Exhibit 10.02
CUSTOMER AGREEMENT
BETWEEN
ML CHESAPEAKE L.P.
AND
XXXXXXX XXXXX FUTURES INC.
DATED AS OF APRIL 15, 1996
ML CHESAPEAKE L.P.
CUSTOMER AGREEMENT
In consideration of the acceptance by Xxxxxxx Xxxxx Futures
Inc. ("Broker") of one or more accounts of ML Chesapeake L.P. ("Customer"), it
is agreed as follows:
1. Customer acknowledges that the purchase and sale of
commodity futures and forward contracts and commodity options is speculative,
involves a high degree of risk and is suitable only for persons who can assume
the risk of losses in excess of their margin deposits and option premiums.
Customer understands that because of the low margin normally required in
commodity futures and forward trading, small price changes in commodity futures
and forward contracts may result in significant Customer losses, which losses
may substantially exceed Customer's margin deposits and any other deposits
Customer may make. Broker has disclosed all the foregoing risks and information,
as well as the fact that the proposed monthly brokerage commissions of 1/12 of
1% of the month-end assets allocated to the Trading Advisor for management (a
6.5% annual rate), may result in significantly higher brokerage costs than those
charged by Broker to other customers, including other commodity pools such as
Customer. Depending upon the number of trades ordered for Customer by Chesapeake
Capital Corporation (the "Trading Advisor"), the foregoing flat-rate commissions
could constitute a substantial premium over Broker's standard speculative
round-turn commission rates.
Broker agrees to pay all floor brokerage charges relating to
Customer's trading, including any such charges assessed on trades executed by
floor brokers unaffiliated with Broker, provided that such charges do not exceed
Broker's standard rates (provided such rates are competitive).
2. Customer authorizes Broker, as Customer's commodity
broker and as Customer's principal, to purchase and sell commodity futures and
forward contracts, respectively, (and to use the services of other persons
designated by Customer in writing from time to time, in doing so) and to
purchase, sell and exercise commodity options for Customer's account in
accordance with the written or oral instructions of the Trading Advisor as
described in the Offering Memorandum of Customer, dated October 31, 1995 (as may
be amended from time to time, the "Offering Memorandum"), which Trading Advisor
have been granted full discretionary trading authority with respect to
Customer's assets, or such other person or persons as Customer may designate to
Broker in writing from time to time. Customer acknowledges and agrees that
Broker shall have no discretion with respect to the trading decisions to be made
for the account of Customer except as may otherwise be agreed upon in writing
between Customer and Broker. Customer has delivered to Broker a true copy of the
Advisory Agreement between Customer and the Trading Advisor (the "Advisory
Agreement"). Customer may override the authority of the Trading Advisor in
certain limited circumstances as described in such Advisory Agreement and the
Offering Memorandum. Broker shall be in no respect responsible for any actions
taken in compliance with instructions from the Trading Advisor or from Customer.
3. Broker shall act as custodian for all assets of
Customer. In such capacity, Broker may cause to be held cash and other assets of
Customer by such bank or banks as Broker may select from time to time, in its
sole discretion, subject to the approval of Customer, and may
transmit funds to exchanges as margin. Broker shall not deposit assets of
Customer as margin in respect of Customer's forward trades, which trades shall
be effected pursuant to the Foreign Exchange Desk Service Agreement between
Customer, Broker, Xxxxxxx Xxxxx International Bank, Xxxxxxx Xxxxx Investment
Partners Inc. and certain other parties dated as of ____________ (the "F/X Desk
Agreement"). Broker will credit Customer with interest as if the daily cash
balance in Customer's account were continuously invested in 91-day Treasury
Bills at prevailing rates auctioned during each month. Broker will, in turn,
deposit such cash assets in a non-interest bearing, demand deposit "customer
segregated funds account" maintained at a major money center or foreign bank.
Broker, or any of its affiliates may make such "offset account" or similar
arrangements with respect to such "customer segregated funds account" and may
retain all benefit therefrom, provided that no such arrangements shall subject
the assets of the Customer to any liability in respect of any Xxxxxxx Xxxxx debt
or obligation. Such "customer segregated funds account" will be maintained in
full compliance with applicable CFTC rules governing maintenance of "customer
funds."
In the event that an "offset" or similar arrangements are
deemed to be undesirable by Broker, in its sole discretion, Broker may, in lieu
of such arrangements, invest Customer's funds in 91-day Treasury Bills to the
greatest extent which Broker deems practical. All interest earned on such
Treasury Bills shall inure to the benefit of Customer, and Broker shall not be
required to make any additional payments to Customers in respect of interest
income or yield. Broker shall have no liability to Customer in connection with
any such investment except for Broker's negligence or misconduct in connection
therewith. Broker shall be entitled to retain any other economic benefit which
may accrue from its possession of Customer's assets, provided that such benefit
could not reasonably be made available to Customer.
4. Customer shall pay Broker: (a) the applicable
initial, maintenance and variation margin requirements in effect from time to
time and the brokerage commissions described in the Offering Memorandum; and (b)
service charges on any Customer deficit balance at the rates customarily charged
by Broker and interest on any such deficit balance at the rate of one percent
(1%) over the average prime rate announced from time to time by The Xxxxxx
Guaranty Trust Company of New York, with interest to be computed and charged by
Broker on a monthly basis, or the maximum rate allowed by law, whichever is
less. All routine charges, including without limitation, exchange fees, National
Futures Association transaction fees and clearing fees and floor brokerage due
in respect of Customer's trading shall be paid by Broker from the monthly
flat-rate commission received by Broker from Customer. Broker shall pay all "pit
brokerage" incurred in respect of Customer's trading without reimbursement
therefor by Customer.
5. Customer acknowledges that Broker has the right, but
no responsibility or obligation, to limit the number of commodity futures,
forward and commodity options which Customer may maintain or acquire through
Broker at any time. Broker shall give Customer prior notice of any such
limitation.
6. Customer shall maintain at all times all of its
assets, except such assets as may be held by banks, with Broker to be used to
provide, and subject to be transmitted to exchanges in respect of, margins for
Customer's account as required from time to time by Broker in its sole and
absolute discretion. Margin requirements established by Broker may exceed or
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differ from the requirements set by any commodity exchange or third party and
may be changed by Broker without notice to Customer, such changes to apply to
existing as well as future positions, should Broker so elect. If at any time
Customer's account does not contain the amount of margin and/or premium required
by Broker, Broker may, at any time, close out Customer's open positions in whole
or in part and take any action described in Section 11 hereof, after giving
notice thereof to the Trading Advisor and the Customer. While Broker has the
right to close out Customer's open positions in whole or in part for failure to
maintain the amount of margin required by Broker or pay premiums due to Broker,
Customer understands and agrees that Broker has no obligation to Customer to do
so in the absence of specific instructions from Customer or the Trading Advisor.
7. All transactions by Broker on Customer's behalf shall
be subject to the applicable constitutional provision, by-laws, rules,
regulations, rulings and interpretations of the contract market on which such
transactions are executed or cleared by Broker or its agents for Customer's
account, and to all applicable governmental acts and statutes (such as the
Commodity Exchange Act) and the rules and regulations made thereunder; Broker
shall not be liable to Customer as a result of any action taken by Broker or its
agents that is considered in good faith by Broker to be required by any such
constitutional provision, rule, regulation, ruling, interpretation, act, statute
or regulation. The foregoing provision is solely for the protection and benefit
of Broker, and any failure by Broker or its agents to comply with any such
constitution, rule, regulation, ruling, interpretation, act, statute or other
regulation shall not relieve Customer of any obligations under this Agreement
nor be construed to create rights hereunder in favor of Customer against Broker.
8. All monies, securities, commodities, commodity
futures contracts, commodity options or other property, including any property
held by banks, now or at any future time in Customer's account or held by Broker
for Customer are hereby pledged with Broker and shall be subject to a security
interest in Broker's favor to secure any indebtedness at any time owing from
Customer to Broker.
9. All transactions for or on Customer's behalf shall be
deemed to be included in a single account whether or not such transactions are
segregated on Broker's records into separate accounts, either severally or
jointly with others -- the foregoing provision being solely for Broker's
protection.
Broker's rights with respect to Customer's property shall be
qualified by applicable requirements for the segregation of customer property
under the Commodity Exchange Act and the regulations of the Commodity Futures
Trading Commission.
10. Broker shall not be responsible for: (1) delays in
the transmission of orders due to breakdown or failure of transmission or
communication facilities or to any other cause beyond Broker's reasonable
control or not resulting from Broker's negligence or misconduct; or (2) any gain
or loss to Customer from fluctuations in currency exchange rates in any foreign
currency in which any commodity futures, forward or commodity option contract or
deposited property is held, except to the extent that any amount may be owing
from Broker to Customer pursuant to any transaction in a foreign currency
between Broker and Customer, provided that there is no negligence or misconduct
on the part of Broker in respect of such loss.
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11. In the event that: (a) Customer shall terminate or be
dissolved; (b) a proceeding under the Bankruptcy Code, an assignment for the
benefit of creditors or an application for a receiver, custodian or trustee
shall be filed or applied for by or against Customer; (c) any property in
Customer's account shall be garnished or attached; (d) the property held in
Customer's account shall be determined by Broker in its sole and absolute
discretion, and regardless of current market quotations, to be inadequate to
secure Customer's account; (e) Customer's account shall incur a deficit balance;
or (f) Customer shall acquire or maintain open positions with Broker in excess
of the limits imposed from time to time by Broker pursuant to Section 5 hereof,
Broker may close out Customer's account in whole or in part, sell any or all of
Customer's property held by Broker, buy or sell any securities, commodities,
commodity futures, forward or commodity options, or any other property, for
Customer's account, or cancel any outstanding orders to close out any account of
Customer or to close out any commitment made by Broker on behalf of Customer.
Such sale, purchase or cancellation may be made at Broker's discretion on a
contract market or at public auction or at private sale. No prior tender,
demand, call or prior notice from Broker of the time and place of such sale or
purchase shall be deemed to be a waiver of Broker's right to sell or buy any
property held by Broker, or owed to Broker by Customer. Broker may, to the
extent permitted by law, purchase the whole or any part of any such Customer
property, free from any right of redemption, and Customer shall remain liable
for and shall pay to Broker the amount of any deficiency resulting from any such
transactions.
12. If at any time Customer shall be unable to deliver to
Broker any property previously sold by Broker on Customer's behalf, Customer
authorizes Broker in its discretion to borrow or to buy any property necessary
to make delivery thereof, and Customer shall pay and reimburse Broker for any
cost, loss and damage (including consequential costs, losses, penalties, fines
and damages) which Broker may sustain thereby and any premiums which Broker may
be required to pay thereon, and for any cost, loss and damage (including
consequential costs, losses, penalties, fines and damages) which Broker may
sustain from its inability to borrow or buy any such property.
13. In the event Broker does not receive timely
instructions with respect to outstanding options held in Customer's account to
liquidate, exercise or permit such options to expire, Broker shall permit such
options in Customer's account to expire.
Customer shall give liquidating instructions to Broker
concerning Customer's open futures and forward positions maturing in a current
month at least five (5) business days prior to the first notice day, in the case
of long positions, and at least five (5) business days prior to the last trading
day, in the case of short positions. Alternatively, Customer shall deliver to
Broker sufficient funds to take delivery or sufficient funds and/or the
necessary documents to make delivery within the time period hereinabove
specified. If Customer does not either give instructions or deliver the funds
and/or documents hereby required to Broker within such period, Broker may,
without notice, either liquidate Customer's positions pursuant to Section 11 or
take or make delivery on behalf of Customer upon such terms and in such manner
as Broker determines in its sole and absolute discretion.
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14. Customer agrees and acknowledges that with respect to
its forward trading, Customer shall trade through Broker pursuant to the terms
of the F/X Desk Agreement and such trading shall be subject to Broker's standard
netting provisions.
15. Customer agrees that Broker may, from time to time,
change the account number assigned to any account covered by this Agreement, and
that this Agreement shall remain in full force and effect as to any such
renumbered account.
16. Subject to Section 7 hereof, no provision of this
Agreement shall in any respects be waived, altered, modified or amended unless
such waiver, alteration, modification or amendment be committed to writing and
signed by Customer and an officer of Broker.
17. This Agreement shall be construed according to, and
the rights and liabilities of the parties hereto shall be governed by, the laws
of the State of New York.
18. This Agreement shall be binding upon Customer and
Customer's assigns.
19. Customer acknowledges that it is an affiliate of
Broker. However, Customer acknowledges and agrees that this Agreement may be
enforced against Customer in accordance with its terms, irrespective of such
affiliation.
20. If any term or provision hereof, or the application
thereof to any person or circumstance, shall to any extent be contrary to any
exchange or government regulation or otherwise invalid or unenforceable, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is contrary, invalid or
enforceable, shall not be affected thereby, and shall be enforced to the fullest
extent permitted by regulation and law, provided such enforcement does not
materially alter the intent of this Agreement or reduce the security, or
increase the obligations, of Broker hereunder.
21. The rights and remedies conferred upon the parties
hereto shall be cumulative, and the exercise or waiver of any thereof shall not
preclude or inhibit the exercise of additional rights or remedies.
22. Broker shall be free to render services of the nature
to be rendered to Customer hereunder to persons or parties in addition to
Customer, and the parties acknowledge that Broker does and will render such
services, including to commodity pools similar in nature to Customer, and may do
so on terms more favorable than those granted to Customer hereunder. However,
Broker shall not knowingly or deliberately favor any account over Customer with
respect to the execution of commodity trades.
23. This Agreement shall be cancelable, without penalty,
upon sixty (60) days' notice to the parties hereto by Broker or Customer.
24. Any notices under this Agreement shall be given or
confirmed in writing, delivered personally or sent by mail, as follows:
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if to Customer:
ML CHESAPEAKE L.P.
c/x Xxxxxxx Xxxxx Investment Partners Inc.
Xxxxxxx Xxxxx World Headquarters
Sixth Floor, South Tower
World Financial Center
New York, New York 10080-6106
Attn: Xxxx X. Xxxxxxx, Xx.
with a copy to:
XXXXXXX XXXXX INVESTMENT PARTNERS INC.
Xxxxxxx Xxxxx World Headquarters
Sixth Floor, South Tower
World Financial Center
New York, New York 10080-6106
Attn: Xxxx X. Xxxxxxx, Xx.
if to Broker:
XXXXXXX XXXXX FUTURES INC.
Xxxxxxx Xxxxx World Headquarters
23rd Floor
North Tower
World Financial Center
New York, New York 10080-6121
Attn: Xxxxxxx Xxxxxxxx, Esq.
Notices hereunder shall be effective only when actually
received.
25. Customer understands that any of its assets held by
the parties with which Customer trades in the forward markets will not be
subject to Commodity Futures Trading Commission segregation requirements.
26. This Agreement shall inure to the benefit of Broker.
This Agreement shall also inure to the benefit of any of Broker's affiliates
through which Customer may trade and to that of the respective successors (by
merger, consolidation or otherwise) and assigns of each of the foregoing
parties, each of which may transfer Customer's account to any such successors or
assigns.
27. Broker and Customer each agree that in the event of
inconsistencies between the terms of this Agreement and the Offering Memorandum,
the latter shall control as if set forth verbatim herein.
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IN WITNESS WHEREOF, this Agreement has been executed for and
on behalf of the undersigned on the day and year first written above.
ML CHESAPEAKE L.P.
By: Xxxxxxx Xxxxx Investment Partners
Inc., General Partner
By: /s/ Xxxx X. Xxxxxxx, Xx.
---------------------------------------------
Name: Xxxx X. Xxxxxxx, Xx.
Title: Chief Executive Officer, President &
Director
Accepted and Confirmed
XXXXXXX XXXXX FUTURES INC.
By: /s/ Xxxx X. Xxxxxxx, Xx.
-------------------------------
Name: Xxxx X. Xxxxxxx, Xx.
Title: Co-Chairman
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