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Sample Business Contracts

Employment Agreement - Xybernaut Corp. and Steven A. Newman

Employment Forms

  • Employment Agreement. Employers can customize an employment agreement that states the salary, benefits, working hours and other important provisions for their new or existing employee.
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  • Commission Agreement. Employers who compensate their sales employees based on commissions can prepare an agreement to reduce misunderstandings by specifying the base salary and how commissions are calculated.
  • Executive Employment Agreement. Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.
  • Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.
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                              EMPLOYMENT AGREEMENT


          EMPLOYMENT  AGREEMENT dated April 29, 2003, effective as of January 1,
2003 (this "Agreement"), by and between STEVEN A. NEWMAN (the "Executive"),  and
XYBERNAUT CORPORATION, a Delaware corporation (the "Company").

          WHEREAS,  the  Executive  has  been  employed  as  Vice  Chairman  and
Executive Vice President of the Company; and

          WHEREAS,  the Company desires to employ the Executive as the President
and Chief Operating Officer of the Company and the Executive desires to continue
his employment  with the Company in the  aforementioned  capacity,  all upon the
terms and provisions, and subject to the conditions set forth in this Agreement.

          NOW,  THEREFORE,  in  consideration  of the  foregoing  and the mutual
covenants  and  agreements   contained  herein,  and  other  good  and  valuable
consideration,   the  receipt  and  legal   sufficiency   of  which  are  hereby
acknowledged, the parties hereby agree as follows:

          Section 1. Definitions.  As used in this Agreement the following terms
shall have the meanings set forth in this Section 1:

          (a)  "Affiliate"  of any  Person  means any  stockholder  or person or
entity controlling,  controlled by under common control with such Person, or any
director,  officer or key  executive  of such Person or any of their  respective
relatives. For purposes of this definition, "control," when used with respect to
any  Person,  means the power to direct  the  management  and  policies  of such
Person,  directly  or  indirectly,  whether  through  the  ownership  of  voting
securities,   by  contract  or  otherwise;   and  the  terms  "controlling"  and
"controlled" have meanings that correspond to the foregoing.

          (b) "Cause" shall mean (i) the Company being subjected to any criminal
liability  under any applicable law as a result of any action or inaction on the
part of the  Executive,  which the  Executive  did not, at the time,  reasonably
believe to be in the best  interests  of the  Company;  (ii) the  conviction  or
admission of the Executive of, or plea by the Executive of nolo  contendre to, a
felony or crime involving moral turpitude which the Board of Directors concludes
is  likely to have a  material  and  adverse  effect  on the  reputation  of the
Company; (iii) if the Executive is chronically addicted to any narcotic or other
illegal or controlled  substance or repeatedly  abuses any alcoholic  product or
any  prescription  stimulants  or  depressant,  as  determined  by  a  physician
designated  by the  Company,  which in the  reasonable  opinion  of the Board of
Directors of the Company materially  interferes with Executive's  performance of
his duties and  obligations  hereunder;  (iv) the  Executive  commits any act of
fraud,  or  steals or  misappropriates  any asset or  property  of the  Company,
including, without limitation, any act of theft or embezzlement; or (v) a breach
of a material provision of this Agreement by the Executive which is not cured by
the Executive  within ten (10) business days after written notice of such breach
is received by the Executive from the Company.



<PAGE>

          (c)  "Change  of  Control"  shall  mean the  occurrence  of any of the
following:  (i) a Person or group of Persons,  other than any current  member of
the Board of Directors,  obtains beneficial ownership of at least thirty percent
(30%) of the  outstanding  capital  stock of the  Company;  (ii) a change in the
membership of more than fifty percent (50%) of the current Board of Directors in
any twelve (12) month period; or (iii) a sale of all or substantially all of the
assets of the Company and its subsidiaries.

          (d) "Common  Stock"  shall mean the common  stock,  par value $.01 per
share,  of the  Company,  and any  other  class of common  stock of the  Company
created  after  the date of this  Agreement  in  accordance  with the  Company's
Certificate of Incorporation and applicable law.

          (e) "Competing Business" shall mean any business,  enterprise or other
Person that as one of its businesses or  activities,  is engaged in the business
of  manufacturing,   selling,  marketing,  licensing  or  distributing  wearable
computers  or the  solutions  associated  therewith  that  are  provided  by the
Company.

          (f) "Confidential and Proprietary  Information" shall mean any and all
(i) confidential or proprietary information or material not in the public domain
about or relating to the business,  operations, assets or financial condition of
the Company or any  Affiliate of the Company or any of the Company's or any such
Affiliate's  trade  secrets,   including,   without  limitation,   research  and
development  plans or projects;  data and reports;  computer  materials  such as
programs,  instructions and printouts;  formulas;  product testing  information;
business improvements,  processes,  marketing and selling strategies;  strategic
business  plans (whether  pursued or not);  joint venture  strategies;  budgets;
unpublished financial statements;  licenses;  pricing, pricing strategy and cost
data;  information  regarding the skills and  compensation  of  executives;  the
identities of clients and potential clients;  intellectual  property  strategies
and any work on any patents,  trademarks and tradenames,  prior to any filing or
the use thereof in  commerce;  pricing,  timing,  sales  terms,  service  plans,
methods,  practices,   strategies,   forecasts,  know-how  and  other  marketing
techniques;  and (ii)  information,  documentation or material not in the public
domain by virtue of any action by or on the part of the Executive, the knowledge
of which  gives or may give the  Company  or any  Affiliate  of the  Company  an
advantage over any Person not possessing such information.  For purposes hereof,
the  term  Confidential  and  Proprietary  Information  shall  not  include  any
information  or material (i) that is known to the general  public other than due
to a breach of this  Agreement  by the  Executive  or (ii) was  disclosed to the
Executive by a Person who the Executive did not reasonably  believe was bound to
a confidentiality or similar agreement with the Company.

          (g)  "Employment  Term" shall have the  meaning  given to that term in
Section 2 hereof.

          (h) "GAAP" shall mean  generally  accepted  United  States  accounting
principles, as from time to time in effect.

          (i) "Good Reason" shall mean (i) a substantial  change to or reduction
in  the   duties   or   responsibilities   of  the   Executive   such  that  the
responsibilities   of  the  Executive  are  no  longer   commensurate  with  the
Executive's office with the Company as set forth herein;  (ii) the



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<PAGE>

occurrence  of a Change  of  Control;  provided  that in order  for a Change  of
Control to constitute  "Good Reason" the factors set forth in items (i) or (iii)
shall have also occurred;  (iii) a change in the Executive's office from that of
President and Chief  Operating  Officer of the Company which is not concurred in
by the Executive  within three (3) months of its occurrence;  or (iv) the breach
of a material term or  provisions of this  Agreement by the Company which is not
cured by the Company  within ten (10) business days after written notice of such
breach is received by the Company from the Executive.

          (j) "Gross Revenues" for each twelve (12) month period during the Term
shall have the meaning of gross revenues of the Company set forth in the audited
annual financial statements of the Company for the applicable twelve (12) months
and which shall be determined  in  accordance  with GAAP applied on a consistent
basis.

          (k)  "Incapacity"  shall  mean  any  illness  or  mental  or  physical
incapacity or disability which prevents the Executive from performing his duties
or  obligations  hereunder for a continuous  period of one hundred  twenty (120)
consecutive  days or for shorter  periods  aggregating  one hundred eighty (180)
days within any consecutive twelve (12) month period.

          (l)  "Inventions"  shall mean  inventions,  discoveries,  concepts and
ideas,  whether patentable or not,  including,  without  limitation,  processes,
methods,  formulae and techniques,  and improvements thereof or know-how related
thereto, concerning any business activity of the Company or any Affiliate of the
Company, with which the Executive becomes, directly or indirectly, involved as a
result  in  whole  or in  part,  directly  or  indirectly,  of  the  Executive's
employment by the Company, or any Affiliate of the Company.

          (m)  "Performance  Bonus" shall have the meaning given to that term in
Section 4(d) hereof.

          (n)  "Person"  shall mean,  without  limitation,  any natural  person,
corporation,  partnership, limited liability company, joint stock company, joint
venture association, trust or other similar entity or firm.

          (o) "Prior  Agreement"  shall mean that certain  Employment  Agreement
dated as of January 1, 2000 between the Executive and the Company.

          (p) "Salary" shall have the meaning given to that term in Section 4(a)
hereof.

          (q) "Without  Cause"  shall mean the  termination  of the  Executive's
employment  hereunder  by the  Company  (and  not  the  Executive),  other  than
termination by the Company due to the  Executive's  death or Incapacity or based
upon Cause.

          Section  2.  Employment  and Term.  The  Company  hereby  employs  the
Executive as the  President and Chief  Operating  Officer of the Company and the
Executive  hereby accepts such  employment in that capacity,  upon the terms and
provisions,  and subject to the conditions,  set forth in this Agreement,  for a
term of two (2)  years,  commencing  on  January 1,  2003,  and  terminating  on
December 31, 2004, unless earlier  terminated as provided in this Agreement (the
"Employment Term").



                                       -3-
<PAGE>

          Section 3. Executive's Duties.

          (a) The Executive shall be the senior executive officer of the Company
responsible  for  the  Company's  operations   including,   without  limitation,
overseeing  the  management  of the  Company's  day-to-day  operations  and  the
strategic planning of the Company.  The Executive shall report directly and only
to the Company's Chief Executive Officer,  Mr. Edward G. Newman and the Board of
Directors of the  Company.  The  Executive  may perform such other duties as may
reasonably  be  assigned  to the  Executive  by the  Company's  Chief  Executive
Officer,  Mr. Edward G. Newman.  The Executive shall also serve as Vice-Chairman
of the Board of Directors of the Company.

          (b) The Executive shall devote substantially all of his business time,
effort,  skill and  attention  to the  business,  operations  and affairs of the
Company and to the  furtherance of the interests,  business and prospects of the
Company.  The Executive  shall perform the  Executive's  duties and  obligations
hereunder  diligently,  competently,  faithfully and to the best of his ability.
Subject to disclosure to the Company's general corporate counsel,  the Executive
may  serve  on the  board  of  directors  or  other  governing  boards  of other
corporations or businesses or industry organizations; provided that such service
does not materially interfere with the Executive's performance of his duties and
obligations hereunder.

          (c) The Executive  agrees to execute policy  statements and agreements
that the Company may,  from time to time,  reasonably  require all of its senior
executive officers to execute.

          Section 4. Compensation.

          (a) In  consideration  of the  performance  of all of the  duties  and
obligations  to be performed by the Executive  hereunder,  the Company agrees to
pay, and the Executive agrees to accept,  for each year of the Employment Term a
salary (the "Salary") at an annual rate of $300,000,  payable in accordance with
the Company's regular payroll practices as from time to time in effect, less all
withholdings and other deductions required to be deducted in accordance with any
applicable federal, state, local or foreign law, rule or regulation.

          (b) At the sole  discretion  of the Board of  Directors of the Company
the Executive may be paid a  discretionary  annual bonus in cash,  Common Stock,
options to purchase Common Stock,  Stock  Appreciation  Rights  ("SAR's") or any
combination  thereof, in such an amount, if any, and based upon such criteria as
the  Board  of  Directors  of  the  Company  may  from  time  to  time  consider
appropriate.

          (c)  Concurrently  with the execution and delivery of this  Agreement,
the Company will issue to the Executive  options to purchase  250,000  shares of
the Company's  Common Stock (the "Signing  Options").  The Signing  Options will
have an exercise  price equal to the average  closing price of the shares of the
Company's  Common Stock equal to the closing price of the shares of Common Stock
on December  31, 2002.  The Signing  Options  shall vest as follows:  125,000 on
December 31, 2003 and 125,000 on December 31, 2004.  The Signing  Options  shall
have a term of ten (10) years and options issued pursuant to the Company's stock
option plans.



                                       -4-
<PAGE>

          (d)  As  additional  consideration  for  Executive's  services  to the
Company  hereunder,  the  Company  shall  pay  Executive  an annual  bonus  (the
"Performance Bonus"), based upon the Company's performance during the Employment
Term,  commencing with the fiscal year from January 1, 2003 through December 31,
2003,  and for the fiscal year from July 1, 2004 through  December 31, 2004,  if
applicable,  if  earned,  in the  form of  options  to  purchase  shares  of the
Company's  Common  Stock,  in an amount  equal to the greater of (i) two percent
(2%) of the  excess  over the  Revenue  Goal (as  hereinafter  defined),  if the
Revenue Goal is attained for the  applicable  fiscal year;  or (ii) five percent
(5%) of the excess over Net Profit  Goal (as  hereinafter  defined),  if the Net
Profit Goal is attained for the applicable fiscal year. For purposes hereof, the
term  "Revenue  Goal" for the fiscal year ended  December  31, 2003 shall mean a
fifty percent (50%) increase of the Company's  revenues for the fiscal year when
compared to the prior fiscal year; and for the fiscal year commencing January 1,
2004,  the Revenue  Goal shall be mutually  agreed to by the  Executive  and the
Compensation  Committee of the  Company's  Board of  Directors  (based upon good
faith  negotiations)  by December 15, 2003. For purposes  hereof,  the term "Net
Profit Goal" shall be the  attainment  of  profitability  by the Company for the
fiscal year ended December 31, 2003; and for the fiscal year commencing  January
1, 2004 shall be as mutually  agreed to by the  Executive  and the  Compensation
Committee  of  the  Company's   Board  of  Directors   (based  upon  good  faith
negotiations)  by December 15, 2003. The  calculation of whether any Performance
Bonus is due for any fiscal year during the Employment Term shall be made by the
Board of  Directors  and upon  the  Company's  issuance  of its  audited  annual
financial  statements.  The Performance  Bonus, if earned,  shall be paid within
thirty (30) days of the publication of the audited  financial  statements of the
Company for the  applicable  year, in the form of options to purchase  shares of
the Company's  Common Stock valued at an exercise  price equal to the average of
the closing  market  price of the shares of the  Company's  Common Stock for the
thirty  (30) days  prior to the end of the  applicable  fiscal  year,  or at the
request of the  Executive,  shares of the Company's  Common  Stock.  Any options
issued in respect  of the  Performance  Bonus  shall be subject to the terms and
provisions  of the  Company's  stock  option  plans as then in effect  or, if no
shares  are  available  under  stock  option  plans  then  in  effect,   or  any
subsequently  enacted stock option plan, as applicable,  except that they may be
exercised  in any amount,  at any time after being  vested until three (3) years
from date of termination of employment and are  irrevocable  during that period.
Should there not be sufficient  options  available or usable under the Company's
stock option  plans as then in effect,  the Company will use its best efforts to
cause a new stock option plan to be adopted which will cover the options subject
to the Performance  Bonus.  If no new stock option plan is adopted,  the Company
will grant SAR's shares of Common Stock or make a cash payment to the  Executive
of substantially similar value, within thirty (30) days from the date that it is
determined   that  a   sufficient   number  of   options   are  not   available.
Notwithstanding  anything set forth in this Section  4(d), in no event shall the
options granted to the Executive,  if any, as the Performance Bonus with respect
to any fiscal year during the  Employment  Term exceed four  percent (4%) of the
Company's outstanding shares of capital stock.

          (e)   Notwithstanding   anything  set  forth  in  Section  4(d),  when
calculating  if the  Revenue  Goal or Net Profit  Goal has been  attained in any
particular  fiscal year, the Company's  Compensation  Committee  shall make such
adjustments as are equitable to the Executive and the Company to account for any
acquisitions of companies or businesses by the Company or its subsidiaries.



                                       -5-
<PAGE>

          (f) Should  there be a Change of  Control of the  Company or any other
transaction  in  which  the  Company  is not the  surviving  entity  during  the
Employment Term, then as part of that transaction,  the Company will require the
surviving  entity to modify their  Agreement in a fair and  equitable  manner to
provide  the  Executive  the same type of  benefits  that he is entitled to earn
pursuant to Section 4(e) of this Agreement.

          (g) All options granted to the Executive  pursuant to the Agreement or
referred  to  herein,  to the  extent  permitted  by  applicable  law,  shall be
transferable  and  assignable.  Any unvested  options  granted to the  Executive
hereunder  shall  fully vest upon a Change in Control or upon a  termination  of
this Agreement by the Executive for Good Reason.

          Section 5. Benefits, Vacation.

          (a) During the  Employment  Term,  the Executive  shall be entitled to
such  insurance and health and medical  benefits as are generally made available
to the senior executives of the Company,  as a group,  pursuant to such plans as
are from time to time  maintained by the Company;  provided,  however,  that the
Executive shall be required to comply with the conditions of coverage  attendant
to such plans.

          (b) During each contract year of the  Employment  Term,  the Executive
shall be  entitled  to six (6)  weeks of  vacation.  The  Executive  shall  take
vacation  at  such  time or  times  as the  Executive  desires,  subject  to the
concurrence  of the  Company  based  upon the then  current  business  needs and
activities  of the Company.  Vacation  shall accrue if unused during the term of
employment.  At the end of each fiscal year,  any unused  vacation  time will be
paid out to Executive based on Executive's annual salary in effect at that time.

          (c) During the  Employment  Term,  the Executive  shall be eligible to
participate  in the profit sharing and other benefit plans that the Company from
time to time makes available to the senior executives of the Company as a group,
subject  to the terms,  provisions  and  conditions  of such  plans,  including,
without limitation, any vesting periods and eligibility criteria.

          (d) During the Employment Term, the Company shall pay to the Executive
a car  allowance of $1,000 per month.  The amounts  paid and/or  provided for in
this Section 5(d) shall be reported by the Company on Internal  Revenue  Service
Form 1099.

          Section 6.  Business  Expenses.  The  Executive  shall be  entitled to
reimbursement for ordinary,  necessary and reasonable business expenses actually
incurred by the Executive  during the Employment  Term in the performance of the
Executive's duties hereunder,  if supported by such reasonable  documentation as
may be required by the Company in accordance with the Company's policies.



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<PAGE>

          Section 7. Termination of Employment Term.

          (a) In the event of the death of the Executive  during the  Employment
Term, the Executive's  employment hereunder shall automatically  terminate as of
the date of  death;  provided,  however,  that the  Executive's  estate or legal
representative,  as the  case may be,  shall be  entitled  to  receive,  and the
Company  shall pay,  any  accrued  and unpaid  Salary for a one (1) year  period
following the date of death, any Performance Bonus that would be payable for the
one (1) year period in which the Executive  died which are properly owing to the
Executive pursuant to Section 6 hereof.

          (b) In the event of the  Executive's  Incapacity,  the Company may, in
its sole discretion, terminate the Executive's employment hereunder upon written
notice  to  the  Executive;   provided,  however,  that  the  Executive  or  the
Executive's  legal  representative,  as the case may be,  shall be  entitled  to
receive,  and the Company shall pay, (i) any accrued and unpaid Salary for a one
(1) year period from the date of termination,  less any amounts  received by the
Executive under any disability  insurance policy maintained by the Company;  and
(ii) any Performance  Bonus that would be payable for the one (1) year period in
which the  Executive's  employment is terminated  (payment of which shall be for
the entire year) due to Incapacity and  reimbursement of business expenses which
are properly  owing to the Executive  pursuant to Section 6 hereof,  through the
date of termination.

          (c) The  Company  shall have the right to  terminate  the  Executive's
employment under this Agreement at any time for Cause upon written notice to the
Executive.  In the event the Executive's  employment  hereunder is terminated by
the Company for Cause,  the Company  shall only be  obligated to pay accrued and
unpaid  Salary  through the date of  termination  and the Company  shall pay any
accrued and  unreimbursed  business  expenses  which are  properly  owing to the
Executive pursuant to Section 6 hereof through the date of termination.

          (d) The  Company  shall have the right to  terminate  the  Executive's
employment  hereunder  Without  Cause at any time upon  thirty  (30) days' prior
written  notice to the  Executive.  If the Company  terminates  the  Executive's
employment hereunder Without Cause prior to December 31, 2003, the Company shall
(i) continue to pay the Salary to the  Executive  provided for  hereunder  for a
period  equal  to the  lesser  of (x)  eighteen  (18)  months  from  the date of
termination and (y) the remaining period of the Employment Term and (ii) pay any
unreimbursed  business  expenses  which  are  properly  owing  to the  Executive
pursuant  to Section 6 hereof  through the date of  termination.  If the Company
terminates the Executive's employment hereunder Without Cause after December 31,
2003, the Company shall (i) continue to pay Salary to the Executive provided for
hereunder  for a period equal to the greater of nine (9) months or the remaining
period of the Employment  Term and (ii) pay an  unreimbursed  business  expenses
which are properly  owing to the Executive  pursuant to Section 6 hereof through
the  date  of  termination.  In  addition,  should  the  Executive's  employment
hereunder be terminated  Without  Cause,  the Company shall pay to the Executive
the  Performance  Bonus,  if any,  for the  entire  contract  year in which  the
termination of the Executive's employment with the Company hereunder occurs. The
Executive shall not be under any obligation to mitigate the Company's obligation
pursuant to this Section 7(d) by securing other employment or otherwise.



                                      -7-
<PAGE>

          (e) The  Executive  shall have the right to terminate  his  employment
with the Company hereunder for Good Reason,  upon not less than thirty (30) days
prior  written  notice  to the  Company.  Should  the  Executive  terminate  his
employment hereunder for Good Reason, the Company shall be obligated to make the
payments  to the  Executive  provided  for  in  Section  7(d)  hereof  upon  the
termination of the Executive's employment by the Company Without Cause.

          (f) The  failure of the  Company to  continue  the  employment  of the
Executive upon  expiration of the entire two (2) year  Employment Term shall not
be considered a termination  of employment for purposes of this  Agreement.  The
Company's obligations with respect to the Performance Bonus for the last year of
the Employment Term, if any, shall survive the expiration of this Agreement.

          Section 8. Inventions.  Any Inventions  originated or conceived by the
Executive  related  to the  Company's  business,  during his  employment  by the
Company or any  Affiliate  of the Company or with the use or  assistance  of the
facilities,  materials  or  personnel  of the  Company or any  Affiliate  of the
Company,  either solely or jointly with others,  during the period of employment
with the Company or any Affiliate of the Company shall be the sole and exclusive
property of the Company.  The Executive hereby irrevocably assigns and transfers
to the  Company  and agrees to  transfer  and assign to the  Company  all of his
right,  title and interest in and to all  Inventions,  and to  applications  for
patents  and  patents  granted  upon such  Inventions  and to all  copyrightable
material  related thereto  developed by the Executive or under his  supervision.
The  Executive  agrees for himself and his heirs and  personal  representatives,
upon the request of the Company and at the Company's  expense,  to do such acts,
to execute such  documents  and  instruments  and to  participate  in such legal
proceedings  as from time to time may be  necessary  or  required  to apply for,
secure, maintain,  reissue, extend or defend the worldwide rights of the Company
in any of the Inventions.

          Section 9. Restrictions Respecting Competing Businesses,  Confidential
Information,  etc. The Executive  acknowledges  and agrees that by virtue of the
Executive's  position  and  involvement  with the  business  and  affairs of the
Company,  the Executive  will develop  substantial  expertise and knowledge with
respect to the most significant aspects of the Company's  business,  affairs and
operations  and will have  access to  significant  aspects of the  business  and
operations of the Company and to Confidential and Proprietary Information of the
Company.

          (a) The  Executive  hereby  covenants  and  agrees  that,  during  the
Employment Term and thereafter,  unless otherwise authorized by the Company, the
Executive  shall  not,  directly  or  indirectly,  under any  circumstance:  (i)
disclose to any other  Person  (other than in the regular  course of business of
the Company) any Confidential and Proprietary  Information,  other than pursuant
to applicable  law,  regulation or subpoena or with the prior written consent of
the  Company;  (ii)  act or  fail to act so as to  impair  the  confidential  or
proprietary  nature of any Confidential and Proprietary  Information;  (iii) use
any Confidential and Proprietary  Information  related to the Company's business
other than for the sole and exclusive  benefit of the Company;  or (iv) offer or
agree to,  or cause or assist in the  inception  or  continuation  of,  any such
disclosure,  impairment or use of any Confidential and Proprietary  Information.
Following the Employment Term, the Executive shall return all documents, records
and other items containing any  Confidential and Proprietary  Information to the
Company  (regardless  of the  medium in



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<PAGE>

which  maintained or stored),  without  retaining any copies,  notes or excerpts
thereof, or at the request of the Company, shall destroy such documents, records
and items (any such  destruction to be certified by the Executive to the Company
in writing).

          (b) The Executive  covenants  and agrees that,  while the Executive is
employed by the Company  and for one (1) year after the  Executive  ceases to be
employed  by the  Company,  if the  Executive  (i)  voluntarily  terminates  his
employment with the Company,  other than a termination by the Executive for Good
Reason or (ii) is terminated by the Company for Cause,  the Executive shall not,
directly or  indirectly,  manage,  operate or  control,  or  participate  in the
ownership,  management,  operation or control of, or otherwise become interested
in (whether as an owner, stockholder,  partner, lender,  consultant,  Executive,
agent,  supplier,  distributor or otherwise) any Competing Business or, directly
or  indirectly,  induce or  influence  any  customer or other  Person that has a
business  relationship  with the Company,  or any  Affiliate of the Company,  to
discontinue or reduce the extent of such relationship or modify its relationship
with the Company in a manner that is materially adverse to the Company; provided
that in the case of a termination  by the  Executive  pursuant to clause (i) the
Company  at all  times  continues  to pay the  amounts  owing  to the  Executive
pursuant to Section 7(b) hereof.  For purposes of this Agreement,  the Executive
shall be deemed to be directly or  indirectly  interested in a business if he is
engaged or  interested  in that business as a  stockholder,  director,  officer,
Executive,  agent,  partner,  individual  proprietor,   consultant,  advisor  or
otherwise,  but  not  if the  Executive's  interest  is  limited  solely  to the
ownership  of  not  more  than  5% of the  securities  of any  class  of  equity
securities of a corporation  or other Person whose shares are listed or admitted
to trade on a national  securities exchange or are quoted on NASDAQ or a similar
means if NASDAQ is no longer providing such information.

          (c) While the  Executive  is  employed  by the Company and for one (1)
year after the Executive ceases to be an employed by the Company,  the Executive
shall not,  directly or indirectly,  solicit to employ for himself or others any
employee of the Company or any  Affiliate  of the Company who was an employee of
the Company or any Affiliate of the Company as of the date of the termination of
the Executive's  employment with the Company, or to solicit any such employee to
leave such  employee's  employment  or join the employ of another,  then or at a
later time;  provided that the foregoing shall not apply to any family member of
the  Executive  who is  employed  by the  Company or any such  Affiliate  or the
Executive's administrative assistant.

          (d) The  parties  agree  that  nothing  in  this  Agreement  shall  be
construed  to limit or negate the common  law of torts,  confidentiality,  trade
secrets, fiduciary duty and obligations where such laws provide the Company with
any broader, further or other remedy or protection than those provided herein.

          (e) Following the termination of the  Executive's  employment with the
Company or the expiration of the Employment Term, the Executive shall return all
Company property in his possession to the Company.

          (f) Because the breach of any of the  provisions of this Section 9 may
result in immediate and irreparable  injury to the Company for which the Company
may not have an  adequate  remedy at law,  the  Company  shall be  entitled,  in
addition to all other rights and



                                      -9-
<PAGE>

remedies,  to a decree of  specific  performance  of the  restrictive  covenants
contained in this Section 9 and to an injunction enjoining such breach,  without
posting a bond or furnishing similar security.

          Section 10. Severability. Each term and provision of this Agreement is
severable; the invalidity, illegality or unenforceability or modification of any
term or provision of this Agreement shall not affect the validity,  legality and
enforceability of the other terms and provisions of this Agreement,  which shall
remain in full  force  and  effect.  Since it is the  desire  and  intent of the
parties that the  provisions of this Agreement be enforced to the fullest extent
permissible  under the laws and public policies applied in each  jurisdiction in
which enforcement is sought,  should any particular  provision of this Agreement
be deemed invalid,  illegal or unenforceable,  the same shall be deemed reformed
and amended to delete that portion that is adjudicated to be invalid, illegal or
unenforceable and the deletion shall apply only with respect to the operation of
such  provision  and to the extent of such  provision  and, to the extent that a
provision  of this  Agreement  would be  deemed  unenforceable  by virtue of its
scope, but may be made enforceable by limitation thereon, each party agrees that
this  Agreement  shall  be  reformed  and  amended  so that  the  same  shall be
enforceable to the fullest extent permissible under the laws and public policies
applied in the jurisdiction in which enforcement is sought.

          Section 11. Assignment.  This Agreement and the rights and obligations
of the parties hereto shall bind and inure to the benefit of each of the parties
hereto, the heirs,  executors,  administrators and legal  representatives of the
Executive and the successors and permitted assigns of the Company.  Neither this
Agreement nor any rights or benefits  hereunder may be assigned by the Executive
or the Company  without  the prior  written  consent of the other party  hereto,
except that the Company may assign any of its rights or obligations hereunder to
any other Person which purchases all or substantially all of the common stock or
assets  of  the  Company  or  is  the   successor  to  the  Company  by  merger,
consolidation, recapitalization or other similar transaction.

          Section 12. Amendment;  Entire Agreement,  etc. This Agreement may not
be modified,  amended,  altered or  supplemented  except by a written  agreement
executed by the parties hereto. This Agreement contains the entire agreement and
understanding  of the parties  hereto with respect to the subject matter of this
Agreement  and  supersedes  all  prior  and/or  contemporaneous  agreements  and
understandings  of any kind and nature  (whether  written or oral)  between  the
parties  with  respect to such subject  matter,  all of which are merged  herein
(including, without limitation, the Prior Employment Agreement).

          Section  13.  Waiver.  Waiver by either  party of either  breach of or
failure to comply with any provision of this  Agreement by the other party shall
not be construed as, or constitute,  a continuing waiver of such provision, or a
waiver of any other breach of, or failure to comply with, any other provision of
this Agreement, any such waiver must be in writing to be limited to the specific
matter  and  instance  for  which it is given.  No waiver of any such  breach or
failure or of any term or condition of this Agreement shall be effective  unless
in a written  instrument and signed by the waiving party and  delivered,  in the
manner required for notices generally, to the affected party.



                                      -10-
<PAGE>

          Section 14. Notices.  All notices,  consents,  directions,  approvals,
instructions,  requests  and other  communications  required or permitted by the
terms of this Agreement to be given to any person shall be in writing, and shall
be delivered  personally or sent by certified  mail,  return  receipt  requested
(postage prepaid) or by telecopy,  to the parties at the following  addresses or
telecopy numbers, as applicable:

          If to the Executive:

                 Dr. Steven. Newman
                 Xybernaut Corporation
                 12701 Fair Lakes Circle
                 Suite 550
                 Fairfax, VA  22033
                 Telecopier: (703) 222-7660

          If to the Company:

                 Xybernaut Corporation
                 12701 Fair Lakes Circle
                 Suite 550
                 Fairfax, VA  22033
                 Attention:  Secretary
                 Telecopier:  (703) 631-6734

                 With a copy to:

                 Jenkens & Gilchrist Parker Chapin LLP
                 The Chrysler Building
                 405 Lexington Avenue
                 New York, NY  10174
                 Attention:  Martin Eric Weisberg, Esq.
                 Telecopier:  (212) 704-6288

or to such other  address as a party may have  furnished to the other parties in
writing in  accordance  herewith.  Any  notice,  consent,  direction,  approval,
instruction,  request  or other  communication  given in  accordance  with  this
Section 14 shall be effective after it is received by the intended recipient.

          Section 15.  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA APPLICABLE
TO  AGREEMENTS  MADE  AND TO BE  PERFORMED  IN THAT  STATE,  WITHOUT  REGARD  OR
REFERENCE  TO ITS  PRINCIPLES  OF  CONFLICTS OF LAWS.  THIS  AGREEMENT  SHALL BE
CONSTRUED AND INTERPRETED  WITHOUT REGARD TO ANY  PRESUMPTION  AGAINST THE PARTY
CAUSING THIS AGREEMENT TO BE DRAFTED.



                                      -11-
<PAGE>

          Section 16.  Arbitration.  The parties  agree that with respect to any
dispute or claim  hereunder,  either party shall be entitled to submit the claim
or dispute to binding  arbitration to be held in Fairfax  County,  Virginia,  in
accordance with the rules and procedures of the American Arbitration Association
(the "AAA").  The party or parties  requesting  arbitration shall serve upon the
other party a demand therefor, in writing,  specifying in detail the controversy
and matter(s) to be submitted to  arbitration.  The selection of arbitrators and
the  arbitration  proceedings  shall be  conducted  pursuant  to the  rules  for
resolution  of  commercial  disputes  promulgated  by the  American  Arbitration
Association  (the  "AAA")  and the  procedures  of the AAA from  time to time in
effect for the resolution of commercial disputes. Each party shall designate one
(1) arbitrator and the two (2) arbitrators  shall designate a third  arbitrator.
If the two (2)  arbitrators are not able to agree on the third  arbitrator,  the
third  arbitrator  shall be  chosen  from a  listing  of  available  arbitrators
designated  by the  AAA in  accordance  with  the  procedures  of  the  AAA.  An
arbitration  conducted  pursuant  to this  Section  16  shall  be the  sole  and
exclusive  remedy for the resolution of any such dispute or claim arising out of
or relating to this Agreement.  The  determination  of the arbitrators  shall be
conclusive and binding on the parties.  The  arbitrators  shall,  in addition to
making an award,  be entitled to determine that the costs and expenses  incurred
by the  prevailing  party in the  arbitration  (including,  without  limitation,
reasonable attorneys' fees and expenses and the costs of the AAA) be paid by the
other party to the arbitration.  Judgment on the decision of the arbitrators may
be entered in any court of competent jurisdiction. Each of Executive and Company
hereby (i) irrevocably  consents to the exclusive  personal  jurisdiction of the
courts of the Commonwealth of Virginia  located in Fairfax County,  Virginia for
this  purpose;  (ii)  waives any right to contest the venue of such  courts;  or
(iii) to assert that such courts constitute an inconvenient forum.

          Section 17.  Headings;  Counterparts.  The headings  contained in this
Agreement  are inserted  for  reference  purposes  only and shall not in any way
affect the meaning,  construction  or  interpretation  of this  Agreement.  This
Agreement may be executed in two (2)  counterparts,  each of which when executed
shall be deemed to be an original, but both of which, when taken together, shall
constitute one and the same document.


                           [INTENTIONALLY LEFT BLANK]




                                      -12-
<PAGE>



          IN WITNESS  WHEREOF,  the Executive and the Company have executed this
Agreement as of the date first above written.





                                      ------------------------------------------
                                      Steven A. Newman




                                      XYBERNAUT CORPORATION


                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title: