EXHIBIT 10.2

GUC SUBORDINATED PLAN NOTE

$1,000,000      , 2006

FOR VALUE RECEIVED and intending to be legally bound, the undersigned, Xybernaut
Corporation, a Delaware corporation (“XC”), in all capacities, including,
without limitation, as successor-by-merger to Xybernaut Solutions, Inc., a
Virginia corporation (“XSI”) and a reorganized debtor (post-merger XC, “XYB”),
promises to pay, in lawful money of the United States of America, to the order
of Howard S. Cohen, solely in his capacity as the XYB unsecured creditor
representative (“Representative”) and not in his individual capacity, c/o
Parente Randolph, LLC, 824 Market Street, Suite 809, Wilmington, DE 19801 (or
such other address as Representative may otherwise designate to XYB in writing
as set forth herein), his successors and assigns, if any, the maximum aggregate
principal sum of One Million Dollars ($1,000,000), or such lesser sum which
represents the principal balance outstanding under this GUC Subordinated Plan
Note (this “Note”) established pursuant to the provisions of that certain
Debtors’ Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code of XYB dated October 11, 2006 (as it may be amended or modified, the
“Plan”), which became effective on      , 2006 (the “Effective Date”). All
capitalized terms used herein without further definition shall have the
respective meanings ascribed thereto in the Plan.

1. Definitions.

1.1. “Consolidated EBITDA” means, for any period, consolidated net income of XYB
and its consolidated subsidiaries for such period, plus an amount that in the
determination of consolidated net income for such period has been deducted for
(without duplication): (i) interest expense, (ii) charges against income for
taxes, (iii) depreciation expense, amortization expense and other non-cash
charges; provided, however, that Consolidated EBITDA shall not include, for any
period, any consolidated net income (or related add-backs) to the extent
allocable solely to an Excluded Business so long as XYB and its consolidated
subsidiaries segregate, in a commercially reasonable manner, such consolidated
net income (and related add-backs) and the applicable amounts set forth in the
definition of “Excess Cash Flow” from the calculation of such items for the
remaining portion of the business of XYB and its consolidated subsidiaries in
their respective books and records and financial statements. For avoidance of
doubt, consolidated net income shall include income from asset dispositions
outside of the ordinary course of business.

1.2. “ERC” means East River Capital LLC, a Delaware limited liability company.

1.3. “Excess Cash Flow” means, for any period, Consolidated EBITDA for such
period minus the sum of the following amounts (which amounts shall exclude all
such amounts allocable to an Excluded Business if the consolidated net income of
such Excluded Business is excluded from the calculation of Consolidated EBITDA
for such period): (i) non-financed capital expenditures made by XYB and its
consolidated subsidiaries during such period, (ii) amounts paid in cash by such
entities in respect of taxes during such period, (iii) amounts paid in cash in
respect of principal and interest payments to parties unrelated to ERC,
(iv) interest income for such period, (v) to the extent included in the
determination of consolidated net income of XYB and its consolidated
subsidiaries for such period, the proceeds of the sale, assignment, license,
transfer or other disposition of any IP Assets existing as of the Effective Date
(and royalties or proceeds therefrom or thereof) to a bona fide transferee other
than an affiliate of ERC received by such entities during such period and
(vi) to the extent included in the determination of consolidated net income of
XYB and its consolidated subsidiaries for such period, the cash proceeds of the
Litigation Fund received by such entities during such period.

1.4. “Excluded Business” shall mean any business acquired by XYB or its
consolidated subsidiaries from a third party (including ERC or its affiliates)
following the Effective Date.

1.5. “GAAP” shall mean generally accepted accounting principles in the United
States of America in effect from time to time.

1.6. “Senior Obligations” means, collectively, (i) all outstanding indebtedness
under that certain Amended and Restated Secured Promissory Note, dated May 1,
2006, by XC and XSI in favor of ERC and related loan documents (collectively the
“DIP Loan Documents”), in the aggregate principal amount of $     [to be
agreed], minus any principal payments thereon, plus interest at the rate of 15%
per annum, plus all premium, fees, charges, indemnified amounts and reasonable
out of pocket costs and expenses under the DIP Loan Documents, in each case,
which have been approved by the Bankruptcy Court pursuant to a postpetition
financing order; (ii) the Senior Revolving Loan Obligations; (iii) all
indebtedness under that certain ERC plan exit term facility to XYB in the
maximum principal amount of $575,000 minus any principal payments thereon, plus
interest at the rate of 15% per annum, plus all fees and other amounts
(including, without limitation, reasonable out-of-pocket costs and expenses)
payable in accordance with the terms thereof incurred prior to the Effective
Date in the amount of $     [to be agreed], plus all reasonable fees and other
amounts payable in accordance with the terms thereof incurred on and after the
Effective Date; and (iv) reasonable extensions of credit to XYB or to the
Litigation Fund, as appropriate, to fund — (x) costs incurred by the Litigation
Fund in respect of certain XYB claims and XYB creditor claims asserted by XYB
and the Litigation Fund on behalf of XYB and XYB creditors, and (y) costs
incurred by XYB in respect of or relating to the maintenance of the IP Assets,
which existed and were active as of the Effective Date — plus interest at a rate
of 15% per annum; provided, however, that the Senior Obligations shall be (or,
for purposes of this Note, shall be deemed to be) permanently reduced
dollar-for-dollar by (A) the net proceeds of the sale, assignment, license,
transfer or other disposition of any IP Assets existing as of the Effective Date
(and royalties or proceeds therefrom or thereof), (B) the net proceeds of the
Litigation Fund to the extent authorized to be paid to, and authorized to be
received by, XYB or ERC (for the avoidance of doubt, if payment and receipt of
such proceeds are authorized, but such net proceeds are not received by XYB or
ERC, by reason of an action taken by an entity unaffiliated with and otherwise
unrelated to XYB or ERC or a limitation on such payment or receipt up by order
or direction of a court of competent jurisdiction upon motion by an entity
unaffiliated with and otherwise unrelated to XYB or ERC , then Senior
Obligations shall not be reduced by such net proceeds until such limitation is
released or made ineffective whether by agreement or court order), and (C) 100%
of Excess Cash Flow for each fiscal quarter commencing with the first fiscal
quarter ending on or after the Effective Date.

1.7. “Senior Revolving Loan Obligations” means all indebtedness under that
certain ERC plan exit postpetition revolving credit facility to XYB in the
original commitment amount of $375,000, as such commitment may be increased from
time to time, plus interest at a rate of 15% per annum, plus a premium equal to
62.5% of ERC’s total expenses for the period from May 15, 2006 through the
Effective Date, plus interest on such premium at a rate of 15% per annum, plus
reasonable out-of-pocket costs and expenses, plus all reasonable fees and other
amounts (including, without limitation, reasonable out-of-pocket costs and
expenses) payable in accordance with the terms thereof incurred prior to the
Effective Date, plus all reasonable fees and other amounts payable in accordance
with the terms thereof on or after the Effective Date, provided that in order
for the indebtedness and other obligations under such revolving credit facility
to constitute part of the “Senior Revolving Obligations”, (y) the proceeds of
such revolving credit facility shall be expressly required to be used solely to
fund the working capital of XYB (and not to fund, e.g., fixed asset purchases or
merger and acquisition activity), which shall include, without limitation,
business operations, employee compensation and reasonable advisory fees, and
(z) in connection with any increase in the commitment amount of such revolving
credit facility above $375,000, such increase shall be conditioned on permanent
modifications to the revolving credit facilities pursuant to which all future
advances under the increased commitment shall be predicated on a commercially
reasonable, working capital asset-based lending formula.

2. Construction. As used in this Note, accounting terms, to the extent not
defined, shall have the respective meanings given to them under GAAP,
consistently applied.

3. Term. This Note terminates on the first Business Day following the fifth
anniversary of the Effective Date (the “Termination Date”); provided, however,
that such termination shall not be effective with respect to any claims on
account of (i) principal and interest, if any, hereunder due and owing on the
Termination Date (irrespective of the operation of Section 6 hereof), (ii) any
Event of Default (as defined below) occurring prior to the Termination Date or
(iii) interest or reasonable expenses accruing after the Termination Date on or
with respect to claims referred to in the preceding clauses (i) or (ii).

4. Payment. XYB shall pay the outstanding principal balance of this Note in an
amount equal to 50% of the sum of Excess Cash Flow for each fiscal quarter,
commencing with the first fiscal quarter ending on or after the Effective Date,
payable upon delivery of the financial statements and certificate to
Representative referred to in and required by Section 5 below for such fiscal
quarter but in any event not later than 45 days after the end of each such
fiscal quarter; provided, however, that no principal payment under this Note
shall accrue or be payable in respect of any fiscal quarter that occurs during a
Blockage Period (as defined below) unless such Blockage Period ends on or prior
to the last day of such fiscal quarter.

5. Reporting. XYB shall deliver to Representative within 45 days after the end
of each fiscal quarter, (i) an unaudited consolidated balance sheet of XYB and
unaudited consolidated statements of income and stockholders’ equity and cash
flow of XYB reflecting results of operations from the beginning of the fiscal
year to the end of such quarter and for such quarter, and (ii) to the extent
applicable, an unaudited consolidated balance sheet of XYB and unaudited
consolidated statements of income and stockholders’ equity and cash flow of XYB
reflecting results of operations from the beginning of the fiscal year to the
end of such quarter and for such quarter, which consolidated balance sheet and
consolidated statements of income and stockholders’ equity and cash flow shall
segregate the consolidated net income (and related add-backs) of the Excluded
Business and the applicable amounts of the Excluded Business set forth in the
definition of “Excess Cash Flow” from the calculation of such items for the
remaining portion of the business of XYB and its consolidated subsidiaries, in
each case, prepared on a basis consistent with prior practices and complete and
correct in all material respects. XYB shall cause all such reports to be
prepared in accordance with GAAP applied consistently throughout the periods
reflected therein. All such reports shall be accompanied by a certificate of the
chief financial officer of XYB on behalf of XYB setting forth in reasonable
detail the calculation of Excess Cash Flow for the applicable fiscal quarter.

6. Subordination.

(a) Payment under this Note by XYB to the Representative shall be subordinated
to the repayment of the Senior Obligations by XYB (but not to any other
indebtedness or obligations owing to ERC). No payments shall be made or accepted
under this Note until all Senior Obligations (other than (i) contingent
indemnification obligations for which no claim has been made and (ii) the Senior
Revolving Loan Obligations) are paid in full; provided, however, that following
payment in full of all Senior Obligations (other than (i) contingent
indemnification obligations for which no claim has been made and (ii) the Senior
Revolving Loan Obligations), and so long as the Senior Revolving Loan
Obligations are not in default and have not been accelerated (and the
commitments thereunder terminated), XYB shall make, and Representative shall be
entitled to accept, any and all payments required under this Note. Any period
during which payments under this Note are not permitted to be made or accepted
pursuant to this Section 6 shall constitute a “Blockage Period”. Until all
Senior Obligations (other than (i) contingent indemnification obligations for
which no claim has been made and (ii) the Senior Revolving Loan Obligations) are
paid in full, the Representative shall not commence any lawsuit, action or
proceeding of any kind against XYB or against its properties or assets, upon or
in respect of this Note, to recover all or any part of any amounts owing under
this Note, or join with any creditors of XYB to commence any involuntary
bankruptcy or similar proceeding against XYB (each an “Enforcement Action”);
provided, however, that acceleration of this Note upon the occurrence of an
Event of Default shall not constitute an Enforcement Action. In addition,
following payment in full of all Senior Obligations (other than (i) contingent
indemnification obligations for which no claim has been made and (ii) the Senior
Revolving Loan Obligations), the Representative shall not take any Enforcement
Action if the Senior Revolving Loan Obligations have been accelerated (and the
commitments thereunder terminated) as a result of an event of default
thereunder; provided, however, that in the absence of such acceleration (and
commitment termination), the Representative may take any and all Enforcement
Actions following the occurrence of an Event of Default hereunder.

(b) If ERC elects to convert any of the Senior Obligations into a debt or equity
security of XYB with economic terms no less favorable to XYB than the economic
terms of such Senior Obligations prior to conversion, then the obligations of
XYB under such security shall likewise constitute Senior Obligations; provided,
however, that for purposes of determining whether payments under this Note may
be made and accepted pursuant to Section 6(a) above, such obligations (without
duplication) shall be deemed to be reduced dollar-for-dollar in accordance with
the proviso contained in the definition of “Senior Obligations”.

7. Redemption. At any time during the period from the Effective Date through the
second anniversary of the Effective Date (the “Redemption Period”), whether or
not an Event of Default exists, XYB may redeem this Note by (i) delivering to
Representative a written notice of redemption in substantially the form attached
hereto as Exhibit A executed by XYB and acknowledged and agreed to by ERC (such
notice, a “Redemption Notice”), and (ii) paying the Representative the sum of
$65,000. Following the Redemption Period, XYB may redeem this Note by prepaying
the full amount owing under this Note. Any redemption of this Note, whether
during or following the Redemption Period, shall be permitted without penalty or
premium.

8. Events of Default and Remedies. An “Event of Default” shall occur hereunder
if XYB (i) fails to make any payment when due hereunder, (ii) otherwise breaches
any provision hereof, (iii) becomes the subject of a bankruptcy case or similar
insolvency proceeding or an assignment for the benefit of creditors or similar
“out of court” debt readjustment process, (iv) ceases operations or sells or
otherwise disposes of substantially all of its assets, (v) sells or otherwise
disposes of any assets (including by way of investments in subsidiaries), other
than immaterial assets, and the transferee thereof does not become a joint and
several co-maker under this Note at or prior to the time of such disposition
pursuant to documentation reasonably acceptable to the Representative (in the
event that such transferee becomes a co-maker under this note, then all
references to XYB contained in this Note thereafter shall be deemed to include
such transferee in addition to XYB), or (vi) is the subject of a change of
control whereby ERC ceases to own and control, directly or indirectly,
beneficially and of record, at least 50% of the voting and economic interests in
XYB. If an Event of Default occurs, (y) all amounts owing under this Note shall
bear interest at 15% per annum from the date of the occurrence of the Event of
Default (and such interest rate shall continue to apply whether or not judgment
shall be entered on this Note), and (z) all amounts owing under this Note shall
be immediately due and payable without notice or demand and, subject to
Section 6 hereof, the Representative may exercise from time to time any of the
rights and remedies available under this Note or under applicable law.

9. Representations and Warranties. XYB hereby represents and warrants to the
Representative that:

(a) XYB is duly organized, validly existing and in good standing under law, has
full power, authority and legal right to execute, deliver and perform under this
Note and has taken all necessary corporate and legal action to authorize the
execution, delivery and performance of this Note on the terms and conditions
hereof;

(b) this Note constitutes the legal, valid and binding obligation of XYB
enforceable against XYB in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law);

(c) the execution, delivery and performance by XYB of this Note will not violate
the charter, bylaws or other corporate rules of XYB or any provision of law or
regulation or of any judgment, order or decree of any court, arbitrator or
governmental authority or of any agreement of any nature whatsoever, binding
upon XYB or its assets; and

(d) except for Bankruptcy Court approval, which has been obtained, no consent,
authorization or approval of, filing with, notice to or exemption from any
governmental authority is required in connection with the execution, delivery,
performance, validity or enforceability of this Note.

10. Notices. All notices, requests and demands to or upon XYB, ERC or the
Representative to be effective shall be in writing (including by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
sent, confirmation of receipt received, addressed as follows or to such other
address as may be hereafter notified by the parties hereto:

If to XYB:

 
Xybernaut Corporation 5175 Parkstone Drive, Suite 130 Chantilly, VA 20151-3832
Attn: Perry L. Nolen Facsimile:703-480-0488
With a copy to:
 

     
 
   
 
  McGuireWoods, LLP
100 N. Tryon Street
Suite 2900
Charlotte, NC 28202
Attention:Thomas E. Cabaniss
Telecopy No.:(704) 373-8824
 
   
 
  If to the Representative:
 
   

     
Howard S. Cohen
c/o Parente Randolph, LLC
 

 
    824 Market Street, Suite 809

 
   
Wilmington, DE 19801
Attention:
Telecopy No.:
 
Howard S. Cohen
(302) 428-0999
 
   
If to ERC:
 

 
 

      James A. Coyne

      East River Capital LLC

  200   Nyala Farm Road

      Westport, Connecticut 06880

      Fax: (203) 341-9988

With a copy to:

      Skadden, Arps, Slate, Meagher & Flom LLP

 
   
Four Times Square
New York, NY 10036
Attention:
Telecopy No.:
 

D. J. Baker
(917) 777-2150

      Miles & Stockbridge, P.C.

 
   
1751 Pinnacle Drive
Suite 500
McLean, VA 22102
Attention:
Telecopy No.:
 

Brian F. Kenney
(703) 610-8686

11. Miscellaneous.

(a) This Note shall bind XYB and its successors and assigns, and the benefits
hereof shall inure to the benefit of the Representatives and its successors and
assigns; provided, however, that neither XYB or the Representative may assign or
delegate any of its rights or duties hereunder without the prior written consent
of the other party hereto, and any attempted assignment without such consent
shall be null and void.

(b) XYB hereby forever waives presentment, protest, demand, notice of nonpayment
and all other notices in connection with the delivery, acceptance, performance
or enforcement of this Note. XYB also forever waives all defenses based on
suretyship.

(c) This Note shall be governed by and construed in accordance with the
substantive laws of the State of Delaware. Any judicial proceeding arising out
of or relating to this Note may be brought in the Bankruptcy Court and each
party accepts the non-exclusive jurisdiction of the Bankruptcy Court.

(d) The provisions of this Note are to be deemed severable and the invalidity or
unenforceability of any provision shall not affect or impair the remaining
provisions of this Note which shall continue in full force and effect.

(e) This Note contains the entire agreement between the parties relative to the
subject matter hereof. No modification, amendment or waiver of, or consent to
any departure by XYB from, any provision of this Note will be effective unless
made in a writing signed by the Representative, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.

(f) No delay or omission on the Representative’s part to exercise any right or
power arising hereunder will impair any such right or power or be considered a
waiver of any such right or power, nor will the Representative’s action or
inaction impair any such right or power. The Representative’s rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Representative may have under other agreements, at law or in
equity.

(g) XYB agrees to pay on demand, to the extent permitted by law, all reasonable
costs and expenses incurred by the Representative in the enforcement of its
rights in this Note, including without limitation reasonable attorneys’ fees and
expenses.

(i) All parties acknowledge that each party and its counsel have reviewed this
Note and that any rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the
interpretation of this Note.

12. WAIVER OF JURY TRIAL. ALL PARTIES IRREVOCABLY WAIVE ANY AND ALL RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE
RELATING TO THIS NOTE. ALL PARTIES ACKNOWLEDGE THAT THE FOREGOING WAIVER IS
KNOWING AND VOLUNTARY.

* * * * *

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IN WITNESS WHEREOF, and intending to be legally bound hereby, XYB has executed
this Note as of the day and year first above written.

XYBERNAUT CORPORATION

By:
Name:
Title:

AGREED AND ACKNOWLEDGED
as of the date first above written:

PARENTE RANDOLPH, LLC

as Estate and Creditor Representative

By:
Name:
Title:

EAST RIVER CAPITAL LLC

By:
Name:
Title:

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EXHIBIT A
Form of Redemption Notice

     , 2006

Howard S. Cohen, as a
XYB unsecured creditor representative
     
     
     

RE: Redemption Notice under GUC Subordinated Plan Note, dated as of      , 2006
(the “Note”), by Xybernaut Corporation (“XYB”) in favor of Howard S. Cohen, as a
XYB unsecured creditor representative

Dear Mr. Cohen:

Reference is made to the Note. All capitalized terms used herein without further
definition shall have the respective meanings ascribed thereto in the Note.

This notice constitutes the Redemption Notice described in Section 7 of the
Note. XYB will redeem the Note on or about      , 2006 (the “Redemption Date”)
by paying you the sum of $65,000. If you do not receive such sum in good cleared
funds on or prior to the Redemption Date, then this notice shall be null and
void. XYB represents and warrants that the Redemption Date is prior to the end
of the Redemption Period and that if the Redemption Date is prior to the end of
the Subordination Period, then ERC has consented to the redemption (as further
evidenced by ERC’s signature below).

Very truly yours,

XYBERNAUT CORPORATION

By:

Name/Title:

AGREED AND ACKNOWLEDGED
as of the date first above written:

EAST RIVER CAPITAL LLC

By:
Name/Title:

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