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                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT


               EMPLOYMENT AGREEMENT dated as of January 1, 2000 (this
"Agreement"), by and between STEVEN A. NEWMAN (the "Executive"), and XYBERNAUT
CORPORATION, a Delaware Corporation (the "Company").

               WHEREAS, the Company desires to employ the Executive as the
Executive Vice President of the Company and the Executive desires to accept
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
committing fraud, or stealing or misappropriating any asset or property of the
Company, including, without limitation, any theft or embezzlement; or (v) a
breach of a material term or provision of this Agreement by the Executive which
is not cured within ten (10) business days after written notice of such breach
is received by the Executive from the Company.

               (c) "Change of Control" shall mean the occurrence of the
following: (i) a Person or group of Persons, other than any current member of
the Board of Directors, obtain


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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) Edward Newman is no longer Chairman and Chief Executive Officer of the
Company.

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

               (h) "Discretionary Bonus" shall have the meaning given to that
term in Section 4(c) hereof.

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


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

               (k) "Good Reason" shall mean a (i) 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 occurrence of
a Change of Control; (iii) a change in the Executive's office from that of
Executive Vice President 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 provision of this Agreement by the Company which is not cured
by the Company within ten (10) business days after written notice of said breach
is received by the Company from the Executive.

               (l) "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
annual financial statements of the Company for the respective applicable twelve
(12) months and which shall be determined in accordance with GAAP applied on a
consistent basis.

               (m) "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.

               (n) "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.

               (o) "Market Cap" shall mean the aggregate market value of all of
the Company's issued and outstanding shares of Common Stock as of the date of
determination.

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

               (q) "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.

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

               (s) "Signing Bonus" shall have the meaning given to that term in
Section 4(b) hereof.


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               (t) "Without Cause" shall mean the termination of the Executive's
employment hereunder by the Company, 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 Executive Vice President 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 three
(3) years, commencing on January 1, 2000, and terminating on December 31, 2002,
unless earlier terminated as provided in this Agreement (the "Employment Term").

               Section 3. Executive's Duties.

               (a) The Executive shall be the senior executive officer of the
Company responsible for the Company's strategic operations including, without
limitation, overseeing the Company's merger and acquisition activity, strategic
business development, joint ventures, capital raising (including, without
limitation, liaising with investment banks and financial advisers),
international affairs, the Company's relationships with outside counsel and
other professionals. The Executive shall report directly and only to the
Company's Chief Executive Officer, Mr. Edward G. Newman. 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 or the Board of
Directors.

               (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, and as
consultants to, 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. The Company acknowledges
that the Executive serves on the board of directors or advisory board of the
corporations set forth on Schedule A attached hereto, and the Company hereby
consents to the Executive serving on such boards.

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

               (d) Notwithstanding anything herein to the contrary, the
Executive shall be able to take such time away from his day-to-day activities on
behalf of the Company to maintain his professional medical licenses and
competence; provided that the same does not materially detract from the
performance of his services hereunder.


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               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 the first year of the Employment
Term a salary (the "Salary") at an annual rate of $225,000, 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. In addition, the amount of the Executive's compensation for the
period from October 1, 1999 through December 31, 1999 shall be retroactively
adjusted to be at an annual rate of $225,000, any differential owing to the
Executive as a result of such adjustment shall be paid to the Executive promptly
after the execution and delivery of this Agreement. After the first year during
the Employment Term, the annual Salary for each successive year will be
increased by the lesser of (i) 10% and (ii) the percentage increase, if any, in
the CPI for each year just completed measured for the entire twelve (12) month
period, plus three percent (3%). For purposes hereof, the term "CPI" means the
Consumer Price Index for all Urban Consumers for the United States for the
Washington, D.C. metropolitan area prepared by the Bureau of Labor Statistics of
the U.S. Department of Labor, or if such index is not then being published, by
the U.S. Department of Labor, the most nearly comparable successor index that
the parties may agree upon. By this Agreement, the Company confirms its prior
grant to the Executive, of options to purchase shares of the Company's Common
Stock in respect of a salary deferral applicable to the Executive for the period
from September 1, 1999 through December 31, 1999, on the same basis as the other
employees of the Company. Such options vest immediately upon the grant, shall
have an exercise price of $1.78 per share and shall have a term of three (3)
years.

               (b) In consideration of the Executive's execution and delivery of
this Agreement, upon the execution and delivery of this Agreement the Company
shall make a cash payment of $50,000.00 (the "Signing Bonus"). By this
Agreement, the Company confirms its prior grant to the Executive of options to
purchase 300,000 shares of the Company's Common Stock at an exercise price equal
to the closing price for the Company's Common Stock on October 1, 1999 and
having a term of seven (7) years, which was ratified by the Company's Board of
Directors on December 27, 1999.

               (c) At the sole discretion of the Board of Directors of the
Company the Executive may be paid, in cash, Common Stock, options to purchase
Common Stock, Stock Appreciation Rights ("SAR's") or any combination thereof, an
annual bonus 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
(the "Discretionary Bonus"). The minimum amount of the cash portion of the
Discretionary Bonus for fiscal year 2000 shall be $100,000, which minimum amount
shall be paid within five (5) business days after the Executive's request
therefor. In addition, this Agreement shall confirm the prior grant to the
Executive's, in recognition of the Executive's past services to the Company, of
a grant to the Executive of options to purchase 100,000 shares of the Company's
Common Stock at an exercise price equal to the closing price of the Company's
Common Stock on December 3, 1999, which grant was ratified by the


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Company's Board of Directors on December 27, 1999. The options granted as part
of the Discretionary Bonus shall be vested as of the date hereof, and shall be
subject to the terms and provisions of the Company's 1997 Stock Option Plan, the
Company's 1999 Stock Option Plan 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
shall be irrevocable during that period. Should there not be sufficient options
available or usable under said stock option Plans then, the Company will use its
best efforts to cause a new stock option plan to be adopted which will cover
such options. If no new plan is adopted, the Company will grant SAR's or make a
cash payment to the Executive of substantially similar value, within one hundred
eighty (180) days from the date that it is determined that a sufficient number
of options are not available.

               (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, 2000 through December 31,
2000, and for each fiscal year during the Employment Term thereafter, 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) one and one-half percent (1.5%) of the
Revenue Goal (as hereinafter defined), if the Revenue Goal is attained; or (ii)
two percent (2%) of the increase, if any, in the Market Cap from January 1
through December 31 of the applicable fiscal year during the Employment Term.
For purposes hereof, the term "Revenue Goal" shall mean eighty-five percent
(85%) of the Company's revenue goal for each fiscal year during the Employment
Term occurring after the first year of the Employment Term, as set forth in its
business plan for such year; provided that for the fiscal year from January 1,
2000 through December 31, 2000 the Revenue Goal shall be $20,000,000. For
purposes hereof, the Market Cap Test shall be based on the average of the number
of shares outstanding and closing prices for the Company's Common Stock for the
thirty (30) days ended December 31 of the applicable year, compared to the
comparable thirty (30) day period in the prior year. The calculation of whether
any Performance Bonus is due for any fiscal year during the Employment Term
occurring thereafter, as applicable, shall be made by the Board of Directors
promptly after the end of the fiscal year in respect of the Market Cap test and
upon the Company's issuance of its audited annual financial statements in
respect of the Revenue Goal test. The Performance Bonus, if earned, shall be
paid 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. Any options issued in respect of the
Performance Bonus shall be subject to the terms and provisions of the Company's
1999 Stock Option Plan or, if no shares are available under such Plan, 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 said Stock
Option Plans, 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 plan is adopted, the Company will grant SAR's or make a cash


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payment to the Executive of substantially similar value, within one hundred
eighty (180) days from the date that it is determined that a sufficient number
of options are not available.

               (e) 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 the
greater of (i) options exercisable into 500,000 shares of Common Stock or (ii)
1.5% of the Company's outstanding shares of capital stock.

               (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 the Agreement in an equitable manner to provide the
Executive the same type of benefits that he is entitled to earn pursuant to
Section 4(d) of this Agreement.

               (g) All options granted to the Executive pursuant to this
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 of 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.

               (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 non-accountable expense allowance of $2,500 per month. In addition,
the Company shall also pay reasonable legal and estate planning expenses of
Executive in an amount not to exceed $5,000 for each calendar year during the
Employment Term. The amounts paid and/or provided for in this Section 5(d) shall
be reported by the Company on Internal Revenue Service Form 1099.


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               (e) The Company shall obtain a life insurance policy in the face
amount aggregating Two Million Dollars ($2,000,000.00), which are made payable
to such beneficiary or beneficiaries who are designated by the Executive. The
Company shall pay all premiums due on such policies during the Employment Term.
After the termination or expiration of the Employment Term, at the request of
the Executive, the Company shall assign such insurance policies to the
Executive.

               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.

               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 two (2)
year period following the date of death, any Performance Bonus that would be
payable for the two (2) 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 two
(2) 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 two (2) year after the
Executive's employment is terminated 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 ten (10) days' prior written
notice to the Executive. If the Company terminates the Executive's employment
hereunder Without Cause, the Company shall (i) continue to pay Salary to the
Executive provided for hereunder for a period equal to the greater of (x) 2
years 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. In


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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 and for the contract year following the year
in which the termination occurred. 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.

               (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 three (3) 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 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 all aspects of the Company's business, affairs and operations
and will have access to all significant aspects of the business and operations
of the Company and to Confidential and Proprietary Information.

               (a) The Executive hereby covenants and agrees that, during the
Employment Term and thereafter, unless otherwise authorized by the Company in
writing, the Executive shall not, directly or indirectly, under any
circumstance: (i) disclose to any other Person (other than in


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<PAGE>   10
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
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 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 for Good Reason or (ii) is terminated by the Company
for Cause, the Executive shall not, directly or indirectly, manage, operate or
control, 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; 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.

               (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) Because the breach of any of the provisions of this Section 9
will result in immediate and irreparable injury to the Company for which the
Company will not have an adequate remedy at law, the Company shall be entitled,
in addition to all other rights and remedies, to seek a degree of specific
performance of the restrictive covenants contained in this Section 9 and to a
temporary and permanent injunction enjoining such breach, without posting bond
or furnishing similar security.


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<PAGE>   11
               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 or other similar transaction).

               Section 12. Amendment; Entire Agreement. 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.

               Section 13. Waivers. 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.

               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


                                      -11-


<PAGE>   12
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) 631-7070

                      With a copy to:

                      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; Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE 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. EACH OF THE PARTIES UNCONDITIONALLY AND
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
VIRGINIA AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF VIRGINIA
WITH RESPECT TO


                                      -12-


<PAGE>   13
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH OF THE PARTIES WAIVE ANY RIGHT TO CONTEST THE VENUE OF SAID COURTS OR TO
CLAIM THAT SAID COURTS CONSTITUTE AN INCONVENIENT FORUM. EACH OF THE PARTIES
UNCONDITIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

               Section 16. 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]


                                      -13-


<PAGE>   14
               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: