Exhibit 10.42 Escrow Agreement 2-13-06


     

    EXHIBIT
      10.42

     

     

    FUNDS
      ESCROW AGREEMENT

     

     

    This
      Agreement is dated as of the 13th
      day of
      February, 2006 among Dalrada Financial Corp., a Delaware corporation (the
      "Company"), the Subscribers identified on Schedule A hereto (each a “Subscriber”
and collectively “Subscribers”), and Grushko & Mittman, P.C. (the "Escrow
      Agent"):

     

    W I T N E S S E T H:

     

    WHEREAS,
      the Company and Subscribers have entered into a Subscription Agreement calling
      for the sale by the Company to the Subscriber of secured promissory notes
      (“Notes”) and Warrants for an aggregate purchase price of not less than
      $5,000,000 in the amounts set forth on Schedule A hereto; and

     

    WHEREAS,
      the parties hereto require the Company to deliver the Notes and Warrants against
      payment therefor, with such Notes, Warrants and the Escrowed Funds to be
      delivered to the Escrow Agent to be held in escrow and released by the Escrow
      Agent in accordance with the terms and conditions of this Agreement;
      and

     

    WHEREAS,
      the Escrow Agent is willing to serve as escrow agent pursuant to the terms
      and
      conditions of this Agreement;

     

    NOW
      THEREFORE, the parties agree as follows:

     

    ARTICLE
      I

     

    INTERPRETATION

     

    1.1. Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Subscription Agreement shall have the meanings given to such terms in the
      Subscription Agreement. Whenever used in this Agreement, the following terms
      shall have the following respective meanings:

     

    (a) "Agreement"
      means this Agreement and all amendments made hereto and thereto by written
      agreement between the parties;

     

    (b) “Closing
      Date” shall have the meaning set forth in Section 1 of the Subscription
      Agreement;

     

    (c) “Collateral
      Agent Agreement” shall have the meaning set forth in Section 3 of the
      Subscription Agreement;

     

    (d) “Due
      Diligence Fee” shall have the meaning set forth in Section 8(b) of the
      Subscription Agreement;

     

    (e) "Escrowed
      Payment" means an aggregate payment of not less than $5,000,000 of Purchase
      Price;

     

    (f)
       “Guaranty”
      shall have the meaning set forth in Section 3 of the Subscription
      Agreement;

    1

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g) “Legal
      Fees” shall have the meaning set forth in Section 8(c) of the Subscription
      Agreement;

     

    (h) “Legal
      Opinion” means the original signed legal opinion referred to in Section 6 of the
      Subscription Agreement;

     

    (i) “Notes”
      shall have the meaning set forth in Section 1 of the Subscription
      Agreement;

     

    (j) “Purchase
      Price” shall mean not less than $5,000,000;

     

    (k) “Security
      Agreement” shall have the meaning set forth in Section 3 of the Subscription
      Agreement; 

     

    (l) "Subscription
      Agreement" means the Subscription Agreement (and the exhibits thereto) entered
      into or to be entered into by the Company and Subscribers in reference to the
      sale and purchase of the Notes and Warrants;

     

    (m) “Warrants”
      shall have the meaning set forth in Section 2 of the Subscription Agreement
      and
      include the Warrants issuable as described in Section 9(v) of the Subscription
      Agreement;

     

    (n) Collectively,
      the executed Subscription Agreement, Notes, Legal Opinion, Warrants, Due
      Diligence Fee, Collateral Agent Agreement, Guaranty and Security Agreement
      are
      referred to as "Company Documents"; and

     

    (o) Collectively,
      the Escrowed Payment and the executed Subscription Agreement are referred to
      as
      "Subscriber Documents".

     

    1.2. Entire
      Agreement.
      This
      Agreement along with the Company Documents and the Subscriber Documents
      constitute the entire agreement between the parties hereto pertaining to the
      Company Documents and Subscriber Documents and supersedes all prior agreements,
      understandings, negotiations and discussions, whether oral or written, of the
      parties. There are no warranties, representations and other agreements made
      by
      the parties in connection with the subject matter hereof except as specifically
      set forth in this Agreement, the Company Documents and the Subscriber
      Documents.

     

    1.3. Extended
      Meanings.
      In this
      Agreement words importing the singular number include the plural and vice versa;
      words importing the masculine gender include the feminine and neuter genders.
      The word "person" includes an individual, body corporate, partnership, trustee
      or trust or unincorporated association, executor, administrator or legal
      representative.

     

    1.4. Waivers
      and Amendments.
      This
      Agreement may be amended, modified, superseded, cancelled, renewed or extended,
      and the terms and conditions hereof may be waived, only by a written instrument
      signed by all parties, or, in the case of a waiver, by the party waiving
      compliance. Except as expressly stated herein, no delay on the part of any
      party
      in exercising any right, power or privilege hereunder shall operate as a waiver
      thereof, nor shall any waiver on the part of any party of any right, power
      or
      privilege hereunder preclude any other or future exercise of any other right,
      power or privilege hereunder.

    2

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.5. Headings.
      The
      division of this Agreement into articles, sections, subsections and paragraphs
      and the insertion of headings are for convenience of reference only and shall
      not affect the construction or interpretation of this Agreement.

     

    1.6. Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to conflicts
      of laws
      principles that would result in the application of the substantive laws of
      another jurisdiction. Any action brought by either party against the other
      concerning the transactions contemplated by this Agreement shall be brought
      only
      in the state courts of New York or in the federal courts located in the state
      of
      New York. Both parties and the individuals executing this Agreement and other
      agreements on behalf of the Company agree to submit to the jurisdiction of
      such
      courts and waive trial by jury. The prevailing party (which shall be the party
      which receives an award most closely resembling the remedy or action sought)
      shall be entitled to recover from the other party its reasonable attorney's
      fees
      and costs. In the event that any provision of this Agreement or any other
      agreement delivered in connection herewith is invalid or unenforceable under
      any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any such provision which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision of any agreement.

     

    1.7. Specific
      Enforcement, Consent to Jurisdiction.
      The
      Company and Subscriber acknowledge and agree that irreparable damage would
      occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to an injuction or
      injunctions to prevent or cure breaches of the provisions of this Agreement
      and
      to enforce specifically the terms and provisions hereof or thereof, this being
      in addition to any other remedy to which any of them may be entitled by law
      or
      equity. Subject to Section 1.6 hereof, each of the Company and Subscriber hereby
      waives, and agrees not to assert in any such suit, action or proceeding, any
      claim that it is not personally subject to the jurisdiction of such court,
      that
      the suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of the suit, action or proceeding is improper. Nothing in this Section
      shall affect or limit any right to serve process in any other manner permitted
      by law.

     

    ARTICLE
      II

     

    DELIVERIES
      TO THE ESCROW AGENT

     

    2.1. Company
      Deliveries.
      On or
      before the Closing Date, the Company shall deliver the Company Documents to
      the
      Escrow Agent.

     

    2.2. Subscriber
      Deliveries.
      On or
      before the Closing Date, each Subscriber shall deliver to the Escrow Agent
      such
      Subscriber’s portion of the Purchase Price and the executed Subscription
      Agreement. The Escrowed Payment will be delivered pursuant to the following
      wire
      transfer instructions:

     

    Citibank,
      N.A.

    1155
      6th
      Avenue

    New
      York,
      NY 10036, USA

    ABA
      Number: 0210-00089

    For
      Credit to: Grushko & Mittman, IOLA Trust Account

    Account
      Number: 45208884

    3

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.3. Intention
      to Create Escrow Over Company Documents and Subscriber Documents.
      The
      Subscriber and Company intend that the Company Documents and Subscriber
      Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement
      for their benefit as set forth herein.

     

    2.4. Escrow
      Agent to Deliver Company Documents and Subscriber Documents.
      The
      Escrow Agent shall hold and release the Company Documents and Subscriber
      Documents only in accordance with the terms and conditions of this
      Agreement.

     

    ARTICLE
      III

     

    RELEASE
      OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

     

    3.1. Release
      of Escrow.
      Subject
      to the provisions of Section 4.2, the Escrow Agent shall release the Company
      Documents and Subscriber Documents as follows:

     

    (a) On
      the
      Closing Date, the Escrow Agent will simultaneously release the Company Documents
      to the Subscriber and release the Subscriber Documents to the Company except
      that: (i) the Due Diligence Fee will be released to the recipient identified
      on
      Schedule 8 to the Subscription Agreement; (ii) the Legal Fees will be released
      to the Subscriber’s attorneys; and (iii) the Security Agreement, Guaranty and
      Collateral Agent Agreement will also be released to the Collateral
      Agent.

     

    (b) All
      funds
      to be delivered to the Company shall be delivered pursuant to the wire
      instructions to be provided in writing by the Company to the Escrow Agent.
      

     

    (c) Notwithstanding
      the above, upon receipt by the Escrow Agent of joint written instructions
      ("Joint Instructions") signed by the Company and the Subscriber, it shall
      deliver the Company Documents and Subscriber Documents in accordance with the
      terms of the Joint Instructions.

     

    (d) Notwithstanding
      the above, upon receipt by the Escrow Agent of a final and non-appealable
      judgment, order, decree or award of a court of competent jurisdiction (a "Court
      Order"), the Escrow Agent shall deliver the Company Documents and Subscriber
      Documents in accordance with the Court Order. Any Court Order shall be
      accompanied by an opinion of counsel for the party presenting the Court Order
      to
      the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent)
      to
      the effect that the court issuing the Court Order has competent jurisdiction
      and
      that the Court Order is final and non-appealable.

     

    3.2. Acknowledgement
      of Company and Subscriber; Disputes.
      The
      Company and the Subscriber acknowledge that the only terms and conditions upon
      which the Company Documents and Subscriber Documents are to be released are
      set
      forth in Sections 3 and 4 of this Agreement. The Company and the Subscriber
      reaffirm their agreement to abide by the terms and conditions of this Agreement
      with respect to the release of the Company Documents and Subscriber Documents.
      Any dispute with respect to the release of the Company Documents and Subscriber
      Documents shall be resolved pursuant to Section 4.2 or by agreement between
      the
      Company and Subscriber.

     

    ARTICLE
      IV

     

    CONCERNING
      THE ESCROW AGENT

     

    4.1. Duties
      and Responsibilities of the Escrow Agent.
      The
      Escrow Agent's duties and responsibilities shall be subject to the following
      terms and conditions:

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    (a) The
      Subscriber and Company acknowledge and agree that the Escrow Agent (i) shall
      not
      be responsible for or bound by, and shall not be required to inquire into
      whether either the Subscriber or Company is entitled to receipt of the Company
      Documents and Subscriber Documents pursuant to, any other agreement or
      otherwise; (ii) shall be obligated only for the performance of such duties
      as
      are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii)
      may rely on and shall be protected in acting or refraining from acting upon
      any
      written notice, instruction, instrument, statement, request or document
      furnished to it hereunder and believed by the Escrow Agent in good faith to
      be
      genuine and to have been signed or presented by the proper person or party,
      without being required to determine the authenticity or correctness of any
      fact
      stated therein or the propriety or validity or the service thereof; (iv) may
      assume that any person believed by the Escrow Agent in good faith to be
      authorized to give notice or make any statement or execute any document in
      connection with the provisions hereof is so authorized; (v) shall not be under
      any duty to give the property held by Escrow Agent hereunder any greater degree
      of care than Escrow Agent gives its own similar property; and (vi) may consult
      counsel satisfactory to Escrow Agent, the opinion of such counsel to be full
      and
      complete authorization and protection in respect of any action taken, suffered
      or omitted by Escrow Agent hereunder in good faith and in accordance with the
      opinion of such counsel.

     

    (b) The
      Subscriber and Company acknowledge that the Escrow Agent is acting solely as
      a
      stakeholder at their request and that the Escrow Agent shall not be liable
      for
      any action taken by Escrow Agent in good faith and believed by Escrow Agent
      to
      be authorized or within the rights or powers conferred upon Escrow Agent by
      this
      Agreement. The Subscriber and Company, jointly and severally, agree to indemnify
      and hold harmless the Escrow Agent and any of Escrow Agent's partners,
      employees, agents and representatives for any action taken or omitted to be
      taken by Escrow Agent or any of them hereunder, including the fees of outside
      counsel and other costs and expenses of defending itself against any claim
      or
      liability under this Agreement, except in the case of gross negligence or
      willful misconduct on Escrow Agent's part committed in its capacity as Escrow
      Agent under this Agreement. The Escrow Agent shall owe a duty only to the
      Subscriber and Company under this Agreement and to no other person.

     

    (c) The
      Subscriber and Company jointly and severally agree to reimburse the Escrow
      Agent
      for outside counsel fees, to the extent authorized hereunder and incurred in
      connection with the performance of its duties and responsibilities
      hereunder.

     

    (d) The
      Escrow Agent may at any time resign as Escrow Agent hereunder by giving five
      (5)
      days prior written notice of resignation to the Subscriber and the Company.
      Prior to the effective date of the resignation as specified in such notice,
      the
      Subscriber and Company will issue to the Escrow Agent a Joint Instruction
      authorizing delivery of the Company Documents and Subscriber Documents to a
      substitute Escrow Agent selected by the Subscriber and Company. If no successor
      Escrow Agent is named by the Subscriber and Company, the Escrow Agent may apply
      to a court of competent jurisdiction in the State of New York for appointment
      of
      a successor Escrow Agent, and to deposit the Company Documents and Subscriber
      Documents with the clerk of any such court.

     

    (e) The
      Escrow Agent does not have and will not have any interest in the Company
      Documents and Subscriber Documents, but is serving only as escrow agent, having
      only possession thereof. The Escrow Agent shall not be liable for any loss
      resulting from the making or retention of any investment in accordance with
      this
      Escrow Agreement.

     

    (f) This
      Agreement sets forth exclusively the duties of the Escrow Agent with respect
      to
      any and all matters pertinent thereto and no implied duties or obligations
      shall
      be read into this Agreement.

     

    5

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g) The
      Escrow Agent shall be permitted to act as counsel for the Subscriber in any
      dispute as to the disposition of the Company Documents and Subscriber Documents,
      in any other dispute between the Subscriber and Company, whether or not the
      Escrow Agent is then holding the Company Documents and Subscriber Documents
      and
      continues to act as the Escrow Agent hereunder.

     

    (h) The
      provisions of this Section 4.1 shall survive the resignation of the Escrow
      Agent
      or the termination of this Agreement.

     

    4.2. Dispute
      Resolution: Judgments.
      Resolution of disputes arising under this Agreement shall be subject to the
      following terms and conditions:

     

    (a) If
      any
      dispute shall arise with respect to the delivery, ownership, right of possession
      or disposition of the Company Documents and Subscriber Documents, or if the
      Escrow Agent shall in good faith be uncertain as to its duties or rights
      hereunder, the Escrow Agent shall be authorized, without liability to anyone,
      to
      (i) refrain from taking any action other than to continue to hold the Company
      Documents and Subscriber Documents pending receipt of a Joint Instruction from
      the Subscriber and Company, or (ii) deposit the Company Documents and Subscriber
      Documents with any court of competent jurisdiction in the State of New York,
      in
      which event the Escrow Agent shall give written notice thereof to the Subscriber
      and the Company and shall thereupon be relieved and discharged from all further
      obligations pursuant to this Agreement. The Escrow Agent may, but shall be
      under
      no duty to, institute or defend any legal proceedings which relate to the
      Company Documents and Subscriber Documents. The Escrow Agent shall have the
      right to retain counsel if it becomes involved in any disagreement, dispute
      or
      litigation on account of this Agreement or otherwise determines that it is
      necessary to consult counsel.

     

    (b) The
      Escrow Agent is hereby expressly authorized to comply with and obey any Court
      Order. In case the Escrow Agent obeys or complies with a Court Order, the Escrow
      Agent shall not be liable to the Subscriber and Company or to any other person,
      firm, corporation or entity by reason of such compliance.

     

    ARTICLE
      V

     

    GENERAL
      MATTERS

     

    5.1. Termination.
      This
      escrow shall terminate upon the release of all of the Company Documents and
      Subscriber Documents or at any time upon the agreement in writing of the
      Subscriber and Company.

     

    5.2. Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: 

     

    6

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a) If
      to the
      Company, to:

    


    Dalrada
      Financial Corp.

    9449
      Balboa Avenue, Suite 211

    San
      Diego, CA 92123

    Attn:
      Brian Bonar, CEO

    Fax:
      (858)
      613-1311

    


    With
      a
      copy by telecopier only to:

    


    Owen
      M.
      Naccarato, Esq.

    Naccarato
      & Associates

    18301
      Von
      Karman Avenue, Suite 430

    Irvine,
      CA 92612

    Fax:
      (949) 851-9262

    


    (b) If
      to the
      Subscribers, to: the addresses and fax numbers listed on Schedule A
      hereto

    


    (c) If
      to the
      Escrow Agent, to:

     

    Grushko
      & Mittman, P.C.

    551
      Fifth
      Avenue, Suite 1601

    New
      York,
      New York 10176

    Fax:
      212-697-3575

     

    or
      to
      such other address as any of them shall give to the others by notice made
      pursuant to this Section 5.2.

     

    5.3. Interest.
      The
      Escrowed Payment shall not be held in an interest bearing account nor will
      interest be payable in connection therewith. In the event the Escrowed Payment
      is deposited in an interest bearing account, each Subscriber shall be entitled
      to receive its pro rata
      portion
      of any accrued interest thereon, but only if the Escrow Agent receives from
      such
      Subscriber the Subscriber’s United States taxpayer identification number and
      other requested information and forms.

     

    5.4. Assignment;
      Binding Agreement.
      Neither
      this Agreement nor any right or obligation hereunder shall be assignable by
      any
      party without the prior written consent of the other parties hereto. This
      Agreement shall enure to the benefit of and be binding upon the parties hereto
      and their respective legal representatives, successors and assigns.

     

    5.5. Invalidity.
      In the
      event that any one or more of the provisions contained herein, or the
      application thereof in any circumstance, is held invalid, illegal, or
      unenforceable in any respect for any reason, the validity, legality and
      enforceability of any such provision in every other respect and of the remaining
      provisions contained herein shall not be in any way impaired thereby, it being
      intended that all of the rights and privileges of the parties hereto shall
      be
      enforceable to the fullest extent permitted by law.

     

     


    
      
        7

        


        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    5.6. Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile
      transmission and delivered by facsimile transmission.

     

    5.7. Agreement.
      Each of
      the undersigned states that he has read the foregoing Funds Escrow Agreement
      and
      understands and agrees to it.

     

    DALRADA
      FINANCIAL CORP.

    the
      “Company”

    


    /s/
      Brian
      Bonar

    


    By:___________________________________

     

    


    


    


    


    /s/
      P.
      Benz              /s/
      P.
      Benz

    ______________________________________  _______________________________________

    LONGVIEW
      FUND, L.P.            LONGVIEW
      EQUITY FUND, L.P.  

    “Subscriber”              “Subscriber”

    


    


    /s/
      P.
      Benz              /s/
      C.
      Ackerman

    ______________________________________  _______________________________________

    LONGVIEW
      INTERNATIONAL EQUITY          ALPHA
      CAPITAL
      AKTIENGESELLSCHAFT

    FUND,
      L.P. - “Subscriber”            “Subscriber”

     

    


    /s/
      F.
      Morax                                /s/
      H.
      Schraub

    ______________________________________  _______________________________________

    BALMORE,
      S.A.             HOWARD
      SCHRAUB 

    “Subscriber”              “Subscriber”

    


    


    ESCROW
      AGENT:

    


    


    /s/
      B.
      Mittman

    ______________________________________

    GRUSHKO
      & MITTMAN, P.C.

     

    
      
        8

        


        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      SCHEDULE
        A TO FUNDS ESCROW AGREEMENT




    


    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE

            	
              CASH
                PORTION OF PURCHASE PRICE

            	
              WARRANTS

            
	
              LONGVIEW
                FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

            	
              $3,871,707.00

            	
              $2,884,800.00

            	
              693,768,501

            
	
              LONGVIEW
                EQUITY FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

            	
              $1,005,000.00

            	
              $1,005,000.00

            	
              180,085,255

            
	
              LONGVIEW
                INTERNATIONAL EQUITY FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

            	
              $495,000.00

            	
              $495,000.00

            	
              88,698,708

            
	
              ALPHA
                CAPITAL AKTIENGESELLSCHAFT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

            	
              $492,426.00

            	
              -0-

            	
              88,237,475

            
	
              BALMORE,
                S.A.

              P.O.
                Box 146, Road Town

              Tortola,
                BVI

              Fax:

            	
              $1,380,960.00

            	
              -0-

            	
              247,453,268

            
	
              HOWARD
                SCHRAUB

              c/o
                G. Howard Associates Inc.

              525
                East 72nd
                Street

              New
                York, NY 10021

              Fax:
                (212) 737-7467

            	
              $300,000.00

            	
              -0-

            	
              53,756,793

            
	
              TOTAL

            	
              $7,545,093.00

            	 	
              1,352,000,000

            


    

    


     

    9