exv10w3






Exhibit 10.3




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 Diversified Futures Fund L. P II.” (Escrow
Accounts):




          All proceeds of subscriptions (the “Escrow Property”) for Units of Limited Partnership
Interest (“Units”) in SMITH BARNEY DIVERSIFIED FUTURES FUND L. P. II, 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 $5,000,000 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 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. During the
Continuous Offering Period (as defined in Paragraph 6 below), all Escrow Property 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 on the first day of the month succeeding the
request. Any such request shall be made sufficiently in



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advance of the first day of a month to provide sufficient time for the Escrow Agent to process
the request for delivery to the Partnership on the first day of the month. If subscriptions for
Units in the aggregate value of $5,000,000 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
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 the escrow.




          6. The Initial Offering Period for the Units shall mean a period of 90 days commencing on the
date the Partnership’s Registration Statement is declared effective 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. The Continuous Offering Period for the Units shall
mean a period commencing on the termination of the Initial Offering Period (if at least 5,000 Units
are sold during the Initial Offering Period) and ending upon the sale of 100,000 Units.




          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.




          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.




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          (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 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 Diversified Futures Fund L. P. II

and Smith Barney Futures Management Inc.




390 Greenwich Street — 1st floor

New York, New York 10013

Attention: Mr. Alexander J. Sloane




     To:    Smith Barney Inc.


390 Greenwich Street — 1st floor

New York, New York 10013

Attention: Mr. Alexander J. Sloane



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


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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.




          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 August __, 1995




	 	 	 	 	 	 	 
	 	 	Parties to the Escrow	 	 
	 
	 	 	 	 	 	 
	 	 	SMITH BARNEY DIVERSIFIED	 	 
	 	 	FUTURES FUND L.P. II	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Smith Barney	 	 
	 

	 	 	 	     Futures Management Inc.,	 	 
	 

	 	 	 	     General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	SMITH BARNEY FUTURES	 	 
	 	 	MANAGEMENT INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	SMITH BARNEY INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 






ACCEPTED:




EUROPEAN AMERICAN BANK




By




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SCHEDULE 1




	 	 	 	 	 	 	 
	Name	 	Title	 	Signature	 	 
	 
	 	 	 	 	 	 
	Alexander J. Sloane

	 	President
	 	 

	 	 
	Director
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Philip M. Waterman, Jr.

	 	Co-Chairman	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	and Director	 	 	 	 
	 
	 	 	 	 	 	 
	Daniel Dantuono

	 	Treasurer	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Director and Chief	 	 	 	 
	 

	 	Financial Officer	 	 	 	 







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