<PAGE>

                                                                    EXHIBIT 4.19


                             FUNDS ESCROW AGREEMENT
                             ----------------------

     This Agreement is dated as of the 27th day of June, 2001 among Advanced
Aerodynamics & Structures, Inc., a Delaware corporation (the "Company"), the
Subscriber identified on Schedule A hereto ("Subscriber"), and Barry Deonarine,
Esq. (the "Escrow Agent"):

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, the Company and Subscriber have entered into a Subscription
Agreement ("Subscription Agreement") calling for the sale by the Company to the
Subscriber of Note in the aggregate principal amount of $1,000,000, and common
stock purchase warrants in the amount set forth on Schedule A hereto; and

     WHEREAS, the parties hereto require the Company to deliver the Note against
payment therefor, with such Note and payment 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. 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) "Escrowed Payment" means the sums set forth on Schedule A hereto.

         (c) "Legal Opinion" means the original signed legal opinion referred
to in Section 3 of the Subscription Agreement.

         (d) "Note" means the Convertible Note of the Company issued to the
Subscriber in the amount of $1,000,000 in the form of Exhibit A annexed to the
Subscription Agreement.

         (e) "Subscription Agreement" means the executed Subscription Agreement
entered into by the parties in reference to the Note.

         (f) "Warrants" means the Common Stock Purchase Warrants referred to in
Section 5 and Section 6 of the Subscription Agreement.







<PAGE>


     (g) Collectively, the following are referred to as "Company Documents":

         (i)   Subscription Agreement;

         (ii)  Note; and

         (iii) Legal Opinion.

     (h) Collectively, the following are referred to as "Subscriber Documents":

         (i)   Escrowed Payment; and

         (ii)  Subscription Agreement.

     1.2 Entire Agreement. This Agreement constitutes 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.

     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.

     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
principles of conflicts of laws. Any action brought by any party against the
others 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 Southern District of New York. The 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 parties 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

                                       2



<PAGE>

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 the 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.

     1.8 Fees. The Company shall pay the attorneys for the Subscriber the fee
         ----
described in Section 6 of the Subscription Agreement. This fee shall be payable
by proportionate deduction from the Escrowed Payment, but only if the
corresponding cash portion of the Escrowed Payment is to be released to or on
behalf of the Company pursuant to this Agreement.

                                   ARTICLE II
                         DELIVERIES TO THE ESCROW AGENT

     2.1 Delivery of Company Documents to Escrow Agent. On or about the date
         ---------------------------------------------
hereof, the Company shall deliver to the Escrow Agent the Company Documents.

     2.2 Delivery of Subscriber Documents to Escrow Agent. On or about the date
         ------------------------------------------------
hereof, the Subscriber shall deliver to the Escrow Agent the Subscriber
Documents.

     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:

                                       3









<PAGE>

         (a) Upon receipt by the Escrow Agent of the Company Documents and the
corresponding Subscriber Documents, the Escrow Agent will simultaneously
release the Company Documents to the Subscriber and release the corresponding
Subscriber Documents to the Company except that the fee described in Section
1.8 above will be released to the attorney for the Subscriber. At the request
of the Escrow Agent, the Company will provide written facsimile or original
instructions to the Escrow Agent as to the disposition of all funds releasable
to the Company. Schedule A identifies the Investors who have already delivered
their portion of the Escrowed Payment to the Company. The Escrow Agent is
instructed to deem such payment as having been released to the Company subject
to and pursuant to this Escrow Agreement.

          (b) In the event the Escrow Agent does not receive Company Documents
and the corresponding Subscriber Documents prior to June 28, 2001, then the
Escrow Agent will promptly return the Company Documents to the Company, and
promptly return the Subscriber Documents to the Subscriber.

          (c) 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) 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 Note and Escrowed Payment. Any dispute with
respect to the release of the Note and Escrowed Payment 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:

          (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

                                       4

<PAGE>

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 purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (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 the 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 its reasonable out-of-pocket expenses (including
outside counsel fees, to the extent authorized hereunder) 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 the 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 the
Company. If no successor Escrow Agent is named by the Subscriber and the
Company, the Escrow Agent may apply to a court of competent jurisdiction in the
State of New York and County 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

<PAGE>

               (g)   The Escrow Agent shall be permitted to act as counsel for
the Subscriber or the Company, as the case may be, in any dispute as to the
disposition of the Company Documents and Subscriber Documents, in any other
dispute between the Subscriber and the 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 the Company, or (ii) deposit the
Company Documents and Subscriber Documents with any court of competent
jurisdiction in the State of New York and County 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 the
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
               -----------
writing of the Subscriber and Company.

        5.2    Notices. All notices, request, demands and other communications
               -------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):

               (a)   If to the Company, to:

                     Advanced Aerodynamics & Structures, Inc.
                     3205 Lakewood Boulevard

                                       6




<PAGE>

                     Long Beach Airport, CA 90808
                     Telecopier: (562) 938-8620

                     With a copy by telecopier only to:

                     Luce, Forward, Hamilton & Scripps, LLP
                     600 West Broadway, Suite 2600
                     San Diego, CA 92101
                     Attn: Otto Sorensen, Esq.
                     Telecopier: (619) 645-5324

                (b)  If to the Subscriber, to the addresses and fax numbers set
forth on Schedule A hereto.

                (c)  If to the Escrow Agent, to:

                     Barry Deonarine, Esq.
                     11 Park Place, Suite 910
                     New York, New York, 10007

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.

        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.

        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.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       7

<PAGE>

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

ADVANCED AERODYNAMICS &
STRUCTURES, INC. - the "Company"


By: ____________________________________        ________________________________
    Carl L. Chen, Chairman &                    THE KESHET FUND, L.P. -
    Chief Executive Officer                     "Subscriber"


                                                ________________________________
                                                Barry Deonarine, Esq.
                                                Escrow Agent

                                        8

<PAGE>

                      SCHEDULE A TO FUNDS ESCROW AGREEMENT
                      ------------------------------------

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
SUBSCRIBERS                             PRINCIPAL AMOUNT OF SECURED             WARRANTS
                                        CONVERTIBLE NOTE
----------------------------------------------------------------------------------------------------
<S>                                     <C>                                     <C>
THE KESHET FUND, L.P.                   $1,000,000.00                           2,645,161
c/o Keshet Management Limited
Ragnall House, 18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax:  011-44-1624-661594
----------------------------------------------------------------------------------------------------
TOTAL                                   $1,000,000.00                           2,645,161 Warrants
----------------------------------------------------------------------------------------------------
</TABLE>

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