MANAGEMENT AGREEMENT


     AGREEMENT  made as of the 3rd day of July,  2001 among SMITH BARNEY FUTURES
MANAGEMENT  LLC, a  Delaware  corporation  ("SBFM"),  SMITH  BARNEY  DIVERSIFIED
FUTURES FUND L. P. II, a New York limited  partnership (the  "Partnership")  and
CAPITAL FUND MANAGEMENT SA, a French Corporation (the "Advisor").

                              W I T N E S S E T H :
                               - - - - - - - - - -
     WHEREAS,  SBFM is the general partner of Smith Barney  Diversified  Futures
Fund L. P. II, a limited  partnership  organized for the purpose of  speculative
trading of commodity interests, including futures contracts, options and forward
contracts with the objective of achieving substantial capital appreciation;  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 the  General  Partner 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  Prospectus  and  Disclosure  Document dated April 30,
1997, 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 Discus (1.5x leverage) 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.

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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.

     (b) SBFM acknowledges  receipt of the Advisor's  Disclosure  Document dated
April 1, 2001 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 the Partnership's  assets to the Advisor will
be made to the Advisor's Discus (1.5x leverage) Program (the "Program").  In the
event the Advisor wishes to use a trading system or methodology other than or in
addition to the system or methodology outlined in the description of the Program
in the Disclosure  Document 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  for 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,
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 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 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

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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 shall not
be 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.
Further,  SBFM  agrees  to treat as  confidential  any  results  of  proprietary
accounts and/or proprietary information with respect to trading systems obtained
from the Advisor.

     (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 it or any of its principals or employees in communicating
improper  trading  instructions  or  orders  to  any  broker  on  behalf  of the
Partnership.

     2. INDEPENDENCE OF THE ADVISOR.  For all purposes herein, the Advisor shall
be deemed to be an independent  contractor  and,  except as 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  quarterly

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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, amended as of August
8, 1994,  and  amended and  restated  as of July 31, 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.

     (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 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,  which fee shall be based on New
Trading Profits earned from the commencement of trading by the Advisor on behalf
of the Partnership 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.

     (d)  Quarterly  incentive  fees and monthly  management  fees shall be paid
within twenty (20) business  days  following the end of the period,  as the case
may be, 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
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 calendar
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.

     (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

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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  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  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 or methods may
be utilized for differing  sizes of accounts,  accounts with  different  trading
policies,  accounts  experiencing  differing  inflows  or  outflows  of  equity,
accounts  which  commence  trading  at  different  times,  accounts  which  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.

<PAGE>

     5. TERM. (a) This  Agreement  shall continue in effect until June 30, 2002.
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 to  immediately
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
redemptions, 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  SBFM to terminate  this  Agreement;  (iv) the Advisor  fails to
comply with the terms of this  Agreement;  (v) 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; or
(vi) SBFM  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,  SBFM 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)
Jean-Pierre  Aguilar  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  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;  (ii) after June 30,  2002;  or (iii) 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 or Paragraph 1(e) 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 breach of

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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.

     (ii) 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  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 SBFM 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.

     (iv) 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.

     (v) 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

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respect  or  involved  negligence,   bad  faith,   recklessness  or  intentional
misconduct on the part of the Advisor  (except as otherwise  provided in Section
1(g)).

     (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) The  Disclosure  Document  is in full  compliance  with  the  Commodity
Exchange  Act and the  rules  and  regulations  promulgated  thereunder;  and is
accurate 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.  References to the Advisor and its principals
if any, in any prospectus  will, after review and approval of such references by
the Advisor prior to the use of such  prospectus 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.  The Advisor's  performance tables have been examined by an independent
certified  public  accountant  and the report thereon has been provided to SBFM.
The Advisor will have its performance tables so examined no less frequently than
annually during the term of this Agreement.

<PAGE>

     (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 corporation  duly organized,  validly existing and in
good standing under the laws of France 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  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  (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 any prospectus,  made in
reliance upon, and in conformity  with,  information  furnished to SBFM by or on
behalf of the Advisor expressly for use in a prospectus.

     (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) It 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.

<PAGE>

     (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  $1,000,000
during the term of this Agreement.

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


<PAGE>

     (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.

<PAGE>

     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, 7th Floor
                            New York, New York 10013
                            Attention: David J. Vogel

     If to the Advisor:
                           Capital Fund Management SA
                               109-111 Rue V. Hugo
                             92532 Levallois, France
                            Attn: Jean-Pierre Aguilar

     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.


<PAGE>

     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


SMITH BARNEY DIVERSIFIED
FUTURES FUND L. P. II


By: Smith Barney Futures Management LLC
    (General Partner)


By _/S/ David J. Vogel
----------------------
   David J. Vogel
   President


CAPITAL FUND MANAGEMENT SA


By /s/ Jean-Pierre Aguilar
--------------------------
   Jean-Pierre Aguilar
   Title: