content: SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
  
  
                                   FORM 8-K
  
  
                                CURRENT REPORT
                Pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934
  
  
     Date of Report (Date of earliest event reported): October 25, 2005
  
  
                              SONEX RESEARCH, INC.
                (Exact name of registrant as specified in Charter)
  
  
           Maryland                  000-14465              52-1188993
        (State or other           (Commision file         (IRS employer
        jurisdiction of               number)           identification no.)
         incorporation)
  
  
                       23 Hudson Street, Annapolis, MD 21401
                      (Address of principal executive offices)
  
  
                                (410) 266-5556
               (Registrant's telephone number, including area code)
  
  
                                      N/A
           (Former name or former address, if changed since last report)
  
  
  
  Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
  simultaneously  satisfy the filing obligation of the registrant under any of the
  following   provisions  (see  General  Instruction  A.2.  below):
  
  [ ]  Written communications  pursuant to Rule 425 under the Securities Act
       (17 CFR 230.425)
  [ ]  Soliciting  material  pursuant to Rule 14a-12  under the Exchange Act
       (17 CFR 240.14a-12)
  [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
       Exchange  Act (17 CFR  240.14d-2(b))
  [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
       Exchange Act (17 CFR 240.13e-4(c))
  
  
  
  
  
  
  ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
  
  
  On October 31, 2005,  Sonex Research,  Inc. (the "Company" or the  "Registrant")
  announced  on  its  website   (www.sonexresearch.com)  that  it  has  reached  a
  settlement  of a  lawsuit  filed in April  2005 by three  Maryland  shareholders
  alleging the  fraudulent  transfer of ownership of the Company's  patents to its
  officers.  While Sonex  continues to deny the  allegations  and asserts that the
  Company  maintains  title to its  patents,  the  Company  settled the lawsuit by
  reaching  agreement  to stay the case until  March 31, 2006 in order to minimize
  the expense and disruption to its business of continuing to litigate the case.
  
  The Complaint against Sonex, Dr. Andrew A. Pouring,  Chairman of the Board,
  CEO and President,  and George E.  Ponticas,  CFO,  Secretary and director,  was
  filed in the Circuit Court for Anne Arundel County.  Plaintiffs  Robert T. Emmet
  of  Annapolis,  Sidney L.  Gulick,  3d of  Adelphi,  and Robert  Martin,  Jr. of
  Myersville,  sought a $1 million judgment in their favor for alleged  violations
  of Maryland law regarding actions by directors who have a financial  interest in
  a particular  transaction or contract approved by the Board. Dr. Pouring and Mr.
  Ponticas  currently  are the only officers and members of the Board of Directors
  of Sonex, as a vacancy in the Board has existed since November 2004.
  
  The  Complaint  concerned  actions  taken by  management  early in 2005 during a
  period of cash flow  difficulties to insure that key personnel would continue to
  provide  services  and make loans to Sonex in order for the Company to remain in
  operation. The Company executed a First Loan and Security Agreement (the "FLSA")
  effective  as of  January  2005  granting a priority  security  interest  in its
  patents to Dr. Pouring, Mr. Ponticas,  and Michael I. Keller, the consultant who
  serves as the Company's  Director of Business  Development and Technical Program
  Manager,  to secure  payment of  compensation  being  deferred on an ongoing and
  future basis, new loans made to the Company,  and personal financial  guaranties
  by Dr.  Pouring of Company credit card  obligations.  The FLSA also provides for
  acceptance by the Company of new loans from sources other than Pouring, Ponticas
  and Keller.
  
  The Company also  executed a Second Loan and Security  Agreement  (the  "SLSA"),
  subordinated  to  the  FLSA,  in  favor  of  these   individuals  for  financial
  obligations  incurred  prior to 2005.  The SLSA also applied to notes payable to
  Plaintiff Gulick.
  
  In exchange for the grant of the security interests in the patents, Dr. Pouring,
  Mr. Ponticas,  and Mr. Keller agreed to stay, through March 31, 2005, any demand
  for immediate payment of unpaid  compensation  earned beginning in January 2005.
  Although that date has passed, no demand for payment has been made to date. Each
  individual continues to defer most or all of his current compensation.
  
  Under the litigation settlement, the parties agreed to stay the case until March
  31, 2006. The Plaintiffs agreed to dismiss all monetary claims without prejudice
  (meaning they have the right to refile  monetary  claims  within the  applicable
  statute of limitations).  In exchange, Dr. Pouring, Mr. Ponticas, and Mr. Keller
  have  agreed  to stay  any  demand  for  immediate  payment  of  unpaid  current
  compensation  through  March 31,  2006 if they  continue  in the  service of the
  Company or if no event of default  under the FLSA or SLSA  occurs.  The  Company
  also has agreed to invite the Plaintiffs to participate in discussions and offer
  assistance and suggestions regarding the appointment of independent directors to
  the Board of Directors of Sonex.  In addition,  Mr.  Gulick has agreed to extend
  the due dates of notes payable to him by the Company through March 31, 2006. The
  principal  amounts of such notes total  $106,000,  while  interest  payments are
  current through June 30, 2005.
  
  As of September 30, 2005,  the FLSA applies to total  financial  obligations  of
  approximately  $359,000,   consisting  of  shareholder  loans  of  approximately
  $68,000,  unpaid compensation of approximately $263,000, and Company credit card
  obligations under personal financial guaranties of approximately  $28,000, while
  the SLSA  applies to total  financial  obligations  of  approximately  $718,000,
  consisting of shareholder loans of approximately  $133,000,  unpaid compensation
  of  approximately   $558,000,  and  Company  credit  card  and  equipment  lease
  obligations under personal financial guaranties of approximately $27,000.
  
  The  Plaintiffs  will have 30 days from March 31, 2006 to petition  the court to
  reopen the case; otherwise, the case shall be dismissed with prejudice,  meaning
  that the Plaintiffs will be barred from making such claims in the future.
  
  The October 25, 2005  Agreement to Stay is provided as Exhibit 99.1 to this Form
  8-K. Also  provided as exhibits are the FLSA,  the SLSA,  and the  amendments to
  both documents executed in connection with the settlement.
  
  
  
  ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS
  
  
  (c) Exhibits
  
       99.1  October 25, 2005 Agreement to Stay
       99.2  October 25, 2005 Amendment to First Loan and Security Agreement
       99.3  October 25, 2005 Amendment to Second Loan and Security Agreement
       99.4  First Loan and Security Agreement dated March 3, 2005
       99.5  Second Loan and Security Agreement dated March 3, 2005
  
  
  
  SIGNATURES
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned hereunto duly authorized.
  
  
  October 31, 2005
  
  SONEX RESEARCH, INC.
  Registrant
  
  
  
  /s/ George E. Ponticas
  ----------------------
  George E. Ponticas
  Chief Financial Officer and Secretary
  
  
  
  
                                                                      EXHIBIT 99.1
  
  
                                  AGREEMENT TO STAY
  
       This Agreement to Stay  (hereinafter  "Agreement") is made and entered into
  this 25th day of October,  2005 by and between SONEX RESEARCH,  INC.  ("SONEX"),
  ANDREW A. POURING ("POURING"), GEORGE E. PONTICAS ("PONTICAS"),  ROBERT T. EMMET
  ("EMMET"), SIDNEY L. GULICK, III ("GULICK"),  ROBERT MARTIN, JR. ("MARTIN"), and
  MICHAEL I. KELLER ("KELLER").
  
       WHEREAS,  EMMET,  GULICK,  and MARTIN filed a civil action  against  SONEX,
  POURING, and PONTICAS, in the Circuit Court for Anne Arundel County, Maryland in
  the case styled as Robert T. Emmet, et al. v. SONEX Research, Inc., et al., Case
  No. 02-C-05-104907 CN (hereinafter referred to as the "Lawsuit"); and
  
           WHEREAS,  EMMET,  GULICK, and MARTIN sued SONEX,  POURING, and PONTICAS
  for alleged  violations of Section 2-419 of the  Corporations  and  Associations
  Article of  Maryland's  Annotated  Code  regarding  a "First  Loan and  Security
  Agreement"  and "Second Loan and Security  Agreement,"  both dated March 3, 2005
  (hereinafter  referred  to as  "Security  Agreements")  which  created  security
  interests in all patents and trademarks owned by SONEX;
  
           WHEREAS, SONEX, POURING, AND PONTICAS categorically deny that they were
  involved in any wrongdoing  relating to the Lawsuit or the Security  Agreements,
  and specifically deny any liability for any of the claims made by EMMET, GULICK,
  AND MARTIN in the Lawsuit; and
  
           WHEREAS,  it is in the  mutual  interest  of all  the  parties  to this
  Agreement  to stay the  Lawsuit  and any and all claims and  demands of whatever
  sort between them, without the use of costly Court proceedings.
  
           WITNESSETH,  NOW, THEREFORE, in consideration of the foregoing recitals
  and the terms and promises,  premises and covenants  contained herein, and other
  good and valuable consideration,  the receipt and sufficiency of which is hereby
  acknowledged, the parties do hereby agree as follows:
  
           AGREED:
  
           1.  Incorporation  of  Recitals.The  recitals  to  this  Agreement  are
  incorporated as referenced herein.
  
           2.       Terms of Stay:
  
       (a)  Plaintiffs  have  filed a Motion to Dismiss  all  claims for  monetary
  damage without prejudice in the Lawsuit. (See Exhibit A)
  
       (b) The parties  filed a Joint Motion to Stay the  remainder of the Lawsuit
  until March 31, 2006.  (See Exhibit B). After March 31, 2006,  Plaintiffs  shall
  have  thirty  (30)  days to  petition  to the court to reopen  the  Lawsuit.  If
  Plaintiffs do not petition to reopen within this time period,  the Lawsuit shall
  be dismissed with prejudice.
  
       (c)  Defendants  have  provided an  affidavit of Charles C.  McGettigan,  a
  representative of the Preferred Stockholders of SONEX, regarding his discussions
  with PONTICAS  regarding the Security  Agreements  and the liens on the patents.
  Mr. McGettigan has certified that he has reviewed the Security Agreements.  (See
  Exhibit C -- Affidavit of Charles C. McGettigan).
  
       (d) PONTICAS,  POURING,  KELLER, AND GULICK hereby agree to amend the First
  and  Second  Loan and  Security  Agreements  to  reflect  the fact that they are
  willing to stay any demand for payments  under the Security  Agreements and stay
  any enforcement against the patents securing the Security Agreements until March
  31, 2006, as set forth in the Amendments to the Security  Agreements attached as
  Exhibit D.
  
       (e)  GULICK  hereby  agrees  to stay  any  demand  for  payment  under  his
  Promissory  Notes with SONEX in the aggregate  principal  amount of  $106,000.00
  through March 31, 2006, as set forth in the Promissory Notes attached as Exhibit
  E.
  
       (f) PONTICAS intends to pursue an Employment  Agreement with SONEX securing
  his  employment  through  March 31, 2006,  with  provisions  that he may only be
  terminated "for cause."
  
       (g) POURING AND KELLER  currently have  Consulting  Agreements  with SONEX.
  They  intend to pursue  amendments  of those  Consulting  Agreements  with SONEX
  securing  their services for SONEX through March 31, 2006, and stating that such
  Consulting Agreement may not be canceled except "for cause."
  
       (h) Plaintiffs  understand  that  PONTICAS,  POURING AND KELLER will pursue
  these agreements  and/or amendments with SONEX, and agree not to oppose any such
  agreements or amendments.
  
       (i)  SONEX  agrees  that  Plaintiffs  will be  invited  to  participate  in
  discussions and offer  assistance and  suggestions  regarding the appointment of
  outside /  independent  directors to the Board of  Directors  of SONEX.  (j) The
  parties  will  mutually  agree  upon  acceptable  language  for a press  release
  discussing  the terms of this  settlement  before such  release is issued to the
  public. (See Exhibit F).
  
           3. No Admission. It is understood and agreed that in entering into this
  Agreement that SONEX,  POURING, AND PONTICAS  specifically deny liability of any
  and every  sort and state that they have made no  agreement  to do or omit to do
  any act or thing not set forth herein. It is further  understood and agreed that
  this  Agreement  is not to be  construed  as an admission of liability by SONEX,
  POURING,  AND PONTICAS  but rather as a compromise  and stay of the claims which
  are specifically denied and disputed.  This Agreement is entered as a compromise
  in order to avoid expense.
  
  
           4.       Miscellaneous.
  
       (a) Fully  Integrated  Agreement.  This writing  constitutes  the complete,
  final and entire  understanding  of the  parties  hereto,  and they shall not be
  bound by any terms,  covenants,  conditions  or  representations  not  expressly
  herein contained, in writing.
  
       (b) Modification. This Agreement may not be modified or changed orally, but
  only by an agreement in writing signed by the party against whom  enforcement of
  any such change is sought.
  
       (c) Choice of Law.  This  Agreement  shall be governed  by and  interpreted
  according to the Laws of the State of Maryland.
  
       (d) This  Agreement  maybe  executed in two or more  counterparts,  each of
  which  shall be deemed to be an  original,  and all of which  together  shall be
  deemed to be one and the same Agreement.
  
       IN WITNESS WHEREOF,  we have hereunto set our hands and seals this 25th day
  of October, 2005.
  
  WITNESS:
  
  
  ___________________________              ________________________________(SEAL)
                                                    SONEX RESEARCH, INC.
  
  ____________________________             ________________________________(SEAL)
                                                    ANDREW A. POURING
  ___________________________              ________________________________(SEAL)
                                                    GEORGE E. PONTICAS
  ___________________________              ________________________________(SEAL)
                                                    ROBERT T. EMMET
  ___________________________              ________________________________(SEAL)
                                                    SIDNEY L. GULICK, III
  ___________________________              ________________________________(SEAL)
                                                    ROBERT MARTIN, JR.
  ___________________________              ________________________________(SEAL)
                                                    MICHAEL I. KELLER
  
  
  
                       CONSENT OF SONEX PREFERRED SHAREHOLDERS
  
       I, Charles C.  McGettigan,  am a general  partner of  Proactive  Investment
  Managers,  L.P.,  which is the  general  partner  of  Proactive  Partners,  L.P.
  ("Proactive"), owner of approximately 725,000 shares (47%) of the Sonex Reseach,
  Inc. ("Sonex" or the "Company") Preferred Stock. An affiliated entity, Lagunitas
  Partners, L.P. ("Lagunitas"), is the owner of approximately 725,000 shares (47%)
  of the  Sonex  Preferred  Stock.  I am a  representative  of  94%  of the  Sonex
  Preferred  Stockholders  held by Proactive and  Lagunitas.  I have reviewed this
  Agreement to Stay and all the Exhibits attached and consent to its terms.
  
  
  -----------------------------                       -------------------
  Charles C. McGettigan,                                        Date
  Representative of Sonex Preferred Stockholders
  
  
  
  
                                                                      EXHIBIT 99.2
  
  
                   AMENDMENT TO FIRST LOAN AND SECURITY AGREEMENT
  
  THIS  AMENDMENT is made as of October 25, 2005, by and between  Sonex  Research,
  Inc.  ("Borrower")  and  Andrew  A.  Pouring  ("Pouring"),  George  E.  Ponticas
  ("Ponticas") and Michael I. Keller ("Keller")  (collectively  sometimes referred
  to as the "Lender").
  
  WHEREAS,  Borrower and Lender are parties to a First Loan and Security Agreement
  dated March 3, 2005 (the  "FLSA")  pursuant to which the Lender  agreed to stay,
  through March 31, 2005, any demand for immediate payment of unpaid  compensation
  earned beginning in January 2005, and
  
  WHEREAS, the parties desire to amend the FLSA,
  
  NOW,  THEREFORE,  the parties agree that the FLSA is hereby amended to extend to
  March 31, 2006 the date through  which the Lender  agrees to stay any demand for
  immediate  payment of unpaid  compensation  earned  beginning  in January  2005,
  provided  that the Lender  shall  continue in the  employment  of, or serve as a
  consultant  to,  the  Borrower,  or that no Event of  Default,  as that  term is
  defined in the FLSA,  shall  occur.  The parties  agree that all other terms and
  conditions of the FLSA shall remain the same.
  
  This instrument shall be interpreted in accordance with the laws of the State of
  Maryland.
  
  IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the FLSA to
  be executed as of the day and year first above written.
  
  
                                    SONEX RESEARCH, INC.
  
  
                                    By: --------------------------
                                        Andrew A. Pouring,
                                        Chief Executive Officer
  
  
  LENDER
  
  
  --------------------------
  Andrew A. Pouring
  
  
  --------------------------
  George E. Ponticas
  
  
  --------------------------
  Michael I. Keller
  
  
  
  
                                                                      EXHIBIT 99.3
  
  
                  AMENDMENT TO SECOND LOAN AND SECURITY AGREEMENT
  
  THIS  AMENDMENT is made as of October 25, 2005, by and between  Sonex  Research,
  Inc.  ("Borrower")  and  Andrew  A.  Pouring  ("Pouring"),  George  E.  Ponticas
  ("Ponticas"),  Michael I. Keller ("Keller"), and Sidney L. Gulick, 3d ("Gulick")
  (collectively sometimes referred to as the "Lender").
  
  WHEREAS, Borrower and Lender are parties to a Second Loan and Security Agreement
  dated March 3, 2005 (the "SLSA") pursuant to which Pouring,  Ponticas and Keller
  agreed to stay,  through  March 31, 2005,  any demand for  immediate  payment of
  unpaid compensation earned as of December 31, 2004, and pursuant to which Gulick
  agreed to extend, to March 31, 2005, the due dates of notes payable  outstanding
  as of December 31, 2004, and
  
  WHEREAS, the parties desire to amend the SLSA,
  
  NOW, THEREFORE,  the parties agree that the SLSA is hereby amended to (1) extend
  to March 31, 2006 the date through which  Pouring,  Ponticas and Keller agree to
  stay any  demand  for  immediate  payment  of unpaid  compensation  earned as of
  December 31, 2004,  provided that each shall  continue in the  employment of, or
  serve as a consultant  to, the  Borrower,  or that no Event of Default,  as that
  term is defined in the SLSA, shall occur, and (2) extend, to March 31, 2006, the
  due dates of notes payable to Gulick which were  outstanding  as of December 31,
  2004,  provided  that no Event of Default,  as that term is defined in the SLSA,
  shall occur.  The parties agree that all other terms and  conditions of the SLSA
  shall remain the same.
  
  This instrument shall be interpreted in accordance with the laws of the State of
  Maryland.
  
  IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the FLSA to
  be executed as of the day and year first above written.
  
  
                               SONEX RESEARCH, INC.
  
  
                               By:  -------------------------------------
                               Andrew A. Pouring, Chief Executive Officer
  
  
  LENDER
  
  
  --------------------------             --------------------------
  Andrew A. Pouring                      Michael I. Keller
  
  
  --------------------------             --------------------------
  George E. Ponticas                     Sidney L. Gulick, 3d
  
  
  
                                                                      EXHIBIT 99.4
  
  
                     FIRST LOAN AND SECURITY AGREEMENT
  
  THIS FIRST LOAN AND SECURITY AGREEMENT (the "Agreement") dated March 3, 2005, is
  made  between  Sonex  Research,   Inc.   ("Borrower")   and  Andrew  A.  Pouring
  ("Pouring"),  George E. Ponticas  ("Ponticas") and Michael I. Keller  ("Keller")
  (collectively sometimes referred to as the "Lender").
  
  
                         EXPLANATORY STATEMENT
  
           WHEREAS,  Pouring has been  associated  with the Borrower since 1980 as
  its founder and, at various times, as an employee,  executive officer,  director
  and  consultant,  and is currently  serving as the  Borrower's  Chairman,  Chief
  Executive  Officer,  President and Chief Technical  Officer,  and has personally
  guaranteed  credit card and  equipment  lease  obligations  of the Borrower (the
  "Financial Guarantees");
  
           WHEREAS,  Ponticas has been associated with the Borrower since 1987, at
  various times as an employee,  executive officer and director,  and is currently
  serving as the Borrower's Chief Financial  Officer,  Secretary,  Treasurer,  and
  Vice President of Finance;
  
           WHEREAS,  Keller has been a valued  consultant  to the  Borrower  since
  1998, serving as Director of Business Development and technical program manager,
  and has been a source of working capital loans for the Borrower since 2004;
  
           WHEREAS,  on January  7, 2005 the  Borrower  and the Lender  executed a
  Statement  of  Intent,  a copy of which is  attached  hereto  as  Exhibit  1, to
  document an agreement in principle by the parties for the conditions under which
  Pouring,  Ponticas and Keller,  acting as a group for the mutual  benefit of the
  Borrower, its creditors,  its shareholders,  and themselves,  would undertake to
  keep the Borrower in operation for the immediately foreseeable future;
  
           WHEREAS,  the  Lender is  needed  to  provide  future  services  to the
  Borrower  and is  prepared  to defer  certain  compensation  that the  Lender is
  entitled to receive for services to be performed for the benefit of the Borrower
  and to stay any  demand for  immediate  payment  of such  deferred  compensation
  through March 31, 2005;
  
           WHEREAS,  the Borrower also seeks from the Lender  additional loans for
  working capital and additional Financial Guarantees;
  
           WHEREAS,  the Lender has required  that the Borrower  provide  security
  beginning on the effective  date of this  Agreement for the amount of the future
  deferred  compensation  due the  Lender by the  Borrower,  additional  loans for
  working capital from the Lender,  additional Financial Guarantees by the Lender,
  and  reimbursement  for expenses incurred by the Lender related to the providing
  of services to the  borrower or paid by the Lender on behalf of the Borrower for
  which reimbursement is sought (together referred to as "Reimbursable Expenses");
  
           WHEREAS,  Keller has loaned the  Borrower  an  additional  $25,000  for
  working capital pursuant to a Promissory Note dated January 7, 2005 (the "Keller
  Note"), Pouring has loaned the Borrower $5,000 for working capital pursuant to a
  Promissory  Note dated March 3, 2005 (the  "Pouring  Note"),  and  Ponticas  has
  loaned the Borrower  $5,000 for working  capital  pursuant to a Promissory  Note
  dated March 3, 2005 (the "Ponticas Note") (the Keller Note, the Pouring Note and
  the Ponticas Note are collectively referred to hereafter as the "Notes");
  
           WHEREAS,  on February 15, 2005 Pouring  executed a Financial  Guarantee
  for the payment of credit card obligations of the Borrower to Advanta Bank Corp.
  in the current amount of $15,200 up to a credit limit of $27,500;
  
           WHEREAS,  Pouring, Ponticas and Keller have agreed to be secured by the
  Borrower on a shared basis pursuant to the terms of a separate agreement between
  and amongst themselves,  and it is their intention to further share the security
  interest  in the  Collateral  with  additional  potential  lenders  or others as
  necessary for the benefit of the Borrower and its shareholders;
  
           WHEREAS,  the  Borrower  is  agreeable  to secure the  future  deferred
  compensation,   additional  loans  for  working  capital,  additional  Financial
  Guarantees,  and  Reimbursable  Expenses,  and to pay the expenses of perfecting
  such security interest;
  
  
           NOW, THEREFORE, in consideration of the Explanatory Statement, which is
  incorporated herein by reference, and the covenants, agreements,  warranties and
  representations  contained herein and for other good and valuable consideration,
  the receipt and sufficiency of which are hereby acknowledged, the parties hereto
  do hereby agree as follows:
  
  
                                      ARTICLE I
                               EFFECTIVENESS AND TERM
  
           This  Agreement  shall be  effective  for all purposes as of January 7,
  2005,  except with  respect to  Pouring's  Financial  Guarantee  to Advanta Bank
  Corp.,  for which the effective date shall be February 15, 2005, and the Pouring
  Note and the Ponticas Note, for which Notes the effective date shall be March 3,
  2005. This Agreement shall remain in effect until all the Indebtedness  (defined
  below) has been repaid in full.
  
  
                                     ARTICLE II
                                     DEFINITIONS
  
  SECTION 2.1.  DEFINITIONS.  As used in this  Agreement and in the Loan Documents
  (defined  below),  the following  terms shall have the meanings  indicated below
  unless the specific context requires a different meaning.  All capitalized terms
  which are not  otherwise  defined  herein and which are defined in the  Maryland
  Uniform Commercial Code - Secured Transactions, Title 9, Commercial Law Article,
  Annotated  Code of  Maryland,  as  amended,  shall have the  meanings  set forth
  therein.
  
           "Collateral"  means all of the following property in which the Borrower
  has  granted a security  interest  to the Lender  pursuant to Article IV of this
  Agreement, both now owned and existing and hereafter owned, existing,  acquired,
  created and arising, regardless of where located, and all of the Borrower's both
  now existing and hereafter  acquired  rights,  title and interest in and to such
  property together with all replacements thereof and substitutions therefore (all
  of such  property  described  below and such rights,  title and  interest  being
  herein  collectively  called  the  "Collateral"):  All  patents  and  trademarks
  registrations  and  applications  made by, or on behalf of, the  Borrower to the
  Patent and  Trademark  Office or to any similar  office or agency of any foreign
  country or political subdivision thereof for the registration,  now of record or
  in the future to become of record;
  
           All cash and noncash  proceeds  and  products of the above,  including,
  without  limitation,  all cash and noncash  proceeds of, and all other  profits,
  rentals or receipts, in whatever form, arising from the collection, sale, lease,
  exchange,  assignment,  licensing or other  disposition of, or realization upon,
  any  asset  or  property  which  constitutes  Collateral,   including,   without
  limitation,  all claims of Borrower against third parties for loss of, damage to
  or theft or destruction of, or for proceeds payable under, or unearned  premiums
  with  respect to,  policies of insurance  covering  any asset or property  which
  constitutes Collateral, any condemnation or requisition payments with respect to
  any asset or property which  constitutes  Collateral,  in each case whether both
  now existing and hereafter arising,  and all cash, checks, draft and instruments
  received or held for the benefit of the Secured Party.
  
           "Encumbrance" means any mortgage,  lien, pledge, adverse claim, charge,
  security interest or other encumbrance in or on, or any interest or title of any
  vendor,  lessor,  lender,  or other secured party under any conditional  sale or
  other  title  retention  agreement  or lease with  respect  to, any  property or
  collateral.
  
           "Event of Default"  and  "Default"  shall have the meaning set forth in
  Section 8.1 hereof.
  
       "Indebtedness"  or "Loan" means any obligation  owed by the Borrower to the
  Lender for all  deferred  compensation,  loans for  working  capital,  Financial
  Guarantees,  and Reimbursable Expenses accruing, or entered into, from and after
  the effective date of this Agreement. A listing of the Indebtedness  accumulated
  as of March 3, 2005 is  attached  hereto as  Exhibit  2. Such  listing  is to be
  updated from time to time by the Borrower and appended to Exhibit 2.  Additional
  Indebtedness  entered into by agreement  of the parties  subsequent  to March 3,
  2005 shall be listed and attached hereto as Exhibit 3.
  
           "Loan  Documents"  means all  documents  executed  by the  Borrower  in
  connection with the Notes, Financial Guarantees,  Reimbursable Expenses, and the
  employment  of the Lender,  including  but not limited to, this  Agreement,  the
  Employment  Agreements and/or Consulting Agreements between Lender and Borrower,
  salary  amounts  authorized  by the  Board of  Directors  of the  Borrower,  the
  compensation  records of the Borrower,  and any financing statements relating to
  the Collateral.
  
           "Obligations"  means the absolute  obligation of the Borrower to pay to
  the Lender (a) any and all sums due to the Lender  under the stated terms of the
  Indebtedness,  this Agreement or the Loan Documents, and (b) in the event of any
  proceeding to enforce the collection of the  Obligations,  or any of them, after
  Default,  the  reasonable  expenses of retaking,  holding,  preparing  for sale,
  selling or  otherwise  disposing of or  realizing  on the  Collateral  or of any
  exercise by the Lender of the Lender's rights in the Event of Default,  together
  with attorneys' fees, expenses of collection and court costs, as provided in the
  Loan Documents.
  
                                     ARTICLE III
                              TERMS OF THE INDEBTEDNESS
  
           The terms of the  Indebtedness  are more  fully  described  in the Loan
  Documents.
  
  
                                     ARTICLE IV
                                SECURITY FOR THE LOAN
  
       SECTION 4.1 SECURITY. The Borrower's Obligations under the Indebtedness are
  evidenced and secured by (a) this Agreement and (b) the Loan Documents. In order
  to secure the full and timely payment and  performance of the  Obligations,  the
  Borrower  hereby pledges and grants to the Lender all of the  Borrower's  right,
  title and interest in, the Collateral.
  
       SECTION  4.2  EXERCISE  OF RIGHTS.  Until such time as the  Borrower  is in
  default in paying the principal sum of the  Indebtedness or any interest accrued
  thereon,  or in performing any of the  Borrower's  other  obligations  under the
  provisions  of the Loan  Documents,  after  notice  and beyond  applicable  cure
  periods, if any, the Lender shall be entitled to exercise all of the rights held
  by  it  under  the  provisions  of  this  Agreement  and  the  Loan   Documents.
  
  
       SECTION 4.3 INTENTIONALLY OMITTED.
  
       SECTION 4.4 PROCEEDS AND PRODUCTS.  The Lender's  security  interest  shall
  apply to and cover any and all  proceeds of the  Collateral,  including  but not
  limited  to,   insurance   proceeds   and  the   products  of  any   Collateral.
  
  
           SECTION  4.5  PRIORITY  OF LIEN  AND  SECURITY  INTEREST.  The lien and
  security  interest  granted  by the  Borrower  to the  Lender  pursuant  to this
  Agreement shall be and remain, at all times that any portion of the Indebtedness
  remains  outstanding and unpaid,  a first and  indefeasible  perfected  security
  interest in and to the Collateral,  unless otherwise agreed to be the Lender. It
  is  agreed  that any  security  given by the  Borrower  to the  Lender to secure
  antecedent deferred compensation shall be specifically  subordinated to deferred
  compensation that accrued from and after the effective date of this Agreement.
  
       SECTION 4.6 LOSS OF  SECURITY.  The Lender shall not be liable for any loss
  of any Collateral in its possession,  nor shall such loss diminish the debt due,
  unless said loss results from Lender's gross  negligence or willful  misconduct.
  
  
           SECTION 4.7 TERMINATION OF SECURITY  INTEREST.  Upon payment in full of
  such principal sum, interest and other Indebtedness,  and all other sums owed to
  the Lender under the  provisions of the Loan  Documents,  this  Agreement or any
  other document  executed in connection  therewith,  the security interest in the
  Collateral shall be and become void and of no further effect; provided, that the
  affidavit, certificate, letter or statement of any officer, agent or attorney of
  the Lender that any of such principal sum, interest,  indebtedness or other sums
  remain  unpaid  shall be and  constitute  conclusive  evidence of the  validity,
  effectiveness and continuing force of the assignment, and any person may, and is
  hereby  authorized to, rely thereon.  The Borrower hereby authorizes and directs
  the licensee under each present or future Patent or Trademark, upon receipt from
  the Lender of written  notice  that a default  exists  thereunder  or under this
  Agreement,  after notice and beyond  applicable  cure periods to pay over to the
  Lender all rents,  income and profits  arising or accruing under such Patent and
  Trademark  and to continue to do so until  otherwise  notified in writing by the
  Lender.
  
  
                                      ARTICLE V
                           REPRESENTATIONS AND WARRANTIES
                                   BY THE BORROWER
  
       SECTION 5.1  REPRESENTATIONS  AND WARRANTIES BY THE BORROWER.  The Borrower
  makes the following representations and warranties:
  
       (a)  Existence.  The Borrower is a corporation  duly organized and existing
  and in good  standing  under the laws of the State of Maryland  and the Borrower
  has the power to own its  properties  and to carry on its  business as now being
  conducted,  and the  Borrower is duly  qualified  to do business  and is in good
  standing in each  jurisdiction in which the character of the properties owned by
  it therein or in which the transaction of its business makes such  qualification
  necessary.
  
       (b) Authority.  The Borrower has full power and authority to enter into and
  execute and deliver this Agreement and each of the other Loan Documents executed
  and delivered by it and to incur and perform the Borrower's Obligations provided
  for herein and therein  (including  the borrowing  under the  Indebtedness).  No
  further  consent  or  approval  of any  other  person  or  public  authority  or
  regulatory body is required as a condition to the validity or  enforceability of
  this Agreement or any of the other Loan Documents, or if required, the
  same has been obtained.
  
       (c) Binding Agreements. This Agreement and each of the other Loan Documents
  executed and delivered by the Borrower  have been duly and properly  executed by
  the  Borrower,  constitute  the valid and  legally  binding  obligations  of the
  Borrower and are fully enforceable against the Borrower in accordance with their
  respective terms.
  
       (d) Litigation. There is no litigation or proceeding pending or threatened,
  before any court or administrative agency which will materially adversely affect
  the  financial  condition  of the  Borrower or the  authority of the Borrower to
  enter into, or the validity or  enforceability  of, this Agreement or any of the
  other Loan  Documents or the ability of the  Borrower to perform the  Borrower's
  Obligations which has not been disclosed to the Lender.
  
       (e) No  Conflicting  Agreements.  There is (i) no provision in any existing
  mortgage,  indenture, contract or agreement binding on the Borrower or affecting
  any of the  Borrower's  property  and (ii) no provision of law or order of court
  binding upon the  Borrower or affecting  any of the  Borrower's  property  which
  would conflict with or in any way prevent the execution, delivery or performance
  of the terms of this  Agreement or of any of the other Loan  Documents  executed
  and delivered by the  Borrower,  or which would be in
  default or violated as a result of such execution, delivery or performance.
  
       (f)  Taxes.  The  Borrower  has timely and  accurately  filed all  required
  federal,  state and local tax or  information  returns,  and it is not currently
  being  audited by either the state or federal  governments.  The Borrower is not
  delinquent  in the payment of any income,  property or other  federal,  state or
  local tax or assessment.
  
       (g) Place of Business of Borrower.  The Borrower has a place of business in
  Anne  Arundel  County,  Maryland,  which is the only  place  where the  Borrower
  maintains a place of business.
  
       (h) Name.  The Borrower has never  operated under or used any other name or
  title to all of the Collateral.  The Lender's security interest shall constitute
  a first and indefeasible  security interest therein,  unless otherwise agreed to
  by the Lender.
  
       (i) No Untrue  Statements.  Neither this Agreement,  the Loan Documents nor
  any other document, certificate or statement furnished or to be furnished by the
  Borrower or by any other party to the Lender in connection herewith contains, or
  at the time of delivery will contain, any untrue statement of a material fact or
  omits  or will  omit to state a  material  fact  necessary  in order to make the
  statements   contained   herein   and   therein   not   materially   misleading.
  
  
                                         ARTICLE VI
                             AFFIRMATIVE COVENANTS OF BORROWER
  
           The Borrower hereby  covenants and agrees that from the date hereof and
  until satisfaction in full of the Obligations, unless the Lender shall otherwise
  consent in writing, the Borrower shall do the following:
  
       SECTION  6.1 NOTICE OF CHANGE OF  BUSINESS  LOCATION.  The  Borrower  shall
  notify the Lender in  writing  thirty  (30) days in advance of any change in the
  location of any of its places of business or of the establishment of any new, or
  the     discontinuance     of    any     existing,     place    of     business.
  
  
       SECTION 6.2  EXISTENCE;  CERTAIN  RIGHTS;  LAWS.  The Borrower shall do all
  things  necessary  to  preserve  and  keep  in full  force  and  effect  in each
  jurisdiction in which it conducts business,  the business  existence,  licenses,
  permits, rights, patents, trademarks, trade names and franchises of the Borrower
  and comply with all present and future  laws,  ordinances,  rules,  regulations,
  judgments, orders and decrees which affect in any material way the Borrower, its
  assets or the operation of its business.
  
           SECTION 6.3 NOTICE OF  LITIGATION  OR OTHER  PROCEEDINGS.  The Borrower
  shall give immediate notice to the Lender of (i) the existence of any continuing
  material dispute with respect to any of the Collateral,  (ii) the institution of
  any  litigation,   administrative   proceeding  or  governmental   investigation
  involving  the  Borrower  and/or  any of the  Collateral,  any  of  which  might
  materially and adversely affect the operation,  financial condition, property or
  business of the Borrower or any of the  Collateral or affect the  enforceability
  of this Agreement or any of the other Loan Documents.
  
       SECTION 6.4  INDEBTEDNESS.  The Borrower shall pay or cause to be paid when
  due (or within  applicable  grace  periods) all  Indebtedness  of the  Borrower.
  
  
       SECTION 6.5 NOTICE OF EVENTS OF DEFAULT.  The Borrower shall give immediate
  notice to the Lender if the  Borrower  becomes  aware of the  occurrence  of any
  Event of Default,  or of any facts,  condition or event which with the giving of
  notice  or lapse  of time,  or  both,  would be an Event of  Default,  or of the
  failure of the Borrower to observe or perform any of the conditions or covenants
  to be observed or performed by it under this  Agreement or any of the other Loan
  Documents.
  
           SECTION 6.6 FURTHER  ASSURANCES.  The Borrower shall execute such other
  and further documents, including without limitation,  promissory notes, security
  agreements,  agreements,  financing  statements,  continuation  statements,  and
  similar  instruments as may from time to time, in the sole opinion of the Lender
  or the  Lender's  counsel,  be  necessary,  proper or  convenient,  to  perfect,
  confirm, establish, re-establish,  continue or complete the security interest in
  the Collateral and the purposes and intentions of this  Agreement,  it being the
  intention  of the  Borrower to hereby  provide a full and  absolute  warranty of
  further  assurance to the Lender.  In the event the Borrower  shall fail for any
  reason to execute,  within ten (10) days of the  Lender's  written  demand,  any
  document of the  aforementioned  type which the Lender  requests the Borrower to
  execute, the Borrower shall and hereby irrevocably and automatically appoint the
  Lender as the  Borrower's  attorney-in-fact  to  execute  such  document  in the
  Borrower's name, place and stead and on the Borrower's behalf, and such power of
  attorney shall constitute a power of attorney coupled with an interest and shall
  be irrevocable  unless and until the subject  document is fully and  effectively
  executed.
  
  
                                     ARTICLE VII
                                 NEGATIVE COVENANTS
  
           The Borrower  covenants and agrees that, until  satisfaction in full of
  all Obligations, it will not do or permit to be done or to cause to occur any of
  the acts or happenings set forth below without the prior written  consent of the
  Lender.
  
       SECTION 7.1 FUNDAMENTAL CHANGES.  Change its name, enter into or effect any
  merger, consolidation,  share exchange, division, conversion,  reclassification,
  recapitalization,  reorganization  or other  transactions  of like effect  which
  changes the control of the  affairs of  Borrower  from that which  exists on the
  date hereof, or dissolve,  sell, transfer,  lease or otherwise dispose of all or
  (except in the  ordinary  course of business  for  adequate  consideration)  any
  material portion of its assets or any  significant  product
  line or process.
  
       SECTION 7.2  ENCUMBRANCE OR DISPOSAL OF COLLATERAL.  The Borrower shall not
  sell, lease, convey, or otherwise dispose of, or mortgage, pledge, assign, grant
  or permit to exist any liens,  claims,  encumbrances or security interests in or
  upon any of the Collateral,  except liens,  if any,  required by this Agreement.
  
  
       SECTION 7.3 ASSIGNMENT OF THIS AGREEMENT.  The Borrower shall not assign or
  attempt to assign this Agreement to any person.
  
       SECTION 7.4 PREPAYMENT OF INDEBTEDNESS.  Make any voluntary  prepayments of
  Indebtedness other than in ordinary course of business.
  
  
                                    ARTICLE VIII
                             EVENTS OF DEFAULT; REMEDIES
  
       SECTION 8.1 EVENTS OF DEFAULT  DEFINED.  The following  shall be "Events of
  Default"  under this  Agreement,  and the terms  "Events of Default",  "Event of
  Default" and "default" shall mean, whenever they are used in this Agreement, any
  one or more of the following events:
  
       (a) Any  representation  or  warranty  made herein or in any  statement  or
  representation  made in any certificate,  report,  financial  statement or other
  instrument  furnished in connection with this Agreement,  or in any of the other
  Loan Documents,  shall prove to have been incorrect in any material respect when
  made or shall be breached in any material respect; or
  
       (b) The Borrower shall fail to pay within five (5) days written notice that
  the same is due and  payable  any  payment of  principal  of or  interest  under
  Indebtedness  or with  respect to any other sums or charges  due on or under the
  Indebtedness  or any repayment  required by the security  agreement  executed in
  connection with this transaction;
  
                    (c)  There  shall  occur a  default  in the  due and  punctual
  performance  or  observance  of any  term,  covenant,  condition,  agreement  or
  provision,  other than as specified in the foregoing Paragraph (b), contained in
  any of the Loan Documents  associated with this transaction,  to be performed or
  observed by the  Borrower,  which is not cured within thirty (30) days of notice
  of said default, provided Borrower shall be given a greater period to cure if it
  commences  to cure within said  thirty (30) day period and  diligently  proceeds
  towards cure;
  
                    (d)  The  Borrower  shall  (i)  apply  for or  consent  to the
  appointment of, or the taking of possession by, a receiver,  custodian,  trustee
  or liquidator of itself or any of its property or assets,  (ii) become generally
  unable to pay its debts as they mature,  (iii) make a general assignment for the
  benefit of creditors,  (iv) be adjudicated a debtor under 11 U.S.C.  section 101
  et. seq.,  (v) file a voluntary  petition in  bankruptcy or a petition or answer
  seeking  reorganization or an arrangement with creditors or to take advantage of
  any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
  liquidation  statute,  or an answer  admitting  the  material  allegations  of a
  petition filed against it in any proceeding under any such law, or if any action
  shall  be  taken  by the  Borrower  for the  purposes  of  affecting  any of the
  foregoing,  or (vi)  by any  act  indicate  its  consent  to,  approval  of,  or
  acquiescence  in, any such  proceeding or the  appointment of any receiver of or
  trustee for the  Borrower or any of its  property or assets,  or suffer any such
  receivership, trusteeship or proceeding to continue undischarged for a period of
  sixty (60) days, or
  
       (e) An order, judgment or decree shall be entered, without the application,
  approval  or consent of the  Borrower  by any court of  competent  jurisdiction,
  approving a petition seeking the dissolution or  reorganization  of the Borrower
  or of all or any substantial part of the assets of the Borrower, or appointing a
  receiver,  trustee or  liquidator  of the Borrower  and such order,  judgment or
  decree shall continue  unstayed and in effect for any period of sixty (60) days;
  or
  
       (f) Any  judgment  against  the  Borrower,  or any  attachment  or any levy
  against any  property of the  Borrower  with respect to a claim for an amount in
  excess of Twenty-Five  Thousand Dollars ($25,000) remains unpaid,  undischarged,
  unbonded or undismissed for a period of sixty (60) days; or
  
       (g) An Event of Default shall occur under any of the other Loan  Documents;
  or
  
       (h) The Borrower is dissolved, terminated and/or liquidated.
  
  
       SECTION  8.2  REMEDIES ON  DEFAULT.  In  addition  to all other  rights and
  remedies  provided to it by law and under the Loan Documents,  the Lender on the
  happening of any Event of Default may in its sole and absolute discretion do any
  or all of the following:
  
       (a) Declare the unpaid  principal of the  Indebtedness and interest accrued
  thereon,  together with all other monies  payable to the Lender by the Borrower,
  to be immediately due and payable by notice in writing to that effect, delivered
  to the Borrower, and upon such declaration, all such monies shall be immediately
  due and payable at the place of payment provided in such notice, anything in the
  Loan Documents or in this Agreement to the contrary notwithstanding.
  
       (b) Foreclose on any of the  Collateral,  or any collateral in which Lender
  has an  interest  pursuant  to the terms of any other  Indebtedness  outstanding
  between Borrower and the Lender;
  
       (c) File suit against the Borrower under any Document  associated with this
  transaction;
  
       (d) Seek specific  performance or injunctive relief to enforce  performance
  of the undertakings,  duties and agreements provide in the documents  associated
  with this transaction, whether or not a remedy exits as law or is adequate;
  
                    (e) The rights and remedies  provided in this  Agreement or in
  the Loan Documents or under  applicable law shall be cumulative and the exercise
  of any  particular  right or remedy shall not preclude the exercise of any other
  rights or remedies in addition to or as an  alternative of such right or remedy.
  No delay or omission to exercise  any right or power  accruing  upon an Event of
  Default  shall  impair  any such right or power or be  construed  to be a waiver
  thereof,  but any such right and power may be exercised from time to time and as
  often as may be deemed prudent.
  
           SECTION  8.3  SALE OF  COLLATERAL.  In  addition  to any  other  remedy
  provided  herein,  the Lender may,  subject to applicable law, sell at public or
  private sale or otherwise realize upon, in Annapolis, Maryland or elsewhere, the
  whole or, from time to time,  any part of the  Collateral or any interest  which
  the  Borrower may have  therein.  After  deducting  from the proceeds of sale or
  other  disposition of the  Collateral  all expenses,  including all expenses for
  legal services,  the Lender shall apply such proceeds toward the satisfaction of
  the  Indebtedness.  Any remainder of the proceeds after  satisfaction in full of
  all  amounts  due and  owing  under the  Indebtedness  shall be  distributed  as
  required by applicable  law.  Notice of any sale or other  disposition  shall be
  given to the Borrower at least  fifteen (15) working days (or such longer period
  as may be required by law) before the time of any intended public sale or of the
  time  after  which  the  intended  private  sale  or  other  disposition  of the
  Collateral is to be made,  which the Borrower  hereby agrees shall be reasonable
  notice of such sale or other disposition. The Borrower agrees to assemble, or to
  cause to be assembled,  at the  Borrower's  own expense,  the Collateral at such
  place or  places  as the  Lender  shall  designate.  At any  such  sale or other
  disposition,  the Lender may, to the extent  permissible  under  applicable law,
  purchase  the  whole  or  any  part  of the  Collateral.  Without  limiting  the
  generality  of any of the rights and  remedies  conferred  upon the Lender under
  this Agreement,  the Lender may, to the full extent  permitted by applicable law
  (a) enter upon the premises of the Borrower and exclude  therefrom  the Borrower
  or any affiliate  thereof,  and take  immediate  possession  of the  Collateral,
  either  personally  or by means of a receiver  appointed by a court of competent
  jurisdiction,  using all necessary  force to do so, (b) at the Lender's  option,
  use,  operate,  manage and  control the  Collateral  in any lawful  manner,  (c)
  collect and receive all rents,  income,  revenue,  earnings,  issues and profits
  therefrom, and (d) maintain, repair, renovate, alter or remove the Collateral as
  the Lender may determine in the Lender's sole and absolute discretion.
  
       SECTION  8.4  ATTORNEY'S  FEES AND  EXPENSES.  The  Borrower  shall pay all
  reasonable  attorneys'  fees and expenses which the Lender may incur as a result
  or in consequence of the happening of an Event of Default,  even if the Event of
  Default   is  cured  and  the   Indebtedness   is   placed  in  good   standing.
  
  
           SECTION 8.5  CONFESSED  JUDGMENT.  UPON THE  OCCURRENCE  OF AN EVENT OF
  DEFAULT, THE BORROWER HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE LENDER OR
  ANY CLERK OF ANY COURT OF RECORD  TO  APPEAR  FOR THE  BORROWER  IN ANY COURT OF
  RECORD IN THE STATE OF  MARYLAND  AND CONFESS  JUDGMENT  WITHOUT  PRIOR  HEARING
  AGAINST THE  BORROWER IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE UNPAID
  PRINCIPAL  SUM,  ALL  INTEREST  ACCRUED AND UNPAID  THEREON,  ALL OTHER  AMOUNTS
  PAYABLE BY THE BORROWER TO THE LENDER UNDER THE TERMS OF THE INDEBTEDNESS OR ANY
  OF THE OTHER  LOAN  DOCUMENTS,  COSTS OF SUIT,  AND  ATTORNEYS'  FEES OF FIFTEEN
  PERCENT  (15%) OF THE  UNPAID  PRINCIPAL  SUM AND  INTEREST  THEN DUE  HEREUNDER
  (PROVIDED  THAT,  IF SUCH  JUDGMENT IS NOT APPEALED OR CONTESTED BY THE BORROWER
  THEN,  FOLLOWING THE PASSAGE OF TIME FOR APPEAL, AND COLLECTION OF THE AMOUNT OF
  SUCH JUDGMENT AND ALL SUCH FEES AND COSTS, THE LENDER WILL REMIT TO THE BORROWER
  THE EXCESS,  IF ANY, OF THE ATTORNEY'S FEES AWARDED AND COLLECTED AND THE ACTUAL
  ATTORNEY' FEES REASONABLY  INCURRED BY LENDER IN ENFORCING ITS RIGHTS  HEREUNDER
  OR UNDER THE OTHER LOAN DOCUMENTS).  THE BORROWER HEREBY RELEASES, TO THE EXTENT
  PERMITTED BY  APPLICABLE  LAW, ALL ERRORS AND ALL RIGHTS OF  EXEMPTION,  APPEAL,
  STAY OF  EXECUTION,  INQUISITION,  AND OTHER  RIGHTS TO WHICH THE  BORROWER  MAY
  OTHERWISE BE ENTITLED  UNDER THE LAWS OF THE UNITED  STATES OF AMERICA OR OF ANY
  STATE OR  POSSESSION  OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY
  HEREAFTER BE ENACTED.  THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER  JUDGMENT
  AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES  THEREOF OR
  BY ANY IMPERFECT  EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
  ENTERED  PURSUANT  THERETO.  SUCH  AUTHORITY  MAY BE  EXERCISED  ON ONE OR  MORE
  OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT  JURISDICTIONS  AS OFTEN
  AS THE LENDER  SHALL DEEM  NECESSARY  OR  DESIRABLE,  FOR ALL OF WHICH THIS NOTE
  SHALL BE A SUFFICIENT WARRANT.
  
           SECTION 8.6 WAIVERS; CONSENT TO JURISDICTION.  The Borrower irrevocably
  submits to the  jurisdiction  of any state or federal court sitting in the State
  of Maryland over any suit,  action, or proceeding  arising out of or relating to
  this Agreement. The Borrower irrevocably waives, to the fullest extent permitted
  by law, any objection  that the Borrower may now or hereafter have to the laying
  of venue of any such suit,  action, or proceeding  brought in any such court and
  any claim that any such suit,  action,  or proceeding  brought in any such court
  has been  brought in an  inconvenient  forum.  Final  judgment in any such suit,
  action, or proceeding  brought in any such court shall be conclusive and binding
  upon the  Borrower  and may be  enforced  in any court in which the  Borrower is
  subject to  jurisdiction  by a suit upon such judgment  provided that service of
  process is  effected  upon the  Borrower as  provided  in this  Agreement  or as
  otherwise  permitted by applicable  law. The Borrower hereby consents to process
  being served in any suit,  action,  or proceeding  instituted in connection with
  this Agreement by (a) the mailing of a copy thereof by certified  mail,  postage
  prepaid,  return  receipt  requested,  to the  Borrower  and (b)  serving a copy
  thereof any agent hereafter  designated in writing to the Lender by the Borrower
  as the Borrower's agent for service of process.  The Borrower irrevocably agrees
  that such service  shall be deemed to be service of process upon the Borrower in
  any such suit,  action, or proceeding.  Nothing in this Section shall affect the
  right of the Lender to serve  process in any manner  otherwise  permitted by law
  and  nothing in this  Section  will limit the right of the Lender  otherwise  to
  bring  proceedings  against the  Borrower in the courts of any  jurisdiction  or
  jurisdictions.  THE  BORROWER  HEREBY  WAIVES  TRIAL  BY JURY IN ANY  ACTION  OR
  PROCEEDING  TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,  ARISING OUT OF
  OR IN ANY  WAY  PERTAINING  TO  (A)  THIS  INDEBTEDNESS,  OR  (B)  ANY  DOCUMENT
  ASSOCIATED WITH THIS  TRANSACTION.  IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
  CONSTITUTES A WAVIER OF TRIAL BY JURY OF ALL CLAIMS  AGAINST ALL PARTIES TO SUCH
  ACTIONS OR PROCEEDINGS,  INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
  THIS INDEBTEDNESS.  THIS WAIVER IS KNOWINGLY,  WILLINGLY AND VOLUNTARILY MADE BY
  THE BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT
  OR OPINION  HAVE BEEN MADE BY ANY  INDIVIDUAL  TO INDUCE THIS WAVIER OF TRIAL BY
  JURY OR TO IN ANY WAY MODIFY OR NULLIFY  ITS  EFFECT.  THE  BORROWER  HAS HAD AN
  OPPORTUNITY TO CONSULT  COUNSEL  REGARDING THIS WAIVER OR HAD KNOWINGLY  ELECTED
  NOT TO CONSULT WITH COUNSEL PRIOR TO MAKING THIS WAIVER.
  
                                     ARTICLE IX
                                    MISCELLANEOUS
  
       SECTION 9.1 INCONSISTENCIES. The terms and conditions of the Loan Documents
  are  incorporated  by  reference  and made a part  hereof  as if fully set forth
  herein. In the event of any inconsistencies between this Agreement and any other
  Loan  Documents,  such  inconsistencies  shall  be  construed,  interpreted  and
  resolved so as to benefit the Lender.
  
       SECTION 9.2 BENEFIT;  BURDENS. This Agreement shall inure to the benefit of
  and  shall be  binding  upon the  Lender,  the  Borrower  and  their  respective
  successors and permitted assigns and shall not inure to the benefit of any other
  party.
  
       SECTION 9.3 NOTICES.  All  notices,  certificates  or other  communications
  hereunder shall be  sufficiently  given and shall be deemed given when delivered
  or when mailed by first class,  certified mail, postage prepaid,  return receipt
  requested,  addressed to the Borrower, the Lender or to any other Person to whom
  any such notice or certificate  or other  communication  is to be given,  at the
  following addresses:
  
  If to the Lender:        Andrew A. Pouring             George E. Ponticas
                           Edgewater, Maryland 21037     Timonium, Maryland 21093
  
                           Michael I. Keller
                           Alexandria, Virginia 22311
  
  If to the Borrower:      Sonex Research, Inc
                           c/o Andrew A. Pouring
                           23 Hudson Street
                           Annapolis, Maryland 21401
  
       SECTION 9.4 AMENDMENTS,  CHANGES AND MODIFICATIONS.  This Agreement may not
  be  amended,  changed,  modified,  altered  or  terminated  except  by a written
  instrument      executed     by     the     Lender     and     the     Borrower.
  
  
       SECTION 9.5 LAW GOVERNING. This Agreement is prepared and entered into with
  the  intention  that  the  law  of  the  State  of  Maryland  shall  govern  its
  construction and interpretation.
  
           IN WITNESS  WHEREOF,  the  Borrower  has caused  this  Agreement  to be
  executed and sealed as of the day and year first above written.
  
  
  WITNESS/ATTEST:                    SONEX RESEARCH, INC.
  
  
  
  ---------------                    --------------------
                                     Andrew A. Pouring,
                                     Chief Executive Officer
  
  
  
  
  
                                     EXHIBIT 1
  
                                STATEMENT OF INTENT
                                   January 7, 2005
  
  
  
           Sonex Research,  Inc. ("Sonex" or the "Company") has been unable for an
  extended  period  of time to keep  current  with its  compensation  payments  to
  consultant  Michael I.  Keller and to officers  Andrew A.  Pouring and George E.
  Ponticas,  or to timely  repay  loans made by Keller and  shareholder  Sidney L.
  Gulick,  3d. The Company's  accounting  records provide detailed listings of the
  significant amounts owed to these individuals.
  
           The Company  requires an immediate  infusion of cash for urgent working
  capital  needs.  The Company needs  Pouring,  Ponticas and Keller to continue to
  provide  services  in their  present  capacities  in order  for the  Company  to
  continue in operation,  yet the Company  presently does not have sufficient cash
  to pay  current  compensation  as earned.  Through  March 31,  2005 the  Company
  anticipates  cash receipts of $116,807  upon payment on the Company's  remaining
  invoices  issued  and to be issued to the  Defense  Advanced  Research  Projects
  Agency (DARPA)  totaling  $104,341,  and $12,466 under a current  purchase order
  from XXXXXX XXXXXXX  XXXXXXXX XXXXX, yet such cash receipts are restricted as to
  use because  they are  currently  securing  amounts  due under notes  payable to
  Gulick and  Keller.  In  addition,  Keller has  offered to provide  the  Company
  additional  cash for working capital of $25,000 on the good faith promise of the
  Company to provide  promptly  adequate  security  for such note and for previous
  notes and assurances as to the  availability of Pouring and Ponticas to continue
  to provide services to Sonex.
  
       This Statement of Intent serves to provide preliminary  documentation of an
  agreement in principle by Sonex, Keller, Pouring and Ponticas for the conditions
  under which these  individuals will undertake to keep Sonex in operation for the
  immediately foreseeable future. Pouring,  Ponticas and Keller have agreed to act
  as a group for the mutual  benefit of the  Company,  its  shareholders,  Gulick,
  other  creditors and  themselves.  Pouring is also acting  individually  for the
  benefit of consultant David A. Blank. In consideration,  Sonex agrees to execute
  a pledge,  assignment  or grant to  Keller,  Pouring,  Ponticas  and Gulick of a
  shared  security  interest in the  Company's  patents  (the  "Collateral")  with
  respect to the following services,  personal  guarantees,  and liabilities which
  are detailed in the Company's accounting records:
  
       1.  Accrued  compensation,  comprised  of  wages,  vacation,  bonus  and/or
           consulting  fees owed to Keller,  Pouring and Ponticas,  and to Blank
           in an amount to be  determined  by  Pouring.
       2.  Reimbursable  expenses  owed to  Keller, Pouring and Ponticas.
       3.  Notes plus accrued interest payable to Keller and Gulick.
       4.  Personal financial  guarantees by Pouring for the payment by the
           Company of charges  accumulated  with respect to business  credit card
           accounts and pursuant  to  equipment  leases.
       5.  Payments  for  continued  services by Pouring, Ponticas and Keller.
  
           Sonex is to receive the following consideration:
  
       1.  Keller will provide the Company additional cash for working capital of
           $25,000 pursuant to a Promissory Note payable by March 31, 2005.
       2.  Keller and Gulick will agree to extend to March 31, 2005 the due dates
           of all presently outstanding notes and will agree to amend such notes
           to release the collateral presently provided by cash payments received
           from Company revenues.
       3.  Pouring, Ponticas and Keller will agree to continue to provide services
           to the Company in their present capacities under existing compensation
           arrangements for the immediately foreseeable future under the risk of
           the Company's being unable to pay outstanding compensation and/or
           current compensation as earned.
       4.  Pouring, Ponticas and Keller will agree to stay any demand for
           immediate payment of outstanding compensation through March 31, 2005.
  
           It is the  intention  of  Sonex  to  obtain  legal  counsel  as soon as
  practical  to  prepare  a  security  and/or  other  similar  agreement(s)  to be
  effective  January 7, 2005 (the  "Security  Agreement")  to record  formally the
  intent of the parties as outlined herein.  It is the intention of the parties to
  further share the security interest in the Collateral with additional  potential
  lenders  or  others  as  necessary  for  the  benefit  of the  Company  and  its
  shareholders.
  
           Signed this 7th day of January, 2005, at Annapolis, Maryland.
  
  
  
  ------------------
  Michael I. Keller
  
  
  ------------------
  Andrew A. Pouring
  
  
  ------------------
  George E. Ponticas
  
  
  
                                SONEX RESEARCH, INC.
  
  
  By:      ------------------                  ------------------
           Andrew A. Pouring                   George E. Ponticas
           Chief Executive Officer             Chief Financial Officer
  
  
  
                                     EXHIBIT 2
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 3, 2005
  
  
  First security:
  
  
  Ongoing and future services (Jan 2005 through March 3, 2005 ):
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   22,384
  Ponticas   CFO & Secretary                                      18,461
  Keller     Director of Business Development & Program Manager   13,616   54,461
  
  
  New loans plus interest:
  
                           Date and Description
                           --------------------
  
  Keller     1/7/05 - Operating cash                              25,000
  Ponticas   3/3/05 - Legal fee retainer                           5,000
  Pouring    3/3/05 - Legal fee retainer                           5,000   35,000
  
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                       1,565
  Pouring    Since 2/15/05 - Advanta Mastercard                   15,200   16,765
                                                                          -------
  
             Total                                                        106,226
  
  
  
                                 EXHIBIT 2.1
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 31, 2005
  
  
  First security:
  
  
  Ongoing and future services (Jan 2005 through March 31, 2005 ):
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   36,147
  Ponticas   CFO & Secretary                                      31,499
  Keller     Director of Business Development & Program Manager   24,332   91,978
  
  
  New loans plus interest:
  
                            Date and Description
                            --------------------
  
  Keller     1/7/05 - Operating cash                              25,345
  Ponticas   3/3/05 - Legal fee retainer                           5,024
  Pouring    3/3/05 - Legal fee retainer                           5,024
  Keller     3/28/05 - Operating cash                             12,008   47,401
  
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                       3,263
  Pouring    Since 2/15/05 - Advanta Mastercard                   15,200   18,463
                                                                          -------
  
             Total                                                        157,842
  
  
  
  
                                    EXHIBIT 2.2
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    JUNE 30, 2005
  
  
  First security:
  
  
  Ongoing and future services (Jan 2005 through June 2005):
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   57,842
  Ponticas   CFO & Secretary                                      66,690
  Keller     Director of Business Development & Program Manager   46,606  171,138
  
  
  New loans plus interest:
  
                           Date and Description
                           --------------------
  
  Keller     1/7/05 - Operating cash                              25,719
  Ponticas   3/3/05 - Legal fee retainer                           5,098
  Pouring    3/3/05 - Legal fee retainer                           5,098
  Keller     3/28/05 - Operating cash                             12,188
  Keller     5/3/05 - Operating cash                              10,097
  Keller     5/19/05 - Operating cash                             10,069
  Keller     6/15/05 - Operating cash                             10,026   78,295
  
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                       6,259
  Pouring    Since 2/15/05 - Advanta Mastercard                   13,950   20,209
                                                                          -------
  
  
                Total                                                     269,642
  
  
  
  
                                   EXHIBIT 2.3
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                 September 30, 2005
  
  
  First security:
  
  
  Ongoing and future services (Jan 2005 through September 2005):
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   90,719
  Ponticas   CFO & Secretary                                      97,266
  Keller     Director of Business Development & Program Manager   74,945  262,929
  
  
  New loans plus interest:
  
                           Date and Description
                           --------------------
  
  Keller     1/7/05 - Operating cash                              25,378
  Keller     3/28/05 - Operating cash                             12,182
  Keller     5/3/05 - Operating cash                              10,151
  Keller     5/19/05 - Operating cash                             10,151
  Keller     6/15/05 - Operating cash                             10,151   68,013
  
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                      14,807
  Pouring    Since 2/15/05 - Advanta Mastercard                   13,050   27,857
                                                                          -------
  
  
                Total                                                     358,799
  
  
  
  
  
                                     EXHIBIT 3
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                 September 30, 2005
  
                        INDEBTEDNESS ADDED TO FIRST SECURITY
  
  
  
   Date               Lender               Description                Amount
   ----               ------               -----------                ------
  
  
  3/28/05         Michael I. Keller       Note payable               $ 12,000
  
  5/3/05          Michael I. Keller       Note payable                 10,000
  
  5/19/05         Michael I. Keller       Note payable                 10,000
  
  6/15/05         Michael I. Keller       Note payable                 10,000
                                                                     --------
  
                  Total                                              $ 42,000
  
  
                                                                      EXHIBIT 99.5
  
  
                         SECOND LOAN AND SECURITY AGREEMENT
  
       THIS SECOND LOAN AND SECURITY  AGREEMENT (the  "Agreement")  dated March 3,
  2005 is made between Sonex Research, Inc. (the "Borrower") and Andrew A. Pouring
  ("Pouring"), George E. Ponticas ("Ponticas"),  Michael I. Keller ("Keller"), and
  Sidney L.  Gulick,  3d  ("Gulick")  (collectively  sometimes  referred to as the
  "Lender").
  
  
                                EXPLANATORY STATEMENT
  
           WHEREAS,  Pouring has been  associated  with the Borrower since 1980 as
  its founder and, at various times, as an employee,  executive officer,  director
  and  consultant,  and is currently  serving as the  Borrower's  Chairman,  Chief
  Executive Officer, President and Chief Technical Officer;
  
           WHEREAS, Pouring is owed unpaid compensation of $325,513 as of December
  31, 2004 that has been earned since his  employment by the Borrower,  consisting
  of wages,  vacation,  and bonus  compensation of $257,548 and unpaid  consulting
  fees of $67,965 (together,  "Pouring's Accrued  Compensation").  Pouring is also
  owed deferred  salary of $486,423 as of December 31, 2004, the timing of payment
  of which is currently  subject to the conditions of the 1992 Consent to Deferral
  agreement  between  Pouring  and  the  Borrower.  Pouring  also  has  personally
  guaranteed  the  payment  by the  Borrower  of charges  accumulated  on two VISA
  business  credit card  accounts  with a combined  credit  limit of $46,500,  the
  outstanding  balances on which accounts totaled $40,889 as of December 31, 2004.
  Pouring also has personally  guaranteed payment by the Borrower of principal and
  interest on two equipment lease  obligations with unpaid principal of $27,021 as
  of December 31, 2004. The personal guarantees by Pouring of VISA business credit
  card  accounts and  equipment  lease  obligations  are referred to as "Financial
  Guarantees".
  
           WHEREAS,  Ponticas has been  associated with the Borrower since 1987 at
  various times as an employee,  executive officer and director,  and is currently
  serving as the Borrower's Chief Financial  Officer,  Secretary,  Treasurer,  and
  Vice President of Finance;
  
       WHEREAS,  Ponticas is owed unpaid  compensation  of $219,324 as of December
  31, 2004 that has been earned since his  employment by the Borrower,  consisting
  of wages, vacation, and bonus compensation  ("Ponticas' Accrued  Compensation").
  Ponticas is also owed deferred  salary of $155,326 as of December 31, 2004,  the
  timing of payment of which is currently  subject to the  conditions  of the 1992
  Consent to Deferral agreement between Ponticas and the Borrower.
  
           WHEREAS,  Keller has been a valued  consultant  to the  Borrower  since
  1998, serving as Director of Business Development and technical program manager,
  and has been a source of working capital loans for the Borrower since 2004;
  
           WHEREAS,  Keller  is owed from the  Borrower  a total of  $25,000  plus
  accrued  interest  pursuant to  Promissory  Notes  dated  August 13, 2004 in the
  principal  amount of $7,500 and  December  17, 2004 in the  principal  amount of
  $17,500 (the "2004 Keller Notes"),  as well as unpaid consulting fees of $83,270
  ("Keller's Accrued Compensation");
  
       WHEREAS,  Gulick is owed by the  Borrower a total of $106,000  plus accrued
  interest  pursuant to Promissory  Notes dated March 27, 2002, June 25, 2003, and
  March 16, 2004 (the "Gulick Notes");
  
           WHEREAS,  all of the  above-described  Accrued  Compensation is payable
  upon demand,  and payment of principal  and interest  under the Gulick Notes and
  the Keller  Notes were due on  December  31, 2004 and are secured by revenues of
  the  Borrower,  with the exception of the December 17, 2004  Promissory  Note to
  Keller  which is due on March 31,  2005 and is not  secured by  revenues  of the
  Borrower;
  
           WHEREAS,  on January  7, 2005 the  Borrower  and the Lender  executed a
  Statement  of  Intent,  a copy of which is  attached  hereto  as  Exhibit  1, to
  document an agreement in principle by the parties for the conditions under which
  Pouring,  Ponticas and Keller,  acting as a group for the mutual  benefit of the
  Borrower, its creditors,  its shareholders,  and themselves,  would undertake to
  keep the Borrower in operation for the immediately foreseeable future;
  
           WHEREAS,  the Borrower needs the Lender to agree to stay any demand for
  payment of the above-described Accrued Compensation and Notes and to release the
  security of the Notes presently provided by revenues of the Borrower;
  
           WHEREAS,  the Lender is  willing to stay any demand for  payment of the
  above-described  Accrued  Compensation  through  March 31, 2005 and to amend the
  Notes to extend the due dates to March 31,  2005 and to release  the  collateral
  presently provided by revenues of the Borrower, in exchange for which the Lender
  requires  that the  Borrower  provide  security  for the  payment of the Accrued
  Compensation, Notes and Financial Guarantees;
  
           WHEREAS,  Pouring,  Ponticas,  Keller,  and  Gulick  have  agreed to be
  secured by the  Borrower on a shared  basis  pursuant to the terms of a separate
  agreement between and amongst themselves;
  
           WHEREAS, the Borrower is agreeable to secure the Accrued  Compensation,
  Notes and  Financial  Guarantees,  and to pay the  expenses of  perfecting  such
  security interest;
  
  
           NOW, THEREFORE, in consideration of the Explanatory Statement, which is
  incorporated herein by reference, and the covenants, agreements,  warranties and
  representations  contained herein and for other good and valuable consideration,
  the receipt and sufficiency of which are hereby acknowledged, the parties hereto
  do hereby agree as follows:
  
  
                                      ARTICLE I
                               EFFECTIVENESS AND TERM
  
           This  Agreement  shall be  effective  for all purposes as of January 7,
  2005 and shall remain in effect until all the  Indebtedness  (defined below) has
  been repaid in full.
  
  
                                     ARTICLE II
                                     DEFINTIONS
  
       SECTION  2.1.  DEFINITIONS.  As  used  in this  Agreement  and in the  Loan
  Documents (defined below), the following terms shall have the meanings indicated
  below unless the specific context requires a different meaning.  All capitalized
  terms  which are not  otherwise  defined  herein  and which are  defined  in the
  Maryland Uniform Commercial Code - Secured Transactions, Title 9, Commercial Law
  Article,  Annotated  Code of Maryland,  as amended,  shall have the meanings set
  forth therein.
  
           "Collateral"  means all of the following property in which the Borrower
  has  granted a security  interest  to the Lender  pursuant to Article IV of this
  Agreement, both now owned and existing and hereafter owned, existing,  acquired,
  created and arising, regardless of where located, and all of the Borrower's both
  now existing and hereafter  acquired  rights,  title and interest in and to such
  property together with all replacements thereof and substitutions therefore (all
  of such  property  described  below and such rights,  title and  interest  being
  herein  collectively  called  the  "Collateral"):  All  patents  and  trademarks
  registrations  and  applications  made by, or on behalf of, the  Borrower to the
  Patent and  Trademark  Office or to any similar  office or agency of any foreign
  country or political subdivision thereof for the registration,  now of record to
  in the future to become of record;
  
           All cash and noncash  proceeds  and  products of the above,  including,
  without  limitation,  all cash and noncash  proceeds of, and all other  profits,
  rentals or receipts, in whatever form, arising from the collection, sale, lease,
  exchange,  assignment,  licensing or other  disposition of, or realization upon,
  any  asset  or  property  which  constitutes  Collateral,   including,   without
  limitation,  all claims of Borrower against third parties for loss of, damage to
  or theft or destruction of, or for proceeds payable under, or unearned  premiums
  with  respect to,  policies of insurance  covering  any asset or property  which
  constitutes Collateral, any condemnation or requisition payments with respect to
  any asset or property which  constitutes  Collateral,  in each case whether both
  now existing and hereafter arising,  and all cash, checks, draft and instruments
  received or held for the benefit of the Secured Party.
  
           "Encumbrance" means any mortgage,  lien, pledge, adverse claim, charge,
  security interest or other encumbrance in or on, or any interest or title of any
  vendor,  lessor,  lender,  or other secured party under any conditional  sale or
  other  title  retention  agreement  or lease with  respect  to, any  property or
  collateral.
  
           "Event of Default"  and  "Default"  shall have the meaning set forth in
  Section 8.1 hereof.
  
           "Indebtedness"  or "Loan" means any obligation  owed by the Borrower to
  the Lender for all  Accrued  Compensation,  Notes and  Financial  Guarantees  as
  described  in  this  Agreement  and the  2004  Keller  Notes  and  Gulick  Notes
  (collectively   referred  to  hereafter  as  the  "Notes").  A  listing  of  the
  Indebtedness  accumulated as of December 31, 2004 is attached  hereto as Exhibit
  2. Such  listing is to be updated  from time to time by the  Borrower to reflect
  payments made and is to be appended to Exhibit 2.
  
           "Loan  Documents"  means all  documents  executed  by the  Borrower  in
  connection  with the employment of the Lender or loans made by the Lender to the
  Borrower and evidenced by notes,  including but not limited to, this  Agreement,
  the Notes,  salary amounts authorized by the Board of Directors of the Borrower,
  the compensation records of the Borrower,  and any financing statements relating
  to the Collateral.
  
           "Obligations"  means the absolute  obligation of the Borrower to pay to
  the Lender (a) any and all sums due to the Lender  under the stated terms of the
  Indebtedness,  this Agreement or the Loan Documents, and (b) in the event of any
  proceeding to enforce the collection of the  Obligations,  or any of them, after
  Default,  the  reasonable  expenses of retaking,  holding,  preparing  for sale,
  selling or  otherwise  disposing of or  realizing  on the  Collateral  or of any
  exercise by the Lender of the Lender's rights in the Event of Default,  together
  with attorneys' fees, expenses of collection and court costs, as provided in the
  Loan Documents.
  
  
                                     ARTICLE III
                              TERMS OF THE INDEBTEDNESS
  
           The terms of the  Indebtedness  are more  fully  described  in the Loan
  Documents.
  
  
                                     ARTICLE IV
                                SECURITY FOR THE LOAN
  
       SECTION 4.1 SECURITY. The Borrower's Obligations under the Indebtedness are
  evidenced and secured by (a) this Agreement and (b) the Loan Documents. In order
  to secure the full and timely payment and  performance of the  Obligations,  the
  Borrower  hereby pledges and grants to the Lender all of the  Borrower's  right,
  title and interest in, to the Collateral.
  
       SECTION  4.2  EXERCISE  OF RIGHTS.  Until such time as the  Borrower  is in
  default in paying the principal sum of the  Indebtedness or any interest accrued
  thereon,  or in performing any of the  Borrower's  other  obligations  under the
  provisions  of the Loan  Documents,  after  notice  and beyond  applicable  cure
  periods, if any, the Lender shall be entitled to exercise all of the rights held
  by it under the provisions of this Agreement and the Note.
  
       SECTION 4.3 INTENTIONALLY OMITTED.
  
       SECTION 4.4 PROCEEDS AND PRODUCTS.  The Lender's  security  interest  shall
  apply to and cover any and all  proceeds of the  Collateral,  including  but not
  limited  to,   insurance   proceeds   and  the   products  of  any   Collateral.
  
  
           SECTION  4.5  PRIORITY  OF LIEN  AND  SECURITY  INTEREST.  The lien and
  security  interest  granted  by the  Borrower  to the  Lender  pursuant  to this
  Agreement shall be and remain, at all times that any portion of the Indebtedness
  remains  outstanding and unpaid,  a second and indefeasible  perfected  security
  interest in and to the Collateral,  unless otherwise agreed to be the Lender. It
  is agreed that any security given by the Borrower to the Lender to secure future
  deferred  compensation  shall be a first  and  indefeasible  perfected  security
  interest  in  and  to  the  Collateral  and  this  lien  shall  be  specifically
  subordinated to said first lien.
  
       SECTION 4.6 LOSS OF  SECURITY.  The Lender shall not be liable for any loss
  of any Collateral in its possession,  nor shall such loss diminish the debt due,
  unless said loss results from Lender's gross  negligence or willful  misconduct.
  
  
           SECTION 4.7 TERMINATION OF SECURITY  INTEREST.  Upon payment in full of
  such principal sum, interest and other indebtedness,  and all other sums owed to
  the Lender under the  provisions of the Loan  Documents,  this  Agreement or any
  other document  executed in connection  therewith,  the security interest in the
  Collateral shall be and become void and of no further effect; provided, that the
  affidavit, certificate, letter or statement of any officer, agent or attorney of
  the Lender that any of such principal sum, interest,  indebtedness or other sums
  remain  unpaid  shall be and  constitute  conclusive  evidence of the  validity,
  effectiveness and continuing force of the assignment, and any person may, and is
  hereby  authorized to, rely thereon.  The Borrower hereby authorizes and directs
  the licensee under each present or future Patent or Trademark, upon receipt from
  the Lender of written  notice  that a default  exists  thereunder  or under this
  Agreement,  after notice and beyond  applicable  cure periods to pay over to the
  Lender all rents,  income and profits  arising or accruing under such Patent and
  Trademark  and to continue to do so until  otherwise  notified in writing by the
  Lender.
  
  
                                      ARTICLE V
                           REPRESENTATIONS AND WARRANTIES
                                   BY THE BORROWER
  
  
       SECTION 5.1  REPRESENTATIONS  AND WARRANTIES BY THE BORROWER.  The Borrower
  makes the following representations and warranties:
  
       (a)  Existence.  The Borrower is a corporation  duly organized and existing
  and in good  standing  under the laws of the State of Maryland  and the Borrower
  has the power to own its  properties  and to carry on its  business as now being
  conducted,  and the  Borrower is duly  qualified  to do business  and is in good
  standing in each  jurisdiction in which the character of the properties owned by
  it therein or in which the transaction of its business makes such  qualification
  necessary.
  
       (b) Authority.  The Borrower has full power and authority to enter into and
  execute and deliver this Agreement and each of the other Loan Documents executed
  and delivered by it and to incur and perform the Borrower's Obligations provided
  for herein and therein  (including  the borrowing  under the  Indebtedness).  No
  further  consent  or  approval  of any  other  person  or  public  authority  or
  regulatory body is required as a condition to the validity or  enforceability of
  this Agreement or any of the other Loan Documents, or if required, the
  same has been obtained.
  
       (c) Binding Agreements. This Agreement and each of the other Loan Documents
  executed and delivered by the Borrower  have been duly and properly  executed by
  the  Borrower,  constitute  the valid and  legally  binding  obligations  of the
  Borrower and are fully enforceable against the Borrower in accordance with their
  respective terms.
  
       (d) Litigation. There is no litigation or proceeding pending or threatened,
  before any court or administrative agency which will materially adversely affect
  the  financial  condition  of the  Borrower or the  authority of the Borrower to
  enter into, or the validity or  enforceability  of, this Agreement or any of the
  other Loan  Documents or the ability of the  Borrower to perform the  Borrower's
  Obligations which has not been disclosed to the Lender.
  
       (e) No  Conflicting  Agreements.  There is (i) no provision in any existing
  mortgage,  indenture, contract or agreement binding on the Borrower or affecting
  any of the  Borrower's  property  and (ii) no provision of law or order of court
  binding upon the  Borrower or affecting  any of the  Borrower's  property  which
  would conflict with or in any way prevent the execution, delivery or performance
  of the terms of this  Agreement or of any of the other Loan  Documents  executed
  and delivered by the  Borrower,  or which would be in
  default or violated as a result of such execution, delivery or performance.
  
       (f)  Taxes.  The  Borrower  has timely and  accurately  filed all  required
  federal,  state and local tax or  information  returns,  and it is not currently
  being  audited by either the state or federal  governments.  The Borrower is not
  delinquent  in the payment of any income,  property or other  federal,  state or
  local tax or assessment.
  
       (g) Place of Business of Borrower.  The Borrower has a place of business in
  Anne  Arundel  County,  Maryland,  which is the only  place  where the  Borrower
  maintains a place of business.
  
       (h) Name.  The Borrower has never  operated under or used any other name or
  title to all of the Collateral.  The Lender's security interest shall constitute
  a first and indefeasible  security interest therein,  unless otherwise agreed to
  by the Lender.
  
       (i) No Untrue  Statements.  Neither this Agreement,  the Loan Documents nor
  any other document, certificate or statement furnished or to be furnished by the
  Borrower or by any other party to the Lender in connection herewith contains, or
  at the time of delivery will contain, any untrue statement of a material fact or
  omits  or will  omit to state a  material  fact  necessary  in order to make the
  statements   contained   herein   and   therein   not   materially   misleading.
  
  
                                         ARTICLE VI
                             AFFIRMATIVE COVENANTS OF BORROWER
  
           The Borrower hereby  covenants and agrees that from the date hereof and
  until  satisfaction  in  full  of the  Indebtedness,  unless  the  Lender  shall
  otherwise consent in writing, the Borrower shall do the following:
  
  
       SECTION  6.1 NOTICE OF CHANGE OF  BUSINESS  LOCATION.  The  Borrower  shall
  notify the Lender in  writing  thirty  (30) days in advance of any change in the
  location of any of its places of business or of the establishment of any new, or
  the     discontinuance     of    any     existing,     place    of     business.
  
  
       SECTION 6.2  EXISTENCE;  CERTAIN  RIGHTS;  LAWS.  The Borrower shall do all
  things  necessary  to  preserve  and  keep  in full  force  and  effect  in each
  jurisdiction in which it conducts business,  the business  existence,  licenses,
  permits, rights, patents, trademarks, trade names and franchises of the Borrower
  and comply with all present and future  laws,  ordinances,  rules,  regulations,
  judgments, orders and decrees which affect in any material way the Borrower, its
  assets or the operation of its business.
  
           SECTION 6.3 NOTICE OF  LITIGATION  OR OTHER  PROCEEDINGS.  The Borrower
  shall give immediate notice to the Lender of (i) the existence of any continuing
  material dispute with respect to any of the Collateral,  (ii) the institution of
  any  litigation,   administrative   proceeding  or  governmental   investigation
  involving  the  Borrower  and/or  any of the  Collateral,  any  of  which  might
  materially and adversely affect the operation,  financial condition, property or
  business of the Borrower or any of the  Collateral or affect the  enforceability
  of this Agreement or any of the other Loan Documents.
  
       SECTION 6.4  INDEBTEDNESS.  The Borrower shall pay or cause to be paid when
  due (or within  applicable  grace  periods) all  Indebtedness  of the  Borrower.
  
  
       SECTION 6.5 NOTICE OF EVENTS OF DEFAULT.  The Borrower shall give immediate
  notice to the Lender if the  Borrower  becomes  aware of the  occurrence  of any
  Event of Default,  or of any facts,  condition or event which with the giving of
  notice  or lapse  of time,  or  both,  would be an Event of  Default,  or of the
  failure of the Borrower to observe or perform any of the conditions or covenants
  to be observed or performed by it under this  Agreement or any of the other Loan
  Documents.
  
           SECTION 6.6 FURTHER  ASSURANCES.  The Borrower shall execute such other
  and further documents, including without limitation,  promissory notes, security
  agreements,  agreements,  financing  statements,  continuation  statements,  and
  similar  instruments as may from time to time, in the sole opinion of the Lender
  or the  Lender's  counsel,  be  necessary,  proper or  convenient,  to  perfect,
  confirm, establish, re-establish,  continue or complete the security interest in
  the Collateral and the purposes and intentions of this  Agreement,  it being the
  intention  of the  Borrower to hereby  provide a full and  absolute  warranty of
  further  assurance to the Lender.  In the event the Borrower  shall fail for any
  reason to execute,  within ten (10) days of the  Lender's  written  demand,  any
  document of the  aforementioned  type which the Lender  requests the Borrower to
  execute, the Borrower shall and hereby irrevocably and automatically appoint the
  Lender as the  Borrower's  attorney-in-fact  to  execute  such  document  in the
  Borrower's name, place and stead and on the Borrower's behalf, and such power of
  attorney shall constitute a power of attorney coupled with an interest and shall
  be irrevocable  unless and until the subject  document is fully and  effectively
  executed.
  
                                     ARTICLE VII
                                 NEGATIVE COVENANTS
  
           The Borrower  covenants and agrees that, until  satisfaction in full of
  all Obligations, it will not do or permit to be done or to cause to occur any of
  the acts or happenings set forth below without the prior written  consent of the
  Lender.
  
       SECTION 7.1 FUNDAMENTAL CHANGES.  Change its name, enter into or effect any
  merger, consolidation,  share exchange, division, conversion,  reclassification,
  recapitalization,  reorganization  or other  transactions  of like effect  which
  changes the control of the  affairs of  Borrower  from that which  exists on the
  date hereof, or dissolve,  sell, transfer,  lease or otherwise dispose of all or
  (except in the  ordinary  course of business  for  adequate  consideration)  any
  material portion of its assets or any  significant  product
  line or process.
  
       SECTION 7.2  ENCUMBRANCE OR DISPOSAL OF COLLATERAL.  The Borrower shall not
  sell, lease, convey, or otherwise dispose of, or mortgage, pledge, assign, grant
  or permit to exist any liens,  claims,  encumbrances or security interests in or
  upon any of the Collateral,  except liens,  if any,  required by this Agreement.
  
  
       SECTION 7.3 ASSIGNMENT OF THIS AGREEMENT.  The Borrower shall not assign or
  attempt to assign this Agreement to any person.
  
       SECTION 7.4 PREPAYMENT OF INDEBTEDNESS.  Make any voluntary  prepayments of
  Indebtedness other than in ordinary course of business.
  
  
                                    ARTICLE VIII
                             EVENTS OF DEFAULT; REMEDIES
  
  
       SECTION 8.1 EVENTS OF DEFAULT  DEFINED.  The following  shall be "Events of
  Default"  under this  Agreement,  and the terms  "Events of Default",  "Event of
  Default" and "default" shall mean, whenever they are used in this Agreement, any
  one or more of the following events:
  
       (a) Any  representation  or  warranty  made herein or in any  statement  or
  representation  made in any certificate,  report,  financial  statement or other
  instrument  furnished in connection with this Agreement,  or in any of the other
  Loan Documents,  shall prove to have been incorrect in any material respect when
  made or shall be breached in any material respect; or
  
       (b) The Borrower shall fail to pay within five (5) days written notice that
  the same is due and  payable  any  payment of  principal  of or  interest  under
  Indebtedness  or with  respect to any other sums or charges  due on or under the
  Indebtedness  or any repayment  required by the security  agreement  executed in
  connection with this transaction;
  
                    (c)  There  shall  occur a  default  in the  due and  punctual
  performance  or  observance  of any  term,  covenant,  condition,  agreement  or
  provision,  other than as specified in the foregoing Paragraph (b), contained in
  any of the Loan Documents  associated with this transaction,  to be performed or
  observed by the  Borrower,  which is not cured within thirty (30) days of notice
  of said default, provided Borrower shall be given a greater period to cure if it
  commences  to cure within said  thirty (30) day period and  diligently  proceeds
  towards cure;
  
                    (d)  The  Borrower  shall  (i)  apply  for or  consent  to the
  appointment of, or the taking of possession by, a receiver,  custodian,  trustee
  or liquidator of itself or any of its property or assets,  (ii) become generally
  unable to pay its debts as they mature,  (iii) make a general assignment for the
  benefit of creditors,  (iv) be adjudicated a debtor under 11 U.S.C.  section 101
  et. seq.,  (v) file a voluntary  petition in  bankruptcy or a petition or answer
  seeking  reorganization or an arrangement with creditors or to take advantage of
  any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
  liquidation  statute,  or an answer  admitting  the  material  allegations  of a
  petition filed against it in any proceeding under any such law, or if any action
  shall  be  taken  by the  Borrower  for the  purposes  of  affecting  any of the
  foregoing,  or (vi)  by any  act  indicate  its  consent  to,  approval  of,  or
  acquiescence  in, any such  proceeding or the  appointment of any receiver of or
  trustee for the  Borrower or any of its  property or assets,  or suffer any such
  receivership, trusteeship or proceeding to continue undischarged for a period of
  sixty (60) days, or
  
       (e) An order, judgment or decree shall be entered, without the application,
  approval  or consent of the  Borrower  by any court of  competent  jurisdiction,
  approving a petition seeking the dissolution or  reorganization  of the Borrower
  or of all or any substantial part of the assets of the Borrower, or appointing a
  receiver,  trustee or  liquidator  of the Borrower  and such order,  judgment or
  decree shall continue  unstayed and in effect for any period of sixty (60) days;
  or
  
       (f) Any  judgment  against  the  Borrower,  or any  attachment  or any levy
  against any  property of the  Borrower  with respect to a claim for an amount in
  excess of Twenty-Five  Thousand Dollars ($25,000) remains unpaid,  undischarged,
  unbonded or undismissed for a period of sixty (60) days; or
  
       (g) An Event of Default shall occur under any of the other Loan  Documents;
  or
  
       (h) The Borrower is dissolved, terminated and/or liquidated.
  
      SECTION  8.2  REMEDIES ON  DEFAULT.  In  addition  to all other  rights and
  remedies  provided to it by law and under the Loan Documents,  the Lender on the
  happening of any Event of Default may in its sole and absolute discretion do any
  or all of the following:
  
       (a) Declare the unpaid  principal of the  Indebtedness and interest accrued
  thereon,  together with all other monies  payable to the Lender by the Borrower,
  to be immediately due and payable by notice in writing to that effect, delivered
  to the Borrower, and upon such declaration, all such monies shall be immediately
  due and payable at the place of payment provided in such notice, anything in the
  Loan Documents or in this Agreement to the contrary notwithstanding.
  
       (b) Foreclose on any of the  Collateral,  or any collateral in which Lender
  has an  interest  pursuant  to the terms of any other  Indebtedness  outstanding
  between Borrower and the Lender;
  
       (c) File suit against the Borrower under any Document  associated with this
  transaction;
  
       (d) Seek specific  performance or injunctive relief to enforce  performance
  of the undertakings,  duties and agreements provide in the documents  associated
  with this transaction, whether or not a remedy exits as law or is adequate;
  
                    (e) The rights and remedies  provided in this  Agreement or in
  the Loan Documents or under  applicable law shall be cumulative and the exercise
  of any  particular  right or remedy shall not preclude the exercise of any other
  rights or remedies in addition to or as an  alternative of such right or remedy.
  No delay or omission to exercise  any right or power  accruing  upon an Event of
  Default  shall  impair  any such right or power or be  construed  to be a waiver
  thereof,  but any such right and power may be exercised from time to time and as
  often as may be deemed prudent.
  
           SECTION  8.3  SALE OF  COLLATERAL.  In  addition  to any  other  remedy
  provided  herein,  the Lender may,  subject to applicable law, sell at public or
  private sale or otherwise realize upon, in Annapolis, Maryland or elsewhere, the
  whole or, from time to time,  any part of the  Collateral or any interest  which
  the  Borrower may have  therein.  After  deducting  from the proceeds of sale or
  other  disposition of the  Collateral  all expenses,  including all expenses for
  legal services,  the Lender shall apply such proceeds toward the satisfaction of
  the  Indebtedness.  Any remainder of the proceeds after  satisfaction in full of
  all  amounts  due and  owing  under the  Indebtedness  shall be  distributed  as
  required by applicable  law.  Notice of any sale or other  disposition  shall be
  given to the Borrower at least  fifteen (15) working days (or such longer period
  as may be required by law) before the time of any intended public sale or of the
  time  after  which  the  intended  private  sale  or  other  disposition  of the
  Collateral is to be made,  which the Borrower  hereby agrees shall be reasonable
  notice of such sale or other disposition. The Borrower agrees to assemble, or to
  cause to be assembled,  at the  Borrower's  own expense,  the Collateral at such
  place or  places  as the  Lender  shall  designate.  At any  such  sale or other
  disposition,  the Lender may, to the extent  permissible  under  applicable law,
  purchase  the  whole  or  any  part  of the  Collateral.  Without  limiting  the
  generality  of any of the rights and  remedies  conferred  upon the Lender under
  this Agreement,  the Lender may, to the full extent  permitted by applicable law
  (a) enter upon the premises of the Borrower and exclude  therefrom  the Borrower
  or any affiliate  thereof,  and take  immediate  possession  of the  Collateral,
  either  personally  or by means of a receiver  appointed by a court of competent
  jurisdiction,  using all necessary  force to do so, (b) at the Lender's  option,
  use,  operate,  manage and  control the  Collateral  in any lawful  manner,  (c)
  collect and receive all rents,  income,  revenue,  earnings,  issues and profits
  therefrom, and (d) maintain, repair, renovate, alter or remove the Collateral as
  the Lender may determine in the Lender's sole and absolute discretion.
  
       SECTION  8.4  ATTORNEY'S  FEES AND  EXPENSES.  The  Borrower  shall pay all
  reasonable  attorneys'  fees and expenses which the Lender may incur as a result
  or in consequence of the happening of an Event of Default,  even if the Event of
  Default   is  cured  and  the   Indebtedness   is   placed  in  good   standing.
  
  
           SECTION 8.5  CONFESSED  JUDGMENT.  UPON THE  OCCURRENCE  OF AN EVENT OF
  DEFAULT, THE BORROWER HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE LENDER OR
  ANY CLERK OF ANY COURT OF RECORD  TO  APPEAR  FOR THE  BORROWER  IN ANY COURT OF
  RECORD IN THE STATE OF  MARYLAND  AND CONFESS  JUDGMENT  WITHOUT  PRIOR  HEARING
  AGAINST THE  BORROWER IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE UNPAID
  PRINCIPAL  SUM,  ALL  INTEREST  ACCRUED AND UNPAID  THEREON,  ALL OTHER  AMOUNTS
  PAYABLE BY THE BORROWER TO THE LENDER UNDER THE TERMS OF THE INDEBTEDNESS OR ANY
  OF THE OTHER  LOAN  DOCUMENTS,  COSTS OF SUIT,  AND  ATTORNEYS'  FEES OF FIFTEEN
  PERCENT  (15%) OF THE  UNPAID  PRINCIPAL  SUM AND  INTEREST  THEN DUE  HEREUNDER
  (PROVIDED  THAT,  IF SUCH  JUDGMENT IS NOT APPEALED OR CONTESTED BY THE BORROWER
  THEN,  FOLLOWING THE PASSAGE OF TIME FOR APPEAL, AND COLLECTION OF THE AMOUNT OF
  SUCH JUDGMENT AND ALL SUCH FEES AND COSTS, THE LENDER WILL REMIT TO THE BORROWER
  THE EXCESS,  IF ANY, OF THE ATTORNEY'S FEES AWARDED AND COLLECTED AND THE ACTUAL
  ATTORNEY' FEES REASONABLY  INCURRED BY LENDER IN ENFORCING ITS RIGHTS  HEREUNDER
  OR UNDER THE OTHER LOAN DOCUMENTS).  THE BORROWER HEREBY RELEASES, TO THE EXTENT
  PERMITTED BY  APPLICABLE  LAW, ALL ERRORS AND ALL RIGHTS OF  EXEMPTION,  APPEAL,
  STAY OF  EXECUTION,  INQUISITION,  AND OTHER  RIGHTS TO WHICH THE  BORROWER  MAY
  OTHERWISE BE ENTITLED  UNDER THE LAWS OF THE UNITED  STATES OF AMERICA OR OF ANY
  STATE OR  POSSESSION  OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY
  HEREAFTER BE ENACTED.  THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER  JUDGMENT
  AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES  THEREOF OR
  BY ANY IMPERFECT  EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
  ENTERED  PURSUANT  THERETO.  SUCH  AUTHORITY  MAY BE  EXERCISED  ON ONE OR  MORE
  OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT  JURISDICTIONS  AS OFTEN
  AS THE LENDER  SHALL DEEM  NECESSARY  OR  DESIRABLE,  FOR ALL OF WHICH THIS NOTE
  SHALL BE A SUFFICIENT WARRANT.
  
           SECTION 8.6 WAIVERS; CONSENT TO JURISDICTION.  The Borrower irrevocably
  submits to the  jurisdiction  of any state or federal court sitting in the State
  of Maryland over any suit,  action, or proceeding  arising out of or relating to
  this Agreement. The Borrower irrevocably waives, to the fullest extent permitted
  by law, any objection  that the Borrower may now or hereafter have to the laying
  of venue of any such suit,  action, or proceeding  brought in any such court and
  any claim that any such suit,  action,  or proceeding  brought in any such court
  has been  brought in an  inconvenient  forum.  Final  judgment in any such suit,
  action, or proceeding  brought in any such court shall be conclusive and binding
  upon the  Borrower  and may be  enforced  in any court in which the  Borrower is
  subject to  jurisdiction  by a suit upon such judgment  provided that service of
  process is  effected  upon the  Borrower as  provided  in this  Agreement  or as
  otherwise  permitted by applicable  law. The Borrower hereby consents to process
  being served in any suit,  action,  or proceeding  instituted in connection with
  this Agreement by (a) the mailing of a copy thereof by certified  mail,  postage
  prepaid,  return  receipt  requested,  to the  Borrower  and (b)  serving a copy
  thereof any agent hereafter  designated in writing to the Lender by the Borrower
  as the Borrower's agent for service of process.  The Borrower irrevocably agrees
  that such service  shall be deemed to be service of process upon the Borrower in
  any such suit,  action, or proceeding.  Nothing in this Section shall affect the
  right of the Lender to serve  process in any manner  otherwise  permitted by law
  and  nothing in this  Section  will limit the right of the Lender  otherwise  to
  bring  proceedings  against the  Borrower in the courts of any  jurisdiction  or
  jurisdictions.  THE  BORROWER  HEREBY  WAIVES  TRIAL  BY JURY IN ANY  ACTION  OR
  PROCEEDING  TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,  ARISING OUT OF
  OR IN ANY  WAY  PERTAINING  TO  (A)  THIS  INDEBTEDNESS,  OR  (B)  ANY  DOCUMENT
  ASSOCIATED WITH THIS  TRANSACTION.  IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
  CONSTITUTES A WAVIER OF TRIAL BY JURY OF ALL CLAIMS  AGAINST ALL PARTIES TO SUCH
  ACTIONS OR PROCEEDINGS,  INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
  THIS INDEBTEDNESS.  THIS WAIVER IS KNOWINGLY,  WILLINGLY AND VOLUNTARILY MADE BY
  THE BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT
  OR OPINION  HAVE BEEN MADE BY ANY  INDIVIDUAL  TO INDUCE THIS WAVIER OF TRIAL BY
  JURY OR TO IN ANY WAY MODIFY OR NULLIFY  ITS  EFFECT.  THE  BORROWER  HAS HAD AN
  OPPORTUNITY TO CONSULT  COUNSEL  REGARDING THIS WAIVER OR HAD KNOWINGLY  ELECTED
  NOT TO CONSULT WITH COUNSEL PRIOR TO MAKING THIS WAIVER.
  
                                     ARTICLE IX
                                    MISCELLANEOUS
  
       SECTION 9.1 INCONSISTENCIES. The terms and conditions of the Loan Documents
  are  incorporated  by  reference  and made a part  hereof  as if fully set forth
  herein. In the event of any inconsistencies between this Agreement and any other
  Loan  Documents,  such  inconsistencies  shall  be  construed,  interpreted  and
  resolved so as to benefit the Lender.
  
       SECTION 9.2 BENEFIT;  BURDENS. This Agreement shall inure to the benefit of
  and  shall be  binding  upon the  Lender,  the  Borrower  and  their  respective
  successors and permitted assigns and shall not inure to the benefit of any other
  party.
  
       SECTION 9.3 NOTICES.  All  notices,  certificates  or other  communications
  hereunder shall be  sufficiently  given and shall be deemed given when delivered
  or when mailed by first class,  certified mail, postage prepaid,  return receipt
  requested,  addressed to the Borrower, the Lender or to any other Person to whom
  any such notice or certificate  or other  communication  is to be given,  at the
  following addresses:
  
  If to the Lender:        Andrew A. Pouring             George E. Ponticas
                           Edgewater, Maryland 21037     Timonium, Maryland 21093
  
                           Michael I. Keller             Sidney Gulick, 3d
                           Alexandria, Virginia 22311    Adelphi, Maryland 20783
  
  If to the Borrower:      Sonex Research, Inc
                           c/o Andrew A. Pouring
                           23 Hudson Street
                           Annapolis, Maryland 21401
  
       SECTION 9.4 AMENDMENTS,  CHANGES AND MODIFICATIONS.  This Agreement may not
  be  amended,  changed,  modified,  altered  or  terminated  except  by a written
  instrument      executed     by     the     Lender     and     the     Borrower.
  
  
       SECTION 9.5 LAW GOVERNING. This Agreement is prepared and entered into with
  the  intention  that  the  law  of  the  State  of  Maryland  shall  govern  its
  construction and interpretation.
  
           IN WITNESS  WHEREOF,  the  Borrower  has caused  this  Agreement  to be
  executed and sealed as of the day and year first above written.
  
  
  WITNESS/ATTEST:                    SONEX RESEARCH, INC.
  
  
  
  ---------------                    --------------------
                                     Andrew A. Pouring,
                                     Chief Executive Officer
  
  
  
  
  
                                     EXHIBIT 1
  
                                STATEMENT OF INTENT
                                   January 7, 2005
  
  
  
           Sonex Research,  Inc. ("Sonex" or the "Company") has been unable for an
  extended  period  of time to keep  current  with its  compensation  payments  to
  consultant  Michael I.  Keller and to officers  Andrew A.  Pouring and George E.
  Ponticas,  or to timely  repay  loans made by Keller and  shareholder  Sidney L.
  Gulick,  3d. The Company's  accounting  records provide detailed listings of the
  significant amounts owed to these individuals.
  
           The Company  requires an immediate  infusion of cash for urgent working
  capital  needs.  The Company needs  Pouring,  Ponticas and Keller to continue to
  provide  services  in their  present  capacities  in order  for the  Company  to
  continue in operation,  yet the Company  presently does not have sufficient cash
  to pay  current  compensation  as earned.  Through  March 31,  2005 the  Company
  anticipates  cash receipts of $116,807  upon payment on the Company's  remaining
  invoices  issued  and to be issued to the  Defense  Advanced  Research  Projects
  Agency (DARPA)  totaling  $104,341,  and $12,466 under a current  purchase order
  from XXXXXX XXXXXXX  XXXXXXXX XXXXX, yet such cash receipts are restricted as to
  use because  they are  currently  securing  amounts  due under notes  payable to
  Gulick and  Keller.  In  addition,  Keller has  offered to provide  the  Company
  additional  cash for working capital of $25,000 on the good faith promise of the
  Company to provide  promptly  adequate  security  for such note and for previous
  notes and assurances as to the  availability of Pouring and Ponticas to continue
  to provide services to Sonex.
  
       This Statement of Intent serves to provide preliminary  documentation of an
  agreement in principle by Sonex, Keller, Pouring and Ponticas for the conditions
  under which these  individuals will undertake to keep Sonex in operation for the
  immediately foreseeable future. Pouring,  Ponticas and Keller have agreed to act
  as a group for the mutual  benefit of the  Company,  its  shareholders,  Gulick,
  other  creditors and  themselves.  Pouring is also acting  individually  for the
  benefit of consultant David A. Blank. In consideration,  Sonex agrees to execute
  a pledge,  assignment  or grant to  Keller,  Pouring,  Ponticas  and Gulick of a
  shared  security  interest in the  Company's  patents  (the  "Collateral")  with
  respect to the following services,  personal  guarantees,  and liabilities which
  are detailed in the Company's accounting records:
  
       1.  Accrued  compensation,  comprised  of  wages,  vacation,  bonus  and/or
           consulting  fees owed to Keller,  Pouring and Ponticas,  and to Blank
           in an amount to be  determined  by  Pouring.
       2.  Reimbursable  expenses  owed to  Keller, Pouring and Ponticas.
       3.  Notes plus accrued interest payable to Keller and Gulick.
       4.  Personal financial  guarantees by Pouring for the payment by the
           Company of charges  accumulated  with respect to business  credit card
           accounts and pursuant  to  equipment  leases.
       5.  Payments  for  continued  services by Pouring, Ponticas and Keller.
  
           Sonex is to receive the following consideration:
  
       1.  Keller will provide the Company additional cash for working capital of
           $25,000 pursuant to a Promissory Note payable by March 31, 2005.
       2.  Keller and Gulick will agree to extend to March 31, 2005 the due dates
           of all presently outstanding notes and will agree to amend such notes
           to release the collateral presently provided by cash payments received
           from Company revenues.
       3.  Pouring, Ponticas and Keller will agree to continue to provide services
           to the Company in their present capacities under existing compensation
           arrangements for the immediately foreseeable future under the risk of
           the Company's being unable to pay outstanding compensation and/or
           current compensation as earned.
       4.  Pouring, Ponticas and Keller will agree to stay any demand for
           immediate payment of outstanding compensation through March 31, 2005.
  
           It is the  intention  of  Sonex  to  obtain  legal  counsel  as soon as
  practical  to  prepare  a  security  and/or  other  similar  agreement(s)  to be
  effective  January 7, 2005 (the  "Security  Agreement")  to record  formally the
  intent of the parties as outlined herein.  It is the intention of the parties to
  further share the security interest in the Collateral with additional  potential
  lenders  or  others  as  necessary  for  the  benefit  of the  Company  and  its
  shareholders.
  
           Signed this 7th day of January, 2005, at Annapolis, Maryland.
  
  
  
  ------------------
  Michael I. Keller
  
  
  ------------------
  Andrew A. Pouring
  
  
  ------------------
  George E. Ponticas
  
  
  
                                SONEX RESEARCH, INC.
  
  
  By:      ------------------                  ------------------
           Andrew A. Pouring                   George E. Ponticas
           Chief Executive Officer             Chief Financial Officer
  
  
  
                                   EXHIBIT 2
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                  DECEMBER 31, 2004
  
                                   SECOND SECURITY
  
  
  Services:
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  325,513
  Ponticas   CFO & Secretary                                     219,659
  Keller     Director of Business Development & Program Manager   86,015  631,187
  
  
  Notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         109,206
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,217  134,423
  
  
  Financial guarantees:
  
  Pouring    Capital One VISA                                     24,797
  Pouring    Bank of America (Fleet) VISA                         16,092
  Pouring    Equipment lease obligations                          27,021   67,910
                                                                          -------
  
  
             Total                                                        833,520
  
  
  
  
  
                                    EXHIBIT 2.1
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 3, 2005
  
  
  Second security:
  
  
  Services through Dec 2004:
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  323,254
  Ponticas   CFO & Secretary                                     210,598
  Keller     Director of Business Development & Program Manager   83,270  617,122
  
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         109,206
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,217  134,423
  
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     23,415
  Pouring    Equipment lease obligations                          25,012   48,427
                                                                          -------
  
  
             Total                                                        799,972
  
  
  
  
  
                                   EXHIBIT 2.2
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 31, 2005
  
  
  Second security:
  
  
  Services through Dec 2004:
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  323,513
  Ponticas   CFO & Secretary                                     207,713
  Keller     Director of Business Development & Program Manager   83,270  614,496
  
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         110,774
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,587  136,361
  
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     21,717
  Pouring    Equipment lease obligations                          23,986   45,703
                                                                          -------
  
  
             Total                                                        796,560
  
  
  
  
                                    EXHIBIT 2.3
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    JUNE 30, 2005
  
  
  Second security:
  
  
  Services through Dec 2004:
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  323,513
  Ponticas   CFO & Secretary                                     195,599
  Keller     Director of Business Development & Program Manager   83,270  602,382
  
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         112,360
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,961  138,321
  
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     18,721
  Pouring    Equipment lease obligations                          20,818   39,539
                                                                          -------
  
  
             Total                                                        780,242
  
  
  
  
                                   EXHIBIT 2.4
  
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                 SEPTEMBER 30, 2005
  
  
  Second security:
  
  
  Services through Dec 2004:
  
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  317,513
  Ponticas   CFO & Secretary                                     165,022
  Keller     Director of Business Development & Program Manager   75,250  557,785
  
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         107,603
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,378  132,981
  
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     10,713
  Pouring    Equipment lease obligations                          17,512   27,685
                                                                          -------
  
  
             Total                                                        718,451
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text: SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
  
                                   FORM 8-K
  
                                CURRENT REPORT
                Pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934
  
     Date of Report (Date of earliest event reported): October 25, 2005
  
                              SONEX RESEARCH, INC.
                (Exact name of registrant as specified in Charter)
  
           Maryland                  000-14465              52-1188993
        (State or other           (Commision file         (IRS employer
        jurisdiction of               number)           identification no.)
         incorporation)
  
                       23 Hudson Street, Annapolis, MD 21401
                      (Address of principal executive offices)
  
                                (410) 266-5556
               (Registrant's telephone number, including area code)
  
                                      N/A
           (Former name or former address, if changed since last report)
  
  Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
  simultaneously  satisfy the filing obligation of the registrant under any of the
  following   provisions  (see  General  Instruction  A.2.  below):
  
  [ ]  Written communications  pursuant to Rule 425 under the Securities Act
       (17 CFR 230.425)
  [ ]  Soliciting  material  pursuant to Rule 14a-12  under the Exchange Act
       (17 CFR 240.14a-12)
  [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
       Exchange  Act (17 CFR  240.14d-2(b))
  [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
       Exchange Act (17 CFR 240.13e-4(c))
  
  ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
  
  On October 31, 2005,  Sonex Research,  Inc. (the "Company" or the  "Registrant")
  announced  on  its  website   (www.sonexresearch.com)  that  it  has  reached  a
  settlement  of a  lawsuit  filed in April  2005 by three  Maryland  shareholders
  alleging the  fraudulent  transfer of ownership of the Company's  patents to its
  officers.  While Sonex  continues to deny the  allegations  and asserts that the
  Company  maintains  title to its  patents,  the  Company  settled the lawsuit by
  reaching  agreement  to stay the case until  March 31, 2006 in order to minimize
  the expense and disruption to its business of continuing to litigate the case.
  
  The Complaint against Sonex, Dr. Andrew A. Pouring,  Chairman of the Board,
  CEO and President,  and George E.  Ponticas,  CFO,  Secretary and director,  was
  filed in the Circuit Court for Anne Arundel County.  Plaintiffs  Robert T. Emmet
  of  Annapolis,  Sidney L.  Gulick,  3d of  Adelphi,  and Robert  Martin,  Jr. of
  Myersville,  sought a $1 million judgment in their favor for alleged  violations
  of Maryland law regarding actions by directors who have a financial  interest in
  a particular  transaction or contract approved by the Board. Dr. Pouring and Mr.
  Ponticas  currently  are the only officers and members of the Board of Directors
  of Sonex, as a vacancy in the Board has existed since November 2004.
  
  The  Complaint  concerned  actions  taken by  management  early in 2005 during a
  period of cash flow  difficulties to insure that key personnel would continue to
  provide  services  and make loans to Sonex in order for the Company to remain in
  operation. The Company executed a First Loan and Security Agreement (the "FLSA")
  effective  as of  January  2005  granting a priority  security  interest  in its
  patents to Dr. Pouring, Mr. Ponticas,  and Michael I. Keller, the consultant who
  serves as the Company's  Director of Business  Development and Technical Program
  Manager,  to secure  payment of  compensation  being  deferred on an ongoing and
  future basis, new loans made to the Company,  and personal financial  guaranties
  by Dr.  Pouring of Company credit card  obligations.  The FLSA also provides for
  acceptance by the Company of new loans from sources other than Pouring, Ponticas
  and Keller.
  
  The Company also  executed a Second Loan and Security  Agreement  (the  "SLSA"),
  subordinated  to  the  FLSA,  in  favor  of  these   individuals  for  financial
  obligations  incurred  prior to 2005.  The SLSA also applied to notes payable to
  Plaintiff Gulick.
  
  In exchange for the grant of the security interests in the patents, Dr. Pouring,
  Mr. Ponticas,  and Mr. Keller agreed to stay, through March 31, 2005, any demand
  for immediate payment of unpaid  compensation  earned beginning in January 2005.
  Although that date has passed, no demand for payment has been made to date. Each
  individual continues to defer most or all of his current compensation.
  
  Under the litigation settlement, the parties agreed to stay the case until March
  31, 2006. The Plaintiffs agreed to dismiss all monetary claims without prejudice
  (meaning they have the right to refile  monetary  claims  within the  applicable
  statute of limitations).  In exchange, Dr. Pouring, Mr. Ponticas, and Mr. Keller
  have  agreed  to stay  any  demand  for  immediate  payment  of  unpaid  current
  compensation  through  March 31,  2006 if they  continue  in the  service of the
  Company or if no event of default  under the FLSA or SLSA  occurs.  The  Company
  also has agreed to invite the Plaintiffs to participate in discussions and offer
  assistance and suggestions regarding the appointment of independent directors to
  the Board of Directors of Sonex.  In addition,  Mr.  Gulick has agreed to extend
  the due dates of notes payable to him by the Company through March 31, 2006. The
  principal  amounts of such notes total  $106,000,  while  interest  payments are
  current through June 30, 2005.
  
  As of September 30, 2005,  the FLSA applies to total  financial  obligations  of
  approximately  $359,000,   consisting  of  shareholder  loans  of  approximately
  $68,000,  unpaid compensation of approximately $263,000, and Company credit card
  obligations under personal financial guaranties of approximately  $28,000, while
  the SLSA  applies to total  financial  obligations  of  approximately  $718,000,
  consisting of shareholder loans of approximately  $133,000,  unpaid compensation
  of  approximately   $558,000,  and  Company  credit  card  and  equipment  lease
  obligations under personal financial guaranties of approximately $27,000.
  
  The  Plaintiffs  will have 30 days from March 31, 2006 to petition  the court to
  reopen the case; otherwise, the case shall be dismissed with prejudice,  meaning
  that the Plaintiffs will be barred from making such claims in the future.
  
  The October 25, 2005  Agreement to Stay is provided as Exhibit 99.1 to this Form
  8-K. Also  provided as exhibits are the FLSA,  the SLSA,  and the  amendments to
  both documents executed in connection with the settlement.
  
  ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS
  
  (c) Exhibits
  
       99.1  October 25, 2005 Agreement to Stay
       99.2  October 25, 2005 Amendment to First Loan and Security Agreement
       99.3  October 25, 2005 Amendment to Second Loan and Security Agreement
       99.4  First Loan and Security Agreement dated March 3, 2005
       99.5  Second Loan and Security Agreement dated March 3, 2005
  
  SIGNATURES
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned hereunto duly authorized.
  
  October 31, 2005
  
  SONEX RESEARCH, INC.
  Registrant
  
  /s/ George E. Ponticas
  ----------------------
  George E. Ponticas
  Chief Financial Officer and Secretary
  
                                                                      EXHIBIT 99.1
  
                                  AGREEMENT TO STAY
  
       This Agreement to Stay  (hereinafter  "Agreement") is made and entered into
  this 25th day of October,  2005 by and between SONEX RESEARCH,  INC.  ("SONEX"),
  ANDREW A. POURING ("POURING"), GEORGE E. PONTICAS ("PONTICAS"),  ROBERT T. EMMET
  ("EMMET"), SIDNEY L. GULICK, III ("GULICK"),  ROBERT MARTIN, JR. ("MARTIN"), and
  MICHAEL I. KELLER ("KELLER").
  
       WHEREAS,  EMMET,  GULICK,  and MARTIN filed a civil action  against  SONEX,
  POURING, and PONTICAS, in the Circuit Court for Anne Arundel County, Maryland in
  the case styled as Robert T. Emmet, et al. v. SONEX Research, Inc., et al., Case
  No. 02-C-05-104907 CN (hereinafter referred to as the "Lawsuit"); and
  
           WHEREAS,  EMMET,  GULICK, and MARTIN sued SONEX,  POURING, and PONTICAS
  for alleged  violations of Section 2-419 of the  Corporations  and  Associations
  Article of  Maryland's  Annotated  Code  regarding  a "First  Loan and  Security
  Agreement"  and "Second Loan and Security  Agreement,"  both dated March 3, 2005
  (hereinafter  referred  to as  "Security  Agreements")  which  created  security
  interests in all patents and trademarks owned by SONEX;
  
           WHEREAS, SONEX, POURING, AND PONTICAS categorically deny that they were
  involved in any wrongdoing  relating to the Lawsuit or the Security  Agreements,
  and specifically deny any liability for any of the claims made by EMMET, GULICK,
  AND MARTIN in the Lawsuit; and
  
           WHEREAS,  it is in the  mutual  interest  of all  the  parties  to this
  Agreement  to stay the  Lawsuit  and any and all claims and  demands of whatever
  sort between them, without the use of costly Court proceedings.
  
           WITNESSETH,  NOW, THEREFORE, in consideration of the foregoing recitals
  and the terms and promises,  premises and covenants  contained herein, and other
  good and valuable consideration,  the receipt and sufficiency of which is hereby
  acknowledged, the parties do hereby agree as follows:
  
           AGREED:
  
           1.  Incorporation  of  Recitals.The  recitals  to  this  Agreement  are
  incorporated as referenced herein.
  
           2.       Terms of Stay:
  
       (a)  Plaintiffs  have  filed a Motion to Dismiss  all  claims for  monetary
  damage without prejudice in the Lawsuit. (See Exhibit A)
  
       (b) The parties  filed a Joint Motion to Stay the  remainder of the Lawsuit
  until March 31, 2006.  (See Exhibit B). After March 31, 2006,  Plaintiffs  shall
  have  thirty  (30)  days to  petition  to the court to reopen  the  Lawsuit.  If
  Plaintiffs do not petition to reopen within this time period,  the Lawsuit shall
  be dismissed with prejudice.
  
       (c)  Defendants  have  provided an  affidavit of Charles C.  McGettigan,  a
  representative of the Preferred Stockholders of SONEX, regarding his discussions
  with PONTICAS  regarding the Security  Agreements  and the liens on the patents.
  Mr. McGettigan has certified that he has reviewed the Security Agreements.  (See
  Exhibit C -- Affidavit of Charles C. McGettigan).
  
       (d) PONTICAS,  POURING,  KELLER, AND GULICK hereby agree to amend the First
  and  Second  Loan and  Security  Agreements  to  reflect  the fact that they are
  willing to stay any demand for payments  under the Security  Agreements and stay
  any enforcement against the patents securing the Security Agreements until March
  31, 2006, as set forth in the Amendments to the Security  Agreements attached as
  Exhibit D.
  
       (e)  GULICK  hereby  agrees  to stay  any  demand  for  payment  under  his
  Promissory  Notes with SONEX in the aggregate  principal  amount of  $106,000.00
  through March 31, 2006, as set forth in the Promissory Notes attached as Exhibit
  E.
  
       (f) PONTICAS intends to pursue an Employment  Agreement with SONEX securing
  his  employment  through  March 31, 2006,  with  provisions  that he may only be
  terminated "for cause."
  
       (g) POURING AND KELLER  currently have  Consulting  Agreements  with SONEX.
  They  intend to pursue  amendments  of those  Consulting  Agreements  with SONEX
  securing  their services for SONEX through March 31, 2006, and stating that such
  Consulting Agreement may not be canceled except "for cause."
  
       (h) Plaintiffs  understand  that  PONTICAS,  POURING AND KELLER will pursue
  these agreements  and/or amendments with SONEX, and agree not to oppose any such
  agreements or amendments.
  
       (i)  SONEX  agrees  that  Plaintiffs  will be  invited  to  participate  in
  discussions and offer  assistance and  suggestions  regarding the appointment of
  outside /  independent  directors to the Board of  Directors  of SONEX.  (j) The
  parties  will  mutually  agree  upon  acceptable  language  for a press  release
  discussing  the terms of this  settlement  before such  release is issued to the
  public. (See Exhibit F).
  
           3. No Admission. It is understood and agreed that in entering into this
  Agreement that SONEX,  POURING, AND PONTICAS  specifically deny liability of any
  and every  sort and state that they have made no  agreement  to do or omit to do
  any act or thing not set forth herein. It is further  understood and agreed that
  this  Agreement  is not to be  construed  as an admission of liability by SONEX,
  POURING,  AND PONTICAS  but rather as a compromise  and stay of the claims which
  are specifically denied and disputed.  This Agreement is entered as a compromise
  in order to avoid expense.
  
           4.       Miscellaneous.
  
       (a) Fully  Integrated  Agreement.  This writing  constitutes  the complete,
  final and entire  understanding  of the  parties  hereto,  and they shall not be
  bound by any terms,  covenants,  conditions  or  representations  not  expressly
  herein contained, in writing.
  
       (b) Modification. This Agreement may not be modified or changed orally, but
  only by an agreement in writing signed by the party against whom  enforcement of
  any such change is sought.
  
       (c) Choice of Law.  This  Agreement  shall be governed  by and  interpreted
  according to the Laws of the State of Maryland.
  
       (d) This  Agreement  maybe  executed in two or more  counterparts,  each of
  which  shall be deemed to be an  original,  and all of which  together  shall be
  deemed to be one and the same Agreement.
  
       IN WITNESS WHEREOF,  we have hereunto set our hands and seals this 25th day
  of October, 2005.
  
  WITNESS:
  
  ___________________________              ________________________________(SEAL)
                                                    SONEX RESEARCH, INC.
  
  ____________________________             ________________________________(SEAL)
                                                    ANDREW A. POURING
  ___________________________              ________________________________(SEAL)
                                                    GEORGE E. PONTICAS
  ___________________________              ________________________________(SEAL)
                                                    ROBERT T. EMMET
  ___________________________              ________________________________(SEAL)
                                                    SIDNEY L. GULICK, III
  ___________________________              ________________________________(SEAL)
                                                    ROBERT MARTIN, JR.
  ___________________________              ________________________________(SEAL)
                                                    MICHAEL I. KELLER
  
                       CONSENT OF SONEX PREFERRED SHAREHOLDERS
  
       I, Charles C.  McGettigan,  am a general  partner of  Proactive  Investment
  Managers,  L.P.,  which is the  general  partner  of  Proactive  Partners,  L.P.
  ("Proactive"), owner of approximately 725,000 shares (47%) of the Sonex Reseach,
  Inc. ("Sonex" or the "Company") Preferred Stock. An affiliated entity, Lagunitas
  Partners, L.P. ("Lagunitas"), is the owner of approximately 725,000 shares (47%)
  of the  Sonex  Preferred  Stock.  I am a  representative  of  94%  of the  Sonex
  Preferred  Stockholders  held by Proactive and  Lagunitas.  I have reviewed this
  Agreement to Stay and all the Exhibits attached and consent to its terms.
  
  -----------------------------                       -------------------
  Charles C. McGettigan,                                        Date
  Representative of Sonex Preferred Stockholders
  
                                                                      EXHIBIT 99.2
  
                   AMENDMENT TO FIRST LOAN AND SECURITY AGREEMENT
  
  THIS  AMENDMENT is made as of October 25, 2005, by and between  Sonex  Research,
  Inc.  ("Borrower")  and  Andrew  A.  Pouring  ("Pouring"),  George  E.  Ponticas
  ("Ponticas") and Michael I. Keller ("Keller")  (collectively  sometimes referred
  to as the "Lender").
  
  WHEREAS,  Borrower and Lender are parties to a First Loan and Security Agreement
  dated March 3, 2005 (the  "FLSA")  pursuant to which the Lender  agreed to stay,
  through March 31, 2005, any demand for immediate payment of unpaid  compensation
  earned beginning in January 2005, and
  
  WHEREAS, the parties desire to amend the FLSA,
  
  NOW,  THEREFORE,  the parties agree that the FLSA is hereby amended to extend to
  March 31, 2006 the date through  which the Lender  agrees to stay any demand for
  immediate  payment of unpaid  compensation  earned  beginning  in January  2005,
  provided  that the Lender  shall  continue in the  employment  of, or serve as a
  consultant  to,  the  Borrower,  or that no Event of  Default,  as that  term is
  defined in the FLSA,  shall  occur.  The parties  agree that all other terms and
  conditions of the FLSA shall remain the same.
  
  This instrument shall be interpreted in accordance with the laws of the State of
  Maryland.
  
  IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the FLSA to
  be executed as of the day and year first above written.
  
                                    SONEX RESEARCH, INC.
  
                                    By: --------------------------
                                        Andrew A. Pouring,
                                        Chief Executive Officer
  
  LENDER
  
  --------------------------
  Andrew A. Pouring
  
  --------------------------
  George E. Ponticas
  
  --------------------------
  Michael I. Keller
  
                                                                      EXHIBIT 99.3
  
                  AMENDMENT TO SECOND LOAN AND SECURITY AGREEMENT
  
  THIS  AMENDMENT is made as of October 25, 2005, by and between  Sonex  Research,
  Inc.  ("Borrower")  and  Andrew  A.  Pouring  ("Pouring"),  George  E.  Ponticas
  ("Ponticas"),  Michael I. Keller ("Keller"), and Sidney L. Gulick, 3d ("Gulick")
  (collectively sometimes referred to as the "Lender").
  
  WHEREAS, Borrower and Lender are parties to a Second Loan and Security Agreement
  dated March 3, 2005 (the "SLSA") pursuant to which Pouring,  Ponticas and Keller
  agreed to stay,  through  March 31, 2005,  any demand for  immediate  payment of
  unpaid compensation earned as of December 31, 2004, and pursuant to which Gulick
  agreed to extend, to March 31, 2005, the due dates of notes payable  outstanding
  as of December 31, 2004, and
  
  WHEREAS, the parties desire to amend the SLSA,
  
  NOW, THEREFORE,  the parties agree that the SLSA is hereby amended to (1) extend
  to March 31, 2006 the date through which  Pouring,  Ponticas and Keller agree to
  stay any  demand  for  immediate  payment  of unpaid  compensation  earned as of
  December 31, 2004,  provided that each shall  continue in the  employment of, or
  serve as a consultant  to, the  Borrower,  or that no Event of Default,  as that
  term is defined in the SLSA, shall occur, and (2) extend, to March 31, 2006, the
  due dates of notes payable to Gulick which were  outstanding  as of December 31,
  2004,  provided  that no Event of Default,  as that term is defined in the SLSA,
  shall occur.  The parties agree that all other terms and  conditions of the SLSA
  shall remain the same.
  
  This instrument shall be interpreted in accordance with the laws of the State of
  Maryland.
  
  IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the FLSA to
  be executed as of the day and year first above written.
  
                               SONEX RESEARCH, INC.
  
                               By:  -------------------------------------
                               Andrew A. Pouring, Chief Executive Officer
  
  LENDER
  
  --------------------------             --------------------------
  Andrew A. Pouring                      Michael I. Keller
  
  --------------------------             --------------------------
  George E. Ponticas                     Sidney L. Gulick, 3d
  
                                                                      EXHIBIT 99.4
  
                     FIRST LOAN AND SECURITY AGREEMENT
  
  THIS FIRST LOAN AND SECURITY AGREEMENT (the "Agreement") dated March 3, 2005, is
  made  between  Sonex  Research,   Inc.   ("Borrower")   and  Andrew  A.  Pouring
  ("Pouring"),  George E. Ponticas  ("Ponticas") and Michael I. Keller  ("Keller")
  (collectively sometimes referred to as the "Lender").
  
                         EXPLANATORY STATEMENT
  
           WHEREAS,  Pouring has been  associated  with the Borrower since 1980 as
  its founder and, at various times, as an employee,  executive officer,  director
  and  consultant,  and is currently  serving as the  Borrower's  Chairman,  Chief
  Executive  Officer,  President and Chief Technical  Officer,  and has personally
  guaranteed  credit card and  equipment  lease  obligations  of the Borrower (the
  "Financial Guarantees");
  
           WHEREAS,  Ponticas has been associated with the Borrower since 1987, at
  various times as an employee,  executive officer and director,  and is currently
  serving as the Borrower's Chief Financial  Officer,  Secretary,  Treasurer,  and
  Vice President of Finance;
  
           WHEREAS,  Keller has been a valued  consultant  to the  Borrower  since
  1998, serving as Director of Business Development and technical program manager,
  and has been a source of working capital loans for the Borrower since 2004;
  
           WHEREAS,  on January  7, 2005 the  Borrower  and the Lender  executed a
  Statement  of  Intent,  a copy of which is  attached  hereto  as  Exhibit  1, to
  document an agreement in principle by the parties for the conditions under which
  Pouring,  Ponticas and Keller,  acting as a group for the mutual  benefit of the
  Borrower, its creditors,  its shareholders,  and themselves,  would undertake to
  keep the Borrower in operation for the immediately foreseeable future;
  
           WHEREAS,  the  Lender is  needed  to  provide  future  services  to the
  Borrower  and is  prepared  to defer  certain  compensation  that the  Lender is
  entitled to receive for services to be performed for the benefit of the Borrower
  and to stay any  demand for  immediate  payment  of such  deferred  compensation
  through March 31, 2005;
  
           WHEREAS,  the Borrower also seeks from the Lender  additional loans for
  working capital and additional Financial Guarantees;
  
           WHEREAS,  the Lender has required  that the Borrower  provide  security
  beginning on the effective  date of this  Agreement for the amount of the future
  deferred  compensation  due the  Lender by the  Borrower,  additional  loans for
  working capital from the Lender,  additional Financial Guarantees by the Lender,
  and  reimbursement  for expenses incurred by the Lender related to the providing
  of services to the  borrower or paid by the Lender on behalf of the Borrower for
  which reimbursement is sought (together referred to as "Reimbursable Expenses");
  
           WHEREAS,  Keller has loaned the  Borrower  an  additional  $25,000  for
  working capital pursuant to a Promissory Note dated January 7, 2005 (the "Keller
  Note"), Pouring has loaned the Borrower $5,000 for working capital pursuant to a
  Promissory  Note dated March 3, 2005 (the  "Pouring  Note"),  and  Ponticas  has
  loaned the Borrower  $5,000 for working  capital  pursuant to a Promissory  Note
  dated March 3, 2005 (the "Ponticas Note") (the Keller Note, the Pouring Note and
  the Ponticas Note are collectively referred to hereafter as the "Notes");
  
           WHEREAS,  on February 15, 2005 Pouring  executed a Financial  Guarantee
  for the payment of credit card obligations of the Borrower to Advanta Bank Corp.
  in the current amount of $15,200 up to a credit limit of $27,500;
  
           WHEREAS,  Pouring, Ponticas and Keller have agreed to be secured by the
  Borrower on a shared basis pursuant to the terms of a separate agreement between
  and amongst themselves,  and it is their intention to further share the security
  interest  in the  Collateral  with  additional  potential  lenders  or others as
  necessary for the benefit of the Borrower and its shareholders;
  
           WHEREAS,  the  Borrower  is  agreeable  to secure the  future  deferred
  compensation,   additional  loans  for  working  capital,  additional  Financial
  Guarantees,  and  Reimbursable  Expenses,  and to pay the expenses of perfecting
  such security interest;
  
           NOW, THEREFORE, in consideration of the Explanatory Statement, which is
  incorporated herein by reference, and the covenants, agreements,  warranties and
  representations  contained herein and for other good and valuable consideration,
  the receipt and sufficiency of which are hereby acknowledged, the parties hereto
  do hereby agree as follows:
  
                                      ARTICLE I
                               EFFECTIVENESS AND TERM
  
           This  Agreement  shall be  effective  for all purposes as of January 7,
  2005,  except with  respect to  Pouring's  Financial  Guarantee  to Advanta Bank
  Corp.,  for which the effective date shall be February 15, 2005, and the Pouring
  Note and the Ponticas Note, for which Notes the effective date shall be March 3,
  2005. This Agreement shall remain in effect until all the Indebtedness  (defined
  below) has been repaid in full.
  
                                     ARTICLE II
                                     DEFINITIONS
  
  SECTION 2.1.  DEFINITIONS.  As used in this  Agreement and in the Loan Documents
  (defined  below),  the following  terms shall have the meanings  indicated below
  unless the specific context requires a different meaning.  All capitalized terms
  which are not  otherwise  defined  herein and which are defined in the  Maryland
  Uniform Commercial Code - Secured Transactions, Title 9, Commercial Law Article,
  Annotated  Code of  Maryland,  as  amended,  shall have the  meanings  set forth
  therein.
  
           "Collateral"  means all of the following property in which the Borrower
  has  granted a security  interest  to the Lender  pursuant to Article IV of this
  Agreement, both now owned and existing and hereafter owned, existing,  acquired,
  created and arising, regardless of where located, and all of the Borrower's both
  now existing and hereafter  acquired  rights,  title and interest in and to such
  property together with all replacements thereof and substitutions therefore (all
  of such  property  described  below and such rights,  title and  interest  being
  herein  collectively  called  the  "Collateral"):  All  patents  and  trademarks
  registrations  and  applications  made by, or on behalf of, the  Borrower to the
  Patent and  Trademark  Office or to any similar  office or agency of any foreign
  country or political subdivision thereof for the registration,  now of record or
  in the future to become of record;
  
           All cash and noncash  proceeds  and  products of the above,  including,
  without  limitation,  all cash and noncash  proceeds of, and all other  profits,
  rentals or receipts, in whatever form, arising from the collection, sale, lease,
  exchange,  assignment,  licensing or other  disposition of, or realization upon,
  any  asset  or  property  which  constitutes  Collateral,   including,   without
  limitation,  all claims of Borrower against third parties for loss of, damage to
  or theft or destruction of, or for proceeds payable under, or unearned  premiums
  with  respect to,  policies of insurance  covering  any asset or property  which
  constitutes Collateral, any condemnation or requisition payments with respect to
  any asset or property which  constitutes  Collateral,  in each case whether both
  now existing and hereafter arising,  and all cash, checks, draft and instruments
  received or held for the benefit of the Secured Party.
  
           "Encumbrance" means any mortgage,  lien, pledge, adverse claim, charge,
  security interest or other encumbrance in or on, or any interest or title of any
  vendor,  lessor,  lender,  or other secured party under any conditional  sale or
  other  title  retention  agreement  or lease with  respect  to, any  property or
  collateral.
  
           "Event of Default"  and  "Default"  shall have the meaning set forth in
  Section 8.1 hereof.
  
       "Indebtedness"  or "Loan" means any obligation  owed by the Borrower to the
  Lender for all  deferred  compensation,  loans for  working  capital,  Financial
  Guarantees,  and Reimbursable Expenses accruing, or entered into, from and after
  the effective date of this Agreement. A listing of the Indebtedness  accumulated
  as of March 3, 2005 is  attached  hereto as  Exhibit  2. Such  listing  is to be
  updated from time to time by the Borrower and appended to Exhibit 2.  Additional
  Indebtedness  entered into by agreement  of the parties  subsequent  to March 3,
  2005 shall be listed and attached hereto as Exhibit 3.
  
           "Loan  Documents"  means all  documents  executed  by the  Borrower  in
  connection with the Notes, Financial Guarantees,  Reimbursable Expenses, and the
  employment  of the Lender,  including  but not limited to, this  Agreement,  the
  Employment  Agreements and/or Consulting Agreements between Lender and Borrower,
  salary  amounts  authorized  by the  Board of  Directors  of the  Borrower,  the
  compensation  records of the Borrower,  and any financing statements relating to
  the Collateral.
  
           "Obligations"  means the absolute  obligation of the Borrower to pay to
  the Lender (a) any and all sums due to the Lender  under the stated terms of the
  Indebtedness,  this Agreement or the Loan Documents, and (b) in the event of any
  proceeding to enforce the collection of the  Obligations,  or any of them, after
  Default,  the  reasonable  expenses of retaking,  holding,  preparing  for sale,
  selling or  otherwise  disposing of or  realizing  on the  Collateral  or of any
  exercise by the Lender of the Lender's rights in the Event of Default,  together
  with attorneys' fees, expenses of collection and court costs, as provided in the
  Loan Documents.
  
                                     ARTICLE III
                              TERMS OF THE INDEBTEDNESS
  
           The terms of the  Indebtedness  are more  fully  described  in the Loan
  Documents.
  
                                     ARTICLE IV
                                SECURITY FOR THE LOAN
  
       SECTION 4.1 SECURITY. The Borrower's Obligations under the Indebtedness are
  evidenced and secured by (a) this Agreement and (b) the Loan Documents. In order
  to secure the full and timely payment and  performance of the  Obligations,  the
  Borrower  hereby pledges and grants to the Lender all of the  Borrower's  right,
  title and interest in, the Collateral.
  
       SECTION  4.2  EXERCISE  OF RIGHTS.  Until such time as the  Borrower  is in
  default in paying the principal sum of the  Indebtedness or any interest accrued
  thereon,  or in performing any of the  Borrower's  other  obligations  under the
  provisions  of the Loan  Documents,  after  notice  and beyond  applicable  cure
  periods, if any, the Lender shall be entitled to exercise all of the rights held
  by  it  under  the  provisions  of  this  Agreement  and  the  Loan   Documents.
  
       SECTION 4.3 INTENTIONALLY OMITTED.
  
       SECTION 4.4 PROCEEDS AND PRODUCTS.  The Lender's  security  interest  shall
  apply to and cover any and all  proceeds of the  Collateral,  including  but not
  limited  to,   insurance   proceeds   and  the   products  of  any   Collateral.
  
           SECTION  4.5  PRIORITY  OF LIEN  AND  SECURITY  INTEREST.  The lien and
  security  interest  granted  by the  Borrower  to the  Lender  pursuant  to this
  Agreement shall be and remain, at all times that any portion of the Indebtedness
  remains  outstanding and unpaid,  a first and  indefeasible  perfected  security
  interest in and to the Collateral,  unless otherwise agreed to be the Lender. It
  is  agreed  that any  security  given by the  Borrower  to the  Lender to secure
  antecedent deferred compensation shall be specifically  subordinated to deferred
  compensation that accrued from and after the effective date of this Agreement.
  
       SECTION 4.6 LOSS OF  SECURITY.  The Lender shall not be liable for any loss
  of any Collateral in its possession,  nor shall such loss diminish the debt due,
  unless said loss results from Lender's gross  negligence or willful  misconduct.
  
           SECTION 4.7 TERMINATION OF SECURITY  INTEREST.  Upon payment in full of
  such principal sum, interest and other Indebtedness,  and all other sums owed to
  the Lender under the  provisions of the Loan  Documents,  this  Agreement or any
  other document  executed in connection  therewith,  the security interest in the
  Collateral shall be and become void and of no further effect; provided, that the
  affidavit, certificate, letter or statement of any officer, agent or attorney of
  the Lender that any of such principal sum, interest,  indebtedness or other sums
  remain  unpaid  shall be and  constitute  conclusive  evidence of the  validity,
  effectiveness and continuing force of the assignment, and any person may, and is
  hereby  authorized to, rely thereon.  The Borrower hereby authorizes and directs
  the licensee under each present or future Patent or Trademark, upon receipt from
  the Lender of written  notice  that a default  exists  thereunder  or under this
  Agreement,  after notice and beyond  applicable  cure periods to pay over to the
  Lender all rents,  income and profits  arising or accruing under such Patent and
  Trademark  and to continue to do so until  otherwise  notified in writing by the
  Lender.
  
                                      ARTICLE V
                           REPRESENTATIONS AND WARRANTIES
                                   BY THE BORROWER
  
       SECTION 5.1  REPRESENTATIONS  AND WARRANTIES BY THE BORROWER.  The Borrower
  makes the following representations and warranties:
  
       (a)  Existence.  The Borrower is a corporation  duly organized and existing
  and in good  standing  under the laws of the State of Maryland  and the Borrower
  has the power to own its  properties  and to carry on its  business as now being
  conducted,  and the  Borrower is duly  qualified  to do business  and is in good
  standing in each  jurisdiction in which the character of the properties owned by
  it therein or in which the transaction of its business makes such  qualification
  necessary.
  
       (b) Authority.  The Borrower has full power and authority to enter into and
  execute and deliver this Agreement and each of the other Loan Documents executed
  and delivered by it and to incur and perform the Borrower's Obligations provided
  for herein and therein  (including  the borrowing  under the  Indebtedness).  No
  further  consent  or  approval  of any  other  person  or  public  authority  or
  regulatory body is required as a condition to the validity or  enforceability of
  this Agreement or any of the other Loan Documents, or if required, the
  same has been obtained.
  
       (c) Binding Agreements. This Agreement and each of the other Loan Documents
  executed and delivered by the Borrower  have been duly and properly  executed by
  the  Borrower,  constitute  the valid and  legally  binding  obligations  of the
  Borrower and are fully enforceable against the Borrower in accordance with their
  respective terms.
  
       (d) Litigation. There is no litigation or proceeding pending or threatened,
  before any court or administrative agency which will materially adversely affect
  the  financial  condition  of the  Borrower or the  authority of the Borrower to
  enter into, or the validity or  enforceability  of, this Agreement or any of the
  other Loan  Documents or the ability of the  Borrower to perform the  Borrower's
  Obligations which has not been disclosed to the Lender.
  
       (e) No  Conflicting  Agreements.  There is (i) no provision in any existing
  mortgage,  indenture, contract or agreement binding on the Borrower or affecting
  any of the  Borrower's  property  and (ii) no provision of law or order of court
  binding upon the  Borrower or affecting  any of the  Borrower's  property  which
  would conflict with or in any way prevent the execution, delivery or performance
  of the terms of this  Agreement or of any of the other Loan  Documents  executed
  and delivered by the  Borrower,  or which would be in
  default or violated as a result of such execution, delivery or performance.
  
       (f)  Taxes.  The  Borrower  has timely and  accurately  filed all  required
  federal,  state and local tax or  information  returns,  and it is not currently
  being  audited by either the state or federal  governments.  The Borrower is not
  delinquent  in the payment of any income,  property or other  federal,  state or
  local tax or assessment.
  
       (g) Place of Business of Borrower.  The Borrower has a place of business in
  Anne  Arundel  County,  Maryland,  which is the only  place  where the  Borrower
  maintains a place of business.
  
       (h) Name.  The Borrower has never  operated under or used any other name or
  title to all of the Collateral.  The Lender's security interest shall constitute
  a first and indefeasible  security interest therein,  unless otherwise agreed to
  by the Lender.
  
       (i) No Untrue  Statements.  Neither this Agreement,  the Loan Documents nor
  any other document, certificate or statement furnished or to be furnished by the
  Borrower or by any other party to the Lender in connection herewith contains, or
  at the time of delivery will contain, any untrue statement of a material fact or
  omits  or will  omit to state a  material  fact  necessary  in order to make the
  statements   contained   herein   and   therein   not   materially   misleading.
  
                                         ARTICLE VI
                             AFFIRMATIVE COVENANTS OF BORROWER
  
           The Borrower hereby  covenants and agrees that from the date hereof and
  until satisfaction in full of the Obligations, unless the Lender shall otherwise
  consent in writing, the Borrower shall do the following:
  
       SECTION  6.1 NOTICE OF CHANGE OF  BUSINESS  LOCATION.  The  Borrower  shall
  notify the Lender in  writing  thirty  (30) days in advance of any change in the
  location of any of its places of business or of the establishment of any new, or
  the     discontinuance     of    any     existing,     place    of     business.
  
       SECTION 6.2  EXISTENCE;  CERTAIN  RIGHTS;  LAWS.  The Borrower shall do all
  things  necessary  to  preserve  and  keep  in full  force  and  effect  in each
  jurisdiction in which it conducts business,  the business  existence,  licenses,
  permits, rights, patents, trademarks, trade names and franchises of the Borrower
  and comply with all present and future  laws,  ordinances,  rules,  regulations,
  judgments, orders and decrees which affect in any material way the Borrower, its
  assets or the operation of its business.
  
           SECTION 6.3 NOTICE OF  LITIGATION  OR OTHER  PROCEEDINGS.  The Borrower
  shall give immediate notice to the Lender of (i) the existence of any continuing
  material dispute with respect to any of the Collateral,  (ii) the institution of
  any  litigation,   administrative   proceeding  or  governmental   investigation
  involving  the  Borrower  and/or  any of the  Collateral,  any  of  which  might
  materially and adversely affect the operation,  financial condition, property or
  business of the Borrower or any of the  Collateral or affect the  enforceability
  of this Agreement or any of the other Loan Documents.
  
       SECTION 6.4  INDEBTEDNESS.  The Borrower shall pay or cause to be paid when
  due (or within  applicable  grace  periods) all  Indebtedness  of the  Borrower.
  
       SECTION 6.5 NOTICE OF EVENTS OF DEFAULT.  The Borrower shall give immediate
  notice to the Lender if the  Borrower  becomes  aware of the  occurrence  of any
  Event of Default,  or of any facts,  condition or event which with the giving of
  notice  or lapse  of time,  or  both,  would be an Event of  Default,  or of the
  failure of the Borrower to observe or perform any of the conditions or covenants
  to be observed or performed by it under this  Agreement or any of the other Loan
  Documents.
  
           SECTION 6.6 FURTHER  ASSURANCES.  The Borrower shall execute such other
  and further documents, including without limitation,  promissory notes, security
  agreements,  agreements,  financing  statements,  continuation  statements,  and
  similar  instruments as may from time to time, in the sole opinion of the Lender
  or the  Lender's  counsel,  be  necessary,  proper or  convenient,  to  perfect,
  confirm, establish, re-establish,  continue or complete the security interest in
  the Collateral and the purposes and intentions of this  Agreement,  it being the
  intention  of the  Borrower to hereby  provide a full and  absolute  warranty of
  further  assurance to the Lender.  In the event the Borrower  shall fail for any
  reason to execute,  within ten (10) days of the  Lender's  written  demand,  any
  document of the  aforementioned  type which the Lender  requests the Borrower to
  execute, the Borrower shall and hereby irrevocably and automatically appoint the
  Lender as the  Borrower's  attorney-in-fact  to  execute  such  document  in the
  Borrower's name, place and stead and on the Borrower's behalf, and such power of
  attorney shall constitute a power of attorney coupled with an interest and shall
  be irrevocable  unless and until the subject  document is fully and  effectively
  executed.
  
                                     ARTICLE VII
                                 NEGATIVE COVENANTS
  
           The Borrower  covenants and agrees that, until  satisfaction in full of
  all Obligations, it will not do or permit to be done or to cause to occur any of
  the acts or happenings set forth below without the prior written  consent of the
  Lender.
  
       SECTION 7.1 FUNDAMENTAL CHANGES.  Change its name, enter into or effect any
  merger, consolidation,  share exchange, division, conversion,  reclassification,
  recapitalization,  reorganization  or other  transactions  of like effect  which
  changes the control of the  affairs of  Borrower  from that which  exists on the
  date hereof, or dissolve,  sell, transfer,  lease or otherwise dispose of all or
  (except in the  ordinary  course of business  for  adequate  consideration)  any
  material portion of its assets or any  significant  product
  line or process.
  
       SECTION 7.2  ENCUMBRANCE OR DISPOSAL OF COLLATERAL.  The Borrower shall not
  sell, lease, convey, or otherwise dispose of, or mortgage, pledge, assign, grant
  or permit to exist any liens,  claims,  encumbrances or security interests in or
  upon any of the Collateral,  except liens,  if any,  required by this Agreement.
  
       SECTION 7.3 ASSIGNMENT OF THIS AGREEMENT.  The Borrower shall not assign or
  attempt to assign this Agreement to any person.
  
       SECTION 7.4 PREPAYMENT OF INDEBTEDNESS.  Make any voluntary  prepayments of
  Indebtedness other than in ordinary course of business.
  
                                    ARTICLE VIII
                             EVENTS OF DEFAULT; REMEDIES
  
       SECTION 8.1 EVENTS OF DEFAULT  DEFINED.  The following  shall be "Events of
  Default"  under this  Agreement,  and the terms  "Events of Default",  "Event of
  Default" and "default" shall mean, whenever they are used in this Agreement, any
  one or more of the following events:
  
       (a) Any  representation  or  warranty  made herein or in any  statement  or
  representation  made in any certificate,  report,  financial  statement or other
  instrument  furnished in connection with this Agreement,  or in any of the other
  Loan Documents,  shall prove to have been incorrect in any material respect when
  made or shall be breached in any material respect; or
  
       (b) The Borrower shall fail to pay within five (5) days written notice that
  the same is due and  payable  any  payment of  principal  of or  interest  under
  Indebtedness  or with  respect to any other sums or charges  due on or under the
  Indebtedness  or any repayment  required by the security  agreement  executed in
  connection with this transaction;
  
                    (c)  There  shall  occur a  default  in the  due and  punctual
  performance  or  observance  of any  term,  covenant,  condition,  agreement  or
  provision,  other than as specified in the foregoing Paragraph (b), contained in
  any of the Loan Documents  associated with this transaction,  to be performed or
  observed by the  Borrower,  which is not cured within thirty (30) days of notice
  of said default, provided Borrower shall be given a greater period to cure if it
  commences  to cure within said  thirty (30) day period and  diligently  proceeds
  towards cure;
  
                    (d)  The  Borrower  shall  (i)  apply  for or  consent  to the
  appointment of, or the taking of possession by, a receiver,  custodian,  trustee
  or liquidator of itself or any of its property or assets,  (ii) become generally
  unable to pay its debts as they mature,  (iii) make a general assignment for the
  benefit of creditors,  (iv) be adjudicated a debtor under 11 U.S.C.  section 101
  et. seq.,  (v) file a voluntary  petition in  bankruptcy or a petition or answer
  seeking  reorganization or an arrangement with creditors or to take advantage of
  any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
  liquidation  statute,  or an answer  admitting  the  material  allegations  of a
  petition filed against it in any proceeding under any such law, or if any action
  shall  be  taken  by the  Borrower  for the  purposes  of  affecting  any of the
  foregoing,  or (vi)  by any  act  indicate  its  consent  to,  approval  of,  or
  acquiescence  in, any such  proceeding or the  appointment of any receiver of or
  trustee for the  Borrower or any of its  property or assets,  or suffer any such
  receivership, trusteeship or proceeding to continue undischarged for a period of
  sixty (60) days, or
  
       (e) An order, judgment or decree shall be entered, without the application,
  approval  or consent of the  Borrower  by any court of  competent  jurisdiction,
  approving a petition seeking the dissolution or  reorganization  of the Borrower
  or of all or any substantial part of the assets of the Borrower, or appointing a
  receiver,  trustee or  liquidator  of the Borrower  and such order,  judgment or
  decree shall continue  unstayed and in effect for any period of sixty (60) days;
  or
  
       (f) Any  judgment  against  the  Borrower,  or any  attachment  or any levy
  against any  property of the  Borrower  with respect to a claim for an amount in
  excess of Twenty-Five  Thousand Dollars ($25,000) remains unpaid,  undischarged,
  unbonded or undismissed for a period of sixty (60) days; or
  
       (g) An Event of Default shall occur under any of the other Loan  Documents;
  or
  
       (h) The Borrower is dissolved, terminated and/or liquidated.
  
       SECTION  8.2  REMEDIES ON  DEFAULT.  In  addition  to all other  rights and
  remedies  provided to it by law and under the Loan Documents,  the Lender on the
  happening of any Event of Default may in its sole and absolute discretion do any
  or all of the following:
  
       (a) Declare the unpaid  principal of the  Indebtedness and interest accrued
  thereon,  together with all other monies  payable to the Lender by the Borrower,
  to be immediately due and payable by notice in writing to that effect, delivered
  to the Borrower, and upon such declaration, all such monies shall be immediately
  due and payable at the place of payment provided in such notice, anything in the
  Loan Documents or in this Agreement to the contrary notwithstanding.
  
       (b) Foreclose on any of the  Collateral,  or any collateral in which Lender
  has an  interest  pursuant  to the terms of any other  Indebtedness  outstanding
  between Borrower and the Lender;
  
       (c) File suit against the Borrower under any Document  associated with this
  transaction;
  
       (d) Seek specific  performance or injunctive relief to enforce  performance
  of the undertakings,  duties and agreements provide in the documents  associated
  with this transaction, whether or not a remedy exits as law or is adequate;
  
                    (e) The rights and remedies  provided in this  Agreement or in
  the Loan Documents or under  applicable law shall be cumulative and the exercise
  of any  particular  right or remedy shall not preclude the exercise of any other
  rights or remedies in addition to or as an  alternative of such right or remedy.
  No delay or omission to exercise  any right or power  accruing  upon an Event of
  Default  shall  impair  any such right or power or be  construed  to be a waiver
  thereof,  but any such right and power may be exercised from time to time and as
  often as may be deemed prudent.
  
           SECTION  8.3  SALE OF  COLLATERAL.  In  addition  to any  other  remedy
  provided  herein,  the Lender may,  subject to applicable law, sell at public or
  private sale or otherwise realize upon, in Annapolis, Maryland or elsewhere, the
  whole or, from time to time,  any part of the  Collateral or any interest  which
  the  Borrower may have  therein.  After  deducting  from the proceeds of sale or
  other  disposition of the  Collateral  all expenses,  including all expenses for
  legal services,  the Lender shall apply such proceeds toward the satisfaction of
  the  Indebtedness.  Any remainder of the proceeds after  satisfaction in full of
  all  amounts  due and  owing  under the  Indebtedness  shall be  distributed  as
  required by applicable  law.  Notice of any sale or other  disposition  shall be
  given to the Borrower at least  fifteen (15) working days (or such longer period
  as may be required by law) before the time of any intended public sale or of the
  time  after  which  the  intended  private  sale  or  other  disposition  of the
  Collateral is to be made,  which the Borrower  hereby agrees shall be reasonable
  notice of such sale or other disposition. The Borrower agrees to assemble, or to
  cause to be assembled,  at the  Borrower's  own expense,  the Collateral at such
  place or  places  as the  Lender  shall  designate.  At any  such  sale or other
  disposition,  the Lender may, to the extent  permissible  under  applicable law,
  purchase  the  whole  or  any  part  of the  Collateral.  Without  limiting  the
  generality  of any of the rights and  remedies  conferred  upon the Lender under
  this Agreement,  the Lender may, to the full extent  permitted by applicable law
  (a) enter upon the premises of the Borrower and exclude  therefrom  the Borrower
  or any affiliate  thereof,  and take  immediate  possession  of the  Collateral,
  either  personally  or by means of a receiver  appointed by a court of competent
  jurisdiction,  using all necessary  force to do so, (b) at the Lender's  option,
  use,  operate,  manage and  control the  Collateral  in any lawful  manner,  (c)
  collect and receive all rents,  income,  revenue,  earnings,  issues and profits
  therefrom, and (d) maintain, repair, renovate, alter or remove the Collateral as
  the Lender may determine in the Lender's sole and absolute discretion.
  
       SECTION  8.4  ATTORNEY'S  FEES AND  EXPENSES.  The  Borrower  shall pay all
  reasonable  attorneys'  fees and expenses which the Lender may incur as a result
  or in consequence of the happening of an Event of Default,  even if the Event of
  Default   is  cured  and  the   Indebtedness   is   placed  in  good   standing.
  
           SECTION 8.5  CONFESSED  JUDGMENT.  UPON THE  OCCURRENCE  OF AN EVENT OF
  DEFAULT, THE BORROWER HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE LENDER OR
  ANY CLERK OF ANY COURT OF RECORD  TO  APPEAR  FOR THE  BORROWER  IN ANY COURT OF
  RECORD IN THE STATE OF  MARYLAND  AND CONFESS  JUDGMENT  WITHOUT  PRIOR  HEARING
  AGAINST THE  BORROWER IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE UNPAID
  PRINCIPAL  SUM,  ALL  INTEREST  ACCRUED AND UNPAID  THEREON,  ALL OTHER  AMOUNTS
  PAYABLE BY THE BORROWER TO THE LENDER UNDER THE TERMS OF THE INDEBTEDNESS OR ANY
  OF THE OTHER  LOAN  DOCUMENTS,  COSTS OF SUIT,  AND  ATTORNEYS'  FEES OF FIFTEEN
  PERCENT  (15%) OF THE  UNPAID  PRINCIPAL  SUM AND  INTEREST  THEN DUE  HEREUNDER
  (PROVIDED  THAT,  IF SUCH  JUDGMENT IS NOT APPEALED OR CONTESTED BY THE BORROWER
  THEN,  FOLLOWING THE PASSAGE OF TIME FOR APPEAL, AND COLLECTION OF THE AMOUNT OF
  SUCH JUDGMENT AND ALL SUCH FEES AND COSTS, THE LENDER WILL REMIT TO THE BORROWER
  THE EXCESS,  IF ANY, OF THE ATTORNEY'S FEES AWARDED AND COLLECTED AND THE ACTUAL
  ATTORNEY' FEES REASONABLY  INCURRED BY LENDER IN ENFORCING ITS RIGHTS  HEREUNDER
  OR UNDER THE OTHER LOAN DOCUMENTS).  THE BORROWER HEREBY RELEASES, TO THE EXTENT
  PERMITTED BY  APPLICABLE  LAW, ALL ERRORS AND ALL RIGHTS OF  EXEMPTION,  APPEAL,
  STAY OF  EXECUTION,  INQUISITION,  AND OTHER  RIGHTS TO WHICH THE  BORROWER  MAY
  OTHERWISE BE ENTITLED  UNDER THE LAWS OF THE UNITED  STATES OF AMERICA OR OF ANY
  STATE OR  POSSESSION  OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY
  HEREAFTER BE ENACTED.  THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER  JUDGMENT
  AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES  THEREOF OR
  BY ANY IMPERFECT  EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
  ENTERED  PURSUANT  THERETO.  SUCH  AUTHORITY  MAY BE  EXERCISED  ON ONE OR  MORE
  OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT  JURISDICTIONS  AS OFTEN
  AS THE LENDER  SHALL DEEM  NECESSARY  OR  DESIRABLE,  FOR ALL OF WHICH THIS NOTE
  SHALL BE A SUFFICIENT WARRANT.
  
           SECTION 8.6 WAIVERS; CONSENT TO JURISDICTION.  The Borrower irrevocably
  submits to the  jurisdiction  of any state or federal court sitting in the State
  of Maryland over any suit,  action, or proceeding  arising out of or relating to
  this Agreement. The Borrower irrevocably waives, to the fullest extent permitted
  by law, any objection  that the Borrower may now or hereafter have to the laying
  of venue of any such suit,  action, or proceeding  brought in any such court and
  any claim that any such suit,  action,  or proceeding  brought in any such court
  has been  brought in an  inconvenient  forum.  Final  judgment in any such suit,
  action, or proceeding  brought in any such court shall be conclusive and binding
  upon the  Borrower  and may be  enforced  in any court in which the  Borrower is
  subject to  jurisdiction  by a suit upon such judgment  provided that service of
  process is  effected  upon the  Borrower as  provided  in this  Agreement  or as
  otherwise  permitted by applicable  law. The Borrower hereby consents to process
  being served in any suit,  action,  or proceeding  instituted in connection with
  this Agreement by (a) the mailing of a copy thereof by certified  mail,  postage
  prepaid,  return  receipt  requested,  to the  Borrower  and (b)  serving a copy
  thereof any agent hereafter  designated in writing to the Lender by the Borrower
  as the Borrower's agent for service of process.  The Borrower irrevocably agrees
  that such service  shall be deemed to be service of process upon the Borrower in
  any such suit,  action, or proceeding.  Nothing in this Section shall affect the
  right of the Lender to serve  process in any manner  otherwise  permitted by law
  and  nothing in this  Section  will limit the right of the Lender  otherwise  to
  bring  proceedings  against the  Borrower in the courts of any  jurisdiction  or
  jurisdictions.  THE  BORROWER  HEREBY  WAIVES  TRIAL  BY JURY IN ANY  ACTION  OR
  PROCEEDING  TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,  ARISING OUT OF
  OR IN ANY  WAY  PERTAINING  TO  (A)  THIS  INDEBTEDNESS,  OR  (B)  ANY  DOCUMENT
  ASSOCIATED WITH THIS  TRANSACTION.  IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
  CONSTITUTES A WAVIER OF TRIAL BY JURY OF ALL CLAIMS  AGAINST ALL PARTIES TO SUCH
  ACTIONS OR PROCEEDINGS,  INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
  THIS INDEBTEDNESS.  THIS WAIVER IS KNOWINGLY,  WILLINGLY AND VOLUNTARILY MADE BY
  THE BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT
  OR OPINION  HAVE BEEN MADE BY ANY  INDIVIDUAL  TO INDUCE THIS WAVIER OF TRIAL BY
  JURY OR TO IN ANY WAY MODIFY OR NULLIFY  ITS  EFFECT.  THE  BORROWER  HAS HAD AN
  OPPORTUNITY TO CONSULT  COUNSEL  REGARDING THIS WAIVER OR HAD KNOWINGLY  ELECTED
  NOT TO CONSULT WITH COUNSEL PRIOR TO MAKING THIS WAIVER.
  
                                     ARTICLE IX
                                    MISCELLANEOUS
  
       SECTION 9.1 INCONSISTENCIES. The terms and conditions of the Loan Documents
  are  incorporated  by  reference  and made a part  hereof  as if fully set forth
  herein. In the event of any inconsistencies between this Agreement and any other
  Loan  Documents,  such  inconsistencies  shall  be  construed,  interpreted  and
  resolved so as to benefit the Lender.
  
       SECTION 9.2 BENEFIT;  BURDENS. This Agreement shall inure to the benefit of
  and  shall be  binding  upon the  Lender,  the  Borrower  and  their  respective
  successors and permitted assigns and shall not inure to the benefit of any other
  party.
  
       SECTION 9.3 NOTICES.  All  notices,  certificates  or other  communications
  hereunder shall be  sufficiently  given and shall be deemed given when delivered
  or when mailed by first class,  certified mail, postage prepaid,  return receipt
  requested,  addressed to the Borrower, the Lender or to any other Person to whom
  any such notice or certificate  or other  communication  is to be given,  at the
  following addresses:
  
  If to the Lender:        Andrew A. Pouring             George E. Ponticas
                           Edgewater, Maryland 21037     Timonium, Maryland 21093
  
                           Michael I. Keller
                           Alexandria, Virginia 22311
  
  If to the Borrower:      Sonex Research, Inc
                           c/o Andrew A. Pouring
                           23 Hudson Street
                           Annapolis, Maryland 21401
  
       SECTION 9.4 AMENDMENTS,  CHANGES AND MODIFICATIONS.  This Agreement may not
  be  amended,  changed,  modified,  altered  or  terminated  except  by a written
  instrument      executed     by     the     Lender     and     the     Borrower.
  
       SECTION 9.5 LAW GOVERNING. This Agreement is prepared and entered into with
  the  intention  that  the  law  of  the  State  of  Maryland  shall  govern  its
  construction and interpretation.
  
           IN WITNESS  WHEREOF,  the  Borrower  has caused  this  Agreement  to be
  executed and sealed as of the day and year first above written.
  
  WITNESS/ATTEST:                    SONEX RESEARCH, INC.
  
  ---------------                    --------------------
                                     Andrew A. Pouring,
                                     Chief Executive Officer
  
                                     EXHIBIT 1
  
                                STATEMENT OF INTENT
                                   January 7, 2005
  
           Sonex Research,  Inc. ("Sonex" or the "Company") has been unable for an
  extended  period  of time to keep  current  with its  compensation  payments  to
  consultant  Michael I.  Keller and to officers  Andrew A.  Pouring and George E.
  Ponticas,  or to timely  repay  loans made by Keller and  shareholder  Sidney L.
  Gulick,  3d. The Company's  accounting  records provide detailed listings of the
  significant amounts owed to these individuals.
  
           The Company  requires an immediate  infusion of cash for urgent working
  capital  needs.  The Company needs  Pouring,  Ponticas and Keller to continue to
  provide  services  in their  present  capacities  in order  for the  Company  to
  continue in operation,  yet the Company  presently does not have sufficient cash
  to pay  current  compensation  as earned.  Through  March 31,  2005 the  Company
  anticipates  cash receipts of $116,807  upon payment on the Company's  remaining
  invoices  issued  and to be issued to the  Defense  Advanced  Research  Projects
  Agency (DARPA)  totaling  $104,341,  and $12,466 under a current  purchase order
  from XXXXXX XXXXXXX  XXXXXXXX XXXXX, yet such cash receipts are restricted as to
  use because  they are  currently  securing  amounts  due under notes  payable to
  Gulick and  Keller.  In  addition,  Keller has  offered to provide  the  Company
  additional  cash for working capital of $25,000 on the good faith promise of the
  Company to provide  promptly  adequate  security  for such note and for previous
  notes and assurances as to the  availability of Pouring and Ponticas to continue
  to provide services to Sonex.
  
       This Statement of Intent serves to provide preliminary  documentation of an
  agreement in principle by Sonex, Keller, Pouring and Ponticas for the conditions
  under which these  individuals will undertake to keep Sonex in operation for the
  immediately foreseeable future. Pouring,  Ponticas and Keller have agreed to act
  as a group for the mutual  benefit of the  Company,  its  shareholders,  Gulick,
  other  creditors and  themselves.  Pouring is also acting  individually  for the
  benefit of consultant David A. Blank. In consideration,  Sonex agrees to execute
  a pledge,  assignment  or grant to  Keller,  Pouring,  Ponticas  and Gulick of a
  shared  security  interest in the  Company's  patents  (the  "Collateral")  with
  respect to the following services,  personal  guarantees,  and liabilities which
  are detailed in the Company's accounting records:
  
       1.  Accrued  compensation,  comprised  of  wages,  vacation,  bonus  and/or
           consulting  fees owed to Keller,  Pouring and Ponticas,  and to Blank
           in an amount to be  determined  by  Pouring.
       2.  Reimbursable  expenses  owed to  Keller, Pouring and Ponticas.
       3.  Notes plus accrued interest payable to Keller and Gulick.
       4.  Personal financial  guarantees by Pouring for the payment by the
           Company of charges  accumulated  with respect to business  credit card
           accounts and pursuant  to  equipment  leases.
       5.  Payments  for  continued  services by Pouring, Ponticas and Keller.
  
           Sonex is to receive the following consideration:
  
       1.  Keller will provide the Company additional cash for working capital of
           $25,000 pursuant to a Promissory Note payable by March 31, 2005.
       2.  Keller and Gulick will agree to extend to March 31, 2005 the due dates
           of all presently outstanding notes and will agree to amend such notes
           to release the collateral presently provided by cash payments received
           from Company revenues.
       3.  Pouring, Ponticas and Keller will agree to continue to provide services
           to the Company in their present capacities under existing compensation
           arrangements for the immediately foreseeable future under the risk of
           the Company's being unable to pay outstanding compensation and/or
           current compensation as earned.
       4.  Pouring, Ponticas and Keller will agree to stay any demand for
           immediate payment of outstanding compensation through March 31, 2005.
  
           It is the  intention  of  Sonex  to  obtain  legal  counsel  as soon as
  practical  to  prepare  a  security  and/or  other  similar  agreement(s)  to be
  effective  January 7, 2005 (the  "Security  Agreement")  to record  formally the
  intent of the parties as outlined herein.  It is the intention of the parties to
  further share the security interest in the Collateral with additional  potential
  lenders  or  others  as  necessary  for  the  benefit  of the  Company  and  its
  shareholders.
  
           Signed this 7th day of January, 2005, at Annapolis, Maryland.
  
  ------------------
  Michael I. Keller
  
  ------------------
  Andrew A. Pouring
  
  ------------------
  George E. Ponticas
  
                                SONEX RESEARCH, INC.
  
  By:      ------------------                  ------------------
           Andrew A. Pouring                   George E. Ponticas
           Chief Executive Officer             Chief Financial Officer
  
                                     EXHIBIT 2
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 3, 2005
  
  First security:
  
  Ongoing and future services (Jan 2005 through March 3, 2005 ):
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   22,384
  Ponticas   CFO & Secretary                                      18,461
  Keller     Director of Business Development & Program Manager   13,616   54,461
  
  New loans plus interest:
  
                           Date and Description
                           --------------------
  
  Keller     1/7/05 - Operating cash                              25,000
  Ponticas   3/3/05 - Legal fee retainer                           5,000
  Pouring    3/3/05 - Legal fee retainer                           5,000   35,000
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                       1,565
  Pouring    Since 2/15/05 - Advanta Mastercard                   15,200   16,765
                                                                          -------
  
             Total                                                        106,226
  
                                 EXHIBIT 2.1
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 31, 2005
  
  First security:
  
  Ongoing and future services (Jan 2005 through March 31, 2005 ):
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   36,147
  Ponticas   CFO & Secretary                                      31,499
  Keller     Director of Business Development & Program Manager   24,332   91,978
  
  New loans plus interest:
  
                            Date and Description
                            --------------------
  
  Keller     1/7/05 - Operating cash                              25,345
  Ponticas   3/3/05 - Legal fee retainer                           5,024
  Pouring    3/3/05 - Legal fee retainer                           5,024
  Keller     3/28/05 - Operating cash                             12,008   47,401
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                       3,263
  Pouring    Since 2/15/05 - Advanta Mastercard                   15,200   18,463
                                                                          -------
  
             Total                                                        157,842
  
                                    EXHIBIT 2.2
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    JUNE 30, 2005
  
  First security:
  
  Ongoing and future services (Jan 2005 through June 2005):
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   57,842
  Ponticas   CFO & Secretary                                      66,690
  Keller     Director of Business Development & Program Manager   46,606  171,138
  
  New loans plus interest:
  
                           Date and Description
                           --------------------
  
  Keller     1/7/05 - Operating cash                              25,719
  Ponticas   3/3/05 - Legal fee retainer                           5,098
  Pouring    3/3/05 - Legal fee retainer                           5,098
  Keller     3/28/05 - Operating cash                             12,188
  Keller     5/3/05 - Operating cash                              10,097
  Keller     5/19/05 - Operating cash                             10,069
  Keller     6/15/05 - Operating cash                             10,026   78,295
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                       6,259
  Pouring    Since 2/15/05 - Advanta Mastercard                   13,950   20,209
                                                                          -------
  
                Total                                                     269,642
  
                                   EXHIBIT 2.3
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                 September 30, 2005
  
  First security:
  
  Ongoing and future services (Jan 2005 through September 2005):
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer   90,719
  Ponticas   CFO & Secretary                                      97,266
  Keller     Director of Business Development & Program Manager   74,945  262,929
  
  New loans plus interest:
  
                           Date and Description
                           --------------------
  
  Keller     1/7/05 - Operating cash                              25,378
  Keller     3/28/05 - Operating cash                             12,182
  Keller     5/3/05 - Operating cash                              10,151
  Keller     5/19/05 - Operating cash                             10,151
  Keller     6/15/05 - Operating cash                             10,151   68,013
  
  Financial guarantees:
  
  Pouring    Since 1/1/05 - Capital One VISA                      14,807
  Pouring    Since 2/15/05 - Advanta Mastercard                   13,050   27,857
                                                                          -------
  
                Total                                                     358,799
  
                                     EXHIBIT 3
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                 September 30, 2005
  
                        INDEBTEDNESS ADDED TO FIRST SECURITY
  
   Date               Lender               Description                Amount
   ----               ------               -----------                ------
  
  3/28/05         Michael I. Keller       Note payable               $ 12,000
  
  5/3/05          Michael I. Keller       Note payable                 10,000
  
  5/19/05         Michael I. Keller       Note payable                 10,000
  
  6/15/05         Michael I. Keller       Note payable                 10,000
                                                                     --------
  
                  Total                                              $ 42,000
  
                                                                      EXHIBIT 99.5
  
                         SECOND LOAN AND SECURITY AGREEMENT
  
       THIS SECOND LOAN AND SECURITY  AGREEMENT (the  "Agreement")  dated March 3,
  2005 is made between Sonex Research, Inc. (the "Borrower") and Andrew A. Pouring
  ("Pouring"), George E. Ponticas ("Ponticas"),  Michael I. Keller ("Keller"), and
  Sidney L.  Gulick,  3d  ("Gulick")  (collectively  sometimes  referred to as the
  "Lender").
  
                                EXPLANATORY STATEMENT
  
           WHEREAS,  Pouring has been  associated  with the Borrower since 1980 as
  its founder and, at various times, as an employee,  executive officer,  director
  and  consultant,  and is currently  serving as the  Borrower's  Chairman,  Chief
  Executive Officer, President and Chief Technical Officer;
  
           WHEREAS, Pouring is owed unpaid compensation of $325,513 as of December
  31, 2004 that has been earned since his  employment by the Borrower,  consisting
  of wages,  vacation,  and bonus  compensation of $257,548 and unpaid  consulting
  fees of $67,965 (together,  "Pouring's Accrued  Compensation").  Pouring is also
  owed deferred  salary of $486,423 as of December 31, 2004, the timing of payment
  of which is currently  subject to the conditions of the 1992 Consent to Deferral
  agreement  between  Pouring  and  the  Borrower.  Pouring  also  has  personally
  guaranteed  the  payment  by the  Borrower  of charges  accumulated  on two VISA
  business  credit card  accounts  with a combined  credit  limit of $46,500,  the
  outstanding  balances on which accounts totaled $40,889 as of December 31, 2004.
  Pouring also has personally  guaranteed payment by the Borrower of principal and
  interest on two equipment lease  obligations with unpaid principal of $27,021 as
  of December 31, 2004. The personal guarantees by Pouring of VISA business credit
  card  accounts and  equipment  lease  obligations  are referred to as "Financial
  Guarantees".
  
           WHEREAS,  Ponticas has been  associated with the Borrower since 1987 at
  various times as an employee,  executive officer and director,  and is currently
  serving as the Borrower's Chief Financial  Officer,  Secretary,  Treasurer,  and
  Vice President of Finance;
  
       WHEREAS,  Ponticas is owed unpaid  compensation  of $219,324 as of December
  31, 2004 that has been earned since his  employment by the Borrower,  consisting
  of wages, vacation, and bonus compensation  ("Ponticas' Accrued  Compensation").
  Ponticas is also owed deferred  salary of $155,326 as of December 31, 2004,  the
  timing of payment of which is currently  subject to the  conditions  of the 1992
  Consent to Deferral agreement between Ponticas and the Borrower.
  
           WHEREAS,  Keller has been a valued  consultant  to the  Borrower  since
  1998, serving as Director of Business Development and technical program manager,
  and has been a source of working capital loans for the Borrower since 2004;
  
           WHEREAS,  Keller  is owed from the  Borrower  a total of  $25,000  plus
  accrued  interest  pursuant to  Promissory  Notes  dated  August 13, 2004 in the
  principal  amount of $7,500 and  December  17, 2004 in the  principal  amount of
  $17,500 (the "2004 Keller Notes"),  as well as unpaid consulting fees of $83,270
  ("Keller's Accrued Compensation");
  
       WHEREAS,  Gulick is owed by the  Borrower a total of $106,000  plus accrued
  interest  pursuant to Promissory  Notes dated March 27, 2002, June 25, 2003, and
  March 16, 2004 (the "Gulick Notes");
  
           WHEREAS,  all of the  above-described  Accrued  Compensation is payable
  upon demand,  and payment of principal  and interest  under the Gulick Notes and
  the Keller  Notes were due on  December  31, 2004 and are secured by revenues of
  the  Borrower,  with the exception of the December 17, 2004  Promissory  Note to
  Keller  which is due on March 31,  2005 and is not  secured by  revenues  of the
  Borrower;
  
           WHEREAS,  on January  7, 2005 the  Borrower  and the Lender  executed a
  Statement  of  Intent,  a copy of which is  attached  hereto  as  Exhibit  1, to
  document an agreement in principle by the parties for the conditions under which
  Pouring,  Ponticas and Keller,  acting as a group for the mutual  benefit of the
  Borrower, its creditors,  its shareholders,  and themselves,  would undertake to
  keep the Borrower in operation for the immediately foreseeable future;
  
           WHEREAS,  the Borrower needs the Lender to agree to stay any demand for
  payment of the above-described Accrued Compensation and Notes and to release the
  security of the Notes presently provided by revenues of the Borrower;
  
           WHEREAS,  the Lender is  willing to stay any demand for  payment of the
  above-described  Accrued  Compensation  through  March 31, 2005 and to amend the
  Notes to extend the due dates to March 31,  2005 and to release  the  collateral
  presently provided by revenues of the Borrower, in exchange for which the Lender
  requires  that the  Borrower  provide  security  for the  payment of the Accrued
  Compensation, Notes and Financial Guarantees;
  
           WHEREAS,  Pouring,  Ponticas,  Keller,  and  Gulick  have  agreed to be
  secured by the  Borrower on a shared  basis  pursuant to the terms of a separate
  agreement between and amongst themselves;
  
           WHEREAS, the Borrower is agreeable to secure the Accrued  Compensation,
  Notes and  Financial  Guarantees,  and to pay the  expenses of  perfecting  such
  security interest;
  
           NOW, THEREFORE, in consideration of the Explanatory Statement, which is
  incorporated herein by reference, and the covenants, agreements,  warranties and
  representations  contained herein and for other good and valuable consideration,
  the receipt and sufficiency of which are hereby acknowledged, the parties hereto
  do hereby agree as follows:
  
                                      ARTICLE I
                               EFFECTIVENESS AND TERM
  
           This  Agreement  shall be  effective  for all purposes as of January 7,
  2005 and shall remain in effect until all the  Indebtedness  (defined below) has
  been repaid in full.
  
                                     ARTICLE II
                                     DEFINTIONS
  
       SECTION  2.1.  DEFINITIONS.  As  used  in this  Agreement  and in the  Loan
  Documents (defined below), the following terms shall have the meanings indicated
  below unless the specific context requires a different meaning.  All capitalized
  terms  which are not  otherwise  defined  herein  and which are  defined  in the
  Maryland Uniform Commercial Code - Secured Transactions, Title 9, Commercial Law
  Article,  Annotated  Code of Maryland,  as amended,  shall have the meanings set
  forth therein.
  
           "Collateral"  means all of the following property in which the Borrower
  has  granted a security  interest  to the Lender  pursuant to Article IV of this
  Agreement, both now owned and existing and hereafter owned, existing,  acquired,
  created and arising, regardless of where located, and all of the Borrower's both
  now existing and hereafter  acquired  rights,  title and interest in and to such
  property together with all replacements thereof and substitutions therefore (all
  of such  property  described  below and such rights,  title and  interest  being
  herein  collectively  called  the  "Collateral"):  All  patents  and  trademarks
  registrations  and  applications  made by, or on behalf of, the  Borrower to the
  Patent and  Trademark  Office or to any similar  office or agency of any foreign
  country or political subdivision thereof for the registration,  now of record to
  in the future to become of record;
  
           All cash and noncash  proceeds  and  products of the above,  including,
  without  limitation,  all cash and noncash  proceeds of, and all other  profits,
  rentals or receipts, in whatever form, arising from the collection, sale, lease,
  exchange,  assignment,  licensing or other  disposition of, or realization upon,
  any  asset  or  property  which  constitutes  Collateral,   including,   without
  limitation,  all claims of Borrower against third parties for loss of, damage to
  or theft or destruction of, or for proceeds payable under, or unearned  premiums
  with  respect to,  policies of insurance  covering  any asset or property  which
  constitutes Collateral, any condemnation or requisition payments with respect to
  any asset or property which  constitutes  Collateral,  in each case whether both
  now existing and hereafter arising,  and all cash, checks, draft and instruments
  received or held for the benefit of the Secured Party.
  
           "Encumbrance" means any mortgage,  lien, pledge, adverse claim, charge,
  security interest or other encumbrance in or on, or any interest or title of any
  vendor,  lessor,  lender,  or other secured party under any conditional  sale or
  other  title  retention  agreement  or lease with  respect  to, any  property or
  collateral.
  
           "Event of Default"  and  "Default"  shall have the meaning set forth in
  Section 8.1 hereof.
  
           "Indebtedness"  or "Loan" means any obligation  owed by the Borrower to
  the Lender for all  Accrued  Compensation,  Notes and  Financial  Guarantees  as
  described  in  this  Agreement  and the  2004  Keller  Notes  and  Gulick  Notes
  (collectively   referred  to  hereafter  as  the  "Notes").  A  listing  of  the
  Indebtedness  accumulated as of December 31, 2004 is attached  hereto as Exhibit
  2. Such  listing is to be updated  from time to time by the  Borrower to reflect
  payments made and is to be appended to Exhibit 2.
  
           "Loan  Documents"  means all  documents  executed  by the  Borrower  in
  connection  with the employment of the Lender or loans made by the Lender to the
  Borrower and evidenced by notes,  including but not limited to, this  Agreement,
  the Notes,  salary amounts authorized by the Board of Directors of the Borrower,
  the compensation records of the Borrower,  and any financing statements relating
  to the Collateral.
  
           "Obligations"  means the absolute  obligation of the Borrower to pay to
  the Lender (a) any and all sums due to the Lender  under the stated terms of the
  Indebtedness,  this Agreement or the Loan Documents, and (b) in the event of any
  proceeding to enforce the collection of the  Obligations,  or any of them, after
  Default,  the  reasonable  expenses of retaking,  holding,  preparing  for sale,
  selling or  otherwise  disposing of or  realizing  on the  Collateral  or of any
  exercise by the Lender of the Lender's rights in the Event of Default,  together
  with attorneys' fees, expenses of collection and court costs, as provided in the
  Loan Documents.
  
                                     ARTICLE III
                              TERMS OF THE INDEBTEDNESS
  
           The terms of the  Indebtedness  are more  fully  described  in the Loan
  Documents.
  
                                     ARTICLE IV
                                SECURITY FOR THE LOAN
  
       SECTION 4.1 SECURITY. The Borrower's Obligations under the Indebtedness are
  evidenced and secured by (a) this Agreement and (b) the Loan Documents. In order
  to secure the full and timely payment and  performance of the  Obligations,  the
  Borrower  hereby pledges and grants to the Lender all of the  Borrower's  right,
  title and interest in, to the Collateral.
  
       SECTION  4.2  EXERCISE  OF RIGHTS.  Until such time as the  Borrower  is in
  default in paying the principal sum of the  Indebtedness or any interest accrued
  thereon,  or in performing any of the  Borrower's  other  obligations  under the
  provisions  of the Loan  Documents,  after  notice  and beyond  applicable  cure
  periods, if any, the Lender shall be entitled to exercise all of the rights held
  by it under the provisions of this Agreement and the Note.
  
       SECTION 4.3 INTENTIONALLY OMITTED.
  
       SECTION 4.4 PROCEEDS AND PRODUCTS.  The Lender's  security  interest  shall
  apply to and cover any and all  proceeds of the  Collateral,  including  but not
  limited  to,   insurance   proceeds   and  the   products  of  any   Collateral.
  
           SECTION  4.5  PRIORITY  OF LIEN  AND  SECURITY  INTEREST.  The lien and
  security  interest  granted  by the  Borrower  to the  Lender  pursuant  to this
  Agreement shall be and remain, at all times that any portion of the Indebtedness
  remains  outstanding and unpaid,  a second and indefeasible  perfected  security
  interest in and to the Collateral,  unless otherwise agreed to be the Lender. It
  is agreed that any security given by the Borrower to the Lender to secure future
  deferred  compensation  shall be a first  and  indefeasible  perfected  security
  interest  in  and  to  the  Collateral  and  this  lien  shall  be  specifically
  subordinated to said first lien.
  
       SECTION 4.6 LOSS OF  SECURITY.  The Lender shall not be liable for any loss
  of any Collateral in its possession,  nor shall such loss diminish the debt due,
  unless said loss results from Lender's gross  negligence or willful  misconduct.
  
           SECTION 4.7 TERMINATION OF SECURITY  INTEREST.  Upon payment in full of
  such principal sum, interest and other indebtedness,  and all other sums owed to
  the Lender under the  provisions of the Loan  Documents,  this  Agreement or any
  other document  executed in connection  therewith,  the security interest in the
  Collateral shall be and become void and of no further effect; provided, that the
  affidavit, certificate, letter or statement of any officer, agent or attorney of
  the Lender that any of such principal sum, interest,  indebtedness or other sums
  remain  unpaid  shall be and  constitute  conclusive  evidence of the  validity,
  effectiveness and continuing force of the assignment, and any person may, and is
  hereby  authorized to, rely thereon.  The Borrower hereby authorizes and directs
  the licensee under each present or future Patent or Trademark, upon receipt from
  the Lender of written  notice  that a default  exists  thereunder  or under this
  Agreement,  after notice and beyond  applicable  cure periods to pay over to the
  Lender all rents,  income and profits  arising or accruing under such Patent and
  Trademark  and to continue to do so until  otherwise  notified in writing by the
  Lender.
  
                                      ARTICLE V
                           REPRESENTATIONS AND WARRANTIES
                                   BY THE BORROWER
  
       SECTION 5.1  REPRESENTATIONS  AND WARRANTIES BY THE BORROWER.  The Borrower
  makes the following representations and warranties:
  
       (a)  Existence.  The Borrower is a corporation  duly organized and existing
  and in good  standing  under the laws of the State of Maryland  and the Borrower
  has the power to own its  properties  and to carry on its  business as now being
  conducted,  and the  Borrower is duly  qualified  to do business  and is in good
  standing in each  jurisdiction in which the character of the properties owned by
  it therein or in which the transaction of its business makes such  qualification
  necessary.
  
       (b) Authority.  The Borrower has full power and authority to enter into and
  execute and deliver this Agreement and each of the other Loan Documents executed
  and delivered by it and to incur and perform the Borrower's Obligations provided
  for herein and therein  (including  the borrowing  under the  Indebtedness).  No
  further  consent  or  approval  of any  other  person  or  public  authority  or
  regulatory body is required as a condition to the validity or  enforceability of
  this Agreement or any of the other Loan Documents, or if required, the
  same has been obtained.
  
       (c) Binding Agreements. This Agreement and each of the other Loan Documents
  executed and delivered by the Borrower  have been duly and properly  executed by
  the  Borrower,  constitute  the valid and  legally  binding  obligations  of the
  Borrower and are fully enforceable against the Borrower in accordance with their
  respective terms.
  
       (d) Litigation. There is no litigation or proceeding pending or threatened,
  before any court or administrative agency which will materially adversely affect
  the  financial  condition  of the  Borrower or the  authority of the Borrower to
  enter into, or the validity or  enforceability  of, this Agreement or any of the
  other Loan  Documents or the ability of the  Borrower to perform the  Borrower's
  Obligations which has not been disclosed to the Lender.
  
       (e) No  Conflicting  Agreements.  There is (i) no provision in any existing
  mortgage,  indenture, contract or agreement binding on the Borrower or affecting
  any of the  Borrower's  property  and (ii) no provision of law or order of court
  binding upon the  Borrower or affecting  any of the  Borrower's  property  which
  would conflict with or in any way prevent the execution, delivery or performance
  of the terms of this  Agreement or of any of the other Loan  Documents  executed
  and delivered by the  Borrower,  or which would be in
  default or violated as a result of such execution, delivery or performance.
  
       (f)  Taxes.  The  Borrower  has timely and  accurately  filed all  required
  federal,  state and local tax or  information  returns,  and it is not currently
  being  audited by either the state or federal  governments.  The Borrower is not
  delinquent  in the payment of any income,  property or other  federal,  state or
  local tax or assessment.
  
       (g) Place of Business of Borrower.  The Borrower has a place of business in
  Anne  Arundel  County,  Maryland,  which is the only  place  where the  Borrower
  maintains a place of business.
  
       (h) Name.  The Borrower has never  operated under or used any other name or
  title to all of the Collateral.  The Lender's security interest shall constitute
  a first and indefeasible  security interest therein,  unless otherwise agreed to
  by the Lender.
  
       (i) No Untrue  Statements.  Neither this Agreement,  the Loan Documents nor
  any other document, certificate or statement furnished or to be furnished by the
  Borrower or by any other party to the Lender in connection herewith contains, or
  at the time of delivery will contain, any untrue statement of a material fact or
  omits  or will  omit to state a  material  fact  necessary  in order to make the
  statements   contained   herein   and   therein   not   materially   misleading.
  
                                         ARTICLE VI
                             AFFIRMATIVE COVENANTS OF BORROWER
  
           The Borrower hereby  covenants and agrees that from the date hereof and
  until  satisfaction  in  full  of the  Indebtedness,  unless  the  Lender  shall
  otherwise consent in writing, the Borrower shall do the following:
  
       SECTION  6.1 NOTICE OF CHANGE OF  BUSINESS  LOCATION.  The  Borrower  shall
  notify the Lender in  writing  thirty  (30) days in advance of any change in the
  location of any of its places of business or of the establishment of any new, or
  the     discontinuance     of    any     existing,     place    of     business.
  
       SECTION 6.2  EXISTENCE;  CERTAIN  RIGHTS;  LAWS.  The Borrower shall do all
  things  necessary  to  preserve  and  keep  in full  force  and  effect  in each
  jurisdiction in which it conducts business,  the business  existence,  licenses,
  permits, rights, patents, trademarks, trade names and franchises of the Borrower
  and comply with all present and future  laws,  ordinances,  rules,  regulations,
  judgments, orders and decrees which affect in any material way the Borrower, its
  assets or the operation of its business.
  
           SECTION 6.3 NOTICE OF  LITIGATION  OR OTHER  PROCEEDINGS.  The Borrower
  shall give immediate notice to the Lender of (i) the existence of any continuing
  material dispute with respect to any of the Collateral,  (ii) the institution of
  any  litigation,   administrative   proceeding  or  governmental   investigation
  involving  the  Borrower  and/or  any of the  Collateral,  any  of  which  might
  materially and adversely affect the operation,  financial condition, property or
  business of the Borrower or any of the  Collateral or affect the  enforceability
  of this Agreement or any of the other Loan Documents.
  
       SECTION 6.4  INDEBTEDNESS.  The Borrower shall pay or cause to be paid when
  due (or within  applicable  grace  periods) all  Indebtedness  of the  Borrower.
  
       SECTION 6.5 NOTICE OF EVENTS OF DEFAULT.  The Borrower shall give immediate
  notice to the Lender if the  Borrower  becomes  aware of the  occurrence  of any
  Event of Default,  or of any facts,  condition or event which with the giving of
  notice  or lapse  of time,  or  both,  would be an Event of  Default,  or of the
  failure of the Borrower to observe or perform any of the conditions or covenants
  to be observed or performed by it under this  Agreement or any of the other Loan
  Documents.
  
           SECTION 6.6 FURTHER  ASSURANCES.  The Borrower shall execute such other
  and further documents, including without limitation,  promissory notes, security
  agreements,  agreements,  financing  statements,  continuation  statements,  and
  similar  instruments as may from time to time, in the sole opinion of the Lender
  or the  Lender's  counsel,  be  necessary,  proper or  convenient,  to  perfect,
  confirm, establish, re-establish,  continue or complete the security interest in
  the Collateral and the purposes and intentions of this  Agreement,  it being the
  intention  of the  Borrower to hereby  provide a full and  absolute  warranty of
  further  assurance to the Lender.  In the event the Borrower  shall fail for any
  reason to execute,  within ten (10) days of the  Lender's  written  demand,  any
  document of the  aforementioned  type which the Lender  requests the Borrower to
  execute, the Borrower shall and hereby irrevocably and automatically appoint the
  Lender as the  Borrower's  attorney-in-fact  to  execute  such  document  in the
  Borrower's name, place and stead and on the Borrower's behalf, and such power of
  attorney shall constitute a power of attorney coupled with an interest and shall
  be irrevocable  unless and until the subject  document is fully and  effectively
  executed.
  
                                     ARTICLE VII
                                 NEGATIVE COVENANTS
  
           The Borrower  covenants and agrees that, until  satisfaction in full of
  all Obligations, it will not do or permit to be done or to cause to occur any of
  the acts or happenings set forth below without the prior written  consent of the
  Lender.
  
       SECTION 7.1 FUNDAMENTAL CHANGES.  Change its name, enter into or effect any
  merger, consolidation,  share exchange, division, conversion,  reclassification,
  recapitalization,  reorganization  or other  transactions  of like effect  which
  changes the control of the  affairs of  Borrower  from that which  exists on the
  date hereof, or dissolve,  sell, transfer,  lease or otherwise dispose of all or
  (except in the  ordinary  course of business  for  adequate  consideration)  any
  material portion of its assets or any  significant  product
  line or process.
  
       SECTION 7.2  ENCUMBRANCE OR DISPOSAL OF COLLATERAL.  The Borrower shall not
  sell, lease, convey, or otherwise dispose of, or mortgage, pledge, assign, grant
  or permit to exist any liens,  claims,  encumbrances or security interests in or
  upon any of the Collateral,  except liens,  if any,  required by this Agreement.
  
       SECTION 7.3 ASSIGNMENT OF THIS AGREEMENT.  The Borrower shall not assign or
  attempt to assign this Agreement to any person.
  
       SECTION 7.4 PREPAYMENT OF INDEBTEDNESS.  Make any voluntary  prepayments of
  Indebtedness other than in ordinary course of business.
  
                                    ARTICLE VIII
                             EVENTS OF DEFAULT; REMEDIES
  
       SECTION 8.1 EVENTS OF DEFAULT  DEFINED.  The following  shall be "Events of
  Default"  under this  Agreement,  and the terms  "Events of Default",  "Event of
  Default" and "default" shall mean, whenever they are used in this Agreement, any
  one or more of the following events:
  
       (a) Any  representation  or  warranty  made herein or in any  statement  or
  representation  made in any certificate,  report,  financial  statement or other
  instrument  furnished in connection with this Agreement,  or in any of the other
  Loan Documents,  shall prove to have been incorrect in any material respect when
  made or shall be breached in any material respect; or
  
       (b) The Borrower shall fail to pay within five (5) days written notice that
  the same is due and  payable  any  payment of  principal  of or  interest  under
  Indebtedness  or with  respect to any other sums or charges  due on or under the
  Indebtedness  or any repayment  required by the security  agreement  executed in
  connection with this transaction;
  
                    (c)  There  shall  occur a  default  in the  due and  punctual
  performance  or  observance  of any  term,  covenant,  condition,  agreement  or
  provision,  other than as specified in the foregoing Paragraph (b), contained in
  any of the Loan Documents  associated with this transaction,  to be performed or
  observed by the  Borrower,  which is not cured within thirty (30) days of notice
  of said default, provided Borrower shall be given a greater period to cure if it
  commences  to cure within said  thirty (30) day period and  diligently  proceeds
  towards cure;
  
                    (d)  The  Borrower  shall  (i)  apply  for or  consent  to the
  appointment of, or the taking of possession by, a receiver,  custodian,  trustee
  or liquidator of itself or any of its property or assets,  (ii) become generally
  unable to pay its debts as they mature,  (iii) make a general assignment for the
  benefit of creditors,  (iv) be adjudicated a debtor under 11 U.S.C.  section 101
  et. seq.,  (v) file a voluntary  petition in  bankruptcy or a petition or answer
  seeking  reorganization or an arrangement with creditors or to take advantage of
  any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
  liquidation  statute,  or an answer  admitting  the  material  allegations  of a
  petition filed against it in any proceeding under any such law, or if any action
  shall  be  taken  by the  Borrower  for the  purposes  of  affecting  any of the
  foregoing,  or (vi)  by any  act  indicate  its  consent  to,  approval  of,  or
  acquiescence  in, any such  proceeding or the  appointment of any receiver of or
  trustee for the  Borrower or any of its  property or assets,  or suffer any such
  receivership, trusteeship or proceeding to continue undischarged for a period of
  sixty (60) days, or
  
       (e) An order, judgment or decree shall be entered, without the application,
  approval  or consent of the  Borrower  by any court of  competent  jurisdiction,
  approving a petition seeking the dissolution or  reorganization  of the Borrower
  or of all or any substantial part of the assets of the Borrower, or appointing a
  receiver,  trustee or  liquidator  of the Borrower  and such order,  judgment or
  decree shall continue  unstayed and in effect for any period of sixty (60) days;
  or
  
       (f) Any  judgment  against  the  Borrower,  or any  attachment  or any levy
  against any  property of the  Borrower  with respect to a claim for an amount in
  excess of Twenty-Five  Thousand Dollars ($25,000) remains unpaid,  undischarged,
  unbonded or undismissed for a period of sixty (60) days; or
  
       (g) An Event of Default shall occur under any of the other Loan  Documents;
  or
  
       (h) The Borrower is dissolved, terminated and/or liquidated.
  
      SECTION  8.2  REMEDIES ON  DEFAULT.  In  addition  to all other  rights and
  remedies  provided to it by law and under the Loan Documents,  the Lender on the
  happening of any Event of Default may in its sole and absolute discretion do any
  or all of the following:
  
       (a) Declare the unpaid  principal of the  Indebtedness and interest accrued
  thereon,  together with all other monies  payable to the Lender by the Borrower,
  to be immediately due and payable by notice in writing to that effect, delivered
  to the Borrower, and upon such declaration, all such monies shall be immediately
  due and payable at the place of payment provided in such notice, anything in the
  Loan Documents or in this Agreement to the contrary notwithstanding.
  
       (b) Foreclose on any of the  Collateral,  or any collateral in which Lender
  has an  interest  pursuant  to the terms of any other  Indebtedness  outstanding
  between Borrower and the Lender;
  
       (c) File suit against the Borrower under any Document  associated with this
  transaction;
  
       (d) Seek specific  performance or injunctive relief to enforce  performance
  of the undertakings,  duties and agreements provide in the documents  associated
  with this transaction, whether or not a remedy exits as law or is adequate;
  
                    (e) The rights and remedies  provided in this  Agreement or in
  the Loan Documents or under  applicable law shall be cumulative and the exercise
  of any  particular  right or remedy shall not preclude the exercise of any other
  rights or remedies in addition to or as an  alternative of such right or remedy.
  No delay or omission to exercise  any right or power  accruing  upon an Event of
  Default  shall  impair  any such right or power or be  construed  to be a waiver
  thereof,  but any such right and power may be exercised from time to time and as
  often as may be deemed prudent.
  
           SECTION  8.3  SALE OF  COLLATERAL.  In  addition  to any  other  remedy
  provided  herein,  the Lender may,  subject to applicable law, sell at public or
  private sale or otherwise realize upon, in Annapolis, Maryland or elsewhere, the
  whole or, from time to time,  any part of the  Collateral or any interest  which
  the  Borrower may have  therein.  After  deducting  from the proceeds of sale or
  other  disposition of the  Collateral  all expenses,  including all expenses for
  legal services,  the Lender shall apply such proceeds toward the satisfaction of
  the  Indebtedness.  Any remainder of the proceeds after  satisfaction in full of
  all  amounts  due and  owing  under the  Indebtedness  shall be  distributed  as
  required by applicable  law.  Notice of any sale or other  disposition  shall be
  given to the Borrower at least  fifteen (15) working days (or such longer period
  as may be required by law) before the time of any intended public sale or of the
  time  after  which  the  intended  private  sale  or  other  disposition  of the
  Collateral is to be made,  which the Borrower  hereby agrees shall be reasonable
  notice of such sale or other disposition. The Borrower agrees to assemble, or to
  cause to be assembled,  at the  Borrower's  own expense,  the Collateral at such
  place or  places  as the  Lender  shall  designate.  At any  such  sale or other
  disposition,  the Lender may, to the extent  permissible  under  applicable law,
  purchase  the  whole  or  any  part  of the  Collateral.  Without  limiting  the
  generality  of any of the rights and  remedies  conferred  upon the Lender under
  this Agreement,  the Lender may, to the full extent  permitted by applicable law
  (a) enter upon the premises of the Borrower and exclude  therefrom  the Borrower
  or any affiliate  thereof,  and take  immediate  possession  of the  Collateral,
  either  personally  or by means of a receiver  appointed by a court of competent
  jurisdiction,  using all necessary  force to do so, (b) at the Lender's  option,
  use,  operate,  manage and  control the  Collateral  in any lawful  manner,  (c)
  collect and receive all rents,  income,  revenue,  earnings,  issues and profits
  therefrom, and (d) maintain, repair, renovate, alter or remove the Collateral as
  the Lender may determine in the Lender's sole and absolute discretion.
  
       SECTION  8.4  ATTORNEY'S  FEES AND  EXPENSES.  The  Borrower  shall pay all
  reasonable  attorneys'  fees and expenses which the Lender may incur as a result
  or in consequence of the happening of an Event of Default,  even if the Event of
  Default   is  cured  and  the   Indebtedness   is   placed  in  good   standing.
  
           SECTION 8.5  CONFESSED  JUDGMENT.  UPON THE  OCCURRENCE  OF AN EVENT OF
  DEFAULT, THE BORROWER HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE LENDER OR
  ANY CLERK OF ANY COURT OF RECORD  TO  APPEAR  FOR THE  BORROWER  IN ANY COURT OF
  RECORD IN THE STATE OF  MARYLAND  AND CONFESS  JUDGMENT  WITHOUT  PRIOR  HEARING
  AGAINST THE  BORROWER IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE UNPAID
  PRINCIPAL  SUM,  ALL  INTEREST  ACCRUED AND UNPAID  THEREON,  ALL OTHER  AMOUNTS
  PAYABLE BY THE BORROWER TO THE LENDER UNDER THE TERMS OF THE INDEBTEDNESS OR ANY
  OF THE OTHER  LOAN  DOCUMENTS,  COSTS OF SUIT,  AND  ATTORNEYS'  FEES OF FIFTEEN
  PERCENT  (15%) OF THE  UNPAID  PRINCIPAL  SUM AND  INTEREST  THEN DUE  HEREUNDER
  (PROVIDED  THAT,  IF SUCH  JUDGMENT IS NOT APPEALED OR CONTESTED BY THE BORROWER
  THEN,  FOLLOWING THE PASSAGE OF TIME FOR APPEAL, AND COLLECTION OF THE AMOUNT OF
  SUCH JUDGMENT AND ALL SUCH FEES AND COSTS, THE LENDER WILL REMIT TO THE BORROWER
  THE EXCESS,  IF ANY, OF THE ATTORNEY'S FEES AWARDED AND COLLECTED AND THE ACTUAL
  ATTORNEY' FEES REASONABLY  INCURRED BY LENDER IN ENFORCING ITS RIGHTS  HEREUNDER
  OR UNDER THE OTHER LOAN DOCUMENTS).  THE BORROWER HEREBY RELEASES, TO THE EXTENT
  PERMITTED BY  APPLICABLE  LAW, ALL ERRORS AND ALL RIGHTS OF  EXEMPTION,  APPEAL,
  STAY OF  EXECUTION,  INQUISITION,  AND OTHER  RIGHTS TO WHICH THE  BORROWER  MAY
  OTHERWISE BE ENTITLED  UNDER THE LAWS OF THE UNITED  STATES OF AMERICA OR OF ANY
  STATE OR  POSSESSION  OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY
  HEREAFTER BE ENACTED.  THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER  JUDGMENT
  AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES  THEREOF OR
  BY ANY IMPERFECT  EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
  ENTERED  PURSUANT  THERETO.  SUCH  AUTHORITY  MAY BE  EXERCISED  ON ONE OR  MORE
  OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT  JURISDICTIONS  AS OFTEN
  AS THE LENDER  SHALL DEEM  NECESSARY  OR  DESIRABLE,  FOR ALL OF WHICH THIS NOTE
  SHALL BE A SUFFICIENT WARRANT.
  
           SECTION 8.6 WAIVERS; CONSENT TO JURISDICTION.  The Borrower irrevocably
  submits to the  jurisdiction  of any state or federal court sitting in the State
  of Maryland over any suit,  action, or proceeding  arising out of or relating to
  this Agreement. The Borrower irrevocably waives, to the fullest extent permitted
  by law, any objection  that the Borrower may now or hereafter have to the laying
  of venue of any such suit,  action, or proceeding  brought in any such court and
  any claim that any such suit,  action,  or proceeding  brought in any such court
  has been  brought in an  inconvenient  forum.  Final  judgment in any such suit,
  action, or proceeding  brought in any such court shall be conclusive and binding
  upon the  Borrower  and may be  enforced  in any court in which the  Borrower is
  subject to  jurisdiction  by a suit upon such judgment  provided that service of
  process is  effected  upon the  Borrower as  provided  in this  Agreement  or as
  otherwise  permitted by applicable  law. The Borrower hereby consents to process
  being served in any suit,  action,  or proceeding  instituted in connection with
  this Agreement by (a) the mailing of a copy thereof by certified  mail,  postage
  prepaid,  return  receipt  requested,  to the  Borrower  and (b)  serving a copy
  thereof any agent hereafter  designated in writing to the Lender by the Borrower
  as the Borrower's agent for service of process.  The Borrower irrevocably agrees
  that such service  shall be deemed to be service of process upon the Borrower in
  any such suit,  action, or proceeding.  Nothing in this Section shall affect the
  right of the Lender to serve  process in any manner  otherwise  permitted by law
  and  nothing in this  Section  will limit the right of the Lender  otherwise  to
  bring  proceedings  against the  Borrower in the courts of any  jurisdiction  or
  jurisdictions.  THE  BORROWER  HEREBY  WAIVES  TRIAL  BY JURY IN ANY  ACTION  OR
  PROCEEDING  TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,  ARISING OUT OF
  OR IN ANY  WAY  PERTAINING  TO  (A)  THIS  INDEBTEDNESS,  OR  (B)  ANY  DOCUMENT
  ASSOCIATED WITH THIS  TRANSACTION.  IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
  CONSTITUTES A WAVIER OF TRIAL BY JURY OF ALL CLAIMS  AGAINST ALL PARTIES TO SUCH
  ACTIONS OR PROCEEDINGS,  INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
  THIS INDEBTEDNESS.  THIS WAIVER IS KNOWINGLY,  WILLINGLY AND VOLUNTARILY MADE BY
  THE BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT
  OR OPINION  HAVE BEEN MADE BY ANY  INDIVIDUAL  TO INDUCE THIS WAVIER OF TRIAL BY
  JURY OR TO IN ANY WAY MODIFY OR NULLIFY  ITS  EFFECT.  THE  BORROWER  HAS HAD AN
  OPPORTUNITY TO CONSULT  COUNSEL  REGARDING THIS WAIVER OR HAD KNOWINGLY  ELECTED
  NOT TO CONSULT WITH COUNSEL PRIOR TO MAKING THIS WAIVER.
  
                                     ARTICLE IX
                                    MISCELLANEOUS
  
       SECTION 9.1 INCONSISTENCIES. The terms and conditions of the Loan Documents
  are  incorporated  by  reference  and made a part  hereof  as if fully set forth
  herein. In the event of any inconsistencies between this Agreement and any other
  Loan  Documents,  such  inconsistencies  shall  be  construed,  interpreted  and
  resolved so as to benefit the Lender.
  
       SECTION 9.2 BENEFIT;  BURDENS. This Agreement shall inure to the benefit of
  and  shall be  binding  upon the  Lender,  the  Borrower  and  their  respective
  successors and permitted assigns and shall not inure to the benefit of any other
  party.
  
       SECTION 9.3 NOTICES.  All  notices,  certificates  or other  communications
  hereunder shall be  sufficiently  given and shall be deemed given when delivered
  or when mailed by first class,  certified mail, postage prepaid,  return receipt
  requested,  addressed to the Borrower, the Lender or to any other Person to whom
  any such notice or certificate  or other  communication  is to be given,  at the
  following addresses:
  
  If to the Lender:        Andrew A. Pouring             George E. Ponticas
                           Edgewater, Maryland 21037     Timonium, Maryland 21093
  
                           Michael I. Keller             Sidney Gulick, 3d
                           Alexandria, Virginia 22311    Adelphi, Maryland 20783
  
  If to the Borrower:      Sonex Research, Inc
                           c/o Andrew A. Pouring
                           23 Hudson Street
                           Annapolis, Maryland 21401
  
       SECTION 9.4 AMENDMENTS,  CHANGES AND MODIFICATIONS.  This Agreement may not
  be  amended,  changed,  modified,  altered  or  terminated  except  by a written
  instrument      executed     by     the     Lender     and     the     Borrower.
  
       SECTION 9.5 LAW GOVERNING. This Agreement is prepared and entered into with
  the  intention  that  the  law  of  the  State  of  Maryland  shall  govern  its
  construction and interpretation.
  
           IN WITNESS  WHEREOF,  the  Borrower  has caused  this  Agreement  to be
  executed and sealed as of the day and year first above written.
  
  WITNESS/ATTEST:                    SONEX RESEARCH, INC.
  
  ---------------                    --------------------
                                     Andrew A. Pouring,
                                     Chief Executive Officer
  
                                     EXHIBIT 1
  
                                STATEMENT OF INTENT
                                   January 7, 2005
  
           Sonex Research,  Inc. ("Sonex" or the "Company") has been unable for an
  extended  period  of time to keep  current  with its  compensation  payments  to
  consultant  Michael I.  Keller and to officers  Andrew A.  Pouring and George E.
  Ponticas,  or to timely  repay  loans made by Keller and  shareholder  Sidney L.
  Gulick,  3d. The Company's  accounting  records provide detailed listings of the
  significant amounts owed to these individuals.
  
           The Company  requires an immediate  infusion of cash for urgent working
  capital  needs.  The Company needs  Pouring,  Ponticas and Keller to continue to
  provide  services  in their  present  capacities  in order  for the  Company  to
  continue in operation,  yet the Company  presently does not have sufficient cash
  to pay  current  compensation  as earned.  Through  March 31,  2005 the  Company
  anticipates  cash receipts of $116,807  upon payment on the Company's  remaining
  invoices  issued  and to be issued to the  Defense  Advanced  Research  Projects
  Agency (DARPA)  totaling  $104,341,  and $12,466 under a current  purchase order
  from XXXXXX XXXXXXX  XXXXXXXX XXXXX, yet such cash receipts are restricted as to
  use because  they are  currently  securing  amounts  due under notes  payable to
  Gulick and  Keller.  In  addition,  Keller has  offered to provide  the  Company
  additional  cash for working capital of $25,000 on the good faith promise of the
  Company to provide  promptly  adequate  security  for such note and for previous
  notes and assurances as to the  availability of Pouring and Ponticas to continue
  to provide services to Sonex.
  
       This Statement of Intent serves to provide preliminary  documentation of an
  agreement in principle by Sonex, Keller, Pouring and Ponticas for the conditions
  under which these  individuals will undertake to keep Sonex in operation for the
  immediately foreseeable future. Pouring,  Ponticas and Keller have agreed to act
  as a group for the mutual  benefit of the  Company,  its  shareholders,  Gulick,
  other  creditors and  themselves.  Pouring is also acting  individually  for the
  benefit of consultant David A. Blank. In consideration,  Sonex agrees to execute
  a pledge,  assignment  or grant to  Keller,  Pouring,  Ponticas  and Gulick of a
  shared  security  interest in the  Company's  patents  (the  "Collateral")  with
  respect to the following services,  personal  guarantees,  and liabilities which
  are detailed in the Company's accounting records:
  
       1.  Accrued  compensation,  comprised  of  wages,  vacation,  bonus  and/or
           consulting  fees owed to Keller,  Pouring and Ponticas,  and to Blank
           in an amount to be  determined  by  Pouring.
       2.  Reimbursable  expenses  owed to  Keller, Pouring and Ponticas.
       3.  Notes plus accrued interest payable to Keller and Gulick.
       4.  Personal financial  guarantees by Pouring for the payment by the
           Company of charges  accumulated  with respect to business  credit card
           accounts and pursuant  to  equipment  leases.
       5.  Payments  for  continued  services by Pouring, Ponticas and Keller.
  
           Sonex is to receive the following consideration:
  
       1.  Keller will provide the Company additional cash for working capital of
           $25,000 pursuant to a Promissory Note payable by March 31, 2005.
       2.  Keller and Gulick will agree to extend to March 31, 2005 the due dates
           of all presently outstanding notes and will agree to amend such notes
           to release the collateral presently provided by cash payments received
           from Company revenues.
       3.  Pouring, Ponticas and Keller will agree to continue to provide services
           to the Company in their present capacities under existing compensation
           arrangements for the immediately foreseeable future under the risk of
           the Company's being unable to pay outstanding compensation and/or
           current compensation as earned.
       4.  Pouring, Ponticas and Keller will agree to stay any demand for
           immediate payment of outstanding compensation through March 31, 2005.
  
           It is the  intention  of  Sonex  to  obtain  legal  counsel  as soon as
  practical  to  prepare  a  security  and/or  other  similar  agreement(s)  to be
  effective  January 7, 2005 (the  "Security  Agreement")  to record  formally the
  intent of the parties as outlined herein.  It is the intention of the parties to
  further share the security interest in the Collateral with additional  potential
  lenders  or  others  as  necessary  for  the  benefit  of the  Company  and  its
  shareholders.
  
           Signed this 7th day of January, 2005, at Annapolis, Maryland.
  
  ------------------
  Michael I. Keller
  
  ------------------
  Andrew A. Pouring
  
  ------------------
  George E. Ponticas
  
                                SONEX RESEARCH, INC.
  
  By:      ------------------                  ------------------
           Andrew A. Pouring                   George E. Ponticas
           Chief Executive Officer             Chief Financial Officer
  
                                   EXHIBIT 2
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                  DECEMBER 31, 2004
  
                                   SECOND SECURITY
  
  Services:
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  325,513
  Ponticas   CFO & Secretary                                     219,659
  Keller     Director of Business Development & Program Manager   86,015  631,187
  
  Notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         109,206
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,217  134,423
  
  Financial guarantees:
  
  Pouring    Capital One VISA                                     24,797
  Pouring    Bank of America (Fleet) VISA                         16,092
  Pouring    Equipment lease obligations                          27,021   67,910
                                                                          -------
  
             Total                                                        833,520
  
                                    EXHIBIT 2.1
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 3, 2005
  
  Second security:
  
  Services through Dec 2004:
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  323,254
  Ponticas   CFO & Secretary                                     210,598
  Keller     Director of Business Development & Program Manager   83,270  617,122
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         109,206
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,217  134,423
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     23,415
  Pouring    Equipment lease obligations                          25,012   48,427
                                                                          -------
  
             Total                                                        799,972
  
                                   EXHIBIT 2.2
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    MARCH 31, 2005
  
  Second security:
  
  Services through Dec 2004:
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  323,513
  Ponticas   CFO & Secretary                                     207,713
  Keller     Director of Business Development & Program Manager   83,270  614,496
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         110,774
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,587  136,361
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     21,717
  Pouring    Equipment lease obligations                          23,986   45,703
                                                                          -------
  
             Total                                                        796,560
  
                                    EXHIBIT 2.3
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                    JUNE 30, 2005
  
  Second security:
  
  Services through Dec 2004:
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  323,513
  Ponticas   CFO & Secretary                                     195,599
  Keller     Director of Business Development & Program Manager   83,270  602,382
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         112,360
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,961  138,321
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     18,721
  Pouring    Equipment lease obligations                          20,818   39,539
                                                                          -------
  
             Total                                                        780,242
  
                                   EXHIBIT 2.4
  
                                SONEX RESEARCH, INC.
                           OBLIGATIONS SECURED BY PATENTS
                                 SEPTEMBER 30, 2005
  
  Second security:
  
  Services through Dec 2004:
  
    Name                         Services                         Amount
    ----                         --------                         ------
  
  Pouring    Chairman, CEO, President & Chief Technical Officer  317,513
  Ponticas   CFO & Secretary                                     165,022
  Keller     Director of Business Development & Program Manager   75,250  557,785
  
  Pre-2005 notes & interest payable:
  
                           Date and Description
                           --------------------
  
  Gulick     3/27/02, 6/25/03 & 3/16/04 - Operating cash         107,603
  Keller     8/13/04 & 12/17/04 - Operating cash                  25,378  132,981
  
  Pre-2005 financial guarantees:
  
  Pouring    Capital One VISA                                     10,713
  Pouring    Equipment lease obligations                          17,512   27,685
                                                                          -------
  
             Total                                                        718,451