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 BRIDGEWATER  ASSOCIATES INC., a Connecticut  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
strategies  and trading  policies  set forth in the  Prospectus  and  Disclosure
Document 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 Aggressive Pure
Alpha Futures Only 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 acknowledges that to the extent SBFM does not
consent  to  futures   give-ups  or  the  use  of  multiple   foreign   exchange
counterparties,  the Partnership may be  disadvantaged  because the Advisor will
execute all block orders  first.  In this  connection,  the Advisor will have no
liability for the difference in performance among the Advisor's client accounts.

            (c)  The  initial  allocation  of the  Partnership's  assets  to the
Advisor will be made to the Advisor's Aggressive Pure Alpha Futures Only 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  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 notify
SBFM of all 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 (including methods,  models and strategies) to be provided by the Advisor
is a property  right  belonging  to the Advisor and that they will keep all such
information  confidential.  In addition,  except as  otherwise  provided in this
agreement or required by law, the Partnership and SBFM agree not to disclose any
information  regarding  the  Advisor  without  the  Advisor's  written  consent.
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, 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 the  Partnership,  the General
Partner, any trading advisor or any limited partner.

            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
annually  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 1/12 of 1.25% (1.25% per year) of the
month-end Net Assets of the Partnership  allocated to the Advisor.  No incentive
fee shall be paid until the end of the nearest  calendar quarter ending at least
twelve months after trading  commences (the "Initial  Payment Date"),  which fee
shall be based on New Trading  Profits earned from the  commencement  of trading
operations by the Partnership  through the end of that period; that is, June 30,
2001. The next incentive fee shall be paid at the end of the first full calendar
year during which the Advisor trades on behalf of the  Partnership  (the "Second
Payment Date");  that is, December 31, 2001. From that point on,  incentive fees
will be paid as of the end of each twelve months  following  the Second  Payment
Date.

            (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  attributable to the Advisor will not exceed $45,000 per annum. Ongoing
expenses  above will not  include  expenses  of  litigation  not  involving  the
activities  of the  Advisor  on  behalf  of the  Partnership.  For  purposes  of
calculating New Trading Profits,  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.

            (d) Annual 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  year or a
calendar month,  as the case may be, the annual  incentive fee shall be computed
as if the effective  date of  termination  were the last day of the then current
year 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
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.

            (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
pursuant to the same trading  program 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  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 or (ii) 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  Partnership  fails to  approve  a change in the  Trading
system or  methodology  as described in Section 1(c);  (v) in the event that the
Advisor ceases to manage pursuant to the Trading program; (vi) in the event that
the  Advisor's  allocation  of assets falls below $10  million;  or (vii) in the
event that the Advisor is not able to legally fulfill obligations as a result of
a revocation of a registration or license. 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  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) 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
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)  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 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

            (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  Connecticut  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,  if any, in the
Prospectus, made in reliance upon, and in conformity with, information furnished
to SBFM by or on behalf of the Advisor expressly for use in the 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.

            (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 promptly to notify, in writing, the broker, SBFM and the Partnership's
brokers  of (i) any  trade  which  the  Advisor  believes  was not  executed  in
accordance  with its  instructions,  and (ii) any trading error committed by the
Advisor that has a material adverse economic impact.

            (iv) The Advisor will maintain a net worth of not less than $750,000
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 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:

                  Bridgewater Associates, Inc.
                  1 Glendinning Place
                  Westport, Connecticut 06880
                  Attention:  Ms. Giselle Wagner


            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.


            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 INC.


                                    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


                                    BRIDGEWATER ASSOCIATES, INC.


                                       By
                                       Giselle Wagner
                                       Title: