<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1999 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER: 0-23616
PRIME RETAIL, INC.
-------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
MARYLAND 38-2559212
------------------------------- --------------------------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
100 EAST PRATT STREET
BALTIMORE, MD 21202 (410) 234-0782
------------------------------------- --------------------------------
(Address of principal executive offices, (Registrant's telephone number,
including zip code) including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
-----------------------------------------------------------
Common Stock, $0.01 par value
10.5% Series A Cumulative Preferred Stock, $0.01 par value
8.5% Series B Cumulative Participating Convertible Preferred Stock,
$0.01 par value
-------------------------------------------------------------------
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
-----------------------------------------------------------
None
----
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / / No /x/
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant was approximately $43,397,916 on April 13, 2000 (based on the closing
price per share as reported on the New York Stock Exchange - Composite
Transactions).
The number of shares of the registrant's Common Stock outstanding as of March
31, 2000 was 43,577,916.
<PAGE>
PRIME RETAIL, INC.
FORM 10-K/A
DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART III
--------
<S> <C> <C>
Item 10. Directors and Executive Officers of the Registrant..............................1
Item 11. Executive Compensation..........................................................5
Item 12. Security Ownership of Certain Beneficial Owners and Management.................11
Item 13. Certain Relationships and Related Transactions.................................15
Signatures.....................................................................16
</TABLE>
-i-
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PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, position and, as of December
31, 1999, ages of certain of the directors of the Company (except for
information regarding certain of the directors set forth in Item 10 that is
contained in Part I).
<TABLE>
<CAPTION>
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NAME POSITION AGE
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<S> <C> <C>
Michael W. Reschke Chairman of the Board, Director 44
William P. Dickey Director 57
William H. Carpenter, Jr. Director 49
Norman Perlmutter Director 66
Kenneth A. Randall Director 72
Sharon Sharp Director 60
Robert Perlmutter Director 38
James R. Thompson Director 63
Marvin Traub Director 75
=============================================================================================
</TABLE>
The following is a biographical summary as of December 31, 1999 of the
experience of certain directors of the Company.
WILLIAM H. CARPENTER, JR. William H. Carpenter, Jr. has been a Director
of Prime Retail, Inc. since its inception. Mr. Carpenter previously served as
President and Chief Operating Officer of Prime Retail, Inc. from the Company's
inception through October 6, 1999. Beginning October 6, 1999, Mr. Carpenter
served as President and Chief Executive Officer of primeoutlets.com inc., a
subsidiary of Prime Retail, Inc., which ceased operations on April 12, 2000. Mr.
Carpenter joined PGI in 1989, serving as Senior Vice President and, immediately
prior to joining Prime Retail, Inc., as Executive Vice President. 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. 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 International Counsel of
Shopping Centers/Value Retail News Executive Committee and also sits on the
Board for Severn School.
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NORMAN PERLMUTTER. Norman Perlmutter has been a Director of Prime
Retail, Inc. since 1998. Mr. Perlmutter is Managing Partner of the Snowmass Land
Company, Chairman of the Board of Managers of International Airport Centers, and
Chairman and Managing Director of the Perlmutter Investment Company. From 1966
until 1999, Mr. Perlmutter served as Chairman of the Board 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. and United
Television, Inc. Mr. Perlmutter previously served on the boards of United Asset
Management; Warner Communications, Inc.; Horizon Group, Inc., which merged with
Prime Retail, Inc.; and Horizon Group Properties, 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 has been a Director of Prime
Retail, Inc. since its inception. Mr. Randall is Chairman of the Audit Committee
of the Board of Directors. Mr. Randall 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, 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.
ROBERT D. PERLMUTTER. Robert D. Perlmutter, a Director of Prime Retail,
Inc. since the closing of the merger with Horizon Group, Inc., is 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. 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 a licensed salesperson. 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 its inception, is the Chairman of the law firm of Winston &
Strawn and has been a partner
2
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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,
Navigant Consulting, Inc., Hollinger International, Inc. and Metal Management,
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 its inception, has been President of Marvin Traub & Associates ("MTA")
since 1992. MTA is an international consulting firm with clients in France,
Italy, the United Kingdom and the United States. 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. Mr. Traub is Chairman of the Home
Co., in which Prime Retail, Inc. owns an interest, and the Johnnie Walker
Collection, a men's sportswear collection. 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.
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 and the Independent Directors
Committee. Each director attended at least 75% of the combined number of
meetings of the Board and any committee of which he or she was a member except
Mr. R. Perlmutter, who attended 67% of such meetings.
AUDIT COMMITTEE. The functions of the Audit Committee, which consists
of Messrs. R. Perlmutter and Randall and Ms. Sharp, 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. Mr. Randall is Chairman of the Audit
Committee.
EXECUTIVE COMMITTEE. The Executive Committee, which consists of Messrs.
N. Perlmutter, Dickey and G. Reschke and Governor Thompson, 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;
provided, however, unless specifically authorized by the Board of Directors, the
Executive Committee's authorization related to any individual matter shall not
exceed $3,000,000. 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. Mr. N. Perlmutter is Chairman of the Executive
Committee.
3
<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee, which consists of
Messrs. Dickey and Randall and Ms. Sharp, has certain responsibilities in
connection with determining the compensation for the Company's executive
officers and implementing and administering the Company's Stock Incentive Plans.
During 1999, the Compensation Committee assumed the responsibilities of the
Company's Executive Compensation and Stock Incentive Plan Committee which was
previously responsible for determining the compensation of the Company's
executive officers and implementing and administering the Company's Stock
Incentive Plans. Mr. Dickey is Chairman of the Compensation Committee.
INDEPENDENT DIRECTORS COMMITTEE. The Independent Directors Committee,
which consists of Messrs. Dickey, 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, 1999, the Audit Committee
held one meeting, the Executive Compensation and Stock Incentive Plan Committee
held three meetings, the Independent Directors Committee held one meeting and
the Board of Directors held eleven meetings. During 1999, the Compensation
Committee assumed the responsibilities of the Executive Compensation and Stock
Incentive Plan Committee.
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 Prime Retail, Inc. Nonemployee Director Stock Plan (the
"Directors Plan") adopted at the 1999 annual meeting, the Company granted each
outside director of the Company automatic restricted stock awards of 3,000
shares of Common Stock as follows: William P. Dickey (3,000), Terence C. Golden
(3,000), Norman Perlmutter (3,000), Robert D. Perlmutter (3,000), Kenneth A.
Randall (3,000), Sharon Sharp (3,000), Governor James R. Thompson (3,000) and
Marvin S. Traub (3,000). Such restricted stock were fully vested upon the date
of grant.
4
<PAGE>
In consideration for service on the Board of Directors' Executive
Committee in 1999, pursuant to the Directors Plan, the Company granted options
to purchase an aggregate of 60,000 shares of Common Stock to Mr. N. Perlmutter.
Such options vested immediately and will terminate on July 28, 2009. The
exercise price of such options is $8.50. In consideration for service on the
Board of Directors' Executive Committee in 2000, Governor James R. Thompson and
Messrs. N. Perlmutter and W. Dickey each received restricted stock awards of
60,000 shares of Common Stock, which awards were made pursuant to the Directors
Plan and which shares vest on a monthly basis beginning May 1, 2000 and which
fully vest on September 1, 2000. As additional consideration for service on the
Board of Director's Executive Committee, pursuant to the Prime Retail, Inc. 1994
Stock Incentive Plan, the Company granted options to purchase an aggregate of
420,000 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): Norman Perlmutter (140,000), William P. Dickey (140,000) and
Governor James R. Thompson (140,000). Such options vest on a monthly basis
beginning May 1, 2000 and fully vest on February 1, 2001 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 services of
the optionee as a Director of the Company. The exercise price of such options
is $1.6875 per share.
ITEM 11 -- EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
for services in all capacities to the Company for the years ended December 31,
1997, 1998 and 1999 with respect to the Chairman of the Board of Directors, the
Chief Executive Officer of the Company and the four other persons who were the
most highly compensated executive officers of the Company during 1999 (the
"Named Executives").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual
Compensation LONG TERM COMPENSATION
-------------------- ----------------------------------------------
AWARDS PAYOUTS
------------------------------ -------------
RESTRICTED SECURITIES LTIP
Name and Principal STOCK AWARD(S) UNDERLYING PAYOUTS
POSITION YEAR SALARY BONUS(1) (#) OPTIONS (#) ($)
---------------------- ---- ------ -------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Reschke 1999 $259,255 - - - -
Chairman of the Board(2) 1998 259,615 $225,000 41,831 300,000(2) -
1997 150,000 500,000 - 75,000(3) -
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Abraham Rosenthal (3) 1999 417,692 - - - (10)
1998 415,384 360,000 - 300,000(6) $ 628,925(9)
1997 257,420 250,000 - 75,000(8) 1,261,150(9)
William H. Carpenter, Jr. (4) 1999 419,904 - - - (10)
1998 415,384 360,000 - 300,000(6) 628,925(9)
1997 257,420 250,000 - 75,000(8) 1,261,150(9)
Glenn D. Reschke 1999 266,288 - - - -
Acting Chief Executive 1998 225,961 252,500 15,687 50,000(6) -
Officer and President (5) 1997 175,000 175,000 - 10,000(7) -
David G. Phillips 1999 321,644 160,000 - - -
Executive Vice President 1998 225,961 395,300 15,687 170,000(6) -
1997 175,000 175,000 - 10,000(7) -
C. Alan Schroeder 1999 239,971 107,000 - - -
Executive Vice President - 1998 200,000 280,000 15,687 50,000(6) -
General Counsel and Secretary 1997 147,923 150,000 - 10,000(7) -
</TABLE>
--------------------
NOTES:
(1) Reflects bonus paid for performance in year indicated.
(2) On April 5, 2000, Mr. M. Reschke relinquished his responsibilities as an
executive officer and became non-executive Chairman of the Board of
Directors of Prime Retail, Inc.
(3) On February 25, 2000, Mr. Rosenthal resigned as Chief Executive Officer of
the Company.
(4) On October 6, 1999, Mr. Carpenter resigned as President and Chief Operating
Officer of the Company and became Chief Executive Officer and President of
the Company's subsidiary, primeoutlets.com inc. Of the $419,904 Mr.
Carpenter received in salary during 1999, $353,077 was paid by Prime
Retail, L.P. and $66,827 was paid by primeoutlets.com, inc. At the close of
business on April 12, 2000, primeoutlets.com inc. ceased operations.
(5) Mr. G. Reschke was promoted to President and Chief Operating Officer on
October 6, 1999 and then to President and acting Chief Executive Officer on
February 25, 2000. Formerly, Mr. G. Reschke served as Executive Vice
President - Development and Acquisitions.
(6) Options granted pursuant to the 1998 Long-Term Stock Incentive Plan.
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(7) Options granted pursuant to the 1995 Stock Incentive Plan.
(8) 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.
(9) Reflects a special distribution from the Operating Partnership to certain
limited liability companies controlled by Messrs. Rosenthal and Carpenter
(the "Executive LLCs"). See "Other Information--Certain Relationships and
Related Transactions--Loans to Messrs. Rosenthal and Carpenter."
(10) As part of their 1999 compensation, the Board of Directors of the Company
approved distributions to Messrs. Rosenthal and Carpenter in the amount of
their outstanding balances due under each of their notes made to the
Operating Partnership. See "Other Information--Certain Relationships and
Related Transactions." Mr. Rosenthal received a special distribution in
2000 in the amount of $628,927.85 which was used as payment in full of his
outstanding obligations under his note. The Company remains contractually
obligated to make a distribution to Mr. Carpenter in an amount equal to the
outstanding balance then remaining under his note, subject to the condition
that Mr. Carpenter immediately apply such distribution to repay his
outstanding obligations under such note.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any options in 1999 to the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the number
of Common Shares underlying Stock Options held by each of the Named Executives
and the value of such officers' exercisable and unexercisable options on
December 31, 1999. None of the Named Executives exercised any Stock Options
during 1999.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS AT 1999
UNEXERCISED OPTIONS YEAR-END
SHARES AT 1999 YEAR-END (#) ($)(1)
ACQUIRED ON VALUE -------------------- ------
EXERCISE REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME (#) ($) UNEXERCISABLE) UNEXERCISABLE)
---- --------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Michael W. Reschke - - 324,999/100,001 $0.00/$0.00
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Abraham Rosenthal - - 274,999/100,001 0.00/0.00
William H. Carpenter, Jr. - - 274,999/100,001 0.00/0.00
Glenn D. Reschke - - 80,000/0 0.00/0.00
David G. Phillips - - 120,000/80,000 0.00/0.00
C. Alan Schroeder - - 67,000/0 0.00/0.00
</TABLE>
--------------------
Note:
(1) Based on the market price of $5.625 per share, which was the closing
selling price per share of Common Stock on the NYSE on December 31,
1999, less the option exercise price of unexercised, in-the-money
options held by the Named Executives at December 31, 1999.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with each of Messrs. G. Reschke and Phillips. The agreements with
Messrs. G. Reschke and Phillips generally provide that such executive officers
shall devote substantially all of their business time to the operation of the
Company. The Employment Agreements for each of Mr. G. Reschke and Mr. Phillips
provide for terms expiring on July 30, 2002 and March 22, 1999, respectively,
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 with Messrs. G. 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.
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 Mr. 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 Mr. G. Reschke
such amount for termination by the Company "without cause" or for termination by
the executive for "good reason" will be equal to the sum of (x) one times the
amount of his annual base salary plus (y) one times the average of the amounts
payable to such executive for the prior two years under the terms of his
"performance bonus" (as such term is defined in Mr. G. Reschke's Employment
Agreement).
The Employment Agreement with Mr. G. Reschke provides that if, within
twenty-four months following a "change of control" of the Company, the Company
terminates the
8
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executive's employment "without cause" or the executive terminates his
employment with "good reason," such executive will be entitled to receive: (i)
any amounts accrued but undistributed; (ii) other vested benefits through the
effective date of the termination and health and life insurance benefits for a
period of two years, plus (iii) a termination distribution in the amount of
$1,600,000. Additionally, if the Employment Agreement is so terminated, certain
restrictions on the transfer of stock held by Mr. G. Reschke (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 Agreement is terminated, Mr. G. Reschke will be fully vested
in any amount accrued on his behalf under any qualified or nonqualified
retirement plans of the Company.
With regard to Mr. G. Reschke, the Employment Agreement contains
certain non-compete provisions restricting the executive 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
Agreement provides 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.
On April 5, 2000, the Company and Mr. M. Reschke agreed to terminate
Mr. M. Reschke's employment agreement with the Company as a result of Mr. M.
Reschke relinquishing his responsibilities as an executive officer of the
Company and becoming a non-executive Chairman of the Board of Directors of Prime
Retail, Inc.
The Company has entered into a separation agreement (the "Separation
Agreement") with Mr. Rosenthal effective as of February 25, 2000. Pursuant to
such Separation Agreement, Mr. Rosenthal resigned as Chief Executive Officer and
as a member of the Company's Board of Directors. Pursuant to his Separation
Agreement, Mr. Rosenthal is entitled to receive separation payments which
include: (i) accrued but undistributed amounts of his Base Distribution (as
defined in his employment agreement) through March 1, 2000; (ii) a special
distribution of $628,927.85 (previously approved by the Board of Directors of
the Company in connection with his 1999 compensation) to be used by Mr.
Rosenthal as payment in full of his outstanding obligations under a recourse
loan of $2.375 million made by the Operating Partnership to Mr. Rosenthal in
connection with the Company's IPO ("See Other Information--Loans to Messrs.
Rosenthal and Carpenter"); and (iii) a severance distribution in an amount equal
to $1,750,000 of which $600,000 was paid in March 2000 and the balance of which
is payable, without interest, in eighteen equal monthly installments of
$63,888.89 commencing March 31, 2000.
Under the terms of the Separation Agreement with Mr. Rosenthal, the
Company provided health and life insurance benefits will be maintained for
eighteen months following the date of
9
<PAGE>
the Separation Agreement. Mr. Rosenthal's option awards under the Company's 1998
Long-Term Stock Incentive Plan became fully vested.
The Separation Agreement with Mr. Rosenthal also included
non-competition, non-solicitation and non-disclosure provisions which generally
prohibit Mr. Rosenthal for a period of one year from the date of the Separation
Agreement from (i) competing with the "business" (as such term is defined in the
Separation Agreement) within a defined geographic area, (ii) soliciting
employees, customers, vendors or tenants to terminate their relationship with
the Company, and (iii) disclosing or using any "trade secret" (as such term is
defined in the Separation Agreement).
On October 6, 1999, the Company, the Operating Partnership and its
subsidiary primeoutlets.com, inc. entered into an employment agreement with Mr.
Carpenter (the "Employment Agreement") pursuant to which Mr. Carpenter resigned
as President and Chief Operating Officer of the Company and became the President
and Chief Executive Officer of its subsidiary primeoutlets.com inc. Such
Employment Agreement superceded all other employment agreements between Mr.
Carpenter and Prime Retail, Inc. or its predecessors or any subsidiaries. At the
close of business on April 12, 2000, primeoutlets.com, inc. ceased operations.
Pursuant to his Employment Agreement upon his termination from
primeoutlets.com inc., Mr. Carpenter is entitled to certain benefits, including
the following: (i) all accrued but unpaid amounts of his "base salary" (as such
term is defined in the Employment Agreement (minimum annual salary of $425,000))
through the two year anniversary of October 6, 1999; (ii) payment in an amount
equal to the greater of (A)(1) 2.01 times the amount of any cash bonus received
by Mr. Carpenter from Prime Retail, Inc. for the year ended December 31, 1998
less (2) the amount of any "performance bonus" (as such term is defined in the
Employment Agreement) received by Mr. Carpenter for the year of termination, or
(B) 0.5 times the amount of the most recent "performance bonus" paid to Mr.
Carpenter by Prime Retail, Inc. or primeoutlets.com, inc. in respect of any full
calendar year, to be paid in one lump sum within 30 days; (iii) any vested
benefits through the terminate date; and (iv) health and life insurance benefits
for a period of two years from the date of the Employment Agreement.
The Employment Agreement with Mr. Carpenter includes non-competition
and non-disclosure provisions which generally prohibit Mr. Carpenter for a
period of one year from the date of his termination of employment from (i)
competing with the "business" (as such term is defined in the Employment
Agreement) within a defined geographic area and (ii) disclosing or using any
"trade secret" (as such term is defined in the Employment Agreement).
In addition, Mr. Carpenter's Employment Agreement reaffirms the
Company's obligation to make a special distribution to Mr. Carpenter in an
amount equal to the outstanding balance under a recourse loan of $2.375 million
made by the Operating Partnership to Mr. Carpenter in connection with the
Company's IPO. Such distribution was approved by the Company's Board of
Directors in 1999 as part of Mr. Carpenter's annual compensation. Such
distribution is
10
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required to be used by Mr. Carpenter to pay in full his outstanding obligations
under such loan. (See "Other Information--Loans to Messrs. Rosenthal and
Carpenter").
EXECUTIVE COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The Compensation 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. Dickey and Randall and Ms. Sharp currently serve on
the Compensation 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 Compensation
Committee, (ii) the Board of Directors of another entity in which one of the
executive officers of such entity served on the Company's Compensation
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, 1999.
ITEM 12 -- 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, 2000 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 Amended and Restated 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
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Partnership of the Operating Partnership (as amended, 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.
<TABLE>
<CAPTION>
NUMBER OF PRIME PERCENT OF ALL
COMMON SHARES/ PRIME COMMON
PRIME 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) 7,595,929 15.0% 11.4%
Michael W. Reschke(6) 8,231,901 16.1 12.3
Glenn D. Reschke(7) 403,337 (11) (11)
David G. Phillips(8) 266,807 (11) (11)
C. Alan Schroeder (9) 95,807 (11) (11)
William H. Carpenter, Jr.(10) 796,090 1.8 1.2
William P. Dickey 107,196 (11) (11)
Norman Perlmutter(12) 900,935 2.0 1.3
Robert D. Perlmutter 9,268 (11) (11)
Kenneth A. Randall(13) 13,500 (11) (11)
Sharon J. Sharp 3,000 (11) (11)
James R. Thompson 106,832 (11) (11)
Marvin S. Traub(14) 59,757 (11) (11)
Directors and officers of the Company
as a group (18 persons) 11,126,557 25.5 16.6
AXA Financial, Inc. (15) 4,057,234 9.3 6.1
Southeastern Asset Mgmt., Inc. (16) 3,371,400 7.8 5.0
Merrill Lynch & Co., Inc.(17) 2,517,127 5.8 3.8
</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
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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,
2000 as follows: Mr. M. Reschke 425,000; Mr. Rosenthal 375,000; Mr.
Carpenter 375,000; Mr. Dickey 42,524; Mr. Golden 10,000; Mr. N. Perlmutter
212,840; Mr. R. Perlmutter 4,596; Mr. Randall 10,000; Governor Thompson
43,332; Mr. Traub, including Marvin Traub Associates, Inc. ("MTA"), 55,000;
Mr. G. Reschke 83,750 (3,750 of which are held by Ms. Tina Reschke, wife of
Mr. G. Reschke); Mr. Mulreaney 70,000; Mr. Schroeder 67,000; and Mr.
Phillips 140,000. Information presented also includes Common Shares issued
pursuant to a Restricted Stock Award Plan which have vested or will vest
within 60 days of April 15, 2000 as follows: Mr. N Perlmutter 52,272; Mr.
W. Dickey 52,272; Governor Thompson 52,272; and Mr. Schroeder, 7,843.
(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, 2000.
(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, 2000. 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 251,300 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 Securities Exchange Act of 1934 (the
"Exchange Act").
(6) Information presented includes 7,344,629 Common Units and 251,300 Common
Shares held by PGI (Mr. M. Reschke is the Chairman and Chief Executive
Officer of PGI) and certain limited partnerships affiliated with PGI,
199,548 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 425,000 Common Shares which Mr.
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<PAGE>
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 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 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.
(8) 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,
140,000 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.
(9) Information presented includes 28,687 Common Shares owned by Mr. Schroeder,
120 Common Shares issuable to Mr. Schroeder upon conversion of the 100
Series B Preferred Shares owned by him and 67,000 Common Shares which Mr.
Schroeder has the right to acquire upon exercise of certain Stock Options.
(10) Information presented includes 371,090 Common Units, 125,000 of which are
held by a limited liability company controlled by Mr. Carpenter, 375,000
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.
(11) Amount represents less than 1%.
(12) Information presented includes 64,742 Common Shares, 176 of which are owned
by Mr. N. Perlmutter's wife and 764 of 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 of which are issuable to Mr. N. Perlmutter's wife upon
conversion of her 1,734 Series B Preferred Shares, and 306 of which are
issuable to Mr. N. Perlmutter's children upon conversion of their 256
Series B Preferred Shares, 620,653 Common Units owned by Mr. N.
Perlmutter's wife, and 212, 840 Common Shares which Mr. N. Perlmutter has
the right to acquire upon exercise of Stock Options.
(13) Information presented includes 3,500 Common Shares, 500 of which are owned
by Mr. Randall's wife, and 10,000 Common Shares which Mr. Randall has the
right to acquire upon exercise of Stock Options.
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(14) Information presented includes 45,000 Common Shares which MTA, an affiliate
of Mr. Traub, has the right to acquire upon exercise of Stock Options.
(15) Information presented is based on a Schedule 13G/A filed with the
Commission on February 14, 2000 on behalf of AXA Financial, Inc. (f/k/a The
Equitable Companies Incorporated), The Mutuelles AXA and AXA in their
respective capacities as parent holding companies with respect to the
holdings of their 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
and (iii) Wood, Struthers & Winthrop Management Corporation, an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940.
(16) Information presented is based on a Schedule 13G/A filed with the
Commission on February 9, 2000 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/A
indicates that all the securities covered by this statement are owned by
Longleaf and none are owned directly or indirectly by Southeastern.
Southeastern and 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.
(17) Information presented is based on a Schedule 13G/A filed with the
Commission on February 7, 2000 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.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.
15
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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 connection with the Company's joint venture project in
Europe. In connection with the agreement with Financo, during 1999 Financo
received a fee of $201,000 plus expenses.
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 and is guaranteed by Messrs. Rosenthal and Carpenter,
respectively. As a part of the severance package included in Mr. Rosenthal's
Separation Agreement (see "Compensation of Executive Officers--Employment
Agreements and Change of Control Agreements"), Mr. Rosenthal received a special
distribution in 2000 in the amount of $628,927.85 which was used as payment in
full of his outstanding obligations under the loan. Mr. Pursuant to Mr.
Carpenter's Employment Agreement (see "Compensation of Executive
Officers--Employment Agreements and Change of Control Agreements"), Mr.
Carpenter is entitled to a distribution from the Operating Partnership in an
amount equal to the outstanding balance under his Note, subject to the condition
that Mr. Carpenter immediately apply such distribution to repay his outstanding
obligations under his loan.
OBLIGATIONS WITH RESPECT TO HORIZON GROUP PROPERTIES, INC. ("HGP")
CREDIT FACILITIES. As of December 31, 1999, the Company is a guarantor or
otherwise obligated with respect to an aggregate of approximately $12.7 million
of the indebtedness of HGP and its affiliates including a $10 million obligation
under HGP's secured credit facility which bears a rate of interest of LIBOR plus
1.90%, matures in July, 2001 and is collateralized by seven properties located
throughout the United States. HGP is a publicly traded company which was formed
in connection with the Company's merger with Horizon in June 1998. Mr. M.
Reschke, Director of the Company, is a member of the board of directors of HGP.
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 PRIOR INTEREST IN PRIME OUTLETS AT
BELLPORT. On February 21, 1999, the Operating Partnership began management and
operation of the Bellport Outlet Center located in Patchogue, New York, which
was previously partially owned and operated by HGP. Pursuant to the terms of the
management agreement, the Operating Partnership received payments based on 4% of
gross revenues. On September 1, 1999, the Company acquired HGP's interest in
what was then known as Bellport Outlet Center from HGP. The center is now known
as Prime Outlets at Bellport.
16
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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.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRIME RETAIL, INC.
Dated: May 30, 2000 /s/ Glenn D. Reschke
-------------------------------------
Glenn D. Reschke
President and Chief Executive Officer
17
