EXHIBIT 10.03
CUSTOMER AGREEMENT
AMONG
ML PRINCIPAL PROTECTION L.P.
(FORMERLY, ML PRINCIPAL PROTECTION PLUS L.P.)
ML PRINCIPAL PROTECTION TRADING L.P.
(FORMERLY, ML PRINCIPAL PROTECTION PLUS TRADING L.P.
AND
MERRILL LYNCH FUTURES INC.
DATED AS OF ________________, 1996
ML PRINCIPAL PROTECTION TRADING L.P.
CUSTOMER AGREEMENT
In consideration of the acceptance by MERRILL LYNCH FUTURES INC. ("Broker")
of one or more accounts of ML PRINCIPAL PROTECTION TRADING L.P., formerly ML
Principal Protection Trading 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 0.7917 of 1% of
the month-end assets allocated to the Trading Advisors for management (a 9.5%
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 its
advisors (the "Trading Advisors"), 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).
Broker agrees to pay all fees of Merrill Lynch Asset Management, L.P.,
which will provide cash management services to Customer and to ML Principal
Protection L.P., (formerly, ML Principal Protection Plus L.P.) the sole limited
partner of Customer (the "Parent").
2. Customer authorizes Broker, as Customer's commodity broker and as
Customer's principal, to purchase and sell commodity futures and forward
contracts (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 Advisors as described in the Prospectus of Customer and the Parent dated
_______, 1996, including the Prospectus Supplement thereto (as the same may be
amended as supplemented from time to time, the "Prospectus"), which Trading
Advisors 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 Agreements between Customer and each of the Trading Advisors (the
"Advisory Agreements"). Customer may override the authority of the Trading
Advisors in certain limited circumstances as described in such Advisory
Agreements and the Prospectus. Broker shall be in no respect responsible for any
actions taken in compliance with instructions from the Trading Advisors or from
Customer.
3. Broker shall act as custodian for all assets of Customer on deposit
with Broker. 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, Merrill Lynch International Bank, Merrill Lynch Investment Partners
Inc. (formerly, ML Future Investment Partner Inc.) and certain other parties
dated as of July 1, 1993 as amended by the Amendment to Foreign Exchange Desk
Service Agreement dated as of _______, 1996 (the "F/X Desk Agreement"). Broker
will invest such assets in a manner consistent with the "Use of Proceeds"
section in the Prospectus.
Broker may hold Customer assets in unregulated accounts. Assets held in
Customer's name at affiliates of Broker shall be held in unregulated accounts.
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Certain Customer assets will be converted into foreign currencies and used
to margin foreign futures positions held for Customer. Broker will hold such
non-U.S. dollar funds in a "foreign futures secured amount" or a "foreign
options secured amount" account, and will invest such assets, to the extent
practicable, in short-term government securities denominated in such currencies.
All interest earned on such investments shall inure to the benefit of Customer's
account. Customer shall bear the exchange-rate risk involved in converting and
re-converting assets held in Customer's account between U.S. dollars and foreign
currencies.
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 Prospectus; 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 Morgan 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.
Customer hereby authorizes Broker to pay all fees of Merrill Lynch Asset
Management, L.P., in connection with Merrill Lynch Asset Management, L.P.'s
provision of cash management services to Customer, from the monthly flat-rate
commission received by Broker from Customer.
5. Customer acknowledges that Broker has the right, but no responsibility
or obligation, to limit the number of
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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 that portion of its assets 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 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 Advisors 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 Advisors.
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.
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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. The Parent, the sole limited partner of Customer, hereby authorizes and
directs Broker to debit directly from Parent's bank or custodial accounts(s) all
amounts due to Broker from Parent as provided under Section 16(e) of the
Parent's Third Amended Limited Partnership Agreement -- being amounts equal to
the difference between the assets which Customer commits to trading and the
actual equity invested in Customer. Such debits may be made without need of
prior notice to either Customer or the Parent.
11. 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.
12. In the event that: (a) Customer shall terminate or be dissolved; (b)
a proceeding under the Bankruptcy Code, an
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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.
13. 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.
14. Broker acknowledges and agrees that Customer is a subsidiary limited
partnership of the Parent, which is the sole limited partner of Customer and
whose general partner is also the general partner of Customer. Broker agrees
that except pursuant to the Parent's undertaking pursuant to Section 16(e) of
the
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Parent's Limited Partnership Agreement, Broker will look only to the assets of
Customer, and not to any assets of the Parent itself, to satisfy any debts or
liabilities due to the Broker hereunder.
Broker also agrees that (i) it will in no event seek to assert, other than
pursuant to and to the extent of the Parent's undertaking set forth in Section
16(e) of the Parent's Limited Partnership Agreement, that the Parent or any of
its assets is in any respects subject to any debts of or claims against
Customer, either through "piercing the corporate veil," "substantive
consolidation" or other theories, and (ii) Broker will take no action and
institute no action or proceeding seeking to adjudicate the Customer a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property.
In no event shall Broker collect any amounts from Customer if doing so
would result in the assets attributable to one series of units of limited
partnership interest sold by Parent being used to pay any losses incurred in
respect of any other such series.
15. 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
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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.
16. 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.
17. 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.
18. 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.
19. 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.
20. This Agreement shall be binding upon Customer and Customer's assigns.
21. 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.
22. 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.
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23. 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.
24. 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.
25. This Agreement shall be cancelable, without penalty, upon sixty (60)
days' notice to the parties hereto by Broker or Customer.
26. Any notices under this Agreement shall be given or confirmed in
writing, delivered personally or sent by mail, as follows:
if to Customer:
ML PRINCIPAL PROTECTION TRADING L.P.
c/o Merrill Lynch Investment Partners Inc.
Merrill Lynch World Headquarters
Sixth Floor, South Tower
World Financial Center
New York, New York 10080-6106
Attn: John R. Frawley, Jr.
with a copy to:
MERRILL LYNCH INVESTMENT PARTNERS INC.
Merrill Lynch World Headquarters
Sixth Floor, South Tower
World Financial Center
New York, New York 10080-6106
Attn: John R. Frawley, Jr.
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if to Broker:
MERRILL LYNCH FUTURES INC.
Merrill Lynch World Headquarters
World Financial Center
250 Versey Street
23rd Floor
New York, New York 10080-1323
Attn: William Maitland, Esq.
Notices hereunder shall be effective only when actually received.
27. 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.
28. 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.
29. Broker and Customer each agree that in the event of inconsistencies
between the terms of this Agreement and the Prospectus, 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 PRINCIPAL PROTECTION
TRADING L.P.
By: Merrill Lynch Investment
Partners
Inc., General Partner
By:________________________________
James M. Bernard, Vice President
Accepted and Confirmed:
MERRILL LYNCH FUTURES INC.
By:_________________________________
Name:
Title:
ML PRINCIPAL PROTECTION L.P.
(solely in respect of Section 10
hereof)
By: Merrill Lynch Investment Partners
Inc., General Partner
By:_________________________________
James M. Bernard, Vice President
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MERRILL LYNCH ASSET MANAGEMENT, L.P.
(solely in respect of Section 1,
paragraph 3 and Section 4, paragraph
2 hereof)
By: Princeton Services, Inc.,
General Partner
By:____________________________
Name:
Title:
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