<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:
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<PAGE>
[PRIME RETAIL LOGO]
May 17, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Prime Retail, Inc. (the "Company") to be held at the Baltimore World Trade
Center, Maryland Room, 21st Floor, 401 East Pratt Street, Baltimore, Maryland,
on June 21, 2000, at 11:00 a.m., local time.
The purpose of the Meeting is to consider and take action (i) to elect
three Directors, (ii) to ratify the appointment of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending December 31,
2000, and (iii) 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 1999 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/ GLENN D. RESCHKE
-------------------------------------
Glenn D. Reschke
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
PRIME RETAIL, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON JUNE 21, 2000
To the Stockholders:
The Annual Meeting of Stockholders of Prime Retail, Inc., a Maryland
corporation (the "Company"), will be held at the Baltimore World Trade Center,
Maryland Room, 21st Floor, 401 East Pratt Street, Baltimore, Maryland, on June
21, 2000 at 11:00 a.m., local time (the "Meeting"), to consider and vote on the
following matters:
(i) To elect three Directors;
(ii) To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December
31, 2000; and
(iii) 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 May 10, 2000 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
May 17, 2000
---------------------------------------
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
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 21, 2000
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 Wednesday, June 21, 2000 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 May 22, 2000. 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 1999.
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, the Company's
transfer agent, to solicit proxies on behalf of the Company. The fee associated
with this service is included within the Company's monthly fee to the transfer
agent of $1,000 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 May 10, 2000 (the "Record Date") will be entitled
to vote at the Meeting. As of the Record Date, the Company had 43,577,916 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 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.
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 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.
-2-
<PAGE>
<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 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
-3-
<PAGE>
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. 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.
-4-
<PAGE>
(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.
(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.
-5-
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors proposes the election of three Class III
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.
On February 25, 2000 and March 16, 2000, Abraham Rosenthal and Terence
C. Golden, respectively, resigned from the Board of Directors of Prime Retail,
Inc. As a result of such resignations, the Board of Directors has determined to
reduce the number of members of the Board to ten.
Set forth below are the names of and certain other information
regarding the nominees for the three 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>
Michael W. Reschke 44 Chairman of the Board, Director 2003 1994
Glenn D. Reschke 49 Acting Chief Executive Officer, 2003 1994
President and Director
William P. Dickey 57 Director 2003 1998
</TABLE>
-6-
<PAGE>
MICHAEL W. RESCHKE. Michael W. Reschke has been the Chairman of the
board of directors of Prime Retail, Inc. since its inception. On April 5, 2000,
Mr. Reschke relinquished his responsibilities as an executive officer and became
non-executive Chairman of the Board of Prime Retail, Inc. Mr. Reschke founded
PGI in 1981 and, since that time, has acted as PGI's Chairman, Chief Executive
Officer, and President. For the last eighteen 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 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
National Real Estate Roundtable, the Chicago Development Council, and the Urban
Land Institute. Mr. Reschke is the brother of Glenn D. Reschke, President and
Chief Executive Officer and a director of Prime Retail, Inc.
GLENN D. RESCHKE. On February 25, 2000, Glenn D. Reschke was promoted
to President and acting Chief Executive Officer of Prime Retail, Inc. Formerly,
Mr. Reschke served as Executive Vice President-Development and Acquisitions from
March 22, 1994 until October 6, 1999, when he was named President and Chief
Operating Officer. Mr. Reschke has served as a Director of the Company since
1997. Mr. Reschke's responsibilities with Prime Retail, Inc. include strategic
planning, investor relations, capital markets, financing, leasing, marketing,
operations, and the management, development, and construction of Prime Retail,
Inc.'s retail projects. Mr. Reschke joined PGI in 1983 and, between then and
1994, 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. 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. William P. Dickey has been a Director of Prime
Retail, Inc. since 1998. Mr. Dickey is Chairman of the Compensation Committee of
the Board of Directors of the Company. 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. Mr. Dickey is a Trustee of the Vera Institute of Justice
and Regis High School (N.Y.) and a member of the Urban Land Institute.
-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>
William H. Carpenter, Jr. 49 Director 2001 1994
Norman Perlmutter 66 Director 2001 1998
Kenneth A. Randall 72 Director 2001 1994
Sharon Sharp 60 Director 2001 1997
Robert Perlmutter 38 Director 2002 1998
James R. Thompson 63 Director 2002 1994
Marvin Traub 75 Director 2002 1994
</TABLE>
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.
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
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<PAGE>
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 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.
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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.
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.
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<PAGE>
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, 2000. Ernst & Young
LLP served as independent auditors of the Company for the year ended December
31, 1999. 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, 2000.
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<PAGE>
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.
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 $1.6875 per share.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
for services in all capacities to the Company for the years ended December 31,
1997, 1998 and 1999 with respect to the Chairman of the Board of Directors, the
Chief Executive Officer of the Company and the four other persons who were the
most highly compensated executive officers of the Company during 1999 (the
"Named Executives").
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG TERM COMPENSATION
--------------------- ------------------------------------------
AWARDS PAYOUTS
------ --------
RESTRICTED
STOCK SECURITIES LTIP
NAME AND PRINCIPAL AWARD(S) UNDERLYING PAYOUTS
POSITION YEAR SALARY BONUS(1) (#) OPTIONS (#) ($)
------------------ ---- ------ -------- ---------- ----------- ---------
<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) -
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,
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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.
(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 $628,927.85 which was
used as payment in full of his outstanding obligations under his note.
The Company remains contractually obligated to make a distribution to
Mr. Carpenter in an amount equal to the outstanding balance then
remaining under his note, subject to the condition that Mr. Carpenter
immediately apply such distribution to repay his outstanding
obligations under such note.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any options in 1999 to the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the number
of Common Shares underlying Stock Options held by each of the Named Executives
and the value of such officers' exercisable and unexercisable options on
December 31, 1999. None of the Named Executives exercised any Stock Options
during 1999.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS AT 1999
UNEXERCISED OPTIONS YEAR-END
SHARES AT 1999 YEAR-END (#) ($)(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
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.
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<PAGE>
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 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
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<PAGE>
$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 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 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").
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<PAGE>
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.
REPORT OF COMPENSATION COMMITTEE
RESPONSIBILITIES OF THE COMMITTEE
The Compensation Committee consists of three independent, non-employee
directors: Messrs. Dickey and Randall and Ms. Sharp. It is the Compensation
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 Compensation 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.
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.
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.
The Company's executive compensation programs consist of the following
components:
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<PAGE>
BASE SALARY
The Compensation Committee has the discretion (except as otherwise
restricted by any employment agreements) to adjust the salaries of the Named
Executives and other senior executive officers of the Company. The Compensation
of the Named Executives in 1999 is set forth herein in the section entitled
"Compensation of Executive Officers--Employment Agreements and Change of Control
Agreements." The Compensation Committee decided not to increase the 1999 base
salaries for the senior management team for 2000.
ANNUAL PERFORMANCE BONUS
The annual performance bonus for senior officers is determined by the
Compensation Committee based on a variety of criteria related to individual and
company performance. In 1999, bonuses were paid to two Named Executives, C. Alan
Schroeder and David Phillips, and certain other senior officers. See
"Compensation of Executive Officers."
STOCK INCENTIVE PLANS
To provide greater equity interests to the Company's Chief Executive
Officer, President and other senior executives, the Compensation Committee
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.
Because the Company did not achieve the threshold levels of total shareholder
return under the Program for 1999, no restricted stock awards were due.
LONG-TERM COMPENSATION
In connection with the Company's initial public offering (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 Compensation 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. As part of the Executive LLCs'
1999 compensation, the Board of Directors of the Company approved distributions
to the Executive LLCs in the amount of their outstanding balances due under
their Notes. In 2000, Mr. Rosenthal received a special distribution 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
under his Note, subject to the condition that Mr. Carpenter immediately apply
such distribution to repay his outstanding obligations under his Note.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
One of the factors the Compensation 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 Compensation
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
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<PAGE>
Summary Compensation Table, other than performance-based compensation. The
Compensation 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.
Compensation Committee
William P. Dickey
Kenneth A. Randall
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, 1999 to December 31, 1999 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, 1999 through December
31, 1999 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.
Share Price Performance
<TABLE>
<CAPTION>
EQUITY OUTLET
DATE PRT S & P 500 CENTER INDEX
---- --- --------- ------------
<S> <C> <C> <C>
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
Dec-99 52.29 369.39 67.17
</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 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.
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<PAGE>
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.
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) Anastasia T. Harris, a former
Senior Vice President of the Company, did not timely report her May 19, 1999 and
August 17, 1999 purchases of .7528 and .8553 shares of Convertible Preferred
Stock, respectively, and her August 17, 1999 purchase of 152.9 shares of Common
Stock.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any stockholder who wishes to submit a proposal to be presented at the
Company's 2001 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 January 22, 2001 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.
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<PAGE>
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: May 17, 2000
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<PAGE>
APPENDIX I
FORM OF PROXY
PRIME RETAIL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
MEETING OF STOCKHOLDERS,
JUNE 21, 2000
The undersigned hereby appoint Glenn D. Reschke and C. Alan Schroeder,
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, 12 Floor Conference Room, Baltimore, Maryland, on June
21, 2000, 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.
1. To elect Michael W. Reschke, Glenn D. Reschke and William P. Dickey
as Directors of the Company with terms expiring in 2003.
/ / FOR / / AGAINST / / WITHHELD
For, except vote withheld from the following nominees:
------------------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP as the
Company's Independent Auditors for the fiscal year ending December 31, 2000.
/ / FOR / / AGAINST / / WITHHELD
3. 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.
<PAGE>
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 ABOVE.
DATED: _______________, 2000
----------------------------
SIGNATURE
----------------------------
SIGNATURE IF HELD JOINTLY
PLEASE SIGN EXACTLY AS NAME(S)
APPEAR ON THIS PROXY CARD.
WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY-IN-
FACT, EXECUTOR, ADMINISTRATOR,
PERSONAL REPRESENTATIVE,
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.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
