MANAGEMENT AGREEMENT

     AGREEMENT  made as of the __ day of July,  2002 among SMITH BARNEY  FUTURES
MANAGEMENT LLC, a Delaware  limited  liability  company  ("SBFM"),  SMITH BARNEY
PRINCIPAL  PLUS  FUTURES  FUND  L.P.,  a  New  York  limited   partnership  (the
"Partnership")  and POTOMAC PORTFOLIOS LLC, a Delaware limited liability company
(the "Advisor").

                              W I T N E S S E T H :

     WHEREAS, SBFM is the general partner of SMITH BARNEY PRINCIPAL PLUS FUTURES
FUND  L.P.,  a limited  partnership  organized  with the  objective  to  achieve
substantial  capital  appreciation  by  engaging  in  speculative  trading  of a
diversified   portfolio  of  commodity   interests  which  may  include  futures
contracts, options, forward contracts and physicals; and

     WHEREAS,  the Limited  Partnership  Agreement  establishing the Partnership
(the "Limited  Partnership  Agreement")  permits SBFM to delegate to one or more
commodity  trading advisors SBFM's  authority to make trading  decisions for the
Partnership; and

     WHEREAS,  the Advisor is registered as a commodity trading advisor with the
Commodity  Futures Trading  Commission  ("CFTC") and is a member of the National
Futures Association ("NFA"); and

     WHEREAS,  SBFM is registered as a commodity pool operator with the CFTC and
is a member of the NFA; and

     WHEREAS,  SBFM,  the  Partnership  and the Advisor  wish to enter into this
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 allocated to it by SBFM in commodity interests,  including commodity
futures contracts,  options and forward contracts. All such trading on behalf of
the Partnership  shall be in accordance  with the trading  policies set forth in
the  Partnership's  Prospectus dated as of July 12, 1995 (as  supplemented,  the
"Prospectus"),  and as such  trading  policies  may be changed from time to time
upon receipt by the Advisor of prior written  notice of such change and pursuant
to the  trading  strategy  selected  by SBFM to be  utilized  by the  Advisor in
managing the  Partnership's  assets.  SBFM has initially  selected the Advisor's
Managed  Account  Program to manage the  Partnership's  assets  allocated to the
Advisor.  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 SBFM. 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.  The Advisor will
have no responsibility  for the management of the Partnership's  assets invested
in Zero Coupon U.S. Treasury obligations.

     (b) SBFM acknowledges  receipt of the Advisor's  Disclosure  Document dated
May 1, 2002, as filed with the NFA and the CFTC (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 SBFM 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 SBFM, 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 SBFM, provided that the futures commission merchant or independent
floor broker and any give-up or floor  brokerage fees are approved in advance by
SBFM. 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).

     (c) The initial  allocation of not less than $500,000 of the  Partnership's
assets to the Advisor will be made to the Advisor's Managed Account Program (the
"Program").  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 SBFM prior  written  notice of its  intention to utilize such
different trading system or methodology and SBFM consents thereto in writing. In
addition,  the Advisor will provide [five] days' prior written notice to SBFM 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  on  behalf  of the
Partnership without the prior written consent of SBFM. In addition,  the Advisor
will notify SBFM 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,  Schedule A to this Agreement  provides a
current list of all commodity interests that may be traded for the Partnership's
account and the Advisor will not trade any  additional  commodity  interests for
such account  without  providing  notice  thereof to SBFM and  receiving  SBFM's
written  approval.  The Advisor also agrees to provide SBFM, on a monthly basis,
with a written  report of the assets under the Advisor's  management  (including
notional and committed  funds)  together  with all other  matters  deemed by the
Advisor to be material changes to its business not previously  reported to SBFM.
The Advisor further agrees that it will convert foreign  currency  balances (not
required to margin positions  denominated in a foreign currency) to U.S. dollars
no less frequently than monthly.  U.S. dollar  equivalents in individual foreign
currencies of more than $100,000  will be converted to U.S.  dollars  within one
business day after such funds are no longer needed to margin foreign positions.

     (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 SBFM to
be made in any  filings  required  by Federal or state law or NFA rule or order.
Notwithstanding  Sections  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 SBFM 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 SBFM  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.

     (e) The  Advisor  understands  and  agrees  that SBFM 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
Section 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  Section 1 shall
neither  terminate this Agreement nor modify in any regard the respective rights
and obligations of the parties hereunder.

     (f)  SBFM  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. SBFM 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 SBFM's
sole  discretion so that SBFM may  reallocate  the  Partnership's  assets,  meet
margin calls on the Partnership's  account,  fund redemptions,  or for any other
reason,  except that SBFM will not require the liquidation of specific positions
by the Advisor. SBFM 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 errors
committed  or caused by the Advisor or any of its  principals  or  employees  in
communicating  incorrect trading  instructions or orders to any broker on behalf
of the Partnership.

     (h) SBFM and the  Partnership  agree that the Advisor may disclose to third
parties  that the Advisor  manages  assets of SBFM and the  Partnership  and the
general level of such assets; provided,  however, that no written description of
SBFM,  the  Partnership  or any of their  affiliates  may be  distributed by the
Advisor without the prior written consent of SBFM.

     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,  SBFM, or any other trading  advisor.  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 no
longer acting as an 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 as of the end
of each calendar  quarter  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 sum
of (A) month-end Net Assets of the Partnership allocated to the Advisor, and (B)
Notional Funds traded by the Advisor on behalf of the Partnership.

     (b) "Net Assets"  shall have the meaning set forth in Paragraph  7(d)(1) of
the Limited  Partnership  Agreement dated as of June 22, 1995 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. "Notional funds" shall be the amount in excess of Net Assets that
SBFM and the Advisor  have agreed will be employed in  determining  the level of
trading by the Advisor on behalf of the Partnership.

     (c) "New  Trading  Profits"  shall mean the  excess,  if any, of Net Assets
(plus any notional funds) managed by the Advisor at the end of the fiscal period
over Net Assets (plus any notional  funds)  managed by the Advisor at the end of
the highest  previous  fiscal  period or Net Assets  (plus any  notional  funds)
allocated to the Advisor at the date trading commences, whichever is higher, and
as further  adjusted to  eliminate  the effect on Net Assets  (plus any notional
funds) resulting from new capital contributions,  redemptions,  reallocations or
capital  distributions  (of actual or notional  funds),  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 (plus any notional funds). Ongoing expenses will not include expenses
of  litigation  not  involving  the  activities  of the Advisor on behalf of the
Partnership.  Ongoing expenses include offering expenses of the Partnership,  if
any.  The first  incentive  fee shall be due and paid as of the end of the first
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  operations by the Advisor on behalf of the Partnership  through the end
of the such 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  (plus any  notional  funds)  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.

     (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 the termination of this Agreement as of any date
which  shall not be the end of a calendar  quarter or a calendar  month,  as the
case may be, the  quarterly  incentive fee shall be computed as if the effective
date of  termination  were  the last day of the  then  current  quarter  and the
monthly  management fee shall be prorated to the effective date of  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 SBFM  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.  For the purposes
of this  paragraph,  the lack of trading by the Advisor under  circumstances  in
which the  Advisor's  trading  system or  methodology  indicates  that no trades
should be made shall not be  construed as an inability by the Advisor to provide
the services contemplated herein.

(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.  SBFM 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 in all respects, in any manner, and with respect to
any security, commodity or market whatsoever 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  information,  computer  programs and trading
strategies,  programs or formulas  which they obtain,  produce or utilize in the
performance  of  services  to SBFM for the  Partnership.  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  materially  affect the  capacity  of the Advisor to continue to render
services to SBFM 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
SBFM 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
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,
it being acknowledged,  however, that different trading strategies,  investments
or methods  may be utilized  for  differing  sizes of  accounts,  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.

     (c) It is  acknowledged  that the Advisor  and/or its officers,  employees,
directors  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
SBFM respecting the performance of the Partnership's  account as compared to the
performance of other accounts  managed by the Advisor or its principals as shall
be reasonably  requested by SBFM. 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 manager.

     5. TERM.  (a) This  Agreement  shall  continue in effect until February 15,
2003.  SBFM 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,  SBFM may terminate  this  Agreement at any  month-end  upon 30 days'
notice to the Advisor.  At any time during the term of this Agreement,  SBFM may
elect immediately to terminate this Agreement if (i) the Net Assets allocated to
the  Advisor   (adjusted  for   redemptions,   distributions,   withdrawals   or
reallocations,  if any)  decline  by 15% or more as of the end of a trading  day
from such Net Assets  previous  highest value;  (ii) the Advisor fails to comply
with  the  terms  of this  Agreement;  (iii)  SBFM,  in good  faith,  reasonably
determines  that the  performance  of the  Advisor  has been  such  that  SBFM's
fiduciary  duties to the  Partnership  require SBFM to terminate this Agreement;
(iv) SBFM  reasonably  believes that the  application  of  speculative  position
limits will  substantially  affect the performance of the  Partnership;  (v) the
Advisor merges, consolidates with another entity, sells a substantial portion of
its assets,  or becomes  bankrupt or insolvent;  (vi) Thomas Lott dies,  becomes
incapacitated, leaves the employ of the Advisor or is otherwise not managing the
trading programs or systems of the Advisor; or (vii) 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' prior written notice to SBFM (i) in the event that the trading policies of
the  Partnership  as set forth in the Prospectus are changed in such manner that
the Advisor  reasonably  believes will adversely  affect the  performance of its
trading strategies; or (ii) in the event that the General Partner or Partnership
fails to comply with the terms of this  Agreement.  The Advisor may  immediately
terminate this Agreement if SBFM's  registration as a commodity pool operator or
its membership in the NFA is terminated or suspended.

     (c) 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
Section 3 hereof.

     6. INDEMNIFICATION.  (a)(i) In any threatened, pending or completed action,
suit,  or  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,  SBFM 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 action, suit, or 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 material
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 Partnership  Agreement.  The
termination of any action,  suit or 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.

     (i) To the extent  that the Advisor  has been  successful  on the merits or
otherwise  in  defense  of  any  action,  suit  or  proceeding  referred  to  in
subparagraph  (i) above,  or in defense of any claim,  issue or matter  therein,
SBFM shall  indemnify it against the expenses  (including,  without  limitation,
attorneys' and  accountants'  fees)  actually and  reasonably  incurred by it in
connection therewith.

     (ii) Any indemnification  under subparagraph (i) above, unless ordered by a
court  or  administrative  forum,  shall  be  made  by  SBFM  on  behalf  of the
Partnership   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 SBFM 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 SBFM's  selection unless the Advisor
notifies  SBFM  in  writing,  received  by  SBFM  within  five  days  of  SBFM's
telecopying to the Advisor of the notice of SBFM's  selection,  that the Advisor
does not approve the selection.

     (iii) In the event the  Advisor  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  Partnership's or SBFM's  activities or claimed  activities
unrelated to the Advisor,  SBFM shall  indemnify,  defend and hold  harmless the
Advisor against any loss, liability, damage, cost or expense (including, without
limitation, attorneys' and accountants' fees) incurred in connection therewith.

     (iv) As used in this Paragraph  6(a), the terms "Advisor" shall include the
Advisor, its principals, officers, directors, stockholders and employees and the
term "SBFM" shall include the Partnership.

     (b) (i) The Advisor agrees to indemnify, defend and hold harmless SBFM, 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
action or 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  violated  the terms of this  Agreement  in any material
respect  or  involved  negligence,   bad  faith,   recklessness  or  intentional
misconduct on the part of the Advisor.

     (ii) In the event SBFM, 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, directors, shareholder(s)
or employees  unrelated  to SBFM's or the  Partnership's  business,  the Advisor
shall indemnify,  defend and hold harmless SBFM, 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 that:

     (i) All  references  to the Advisor  and its  principals  in the  Advisor's
Disclosure  Document are  accurate in all  material  respects and as to them the
Disclosure  Document 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.

     (ii) The  information  with  respect to the Advisor set forth in the actual
performance tables in the Disclosure  Document is based on a fully-funded subset
of all  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.

     (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  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 limited  liability  company duly  organized,  validly
existing  and in good  standing  under the laws of the State of Delaware and has
full  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.

     (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 SBFM to provide the
Partnership with such  information as shall be reasonably  necessary so that, as
to the Advisor and its principals, such prospectus is accurate.

(b)      SBFM represents and warrants for itself and the Partnership that:

     (i) The Prospectus 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.

     (ii) It is a limited liability company duly organized, validly existing and
in good standing  under the laws of the State of Delaware and has full power and
authority to perform its obligations under this Agreement.

     (iii) SBFM and the  Partnership  have the capacity  and  authority to enter
into this Agreement on behalf of the Partnership.

     (iv) This  Agreement  has been duly and validly  authorized,  executed  and
delivered  on SBFM's and the  Partnership's  behalf  and is a valid and  binding
agreement of SBFM and the Partnership enforceable in accordance with its terms.

     (v) SBFM 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) SBFM is duly registered with the CFTC as a commodity  trading advisor,
commodity pool operator,  is a member of the NFA and is in compliance  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.

     (vii) The Partnership is a limited  partnership  duly organized and validly
existing  under  the  laws of the  State of New  York  and has  full  power  and
authority to enter into this Agreement and to perform its obligations under this
Agreement.

8.       COVENANTS OF THE ADVISOR, SBFM 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 SBFM of the  commencement  of any
material suit, action or proceeding  involving it, whether or not any such suit,
action or proceeding also involves SBFM.

     (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 to notify,  in writing,  the broker and SBFM
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  [$_______]
during the term of this  Agreement.  [or  principal(s)  will provide  promissory
note]]

     (v) The Advisor currently estimates the total capacity of the Program to be
$30,000,000  and agrees to inform SBFM and the  Partnership (A) of any increases
or  decreases in capacity  that may, in the sole  opinion of the Advisor,  occur
under future market  conditions,  and (B) monthly of the  aggregate  funds under
management  in the  Program  in  order  that  SBFM  and the  Partnership  may be
periodically  apprised  of  the  Advisor's  progress  toward  achieving  Program
capacity.  SBFM shall have the opportunity to allocate  additional  funds to the
Advisor for the account of the Partnership or any affiliate of SBFM, under terms
negotiated and mutually  agreeable to all parties,  and the Advisor shall accept
such funds prior to  accepting  funds to manage from  persons or entities  other
than  (A)  SBFM  and  its  affiliates,  (B)  the  Advisor,  its  principals  and
affiliates,  and (C) such other persons or entities for which  commitments  have
already been made.

(b)      SBFM agrees for itself and the Partnership that:

     (i) SBFM 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) SBFM 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) The  information  given to the Advisor in connection with the opening
of the account (including but not limited to the information provided herein) is
full, true, complete and accurate.

     (iv) The Advisor  may rely on such  information  until it receives  written
notice from the Partnership of any changes.

     (v) No description of the Advisor or the trading system or methodology used
by the Advisor may be distributed  by the  Partnership or its agents without the
prior written consent of the Advisor.

     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 SBFM:

                           Smith Barney Futures Management LLC
                           388 Greenwich Street
                           New York, New York  10013
                           Attention:  David J. Vogel

                  If to the Advisor:

                           Potomac Portfolios LLC
                           5185 MacArthur Blvd.
                           Washington, D.C.  20016
                           Attention: Thomas Lott

                  with a copy to:

                           Kirkpatrick & Lockhart LLP
                           535 Smithfield Street, 21st Floor
                           Pittsburgh, PA  15222
                           Attn: Paul Schwendeman

     13.  GOVERNING  LAW. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of New York.

     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
National  Futures  Association  or, if the National  Futures  Association  shall
refuse  jurisdiction,  then in accordance with the rules, then in effect, of the
American  Arbitration  Association;  provided,  however,  that the  power of the
arbitrator  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.

     15. NO THIRD PARTY BENEFICIARIES. There are no third party beneficiaries to
this Agreement.


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


             SMITH BARNEY
             FUTURES MANAGEMENT LLC


          By /s/ David J. Vogel
                 David J. Vogel
                 President and Director


             SMITH BARNEY
             PRINCIPAL PLUS FUTURES FUND L.P.

             By:   Smith Barney
                   Futures Management LLC
                   (General Partner)


          By /s/ David J. Vogel
                 David J. Vogel
                 President and Director

POTOMAC PORTFOLIOS LLC


By
     Name:
     Title:


                                   Schedule A


     Tradable Commodity Interests

        Metals                             Food
        Gold                                Coffee
        Silver                              Sugar
        Copper                              Cocoa
        Platinum                            Orange Juice
        Palladium
                                            Petroleum
        Currencies                          Crude Oil
        Swiss Franc                         Heating Oil
        Euro Currency                       Unleaded Gas
        Japanese Yen                        Natural Gas
        Canadian Dollar                     Fiber
        British Pound                       Cotton
        US Dollar Index                     Lumber
        Australian Dollar
                                            Livestock
        Interest Rates                      Feeder Cattle
        30-Year Bond                        Live Cattle
        10-Year Note                        Lean Hogs
        5-Year Note                         Pork Bellies
        2-Year Note
        Eurodollar                           Grains
                                            Corn
         Indexes                            Wheat
        SP500                               Oats
        Nasdaq 100                          Soybeans
        Russell 2000                        Soybean Meal
        Dow Jones                           Soybean Oil
        Midcap 400
        CRB Index
        GI Index