EXHIBIT 10.3

GUC DISTRIBUTION AGREEMENT

BETWEEN

XYBERNAUT CORPORATION,

XYBERNAUT SOLUTIONS, INC.

AND

HOWARD S. COHEN

DATED AS OF NOVEMBER __, 2006

1

GUC DISTRIBUTION AGREEMENT

PREAMBLE

This Agreement (the “Agreement”) is made as of this      day of November, 2006,
by and among Xybernaut Corporation and Xybernaut Solutions, Inc., as reorganized
and merged by the confirmed Plan (as that term is defined herein) and pursuant
to State law (“Xybernaut”), on the one hand, and Howard S. Cohen (the “GUC
Representative”) on the other. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Debtors’ Amended Joint
Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated
October 11, 2006, as may be further modified by order of the Bankruptcy Court
(the “Plan”). Notwithstanding the date of execution, this Agreement shall only
become effective on the Effective Date.

RECITALS

WHEREAS, on July 25, 2005, Xybernaut Corporation and Xybernaut Solutions, Inc.
(the “Debtors”) each filed a voluntary petition for relief under chapter 11 of
the Bankruptcy Code, in the Bankruptcy Court; and

WHEREAS, on October 11, 2006, the Debtor filed the Plan with the Bankruptcy
Court; and

WHEREAS, on November      , 2006, the Bankruptcy Court entered an Order
confirming the Plan; and

WHEREAS, pursuant to, and upon the Effective Date of, the Plan, the Debtors’
property and assets shall vest in the Reorganized Debtors pursuant to the terms
of the Plan;

WHEREAS, as provided for in the Plan, Mr. Cohen shall be the GUC Representative;
and

NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Plan Definitions. To the extent an initially capitalized term is not
otherwise defined herein, such term shall have the meaning set forth in the
Plan.

Section 1.2 Defined Terms. As used herein, the terms below shall have the
following meanings:

(a) “Administrative Reserve” has the meaning set forth in Sections 3.1(a)(ii)
and 3.3 hereof.

(b) “Agreement” has the meaning set forth in the Preamble.

(c) “Catch-Up Distribution” has the meaning set forth in Section 3.2(c) herein.

(d) “Debtors” has the meaning set forth in the Preamble.

(e) “Disputed Claims Reserve” has the meaning set forth in Sections 3.1(a)(i)
and 3.2 herein.

(f) “Distributions” has the meaning set forth in Section 3.1(a) herein.

(g) “GUC Representative” has the meaning set forth in the Preamble and as set
forth in Section 1.41 of the Plan.

(h) “Initial Distribution” means, with respect to an Allowed General Unsecured
Claim, the first distribution of Cash made on account of such Allowed General
Unsecured Claim to the holder thereof.

(i) “Indemnified Parties” has the meaning set forth in Section 5.6 hereof.

(j) “One-Year Period” has the meaning set forth in Section 3.4(a) hereof.

(k) “Plan” has the meaning set forth in the Preamble.

(l) “Plan Documents” means any documents, agreements, orders or instruments
evidencing or implementing the Plan, including without limitation this
Agreement, the Plan, the Confirmation Order and documents contained in the Plan
Supplement.

(m) “Reserves” has the meaning set forth in Section 3.1(a) herein.

(n) “Supplemental Distribution” means, on each Distribution Date, the amount of
Available Cash to be distributed to holders of Allowed General Unsecured Claims
under the Plan.

(o) “Unclaimed Property” has the meaning set forth in Section 3.4(a) herein.

(p) “Unclaimed Property Reserve” has the meaning set forth in Section 3.4(a)
herein.

(q) “Underfunded Reserve” means any of the Reserves in which there are
insufficient funds to pay operating expenses or Allowed General Unsecured Claims
which should have been paid from such Reserves.

ARTICLE II

ACCEPTANCE OF POSITIONS AND OBLIGATION TO PAY CLAIMS

Section 2.1 Acceptance. (a) Howard S. Cohen accepts employment as the GUC
Representative of the Debtors’ estates, for the purposes more fully set forth in
the Plan and herein below and implementing the Plan; (b) Howard S. Cohen agrees
to observe and perform all duties and obligations imposed upon the GUC
Representative (as GUC Representative of the Debtors’ estates) under this
Agreement, the Plan, orders of the Bankruptcy Court and applicable law; and (c)
Howard S. Cohen hereby discloses that he is a principal of Parente Randolph,
LLC, the financial advisors of the Creditors’ Committee and may use Parente
Randolph, LLC to assist him in the discharge of his duties hereunder.

Section 2.2 Payment of Claims. Howard S. Cohen, solely in his capacity as the
GUC Representative, agrees to pay from the GUC Distribution Fund all Allowed
General Unsecured Claims in accordance with the terms and conditions of the
Plan, and orders of the Bankruptcy Court, including the Confirmation Order, and
this Agreement. The GUC Representative shall be the only authorized signatory
and disbursement agent in respect of the GUC Distribution Fund.

ARTICLE III

ADMINISTRATION

Section 3.1 Establishment and Maintenance of Reserves and Escrows.

(a) Initial Establishment of Accounts and Reserves. On the Effective Date or as
soon thereafter as practicable, the GUC Representative shall establish the GUC
Distribution Fund, (A) into which shall be deposited the initial distribution of
the $175,000.00 provided by the ERC Term Loan, any portion of the proceeds from
the Litigation Fund in accordance with Section 5.2 of the Plan, and proceeds
from the GUC Subordinated Plan Note, in accordance with Section 5.4 of the Plan,
and (B) from which shall be made all distributions (“Distributions”) (1) on the
Initial Distribution Date on account of General Unsecured Claims that were
Allowed Claims on or before the Effective Date, and (2) on each subsequent
Distribution Date. Further, the GUC Representative shall establish the following
reserves with the amounts in the GUC Distribution Fund (the “Reserves”):

(i) Disputed Claims Reserve. An allocation of an amount in the GUC Distribution
Fund, designated as a “disputed claims reserve,” as described more fully in
Section 3.2 below (the “Disputed Claims Reserve”).

(ii) Administrative Reserve. An allocation of an amount in the GUC Distribution
Fund, designated as an “Administrative Reserve,” as described more fully in
Section 3.3 below (the “Administrative Reserve”).

(b) Subsequent Establishment of Accounts. Reserves and Escrows. On or after the
Effective Date, the GUC Representative (i) shall establish and maintain an
Unclaimed Distributions Reserve as defined in Section 3.4 of the Agreement and
such additional accounts, reserves and escrows as may be required by applicable
law or by order of the Bankruptcy Court and (ii) may establish and maintain such
additional accounts, reserves and escrows as it deems necessary or desirable to
carry out the provisions of the Plan and the Agreement.

(c) Underfunding and Overfunding of Reserves. To the extent that the provisions
of this Agreement require the GUC Representative to fund a Reserve or to
transfer Cash to any Underfunded Reserve and there does not exist sufficient
Cash to fully fund all Reserves, the GUC Representative shall fund the Reserves
and/or the Underfunded Reserve as it deems appropriate and in the best interests
of the General Unsecured Creditors.

Section 3.2 Disputed Claims Reserve.

(a) On the Effective Date (or as soon thereafter as is practicable) and from
time to time thereafter, including on each Distribution Date, the GUC
Representative shall allocate funds within the GUC Distribution Fund to the
Disputed Claims Reserve with an amount estimated by the GUC Representative as
necessary to satisfy the pro-rata share of the Distributions to which holders of
Disputed General Unsecured Claims would be entitled under the Plan as of such
date if such Disputed General Unsecured Claims were Allowed Claims in their
Disputed Claim amount; provided, however, that the GUC Representative on behalf
of the Debtors’ estates may, at any time, file motion(s) pursuant to section
502(c) of the Bankruptcy Code for order(s) estimating and limiting the amount of
Cash which shall be deposited in the Disputed Claims Reserve in respect of any
Disputed General Unsecured Claims, with notice and an opportunity to be heard to
the affected holders of such Disputed General Unsecured Claims.

(b) From time to time and in any event on each Distribution Date, the GUC
Representative shall determine the amount of Cash required to adequately
maintain the Disputed Claims Reserve on and after such date and maintain a
reserve of Cash in such amount. If, and to the extent that, after making and
giving effect to the determination referred to in the immediately preceding
sentence and the distributions described below, the GUC Representative
determines that the Disputed Claims Reserve: (i) contains Cash in an amount in
excess of the amount then required to adequately maintain the Disputed Claims
Reserve, then at any such time the GUC Representative shall allocate such
surplus Cash, first, to any Underfunded Reserve (but only to the extent of any
underfunding) and, next, to the GUC Distribution Fund, or (ii) does not contain
Cash in an amount sufficient to adequately maintain the Disputed Claims Reserve,
then at any such time the GUC Representative shall allocate Cash from any
overfunded Reserve until the deficit in the Disputed Claims Reserve is
eliminated.

(c) After a final order has been entered, or other final resolution has been
reached, with respect to any given Disputed General Unsecured Claim for which
Cash was reserved in the Disputed Claims Reserve, the balance, if any, of Cash
remaining in the Disputed Claims Reserve on account of such Disputed General
Unsecured Claim after making any Initial Distribution or such later distribution
to make such Claim holder receive its pro rata share of amounts already
distributed to other General Unsecured Claim holders (a “Catch-Up Distribution”)
to which the holder of such Claim may have become entitled by virtue of such
final order or other final resolution shall be transferred, first, to any
Underfunded Reserve (but only to the extent of any underfunding) and, next, to
the GUC Distribution Fund.

(d) Notwithstanding that the Allowed amount of any Disputed General Unsecured
Claim is reconsidered under the applicable provisions of the Bankruptcy Code and
Bankruptcy Rules or is Allowed in an amount for which after application of the
payment priorities established by this Plan there is insufficient value to
provide a recovery equal to that received by other holders of Allowed General
Unsecured Claims, no Claim holder shall have recourse against the GUC
Representative or any of his professional consultants, attorneys, advisors, or
his successors or assigns, or any of their respective property.

Section 3.3 Administrative Reserve.

(a) On the Effective Date, a $5,000 reserve shall be established in the GUC
Distribution Fund for the GUC Representative’s distributional fees and expenses
and the GUC Representative may charge the GUC Distribution Fund for any
reasonable excess approved by the Post-Effective Date Creditors’ Committee.

Section 3.4 Unclaimed Distributions Reserve.

(a) If any Distribution to any holder of an Allowed General Unsecured Claim is
returned to the GUC Representative as undeliverable as provided in Section 6.3
of the Plan (“Unclaimed Property”), such Distributions shall be deposited in the
GUC Distribution Fund and ear-marked and designated as an “Unclaimed Property
Reserve” (the “Unclaimed Property Reserve”) and no further Distributions shall
be made to such holder unless and until the GUC Representative has been notified
of the then current address of such holder. Once a Distribution to a General
Unsecured Creditor under the Plan becomes Unclaimed Property, the GUC
Representative shall, subject to the limitations set forth herein and in the
Plan, (i) hold such Unclaimed Property in the Unclaimed Property Reserve solely
for the benefit of such holder or holders which have failed to claim such
Unclaimed Property for the period of one year from the later of (a) the
Effective Date and (b) the date such holder’s General Unsecured Claim is Allowed
(the “One-Year Period”); and (ii) release the Unclaimed Property from the
Unclaimed Property Reserve and deliver to the holder entitled thereto upon
presentation during such One-Year Period of proper proof by such holder of its
entitlement thereto. If the Unclaimed Property remains in the Unclaimed Property
Reserve beyond the One-Year Period, such Unclaimed Property shall revert to the
GUC Distribution Fund for the benefit of all other General Unsecured Claim
holders. Such funds shall not be subject to escheat laws of any state. GUC
Representative shall have no obligation to attempt to locate any holder of an
Allowed General Unsecured Claim other than reviewing the Debtors’ books and
records (including any proofs of claim filed against the Debtors).

Section 3.5 Distributions to Holders of Allowed General Unsecured Claims.

(a) Initial Distributions. The initial distribution of the $175,000.00 provided
by the ERC Term Loan from the GUC Distribution Fund (less reserves established
for fees, costs and expenses and reserves for Disputed General Unsecured Claims,
if any) shall occur within thirty (30) days of the Effective Date and
distributions thereafter shall occur within thirty (30) days of such time as the
amount in the GUC Distribution Fund exceeds $100,000.00.

(b) Additional Distributions. The GUC Representative shall make additional
Distributions and Catch-Up Distributions from the GUC Distribution Fund to
holders of Allowed General Unsecured Claims when and as required under the Plan,
Confirmation Order, this Agreement and the other Plan Documents.

Section 3.6 De Minimis Distributions. Notwithstanding any other provision of the
Plan, other Plan Documents, or this Agreement, the GUC Representative shall not
have an obligation to make Distributions or payments of fractions of dollars,
and whenever any payment of a fraction of a dollar under the Plan would
otherwise be called for, the actual payment made shall reflect a rounding of
such fraction to the nearest whole dollar (up or down), with half dollars being
rounded down. No Cash payment of less than $15.00 shall be made to the holder of
any Allowed General Unsecured Claim.

Section 3.7 Investment of Cash. The GUC Representative shall invest the GUC
Distribution Fund’s Cash, including the Cash in the Reserves, in: (a) direct
obligations of the United States of America or obligations of any agency or
instrumentality thereof that are backed by the full faith and credit of the
United States of America, including funds consisting solely or predominantly of
such securities; (b) money market deposit accounts, checking accounts, savings
accounts or certificates of deposit, or other time deposit accounts that are
issued by a commercial bank or savings institution organized under the laws of
the United States of America or any state thereof; or (c) any other investments
that may be permissible under section 345 of the Bankruptcy Code. Such
investments shall mature in such amounts and at such times as the GUC
Representative, in the GUC Representative’s sole discretion, shall deem
appropriate to provide funds when needed to transfer funds or make payments in
accordance with the Plan and this Agreement. The interest or other income earned
on the investments of the Cash in the GUC Distribution Fund or other reserve,
account or escrow established pursuant to the Agreement, the Plan or any order
of the Bankruptcy Court shall constitute a part of such reserve, account or
escrow unless and until transferred or distributed pursuant to the terms of the
Plan, this Agreement or order of the Bankruptcy Court.

Section 3.8 Treatment of Accounts. For purposes of the Agreement, unless
otherwise ordered by the Bankruptcy Court, the GUC Representative may pool for
investment purposes any funds which may or which are required to be segregated
or placed into separate Reserves, escrows or accounts under the Plan or the
Agreement; provided, however, that the GUC Representative shall treat such funds
as segregated accounts in its books and records. In addition, notwithstanding
any requirement that Distributions hereunder to any holder of an Allowed General
Unsecured Claim on the Initial Distribution Date or any Distribution Date be
made from a specified Reserve, escrow or account, disbursements may be made as a
single aggregate Distribution to such holder of an Allowed General Unsecured
Claim; provided, further, that the GUC Representative shall treat the funds so
distributed as having been distributed from the appropriate Reserve or account
in the GUC Representative’s books and records.

Section 3.9 Use of Assets. All Cash or other property held or collected by the
GUC Representative shall be used solely for the purposes contemplated by the
Plan, this Agreement the other Plan Documents, and the Confirmation Order.

Section 3.10 Books and Records; Quarterly Reporting. The GUC Representative
shall maintain appropriate books and records. The GUC Representative further
shall provide quarterly cash basis accountings of all amounts received and
distributed, to Xybernaut and the Post-Effective Date Creditors’ Committee.

Section 3.11 Wind Up of GUC Distribution Fund. Once all amounts reasonably
expected to be deposited into the GUC Distribution Fund have been deposited and
distributed in accordance with this Agreement and the Plan, any remaining de
minimis amounts left in the GUC Distribution Fund shall be used to pay any
outstanding allowed professional fees of the Creditors’ Committee professionals
on a pro rata basis, or, if there are no such outstanding allowed Creditors’
Committee professional fees, such remaining de minimis amounts shall be donated
to a nationally recognized charitable organization of the GUC Representative’s
choice (i.e., United Way, etc.).

Section 3.12 No Other Duties. Other than the duties and obligations of the GUC
Representative specifically set forth or provided for in this Agreement, under
the Plan or other Plan Documents, the GUC Representative shall have no duties or
obligations of any kind or nature with respect to his employment or position as
such.

ARTICLE IV

POWERS AND RIGHTS OF THE GUC REPRESENTATIVE

Section 4.1 Authority. The GUC Representative shall report to the Post-Effective
Date Creditors’ Committee and shall be subject to all duties and exercise all
powers stated in the Plan and this Agreement. The GUC Representative may rely on
advice from Post-Effective Date Creditors’ Committee counsel, but may retain
other counsel in respect of Third Party Claims subject to the terms of the Joint
Litigation Agreement. In no event shall the GUC Representative be obligated to
take any action (or refrain from taking any action) which it believes in good
faith to be unlawful or inconsistent with his fiduciary duties as the GUC
Representative. The GUC Representative’s duties shall be discharged upon the
final distribution from the GUC Distribution Fund provided, however, the
indemnity provisions of Section 12.2(e) shall survive and not be discharged.

Section 4.2 Powers of the GUC Representative. The GUC Representative shall be an
estate representative under section 1123(b)(3)(B) of the Bankruptcy Code charged
with powers and rights contemplated by the Plan (including without limitation,
such powers and rights as may be required and agreed under the Joint Litigation
Agreement, the power and right to reconcile claims and expenses, and to assert
Third Party Claims with the consent of Reorganized Xybernaut, all of which
powers and rights shall be exercised pursuant to the GUC Distribution Agreement,
the Plan, the Plan Documents and the Confirmation Order), (ii) shall hold and
distribute Cash from the GUC Distribution Fund to holders of Allowed General
Unsecured Claims in accordance with the provisions of the GUC Distribution
Agreement, the Plan, the GUC Subordinated Plan Note, the Plan Documents and the
Confirmation Order, and (iii) shall be the only authorized signatory and
disbursement agent in respect of the GUC Distribution Fund. Further, the GUC
Representative shall have the following specific powers in addition to any
powers conferred upon the GUC Representative by any other section or provision
of this Agreement, the Plan, or the other Plan Documents; provided, however,
that the enumeration of the following powers shall not be considered in any way
to limit or control the power of the GUC Representative to act as authorized by
any other section or provision of the Agreement or the Plan:

(a) exercising all power and authority that may be exercised, and taking all
proceedings and acts that may be taken, including activities consistent with the
Plan;

(b) managing the GUC Distribution Fund, establishing the Reserves and investing
the GUC Distribution Fund Cash, including, but not limited to, the Cash held in
the Reserves in (i) direct obligations of the United States of America or
obligations of any agency or instrumentality thereof that are backed by the full
faith and credit of the United States of America, including funds consisting
solely or predominantly of such securities; (ii) money market deposit accounts,
checking accounts, savings accounts or certificates of deposit, or other time
deposit accounts that are issued by a commercial bank or savings institution
organized under the laws of the United States of America or any state thereof;
or (iii) any other investments that may be permissible under section 345 of the
Bankruptcy Code;

(c) having signatory authority in respect of the GUC Distribution Fund;

(d) having consultation rights with the Reorganized Debtors with respect to any
decision of the Reorganized Debtors regarding whether to pursue any expression
of interest and/or bid for the IP Assets;

(e) employing, supervising and compensating from the Administrative Reserve
professionals retained to represent the interests of and serve on behalf of the
General Unsecured Creditors and the GUC Representative (the “Administrator
Professionals”) and compensating from the Administrative Reserve the
Administrator Professionals;

(f) objecting to Claims or Equity Interests filed against the Debtors or the
Reorganized Debtors on any basis;

(g) seeking estimation of contingent or unliquidated Claims under Bankruptcy
Code section 502(c);

(h) seeking determination of tax liability under Bankruptcy Code section 505;

(i) asserting and/or pursuing Third Party Claims, other than the Third Party
Litigation, on behalf of the Reorganized Xybernaut if the Reorganized Debtors
decline to pursue any such Third Party Claim, provided the GUC Representative
receives authorization by the Bankruptcy Court after notice to Reorganized
Xybernaut and opportunity for a hearing, or receive written agreement by
Reorganized Xybernaut and file a certification regarding the same with the
Bankruptcy Court; and

(j) settling, dismissing or otherwise disposing of any Third Party Claims that
the GUC Representative is authorized to assert and/or pursue.

Section 4.3 Authority to Object to Claims and Equity Interests and to Settle
Disputed Claims and Third Party Claims.

(a) The GUC Representative shall be authorized to object to any Claims or Equity
Interests filed against the Debtors or the Reorganized Debtors which are not
deemed as Allowed Claims under the Plan.

(b) The GUC Representative shall be authorized and empowered to compromise and
settle Disputed Claims that are the subject of the GUC Representative’s Claim
objection and Third Party Claims that are the subject of the GUC
Representative’s third party actions and execute necessary documents, in
consultation with the Post-Effective Date Creditors’ Committee, upon such notice
as contemplated by the Plan.

ARTICLE V

SUCCESSION, COMPENSATION, INDEMNITY AND RELATED MATTERS

Section 5.1 Resignation. The GUC Representative may resign by giving not less
than thirty (30) days prior written notice, which notice shall be filed with the
Bankruptcy Court. The GUC Representative may designate a replacement, provided
that such designee is acceptable to the Reorganized Debtors, ERC and the
Post-Effective Date Creditors’ Committee. If such designee is not acceptable to
any of the foregoing, such resignation shall become effective upon the
appointment and Bankruptcy Court approval of a successor GUC Representative.

Section 5.2 Removal. The GUC Representative may be removed for cause at any time
by the Bankruptcy Court, upon the request of any holder of an Allowed General
Unsecured Claim or the Post-Effective Date Creditors’ Committee. For purposes of
this Section 5.2, “cause” shall mean: (a) an act of fraud, embezzlement or theft
in connection with the GUC Representative’s duties or in the course of his
employment in such capacity, (b) the intentional wrongful damage to property of
the Reorganized Debtors, (c) the intentional wrongful disclosure of confidential
information of the Debtors, (d) neglect or breach by the GUC Representative of
his duties under the Agreement, the Plan or other Plan Documents, or (e) gross
negligence by the GUC Representative in connection with the performance of his
duties under this Agreement. Unless the Bankruptcy Court orders immediate
removal, the GUC Representative shall continue to serve until a successor GUC
Representative is appointed, and such appointment becomes effective, in
accordance with Section 5.3 hereof. In the event that an action to remove the
GUC Representative for cause is commenced, the GUC Representative shall be
prohibited from making any distributions or withdrawals from the GUC
Distribution Fund immediately upon the commencement of such action.

Section 5.3 Appointment of Successor GUC Representative. In the event of a
vacancy by reason of the immediate removal of the GUC Representative or
prospective vacancy by reason of resignation (where replacement cannot be made
pursuant to Section 5.1 of this Agreement) or removal, the GUC Representative or
the Post-Effective Date Creditors’ Committee may file a motion with the
Bankruptcy Court on not less than twenty (20) days notice to: (i) parties
requesting notice in the Chapter 11 Cases pursuant to Bankruptcy Rule 2002, or
(ii) parties designated by the Bankruptcy Court as parties to be noticed
following consummation of the Plan, seeking the appointment of a replacement GUC
Representative.

Every successor GUC Representative appointed hereunder shall execute,
acknowledge and deliver to the Bankruptcy Court, the Reorganized Debtors, and
the retiring GUC Representative, if any, an instrument accepting such
appointment subject to the terms and provisions hereof. The successor GUC
Representative, without any further act, shall become vested with all the
rights, powers and duties of the GUC Representative, provided, however, that no
GUC Representative shall be liable for the acts or omissions of any prior or
subsequent GUC Representative.

Section 5.4 Continuity. Unless otherwise ordered by the Bankruptcy Court, the
resignation or removal of the GUC Representative shall not operate to invalidate
any action theretofore taken by the GUC Representative. In the event of the
immediate removal of the GUC Representative, the Post-Effective Date Creditors’
Committee may act as Interim GUC Representative until a successor GUC
Representative is approved by the Bankruptcy Court. In the event of the
resignation or removal of the GUC Representative, he shall (a) execute and
deliver by the effective date of such resignation or removal such documents,
instruments and other writings as may be reasonably requested by the
Post-Effective Date Creditors’ Committee or the Bankruptcy Court to effect the
termination of the GUC Representative under this Agreement; and (b) assist and
cooperate in effecting the assumption of such GUC Representative’s obligations
and functions by a successor GUC Representative. If for any reason the GUC
Representative fails to execute the documents described in section (a) of the
preceding sentence, the Post-Effective Date Creditors’ Committee shall be
authorized to obtain an order of the Bankruptcy Court effecting the termination
of such GUC Representative’s capacity under this Agreement. The Post-Effective
Date Creditors’ Committee shall be entitled to reimbursement of any fees and
costs from the GUC Distribution Fund in connection with any action that it takes
which is authorized by this Agreement, including any services provided as
Interim GUC Representative or action to remove the GUC Representative or action
to appoint a successor GUC Representative.

Section 5.5 Compensation. The GUC Representative shall be compensated for
services he performs in connection with the Agreement on an hourly basis, in
accordance with the hourly rates attached hereto as Exhibit A. The GUC
Representative also shall be reimbursed for reasonable out-of-pocket expenses
incurred by the GUC Representative in connection with performing the duties
provided hereunder. Such compensation and reimbursement shall be funded from the
$5,000 Administrative Reserve of the GUC Distribution Fund.

Any out-of-pocket expenses incurred to pursue any Third Party Claims by or on
behalf of the GUC Representative shall be payable from the GUC Distribution Fund
and Reorganized Xybernaut shall have no liability or responsibility therefore.

The GUC Representative shall provide to the Post-Effective Date Creditors’
Committee monthly bills for services performed. Compensation and expenses to be
paid or reimbursed to the GUC Representative as provided herein shall be paid
from the Administrative Reserve. Any successor GUC Representative shall receive
such reasonable compensation from the Administrative Reserve for service as GUC
Representative as may be approved by the Post-Effective Date Creditors’
Committee (without any requirement of Bankruptcy Court approval) and
reimbursement from the Administrative Reserve or expenses reasonably incurred in
performing the duties of the GUC Representative.

The expenses for which the GUC Representative are entitled to be reimbursed
include (without limitation) travel, temporary staff or employee cost, lodging,
duplicating, postage, computer research, messenger service and telephone service
and the fees and expenses of the Administrator Professionals, including without
limitation (x) the reasonable fees and expenses for financial and accounting
services provided to the GUC Representative in the performance by the GUC
Representative of the duties imposed hereunder, and (y) the reasonable fees and
expenses of counsel for services rendered to the GUC Representative in the
performance by the GUC Representative of the duties imposed hereunder and also
in connection with the review of relevant documentation and the negotiation and
enforcement of this Agreement and related provisions under the Plan, and related
documents and agreements.

Notwithstanding anything to the contrary herein, neither the Debtors,
Reorganized Xybernaut nor ERC shall have any obligation for payment of any fees,
costs or expenses of the GUC Representative, the Post-Effective Date Creditors’
Committee or any of their respective professionals. All such fees, costs and
expenses shall be paid solely from the GUC Distribution Fund. This provision
does not release or limit the obligations otherwise set forth in the Plan to
fund the GUC Distribution Fund.

Section 5.6 Standard of Care; Limit of Liability. The GUC Representative shall
not have or incur any liability to any holder of a Class 5 Allowed General
Unsecured Claim for any act or omission after the Effective Date arising out of
the administration of the GUC Distribution Fund, except for willful misconduct,
fraud, recklessness or gross negligence. Any such liability of the GUC
Representative shall be limited to the amount of the funds held in the GUC
Distribution Fund.

Section 5.7 Indemnification. Reorganized Xybernaut shall be indemnified by the
GUC Representative from and against any and all claims, obligations, suits,
judgments, damages, rights, causes of action and liabilities arising from,
relating to or in connection with any act or omission of the GUC Representative
relating to or in respect of distributions from the GUC Distribution Fund;
provided that the foregoing shall not release the obligations of the Reorganized
Debtors to fund the GUC Distribution Fund pursuant to the Plan

Section 5.8 Reliance by the GUC Representative. The GUC Representative may rely,
and shall be fully protected in acting or refraining from acting if it relies,
upon any resolution, statement, certificate, instrument, opinion, report,
notice, request, consent, order or other instrument or document that the GUC
Representative reasonably believes to be genuine and to have been signed or
presented by the party or parties properly authorized to do so or, in the case
of cables, telecopies and telexes, to have been sent by the proper party or
parties, and the GUC Representative may conclusively rely as to the truth of the
statements and correctness of the opinions expressed therein. The GUC
Representative may consult with counsel and other professionals regarding
matters in their area of expertise, and any opinion of counsel shall be full and
complete authorization and protection in respect of any action taken or not
taken by the GUC Representative. The GUC Representative shall be entitled to
rely upon the advice of such professionals in acting or failing to act, and
shall not be liable for any act taken or not taken in good faith in reliance
thereon. The GUC Representative shall have the right at any time to seek and
rely upon instructions from the Bankruptcy Court concerning this Agreement, the
Plan or any other Plan Documents, and the GUC Representative shall be entitled
to rely upon such instructions in acting or failing to act and shall not be
liable for any act taken or not taken in reliance thereon.

ARTICLE VI

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TERMINATION

Section 6.1 Termination. The GUC Representative’s duties shall be discharged
upon the final distribution from the GUC Distribution Fund provided, however,
the indemnity provisions of Section 12.2(e) of the Plan shall survive and not be
discharged. Upon the final distribution from the GUC Distribution Fund, the GUC
Representative shall file a certification stating that the assets of the GUC
Distribution Fund have been exhausted and final Distributions of Cash have been
made under the Plan. Upon the GUC Representative’s exhaustion of the assets of
the GUC Distribution Fund and completion of the actions specified in the
preceding sentence, this Agreement shall terminate.

Except as otherwise specifically provided herein, after the termination of the
Agreement pursuant to Section 6.1 above, the GUC Representative shall have no
further duties or obligations hereunder, but shall remain subject to the
protections of Sections 5.6 and 5.8 of this Agreement.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1 Descriptive Headings. The headings contained in the Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of the Agreement.

Section 7.2 Amendment. Waiver and Modification. The Agreement may not be amended
except by an instrument executed by the Debtors (or Reorganized Xybernaut, as
appropriate), the Post-Effective Date Creditors’ Committee and the GUC
Representative.

Section 7.3 Governing Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the rules of
conflict of laws of the State of Delaware or any other jurisdiction, including
without limitation the State of Virginia.

Section 7.4 Counterparts; Effectiveness. The Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement. The Agreement shall become
effective when each party hereto shall have received counterparts thereof signed
by all the other parties hereto.

Section 7.5 Severability; Validity. If any provision of the Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of the Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of the Agreement are agreed to be severable.

Section 7.6 Notices. Any notice or other communication hereunder shall be in
writing and, unless otherwise expressly provided herein, shall be deemed to have
been duly given or made when actually delivered or, in the case of notice by
facsimile transmission, when received and telephonically confirmed, addressed as
follows (or at such other address for such entity as shall be specified by like
notice):

(a) If to the GUC Representative, to:

230 North Ott Street
Allentown, PA 18104
hscohen@ptd.net
Attn: Howard S. Cohen
Telephone: 215-806-0777

with copies to:

         
BLANK ROME LLP One Logan Square
        130 N. 18th Street

Philadelphia, PA 19103 Telephone:215-569-5500 Facsimile:215-569-5555 Attn:
  Michael B. Schaedle, Esq.

(b) If to Xybernaut, to:

         
Xybernaut Corporation
        5175 Parkstone Drive, Suite 130

Chantilly, VA 20151-3832 Attn: Perry L. Nolen Telephone:
    703-480-0480  
Facsimile:
    703-480-0488  

                 
with copies to:
                   SKADDEN ARPS
           Four Times Square
           New York, NY 10036
           Attn: D.J. Baker, Esq.
           Telephone:
    212-735-2150      Facsimile:
    917-777-2150  

Section 7.7 Relationship to Plan. The principal purpose of this Agreement is to
aid in the implementation of the Plan and, therefore, this Agreement
incorporates and is subject to the provisions of the Plan. To that end, the GUC
Representative shall have full power and authority to take any action consistent
with the purposes and provisions of the Plan. In the event that the provisions
of this Agreement are found to be inconsistent with the provisions of the Plan,
the provisions of the Plan shall control; provided, however, that provisions of
this Agreement adopted by amendment and approved by the Bankruptcy Court
following substantial consummation (as such term is used in section 1127(b) of
the Bankruptcy Code) shall control over provisions of the Plan.

Section 7.8 Retention of Jurisdiction. As provided in Section 11 of the Plan,
the Bankruptcy Court shall retain jurisdiction for the purposes of interpreting
and implementing the provisions of this Agreement; provided, however, that the
retention of jurisdiction shall not require the retention or payment of the GUC
Representative or Administrator Professionals to be approved by the Bankruptcy
Court.

IN WITNESS WHEREOF, the parties have either executed and acknowledged this
Agreement or caused it to be executed and acknowledged on their behalf by their
duly authorized officers at of the date first above written.

XYBERNAUT CORPORATION

By:
Perry L. Nolen
President

XYBERNAUT SOLUTIONS, INC.

By:
Edward Maddox
President

HOWARD S. COHEN

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Exhibit A to GUC Distribution Agreement

Hourly Rate Schedule of GUC Representative:

     
Howard S. Cohen:
  $415/hour
 
   
Principals/Directors:
  $300 — $415/hour
 
   
Managers/Senior Associates:
  $175 — $315/hour
 
   
Senior Consultants:
  $100 — $175/hour
 
   
Para Professionals:
  $80 — $100/hour
 
   

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