Ex-10.51

                              Employment Agreement


     THIS EMPLOYMENT  AGREEMENT (the  "Agreement"),  effective as of January 10,
2002 (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 David G. Phillips,  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, the Company believes that it would benefit from the application of
Executive's  particular  and unique  skill,  experience,  and  background to the
management  and  operation  of the  Company as its  Executive  Vice  President -
Leasing, International and New Business Development;

     WHEREAS,  Executive  wishes to commit  himself to serve the  Company in the
position set forth herein on the terms herein provided;

     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  - Leasing,  International  and New  Business
Development  of the  Company  on the  terms  and  conditions  provided  in  this
Agreement.  Executive  shall serve as the  Executive  Vice  President - Leasing,
International  and New Business  Development of the Company and Executive  shall
exercise  such powers and  authority  as are  customarily  inherent in a similar
position in a comparable  publicly-held  entity or as provided by the By-laws of
Prime  ("By-laws")  and the  Agreement of Limited  Partnership  of the Operating
Partnership, as amended (the "Partnership Agreement"). Prime, in its capacity as
sole general  partner of the Operating  Partnership,  may, from time to time, in
its sole  discretion,  by action of its Board of Directors (the "Board") further
define and  clarify  Executive's  duties  and  services  hereunder  or under the
By-laws or  Partnership  Agreement  in a manner  consistent  with the office 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 to Robert A. Brvenik, Chief
Financial  Officer  (the "CFO") with  respect to leasing and Leasing  Department
matters and to Glenn D.  Reschke,  President  and Chief  Executive  Officer (the
"CEO") with  respect to  international  and other  non-leasing  matters and will
perform  all of his  duties  in  accordance  with  such  reasonable  directions,
requests,  rules  and  regulations  as are  specified  by  the  CEO  and  CFO in
connection with his employment.  Notwithstanding the foregoing,  the Company may
alter the reporting relationship of Executive so that he thereafter, at least in
part, reports to the Company's President,  the CEO or an individual who has been
retained to serve as the Company's Chief Operating  Officer,  or a similar role,
if  that  individual  reports  directly  to the  CEO.  During  the  Term of this
Agreement,  it shall not be a violation of this Agreement or a material conflict
of interest for purposes of Section 4(a)(3) hereof 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, (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,  or (iv)
communicate with potential  investors  regarding their investment in the Company
or its assets, which investments may include the potential for Executive to have
an ownership  interest,  provided  Executive  discloses this  involvement to the
Company and the CEO's permission regarding such communications is obtained.

<PAGE>
2. Term.  The term of this  Agreement  shall commence as of January 1, 2002 and,
unless earlier  terminated in accordance with the terms of this Agreement,  will
extend to June 30, 2003 ("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)(F)  hereof.  The Original Term and any
Extended Term of this Agreement shall end only following  termination by written
notice by the Company or Executive in accordance with this Section. 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 Fifty Thousand  Dollars  ($250,000)  per calendar  year,  payable in
accordance  with the general  policies and procedures for payment of salaries to
any other  executive  personnel of the Company but in all events payable no less
frequently  than  monthly.  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. (1) In addition to the Base Salary,  Executive shall
have the  right to  receive,  and the  Company  agrees  to pay to  Executive,  a
performance  bonus for each calendar year during the Term of this Agreement,  in
such  amounts as the  Committee,  in its sole  discretion,  may  determine  (the
"Performance  Bonus").  If the Board,  either directly or through the Committee,
establishes  performance measures for senior officers (which term is intended to
include  Executive),  those  established  criteria  will be  used  to  determine
Executive's  entitlement to a Performance Bonus.  Notwithstanding the foregoing,
nothing in this  Agreement  obligates  the Board to establish  such  performance
measures, and the lack of established performance measures will not constitute a
breach of this  Agreement  in any  manner.  In lieu of  established  performance
measures,  the Board will determine Executive's  Performance Bonus solely in its
discretion.  The parties  hereto  acknowledge  that any  corporate or individual
performance  objectives  established  pursuant  to  this  Section  3(b)  will be
determined  prior  to,  or as soon as  possible  after,  the  beginning  of each
calendar year and that such objectives may objectively be met by Executive.  The
aggregate  Performance  Bonus for a calendar year payable in accordance with the
provisions  of this Section 3(b) is expected to be up to 100% of the Base Salary
for such calendar year.  Further,  Executive shall only be entitled to receive a
Performance  Bonus for a calendar year if Executive has been and continues to be
retained  by the  Company as an  executive  officer of the  Company for the full
calendar year or if (i) the Company  terminates  Executive's  employment without
Cause (as defined  below),  (ii)  Executive  terminates  his employment for Good
Reason (as defined  below),  (iii)  Executive  terminates his employment for any
reason simultaneously with, or within six months following, a Change of Control,
or (iv) if Executive does not terminate his employment  simultaneously  with, or
within six months  following,  a change of control,  and Executive's  employment
ends for any reason within 24 months  following a Change of Control.  Any amount
of Performance Bonus required to be paid to Executive for a calendar year during
the Term of this Agreement shall be paid by the Company to Executive  during the
pay period of the Company following  finalization of the audit for such calendar
year and final review and approval of the bonus  calculation  by the  Committee,
and, in all events, on or before March 31 of the year immediately  following the
end of the calendar year for which such Performance Bonus is attributable.

     (2) The  Company  agrees to make a payment to  Executive  in respect of his
previous employment arrangements in the amount of $160,000,  which shall be made
within five business days of the execution of this  Agreement.  In the event the
Company fails to make this payment as described  directly above,  Executive may,
in his sole  discretion,  void this  Agreement  and all  obligations  hereunder,
including any release of claims. Notwithstanding the foregoing, Executive has no
right to receive and the Company has no  obligation to make any bonus payment to
Executive for the 2001 calendar year or any year thereafter, except as otherwise
stated herein.

<PAGE>
     (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 five (5)
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.

<PAGE>
     (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, simultaneously with execution of this Agreement, the Company shall pay
directly to Executive's counsel Executive's  reasonable legal fees in connection
with the  negotiation of this Agreement up to a maximum of $55,000.  The Company
also shall reimburse Executive 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. In consideration for Executive's  employment  hereunder,
the  Company  agrees  to grant  Executive  options  to  purchase  shares  of the
Company's  common  stock to the same  extent  and on the same terms as it offers
options to any other senior  management  level employees of the Company.  In the
event the Company offers options to any other  management level employees of the
Company,  it shall grant the Executive a number of options at least equal to the
number of options granted to the General Counsel or any Senior Vice President.

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 prior  calendar  years,  provided  that for
purposes of this calculation,  Executive's  annual bonus shall be deemed to have
been  $160,000  both for year 2000 and for year 2001,  or, if  greater,  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;

<PAGE>
     (C) any vested benefits or amounts pursuant to Sections 3(c), 3(e) and 3(f)
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, the Company-paid
life  insurance  benefits  specified in Section 3(f) above and 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.  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
         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) and 3(f) 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.

<PAGE>
     (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)  and  3(f)  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:

<PAGE>
                (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.

<PAGE>
     (d) Termination  Following a Change of Control. If (i) Executive terminates
this Agreement for any reason  simultaneously with a Change of Control (in which
event notice under  Section 2 above shall not be necessary  and the  termination
payments to be made under  Sections  4(d)(1),  4(d)(2) and 4(d)(3) shall be paid
simultaneously  with, and as a part of, the Change of Control),  (ii) within six
(6) months following a Change of Control Executive terminates this Agreement for
any  reason,  subject to the  notice  provisions  of Section 2 hereof,  or (iii)
within 24 months  following a Change of Control,  the  Company  terminates  this
Agreement during its Original Term other than for Cause or Executive  terminates
this Agreement during its Original Term with Good Reason,  the Company shall pay
Executive (and  Executive's  eligible  dependents  with respect to paragraph (D)
below) the following benefits and payments:

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

                (2) a termination payment  in an amount  equal to the product of
         (x) the number of full and partial years remaining in the Original Term
         (or,  if greater, 2 years)  and (y)  the One-Year Pay Equivalent, which
         amount shall be  payable within thirty (30)  days of the effective date
         of termination;

                (3) any  vested  benefits or  amounts  pursuant to Section 3(c),
         3(e), 3(f) and 3(g) hereof  throug h the effective date of termination,
         payable in accordance with the provisions of any such plan(s);

                (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.

<PAGE>

     (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(h),
4(e),  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  cash surrender 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.

<PAGE>
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.  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  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  accounting or other financial  services to any of the
named entities in this Section 5(d);  however,  Executive is not prohibited from
joining or otherwise  associating with an accounting or consulting firm in which
other  professionals  provide  such  services  to  any of  the  named  entities.
Executive  further agrees that in the event Executive  terminates this Agreement
for other than Good Reason or the Company  terminates  this Agreement for Cause,
for a six-month period  immediately  following the date notice of termination is
provided  Executive  shall  be  prohibited  from  being  an  employee  of,  or a
consultant  to, any firm or entity (or  affiliate  thereof) to which  consulting
services  were  provided by Prime while  Executive was an employee or with which
specific business  opportunities were being explored (e.g., the opportunity fund
in England).

     (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.

<PAGE>
     (f) Mutual Release of Claims.  Executive,  on Executive's behalf as well as
on behalf of Executive's  spouse,  agents,  representatives,  heirs,  executors,
administrators,  successors,  assigns  and anyone  claiming  through  Executive,
hereby forever irrevocably releases, relinquishes and waives, except as provided
herein,  all known and unknown  claims that Executive has had or now has against
Prime or the  Operating  Partnership  (including  any past,  present  and future
subsidiaries,  affiliated entities, officers, directors, partners, shareholders,
trustees,  fiduciaries  and agents) in any way  related to his prior  employment
arrangements  with the Company and its affiliates,  or the termination  thereof,
provided,  however, that Executive does not release, relinquish or waive (i) any
known or  unknown  claim that  Executive  has had or now has  against  any party
(including,  but not limited to, Prime or the Operating  Partnership)  under any
pension benefit plan or welfare benefit plan or program sponsored by the Company
or offered by, or on behalf of, the Company to  Executive  at any time,  or (ii)
any right to have the Company  indemnify,  defend or hold harmless  Executive in
connection  with his prior  employment  arrangements  with the  Company  and its
affiliates.   Notwithstanding  anything  to  the  contrary  in  this  Agreement,
Executive retains and does not release,  relinquish,  or waive any rights he may
have  under  any  stock  award  agreement  between  Executive  and the  Company,
including  any  stock  option  agreement  or stock  grant  agreement.  Executive
represents  that as of the  execution of this  Agreement he has vested,  accrued
benefits  in a  Company-sponsored  401(k)  plan and that he has  claims to those
benefits,  which if not paid may give rise to claims  against the Company in its
fiduciary  capacity.  Executive  further  represents  that  other than as stated
above,  he has no knowledge of any claims that he may bring at this time against
Prime or the  Operating  Partnership  (including  any past,  present  and future
subsidiaries,    officers,   directors,   partners,   shareholders,    trustees,
fiduciaries, and agents) under the plans described in the preceding sentence.

                Prime and the Operating Partnership, on their own behalf as well
         as on behalf  of  each's respective agents, representatives, affiliated
         entities,  administrators,  successors,  assigns,  and  anyone claiming
         through  each,  hereby forever  irrevocably releases,  relinquishes and
         waives,  except as otherwise provided herein, (i) all known and unknown
         claims  that  each  has  had  or  now has against Executive relating to
         Executive's  performance  or  non-performance  under  prior  employment
         agreements  between  Executive and the Company, including any amendment
         thereof, and (ii) all other known claims each has against Executive.

                The  parties  hereto  understand and agree that the releases set
         forth  herein  do  not  in any way affect the rights of either party to
         take  whatever steps may  be  necessary  to  enforce  the terms of this
         Agreement or to obtain appropriate relief in the event of any breach of
         the terms of this Agreement.

     (g) 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.

<PAGE>
     (h)  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 may be
fair and  reasonable,  may be  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.

     (i) 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.

<PAGE>
     (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.

<PAGE>
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): if to Executive, to:

         (a)      David G. Phillips
                  3115 Caves Road
                  Owings Mills, Maryland 21117

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

                  Hogan & Hartson L.L.P.
                  Attn: Walter G. Lohr, Jr.
                  111 South Calvert Street
                  Suite 1600
                  Baltimore, MD  21202

<PAGE>
         (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


                  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.

<PAGE>
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.


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

EXECUTIVE:

/s/ David G. Phillips
------------------------------------
David G. Phillips


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

By:  /s/ Glenn D. Reschke                       By:  Prime Retail, Inc.
     ------------------------------------
Name:   Glenn D. Reschke                        Its:  Sole General Partner
Title:  President, Chief Executive Officer
                                                By:  /s/ Glenn D. Reschke
                                                     ---------------------------
                                                Name:  Glenn D. Reschke
                                                Title:  President,
                                                        Chief Executive Officer