Execution Copy

                               SECOND AMENDMENT TO
                              EMPLOYMENT AGREEMENT


     The EMPLOYMENT  AGREEMENT (the "Agreement"),  dated as of January 10, 2002,
by and between Prime Retail,  Inc., a Maryland  corporation  ("Prime"),  and the
sole general partner of Prime Retail,  L.P., a Delaware limited partnership (the
"Operating Partnership"), and David G. Phillips (the "Executive"), as amended by
the first Amendment thereto,  effective June 6, 2002, is further amended by this
Second Amendment, effective August 12, 2002 in the following respects:

        1.      Section 2 of the Agreement is hereby deleted in its entirety and
replaced with the following:

                2.      Term.

                The  term  of  this  Agreement,  unless  earlier  terminated  in
                accordance  with  the  terms  of  this Agreement, will extend to
                December 31, 2005  (the  "Original  Term");  provided,  however,
                that if this Agreement is not affirmatively terminated by either
                party, or extended or renewed for a specific duration in writing
                by  agreement  of  the  parties,  prior  to  the last day of the
                Original Term, this Agreement will continue  on a month-to-month
                basis  thereafter  (the "Extended Term").  The  parties agree to
                cooperate and discuss in good faith their intentions with regard
                to  this Agreement's extension or renewal 12 months prior to the
                end  of  the Original Term.   Notwithstanding the foregoing, the
                Company  agrees  to  provide  Executive  with  a  minimum of six
                months'  advance  written notice of its intent to terminate this
                Agreement during the Original  Term or the Extended Term for any
                reason other than Cause,  in which case the Company shall comply
                with the notice requirements of Sections 4(a)(2) and (3) hereof,
                and Executive agrees to provide the Company with a minimum of 60
                days'  advance  written  notice  of his intent to terminate this
                Agreement during the Original  Term or the Extended Term for any
                reason other than Good Reason,  in  which  case  Executive shall
                comply   with  the  notice  requirements  of  Section 4(b)(1)(E)
                hereof.  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."

        2.      Subpart (B) of Section 4(a)(1) is hereby deleted in its entirety
and replaced with the following:

                (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
                (which term shall  exclude awards received pursuant to the Prime
                Retail, Inc. 2002  Long-Term  Incentive Plan)  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;

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                                    Page (2)


        3.      The following subpart (E) is hereby added to Section 4(a)(1) of
the Agreement:

                (E)     all  vested  but  undistributed  awards  under the Prime
                Retail, Inc. 2002 Long-Term Incentive Plan, payable to Executive
                in accordance with the provisions of that plan.

        4.      The following  subpart (D) is hereby added to Section 4(a)(2) of
the Agreement:

                (D)     receive  all  vested  but undistributed awards under the
                Prime Retail, Inc. 2002  Long-Term  Incentive Plan,  payable  to
                Executive in accordance with the provisions of that plan.

         5. The following subpart (E)  is hereby added to Section 4(a)(4) of the
Agreement:

                (E)     all  vested  but  undistributed  awards  under the Prime
                Retail, Inc. 2002 Long-Term Incentive Plan, payable to Executive
                in accordance with the provisions of that plan.

        6.      Subpart (B)  of  Section 4(b)(1)  of  the  Agreement  is  hereby
deleted in its entirety and replaced with the following:

                (B)     any earned and unpaid bonus(es) otherwise payable to him
                in   accordance   with   Section  3(b),  and   all  vested   but
                undistributed awards under the Prime Retail, Inc. 2002 Long-Term
                Incentive  Plan,  payable  to  Executive  in accordance with the
                provisions of that plan;

        7.      The  following  sentence  is  hereby added at the end of Section
4(c), "Death":

                In addition, the Executive's estate shall be entitled to receive
                all vested but undistributed awards under the Prime Retail, Inc.
                2002  Long-Term  Incentive  Plan,   payable  to  the  estate  in
                accordance with the provisions of that plan.

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                                    Page (3)


        8.      Subpart (2) of  Section 4(d), "Termination Following a Change of
Control," is hereby deleted in its entirety and replaced with the following:

                (2)     a  termination  payment  in an amount equal to two times
                the  One-Year  Pay  Equivalent,  which  amount  shall be payable
                within thirty (30) days  of  the  effective date of termination;
                provided, however,  that  if  Executive has received a Milestone
                Bonus under the Prime Retail, Inc. 2002 Long-Term Incentive Plan
                the vesting of which was accelerated  pursuant to Section 5.3(a)
                (iv) thereof but the amount of which was not reduced pursuant to
                the last sentence of Section 5.4 thereof (the "Change of Control
                Accelerated Award"),  the  termination payment described in this
                subpart (2) shall be reduced by the  amount  that such Change of
                Control Accelerated Award  would  have  been reduced pursuant to
                the last sentence of  Section 5.4 of the Prime Retail, Inc. 2002
                Long-Term  Incentive  Plan  had the termination payment been due
                and  owing  under  this  Section 4(d) at  the time the Change of
                Control Accelerated Award was distributed to Executive;

        9.      Nothing  in  this  Amendmen  or  in  the Amendment to Employment
Agreement  dated  as  of January 10, 2002, supersedes, modifies, or replaces any
term  or  provision of  the Agreement,  except  as  explicitly  stated  in  this
Amendment  or  in  the Amendment to Employment Agreement dated as of January 10,
2002.  All provisions of the Agreement,  as amended,  shall remain in full force
and effect, except as explicitly modified herein.

        10.     This Amendment may be executed in one or more counterparts which
taken together shall constitute one and the same instrument.


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:  CHAIRMAN, CHIEF EXECUTIVE OFFICER      By:     /s/ Glenn D. Reschke
                                                       --------------------
                                               Name:   GLENN D. RESCHKE
                                               Title:  CHAIRMAN, CHIEF EXECUTIVE
                                                       OFFICER