Employment Agreement


         This  Employment  Agreement (the  "Agreement"),  effective as of May 3,
2000 (the  "Effective  Date"),  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 C. Alan  Schroeder,  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 North America, Puerto Rico and Western Europe;

         Whereas,  Executive is employed as Prime's  Executive  Vice President -
General Counsel and Secretary,  and in addition thereto  Executive holds various
offices with the Company's affiliates and subsidiaries;

         Whereas,  the Company believes that it would benefit from the continued
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 Executive Vice  President - General  Counsel and Secretary of the Company
on the terms and conditions provided in this Agreement. Executive shall serve as
the Executive Vice President - General  Counsel and Secretary of the Company and
Executive shall exercise such powers and authority as are  customarily  inherent
in 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"),  including
having primary oversight and responsibility for the legal affairs of the Company
and the  authority  to hire and fire  within the scope of his  responsibilities.
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. Executive will report
directly and exclusively to the Company's  President and Chief Executive Officer
("CEO"),  and he  will  perform  all of  his  duties  in  accordance  with  such
reasonable directions,  requests,  rules and regulations as are specified by the
CEO in connection with his  employment.  Notwithstanding  the foregoing,  in the
event the Company retains an individual to serve as its Chief Operating Officer,
or a similar role, and that individual  reports directly to the CEO, the parties
acknowledge  that the Company may alter the reporting  relationship of Executive
so that he thereafter reports to such individual and the CEO. During the Term of
this  Agreement,  it shall not be a violation of this Agreement for Executive to
(i)  serve on  corporate,  industry-related,  civic,  or  charitable  boards  or
committees  or devote time to serving any such entities or  organizations,  (ii)
deliver  lectures,  fulfill  speaking  engagements,   or  teach  at  educational
institutions, or (iii) manage personal investments and finances and business and
legal affairs,  to the extent that such activities do not violate this Section 1
or Section 5 hereof.

2. Term. The term of this Agreement shall commence as of the Effective Date and,
unless earlier  terminated in accordance with the terms of this Agreement,  will
extend to the third  anniversary of such date ("the Original  Term");  provided,
however, that if this Agreement is not affirmatively terminated by either party,
or extended or renewed for a specific  duration in writing by  agreement  of the
parties,  prior  to the last  day of the  Original  Term,  this  Agreement  will
continue on a month-to-month basis thereafter (the "Extended Term"). The parties
agree to  cooperate  and discuss in good faith their  intentions  with regard to
this Agreement's extension or renewal 12 months prior to the end of the Original
Term.  Notwithstanding  the foregoing,  the Company agrees to provide  Executive
with a minimum of six months'  advance written notice of its intent to terminate
this  Agreement  during the Original  Term or the  Extended  Term for any reason
other  than  Cause,  in which  case the  Company  shall  comply  with the notice
requirements of Sections 4(a)(2) and (3) hereof, and Executive agrees to provide
the Company with a minimum of 60 days' advance  written  notice of his intent to
terminate this  Agreement  during the Original Term or the Extended Term for any
reason other than Good  Reason,  in which case  Executive  shall comply with the
notice   requirements  of  Section  4(b)(1)(E)  hereof.  For  purposes  of  this
Agreement,  the  terms  "Original  Term" and  "Extended  Term"  shall  herein be
collectively referred to as the "Term."

3.       Compensation and Related Matters.

(a) Base Salary.  During the Term of this Agreement,  the Operating  Partnership
agrees to pay to Executive a base salary in an  aggregate  amount of Two Hundred
Thirty Six Thousand Five Hundred Dollars  ($236,500) 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.  The then applicable  amount of yearly base salary
payable to  Executive  pursuant to the  provisions  of this  Section  3(a) shall
herein be referred to as the "Base Salary." The Base Salary payable to Executive
pursuant to the  provisions  of this  Section  3(a) shall be subject to periodic
review by the  Compensation  Committee  of the Board of  Directors of Prime (the
"Committee") based upon periodic review of Executive's  performance conducted on
at least an annual basis and may be periodically  increased as a result thereof;
provided,  however,  that the Base Salary  payable to Executive  pursuant to the
provisions  of this  Section  3(a) shall in no event be less than the  aggregate
amount  set  forth in the  first  sentence  of this  paragraph.  In no event may
Executive's  Base Salary be reduced during the Term without his express  written
consent.

(b) Performance Bonus. In addition to the Base Salary,  Executive shall have the
right to receive,  and the Operating  Partnership 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% 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), or (iii)  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.

(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 life, disability,  health,
dental,  vision  and  other  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.  In addition,  Executive shall be covered by any and all
policies of directors and officers insurance coverage obtained by the Board from
time to time for its  senior  executive  officers,  the terms of which  shall be
established by the Board in its sole discretion.

(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.

(4) Notwithstanding anything to the contrary contained herein,
the Company  reserves the right to amend or terminate any plan described in this
Section 3(c) for any reason; provided,  however, that (i) no such amendment that
would reduce the benefits of Executive  will be adopted  unless it affects other
senior executive  officers  across-the-board,  and (ii) if any plan amendment or
termination  reduces the benefits of Executive,  the Company  agrees to adopt or
maintain  one or  more  replacement  plans  that  will  provide  Executive  with
reasonably comparable benefits throughout the Term of this Agreement.
(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
(considered  to be  granted  for  each  half-year  as of the  first  day of that
half-year)  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 Executive in the performance of his duties  hereunder.  In addition,
the Company agrees to pay, or reimburse  Executive for, any legal fees and costs
he incurs in connection with the negotiation and execution of this Agreement, up
to a maximum of $10,000,  and for any reasonable  legal fees and costs he incurs
in connection  with the  negotiation  and execution of renewals,  extensions and
amendments of this Agreement.

(f) Life  Insurance.  The Company  shall provide  $2,000,000  of life  insurance
coverage for the benefit of Executive during the Term of this Agreement.

(g) Stock Options.

(i) In consideration for Executive's  employment  hereunder,  as of May 11, 2000
(the "Date of Grant"),  Prime  granted  Executive  an option (the  "Option")  to
purchase  200,000 shares of Prime's common stock, par value $0.01 per share (the
"Common Stock").  The purchase price per share was $2.00 (the "Exercise Price").
The Option was granted  pursuant to the Prime Retail,  Inc. 1998 Long-Term Stock
Incentive Plan (the "LTIP") and is subject to the terms and conditions contained
in the Stock Award  Agreement  entered into between Prime and  Executive,  which
terms  include:  (i) the Option will have a term of ten years  measured from the
date of grant;  (ii) the greatest  portion of the Option shares  allowable under
the LTIP will be issued as incentive stock options; (iii) the Option shares will
vest and become exercisable as follows:  increments of 8.33% of the total number
of shares  will  become  vested as of the  first  day of each  contract  quarter
following  the Date of Grant,  such that the shares shall be fully vested before
the third  anniversary of the Effective Date,  assuming  Executive's  employment
with Prime continues through such dates; (iv) the Option will remain exercisable
for 30 days following  termination  of Executive for Cause,  and in the event of
Executive's  termination  of  employment  for any other  reason the Option  will
remain  exercisable for 90 days; and (v) upon  Executive's  resignation for Good
Reason or  termination  without Cause (each as herein defined and without regard
to whether a Change of Control has occurred)  during the Term of this Agreement,
the entire Option, in addition to all other outstanding options awarded by Prime
to  Executive,  will  become  fully  vested and  exercisable,  to the extent not
previously  exercised.  Prime will take all steps  necessary  to ensure that all
options held by Executive survive any Change of Control.

4.       Termination and Termination Benefits.

(a)      Termination by Prime.

(1)  Without  Cause.  Subject  to the notice  provisions  set forth in Section 2
hereof, the Company may terminate this Agreement and Executive's services at any
time for any reason,  and after any required  notice is provided to Executive he
shall  continue to perform  his duties  under this  Agreement  during the notice
period  if the  Company  so  elects.  In  connection  with  the  termination  of
Executive's  services without Cause during the Term of this Agreement,  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 and vacation  through the
effective  date of  termination,  payable in accordance  with the  provisions of
Sections 3(a) and 3(d) above;

(B) if such termination  occurs during the Original Term, a termination  payment
in an amount  equal to the product of (x) the number of full and  partial  years
remaining in the Original Term, and (y) the sum of (i) Executive's  then current
Base Salary and (ii) a bonus payment  equal to 100% of the average  annual bonus
paid to Executive for the two most recent  calendar years in which he received a
bonus,  or if no such bonus  payments  were made to  Executive,  a bonus payment
equal to 50% of his then current Base Salary (the sum of the amounts  determined
by adding  clauses (i) and (ii) is in the aggregate  hereinafter  referred to as
the "One-Year Pay Equivalent"),  and the product of (x) and (y) 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(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

(D) if such  termination  occurs during the Original Term, (i) the  Company-paid
health  insurance  benefits  specified in Section  3(c)(1) above for a period of
twelve  (12)  months  following  the  effective  date of  termination  and  (ii)
following such period, Executive shall be entitled to all rights afforded to him
under the federal  Consolidated  Omnibus Budget  Reconciliation Act ("COBRA") to
purchase  continuation coverage of health insurance benefits for himself and his
dependents for the maximum period permitted by law. If such  termination  occurs
during the Extended Term,  Executive will be entitled to all rights  afforded to
him under COBRA to purchase  continuation  coverage of health insurance benefits
for himself and his dependents for the maximum period permitted by law.

In the event that Executive is terminated without Cause pursuant to this Section
4(a)(1) or resigns for Good Reason and within 12 months from the effective  date
of such termination or resignation 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(d) 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 (C) below) shall be
entitled to:

(A)      receive all accrued but unpaid  amounts of the Base Salary and vacation
         through the effective date of  termination,  payable in accordance with
         the provisions of Sections 3(a) and 3(d) above;

(B)      receive the vested benefits or amounts pursuant to Sections 3(c), 3(e),
         3(f) and 3(g) hereof through the effective date of termination, payable
         as otherwise provided in such Sections; and

(C)      exercise   all  rights   afforded   to  him  under  COBRA  to  purchase
         continuation  coverage of health insurance benefits for himself and his
         dependents for the maximum period permitted by law.

(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 or physical or mental  disability,  Executive
shall fail to perform the material duties required by this Agreement  during any
four (4) consecutive  months during the Term of this Agreement,  the Company may
terminate this Agreement,  subject to the notice provisions set forth in Section
2 hereof.  In such event,  Executive (and Executive's  eligible  dependents with
respect to paragraph (D) below) shall receive:

(A)      all accrued but unpaid amounts of the Base Salary and vacation  through
         the  effective  date of  termination,  payable in  accordance  with the
         provisions of Sections 3(a) and 3(d) above;

(B)      if, and only if, the Company has  terminated  or  otherwise  materially
         reduced Executive's long-term disability coverage that was in effect on
         the Effective Date of this Agreement,  then Executive shall be entitled
         to receive 1.5 times the One-Year Pay Equivalent;

(C)      any vested  benefits or amounts  pursuant to Sections 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

(D)      the benefits described in Section 4(a)(1)(D).


This Section 4(a)(4) shall not limit the entitlement of 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 for Any Reason.

(1) Subject to the notice requirements set forth in Section 2 hereof,  Executive
may terminate this Agreement at any time with or without Good Reason (as defined
herein),  and after any  required  notice is provided  to the Company  Executive
shall  continue to perform  his duties  under this  Agreement  during the notice
period if the Company so elects. If Executive terminates his employment for Good
Reason,  the Company shall pay him the compensation and other benefits  provided
above in Section  4(a)(1) as if it had terminated  his employment  without Cause
after providing the requisite notice pursuant to Section 2 hereof. In connection
with the  termination of this Agreement  pursuant to this Section  4(b)(1) other
than for Good  Reason,  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 and vacation  through the
effective  date of  termination,  payable in accordance  with the  provisions of
Sections 3(a) and 3(d) above;

(B) any earned and unpaid bonus(es)  otherwise payable to him in accordance with
Section 3(b);

(C) any vested  benefits or amounts  pursuant to Sections 3(c),  3(e),  3(f) and
3(g) hereof  through the  effective  date of  termination,  payable as otherwise
provided in such Sections; and

(D) all rights afforded to him under COBRA to purchase  continuation coverage of
health insurance  benefits for himself and his dependents for the maximum period
permitted by law.

(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 (reduced to ten (10) days for failure to pay Base Salary) after
receipt  by the  Company  of a  written  notice  from  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 sixty (60) days; (B)  Executive's
title or scope of responsibilities and duties are materially diminished from the
level provided in this Agreement, or the Company fails to provide Executive with
adequate office facilities and support services to perform such responsibilities
and duties; or (C) the Company changes Executive's principal place of employment
to a location more than 25 miles from the  Company's  principal  Baltimore  City
office as of the Effective Date.  Executive's  delay in providing  notice of his
termination  for Good Reason shall not be deemed to be a waiver of any such Good
Reason unless and until Executive fails to provide such notice within six months
after the  occurrence  of the event  triggering  such Good Reason,  nor does the
failure to resign for one Good Reason prevent any later Good Reason  resignation
for a similar or different reason.

(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
Executive's  Base Salary and  vacation  through the date of  Executive's  death,
payable in accordance  with the  provisions of Sections 3(a) and 3(d) above.  In
addition,  Executive's  eligible  dependents  shall be  entitled  to receive the
benefits  specified in Section  4(a)(1)(D)  above,  to the extent  applicable to
dependents. 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)  Termination  Following a Change of Control.  If,  within  twenty-four  (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, in either case,  subject to
the notice provisions of Section 2 hereof,  Executive (and Executive's  eligible
dependents with respect to paragraph (D) below) shall be entitled to receive 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.

(e) "Change of Control"  Defined.  For purposes of this Agreement,  a "Change of
Control"  shall be deemed to have  occurred  if (1) any  "person" or "group" (as
such terms are used for purposes of Sections  13(d) and 14(d) of the  Securities
Exchange Act of 1934, as amended, regardless of whether applicable),  other than
a trustee or other fiduciary  holding  securities under an employee benefit plan
of Prime or a corporation  owned directly or indirectly by the  stockholders  of
Prime in substantially the same proportions as their ownership of stock of Prime
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 individuals who constitute
the Board  immediately  before a proxy  contest  cease to  constitute at least a
majority  of the Board  (excluding  any Board  seat that is vacant or  otherwise
unoccupied)   immediately   following  the  proxy  contest;   (4)  a  merger  or
consolidation  of Prime  with or into any other  entity,  other than a merger or
consolidation   (i)  that  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) where more than 50% of the Board of
Directors  of the  surviving  entity is  composed  of members  from the Board of
Directors  of Prime,  with terms ending at least 11 months after the date of the
merger or  consolidation;  or (5) 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, and such transaction is substantially completed. However,
in no event will a Change of Control be deemed to have occurred, with respect to
Executive,  if  Executive  is part of a purchasing  group that  consummates  the
Change  of  Control  transaction.  Executive  will be  deemed to be "part of the
purchasing  group" for  purposes of the  preceding  sentence if  Executive is an
equity  participant in the purchasing  company or group (except for: (i) passive
ownership of less than three percent of the stock of the purchasing  company; or
(ii) ownership of equity  participation in the purchasing company or group which
is otherwise not significant,  as determined prior to the Change of Control by a
majority of the non-employee continuing directors).

(f) The Company may make any payments due Executive  under Sections 3(g),  4(d),
and 6 before the  completion  of the Change of  Control,  if, in the  reasonable
opinion of the Chairman of the Board's Compensation  Committee (the "Chairman"),
all conditions for completion of the Change of Control are substantially  likely
to be met. At that time,  the Chairman may release the payments or authorize the
option  vesting,  subject to  Executive's  agreement  to  promptly  return  such
payments  and agree to  rescission  of the vesting if the Change of Control does
not then occur.

(g)  Purchase  of  Life  Insurance.  Notwithstanding  anything  to the  contrary
contained  herein,  in the event that the services of Executive with the Company
terminate  for any reason  other than death,  Executive  shall have the right to
acquire any life  insurance  policies  maintained  by the Company on the life of
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.

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-Disclosure. Executive shall not disclose or use, except for or on behalf
of the "Group"  (consisting  of Prime and the Operating  Partnership  and any of
their  direct and  indirect  subsidiaries),  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 5(b),
"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.  Executive  shall be subject to the  restrictions  of this Section 5(b)
indefinitely.

(c)  Non-Solicitation.  During  the  period  of the  later  of  (i)  Executive's
employment  under this  Agreement,  or (ii) throughout the Original Term of this
Agreement,  but only if  Executive  resigns  other  than for Good  Reason  or is
terminated by the Company with Cause, (the "Restrictive  Period") and within the
United States (the  "Restrictive  Geographic  Area"),  Executive shall not hire,
cause to be hired, or 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.  Notwithstanding the foregoing,  if
any officer,  employee,  agent,  consultant,  independent contractor,  tenant or
customer of the Company is contacted by, or receives a general  communication or
solicitation directed to the general public from, an entity with which Executive
has become employed or otherwise affiliated,  the parties hereto agree that such
contact or  communication  shall not violate  this  provision  unless  Executive
directly  or  indirectly   initiated  it.  The  time  period  during  which  the
prohibitions  set forth  above  apply  shall be  extended  by the length of time
during which it is judicially  determined  that  Executive has violated any such
prohibition in any respect.

(d)  Non-Competition.  In return for the  performance of the  management  duties
described in Section 1 hereof,  Executive agrees that (A) during the Restrictive
Period he will 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,  perform or solicit  services for any of the  following
entities:  The Mills Corporation;  Tanger Factory Outlet Centers,  Inc.; Chelsea
GCA Realty,  Inc.; New Plan Excel Realty Trust,  Inc.; and Charter Oak Partners.
Executive  agrees and  acknowledges  that  during the  Restrictive  Period he is
prohibited  from  providing  legal services to any of the named entities in this
Section 5(d);  however,  Executive is not  prohibited  from joining or otherwise
associating  with a law firm in which other attorneys  provide legal services to
any of the named entities.

(e) 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.
Executive  shall  have the right to retain  copies of forms and other  documents
used by the Company, redacted to remove the specific references to the Company.

(f)  Equitable  Relief.  In the event of any breach by  Executive  of any of the
covenants contained in this Section 5, it is specifically  understood and agreed
that  Company  shall be  entitled,  in addition to any other  remedy that it may
have, to seek equitable relief by way of injunction, an accounting or otherwise.

(g)  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 this Section 5 are
fair  and  reasonable,   are  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.

(h) Indemnification.  The Company shall, to the maximum extent permitted by law,
and in addition to any such rights  granted to or available  to Executive  under
the Company's Articles and By-Laws,  or standing or other  resolutions,  defend,
indemnify and hold harmless  Executive  from and against any and all claims made
against Executive  concerning or relative to his service,  actions, or omissions
on behalf of the  Company  as an  employee,  officer,  director  or agent of the
Company.  The Company shall, upon Executive's  request,  promptly advance or pay
any amounts for costs,  charges,  or expenses  (including,  without  limitation,
legal fees and expenses incurred by counsel retained by Executive) in respect of
his right to indemnification  hereunder,  subject to a later determination as to
Executive's  ultimate  right  to  receive  such  payment.  Executive's  right to
indemnification  shall survive until the expiration of any applicable statute of
limitations, without regard to the earlier termination of Executive's employment
hereunder or of the Term.

6.       Golden Parachute Provision.

(a)  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  from  the  Operating
Partnership  (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.

(b) Determination of Gross-Up. Subject to the provisions of paragraph (c) below,
all  determinations  required to be made under this Section 6, 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  6,  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 (c) below.

(c) 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  Executive  based on the
Underpayment, and such additional Gross-Up Payment shall be promptly paid by the
Company to or for the benefit of 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.

7. Transfer of Equity Interest to Employer Upon Termination of Employment. As of
the Date of Termination  and in  consideration  for the payment of $100.00 cash,
Executive  agrees to execute  and deliver to Prime or its  designee  any and all
certificates for shares of capital stock (with appropriate stock powers attached
and properly  signed) of Prime's  subsidiaries  and  affiliates  (other than the
Operating Partnership),  including,  but not limited to Prime Retail E-Commerce,
Inc., Prime Retail Stores, Inc., and Prime Retail Furniture,  Inc. (all of which
are Maryland  corporations) (the "Subsidiary Shares").  Executive further agrees
to execute and deliver such other  documentation as Prime reasonably requests to
effect the  assignment  of the  Subsidiary  Shares.  For the avoidance of doubt,
nothing  contained  in this  Section 7 will be deemed to  require  Executive  to
transfer  or  carry  any of his  equity  interests  in  Prime  or the  Operating
Partnership.

8. 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.

9.  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 fulfill all of the  Company's  obligations  under this  Agreement  as
provided in Section 10 below.

10. 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.

11.  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:

                  C. Alan Schroeder
                  454 Garrison Forest Road
                  Owings Mills, Maryland 21117

                  with a copy to (which shall not constitute notice):

                  John B. Watkins and R. Scott Kilgore
                  Wilmer, Cutler & Pickering
                  2445 M Street, NW
                  Washington, DC  20037

(b)      if to Prime or to the Operating Partnership, to:

                  Prime Retail, Inc.
                  Attn:  Board of Directors
                  100 East Pratt Street
                  19th Floor
                  Baltimore, Maryland 21202




<PAGE>



                  with a copy to (which shall not constitute notice):

                  Winston & Strawn
                  Attn:  Steven J. Gavin
                  35 West Wacker Drive
                  Chicago, Illinois 60601

12. Amendment.  This Agreement may not be changed, modified or amended except in
writing signed by all of the parties hereto.

13. 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.

14.  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.

15. 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.

16.  Legal Fees.  If any dispute or  disagreement  arising  hereunder or related
hereto shall result in legal action between the Company and Executive, Executive
shall be entitled,  within 30 days after incurring such fees and  disbursements,
to recover  from the Company any  reasonable  expenses for  attorney's  fees and
disbursements  incurred  by  him  in  connection  with  Executive's  good  faith
maintenance or defense of such action,  on an after-tax basis,  unless Executive
does not prevail in such action.

17. No Mitigation.  The Company waives,  releases and remises (x) any obligation
or duty under  applicable  law or  otherwise on the part of Executive to seek or
obtain other engagements or employment or to otherwise  mitigate any payments or
damages to which  Executive  may be  entitled to by reason of any  operation  or
termination of this Agreement; and (y) any right in or claim to any remuneration
or compensation  received by Executive pursuant to any engagements or employment
subsequent to the termination of this Agreement.

18.  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.

19.  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.



                            (signature page follows)

<PAGE>






         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date first written above.



EXECUTIVE:

-----------------------
C. Alan Schroeder


PRIME  RETAIL,  INC.,  a Maryland  corporation  PRIME  RETAIL,  L.P., a Delaware
limited partnership

By:      ______________________                 By:      Prime Retail, Inc.
Name:    ______________________                 Its:     Sole General Partner
Title:   ______________________
                                                By:      ______________________
                                                Name:    ______________________
                                                Title:   ______________________


<PAGE>



                                    Exhibit A
                               Dispute Resolution


Mediation
If either  party has a dispute  or claim  relating  to this  Agreement  or their
relationship  and except as set forth in  Alternatives,  the parties  must first
seek to mediate  the same before an  impartial  mediator  the  parties  mutually
designate,  at the Company's  expense  (other than their  respective  attorneys'
fees).  Subject to the mediator's  schedule,  the mediation must occur within 45
days of either party's written demand. However, in an appropriate  circumstance,
a  party  may  seek  emergency  equitable  relief  from  a  court  of  competent
jurisdiction notwithstanding this obligation to mediate.

Binding
Arbitration
If the mediation  reaches no solution or the parties agree to forego  mediation,
the parties will promptly  submit their disputes to binding  arbitration  before
one or more arbitrators  (collectively or singly,  the "Arbitrator") the parties
agree to select (or whom,  absent agreement,  a court of competent  jurisdiction
selects).  The  arbitration  must follow  applicable  law related to arbitration
proceedings and, where appropriate, the Employment Dispute Rules of the American
Arbitration Association.

Arbitration
Principles
All  statutes  of  limitations  and  substantive  laws  applicable  to  a  court
proceeding will apply to this proceeding.  The Arbitrator will have the power to
grant relief in equity as well as at law, to issue  subpoenas  duces  tecum,  to
question witnesses, to consider affidavits (provided there is a fair opportunity
to rebut the  affidavits),  to  require  briefs  and  written  summaries  of the
material  evidence,  and to relax the rules of evidence and procedure,  provided
that the Arbitrator must not admit evidence it does not consider  reliable.  The
parties agree (and the Arbitrator must agree) that all proceedings and decisions
of the  Arbitrator  will be  maintained  in  confidence,  to the extent  legally
permissible,  and not be made public by any party or the Arbitrator  without the
prior written consent of all parties to the  arbitration,  except as the law may
otherwise require.

Discovery;  The parties have selected  arbitration to expedite the resolution of
disputes  Evidence;  and  to  reduce  the  costs  and  burdens  associated  with
litigation. The Presumptions parties agree that the Arbitrator should take these
concerns into account when  determining  whether to authorize  discovery and, if
so,  the scope of  permissible  discovery  and  other  hearing  and  pre-hearing
procedures. The Arbitrator may permit reasonable discovery rights in preparation
for the  arbitration,  provided that it should  accelerate the scheduling of and
responses to such  discovery so as not to  unreasonably  delay the  arbitration.
Exhibits  must be marked and left with the  Arbitrator  until it has  rendered a
decision.  Either party may elect, at its expense,  to record the proceedings by
audiotape  or  stenographic  recorder  (but not by video).  The  Arbitrator  may
conclude that the applicable law of any foreign  jurisdiction would be identical
to that of Maryland on the pertinent  issue(s),  absent a party's  providing the
Arbitrator with relevant  authorities  (and copying the opposing party) at least
five business days before the arbitration hearing.

Nature of Award
The Arbitrator  must render its award,  to the extent  feasible,  within 30 days
after the close of the hearing.  The award must set forth the material  findings
of fact and legal  conclusions  supporting the award.  The parties agree that it
will be final, binding, and enforceable by any court of competent  jurisdiction.
Where  necessary or appropriate to effectuate  relief,  the Arbitrator may issue
equitable  orders as part of or ancillary to the award. The Arbitrator may award
reasonable  attorneys' fees to the prevailing  party to the extent a court could
have made such an award.

Appeal
The parties may appeal the award  based on the  grounds  allowed by statute,  as
well as upon the ground that the award misapplies the law to the facts, provided
that such appeal is filed within the applicable  time limits law allows.  If the
award is appealed, the court may consider the ruling,  evidence submitted during
the  arbitration,  briefs,  and arguments but must not try the case de novo. The
parties will bear the costs and fees  associated  with the appeal in  accordance
with  the  arbitration  award  or,  in the  event  of a  successful  appeal,  in
accordance with the court's final judgment.

Alternatives
This  Dispute  Resolution  provision  does not  preclude  a party  from  seeking
equitable relief from a court (i) to prevent  imminent or irreparable  injury or
(ii) pending arbitration, to preserve the last peaceable status quo, nor does it
preclude  the parties  from  agreeing to a less  expensive  and faster  means of
dispute resolution.