<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
GREAT LAKES REIT
- --------------------------------------------------------------------------------
(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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:
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(4) Date Filed:
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<PAGE>
[LOGO]
GREAT LAKES REIT
823 COMMERCE DRIVE
SUITE 300
OAK BROOK, ILLINOIS 60523
April 6, 1999
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Great Lakes REIT (the "Company"), which will be held at The
Lodge at the McDonald's Corporation Office Campus, 2815 Jorie Boulevard, Oak
Brook, Illinois on May 19, 1999 at 10:00 a.m., local time.
At the Annual Meeting, you will be asked to consider and vote upon (1) a
proposal to elect seven trustees for terms expiring at the Annual Meeting to be
held in 2000; and (2) such other matters as may properly come before the meeting
or any adjournments or postponements thereof.
The accompanying Notice of Annual Meeting of Shareholders and proxy
statement contain information about the Annual Meeting, including information
about the proposal to elect seven trustees for terms expiring at the Annual
Meeting to be held in 2000.
After careful consideration, your Board of Trustees recommends that all
shareholders vote "FOR" each of the seven Trustees nominated for terms expiring
at the Annual Meeting in 2000.
It is important that your shares be represented at the Annual Meeting.
Therefore, whether or not you plan to attend the meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed postage
prepaid envelope. If you attend the Annual Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card.
We encourage you to attend the Annual Meeting in person, but whether you
expect to attend the Annual Meeting or not, we urge you to return your proxy
card promptly.
Sincerely yours,
[SIGNATURE]
Richard A. May
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Your vote is important. Please complete, sign and date and return the enclosed
proxy card as soon as possible. Otherwise, your vote cannot be counted.
<PAGE>
GREAT LAKES REIT
823 COMMERCE DRIVE
SUITE 300
OAK BROOK, ILLINOIS 60523
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1999
---------------------
To the Shareholders of Great Lakes REIT:
Notice is hereby given that the Annual Meeting of the Company will be held
at The Lodge at the McDonald's Corporation Office Campus, 2815 Jorie Boulevard,
Oak Brook, Illinois on May 19, 1999 at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to elect seven trustees for terms
expiring at the Annual Meeting in 2000.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only holders of record of the Company's common shares of beneficial interest
at the close of business on March 19, 1999, the record date for the Annual
Meeting, are entitled to notice of, and to vote at, the Annual Meeting and at
any adjournments or postponements thereof.
The election to the Company's Board of Trustees of each of the nominees
specified requires the affirmative vote of a plurality of the votes cast at the
Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. Whether or not you plan to attend the Annual Meeting, please complete,
date and sign the enclosed proxy and return it in the enclosed envelope as
promptly as possible. If a proxy is signed but no voting instructions are
indicated thereon, that proxy will be voted "for" each of the Trustees nominated
pursuant to the Trustee election proposal. If you attend the Annual Meeting, you
may withdraw the proxy and vote in person.
By Order of the Board of Trustees,
[SIGNATURE]
Richard L. Rasley
SECRETARY
Oak Brook, Illinois
April 6, 1999
<PAGE>
GREAT LAKES REIT
----------------
PROXY STATEMENT
---------------------
This proxy statement is being furnished to the holders of the common shares
of beneficial interest, $.01 par value per share (the "Common Shares"), of the
Company in connection with the solicitation of proxies by the Board of Trustees
of the Company (the "Board of Trustees") for use at the Annual Meeting to be
held at The Lodge at the McDonald's Corporation Office Campus, 2815 Jorie
Boulevard, Oak Brook, Illinois on May 19, 1999 at 10:00 a.m., local time, and at
any adjournments or postponements thereof.
At the Annual Meeting, shareholders will be asked to consider and vote upon
a proposal to elect seven trustees for terms expiring at the Annual Meeting in
2000.
The Board of Trustees has fixed the close of business on March 19, 1999 as
the record date for the determination of shareholders entitled to receive notice
of and vote at the Annual Meeting (the "Record Date"). As of the Record Date,
there were 16,526,461 Common Shares issued and outstanding.
This proxy statement and the accompanying proxy are first being mailed to
shareholders of the Company on or about April 6, 1999.
VOTING OF PROXIES
The proxy accompanying this proxy statement is solicited on behalf of the
Board of Trustees for use at the Annual Meeting. Shareholders are requested to
complete, date and sign the accompanying proxy and promptly return it in the
accompanying envelope or otherwise mail it to the Company. Unless contrary
instructions are given, the persons designated as proxy holders in the proxy
card will vote the Common Shares represented thereby for the election as trustee
of the Company of each of the nominees proposed by the Board of Trustees. The
Board of Trustees is not currently aware of any matters other than those
referred to herein that will come before the Annual Meeting. Because the Company
did not receive by March 22, 1999 (the deadline determined under Section 13 of
the Company's Bylaws) notice of any matter intended to be raised by a
shareholder at the Annual Meeting, the persons designated as proxy holders in
the proxy card will vote the shares represented thereby, with regard to any
other matter as may properly come before the Annual Meeting, as recommended by
the Board of Trustees or, if no such recommendation is given, in their own
discretion.
VOTE REQUIRED
Under Maryland law and the Company's Declaration of Trust, the election to
the Board of Trustees of each of the nominees proposed by the Board of Trustees
requires the affirmative vote of a plurality of the votes cast at the Annual
Meeting.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The holders of a majority of the Common Shares issued and outstanding and
entitled to vote at the Annual Meeting, present in person or by proxy, will
constitute a quorum at the Annual Meeting. Abstentions and broker non-votes will
be counted for purposes of determining the presence of a quorum at the Annual
Meeting.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
the inspectors of election appointed for the Annual Meeting, who will determine
whether or not a quorum is present. Votes may be cast for, against or as
abstentions. Broker/dealers who hold their customers' shares in street name may,
under the applicable rules of the exchange and other self-regulatory
organizations of which the broker/ dealers are members, sign and submit proxies
for such shares and may vote such shares on routine matters,
<PAGE>
which, under such rules, typically include the election of trustees. Abstentions
on the trustee election proposal will have no effect on the result of the
proposal.
Each shareholder who signs and returns a proxy in the form enclosed with
this proxy statement may revoke it at any time prior to its exercise by giving
notice of such revocation to the Company in writing to the Secretary of the
Company, by signing and timely returning a later dated proxy, or by voting in
person at the Annual Meeting. Unless so revoked, the Common Shares represented
by each such proxy will be voted at the meeting and any adjournment thereof.
Presence at the meeting of a shareholder who has signed a proxy but does not
duly revoke it or request to vote in person does not revoke that proxy.
ELECTION OF TRUSTEES
The Board of Trustees presently consists of seven members. All trustees hold
office for a term of one year or until their successors have been elected.
At the Annual Meeting, shareholders will elect a board consisting of seven
trustees. Unless authority to do so is specifically withheld, the persons named
in the accompanying proxy will vote for the election of each of the nominees
named below. Under Maryland law and the Company's Declaration of Trust, the
seven nominees who receive the most votes at the meeting will be elected as
trustees. All of the nominees currently are trustees of the Company.
The name, age, and current principal position(s), if any, with the Company
of each nominee for trustee is as follows:
<TABLE>
<CAPTION>
TRUSTEE
NAME SINCE AGE PRESENT PRINCIPAL POSITION AND OFFICES WITH THE COMPANY
- ----------------------- ------------ --- -------------------------------------------------------------------
<S> <C> <C> <C>
Richard A. May 1992 54 Chairman of the Board, Chief Executive Officer and Trustee
James J. Brinkerhoff 1996 48 Trustee
Patrick R. Hunt 1998 45 President, Chief Operating Officer and Trustee
Daniel E. Josephs 1993 67 Trustee
Daniel P. Kearney 1998 59 Trustee
Edward Lowenthal 1996 54 Trustee
Donald E. Phillips 1992 66 Trustee
</TABLE>
RICHARD A. MAY. Mr. May co-founded the Company in 1992 and has served as
principal executive officer and as Chairman of the Board of Trustees of the
Company since its inception. Mr. May is currently the Chairman of the Board and
Chief Executive Officer of the Company. In 1986, Mr. May co-founded Equity
Partners, Ltd. (the "Advisor") and from 1987 until April 1, 1996, Mr. May was an
officer and shareholder of the Advisor. Mr. May is a licensed real estate broker
in the States of Illinois and Indiana and holds several inactive National
Association of Securities Dealers, Inc. licenses. He is also a member of the
National Association of Real Estate Investment Trusts ("NAREIT"). Mr. May
received his Bachelor's Degree in mechanical engineering from the University of
Illinois and received his MBA degree from The University of Chicago.
JAMES J. BRINKERHOFF. Mr. Brinkerhoff has served as a member of the Board
of Trustees since August 1996. Mr. Brinkerhoff is Executive Vice President, of
Fortis Advisers, Inc. ("Fortis Advisers"), the New York-based investment
management affiliate of Fortis, Inc. Prior to joining Fortis Advisers in 1994,
he was Senior Vice President and Portfolio Manager with Aldrich, Eastman &
Waltch, Inc. ("AEW"), a Boston-based pension fund advisor. While at AEW, Mr.
Brinkerhoff was responsible for managing the United States Real Estate Portfolio
of the Church Commissioners for England. From 1983 to 1993, he was an officer
and partner of Chesterton International, a London-based real estate adviser,
where he was responsible for the creation and management of the Church
Commissioners' United States Real Estate Portfolio. Mr. Brinkerhoff received his
MBA degree from the Wharton School, University of Pennsylvania, and received his
Bachelor's Degree from Boston University. He is a full member of the Urban Land
Institute.
2
<PAGE>
PATRICK R. HUNT. Mr. Hunt, President and Chief Operating Officer, joined
the Company in August 1997 and has general supervisory responsibility for the
Company's operating activities. From 1983 until August 1997, Mr. Hunt was
employed by Jones Lang LaSalle (formerly LaSalle Partners), a Chicago-based
provider of international real estate services. At Jones Lang LaSalle, Mr. Hunt
most recently served as managing director of portfolio management and client
servicing of Jones Lang LaSalle's commingled fund investments. Prior to that, he
served as Administrative Head of Jones Lang LaSalle's Los Angeles corporate
office. From 1975 to 1983, Mr. Hunt was employed by Harris Trust and Savings
Bank in Chicago, where he served as a Vice President in the Corporate Banking
Department. Mr. Hunt is a member of the Pension Real Estate Association and
NAREIT. He received his Bachelor's Degree from Northwestern University and
received his MBA degree from The University of Chicago.
DANIEL E. JOSEPHS. Mr. Josephs has served as a member of the Board of
Trustees since March 1993. Mr. Josephs is currently an independent business
consultant. From 1985 through 1995, Mr. Josephs served as the President, Chief
Operating Officer and Director of Dominick's Finer Foods of Northlake, Illinois,
a major Chicago-area retail grocery company. Mr. Josephs currently serves on the
Board of Trustees of Options for People, Inc., a Chicago-area non-profit
concern. Mr. Josephs received his Bachelor's Degree from Northwestern University
and received his MBA degree from The University of Chicago.
DANIEL P. KEARNEY. Mr. Kearney has served as a member of the Board of
Trustees since April 1998. Mr. Kearney is currently an independent financial
consultant. From 1990 through February 1998, Mr. Kearney was employed by Aetna
Inc. He most recently served as Executive Vice President and Chief Investment
Officer of Aetna Inc. and as President of Aetna Retirement Services. From 1989
to 1990, Mr. Kearney was President and Chief Executive Officer of the Resolution
Trust Corporation Oversight Board. From 1988 to 1989, Mr. Kearney was a
Principal of AEW. Prior to joining AEW, Mr. Kearney was a Managing Director of
Salomon Brothers Inc. Mr. Kearney currently serves as a member of the Board of
Directors of MBIA, Inc., a municipal bond financial guarantee company that is
listed on the New York Stock Exchange ("NYSE"). Mr. Kearney received his
Bachelor's Degree and Master's Degree from Michigan State University and
received his JD degree from The University of Chicago Law School.
EDWARD LOWENTHAL. Mr. Lowenthal has served as a member of the Board of
Trustees since August 1996. Mr. Lowenthal was a Founder, Trustee and President
of Wellsford Residential Property Trust ("WRP"), a NYSE-listed multi-family REIT
that was acquired by Equity Residential Properties Trust ("Equity Residential"),
a publicly traded apartment property REIT, on May 30, 1997. Upon completion of
Equity Residential's acquisition of WRP, Mr. Lowenthal (1) joined the Board of
Trustees of Equity Residential and (2) became President and a director of
Wellsford Real Properties Inc., a real estate company that is listed on the
American Stock Exchange. Mr. Lowenthal is a member of the Board of Governors of
NAREIT. Mr. Lowenthal currently serves as a member of the Boards of Directors of
Omega Healthcare Investors, Inc., Omega Worldwide, Inc. and Corporate
Renaissance Partners. He received his Bachelor's Degree from Case Western
Reserve University and received his JD degree from Georgetown University Law
Center.
DONALD E. PHILLIPS. Mr. Phillips has served as a member of the Board of
Trustees since September 1992. Mr. Phillips is currently retired. From 1960
until 1980, Mr. Phillips served as a corporate executive in a variety of
capacities for International Minerals & Chemicals Corporation of Northbrook,
Illinois and, from 1976 to 1980, he was Group President & CEO of IMC Industry
Group, Inc. ("IMC"), a chemical and minerals firm. From 1980 until 1988, he
served as Group President and CEO of Pitman Moore, Inc., then a wholly owned
subsidiary of IMC. Mr. Phillips currently serves as Chairman of the Board of
Directors of Synbiotics Corporation and is also a member of the Board of
Directors of Potash Corporation. Mr. Phillips received his Bachelor's Degree
from Mississippi College and received his MBA degree from the University of
Mississippi. He is also a graduate of the Executive Program in Business
Administration in the Graduate School of Business, Columbia University and he is
a recipient of an Honorary Doctor of Laws degree from Mississippi College.
3
<PAGE>
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT ALL SHAREHOLDERS VOTE
"FOR" THE ELECTION AS A TRUSTEE OF EACH OF THE NOMINEES SET FORTH ABOVE.
COMMITTEES OF THE BOARD OF TRUSTEES
The Company has standing Audit, Compensation, Nominating and Finance
Committees.
AUDIT COMMITTEE. The Audit Committee was established by the Board of
Trustees in 1993 and is responsible for making recommendations concerning the
engagement of independent public accountants, reviewing with the independent
public accountants the plans and results of the audit engagement, approving
professional services provided by the independent public accountants,
considering the range of audit and non-audit professional fees and reviewing
with the independent accountants and management, the adequacy of the Company's
internal accounting controls. The Audit Committee is required to be comprised of
two or more members of the Board of Trustees who are not also employees of the
Company (each, an "Independent Trustee"). The current members of the Audit
Committee are Messrs. Phillips (Chairman), Brinkerhoff and Josephs.
COMPENSATION COMMITTEE. The Compensation Committee was established by the
Board of Trustees in 1995 and is responsible for establishing remuneration
levels for executive officers of the Company and administering the 1997 Equity
and Performance Incentive Plan (the "1997 Incentive Plan") and any other
incentive programs. The Compensation Committee is required to be comprised of
three or more Independent Trustees. The Compensation Committee currently
consists of Messrs. Josephs (Chairman), Lowenthal and Phillips.
NOMINATING COMMITTEE. The Nominating Committee was established by the Board
of Trustees in 1997 and is responsible for recommending criteria for membership
on the Board; soliciting potential Board candidates when there is a need to fill
a current or future Board position; proposing to the full Board recommendations
to fill vacant positions on the Board; and considering and recommending to the
full Board the types and functions of Board committees. The Nominating Committee
is required to be comprised of three or more independent Trustees. The
Nominating Committee currently consists of Messrs. Brinkerhoff (Chairman),
Josephs and Kearney. The Committee has adopted the policy that it will consider
nominees recommended by shareholders. Any such nominations should be submitted
to the Committee through a written recommendation addressed to the Secretary of
the Company.
FINANCE COMMITTEE. The Finance Committee was established by the Board of
Trustees in 1998 and is responsible for reviewing management proposals and
making recommendations to the Board regarding matters related to the debt and
equity capitalization of the Company, dividend policy and other finance matters.
The Finance Committee currently consists of Messrs. May (Chairman), Kearney and
Lowenthal
During 1998, 13 meetings of the Board of Trustees were held, two meetings of
the Audit Committee were held, six meetings of the Compensation Committee were
held, two meetings of the Nominating Committee were held, and four meetings of
the Finance Committee were held. All trustees attended at least 75%, in the
aggregate, of the number of meetings of the Board of Trustees and the committees
of which they were members during their periods of service as trustees and
committee members during 1998.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
trustees and executive officers, and holders of 10% or more of the outstanding
Common Shares to file an initial report of ownership (Form 3) and reports of
changes of ownership (Forms 4 and 5) of Common Shares with the Securities and
Exchange Commission. Such persons are required to furnish the Company with
copies of all Section 16(a) forms that they file. Based solely upon a review of
these filings and written representations from the Company's trustees and
executive officers that no other reports were required, the Company notes that
the following Section 16(a) reports related to 1998 were delinquent: Richard L.
Rasley, the Company's Executive Vice President and Secretary, reported on a Form
4 one transaction that should have been reported on an earlier Form 4 and
Richard A. May, the Company's Chief Executive Officer, reported on a Form 5 one
transaction that should have been reported on an earlier Form 4.
EXECUTIVE COMPENSATION
COMPENSATION OF TRUSTEES
Members of the Board of Trustees and committees thereof who are Independent
Trustees receive an annual retainer fee of $13,000 plus fees of $1,000 for each
day on which they attend an in-person meeting of the Board of Trustees, $500 for
each day on which they attend an in-person meeting of a committee of the Board
of Trustees and $250 for each day on which they participate telephonically in a
meeting of the Board of Trustees or a committee thereof. The Company reimburses
each trustee for expenses incurred in attending meetings. In addition, Trustees
who are not also officers of the Company are currently eligible to be granted
options to acquire up to 5,000 Common Shares under the Amended and Restated
Option Plan for Independent Trustees (the "Trustee Plan") at a price equal to
the fair market value of the Common Shares as of the end of each fiscal year. As
compensation for services performed during 1998, each of Messrs. Brinkerhoff,
Josephs, Kearney, Lowenthal and Phillips received an option to purchase 5,000
Common Shares at an exercise price of $15.775 per share. Such options were
exercisable when granted and will expire on the earlier of December 31, 2008 or
six months after a trustee is removed by the shareholders for cause pursuant to
the Company's Bylaws. Mr. Brinkerhoff assigned his 1998 share purchase option to
Fortis Benefits Insurance Company ("FBIC"), the parent company of his employer.
During the period of 30 days after any "change in control," a person
entitled to exercise an option granted under the Trustee Plan may elect to
require the Company to purchase all or any portion of such option at a purchase
price equal to the difference between the fair market value and the option
exercise price. For purposes of the Trustee Plan, a "change in control" means
(1) certain consolidations or mergers of the Company; (2) certain sales of all
or substantially all of the assets of the Company; (3) the filing of a Schedule
13D or Schedule 14D-1 under the Exchange Act disclosing that any person had
become the beneficial owner of 20% or more of the issued and outstanding shares
of voting securities of the Company; (4) certain filings of reports or proxy
statements with the Securities and Exchange Commission; or (5) during any period
of two consecutive years, individuals who at the beginning of any such period
constitute the Board of Trustees cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's shareholders, of each new member of the Board of Trustees was approved
by a vote of at least two-thirds of the members of the Board of Trustees then
still in office at the beginning of any such period.
As cash compensation for their services in 1998, the Independent Trustees
earned the following: Mr. Brinkerhoff $24,000; Mr. Josephs, $24,625; Mr. Kearney
$9,250; Mr. Lowenthal $24,000; and Mr. Phillips, $24,625. Mr. Brinkerhoff
assigned the cash compensation earned for such services to FBIC.
COMPENSATION OF EXECUTIVE OFFICERS
The table below sets forth the summary compensation of the Company's Chief
Executive Officer and the four other most highly paid executive officers of the
Company (the "Named Executive Officers") based on the aggregate compensation
paid to such officers in 1998. Consequently, a portion of the 1996
5
<PAGE>
compensation noted herein includes compensation paid to the Named Executive
Officers by the Advisor. A portion of the option to purchase Common Shares
granted to the Named Executive Officers in 1996 were originally granted to the
Advisor pursuant to various services agreements and the Advisor subsequently
transferred such options to its employees as permitted by the Advisor's stock
option plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ RESTRICTED UNDERLYING
SALARY SHARE AWARDS OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS ($) ($)(4)(2) SARS (#)(3) COMPENSATION ($)
- -------------------------------- --------- ------------ ----------- --------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. May 1998 236,250 162,422 -- 34,700 11,636
Chief Executive Officer 1997 225,000 112,500 -- 320,000 4,152
1996 180,000 72,000 -- 49,578 4,038
Patrick R. Hunt 1998 216,300 148,706 -- 31,950 7,968
President (5) 1997 109,459 32,658 -- 223,000 1,845
Richard L. Rasley 1998 131,250 72,188 -- 19,450 6,700
Executive Vice President 1997 125,000 50,000 -- 172,000 4,090
1996 115,000 34,500 -- 20,785 4,007
Raymond M. Braun 1998 131,250 90,234 102,852 19,450 7,860
Chief Investment Officer 1997 125,000 62,500 -- 149,000 4,328
1996 105,000 36,750 222,852 18,800 4,224
James Hicks 1998 131,250 72,188 -- 19,450 7,896
Chief Financial Officer 1997 125,000 43,750 -- 149,000 4,340
1996 100,000 30,000 51,432 14,800 4,213
</TABLE>
- ------------------------
(1) The salary information represents the individual's salary compensation paid
(a) by the Company in 1998, 1997 and in 1996 for the period beginning on
April 1, 1996 and ending December 31, 1996, and (b) by the Advisor for the
period from January 1, 1996 to April 1, 1996.
(2) Effective April 1, 1996 and in connection with the Merger, Messrs. Rasley,
Braun and Hicks received 8,571, 8,571 and 4,286 restricted Common Shares
("Restricted Shares"), respectively, as an inducement to accept employment
with the Company. Effective May 1, 1996, Mr. Braun received an additional
10,000 Restricted Shares as an inducement to remain employed with the
Company. Such Restricted Shares were valued at prices equal to the fair
market value on the dates of grant, which in all cases was deemed to be
$12.00. On April 1, 1997, the restrictions lapsed with respect to 4,285
Restricted Shares held by Messrs. Rasley and Braun and with respect to 2,143
Restricted Shares held by Mr. Hicks. On May 13, 1997, upon the closing of
the initial public offering of Common Shares, the restrictions lapsed with
respect to the remaining Restricted Shares held by Messrs. Rasley and Hicks
and with respect to 4,286 Restricted Shares held by Mr. Braun. As of
December 31, 1998, the number of Restricted Shares held by Mr. Braun was
10,000. As of December 31, 1998, the value of the Restricted Shares held by
Mr. Braun was $159,000, based upon the closing price of the Common Shares on
the NYSE Composite Tape on December 31, 1998 ($15.69). Dividends are paid on
all the Restricted Shares held by Mr. Braun.
(3) Options granted during 1998, 1997 and 1996 were issued at exercise prices
greater than or equal to the fair market value of Common Shares on the dates
of grant. Since May 8, 1997, the first day the Common Shares were listed on
the NYSE, fair market value has been determined by reference to the closing
price of the Common Shares on the NYSE Composite Tape on the last trading
day prior to the effective date of the grant. Prior to May 8, 1997, fair
market value of the Common Shares was determined by the Board of Trustees.
Options to purchase 17,578, 6,785, 2,800 and 2,800 Common Shares deemed to
have been granted to Messrs. May, Rasley, Braun and Hicks, respectively, in
1996
6
<PAGE>
represent options to purchase Common Shares that were assigned to such
individuals by the Advisor during 1995 from a pool of options that had been
granted to the Advisor by the Company pursuant to service agreements during
the period from the Company's organization through December 31, 1995. Such
options were exercisable on the date of grant. Options granted in 1996 under
the Company's 1996 Option Plan, which plan was replaced in its entirety by
the 1997 Incentive Plan, and in 1997 under the 1997 Incentive Plan expire
upon the earliest of (a) ten years following the date of grant, (b) one year
after the termination of the optionee's employment due to death or
disability or (c) three months after the termination of the optionee's
employment for any other reason. One-third of the options granted in 1996
became exercisable on September 24, 1997, and September 24, 1998 and the
balance of such options (one-third of the shares covered thereby) become
exercisable on September 24, 1999. One-half of the options granted on
February 27, 1997 became exercisable on September 11, 1997 and the balance
of such options will became exercisable August 27, 1998. One-half of the
options granted on December 31, 1997 became exercisable on the date of grant
and such options will become exercisable in full on June 30, 1999. One third
of the options granted in 1998 become exercisable on the anniversary of the
grant date, November 18, in each of the years 1999, 2000 and 2001. All such
options become exercisable in full upon a "change in control" of the Company
(defined substantially the same as under the Trustee Plan, see
"--Compensation of Trustees" herein).
(4) These amounts represent group life and health insurance premiums paid by the
Advisor and the Company (for 1996) and the Company (for 1997 and 1998). In
addition, the amounts include payments made by the Company during 1998 for
financial planning services.
(5) Mr. Hunt became an employee of the Company in September 1997; therefore, no
information is presented for 1996. Mr. Hunt received $43,469 of additional
compensation in 1997 in connection with his accepting employment with the
Company.
OPTION/SAR GRANTS IN FISCAL 1998
The following table sets forth certain information regarding share purchase
options granted to and exercised by the Named Executive Officers during 1998 and
the share purchase options held by them as of December 31, 1998. No SARs were
granted by the Company during 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS/SARS STOCK PRICE APPRECIATION
OPTIONS/SARS GRANTED TO EXERCISE FOR OPTION TERM (2)($)
GRANTED EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME (#)(1) FISCAL YEAR SHARE ($) DATE 5% 10%
- ---------------------- ------------- ----------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. May 34,700 13.10% 16.25 11/17/08 354,617.96 898,671.53
Patrick R. Hunt 31,950 12.06% 16.25 11/17/08 326,514.23 827,451.16
Richard L. Rasley 19,450 7.34% 16.25 11/17/08 198,770.01 503,722.23
Raymond M. Braun 19,450 7.34% 16.25 11/17/08 198,770.01 503,722.23
James Hicks 19,450 7.34% 16.25 11/17/08 198,770.01 503,722.23
</TABLE>
- ------------------------
(1) Such options were granted on November 18, 1998 under the 1997 Incentive
Plan. Options on one-third of the shares covered thereby become exercisable
on the anniversary of the date of the grant, November 18, in each of the
years 1999, 2000 and 2001. Such options expire upon the earliest of: (a)
November 17, 2008, (b) one year after the termination of the optionee's
employment due to death or disability or (c) three months after the
termination of the optionee's employment for any other reason. All such
options become exercisable in full upon a "change in control" of the Company
(defined substantially the same as under the Trustee Plan, see
"--Compensation of Trustees" herein).
(2) Based on a ten-year term and annual compounding, the 5% and 10% calculations
are set forth in compliance with Securities and Exchange Commission rules.
The appreciation calculators are not necessarily indicative of future values
of options or of the Common Shares.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning all share purchase
options exercised during fiscal 1998 and unexercised share purchase options held
at the end of that fiscal year by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
12/31/98 IN-THE- MONEY OPTIONS/SARS
SHARES VALUE ---------------------------- AT 12/31/98 ($)(1)
ACQUIRED ON REALIZED EXERCISABLE UNEXERCISABLE --------------------------
NAME EXERCISE (#) ($) (# OF SHARES) (# OF SHARES) EXERCISABLE UNEXERCISABLE
- ----------------------------- ------------ ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. May............... 173,166 28,665 145,000 57,867 -- 28,668
Patrick R. Hunt.............. 75,000 -- 11,500 118,450 -- --
Richard L. Rasley............ 79,000 -- 90,667 31,117 12,543 12,543
Raymond M. Braun............. -- -- 171,667 31,783 94,204 14,333
James Hicks.................. 4,000 10,750 142,000 30,450 -- 10,750
</TABLE>
- --------------------------
(1) Value based on the closing price of a Company Common Share of $15.69 on
December 31, 1998, as reported on the NYSE Composite Tape, minus the
exercise price.
EMPLOYMENT AGREEMENTS
The Company and each of the Named Executive Officers are parties to
employment agreements dated July 17, 1998 (the "Employment Agreements").
Pursuant to the Employment Agreements, each Named Executive Officer has agreed
to serve as an executive officer of the Company for a specified term, which for
Messrs. May and Hunt is through June 30, 2001 and for Messrs. Rasley, Hicks, and
Braun is through June 30, 2000. The term of each Employment Agreement will be
automatically extended for an additional year unless earlier terminated. Each of
the Named Executive Officers has agreed to refrain from engaging in certain
defined "competitive activities" for a one year period following any termination
for which he has received a payment under his Employment Agreement.
Each Employment Agreement provides for compensation to be paid to the Named
Executive Officers under four different scenarios. First, if the Named Executive
Officer's employment is terminated for any reason other than for cause, death,
or permanent disability, or if the Named Executive Officer terminates his
employment for Good Reason, the Named Executive Officer will be entitled to
receive a lump sum payment equal to two times the sum of: (1) his highest annual
base pay during the term of the Employment Agreement and (2) his most recent
bonus percentage multiplied by such annual base pay, and, for a period of 12
months following the date of his termination the Company will continue to
provide the Named Executive Officer with employee benefits that are
substantially similar to those he was receiving or entitled to receive prior to
such date. Second, if the Named Executive Officer's employment is terminated due
to his permanent disability, the Named Executive Officer will be entitled to
receive a lump sum payment equal to two times the sum of: (1) his highest annual
base pay during the term of the Employment Agreement and (2) his most recent
bonus percentage multiplied by such annual base pay, and, for a period of 24
months following his termination date the Company will continue to provide the
Named Executive Officer with employee benefits that are substantially similar to
those he was receiving or entitled to receive prior to such date. Third, if the
Named Executive Officer's employment is terminated due to his death, his estate
shall be entitled to receive a lump sum payment equal to two times the sum of:
(1) the Named Executive Officer's highest annual base pay during the term of the
Employment Agreement and (2) his most recent bonus percentage multiplied by such
annual base pay. Fourth, in the event there has been a Change in Control, if the
Named Executive Officer's employment is terminated for any reason other than for
cause, including as a result of the executive's death and the executive's
permanent disability, during a 12-month severance period following any such
Change in Control, each of Messrs. Rasley, Braun and Hicks will be entitled to
receive a lump sum payment equal to two times the sum of: (1) his respective
8
<PAGE>
highest annual base pay during the term of the Agreement and (2) his most recent
bonus percentage multiplied by such annual Base Pay, and each of Messrs. May and
Hunt will be entitled to receive a lump sum payment equal to three times the sum
of: (1) his respective highest annual Base Pay during the term of the Agreement
and (2) his most recent bonus percentage multiplied by such annual Base Pay. In
addition, for a period of 12 months following his termination date the Company
will continue to provide the Named Executive Officer with employee benefits that
are substantially similar to those he was receiving or entitled to receive prior
to the termination date. Any payments made by the Company pursuant to the
Employment Agreement will be increased in the event the contractual payments to
any of the Named Executive Officers become subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended.
"Good Reason" is defined in the Employment Agreements as (1) the executive's
resignation or retirement is requested by the Company other than for cause; (2)
any significant change in the nature or scope of the executive's duties or level
of authority and responsibility; (3) any reduction in the executive's applicable
total compensation or benefits other than a reduction in compensation or
benefits applicable to substantially all of the Company's employees; (4) a
breach by the Company of any other material provision of the change in control
agreement; or (5) a reasonable determination by the executive that, as a result
of a change in control of the Company and a change in circumstances thereafter
significantly affecting the executive's position, the executive is unable to
exercise the prior level of the executive authority and responsibility. A
"Change in Control" is deemed to occur under the Employment Agreements if (1)
any person becomes the beneficial owner of 50% or more of the outstanding Common
Shares, (2) during any 24-month period, individuals who at the beginning of such
period constitute the Board of Trustees (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Trustees; provided,
however, that any individual becoming a trustee during such period whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the trustees then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding for this purpose any such individual whose
initial assumption of office is in connection with an actual or threatened
contest for the election of trustees (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934, or any
successor rule) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Trustees, (3)
certain consolidations or mergers of the Company occur, (4) certain sales,
leases, exchanges or other transfers of all, or substantially all, of the assets
of the Company or (5) if the Company files a report or proxy statement with the
Securities and Exchange Commission that a change in control of the Company has
occurred or will occur in the future pursuant to any then-existing contract or
transaction.
LIMITED PURPOSE EMPLOYEE LOAN PROGRAM
The Company has established the Limited Purpose Employee Loan Program (the
"Employee Loan Program") for the purpose of attracting and retaining key
employees by facilitating their ability to implement the Company's long term
incentive programs. Under the Employee Loan Program, the Compensation Committee
has authorized the Company to make loans and loan guarantees to, or for the
benefit of any employee of the Company to facilitate the implementation of the
Company's long- term incentive plans. Under the Employee Loan Program, subject
to certain limitations that became effective as of March 1, 1998, employees may
borrow to fund up to 100% of (1) the cost of exercising share purchase options
held by the employee or (2) individual income tax obligations which may arise as
a result of aspects of the implementation of the Company's long-term incentive
plans. Loans under the Employee Loan Program bear interest payable quarterly at
the interest rate for borrowings under the Company's bank credit facility, are
recourse to the employees and are secured by a pledge of the shares acquired by
the employee through this program. Such loans expire on (1) the earlier of the
fifth anniversary of the loan date and (2) the date that is 60 days following
the termination of employment. As of December 31, 1998,
9
<PAGE>
employees had acquired an aggregate of 819,323 Common Shares through this
program with aggregate outstanding loan amounts of $12,234,797 due the Company.
Mr. May borrowed $2,832,756 in 1998 under the Employee Loan Program, all of
which was outstanding at December 31, 1998. The proceeds of Mr. May's loan were
used to pay the purchase price for options covering 173,166 Common Shares and
withholding taxes related to the exercise of the share purchase options. Mr.
Hunt borrowed $1,274,648 in 1998 under the Employee Loan Program, all of which
was outstanding at December 31, 1998. The proceeds of Mr. Hunt's loan were used
to pay the purchase price for options covering 75,000 Common Shares and
withholding taxes related to the exercise of the share purchase options. Mr.
Rasley borrowed $1,264,000 in 1998, all of which was outstanding at December 31,
1998. The proceeds of Mr. Rasley's loan were to pay the exercise price for
options covering 79,000 Common Shares. Mr. Hicks borrowed $52,000 in 1998, all
of which was outstanding at December 31, 1998. The proceeds of Mr. Hicks' loan
were used to pay the exercise price for options covering 4,000 Common Shares.
The following table summarizes the borrowings made by the Named Executive
Officers during 1998.
<TABLE>
<CAPTION>
SHARES ACQUIRED
TOTAL AMOUNT WITH THE
BORROWINGS OUTSTANDING AS OF PROCEEDS OF THE
NAME DURING 1998 DECEMBER 31, 1998 EMPLOYEE LOANS
----------------------- ------------ ----------------- ---------------
<S> <C> <C> <C>
Richard A. May................................................. $ 2,832,756 $ 2,832,756 173,166
Patrick R. Hunt................................................ $ 1,274,648 $ 1,274,648 75,000
Richard L. Rasley.............................................. $ 1,264,000 $ 1,264,000 79,000
James Hicks.................................................... $ 52,000 $ 52,000 4,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Josephs (Chairman),
Lowenthal and Phillips. None of the members of the Compensation Committee is or
has ever been an officer or employee of the Company or had any other
relationship with the Company, except as a member of the Board of Trustees and
as a shareholder.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1998 the Compensation Committee of the Board of Trustees (the
"Committee") was comprised of Messrs. Josephs (Chairman), Lowenthal and
Phillips. The Board of Trustees has delegated to the Committee the authority to
determine the compensation of the Company's executive officers and other key
management employees. The Committee's primary objective is to ensure that the
Company's compensation policies attract, motivate and retain qualified managers
in a manner consistent with maximization of shareholder value. The Company's
compensation is structured philosophically on a "pay for performance" foundation
and thus recognizes the desirability of compensation directed specifically to
motivate and reward executive managers for achieving both short and long-term
performance objectives. Compensation is comprised of three major components:
base salary, incentive bonus and stock options.
Until April 1, 1996, the Company had no employees and all services were
provided by the Advisor pursuant to various fee-for-service agreements. The
information reported under "--Compensation of Executive Officers" represents the
aggregate compensation paid to the Named Executive Officers (1) by the Company
for the years ended December 31, 1998 and December 31, 1997 and for the period
from April 1, 1996 to December 31, 1996 and (2) by the Advisor for the period
from January 1, 1996 to April 1, 1996.
10
<PAGE>
BASE SALARY
Base salaries are determined in the context of an individual's
responsibilities and competitive benchmarking. Base salaries are reviewed
annually and adjusted on the basis of individual performance and competitive
considerations. In making base salary adjustments, the Committee considers an
individual's performance, especially the effective discharge of assigned
responsibilities and the leadership and motivation provided to subordinates. In
making salary decisions for 1998, the Committee considered the effects of
inflation and certain subjective criteria, including the Committee's evaluation
of each executive officer's performance of his duties.
In 1998, the Company offered an annual incentive bonus compensation program
for the executive officers that was designed to motivate short-term performance.
Participants in the program were entitled to an annual incentive bonus based
upon (1) the relationship of the Company's actual funds from operations ("FFO")
compared to budgeted FFO for the 1998 fiscal year; and (2) the individual's
attainment of personal objectives. Seventy-five percent of each participant's
bonus was to be determined with reference to the FFO component and the remaining
25% of the bonus was to be determined with reference to personal goal
attainment. Personal goals generally specified attainment of particular
objectives or management responsibilities for the participant. The Committee
believes that the relatively heavy weight assigned to attainment of the
Company's budgeted FFO was appropriate in the light of the priority of
maximizing shareholder value and the desirability of emphasizing teamwork in the
management of the Company.
Under the 1998 incentive compensation program, each executive officer was
assigned "threshold," "target" and "maximum" bonuses that were a fixed
percentage of base salary. These percentages were 25%, 50% and 100%,
respectively, for Messrs. May, Hunt and Braun; and 25%, 40% and 80%,
respectively, for Messrs. Rasley and Hicks. Each participant was entitled to
receive at least 75% of the designated bonus percentage based upon the Company's
achievement of FFO budgets established by the Committee. If the threshold FFO
was not met, no bonus would be paid; if the threshold FFO but not the target FFO
was met, the threshold bonus would be paid; and if the target FFO was met or
exceeded, the target bonus would be paid and the bonus would be increased on a
linear basis up to the maximum based upon a scale established by the Committee.
In 1998 the Committee determined that the target FFO had been exceeded but the
maximum had not been reached. In addition, the Committee concluded that each of
the executive officers had met their personal objectives. Therefore, the
Committee determined that each participant in the incentive compensation program
should receive an amount an amount more than his or her respective target bonus
but less than his or her respective maximum bonus.
SHARE PURCHASE OPTION GRANTS
The Committee seeks to ensure that the executive officers of the Company
focus attention on long-term objectives, including maximization of value for
shareholders. The Committee believes that share purchase options are an
appropriate compensation tool to motivate and reward executive managers for
long-term performance. The Committee believes that the price of the Common
Shares is an appropriate index of long-term value creation by the management
group. In 1998, the Committee granted an aggregate of 200,000 performance-based
options to purchase Common Shares to executive officers. See "--Compensation of
Executive Officers--Share Purchase Option Grants in Fiscal 1998."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. May's salary compensation as reported under "Executive
Compensation--Summary Compensation Table" for 1998 was $236,250, which was 5%
higher than the corresponding amount reported for 1997. In making such
determination, the Committee considered, among other things, competitive
benchmarking and the Company's performance in the preceding twelve-month period
compared to budgeted performance.
11
<PAGE>
Mr. May participated in the annual incentive bonus compensation program and
his target bonus was 50% of his base salary. Consistent with the approach
described above regarding incentive bonuses for other executive officers, and
based upon the determination that the target FFO had been exceeded, Mr. May
received a bonus payout for 1998 equal to 68.75% of his base salary. Mr. May
also received performance-based share purchase options covering 34,700 Common
Shares. See "--Compensation of Executive Officers--Stock Option Grants in Fiscal
1998."
LIMITATIONS ON DEDUCTIBILITY
In 1993, changes were made to the federal corporate income tax law that
limit the ability of public companies to deduct compensation in excess of $1
million paid annually to each of the chief executive officer and the other four
most highly compensated executive officers. There are exemptions from this
limit, including compensation that is based on the attainment of performance
goals that are established by the Committee and approved by the Company's
shareholders. It is the Committee's policy to seek to qualify executive
compensation for deductibility where practicable and to the extent that such
policy is consistent with the Company's overall objectives in attracting,
motivating and retaining its executives. The Company believes that, based upon
current compensation levels, compensation paid in 1998 should be fully
deductible.
THE COMPENSATION COMMITTEE DURING 1998
Daniel E. Josephs (Chairman)
Edward Lowenthal
Donald E. Phillips
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative return
on the Common Shares with that of the Standard & Poor's 500 Stock Index (the
"S&P 500 Index") and the National Association of Real Estate Investment Trusts
Equity Index (the "NAREIT Equity Index") at May 8, 1997 (the first day the
Common Shares were listed on the NYSE) and the last day of each quarter of 1998
and 1997 subsequent to May 8, 1997. The graph assumes a $100 investment and
reinvestment of dividends.
<TABLE>
<CAPTION>
GREAT LAKES REIT S&P 500 INDEX NAREIT EQUITY INDEX
<S> <C> <C> <C>
05-8-97 $ 100.00 $ 100.00 $ 100.00
06-97 108.00 107.89 107.94
09-97 126.36 115.45 120.70
12-97 131.63 118.50 122.81
03-98 132.28 134.35 122.24
06-98 121.78 138.25 116.63
09-98 118.19 123.99 104.36
12-98 113.57 149.83 101.31
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Shares as of March 1, 1999 by (1) each trustee, (2) each of
the Named Executive Officers, (3) all trustees and executive officers of the
Company as a group and (4) each other person who is known by the Company to be
the beneficial owner of 5% or more of the Company's outstanding Common Shares.
Unless otherwise indicated in a footnote, all such Common Shares are owned
directly, and the indicated person has sole voting and investment power.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OWNED
- ------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Morgan Stanley Dean Witter & Co. (2) ................................................ 2,520,600 15.28%
1585 Broadway
New York, NY 10036
Fortis Benefits Insurance Co. (3) ................................................... 1,015,000 6.15%
One Chase Manhattan Plaza
New York, NY 10005
Nike Securities L.P. (4) ............................................................ 915,059 5.55%
1001 Warrenville Road
Lisle, IL 60532
Raymond M. Braun (5)................................................................. 209,838 1.26%
James J. Brinkerhoff................................................................. -- *
James Hicks (6)...................................................................... 176,286 1.06%
Patrick R. Hunt (7).................................................................. 211,500 1.28%
Daniel E. Josephs (8)................................................................ 69,356 *
Daniel P. Kearney (9)................................................................ 6,500 *
Edward Lowenthal (10)................................................................ 25,630 *
Richard A. May (11).................................................................. 649,604 3.90%
Donald E. Phillips (12).............................................................. 53,980 *
Richard L. Rasley (13)............................................................... 289,346 1.74%
All trustees and officers as a group (11 persons) (14)............................... 1,692,040 9.84%
</TABLE>
- ------------------------
* Less than 1%
(1) All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934.
(2) As reported in the most recent Schedule 13G filed with the Securities and
Exchange Commission, by Morgan Stanley Dean Witter & Co., an investment
advisor registered under Section 203 of the Investment Advisors Act of 1940
("MSDW"), and Morgan Stanley Dean Witter Investment Management Inc., an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940 ("MSIM"), (i) MSDW has shared voting power as to 1,938,300
Common Shares and shared dispositive power as to 2,520,600 Common Shares and
(ii) MSIM has shared voting power as to 1,319,000 Common Shares and shared
dispositive power as to 1,896,300 Common Shares. Also includes options
exercisable within 60 days of March 1, 1999 to purchase 5,000 Common Shares,
which options were granted to a former trustee of the Company as trustee
compensation and assigned by such trustee to MSIM.
(3) Based on the most recent Schedule 13D on file with the Securities and
Exchange Commission. Includes options exercisable within 60 days of March 1,
1999 to purchase 15,000 Common Shares, which options were granted to Mr.
Brinkerhoff as trustee compensation and assigned by Mr. Brinkerhoff to FBIC
14
<PAGE>
(4) As reported in a Schedule 13G filed with the Securities and Exchange
Commission by Nike Securities L.P., ("NLP"), a broker-dealer registered
under section 15 of the Securities Exchange Act of 1934, and First Trust
Advisers, L.P., ("FTALP") a investment adviser registered in accordance
under Section 203 of the Investment Advisors Act of 1940, and Nike
Securities Corporation ("NSC"), general partner of NLP and FTALP, each of
NLP, FTALP and NSC have shared voting and dispositive power as to 915,059
Common Shares.
(5) Includes options exercisable within 60 days of March 1, 1999 to purchase
171,667 Common Shares.
(6) Includes options exercisable within 60 days of March 1, 1999 to purchase
142,000 Common Shares.
(7) Includes options exercisable within 60 days of March 1, 1999 to purchase
86,500 Common Shares.
(8) Includes options exercisable within 60 days of March 1, 1999 to purchase
24,000 Common Shares.
(9) Includes options exercisable within 60 days of March 1, 1999 to purchase
5,000 Common Shares.
(10) Includes options exercisable within 60 days of March 1, 1999 to purchase
15,000 Common Shares. Excludes 76,923 Common Shares that are beneficially
owned by Wellsford Karpf Zarrilli Ventures, L.L.C. ("WKZV"). Mr. Lowenthal
is a member of and may be deemed to beneficially own the 76,923 shares of
Common Shares that are beneficially owned by WKZV, however, Mr. Lowenthal
disclaims beneficial ownership of all such shares.
(11) Includes options exercisable within 60 days of March 1, 1999 to purchase
145,000 Common Shares and 8,824 Indemnification Shares (defined herein under
the caption "Certain Relationships and Related Transactions--Advisor
Relationship") held in escrow pursuant to the terms of the merger of the
Advisor with and into the Company.
(12) Includes options exercisable within 60 days of March 1, 1999 to purchase
18,000 Common Shares.
(13) Includes options exercisable within 60 days of March 1, 1999 to purchase
90,667 Common Shares and 1,765 Indemnification Shares held in escrow
pursuant to the terms of the merger of the Advisor with and into the
Company.
(14) Includes options exercisable within 60 days of March 1, 1999 to purchase an
aggregate of 622,834 Common Shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ADVISOR RELATIONSHIP
From the Company's organization until the completion of the merger of the
Advisor with and into the Company on April 1, 1996, the Advisor provided various
services to the Company pursuant to an Advisory Agreement dated July 2, 1992 as
restated July 1, 1994, relating to the selection, purchase, financing and
operation of the Company's properties, and pursuant to other agreements
regarding property management and offering administration activities.
In connection with the merger of the Advisor with and into the Company, the
shareholders of the Advisor received 100,000 Common Shares, 15,000 of which were
placed in escrow to secure the indemnification obligations of the shareholders
of the Advisor (the "Indemnification Shares"). Indemnification Shares that are
not applied to indemnifiable damages will be distributed to the shareholders of
the Advisor upon the later of (1) April 1, 2001 or (2) the expiration of the
last applicable statute of limitations within which tax-based claims can be
made. In addition, certain employees of the Advisor received Restricted Shares
as an inducement to accept employment with the Company, including 8,571, 8,571
and 4,286 Restricted Shares issued to Messrs. Rasley, Braun and Hicks,
respectively. The restrictions on one-half of the Restricted Shares lapsed on
April 1, 1997 and May 13, 1997 (the closing date of the Company's public
offering of Common Shares), respectively. In addition, effective May 1, 1996,
Mr. Braun received an additional 10,000 Restricted Shares that vest in equal
annual installments on May 1 of each of the years 1999 through 2002 provided
that Mr. Braun is then employed by the Company.
15
<PAGE>
MANAGEMENT LOANS
Pursuant to the Employee Loan Program, an aggregate principal amount of
$9,371,947 in loans made to certain executive officers by the Company was
outstanding at December 31, 1998. Such loans bear interest at the interest rate
of borrowings under the Company's bank credit facility and are payable
quarterly. See "Executive Compensation--Limited Purpose Employee Loan Program"
for a description of such loans.
OTHER MATTERS
The Board of Trustees knows of no business that will be presented at the
Annual Meeting other than the election of seven trustees. Because the Company
did not receive by March 22, 1999 notice of any matter intended to be raised by
a shareholder, proxies will be voted in respect of any other matters as may
properly come before the Annual Meeting in accordance with the recommendation of
the Board of Trustees or, if no such recommendation is given, in the discretion
of the person or persons voting the proxies.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Company's
annual meeting of shareholders (the "2000 Meeting"), which the Company's Bylaws
require be held in May 2000, and to be considered for inclusion in the Company's
proxy and proxy statement related to the 2000 Meeting must be received by the
Secretary of the Company by December 14, 1999.
Any shareholder intending to propose any matter at the 2000 Meeting but not
intending for the Company to include the matter in its proxy statement must
notify the Company by March 20, 2000 of such intention. If the Company does not
receive such notice by that date, the notice will be considered untimely. The
Company's proxy for the 2000 Meeting will grant discretionary authority to the
persons named therein to exercise their voting discretion with respect to any
such matter of which the Company does not receive notice by March 20, 2000.
Any shareholder wishing to submit a proposal at the 2000 Meeting must also
comply with certain provisions of the Company's Declaration of Trust and Bylaws
(collectively, the "Charter Documents"). The Charter Documents require written
notice of any such proposal (and certain other information) to be delivered to
the Secretary of the Company generally not later than 60 days in advance of the
date of the previous year's meeting. The Company will provide (without charge) a
copy of the Charter Documents to any holder of record of Common Shares.
Notices regarding shareholder proposals and requests for copies of the
Charter Documents should be directed to: Secretary, Great Lakes REIT, 823
Commerce Drive, Suite 300, Oak Brook, Illinois 60523.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, ALL
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING FORM
OF PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Trustees,
[SIGNATURE]
Richard L. Rasley
SECRETARY
April 6, 1999
16
<PAGE>
P R O X Y GREAT LAKES REIT
The undersigned shareholder of Great Lakes REIT, a Maryland real estate
investment trust (the "Company"), hereby appoints Richard A. May and Richard L.
Rasley as proxies for the undersigned, with the full power of substitution in
each of them, to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at the Company's Annual Meeting of Shareholders
(the "Annual Meeting") to be held on May 19, 1999 at 10:00 a.m., Central Time,
at The Lodge at McDonald's Corporation Office Campus, 2815 Jorie Boulevard, Oak
Brook, Illinois, and otherwise to represent the undersigned at the Annual
Meeting with all powers possessed by the undersigned if personally present at
the Annual Meeting, and at any and all adjournments or postponements thereof,
upon the following matters that are more fully described in the accompanying
Proxy Statement. The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and the accompanying Proxy Statement and revokes
any proxy heretofore given with respect to the Annual Meeting. The votes
entitled to be cast by the undersigned will be cast in the manner directed
below. If this proxy is executed but no direction is made, the votes entitled to
be cast by the undersigned will be cast for each of the nominees for Trustee,
and in the discretion of the proxy holder on any other matter that may properly
come before the Annual Meeting or any adjournment or postponement thereof.
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<S> <C> <C> <C> <C>
1. ELECTION OF TRUSTEES.
/ / FOR all nominees listed below. (except as marked to the contrary below)
(Instruction: To withhold autority to vote for any individual nominee mark the box next to the nominee's
name below)
/ / Richard A. May / / James J. Brinkerhoff / / Patrick R. Hunt / / Daniel E. Josephs
/ / Daniel P. Kearney / / Edward Lowenthal / / Donald E. Philips
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
2. TO VOTE AND OTHERWISE REPRESENT THE UNDERSIGNED UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF IN THE DISCRETION OF THE PROXY HOLDERS.
</TABLE>
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Number of Shares:
Name of Shareholder:
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Signature of Shareholder(s):
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Date
