<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PRIME RETAIL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transactions applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
April 28, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Prime Retail, Inc. (the "Company") to be held at 100 East Pratt Street, 12th
Floor Conference Room, Baltimore, Maryland, on June 3, 1999, at 11:00 a.m.,
local time.
The purpose of the Meeting is to consider and take action (i) to elect
four Directors, (ii) to ratify the appointment of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending December 31,
1999, (iii) to approve the Amended and Restated Prime Retail, Inc. Nonemployee
Director Stock Plan, and (iv) to transact such other business as may properly
come before the Meeting. Additional information with respect to these matters is
set forth in the enclosed Proxy Statement and the formal notice of Meeting. Also
enclosed is a Proxy Card and the Company's 1998 Annual Report to Stockholders.
After reading these materials, please mark, date, sign, and return the enclosed
Proxy Card to ensure that your vote on the important business matters to be
considered at the Meeting will be recorded.
I appreciate your investment in the Company and am looking forward to
this opportunity to meet you personally. Whether or not you can attend, however,
I greatly appreciate your cooperation in returning the enclosed Proxy Card.
Sincerely,
/s/ Michael W. Reschke
Michael W. Reschke
CHAIRMAN OF THE BOARD
<PAGE>
PRIME RETAIL, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
To the Stockholders:
The Annual Meeting of Stockholders of Prime Retail, Inc., a Maryland
corporation (the "Company"), will be held at 100 East Pratt Street, 12th Floor
Conference Room, Baltimore, Maryland, on June 3, 1999 at 11:00 a.m., local time
(the "Meeting"), to consider and vote on the following matters:
(i) To elect four Directors;
(ii) To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December
31, 1999;
(iii) To approve the Amended and Restated Prime Retail, Inc.
Nonemployee Director Stock Plan; and
(iv) To transact such other business as may properly come before
the Meeting or any adjournment(s) or postponement(s) thereof.
Holders of record of the Company's Common Stock, $0.01 par value per
share, at the close of business on March 26, 1999 shall be entitled to notice
of, and to vote with respect to all matters to be acted upon at, the Meeting.
By Order of the Board of Directors,
/s/ C. Alan Schroeder
C. Alan Schroeder
SECRETARY
Baltimore, Maryland
April 28, 1999
---------------------------------------
PLEASE DATE, SIGN AND RETURN YOUR PRIME PROXY PROMPTLY IN THE ENCLOSED,
SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
---------------------------------------
<PAGE>
PRIME RETAIL, INC.
100 EAST PRATT STREET
BALTIMORE, MARYLAND 21202
----------------------
PROXY STATEMENT
FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
The enclosed proxy is solicited by and on behalf of the board of
directors (the "Board of Directors" or "Directors") of Prime Retail, Inc., a
Maryland corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on Thursday, June 3, 1999 at 11:00 a.m.,
local time, or at any adjournment or postponement thereof. This Proxy Statement
and accompanying Proxy Card are being mailed to stockholders on or about April
30, 1999. There is being mailed herewith to each stockholder of record on the
Record Date (as hereafter defined) the Company's Annual Report to Stockholders
for 1998.
DESCRIPTION OF THE PROXY; PROXY SOLICITATION
If the accompanying Proxy Card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the Proxy Card will vote in favor of the matters
presented in this Proxy Statement, and as recommended by the Board of Directors
with regard to all other matters. Each proxy executed and returned by a
stockholder may be revoked at any time before it is voted by timely submission
of written notice of revocation or by submission of a duly executed proxy
bearing a later date (in either case directed to the Secretary of the Company)
or, if present at the Meeting, a stockholder may elect to revoke his or her
proxy and vote shares personally. The principal executive offices of the Company
are located at 100 East Pratt Street, 19th Floor, Baltimore, Maryland 21202.
The cost of solicitation of proxies will be borne by the Company. The
Company has engaged American Stock Transfer and Trust Company to solicit proxies
on behalf of the Company. The Company will pay such firm a fee of $6,000, plus
expenses. In addition, the Company may use the services of its Directors,
officers, employees and others to solicit proxies, personally or by telephone;
arrangements may also be made with brokerage houses and other custodians,
nominees, fiduciaries and stockholders of record to forward solicitation
material to the beneficial owners of stock held of record by such persons. The
Company may reimburse such solicitors for reasonable out-of-pocket expenses
incurred by them in connection with such solicitation. If any personal
interviews or telephone conversations are used to solicit proxies, delivery of
this Proxy Statement and Proxy Card will precede the interview or telephone
conversation. If as a result of the interview or conversation additional Proxy
Cards are requested or required, they will be forwarded to the registered holder
as so requested or required.
<PAGE>
QUORUM AND VOTE REQUIRED
Only holders of record of the Company's Common Stock, $0.01 par value
per share ("Common Stock"), on March 26, 1999 (the "Record Date") will be
entitled to vote at the Meeting. As of the Record Date, the Company had
43,041,709 shares of Common Stock outstanding and entitled to vote with respect
to all matters to be acted upon at the Meeting. Each holder of Common Stock is
entitled to one vote with respect to matters to be acted upon for each share of
stock held by such holder. Under Maryland Law, the presence of holders in person
or by proxy representing a majority of all the votes entitled to be cast at the
Meeting will constitute a quorum at the Meeting. Abstentions and broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business. Assuming the presence of a quorum,
directors are elected by the affirmative vote of a plurality of all the votes
cast by holders of Common Stock and ratification of auditors and approval of the
Amended and Restated Prime Retail, Inc. Nonemployee Director Stock Plan (the
"Amended Directors Plan") requires the affirmative vote of a majority of all the
votes cast by holders of Common Stock present in person or represented by a
proxy at the meeting. Abstentions and broker non-votes will not be considered
votes cast for purposes of the foregoing and, therefore, will have no effect on
the election of directors but will operate as votes against the ratification of
auditors and the approval of the Amended Directors Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock ("Common Shares") and of common
units of limited partnership interests ("Common Units") in Prime Retail, L.P., a
Delaware limited partnership in which the Company is the sole general partner
(the "Operating Partnership"), as of April 15, 1999 for (a) each stockholder of
the Company holding more than 5% of the voting securities of the Company, (b)
each named executive officer listed in the Summary Compensation Table presented
below, (c) the Directors of the Company and (d) the Directors and executive
officers of the Company as a group. Unless otherwise indicated in the footnotes,
all of such interests are owned directly, and the indicated person or entity has
sole voting and investment power. The number of shares represents the number of
Common Shares the person holds, the number of Common Shares the person has the
right to acquire upon exercise of certain stock options ("Stock Options")
granted pursuant to the Company's 1994 Stock Incentive Plan, the Company's 1995
Stock Incentive Plan, the Consulting Agreement between the Operating Partnership
and Marvin Traub Associates, Inc. ("MTA"), the Company's 1998 Long-Term Stock
Incentive Plan and the Company's Nonemployee Director Stock Plan (collectively,
the "Stock Incentive Plans"), the number of Common Shares into which Common
Units held by the person are exchangeable (if, as discussed below, the Company
elects to issue Common Shares rather than pay cash upon such exchange) and the
number of Common Shares into which shares of the Company's 8.5% Series B
Cumulative Participating Convertible Preferred Stock, $0.01 par value per share
(the "Series B Preferred Stock"), held by the person are convertible. The extent
to which a person directly holds Common Stock, Stock Options, Common Units or
Series B Preferred Stock is set forth in the notes. The Third Amended and
Restated Agreement of Limited Partnership of the Operating Partnership (the
"Operating Partnership Agreement") provides that Common Units may be exchanged,
subject to certain limitations, into Common Shares or, at the option of the
Company, cash equal to the fair market value of a share of Common Stock at the
time of exchange. Holders of Series B Preferred Stock have the right, subject to
ownership and transfer restrictions in the Company's charter intended to allow
the Company to maintain its status as a REIT, to convert all or any of their
Series B Preferred Stock into Common Shares at the conversion price of $20.90
per share of Common Stock, subject to certain adjustments.
Page 2
<PAGE>
<TABLE>
<CAPTION>
Number of
Prime Common Percent of All
Shares/Prime Prime Common
Partnership Percent of Shares/Prime
Common Units All Prime Partnership
Name and Address of Beneficially Owned Common Shares Common Units
Beneficial Owner (1) (2) (3) (4)
- -------------------- ------------------ -------------- ---------------
<S> <C> <C> <C>
The Prime Group, Inc.(5) 7,594,629 15.1% 11.5%
Michael W. Reschke(6) 8,125,600 16.0 12.3
Abraham Rosenthal(7) 724,089 1.7 1.1
William H. Carpenter, Jr.(8) 703,961 1.6 1.1
Glenn D. Reschke(9) 403,337 (10) (10)
David G. Phillips(11) 246,807 (10) (10)
Robert P. Mulreaney(12) 92,931 (10) (10)
William P. Dickey 15,864 (10) (10)
Terence C. Golden 22,500 (10) (10)
Norman Perlmutter(13) 819,603 1.9 1.2
Robert D. Perlmutter 11,268 (10) (10)
Kenneth A. Randall(14) 20,500 (10) (10)
Sharon J. Sharp 10,000 (10) (10)
James R. Thompson 20,500 (10) (10)
Marvin S. Traub(15) 66,577 (10) (10)
Directors and officers of the Company
as a group (23 persons) 11,615,397 21.5 17.5
Equitable Companies, Inc. (16) 4,875,034 11.3 7.4
Southeastern Asset Mgmt., Inc. (17) 3,371,400 7.8 5.1
Merrill Lynch & Co., Inc.(18) 2,402,692 5.6 3.6
</TABLE>
- --------------------
Notes:
(1) All of the Directors of the Company and the Named Executives (as
hereinafter defined) may be contacted c/o Prime Retail, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202.
(2) The beneficial ownership of Common Shares and shares of Series B
Preferred Stock ("Series B Preferred Shares") reported herein is based
upon filings with the Securities and Exchange Commission (the
"Commission") and is subject to confirmation by the Company that such
ownership did not violate the ownership restrictions in the Company's
Charter. The ownership of Common Units reported herein is derived from
the transfer records maintained by the Operating Partnership based on
information provided by the Operating Partnership's limited partners.
Information presented includes Common Shares issuable upon exercise of
Stock Options which have vested or will vest within 60 days of April
15, 1999 as follows: Mr. M. Reschke 324,999; Mr. Rosenthal 274,999;
Mr. Carpenter 274,999; Mr. Dickey 14,192; Mr. Golden 20,000; Mr. N.
Perlmutter 124,508; Mr. R. Perlmutter 9,596; Mr. Randall 20,000; Ms.
Sharp 10,000; Governor Thompson 20,000; Mr. Traub, including Marvin
Traub Associates, Inc. ("MTA"), 65,000; Mr. G. Reschke 83,750 (3,750 of
which are held by Ms. Tina Reschke, wife of Mr. G. Reschke); Mr.
Mulreaney 70,000; and Mr. Phillips 120,000.
Page 3
<PAGE>
(3) Information presented assumes exchange or conversion only of Common
Units and Series B Preferred Shares owned by such beneficial owner for
Common Shares. Information presented also includes Common Shares
issuable upon exercise of Stock Options of such beneficial owner which
have vested or will vest within 60 days of April 15, 1999.
(4) Information presented assumes exchange or conversion of all outstanding
Common Units and Series B Preferred Shares for Common Shares and also
includes Common Shares issuable upon exercise of Stock Options which
have vested or will vest within 60 days of April 15, 1999. The Common
Units may be exchanged on a one-for-one basis for Common Shares (or, at
the Company's election, cash of an equivalent value) at any time.
(5) Information presented includes 7,344,629 Common Units and 250,000
Common Shares owned by The Prime Group, Inc. ("PGI") and certain
limited partnerships affiliated with PGI. The address of PGI is 77 West
Wacker Drive, Suite 4200, Chicago, Illinois 60601. Certain of the
Common Units and Common Shares held by PGI have been pledged to certain
unaffiliated third parties to secure certain indebtedness of PGI and
its affiliates (collectively, the "Pledgees"). Unless and until the
Pledgees foreclose on the pledged Common Units or have given notice of
an event of default under the operative pledge or loan agreement, such
entities will not have the direct or indirect power to vote or dispose
of the Common Units so pledged. The Pledgees disclaim beneficial
ownership of these pledged Common Units pursuant to Section 13d-4 of
the Exchange Act.
(6) Information presented includes 7,344,629 Common Units and 250,000
Common Shares held by PGI (Mr. M. Reschke is the Chairman and Chief
Executive Officer of PGI) and certain limited partnerships affiliated
with PGI, 194,548 Common Shares owned by Mr. M. Reschke, 11,424 Common
Shares issuable to Mr. M. Reschke upon conversion of the 9,552 Series B
Preferred Shares owned by him, and 324,999 Common Shares which Mr. M.
Reschke has the right to acquire upon exercise of Stock Options. Mr. M.
Reschke's address is 77 West Wacker Drive, Suite 4200, Chicago,
Illinois 60601.
(7) Information presented includes 371,090 Common Units, 125,000 of which
are held by a limited liability company controlled by Mr. Rosenthal and
18,198 of which are held in trust for Mr. Rosenthal's children, 28,000
Common Shares, 10,000 of which are owned by Ms. Joanne Rosenthal, Mr.
Rosenthal's wife, 274,999 Common Shares which Mr. Rosenthal has the
right to acquire upon exercise of Stock Options and 50,000 Common Units
which Mr. Rosenthal has the right to acquire upon exercise of certain
options granted by PGI.
(8) Information presented includes 371,090 Common Units, 125,000 of which
are held by a limited liability company controlled by Mr. Carpenter,
4,284 Common Shares owned by Mr. Carpenter's children, 3,588 Common
Shares issuable to Mr. Carpenter upon conversion of the 3,000 Series B
Preferred Shares owned by him, 274,999 Common Shares which Mr.
Carpenter has the right to acquire upon exercise of Stock Options and
50,000 Common Units which Mr. Carpenter has the right to acquire upon
exercise of certain options granted by PGI.
(9) Information presented includes 251,300 Common Units which are held by
Reschke I LLC, 68,287 Common Shares owned by Mr. G. Reschke, 80,000
Common Shares which Mr. G. Reschke has the right to acquire upon the
exercise of Stock Options and 3,750 Common Shares
Page 4
<PAGE>
which Ms. Tina M. Reschke, Mr. G. Reschke's wife, has the right to
acquire upon the exercise of Stock Options. Mr. G. Reschke disclaims
beneficial ownership of such shares pursuant to Section 13d-4 of the
Exchange Act.
(10) Amount represents less than 1%.
(11) Information presented includes 26,687 Common Shares, 500 of which are
held in trust for Mr. Phillips' children, 120 Common Shares issuable to
Mr. Phillips upon conversion of the 100 Series B Preferred Shares owned
by him, 120,000 Common Shares which Mr. Phillips has the right to
acquire upon exercise of Stock Options and 100,000 Common Units which
Mr. Phillips has the right to acquire upon exercise of certain options
granted by PGI.
(12) Information presented includes 22,166 Common Shares owned by
Mr. Mulreaney, 765 Common Shares issuable to Mr. Mulreaney upon
conversion of the 640 Series B Preferred Shares owned by him, and
70,000 Common Shares which Mr. Mulreaney has the right to acquire upon
exercise of Stock Options.
(13) Information presented includes 1,742 Common Shares, 176 which are owned
by Mr. N. Perlmutter's wife and 764 which are held in trust for Mr.
Perlmutter's children, 2,700 Common Shares of which 320 are issuable to
Mr. N. Perlmutter upon conversion of the 268 Series B Preferred Shares
owned by him, 2,074 are issuable to Mr. N. Perlmutter's wife upon
conversion of her 1,734 Series B Preferred Shares, and 306 are issuable
to Mr. N. Perlmutter's children upon conversion of their 256 Series B
Preferred Shares, 690,653 Common Units owned by Mr. N. Perlmutter's
wife, and 124,508 Common Shares which Mr. N. Perlmutter has the right
to acquire upon exercise of Stock Options.
(14) Information presented includes 500 Common Shares owned by Mr. Randall's
wife, and 20,000 Common Shares which Mr. Randall has the right to
acquire upon exercise of Stock Options.
(15) Information presented includes 45,000 Common Shares which MTA, an
affiliate of Mr. Traub, has the right to acquire upon exercise of Stock
Options.
(16) Information presented is based on a Schedule 13G/A filed with the
Commission on April 12, 1999 on behalf of Equitable Companies in its
capacity as a parent holding company with respect to the holdings of
its following subsidiaries (i) Alliance Capital Management L.P., an
investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, (ii) The Equitable Life Assurance Society of the
United States, an insurance company, a broker-dealer registered under
Section 15 of the Securities and Exchange Act of 1934 and an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940.
(17) Information presented is based on a Schedule 13G filed with the
Commission on February 5, 1999 on behalf of (i) Longleaf Partners
Realty Fund, a series of Longleaf Partners Fund Trust, an open-end
management investment company registered under the Investment Company
Act of 1940 ("Longleaf"), (ii) Southeastern Asset Management, Inc., a
registered investment adviser ("Southeastern") and (iii) Mr. O. Mason
Hawkins, the Chairman of the Board and C.E.O. of Southeastern. The
Schedule 13G indicates that all the securities covered by this
statement are owned by Longleaf and none are owned directly or
indirectly by Southeastern. Southeastern and
Page 5
<PAGE>
Mr. Hawkins disclaim beneficial ownership of the Common Shares pursuant
to Section 13d-4 of the Exchange Act. The address of each of Longleaf,
Southeastern and Mr. Hawkins is Southeastern Asset Management, Inc.,
6410 Poplar Ave., Suite 900, Memphis, Tennessee 38119.
(18) Information presented is based on a Schedule 13G filed with the
Commission on February 14, 1999 on behalf of Merrill Lynch & Co., Inc.
("ML&Co.") as the parent holding company for The Merrill Lynch Asset
Management Group ("AMG"). AMG is an operating division of ML&Co.
consisting of ML&Co.'s indirectly-owned asset management subsidiaries.
Merrill Lynch Asset Management, L.P. is the asset management subsidiary
which holds certain shares of the common stock which is the subject of
the Schedule 13G filing.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to Agreement and Plan of Merger (the "Merger Agreement")
relating to the merger of Prime Retail, Inc. with Horizon Group, Inc.
("Horizon") on June 15, 1998, the Board of Directors of the Company was expanded
from nine to 12 persons. The Merger Agreement further provided that, at the
effective time of such merger, the Board of Directors would consist of the nine
directors of Prime Retail, Inc. then in office and three persons designated by
Horizon. The persons so designated by Horizon were Norman Perlmutter, William P.
Dickey and Robert D. Perlmutter.
The Board of Directors proposes the election of four Class II directors
at the Meeting, each to hold office for a three year term or until their
successors are duly elected and qualified. It is intended that the accompanying
form of Proxy will be voted for the nominees set forth below, each of whom is
currently a Director of the Company. If some unexpected occurrence should make
necessary, in the Board of Directors' judgment, the substitution of some other
person or persons for any of the nominees, shares will be voted for such other
person or persons as the Board of Directors may select. The Board of Directors
is not aware that any nominee may be unable or unwilling to serve as a Director.
Set forth below are the names of and certain other information
regarding the nominees for the four Director positions to be elected at the
Meeting and also regarding the Directors whose terms of office will continue
after the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED BELOW.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
Year Term
Principal Occupation of Office Served as a
Name Age and Position Held Will Expire Director Since
---- --- ------------------------ ----------- --------------
<S> <C> <C> <C> <C>
Abraham Rosenthal 49 Chief Executive Officer, 2002 1994
Director
Robert D. Perlmutter 37 Director 2002 1998
James R. Thompson 62 Director 2002 1994
Marvin S. Traub 74 Director 2002 1994
</TABLE>
Page 6
<PAGE>
ABRAHAM ROSENTHAL. Abraham Rosenthal has been the Chief Executive
Officer and a Director of Prime Retail, Inc. since its inception. Mr. Rosenthal
joined PGI in 1988, serving as Vice President, Senior Vice President and,
immediately prior to joining Prime Retail, Inc., as Executive Vice President.
Mr. Rosenthal's responsibilities with Prime Retail, Inc. include strategic
planning, new business development, investor relations, capital markets,
financing, site selection, pre-development activities and building designs. Mr.
Rosenthal has been involved in retail design and development for the past 20
years. Prior to joining PGI, Mr. Rosenthal was Vice President-Design and
Construction of Cordish/Embry and Associates. Mr. Rosenthal received a Bachelor
of Architecture degree from the University of Maryland School of Architecture,
is a registered architect in the State of Maryland and is certified by the
National Council of Architectural Registration Board. Mr. Rosenthal is a full
member of the International Council of Shopping Centers ("ICSC") and the
National Realty Committee and NAREIT. Mr. Rosenthal is on the executive
committee of the Baltimore Museum of Art and chairs the organization's
Development, Marketing and Finance Committee. Mr. Rosenthal is also a member of
the Maryland/Israel Development Center and is on the board and a member of the
executive committee for the Baltimore's Downtown Partnership. Mr. Rosenthal is
also a board member of Sinai Hospital and Bryn Mawr School. Mr. Rosenthal was
the recipient of the 1995 Entrepreneur of the Year Award for Maryland Real
Estate.
ROBERT D. PERLMUTTER. Robert D. Perlmutter, a Director of Prime
Retail, Inc. since the closing of the merger with Horizon Group, Inc., is,
as of April, 1999, a principal of Davis Street Land Company, a real estate
development firm focused on the development and ownership of retail
properties in suburban downtown areas. From 1990 to 1998, Mr. Perlmutter
was President and Chief Executive Officer of Heitman Retail Properties, a
subsidiary of Heitman Properties, Ltd., which as asset manager, was
listed by Shopping Center World as the fourth largest owner of regional mall
shopping centers in the United States. Mr. Perlmutter previously served
on the board of Horizon Group, Inc., which merged with Prime Retail, Inc.
Mr. Perlmutter is a member of the ICSC, the Illinois ICSC Committee and
NAREIT. Mr. Perlmutter received a Bachelor of Science degree from the
University of Colorado in Boulder. Mr. Perlmutter is the son of Norman
Perlmutter.
GOVERNOR JAMES R. THOMPSON. James R. Thompson, a Director of
Prime Retail, Inc. since the Company's initial public offering (the
"Prime IPO"), is the Chairman of the law firm of Winston & Strawn and has
been a partner with the firm since 1991. Prior to joining Winston & Strawn,
Governor Thompson served as the Governor of Illinois from 1977-1991.
Governor Thompson serves on the board of directors of FMC Corporation,
American National Can, Jefferson Smurfit Group plc, Union Pacific Resources
Company, Prime Group Realty Trust, The Metzler Group, Inc. and Hollinger
International, Inc. Governor Thompson received his Juris Doctorate
degree from the Northwestern University Law School.
MARVIN S. TRAUB. Marvin S. Traub, a Director of Prime Retail,
Inc. since the Prime IPO, has been President of MTA since 1992. In
addition, Mr. Traub joined Financo, Inc. in 1994 as Senior Advisor.
Prior to establishing MTA, Mr. Traub was Chairman of Bloomingdales from
1978-1992 and was Vice Chairman of Federated Department Stores from
1988-1992. Mr. Traub was a director and Chairman of the Executive Committee
of The Conran Stores, Inc. The Conran Stores, Inc. filed a petition for
protection under U.S. bankruptcy laws on January 10, 1994. Mr. Traub
received an M.B.A. degree (with distinction) from Harvard Business School
after receiving a B.A. degree (magna cum laude) from Harvard University.
Page 7
<PAGE>
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<CAPTION>
Year Term
Principal Occupation of Office Served as a
Name Age and Position Held Will Expire Director Since
-------------- --- ------------------------------- ----------- --------------
<S> <C> <C> <C> <C>
Michael W. Reschke 43 Chairman of the Board, Director 2000 1994
William H. Carpenter, Jr. 48 President, Chief Operating 2001 1994
Officer, Director
Glenn D. Reschke 48 Executive Vice President- 2000 1997
Development and Acquisitions,
Director
William P. Dickey 56 Director 2000 1998
Terence C. Golden 54 Director 2000 1994
Norman Perlmutter 65 Director 2001 1994
Kenneth A. Randall 71 Director 2001 1994
Sharon Sharp 59 Director 2001 1997
</TABLE>
MICHAEL W. RESCHKE. Michael W. Reschke has been the Chairman of the
board of directors of Prime Retail, Inc. since its inception. Mr. Reschke
founded PGI in 1981 and, since that time, has acted as PGI's Chairman, Chief
Executive Officer, and President. For the last seventeen years, Mr. Reschke has
directed and managed the development, finance, construction, leasing, marketing,
acquisition, renovation, and property management activities of PGI. Mr. Reschke
is Chairman of the board of directors of Brookdale Living Communities, Inc. and
Prime Group Realty Trust and a member of the board of directors of Horizon Group
Properties, Inc. Mr. Reschke received a Juris Doctorate degree (summa cum laude)
from the University of Illinois after having received a B.A. degree (summa cum
laude) in Accounting from Northern Illinois University. Mr. Reschke is licensed
to practice law in the State of Illinois and is a certified public accountant.
Mr. Reschke is a member of the Chairman's Roundtable and the Executive Committee
of the National Realty Committee, as well as a full member of the Urban Land
Institute. Mr. Reschke is the brother of Glenn D. Reschke, an executive officer
and director of Prime Retail, Inc.
WILLIAM H. CARPENTER, JR. William H. Carpenter, Jr. has been
President, Chief Operating Officer and a Director of Prime Retail, Inc.
since its inception. Mr. Carpenter joined PGI in 1989, serving as Senior
Vice President and, immediately prior to joining Prime Retail, Inc., as
Executive Vice President. Mr. Carpenter's responsibilities with Prime
Retail, Inc. include leasing, marketing, operations and management,
development, and construction. Prior to joining PGI, Mr. Carpenter was
President of D.I. Realty, Inc. (a division of Design International) from
1988 to 1989 and in such capacity managed all aspects of retail leasing and
development for D.I. Realty, Inc., including property management,
construction, and merchant coordination. Mr. Carpenter previously was
senior regional leasing director with The Rouse Company and a partner
with Cordish/Embry and Associates in Baltimore, Maryland. In these
positions, Mr. Carpenter directed the development and leasing of a number
of major urban projects in cooperation with city governments. Over the
last 23 years, Mr. Carpenter has been involved in over 57 major urban,
suburban and outlet projects throughout the United States. Mr. Carpenter
attended the University of Baltimore and is a member of the International
Council of Shopping Centers, a member of Developers of Outlet Centers, and
a full member of the Urban Land Institute. Mr. Carpenter sits on the
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<PAGE>
International Counsel of Shopping Centers/Value Retail News Executive Committee
and also sits on the Board for Severn School. Mr. Carpenter was the recipient of
the 1995 Entrepreneur of the Year Award for Maryland Real Estate.
GLENN D. RESCHKE. Glenn D. Reschke is Executive Vice President -
Development and Acquisitions and a Director of Prime Retail, Inc., where he is
responsible for site selection, design and construction for Prime Retail, Inc.'s
new retail projects, as well as the acquisition of existing outlet centers
nationwide. Mr. Reschke joined PGI in 1983 and, since that time, served as Vice
President, Senior Vice President and Executive Vice President of PGI, and was
responsible for PGI's multi-family, senior housing, single family and land
development divisions. Prior to that, Mr. Reschke was the Director of the EPA's
Automotive Emission Testing Laboratory in Ann Arbor, Michigan where he managed
the nation's automotive emission certification and fuel economy testing programs
for the Federal Government. Mr. Reschke received a Masters in Business
Administration from Eastern Michigan University with a specialization in finance
after receiving a Bachelor of Science degree with honors in Chemical Engineering
from Rose Hulman Institute of Technology in Terre Haute, Indiana. Mr. Reschke is
the brother of Michael W. Reschke, Prime Retail, Inc.'s Chairman of the Board.
WILLIAM P. DICKEY. Mr. Dickey is the owner and President of the
Dermot Company, Inc., a California real estate investment and advisory firm.
Prior to forming the Dermot Company, Inc. in October 1991, Mr. Dickey was a
Managing Director at The First Boston Corporation, a New York investment
banking firm (now CS First Boston) from February 1986 to November 1990. Prior
to joining First Boston, Mr. Dickey was a partner with the New York law firm
of Cravath, Swaine & Moore from May 1980 to February 1986. From 1964 to 1970,
Mr. Dickey was an officer in the U.S. Air Force and during that time served
tours in the Philippines and Vietnam as an intelligence officer, and at the
U.S. Air Force Academy as an instructor. Mr. Dickey is a Trustee of the
Retail Property Trust, an institutionally-owned REIT with investments in
regional shopping centers. Mr. Dickey is a Director of Price Enterprises,
Inc., Mezzanine Capital Property Investors, Inc. and Kilroy Realty
Corporation. Mr. Dickey previously served on the board of Horizon Group,
Inc., which merged with Prime Retail, Inc. Mr. Dickey holds a J.D. degree
from Columbia Law School, an M.A. degree in International Affairs from
Georgetown University, and a B.S. degree from the U.S. Air Force Academy.
TERENCE C. GOLDEN. Terence C. Golden, a Director of Prime Retail,
Inc. since the Prime IPO, has been Chief Executive Officer, President and
director of Host Marriott Corporation, Bethesda, Maryland since September
1995 as well as Chairman of the Board of Bailey Realty Corporation (BRC) in
Washington, D.C. since 1991. Prior to forming BRC, Mr. Golden held the
position of Chief Financial Officer of The Oliver Carr Company from 1989 to
1991. From 1985 to 1988, Mr. Golden was appointed by President Reagan and
confirmed by the U.S. Senate to the office of Administrator of General
Services Administration. From 1984 through 1985, Mr. Golden was Assistant
Secretary at the U.S. Department of Treasury. Mr. Golden was one of the
founding partners of Trammell Crow Residential Companies and was its Managing
Partner from 1976 through 1984. Mr. Golden also serves as a director of
Cousins Properties, Inc. and PEPCO. Mr. Golden received an M.B.A. degree
from Harvard Business School (1970), an M.S. degree in Nuclear Engineering
at the Massachusetts Institute of Technology (1967), and a B.S. degree in
Mechanical Engineering from the University of Notre Dame (1966).
NORMAN PERLMUTTER. Since 1966 Mr. Perlmutter has served as Chairman
of the Board and Chief Executive Officer of Heitman Financial Ltd., one of
the largest full service real estate companies and real estate investment
managers for employee benefit plans in the United States. Mr. Perlmutter is
also a director of Chris-Craft Industries, Inc., Heitman/PRA Securities
Advisors, Inc., United Television, Inc. and Horizon Group Properties, Inc.
Mr. Perlmutter previously served on the boards of United Asset
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<PAGE>
Management Corporation, Warner Communications, and Horizon Group, Inc., which
merged with Prime Retail, Inc. He holds a B.S. degree from the University of
Illinois. Mr. Perlmutter is the father of Robert D. Perlmutter.
KENNETH A. RANDALL. Kenneth A. Randall, a Director of Prime Retail,
Inc. since the Prime IPO, was the Chairman of ICL Inc. from 1980 to 1982,
Vice Chairman of Northeast Bancorp, Inc. from 1977 to 1987, the Chairman and
Chief Executive Officer of United Virginia Bankshares Incorporated from
1970 to 1976 and the Chairman of the FDIC from 1965 to 1970. Mr. Randall was
President and Chief Executive Officer of The Conference Board, Inc. from 1976
to 1982. Mr. Randall currently serves on the board of directors of Dominion
Resources, Inc., Dominion Energy, Inc., Lumbermans Mutual Casualty Company,
American Motorist Insurance Company, American Manufacturers Mutual Insurance
Company and Virginia Electric and Power Company. Mr. Randall also serves as
trustee of the principal Oppenheimer mutual funds. Mr. Randall attended Weber
State University and received a B.A. degree and an M.S. degree from Brigham
Young University.
SHARON SHARP. Sharon Sharp, a Director of Prime Retail, Inc. since
November 1997, currently is a director of the Public Gaming Research
Institute ("PGRI"), where she serves as publisher of Public Gaming
International, the leading magazine of the worldwide lottery industry, and
manages their international career placement service specializing in lottery
and gaming personnel. Prior to joining PGRI, Ms. Sharp served as director of
the Illinois and California Lotteries from 1987-1993. Ms. Sharp attended Holy
Cross Central School of Nursing, and received an A.A.S. in Journalism from
Harper College.
INFORMATION REGARDING MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established the Audit Committee, the
Executive Committee, the Compensation Committee, the Executive Compensation and
Stock Incentive Plan Committee and the Independent Directors Committee.
AUDIT COMMITTEE. The functions of the Audit Committee, which consists
of Messrs. Golden and Randall, include making recommendations concerning the
engagement of independent public accountants, reviewing with the independent
accountants the plans and results of the audit engagement, approving
professional services provided by the independent public accountants, reviewing
the independence of the independent public accountants, considering the range of
audit and non-audit fees, and reviewing the adequacy of the Company's internal
accounting controls.
EXECUTIVE COMMITTEE. The Executive Committee, which consists of Messrs.
M. Reschke, Rosenthal and Carpenter, has certain authority to acquire and
dispose of real property and the power to authorize, on behalf of the Board of
Directors, the execution of certain contracts and agreements, including those
related to certain financings by the Company. The Executive Committee meets
monthly (or more frequently if necessary) and all actions by the committee are
reported at the next meeting of the Board of Directors.
COMPENSATION COMMITTEE. The Compensation Committee, which consists
of Messrs. Golden, Randall and Traub and Governor Thompson and Ms. Sharp, has
certain responsibilities in connection with determining the compensation for
the Company's employees.
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<PAGE>
EXECUTIVE COMPENSATION AND STOCK INCENTIVE PLAN COMMITTEE. The
Executive Compensation and Stock Incentive Plan Committee, which consists of
Messrs. Golden and Randall and Ms. Sharp, has responsibility for determining the
compensation of the Company's executive officers and implementing and
administering the Company's Stock Incentive Plans.
INDEPENDENT DIRECTORS COMMITTEE. The Independent Directors Committee,
which consists of Messrs. Dickey, Golden, N. Perlmutter, R. Perlmutter, Randall,
Traub and Governor Thompson and Ms. Sharp, has the responsibility to (i)
consider and approve any proposed action or transaction involving the Company
and PGI; (ii) consider and take such actions and make such approvals and
recommendations as are required to be considered, taken or made by the Company's
independent directors under either the Operating Partnership Agreement or
corporate governance documents relating to the Company, or otherwise; and (iii)
consider and take such actions and make such approvals as are appropriate to
reduce or eliminate any potential or apparent conflict of interest which may
arise in connection with any proposed action or transaction involving the
Company.
During the fiscal year ended December 31, 1998, the Audit Committee
held two meetings, the Compensation Committee held two meetings, the Executive
Compensation and Stock Incentive Plan Committee held two meetings, the
Independent Directors Committee held three meetings and the Board of Directors
held six meetings.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as independent
auditors of the Company, for the year ending December 31, 1999. Ernst & Young
LLP served as independent auditors of the Company for the year ended December
31, 1998. A representative of Ernst & Young LLP will attend the Meeting and will
have an opportunity to make a statement if they desire to do so and, while not
intending to make a statement, will respond to appropriate questions directed to
Ernst & Young LLP.
The appointment of auditors is approved annually by the Board of
Directors and subsequently submitted to the stockholders for ratification. The
decision of the Board of Directors is based on the recommendation of the Audit
Committee. The Audit Committee also reviews and approves proposed nonaudit
services to ensure that they will not impair the independence of the
accountants.
Before making its recommendation to the Board of Directors for
appointment of Ernst & Young LLP, the Audit Committee carefully considered that
firm's qualifications as auditors for the Company. This included a review of its
performance last year, as well as its reputation for integrity and competence in
the fields of accounting and auditing. The Audit Committee has expressed its
satisfaction with Ernst & Young LLP in all of these respects.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999.
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<PAGE>
PROPOSAL NO. 3
APPROVAL OF THE AMENDED AND RESTATED
NONEMPLOYEE DIRECTOR STOCK PLAN
At its 1998 Annual Meeting, the Company's shareholders approved the
Prime Retail, Inc. Nonemployee Director Stock Plan (the "Directors Plan").
The Directors Plan authorizes up to 285,000 Common Shares for grants of
non-qualified stock options. The Board of Directors, upon recommendation of
the Executive Compensation and Stock Incentive Plan Committee, has amended
and restated the Amended Directors Plan to provide for automatic restricted
stock awards and to permit non-qualified stock option awards.
The following summary of the Amended Directors Plan is qualified in
its entirety by reference to the amended and restated plan document, a copy
of which is attached to this Proxy Statement as Appendix I.
ELIGIBILITY. Each Director who is not a current employee of the
Company (a "Nonemployee Director") will participate in the Amended Directors
Plan. Of the three nominees for election as Directors at the Meeting,
Messrs. R. Perlmutter and Traub and Governor Thompson are Nonemployee
Directors.
ADMINISTRATION. The Board of Directors shall administer the Amended
Directors Plan. The Board of Directors has the authority to interpret the
Amended Directors Plan and establish or amend any rules for its
administration. The Board of Directors does not, however, have any discretion
with respect to either eligibility or selection of Nonemployee Directors to
receive restricted stock awards or the number or timing of such grants. The
Board of Directors has discretion with respect to eligibility and selection
of Nonemployee Directors to receive stock option awards and the number of
shares subject to such options and the timing of those grants.
SHARES AVAILABLE UNDER THE AMENDED DIRECTORS PLAN. A maximum of
285,000 Common Shares are reserved for issuance under the Directors Plan. The
Amended Directors Plan does not change that number. The Board of Directors is
authorized to satisfy grants under the Amended Directors Plan with authorized
but unissued Common Shares or Common Shares previously issued and reacquired
by the Company. The Company intends to purchase shares on the open market to
satisfy awards under the Amended Directors Plan, to the extent the Board of
Directors deems such purchases to be in the Company's best interest. If an
Amended Directors Plan award expires, terminates or is forfeited for any
reason the Common Shares associated with it shall again be available for
awards under the Amended Directors Plan. The maximum number of Common Shares
and outstanding awards will be adjusted to reflect stock dividends, stock
splits, reverse stock splits, share combinations, stock rights offerings, or
similar events of or by the Company.
RESTRICTED STOCK GRANTS. The Board of Directors may award Common Shares
that are subject to such restrictions as it deems appropriate, including
restrictions against transfer for a specified period ("Restricted Stock").
Subject to shareholder approval of the Amended Directors Plan, it will provide
for automatic grants of 2,000 shares of Restricted Stock to each Nonemployee
Director who has at least three months of service on the Board of Directors on
the date the Amended Directors Plan is approved (the "Effective Date"). The
Amended Directors Plan also will provide for automatic grants of 1,000 shares of
Restricted Stock to each Nonemployee Director who is added to the Board of
Directors after the Effective Date and an automatic grant of 1,000 shares of
Restricted Stock to each Nonemployee
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<PAGE>
Director who has completed at least three months of service on the Board of
Directors as of each annual meeting date (beginning with the 1999 annual
meeting); provided, however, that the Board of Directors may resolve, in its
sole discretion, that eligible Directors shall receive stock options of a
substantially equivalent value, in lieu of these automatic grants of
Restricted Stock.
Prior to the amendment and restatement, the Directors Plan provided for
automatic grants of stock options for: (i) 10,000 shares to each Nonemployee
Director who has at least three months of service on the Board of Directors on
the date the Amended Directors Plan was approved by shareholders; (ii) 5,000
shares to each Nonemployee Director added to the Board of Directors after the
approval date; and (iii) 5,000 shares to each Nonemployee Director who completes
a year of service on the Board of Directors as of each annual meeting date
(beginning with the 1999 annual meeting). The change from automatic awards of
stock options to automatic awards of restricted stock was made to mirror the
Company's shift in award strategy to restricted stock from stock options for its
senior executive employees. The amount of the automatic awards was reduced by a
multiple of five, pursuant to the recommendation of the Company's compensation
consultant, to reflect the difference in estimated value between stock option
awards and restricted stock awards. If the Amended Directors Plan is adopted the
stock option awards granted under the Directors Plan in 1998 will be cancelled.
The Restricted Stock awards shall be fully vested at all times. The
Board of Directors may impose such other restrictions on the Restricted Stock as
it deems appropriate. Prior to the lapse of restrictions, a Nonemployee Director
who has received an award of Restricted Stock generally has the rights of a
shareholder of the Company, including the right to vote and to receive cash
dividends on the shares of Restricted Stock. Any stock dividend issued with
respect to shares of Restricted Stock shall be treated as additional shares
granted under the Restricted Stock award.
The following table sets forth the number of shares of Restricted Stock
that will be issued in 1999 under the Amended Directors Plan to each Nonemployee
Director, assuming the Company's shareholders approve the Amended Directors
Plan.
<TABLE>
<CAPTION>
Number of Shares
Nonemployee Director Dollar Value(1) of Restricted Stock
- -------------------- --------------- -------------------
<S> <C> <C>
William P. Dickey $ 26,812.50 3,000
Terence C. Golden $ 26,812.50 3,000
Robert D. Perlmutter (2) $ 26,812.50 3,000
Norman Perlmutter $ 26,812.50 3,000
Kenneth A. Randall $ 26,812.50 3,000
James R. Thompson (2) $ 26,812.50 3,000
Marvin S. Traub (2) $ 26,812.50 3,000
Sharon J. Sharp $ 26,812.50 3,000
---------- ------
All Current Nonemployee Directors as a Group $214,500.00 24,000
</TABLE>
(1) Based on the market price of $8.9375 per share, which was the closing
selling price of Common Stock on the NYSE on April 23, 1999.
(2) The Director will only receive these shares of Restricted Stock if he
is reelected to the Board of Directors at the Meeting.
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<PAGE>
STOCK OPTION GRANTS. The Board of Directors may grant options to
purchase Common Shares, which are non-qualified stock option ("Stock Options").
The Board of Directors will determine the exercise price per Common Share for a
Stock Option. A Stock Option awarded under the Amended Directors Plan will be
immediately exercisable.
A Nonemployee Director must pay the exercise price per Common Share
when he or she exercises all or a portion of a Stock Option. The exercise price
may be paid (a) by check or in cash, (b) in whole Common Share, (c) by
simultaneous sales of Common Shares through a broker, or (d) through any
combination of such methods.
A Nonemployee Director may not transfer Stock Options other than
through the laws of descent and distribution or pursuant to a domestic relations
order.
AMENDMENT AND TERMINATION OF THE AMENDED DIRECTORS PLAN. The Board of
Directors may from time to time in its discretion amend or modify the Amended
Directors Plan without the approval of shareholders, provided that such an
amendment or modification does not increase the Company's cost. No amendment
shall become effective without shareholder approval if such approval is required
by law, rule or regulation. No amendment may adversely effect any right of a
Nonemployee Director with respect to any outstanding award without the written
consent of the Nonemployee Director, unless the change is required to comply
with any federal or state statute or regulation.
The Amended Directors Plan shall terminate on March 18, 2008 or at such
earlier time as the Board of Directors may determine. Any termination shall not
adversely affect any outstanding award without the written consent of the
Nonemployee Director.
FEDERAL INCOME TAX CONSEQUENCES. The Nonemployee Director recognizes
ordinary income and the Company is entitled to a corresponding federal income
tax deduction equal to the fair market value of the Common Shares when the
restrictions lapse and the Restricted Stock becomes fully vested. If the
Nonemployee Director makes an election under Section 83(b) of the Code (a
"Section 83(b) Election") within 30 days after receiving the Restricted Stock,
the Nonemployee Director recognizes ordinary income and the Company is entitled
to a corresponding federal income tax deduction equal to the fair market value
(determined without regard to any restrictions) of the Common Shares at that
time. If a Nonemployee Director makes a Section 83(b) Election, he or she will
not recognize any additional income when the restrictions lapse. If the shares
of Restricted Stock are subsequently forfeited, however, the Nonemployee
Director may not deduct the income that was recognized under the Section 83(b)
Election.
A Nonemployee Director will not recognize income when a stock option is
granted and the Company will not be entitled to a deduction at that time. When
the option is exercised, the Nonemployee Director will recognize ordinary income
equal to the difference, if any, between the aggregate exercise price paid and
the fair market value, as of the date the option is exercised, of the Common
Shares received. The Nonemployee Director's tax basis in such shares will equal
the exercise price paid plus the amount recognized by the Nonemployee Director
as ordinary income. The Company will generally be entitled to a federal income
tax deduction in the Company's tax year in which the option is exercised equal
to the ordinary income recognized by the Nonemployee Director as described
above. The Nonemployee Director's holding period when determining whether a
subsequent sale of the Common Shares is eligible for capital gains or losses
begins when the Stock Option is exercised.
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<PAGE>
REQUIRED VOTE. To be adopted, the Amended Directors Plan Proposal
requires the affirmative vote of a majority of the Common Shares present in
person or represented by proxy at the Meeting. If the shareholders do not
approve the amendment and restatement, only stock options may be granted under
the Amended Directors Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
AMENDED DIRECTORS PLAN.
COMPENSATION OF DIRECTORS
Directors who are not employees of, or affiliated with, the Company
will receive a fee for their services as Directors. Such persons will receive
annual compensation of $35,000 plus a fee of $1,000 for attendance in person at
each meeting of the Board of Directors, a fee of $500 for participating by
telephone in each substantial meeting of the Board of Directors or of any
committee of the Board of Directors, a fee of $500 for attending any meeting of
any committee of the Board of Directors, and an annual fee of $1,000 for each
committee on which such member serves. Such persons also will receive
reimbursement of all travel and lodging expenses related to their attendance at
both board and committee meetings.
Pursuant to the Directors Plan, the Company granted options to purchase
an aggregate of 65,000 shares of Common Stock to outside directors of the
Company as follows (with the number of Common Shares to be issued upon exercise
thereof indicated parenthetically): William P. Dickey (5,000), Terence C. Golden
(10,000), Norman Perlmutter (5,000), Robert D. Perlmutter (5,000), Kenneth A.
Randall (10,000), Sharon Sharp (10,000), Governor James R. Thompson (10,000) and
Marvin S. Traub (10,000). Such options were fully vested upon the date of grant
and will terminate upon the earlier to occur of (a) the expiration of ten years
from the date of grant or (b) the expiration of one year from the date of
termination of service of the optionee as a Director of the Company. The
exercise price of such options is $13.09 per share.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
for services in all capacities to the Company for the years ended December 31,
1996, 1997 and 1998 with respect to the Chairman of the Board of Directors, the
Chief Executive Officer of the Company and the four other persons who are the
most highly compensated executive officers of the Company (the "Named
Executives").
Page 15
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- --------------------------------------------
Awards Payouts
-------- -------
Restricted Securities LTIP
Name and Principal Stock Award(s) Underlying Payouts
Position Year Salary Bonus(1) (#) Options (#) ($)
---------------------- ---- ------ -------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Reschke 1998 $259,615 $225,000 41,831 300,000(3) -
Chairman of the Board 1997 150,000 500,000 - 75,000(4) -
1996 150,000 (2) - 50,000(4) -
Abraham Rosenthal 1998 415,384 360,000 0 300,000(3) $ 628,925(6)
Chief Executive Officer 1997 257,420 250,000 - 75,000(5) 1,261,150(6)
1996 257,420 200,833 - 50,000(4) -
William H. Carpenter, Jr. 1998 415,384 360,000 0 300,000(3) 628,925(6)
President, Chief Operating 1997 257,420 250,000 - 75,000(5) 1,261,150(6)
Officer 1996 257,420 200,833 - 50,000(4) -
Glenn D. Reschke 1998 225,961 252,500 15,687 50,000(3) -
Executive Vice President - 1997 175,000 175,000 - 10,000(4) -
Development and Acquisitions 1996 168,269 140,583 - 20,000(4) -
David G. Phillips 1998 225,961 395,300 15,687 170,000(3) -
Executive Vice President - 1997 175,000 175,000 - 10,000(4) -
Operations and Marketing 1996 168,269 140,583 - 20,000(4) -
Robert P. Mulreaney 1998 225,961 302,500 15,687 50,000(3) -
Executive Vice President - 1997 175,000 175,000 - 10,000(4) -
Chief Financial Officer and 1996 168,269 140,583 - 10,000(4) -
Treasurer
</TABLE>
- --------------------
Notes:
(1) Reflects bonus paid for performance in year indicated.
(2) At his request, Mr. M. Reschke was not considered for a
discretionary bonus for the year ended December 31, 1996.
(3) Options granted pursuant to the 1998 Long-Term Stock Incentive Plan.
(4) Options granted pursuant to the 1995 Stock Incentive Plan.
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<PAGE>
(5) Reflects (i) 25,000 options to purchase Common Stock granted pursuant
to the 1995 Stock Incentive Plan and (ii) 50,000 options to purchase
Common Units granted by PGI pursuant to certain indemnification and
option agreements (the "Executive Indemnification and Option
Agreements"). See "Certain Relationships and Related Transactions -
Indemnification and Option Agreements with Messrs. Rosenthal and
Carpenter and the Executive LLCs."
(6) Reflects a special distribution from the Operating Partnership to
certain limited liability companies controlled by Messrs. Rosenthal and
Carpenter (the "Executive LLCs"). See "Report of Executive Compensation
and Stock Incentive Plan Committee - Long-Term Compensation" and
"Certain Relationships and Related Transactions - Indemnification and
Option Agreements with Messrs. Rosenthal and Carpenter and the
Executive LLCs."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
options granted in 1998 to the Named Executives by the Company.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Option Term Based on Grant
Individual Grants Date Stock Price
-------------------------------------------------- -----------------------------
Percent of
Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base
Options(1) In Fiscal Price Expiration
Name Granted(#) Year(2) ($/SH) (3) Date 5%($) 10%($)
-------------- ---------- ---------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Reschke 300,000 17.40% $13.09 6/12/08 $2,546,716 $6,381,986
Abraham Rosenthal 300,000 17.40% 13.09 6/12/08 2,546,716 6,381,986
William H. Carpenter, Jr. 300,000 17.40% 13.09 6/12/08 2,546,716 6,381,986
Glenn D. Reschke 50,000 2.90% 13.09 6/12/08 424,453 1,063,664
David G. Phillips 50,000 2.90% 13.09 6/12/08 424,453 1,063,664
120,000 6.96% 14.19 6/12/08 887,142 2,421,251
Robert P. Mulreaney 50,000 2.90% 13.09 6/12/08 424,453 1,063,664
- --------------------
</TABLE>
Notes:
(1) Except as otherwise noted, the exercise price for the options is
generally payable in cash or, in certain circumstances, by the
surrender, at the fair market value on the date on which the option is
exercised, of Common Shares.
(2) Reflects the percent of total options to purchase Common Shares granted
to employees in the last fiscal year pursuant to the 1998 Long-Term
Stock Incentive Plan and the Nonemployee Director Stock Plan (together,
the "Plans"). A total of 1,724,575 options were granted to employees on
June 12, 1998, June 15, 1998 and December 1, 1998 pursuant to the
Plans.
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<PAGE>
(3) The exercise price for each share is equal to at least one hundred
percent of the Fair Market Value of a share on the date the option
was granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information with respect to the number
of Common Shares underlying Stock Options held by each of the Named Executives
and the value of such officers' exercisable and unexercisable options on
December 31, 1998. None of the Named Executives exercised any Stock Options
during 1998.
<TABLE>
<CAPTION>
Value of
Unexercised
in-the-Money
Number of Options at 1998
Unexercised Options Year-End
Shares at 1998 Year-End (#) ($)(1)
Acquired on Value -------------------- -------------
Exercise Realized (Exercisable/ (Exercisable/
(#) ($) Unexercisable) Unexercisable)
------------ --------- --------------- -------------
<S> <C> <C> <C> <C>
NAME
Michael W. Reschke - - 367,501/207,499 $0.00/$0.00
Abraham Rosenthal - - 317,501/207,499 0.00/0.00
William H. Carpenter, Jr. - - 317,501/207,499 0.00/0.00
Glenn D. Reschke - - 127,560/2,500 0.00/0.00
David G. Phillips - - 147,500/102,500 0.00/0.00
Robert P. Mulreaney - - 70,000/0 0.00/0.00
- --------------------
</TABLE>
Note:
(1) Based on the market price of $9.81 per share, which was the closing
selling price per share of Common Stock on the NYSE on December 31,
1998, less the option exercise price of unexercised, in-the-money
options held by the Named Executives at December 31, 1998.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
The Company has entered into agreements (the "Employment Agreements")
with each of the Named Executives other than Messrs. Mulreaney and G. Reschke.
The agreements with Messrs. M. Reschke, Rosenthal, Carpenter and Phillips
generally provide that such executive officers shall devote substantially all of
their business time to the operation of the Company, except that Mr. M. Reschke
is required to devote only such time as he deems necessary to fulfill his duties
and obligations to the Company as Chairman of the Board of Directors. The
Employment Agreements for each of Mr. M. Reschke and Mr. Phillips provide for
terms expiring on March 22, 1999, which terms are automatically extended for
successive one year periods unless either the Company or the executive officer
provides the other with prior written notice that such term shall not be
extended. The Employment Agreements for Messrs. Rosenthal and Carpenter provide
for a term expiring on the third anniversary of January 1, 1998, which terms are
automatically extended for successive one year periods unless either the Company
or the executive officer provides the other with prior written notice that such
term shall not be extended.
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The Employment Agreements with Messrs. M. Reschke and Phillips provide
that the employees covered thereby are eligible to receive discretionary bonuses
based on the achievement of performance goals established by the Company. The
Employment Agreements with Messrs. Rosenthal and Carpenter provide for annual
performance based bonuses of not more than the executive's base salary
determined by a formula based on the following financial factors: annual growth
in FFO on a fully diluted per share basis, first year return on total
development cost for all new centers and expansions which open during the year,
average sales per square foot, percentage of space leased, and a discretionary
component of not more than 10% of the total bonus paid based on the executive's
participation in the development of new concepts. The Executive Compensation and
Stock Incentive Plan Committee may, in its sole discretion, pay an annual
performance bonus that is greater than that indicated by application of the
formula.
If the Employment Agreements are terminated by the Company "without
cause" or are terminated by the executive after a "change in control" or for
"good reason" (as such terms are defined in the Employment Agreements), the
executive will be entitled to a lump sum payment. With regard to Messrs. M.
Reschke and Phillips, such payment will be an amount equal to the greater of
such executive's annual base salary or 50% of the remaining aggregate base
salary due the executive over the remaining term of his Employment Agreement.
With regard to Messrs. Rosenthal and Carpenter, such amount for termination by
the Company "without cause" or for termination by the executive for "good
reason" will be equal to the executive's annual base salary plus the average
annual performance bonus paid to the executive for the two years preceding the
termination.
The Employment Agreements with Messrs. Rosenthal and Carpenter provide
that if, within twenty-four months following a "change of control" of the
Company, the Company terminates the executive's employment "without cause" or
the executive terminates his employment with "good reason," such executive will
be entitled to receive any bonuses accrued but undistributed, other vested
benefits through the effective date of the termination and health and life
insurance benefits for a period of two years, plus a termination distribution in
the amount of $1.6 million. Additionally, if the Employment Agreements are so
terminated, certain restrictions on the transfer of stock held by Messrs.
Rosenthal and Carpenter (or obtained by such persons upon exercise of Common
Units) may terminate, and any stock awards under the Company's 1998 Long-Term
Stock Incentive Plan will be vested. Finally, if the Employment Agreements are
terminated, Messrs. Rosenthal and Carpenter will be fully vested in any amount
accrued on their behalf under any qualified or nonqualified retirement plans of
the Company. With regard to Messrs. Rosenthal and Carpenter, the Employment
Agreements contain certain non-compete provisions restricting the executives
from developing, acquiring or operating retail properties similar to those
properties developed or operated by the Company for a period of up to two years
following termination of employment, which period may be limited to four
quarters by either party at any time prior to 30 days before the end of the
fourth quarter. The Employment Agreements provide that if the Company terminates
the executive's employment without cause or the executive terminates his
employment with good reason then, so long as the executive is in compliance with
these non-compete provisions, the Company will pay the executive an amount equal
to $66,666.66 per calendar month for a period of 2 years, beginning with the
first calendar month after termination of the executive's employment; provided
that, either the Company or the executive may elect to limit the non-compete
period, and the $66,666.66 monthly payments, to one year.
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EXECUTIVE COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation and Stock Incentive Plan Committee of the
Board of Directors, which is required to have a majority of outside Directors
who are neither employees nor officers of the Company is charged with
determining compensation for the Company's executive officers. Messrs. Golden
and Randall and Ms. Sharp currently serve on the Executive Compensation and
Stock Incentive Plan Committee.
No executive officer of the Company served as a director or member of
(i) the compensation committee of another entity which has an executive officer
who is a Director of the Company or member of the Company's Executive
Compensation and Stock Incentive Plan Committee, (ii) the Board of Directors of
another entity in which one of the executive officers of such entity served on
the Company's Executive Compensation and Stock Incentive Plan Committee, or
(iii) the compensation committee of any other entity in which one of the
executive officers of such entity served as a member of the Company's Board of
Directors, during the year ended December 31, 1998.
REPORT OF EXECUTIVE COMPENSATION
AND STOCK INCENTIVE PLAN COMMITTEE
RESPONSIBILITIES OF THE COMMITTEE
The Executive Compensation and Stock Incentive Plan Committee
consists of three independent, non-employee directors: Messrs. Randall and
Golden and Ms. Sharp. It is the Executive Compensation and Stock Incentive
Plan Committee's responsibility to:
- - Recommend and report to the Board of Directors concerning matters of
compensation relating to the Company's senior executive officers,
including the Named Executives;
- - Administer the Company's executive incentive plans; and
- - Monitor the performance and compensation of the Company's senior
executive officers.
The Executive Compensation and Stock Incentive Plan Committee has
retained the services of a nationally recognized compensation and benefits
consulting firm (the "Consultant") to assist it in performing these duties, and
to obtain access to an extensive database of competitive market practices.
COMPANY PERFORMANCE
In the Executive Compensation and Stock Incentive Plan Committee's
view, the Company's senior management has contributed significantly to the
Company's growth in recent years, measured in terms of portfolio size, FFO, and
FFO per share on a diluted basis. The Company's senior management also has
contributed significantly to the Company's successful efforts to strengthen its
financial condition. Since the completion of the Prime IPO, the Company's outlet
center portfolio has grown from 9 centers with approximately 2.2 million square
feet of GLA to 50 centers with approximately 14.3 million square feet of GLA as
of December 31, 1998. During 1998, the Company's portfolio of outlet center
properties increased in size by 98.8%, or approximately 7.1 million square feet
of GLA. The growth in 1998 reflects the opening of 2 new outlet centers and the
expansion of 9 existing centers and the consummation of the merger with Horizon,
through which the Company acquired 22 of Horizon's best performing centers and
established itself as the largest owner and operator of outlet centers in the
United States. For the year ended December 31, 1998, the Company's FFO before
allocations to
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preferred stockholders and minority interests was $42.3 million, or 90.6%
higher than in 1997. In addition, and more importantly, the Company's FFO per
share increased 17% to $1.41 per share on a diluted basis. Operating
statistics of the Company also improved. Annual portfolio sales were up 8% to
$255 per square foot, year-end occupancy was up 2% to 96%, and average net
rent was up 3% to $14.66 per square foot.
In addition, since June 1996 the members of senior management have
played key roles in structuring and implementing transactions designed to
strengthen the Company's financial condition. As a result of these transactions,
the Company has substantially increased its level of common equity while
reducing its exposure to refinancing risk. In this regard, the Executive
Compensation and Stock Incentive Plan Committee notes that the number of
publicly traded Common Stock increased from 2,875,000 on December 31, 1995 to
42,736,742 on December 31, 1998, representing an increase in the public market
value of outstanding Common Stock (based on closing prices as of such dates)
from $34.1 million to $419.4 million.
THE STRUCTURE AND BASIS OF THE COMPANY'S COMPENSATION PROGRAM
The Company's compensation programs are based on the following guiding
principles:
- - Competitiveness - Offering competitive levels of total compensation,
commensurate with performance, to attract critical executive talent.
- - Pay for Performance - Fostering a culture that motivates and rewards
high-performing executives and emphasizes incentive based compensation.
- - Retention - Retaining exceptional executive talent and promoting
management stability for the long-term benefit of the Company and its
shareholders.
- - Shareholder Interests - Maintaining a compensation program that rewards
the achievement of strategic objectives that enhance shareholder value.
During 1998, the Consultant found that senior executives at most REITs
with the same asset class focus as the Company (i.e., retail) and REITs with a
similar market capitalization are providing stock awards at greater levels than
those received by the Company's senior executive officers, including the
Chairman of the Board, the Chief Executive Officer, and the President and Chief
Operating Officer of the Company.
The Company's executive compensation programs consist of the following
components:
BASE SALARY
The Company has entered into Employment Agreements with Mr. M. Reschke,
the Chairman of the Board of the Company, Mr. Rosenthal, the Chief Executive
Officer of the Company, Mr. Carpenter, the President and Chief Operating Officer
of the Company, and certain other senior executives. Pursuant to such
agreements, the base salaries of Messrs. M. Reschke, Rosenthal and Carpenter for
the period from January 1, 1998 to December 31, 1998 were $250,000, $400,000 and
$400,000, respectively. See "Compensation of Executive Officers -- Employment
Agreements and Change of Control Agreements." Pursuant to the Employment
Agreements, the Executive Compensation and Stock Incentive Plan Committee may
increase a senior executive officer's annual base salary based on achievement of
individual performance goals as well as other factors. Based on its observations
of industry practice, the Executive Compensation and Stock Incentive Plan
Committee decided to increase the base salaries for the senior management team
by five percent for 1999.
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ANNUAL PERFORMANCE BONUS
Executive officers are eligible to receive annual performance bonuses.
Pursuant to the Employment Agreements with Messrs. Rosenthal and Carpenter, 90%
of their annual performance bonus is determined by a formula tied to the
achievement of certain financial and operating objectives and the remaining 10%
is determined at the discretion of the Executive Compensation and Stock
Incentive Plan Committee based on such executive's participation in the
development of new concepts. See "Compensation of Executive Officers --
Employment Agreements and Change of Control Agreements." The annual performance
bonus for other senior officers, including Mr. M. Reschke, is determined by the
Executive Compensation and Stock Incentive Plan Committee based on a variety of
criteria related to individual and company performance.
The potential annual bonus for Mr. Rosenthal and Mr. Carpenter is
$400,000 each. Under a strict application of the Company's bonus formula, Mr.
Rosenthal and Mr. Carpenter would be entitled to an amount equal to 80% of
potential bonus, or $320,000 each. The Executive Compensation and Stock
Incentive Plan Committee believes that the criteria for development return in
the bonus calculation does not accurately capture the Company's performance.
Thus, the Executive Compensation and Stock Incentive Plan Committee decided to
disregard this criteria. Ten percent of the bonus calculation is based on this
criteria. Based on the Company's performance, and Mr. Rosenthal's and Mr.
Carpenter's accomplishments during 1998, the Executive Compensation and Stock
Incentive Plan Committee unanimously approved bonuses for Mr. Rosenthal and Mr.
Carpenter at 90% of total potential bonus, or $360,000 each for the period from
January 1, 1998 to December 31, 1998. In addition, based on the Company's
performance, and senior management's accomplishments during 1998, the Executive
Compensation and Stock Incentive Plan Committee unanimously approved year-end
bonuses for Mr. M. Reschke and other members of senior management equal to 90%
of their respective base salaries for 1998. Mr. M. Reschke received a year-end
bonus of $225,000. The Executive Compensation and Stock Incentive Plan Committee
also decided to revise the development return objective so it will more
accurately reflect the Company's performance in the future.
STOCK INCENTIVE PLANS
The Consultant has advised the Executive Compensation and Stock
Incentive Plan Committee that the typical REIT Chief Executive Officer and
President have been awarded significantly greater equity interests than the
Company has awarded to its Chief Executive Officer and President. To provide
greater equity interests to the Company's Chief Executive Officer, President and
other senior executives, the Executive Compensation and Stock Incentive Plan
Committee has adopted the Prime Retail, Inc. 1999 Long-Term Incentive Program
(the "Program") under the Prime Retail, Inc. 1998 Long-Term Stock Incentive Plan
(the "1998 Stock Incentive Plan"), which was approved by the shareholders last
year.
Under the Program, the Executive Compensation and Stock Incentive Plan
Committee will award shares of restricted stock to senior executive officers and
other selected key employees based on the Company's total shareholder return
(price appreciation and dividends) during a year in relation to objective target
levels established by the Executive Compensation and Stock Incentive Plan
Committee, and in relation to the total shareholder return for the Company's
peer group of companies. The Program also gives the Executive Compensation and
Stock Incentive Plan Committee the discretion to award restricted stock to
eligible employees irrespective of whether the Company met the total shareholder
return targets.
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On the date the restricted stock is awarded, the executive will vest in
twenty-five percent (25%) of the shares subject to the award. The remaining
shares under the restricted stock award will vest at a rate of twenty-five
percent (25%) per year as long as the executive remains employed by the Company.
An executive will have full dividend and voting rights with respect to the
shares of restricted stock awarded to him, regardless of whether or not he is
vested in those shares. Upon a change in control of the Company, an executive
will become vested in all outstanding restricted stock awards. In addition, the
executive shall receive a pro rata restricted stock award for the year in which
the change in control occurs based on the Company's performance during that year
before the change in control as determined by the Executive Compensation and
Stock Incentive Plan Committee, in its sole discretion.
Because the Company did not achieve the threshold levels of total
shareholder return under the Program for 1998, no restricted stock awards
were due. However, the Executive Compensation and Stock Incentive Plan
Committee exercised its discretion to award shares of restricted stock to Mr.
M. Reschke and the Executive Vice Presidents and Senior Vice Presidents
covered by the Program at one-half of the targeted award levels, based on the
Company's operating performance in 1998, the strategic objectives achieved
through the merger with Horizon and the fact that one of the Program's
primary goals is to increase the equity ownership opportunities of the
Company's senior executives. The Executive Compensation and Stock Incentive
Plan Committee did not award restricted stock to Messrs. Rosenthal and
Carpenter. This discretionary award resulted in an award to Mr. M. Reschke of
41,831 shares of restricted stock.
The Executive Compensation and Stock Incentive Plan Committee has
decided to cancel the stock options awarded on March 18, 1994 to Messrs. M.
Reschke, Rosenthal, Carpenter and selected other senior executives. Each
executive has consented to the cancellation of his stock option.
LONG-TERM COMPENSATION
In connection with the Prime IPO, the Executive LLCs borrowed money
from the Company to purchase Common Units, and executed full recourse
promissory notes (the "Notes"). See "Certain Relationships and Transactions
- -- Loans to Messrs. Rosenthal and Carpenter." The Executive LLCs repaid
approximately one-half of the total amount of the Notes in 1998. Based on
what the Executive Compensation and Stock Incentive Plan Committee believes
to be superior performance by the senior executive officers during 1998, the
Executive Compensation and Stock Incentive Plan Committee decided to make a
special distribution to the Executive LLCs in 1999, in the amount of
$600,000, subject to the condition that the Executive LLCs immediately apply
such distribution to repay their outstanding obligations under the Notes.
The Executive Compensation and Stock Incentive Plan Committee also
authorized the Company to enter into Special Distribution and Allocation
Agreements with the Executive LLCs that will entitle the Executive LLCs to a
cash distribution from the Company on or about March 31, 2000, equal to, and
to be applied in full against their outstanding obligations under the Notes,
provided that the Company achieves certain operating and financial
performance objectives to be established by the Executive Compensation and
Stock Incentive Plan Committee. In this manner, the compensation of Messrs.
Rosenthal and Carpenter will be linked, in part, to the Company's achievement
of certain long-term objectives.
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POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
One of the factors the Executive Compensation and Stock Incentive Plan
Committee considers when developing compensation programs is the anticipated tax
treatment to the Company and to the executives of various payments and benefits.
Generally, the Executive Compensation and Stock Incentive Plan Committee intends
to comply with Section 162(m) of the Internal Revenue Code. Section 162(m)
limits the ability of a publicly-held corporation such as the Company to deduct
compensation in excess of $1 million paid to each named executive officer
reported in the Summary Compensation Table, other than performance-based
compensation. The Executive Compensation and Stock Incentive Plan Committee may,
however, determine that it is necessary to exceed the limit on deductibility
under Section 162(m) to insure executive officers are compensated in a manner
consistent with the Company's best interests and those of its shareholders.
Executive Compensation and Stock Incentive Plan Committee
Kenneth A. Randall
Terence C. Golden
Sharon J. Sharp
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<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the Company's performance to
an equity outlet center index consisting of Tanger Factory Outlet Centers, Inc.,
Chelsea GCA Realty, Inc. and the Company (the "Center Index"). The Center Index
has been modified for the period January 1, 1998 to December 31, 1998 to remove
Horizon and FAC Realty Trust, Inc. because (i) pursuant to the Merger Agreement,
Horizon merged with the Company on June 15, 1998 and (ii) FAC Realty Trust, Inc.
(presently named Konover Property Trust) is now classified as an equity strip
center. Share price performance for the period January 1, 1998 through December
31, 1998 and historical share price information are not necessarily indicative
of future results. All stock price performance assumes an initial investment of
$100 at the beginning of the period and assumes the reinvestment of any
dividends.
<TABLE>
<CAPTION>
EQUITY OUTLET
DATE PRT S & P 500 CENTER INDEX
---- --- --------- ------------
<S> <C> <C> <C>
Mar-94 100.00 100.00 100.00
Dec-94 72.08 105.33 88.07
Dec-95 67.47 144.75 85.60
Dec-96 78.44 177.98 89.14
Dec-97 97.04 237.37 89.25
Dec-98 79.24 305.21 79.02
</TABLE>
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<PAGE>
OTHER INFORMATION
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING AGREEMENTS WITH AFFILIATES OF MR. TRAUB. The Company has
entered into a consulting agreement with MTA, an entity owned and controlled by
Mr. Traub. The consulting agreement provides that for so long as Mr. Traub
remains a Director of the Company, MTA will provide consulting and advisory
services in connection with the Company's merchant relations and MTA will
receive a monthly fee of $8,333 for such services.
The Company entered into a consulting agreement with Financo, Inc.
("Financo"), an affiliate of Mr. Traub, pursuant to which Financo advised and
assisted the Company in developing certain discount retailing concepts (the
"Concepts"). In connection with the agreement with Financo, during 1997 the
Company paid to Financo a retainer of $50,000. Pursuant to the agreement, during
1998 Financo received a fee of $200,000 in connection with the formation of a
furniture retailer in which the Company owns a minority interest that will
operate stores in certain of the Company's outlet centers. The agreement between
Financo and the Company terminated upon the formation of the furniture retailer.
LOANS TO MESSRS. ROSENTHAL AND CARPENTER. In connection with the IPO,
the Operating Partnership made recourse loans of $2.375 million for the benefit
of each of Messrs. Rosenthal and Carpenter. Messrs. Rosenthal and Carpenter used
such loan proceeds to acquire 125,000 Common Units at a price of $19.00 per
unit, reflecting the IPO price per share of Common Stock. Each of Messrs.
Rosenthal and Carpenter incurred such loans and made such purchases through the
Executive LLC that he controls and which is the borrower under each such loan.
Each of the loans is secured by a pledge of 125,000 Common Units acquired with
the proceeds thereof (the "Pledged Common Units") and is guaranteed by Messrs.
Rosenthal and Carpenter, respectively. On January 1, 1996, the Company and
Messrs. Rosenthal and Carpenter, respectively, modified the loans to add accrued
and unpaid interest of $187,500 to the principal amount thereof and to amend the
interest rate applicable to the loan from 6.55% per annum to the lesser of (i)
the amount of the distributions paid by the Operating Partnership with respect
to such Pledged Common Units or (ii) 6.55% per annum. Each loan matures on the
earlier to occur of (i) March 22, 2004 or (ii) the first anniversary of the
termination of the individual's employment with the Company for any reason. The
Executive LLCs holding the Pledged Common Units are subject to the same
limitations on transfer and exchange applicable to Messrs. Rosenthal and
Carpenter personally. As of March 31, 1999, each of these recourse loans had an
outstanding principal balance of $593,750. The reduction in the balance of these
recourse loans is attributed to incentive bonus payments from the Company in an
aggregate of $1,261,150 in 1998 and $628,925 in 1999 paid to the Executive LLCs.
Upon receipt of such incentive bonus payments, the Executive LLCs each
immediately applied the full amount of such payments to repay, in part, their
obligations under the recourse loans.
INDEMNIFICATION AND OPTION AGREEMENTS WITH MESSRS. ROSENTHAL AND
CARPENTER AND THE EXECUTIVE LLCS. On January 1, 1996, PGI entered into the
Executive Indemnification and Option Agreements with Messrs. Rosenthal and
Carpenter and the Executive LLCs. Pursuant to these agreements, subject to
Messrs. Rosenthal and Carpenter's continued employment by the Company and
certain other conditions, PGI has agreed to indemnify Messrs. Rosenthal and
Carpenter and the Executive LLCs against 50% of any Loss (as hereinafter
defined). "Loss" means an amount equal to the Note Balance less the sum of (i)
the value of the Pledged Common Units (which shall be deemed to equal the market
value of an identical number of Common Stock on the date at which the Executive
LLC
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must repay the Note Balance, and (ii) any distributions paid in respect of the
Pledged Common Units (other than distributions used to pay interest on the Note
Balance), including any special distributions received by the Executive LLCs
pursuant to the Special Distribution Agreements.
PGI also agreed, subject to Messrs. Rosenthal and Carpenter's continued
employment by the Company, to grant to each of Messrs. Rosenthal and Carpenter
options to purchase (i) up to 50,000 Common Units at $13.00 per Common Unit upon
the first date on which the regular cash distribution for each of four
successive calendar quarters of the Operating Partnership distributable with
respect to Common Units is equal to or greater than the regular quarterly
(calendar) dividend on a per share basis for the outstanding Common Stock for
the same calendar quarters, and (ii) up to 50,000 Common Units at $13.00 per
Common Unit upon the first date on which the regular quarterly (calendar)
dividend per share of Series B Preferred Stock exceeds $.53125 based on the
ability of such class of stock to participate in dividends declared and paid in
respect of the Common Stock. Any options so granted will expire on December 31,
2000. On August 15, 1997, PGI granted each of Messrs. Rosenthal and Carpenter
50,000 options to purchase Common Units as a result of the satisfaction of the
conditions set forth in (i) of this paragraph.
OBLIGATIONS WITH RESPECT TO HORIZON GROUP PROPERTIES, INC. ("HGP")
CREDIT FACILITIES. As of December 31, 1998, the Company is a guarantor or
otherwise obligated with respect to an aggregate of approximately $39.5 million
of the indebtedness of HGP and its affiliates. HGP is a publicly traded company
which was formed in connection with the Company's merger with Horizon in June
1998. Mr. M. Reschke and Mr. N. Perlmutter, Directors of the Company, are
members of the board of directors of HGP. As of December 31, 1998, the
components of such indebtedness included (i) a secured loan with an outstanding
balance of $11.793 million which bears interest at a rate of prime and matures
in April 1999; (ii) a secured loan with an outstanding balance of $10.731
million which bears interest at a rate of 10.25% and matures in June 2018; (iii)
a secured loan with an outstanding balance of $2.645 million which bears
interest at a rate of LIBOR plus 2.50% and matures in December 2002; (iv) a
secured loan with an outstanding balance of $0.31 million which bears interest
at a rate of prime and matures in December 2000; and (v) an unsecured revolving
credit facility with an outstanding balance of $4.0 million which bears a rate
of interest of prime and matures in April 1999. In addition, such guaranteed
indebtedness includes a guarantee by the Operating Partnership of $10.0 million
of obligations under HGP's $108.205 million secured credit facility which bears
a rate of interest of LIBOR plus 1.90 % and matures in July 2001. In the event
HGP is unable to make debt service payments under such facility, the Operating
Partnership may be required by the lenders to make payments under such
guarantee.
OBLIGATIONS WITH RESPECT TO HGP'S BELLPORT OUTLET CENTER. On February
21, 1999, the Operating Partnership began management and operation of the
Bellport Outlet Center located in Patchogue, New York, which is owned and was
previously operated by HGP. Pursuant to the terms of the management agreement,
the Operating Partnership is entitled to payments based on 4% of gross revenues.
OTHER TRANSACTIONS. Governor James R. Thompson, a Director of the
Company, is Chairman of the law firm of Winston & Strawn, which has provided,
and continues to provide, legal services to the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of the
ownership and changes in the ownership with the Commission and the NYSE.
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<PAGE>
Officers, directors and beneficial owners of more than 10% of the outstanding
shares of Common Stock are required by Commission regulation to furnish the
Company with copies of all such forms which they file.
Based solely on the Company's review of the copies of such forms
received by it, and/or written representations from certain reporting persons,
the Company believes that, during the year ended December 31, 1998, its
directors, executive officers and beneficial owners of more than 10% of the
outstanding shares of Common Stock have complied with all filing requirements
applicable to them except for the following: (i) Robert P. Mulreaney, an
Executive Vice President of the Company, did not timely report his June 15, 1998
conversion of shares of common stock of Horizon into 179 shares of Common Stock
and his June 16, 1998 purchase of 2,050 Common Shares Stock and (ii) Anastasia
T. Harris, a Senior Vice President of the Company, did not timely report her May
19, 1998, June 15, 1998 and August 19, 1998 purchases of 41, 75 and 50 shares of
Common Stock, respectively.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any stockholder who wishes to submit a proposal to be presented at the
Company's 2000 Annual Meeting of Stockholders must forward such proposal to the
Secretary of the Company, 100 East Pratt Street, 19th Floor, Baltimore, Maryland
21202, on or prior to December 31, 1999 to be eligible for inclusion in the
Company's Proxy Statement and form of proxy to be used in connection with such
Meeting.
The Company's By-Laws provide that no business may be brought before an
annual meeting unless specified in the notice of meeting, brought before the
meeting by or at the direction of the Board of Directors, or otherwise brought
by a stockholder who has delivered notice to the Company (containing certain
information specified in the By-Laws) not less than 60 or more than 90 days
before the anniversary date of the immediately preceding annual meeting of
stockholders provided that if the annual meeting of stockholders is called for a
date that is not within 30 days before or after such anniversary date, notice
must be delivered not later than 10 days following the date on which notice of
the date of the annual meeting was announced or public disclosure of the date of
the annual meeting was made, whichever is earlier. A copy of the full text of
these By-Law provisions may be obtained by writing to the Secretary of the
Company at the address indicated above.
OTHER BUSINESS
The Board of Directors knows of no business that will be presented for
consideration at the Meeting other than the matters described in this Proxy
Statement. If any other matter should be presented at the Meeting for action,
the persons named in the accompanying proxy card will vote the proxy in their
own discretion.
/s/ C. Alan Schroeder
C. Alan Schroeder
SECRETARY
Dated: April 28, 1999
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<PAGE>
APPENDIX I
PRIME RETAIL, INC. NONEMPLOYEE DIRECTOR STOCK PLAN
(As Amended and Restated Effective February 1, 1999)
SECTION 1. PURPOSE OF PLAN
This Prime Retail, Inc. Nonemployee Director Stock Plan (the "Plan") is
an amendment and restatement of the Prime Retail, Inc. Nonemployee Director
Stock Option Plan originally established by, and approved by the shareholders
of, Prime Retail, Inc. (the "Company") in 1998. The purpose of the Plan is to
provide a means by which the Company may attract and retain directors with
outstanding qualifications, by affording those individuals with incentives to
exert maximum efforts for the success of the Company through opportunities to
participate in the growth, development and financial success of the Company.
SECTION 2. DEFINITIONS
Wherever the following capitalized terms are used in the Plan, they
shall have the following respective meanings:
2.1 "ADMINISTRATOR" means the Board or any committee the Board
designates.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended.
2.4 "COMMON STOCK" means the Common Stock of the Company, par value
$0.01 per share.
2.5 "COMPANY" means Prime Retail, Inc., a Maryland corporation, or any
successor thereto.
2.6 "DATE OF GRANT" means the date as of which an Option has been
granted pursuant to the Plan.
2.7 "DIRECTOR" means a member of the Board.
2.8 "ELIGIBLE DIRECTOR" means a Director who is not an employee of the
Company or any of its subsidiaries or affiliated corporations or
partnerships.
2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.10 "FAIR MARKET VALUE" means the per share value of the Common Stock
as of a given date, determined as the average of the highest and lowest
quoted selling prices for Common Stock on the relevant date, or, if no
sales occurred on such date, the weighted average of the means between
the highest and lowest quoted selling prices on the nearest day before
and the nearest day after the relevant date; provided, however, that
notwithstanding the foregoing, the Administrator may determine "Fair
Market Value" in its discretion.
2.11 "OPTION" means any option granted under this Plan.
Appendix I - Page 1
<PAGE>
2.12 "PARTICIPANT" means an Eligible Director to whom a Stock Award is
made or an Option granted under this Plan.
2.13 "PLAN" means the Prime Retail, Inc. Nonemployee Director Stock
Plan, as it may be amended from time to time.
2.14 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.15 "SEVERANCE DATE" means the date the individual ceases to be a
Director.
2.16 "SHARES" means the shares of the Company's Common Stock.
2.17 "STOCK AWARD" means an award of Shares pursuant to Section 3.1
of the Plan.
2.18 "STOCK AWARD AGREEMENT" means the agreement reflecting the terms
and conditions of a Stock Award pursuant to Section 6.1.
2.19 "STOCK OPTION AGREEMENT" means the agreement reflecting the terms
and conditions of an Option pursuant to Section 6.1.
SECTION 3. SHARE SUBJECT TO PLAN
3.1 SHARES SUBJECT TO PLAN. The aggregate number of Shares that may be
awarded as Stock Awards under Section 4 of the Plan, or issued upon
exercise of Options granted under Section 5 of the Plan, shall not
exceed 285,000.
3.2 CANCELED STOCK AWARD. If any Stock Award is canceled, that number
of Shares shall again be available for Stock Awards under this Plan,
subject to the limitations of Section 3.1.
3.3 UNEXERCISED OPTIONS. If any Option expires or is canceled without
having been fully exercised, a new Option or Options for the number of
Shares that would have been issued upon exercise of the unexercised
portion of such Option may be granted under this Plan, subject to the
limitations of Section 3.1.
SECTION 4. STOCK AWARDS
4.1 ELIGIBILITY. Stock Awards may only be made to Eligible Directors.
4.2 STOCK AWARDS. Subject to the terms and provisions of the Plan, the
Board may, at any time and from time to time, make Stock Awards to
Participants in such number, upon such terms, and at such times as the
Board determines in its sole discretion. Additionally, the following
award shall be automatic under the Plan:
(a) Each individual who has been serving as an Eligible
Director for at least three months on the date the Plan is
approved by the Company's shareholders shall receive a Stock
Award of 2,000 Shares.
Appendix I - Page 2
<PAGE>
(b) Each individual who first becomes an Eligible Director on
or after the date the Plan is approved by the Company's
shareholders shall receive a Stock Award as of such date of
1,000 Shares.
(c) Subject to the limitations of Section 3.1, each Eligible
Director who has completed at least three months of service on
the Board on the date of each annual meeting of the Company's
shareholders, commencing with the 1999 meeting, and who
continues to serve as a member of the Board immediately
following the applicable meeting shall automatically receive a
Stock Award as of the date of such meeting of 1,000 Shares.
Notwithstanding the provisions of paragraphs (b) and (c) above, the
Board may resolve, in its sole discretion, that Eligible Directors
shall receive Options of a substantially equivalent value, in
accordance with Section 5 below, in lieu of the automatic Stock Awards
provided for in paragraphs (b) and (c) above.
4.3 VESTING OF STOCK AWARDS. Stock Awards under the Plan shall be
fully vested at all times.
4.4 OTHER RESTRICTIONS. The Administrator may impose such other
conditions and/or restrictions on any Stock Award pursuant to the Plan
as it deems advisable including, without limitation, restrictions based
upon the achievement of specific performance objectives (Company-wide,
business unit, and/or individual), time-based restrictions on vesting
following the attainment of the performance objectives, and/or
restrictions under applicable federal or state securities laws. The
Company shall retain the certificates representing Shares in the
Company's possession until such time as all conditions and/or
restrictions applicable to such shares have been satisfied.
4.5 VOTING RIGHTS. Participants holding Shares pursuant to a Stock
Award hereunder may exercise full voting rights with respect to those
Shares.
4.6 DIVIDENDS AND OTHER DISTRIBUTIONS. Participants holding Shares
pursuant to a Stock Award hereunder shall be credited with regular cash
dividends or dividend equivalents paid with respect to the shares.
SECTION 5. GRANTING OF OPTIONS
5.1 ELIGIBILITY. Options may only be granted to Eligible Directors.
Options granted under the Plan shall be non-qualified stock options for
purposes of the Code.
5.2 GRANTING OF OPTIONS. Subject to the terms and provisions of the
Plan, the Board may grant Options to Eligible Directors in such number,
upon such terms, and at such times as the Board determines in its sole
discretion.
5.3 VESTING OF OPTIONS. Options granted under the Plan shall be fully
vested upon the Date of Grant.
5.4 OPTION EXERCISE PRICE. The Board shall specify the exercise price
per share for an Option granted under the Plan in the applicable Stock
Option Agreement.
Appendix I - Page 3
<PAGE>
5.5 EXERCISE PERIODS. Except as otherwise provided in the Plan or
applicable Stock Option Agreement, each Option shall be exercisable, in
whole or in part, at any time on or after the Date of Grant and prior
to its expiration. No Option may be exercised to any extent by anyone
after the first to occur of the following events:
(a) the expiration of ten years from the Date of Grant; or
(b) the expiration of one year from the Participant's
Severance Date unless the Participant dies within said
one-year period; or
(c) the expiration of one year from the date of the
Participant's death.
5.6 PERSON ELIGIBLE TO EXERCISE OPTIONS. Except as provided in Section
6.7, during the lifetime of the Participant, only such Participant may
exercise an Option (or any portion thereof) granted to such
Participant. After the death of the Participant, any exercisable
portion of such an Option may be exercised by the personal
representative of such Participant or by any person empowered to do so
under the deceased Participant's will or under the then applicable laws
of descent and distribution.
5.7 PARTIAL EXERCISE OF OPTIONS. At any time and from time to time
prior to the time when any Option becomes unexercisable under the Plan
or applicable Stock Option Agreement, such Option or portion thereof
may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the
Administrator may, by the terms of the Stock Option Agreement, require
any partial exercise to be with respect to a specified minimum number
of shares.
5.8 MANNER OF EXERCISE. An Option, or any portion thereof, may be
exercised solely by delivery to the Company of all of the following
prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) notice in writing signed by the Participant or other
person then entitled to exercise such Option or portion,
stating that such Option or portion is exercised, such notice
complying with all applicable rules established by the
Administrator; and
(b) (i) full payment (in cash or by check) for the
shares with respect to which such Option or portion is
thereby exercised; or
(ii) if permitted under the terms of an Participant's
Stock Option Agreement or with the consent of the
Administrator, Shares owned by the Participant duly endorsed
for transfer to the Company, with a Fair Market Value on the
date of Option exercise equal to the aggregate Option price of
the shares with respect to which such Option or portion is
thereby exercised; or
(iii) with the consent of the Administrator, a full
recourse promissory note bearing interest (at least such rate
as shall then preclude the imputation of interest under the
Code or any successor provision) and payable upon such terms
as may be prescribed by the Administrator. The Administrator
may also prescribe the form of such note and
Appendix I - Page 4
<PAGE>
the security to be given for such note. No Option may,
however, be exercised by delivery of a promissory note or by a
loan from the Company when or where such loan or other
extension of credit is prohibited by law; or
(iv) if permitted in the Participant's Option
Agreement, through a special sale and remittance procedure
pursuant to which the Participant concurrently provides
irrevocable written instructions to a Company-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover
the aggregate exercise price payable for the purchased shares
plus all applicable federal, state and local income and
employment taxes required to be withheld by the Company by
reason of such exercise, and the Company to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
(v) with the consent of the Administrator, any
combination of the consideration provided in the foregoing
subsections (i) through (iv); and
(c) such representations and documents as the Administrator,
in its absolute discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the
Securities Act and any other federal or state securities laws
or regulations, including the representation that the Shares
are being acquired for investment and not resale. The
Administrator may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends
on share certificates and issuing stop-transfer orders to
transfer agents and registrars; and
(d) in the event that the Option or portion thereof shall be
exercised by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to
exercise the Option or portion thereof.
5.9 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Shares issuable
and deliverable upon the exercise of an Option, or any portion thereof,
may be either previously authorized but unissued shares or issued
shares that have then been reacquired by the Company. The Company shall
not be required to issue or deliver any certificate or certificates for
Shares purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) the satisfaction of all requirements set forth in this
Section 5, including payment of the exercise price;
(b) the obtaining of any approval or other clearance from any
state or federal governmental agency that the Administrator
shall, in its absolute discretion, determine to be necessary
or advisable; and
(c) the lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from
time to time for reasons of administrative convenience.
Appendix I - Page 5
<PAGE>
5.10 RIGHTS AS SHAREHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, shareholders of the Company in
respect to any shares purchasable upon the exercise of any part of an
Option unless and until the Option is exercised, the Option price has
been paid to the Company and certificates representing such shares have
been issued by the Company to such holders.
5.11 TRANSFER RESTRICTIONS. The Administrator, in its absolute
discretion, may impose such restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates
evidencing such shares.
5.12 NO OBLIGATION. The granting of an Option shall impose no
obligation upon the Participant to exercise such option.
SECTION 6. ADDITIONAL PROVISIONS
6.1 STOCK AWARD OR OPTION AGREEMENT. Each Stock Award or Option shall
be evidenced by a written Stock Award or Stock Option Agreement, which
shall be executed by the Participant and an authorized officer of the
Company and which shall indicate the date of the Stock Award or Option
grant, the number of Shares awarded or granted, and contain such terms
and conditions as the Administrator shall determine with respect to
such Stock Award or Option, consistent with the Plan.
6.2 ADMINISTRATION OF THE PLAN. The Administrator shall administer the
Plan. Except as otherwise provided in the Plan and except as otherwise
expressly stated to the contrary in the Company's Articles of
Incorporation, Bylaws, or elsewhere, the Administrator shall have the
authority (i) to interpret the Plan, (ii) to prescribe, amend and
rescind rules and regulations relating to the Plan, and (iii) to take
any other actions in connection with the Plan as it may deem necessary
or advisable for the administration of the Plan. All expenses and
liabilities incurred by the Administrator in connection with the
administration of the Plan shall be borne by the Company. The
Administrator may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Administrator, the Company
and the Board shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All elections taken and all
interpretations and determinations made by the Administrator in good
faith shall be final and binding upon all Participants, the Company and
all other interested persons. No member of the Administrator shall be
personally liable for any action, determination or interpretation made
in good faith with respect to the Plan. Members of the Administrator
shall be entitled to indemnification by the Company for any action or
any failure to act in connection with services performed by or on
behalf of the Administrator for the benefit of the Company to the
fullest extent provided or permitted by the Company's Articles of
Incorporation, Bylaws, any insurance policy or other agreement intended
for the benefit of the Administrator, or by any applicable law.
6.3 NO RIGHT TO CONTINUED SERVICE. Nothing in this Plan or in any Stock
Option or Award Agreement shall confer upon any Participant any right
to retention as a member of the Board.
6.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan shall be submitted for
the approval of the Company's stockholders.
Appendix I - Page 6
<PAGE>
6.5 ADJUSTMENTS IN AUTHORIZED SHARES. In the event that the Shares, as
presently constituted, are changed into or exchanged for a different
number or kind of shares of the Company or other securities of the
Company by reason of merger, consolidation, recapitalization,
reclassification, or the number of shares is increased or decreased by
reason of a stock split-up, stock dividend, combination of shares or
any other increase or decrease in the number of such Shares effected
without receipt of consideration by the Company (provided, however,
that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration"),
the Administrator shall make appropriate adjustments in the number and
kind of shares as to which all outstanding Options, or portions thereof
then unexercised, shall be exercisable, to the end that after such
event the Participant's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding
Option shall be made without change in the total price applicable to
the Option or the unexercised portion of the Option (except for any
change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment
in Option price per share. Outstanding Stock Awards shall also be
appropriately amended as may be necessary to reflect the foregoing
events. Any such adjustment made by the Administrator shall be final
and binding upon all Participants, the Company and all other interested
persons.
6.6 NONTRANSFERABILITY. No Option or interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the
Participant or any successors in interest to the Participant or, except
as provided below, shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any
other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section shall prevent transfers
by will or by the applicable laws of descent and distribution.
Notwithstanding the foregoing, an Option may be assigned in whole or in
part during the Participant's lifetime in accordance with the terms of
a domestic relations order (as defined in Code Section 414(p)(1)(b)).
The assigned portion may be exercised only by the person or persons who
acquire a proprietary interest in the Option pursuant to such domestic
relations order. The terms applicable to the assigned portion shall be
the same as those in effect for the Option immediately prior to such
assignment.
6.7 DEATH OF PARTICIPANT. In the event of an Participant's death, the
executor, administrator or other personal representative of the
Participant's estate, or any heir, successor, assign or other
transferee of the Participant receiving such Options by will or by the
laws of descent and distribution, shall have the right, subject to the
restrictions hereof, to exercise all of the Participant's outstanding
Options to the extent then exercisable at any time within one year
after the date of the Participant's death.
6.8 SECURITIES ACT. No Shares shall be required to be distributed until
the Company shall have taken such action, if any, as is then required
to comply with the provisions of the Securities Act or any other then
applicable securities law. The Company reserves the right to place a
legend on any stock certificate issued pursuant to the Plan to assure
compliance with this Section.
Appendix I - Page 7
<PAGE>
6.9 TERMINATION AND AMENDMENT OF PLAN. The Board may at any time
suspend or terminate the Plan, or make such modifications of the Plan
as it shall deem advisable, provided that the Plan shall not be so
changed to increase the cost of the Plan to the Company. However,
without approval of the Company's shareholders given within twelve
months before or after the action by the Board, no such action may,
except as provided in Section 6.5, increase any limit imposed in
Section 3.1 on the maximum number of shares that may be issued under
the Plan, materially modify the eligibility requirements of Sections
4.1 or 5.1, reduce the minimum Option price requirements of Section
5.4, or extend the limit imposed in this Section on the period during
which Stock Award or Option may be made. No Stock Award or Option may
be made during any period of suspension nor after termination of the
Plan, and in no event may any Stock Award or Option be made under this
Plan after the first to occur of the following events:
(a) the expiration of ten years from the date the Plan is
adopted by the Board; or
(b) the expiration of ten years from the date the Plan is
approved by the Company's shareholders under Section 6.4.
6.10 DUTIES OF THE COMPANY. The Company shall, at all times during the
term of each Option, reserve and keep available for issuance or
delivery such number of Shares as will be sufficient to satisfy the
requirements of all Options at the time outstanding. The Company shall
pay all original issue taxes with respect to the issuance or delivery
of Shares pursuant to a Stock Award or the exercise of an Option and
all other fees and expenses necessarily incurred by the Company in
connection therewith.
SECTION 7. GENERAL PROVISIONS
7.1 EXPENSES. The Company shall pay all costs and expenses of
administering the Plan.
7.2 APPLICABLE LAWS. The granting of Stock Awards or Options under the
Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national
securities exchanges as may be required. The provisions of this Plan
shall be interpreted so as to comply with the conditions or
requirements of the Securities Act, the Exchange Act, and rules and
regulations issued thereunder unless a contrary interpretation of any
such provision is otherwise required by applicable law. This Plan and
all Stock Award or Option Agreements entered into pursuant thereto
shall be construed and enforced in accordance with, and governed by,
the laws of the State of Maryland, determined without regard to its
conflict of interest rules.
Appendix I - Page 8
<PAGE>
FORM OF PROXY
PRIME RETAIL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MEETING OF STOCKHOLDERS
JUNE 3, 1999
The undersigned hereby appoints Michael W. Reschke, Abraham Rosenthal,
C. Alan Schroeder and William H. Carpenter, Jr., and each of them, with full
power of substitution, the true and lawful attorneys in fact, agents and
proxies of the undersigned to vote at the Meeting (the "Meeting") of
stockholders of Prime Retail, Inc. (the "Company") to be held at 100 East
Pratt Street, 12th Floor Conference Room, Baltimore, Maryland, on June 3,
1999, at 11:00 a.m., local time, and any and all adjournments thereof, all the
shares of stock of the Company according to the number of votes which the
undersigned would possess if personally present, for the purposes of
considering and taking action upon the following items on the reverse side.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER(S). IF NO DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED
"FOR" THE PROPOSALS LISTED ON THE OTHER SIDE.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
PRIME RETAIL, INC.
JUNE 3, 1999
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
1. TO ELECT THE NOMINEES LISTED AT RIGHT AS DIRECTORS OF THE COMPANY WITH
TERMS EXPIRING IN 2002
FOR WITHHELD
/ / / /
NOMINEES: ABRAHAM ROSENTHAL
ROBERT D. PERLMUTTER
JAMES R. THOMPSON
MARVIN S. TRAUB
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
- -------------------------------------------------------
2. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, L.L.P. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. TO ADOPT THE PROPOSAL AS MORE FULLY DESCRIBED IN THE PROXY STATEMENT,
APPROVING THE AMENDED AND RESTATED PRIME RETAIL, INC. NONEMPLOYEE DIRECTOR
STOCK PLAN.
/ / FOR / / AGAINST / / ABSTAIN
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF, INCLUDING AN ADJOURNMENT TO
SOLICIT ADDITIONAL PROXIES IN THE EVENT THAT A QUORUM IS NOT PRESENT AT THE
MEETING OR IN THE EVENT SUFFICIENT PROXIES VOTED IN FAVOR OF THE APPROVAL OF
THE PROPOSALS HAVE NOT BEEN RECEIVED.
CHANGE OF ADDRESS/COMMENTS APPEAR AT LEFT / /
I PLAN TO ATTEND THE MEETING / /
I DO NOT PLAN TO ATTEND THE MEETING / /
SIGNATURE(S) DATE:
------------------------------------------------ ----------
NOTE: Please sign exactly as name(s) appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
