or for no reason at all upon thirty (30) days' prior written notice to Executive. In connection with the termination of Executive's services pursuant to this Section 4(a)(1), Executive (and Executive's eligible dependents with respect to paragraph (D) below) shall be entitled to receive: (A) all accrued but unpaid amounts of the Base Salary through the effective date of termination, payable in accordance with the provisions of Section 3(a) above; (B) a termination payment in an amount equal to the sum of (x) one (1) times the amount of the Base Salary then applicable, plus (y) one (1) times the average of the amounts payable to the Executive pursuant to the provisions of Section 3(b) hereof for the two (2) calendar years immediately preceding the calendar year in which the effective date of the termination of this Agreement occurs (the sum of the amounts determined by adding subsection (x) and (y) is in the aggregate hereinafter referred to as the "Normal Termination Payment"), and the Normal Termination Payment shall be payable within thirty (30) days of the effective date of termination; (C) any vested benefits or amounts pursuant to Sections 3(c), 3(d), 3(e) and 3(f) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); (D) the health insurance benefits specified in Section 3(c)(1) above for a period of twelve (12) months following the effective date of termination, and following such time period, the Executive shall be entitled to all rights afforded to him under the federal Consolidated Omnibus Budget Reconciliation Act ("COBRA") to purchase continuation coverage of such health insurance benefits for himself and his dependents for the maximum period permitted by law (with respect to this paragraph (D), to the extent required by applicable law, Executive shall be deemed to have elected to exercise his rights under COBRA as of the first day following the effective date of termination); and (E) the life insurance benefits specified in Section 3(f) above for a period of twelve (12) months following the effective date of termination. In the event that Executive is terminated without cause pursuant to this Section 4(a)(1) and within twelve months from the effective date of such termination there is a "Change in Control" of the Company (as defined below), then Executive shall be entitled to receive the benefits set forth in Section 4(e) hereof to the extent and in the amount that such benefits exceed the amounts paid or received by Executive pursuant to this Section 4(a)(1). (2) WITH CAUSE. The Company may terminate this Agreement with "cause" immediately upon written notice to Executive. In connection with the termination of Executive's services pursuant to this Section 4(a)(2), Executive (and Executive's eligible dependents with respect to paragraph (D) below) shall be entitled to: -4- (A) receive all accrued but unpaid amounts of the Base Salary through the effective date of termination, payable in accordance with the provisions of Section 3(a) above; (B) forfeit his entitlement to any bonuses or other payments otherwise payable to him in accordance with Section 3(b) hereof; (C) receive the vested benefits or amounts pursuant to Sections 3(c), 3(d), 3(e) and 3(f) hereof through the effective date of termination, payable as otherwise provided in such Sections; (D) receive the health insurance benefits specified in Section 3(c)(1) above for a period of three (3) months following the effective date of termination, and following such time period, the Executive shall be entitled to all rights afforded to him under COBRA to purchase continuation coverage of such health insurance benefits for himself and his dependents for the maximum period permitted by law (with respect to this paragraph (D), to the extent required by applicable law, Executive shall be deemed to have elected to exercise his rights under COBRA as of the first day of following the effective date of termination); and (E) receive the life insurance benefits specified in Section 3(f) above for a period of three (3) months following the effective date of termination. (3) "CAUSE" DEFINED. For purposes of this Agreement, "Cause" shall mean a reasonable, good faith finding by a majority of the Board (A) that Executive has harmed the Company through an act of dishonesty or material conflict of interest that relates to the performance of Executive's duties hereunder, (B) of Executive's conviction of a felony involving moral turpitude, fraud or embezzlement, (C) that Executive's willful failure to perform in any material respect his duties under this Agreement (other than a failure due to disability) that results in material harm to the Company, after written notice specifying the failure and a reasonable opportunity of at least thirty (30) days to cure (it being understood that if Executive's failure to perform is not of a type requiring a single action to fully cure, then Executive may commence the cure promptly after such written notice and thereafter diligently prosecute such cure to completion) or (D) of a material and willful breach by Executive of any of his obligations hereunder and the failure of Executive to cure such breach within thirty (30) days after receipt by Executive of a written notice of the Company specifying in reasonable detail the nature of the breach. The Company intends that "Cause" must be based only on meaningful and significant matters and not on matters of minor importance. For purposes of this Section, an act, or failure to act, on Executive's part shall be considered "willful" only if done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. (4) DISABILITY. If due to illness, physical or mental disability, or other incapacity, Executive shall fail to perform the duties required by this Agreement during any four (4) consecutive months during the Term of this Agreement, the Company may terminate this Agreement upon thirty (30) days written notice to Executive. In such event, Executive (and Executive's eligible dependents with respect to paragraph (D) below) shall receive: -5- (A) all accrued but unpaid amounts of the Base Salary through the effective date of termination, payable in accordance with the provisions of Section 3(a) above; (B) a Normal Termination Payment which shall be payable within thirty (30) days of the effective date of termination; (C) any vested benefits or amounts pursuant to Sections 3(c), 3(d), 3(e) and 3(f) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); (D) the health insurance benefits specified in Section 3(c)(1) above for a period of twelve (12) months following the effective date of termination, and following such time period, the Executive shall be entitled to all rights afforded to him under COBRA to purchase continuation coverage of such health insurance benefits for himself and his dependents for the maximum period permitted by law (with respect to this paragraph (D), to the extent required by applicable law, Executive shall be deemed to have elected to exercise his rights under COBRA as of the first day following the effective date of termination); and (E) the life insurance benefits specified in Section 3(f) above for a period of twelve (12) months following the date of termination. This Section 4(a)(iii) shall not limit the entitlement of the Executive, his estate or beneficiaries to any disability or other benefits available to Executive under any disability insurance or other benefits plan or policy that is maintained by the Company for Executive's benefit. (b) TERMINATION BY EXECUTIVE. (1) WITH GOOD REASON. Executive may terminate this Agreement with "good reason" upon written notice to the Company. In connection with the termination of this Agreement pursuant to this Section 4(b)(1), Executive (and Executive's eligible dependents with respect to paragraph (E) below) shall be entitled to receive: (A) all accrued but unpaid amounts of the Base Salary through the effective date of termination, payable in accordance with the provisions of Section 3(a) above; (B) a termination payment in an amount equal to one (1) times the amount of the Base Salary, payable within thirty (30) days of the effective date of termination; (C) any earned and unpaid bonus(es) otherwise payable to him in accordance with Sections 3(b); (D) any vested benefits or amounts pursuant to Sections 3(c), 3(d), 3(e) and 3(f) hereof through the effective date of termination, payable as otherwise provided in such Sections; (E) the health insurance benefits specified in Section 3(c)(1) above for the for a period of twelve (12) months following the effective date of termination, and following such -6- time period, the Executive shall be entitled to all rights afforded to him under COBRA to purchase continuation coverage of such health insurance benefits for himself and his dependents for the maximum period permitted by law (with respect to this paragraph (E), to the extent required by applicable law, Executive shall be deemed to have elected to exercise his rights under COBRA as of the first day following the effective date of termination); and (F) the life insurance benefits specified in Section 3(f) above for a period of twelve (12) months following the date of termination. (2) WITHOUT GOOD REASON. Executive may terminate this Agreement at any time for any reason or for no reason at all upon sixty (60) days' written notice to Company, during which period Executive shall continue to perform his duties under this Agreement if Prime so elects. In connection with the termination of Executive's services pursuant to this Section 4(b)(2), Executive (and Executive's eligible dependents with respect to paragraph (C) below) shall be entitled to receive: (A) all accrued but unpaid amounts of the Base Salary through the effective date of termination, paid in accordance with the provisions of Section 3(a) above; (B) the vested benefits and amounts set forth in Sections 3(c), 3(d), 3(e) and 3(f) hereof through the effective date of termination, payable in accordance with the provisions of such Sections; (C) the health insurance benefits specified in Section 3(c)(1) above for a period of six (6) months following the effective date of termination, and following such time period, the Executive shall be entitled to all rights afforded to him under COBRA to purchase continuation coverage of such health insurance benefits for himself and his dependents for the maximum period permitted by law (with respect to this paragraph (C), to the extent required by applicable law, Executive shall be deemed to have elected to exercise his rights under COBRA as of the first day following the effective date of termination); and (D) the life insurance benefits specified in Section 3(f) above for a period of three (3) months following the date of termination. (E) "GOOD REASON" DEFINED. For purposes of this Agreement, "good reason" shall mean (A) the material breach by the Company of any of its obligations hereunder (a bona fide dispute regarding the Performance Bonus shall not be a material breach by the Company) and the failure of the Company to cure such breach within thirty (30) days after receipt by the Company of a written notice from the Executive specifying in reasonable detail the nature of the breach, unless such breach requires a longer period to cure, then the Company shall have the right to cure such breach within such additional period of time not to exceed ninety (90) days, (B) Executive's title or scope of responsibilities and duties are diminished as they existed and as provided in this Agreement immediately prior to such event, or the Company fails to provide Executive with adequate office facilities and support services to perform such responsibilities and duties, (C) the amounts payable to the Executive as existed and as provided in this Agreement immediately prior to such event have been materially reduced in any way, or (D) the Company fails to continue in effect any cash or stock-based incentive or bonus plan, retirement -7- plan, welfare benefit plan, or other benefit plan, program or arrangement, unless the aggregate value (as computed by an independent employee benefits consultant) of all such compensation, retirement and benefit plans, programs and arrangements provided to Executive is not materially less than their aggregate value as of the date of this Agreement (or as of the Change of Control, if greater). (c) DEATH. Notwithstanding any other provision of this Agreement, this Agreement shall terminate on the date of Executive's death. In this event, Executive's estate shall be entitled to receive all accrued but unpaid amounts of the Executive's Base Salary through the date of Executive's death, payable in accordance with the provisions of Section 3(a) above. In addition, the Executive's eligible dependents shall be entitled to receive the health insurance benefits specified in Section 3(c)(1) above for a period of twelve (12) months following the effective date of termination and following such time period, such eligible decedents shall be entitled to all rights afforded to them under COBRA to purchase continuation coverage of such health insurance benefits for the maximum period permitted by law. With respect to the preceding sentence, to the extent required by applicable law, the Executive's dependents shall be deemed to have elected to exercise their rights under COBRA as of the first day following the effective date of termination. This Section 4(c) shall not limit the entitlement of Executive under any insurance or other benefits plan or policy that is maintained by Prime for Executive's benefit. (d) PURCHASE OF LIFE INSURANCE. Notwithstanding anything to the contrary contained herein, in the event that the services of the Executive with the Company terminate for any reason other than death, the Executive shall have the right to acquire any life insurance policies maintained by the Company on the life of the Executive by (i) notifying the Company in writing of his desire to so purchase such life insurance policy or policies and (ii) tendering to the Company a cashier's check in an amount equal to the interpolated surrender cash value of such life insurance policy or policies together with any unearned portion of any current year premium thereof, both within sixty (60) days of the effective date of such termination. (e) TERMINATION FOLLOWING A CHANGE OF CONTROL. If, within twenty-four (24) months following a Change of Control, the Company terminates this Agreement and Executive's services other than for cause or Executive terminates this Agreement with good reason, in either case, by giving thirty (30) days' prior written notice, Executive (and Executive's eligible dependents with respect to paragraph (D) below) shall be entitled to receive the following benefits and payments: (A) all accrued but unpaid amounts of the Base Salary through the effective date of termination, payable in accordance with the provisions of Section 3(a) above; (B) a termination payment in an amount equal to $1,600,000, payable within thirty (30) days of the effective date of termination; (C) any vested benefits or amounts pursuant to Sections 3(c), 3(d), 3(e) and 3(f) hereof through the effective date of termination, payable in accordance with the provisions of any such plan(s); -8- (D) the health insurance benefits specified in Section 3(c)(1) above for a period of twenty-four (24) months following the effective date of termination, and following such time period, the Executive shall be entitled to all rights afforded to him under COBRA to purchase continuation coverage of such health insurance benefits for himself and his dependents for the maximum period permitted by law (with respect to this paragraph (D), to the extent required by applicable law, Executive shall be deemed to have elected to exercise his rights under COBRA as of the first day following the effective date of termination); and (E) the life insurance benefits specified in Section 3(f) above for a period of twenty-four (24) months following the effective date of termination. (F) Executive shall be fully vested in all amounts accrued or accumulated on behalf of Executive under any non-qualified retirement plan established or maintained by the Company, and the Company will promptly pay or distribute all such amounts to Executive in accordance with the terms of such plan as in effect on the date of this Agreement (or as of Executive's employment termination, if more favorable to Executive). If Executive is not fully vested in his accounts or benefits under the Company's qualified retirement plan at his employment termination pursuant to this Section, the Company will make a cash payment to Executive, within 30 days of Executive's employment termination, equal to the amount of such account or benefit that is forfeited. (G) All stock awards or grants under the Prime Retail, Inc. [1998] Stock Incentive Plan shall be fully vested any exercisable as of Executive's employment termination. (H) "CHANGE OF CONTROL" DEFINED. For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of Prime, a corporation owned directly or indirectly by the stockholders of Prime (immediately prior to the initial public offering of Prime) in substantially the same proportions as their ownership of stock of Prime (immediately prior to the initial public offering of Prime), Executive, Michael W. Reschke or Abraham Rosenthal or any of their respective affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of Prime representing 50% or more of the total voting power represented by Prime's then outstanding securities that vote generally in the election of directors (referred to herein as "Voting Securities"); (2) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new directors whose election by the Board or nomination for election by Prime's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; (3) the stockholders of Prime approve a merger or consolidation of Prime with any other corporation, other than a merger or consolidation that (i) would result in the Voting Securities of Prime outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50% of the total voting power represented by the Voting Securities of Prime or such surviving entity outstanding immediately after such merger or consolidation or (ii) 50% or more of the Board of Directors of the surviving entity is composed of members from the -9- Board of Directors of Prime; (4) the stockholders of Prime approve a plan of complete liquidation of Prime or an agreement for the sale or disposition by Prime of (in one transaction or a series of transactions) all or substantially all of Prime's assets. 5. COVENANTS OF EXECUTIVE. (a) NO CONFLICTS. Executive represents and warrants that he is not personally subject to any agreement, order or decree that restricts his acceptance of this Agreement and performance of his duties with the Company hereunder. (b) NON-COMPETITION. In return for the performance of the management duties described in Section 1 hereof, during the Term of the Agreement and for a period of two years thereafter in the event of the termination of this Agreement pursuant to the provisions of Sections 4(a)(1), 4(a)(2), 4(b)(1), 4(b)(2), or 4(e) hereof (the "Restrictive Period"), Executive shall not, directly or indirectly, in any capacity whatsoever, either on his own behalf or on behalf of any other person or entity with whom he may be employed or associated, compete with the Business (as hereinafter defined) in any of the following described manners: (i) perform services of the types that Executive performs on behalf of the Group (as hereinafter defined) for himself, or any affiliate of himself or for any competitor of the Group if such competitor engages in the Business within the United States and any other geographic area or territory wherein the Group is engaged in the Business at the time of Executive's termination of services hereunder ("Restrictive Geographic Area"); or (ii) solicit or accept any Business (or help any other person solicit or accept any Business) from any person or entity that on the date of this Agreement is a vendor, customer or tenant of the Group or at the time of termination of this Agreement any vendor, customer or tenant that is actively being pursued by the Group and that Executive knows is being pursued. For purposes hereof, "Group" shall mean Prime and the Operating Partnership and any of their respective subsidiaries or affiliates, and the term "Business" means any interest in any real property within the retail business that is within the primary business of the Company, as determined from time to time, by a majority vote of the independent directors of the Company. Furthermore, during the Restrictive Period, Executive shall not, directly or indirectly, induce or attempt to persuade any employee or customer, vendor or tenant of the Group or any such entity being actively pursued by the Group to terminate its business relationship with the Group or not proceed with a business relationship with the Group. Notwithstanding the foregoing, nothing herein shall prohibit Executive from owning 5% or less of any securities of a competitor engaged in the same Business if such securities are listed on a nationally recognized securities exchange or traded over-the-counter on the National Association of Securities Dealers Automated Quotation System or otherwise. So long as the Executive is in compliance with the provisions of this Section 6(b), and in addition to the payments required under any other Section of this Agreement, the Company will pay the Executive an amount equal to $66,666.66 per calendar month in arrears for a period of two (2) years beginning with the first calendar month after termination of this Agreement pursuant to the provisions of Sections 4(a)(1), 4(b)(1), or 4(e) hereof. Upon written notice at any time prior to thirty (30) days before the expiration of the first year after termination, the Company or the Executive may elect to limit the Restrictive Period relating to a termination of this Agreement pursuant to Sections 4(a)(1), 4(b)(1) or 4(e) to one year; whereupon, the $66,666.66 monthly payments shall cease at the end of said first year. If this Agreement is terminated pursuant to the provisions of Sections 4(a)(2) or 4(b)(2) hereof, then the Executive shall not be entitled to receive any amounts during the Restrictive Period. -10- (c) NON-DISCLOSURE. During the Restrictive Period and in the Restrictive Geographic Area, Executive shall not disclose or use, except in the pursuit of the Business for or on behalf of the Group, any Trade Secret (as hereinafter defined) of the Group, whether such Trade Secret is in Executive's memory or embodied in writing or other physical form. For purposes of this Section 6(c), "Trade Secret" means any information that derives independent economic value, actual or potential, with respect to the Company from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and is the subject of efforts to maintain its secrecy that are reasonable under the circumstances, including, but not limited to, trade secrets, customer lists, sales records and other proprietary commercial information. Said term, however, shall not include general "know-how" information acquired by Executive during the course of his service which could have been obtained by him from public sources without the expenditure of significant time, effort and expense that does not relate to the Company. (d) RETURN OF DOCUMENTS. Upon termination of his services with the Company, Executive shall return all originals and copies of books, records, documents, customer lists, sales materials, tapes, keys, credit cards and other tangible property of the Company within Executive's possession or under his control. (e) EQUITABLE RELIEF. In the event of any breach by Executive of any of the covenants contained in this Section 6, it is specifically understood and agreed that Company shall be entitled, in addition to any other remedy that it may have, to equitable relief by way of injunction, an accounting or otherwise and to notify any employer or prospective employer of Executive as to the terms and conditions hereof. (f) ACKNOWLEDGMENT. Executive acknowledges that he will be directly and materially involved as a senior executive in all important policy and operational decisions of Company. Executive further acknowledges that the scope of the foregoing restrictions has been specifically bargained between Company and Executive, each being fully informed of all relevant facts. Accordingly, Executive acknowledges that the foregoing restrictions of Section 6 are fair and reasonable, are minimally necessary to protect the Company, its other stockholders and the public from the unfair competition of Executive who, as a result of his performance of services on behalf of the Company, will have had unlimited access to the most confidential and important information of the Company, its business and future plans. Executive furthermore acknowledges that no unreasonable harm or injury will be suffered by him from enforcement of the covenants contained herein and that he will be able to earn a reasonable livelihood following termination of his services notwithstanding enforcement of the covenants contained herein. (g) INDEMNIFICATION. Subject to the provisions of this Agreement, Executive shall indemnify the Company for any and all consequential damages, costs and expenses (including legal fees) resulting from any of his acts or omissions that constitute bad faith, willful or intentional conduct that cause harm to the Company's business or reputation. Executive also shall indemnify the Company for any and all consequential damages, costs and expenses resulting from his acts of omission constituting reckless disregard of his duties to the Company following notice thereof by either Prime or the Operating Partnership after either becomes aware of such conduct and Executive's failure to so cure within 30 days. -11- 6. GROSS UP PAYMENTS. Anything in this Agreement to the contrary notwithstanding, in the event that any payment by or on behalf of the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section) (the "Payments") is determined to be an "excess parachute payment" pursuant to Code Section 280G or any successor or substitute provision of the Code, with the effect that Executive is liable for the payment of the excise tax described in Code Section 4999 or any successor or substitute provision of the Code, or any interest or penalties are incurred by Executive with respect to such Payments (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by Executive of all taxes imposed upon the Gross-Up Payment, including, without limitation, federal, state, local or other income taxes, FICA taxes, and additional Excise Tax (and any interest and penalties imposed with respect to such taxes), Executive retains a portion of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (a) DETERMINATION OF GROSS-UP. Subject to the provisions of paragraph (b) below, all determinations required to be made under this Section, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that serves as the Company's auditors (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from the Company or Executive that there have been Payments, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Executive shall designate another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section, shall be paid by the Company to Executive within five days after the receipt by the Company and Executive of the Accounting firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and Executive, except as provided in paragraph (b) below. (b) IRS CLAIMS. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that the Internal Revenue Service or other agency will claim that a greater Excise Tax is due, and thus a greater amount of Gross-Up Payment should have been made by the Company than that determined pursuant to paragraph (a) above (an "Underpayment"). In the event that Executive is required to make a payment of any such Excise Tax, the Accounting Firm shall determine the amount of the additional Gross-Up Payment due to the Executive based on the Underpayment, and such additional Gross-Up Payment shall be promptly paid by the Company to or for the benefit of the Executive. Executive shall notify the Company in writing of any claim by the Internal Revenue Service or other agency that, if successful, would require the payment by the Company of the Gross-Up Payment or an Underpayment. -12- 7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any and all other employment or service arrangements between Executive, on the one hand, and Prime and/or the Operating Partnership or its predecessors or any subsidiaries, on the other hand, and any and all such employment or service agreements and arrangements are hereby terminated and deemed of no further force or effect. 8. ASSIGNMENT. Neither this Agreement nor any rights or duties of Executive hereunder shall be assignable by Executive and any such purported assignment by him shall be void. Prime may assign all or any of its right hereunder provided that substantially all of the assets of the Company are also transferred to the same party; provided, however, that Prime and the Operating Partnership, jointly and severally shall remain primarily liable to Executive to fulfill all of the Company's obligations under this Agreement and that any such assignee also agrees to be primarily liable to Executive jointly and severally with the Company to fulfil all of the Company's obligations under this Agreement as provided in Section 9 below. 9. SUCCESSORS. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees and the Company's successors and assigns. If Executive should die while any amounts are still payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee or other designee or, if there be no such designee, to Executive's estate. The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company, as the case may be, by agreement in form and substance reasonably satisfactory to Executive, expressly, absolutely and unconditionally to 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 or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement. 10. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if delivered in person or sent by any national overnight delivery service or by certified mail to the following addresses (or to any other address that any party may designate by notice to the other parties hereto): (a) if to Executive, to: Glenn D. Reschke 731 Swan Cove Road Pasadena, Maryland 21122 with a copy to (which will not constitute notice): Richard E. Levine Miles & Stockbridge P.C. 10 Light Street Baltimore, MD 21202 -13- (b) if to Prime or to the Operating Partnership, to: Prime Retail, Inc. 100 East Pratt Street 19th Floor Baltimore, Maryland 21202 General Counsel with a copy to: Steven J. Gavin Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 11. AMENDMENT. This Agreement may not be changed, modified or amended except in writing signed by all of the parties hereto. 12. WAIVER OF BREACH. The waiver by any of the parties hereto of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any part. 13. SEVERABILITY. The Company and Executive each expressly agree and contract that it is not the intention of any of the parties hereto to violate any public policy, statutory or common law, and that if any sentence, paragraph, clause or combination of the same of this agreement is in violation of the law of any state where applicable, such sentence, paragraph, clause or combination of the same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph and this Agreement shall remain binding on the parties to make the covenants of this Agreement binding only to the extent that it may be lawfully done under existing applicable laws. In the event that any part of any covenant of this Agreement is determined by a court of competent jurisdiction to be overly broad thereby making the covenant unenforceable, the parties hereto agree, and it is their desire that such court shall substitute a judicially enforceable limitation in its place, and that as so modified the covenant shall be binding upon the parties as if originally set forth herein. 14. OPPORTUNITY TO EMPLOY COUNSEL. Executive acknowledges receipt of a copy of this Agreement prior to his execution of this Agreement with the Company and also acknowledges that he has had ample time and opportunity to employ counsel of his choice to provide advice concerning the terms and conditions of this Agreement. 15. LEGAL FEES. If the Company materially breaches any of its obligations to Executive under this Agreement and the Executive brings any action, claim, demand, suit or proceeding against the Company to enforce his rights under this Agreement, the Company agrees that it will pay all reasonable legal fees and related legal costs (collectively "Legal Fees") incurred by Executive no later than thirty (30) days following a judgment by a court of competent jurisdiction that the Company materially breached its obligations to the Executive under this Agreement; provided, -14- however, that if it is determined by a final judgment or other final adjudication by a court of competent jurisdiction that the Company did not materially breach any of its obligations to Executive under this Agreement, Executive will pay to Company within thirty (30) days from such final judgment or adjudication the aggregate amount of legal fees and expenses incurred by Company with respect to such action and the amount of any Legal Fees that were previously paid to Executive by the Company pursuant to this Section 15. The Company acknowledges the indemnification obligations of Prime to the Executive and the other officers of Prime as set forth in its By-laws, as they may be amended from time to time. 16. GOVERNING LAW. This Agreement shall be governed by, and construed, interpreted and enforced in accordance with the laws of the State of Maryland, exclusive of the conflict of laws provisions of the State of Maryland. 17. NOTICE OF FUTURE EMPLOYMENT. Executive agrees that during the twenty-four (24) consecutive months immediately following the termination of this Agreement, Executive will within fourteen (14) days of each instance of new employment notify Prime in writing of the identity of his new employer and the job title associated with such employment. 18. BINDING EFFECT. This Agreement shall be binding and legally enforceable against the parties hereto and their respective heirs, personal representatives, successors and assigns, as the case may be. -15- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. EXECUTIVE: /s/ Glenn D. Reschke - -------------------------- Glenn D. Reschke PRIME RETAIL, INC. PRIME RETAIL, L.P. By: /s/ C. Alan Schroeder By: Prime Retail, Inc. --------------------- Its: General Partner Name: C. Alan Schroeder Title: Executive Vice President General Counsel & Secretary By: /s/ C. Alan Schroeder ------------------------ Name: C. Alan Schroeder Title: Executive Vice President General Counsel & Secretary -----END PRIVACY-ENHANCED MESSAGE-----