Exhibit 10.5
ESCROW AGREEMENT

TO:   European American Bank
335 Madison Avenue
New York, New York 10017
Attention: Financial Institutions North America

     The following property is to be deposited with you as Escrow Agent in one
or more Money Market Accounts which shall be entitled “Smith Barney Potomac
Futures Fund L. P.” (Escrow Accounts):
     All proceeds of subscriptions (the “Escrow Property”) for Units of Limited
Partnership Interest (“Units”) in Smith Barney Potomac Futures Fund L. P., a New
York limited partnership (the “Partnership”), received by Smith Barney Inc.
(“SB”), Selling Agent for the Partnership, or additional selling agents
appointed by SB. SB shall deliver to all such prospective subscribers interim
receipts for the amount of the funds deposited in this escrow.
     As Escrow Agent, you are hereby directed to hold, deal with and dispose of
the Escrow Property and any other property at any time held by you hereunder
subject to the terms and conditions hereinafter set forth:
     1. During the Initial Offering Period (as defined in Paragraph 6 below),
all Escrow Property (up to the collected balances in the account or accounts and
as the balances become collected in the account or accounts) deposited with the
Escrow Agent and any interest earned thereon (which shall also be part of the
Escrow Property) shall be paid over and delivered to the Partnership as directed
by written notice by Smith Barney Futures Management Inc., general partner of
the Partnership (the “General Partner”), as soon as practicable after receipt by
the Escrow Agent of such written notice in accordance with Paragraph 2 below. In
the event the General Partner has directed you to operate two bank money market
accounts for the Partnership, such request shall specify the account from which
the Escrow Property should be paid over and delivered to the Partnership.
     2. If subscriptions for Units in the aggregate value of $2,000,000 have
been received during the Initial Offering Period (as defined in Paragraph 6
below), as evidenced by an affidavit of the General Partner attesting to said
fact, the Escrow Property shall be paid over and delivered to the Partnership as
soon as practicable after the receipt of the written request of the General
Partner. Any interest earned on the Escrow Property (which shall also

 

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be part of the Escrow Property) shall be returned by the General Partner
directly to each subscriber in proportion to their respective subscriptions and
to the period their respective subscriptions were held in escrow. If
subscriptions for Units in the aggregate value of $2,000,000 have not been
received during the Initial Offering Period, as evidenced by an affidavit of the
General Partner attesting to said fact, the Escrow Property will be paid over
and delivered by the Escrow Agent directly to subscribers as soon as practicable
after receipt of written directions from the General Partner.
     3. Prior to delivery of the Escrow Property to the Partnership as described
in Paragraph 2 above, the Partnership shall have no title to or interest in the
funds on deposit, and such funds shall under no circumstances be subject to the
payment or satisfaction of the liabilities or indebtedness of the Partnership.
     4. The Escrow Agent shall cause all funds deposited with it pursuant to
this Escrow Agreement to be maintained and invested as the General Partner shall
from time to time direct by written instructions delivered to the Escrow Agent,
in an interest-bearing money market account or accounts, which can be readily
liquidated on twenty-four hours notice, in an amount equal to the collected
balances in the account or accounts, as permitted under the Commission’s
Rule 240.15c2-4.
     5. Within 15 days of receipt of a subscription agreement, the General
Partner may notify the Escrow Agent that a subscription agreement of a
subscriber has not been accepted, and the General Partner may direct the Escrow
Agent by written instruction to return any funds held in the Escrow Account for
the benefit of such subscriber directly to such subscriber, together with such
subscriber’s proportionate share of any interest earned on the Escrow Property
during the period such funds were held in escrow.
     6. The Initial Offering Period for the Units shall mean a period of 90 days
commencing on the date of the Partnership’s Private Placement Offering
Memorandum and Disclosure Document unless the General Partner terminates the
offering at an earlier date or extends the Initial Offering Period for up to an
additional 60 days in which case the Initial Offering Period shall mean such
period as so terminated or extended. The General Partner shall provide the
Escrow Agent with prompt written notice of any such termination or extension.
     7. Any of the persons whose names and signatures appear on Schedule 1
annexed hereto are authorized by the General Partner to deliver any instruction
or notice to the Escrow Agent required or permitted by this Escrow Agreement.

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     8. (a) As Escrow Agent hereunder, you shall have no duties or
responsibilities except those expressly set forth herein. The Escrow Agent shall
act hereunder merely as a depository and in a ministerial capacity. The Escrow
Agent shall not be deemed to be a trustee for any person. In the event checks
are received which represent proceeds of subscriptions, Escrow Agent will
deposit the checks for collection, but shall be under no duty to enforce the
collection of any check. The Escrow Agent shall not be responsible for the form,
terms, validity or negotiability of the checks, the validity of any signature on
any check, or the authority of any person to sign or issue any check.
          (b) The Escrow Agent may consult with counsel and shall be fully
protected with respect to any action taken or omitted by it in good faith on
advice of counsel and you shall have no liability hereunder except for your bad
faith or negligence. You shall have no responsibility as to the validity or
value of the Escrow Property and you may rely on any certificate, statement,
request, consent, agreement or other instrument which you believe to be genuine
and to have been signed or presented by a proper person or persons. You shall
not be bound by any modification of this Escrow Agreement unless in writing and
signed by all parties hereto and actually received by you and, if your duties as
Escrow Agent hereunder are affected, unless you shall have given prior written
consent thereto. In the event that you shall be uncertain as to your duties or
rights hereunder or shall receive instructions from any of the undersigned with
respect to the Escrow Property which, in your opinion, are in conflict with any
of the provisions of this Escrow Agreement, you shall be entitled to refrain
from taking any action other than to retain the Escrow Property until you shall
be directed otherwise in writing by the unanimous consent of the parties hereto
or by final order of a court of competent jurisdiction.
          (c) The Escrow Agent may, at its own discretion, refuse to accept any
deposits lacking the required documentation or containing discrepancies.
          (d) In any event when the Escrow Agent receives disbursement
instructions, it is expressly understood and agreed that the Escrow Agent shall
not be required to make any such disbursement until such amount is, to the
Escrow Agent’s satisfaction, available in cleared funds. Further, in no event
shall the aggregate amount of payments made by the Escrow Agent exceed the
amount of Escrow Property.
     9. Any notice which the Escrow Agent is required or desires to give
hereunder to any of the undersigned shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, on the following day if given by telegram, or on the
third day after mailing if mailed to the

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party to whom notice is to be given by first class mail, registered or certified
with return receipt requested, postage prepaid, and properly addressed as
follows:

         
 
  To:   Smith Barney Potomac Futures Fund L. P.
 
      and Smith Barney Futures Management Inc.
 
       
 
      390 Greenwich Street — 1st floor
 
      New York, New York 10013
 
      Attention: Mr. David J. Vogel
 
       
 
  To:   Smith Barney Inc.
 
       
 
      390 Greenwich Street — 1st floor
 
      New York, New York 10013
 
      Attention: Mr. David J. Vogel

Notices to the Escrow Agent shall be in writing and shall not be deemed to be
given until actually received by the Escrow Agent. Whenever under the terms
hereof the time for giving a notice or performing an act falls upon a Saturday,
Sunday or bank holiday, such time shall be extended to the Escrow Agent’s next
business day.
     10. If any property subject hereto is at any time attached, garnished or
levied upon, shall become or be the subject of any court order, or in case the
payment, assignment, transfer, conveyance or delivery of the Escrow Property
shall be stayed or enjoined by any court order, or in case any order, judgment
or decree shall be made or entered by any court affecting such property, or any
part thereof, then in any of such events the Escrow Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree, which it is advised by legal counsel of its own choosing, is binding
upon it, and if it complies with any such order, writ, judgment or decree, it
shall not be liable to any of the parties hereto or to any other person, firm,
or corporation for any losses, claims, costs, payments or expenses by reason of
such compliance, even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.
     11. The Escrow Agent may resign by giving ten (10) days’ written notice to
the undersigned, and thereafter shall deliver the Escrow Property to a successor
escrow agent acceptable to all parties hereto, which acceptance shall be
evidenced by the joint written and signed order of the undersigned. If no such
order is received by the Escrow Agent by such resignation date, the obligations
of the Escrow Agent shall nevertheless cease and terminate and the Escrow Agent
is unconditionally and irrevocably authorized and empowered to send the Escrow
Property by registered or certified mail to the respective subscribers thereof.

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     12. SB shall reimburse the Escrow Agent for all out-of-pocket expenses
(including, without limitation, New York taxes and other governmental charges)
incurred by you in connection with your duties hereunder and shall indemnify you
against and save you harmless against any and all claims, liabilities, costs,
payments and expenses, including fees of counsel (who may be selected by you),
for anything done or omitted by you in the performance of this Agreement, except
as a result of your own negligence or bad faith, and you shall have a lien on
the Escrow Property for the amount thereof. All such fees and expenses shall be
paid by SB.
     13. In addition, SB agrees to pay the Escrow Agent an Escrow Agent fee of
$2,500 per Escrow Account established. Additionally, SB agrees to pay applicable
fees as set forth in Schedules 2 and 3 annexed hereto.
     14. In the event that any checks or other instruments deposited in the
account or accounts established to hold the Escrow Property prove uncollectible
after the funds represented thereby have been released pursuant to the
Agreement, SB shall promptly reimburse the Escrow Agent therefor upon request,
and the Escrow Agent shall deliver the returned checks or other instruments to
SB.
     15. Nothing in this Agreement is intended to or shall confer upon anyone
other than the parties hereto any legal or equitable right, remedy or claim.
This Agreement shall be governed by, and its provisions construed in accordance
with, the laws of the State of New York, and may be modified only in writing
executed by all parties hereto.

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     16. This Agreement may be executed in one or more counterparts, but in such
event each counterpart shall constitute an original and all of such counterparts
shall constitute one Agreement.
Dated as of April 15, 1997

                  Parties to the Escrow                   SMITH BARNEY POTOMAC  
      FUTURES FUND L.P.    
 
           
 
  By:   Smith Barney         Futures Management Inc.,         General Partner  
 
 
           
 
  By   /s/ David J. Vogel    
 
     
 
   
 
                SMITH BARNEY FUTURES MANAGEMENT INC.    
 
           
 
  By   /s/ David J. Vogel    
 
     
 
   
 
                SMITH BARNEY INC.    
 
           
 
  By   /s/ David J. Vogel    
 
     
 
   

          ACCEPTED:    
 
        EUROPEAN AMERICAN BANK    
 
       
By
       
 
 
 
   

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SCHEDULE 1

              Name   Title   Signature    
 
           
David J. Vogel
  President and Director   /s/ David J. Vogel    
 
     
 
   
 
           
Jack H. Lehman, III
  Chairman and Director   /s/ Jack H. Lehman, III    
 
     
 
   
 
           
Daniel A. Dantuono
  Treasurer, Director and Chief Financial Officer   /s/ Daniel A. Dantuono    
 
     
 
   

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