MANAGEMENT AGREEMENT


            AGREEMENT  made as of the 1st day of July , 2000 among SMITH  BARNEY
FUTURES  MANAGEMENT LLC, a Delaware limited liability  company  ("SBFM"),  SMITH
BARNEY  DIVERSIFIED  FUTURES  FUND L.P.,  a New York  limited  partnership  (the
"Partnership"),  and DOMINION CAPITAL MANAGEMENT,  INC., an Illinois 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.,  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  Partnership's  prospectus  dated as of February  17,
1994, 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  Global  Financial  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 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.  SBFM and
the  Partnership  each  acknowledge  that the Advisor may utilize  exchange  for
physicals transactions in its trading for the Partnership.

            (b) SBFM acknowledges  receipt of the Advisor's  Disclosure Document
dated June 15, 2000, as filed with the NFA and 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).  SBFM 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 SBFM.

            (c)  The  initial  allocation  of the  Partnership's  assets  to the
Advisor will be made in actual funds to the Advisor's Global  Financial  Program
(the  "Program"),  to be traded using leverage of 1.5 times the assets allocated
to the  Advisor.  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  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.  If the Advisor does not receive
written  consent (or denial of consent)  from SBFM within 10 days of the sending
any of the aforementioned  notices, SBFM will be deemed to have consented to the
Advisor's request.  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.
            (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.  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.  SBFM and the  Partnership  shall not distribute any description of the
Advisor,  its principals,  or its or their trading performance without the prior
written consent of 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
(i) 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  and  (ii) the  Advisor  will be  liable  to the
Partnership with respect to losses incurred due to errors committed or caused by
any executing  broker (other than any SBFM  affiliate)  selected by the Advisor,
(it also being  understood that SBFM,  with the assistance of the Advisor,  will
first attempt to recover such losses from the executing broker).

            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.

            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 1.5 times
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 August 27, 1993 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 will
not include offering and  organizational  expenses of the Partnership.  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.  Notwithstanding anything to the contrary herein,
for purposes of this subsection 3(c), Net Assets shall mean 1.5 times the actual
funds managed by the Advisor for the  Partnership.  In  calculating  New Trading
Profits,  incentive fees  previously  paid do not reduce  cumulative New Trading
Profits  in  subsequent  periods,  so the  Advisor  does not  have to earn  back
incentive fees previously paid to it before the assets  allocated tot eh Advisor
can generate additional New Trading Profits on which incentive fees will accrue.

            (d) No incentive  fee shall be paid to the Advisor in respect of its
trading for the  Partnership  prior to January 1, 2001. The Advisor must recover
any  cumulative  net loss existing at the close of business on December 31, 2000
before it may begin to earn New Trading  Profits on which an incentive  fee will
accrue.  In  calculating  New  Trading  Profits,  September  30,  2000  shall be
disregarded  as the end of a  fiscal  period,  notwithstanding  anything  to the
contrary in subsection 3(c).


            (e) 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 fiscal 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.

            (f) 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 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  whose  assets are traded  pursuant  to the Global  Financial
Program  and that it will not  knowingly  or  deliberately  favor any  client or
account  managed  by it over any  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 traded with different degrees
of leverage,  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.

            5. TERM. (a) This Agreement  shall continue in effect until June 30,
2001.  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 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) Scott
A. Foster 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,  2001;  (iii) in the event  that the  General
Partner or Partnership fails to comply with the terms of this Agreement; (iv) in
the event that the Advisor  notifies  SBFM of a proposed  material  change under
section 1(c) of this  Agreement and SBFM  instructs the Advisor not to implement
such change;  (v) in the event that the Advisor determines to cease managing any
customer accounts pursuant to the same strategy as the Advisor has been retained
to  employ on behalf of the  Partnership;  or (vi) in the event  that  brokerage
commissions are increased.  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,  or if Net Assets of the Partnership  managed by the
Advisor fall below $3 million

            (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  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 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 it 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,  arbitrator,  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) actually and reasonably  incurred
in connection therewith.

            (v) Expenses  incurred by an indemnified party under section 6(a) of
this  Agreement in defending a threatened  or asserted  claim or a threatened or
pending  action  shall be paid by the  indemnifying  party in  advance  of final
disposition or settlement of such matter if and to the extent that the person on
whose behalf such  expenses are paid shall agree to reimburse  the  indemnifying
party in the event  indemnification  is not permitted  under this Agreement upon
final disposition or settlement.

            (vi) 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  principals,  officers,  directors and employees
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,  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  principals,
officers,  directors  and  employees  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 principals,  officers,  directors
and employees against any loss,  liability,  damage, cost or expense (including,
without  limitation,  attorneys' and accountants'  fees) actually and reasonably
incurred in connection therewith.

            (c) Any  indemnification  under  subparagraph  (b)(1) above,  unless
ordered by a court,  arbitrator,  or administrative  forum, shall be made by the
Advisor 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 the  Advisor  in a timely  manner,  subject to the SBFM's
approval, which approval shall not be unreasonably withheld. SBFM will be deemed
to have approved the Advisor's selection unless the SBFM notifies the Advisor in
writing,  received by the Advisor within five days of the Advisor's  telecopying
to SBFM of the notice of the Advisor's selection, that SBFM does not approve the
selection.]

            (d) 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.

            (e) 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.

            (f) 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  complete  and  accurate  in  all  material
respects.

            (ii) The performance information 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  as  described  in  the  Notes  to  the
performance table.

            (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 the State of Illinois 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)  are  complete  and accurate in all material
respects.

            (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.

            (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 statement.

            (iv) The Advisor will maintain a net worth of not less than $500,000
during the term of this Agreement.

            (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.

            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 effective upon receipt and shall be in
writing and  delivered  personally or by facsimile 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:  Mr. David J. Vogel

            If to the Advisor:

                  Dominion Capital Management, Inc.
                  555 Wst Jackson Boulevard, Suite 100
                  Chicago, Illionis 60661
                  Attention: Ms. Tracy Wills-Zapata


            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 except that certain persons not parties to this
Agreement have rights under Section 6 hereof.

            16.  CONFIDENTIALITY.  Nothing in this  Agreement  shall require the
Advisor to disclose the names of its customers or  information  that the Advisor
deems to be proprietary or confidential, including without limitation details of
its trading  systems,  methods,  models,  strategies and formulas.  SBFM and the
Partnership  agree  that they will keep  confidential  and will not  disseminate
information regarding such systems,  methods, models, strategies and formulas to
any person.  Any  confidential or proprietary  information as may be acquired by
SBFM  or  the  Partnership  is  to be  used  solely  to  monitor  the  Advisor's
performance on behalf of the Partnership.  Neither SBFM nor the Company will use
such information to attempt to reverse engineer the Advisor's trading strategies
or to trade for itself or others.


<PAGE>


            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:___________________________________
                                       David J. Vogel
                                      President


                                    SMITH BARNEY DIVERSIFIED
                                    FUTURES FUND L.P.


                                    By:   Smith Barney Futures Management LLC
                                          (General Partner)


                                    By:____________________________________
                                       David J. Vogel
                                      President


                                    DOMINION CAPITAL MANAGEMENT, INC.


                                    By:_____________________________________
                                       Tracy Wills-Zapata
                                       Title: