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THIS  WARRANT AND THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE  TRANSFERRED  IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.

No. of Shares of Common Stock:  500,000                            Warrant No. 2

                                     WARRANT

                           To Purchase Common Stock of

                               PRIME RETAIL, INC.

                                December 22, 2000

                  THIS IS TO CERTIFY THAT Greenwich Capital Financial  Products,
Inc., a Delaware  Corporation,  or registered assigns, is entitled,  at any time
prior to the Expiration  Date (as hereinafter  defined),  to purchase from Prime
Retail,  Inc.,  a  Maryland  corporation  ("Company"),   Five  Hundred  Thousand
(500,000)  shares of  Common  Stock  (as  hereinafter  defined  and  subject  to
adjustment as provided herein), in whole or in part, including fractional parts,
at a purchase  price of $1.00 per  share,  all on the terms and  conditions  and
pursuant to the provisions hereinafter set forth.

1.       DEFINITIONS

                  As  used  in  this  Warrant,  the  following  terms  have  the
respective meanings set forth below:

                  "Additional  Shares of Common  Stock" shall mean all shares of
Common Stock issued or issuable by Company after the date hereof, other than:

                  (i)   shares of Warrant Stock;

                  (ii) shares of Common  Stock  issued or  issuable  pursuant to
stock options,  restricted  stock awards or bonus stock awards granted under the
Company's  employee and  director  long term  incentive  plans from time to time
adopted in good faith by the Board of Directors of the Company,  but only to the
extent that the sum of (x) the aggregate number of shares of Common Stock issued
pursuant to such plans  (including  any such shares  issued upon the exercise of
options granted under such plans), whether issued on, prior of or after the date
hereof  and (y) the  aggregate  number of shares  of  Common  Stock  potentially
issuable pursuant to options or awards granted under such plans, whether granted
on, prior to or after the date hereof that have not yet been  exercised does not
exceed, at any time, 10% of issued and outstanding shares of Common Stock;

                  (iii)  shares of Common  Stock  issued  to  holders  of Common
Units of Prime  Retail,  L.P.  in exchange for such Common Units  pursuant to
the Fourth  Amended and Restated  Agreement of Limited  Partnership  of
Prime Retail L.P., as amended or modified from time to time; and

                  (iv) shares of Common Stock issued upon  conversion  of shares
of the Company's 8.5% Series B Cumulative  Participating  Convertible  Preferred
Stock, $0.01 par value per share issued and outstanding on the date hereof.

                  "Appraised  Value"  shall  mean,  in  respect  of any share of
Common Stock on any date herein specified, the fair saleable value of such share
of Common  Stock  (determined  without  giving  effect to the discount for (i) a
minority  interest or (ii) any lack of  liquidity  of the Common Stock or to the
fact that Company may have no class of equity registered under the Exchange Act)
as of the last day of the most recent  fiscal  month to end within 60 days prior
to such date  specified,  based on the value of  Company,  as  determined  by an
investment  banking firm  selected in  accordance  with the terms of Section 15,
divided by the number of Fully Diluted Outstanding shares of Common Stock.

                  "Book  Value"  shall  mean,  in respect of any share of Common
Stock on any date herein specified, the consolidated book value of Company as of
the last day of any month immediately preceding such date, divided by the number
of Fully Diluted  Outstanding shares of Common Stock as determined in accordance
with GAAP  (assuming  the payment of the  exercise  prices for such shares) by a
"Big 5" firm of independent  certified public accountants (i.e., one of the five
largest  accounting  firms in the  U.S.)  selected  by  Company  and  reasonably
acceptable to the Majority Holders.

                  "Business  Day" shall  mean any day that is not a Saturday  or
Sunday or a day on which  banks are  required or  permitted  to be closed in the
State of New York.

                  "Commission" shall mean the Securities and Exchange Commission
or any other federal  agency then  administering  the  Securities  Act and other
federal securities laws.

                  "Common Stock" shall mean (except where the context  otherwise
indicates)  the Common Stock,  $.01 par value,  of Company as constituted on the
date hereof,  and any capital stock into which such Common Stock may  thereafter
be changed,  and shall also  include  (i) capital  stock of Company of any other
class (regardless of how denominated)  issued to the holders of shares of Common
Stock  upon any  reclassification  thereof  which is also  not  preferred  as to
dividends  or assets  over any other  class of stock of Company and which is not
subject  to  redemption  and (ii)  shares of common  stock of any  successor  or
acquiring  corporation (as defined in Section 4.8) received by or distributed to
the  holders of Common  Stock of Company in the  circumstances  contemplated  by
Section 4.8.

                  "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other  securities which are convertible into or exchangeable,
with or without  payment of additional  consideration  in cash or property,  for
Additional Shares of Common Stock,  either immediately or upon the occurrence of
a specified date or a specified event.

                  "Current  Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified,  the higher of (a) the Book Value per
share of Common  Stock at such date,  and (b) the  Appraised  Value per share of
Common Stock as at such date,  or if there shall then be a public market for the
Common Stock, the average of the daily market prices for 30 consecutive Business
Days  commencing 45 days before such date.  The daily market price for each such
Business Day shall be (i) the last sale price on such day on the principal stock
exchange or NASDAQ  Stock Market  ("NASDAQ")  on which such Common Stock is then
listed or admitted  to  trading,  (ii) if no sale takes place on such day on any
such exchange or NASDAQ,  the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ, (iii) if
the Common Stock is not then listed or admitted to trading on any stock exchange
or NASDAQ, the average of the last reported closing bid and asked prices on such
day in the over-the-counter  market, as furnished by the National Association of
Securities Dealers Automatic  Quotation System or the National Quotation Bureau,
Inc., (iv) if neither such corporation at the time is engaged in the business of
reporting  such  prices,  as  furnished by any similar firm then engaged in such
business,  or (v) if there is no such firm,  as  furnished  by any member of the
NASD  selected  mutually by the Majority  Holders and Company or, if they cannot
agree upon such  selection,  as selected by two such members of the NASD, one of
which  shall be  selected  by the  Majority  Holders  and one of which  shall be
selected by Company.

                  "Current  Warrant  Price" shall mean, in respect of a share of
Common Stock at any date herein specified,  the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.

                  "Exercise  Period"  shall  mean the period  during  which this
Warrant is exercisable pursuant to Section 2.1.

                  "Expiration Date" shall mean December 22, 2010.

                  "Fully  Diluted   Outstanding"  shall  mean,  when  used  with
reference to Common Stock,  at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock  issuable in respect of this Warrant  outstanding on such
date, and other options or warrants to purchase, or securities convertible into,
shares  of  Common  Stock  outstanding  on  such  date  which  would  be  deemed
outstanding in accordance  with GAAP for purposes of  determining  book value or
net income per share.

                  "GAAP" shall mean generally accepted accounting  principles in
the United States of America as from time to time in effect.

                  "Holder"  shall mean the Person in whose name the  Warrant set
forth herein is registered on the books of Company maintained for such purpose.

                  "Loan  Agreement" shall mean the Loan Agreement as of December
22, 2000, by and between Fortress Registered  Investment Trust and Prime Retail,
L.P., a Delaware limited partnership.

                  "Majority   Holders"   shall  mean  the  holders  of  Warrants
exercisable  for in  excess of 50% of the  aggregate  number of shares of Common
Stock  then  purchasable  upon  exercise  of all  Warrants,  whether or not then
exercisable.

                  "NASD"  shall mean the  National  Association  of  Securities
Dealers,  Inc.,  or any  successor corporation thereto.

                  "Other  Property"  shall have the meaning set forth in
Section 4.8.

                  "Outstanding"  shall mean,  when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued  shares of Common  Stock,  except shares then owned or held by or for
the account of Company or any subsidiary  thereof,  and shall include all shares
issuable  in  respect  of  outstanding  scrip or any  certificates  representing
fractional interests in shares of Common Stock.

                  "Person"  shall  mean  any  individual,  sole  proprietorship,
partnership,  limited liability company,  joint venture,  trust,  unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or  government  (whether  federal,  state,  county,  city,  municipal  or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended,  or any similar federal  statute,  and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

                  "Transfer"  shall  mean  any  disposition  of any  Warrant  or
Warrant  Stock or of any interest in either  thereof,  which would  constitute a
sale thereof within the meaning of the Securities Act.

                  "Warrants" shall mean the Warrants  originally issued pursuant
to the Loan  Agreement  and all  warrants  issued  upon  transfer,  division  or
combination of, or in substitution  for, any thereof.  All Warrants shall at all
times be identical as to terms and conditions and date,  except as to the number
of shares of Common Stock for which they may be exercised.

                  "Warrant  Price"  shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1,  multiplied by (ii) the Current  Warrant Price as of the date of
such exercise.

                  "Warrant   Stock"  shall  mean  the  shares  of  Common  Stock
purchased by the holders of the Warrants upon the exercise thereof.

2.       EXERCISE OF WARRANT

2.1. Manner of Exercise. From and after the date hereof and until 5:00 P.M., New
York time, on the  Expiration  Date,  Holder may exercise  this Warrant,  on any
Business  Day,  for all or any part of the  number of  shares  of  Common  Stock
purchasable  hereunder.  Any  exercise of this  Warrant  shall be subject to the
ownership limitations set forth in the Company's articles of incorporation.

                  In order to exercise this Warrant, in whole or in part, Holder
shall deliver to Company at its principal office at 100 East Pratt Street,  19th
Floor,  Baltimore,  Maryland  21202,  or at the office or agency  designated  by
Company  pursuant  to Section 12, (i) a written  notice of Holder's  election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant.
Such  notice  shall  be  substantially  in the  form  of the  subscription  form
appearing  at the end of this  Warrant as Exhibit A, duly  executed by Holder or
its agent or  attorney.  Upon receipt  thereof,  Company  shall,  as promptly as
practicable,  and in any event within five Business Days thereafter,  execute or
cause  to be  executed  and  deliver  or  cause  to be  delivered  to  Holder  a
certificate or certificates  representing the aggregate number of full shares of
Common Stock  issuable  upon such  exercise,  together  with cash in lieu of any
fraction  of  a  share,  as  hereinafter  provided.  The  stock  certificate  or
certificates so delivered shall be, to the extent possible, in such denomination
or  denominations  as such  Holder  shall  request  in the  notice  and shall be
registered  in the name of  Holder.  This  Warrant  shall be deemed to have been
exercised  and such  certificate  or  certificates  shall be deemed to have been
issued,  and Holder or any other Person so  designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes,  as
of the date the  notice,  together  with  the cash or check or  checks  and this
Warrant,  is received by Company as described above and all taxes required to be
paid by Holder,  if any,  pursuant to Section 2.2 prior to the  issuance of such
shares  have been  paid.  If this  Warrant  shall have been  exercised  in part,
Company  shall,  at the time of  delivery  of the  certificate  or  certificates
representing  Warrant  Stock,  deliver to Holder a new  Warrant  evidencing  the
rights of Holder to purchase the  unpurchased  shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder,  appropriate notation may be made on
this  Warrant and the same  returned to Holder.  Notwithstanding  any  provision
herein to the contrary,  Company shall not be required to register shares in the
name of any Person who  acquired  this  Warrant (or part  hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.

                  Payment of the  Warrant  Price  shall be made at the option of
the Holder by (i) wire transfer of immediately  available funds to an account or
accounts  designated  by the Company,  (ii)  certified  or official  bank check,
and/or  (ii) by the  Holder's  surrender  to Company of that number of shares of
Warrant  Stock (or the right to  receive  such  number of  shares)  or shares of
Common Stock having an aggregate  Current  Market Price equal to or greater than
the Current Warrant Price for all shares then being purchased  (including  those
being  surrendered) (a "Cashless  Exercise"),  or (iv) any combination  thereof,
duly endorsed by or  accompanied  by  appropriate  instruments  of transfer duly
executed by Holder or by Holder's attorney duly authorized in writing.

                  In no event shall any Holder  which is a  Regulation  Y Holder
(as  hereinafter  defined) be entitled to exercise this Warrant if such exercise
would, taking into consideration all other shares of Common Stock of the Company
owned by such Regulation Y Holder, increase such Regulation Y Holder's ownership
to greater  than 4.9% of the  Company's  outstanding  voting  Common  Stock on a
fully-diluted basis, unless such exercise is:

                  (i)      for the  purpose of the sale of Warrant  Stock to the
                           public in an offering registered under the Securities
                           Act;

                  (ii)     for  the  purpose  of a  sale  in  connection  with a
                           private  placement or other  transaction  pursuant to
                           Rule 144 or rule 144A (or any  successor  provisions)
                           under the Securities Act or otherwise exempt from the
                           registration  requirements  of the  Securities Act in
                           which  no  single  purchaser   receives  an  interest
                           (treating any such Warrant as  exercised)  equivalent
                           to more  than  two  percent  (2%) of the  outstanding
                           Common Stock;

                  (iii)    for  the  purpose  of the  sale  of  Warrant  Stock
                           to a  purchaser  who is  already  a  controlling
                           shareholder of the Company; or

                  (iv)     for the purpose of the sale of the underlying Common
                           Stock back to the Company.

A  "Regulation  Y Holder"  shall be  defined as Holder  which is a bank  holding
company  within the meaning of the Bank Holding  Company Act of 1956, as amended
(the "BHCA"), or a subsidiary thereof subject to Regulation Y under the BHCA. In
the  event of any  change in the  rules  and  regulations  under the BHCA or any
similar  law,  the  effect  of which is to  permit  the  Regulation  Y Holder to
transfer this Warrant or the Warrant  Stock in any other  manner,  the foregoing
restriction shall be deemed modified to permit a transfer of this Warrant or the
Warrant Stock in such other manner.

2.2.  Payment of Taxes. All shares of Common Stock issuable upon the exercise of
this Warrant  pursuant to the terms hereof shall be validly  issued,  fully paid
and  nonassessable  and without any  preemptive  rights.  Company  shall pay all
expenses in connection with, and all taxes and other  governmental  charges that
may be imposed with respect to, the issue or delivery  thereof,  unless such tax
or charge is  imposed  by law upon  Holder,  in which case such taxes or charges
shall be paid by Holder and shall be credited against the exercise price.

2.3.  Fractional  Shares.  Company  shall not be required to issue a  fractional
share of Common  Stock upon  exercise of any  Warrant.  As to any  fraction of a
share  which the  Holder of one or more  Warrants,  the rights  under  which are
exercised in the same transaction,  would otherwise be entitled to purchase upon
such  exercise,  Company  shall pay a cash  adjustment  in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise,  if there is a public  market for
the Common Stock, or the Fair Market Value thereof as determined by the Board of
Directors of Company.

2.4.  Continued  Validity.  A holder of shares of Common  Stock  issued upon the
exercise of this  Warrant,  in whole or in part,  shall  continue to be entitled
with  respect to such shares to all rights to which it would have been  entitled
as Holder under this Warrant. Company will, at the time of each exercise of this
Warrant,  in whole or in part,  upon the  request of the holder of the shares of
Common Stock issued upon such exercise hereof,  acknowledge in writing,  in form
reasonably  satisfactory to such holder, its continuing  obligation to afford to
such holder all such rights;  provided,  however, that if such holder shall fail
to make  any  such  request,  such  failure  shall  not  affect  the  continuing
obligation of Company to afford to such holder all such rights.

3.       TRANSFER, DIVISION AND COMBINATION

3.1. Transfer. Transfer of this Warrant and all rights hereunder, in whole or in
part,  shall be  registered  on the books of Company to be  maintained  for such
purpose,  upon  surrender  of this  Warrant at the  principal  office of Company
referred  to in  Section  2.1 or the  office or  agency  designated  by  Company
pursuant to Section  12,  together  with a written  assignment  of this  Warrant
substantially  in the form of Exhibit B hereto  duly  executed  by Holder or its
agent or attorney. Upon such surrender and, if required,  such payment,  Company
shall  execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denomination specified in such instrument of assignment,
and shall  issue to the  assignor a new Warrant  evidencing  the portion of this
Warrant  not so  assigned,  and this  Warrant  shall  promptly be  cancelled.  A
Warrant,  may be  exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued.

3.2.  Division and  Combination.  This  Warrant may be divided or combined  with
other  Warrants upon  presentation  hereof at the aforesaid  office or agency of
Company,  together with a written notice  specifying the names and denominations
in which  new  Warrants  are to be  issued,  signed  by  Holder  or its agent or
attorney.  Subject to compliance  with Section 3.1 and with Section 9, as to any
transfer  which may be involved in such division or  combination,  Company shall
execute and  deliver a new  Warrant or  Warrants in exchange  for the Warrant or
Warrants to be divided or combined in accordance with such notice.

3.3.     Expenses.  Company shall  prepare, issue and deliver at its own expense
(other than transfer  taxes) the new Warrant or Warrants under this Section 3.

3.4.     Maintenance  of Books.  Company  agrees to maintain,  at its  aforesaid
office or agency,  books for the registration and the registration of transfer
of the Warrants.

4.       ADJUSTMENTS

                  The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant,  shall be subject to adjustment  from time to time as set forth in
this Section 4.  Company  shall give each Holder  notice of any event  described
below which  requires an  adjustment  pursuant to this  Section 4 at the time of
such event.

4.1.     Stock Dividends, Subdivisions and Combinations.  If, at any time,
Company shall:

(a)  take a record  of the  holders  of its  Common  Stock  for the  purpose  of
entitling  them to  receive a dividend  payable  in, or other  distribution  of,
Additional Shares of Common Stock,

(b)  subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or

(c)  combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  occurrence  of such event would own or be entitled to
receive  after the happening of such event,  and (ii) the Current  Warrant Price
shall be adjusted  to equal (A) the  Current  Warrant  Price  multiplied  by the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  adjustment  divided  by (B) the  number of shares for
which this Warrant is exercisable immediately after such adjustment.

4.2.     Certain  Other  Distributions.  If at any time  Company  shall take a
record of the  holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:

(a)      Cash (other than a cash dividend payable out of earnings accumulated
from the date hereof),

(b) any  evidences  of its  indebtedness,  any  shares of its stock or any other
securities or property of any nature  whatsoever  (other than cash,  Convertible
Securities or Additional Shares of Common Stock), or

(c) any warrants or other rights to subscribe  for or purchase any  evidences of
its indebtedness, any shares of its stock or any other securities or property of
any nature  whatsoever  (other than cash,  Convertible  Securities or Additional
Shares of Common Stock),

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  shall be  adjusted  to equal the product of the number of shares of
Common Stock for which this  Warrant is  exercisable  immediately  prior to such
adjustment by a fraction (A) the numerator of which shall be the Current  Market
Price per share of Common  Stock at the date of taking  such  record and (B) the
denominator  of which  shall be such  Current  Market  Price per share of Common
Stock minus the amount  allocable  to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of  Directors  of  Company,  provided  that if such  amount is  disputed  by the
Majority Holders, as determined by an opinion from an investment banking firm of
recognized  national  standing  selected by the Majority Holders) of any and all
such evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so distributable, and (ii) the
Current  Warrant Price shall be adjusted to equal (A) the Current  Warrant Price
multiplied  by the number of shares of Common  Stock for which  this  Warrant is
exercisable  immediately  prior to the  adjustment  divided by (B) the number of
shares for which this Warrant is exercisable  immediately after such adjustment.
A  reclassification  of the Common Stock  (other than a change in par value,  or
from par value to no par value or from no par value to par value) into shares of
Common  Stock  and  shares  of any  other  class  of  stock  shall  be  deemed a
distribution  by Company to the  holders of its Common  Stock of such  shares of
such other  class of stock  within the  meaning of this  Section 4.2 and, if the
outstanding  shares of Common  Stock  shall be changed  into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be  deemed  a  subdivision  or  combination,  as the  case may be,  of the
outstanding shares of Common Stock within the meaning of Section 4.1.

4.3.  Issuance of Additional  Shares of Common Stock. (a) If at any time Company
shall (except as hereinafter  provided)  issue or sell any Additional  Shares of
Common Stock, in exchange for consideration in an amount per Additional Share of
Common  Stock less than the  Current  Warrant  Price at the time the  Additional
Shares of Common Stock are issued,  then (i) the Current Warrant Price as to the
number of shares for which this Warrant is exercisable  prior to such adjustment
shall be reduced to a price  determined  by dividing  (A) an amount equal to the
sum of (x) the number of shares of Common Stock Outstanding immediately prior to
such issue or sale multiplied by the then existing  Current Warrant Price,  plus
(y) the  consideration,  if any, received by Company upon such issue or sale, by
(B) the total number of shares of Common  Stock  Outstanding  immediately  after
such issue or sale; and (ii) the number of shares of Common Stock for which this
Warrant is  exercisable  shall be  adjusted  to equal the  product  obtained  by
multiplying the Current Warrant Price in effect  immediately prior to such issue
or sale by the  number  of shares of Common  Stock  for which  this  Warrant  is
exercisable  immediately  prior to such issue or sale and  dividing  the product
thereof by the Current Warrant Price resulting from the adjustment made pursuant
to clause (i) above.

(b) If at any time Company  shall (except as  hereinafter  provided) at any time
issue or sell any  Additional  Shares of Common  Stock for  consideration  in an
amount per Additional  Share of Common Stock less than the Current Market Price,
then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  shall be adjusted to equal the product  obtained by multiplying the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately prior to such issue or sale by a fraction (A) the numerator of which
shall be the number of shares of Common Stock Outstanding immediately after such
issue or sale, and (B) the denominator of which shall be the number of shares of
Common Stock Outstanding immediately prior to such issue or sale plus the number
of  shares  which  the  aggregate  offering  price of the  total  number of such
Additional  Shares of Common  Stock would  purchase at the then  Current  Market
Price;  and (ii) the Current  Warrant Price as to the number of shares for which
this  Warrant is  exercisable  prior to such  adjustment  shall be  adjusted  by
multiplying  such Current Warrant Price by a fraction (X) the numerator of which
shall be the number of shares for which this Warrant is exercisable  immediately
prior to such  issue  or sale;  and (Y) the  denominator  of which  shall be the
number of shares of Common  Stock  purchasable  immediately  after such issue or
sale.

(c) If at any time Company (except as hereinafter  provided) shall issue or sell
any Additional Shares of Common Stock in exchange for consideration in an amount
per  Additional  Share of Common  Stock which is less than the  Current  Warrant
Price and Current  Market  Price (as defined  above) at the time the  Additional
Shares of Common Stock are issued,  the  adjustment  required  under Section 4.3
shall be made in accordance with the formula in paragraph (a) or (b) above which
results in the lower  Current  Warrant  Price  following  such  adjustment.  The
provisions  of  paragraphs  (a) and (b) of  Section  4.3  shall not apply to any
issuance  of  Additional  Shares of Common  Stock  for  which an  adjustment  is
provided  under  Section  4.1 or 4.2. No  adjustment  of the number of shares of
Common Stock for which this  Warrant  shall be  exercisable  shall be made under
paragraph (a) or (b) of Section 4.3 upon the issuance of any  Additional  Shares
of Common  Stock which are issued  pursuant to the  exercise of any  warrants or
other  subscription  or  purchase  rights or  pursuant  to the  exercise  of any
conversion  or  exchange  rights  in any  Convertible  Securities,  if any  such
adjustment shall previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such  Convertible  Securities  (or upon the
issuance of any  warrant or other  rights  therefor)  pursuant to Section 4.4 or
Section 4.5.

4.4.  Issuance of Warrants or Other Rights.  If at any time Company shall take a
record of the holders of its Common Stock for the purpose of  entitling  them to
receive  a  distribution  of, or shall in any  manner  (whether  directly  or by
assumption in a merger in which Company is the surviving  corporation)  issue or
sell,  any warrants or other rights to subscribe for or purchase any  Additional
Shares of Common Stock or any Convertible Securities,  whether or not the rights
to exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable  upon the exercise of such  warrants or
other rights or upon conversion or exchange of such Convertible Securities shall
be less than the Current  Warrant  Price or the Current  Market  Price in effect
immediately  prior to the time of such issue or sale,  then the number of shares
for which this Warrant is  exercisable  and the Current  Warrant  Price shall be
adjusted as  provided  in Section  4.3 on the basis that the  maximum  number of
Additional  Shares of Common  Stock  issuable  pursuant to all such  warrants or
other  rights or  necessary  to effect the  conversion  or  exchange of all such
Convertible  Securities  shall be deemed to have been issued and outstanding and
Company  shall be  deemed  to have  received  all of the  consideration  payable
therefor,  if any,  as of the date of the  issuance  of such  warrants  or other
rights.  No further  adjustments of the Current Warrant Price shall be made upon
the actual issue of such Common  Stock or of such  Convertible  Securities  upon
exercise  of such  warrants  or other  rights or upon the  actual  issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.

4.5.  Issuance of  Convertible  Securities.  If at any time Company shall take a
record of the holders of its Common Stock for the purpose of  entitling  them to
receive  a  distribution  of, or shall in any  manner  (whether  directly  or by
assumption in a merger in which Company is the surviving  corporation)  issue or
sell,  any  Convertible  Securities,  whether or not the rights to  exchange  or
convert  thereunder  are  immediately  exercisable,  and the price per share for
which Common Stock is issuable upon such  conversion  or exchange  shall be less
than the Current  Warrant  Price or Current  Market Price in effect  immediately
prior to the time of such  issue or sale,  then the  number of Shares  for which
this Warrant is exercisable  and the Current  Warrant Price shall be adjusted as
provided  in Section  4.3 on the basis  that the  maximum  number of  Additional
Shares of Common  Stock  necessary to effect the  conversion  or exchange of all
such Convertible  Securities shall be deemed to have been issued and outstanding
and Company shall have received all of the consideration  payable  therefor,  if
any, as of the date of issuance of such Convertible Securities. No adjustment of
the number of Shares  for which this  Warrant  is  exercisable  and the  Current
Warrant  Price  shall be made under this  Section  4.5 upon the  issuance of any
Convertible Securities which are issued pursuant to the exercise of any warrants
or other subscription or purchase rights therefor,  if any such adjustment shall
previously  have been made upon the  issuance of such  warrants or other  rights
pursuant  to Section  4.4.  No further  adjustments  of the number of Shares for
which this Warrant is  exercisable  and the Current  Warrant Price shall be made
upon the actual issue of such Common Stock upon  conversion  or exchange of such
Convertible  Securities and, if any issue or sale of such Convertible Securities
is made upon  exercise  of any  warrant or other  right to  subscribe  for or to
purchase any such Convertible  Securities for which adjustments of the number of
Shares for which this Warrant is exercisable  and the Current Warrant Price have
been or are to be made  pursuant  to  other  provisions  of this  Section  4, no
further  adjustments  of  the  number  of  Shares  for  which  this  Warrant  is
exercisable  and the Current Warrant Price shall be made by reason of such issue
or sale.

4.6.     [INTENTIONALLY OMITTED]

4.7.  Other  Provisions  Applicable  to  Adjustments  under  this  Section.  The
following  provisions  shall be applicable to the making of  adjustments  of the
number of shares of Common Stock for which this Warrant is  exercisable  and the
Current Warrant Price provided for in this Section 4:

(a) Computation of  Consideration.  To the extent that any Additional  Shares of
Common Stock or any  Convertible  Securities  or any warrants or other rights to
subscribe  for  or  purchase  any  Additional  Shares  of  Common  Stock  or any
Convertible Securities shall be issued for cash consideration, the consideration
received by Company therefor shall be the amount of the cash received by Company
therefor,  or,  if  such  Additional  Shares  of  Common  Stock  or  Convertible
Securities are offered by Company for subscription,  the subscription price, or,
if such Additional Shares of Common Stock or Convertible  Securities are sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price (in any such case  subtracting any amounts paid or
receivable  for accrued  interest or accrued  dividends and without  taking into
account any compensation,  discounts or expenses paid or incurred by Company for
and in the  underwriting  of, or  otherwise  in  connection  with,  the issuance
thereof).  To the extent that such issuance shall be for a  consideration  other
than cash, then, except as herein otherwise  expressly  provided,  the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such  issuance as determined in good faith by the Board of Directors
of  Company,   provided  that  if  the  Majority   Holders  shall  dispute  such
determination, such fair value shall be determined by an investment banking firm
of recognized  standing selected by the Majority Holders. In case any Additional
Shares of Common Stock or any  Convertible  Securities  or any warrants or other
rights to subscribe  for or purchase such  Additional  Shares of Common Stock or
Convertible  Securities  shall be issued in connection  with any merger in which
Company issues any  securities,  the amount of  consideration  therefor shall be
deemed  to be the fair  value,  as  determined  in good  faith  by the  Board of
Directors  of  Company,  of such  portion  of the  assets  and  business  of the
nonsurviving  corporation  as such Board in good  faith  shall  determine  to be
attributable to such Additional Shares of Common Stock,  Convertible Securities,
warrants or other  rights,  as the case may be,  provided  that if the  Majority
Holders shall dispute such determination, such fair value shall be determined by
an  investment  banking  firm of  recognized  standing  selected by the Majority
Holders.  The  consideration  for any Additional Shares of Common Stock issuable
pursuant to any warrants or other  rights to subscribe  for or purchase the same
shall be the  consideration  received by Company for  issuing  such  warrants or
other rights plus the additional  consideration payable to Company upon exercise
of such warrants or other rights. The consideration for any Additional Shares of
Common Stock issuable pursuant to the terms of any Convertible  Securities shall
be the consideration received by Company for issuing warrants or other rights to
subscribe for or purchase such Convertible  Securities,  plus the  consideration
paid or payable to Company in respect of the  subscription  for or  purchase  of
such Convertible Securities, plus the additional consideration,  if any, payable
to Company  upon the  exercise  of the right of  conversion  or exchange in such
Convertible  Securities.  In case of the issuance at any time of any  Additional
Shares of Common Stock or Convertible  Securities in payment or  satisfaction of
any dividends upon any class of stock other than Common Stock,  Company shall be
deemed  to  have  received  for  such  Additional  Shares  of  Common  Stock  or
Convertible  Securities a consideration  equal to the amount of such dividend so
paid or satisfied.

(b) When  Adjustments  to Be Made.  The  adjustments  required by this Section 4
shall  be made  whenever  and as  often  as any  specified  event  requiring  an
adjustment  shall occur,  except that any  adjustment of the number of shares of
Common  Stock for which this  Warrant is  exercisable  that would  otherwise  be
required may be postponed (except in the case of a subdivision or combination of
shares of Common  Stock,  as provided  for in Section 4.1) up to, but not beyond
the  date  of  exercise  if such  adjustment  either  by  itself  or with  other
adjustments  not previously made adds or subtracts less than 1% of the shares of
Common  Stock for which this  Warrant is  exercisable  immediately  prior to the
making of such  adjustment.  Any  adjustment  representing a change of less than
such minimum  amount (except as aforesaid)  which is postponed  shall be carried
forward and made as soon as such  adjustment,  together  with other  adjustments
required by this Section 4 and not  previously  made,  would result in a minimum
adjustment or on the date of exercise.  For the purpose of any  adjustment,  any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.

(c)      Fractional  Interests.  In  computing adjustments under this Section 4,
fractional  interests in Common Stock shall be taken into account to the nearest
1/10th of a share.

(d) When Adjustment Not Required.  If Company shall take a record of the holders
of its Common Stock for the purpose of  entitling  them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the  distribution  to stockholders  thereof,  legally abandon its plan to pay or
deliver such  dividend,  distribution,  subscription  or purchase  rights,  then
thereafter  no  adjustment  shall be  required  by reason of the  taking of such
record  and any such  adjustment  previously  made in respect  thereof  shall be
rescinded and annulled.

(e)  Escrow of  Warrant  Stock.  If after  any  property  becomes  distributable
pursuant to this  Section 4 by reason of the taking of any record of the holders
of Common Stock,  but prior to the occurrence of the event for which such record
is taken,  and Holder  exercises this Warrant,  any Additional  Shares of Common
Stock  issuable upon exercise by reason of such  adjustment  shall be deemed the
last shares of Common Stock for which this Warrant is exercised (notwithstanding
any other  provision to the contrary  herein) and such shares or other  property
shall be held in escrow for Holder by Company to be issued to Holder upon and to
the extent that the event actually takes place, upon payment of the then Current
Warrant Price.  Notwithstanding  any other provision to the contrary herein,  if
the event for which such record was taken fails to occur or is  rescinded,  then
such  escrowed  shares  shall be  cancelled  by Company  and  escrowed  property
returned.

(f)  Challenge to Good Faith  Determination.  Whenever the Board of Directors of
Company  shall be  required  to make a  determination  in good faith of the fair
value of any item under this Section 4, such  determination may be challenged in
good faith by the  Majority  Holders,  and any  dispute  shall be resolved by an
investment banking firm of recognized national standing selected by the Majority
Holders.

4.8. Reorganization,  Reclassification,  Merger, Consolidation or Disposition of
Assets.  In case Company shall  reorganize  its capital,  reclassify its capital
stock,  consolidate or merge with or into another  corporation (where Company is
not the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of Company),  or sell, transfer or otherwise dispose
of all or  substantially  all  its  property,  assets  or  business  to  another
corporation and, pursuant to the terms of such reorganization, reclassification,
merger,  consolidation  or disposition of assets,  shares of common stock of the
successor  or  acquiring  corporation,  or any  cash,  shares  of stock or other
securities  or property of any nature  whatsoever  (including  warrants or other
subscription  or purchase  rights) in addition to or in lieu of common  stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of Company, then each Holder shall
have the right thereafter to receive,  upon exercise of such Warrant, the number
of  shares of common  stock of the  successor  or  acquiring  corporation  or of
Company, if it is the surviving corporation,  and Other Property receivable upon
or as a result of such reorganization,  reclassification,  merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable  immediately  prior to such event.  In case of
any such reorganization,  reclassification, merger, consolidation or disposition
of assets, the successor or acquiring  corporation (if other than Company) shall
expressly  assume the due and punctual  observance  and  performance of each and
every  covenant and  condition  of this Warrant to be performed  and observed by
Company  and all the  obligations  and  liabilities  hereunder,  subject to such
modifications  as may be deemed  appropriate (as determined by resolution of the
Board of Directors  of Company  with the  approval of the  Majority  Holders) in
order to  provide  for  adjustments  of shares of  Common  Stock for which  this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments  provided  for in this  Section 4. For purposes of this Section 4.8,
"common stock of the successor or acquiring  corporation" shall include stock of
such  corporation  of any class which is not preferred as to dividends or assets
over any other  class of stock of such  corporation  and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other  securities  which are convertible  into or  exchangeable  for any such
stock,  either  immediately  or upon  the  arrival  of a  specified  date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock.  The foregoing  provisions of this Section 4.8 shall
similarly  apply  to  successive  reorganizations,  reclassifications,  mergers,
consolidations or disposition of assets.

4.9. Other Action  Affecting  Common Stock.  In case at any time or from time to
time Company  shall take any action in respect of its Common  Stock,  other than
any action  described  in this  Section 4, then,  the number of shares of Common
Stock or other  stock for which  this  Warrant  is  exercisable  purchase  price
thereof  shall be  adjusted  upward  and the  purchase  price  thereof  shall be
adjusted downward in such manner as may be equitable in the circumstances.

4.10.    Certain  Limitations.  Notwithstanding anything herein to the contrary,
Company agrees not to enter into any  transaction  which,  by reason of any
adjustment  hereunder,  would cause the Current Warrant Price to be less
than the par value per share of Common Stock.

5.       NOTICES TO WARRANT HOLDERS

5.1.  Notice of  Adjustments.  Whenever the number of shares of Common Stock for
which this  Warrant is  exercisable,  or whenever  the price at which a share of
such Common  Stock may be  purchased  upon  exercise of the  Warrants,  shall be
adjusted pursuant to Section 4, Company shall forthwith prepare a certificate to
be  executed  by the chief  financial  officer  of  Company  setting  forth,  in
reasonable  detail,  the event  requiring the adjustment and the method by which
such  adjustment was  calculated  (including a description of the basis on which
the Board of Directors of Company  determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription  or  purchase  rights  referred  to  in  Section  4.2  or  4.7(a)),
specifying  the  number  of shares of Common  Stock for which  this  Warrant  is
exercisable  and (if such  adjustment  was made  pursuant to Section 4.8 or 4.9)
describing  the number and kind of any other  shares of stock or Other  Property
for which this Warrant is  exercisable,  and any change in the purchase price or
prices thereof,  after giving effect to such adjustment or change. Company shall
promptly cause a signed copy of such  certificate to be delivered to each Holder
in  accordance  with Section  17.2.  Company  shall keep at its office or agency
designated  pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal  business hours
by any Holder or any prospective  purchaser of a Warrant  designated by a Holder
thereof.

5.2.     Notice of Corporate Action.  If at any time
         --------------------------

(a)  Company  shall take a record of the  holders  of its  Common  Stock for the
purpose of entitling  them to receive a dividend or other  distribution,  or any
right to subscribe for or purchase any evidences of its indebtedness, any shares
of stock of any class or any other  securities  or  property,  or to receive any
other right, or

(b) there shall be any capital  reorganization of Company,  any reclassification
or  recapitalization  of the capital  stock of Company or any  consolidation  or
merger of Company with,  or any sale,  transfer or other  disposition  of all or
substantially  all the  property,  assets or  business  of Company  to,  another
corporation, or

(c)      there shall be a voluntary or involuntary dissolution, liquidation or
winding up of Company;

then,  in any one or more of such  cases,  Company  shall  give to Holder (i) at
least 30 days' prior written  notice of the date on which a record date shall be
selected for such dividend,  distribution or right or for determining  rights to
vote  in  respect  of  any  such   reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization,  reclassification,  merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up, at least 30 days' prior written  notice of the date when the same shall take
place.  Such notice in accordance  with the foregoing  clause also shall specify
(i) the date on which any such  record is to be taken  for the  purpose  of such
dividend,  distribution or right,  the date on which the holders of Common Stock
shall be entitled to any such dividend,  distribution  or right,  and the amount
and  character  thereof,  and (ii) the  date on which  any such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such  time is to be fixed,  as of which the  holders  of Common  Stock  shall be
entitled  to  exchange  their  shares of Common  Stock for  securities  or other
property  deliverable  upon  such  reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up. Each such written notice shall be sufficiently  given if addressed to Holder
at the last address of Holder appearing on the books of Company and delivered in
accordance with Section 17.2.

6.       NO IMPAIRMENT

                  Company   shall  not  by  any   action,   including,   without
limitation,   amending  its   certificate  of   incorporation   or  through  any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities  or any other  voluntary  action,  avoid or seek to avoid the
observance or performance  of any of the terms of this Warrant,  but will at all
times in good  faith  assist in the  carrying  out of all such  terms and in the
taking of all such  actions as may be necessary  or  appropriate  to protect the
rights of Holder  against  impairment.  Without  limiting the  generality of the
foregoing,  Company  will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant,  (b) take all such action as
may be  necessary or  appropriate  in order that Company may validly and legally
issue fully paid and  nonassessable  shares of Common Stock upon the exercise of
this  Warrant,  and (c) use its best efforts to obtain all such  authorizations,
exemptions  or consents  from any public  regulatory  body  having  jurisdiction
thereof as may be necessary to enable Company to perform its  obligations  under
this Warrant.
                  Upon the  request of Holder,  Company  will at any time during
the  period  this  Warrant  is  outstanding  acknowledge  in  writing,  in  form
satisfactory  to  Holder,  the  continuing  validity  of  this  Warrant  and the
obligations of Company hereunder.

7.       RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
         APPROVAL OF ANY GOVERNMENTAL AUTHORITY

                  From and after  the date  hereof,  Company  shall at all times
reserve and keep  available  for issue upon the exercise of Warrants such number
of its authorized  but unissued  shares of Common Stock as will be sufficient to
permit the exercise in full of all  outstanding  Warrants.  All shares of Common
Stock which shall be so issuable,  when issued upon  exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and  nonassessable,  and not subject to preemptive
rights.

                  Before  taking  any action  which  would  cause an  adjustment
reducing  the Current  Warrant  Price  below the then par value,  if any, of the
shares of Common Stock  issuable upon  exercise of the  Warrants,  Company shall
take any  corporate  action  which may be  necessary  in order that  Company may
validly and legally  issue fully paid and  non-assessable  shares of such Common
Stock at such adjusted Current Warrant Price.

                  Before  taking any action which would result in an  adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price,  Company shall obtain all such  authorizations  or
exemptions  thereof,  or consents  thereto,  as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

                  If any shares of Common  Stock  required  to be  reserved  for
issuance upon exercise of Warrants require  registration or  qualification  with
any governmental  authority or other  governmental  approval or filing under any
federal or state law  (otherwise  than as  provided  in  Section 9) before  such
shares may be so issued,  Company  will in good  faith and as  expeditiously  as
possible and at its expense endeavor to cause such shares to be duly registered.

8.       TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS

                  In the case of all dividends or other distributions by Company
to the  holders of its  Common  Stock with  respect  to which any  provision  of
Section 4 refers to the taking of a record of such holders, Company will in each
such  case  take  such a record  and will  take  such  record as of the close of
business  on a  Business  Day.  Company  will  not  at  any  time,  except  upon
dissolution,  liquidation  or winding up of  Company,  close its stock  transfer
books or Warrant  transfer  books so as to result in  preventing or delaying the
exercise or transfer of any Warrant.

9.       TRANSFERABILITY

9.1.  Registration.  The Company shall at all times maintain such  registrations
and  qualifications  in effect  under the  Securities  Act and under  such other
securities or blue sky laws of such  jurisdictions  within the United States and
Puerto Rico as each holder of (i) Warrant  Stock or (ii) this Warrant in respect
of Warrant  Stock  issuable  upon the  exercise of this  Warrant  shall  request
(provided,  however, that Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which it is not
then  qualified or to file any general  consent to service or process) such that
the Warrant Stock is freely  transferable under the Securities Act and all other
applicable law.

9.2. Indemnification.  (a) Company shall indemnify and hold harmless each holder
of  Warrant  Stock (and any holder of this  Warrant,  in respect of the  Warrant
Stock issuable upon exercise hereof), each such holder's directors and officers,
and each other Person  (including  each  underwriter)  who  participated  in the
offering of any Warrant Stock and each other  Person,  if any, who controls such
holder or such  participating  Person within the meaning of the Securities  Act,
against any losses, claims,  damages or liabilities,  joint or several, to which
such  holder  or any  such  director  or  officer  or  participating  Person  or
controlling  Person may become  subject  under the  Securities  Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or  actions  in  respect  thereof)  arise out of or are  based  upon any of the
following statements,  omissions or violations (collectively "Violations"):  (i)
any alleged untrue  statement of any material fact  contained,  on the effective
date thereof,  in any  Registration  Statement  under which such securities were
registered  under  the  Securities  Act,  any  preliminary  prospectus  or final
prospectus  contained therein,  or any amendment or supplement  thereto, or (ii)
any alleged  omission  to state  therein a material  fact  required to be stated
therein or necessary to make the statements  therein not  misleading,  and shall
reimburse  such  holder or such  director,  officer or  participating  Person or
controlling  Person for any legal or any other expenses  reasonably  incurred by
such holder or such  director,  officer or  participating  Person or controlling
Person in  connection  with  investigating  or defending  any such loss,  claim,
damage, liability or action;

         (b) Each  holder of Warrant  Stock who  participates  in an offering of
Warrant Stock hereunder  shall indemnify and hold harmless the Company,  each of
its  directors,  each of its  officers  who shall have  signed any  registration
statement  filed in  connection  with such  offering,  each Person,  if any, who
controls the Company within the meaning of the Securities  Act, any other holder
of Warrant  Stock who  participated  in the offering of any Warrant  Stock,  any
controlling Person of any such other holder and each officer, director, partner,
and employee of such other holder of Warrant Stock and such controlling  Person,
against any losses, claims,  damages or liabilities,  joint or several, to which
any of the foregoing  Persons may otherwise  become subject under the Securities
Act, the Exchange  Act or other  federal or state laws,  insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) are determined by
a court of competent jurisdiction by a final non-appealable order to have solely
arisen out of or be based upon a Violation that occurred in reliance upon and in
conformity  with written  information  furnished by such holder of Warrant Stock
expressly for use in connection with such registration;  provided, however, that
(x) the  indemnification  required  by this  Section  9.2(b)  shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or expense
if settlement is effected  without the consent of the relevant holder of Warrant
Stock,  which consent shall not be  unreasonably  withheld,  and (y) in no event
shall the amount of any  indemnity  under  this  Section  9.2(b)  exceed the net
proceeds from the applicable offering received by such holder of Warrant Stock

10.      SUPPLYING INFORMATION

                  Company shall cooperate with each Holder of a Warrant and each
holder of Warrant  Stock in  supplying  such  information  as may be  reasonably
necessary for such holder to complete and file any  information  reporting forms
presently  or  hereafter  required  by  the  Commission  as a  condition  to the
availability of an exemption from the Securities Act for the sale of any Warrant
Stock.

11.      LOSS OR MUTILATION

                  Upon receipt by Company from any Holder of evidence reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of Greenwich  Capital Financial  Products,
Inc. shall be sufficient  indemnity),  and in case of mutilation  upon surrender
and cancellation  hereof,  Company will execute and deliver in lieu hereof a new
Warrant of like tenor to such Holder;  provided,  in the case of mutilation,  no
indemnity shall be required if this Warrant in identifiable  form is surrendered
to Company for cancellation.

12.      OFFICE OF COMPANY

                  As long as any of the  Warrants  remain  outstanding,  Company
shall maintain an office or agency (which may be the principal executive offices
of Company)  where the Warrants may be presented for exercise,  registration  of
transfer, division or combination as provided in this Warrant.

13.      FINANCIAL AND BUSINESS INFORMATION

13.1. Quarterly Information. During such period, if any, that the Company is not
required to file periodic  reports under the Exchange Act,  Company will deliver
to each Holder,  as soon as practicable after the end of each of the first three
quarters of Company, and in any event within 45 days thereafter,  one copy of an
unaudited  consolidated  balance sheet of Company and its subsidiaries as at the
close of such  quarter,  and the related  unaudited  consolidated  statements of
income and cash flows of Company for such quarter and, in the case of the second
and third quarters, for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year. Such financial statements shall be prepared
by Company in  accordance  with GAAP and  accompanied  by the  certification  of
Company's chief executive officer or chief financial officer that such financial
statements  are  complete  and  correct  and  present  fairly  the  consolidated
financial  position,  results of  operations  and cash flows of Company  and its
subsidiaries as at the end of such quarter and for such year-to-date  period, as
the case may be.

13.2.  Annual  Information.  During such period, if any, that the Company is not
required to file periodic  reports under the Exchange Act,  Company will deliver
to each  Holder  as soon as  practicable  after the end of each  fiscal  year of
Company, and in any event within 90 days thereafter, one copy of:

            (i)     an audited consolidated balance sheet of Company and its
        subsidiaries as at the end of such year, and

            (ii)    audited consolidated statements of income, retained earning
        and cash flows of Company and its subsidiaries for such year;

setting forth in each case in comparative form the figures for the corresponding
periods in the previous  fiscal year, all prepared in accordance  with GAAP, and
which  audited  financial  statements  shall be  accompanied  by (i) an  opinion
thereon of the independent  certified public  accountants  regularly retained by
Company,  or any other  firm of  independent  certified  public  accountants  of
recognized  national  standing  selected  by  Company  and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.

13.3.  Filings.  Company will file on or before the required date all regular or
periodic  reports  (pursuant to the Exchange Act) with the  Commission  and will
deliver  to Holder  promptly  upon  their  becoming  available  one copy of each
report, notice or proxy statement sent by Company to its stockholders generally,
and of each regular or periodic  report  (pursuant to the Exchange  Act) and any
Registration   Statement,   prospectus  or  written  communication  (other  than
transmittal letters) (pursuant to the Securities Act), filed by Company with (i)
the Commission or (ii) any  securities  exchange on which shares of Common Stock
are listed.

14.      [INTENTIONALLY OMITTED]

15.      APPRAISAL

                  The  determination  of the Appraised Value per share of Common
Stock  shall be made by an  investment  banking  firm of  nationally  recognized
standing  selected by the  Majority  Holders.  If the  investment  banking  firm
selected by the Majority  Holders is not  acceptable  to the Company and Company
and the  Majority  Holders  cannot  agree on a  mutually  acceptable  investment
banking firm,  then the Majority  Holders and Company shall each choose one such
investment  banking firm and the respective  chosen firms shall agree on another
investment  banking  firm which  shall  make the  determination.  Company  shall
retain,  at its sole cost, such investment  banking firm as may be necessary for
the determination of Appraised Value required by the terms of this Warrant.

16.      LIMITATION OF LIABILITY

                  No provision hereof,  in the absence of affirmative  action by
Holder to purchase  shares of Common  Stock,  and no  enumeration  herein of the
rights or privileges of Holder hereof,  shall give rise to any liability of such
Holder  for the  purchase  price  of any  Common  Stock or as a  stockholder  of
Company,  whether  such  liability  is  asserted by Company or by  creditors  of
Company.

17.      MISCELLANEOUS

17.1.  Nonwaiver and  Expenses.  No course of dealing or any delay or failure to
exercise any right  hereunder on the part of Holder shall operate as a waiver of
such right or  otherwise  prejudice  Holder's  rights,  powers or  remedies.  If
Company fails to make, when due, any payments  provided for hereunder,  or fails
to comply with any other provision of this Warrant,  Company shall pay to Holder
such amounts as shall be sufficient  to cover any costs and expenses  including,
but not limited to,  reasonable  attorneys'  fees,  including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.

17.2.  Notice  Generally.  Any  notice,  demand,  request,  consent,   approval,
declaration,  delivery or other  communication  hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either  delivered in person with receipt  acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed as follows:

(a) If to any  Holder or holder of  Warrant  Stock,  at its last  known  address
appearing on the books of Company maintained for such purpose.

(b)      If to Company at

                           Prime Retail, Inc.
                           100 East Pratt Street
                           Nineteenth Floor
                           Baltimore, MD 21202
                           Attention:  President

or at such  other  address  as may be  substituted  by  notice  given as  herein
provided.  The giving of any notice required  hereunder may be waived in writing
by the party  entitled to receive such notice.  Every notice,  demand,  request,
consent, approval, declaration,  delivery or other communication hereunder shall
be  deemed to have  been  duly  given or served on the date on which  personally
delivered,  with  receipt  acknowledged,  telecopied  and  confirmed by telecopy
answerback,  or three  Business Days after the same shall have been deposited in
the United  States mail.  Failure or delay in  delivering  copies of any notice,
demand, request, approval,  declaration,  delivery or other communication to the
person  designated  above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval,  declaration,  delivery
or other communication.

17.3. Indemnification. Company agrees to indemnify and hold harmless Holder from
and against any liabilities,  obligations,  losses, damages, penalties, actions,
judgments,  suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon,  incurred by or asserted  against  Holder in
any manner  relating to or arising out of (i) Holder's  exercise of this Warrant
and/or  ownership of any shares of Warrant Stock issued in consequence  thereof,
or (ii) any  litigation  to which  Holder is made a party in its  capacity  as a
stockholder  of Company;  provided,  however,  that  Company  will not be liable
hereunder  to the extent that any  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments, suits, claims, costs, attorneys' fees, expenses
or disbursements are found in a final non-appealable judgment by a court to have
resulted from Holder's gross negligence,  bad faith or willful misconduct in its
capacity as a stockholder or warrantholder of Company.

17.4.  Remedies.  Each holder of Warrant and Warrant Stock, in addition to being
entitled to exercise all rights granted by law,  including  recovery of damages,
will be entitled  to  specific  performance  of its rights  under this  Warrant.
Company agrees that monetary damages would not be adequate  compensation for any
loss incurred by reason of a breach by it of the  provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.

17.5.  Successors  and Assigns.  Subject to the provisions of Sections 3.1, this
Warrant  and the rights  evidenced  hereby  shall inure to the benefit of and be
binding upon the successors of Company and the successors and assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant or Warrant Stock,  and shall be enforceable by
any such Holder or holder of Warrant Stock.

17.6. Amendment.  This Warrant and all other Warrants may be modified or amended
or the  provisions  hereof  waived with the  written  consent of Company and the
Majority  Holders,  provided  that no such Warrant may be modified or amended to
reduce  the  number  of  shares  of Common  Stock  for  which  such  Warrant  is
exercisable  or to increase the price at which such shares may be purchased upon
exercise of such Warrant  (before  giving  effect to any  adjustment as provided
therein) without the prior written consent of the Holder thereof.

17.7.  Severability.  Wherever possible, each provision of this Warrant shall be
interpreted  in such manner as to be effective and valid under  applicable  law,
but if any  provision of this Warrant  shall be  prohibited  by or invalid under
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions of this Warrant.

17.8.    Headings.  The headings  used in this  Warrant are for the  convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.

17.9.    Governing  Law.  This Warrant  shall be governed by the laws of the
State of New York,  without  regard to the provisions thereof relating to
conflict of laws.

                                       [the next page is the signature page]

<PAGE>

                  IN WITNESS WHEREOF, Company has caused this Warrant to be duly
executed  and its  corporate  seal to be  impressed  hereon and  attested by its
Secretary or an Assistant Secretary.

Dated:  December 22, 2000

                                               PRIME RETAIL, INC.

                                               By:  /s/ C. Alan Schroeder
                                               ---------------------------------
                                               Name:  C. Alan Schroeder
                                               Title:  Executive Vice PresidentEmployment Agreement

         THIS  EMPLOYMENT  AGREEMENT (the  "Agreement"),  effective as of May 3,
2000 (the  "Effective  Date"),  by and between  Prime  Retail,  Inc., a Maryland
corporation  ("Prime")  and the sole general  partner of Prime  Retail,  L.P., a
Delaware  limited  partnership  (the  "Operating  Partnership"),  the  Operating
Partnership  (Prime and the  Operating  Partnership  are  sometimes  hereinafter
together  referred  to as the  "Company"),  and Steven  Gothelf,  an  individual
domiciled in the State of Maryland ("Executive").

                                   Witnesseth

         WHEREAS,   the  Company  is  engaged   primarily   in  the   ownership,
development,  construction,  acquisition,  leasing,  marketing and management of
factory outlet centers throughout North America, Puerto Rico and Western Europe;

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

         WHEREAS,  the Company believes that it would benefit from the continued
application  of  Executive's  particular  and  unique  skill,  experience,   and
background to the management and operation of the Company;

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

         WHEREAS,  the parties  wish by this  Agreement  to amend and restate in
entirety the terms and  conditions of the  relationship  between the Company and
Executive;

         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
covenants herein set forth, and for other good and valuable  consideration,  the
receipt and  sufficiency of which is hereby  acknowledged by each of the parties
hereto, the Company and Executive hereby agree as follows:

1. Duties.  During the Term hereof (as defined in Section 2 hereof), the Company
agrees to retain Executive,  and Executive agrees to be retained by the Company,
as the  Executive  Vice  President  - Finance  of the  Company  on the terms and
conditions  provided in this  Agreement.  Executive shall serve as the Executive
Vice President - Finance 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 offices for which he has been retained  hereunder and
the scope of work set forth herein.  Executive agrees to devote his best efforts
and  substantially  all of his business time,  attention,  energy,  and skill to
performing his duties to the Company under this Agreement. Executive will report
directly and exclusively to the Company's  President and Chief Executive Officer
("CEO"),  and he  will  perform  all of  his  duties  in  accordance  with  such
reasonable directions,  requests,  rules and regulations as are specified by the
CEO in connection with his  employment.  Notwithstanding  the foregoing,  in the
event the Company retains an individual to serve as its Chief Operating Officer,
or a similar role, and that individual  reports directly to the CEO, the parties
acknowledge  that the Company may alter the reporting  relationship of Executive
so that he thereafter reports to such individual and the CEO. During the Term of
this  Agreement,  it shall not be a violation of this Agreement for Executive to
(i)  serve on  corporate,  industry-related,  civic,  or  charitable  boards  or
committees  or devote time to serving any such entities or  organizations,  (ii)
deliver  lectures,  fulfill  speaking  engagements,   or  teach  at  educational
institutions, or (iii) manage personal investments and finances and business and
legal affairs,  to the extent that such activities do not violate this Section 1
or Section 5 hereof.

2. Term. The term of this Agreement shall commence as of the Effective Date and,
unless earlier  terminated in accordance with the terms of this Agreement,  will
extend to the second  anniversary of such date ("the Original Term");  provided,
however, that if this Agreement is not affirmatively terminated by either party,
or extended or renewed for a specific  duration in writing by  agreement  of the
parties,  prior  to the last  day of the  Original  Term,  this  Agreement  will
continue on a month-to-month basis thereafter (the "Extended Term"). The parties
agree to  cooperate  and discuss in good faith their  intentions  with regard to
this Agreement's extension or renewal 12 months prior to the end of the Original
Term.  Notwithstanding  the foregoing,  the Company agrees to provide  Executive
with a minimum of six  months'  advance  written  notice (the  "Advanced  Notice
Period") 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  (reduced  to 30 days,  if the term is not  extended  beyond the
Original  Term) of his intent to terminate  this  Agreement  during the Original
Term or the Extended  Term for any reason other than Good Reason,  in which case
Executive  shall  comply  with the notice  requirements  of  Section  4(b)(1)(E)
hereof.  For purposes of this Agreement,  the terms "Original  Term,"  "Extended
Term," and "Advanced Notice Period" 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
Thousand  Dollars  ($200,000) 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. In addition to the Base Salary,  Executive shall have the
right to receive,  and the Operating  Partnership agrees to pay to Executive,  a
performance  bonus for each calendar year during the Term of this Agreement,  in
such  amounts as the  Committee,  in its sole  discretion,  may  determine  (the
"Performance  Bonus").  If the Board,  either directly or through the Committee,
establishes  performance measures for senior officers (which term is intended to
include  Executive),  those  established  criteria  will be  used  to  determine
Executive's  entitlement to a Performance Bonus.  Notwithstanding the foregoing,
nothing in this  Agreement  obligates  the Board to establish  such  performance
measures, and the lack of established performance measures will not constitute a
breach of this  Agreement  in any  manner.  In lieu of  established  performance
measures,  the Board will determine Executive's  Performance Bonus solely in its
discretion.  The parties  hereto  acknowledge  that any  corporate or individual
performance  objectives  established  pursuant  to  this  Section  3(b)  will be
determined  prior  to,  or as soon as  possible  after,  the  beginning  of each
calendar year and that such objectives may objectively be met by Executive.  The
aggregate  Performance  Bonus for a calendar year payable in accordance with the
provisions  of this Section 3(b) is expected to be up to 100% of the Base Salary
for such calendar year.  Further,  Executive shall only be entitled to receive a
Performance  Bonus for a calendar year if Executive has been and continues to be
retained  by the  Company as an  executive  officer of the  Company for the full
calendar year or if (i) the Company  terminates  Executive's  employment without
Cause  (as  defined  below)  during  the Term,  (ii)  Executive  terminates  his
employment for Good Reason (as defined below) during the Term, (iii) Executive's
employment  ends for any reason  within 24 months  following a Change of Control
during the Term, or (iv) the Term expires  during that calendar year. Any amount
of Performance Bonus required to be paid to Executive for a calendar year during
the Term of this Agreement shall be paid by the Company to Executive  during the
pay period of the Company following  finalization of the audit for such calendar
year and final review and approval of the bonus  calculation  by the  Committee,
and, in all events, on or before March 31 of the year immediately  following the
end of the calendar year for which such Performance Bonus is attributable.

(c)      Health Insurance and Other Benefits.
         -----------------------------------

(1)  During  the Term of this  Agreement  and  subject  to the  limitations  and
affirmative  rights set forth in this Section  3(c),  Executive and his eligible
dependents shall have the right to participate in any life, disability,  health,
dental,  vision  and  other  benefit  plans or  programs  that  have been or are
hereafter  adopted  or  maintained  by the  Company  (or in  which  the  Company
participates)  according  to the terms of such plan or  program  with all of the
benefits,  rights and  privileges  as are enjoyed by any other senior  executive
officer of the Company.  In addition,  Executive shall be covered by any and all
policies of directors and officers insurance coverage obtained by the Board from
time to time for its  senior  executive  officers,  the terms of which  shall be
established by the Board in its sole discretion.

(2)  During  the Term of this  Agreement  and  subject  to the  limitations  and
affirmative  rights set forth in this Section  3(c),  Executive and his eligible
dependents  shall have the right to participate in any retirement,  pension,  or
other similar  benefit plan or program that has been or is hereafter  adopted by
the  Company (or in which the Company  participates)  according  to the terms of
such plan or program with all the benefits, rights and privileges as are enjoyed
by any other senior executive officer of the Company.

(3) If the  participation  of Executive under a plan described in subsection (2)
above  would  adversely  affect  the  qualification  of a  plan  intended  to be
qualified under the Internal  Revenue Code of 1986, as amended from time to time
(the "Code"),  the Company shall have the right to exclude  Executive  from that
plan  in  return  for  his   participation  in  (x)  a  non-qualified   deferred
compensation  plan  or (y) an  arrangement  providing  substantially  comparable
benefits under a plan that is either a qualified or non-qualified plan under the
Code at the Company's option.

(4)  Notwithstanding  anything to the  contrary  contained  herein,  the Company
reserves the right to amend or terminate any plan described in this Section 3(c)
for any reason; provided,  however, that (i) no such amendment that would reduce
the  benefits  of  Executive  will be  adopted  unless it affects  other  senior
executive  officers  across-the-board,   and  (ii)  if  any  plan  amendment  or
termination  reduces the benefits of Executive,  the Company  agrees to adopt or
maintain  one or  more  replacement  plans  that  will  provide  Executive  with
reasonably  comparable  benefits  throughout  the  Term of this  Agreement.

(d)  Vacation  and Leaves of  Absence.  Executive  shall be entitled to four (4)
weeks of paid  vacation  leave  during each twelve  (12) month  calendar  period
(considered  to be  granted  for  each  half-year  as of the  first  day of that
half-year)  and paid  holidays  in  accordance  with the  Company's  established
policies.  Executive may accrue unused vacation time if not used in any calendar
year or years,  however,  the maximum  cumulative  amount of vacation  time that
Executive may accrue and carry over to the next year is four weeks.  In addition
to the foregoing, Executive may be granted leaves of absence with or without pay
for such  other  reasons  as shall be  mutually  agreed  upon by the  Board  and
Executive.

(e) Expenses. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably  request in
accordance  with its policy and  procedures,  for all  reasonable  and necessary
expenses  incurred by Executive in the performance of his duties  hereunder.  In
addition,  the Company agrees to pay, or reimburse Executive for, any legal fees
and costs he incurs in  connection  with the  negotiation  and execution of this
Agreement,  up to a maximum of $10,000,  and for any  reasonable  legal fees and
costs he incurs in connection  with the  negotiation  and execution of renewals,
extensions and amendments of this Agreement.

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

(g) Stock Options. (i) In consideration for Executive's employment hereunder, as
of May 11, 2000 (the "Date of Grant"),  Prime  granted  Executive an option (the
"Option") to purchase  100,000 shares of Prime's  common stock,  par value $0.01
per share (the  "Common  Stock").  The  purchase  price per share was $2.00 (the
"Exercise  Price").  The Option was granted  pursuant to the Prime Retail,  Inc.
1998 Long-Term Stock Incentive Plan (the "LTIP") and is subject to the terms and
conditions contained in the Stock Award Agreement entered into between Prime and
Executive,  which  terms  include:  (i) the Option will have a term of ten years
measured from the date of grant;  (ii) the greatest portion of the Option shares
allowable  under the LTIP will be issued as incentive  stock options;  (iii) the
Option shares will vest and become  exercisable as follows:  increments of 12.5%
of the total  number of shares  will  become  vested as of the first day of each
contract  quarter  following  the Date of Grant,  such that the shares  shall be
fully vested  before the second  anniversary  of the  Effective  Date,  assuming
Executive's  employment with Prime continues through such dates; (iv) the Option
will remain  exercisable  for 30 days  following  termination  of Executive  for
Cause,  and in the event of Executive's  termination of employment for any other
reason the Option will remain  exercisable for 90 days; and (v) upon Executive's
resignation for Good Reason or termination without Cause (each as herein defined
and without regard to whether a Change of Control has occurred)  during the Term
of this  Agreement,  the entire  Option,  in addition  to all other  outstanding
options awarded by Prime to Executive, will become fully vested and exercisable,
to the extent not previously  exercised.  Prime will take all steps necessary to
ensure  that all options  held by  Executive  survive any Change of Control.

4. Termination and Termination Benefits.

(a) Termination by Prime.

(1)  Without  Cause.  Subject  to the notice  provisions  set forth in Section 2
hereof, the Company may terminate this Agreement and Executive's services at any
time for any reason,  and after any required  notice is provided to Executive he
shall  continue to perform his duties under this  Agreement  during the Advanced
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
Advanced  Notice Period,  payable in accordance  with the provisions of Sections
3(a) and 3(d) above;

(B) if such termination  occurs during the Original Term, a termination  payment
in an amount  equal to the product of (x) the number of full and  partial  years
remaining in the Original Term, and (y) the sum of (i) Executive's  then current
Base Salary and, (ii) a bonus payment equal to 100% of the average  annual bonus
paid to Executive for the two most recent  calendar years in which he received a
bonus,  or if no such bonus  payments  were made to  Executive,  a bonus payment
equal to 50% of his then current Base Salary (the sum of the amounts  determined
by adding  clauses (i) and (ii) is in the aggregate  hereinafter  referred to as
the "One-Year Pay Equivalent"),  and the product of (x) and (y) shall be payable
no later than thirty  (30) days  following  the last day of the  Advance  Notice
Period;

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

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

         In the event that  Executive is terminated  without  Cause  pursuant to
this  Section  4(a)(1) or resigns  for Good Reason and within 12 months from the
effective date of such termination or resignation there is a "Change in Control"
of the Company (as defined  below),  then Executive shall be entitled to receive
the  benefits  set forth in Section  4(d) hereof to the extent and in the amount
that such benefits exceed the amounts paid or received by Executive  pursuant to
this Section  4(a)(1).  (2) With Cause. The Company may terminate this Agreement
with "Cause"  immediately  upon written notice to Executive.  In connection with
the  termination  of  Executive's  services  pursuant to this  Section  4(a)(2),
Executive (and  Executive's  eligible  dependents  with respect to paragraph (C)
below) shall be entitled to:

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

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

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

(3) "Cause"  Defined.  For  purposes  of this  Agreement,  "Cause"  shall mean a
reasonable, good faith finding by a majority of the Board (A) that Executive has
harmed the Company through an act of dishonesty or material conflict of interest
that  relates  to  the  performance  of  Executive's  duties  hereunder,  (B) of
Executive's  conviction  of  a  felony  involving  moral  turpitude,   fraud  or
embezzlement,  (C) that  Executive's  willful failure to perform in any material
respect his duties under this Agreement (other than a failure due to disability)
that results in material harm to the Company,  after written  notice  specifying
the failure and a  reasonable  opportunity  of at least thirty (30) days to cure
(it being  understood  that if  Executive's  failure to perform is not of a type
requiring a single  action to fully cure,  then  Executive may commence the cure
promptly after such written notice and thereafter diligently prosecute such cure
to  completion)  or (D) of a material and willful  breach by Executive of any of
his  obligations  hereunder  and the  failure of  Executive  to cure such breach
within  thirty (30) days after  receipt by Executive of a written  notice of the
Company  specifying in reasonable  detail the nature of the breach.  The Company
intends that "Cause" must be based only on meaningful  and  significant  matters
and not on matters of minor importance. For purposes of this Section, an act, or
failure to act, on Executive's part shall be considered  "willful" only if done,
or omitted to be done,  by him not in good faith and without  reasonable  belief
that his action or omission was in the best interest of the Company.

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

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

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

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

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

                  This  Section  4(a)(4)  shall  not limit  the  entitlement  of
Executive,  his estate or  beneficiaries  to any  disability  or other  benefits
available to Executive under any disability  insurance or other benefits plan or
policy that is maintained by the Company for Executive's benefit.

(b)      Termination by Executive for Any Reason.

(1) Subject to the notice requirements set forth in Section 2 hereof,  Executive
may terminate this Agreement at any time with or without Good Reason (as defined
herein),  and after any  required  notice is provided  to the Company  Executive
shall  continue to perform his duties  under this  Agreement  during such notice
period if the Company so elects. If Executive terminates his employment for Good
Reason,  the Company shall pay him the compensation and other benefits  provided
above in Section  4(a)(1) as if it had terminated  his employment  without Cause
after providing the requisite notice pursuant to Section 2 hereof. In connection
with the  termination of this Agreement  pursuant to this Section  4(b)(1) other
than for Good  Reason,  Executive  (and  Executive's  eligible  dependents  with
respect to paragraph (D) below) shall be entitled to receive:

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

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

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

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

(E)      "Good Reason"  Defined.  For purposes of this  Agreement, "Good Reason"
         shall mean (A) the material  breach by the Company of any of its
         obligations  hereunder (a bona fide dispute  regarding the Performance
         Bonus shall not be a material breach by the Company) and the failure of
         the Company to cure such breach within thirty (30) days (reduced to ten
         (10) days for failure to pay Base Salary) after receipt by the Company
         of a written  notice from Executive specifying in reasonable detail the
         nature of the breach, unless such  breach  requires a longer  period to
         cure, then the Company shall have the right to cure such breach  within
         such  additional  period  of  time  not to  exceed  sixty  (60)  days;
         (B)  Executive's  title  or  scope of responsibilities  and duties are
         materially  diminished  from the level provided in this  Agreement,  or
         the Company fails to provide Executive with adequate office  facilities
         and support services to perform such responsibilities and duties; or(C)
         the Company changes  Executive's  principal place of employment to a
         location more than 25 miles from the Company's principal Baltimore City
         office as of the Effective Date. Executive's delay in providing  notice
         of his  termination  for Good Reason shall not be deemed to be a waiver
         of any such Good Reason  unless and until  Executive  fails to provide
         such notice  within six  months  after  the  occurrence  of  the  event
         triggering such Good Reason,  nor does the  failure to  resign for  one
         Good Reason prevent any later Good Reason resignation for a similar or
         different reason.

(c) Death. Notwithstanding any other provision of this Agreement, this Agreement
shall  terminate on the date of Executive's  death.  In this event,  Executive's
estate  shall  be  entitled  to  receive  all  accrued  but  unpaid  amounts  of
Executive's  Base Salary and  vacation  through the date of  Executive's  death,
payable in accordance  with the  provisions of Sections 3(a) and 3(d) above.  In
addition,  Executive's  eligible  dependents  shall be  entitled  to receive the
benefits  specified in Section  4(a)(1)(D)  above,  to the extent  applicable to
dependents. This Section 4(c) shall not limit the entitlement of Executive under
any  insurance or other  benefits plan or policy that is maintained by Prime for
Executive's benefit.

(d)  Termination  Following a Change of Control.  If,  within  twenty-four  (24)
months  following a Change of Control,  the Company  terminates  this  Agreement
during its Term  other than for Cause or  Executive  terminates  this  Agreement
during  its Term with  Good  Reason,  in  either  case,  subject  to the  notice
provisions of Section 2 hereof,  Executive (and Executive's  eligible dependents
with respect to paragraph  (D) below) shall be entitled to receive the following
benefits and payments:

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

(2) a termination payment in an amount equal to the product of (x) the number of
full and partial years remaining in the Original Term (or, if greater,  2 years)
and (y) the One-Year Pay Equivalent, which amount shall be payable no later than
thirty (30) days  following (i) the last day of the Advance  Notice  Period,  if
termination  was at the  election  of Prime,  or (ii) the last day of the notice
period  required under Section 2 hereof,  if termination  was at the election of
Executive;

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

(4) the health  insurance  benefits  described in Section  3(c)(1) above for the
maximum period  permitted  under COBRA at the Company's  sole expense,  together
with either (i) additional benefits equivalent to those in effect at the date of
termination,  such that Executive will receive Company-paid coverage for a total
of 24 months or (ii) if providing such benefits is not permitted by the tax laws
or applicable  benefit plans,  the after-tax  equivalent of the premiums paid by
the Company for such coverage.

(e) "Change of Control"  Defined.  For purposes of this Agreement,  a "Change of
Control"  shall be deemed to have  occurred  if (1) any  "person" or "group" (as
such terms are used for purposes of Sections  13(d) and 14(d) of the  Securities
Exchange Act of 1934, as amended, regardless of whether applicable),  other than
a trustee or other fiduciary  holding  securities under an employee benefit plan
of Prime or a corporation  owned directly or indirectly by the  stockholders  of
Prime in substantially the same proportions as their ownership of stock of Prime
becomes  the  "beneficial  owner" (as  defined  in Rule  13d-3  under said Act),
directly or indirectly,  of securities of Prime  representing 50% or more of the
total voting power represented by Prime's then outstanding  securities that vote
generally  in  the  election  of  directors   (referred  to  herein  as  "Voting
Securities"); (2) during any period of two consecutive years, individuals who at
the beginning of such period  constitute  the Board and any new directors  whose
election by the Board or  nomination  for election by Prime's  stockholders  was
approved by a vote of at least  two-thirds  (2/3) of the directors then still in
office  who  either  were  directors  at the  beginning  of the  period or whose
election or nomination  for election was  previously so approved,  cease for any
reason to constitute a majority of the Board; (3) the individuals who constitute
the Board  immediately  before a proxy  contest  cease to  constitute at least a
majority  of the Board  (excluding  any Board  seat that is vacant or  otherwise
unoccupied)   immediately   following  the  proxy  contest;   (4)  a  merger  or
consolidation  of Prime  with or into any other  entity,  other than a merger or
consolidation   (i)  that  would  result  in  the  Voting  Securities  of  Prime
outstanding  immediately  prior  thereto  continuing  to  represent  (either  by
remaining  outstanding  or by being  converted  into  Voting  Securities  of the
surviving  entity) at least 50% of the total  voting  power  represented  by the
Voting  Securities of Prime or such  surviving  entity  outstanding  immediately
after such merger or  consolidation  or (ii) where more than 50% of the Board of
Directors  of the  surviving  entity is  composed  of members  from the Board of
Directors  of Prime,  with terms ending at least 11 months after the date of the
merger or  consolidation;  or (5) the  stockholders  of Prime  approve a plan of
complete  liquidation  of Prime or an agreement for the sale or  disposition  by
Prime of (in one transaction or a series of  transactions)  all or substantially
all of Prime's assets, and such transaction is substantially completed. However,
in no event will a Change of Control be deemed to have occurred, with respect to
Executive,  if  Executive  is part of a purchasing  group that  consummates  the
Change  of  Control  transaction.  Executive  will be  deemed to be "part of the
purchasing  group" for  purposes of the  preceding  sentence if  Executive is an
equity  participant in the purchasing  company or group (except for: (i) passive
ownership of less than three percent of the stock of the purchasing  company; or
(ii) ownership of equity  participation in the purchasing company or group which
is otherwise not significant,  as determined prior to the Change of Control by a
majority of the non-employee continuing directors).

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

(g)  Purchase  of  Life  Insurance.  Notwithstanding  anything  to the  contrary
contained  herein,  in the event that the services of Executive with the Company
terminate  for any reason  other than death,  Executive  shall have the right to
acquire any life  insurance  policies  maintained  by the Company on the life of
Executive by (i)  notifying  the Company in writing of his desire to so purchase
such life  insurance  policy or  policies  and (ii)  tendering  to the Company a
cashier's check in an amount equal to the  interpolated  surrender cash value of
such life insurance policy or policies together with any unearned portion of any
current year premium thereof,  both within sixty (60) days of the effective date
of such termination.

5.       Covenants of Executive.

(a) No Conflicts.  Executive  represents  and warrants that he is not personally
subject to any agreement,  order or decree that restricts his acceptance of this
Agreement and performance of his duties with the Company hereunder.

(b) Non-Disclosure. Executive shall not disclose or use, except for or on behalf
of the "Group"  (consisting  of Prime and the Operating  Partnership  and any of
their  direct and  indirect  subsidiaries),  any Trade  Secret  (as  hereinafter
defined) of the Group,  whether  such Trade Secret is in  Executive's  memory or
embodied in writing or other  physical  form. For purposes of this Section 5(b),
"Trade Secret" means any information  that derives  independent  economic value,
actual or potential,  with respect to the Company from not being generally known
to, and not being  readily  ascertainable  by proper means by, other persons who
can obtain  economic  value  from its  disclosure  or use and is the  subject of
efforts to maintain its secrecy  that are  reasonable  under the  circumstances,
including, but not limited to, trade secrets,  customer lists, sales records and
other proprietary commercial information.  Said term, however, shall not include
general  "know-how"  information  acquired by Executive during the course of his
service.  Executive  shall be subject to the  restrictions  of this Section 5(b)
indefinitely.

(c)  Non-Solicitation.  During  the  period  of the  later  of  (i)  Executive's
employment  under this  Agreement,  or (ii) throughout the Original Term of this
Agreement,  but only if  Executive  resigns  other  than for Good  Reason  or is
terminated by the Company with Cause, (the "Restrictive  Period") and within the
United States (the  "Restrictive  Geographic  Area"),  Executive shall not hire,
cause to be hired, or induce or attempt to induce any officer,  employee, agent,
consultant,  independent  contractor,  tenant  or  customer  of the  Company  to
discontinue  such  affiliation with the Company or to refrain from entering into
new business relationships with the Company.  Notwithstanding the foregoing,  if
any officer,  employee,  agent,  consultant,  independent contractor,  tenant or
customer of the Company is contacted by, or receives a general  communication or
solicitation directed to the general public from, an entity with which Executive
has become employed or otherwise affiliated,  the parties hereto agree that such
contact or  communication  shall not violate  this  provision  unless  Executive
directly  or  indirectly  initiated  it,  and the  parties  further  agree  that
establishing  commercial  relationships  with the  Company's  lenders  and other
sources of capital does 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.

(e) Return of  Documents.  Upon  termination  of his services  with the Company,
Executive  shall return all originals and copies of books,  records,  documents,
customer lists,  sales materials,  tapes,  keys, credit cards and other tangible
property of the Company  within  Executive's  possession  or under his  control.
Executive  shall  have the right to retain  copies of forms and other  documents
used by the Company, redacted to remove the specific references to the Company.

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

(g)  Acknowledgment.  Executive  acknowledges  that  he  will  be  directly  and
materially   involved  as  a  senior  executive  in  all  important  policy  and
operational decisions of Company.  Executive further acknowledges that the scope
of the foregoing  restrictions has been  specifically  bargained between Company
and  Executive,  each being fully informed of all relevant  facts.  Accordingly,
Executive  acknowledges  that the foregoing  restrictions  of this Section 5 are
fair  and  reasonable,   are  necessary  to  protect  the  Company,   its  other
stockholders  and the public from the unfair  competition of Executive who, as a
result of his  performance  of services on behalf of the Company,  will have had
unlimited  access to the most  confidential  and  important  information  of the
Company, its business and future plans. Executive furthermore  acknowledges that
no unreasonable  harm or injury will be suffered by him from  enforcement of the
covenants  contained  herein  and  that he  will  be  able to earn a  reasonable
livelihood following termination of his services notwithstanding  enforcement of
the covenants contained herein.

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

6.       Golden Parachute Provision.

(a)  Gross  Up   Payments.   Anything  in  this   Agreement   to  the   contrary
notwithstanding, in the event that any payment by or on behalf of the Company to
or for the  benefit of  Executive  (whether  paid or payable or  distributed  or
distributable  pursuant  to the  terms  of  this  Agreement  or  otherwise,  but
determined  without  regard  to any  additional  payments  required  under  this
Section) (the  "Payments")  is determined  to be an "excess  parachute  payment"
pursuant to Code Section 280G or any  successor or  substitute  provision of the
Code, with the effect that Executive is liable for the payment of the excise tax
described in Code Section 4999 or any successor or  substitute  provision of the
Code,  or any  interest or penalties  are incurred by Executive  with respect to
such Payments  (such excise tax,  together with any such interest and penalties,
are hereinafter  collectively  referred to as the "Excise Tax"),  then Executive
shall  be  entitled  to  receive  an  additional   payment  from  the  Operating
Partnership  (the  "Gross-Up  Payment") in an amount such that after  payment by
Executive of all taxes  imposed upon the Gross-Up  Payment,  including,  without
limitation,  federal,  state,  local or other  income  taxes,  FICA  taxes,  and
additional  Excise Tax (and any interest and  penalties  imposed with respect to
such taxes),  Executive  retains a portion of the Gross-Up  Payment equal to the
Excise Tax imposed upon the Payments.

(b) Determination of Gross-Up. Subject to the provisions of paragraph (c) below,
all  determinations  required to be made under this Section 6, including whether
and when a Gross-Up  Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such  determination,  shall be
made by the public  accounting  firm that serves as the Company's  auditors (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and Executive  within 15 business days of the receipt of notice from
the Company or Executive that there have been Payments,  or such earlier time as
is requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the  individual,  entity or group effecting the Change
of Control,  Executive shall designate another nationally  recognized accounting
firm to make the determinations  required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder).  All fees and expenses of
the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment,
as  determined  pursuant  to this  Section  6,  shall be paid by the  Company to
Executive within five days after the receipt by the Company and Executive of the
Accounting  firm's  determination.  If the Accounting  Firm  determines  that no
Excise Tax is payable by Executive,  it shall furnish  Executive  with a written
opinion that failure to report the Excise Tax on Executive's  applicable federal
income tax return would not result in the  imposition of a negligence or similar
penalty.  Any  determination  by the  Accounting  Firm shall be binding upon the
Company and Executive, except as provided in paragraph (c) below.

(c) IRS Claims.  As a result of the  uncertainty  in the  application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that the Internal Revenue Service or other agency will
claim that a greater  Excise Tax is due,  and thus a greater  amount of Gross-Up
Payment  should have been made by the Company than that  determined  pursuant to
paragraph (a) above (an "Underpayment"). In the event that Executive is required
to make a payment of any such Excise Tax, the  Accounting  Firm shall  determine
the amount of the  additional  Gross-Up  Payment due to  Executive  based on the
Underpayment, and such additional Gross-Up Payment shall be promptly paid by the
Company to or for the benefit of Executive.  Executive  shall notify the Company
in writing of any claim by the Internal Revenue Service or other agency that, if
successful,  would require the payment by the Company of the Gross-Up Payment or
an Underpayment.

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

8. Prior  Agreement.  This  Agreement  supersedes  and is in lieu of any and all
other employment or service arrangements between Executive, on the one hand, and
Prime and/or the Operating  Partnership or its predecessors or any subsidiaries,
on the other hand,  and any and all such  employment or service  agreements  and
arrangements are hereby terminated and deemed of no further force or effect.

9.  Assignment.  Neither  this  Agreement  nor any rights or duties of Executive
hereunder shall be assignable by Executive and any such purported  assignment by
him shall be void.  Prime may assign all or any of its right hereunder  provided
that  substantially all of the assets of the Company are also transferred to the
same party; provided, however, that Prime and the Operating Partnership, jointly
and severally shall remain  primarily  liable to Executive to fulfill all of the
Company's  obligations  under this  Agreement  and that any such  assignee  also
agrees to be  primarily  liable to  Executive  jointly  and  severally  with the
Company to fulfill all of the  Company's  obligations  under this  Agreement  as
provided in Section 10 below.

10. Successors.  This Agreement shall inure to the benefit of and be enforceable
by Executive's personal and legal  representatives,  executors,  administrators,
successors,  heirs,  distributees,  devisees  and  legatees  and  the  Company's
successors  and  assigns.  If  Executive  should die while any amounts are still
payable to Executive  hereunder,  all such amounts,  unless  otherwise  provided
herein,  shall  be paid in  accordance  with  the  terms  of this  Agreement  to
Executive's devisee, legatee or other designee or, if there be no such designee,
to Executive's estate. The Company will require any successor or assign (whether
direct or indirect, by purchase,  merger,  consolidation or otherwise) to all or
substantially all the business and/or assets of the Company, as the case may be,
by  agreement  in form  and  substance  reasonably  satisfactory  to  Executive,
expressly,  absolutely and  unconditionally  to assume and agree to perform this
Agreement  in the same manner and to the same  extent that the Company  would be
required to perform it if no such succession or assignment had taken place.  Any
failure of the Company to obtain such agreement  prior to the  effectiveness  of
any such succession or assignment shall be a material breach of this Agreement.

11.  Notices.  Any notice required or permitted to be given under this Agreement
shall be  sufficient  if in writing  and if  delivered  in person or sent by any
national  overnight  delivery  service  or by  certified  mail to the  following
addresses (or to any other address that any party may designate by notice to the
other parties hereto):

(a)      if to Executive, to:

                  Steven Gothelf
                  43 Latimore Way
                  Owings Mills, Maryland  21117

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

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

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

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

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

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

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

13. Waiver of Breach.  The waiver by any of the parties  hereto of the breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any part.

14.  Severability.  The Company and Executive each expressly  agree and contract
that it is not the intention of any of the parties  hereto to violate any public
policy, statutory or common law, and that if any sentence,  paragraph, clause or
combination  of the same of this  agreement  is in  violation  of the law of any
state where applicable,  such sentence,  paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful,  and the remainder
of such paragraph and this Agreement shall remain binding on the parties to make
the  covenants  of this  Agreement  binding  only to the  extent  that it may be
lawfully done under existing  applicable laws. In the event that any part of any
covenant of this Agreement is determined by a court of competent jurisdiction to
be overly broad thereby  making the covenant  unenforceable,  the parties hereto
agree,  and it is their  desire that such court shall  substitute  a  judicially
enforceable  limitation in its place, and that as so modified the covenant shall
be binding upon the parties as if originally set forth herein.

15. Opportunity to Employ Counsel.  Executive  acknowledges receipt of a copy of
this  Agreement  prior to his execution of this  Agreement  with the Company and
also  acknowledges  that he has had ample time and opportunity to employ counsel
of his choice to provide  advice  concerning  the terms and  conditions  of this
Agreement.

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

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

18.  Governing  Law.  This  Agreement  shall  be  governed  by,  and  construed,
interpreted  and enforced in accordance  with the laws of the State of Maryland,
exclusive of the conflict of laws provisions of the State of Maryland.

19.  Binding  Effect.  This Agreement  shall be binding and legally  enforceable
against the parties hereto and their respective heirs, personal representatives,
successors and assigns, as the case may be.

                            (signature page follows)

<PAGE>

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

EXECUTIVE:

/s/ Steven S. Gothelf
----------------------------
         Steven Gothelf

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

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

<PAGE>

                                    Exhibit A
                               Dispute Resolution

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

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

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

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

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

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

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}]]