ML LEE ACQUISITION FUND L P (Form Type: DEF 14A, Filing Date: 04/29/1997)

PROXY ML-LEE ACQUISITION FUND, L.P. World Financial Center - South Tower New York, New York 10080 This Proxy is solicited on behalf of the Individual General Partners The undersigned hereby appoints THOMAS H. LEE and JOSEPH L. BOWER and each of them as Proxies, each with the power to appoint his substitute, and hereby authorizes each of them to represent and to vote, as designated herein, all units of limited partnership interest ("Units") of the ML-Lee Acquisition Fund, L.P. (the "Fund") held of record by the undersigned on April 15, 1997 at the Annual Meeting of the Limited Partners of the Fund to be held on June 13, 1997 or any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED LIMITED PARTNER. IF THIS PROXY IS SIGNED AND RETURNED WITHOUT SPECIFIC DIRECTION, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. (Continued and to be signed on the reverse side)

<TABLE> <CAPTION> 1. ELECTION OF INDIVIDUAL GENERAL PARTNERS NOMINEES: Vernon R. Alden, Joseph L. Bower, Stanley H. Feldberg, Thomas H. Lee / / FOR ALL / / WITHHOLD ALL To withhold authority to vote for one or more individual nominees write the name or names on this line _________________________________________ NOMINEE: Mezzanine Investments, L.P. <S> <C> <C> <C> <C> 2. ELECTION OF MANAGING GENERAL PARTNER / / FOR / / WITHHOLD FOR AGAINST ABSTAIN 3. Proposal to ratify the 4. In the discretion of such proxies, upon such selection of Price Waterhouse other business as may properly come before LLP as independent accountants the meeting or any adjournment hereof. of the Fund for its fiscal year ending December 31, 1997. / / / / / / </TABLE> / / PLEASE CHECK HERE if you plan to attend the Annual Meeting. Please sign exactly as name appears hereon. When Units are held by joint tenants, both should sign. When signing as attorney, or as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. Signature(s) _________________________ Date ______________ Signature(s)____________________________ _ Date _______________ / / YOUR VOTE IS IMPORTANT. Please complete, sign and return this card as soon as possible. Mark each vote with an X in the box.

ML-LEE ACQUISITION FUND, L.P. NOTICE OF 1997 ANNUAL MEETING OF LIMITED PARTNERS JUNE 11, 1997 To the Limited Partners of ML-LEE ACQUISITION FUND, L.P. Notice is hereby given that the 1997 Annual Meeting of Limited Partners (the "Meeting") of ML-Lee Acquisition Fund, L.P. (the "Fund") will be held at the offices of Hutchins, Wheeler & Dittmar, 101 Federal Street, 31st Floor, Boston, Massachusetts 02110, on June 11, 1997, at 10:00 A.M. for the following purposes: 1. To elect four Individual General Partners to serve for the ensuing year; 2. To elect one Managing General Partner to serve for the ensuing year; 3. To consider and act upon the proposal to ratify the selection of Price Waterhouse LLP as independent accountants of the Fund for its fiscal year ending December 31, 1997; and 4. To transact such other business as may properly come before the meeting or any adjournment thereof. The Individual General Partners of the Fund have fixed the close of business on April 14, 1997 as the record date for the determination of Limited Partners entitled to notice of and to vote at the Meeting or any adjournment thereof. A complete list of the Limited Partners of the Fund entitled to vote at the Meeting will be available and open to the examination of any Limited Partner of the Fund for any purpose germane to the Meeting during ordinary business hours from and after April 14, 1997, at the office of the Fund, World Financial Center, South Tower, New York, New York 10080.

You are cordially invited to attend the Meeting. All Limited Partners, even those planning to attend the Meeting, are urged to complete, date and sign the enclosed form of proxy and return it promptly in the envelope provided for that purpose. Since mail delays may occur, it is important that the proxy be returned well in advance of the meeting. If you decide to attend the Meeting and wish to vote personally, you may revoke your proxy at any time before it is exercised. The enclosed proxy is being solicited by the Individual General Partners of the Fund. By Order of the Individual General Partners THOMAS H. LEE Individual General Partner Boston, Massachusetts Dated: April 30, 1997 LIMITED PARTNERS ARE URGED TO VOTE, SIGN AND DATE THE ENCLOSED FORM OF PROXY AND TO RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

PROXY STATEMENT ML-LEE ACQUISITION FUND, L.P. WORLD FINANCIAL CENTER SOUTH TOWER NEW YORK, NEW YORK 10080 1997 ANNUAL MEETING OF LIMITED PARTNERS JUNE 11, 1997 INTRODUCTION ML-Lee Acquisition Fund, L.P. (the "Fund") is a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act. The Fund, a business development company under the Investment Company Act of 1940, commenced operations on October 19, 1987, following the initial closing of its public offering. As of April 14, 1997, the Fund had outstanding 487,489 units of limited partnership interest (the "Units"). The Fund is managed by five General Partners, consisting of four Individual General Partners and the Managing General Partner, described below. In accordance with the terms of its Amended and Restated Agreement of Limited Partnership, as amended (the "Partnership Agreement"), the Fund is required to hold annual meetings of the Limited Partners of the Fund to approve certain Fund matters, including the election of Individual General Partners, the election of the Managing General Partner and the ratification of the selection of the independent public accountants for the Fund. This Proxy Statement is furnished in connection with the solicitation of proxies to be voted at the 1997 Annual Meeting of Limited Partners of the Fund (the "Meeting"), to be held at the offices of Hutchins, Wheeler & Dittmar, 101 Federal Street, 31st Floor, Boston, Massachusetts 02110, on June 11, 1997, at 10:00 A.M. The enclosed proxy is being solicited on behalf of the Individual General Partners of the Fund. The approximate mailing date of this Proxy Statement is April 30, 1997. All properly executed proxies received prior to the Meeting will be voted at the Meeting in accordance with the instructions marked thereon or otherwise as provided therein. Unless instructions to the contrary are marked, proxies will be voted for the election of four Individual General Partners, for the election of one Managing General Partner and for the ratification of the selection of independent accountants. Any proxy may be revoked at any time prior to the exercise thereof by giving notice to the Fund at its principal office. The Fund has retained Tritech Services to tabulate the votes in connection with the matters to be acted upon at the Meeting. Abstentions and broker "no votes" will be counted as present in determining whether the Meeting's quorum require- 1

ment is satisfied. When any matter to be acted upon at the Meeting requires a favorable vote by the Limited Partners entitled to vote at the Meeting who hold at least a majority of the Units outstanding, abstentions and broker "no votes" will be considered a vote "Against" the matter; otherwise, abstentions and broker "no votes" will have no effect on the outcome, that is, they will not be considered. The Individual General Partners have fixed the close of business on April 14, 1997 as the record date for the determination of Limited Partners entitled to notice of and to vote at the Meeting and at any adjournment thereof. Limited Partners on the record date will be entitled to one vote for each interest held in the Fund represented by a $1,000 capital contribution to the Fund (a "Unit"). The following table sets forth as of April 14, 1997 the only persons known to the management of the Fund who may be deemed to be beneficial owners of more than five percent of the outstanding Units of limited partnership interest of the Fund. <TABLE> <CAPTION> PERCENT OF UNITS OF THE FUND AMOUNT OF BENEFICIALLY NAME AND ADDRESS BENEFICIAL OWNED AT OF BENEFICIAL OWNER OWNERSHIP APRIL 14, 1997 <S> <C> <C> Yale University 31,537(1) 6.47% Investment Office 230 Prospect Street New Haven, CT 06511 Farallon Capital Partners, L.P. 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1325 San Francisco, CA 94111 Tinicum Partners, L.P. 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1325 San Francisco, CA 94111 Thomas F. Steyer 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1325 San Francisco, CA 94111 Fleur E. Fairman 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1325 San Francisco, CA 94111 David I. Cohen 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1325 San Francisco, CA 94111 </TABLE> 2

<TABLE> <CAPTION> <S> <C> <C> PERCENT OF UNITS OF THE FUND AMOUNT OF BENEFICIALLY NAME AND ADDRESS BENEFICIAL OWNED AT OF BENEFICIAL OWNER OWNERSHIP APRIL 14, 1997 Joseph F. Downes 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1250 San Francisco, CA 94111 Jason M. Fish 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1250 San Francisco, CA 94111 William F. Mellin 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1250 San Francisco, CA 94111 Meridee A. Moore 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1250 San Francisco, CA 94111 Eric M. Ruttenberg 30,200(2) 6.19% Farallon Capital Management, Inc. One Maritime Plaza, Suite 1325 San Francisco, CA 94111 </TABLE> -------- (1) Based upon a statement on Schedule 13G dated February 8, 1995. (2) By reason of Rule 13d-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Farallon Capital Partners, L.P., a California limited partnership ("FCP"), and Tinicum Partners, L.P., a New York limited partnership ("Tinicum"), each may be deemed to own 30,200 Units of limited partnership interest constituting approximately 6.19% of the Units of limited partnership interest, as a result of the direct ownership by FCP of 23,690 of such Units and as a result of the direct ownership by Tinicum of 6,510 of such Units. FCP and Tinicum, however, consider their beneficial interests to be limited to their direct ownership. In addition, by reason of Rule 13d-3 under the Exchange Act, each of the general partners of FCP and Tinicum, Thomas F. Steyer, Fleur E. Fairman, David I. Cohen, Joseph F. Downes, Jason M. Fish, William F. Mellin, Meridee A Moore and Eric M. Ruttenberg, may be deemed to own beneficially the Units of limited partnership interest owned by FCP and Tinicum. 3

The Individual General Partners of the Fund know of no business other than that mentioned in Items 1 through 3 of the Notice of Meeting which will be presented for consideration at the Meeting. If any other matter is properly presented, it is the intention of the persons named in the enclosed proxy to vote in accordance with their best judgment. ELECTION OF GENERAL PARTNERS The five General Partners of the Fund, who are elected annually by the Limited Partners, are responsible for the management and administration of the Fund. The General Partners consist of four Individual General Partners and the Managing General Partner. As required by the Investment Company Act of 1940, a majority of the General Partners must be individuals who are not "interested persons" of the Fund as defined in the Investment Company Act of 1940. In 1987, the Securities and Exchange Commission issued an order declaring that three Individual General Partners of the Fund (the "Independent General Partners"), excluding Thomas H. Lee, are not "interested persons" of the Fund as defined in the Investment Company Act of 1940 solely by reason of their being general partners of the Fund. Mr. Lee and the Managing General Partner are considered interested persons, as described below. The Individual General Partners provide overall guidance and supervision with respect to the operations of the Fund and perform the various duties imposed on the directors of business development companies by the Investment Company Act of 1940. The Individual General Partners supervise the Managing General Partner and must verify that all transactions made in accordance with the Fund's Guidelines for investments fully comply with the Guidelines and specifically approve each Qualified Investment that is a non-Guideline investment or a Bridge Investment. The Fund's investment and reinvestment period expired in 1992 and the only investments now permitted are Follow-On Investments in existing Portfolio Companies. In addition, if a Portfolio Company is in default under a material provision of a lending agreement or has a ratio of operating income to current fixed charges that is less than or equal to 1.1 to 1, the Individual General Partners are required to approve any changes in the terms of or dispositions of the Fund's investment in such Portfolio Company. The Managing General Partner is responsible for purchasing investments for the Fund which have been determined by the Independent General Partners to meet the Fund's investment Guidelines or approved by them notwithstanding the failure to meet all the Guidelines, for recommending the approval of non-Guideline and Bridge Investments and modifications of the terms of or dispositions of Fund investments in a troubled company, for investing and managing Temporary Investments, for the admission of assignee Limited Partners to the Fund and, subject to the supervision of the Individual General Partners, for supervising the Investment Adviser. 4

INDIVIDUAL GENERAL PARTNERS At the Meeting, four Individual General Partners will be elected to serve until the next Annual Meeting of Limited Partners and until their successors are elected and qualified. In the election of Individual General Partners, the four candidates receiving the highest number of votes cast shall be so elected. It is the intention of the persons named in the enclosed proxy to nominate and vote in favor of the election of the persons listed below. Each nominee listed below has consented to continue to serve as an Individual General Partner. The Individual General Partners of the Fund know of no reason why any of these nominees will be unable to serve, but in the event of any such unavailability, the proxies received will be voted for such substitute nominees as the Individual General Partners may recommend. Certain information concerning the nominees, as of April 14, 1997, is set forth below. <TABLE> <CAPTION> UNITS OF INDIVIDUAL THE FUND PRINCIPAL OCCUPATION GENERAL BENEFICIALLY DURING THE PAST NAME AND ADDRESS PARTNER OWNED AS OF FIVE YEARS AND OF NOMINEES AGE SINCE APRIL 14, 1997(1) DIRECTORSHIPS <S> <C> <C> <C> <C> Vernon R. Alden(2) 74 1987 -50- Individual General Partner of 420 Boylston Street the Fund, ML-Lee Acquisition Suite 403 Fund II, L.P. ("Fund II") and Boston, MA 02116 ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. (the "Retirement Fund"; and together with Fund II, the "New Funds"; and together with the Fund and Fund II the "Funds"). Director of Colgate Palmolive Company, Digital Equipment Corporation, Intermet Corporation and Sonesta International Hotels Corporation. Chairman of the Japan Society of Boston, Trustee Emeritus of the Boston Symphony Orchestra and the Boston Museum of Science and Honorary Consul General of the Royal Kingdom of Thailand. </TABLE> 5

<TABLE> <CAPTION> <S> <C> <C> <C> <C> UNITS OF INDIVIDUAL THE FUND PRINCIPAL OCCUPATION GENERAL BENEFICIALLY DURING THE PAST NAME AND ADDRESS PARTNER OWNED AS OF FIVE YEARS AND OF NOMINEES AGE SINCE APRIL 14, 1997(1) DIRECTORSHIPS Thomas H. Lee(3) 53 1987 -20- Individual General Partner of the 75 State Street Funds. Chairman of the Investment Boston, MA 02109 Adviser of the Fund since 1987; Chairman of the Administrative General Partner of the Investment Adviser to the New Funds since 1989; Chairman of the Administrative General Partner of Thomas H. Lee Equity Partners L.P. since 1989. Chairman of the Administrative General Partner of Thomas H. Lee Equity Fund III, L.P. since 1996. Founder of the Thomas H. Lee Company (the "Lee Company") and its President since 1974. Director of Autotote Corporation, Finlay Enterprises Inc., First Security Services Corporation, Health o meter Products, Inc., Livent, Inc., Miller Import Corporation Playtex Products, Inc., Sondik Supply Corporation and Vail Resorts, Inc. Trustee of Brandeis University (Vice Chairman), Museum of Fine Arts Boston, The Wang Center for the Performing Arts, Beth Israel Hospital (Treasurer), NYU Medical Center and The Whitney Museum of American Art; Overseer of Boston Symphony Orchestra and New England Conservatory of Music; Member of the Dean's Council, Faculty of Arts and Sciences and an Executive Committee Member of the Committee on University Resources at Harvard University; Member of the Corporation of Belmont Hill School. UNITS OF INDIVIDUAL THE FUND PRINCIPAL OCCUPATION GENERAL BENEFICIALLY DURING THE PAST NAME AND ADDRESS PARTNER OWNED AS OF FIVE YEARS AND OF NOMINEES AGE SINCE APRIL 14, 1997(1) DIRECTORSHIPS General Partners and -185-(4) Officers as a Group (10 persons) </TABLE> 7

-------- (1) In each case, represents less than 1% of Units outstanding. (2) Member of Audit Committee of the Individual General Partners. (3) Mr. Lee is the Chairman, a Trustee and a majority shareholder of the Investment Adviser; therefore, he is deemed to be an interested person, as defined in the Investment Company Act of 1940, of the Fund. (4) Does not include Capital Contributions made by the Managing General Partner, which are described in "Managing General Partner". COMMITTEE AND INDIVIDUAL GENERAL PARTNERS' MEETINGS The Individual General Partners have a standing Audit Committee which consists of the Independent General Partners. The purposes of the Audit Committee are (i) to recommend to the Independent General Partners the firm of independent public accountants that conducts the Fund's annual audit and (ii) to review the scope of the annual audit conducted by the Fund's independent public accountants and the evaluation by such accountants of the accounting procedures followed by the Fund. The Audit Committee held three meetings in 1996. The Individual General Partners do not have a nominating or compensation committee. During the fiscal year ended December 31, 1996, the Individual General Partners held eight meetings. Each Individual General Partner nominated for election attended at least 75% of (i) the meetings of the Individual General Partners and (ii) if a member of the Audit Committee, the meetings of the Audit Committee held during such fiscal year except for Mr. Lee, who did attend at least 75% of the meetings of the Individual General Partners at which he was entitled to vote on the action taken. Compensation. The Fund paid each Independent General Partner an annual fee of $40,000 in quarterly installments plus $1,000 per meeting of the Individual General Partners attended, together with all actual out-of-pocket expenses relating to attendance at meetings. The Independent General Partners receive $1,000 for each committee meeting attended unless such committee meeting is held on the same day as a meeting of the Individual General Partners. In such case, the Independent General Partners receive $500 for each committee meeting attended. The aggregate fees and expenses incurred by the Fund to the Independent General Partners totaled $146,240 for the fiscal year ended December 31, 1996. Thomas H. Lee, as an interested Individual General Partner, does not receive any additional compensation therefor. 8

Set forth below is a chart showing the aggregate fees and expenses paid by the Fund to each of the Individual General Partners during the fiscal year ended December 31, 1996, as well as the aggregate fees and expenses paid to each Individual General Partner by the Fund, Fund II and the Retirement Fund (collectively, the "Fund Complex") for their services as Individual General Partners to the Funds during the fiscal year ended December 31, 1996: <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> Pension or Total Compensation Retirement from Fund and Aggregate Benefits Accrued Fund Complex Compensation as Part of Fund Paid to Individual Name From Fund Expenses General Partners ------------------- ------------ ---------------- ------------------ Vernon R. Alden $48,000 $ 0 $97,500 Joseph L. Bower 48,000 0 97,500 Stanley H. Feldberg 48,000 0 97,500 Thomas H. Lee 0 0 0 </TABLE> MANAGING GENERAL PARTNER At the Meeting, a Managing General Partner will be elected to serve until the next Annual Meeting of Limited Partners and until its successor is elected and qualified. In the election of Managing General Partner, the one candidate receiving the highest number of votes cast shall be so elected. The Managing General Partner will receive reimbursement of certain expenses and the distributions and allocations described below. The Fund considers its relationship with the Managing General Partner to be an investment advisory relationship. It is the intention of the persons named in the enclosed proxy to nominate and vote in favor of the election of the Managing General Partner discussed below, which will receive the compensation, distributions and allocations described below. The nominee discussed below has consented to continue to serve as Managing General Partner. Information Concerning the Managing General Partner. Mezzanine Investments, L.P. (the "Managing General Partner") is a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act. The Managing General Partner maintains its principal office at World Financial Center, South Tower, New York, New York 10080. The Managing General Partner has acted as the managing general partner of the Fund since the Fund commenced operations on October 19, 1987. The Managing General Partner is engaged in no other activities at the date of this proxy statement. The sole general partner of the Managing General Partner is ML Mezzanine Inc. ("ML Mezzanine"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML"). ML Mezzanine maintains its principal office at World Financial Center, South Tower, New York, New York 10080 and ML maintains its principal office at World Financial Center, North Tower, New York, New York 10281. ML 9

Fund Administrators Inc. (the "Fund Administrator"), a Delaware corporation and an indirect wholly-owned subsidiary of ML, provides administrative services for the Fund pursuant to an Administrative Services Agreement between the Fund and the Fund Administrator, dated June 30, 1989 (the "Administrative Services Agreement"). Information concerning the Fund Administrator is set forth below under "Information Concerning the Fund Administrator." The sole limited partner of the Managing General Partner is Thomas H. Lee Advisors I (the "Investment Adviser"). Information concerning the Investment Adviser is set forth below under "The Management Agreement." The Managing General Partner's unaudited balance sheet at December 31, 1996 is appended to this proxy statement as Exhibit A. The Partnership Agreement obligates the Managing General Partner to contribute cash to the capital of the Fund so that the Managing General Partner's Capital Contribution at all times will be equal to one percent (1%) of the aggregate Capital Contributions of all Partners of the Fund. The Managing General Partner has contributed $4,924,136 to the capital of the Fund. The following table sets forth information concerning the directors and executive officers of ML Mezzanine Inc. Unless otherwise noted, the address of each such person is World Financial Center, South Tower, New York, New York 10080. 10

<TABLE> <CAPTION> <S> <C> <C> <C> <C> OFFICER PRINCIPAL OCCUPATION OR DURING THE PAST DIRECTOR FIVE YEARS AND NAME AGE TITLE SINCE* DIRECTORSHIPS Kevin K. Albert (1) 44 Chairman, 1990 Vice President and a Managing World Financial President, 1987 Director of the Investment Banking Center Director Group ("ML Investment Banking") of North Tower Merrill Lynch, Pierce, Fenner & Smith New York, NY 10281 Incorporated ("Merrill Lynch"). Mr. Albert is the manager of the Equity Private Placement Group and is involved in structuring and placing a diversified array of private equity financings including common stock, preferred stock, limited partnership interests and other equity-related securities. Mr. Albert is also a director of ML Media Management Inc. ("ML Media"), an affiliate of the Managing General Partner and a joint venturer of Media Management Partners, the general partner of ML Media Partners, L.P.; a director of ML Film Entertainment Inc. ("ML Film"), an affiliate of the Managing General Partner, the general partners of Delphi Film Associates IV, V, and ML Delphi Premier Partners, L.P.; a director of ML Opportunity Management Inc. ("ML Opportunity"), a joint venturer in Media Opportunity Management Partners, the general partner of ML Media Opportunity Partners, L.P.; a director of ML Mezzanine II Inc. ("ML Mezzanine II"), a director of Merrill Lynch Venture Capital Inc. ("ML Venture"), an affiliate of the Managing General Partner and the general partner of the managing general partner of ML Venture Partners I, L.P. ("Venture I"), ML Venture Partners II, L.P. ("Venture II"), and ML Oklahoma Venture Partners Limited Partnership ("Oklahoma"); a director of Merrill Lynch R&D Management Inc. ("ML R&D"), the general partner </TABLE> 11

<TABLE> <CAPTION> <S> <C> <C> <C> <C> OFFICER PRINCIPAL OCCUPATION OR DURING THE PAST DIRECTOR FIVE YEARS AND NAME AGE TITLE SINCE* DIRECTORSHIPS of the general partner of ML Technology Ventures, L.P.; Mr. Albert also serves an as independent general partner of Venture I and Venture II. Mr. Albert joined Merrill Lynch in 1981. James V. Caruso 45 Executive 1993 Director of ML Investment Banking. Vice Since June 1992 , Mr. Caruso has President, served as Manager of Merrill Lynch's Director Partnership Analysis and Finance Group (the "Partnership Department"), which is responsible for accounting and the ongoing administration and operations of more than 150 investment limited partnerships as well as the Merrill Lynch affiliated entities that manage or administer such partnerships. Mr. Caruso serves as a director of ML Mezzanine II, KECALP Inc., and affiliate of the Managing General Partner. Mr. Caruso joined Merrill Lynch in 1975. Robert F. Aufenanger 43 Executive 1993 Vice President of Merrill Lynch & Vice Co. Corporate Credit and a Director President, of the Partnership Management Director Department. Mr. Aufenanger is responsible for the ongoing management of the operations of the equipment, real estate and project-related limited partnerships for which subsidiaries of ML Leasing Equipment Corp. and Merrill Lynch Hubbard, Inc., affiliates of the Managing General Partner, are general partners. Mr. Aufenanger serves as a director of ML Opportunity, MLH Real Estate, Inc., ML Mezzanine II, ML Venture and ML R&D. Mr. Aufenanger joined Merrill Lynch in 1980. </TABLE> 12

<TABLE> <CAPTION> <S> <C> <C> <C> <C> OFFICER PRINCIPAL OCCUPATION OR DURING THE PAST DIRECTOR FIVE YEARS AND NAME AGE TITLE SINCE* DIRECTORSHIPS Rosalie Y. Goldberg 59 Vice 1987 Director of Merrill Lynch Private President, Client Group. Ms. Goldberg also is Director Manager of the Merrill Lynch Special Investments Group, a vice president and a director of ML Mezzanine II, and a director of MLL Antiquities and MLL Collectibles. Ms. Goldberg joined Merrill Lynch in 1975. Audrey L. Bommer 30 Vice 1994 Joined ML Investment Banking in President, April 1994 and serves as Treasurer Treasurer and chief financial officer to the Funds. Ms. Bommer manages all financial reporting, accounting, ministerial and administrative services in the Partnership Management Department. Ms. Bommer also serves as Vice President and Treasurer of ML Mezzanine II. From 1989 to 1993, Ms. Bommer was a Senior Auditor with Grant Thornton, LLP. </TABLE> 13

<TABLE> <CAPTION> <S> <C> <C> <C> <C> OFFICER PRINCIPAL OCCUPATION OR DURING THE PAST DIRECTOR FIVE YEARS AND NAME AGE TITLE SINCE* DIRECTORSHIPS Roger F. Castoral, Jr. 28 Vice 1995 Joined ML Investment Banking in President 1995 and serves as Vice President Assistant and Assistant Treasurer to the Treasurer Funds. Mr. Castoral is responsible for fund accounting and financial reporting functions in the Partnership Management Department. Mr. Castoral also serves as Vice President and Assistant Treasurer of ML Mezzanine II. From 1993 to 1995, Mr. Castoral was an Assistant Controller with Midlantic Corporation. From 1991 to 1993, Mr. Castoral was a senior auditor with Midlantic Corporation. Prior to joining Midlantic, Mr. Castoral was a staff accountant at KPMG Peat Marwick. </TABLE> -------- (1) As of April 14, 1997, Mr. Albert beneficially owned 25 Units, which represents less than 1% of Units outstanding. *Officers of ML Mezzanine serve at the pleasure of its Board of Directors. 14

Distributions. The Fund made cash distributions to the Managing General Partner of $1,959,308 during the Fund's fiscal year ended December 31, 1996, all of which related to the MGP's capital contribution. There were no MGP Distributions as defined below by the Fund with respect to the Fund's fiscal year ended December 31, 1996. All distributions to Partners are made according to the following formula: 1. Current Returns. All cash dividends, interest and other income received by the Fund in excess of the Fund's expenses and reserves for expenses and Follow-On investments are distributed to the Limited Partners and to the Managing General Partner quarterly, within 45 days after the end of each calendar quarter, as follows: a. From Mezzanine Investments, first, 99% to the Limited Partners and 1% to the Managing General Partner, until the Limited Partners, as a class, have received from cumulative distributions from Mezzanine Investments, an amount equal to an aggregate return (cumulative but not compounded) of 10% per annum on the average daily amount of Gross Capital Contributions represented by Mezzanine Investments (the "Priority Return"), and any outstanding unpaid Compensatory Payment balance (defined below), second, 100% to the Managing General Partner until the Managing General Partner shall have received an amount equal to any outstanding Deferred Distribution Amount (defined below), third, 69% to the Limited Partners and 31% to the Managing General Partner (30% being an incentive distribution, an "MGP Distribution") until the Managing General Partner has received from all distributions with respect to Mezzanine Investments then or theretofore made (other than as a return of capital), an amount equal to 21% of all such distributions, and fourth, thereafter, 79% to the Limited Partners and 21% to the Managing General Partner (20% being an MGP Distribution). b. From all Other Sources, 99% to the Limited Partners and 1% to the Managing General Partner. 2. Capital Transactions. The net proceeds from the disposition of Qualified Investments and Temporary Investments, including distributions of returns of capital from investments, and proceeds of any refinancing ("Capital Transactions"), that are not applied against outstanding debts of the Fund or reserved for follow-on investments or Fund expenses, will be distributed as soon as practicable after such Capital Transaction as follows: a. From Mezzanine Investments, first, 99% to the Limited Partners and 1% to the Managing General Partner, until the Limited Partners, as a class, have received from cumulative 15

distributions from Mezzanine Investments, an amount equal to the Priority Return and any outstanding unpaid Compensatory Payment balance, second, 100% to the Managing General Partner until the Managing General Partner shall have received an amount equal to any outstanding Deferred Distribution Amount, third, 99% to the Limited Partners and 1% to the Managing General Partner until the Limited Partners, as a class, have received an amount equal to the amount of their Net Capital Contributions represented by Mezzanine Investments then or theretofore liquidated together with the Priority Return and any outstanding Compensatory Payment, fourth, 69% to the Limited Partners and 31% to the Managing General Partner (30% being an MGP Distribution), until the Managing General Partner has received from all distributions with respect to Mezzanine Investments then or theretofore made, 21% of all distributions, and fifth, thereafter, 79% to the Limited Partners and 21% to the Managing General Partner (20% being an MGP Distribution). b. From all Other Sources, 99% to the Limited Partners and 1% to the Managing General Partner. For purposes of the distributions described above, Gross Capital Contributions represented by Mezzanine Investments is the proportionate amount of the Fund's equity that is invested in Mezzanine Investments (the "Net Capital Contributions represented by Mezzanine Investments"), grossed up for the related selling commissions (assuming no discounts), marketing and sales expenses and organization and offering expenses of the Fund. Compensatory Payment means an amount equal to the aggregate of: (i) the cumulative amount by which the Distributable Capital Proceeds related to the Sales of Qualified Investments are less than the Fund's cost of such Qualified Investments, but only to the extent of the excess of cumulative MGP Distributions then or theretofore made over the cumulative amounts of payments then or theretofore made as Compensatory Payments pursuant to the distribution process summarized above and (ii) the cumulative amount of MGP Distributions with respect to those portions of Bridge Investments which were expected to become Mezzanine Investments at liquidation within nine months, but which did not actually become Mezzanine Investments within nine months, or with the approval of the Individual General Partners twelve months. In addition, to the extent that making any MGP Distribution from sales would result in the Managing General Partner receiving cumulative MGP Distributions from dispositions of Qualified Investments in excess of 20% of the cumulative capital gains realized by the Fund (net of realized capital losses and unrealized net capital depreciation), such distribution will instead be deferred (the "Deferred Distribution Amount"). 16

Allocations of Profits and Losses. Profits and Losses for tax and accounting purposes are determined and allocated as of, and within sixty days after, the end of each calendar year. Profits and Losses are allocated consistently with, and generally in the same proportions as, cash distributions (other than as to distributions of capital). All unrealized gains and losses at the termination of the Fund will be deemed realized at that time. Unrealized gains and losses attributable to any securities distributed in kind to Partners will be deemed realized upon such distribution. Removal of the Managing General Partner. The Managing General Partner may be removed from the Fund either (i) by a majority of the Independant General Partners of the Fund, (ii) by failure to be re-elected by the Limited Partners or (iii) with the consent of a majority in interest of the Limited Partners. Information Concerning the Fund Administrator. Pursuant to the Administrative Services Agreement, the Fund Administrator is responsible for the day-to- day administrative affairs of the Fund and for the management of the accounts of Limited Partners. The Fund Administrator also provides the Fund, at the Fund Administrator's expense (except as provided below), with office space, facilities, equipment and personnel necessary to carry out its obligations under such agreement and such other services as the Fund Administrator, subject to supervision by the Individual General Partners, from time to time determines to be necessary and appropriate. The Fund Administration Fee. As of October 19, 1995, the Fund pays the Fund Administrator a quarterly fee payable in advance (the "Fund Administration Fee") at the annual rate of $300,000 plus all actual out-of-pocket expenses incurred on behalf of the Fund (but not for compensation of the executive officers of the Fund Administrator), but in no event exceeding in aggregate the annual amount of $2.0 million. Prior to October 19, 1995, the Fund Administrator paid all expenses relating to administration of the Fund other than extraordinary legal and related expenses and certain expenses of insurance and bonding which have been and continue to be borne by the Fund. The officers and directors of the Fund Administrator do not receive any compensation for their services from the Fund. The Fund Administration Fees and expenses paid by the Fund to the Fund Administrator for the fiscal year ended December 31, 1996, totaled $781,790. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Fund's officers and Individual General Partners and persons owning more than 10% of the outstanding Units of the Fund to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, General Partners and greater than 10% holders of Units are required by SEC regulation to furnish the Fund, through its Managing General Partner, with copies of all Section 16(a) Forms they file. 17

Based solely on copies of such Forms furnished as provided above, or written representations that no Forms 5 were required, the Fund believes that during 1996 through the date hereof all Section 16(a) filing requirements applicable to its officers, General Partners and owners of greater than 10% of its Units were complied with. SELECTION OF INDEPENDENT ACCOUNTANTS At their meeting held in person on December 6, 1996, the Independent General Partners of the Fund unanimously selected the firm of Price Waterhouse LLP, independent accountants, to audit the financial statements of the Fund for the fiscal year ending December 31, 1997. The Fund knows of no direct or indirect financial interest of such firm in the Fund. Such appointment is subject to ratification or rejection by the Limited Partners of the Fund. Unless a contrary specification is made, the accompanying proxy will be voted in favor of ratifying the selection of such accountants. Representatives of Price Waterhouse LLP are expected to be present at the Meeting and will have the opportunity to respond to questions from Limited Partners and to make a statement if they so desire. THE MANAGEMENT AGREEMENT Thomas H. Lee Advisors I, the Investment Adviser, pursuant to an investment management agreement among the predecessor to the Investment Adviser, the Lee Company and the Fund, dated September 14, 1987, as amended March 18, 1988 and as assumed by the Investment Adviser December 29, 1988 (the "Management Agreement"), is responsible for the identification of all Qualified Investments made by the Funds and performs the managerial functions usually carried out by an investment adviser to a business development company. The Investment Adviser and its predecessor entity, Thomas H. Lee Advisors, Inc., have served as the investment adviser for the Fund since the Fund commenced operations on October 19, 1987, and the Limited Partners ratified and approved the Management Agreement at their first two annual meetings held on May 12, 1988 and May 5, 1989. The Management Agreement has been approved by all of the Independent General Partners. Unless earlier terminated, the Management Agreement will continue from year to year if approved by a majority of the Independent General Partners. The Management Agreement is not assignable (within the meaning of the Investment Company Act of 1940) and may be terminated without penalty on 60 days' written notice at the option of the Fund or the Investment Adviser or by vote of the Limited Partners. Information Concerning the Investment Adviser. The Investment Adviser is a Massachusetts business trust with transferable shares, the majority of whose shares are owned by Thomas H. Lee and more than 10% of whose shares are owned by John W. Childs. The Investment Adviser maintains its principal office at the offices of the Thomas H. Lee Company at 75 State Street, Boston, Massachusetts 02109. The Investment Adviser's unaudited balance sheet at December 31, 1996 is appended to this proxy statement as Exhibit B. 18

The following table sets forth information concerning the Trustees and officers of the Investment Adviser. Information concerning Thomas H. Lee, the Chairman and a Trustee of the Investment Adviser, is set forth under "Election of General Partners -- Individual General Partners." Unless otherwise noted, the address of each such person is 75 State Street, Boston, Massachusetts 02109. 19

<TABLE> <CAPTION> <S> <C> <C> <C> <C> OFFICER OR PRINCIPAL OCCUPATION TRUSTEE DURING PAST (DIRECTOR) FIVE YEARS AND NAME AGE TITLE SINCE* DIRECTORSHIPS John W. Childs(1)(2) 55 President, 1987 President of J.W. Childs One Federal Street Trustee Associates, L.P. Managing Boston, MA 02110 Director of the Lee Company from 1987 to 1995. President and Trustee of T.H. Lee Mezzanine II, the Administrative General Partner of the Investment Adviser to the New Funds ("T.H. Lee Mezzanine II"). Thomas R. Shepherd 67 Executive 1987 Managing Director of the Lee Vice President Company since 1986. Executive Vice President of T.H. Lee Mezzanine II. Director of General Nutrition Companies, Inc., Health o meter Products, Inc. and Rayovac Corporation. David V. Harkins 56 Senior 1987 Managing Director of the Lee Vice President, Company since 1986. Senior Vice Trustee President and Trustee of T.H. Lee Mezzanine II. Chairman of National Dentex Corporation since 1983. Director of Stanley Furniture Company, Inc., National Dentex Corporation and First Alert, Inc. C. Hunter Boll 41 Vice President 1987 Managing Director of the Lee Company since 1991; Vice President of the Lee Company from 1986 to 1991. Vice President of T.H. Lee Mezzanine II. Director of Petco Animal Supplies, Inc., and Stanley Furniture Company, Inc. </TABLE> 20

<TABLE> <CAPTION> <S> <C> <C> <C> <C> OFFICER OR PRINCIPAL OCCUPATION TRUSTEE DURING PAST (DIRECTOR) FIVE YEARS AND NAME AGE TITLE SINCE* DIRECTORSHIPS Scott A. Schoen 38 Vice President 1987 Managing Director of the Lee Company since 1991; Vice President of the Lee Company from 1986 to 1990. Vice President of T.H. Lee Mezzanine II. Director of First Alert, Inc., Health o meter, Inc., LaSalle Reinsurance Limited, Rayovac Corporation, Anchor Advanced Products, Inc. and Alliance International Group, Inc. Wendy L. Masler 43 Treasurer, 1987 Senior Vice President and Clerk Treasurer of the Lee Clerk Company since 1984. Treasurer and Clerk of T.H. Lee Mezzanine II. </TABLE> -------- (1) Mr. Childs owns in excess of 10% of the outstanding Shares of the Investment Adviser. Other than Thomas H. Lee, who owns a majority of the outstanding Shares, and Mr. Childs, no one owns more than 10% of the Investment Adviser's Shares. (2) The Fund's investment and reinvestment periods have expired and the Fund is currently being managed with a view towards realizing value, including gains when possible, from the Fund's remaining investments. On July 1, 1995, Mr. Childs formed a new investment company to provide investment services to a new equity fund he is sponsoring, which will make equity investments unrelated to the Fund. As of such date, Mr. Childs ceased to be a managing director of Thomas H. Lee Company. Mr. Childs nevertheless continues in his position as President of the Investment Adviser. Mr. Childs maintains his economic interest in the Investment Adviser and continues to have a financial interest aligned with the Fund. Mr. Childs continues to devote the time and attention to the Investment Adviser and the Fund as required in that capacity. *Officers of the Investment Adviser serve at the pleasure of its Board of Directors. Dates include service with the Investment Advisor's predecessor entity. TERMS OF THE MANAGEMENT AGREEMENT The Management Agreement requires the Investment Adviser to perform, subject to the supervision of the General Partners, managerial and investment advisory services necessary for the operation of the Fund in carrying out its investment objective and policies, including providing managerial assistance to Managed Companies of the Fund and other services related to Mezzanine and Bridge Investments. Management services consist of providing the Fund with office space and 21

equipment and dealing with service agents, accountants, attorneys, brokers and others. The Investment Adviser is responsible for locating, structuring, acquiring, monitoring and disposing of Qualified Investments for the Fund and structuring the Fund's financing. The Fund will make only the Qualified Investments recommended to it by the Investment Adviser, and the Investment Adviser (subject to the supervision of the General Partners) has the exclusive power and authority to make, monitor, manage and control the Fund's Qualified Investments. The Investment Adviser will determine the manner in which voting rights, rights to consent to corporate action, and any other rights pertaining to the Fund's Qualified Investments will be exercised. Management Fee. The Fund pays the Investment Adviser a quarterly fee, payable in advance, at an annual rate, subject to reduction by a portion of certain deductible fees, equal to the greater of $1.2 million and one percent of assets under management; for this purpose "assets under management" is an amount equal to the amount of the Partners' Capital Contributions (net of selling commissions, marketing and sales expenses and organizational and offering expenses paid by the Fund), reduced by the cumulative amount of capital distributed to the Partners and realized capital losses, and increased by outstanding Fund financing. The amount of this management fee is higher than that paid by most other investment funds. Deductible fees consist of (i) as to break-up fees paid to the Investment Adviser or any affiliate thereof relating to a company in which a Qualified Investment is structured but not consummated, the amount of such fee (net of expenses), which is proportionate to the percentage (and if not ascertainable then 35%) of common equity the Fund had or would have had in such company (the "equity percentage") and (ii) as to any investment banking fee paid the Investment Adviser or an affiliate thereof by persons unaffiliated with the Investment Adviser or the Fund, the amount of such fee in excess of one percent of the funding on which it was paid, which is proportionate to the equity percentage. The Investment Adviser may retain without reduction in its fees the amount of any investment banking fees to the extent not in excess of one percent of the funding on which the fee was paid, and the full amount of any management fees paid with respect to Portfolio Companies. See "Certain Transactions." In addition, pursuant to the Amended and Restated Agreement of Limited Partnership of the Managing General Partner, as amended, the Investment Adviser receives those MGP Distributions which are related to investments made by the Fund for which the Investment Adviser acted in the capacity of investment adviser to the Fund. See "Election Of General Partners -- Managing General Partner -- Distributions." Payment of Expenses. The Investment Adviser bears the expense of maintaining the staff necessary for performing its obligations under the Management Agreement, and all other expenses associated with its duties. The Investment Advisor generally recovers its fees and expenses from the Portfolio Companies in completed transactions. However, after an investment has been certified by the 22

Investment Adviser as meeting the Guidelines, or approved by the Independent General Partners and the Managing General Partner, all legal fees and expenses associated with negotiating and structuring the Fund's investment, if not borne by the Portfolio Company or a third party, will be borne by the Fund. Furthermore, in connection with the disposition of a Qualified Investment, all fees, commissions and legal fees and expenses, if not borne by the Portfolio Company or a third party, will be borne by the Fund on a pro rata basis in proportion to its share of the total amount of securities being sold or otherwise disposed of. The Fund's obligation in each case is without regard to whether or not the transaction is consummated; provided, however, any unconsummated sale must have been pursued on the basis of the reasonable business judgment of the Investment Adviser. During the Fund's fiscal year ended December 31, 1996, the Investment Advisory Fees paid by the Fund to the Investment Adviser totaled $1,282,991. CERTAIN TRANSACTIONS Subject to any policies established by the Individual General Partners, the Investment Adviser is responsible for the management of the Fund's Mezzanine Investments and Bridge Investments and is responsible for conducting the negotiations with respect to the acquisition of such investments on behalf of the Fund. Certain of the Mezzanine Investments and Bridge Investments which may be made by the Fund may involve co-investments with entities affiliated with the Investment Adviser. Such co-investments are generally prohibited absent exemptive relief from the Securities and Exchange Commission (the "Commission"). As a result of these affiliations and the Fund's expectation of engaging in such co- investments, the Fund sought an exemptive order from the Commission allowing such co-investment, which was received on September 23, 1987. An additional exemptive order, allowing co-investment with the New Funds was received from the Commission on September 1, 1989. The Funds' co-investments in Managed Companies, and in certain cases their co-investments in Non-Managed Companies, typically involved the entry by the Fund and other equity security holders into stockholders' agreements. While the provisions of such stockholders' agreements vary, such agreements may include provisions as to corporate governance, registration rights, rights of first offer or first refusal, rights to participate in sales of securities to third parties, rights of majority stockholders to compel minority stockholders to participate in sales of securities to third parties, transfer restrictions, and preemptive rights. Set forth below is a description of the transactions involving the Fund and affiliates of the Investment Adviser, including co-investments pursuant to the above exemptive orders, which were consummated, or which were approved but had not yet been consummated, during the period from January 1, 1996 through April 14, 1997. For descriptions of acquisitions and dispositions of securities of Portfolio Companies in which the Fund participated but the Lee Affiliates did not participate, see the Fund's Annual Report for fiscal year 1996. 23

Duro-Test Corporation. On November 1, 1995, Duro-Test Corporation ("Duro-Test") was acquired by a third party by merger, for approximately $33 million. In the merger, the Fund and the Lee Affiliates sold all of the securities of Duro-Test held by them. Proceeds to the Fund totaled $4.6 million of which $1.7 million was held in escrow. Proceeds to the Lee Affiliates totaled approximately $218,000 of which approximately $80,000 was held in escrow. On September 27, 1996, the then remaining amounts in the escrow fund were released to all former Duro-Test stockholders, at which time the Fund received $989,738 and the Lee Affiliates received an aggregate of $44,876. General Nutrition Companies, Inc. As of December 31, 1995, the Fund owned 4,903,766 shares, and the Lee Affiliates owned 11,454,578 shares, of GNC Common Stock, which represented approximately 5.3% and 12.4%, respectively, of GNC's Common Stock. On February 13, 1996, GNC completed a public offering of 17,994,176 shares of Common Stock, including shares sold as a result of the exercise of the underwriters' overallotment option, at a net price per share, after underwriters' discounts and commissions, of $20.7475 (the "1996 Offering"). Of the shares sold, 16,358,342 were offered by the Lee Affiliates and the Fund, and the 1,635,834 shares subject to the underwriters' overallotment option were offered by the Company. In the 1996 Offering, the Fund sold all of its remaining 4,903,766 shares of Common Stock, and received proceeds of $101.7 million, and the Lee Affiliates sold all of their remaining 11,454,578 shares of Common Stock, and received aggregate proceeds of $237.7 million. Petco Animal Supplies, Inc. As of December 31, 1995, the Fund, Fund II, the Retirement Fund and the Lee Affiliates, respectively, held 1,472,622, 175,238, 93,568 and 16,146 shares of Petco Common Stock, representing approximately 11.0%, 1.3%, 0.7% and 0.1% of Petco's outstanding Common Stock. On April 30, 1996, Petco completed a public offering of 5 million shares of its Common Stock (the "Petco Offering"). Of such shares, 2.6 million were sold by Petco and 2.4 million were sold by Petco's shareholders, including the Funds and the Lee Affiliates. As part of the Petco Offering, each of the Funds and the Lee Affiliates sold all of their remaining shares of Petco Common Stock, which resulted in proceeds of $40.3 million for Fund I, $4.8 million for Fund II, $2.6 million for the Retirement Fund and an aggregate of approximately $442,000 for the Lee Affiliates. Omega Wire, Inc. In connection with the sale of THL-Omega Holding Corporation ("Omega") to an unaffiliated third party on March 31, 1995, the Fund sold all of its 80,000 shares of Omega Common Stock, and the Lee Affiliates sold all of their 80,000 shares of Omega Common Stock, for $310 per share. Approximately $1.2 million of the proceeds from the sale of the Common Stock payable to the Fund, along with a proportionate amount from all other shareholders including the Lee Affiliates, was placed in an escrow account for a one-year period, pursuant to the terms of the transaction. All amounts, including interest thereon, were released 24

to the Fund, and all other shareholders, including the Lee Affiliates, on April 5, 1996. Stanley Furniture Company, Inc. As of December 31, 1995, the Fund, Fund II, the Retirement Fund and the Lee Affiliates, respectively, held 2,675,552, 23,105, 18,511 and 40,403 shares of Stanley Common Stock, representing approximately 50.2%, 0.4%, 0.4% and 0.9% of Stanley's outstanding Common Stock. On November 13, 1996, Stanley completed a public offering of 1.0 million shares of its common stock at a gross price of $16.00 per share. These shares were offered by the Fund, Fund II, the Retirement Fund and the Lee Affiliates for a net price (after underwriters' discount) of $15.12 per share. In the offering, the Fund, Fund II, the Retirement Fund and the Lee Affiliates, respectively, sold 969,788, 8,375, 6,710 and 14,659 shares of Stanley Common Stock, generating proceeds of $14.7 million, $126,630, $101,455 and $221,644, respectively. Following the consummation of the offering, Stanley purchased an additional 150,000 shares from the selling stockholders (pursuant to a contractual arrangement) for the same price per share. Pursuant to this arrangement, Stanley purchased 145,468, 1,256, 1,006 and 2,200 shares of Stanley Common Stock from the Fund, Fund II, the Retirement Fund and the Lee Affiliates, respectively, generating proceeds of $2.2 million, $18,990, $15,210 and $33,264, respectively. As of December 31, 1996, the Fund, Fund II, the Retirement Fund and the Lee Affiliates, respectively, held 1,560,296, 13,474, 10,795 and 23,584 shares of Stanley Common Stock, representing approximately 32.9%, 0.4%, 0.4% and 0.5% of Stanley's outstanding Common Stock. During February 1997, the Fund, Fund II, the Retirement Fund and the Lee Affiliates sold 31,515 shares, 272 shares, 218 shares, and 480 shares of Stanley Common Stock, respectively, pursuant to the provisions of Rule 144 under the Securities Act of 1933, as amended, generating proceeds of $756,335, $6,528, $5,232 and $11,520, respectively. CMI Holding Corp. As of December 31, 1995, the Fund and the Lee Affiliates, respectively, held 192,933 and 4,081 shares of CMI Holding Corp. Common Stock, representing approximately 82.1% and 1.7% of CMI's outstanding Common Stock. In addition, the Fund held all 189,996 shares of CMI's preferred stock and a warrant to acquire an additional 100,000 shares of CMI's common stock. On July 23, 1996 CMI completed a restructuring pursuant to which CMI's subordinated lender took control. In connection therewith, all of the then outstanding Common Stock (including the Common Stock held by the Fund and the Lee Affiliates) was canceled for nominal consideration and all of the then outstanding preferred stock held by the Fund was exchanged for warrants to purchase preferred stock and Common Stock. In addition, as part of the transaction, the Fund obtained the release of $3.3 million in escrow proceeds (which included $186,603 of interest) from the 1995 restructuring. As of December 31, 1996, the Fund holds warrants to purchase 15,406 shares of preferred stock and warrants to purchase 39,487 shares of Common Stock, representing 7.5% of the Common Stock of CMI. The Lee Affiliates have no ownership position with respect to CMI. 25

GENERAL INFORMATION MLPF&S, and certain of its affiliates perform various financial services for various portfolio companies of the Fund in the ordinary course of business, including investment banking services, broker/dealer services, economic forecasting and pension plan services. In connection therewith, such persons receive various fees, commissions and reimbursements. The aggregate revenue received by such persons during 1996 for providing such services to Managed Companies in which the Fund has a material interest (other than those specifically set forth above or below) was not in excess of $100,000. Furthermore, MLPF&S and its affiliates or investment companies advised by affiliates of MLPF&S may, from time to time, purchase or sell securities issued by portfolio companies of the Fund in connection with their ordinary investment operations. The Lee Company typically performs certain management services for managed portfolio companies of the Fund and receives management fees in connection therewith, usually pursuant to written agreements with such companies. Of the total of eight managed portfolio companies of the Fund, four paid management fees to the Lee Company (exclusive of reimbursement of expenses) ranging from $12,750 to $280,000 with respect to the year ended December 31, 1996. In addition, certain managed portfolio companies of the Funds have contractual or other relationships pursuant to which they do business with one another. Additional co-investments, investment modifications and follow-on investments are expected to be made by the Lee Affiliates in various investments with the Fund from time to time. The Managing General Partner is responsible for the management of the Fund's short-term investments. In placing orders for money market securities, it is the policy of the Managing General Partner to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Managing General Partner generally seeks reasonably competitive spreads or commissions, the Fund will not necessarily be paying the lowest spread or commission available. Affiliates of the Fund may not serve as the Fund's dealer in connection with such transactions. ADDITIONAL INFORMATION The expense of preparation, printing and mailing of the enclosed form of proxy and accompanying Notice and Proxy Statement will be borne by the Fund. The Fund will pay all reasonable expenses in forwarding proxy solicitation material to the beneficial owners of the Units. Approval of the selection of accountants requires the vote (a) of 67% or more of the Units in the Fund present at the Meeting if the holders of more than 50% of the outstanding Units are present or represented by proxy, or (b) of more than 50% of the outstanding Units, whichever is less. The Individual General Partners and Managing General Partner will be elected if they receive more votes than any other 26

candidate at a meeting at which a majority of the Limited Partners who hold a majority of the outstanding Units are present in person or by proxy. In order to obtain the necessary quorum at the Meeting, supplementary solicitation may be made by mail, telephone, telegraph, or personal interview by officers of the Investment Adviser or the Fund Administrator. It is anticipated that the cost of such supplementary solicitation, if any, will be nominal and will be borne by the Fund. The Partnership Agreement provides that the Limited Partners of the Fund are prohibited from exercising certain rights of Limited Partners, including the right to elect General Partners and to approve certain fund matters, unless prior to the exercise of such rights, counsel for the Fund has delivered to the Fund an opinion to the effect that neither the existence of such rights nor the exercise thereof will violate the provisions of the Revised Uniform Limited Partnership Act of the State of Delaware, as amended, or the applicable laws of the jurisdictions in which the Fund is then formed or qualified, will adversely affect the limited liability of the Limited Partners or will adversely affect the classification of the Fund as a partnership for federal income tax purposes. Counsel to the Fund will deliver an opinion to the Fund with respect to the foregoing. In rendering such opinion, counsel for the Fund may rely as to matters of Delaware law upon the opinion of special Delaware counsel to the Fund. PROPOSALS OF LIMITED PARTNERS Proposals of Limited Partners intended to be presented at the next Annual Meeting of Limited Partners of the Fund must be received by the Fund for inclusion in its proxy statement and form of proxy relating to that meeting by December 31, 1997. By Order of the Individual General Partners THOMAS H. LEE Individual General Partner Dated: April 30, 1997 27

EXHIBIT A MEZZANINE INVESTMENTS, L.P. BALANCE SHEET DECEMBER 31, 1996 (UNAUDITED) <TABLE> <CAPTION> <S> <C> <C> ASSETS NOTES Cash. . . . . . . . . . . . . . . . . . . . $ 7,099 Investments in ML-Lee Acquisition Fund, L.P. 1,309,922 -------------- Total Assets. . . . . . . . . . . . . . . . $ 1,317,021 -------------- -------------- PARTNERS' CAPITAL Partners' Capital General Partner. . . . . . . . . . . . . . . 1,3 $ 3,353,723 Limited Partner. . . . . . . . . . . . . . . (2,036,702) -------------- Total Partners' Capital. . . . . . . . . . . $ 1,317,021 -------------- -------------- </TABLE> See Accompanying Notes to Balance Sheet. A-1

MEZZANINE INVESTMENTS, L.P. NOTES TO BALANCE SHEET DECEMBER 31, 1996 (UNAUDITED) 1. ORGANIZATION Mezzanine Investments, L.P. (the "Managing General Partner") was formed and the Certificate of Limited Partnership was filed under the Delaware Revised Uniform Limited Partnership Act on February 1, 1985. The Managing General Partner is a registered investment adviser and the Managing General Partner of ML-Lee Acquisition Fund, L.P. (the "Fund") and is responsible for supervising the Fund's investments. The Managing General Partner is a limited partnership in which ML Mezzanine Inc. ("ML Mezzanine"), an indirect subsidiary of Merrill Lynch & Co., Inc., acts as the general partner. ML Mezzanine performs the responsibilities of the Managing General Partner with respect to the Fund. The Limited Partner of the Managing General Partner is Thomas H. Lee Advisors I (the "Investment Adviser"), which is an affiliate of the Thomas H. Lee Company, a sole proprietorship owned by Thomas H. Lee. The Fund has elected to operate as a business development company under the Investment Company Act of 1940. Its primary investment objective is to provide current income and long-term capital appreciation by investing in mezzanine securities usually issued in connection with leveraged acquisitions and recapitalizations of businesses. 2. INVESTMENT IN FUND Under the terms of the Amended and Restated Agreement of Limited Partnership of the Fund, as amended (the "Partnership Agreement"), the Managing General Partner on October 19, 1987, admitted additional limited partners to the Fund at the Fund's first closing. The total capital contributions of all such limited partners were $403,383,350 reflecting $132,650 of volume discounts. On November 20, 1987, the Managing General Partner admitted additional limited partners to the Fund at the Fund's second closing. The total capital contributions of all such limited partners were $19,862,000 reflecting $15,000 of volume discounts. On May 20, 1988 the Managing General Partner admitted an additional limited partner to the Fund at the Fund's third closing. The total capital contribution of such limited partner was $49,999,688 reflecting $3,333,312 of volume discounts. On June 15, 1988 the Managing General Partner admitted additional limited partners to the Fund at the Fund's fourth closing. The total capital contributions of all such limited partners were $10,124,720 reflecting $638,280 of volume discounts. As of December 31, 1996, the aggregate capital contributions of all limited partners were $483,369,758 reflecting $4,119,242 of volume discounts. The Managing General Partner has acquired an interest in the Fund in exchange for its cash contributions. The Managing General Partner contributed $4,924,136 to the Fund and will con- A-2

tribute or withdraw cash, if necessary, so that it will maintain a one percent interest in the total capital contributions to the Fund. 3. CAPITAL REQUIREMENTS The General Partner shall remain at all times a net worth at a level that is sufficient to meet all requirements of currently applicable U.S. income tax regulations. 4. CASH DISTRIBUTIONS For the year ended December 31, 1996, the Managing General Partner received $1,959,308 in cash distributions from the Fund. This amount was approved by the Individual General Partners of the Fund throughout the fiscal year and represents 1% of the total cash distributions that were distributed. 5. OTHER On February 6, 1996, the New York Supreme Court, county of New York, issued a decision, after trial, in Winston v. Mezzanine Investments, L.P. The Court found that the incentive distributions to the Fund's Managing General Partner for the fourth quarter of 1989 through the fourth quarter of 1990 had been paid in violation of the Fund's Agreement of Limited Partnership, as amended, and held the General Partners liable for repayment to the plaintiff class of $6,627,752 of excessive distributions, plus interest. The defendants are considering the impact of the Court's decision on the administration of the Fund. A-3

EXHIBIT B THOMAS H. LEE ADVISORS I BALANCE SHEET DECEMBER 31, 1996 (UNAUDITED) <TABLE> <CAPTION> <S> <C> ASSETS Cash. . . . . . . . . . . . . . . . . . . . . . $ 5,106 -------- Total Assets. . . . . . . . . . . . . . . . . . $ 5,106 -------- -------- LIABILITIES AND BENEFICIARIES' EQUITY Liabilities Accounts Payable. . . . . . . . . . . . . . . . $ 0 Beneficiaries' Equity Beneficial Interest. . . . . . . . . . . . . . 25,000 Retained Deficit. . . . . . . . . . . . . . . . (19,894) -------- Total Beneficiaries' Equity. . . . . . . . . . $ 5,106 -------- Total Liabilities and Beneficiaries' Equity. . $ 5,106 -------- -------- </TABLE> See Accompanying Notes to Balance Sheet. B-1

THOMAS H. LEE ADVISORS I NOTES TO BALANCE SHEET DECEMBER 31, 1996 (UNAUDITED) 1. ORGANIZATION AND PURPOSE Thomas H. Lee Advisors I ("Advisors") is a Massachusetts business trust, previously a Massachusetts corporation formed on March 31, 1987. Advisors serves as the Investment Adviser to ML-Lee Acquisition Fund, L.P. (the "Fund"), and is responsible for the identification, management and liquidation of investments for the Fund. Advisors is a limited partner of Mezzanine Investments, L.P., the Managing General Partner of the Fund. Thomas H. Lee, the majority shareholder of Advisors, is also a General Partner of the Fund. Advisors is a registered investment adviser. 2. SIGNIFICANT ACCOUNTING POLICIES No provision for federal income taxes has been made since the liability for such taxes is that of the stockholders rather than the business trust. 3. RELATED PARTY TRANSACTIONS As compensation for its investment advisory services, Advisors receives a quarterly fee from the Fund at the annual rate of 1.0% of assets under management with a minimum annual payment of $1,200,000, subject to adjustment. Advisors also receives, from the Managing General Partner, an Incentive Return, after the Limited Partners have received the 10% Priority Return. The Incentive Return will aggregate not more than 20% of the Fund's current income and capital gains. Advisors has an agreement with Thomas H. Lee Company, a sole proprietorship owned by Thomas H. Lee, that Thomas H. Lee Company will pay the expenses of identifying, managing and liquidating Fund investments to the extent that these expenses are not paid by the Fund or the portfolio companies. 4. OTHER On February 6, 1996, the New York Supreme court, County of New York, issued a decision, after trial, in Winston v. Mezzanine Investments, L.P. The Court found that the incentive distributions to the Fund's Managing General Partner for the fourth quarter of 1989 through the fourth quarter of 1990 had been paid in violation of the Fund's Agreement of Limited Partnership, as amended, and held the General Partners liable for repayment to the plaintiff class of $6,627,752 of excessive distributions, plus interest. The defendants are considering the impact of the Court's decision on the administration of the Fund. B-2