UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): ~~August~~November 1115, 2005

XYBERNAUT CORPORATION

(Exact Name of Registrant as Specified in its Charter)

DELAWARE
(State or Other Jurisdiction of Incorporation)

0-15086 (Commission File Number) 54-1799851 (I.R.S. Employer Identification Number)


0-15086		54-1799851
(Commission File Number)		(I.R.S. Employer
		Identification Number)

12701 FAIR LAKES CIRCLE, FAIRFAX, VIRGINIA, 22033
(Address of Principal Executive Offices) (Zip Code)

(703) 631-6925
(Registrant’s Telephone Number, Including Area Code)

NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 81.01 ~~OTHER~~ENTRY ~~EVENTS~~INTO A MATERIAL DEFINITIVE AGREEMENT

On ~~July~~October 2527, 2005, the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”) authorized Xybernaut Corporation (the “Company”) ~~and~~to IPenter ~~Innovations~~into ~~Financial~~a debtor-in-possession ~~Services~~loan facility. On November 15, 2005, the Company, Xybernaut Solutions, Inc. (together with the Company, the “~~IPI~~Debtors”) ~~entered~~and ~~into~~LC anCapital ~~engagement~~Master ~~letter~~Fund, Ltd. A(“LC ~~brief~~Fund”) ~~description~~entered into ofa Secured Promissory Note (the ~~terms~~“Note”) ofand Security Agreement (collectively the ~~engagement~~“DIP Credit ~~letter~~Facility”) ~~was~~dated ~~included~~as inof ~~Item~~October 131, 2005.01 ofThe DIP Credit Facility provides for one or more loans to the ~~Form~~Debtors ~~8-K~~in ~~filed~~an onamount ~~July~~not exceeding $5 ~~29,~~million ~~2005~~(the ~~and~~“Commitment ~~such~~Amount”). ~~Item~~The isoutstanding ~~incorporated~~principal ~~herein~~balance bywill ~~reference.~~bear Ainterest ~~copy~~from the date of advancement at a rate per annum of 9% payable monthly in arrears. Any repayment not paid when due shall bear interest at the ~~engagement~~rate ~~letter~~per isannum ~~attached~~of 14%. asThe ~~Exhibit~~loan will become due and payable in full on October 9931, 2006 (the “Maturity Date”).1 toThe ~~this~~DIP ~~report~~Credit Facility also provides for a commitment fee of 3% of the Commitment Amount.

OnPursuant ~~August 15,~~to ~~2005~~the DIP Credit Facility, ~~the~~LC ~~United~~Fund ~~States~~agrees ~~Bankruptcy~~to ~~Court~~make ~~for~~loans ~~the~~from ~~Eastern~~time ~~District~~to oftime ~~Virginia~~on ~~(the~~each ~~“Bankruptcy~~requested ~~Court”)~~borrowing ~~approved~~date ~~the~~until ~~employment~~30 days ~~and~~before ~~retention~~the ofMaturity ~~IPI~~Date asin an ~~investment~~aggregate ~~banker~~principal ~~and~~amount ~~consultant~~not to ~~the~~exceed ~~Company~~$5 million. onEach anrequest ~~interim~~shall ~~basis.~~be ~~The~~in ~~Bankruptcy~~a ~~Court~~minimum ~~approved~~amount ~~the~~of ~~advisory~~$50,000 ~~services~~and, if greater, ~~fee~~will be in ~~the~~integral ~~amount~~multiples of $7510,000. ~~per~~With ~~month~~the ~~and~~exception ~~deferred~~of ~~ruling~~the onGUC ~~all~~Escrow ~~other~~(as ~~fees~~defined ~~until a final hearing.~~below), ~~Under~~loans ~~the~~will ~~agreement,~~be ~~the~~used ~~payment~~solely offor ~~such~~working ~~$75~~capital needs,~~000~~ ~~per~~general ~~month~~corporate ~~advisory~~purposes, ~~services~~the ~~fee~~costs isand expenses ~~subject~~associated towith the ~~satisfaction~~ ofbankruptcy ~~certain~~cases, ~~conditions~~all asto ~~set~~the ~~forth~~extent inpermitted under the ~~engagement~~budget approved ~~letter~~by ~~and~~LC ~~described~~Fund. inUp ~~Item~~ to $1.01 5 million of the ~~Form~~loans ~~8-K~~will ~~filed~~be onmade ~~July 29,~~available ~~2005.~~for ~~In addition,~~ the ~~payment~~sole purpose of ~~all~~establishing ~~fees~~an escrow (~~including,~~the ~~without limitation,~~“GUC ~~the~~Escrow”) ~~$75,000~~on ~~per~~behalf ~~month~~of ~~advisory~~general ~~services~~unsecured ~~fee)~~creditors. isFor ~~subject~~each $1.00 toof ~~court~~funds ~~approval~~advanced ~~upon~~for ~~the filing~~operating ofuses, aan ~~fee~~additional ~~application~~$1.00 atwill be advanced to the ~~appropriate~~GUC ~~time~~Escrow. The ~~Bankruptcy~~GUC ~~Court~~Escrow ~~did~~will not ~~approve~~be used for payment of the ~~provisions~~ ~~relating~~Debtors’ on-going post-petition operations or to ~~indemnification~~pay ofany ~~IPI~~other post-petition obligations, but ~~allowed~~will ~~the~~remain ~~Company~~in orescrow ~~IPI~~during tothe ~~reinstate~~pendency of the ~~request~~Debtors’ bankruptcy cases for ~~approval~~the purpose of ~~the~~satisfying ~~indemnification~~claims ~~provisions~~of atthe ~~any~~Debtors’ ~~time~~prepetition general unsecured creditors.

The ~~Company~~Debtors ~~and~~must ~~Boardroom~~submit ~~Specialists,~~to ~~LLC~~LC ~~(“Boardroom”)~~Fund ~~entered~~an ~~into~~eight amonth ~~consulting~~budget ~~agreement~~projection asupdated ~~of April 26,~~on ~~2005.~~a ~~Alfred~~monthly F.basis detailing ~~Fasola~~anticipated iscash ~~Managing~~receipts ~~Principal~~and ofexpenditures, ~~Boardroom.~~including ~~Boardroom~~professional isfees ~~a consulting company with financial~~ and ~~management restructuring expertise~~expenses. ~~A brief description of the terms of~~ ~~the~~The ~~consulting~~monthly ~~agreement~~budgets ~~was~~must ~~included~~be inupdated ~~Item 1.01~~weekly ~~of the Form 8-K filed on May 2, 2005~~ and ~~such Item~~are issubject ~~incorporated~~to ~~herein~~approval by ~~reference.~~LC ~~A copy of the consulting agreement is attached as Exhibit 99~~Fund.~~2 to this report.~~

OnLC ~~August 15,~~Fund ~~2005,~~will ~~the~~have ~~Bankruptcy~~a ~~Court~~first ~~approved~~priority ~~the~~lien ~~employment and retention of Boardroom as restructuring advisor and consultant to the Company~~ on anall ~~interim~~assets ~~basis.~~which ~~The~~will ~~Bankruptcy~~include ~~Court~~intellectual property, ~~approved~~accounts ~~the fees of Boardroom in the amount of $2~~receivable,~~500~~ ~~per day and out-of-pocket expenses including communications~~inventory, ~~travel~~equipment, ~~meals~~general ~~and~~intangibles, ~~living~~contract ~~expenses~~rights, ~~with the payment of such fees subject to~~documents, ~~subsequent~~instruments, ~~court~~chattel ~~approval~~paper ~~upon~~and ~~the~~deposit ~~filing~~accounts ~~of a fee application at~~ (the ~~appropriate time~~“Collateral”). ~~The Bankruptcy~~All ~~Court~~borrowings ~~did~~and reimbursement ~~not~~obligations ~~approve~~under the ~~provisions~~DIP ~~relating~~Credit toFacility ~~indemnification~~will ofbe ~~Boardroom~~entitled ~~but allowed the Company or Boardroom~~ to ~~reinstate~~superpriority ~~the request for approval of the indemnification~~claim ~~provisions at any time~~status.

~~The~~Proceeds ~~Bankruptcy~~from ~~Court~~any ~~will~~court ~~conduct~~approved asale ~~final~~of ~~hearing~~assets onwill ~~the~~be ~~employment~~used ofto ~~IPI~~pay ~~and~~down ~~Boardroom~~the ~~on November 14,~~outstanding ~~2005~~principal. In ~~The~~addition, ~~Bankruptcy~~LC ~~Court~~Fund ~~may~~will ~~consider~~be anentitled ~~earlier~~to ~~date~~receive ~~for~~15% of the ~~final~~consideration ~~hearing,~~paid ~~upon~~to the Debtors in ~~request~~respect of athe ~~party~~sale inor ~~interest~~other ~~and~~disposition ~~proper~~of ~~notice~~any of the Collateral up to one year after confirmation of a chapter 11 plan.

OnIf ~~August 11, 2005,~~ the ~~Company~~Debtors ~~terminated the retention agreement effective July 31~~reorganize, ~~2005~~LC ~~that~~Fund ~~was entered~~will ~~into~~be ~~with~~entitled ~~the Law Offices of James J. Ralabate, dated as of August 1, 2003 and amended as of May 17, 2005. The retention agreement was previously filed as Exhibit 10.24~~ to ~~the~~receive ~~Company’s Amended Annual Report on Form 10~~7-~~K/A for the~~ year ~~ended~~warrants ~~December 31,~~to ~~2003~~purchase ~~filed~~10% ~~on April 26, 2004. The terms~~ of the ~~amendment~~capital ~~letter~~stock toof the ~~retention~~Debtors ~~agreement~~at ~~were~~a ~~previously disclosed in Item 1~~$0.01 of ~~the~~strike ~~Form 8-K filed on May 23~~price, ~~2005.~~subject ~~The amendment letter was filed as Exhibit 10.1~~ to ~~such Form 8~~anti-K.dilution ~~This~~protection ~~information~~and customary isminority ~~being~~shareholder ~~reported under Item 8~~protections.01

~~rather~~Debtors ~~than~~covenant ~~Item 1.02~~to ~~because~~take the ~~Company~~actions ~~believes~~to ~~the~~cause ~~retention agreement was made in~~ the ~~ordinary course~~events ofset ~~business.~~forth ~~The~~on ~~terms of the retention agreement were initially filed as a material contract because Mr.~~Exhibit ~~Ralabate~~C ~~was~~to ~~a director of~~ the ~~Company~~Note ~~at the time the agreement was entered~~to ~~into.~~occur ~~However,~~by ~~Mr. Ralabate ceased to be a Director of~~ the ~~Company~~dates onindicated ~~May 19, 2005~~thereon.

LC Fund’s obligation to make the initial and each successive loan is subject to the satisfaction of the following conditions: (1) the Bankruptcy Court will have issued an order approving the DIP Credit Facility; (2) the Debtors will have executed and delivered to LC Fund the Security Agreement and such other documents necessary to grant to LC Fund a perfected first priority security interest in and lien on the Collateral; (3) the Debtors have delivered to LC Fund the Intellectual Asset Valuation Report, dated June 27, 2005, prepared by IPI Innovations Financial Services, Inc. and current certified inventory and accounts receivable reports, demonstrating that the Collateral supports repayment of the obligations; (4) no default or event of default will have occurred and be continuing or would result from the proposed borrowing; (5) all representations and warranties contained in the Secured Promissory Note or Security Agreement shall be true and correct including a September 30, 2005 balance sheet with no material adverse change from the balance sheet attached to the Note; and (6) LC Fund’s fees and expenses shall have been paid in full in cash.

The Debtors also agreed to pay all costs and expenses of LC Fund, including, without limitation, reasonable attorneys’ fees, incurred in connection with the enforcement of any of its rights and remedies.

Upon the occurrence of an event of default, but subject to at least five days notice, all unpaid principal, accrued interest and other amounts owing will, at the option of LC Fund, be immediately due, payable and collectible by LC Fund pursuant to applicable law and the commitments terminated.

The agreements also contain standard representations and warranties, covenants and certain other matters.

A copy of the Secured Promissory Note is attached hereto as Exhibit 10.1 and is incorporated by reference herein. A copy of the Security Agreement is attached hereto as Exhibit 10.2 and is incorporated by reference herein.

ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION

The description of the DIP Credit Facility set forth in Item 1.01 is incorporated herein by reference.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

99.1		Engagement Letter, dated July 25, 2005, between Xybernaut Corporation and IP Innovations Financial Services, Inc.
99.2		Consulting Agreement, dated as of April 26, 2005, between Xybernaut Corporation and Boardroom Specialists, LLC

10.1 Secured Promissory Note between Xybernaut Corporation, Xybernaut Solutions, Inc. and LC Capital Master Fund, Ltd.

10.2 Security Agreement between Xybernaut Corporation, Xybernaut Solutions, Inc. and LC Capital Master Fund, Ltd.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

XYBERNAUT CORPORATION By: /s/ Perry L. Nolen Perry L. Nolen President and Chief Executive Officer


	XYBERNAUT CORPORATION

	By:	/s/ Perry L. Nolen

		Perry L. Nolen
		President and Chief Executive Officer

Dated: November 21, 2005

Dated: August 19, 2005

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