As filed with the Securities and Exchange Commission on March 13, 1995
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:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ML VENTURE PARTNERS II, L.P.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
J. GERARD CUMMINS, ESQ.
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, N.Y. 10048-0557
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11;(1)
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
(1)Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
ML VENTURE PARTNERS II, L.P.
NOTICE OF 1995 ANNUAL MEETING OF LIMITED PARTNERS
May 2, 1995
To The Limited Partners of
ML Venture Partners II, L.P.
Notice is hereby given that the 1995 Annual Meeting of Limited Partners (the
"Meeting") of ML Venture Partners II, L.P. (the "Partnership") will be held
at the offices of Merrill Lynch & Co., Inc., on the 27th floor of the North
Tower, World Financial Center, New York, New York on Tuesday, May 2, 1995 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 ratify or reject the selection of Deloitte & Touche as independent
auditors of the Partnership for its fiscal year ending December 31, 1995;
(4) To consider and act upon the proposal to approve the continuance of the
Management Agreement among the Partnership, MLVPII Co., L.P. and Merrill
Lynch Venture Capital Inc. and the continuance of the Sub-Management
Agreement among the Partnership, MLVPII Co., L.P., Merrill Lynch Venture
Capital Inc. and DLJ Capital Management Corporation;
(5) To consider and act on a proposal to amend paragraph 11.4 of the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") so as to eliminate the requirement to hold annual meetings of
limited partners and approve certain matters at such meetings; and
(6) To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Individual General Partners of the Partnership have fixed the close of
business on March 17, 1995 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 Partnership entitled to vote
at the Meeting will be available and open to the examination of any limited
partner of the Partnership for any purpose germane to the Meeting during
ordinary business hours from and after April 18, 1995, at the office of the
Partnership, North Tower, World Financial Center, New York, New York
10281-1327.
You are cordially invited to attend the Meeting. Limited partners who do not
expect to attend the Meeting in person are requested to complete, date and
sign the enclosed form of proxy and return it promptly in the envelope
provided for that purpose. The enclosed proxy is being solicited by the
Individual General Partners of the Partnership.
By Order of the Individual General Partners
Kevin K. Albert
Individual General Partner
New York, New York
Dated: March , 1995
<PAGE>
PROXY STATEMENT
ML VENTURE PARTNERS II, L.P.
NORTH TOWER
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281-1327
1995 Annual Meeting of Limited Partners
May 2, 1995
INTRODUCTION
ML Venture Partners II, L.P. (the "Partnership") is a limited partnership
organized under Delaware law. The Partnership, a business development company
under the Investment Company Act of 1940 (the "Investment Company Act"), had
the initial closing of its public offering of 120,000 units of limited
partnership interest aggregating $120 million on March 31, 1987. The
Partnership is managed by five General Partners, consisting of four
Individual General Partners and the Managing General Partner. As a business
development company under the Investment Company Act, the Partnership has
held annual meetings of the limited partners of the Partnership to approve
certain Partnership matters, including the election of General Partners and
the ratification of the selection of the independent auditors for the
Partnership.
This Proxy Statement is furnished in connection with the solicitation of
proxies to be voted at the 1995 Annual Meeting of Limited Partners of the
Partnership (the "Meeting"), to be held at the offices of Merrill Lynch &
Co., Inc., on the 27th floor of the North Tower, World Financial Center, New
York, New York on Tuesday, May 2, 1995, at 10:00 A.M. The enclosed proxy is
being solicited on behalf of the Individual General Partners of the
Partnership. The approximate mailing date of this Proxy Statement is March
, 1995.
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, for the ratification of the
selection of independent auditors, for the approval of the continuance of the
management agreement (the "Management Agreement") among the Partnership,
MLVPII Co., L.P. (the "Managing General Partner") and Merrill Lynch Venture
Capital Inc. (the "Management Company") and the continuance of the
sub-management agreement (the "Sub-Management Agreement") among the
Partnership, the Managing General Partner, the Management Company and DLJ
Capital Management Corporation ("DLJ Capital Management") and for the
amendment of paragraph 11.4 of the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") so as to eliminate the requirement
to hold annual meetings of limited partners and approve certain matters at
such meetings. Any proxy may be revoked at any time prior to the exercise
thereof by giving notice to the Partnership at its principal office.
<PAGE>
The Individual General Partners have fixed the close of business on March 17,
1995 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 Partnership represented by a $1,000 capital contribution to the
Partnership (a "Unit"). As of March 17, 1995, the Partnership had outstanding
120,000 Units. To the knowledge of management of the Partnership, no person
owned beneficially more than 5 percent of its outstanding Units at such date.
The Individual General Partners know of no business other than that mentioned
in Items 1 through 5 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 Partnership are responsible for the
management and administration of the Partnership. The General Partners
consist of four Individual General Partners and the Managing General Partner.
As required by the Investment Company Act, a majority of the General Partners
must be individuals who are not "interested persons" of the Partnership as
defined in the Investment Company Act. In 1987, the Securities and Exchange
Commission (the "SEC") issued an order declaring that the three Independent
General Partners of the Partnership (the "Independent General Partners") are
not "interested persons" of the Partnership as defined in the Investment
Company Act solely by reason of their being general partners of the
Partnership.
The Individual General Partners have full authority over the management of
the Partnership and provide overall guidance and supervision with respect to
the operations of the Partnership and perform the various duties imposed on
the directors of business development companies by the Investment Company
Act. In addition to general fiduciary duties, the Individual General
Partners, among other things, supervise the management arrangements of the
Partnership.
The Managing General Partner, subject to the supervision of the Individual
General Partners, has authority to provide, or arrange for the provision of,
management services in connection with the venture capital investments of the
Partnership. The general partner of the Managing General Partner is the
Management Company. The Management Company is an indirect subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co.").
Individual General Partners
At the Meeting, four Individual General Partners will be elected to serve
until the next meeting of limited partners or until their successors are
elected and qualified. 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 Partnership 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.
<PAGE>
Certain information concerning the nominees is set forth below.
<TABLE>
<CAPTION>
Units of the
Partnership
Individual Beneficially
Principal Occupation During General Owned at
Past Five Years or More Partner March 17,
Name and Address of Nominee Age and Public Directorships Since 1995(3)
<S> <C> <C> <C> <C>
Dr. Steward S. Flaschen(1) 68 President of Flaschen & Davies, a 1987 --0--
592 Weed Street management consulting firm, since 1986;
New Canaan, Connecticut Corporate Senior Vice President and
06840 member of the Management Policy Board of
ITT Corporation from 1982 to 1986 and
General Technical Director from 1969 to
1986; Chairman of Telco Systems Inc.
Jerome Jacobson(1) 73 President of Economic Studies Inc., an 1987 --0--
4200 Massachusetts economic consulting firm, since 1984;
Avenue, N.W. Vice Chairman and a director of the
Washington, D.C. 20016 Burroughs Corporation from 1980 to 1984;
Director of Datawatch Inc. and Easel
Corporation.
William M. Kelly(1) 51 Associate of William T. Golden, Corporate 1991 --0--
40 Wall Street Director and Trustee, since 1980; Vice
New York, New York 10005 President of National Aviation and
Technology Company, a registered
investment company, from 1977 to 1980;
Individual General Partner of ML Venture
Partners I, L.P.
Kevin K. Albert(2) 42 Director and President of the Management 1990 --0--
World Financial Center Company; Managing Director of Merrill
North Tower Lynch Investment Banking Division
New York, New York ("MLIBK") since 1988; Individual General
10281-1327 Partner of ML Venture Partners I, L.P.
<FN>
(1) Member of Audit Committee of the Individual General Partners.
(2) Interested person, as defined in the Investment Company Act, of the
Partnership.
(3) Messrs. Flaschen and Jacobson have each contributed $1,000 to the capital
of the Partnership. Messrs. Kelly and Albert succeeded to the interest of
prior Individual General Partners who each contributed $1,000 to the capital
of the Partnership.
</FN>
</TABLE>
Committees and Individual General Partners' Meetings. The Individual General
Partners have a standing Audit Committee which consists of the Individual
General Partners who are not "interested persons" of the Partnership within
the meaning of the Investment Company Act. The purposes of the Audit
Committee are (i) to recommend to the Individual General Partners the firm of
independent auditors that
<PAGE>
conducts the Partnership's annual audit and (ii) to review the scope of the
annual audit conducted by the Partnership's independent auditors and the
evaluation by such auditors of the accounting procedures followed by the
Partnership. The Individual General Partners do not have a nominating or
compensation committee.
During the fiscal year ended December 31, 1994, the Individual General
Partners held seven meetings and the Audit Committee held 2 meetings. Each
Individual General Partner nominated for election attended at least 75
percent of the meetings of the Individual General Partners and, if a member,
of the Audit Committee held during such fiscal year while he served as an
Individual General Partner.
Interested persons. The Partnership considers one of its Individual General
Partners, Mr. Albert, to be an "interested person" of the Partnership within
the meaning of Section 2(a)(19) of the Investment Company Act. Mr. Albert is
a Director and President of the Management Company and a Managing Director of
MLIBK.
Compensation. The Partnership will pay each Independent General Partner an
annual fee of $20,000 in quarterly installments plus $1,400 for each meeting
of the Individual General Partners attended or for each other meeting,
conference or engagement in connection with Partnership activities at which
attendance by the Individual General Partner is required. Prior to April 1,
1995, such annual fee is $19,000 plus $1,200 for each meeting of the
Individual General Partners attended. The Partnership pays all actual
out-of-pocket expenses incurred by the Independent General Partners relating
to attendance at such meetings. The Independent General Partners receive
$1,200 for each meeting of the Audit Committee 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 meeting of the Audit Committee attended. For the year ended December 31,
1994, the aggregate fees and expenses paid by the Partnership to the
Independent General Partners totalled $12,584.
The following table sets forth for the fiscal year ended December 31, 1994,
compensation paid by the Partnership to its Individual General Partners
("IGP").
<TABLE>
<CAPTION>
Pension or Retirement Total Compensation
Aggregate Benefits Accrued As From Fund
Compensation Part of Partnership Complex Paid
Name of IGP From Partnership expenses To IGP's*
<S> <C> <C> <C>
Dr. Steward S. Flaschen $30,300 None $30,300
Jerome Jacobson $30,300 None $30,300
William M. Kelly $29,100 None $50,100
Kevin K. Albert -- None --
<FN>
*Mr. Kelly acts as an individual general partner of ML Venture Partners I
L.P., a partnership for which the Management Company acts as an investment
adviser. Mr. Albert acts as an individual general partner of ML Venture
Partners I, L.P. and is involved with certain other partnerships affiliated
with ML & Co. and its affiliates. Mr. Albert does not receive separate
compensation from any of the foregoing in connection with his involvement
therewith.
</FN>
</TABLE>
Managing General Partner
At the Meeting, a Managing General Partner will be elected to serve until the
next meeting of limited partners or until its successor is elected and
qualified. It is the intention of the persons named in the enclosed proxy to
nominate and vote in favor of the election of the limited partnership
discussed below. The nominee discussed below has consented to continue to
serve as Managing General Partner.
<PAGE>
Information Concerning the Managing General Partner. MLVPII Co., L.P. (the
"Managing General Partner") is a limited partnership organized on February 4,
1986 under the laws of the State of New York. The Managing General Partner
maintains its principal office at North Tower, World Financial Center, New
York, New York 10281-1327. The Managing General Partner has acted as the
managing general partner of the Partnership since the Partnership commenced
operations. The Managing General Partner is engaged in no other activities at
the date of this proxy statement.
The general partner of the Managing General Partner is the Management
Company. The limited partners of the Managing General Partner include DLJ
Capital Management, Dr. Robert E. Curry and Robert Finzi. Messrs. Curry and
Finzi are currently officers of DLJ Capital Management and were previously
officers of the Management Company.
The Partnership Agreement obligates the Managing General Partner to
contribute cash to the capital of the Partnership 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
Partnership. The Managing General Partner has contributed $1,212,162 to the
capital of the Partnership.
Allocations and Distributions. The profits and losses of the Partnership are
determined and allocated as of the end of and within sixty days after the end
of each calendar year. If the aggregate of the investment income and net
realized capital gains and losses from venture capital investments is
positive, calculated on a cumulative basis over the life of the Partnership
through such year, the Managing General Partner is allocated investment
income and net realized capital gains or losses from venture capital
investments for such year so that, together with all investment income and
gains and losses previously allocated to the Managing General Partner, it has
received 20% of the aggregate of such income and gains calculated on a
cumulative basis over the life of the Partnership through such year. Such
allocation is referred to herein as the "Managing General Partner's
Allocation" and is applicable only to the investment income and net realized
capital gains and losses resulting from venture capital investments. The
Partnership's investment income and net realized capital gains and losses in
excess of the Managing General Partner's Allocation and all other profits and
losses, including interest or other income on funds not invested in venture
capital investments, are allocated among all the Partners (including the
Managing General Partner) in proportion to their capital contributions. Cash
or other assets otherwise distributable to the Managing General Partner are
not distributed to the Managing General Partner to the extent that the net
realized gains allocated to the Managing General Partner are offset by an
amount equal to 20% of the net unrealized losses of the Partnership.
For its fiscal year ended December 31, 1994, the Partnership had a net
realized gain of $18.6 million from portfolio investments sold and written
off. On a cumulative basis, from inception to December 31, 1994, the
Partnership was in a net gain position of $12.0 million from its investment
income and net realized gains and losses from its venture capital portfolio
investments. The Partnership made one cash distribution totaling $16.2
million to limited partners of record and one cash distribution totaling $1.4
million to the Managing General Partner during the fiscal year ended December
31, 1994. The Partnership will make a cash distribution totaling $9.0 million
in April 1995 to limited partners of record on March 31, 1995. The
Partnership made a cash distribution totaling approximately $2.2 million to
the Managing General Partner and a cash distribution totaling approximately
$2,000 to the Individual General Partners in April, 1995.
<PAGE>
Removal of the Managing General Partner. The Managing General Partner may be
removed as the managing general partner of the Partnership either by (i) a
majority of the non-interested Individual General Partners of the
Partnership, (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.
SELECTION OF INDEPENDENT AUDITORS
At their meeting on February 7, 1995, the Individual General Partners of the
Partnership, including all of the Independent General Partners, selected the
firm of Deloitte & Touche ("D&T"), independent auditors, to audit the
financial statements of the Partnership for its fiscal year ending December
31, 1995. The Partnership knows of no direct or indirect financial interest
of such firm in the Partnership. Such appointment is subject to ratification
or rejection by the limited partners of the Partnership. Unless a contrary
specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such auditors.
D&T also acts as independent auditors for Merrill Lynch & Co., Inc., all or
substantially all of its subsidiaries, including the Management Company, the
Managing General Partner and ML Venture Partners I, L.P. D&T also acts as the
independent auditors for certain partnerships in which affiliates of DLJ
Capital Management act as a general partner. The fees received by D&T from
these other entities are substantially greater, in the aggregate, than the
total fees received by it from the Partnership. The Individual General
Partners considered the fact that D&T has been retained as the independent
auditors for Merrill Lynch & Co., Inc., and the other entities described
above in their evaluation of the independence of D&T with respect to the
Partnership.
Representatives of D&T will be available to attend the Meeting and will have
the opportunity to respond to questions from limited partners and to make a
statement if they so desire.
APPROVAL OF THE CONTINUANCE OF THE MANAGEMENT AGREEMENT
AND THE CONTINUANCE OF THE SUB-MANAGEMENT AGREEMENT
Merrill Lynch Venture Capital Inc. (the "Management Company") serves as the
Partnership's management company and performs, or arranges for the
performance of, the management and administrative services necessary for the
operation of the Partnership pursuant to a management agreement dated May 23,
1991 (the "Management Agreement"). The Management Company has served as the
management company for the Partnership since the Partnership commenced
operations in 1987.
On May 23, 1991, the limited partners of the Partnership approved a
sub-management agreement among the Partnership, the Management Company, the
Managing General Partner and DLJ Capital Management. Under the terms of such
sub-management agreement, DLJ Capital Management agreed to provide, subject
to the supervision of the Managing General Partner, the Management Company
and the Individual General Partners, certain of the management services
previously provided by the Management Company. Due to certain transactions
involving The Equitable Companies Incorporated, the indirect parent of DLJ
Capital Management, a substantially similar sub-management agreement (the
"Sub- Management Agreement") was approved by the limited partners of the
Partnership at their 1992 annual meeting held on May 26, 1992.
At their meeting on March 1, 1995, the Individual General Partners of the
Partnership, including all of the Independent General Partners, approved the
continuance of the Management Agreement and the Sub-Management Agreement for
an additional year. In their consideration of this matter, the Individual
<PAGE>
General Partners received information relating to the nature, quality and
extent of the management and administrative services provided to the
Partnership by the Management Company and its affiliates and by DLJ Capital
Management. In this regard, the Individual General Partners considered
information regarding the performance of the Sub-Manager with respect to the
venture capital investments that it has made on behalf of the Partnership,
profitability of the Sub-Manager with respect to the Partnership and certain
comparative data regarding, among other things, management expenses and
performances.In addition, the Individual General Partners reviewed the
personnel resources of the Sub-Manager that had been allocated to the
Partnership for the year ended December 31, 1994. The Independent General
Partners were represented by separate counsel in connection with their review
of the management arrangements of the Partnership.
Information Concerning the Management Company. The Management Company is a
wholly-owned subsidiary of ML Leasing Equipment Corp., which is an indirect
subsidiary of Merrill Lynch & Co., Inc. The Management Company, which was
incorporated under Delaware law on January 25, 1982, maintains its principal
office at North Tower, World Financial Center, New York, New York 10281-1327.
The Management Company also acts as the management company for ML Venture
Partners I, L.P. ("MLVPI"), a business development company under the
Investment Company Act which commenced operations in 1982. In addition, the
Management Company is the general partner of Merrill Lynch Venture Capital
Co., L.P., a New York limited partnership which is the managing general
partner of MLVPI. As compensation for its services to MLVPI, the Management
Company receives a fee at the annual rate of 2% of MLVPI's net assets. At
December 31, 1994, MLVPI had net assets of approximately $2.9 million.
The Management Company also serves as the management company for ML Oklahoma
Venture Partners, Limited Partnership ("ML Oklahoma"), a business development
company under the Investment Company Act which commenced operations in August
1989 with net proceeds of approximately $9.2 million. The Management Company
also acts as the general partner of MLOK Co., Limited Partnership, an
Oklahoma limited partnership which is the managing general partner of ML
Oklahoma. As compensation for its services to ML Oklahoma, the Management
Company receives a fee at the annual rate of 2.5% of the amount of the
partners' capital contributions (net of selling commissions and
organizational and offering expenses paid by ML Oklahoma), reduced by capital
distributed to partners and realized capital losses, with a minimum annual
fee of $200,000. Such fee is determined and payable quarterly. At December
31, 1994, the amount of the partners' capital contributions to ML Oklahoma,
adjusted as described above, equaled approximately $11.5 million.
The following table sets forth information concerning the directors of the
Management Company and the executive officers of the Management Company
involved with the Partnership. Information concerning Kevin K. Albert,
Director and President of the Management Company, is set forth under
"Election of General Partners--Individual General Partners." The address of
Mr. Aufenanger, Mr. Seitz and Mr. Sullivan is South Tower, World Financial
Center, New York, New York 10080.
<PAGE>
<TABLE>
<CAPTION>
Officer or
Director Principal Occupation During
Name Age Title Since Past Five Years or More
<S> <C> <C> <C> <C>
Robert F. Aufenanger 41 Executive 1990 Vice President of Merrill Lynch & Co.
Vice President Corporate Strategy, Credit and Research and
and Director Director of the Partnership Management Group
since 1991; Director of MLIBK from 1990 to
1991; Vice President of MLIBK from 1984 to
1990.
Robert W. Seitz 48 Vice President 1993 First Vice President of Merrill Lynch & Co.
and Director Corporate Strategy, Credit and Research and a
Managing Director within the Corporate Credit
Division of Merrill Lynch since 1987.
Joseph W. Sullivan 37 Treasurer 1993 Assistant Vice President of MLIBK since 1988;
Controller in Partnership Analysis and
Management Department of MLIBK from 1990 to
1993; Assistant Vice President of Standard &
Poor's Corporation from 1988 to 1990.
</TABLE>
<PAGE>
Information Concerning DLJ Capital Management. DLJ Capital Management, a
Delaware corporation, is an indirect wholly-owned subsidiary of Donaldson,
Lufkin & Jenrette, Inc. ("DLJ"), a holding company which through its
subsidiaries engages in the following activities: investment banking,
merchant banking, public finance, trading, distribution and research. DLJ
Capital Management maintains its principal office at 140 Broadway, New York,
New York 10005.
DLJ Capital Management is a wholly-owned subsidiary of DLJ Capital
Corporation ("DLJ Capital"). DLJ Capital, which was founded in 1969, has
established eight institutional venture capital funds ("Sprout Funds") and
several smaller funds, with total committed capital of over $800 million. Six
of such institutional funds, with capital exceeding $700 million, are
currently operating. DLJ Capital's most recent limited partnership is Sprout
VII, LP, which was established in 1994 with in excess of 75 percent of its
$225 million capital provided by participants in earlier Sprout Funds. DLJ
Capital's principal office is located at 140 Broadway, New York, New York
10005, and it maintains additional offices in Menlo Park, California and
Boston, Massachusetts.
The following table sets forth information concerning the directors,
principal executive officers and other officers of DLJ Capital Management.
Unless otherwise noted, the address of each such person is 140 Broadway, New
York, New York 10005.
<PAGE>
<TABLE>
<CAPTION>
Officer or
Director of
DLJ Capital Principal Occupation During
Name Age Title Since Past Five Years or More
<S> <C> <C> <C> <C>
Richard E. Kroon 52 President, Chief 1977 Managing General Partner of Sprout Group, the
Executive venture capital affiliate of DLJ ("Sprout
Officer and Group") since 1981.
Director
Janet A. Hickey 49 Senior Vice 1985 General Partner of Sprout Group since 1985;
President Vice President and Manager of Venture Capital
Division of General Electric Investment Corp.
from 1970 to 1985.
Keith B. Geeslin(1) 41 Senior Vice 1984 General Partner of Sprout Group since 1986.
President
Dr. Robert E. Curry(1) 48 Vice President 1991 President and Director of the Management
Company from 1989 to 1991; Managing Director of
MLIBK from 1990 to 1991; President of Merrill
Lynch R&D from 1990 to 1991; Vice President of
Merrill Lynch R&D Management Inc. ("Merrill
Lynch R&D") from 1984 to 1990 and Director from
1987 to 1991; General Partner of Sprout Group
since 1991.
Robert Finzi(1) 41 Vice President 1991 Vice President of the Management Company from
1985 to 1991; Associate with Menlo Ventures
from 1983 to 1984; General Partner of Sprout
Group since 1991.
Anthony F. Daddino 54 Vice President 1989 Director, Executive Vice President and Chief
and Director Financial Officer of DLJ.
Thomas E. Siegler 60 Secretary, 1971 Senior Vice President and Secretary of DLJ.
Treasurer and
Director
Paul H. Bartlett(1) 34 Vice President 1992 Associate of Sprout Group since 1990;
previously associated with DLJ Investment
Banking.
John D. Lai 43 Vice President 1992 Controller of Sprout Group since 1979.
Kathleen D. LaPorte(1) 33 Vice President 1992 General Partner of Sprout Group since 1994;
previously with the venture capital firm Asset
Management Corp.
James D. Philipkosky 33 Vice President 1992 Associate at Sprout Group since 1990;
previously associated with AVX Corp.
Paul B. Queally 30 Vice President 1992 General Partner of Sprout Group since 1993;
previously Associate of Sprout Group from 1986
to 1993.
Arthur S. Zuckerman 35 Vice President 1992 Chief Administrative Officer of Sprout Group
since 1992; previously Associate of Oxford
Venture Partners.
</TABLE>
<PAGE>
(1) The address of these officers is 3000 Sand Hill Road, Menlo Park,
California 94025.
(2) The address of Messrs. Reeder and Metcalfe is 75 State Street, Boston, MA
02109.
Terms of Contracts
Management Agreement. Under the Management Agreement, subject to the
supervision of the Individual General Partners of the Partnership, the
Management Company performs, or arranges for the performance of, the
management and administrative services necessary for the operation of the
Partnership. The Management Company, subject to the overall supervision of
the Managing General Partner and the Individual General Partners, provides,
or arranges for the provision of, management services in connection with the
Partnership's venture capital investments. The Management Company also
provides investment advisory services in connection with the money market
securities portfolio of the Partnership. The Management Company provides the
Partnership with office space, equipment and facilities and such other
services as the Management Company, subject to review by the Individual
General Partners, from time to time determines to be necessary or useful to
perform its obligations under the Management Agreement. The Management
Company has arranged for Palmeri Fund Administrators, Inc. ("PFA") to provide
certain administrative services to the Partnership. PFA, which is compensated
by the Management Company, assists the Management Company in the provision of
administrative services, including, among other things, accounting, financial
reporting and maintenance of the accounts and data files of the limited
partners of the Partnership.
Management Fee. Pursuant to the Management Agreement, the Partnership pays
the Management Company a fee at the annual rate of 2.5% of the amount of the
partners' capital contributions (net of selling commissions and
organizational and offering expenses paid by the Partnership), reduced by
capital distributed to the Partners and realized capital losses, with a
minimum annual fee of $200,000. Such fee is payable quarterly on the basis of
the amount of the partners' capital contributions, adjusted as described
above, at the end of the preceding calendar quarter. As described below, the
Management Company has entered into a Sub- Management Agreement with DLJ
Capital Management, pursuant to which the Management Company compensates DLJ
Capital Management for management services out of the compensation that the
Management Company receives under the Management Agreement. For the year
ended December 31, 1994, the management fees payable by the Partnership to
the Management Company aggregated $1,333,363.
<PAGE>
Payment of Expenses. The Management Agreement obligates the Management
Company to provide, or arrange for the provision of, management and
investment advisory services, to furnish the Partnership with office space,
equipment and facilities, and to pay the compensation of all General Partners
of the Partnership who are affiliated persons of the Management Company. The
Management Company also bears the administrative and service expenses
associated with managing the Partnership's assets. The Management Agreement
provides that the Partnership will pay all other expenses incurred in the
operation of the Partnership, including, among other things, expenses of
portfolio transactions, valuation costs (including the quarterly calculation
of net asset value), expenses of printing reports and other documents
distributed to limited partners, SEC fees, interest, taxes, fees and actual
out-of-pocket expenses of General Partners who are not affiliated persons of
the Management Company, fees for legal, auditing and services, litigation
expenses, costs of printing proxies and other expenses related to meetings of
limited partners, and other expenses properly payable by the Partnership.
Sub-Management Agreement. The Management Company has entered into a separate
Sub- Management Agreement with DLJ Capital Management, pursuant to which DLJ
Capital Management, subject to the supervision of the Management Company and
the Individual General Partners, provides management services in connection
with the Partnership's venture capital investments and investments of the
Partnership in unaffiliated venture capital funds. The Sub-Management
Agreement provides that in providing such services, DLJ Capital Management
will, subject to the overall supervision of the Managing General Partner, the
Management Company and the Individual General Partners, make all decisions
regarding the Partnership's venture capital investments and, among other
things, find, evaluate, structure, monitor and liquidate such investments and
provide managerial assistance to issuers of venture capital investments. The
Management Company is responsible for the management of the Partnership's
short-term investments. The Sub-Management Agreement provides for the
indemnification of DLJ Capital Management (including its directors, officers
and employees) by the Partnership in connection with the performance of its
services under the Agreement. Such indemnification is to be made under the
same terms under which the Partnership indemnifies the Management Company.
The Sub-Management Agreement provides that as compensation for the services
rendered under the Agreement, DLJ Capital Management receives from the
Management Company 95 percent of the compensation received by the Management
Company under the Management Agreement. Such payments are to be made to DLJ
Capital Management quarterly, after receipt by the Management Company of its
compensation from the Partnership. In connection with the sub-management
arrangements, DLJ Capital Management and DLJ Associates VI L.P., a Delaware
limited partnership whose partners consist of corporate affiliates of DLJ
Capital Management and employees of such affiliates who are officers of DLJ
Capital Management, were admitted as limited partners of the Managing General
Partner. In consideration for the services rendered under the Sub-Management
Agreement, DLJ Capital Management and DLJ Associates will receive 37% and
63%, respectively, of any profits previously allocable to the Management
Company (as the general partner of the Managing General Partner) resulting
from the Managing General Partner's Allocation (as defined on page 5 herein).
The Management Company will continue to be allocated a percentage of all
other items of profit, loss, income and expense allocable to the Managing
General Partner by the Partnership which do not result from the Managing
General Partner's Allocation. For the year ended December 31, 1994, the
sub-management fees payable to DLJ Capital Management aggregated
approximately $1,267,000.
Duration and Termination. If the continuance of the management arrangements
is approved by the limited partners of the Partnership, the Management
Agreement and Sub-Management Agreement will remain in effect until May 23,
1996 and will continue in effect from year to year thereafter if approved
annually (a) by
<PAGE>
the Individual General Partners of the Partnership or by a majority of the
outstanding voting securities of the Partnership and (b) by a majority of
Individual General Partners who are not parties to such contract or
interested persons (as defined in the Investment Company Act) of any such
party. The agreements are not assignable and may be terminated without
penalty on 60 days' written notice at the option of either party thereto or
by the Individual General Partners of the Partnership or the vote of the
outstanding voting securities of the Partnership.
In the event that DLJ Capital Management were to resign as sub-manager or the
Sub-Management Agreement were terminated by the Partnership on the basis of
DLJ Capital Management's negligence, misconduct in the performance of its
duties or reckless disregard of its duties and obligations under the
Sub-Management Agreement, the original interest of the Management Company in
the Managing General Partner's Allocation would revert to the Management
Company (other than the vested portion of its interest which relates to those
investments made by the Partnership during the period that the Sub-Management
Agreement was in effect, which will be retained by DLJ Capital Management and
its affiliate). In the event that the Sub-Management Agreement is otherwise
terminated, DLJ Capital Management and its affiliate would retain their
interest in the Managing General Partner's Allocation and such interest would
not be available for reallocation to a successor sub-manager.
AMENDMENT TO THE PARTNERSHIP AGREEMENT
The Individual General Partners recommend the approval by the limited
partners of the proposed amendment to the Partnership Agreement described
below.
Paragraph 11.4 of the Partnership Agreement presently requires the
Partnership to hold annual meetings of limited partners for the purpose of
voting upon the election of General Partners, as well as any other matters
requiring the consent of all or any of the limited partners. The Partnership
has held such annual meetings each year since the Partnership commenced
operations in 1987. However, in light of the stage of the Partnership's
operations, as described below, the Individual General Partners believe that
the costs which would be incurred in connection with future annual meetings
of limited partners will outweigh the benefits thereof. Thus, Paragraph 11.4
is proposed to be amended in order to eliminate the requirement to hold
annual meetings of limited partners unless such meetings are otherwise
required by the Investment Company Act or any rule or regulation thereunder.
The proposed amendment does not affect the right of the Individual General
Partners or the limited partners to call special meetings of limited partners
in accordance with the terms of the Partnership Agreement.
The Partnership is in the eighth year of its ten year term. From the
commencement of operations to December 31, 1994, the Partnership invested an
aggregate of approximately $110.7 million in 58 venture capital investments.
As of December 31, 1994, the Partnership had 28 remaining portfolio
investments and had net assets of approximately $83 million. During 1993, the
Partnership completed its new investment phase and it will not make any new
venture capital investments. The term of the Partnership may be extended for
up to two additional two year periods if such extension is determined by the
Individual General Partners to be in the Partnership's best interest.
Costs incurred in connection with annual meetings of limited partners include
printing expenses, legal fees and postage. It is estimated that the
elimination of the annual meeting of limited partners will save the
Partnership more than $38,000 per year. In addition, although the number of
limited partners who returned proxies was sufficient to hold valid meetings
for each of the past annual meetings, attendance by limited partners at the
meetings (other than by proxy) has been minimal. For example, a total of one
limited partner has attended the past five annual meetings of limited
partners combined.
<PAGE>
If the proposal to amend the Partnership Agreement as provided herein is
approved, certain matters which have been submitted for a vote of limited
partners in connection with annual meetings of limited partners will no
longer be subject to the approval of limited partners. In the event future
annual meetings of limited partners are not held, the Managing General
Partner and each of the Individual General Partners will serve until such
General Partner withdraws or resigns, or is removed or incapacitated. In
addition, to the extent future meetings of limited partners are not held, the
Individual General Partners, including a majority of the Independent General
Partners, will approve the continuance of the Management Agreement and the
Sub-Management Agreement, and the appointment of the certified public
accountants for the Partnership, without the approval of the limited
partners.
If approved by the limited partners, revised Paragraph 11.4 will provide as
follows (with changes in italics):
11.4 Annual Meetings. Action by the General Partners and Limited Partners may
be taken at a meeting of the General Partners and Limited Partners. To the
extent required by the 1940 Act or any order thereunder, the Individual
General Partners shall call annual meetings of Limited Partners for the
purpose of voting upon the election of General Partners, at which meetings
any other matter requiring the Consent of all or any of the Limited Partners
pursuant to this Agreement may be acted upon. Notification of such a meeting
of Partners shall be given by the Individual General Partners at least 30
days before such meeting. Any such notice shall state briefly the purpose,
time and place of the meeting. All such meetings shall be held within or
outside the State of Delaware at such reasonable place as the Individual
General Partners shall designate and during normal business hours. In the
event the Individual General Partners are not required by the 1940 Act to
call any future annual meetings of Limited Partners, notwithstanding any
provisions herein to the contrary, each of the General Partners will serve
until the Incapacity of such General Partner or until such General Partner
withdraws, retires or is removed. In addition, notwithstanding any provisions
herein to the contrary, in the event the Individual General Partners are not
required by the 1940 Act to call any future annual meetings of Limited
Partners, (i) the continuance of a management agreement with the Management
Company for the management of the business and operation of the Partnership
and (ii) the appointment of the independent certified public accountants for
the Partnership, by the Individual General Partners, including a majority of
the Independent General Partners, in the name of and on behalf of the
Partnership, shall not be subject to the approval of the Limited Partners.
PORTFOLIO TRANSACTIONS
During the year ended December 31, 1994, the Partnership paid $8,400 in
brokerage commission to DLJ Securities Corporation, an affiliate of the
Sub-Manager, in connection with portfolio transactions. Such commissions
represented % of the aggregate brokerage commissions paid by the Partnership
during the year ended December 31, 1994.
Certain of the venture capital investments made by the Partnership have
involved co-investments with entities affiliated with Merrill Lynch & Co.,
Inc. or DLJ Capital Management. As a result of these affiliations, certain
transactions have required exemptive orders from the SEC. Set forth below is
information concerning two exemptive orders issued by the SEC during 1992
pursuant to which the Partnership acquired investments held by the Management
Company or its affiliates.
In accordance with the terms of an order issued by the SEC in May 1994, the
Partnership sold 55,336 shares of common stock of Borg-Warner Automotive,
Inc. ("BWA") for $1.2 million in October 1994 in connection with the public
offering of BWA's shares. Affiliates of the Management Company and the Sub-
Manager were members of the syndicate of underwriters in connection with such
public offering.
<PAGE>
In November 1994 the Partnership received an order from the SEC permitting it
to purchase shares of common stock of Corporate Express, Inc. from the
Management Company in connection with a transaction in which an affiliate of
the Sub-Manager also participated. The aggregate purchase price paid by the
Partnership was approximately $1.1, which, in accordance with the terms of
the order issued by the SEC, was based on the original purchase price plus
carrying costs through the date the Partnership paid for such investment.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice of Proxy Statement will be borne by the
Partnership. The Partnership will reimburse banks, brokers and others for
their reasonable expenses in forwarding proxy solicitation material to the
beneficial owners of the units of limited partnership interest of the
Partnership.
Approval of the continuance of the Management Agreement and of the
Sub-Management Agreement requires the vote of a majority of the outstanding
voting securities of the Partnership which, under the Investment Company Act,
is the vote (a) of 67% or more of the units of limited partnership interest
in the Partnership 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. In order to obtain the
necessary quorum at the Meeting, supplementary solicitation may be made by
mail, telephone, telegraph, or personal interview. It is anticipated that the
cost of such supplementary solicitation, if any, will be nominal.
Proposals of Limited Partners
Proposals of limited partners intended to be presented at the next meeting of
limited partners of the Partnership, if any, must be received by the
Partnership for inclusion in its proxy statement and form of proxy relating
to that meeting by December 5, 1995. If the proposal to amend the Partnership
Agreement to eliminate the requirement to hold annual meetings of limited
partners is approved, it is expected that there will be no subsequent annual
meeting of limited partners. However, the proposed amendment will not affect
the right of limited partners to call special meetings of limited partners in
accordance with the terms of the Partnership Agreement.
By Order of the Individual General Partners
Kevin K. Albert
Individual General Partner
Dated: March , 1995
<PAGE>
<PAGE>
[FORM OF PROXY CARD]
ML VENTURE PARTNERS II, L.P.
North Tower
World Financial Center
New York, New York 10281-1327
THIS PROXY IS SOLICITED ON BEHALF OF THE INDIVIDUAL GENERAL PARTNERS
The undersigned hereby appoints William M. Kelly and Kevin K. Albert as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated herein, all units of limited
partnership interest of ML Venture Partners II, L.P. (the "Partnership") held
of record by the undersigned on March 17, 1995 at the annual meeting of the
limited partners of the Partnership to be held on May 2, 1995 or any
adjournment thereof.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned limited partner. If no direction is made, this Proxy will
be voted for Proposals 1, 2, 3, 4 and 5.
<TABLE>
<S><C> <C> <C>
1. ELECTION OF INDIVIDUAL / /FOR all nominees listed below (except / /WITHHOLD AUTHORITY to
GENERAL PARTNERS as indicated to the contrary below). vote for all nominees listed below.
Nominees: Kevin K. Albert, Dr. Steward S. Flaschen, Jerome Jacobson, William M. Kelly.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided.)
--------------------------------------------------------------------------------------------
2. ELECTION OF MANAGING / /FOR the nominee listed below. / /WITHHOLD AUTHORITY to
GENERAL PARTNER vote for the nominee listed below.
Nominee: MLVPII Co., L.P.
3. Proposal to ratify the selection of Deloitte & Touche as independent auditors of the Partnership for its fiscal year
ending December 31, 1995.
/ /FOR / /AGAINST / /ABSTAIN
4. Proposal to approve the continuance of the Management Agreement among the Partnership, MLVPII Co., L.P. and Merrill
Lynch Venture Capital Inc. and the Sub-Management Agreement among the Partnership, MLVPII
Co., L.P., Merrill Lynch Venture Capital Inc. and DLJ Capital Management Corporation.
/ /FOR / /AGAINST / /ABSTAIN
5. Proposal to Amend Paragraph 11.4 of the Amended and Restated Agreement of Limited Partnership
so as to eliminate the requirement to hold annual meetings of limited
partners and approve certain matters at such meetings.
/ /FOR / /AGAINST / /ABSTAIN
6. In the discretion of such proxies, upon such other business as may properly come before the meeting or any
adjournment thereof.
</TABLE>
Dated______________________________________, 1995____
X____________________________________________________
(Signature)
X____________________________________________________
(Signature, if held jointly)
Please sign exactly as name appears hereon. When units of limited
partnership interest are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please Sign, Date and Return the Proxy Card Promptly Using the
Enclosed Envelope. Please mark boxes / / or X
/X/.
