REGISTRATION RIGHTS AGREEMENT

                            Dated as of June 15, 1998

                                       of

                               PRIME RETAIL, INC.

                                       and

                               PRIME RETAIL, L.P.

                               for the benefit of

                             HOLDERS OF COMMON UNITS

                                       of

                               PRIME RETAIL, L.P.

                                       and

                   CERTAIN STOCKHOLDERS OF PRIME RETAIL, INC.


<PAGE>
                          REGISTRATION RIGHTS AGREEMENT


     THIS REGISTRATION  RIGHTS AGREEMENT (this " Agreement") is made and entered
into as of June 15, 1998, by PRIME  RETAIL,  INC., a Maryland  corporation  (the
"Company"),   and  PRIME  RETAIL  L.P.,  a  Delaware  limited  partnership  (the
"Partnership"),  for the benefit of those  Persons  (as defined  herein) who own
Shares (as defined  herein) and those  Persons  (other than the Company) who own
Units  (as  defined  herein)  and  their  respective  successors,   assigns  and
transferees  (herein  referred to collectively as the "Holders" and individually
as a "Holder");

     WHEREAS,  Prime Retail,  Inc., a Maryland  corporation  ("Old Prime"),  the
Partnership,  Horizon Group, Inc., a Michigan  corporation  ("HGI"), the Company
(formerly known as Sky Merger Corp.), Horizon Group Properties, Inc., a Maryland
corporation, Horizon Group Properties, L.P., a Delaware limited partnership, and
Horizon/Glen Outlet Centers Limited Partnership,  a Delaware limited partnership
("Horizon  Partnership")  have entered  into that  certain  Amended and Restated
Agreement  and  Plan of  Merger  dated  as of  February  1,  1998  (the  "Merger
Agreement");

     WHEREAS,  on the date hereof and in accordance  with the Merger  Agreement,
Horizon  Partnership has merged with and into the Partnership (the  "Partnership
Merger"), with the Partnership as the surviving partnership, HGI has merged with
and into the Company (the "Reincorporation"),  with the Company as the surviving
corporation,  and Old  Prime  has  merged  with and into the  Company,  with the
Company as the surviving  corporation (the "Corporate Merger" and, together with
the Partnership Merger and the Reincorporation, the "Mergers");

     WHEREAS,  Old Prime, the Partnership and certain others have entered into a
Registration  Rights Agreement dated March 22, 1994 (the "Old Prime Registration
Rights  Agreement")  and HGI has entered into a  Registration  Rights  Agreement
dated as of July 14, 1995 (the "HGI Registration Rights Agreement" and, together
with the Old Prime Registration Rights Agreement, the "Prior Agreements").

     WHEREAS,  Sky  Merger  Corp.  filed  a  registration  statement  (the  "S-4
Registration  Statement")  registering  the Shares issuable upon the exchange of
Units under the Securities Act.

     WHEREAS, it is a condition to the consummation of the various  transactions
contemplated by the Merger Agreement that the Company and the Partnership  enter
into this Agreement;

     WHEREAS, the Company and the Partnership have agreed, subject to the terms,
conditions  and  limitations  set forth herein,  to provide the Holders with the
registration rights set forth herein and it is the intent of the Company and the
Partnership  that this Agreement  supersede and replace the Prior  Agreements in
their entirety.
<PAGE>
     NOW,  THEREFORE,  the  Company  for the  benefit of the  holders  agrees as
follows:

     1. Definitions.

          As used in this  Agreement,  the following  capitalized  defined terms
     shall have the following  meanings:  

          "Closing  Date"  shall have the  meaning  assigned to such term in the
     Merger Agreement.

          "Common  Units"  shall  mean  units of  limited  partnership  interest
     designated as Common Units in the Partnership  Agreement and outstanding on
     the date hereof,  including any Common Units issued in connection  with the
     Partnership  Merger,  all of which interests are  exchangeable  for Company
     Common Stock or, at the option of the Company as the general partner of the
     Partnership,  cash  in  accordance  with  Article  XI  of  the  Partnership
     Agreement.

          "Company"  shall have the meaning set forth in the  preamble and shall
     also include any successors thereof.

          "Company  Common Stock" shall mean the shares of common  stock,  $0.01
     par value per share, of the Company.

          "Company  Series B  Preferred  Stock"  shall  mean the  shares of 8.5%
     Series B Cumulative  Participating  Convertible  Preferred Stock, $0.01 par
     value per share, of the Company.

          "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
     amended from time to time.

          "HGI Common Stock" shall mean shares of common stock,  $0.01 par value
     per share,  of HGI and any shares of capital  stock into which such  shares
     are converted pursuant to the Reincorporation.

          "Holder"  or  "Holders"  shall  have  the  meaning  set  forth  in the
     preamble. Holders shall be comprised of REIT Holders and Unit Holders.

          "Old Prime Common Stock" shall mean shares of common stock,  $0.01 par
     value per share, of Old Prime.

          "Partnership"  shall have the  meaning set forth in the  preamble  and
     shall also include any successors thereof.

<PAGE>

          "Partnership  Agreement"  shall mean the Second  Amended and  Restated
     Agreement  of  Limited  Partnership  of  Partnership,  as in  effect on the
     Closing Date and as from time to time amended,  supplemented or modified in
     accordance with the terms thereof.

          "Person" shall mean an individual,  partnership,  corporation,  trust,
     limited liability company, or unincorporated organization,  or a government
     or agency or political subdivision thereof.

          "Prime/Sky  Merger  Effective Time" shall have the meaning assigned to
     such term in the Merger Agreement.

          "Prospectus"  shall mean the  prospectus  included  in a  Registration
     Statement,  and any such  prospectus  as  amended  or  supplemented  by any
     prospectus  supplement  with  respect to the terms of the  offering  of any
     portion of the Registrable Securities covered by a Registration  Statement,
     and by all other amendments and supplements to such  prospectus,  including
     post-effective   amendments,  and  in  each  case  including  all  material
     incorporated by reference therein.

          "Public Sale" shall mean a public sale or  distribution of Registrable
     Securities,  including  a sale  pursuant  to  Rule  144A  (or  any  similar
     provision then in effect) under the Securities Act.

          "Registrable  Securities" shall mean the Shares,  excluding (i) Shares
     for which a  Registration  Statement  relating  to the sale  thereof by the
     Holder shall have become  effective under the Securities Act and which have
     been  disposed of by the Holder  under such  Registration  Statement,  (ii)
     Shares sold or which may be sold or otherwise  distributed pursuant to Rule
     144 or Rule 145 under the  Securities  Act in unlimited  quantities  in any
     three-month  period as  confirmed  in a written  opinion  of counsel to the
     Company  addressed to the Holder or (iii)  Shares as to which  registration
     under the  Securities Act is not required to permit the sale thereof by the
     Holder to the public,  and certificates  without  restrictive  legend shall
     have been delivered by the Company for such Shares.

          "Registration  Expenses"  shall mean any and all expenses  incident to
     performance  of or  compliance  with  this  Agreement,  including,  without
     limitation:  (i)  all  SEC,  stock  exchange  or  National  Association  of
     Securities  Dealers,  Inc. ("NASD")  registration and filing fees, (ii) all
     fees and  expenses  incurred  in  connection  with  compliance  with  state
     securities or blue sky laws (including reasonable fees and disbursements of
     counsel in connection with blue sky qualification of any of the Registrable
     Securities  and the  preparation of a Blue Sky  Memorandum)  and compliance
     with the rules of the NASD,  (iii) all  expenses of any Persons  engaged by
     the Company in  preparing  or  assisting  in  preparing,  word  processing,
     printing and  distributing  any  Registration  Statement,  any  Prospectus,
     certificates  and  other  documents  relating  to  the  performance  of and
     compliance  with this  Agreement,  (iv) all fees and  expenses  incurred in
     connection with the listing,  if any, of any of the Registrable  Securities
     on any  securities  exchange or  exchanges  pursuant to Section  3(a)(viii)
     hereof,  and (v) the fees and  disbursements of counsel for the Company and
     of the  independent  public  accountants  of  the  Company,  including  the
     expenses of any special audits or "cold comfort" letters,  if any, required
     by or incident to such  performance and compliance.  Registration  Expenses
     shall  specifically  exclude  underwriting  discounts and commissions,  and
     transfer taxes, if any,  relating to the sale or disposition of Registrable
     Securities by a selling Holder,  all of which shall be borne by such Holder
     in all cases.
<PAGE>

          "Registration  Notice"  shall  have the  meaning  set forth in Section
     3(a)(ii) hereof.

          "Registration  Statement"  shall mean the S-4  Registration  Statement
     and/or the "shelf" registration  statement of the Company filed pursuant to
     Section 2(a) hereof and any other entity  required to be a registrant  with
     respect to such shelf  registration  statement pursuant to the requirements
     of the Securities Act which covers all of the Registrable  Securities on an
     appropriate  form under Rule 415 under the  Securities  Act, or any similar
     rule that may be adopted by the SEC, and all amendments and  supplements to
     such registration statement,  including post-effective  amendments, in each
     case including the Prospectus  contained therein,  all exhibits thereto and
     all materials incorporated by reference therein.

          "REIT  Holders"  shall mean  Holders of Shares,  and their  respective
     successors, assigns and transferees.

          "SEC" shall mean the Securities and Exchange Commission.

          "Securities  Act" shall mean  Securities  Act of 1933, as amended from
     time to time.

          "Shares"  shall mean  Company  Series B  Preferred  Stock and  Company
     Common Stock that,  in either case,  (i) are issuable  upon the exchange of
     Units in accordance with Article XI of the  Partnership  Agreement or; (ii)
     were issued on the date hereof in connection  with the Corporate  Merger in
     exchange  for HGI  Common  Stock or Old Prime  Common  Stock  that was held
     immediately prior to the Prime/Sky Merger Effective Time by "affiliates" of
     HGI or Old Prime, respectively,  within the meaning of Rule 144(a)(1) under
     the Securities Act.

          "Shelf Registration" shall mean a registration required to be effected
     pursuant to Section 2(a) hereof.

          "Unit Holders" shall mean the holders (other than the Company)  owning
     Units on the date  hereof  and their  respective  successors,  assigns  and
     transferees.

          "Units" shall mean the Common Units.

          2. Shelf Registration Under the Securities Act

          (a) Filing of Registration Statement. As promptly as practicable after
     the date  hereof,  but in any  event  within  thirty  (30) days of the date
     hereof,  the  Company  shall  cause to be  filed  promptly  a  Registration
     Statement on Form S-3  providing for the sale by the Company to the Holders
     of  Shares to be  issued  upon the  exchange  of Units in  accordance  with
     Article XI of the  Partnership  Agreement and providing for the sale by the
     Holders of Registrable  Securities in accordance  with the terms hereof and
     will use its reasonable efforts to cause such Registration  Statement to be
     declared effective by the SEC as soon as reasonably

<PAGE>

     practicable.  The Company agrees to use its reasonable  efforts to keep the
     Registration  Statement  continuously  effective  under the  Securities Act
     until  such date as there  shall no longer  be any  Registrable  Securities
     outstanding,  and further  agrees to supplement  or amend the  Registration
     Statement,  if and as required by the rules,  regulations  or  instructions
     applicable  to  the  registration   form  used  by  the  Company  for  such
     Registration  Statement or by the  Securities Act or by any other rules and
     regulations  thereunder for Registration.  Notwithstanding any provision of
     this Section 2(a) to the contrary,  if as of the date of this Agreement any
     of the  Registrable  Securities  are subject to an  effective  registration
     statement  under the Securities Act on a form permitting the sale of Shares
     in the manner provided for in this Agreement,  such registration  statement
     may,  at the option of the  Company,  serve as the  Registration  Statement
     required  by this  Section  2(a) for all  purposes of this  Agreement  with
     respect  to  such   Shares.   The  Company   shall  cause  to  be  filed  a
     post-effective  amendment to such Registration Statement permitting resales
     of such  Shares  and  shall  use  its  reasonable  efforts  to  cause  such
     post-effective  amendment to become effective on the date hereof or as soon
     as reasonably  practicable after the date hereof. 

          (b)  Expenses.  The  Company  shall pay all  Registration  Expenses in
     connection with any  Registration  pursuant to Section 2. Each Holder shall
     pay all underwriting discounts and commissions,  the fees and disbursements
     of counsel  representing such Holder,  and transfer taxes, if any, relating
     to the sale or disposition of such Holder's Registrable Securities pursuant
     to the Registration Statement.

          (c) Inclusion in Registration Statement.  The Company may require each
     Holder of Registrable  Securities to furnish to the Company in writing such
     information  regarding  the  proposed  offer or sale by such Holder of such
     Registrable  Securities  as the  Company  may from time to time  reasonably
     request  in  writing.  Any  Holder  who does not  provide  the  information
     reasonably  requested by the Company in  connection  with the  Registration
     Statement as promptly as practicably after receipt of such request,  but in
     no event  later  than ten  (10)  business  days  thereafter,  shall  not be
     entitled to have its Registrable  Securities  included in the  Registration
     Statement.

          (d)  Obligations  of  Holders.  Each Holder who sells  Shares  under a
     Registration  Statement  shall be deemed to have agreed to all of the terms
     and conditions of this Agreement and to assume and agree to perform any and
     all obligations of a Holder hereunder.

          3. Registration Procedures.

          (a) Obligations of the Company.  In connection  with the  Registration
     Statement pursuant to Section 2(a) hereof, the Company shall:

               (i) cause the Registration Statement to be available for the sale
          of the Registrable  Securities by Holders in one or more  transactions
          on the New York  Stock  Exchange  ("NYSE")  or  otherwise,  in special
          offering, exchange distributions or secondary distribution pursuant to
          and in accordance with the rules of the NYSE, in the  over-the-counter
          market,
                                           
<PAGE>

          in  negotiated  transactions,  through  the  writing of options of the
          Registrable Securities,  or a combination of such methods of sale, and
          to comply as to form in all material respects with the requirements of
          the applicable form and include all financial  statements  required by
          the SEC to be filed  therewith;  provided,  however,  the Registration
          Statement  shall  also  provide  that  sales may be made by the Holder
          pursuant  to Rule  144.  

               (ii) (A)  prepare  and file  with  the SEC  such  amendments  and
          post-effective  amendments  to the  Registration  Statement  as may be
          necessary to keep such Registration Statement effective for the period
          required  hereunder;   (B)  cause  the  Prospectus  included  in  such
          Registration  Statement to be supplemented by any required  prospectus
          supplement, and as so supplemented to be filed pursuant to Rule 424 or
          any similar  rule that may be adopted  under the  Securities  Act; (C)
          respond promptly to any comments received from the SEC with respect to
          the Registration Statement, or any amendment, post-effective amendment
          or supplement relating thereto;  and (D) comply with the provisions of
          the Securities  Act with respect to the  disposition of all securities
          covered by the Registration Statement;

               (iii)  furnish to each Holder of  Registrable  Securities  and to
          each   underwriter   of  an   underwritten   offering  of  Registrable
          Securities, without charge, as many copies of each prospectus, and any
          amendment or supplement  thereto and such other  documents as they may
          reasonably  request,  in order to facilitate  the public sale or other
          disposition of the Registrable Securities; the Company consents to the
          use of the Prospectus,  by each such Holder of Registrable Securities,
          in connection with the offering and sale of the Registrable Securities
          covered by the Prospectus;

               (iv) notify promptly each Holder of Registrable Securities (A) of
          the issuance by the SEC or any state securities  authority of any stop
          order suspending the effectiveness of a Registration  Statement or the
          initiation of any  proceedings  for that  purpose,  (B) if the Company
          receives  any  notification  with  respect  to the  suspension  of the
          qualification   of  the   Registrable   Securities  for  sale  in  any
          jurisdiction or the initiation of any proceeding for such purpose, and
          (C) of the  happening  of any event  during the period a  Registration
          Statement  is  effective  as  a  result  of  which  such  Registration
          Statement or the related Prospectus contains any untrue statement of a
          material  fact or omits to state  any  material  fact  required  to be
          stated therein or necessary to make the statements  therein,  in light
          of the  circumstances  under  which they were made (in the case of the
          Prospectus), not misleading;
<PAGE>

               (v) make every reasonable  effort to obtain the withdrawal of any
          order  suspending the  effectiveness  of a  Registration  Statement as
          promptly as practicable;

               (vi) use its  reasonable  efforts  to  register  or  qualify  the
          Registrable Securities subject to the Registration Statement under all
          applicable state  securities or "blue sky" laws of such  jurisdictions
          as any Holder of Registrable  Securities  covered by the  Registration
          Statement,  and each  underwriter  thereof,  if any, shall  reasonably
          request in writing, and do any and all other acts and things which may
          be  reasonably  necessary  or  advisable  to enable such Holder or any
          underwriter to consummate the disposition in each such jurisdiction of
          such Registrable Securities owned by such Holder;  provided,  however,
          that the Company shall not be required to (A) qualify  generally to do
          business in any  jurisdiction  or to register as a broker or dealer in
          such jurisdiction  where it would not otherwise be required to qualify
          but for this Section  3(a)(vi),  (B) subject itself to taxation in any
          such jurisdiction,  or (C) submit to the general service of process in
          any such jurisdiction;

               (vii) upon the  occurrence of any event  contemplated  by Section
          3(a)(iv)(C) hereof, use its reasonable efforts promptly to prepare and
          file a  supplement  or  prepare,  file and obtain  effectiveness  of a
          post-effective  amendment to a  Registration  Statement or the related
          Prospectus or any document  incorporated  therein by reference or file
          any other  required  document so that, as thereafter  delivered to the
          purchasers of the  Registrable  Securities,  such  Prospectus will not
          contain  any untrue  statement  of a material  fact or omit to state a
          material fact  required to be stated  therein or necessary to make the
          statement therein,  in the light of the circumstances under which they
          were made, not misleading;
<PAGE>

               (viii)  use its  reasonable  efforts  to  cause  all  Registrable
          Securities  to be listed on any  securities  exchange on which similar
          securities issued by the Company are then listed;

               (ix)  otherwise  use its  reasonable  efforts to comply  with all
          applicable  rules and regulations of the SEC and make available to its
          security  holders,  as soon as  reasonably  practicable,  an  earnings
          statement covering at least twelve (12) months which shall satisfy the
          provisions  of  Section  11(a)  of the  Securities  Act and  Rule  158
          thereunder; and

               (x)  use  its  reasonable   efforts.  to  cause  the  Registrable
          Securities covered by the Registration Statement to be registered with
          or approved by such other governmental  agencies or authorities as may
          be necessary by virtue of the business and  operations  of the Company
          to enable  Holders  that have  delivered  Registration  Notices to the
          Company to consummate the disposition of such Registrable Securities.

     (b)  Obligations of Holders.  In connection  with and as a condition to the
Company's  obligations  with  respect to a  Registration  Statement  pursuant to
Section 2 hereof and this  Section 3, each  Holder  agrees  that (i) it will not
offer or sell its Registrable  Securities under the Registration Statement until
it has received copies of the supplemental or amended Prospectus contemplated by
Section  3(a)(ii)(A) and (B) hereof and receives notice that any  post-effective
amendment  has become  effective;  and (ii) upon  receipt of any notice from the
Company  of the  happening  of  any  event  of the  kind  described  in  Section
3(a)(iv)(C)  hereof,  such  Holder will  forthwith  discontinue  disposition  of
Registrable  Securities  pursuant to a Registration  Statement until such Holder
receives  copies of the  supplemented  or  amended  Prospectus  contemplated  by
Section  3(a)(vi) hereof and receives notice that any  post-effective  amendment
has become  effective,  and,  if so directed  by the  Company,  such Holder will
deliver  to the  Company  (at the  expense  of the  Company)  all  copies in its
possession,  other than permanent file copies then in such Holder's  possession,
of the Prospectus  covering such Registrable  Securities  current at the time of
receipt of such notice.

     (c) Additional  Undertakings.  The Company shall cooperate with the selling
Holders of  Registrable  Securities to  facilitate  the timely  preparation  and
delivery of certificates  representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such  denominations  and registered in such names as the selling  Holders or the
underwriters,  if any, may reasonably request at least three business days prior
to the closing of any sale
<PAGE>

of Registrable  Securities.  The Company further agrees to enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions in order to expedite or facilitate the  disposition of such  Registrable
Securities and in such connection  whether or not an  underwriting  agreement is
entered  into  and  whether  or  not  the   registration   is  an   underwritten
registration:  

               (i) make such  representations  and  warranties to the Holders of
          such  Registrable  Securities and the  underwriters,  if any, in form,
          substance and scope as are customarily made by issuers to underwriters
          in similar  underwritten  offerings as may be reasonably  requested by
          them;  

               (ii)obtain opinions of counsel to the Company and updates thereof
          (which counsel and opinions (in form,  scope and  substance)  shall be
          reasonably satisfactory to the managing underwriters,  if any, and the
          Holders  of  a  majority  in  principal   amount  of  the  Registrable
          Securities  being  sold)  addressed  to each  selling  Holder  and the
          underwriters,  if any,  covering  the matters  customarily  covered in
          opinion requested in sales of securities or underwritten offerings and
          such other matters as may be reasonably  requested by such Holders and
          underwriters;

               (iii) obtain "cold comfort"  letters and updates thereof from the
          Company's independent certified public accountants (and, if necessary,
          any other independent  certified public  accountants of any subsidiary
          of the  Company or of any  business  acquired by the Company for which
          financial  statements  are,  or are  required  to be,  included in the
          Registration Statement) addressed to the underwriters, if any, and use
          reasonable  efforts  to have  such  letter  addressed  to the  selling
          Holders  of  Registrable  Securities  (to the extent  consistent  with
          Statement on Auditing  Standards  No. 72 of the American  Institute of
          Certified Public  Accounts),  such letters to be in customary form and
          covering  matters of the type  customarily  covered in "cold  comfort"
          letters  to  underwriters  in  connection  with  similar  underwritten
          offerings;

               (iv) enter into a securities sales agreement with the Holders and
          an agent  of the  Holders  providing  for,  among  other  things,  the
          appointment  of such agent for the selling  Holders for the purpose of
          soliciting purchases of Registrable Securities,  which agreement shall
          be in form, substance and scope customary for similar offerings;
<PAGE>

               (v) if an underwriting  agreement is entered into, cause the same
          to set forth indemnification  provisions and procedures  substantially
          equivalent to the indemnification  provisions and procedures set forth
          in Section 4 hereof  with  respect to the  underwriters  and all other
          parties to be indemnified  pursuant to said Section or, at the request
          of  any  underwriters,  in  the  form  customarily  provided  to  such
          underwriters in similar types of transactions; and

               (vi) deliver such documents and certificates as may be reasonably
          requested and as are customarily delivered in similar offerings to the
          Holders of the  Registrable  Securities  being  sold and the  managing
          underwriters, if any.

The above shall be done at closing under any  underwriting or similar  agreement
as and to the extent required thereunder.

     4. Indemnification; Contribution.

     (a) Indemnification by the Company and the Partnership. The Company and the
Partnership,  jointly and  severally,  agree to indemnify and hold harmless each
Holder,  each Person, if any, who participates as an underwriter in the offering
or sale of Registrable  Securities hereunder,  each officer and director of such
Holder and underwriter, and each Person, if any, who controls any Holder or such
underwriter within the meaning of Section 15 of the Securities Act as follows:

               (i)  against  any and all  loss,  liability,  claim,  damage  and
          expense whatsoever,  as incurred,  arising out of any untrue statement
          or alleged  untrue  statement  of a  material  fact  contained  in any
          Registration  Statement (or any amendment  thereto)  pursuant to which
          Registrable  Securities  were  registered  under the  Securities  Act,
          including all  documents  incorporated  therein by  reference,  or the
          omission or alleged omission therefrom of a material fact necessary in
          order  to  make  the   statements   therein,   in  the  light  of  the
          circumstances under which they were made, not misleading;

                    (ii) against any and all loss, liability,  claim, damage and
               expense whatsoever,  as incurred,  to the extent of the aggregate
               amount paid in settlement of any litigation,  or investigation or
               proceeding  by any  governmental  agency  or body,  commenced  or
               threatened, or of any claim whatsoever based upon any such untrue
               statement or omission,  or any such alleged  untrue  statement or
               omission, if such settlement is effected with the written consent
               of the Company; and 


<PAGE>

                    (iii)  against any and all expense  whatsoever,  as incurred
               (including   reasonable  fees  and   disbursements  of  counsel),
               reasonably  incurred in  investigating,  preparing  or  defending
               against any  litigation,  or  investigation  or proceeding by any
               governmental  agency or body,  commenced or  threatened,  in each
               case whether or not a party, or any claim  whatsoever  based upon
               any such untrue statement or omission, or any such alleged untrue
               statement or omission, to the extent that any such expense is not
               paid under subparagraph (i) or (ii) above;

provided,  however,  that the indemnity  provided  pursuant to this Section 4(a)
does not apply to any Holder or underwriter with respect to any loss, liability,
claim,  damage or expense to the extent  arising out of any untrue  statement or
omission or alleged  untrue  statement or omission  made in reliance upon and in
conformity with written information  furnished to the Company or the Partnership
by such Holder  expressly for use in a Registration  Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto) as evidenced
by a written statement duly executed by such Holder specifically stating that it
is for use in the preparation thereof.

     (b) Indemnification by the Holders and Underwriters.  Each Holder severally
agrees,  and with respect to any underwriter the Company and the Partnership may
require  an  undertaking   reasonably   satisfactory  to  the  Company  and  the
Partnership from such  underwriter,  to indemnify and hold harmless the Company,
the  Partnership  and the other selling  Holders,  and each of their  respective
directors and officers  (including  each director and officer of the Company who
signed the Registration  Statement),  and each Person,  if any, who controls the
Company,  the  Partnership  or any other  selling  Holder  within the meaning of
Section 15 of the Securities Act, to the same extent as the indemnity  contained
in Section 5(a) hereof (except that any settlement described in Section 4(a)(ii)
shall be  effected  only with the  written  consent  of such  Holder),  but only
insofar as such loss,  liability,  claim,  damage or expense arises out of or is
based upon (i) any untrue statement or omission, or alleged untrue statements or
omissions,  made in a Registration  Statement (or any amendment  thereto) or any
Prospectus  (or any  amendment or  supplement  thereto) in reliance  upon and in
conformity with written information  furnished to the Company or the Partnership
by such selling Holder expressly for use in such Registration  Statement (or any
amendment  thereto) or such Prospectus (or any amendment or supplement  thereto)
as evidenced by a written  statement  duly executed by such Holder  specifically
stating that it is for use in the  preparation  thereof,  or (ii) such  Holder's
failure to deliver a Prospectus to any purchaser of Registrable Securities where
such a delivery  obligation  was applicable to such Holder's sale of Registrable
Securities  and such Holder had been  provided  with  sufficient  copies of such
Prospectus for the relevant  deliveries thereof. In no event shall the liability
of any Holder  under  this  Section  4(b) be  greater in amount  than the dollar

<PAGE>

amount  of the  net  proceeds  received  by such  Holder  upon  the  sale of the
Registrable  Securities  giving  rise to such  indemnification  obligation.  

     (c) Conduct of  Indemnification  Proceedings.  Each indemnified party shall
give  reasonably  prompt  notice  to each  indemnifying  party of any  action or
proceeding  commenced  against it in respect  of which  indemnity  may be sought
hereunder,  but failure to so notify an indemnifying party (i) shall not relieve
it from any liability which it may have under the indemnity  agreement  provided
in  Section  4(a) or (b) above,  unless  and to the extent it did not  otherwise
learn of such action and the lack of notice by the indemnified  party results in
the forfeiture by the indemnifying  party of substantial rights and defenses and
(ii)  shall  not,  in  any  event,  relieve  the  indemnifying  party  from  any
obligations to any indemnified party other than the  indemnification  obligation
provided under Section 4(a) or (b) above.  If the  indemnifying  party so elects
within a reasonable time after receipt of such notice,  the  indemnifying  party
may assume the defense of such action or proceeding at such indemnifying party's
own expense with counsel  chosen by the  indemnifying  party and approved by the
indemnified parties defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
or parties  reasonably  determine that a conflict of interest exists where it is
advisable for such  indemnified  party or parties to be  represented by separate
counsel or that, upon advice of counsel,  there may be legal defenses  available
to them  which are  different  from or in  addition  to those  available  to the
indemnifying  party, then the indemnifying party shall not be entitled to assume
such  defense  and the  indemnified  party or parties  shall be  entitled to one
separate counsel at the indemnifying  party's expense.  If an indemnifying party
is not entitled to assume the defense of such action or  proceeding  as a result
of the proviso to the preceding  sentence,  such  indemnifying  party's  counsel
shall be entitled to conduct the defense of such  indemnified  party or parties,
it being  understood  that both such counsel will  cooperate  with each other to
conduct the defense of such action or proceeding as efficiently as possible.  If
an indemnifying party is not so entitled to assume the defense of such action or
does not assume such defense,  after having  received the notice  referred to in
the first sentence of this paragraph, the indemnifying party or parties will pay
the  reasonable  fees and  expenses  of  counsel  for the  indemnified  party or
parties.  In such event,  however,  no indemnifying party will be liable for any
settlement  effected without the written consent of such indemnifying  party. If
an indemnifying  party is entitled to assume,  and assumes,  the defense of such
action or proceeding in accordance with this paragraph,  such indemnifying party
shall not be liable for any fees and  expenses  of counsel  for the  indemnified
parties  incurred  thereafter in connection with such action or proceeding.  Any
settlement  effected by the Company or the  Partnership  shall also release each
Holder that has sold securities pursuant to the Registration Statement, provided
such Holder is entitled to indemnification with respect to such sale pursuant to
this Section 4. The  indemnification  obligations  provided  pursuant to Section
4(a)  and (b)  hereof  survive,  with  respect  to a  Holder,  the  transfer  of
Registrable  Securities  by such  Holder,  and with  respect  to a Holder or the
Company,  shall remain in full force and effect  regardless of any investigation
made by or on behalf of any indemnified  party,  and shall be in addition to any
other  rights  (to   indemnification,   contribution  or  otherwise)  which  any
indemnified party may have pursuant to laws or contracts.
<PAGE>

     (d) Contribution.

               (i) In order to provide for just and  equitable  contribution  in
          circumstances  in which the indemnity  agreement  provided for in this
          Section  4 is  for  any  reason  held  to  be  unenforceable  although
          applicable  in  accordance   with  its  term,   the  Company  and  the
          Partnership,  jointly and severally,  on the one hand, and the selling
          Holders,  on the other,  shall  contribute  to the  aggregate  losses,
          liabilities,  claims,  damages and expenses of the nature contemplated
          by  such  indemnity   agreement   incurred  by  the  Company  and  the
          Partnership,  jointly and severally,  and the selling Holders, in such
          proportion  as is  appropriate  to reflect the  relative  fault of the
          Company and the Partnership on the one hand and the selling Holders on
          the other hand as well as the  relative  benefits to such  parties and
          other equitable  considerations  (in such proportions that the selling
          Holders are severally,  not jointly,  responsible for the balance), in
          connection  with the  statements or omissions  which  resulted in such
          losses, claims, damages, liabilities or expenses, as well as any other
          relevant   equitable   considerations.   The  relative  fault  of  the
          indemnifying  party and  indemnified  parties  shall be  determined by
          reference  to, among,  other  things,  whether the action in question,
          including any untrue or alleged untrue statement of a material fact or
          omission or alleged  omission to state a material  fact, has been made
          by, or relates to, information supplied by, such indemnifying party or
          the indemnified parties, and the parties' relative intent,  knowledge,
          access to  information  and  opportunity  to correct  or prevent  such
          action.  

               (ii) The Company,  the  Partnership and the Holders agree that it
          would  not be just  or  equitable  if  contribution  pursuant  to this
          Section 4(d) were  determined  by pro rata  allocation or by any other
          method of  allocation  which does not take  account  of the  equitable
          considerations  referred to in the  immediately  preceding  paragraph.
          Notwithstanding the provisions of this Section 4(d), no selling Holder
          shall be required to contribute  any amount in excess of the amount by
          which the  total  price at which the  Registrable  Securities  of such
          selling  Holder  were sold to the  public  exceeds  the  amount of any
          damages which such selling  Holder would  otherwise have been required
          to pay by reason of such untrue statement or omission.
<PAGE>

               (iii)   Notwithstanding  the  foregoing,   no  Person  guilty  of
          fraudulent  misrepresentation  (within the meaning of Section 11(f) of
          the Securities Act) shall be entitled to contribution  from any Person
          who was not guilty of such fraudulent misrepresentation.  For purposes
          of this  Section  4(d),  each  Person,  if any,  who controls a Holder
          within the meaning of Section 15 of the  Securities  Act and directors
          and officers of a Holder shall have the same rights to contribution as
          such Holder,  and each  director of the  Company,  each officer of the
          Company who signed the Registration Statement and each Person, if any,
          who  controls  the  Company  within  the  meaning of Section 15 of the
          Securities Act shall have the same rights to contribution as Company

               (iv) The  contribution  provided  for in this  Section 4(d) shall
          survive,  with  respect  to a  Holder,  the  transfer  of  Registrable
          Securities  by such  Holder,  and  with  respect  to a  Holder  or the
          Company,  shall  remain in full  force and  effect  regardless  of any
          investigation made by or on behalf of any indemnified party.

               5. Rule 144 Sales.

               (a) Reports.  The Company covenants that it will file the reports
          required to be filed by the Company under the  Securities  Act and the
          Securities  Exchange  Act of 1934,  as  amended,  and will  take  such
          further action as any Holder of Registrable  Securities may reasonably
          request,  all to the extent  required  to enable  such  Holder to sell
          Registrable Securities pursuant to Rule 144 under the Securities Act.

               (b) Certificates.  In connection with any sale, transfer or other
          disposition by any Holder of any  Registrable  Securities  pursuant to
          Rule 144 under the  Securities  Act, the Company shall  cooperate with
          such  Holder to  facilitate  the timely  preparation  and  delivery of
          certificates  representing  Registrable  Securities to be sold and not
          bearing any Securities Act legend,  and enable  certificates  for such
          Registrable  Securities to be for such number of shares and registered
          in such names as the selling  Holders may reasonably  request at least
          two (2) business days prior to any sale of Registrable Securities.

               6. Miscellaneous.

               (a)  Amendments and Waivers.  The  provisions of this  Agreement,
          including  the  provisions  of  this  sentence,  may  not be  amended,
          modified or  supplemented,  and waivers or consents to departures from
          the provisions  hereof may not be given without the written consent of
          the Company and the Holders of a majority in amount of the outstanding
          Registrable   Securities;   provided,   however,  that  no  amendment,
          modification or supplement or waiver or consent that adversely effects
          any rights under this
<PAGE>

     Agreement   shall  be  effective  as  against  any  Holder  of  Registrable
     Securities  unless  consented to in writing by such  Holder.  Notice of any
     amendment,   modification  or  supplement  to  this  Agreement  adopted  in
     accordance  with this Section 6(a) shall be provided by the Company to each
     Holder of  Registrable  Securities  at least  thirty (30) days prior to the
     effective date of such amendment,  modification or supplement. 

          (b)  Notices.  All notices and other  communications  provided  for or
     permitted  hereunder shall be made in writing by hand-delivery,  registered
     first-class mail, telex, telecopier,  or any courier guaranteeing overnight
     delivery,  (i) if to a Holder,  at the most current  address  given by such
     Holder to the  Company by means of a notice  given in  accordance  with the
     provisions of this Section 6(b),  which address  initially is, with respect
     to each  Holder,  the address and  facsimile  number set forth next to such
     Holder's  name on the books and  records of the  Company,  or (b) if to the
     Company or the Partnership,  at: Prime Retail, Inc., 100 East Pratt Street,
     Nineteenth  Floor,  Baltimore,  MD  21202  Attention:  C.  Alan  Schroeder,
     facsimile number: (410) 234-0275. All such notices and communications shall
     be deemed  to have  been duly  given:  at the time  delivered  by hand,  if
     personally  delivered;  five (5) business days after being deposited in the
     mail,  postage  prepaid,  if mailed;  when answered back, if telexed;  when
     receipt  is  acknowledged,  if  telecopied;  or at the  time  delivered  if
     delivered by an air courier guaranteeing overnight delivery.

          (c) Successors and Assigns.  This Agreement shall inure to the benefit
     of and be binding upon the  successors,  assigns and transferees of each of
     the Company,  Partnership and the Holders, including without limitation and
     without  the need for an express  assignment,  subsequent  Holders.  If any
     successor,  assignee or transferee of any Holder shall acquire  Registrable
     Securities  or  Units,  in  any  manner,  whether  by  operation  of law or
     otherwise,  such Registrable Securities or Units, as the case may be, shall
     be held  subject to all of the terms of this  Agreement,  and by taking and
     holding such Registrable  Securities or Units such Person shall be entitled
     to receive the  benefits  hereof and shall be  conclusively  deemed to have
     agreed  to be bound by all of the terms and  provisions  hereof.  Each such
     Person  shall be entitled to the  benefits  of this  Agreement  without the
     consent of the Company, the Partnership or any other Holder.

          (d) Headings.  The headings in this Agreement are for the  convenience
     of  reference  only and shall not limit or  otherwise  affect  the  meaning
     hereof.

          (e) GOVERNING LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED
     IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND  WITHOUT GIVING EFFECT
     TO THE CONFLICTS OF LAW PROVISIONS THEREOF.

          (f)  Specific   Performance.   The  Company  and  the  Holders  hereto
     acknowledge  that  there  would be no  adequate  remedy at law if any party
     fails to perform any of its obligations  hereunder,  and accordingly  agree
     that  each  party,  in  addition  to any  other  remedy  to which it may be
     entitled  at law  or in  equity,  shall  be  entitled  to  compel  specific
     performance  of the  obligations of any other party under this Agreement in
     accordance  with the terms and conditions of this Agreement in any court of
     the United States or any State thereof having jurisdiction.
<PAGE>

          (g) Entire  Agreement.  This Agreement is intended by the Company as a
     final  expression  of its  agreement  and  intended  to be a  complete  and
     exclusive  statement of the agreement and  understanding  of the Company in
     respect of the subject matter contained herein.  This Agreement  supersedes
     all prior agreements and understandings of the Company with respect to such
     subject matter.
<PAGE>

          IN WITNESS WHEREOF,  the Company has executed this Agreement as of the
     date first written above.

                                                              PRIME RETAIL, INC.


                                             By:  /s/  William H. Carpenter, Jr.
                                             Name:     William H. Carpenter, Jr.
                                             Title:   President                 


                                                              PRIME RETAIL, L.P.

                                             By: PRIME RETAIL, INC., its General
                                             Partner


                                              By:  /s/ William H. Carpenter, Jr.
                                              Name:    William H. Carpenter, Jr.
                                              Title:   President