Exhibit 10
MANAGEMENT AGREEMENT
     AGREEMENT made as of the 31st day of March, 2008 among CITIGROUP MANAGED
FUTURES LLC, a Delaware limited liability company (“CMF”), SMITH BARNEY
DIVERSIFIED FUTURES FUND L.P. II, a New York limited partnership (the
“Partnership”) and ECKHARDT TRADING COMPANY, an Illinois corporation (“Eckhardt”
or the “Advisor”).
W I T N E S S E T H :
     WHEREAS, CMF is the general partner of the Partnership, a limited
partnership organized for the purpose of speculative trading of futures, options
on futures, forward contracts and currencies with the objective of achieving
substantial capital appreciation, such trading to be conducted directly or
through investment in CMF Eckhardt Master Fund L.P., a New York limited
partnership of which CMF is the general partner and Eckhardt is the advisor; and
     WHEREAS, the Limited Partnership Agreement establishing the Partnership
(the “Limited Partnership Agreement”) permits CMF to delegate to one or more
commodity trading advisors CMF’s authority to make trading decisions for the
Partnership; and
     WHEREAS, the Advisor is registered as a commodity trading advisor in the
United States with the Commodity Futures Trading Commission (“CFTC”) and is a
member of the National Futures Association (“NFA”); and
     WHEREAS, CMF is registered as a commodity pool operator with the CFTC and
is a member of the NFA; and
     WHEREAS, CMF, the Partnership and the Advisor wish to enter into this
Management Agreement (the “Agreement”) in order to set forth the terms and
conditions upon which the Advisor will render and implement advisory services in
connection with the conduct by the Partnership of its commodity trading
activities during the term of this Agreement;
     NOW, THEREFORE, the parties agree as follows:
     1. DUTIES OF THE ADVISOR. (a) For the period and on the terms and
conditions of this Agreement, the Advisor shall have sole authority and
responsibility, as one of the Partnership’s agents and attorneys-in-fact, for
directing the investment and reinvestment of the assets and funds of the
Partnership in futures contracts on U.S. and non-U.S. exchanges, options on
futures, forward contracts on commodities and currencies, cash currencies and
transactions in physical commodities, including exchange of physicals for
futures transactions (“EFP”) (in addition to EFPs on currencies). All such
trading on behalf of the Partnership shall be (i) in accordance with the trading
strategies set forth in the Advisor’s disclosure document dated March 11, 2008
(the “Disclosure Document”) and in accordance with the trading policies set
forth in the Partnership’s Prospectus dated as of May 31, 1996, as supplemented
(the “Prospectus”), as such trading policies may be changed from time to time
upon receipt by the Advisor of prior written notice of such change and
(ii) pursuant to the trading strategy selected

 

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by CMF to be utilized by the Advisor in managing the Partnership’s assets. CMF
has initially selected the Advisor’s Standard Program—Higher Leveraged (the
“Program”) to manage the Partnership’s assets allocated to it. Any open
positions or other investments at the time of receipt of such notice of a change
in trading policy shall not be deemed to violate the changed policy and shall be
closed or sold in the ordinary course of trading. The Advisor may not deviate
from the trading policies set forth in the Prospectus without the prior written
consent of the Partnership given by CMF, which consent shall not be unreasonably
withheld or delayed and may be provided by CMF by email. The Advisor makes no
representation or warranty that the trading to be directed by it for the
Partnership will be profitable or will not incur losses.
     (b) CMF acknowledges receipt of the Disclosure Document. All trades made by
the Advisor for the account of the Partnership shall be made through such
commodity broker or brokers as CMF shall direct, and the Advisor shall have no
authority or responsibility for selecting or supervising any such broker in
connection with the execution, clearance or confirmation of transactions for the
Partnership or for the negotiation of brokerage rates charged therefor. However,
the Advisor, with the prior written permission (by either original or fax copy)
of CMF, may direct all trades in commodity futures and options to a futures
commission merchant or independent floor broker it chooses for execution with
instructions to give-up the trades to the broker designated by CMF, provided
that the futures commission merchant or independent floor broker and any give-up
or floor brokerage fees are approved in advance by CMF, which approval shall not
be unreasonably withheld or delayed and may be provided by CMF by email. All
give-up or similar fees relating to the foregoing shall be paid by the
Partnership after all parties have executed the relevant give-up agreements (by
either original or fax copy). CMF will cause the Partnership’s commodity brokers
to provide the Advisor with copies of all confirmation, purchase and sale,
monthly and similar statements at the time such statements are available to CMF.
     (c) The initial allocation of the Partnership’s assets to the Advisor will
be made to the Program as described in the Disclosure Document. In the event the
Advisor wishes to use a trading system or methodology other than or in addition
to the Program in connection with its trading for the Partnership, either in
whole or in part, it may not do so unless the Advisor gives CMF prior written
notice of its intention to utilize such different trading system or methodology
and CMF consents thereto in writing, which consent shall not be unreasonably
withheld or delayed and may be provided by CMF by email. In addition, the
Advisor will provide five days’ prior written notice to CMF of any change in the
trading system or methodology to be utilized for the Partnership which the
Advisor deems material. If the Advisor deems such change in system or
methodology or in markets traded to be material, the changed system or
methodology or markets traded will not be utilized for the Partnership without
the prior written consent of CMF. In addition, the Advisor will notify CMF of
any changes to the trading system or methodology that would require a change in
the description of the trading strategy or methods described in the Disclosure
Document. Further, the Advisor will provide the Partnership with a current list
of all commodity interests to be traded for the Partnership’s account and will
not trade any additional commodity interests for such account without providing
five days’ prior written notice thereof to CMF and receiving CMF’s written
approval, which approval shall not be unreasonably withheld or delayed and may
be provided by CMF by email. The Advisor also agrees to provide CMF, on a
monthly basis, with a written report of the assets under the

 

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Advisor’s management together with all other matters deemed by the Advisor to be
material changes to its business not previously reported to CMF. The Advisor
further agrees that it will use commercially reasonable efforts to convert
foreign currency balances (not required to margin positions denominated in a
foreign currency) to U.S. dollars no less frequently than monthly.
     (d) The Advisor agrees to make all material disclosures to the Partnership
regarding itself and its principals as defined in Part 4 of the CFTC’s
regulations (“principals”), shareholders, directors, officers and employees,
their trading performance and general trading methods, its customer accounts
(but not the identities of or identifying information with respect to its
customers) and otherwise as are required in the reasonable judgment of CMF to be
made in any filings required by Federal or state law or NFA rule or order.
Notwithstanding Paragraphs 1(d) and 4(d) of this Agreement, the Advisor is not
required to disclose the actual trading results of proprietary accounts of the
Advisor or its principals unless CMF reasonably determines that such disclosure
is required in order to fulfill its fiduciary obligations to the Partnership or
the reporting, filing or other obligations imposed on it by Federal or state law
or NFA rule or order. The Partnership and CMF acknowledge that the trading
advice to be provided by the Advisor is a property right belonging to the
Advisor and that they will keep all such advice confidential and will not make
use of such advice in any manner or disclose such advice to third parties.
Further, CMF agrees to treat as confidential any results of proprietary accounts
and/or proprietary information with respect to trading systems obtained from the
Advisor. Nothing contained in this Agreement shall require the Advisor to
disclose the details of its trading methodologies, programs or systems.
     (e) The Advisor understands and agrees that CMF may designate other trading
advisors for the Partnership and apportion or reapportion to such other trading
advisors the management of an amount of Net Assets (as defined in Paragraph 3(b)
hereof) as it shall determine in its absolute discretion. The designation of
other trading advisors and the apportionment or reapportionment of Net Assets to
any such trading advisors pursuant to this Paragraph 1 shall neither terminate
this Agreement nor modify in any regard the respective rights and obligations of
the parties hereunder.
     (f) CMF may, from time to time, in its absolute discretion, select
additional trading advisors and reapportion funds among the trading advisors for
the Partnership as it deems appropriate. CMF shall use its best efforts to make
reapportionments, if any, as of the first day of a month. The Advisor agrees
that it may be called upon at any time promptly to liquidate positions in CMF’s
sole discretion so that CMF may meet margin calls on the Partnership’s account,
fund redemptions, withdrawals or for any other reason, except that CMF will not
require the liquidation of specific positions by the Advisor. CMF and the
Partnership acknowledge that any such request to liquidate positions by CMF may
result in the Partnership incurring losses which it might otherwise not have
incurred. CMF will use its best efforts to give two days’ prior notice to the
Advisor of any reallocations or liquidations.
     (g) The Advisor will not be liable for trading losses in the Partnership’s
account including losses caused by errors; provided, however, that the Advisor
will be liable to the Partnership with respect to losses incurred due to
negligent errors committed or caused by it or any of its principals or employees
in communicating improper trading instructions or orders to

 

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any broker on behalf of the Partnership. The Advisor shall promptly notify CMF
and the Partnership of any errors committed by it and of any order or trade it
believes was not executed in accordance with its instructions.
     2. INDEPENDENCE OF THE ADVISOR. For all purposes herein, the Advisor shall
be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Partnership in any way and shall not be deemed an agent, promoter or sponsor of
the Partnership, CMF, or any other trading advisor to the Partnership. The
Advisor shall not be responsible to the Partnership, the General Partner, any
trading advisor or any limited partners for any acts or omissions of any other
trading advisor to the Partnership.
     3. COMPENSATION. (a) In consideration of and as compensation for all of the
services to be rendered by the Advisor to the Partnership under this Agreement,
the Partnership shall pay the Advisor (i) an incentive fee payable quarterly
equal to 20% of New Trading Profits (as such term is defined below) earned by
the Advisor for the Partnership and (ii) a monthly fee for professional
management services equal to 1/6 of 1% (2% per year) of the month-end Net Assets
of the Partnership allocated to the Advisor.
     (b) “Net Assets” shall have the meaning set forth in Paragraph 7(d)(1) of
the Limited Partnership Agreement dated as of May 19, 1994 and without regard to
further amendments thereto, provided that in determining the Net Assets of the
Partnership on any date, no adjustment shall be made to reflect any
distributions, redemptions or incentive fees payable as of the date of such
determination.
     (c) “New Trading Profits” shall mean the excess, if any, of Net Assets
managed by the Advisor at the end of the fiscal period over Net Assets managed
by the Advisor at the end of the highest previous fiscal period or Net Assets
allocated to the Advisor at the date trading commences, whichever is higher, and
as further adjusted to eliminate the effect on Net Assets resulting from new
capital contributions, redemptions, reallocations or capital distributions, if
any, made during the fiscal period decreased by interest or other income, not
directly related to trading activity, earned on the Partnership’s assets during
the fiscal period, whether the assets are held separately or in margin accounts.
Ongoing expenses will be attributed to the Advisor based on the Advisor’s
proportionate share of Net Assets. Ongoing expenses above will not include
expenses of litigation not involving the activities of the Advisor on behalf of
the Partnership. Ongoing expenses include offering and organizational expenses
of the Partnership. No incentive fee shall be paid until the end of the first
full calendar quarter of trading by the Advisor on behalf of the Partnership,
which fee shall be based on New Trading Profits earned from the commencement of
trading by the Advisor through the end of the first full calendar quarter.
Interest income earned, if any, will not be taken into account in computing New
Trading Profits earned by the Advisor. If Net Assets allocated to the Advisor
are reduced due to redemptions, distributions or reallocations (net of
additions), there will be a corresponding proportional reduction in the related
loss carryforward amount that must be recouped before the Advisor is eligible to
receive another incentive fee.

 

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     (d) Quarterly incentive fees and monthly management fees shall be paid
within twenty (20) business days following the end of the period for which such
fee is payable. In the event of a redemption, reallocation, distribution or the
termination of this Agreement as of any date which shall not be the end of a
fiscal quarter or a month, as the case may be, the quarterly incentive fee shall
be computed as if the effective date of the redemption, reallocation,
distribution or termination were the last day of the then current quarter and
the monthly management fee shall be prorated to the effective date of the
redemption, reallocation, distribution or termination. If, during any month, the
Partnership does not conduct business operations or the Advisor is unable to
provide the services contemplated herein for more than two successive business
days, the monthly management fee shall be prorated by the ratio which the number
of business days during which CMF conducted the Partnership’s business
operations or utilized the Advisor’s services bears in the month to the total
number of business days in such month.
     (e) The provisions of this Paragraph 3 shall survive the termination of
this Agreement.
     4. RIGHT TO ENGAGE IN OTHER ACTIVITIES. (a) The services provided by the
Advisor hereunder are not to be deemed exclusive. CMF on its own behalf and on
behalf of the Partnership acknowledges that, subject to the terms of this
Agreement, the Advisor and its officers, directors, employees and
shareholder(s), may render advisory, consulting and management services to other
clients and accounts. The Advisor and its officers, directors, employees and
shareholder(s) shall be free to trade for their own accounts and to advise other
investors and manage other commodity accounts during the term of this Agreement
and to use the same and different information, computer programs and trading
strategies, programs or formulas which they obtain, produce or utilize in the
performance of services to CMF for the Partnership. The Partnership and CMF
acknowledge that all such trading for other accounts may increase the level of
competition with respect to priorities of order entry and may restrict the
ability of the Advisor to obtain or maintain positions in futures due to the
application of CFTC or exchange imposed speculative position limits and daily
trading limits. However, the Advisor represents, warrants and agrees that it
believes the rendering of such consulting, advisory and management services to
other accounts and entities will not require any material change in the
Advisor’s basic trading strategies and will not affect the capacity of the
Advisor to continue to render services to CMF for the Partnership of the quality
and nature contemplated by this Agreement.
     (b) If, at any time during the term of this Agreement, the Advisor is
required to aggregate the Partnership’s commodity positions with the positions
of any other person for purposes of applying CFTC- or exchange-imposed
speculative position limits, the Advisor agrees that it will promptly notify CMF
if the Partnership’s positions are included in an aggregate amount which exceeds
the applicable speculative position limit. The Advisor agrees that, if its
trading recommendations are altered because of the application of any
speculative position limits, it will not modify the trading instructions with
respect to the Partnership’s account in such manner as to affect the Partnership
substantially disproportionately as compared with the Advisor’s other accounts.
The Advisor further represents, warrants and agrees that under no circumstances
will it knowingly or deliberately use trading strategies or methods for the

 

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Partnership that are inferior to strategies or methods employed for any other
client or account and that it will not knowingly or deliberately favor any
client or account managed by it over any other client or account in any manner
on an overall basis, it being acknowledged, however, that different trading
strategies or programs, liquidity constraints, rounding of the number of
positions to be established, methods and degrees of leverage may be utilized for
differing sizes of accounts, accounts with different trading policies and
restrictions, accounts with differing fee structures, accounts with different
trading policies, accounts experiencing differing inflows or outflows of equity,
accounts that commence trading at different times, accounts that have different
portfolios or different fiscal years, accounts utilizing different executing
brokers and accounts with other differences, and that such differences may cause
divergent trading results. CMF further acknowledges that the Advisor offers
trading programs other than the Program which it has selected and that such
other trading programs may obtain more favorable results than the Program.
     (c) It is acknowledged that the Advisor and/or its principals, officers,
employees, directors, associated persons and shareholder(s) presently act, and
it is agreed that they may continue to act, as advisor for other accounts
managed by them, and may continue to receive compensation with respect to
services for such accounts in amounts which may be more or less than the amounts
received from the Partnership.
     (d) The Advisor agrees that it shall make such information available to CMF
respecting the performance of the Partnership’s account as compared to the
performance of other client accounts managed by the Advisor or its principals
pursuant to the Program as shall be reasonably requested by CMF. The Advisor
presently believes and represents that existing speculative position limits will
not materially adversely affect its ability to manage the Partnership’s account
given the potential size of the Partnership’s account and the Advisor’s and its
principals’ current accounts and all proposed accounts for which they have
contracted to act as trading advisor.
     5. TERM. (a) This Agreement shall continue in effect until June 30, 2009.
CMF may, in its sole discretion, renew this Agreement for additional one-year
periods upon notice to the Advisor not less than 30 days prior to the expiration
of the previous period. At any time during the term of this Agreement, CMF may
terminate this Agreement at any month-end upon 30 days’ notice to the Advisor.
At any time during the term of this Agreement, CMF may elect to terminate this
Agreement upon 30 days’ notice to the Advisor if (i) the Net Asset Value per
unit shall decline as of the close of business on any day to $400 or less;
(ii) the Net Assets allocated to the Advisor (adjusted for distributions,
withdrawals or reallocations, if any) decline by 50% or more as of the end of a
trading day from such Net Assets’ previous highest value; (iii) limited partners
owning at least 50% of the outstanding units shall vote to require CMF to
terminate this Agreement; (iv) the Advisor fails to comply with the terms of
this Agreement; (v) CMF, in good faith, reasonably determines that the
performance of the Advisor has been such that CMF’s fiduciary duties to the
Partnership require CMF to terminate this Agreement; or (vi) CMF reasonably
believes that the application of speculative position limits will substantially
affect the performance of the Partnership. At any time during the term of this
Agreement, CMF may elect immediately to terminate this Agreement if (i) the
Advisor merges, consolidates with another entity, sells a substantial portion of
its assets, or becomes bankrupt or insolvent, (ii)

 

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William Eckhardt dies, becomes incapacitated, leaves the employ of the Advisor,
ceases to control the Advisor or is otherwise not managing the trading programs
or systems of the Advisor, or (iii) the Advisor’s registration as a commodity
trading advisor with the CFTC or its membership in the NFA or any other
regulatory authority, is terminated or suspended. This Agreement will
immediately terminate upon dissolution of the Partnership or upon cessation of
trading prior to dissolution.
     (b) The Advisor may terminate this Agreement by giving not less than
30 days’ notice to CMF (i) in the event that the trading policies of the
Partnership as established from time to time are changed in such manner that the
Advisor reasonably believes will adversely affect the performance of its trading
strategies; (ii) after June 30, 2009; (iii) in the event that the General
Partner or Partnership fails to comply with the terms of this Agreement; or
(iv) if CMF provides a written objection to a change in the Advisor’s Program
specified in Paragraph 1(a) of this Agreement. The Advisor may immediately
terminate this Agreement if CMF’s registration as a commodity pool operator or
its membership in the NFA is terminated or suspended.
     (c) In the event of the termination of this Agreement, CMF shall promptly
amend the name of the Partnership to remove the word “Eckhardt” and shall
provide the Advisor with proof of such name change within ten (10) business days
of the termination of this Agreement.
     (d) Except as otherwise provided in this Agreement, any termination of this
Agreement in accordance with this Paragraph 5 shall be without penalty or
liability to any party, except for any fees due to the Advisor pursuant to
Paragraph 3 hereof.
     6. INDEMNIFICATION. (a)(i) The Advisor shall not be liable to CMF, the
Partnership or their respective members, partners, successors or assigns under
this Agreement for any act or failure to act taken or omitted in good faith in a
manner reasonably believed to be in or not opposed to the best interests of the
Partnership if such act or failure to act did not constitute negligence,
intentional misconduct or a breach of the Advisor’s fiduciary obligations to the
Partnership as a commodity trading advisor. In any threatened, pending or
completed action, arbitration, claim, demand, dispute, suit or proceeding (each,
a “Proceeding”) to which the Advisor was or is a party or is threatened to be
made a party arising out of or in connection with this Agreement or the
management of the Partnership’s assets by the Advisor or the offering and sale
of units in the Partnership, CMF shall, subject to subparagraph (a)(iii) of this
Paragraph 6, indemnify and hold harmless the Advisor against any loss,
liability, damage, cost, expense (including, without limitation, attorneys’ and
accountants’ fees), judgments and amounts paid in settlement actually and
reasonably incurred by it in connection with such Proceeding if the Advisor
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the Partnership, and provided that its conduct did not
constitute negligence, intentional misconduct, or a breach of its fiduciary
obligations to the Partnership as a commodity trading advisor, unless and only
to the extent that the court or administrative forum in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, the Advisor is fairly
and reasonably entitled to indemnity for such expenses which such court or
administrative forum shall deem proper; and further provided that no
indemnification shall be available from the Partnership if such indemnification
is prohibited by Section 16 of the Limited Partnership Agreement. The

 

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termination of any Proceeding by judgment, order or settlement shall not, of
itself, create a presumption that the Advisor did not act in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Partnership.
     (ii) Without limiting sub-paragraph (i) above, to the extent that the
Advisor has been successful on the merits or otherwise in defense of any
Proceeding referred to in subparagraph (i) above, or in defense of any claim,
issue or matter therein, CMF shall indemnify the Advisor against the expenses
(including, without limitation, attorneys’ and accountants’ fees) actually and
reasonably incurred by it in connection therewith.
     (iii) Any indemnification under subparagraph (i) above, unless ordered by a
court or administrative forum, shall be made by CMF only as authorized in the
specific case and only upon a determination by independent legal counsel in a
written opinion that such indemnification is proper in the circumstances because
the Advisor has met the applicable standard of conduct set forth in subparagraph
(i) above. Such independent legal counsel shall be selected by CMF in a timely
manner, subject to the Advisor’s approval, which approval shall not be
unreasonably withheld. The Advisor will be deemed to have approved CMF’s
selection unless the Advisor notifies CMF in writing, received by CMF within
five days of CMF’s telecopying to the Advisor of the notice of CMF’s selection,
that the Advisor does not approve the selection.
     (iv) In the event the Advisor is made a party to any Proceeding or
otherwise incurs any loss or expense as a result of, or in connection with, the
Partnership’s or CMF’s (or their officers, directors, partners, shareholders or
employees) activities or claimed activities unrelated to the Advisor, CMF shall
indemnify and hold harmless the Advisor against any loss, liability, damage,
cost or expense (including, without limitation, attorneys’ and accountants’
fees) incurred in connection therewith.
     (v) As used in this Paragraph 6(a), the term “Advisor” shall include the
Advisor, its principals, officers, directors, stockholders, employees,
affiliates and associated persons and the term “CMF” shall include the
Partnership.
     (b)(i) The Advisor agrees to indemnify and hold harmless CMF, the
Partnership and their affiliates against any loss, liability, damage, cost or
expense (including, without limitation, attorneys’ and accountants’ fees),
judgments and amounts paid in settlement actually and reasonably incurred by
them (A) as a result of the material breach of any material representations and
warranties made by the Advisor in this Agreement, or (B) as a result of any act
or omission of the Advisor relating to the Partnership if there has been a final
judicial or regulatory determination or, in the event of a settlement of any
Proceeding with the prior written consent of the Advisor, a written opinion of
an arbitrator pursuant to Paragraph 14 hereof, to the effect that such acts or
omissions constituted negligence, intentional misconduct or a breach of the
Advisor’s fiduciary obligations to the Partnership as a commodity trading
advisor (except as otherwise provided in Paragraph 1(g)).
     (ii) In the event CMF, the Partnership or any of their affiliates is made a
party to any claim, dispute or litigation or otherwise incurs any loss or
expense as a result of, or in connection with, the activities or claimed
activities of the Advisor or its principals, officers,

 

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directors, shareholder(s) or employees unrelated to CMF’s or the Partnership’s
business, the Advisor shall indemnify and hold harmless CMF, the Partnership or
any of their affiliates against any loss, liability, damage, cost or expense
(including, without limitation, attorneys’ and accountants’ fees) incurred in
connection therewith.
     (c) In the event that a person entitled to indemnification under this
Paragraph 6 is made a party to an action, suit or proceeding alleging both
matters for which indemnification can be made hereunder and matters for which
indemnification may not be made hereunder, such person shall be indemnified only
for that portion of the loss, liability, damage, cost or expense incurred in
such action, suit or proceeding which relates to the matters for which
indemnification can be made.
     (d) None of the indemnifications contained in this Paragraph 6 shall be
applicable with respect to default judgments, confessions of judgment or
settlements entered into by the party claiming indemnification without the prior
written consent, which shall not be unreasonably withheld, of the party
obligated to indemnify such party.
     (e) The provisions of this Paragraph 6 shall survive the termination of
this Agreement.
     7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
     (a) The Advisor represents and warrants to the Partnership and CMF that:
     (i) The Disclosure Document complies with Part 4 of the CFTC’s regulations
in all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact which is necessary to make the statements
therein not misleading. All references to the Advisor in any supplemental
materials (the “Supplemental Materials”) prepared by the general partner will,
after review and approval by the Advisor, be accurate in all material respects
and will not contain any untrue statement of a material fact or omit to state a
material fact which is necessary to make the statements therein not misleading,
except that with respect to any pro forma or hypothetical performance
information in the Supplemental Materials, this representation and warranty
extends only to any underlying data made available by the Advisor for the
preparation thereof and not to any hypothetical or pro forma adjustments made by
CMF. Subject to such exception, all references to the Advisor and its principals
in the Supplemental Materials will, after review and approval of such references
by the Advisor prior to the use of such Supplemental Materials in connection
with the offering of the Partnership’s units, be accurate in all material
respects.
     (ii) The information with respect to the Advisor set forth in the actual
performance tables in the Disclosure Document is based on all of the customer
accounts managed on a discretionary basis by the Advisor’s principals and/or the
Advisor during the period covered by such tables and required to be disclosed
therein. During the term of this Agreement, the Advisor will prepare performance
tables that comply with all applicable CFTC rules no less frequently than
quarterly.

 

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     (iii) The Advisor will be acting as a commodity trading advisor with
respect to the Partnership and not as a securities investment adviser and is
duly registered with the CFTC as a commodity trading advisor, is a member of the
NFA, and is in compliance in all material respects with such other registration
and licensing requirements as shall be necessary to enable it to perform its
obligations hereunder, and agrees to maintain and renew such registrations and
licenses during the term of this Agreement.
     (iv) The Advisor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois and has full corporate
power and authority to enter into this Agreement and to provide the services
required of it hereunder.
     (v) The Advisor will not, by acting as a commodity trading advisor to the
Partnership, breach or cause to be breached any undertaking, agreement,
contract, statute, rule or regulation to which it is a party or by which it is
bound which would materially limit or affect the performance of its duties under
this Agreement.
     (vi) This Agreement has been duly and validly authorized, executed and
delivered by the Advisor and is a valid and binding agreement enforceable in
accordance with its terms.
     (vii) At any time during the term of this Agreement that a prospectus
relating to the Units is required to be delivered in connection with the offer
and sale thereof, the Advisor agrees upon the request of CMF to provide the
Partnership with such information as shall be necessary so that, as to the
Advisor and its principals, such prospectus is accurate.
     (b) CMF represents and warrants to the Advisor for itself and the
Partnership that:
     (i) The Prospectus (as from time to time amended or supplemented, which
amendment or supplement is approved by the Advisor as to descriptions of itself
and its actual performance) does not contain any untrue statement of a material
fact or omit to state a material fact which is necessary to make the statements
therein not misleading, except that the foregoing representation does not apply
to any statement or omission concerning the Advisor in the Prospectus, made in
reliance upon, and in conformity with, information furnished to CMF by or on
behalf of the Advisor expressly for use in the Prospectus (it being understood
that any hypothetical or pro forma adjustments in Table B were not furnished by
the Advisor).
     (ii) CMF is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
limited liability company power and authority to perform its obligations under
this Agreement.
     (iii) CMF and the Partnership have the capacity and authority to enter into
this Agreement on behalf of the Partnership.

 

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     (iv) This Agreement has been duly and validly authorized, executed and
delivered on CMF’s and the Partnership’s behalf and is a valid and binding
agreement of CMF and the Partnership enforceable in accordance with its terms.
     (v) CMF will not, by acting as General Partner to the Partnership and the
Partnership will not, breach or cause to be breached any undertaking, agreement,
contract, statute, rule or regulation to which it is a party or by which it is
bound which would materially limit or affect the performance of its duties under
this Agreement.
     (vi) CMF is registered as a commodity pool operator and is a member of the
NFA, and it will maintain and renew such registration and membership during the
term of this Agreement.
     (vii) The Partnership is a limited partnership duly organized and validly
existing under the laws of the State of New York and has full limited
partnership power and authority to enter into this Agreement and to perform its
obligations under this Agreement.
     (c) All representations, warranties and covenants contained in this
Agreement shall be continuing during the term of this Agreement and shall
survive the termination of this Agreement with respect to any matter arising
while this Agreement was in effect. Each party hereby agrees that as of the date
of this Agreement it is, and during its term shall be, in compliance with its
representations, warranties and covenants herein contained. In addition, if at
any time any event occurs which would make such representations, warranties or
covenants not true, the party promptly will notify the other parties of such
facts in the manner provided below. All representations, warranties and
covenants herein contained shall inure to the benefit of the party to whom they
are addressed and their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns.
     8. COVENANTS OF THE ADVISOR, CMF AND THE PARTNERSHIP.
     (a) The Advisor agrees as follows:
     (i) In connection with its activities on behalf of the Partnership, the
Advisor will comply with all applicable rules and regulations of the CFTC and/or
the commodity exchange on which any particular transaction is executed.
     (ii) The Advisor will promptly notify CMF of the commencement of any
material suit, action or proceeding involving it, whether or not any such suit,
action or proceeding also involves CMF.
     (iii) In the placement of orders for the Partnership’s account and for the
accounts of any other client, the Advisor will utilize a pre-determined,
systematic, fair and reasonable order entry system, which shall, on an overall
basis, be no less favorable to the Partnership than to any other account managed
by the Advisor. The Advisor acknowledges its obligation to review the
Partnership’s positions, prices and equity in the account managed by the Advisor
daily and within two business days or as soon thereafter as practicable to
notify, in writing, the

 

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broker and CMF and the Partnership’s brokers of (i) any error committed by the
Advisor or its principals or employees; (ii) any trade which the Advisor
believes was not executed in accordance with its instructions; and (iii) any
discrepancy with a value of $10,000 or more (due to differences in the
positions, prices or equity in the account) between its records and the
information reported on the account’s daily and monthly broker statements.
     (iv) The Advisor will maintain a net worth of not less than $1,000,000
during the term of this Agreement.
     (b) CMF agrees for itself and the Partnership that:
     (i) CMF and the Partnership will comply with all applicable rules and
regulations of the CFTC and/or the commodity exchange on which any particular
transaction is executed.
     (ii) CMF will promptly notify the Advisor of the commencement of any
material suit, action or proceeding involving it or the Partnership, whether or
not such suit, action or proceeding also involves the Advisor.
     (iii) CMF will be responsible for compliance with the USA Patriot Act and
related anti-money-laundering regulations with respect to the Partnership and
its limited partners.
     9. COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof.
     10. ASSIGNMENT. This Agreement may not be assigned by any party without the
express written consent of the other parties.
     11. AMENDMENT. This Agreement may not be amended except by the written
consent of the parties.
     12. NOTICES. All notices, demands or requests required to be made or
delivered under this Agreement shall be in writing and delivered personally or
by registered or certified mail or expedited courier, return receipt requested,
postage prepaid, to the addresses below or to such other addresses as may be
designated by the party entitled to receive the same by notice similarly given:
     If to CMF or the Partnership:
Citigroup Managed Futures LLC
731 Lexington Avenue — 25th Floor
New York, New York 10022
Attention: Ms. Jennifer Magro

 

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     If to the Advisor:
Eckhardt Trading Co.
1314 North Dearborn Parkway
Carriage House
Chicago, IL 60610
Attention: Ms. Audrey Gale
     13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of laws.
     14. ARBITRATION. The parties agree that any dispute or controversy arising
out of or relating to this Agreement or the interpretation thereof, shall be
settled by arbitration in accordance with the rules, then in effect, of the NFA
or, if the NFA shall refuse jurisdiction, then in accordance with the rules,
then in effect, of the American Arbitration Association; provided, however, that
the arbitrator(s) shall be knowledgeable in industry standards and practices and
the matters giving rise to the dispute, and that the power of the arbitrator(s)
shall be limited to interpreting this Agreement as written and the arbitrator
shall state in writing his reasons for his award. Judgment upon any award made
by the arbitrator may be entered in any court of competent jurisdiction.
     16. NO THIRD PARTY BENEFICIARIES. Except as otherwise provided in
Paragraph 6, there are no third party beneficiaries to this Agreement.

 

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     IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.

            CITIGROUP MANAGED FUTURES LLC
      By:   /s/ Jennifer Magro       Jennifer Magro      Chief Financial Officer
and Director        SMITH BARNEY DIVERSIFIED FUTURES FUND L. P. II
        By:  Citigroup Managed Futures LLC         (General Partner)           
          By:   /s/ Jennifer Magro       Jennifer Magro      Chief Financial
Officer and Director        ECKHARDT TRADING COMPANY
      By:   /s/ William Eckhardt       Name:  William Eckhardt     
Title:  Chairman and CEO