<PAGE>

                               Description of the
               Prime Retail, Inc. 1999 Long-Term Incentive Program

     In December  1998,  the Executive  Compensation  and Stock  Incentive  Plan
Committee of the Company's  Board of Directors  (the  "Committee")  approved the
Prime Retail, Inc. 1999 Long-Term Incentive Program (the "Program"). The Program
was designed with significant  input from the consulting firm of FPL Associates.
The purposes of the Program are (i) to attract,  retain and  motivate  executive
employees  by  giving  them the  opportunity  to  acquire a  significant  equity
interest in the Company, and (ii) align the interests of the executive employees
with those of the Company's  shareholders.  A summary description of the Program
follows.

Overview of the Program

     Under the Program,  the Committee has established annual  performance-based
awards  ("Target  Awards") for all officers of the Company with a rank of Senior
Vice President or higher ("Executive Employees"). These Target Awards, which are
set  forth on  Exhibit  A  hereto,  will be  payable  in the form of  shares  of
restricted  stock  in  each of  1999,  2000,  2001,  2002  and  2003,  based  on
performance in the immediately preceding year.

     The  actual  annual  award to be made to each  Executive  Employee  will be
determined by the Company's total  shareholder  return (price  appreciation  and
dividends) during the immediately  preceding year ("Total Shareholder  Return").
As described more fully below, if the Company's Total Shareholder Return exceeds
certain levels,  an Executive  Employee may earn up to 150% of his Target Award.
Alternatively,  if Total  Shareholder  Return  falls below  certain  levels,  no
portion of a Target Award will be earned under the Program.

     One-half of an Executive  Employee's annual award under the Program will be
based on the Company's  Total  Shareholder  Return  measured  against  objective
standards.  The balance of an Executive Employee's annual award will be based on
the Company's  Total  Shareholder  Return  measured  against the Company's  Peer
Group.  For purposes of the Program,  the Company's "Peer Group"  initially will
consist of the entities  identified on Exhibit B hereto. The composition of such
Peer Group may be revised from time to time at the discretion of the Committee.

Objective Performance Measures

     The  objective  performance  measures  established  by the  Committee  with
respect to Total Shareholder Return are set forth below:

<TABLE>

<CAPTION>
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                                Threshold Level               Target Level               High Level
-------------------------------------------------------------------------------------------------------------------
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<S>                             <C>                          <C>                         <C>    

Objective Measure:
Total Shareholder Return        12%                          14%                         16%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

     o If the Company attains a Total Shareholder  Return of 12%, each Executive
       Employee will receive 25% of his Target Award under the Program.
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     o If the Company attains a Total Shareholder  Return of 14%, each Executive
       Employee will receive 50% of his Target Award.

     o If the Company attains a Total Shareholder Return of between 12% and 14%,
       or between 14% and 16%, each Executive Employee will receive a percentage
       of his Target  Award  determined  by  straight-line  interpolation,
       between 25% of his Target Award and 50% of his Target  Award,  or between
       50% and 75% of his Target Award, respectively.

     o If the Company  attains a Total  Shareholder  Return of 16% or more, each
       Executive Employee will receive 75% of his Target Award.

     o If the  Company  fails to attain a Total  Shareholder  Return of at least
       12%,  no  award  will be made  under  the  Program  on the  basis  of
       objective performance.

Relative Performance Measures

     In measuring  relative  performance  the Program will compare the Company's
Total Shareholder  Return for the year against that of the Company's Peer Group.
The relative performance measures are described below.
<TABLE>

------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                        Threshold Level                Target Level               High Level
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                           <C>                      <C>    

Relative Measure:                            50th                          75th                      90th
Shareholder Return                        Percentile                    Percentile                Percentile
------------------------------------------------------------------------------------------------------------------
</TABLE>

     o If the Company's Total Shareholder Return ranks at the 50th percentile of
       the Peer Group, each Executive Employee will receive 25% of his Target
       Award.

     o If the Company's Total Shareholder Return ranks at the 75th percentile of
       the Peer Group, each Executive Employee will receive 50% of his Target
       Award.

     o If  the  Company's  Total  Shareholder  Return  ranks  between  the  50th
       percentile  and the 75th  percentile of the Peer Group,  or between the
       75th and 90th percentile, each Executive Employee will receive a 
       percentage of his Target Award determined by straight-line interpolation,
       between 25% of his Target Award and 50% of his  Target  Award,  or
       between  50% and  75% of his  Target  Award, respectively.

     o If the  Company's  Total  Shareholder  Return  ranks  at or over the 90th
       percentile of the Peer Group,  each  Executive  Employee will receive 75%
       of his Target Award.

     o If the Company's Total Shareholder Return is below the 50th Percentile of
       the Peer Group, no award will be made under the Program on the basis of
       relative performance.
<PAGE>

Vesting of Awards.

     All awards will be subject to a vesting schedule. Twenty-five percent (25%)
of the award to an Executive  Employee for any year will vest immediately on the
award date. Thereafter,  on each anniversary of the award date, if the Executive
Employee  is  still  employed  by the  Company  on  that  anniversary  date,  an
additional  twenty-five percent (25%) of the award will become vested.  Thus, an
Executive Employee will be fully vested in any award on the third anniversary of
the award date,  if the Executive  Employee is still  employed by the Company on
that anniversary date.

     Upon a Change in Control of the  Company,  as defined in the Prime  Retail,
Inc.  1998 Stock  Incentive  Plan ("the Plan"),  the vesting of all  outstanding
Awards will be accelerated.  Executive  Employees would receive a pro rata Award
for the portion of the  performance  year that was completed prior to the Change
in Control,  subject to the Committee's discretion to make a greater Award if it
determines that circumstances so warrant.

     Dividend and Voting  Rights.  Shares of the Company's  common stock will be
issued to each Executive  Employees as soon as  practicable  after the Committee
determines the portion of the Target Award that has been earned,  subject to the
vesting restrictions  described above. An Executive Employee will be entitled to
full  dividend  and voting  rights on shares of  restricted  stock issued to him
under the Program.  If the Executive  Employee  terminates  employment  with the
Company before becoming fully vested in the restricted  stock, he will forfeit a
portion of the restricted  stock award, but retain any dividend amounts received
prior to his employment termination.

     Taxation.  In general, an Executive Employee will recognize ordinary income
on the fair market  value of the shares of Company  stock  awarded to him at the
time the shares become vested. The Company should receive a tax deduction in the
same amount and at the same time as the Executive Employees recognize income. To
receive  this  deduction,  the Company must  withhold  any taxes  required to be
withheld by law. An Executive  Employee may elect to satisfy his tax withholding
obligation to the Company by having the Company withhold a portion of his Award,
surrendering  previously-owned  shares to the Company, or paying his withholding
obligation to the Company in cash.

     If an Executive  Employee  sells the Company stock awarded after holding it
for the requisite  period,  generally one year, after it has become vested,  his
gain (or loss) on the sale may be taxable at  long-term  capital  gain (or loss)
rates.

Cancellation of 1994 Options.

     In connection  with the  implementation  of the Program,  the Committee has
recommended  that all stock option  awards made to Executive  Employees on March
18, 1994 be  cancelled.  The  following  Executive  Employees  will be affected:
Michael W. Reschke, 150,000 options; Abraham Rosenthal, 150,000 options; William
H. Carpenter,  Jr., 150,000 options; Glenn D. Reschke, 50,000 options; and David
G. Phillips, 50,000 options.
<PAGE>

Administration by the Committee.

     The Program is being implemented under the terms of the Plan. The Committee
is responsible for setting  performance  goals,  certifying that such goals have
been met under the Program,  and administering the Program.  In this regard, the
Committee  will have the  discretion to approve  additional  awards to Executive
Employees in the event it concludes  that the  objective  and relative  measures
contemplated  by the  Program  do not  provide  a  comprehensive  indication  of
performance.   The  Committee  will  determine  all  questions  arising  in  the
administration,  interpretation,  and application of the Program,  including but
not limited to,  questions of eligibility and the status and rights of Executive
Employees.