THIS NOTE
AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES STATUTES OR
REGULATIONS, AND MAY NOT BE TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION
STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT THERETO, (ii) A WRITTEN
OPINION FROM COUNSEL FOR THE ISSUER OR OTHER COUNSEL FOR THE HOLDER REASONABLY
ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A “NO ACTION” LETTER OR ITS THEN EQUIVALENT
HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH TRANSFER OR SALE.

     

    STEELCLOUD,
INC.

    


    SECOND

    CONSOLIDATED,
AMENDED AND RESTATED

    PROMISSORY
NOTE

    


    THIS
SECOND CONSOLIDATED, AMENDED AND RESTATED PROMISSORY NOTE (this “Second Amended
and Restated Note”) is made and entered into as of September 10, 2010, intending
to be effective for all purposes as of the 2nd day of July, 2010, by and between
STEELCLOUD, INC., a Virginia corporation (hereinafter referred to as the
“Company” or “Borrower”); and CALEDONIA CAPITAL CORPORATION, a Delaware
corporation (hereinafter called the "Lender").

    


    WITNESSETH:

    


    WHEREAS,
Borrower heretofore executed and delivered to the Lender its one certain Secured
Promissory Note dated July 1, 2009 in the original principal amount of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which amount was
subsequently increased to Three Hundred Thousand and 00/100 Dollars
($300,000.00) (together with all amendments, modifications, substitutions,
extensions or renewals thereof hereinafter referred to as "Note 1");
and

    


    WHEREAS,
Borrower heretofore executed and delivered to the Lender its one certain
Revolving Line of Credit Promissory Note dated November 3, 2009 in the original
principal amount of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00)
(together with all amendments, modifications, substitutions, extensions or
renewals thereof hereinafter referred to as "Note 2"); and

    


    WHEREAS,  Borrower
has requested that Lender extend the maturity  date and modify certain
of the terms of Note 1 and Note 2; and

    


    WHEREAS,
Lender is willing to extend the maturity date and modify certain of the terms of
Note 1 and Note 2 on the condition that Borrower agree to pay Lender a
modification fee in the amount of $50,000.00 (the “Modification Fee”) which
shall be added to the principal balance evidenced by Note 1 and Note 2 and
repaid in accordance with the terms of this Second Amended and Restated Note;
and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    WHEREAS,
pursuant to the terms of that certain First Amended and Restated Exchange
Agreement dated as of September 10, 2010, by and between the Company and the
Lender, the Lender exchanged 2,500,000 shares of the Company’s Common Stock for
90,000 shares of the Company’s Series A Preferred Stock and a Note in the
original principal amount of $70,000 (the “Exchange Note”); and

    


    WHEREAS,
Borrower and Lender wish to consolidate the aggregate outstanding principal
balance evidenced by Note 1, Note 2, the Exchange Note, and the Modification Fee
to form a single consolidated debt obligation evidencing a principal
indebtedness in the amount of Five Hundred Seventy Thousand and 00/100 Dollars
($570,000.00) and Borrower and Lender also wish to modify, extend and restate in
their entirety Note 1, Note 2, the Exchange Note, and the terms for repayment of
the Modification Fee, as herein consolidated, upon the terms and conditions set
forth herein.

    


    NOW,
THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in hand paid by
each of the parties to the other, and in consideration of the mutual covenants
and agreements herein contained, the parties hereto, for themselves and their
respective successors and assigns, hereby agree that the terms
of  Note 1, Note 2 and the Modification Fee are hereby consolidated,
amended and restated in their entirety as follows:

    


    PROMISSORY
NOTE

    


    
      
        	
                $570,000

              	
                July
      2, 2010

              


      

    

     

    STEELCLOUD,
INC., a Virginia corporation (the “Company”), for value
received, hereby promises to pay to the order of CALEDONIA CAPITAL
CORPORATION,  a Delaware corporation (the “Holder”), or its
registered assigns, at 19441 Golf Vista Plaza, Suite 360, Leesburg,
VA  20176, the principal amount of FIVE HUNDRED SEVENTY THOUSAND AND
NO/100 DOLLARS ($570,000) on July 2, 2013 (the “Maturity Date”),
with interest thereon at a rate of 12% per annum, until
paid.   Payments of principal, premium, if any, and interest
hereon shall be made in lawful money of the United States of America, and such
payments shall be overdue for purposes hereof if not made on the scheduled date
of payment therefor, without giving effect to any applicable grace
period.  Accrued interest in arrears shall be payable on July 31, 2010
and on the last day of each month thereafter, and on the first to occur of the
conversion of the outstanding balance of this Second Amended and Restated Note
as contemplated by Section 2 hereof, the Maturity Date, and the acceleration of
this Second Amended and Restated Note.  Interest payable on this
Second Amended and Restated Note shall be calculated on the basis of a year of
360 days consisting of twelve 30-day months.  If the date for any
payment of principal is extended (whether by operation of this Second Amended
and Restated Note, any provision of law or otherwise), interest shall be payable
for such extended time at the rates provided herein.  Whenever any
payment hereunder shall be stated to be due on a day other than a business day,
such payment shall be due on the next succeeding business
day.    If the Company shall fail to pay on the due date
therefor, whether on the Maturity Date, by acceleration or otherwise, any
principal owing under this Second Amended and Restated Note, then interest shall
accrue on such unpaid principal from the due date to the date on which such
principal is paid in full at a rate per annum equal to eighteen percent (18%)
(the “Default Rate”).  Interest calculated at the Default Rate shall
be due and payable upon demand by the Lender.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    1.           General.

     

    1.1.           Assignment.  This
Second Amended and Restated Note and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the Holder or its
agent or attorney upon surrender of this Second Amended and Restated Note
together with the Assignment Form attached hereto as Exhibit A, properly
endorsed.

     

    1.2.           Certain
Waivers.  The parties hereto hereby waive presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance or enforcement of this Second Amended and
Restated Note.

     

    1.3.           Governing
Law.  This Second Amended and Restated Note shall be construed
in accordance with and governed by the domestic substantive laws of the
Commonwealth of Virginia without giving effect to any choice of law or conflicts
of law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.

     

    1.4.           Notices.  Unless
otherwise specifically provided herein, all notices and service of any process
shall be in writing, addressed to the respective party at the address set forth
below and may be personally served, faxed or sent by overnight courier service
or United States mail and shall be deemed to have been given: (a) if delivered
in person, when delivered; (b) if delivered by telecopy, on the date of
transmission if confirmed and if transmitted on a business day before 4:00 p.m.
(Eastern time) or, if not, on the next succeeding business day; (c) if delivered
by overnight courier, two days after delivery to such courier properly
addressed; or (d) if by U.S. mail, four business days after depositing in the
United States mail, with postage prepaid and properly addressed.  The
parties hereto may change the address at which they are to receive notices and
the fax number at which they are to receive fax copies hereunder, by notice, in
writing, in the foregoing manner given to the other:

     

    
      	
            	
              If
      to Borrower: 

            	
              SteelCloud,
      Inc.

            


    

    20110 Ashbrook Place, Suite
130

    Ashburn,
VA  20171

    Attn: Brian Hajost

    Fax No. 703-435-8494

    


    
      	
            	
              If
      to Lender: 

            	
              Caledonia
      Capital Corporation

            


    

    19441 Golf Vista Plaza

     Suite 360, Leesburg,
VA  20176,

    Attn: Edward Murchie

    Fax No.
_______________________

    


     

    1.5.           Replacement.  Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Second Amended and Restated Note and, in the case of any
such loss, theft or destruction of this Second Amended and Restated Note, upon
receipt of an indemnity reasonably satisfactory to the Company or, in the case
of any such mutilation, upon the surrender and cancellation of this Second
Amended and Restated Note, the Company, at its expense, shall execute and
deliver, in lieu thereof, a new Note of like tenor and dated the date of such
lost, stolen, destroyed or mutilated Note, and following such execution and
delivery this Second Amended and Restated Note shall not be deemed to be an
outstanding note.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    1.6.           Amendment.  Any term of this
Second Amended and Restated Note may be amended only with the written consent of
the Company and the holder.

     

    
      	
              2.

            	
              Lender’s Conversion
      Option.

            


    

     

    2.1           Conversion
of Note.   The Lender shall have the right at any time and
from time to time to convert all, or any part, of the outstanding balance due
under this Second Amended and Restated Note into shares of Common Stock of the
Company at the conversion rate of $0.10 per share of Common Stock (subject to
adjustment in the event of stock splits or combinations).  To exercise
such conversion right, Lender must give written notice to the Company (“Conversion Notice”)
of such intent at least five (5) days prior to such conversion and specify the
portion of the outstanding principal balance of this Second Amended and Restated
Note to be so converted. No fractional shares of the Company's Common Stock
shall be issued upon conversion of this Second Amended and Restated Note. In
lieu of the Company issuing any fractional shares to Lender upon the conversion
of this Second Amended and Restated Note, the Company shall pay to the Lender
the amount of outstanding principal that is not so converted in cash. Within
five (5) days after receipt of the Conversion Notice, (a) the Company at its
expense will issue and deliver to the Investor a certificate or certificates for
the number of full shares of Common Stock issuable upon such conversion and pay
any outstanding interest accrued under this Second Amended and Restated Note,
(b) the principal balance of this Second Amended and Restated Note shall be
reduced by the amount so converted, and (c) upon conversion of all of the
outstanding principal balance due under this Second Amended and Restated Note,
the Lender shall concurrently surrender this Second Amended and Restated Note,
marked paid, at the principal office of the Company.  Upon conversion
of all of the outstanding principal balance due under this Second Amended and
Restated Note, and payment of any accrued and outstanding interest thereon, the
Company shall be forever released from all its obligations and liabilities under
this Second Amended and Restated Note. Anything contained in this Second Amended
and Restated Note to the contrary notwithstanding, this Note may not be prepaid
without the Company providing the Investor not less than thirty (30) days prior
written notice of such prepayment and the Investor shall not be
required to accept any prepayment of this Second Amended and Restated Note if
following receipt of such written notice the Investor has delivered a Conversion
Notice to the Company.

     

    2.2           Reservation
of Shares.  From and after the date hereof, the Company shall
reserve and keep available for issuance (i) such number of its authorized but
unissued shares of its Common Stock as will be sufficient to permit the
conversion in full of this Second Amended and Restated Note into Common Stock,
and in each case in accordance with this Agreement and the terms of this
Note.  All shares of Common Stock that are so issuable shall, when
issued upon conversion or exercise, be duly and validly issued and fully paid
and non-assessable.  If at any time the number of authorized but
unissued shares of Common Stock shall be insufficient to effect the conversion
or exercise of all the outstanding balance of this Second Amended and Restated
Note, the Company shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purpose.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    2.3           Registration
Rights.  The Lender shall be
entitled to the rights and benefits as a holder of Investor Registrable
Securities under that certain Registration Rights Agreement of even date herewith between and among Borrower,
Lender and Clipper Investors LLC. 

     

    3.           Events of
Default And Remedies.  Any one of the following occurrences
shall constitute an “Event of Default” under this Note:

     

    3.1           The
failure by Borrower to make payment of principal and/or interest due under this
Note as and when the same becomes due and payable in accordance with the terms
hereof;

     

    3.2           Borrower
fails to pay or perform any obligation or covenant under the Security
Agreement.

     

    3.3           If
any proceeding is commenced by or against (unless dismissed within forty-five
(45) calendar days) Borrower under any provision of the United States Bankruptcy
Code or under any other state or federal bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal or moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement or other similar relief is commenced by
Borrower;

     

    3.4           If
all or a substantial portion of Borrower’s assets become subject to writ of
attachment, writ of execution or any other lien, and such writ or lien is not
released within twenty (20) calendar days;

     

    Upon the occurrence of any Event of
Default, (i) the entire unpaid principal amount of this Note, and any unpaid
interest then accrued thereon, and any other amounts owing under or evidenced by
this Note, shall, without notice or demand of any kind by Lender to Borrower or
any other person, immediately become due and payable in full; and (ii) Lender
shall have and may exercise any and all rights and remedies available at law or
in equity and also any and all rights and remedies as may otherwise be available
to Lender.  Notwithstanding anything to the contrary herein, Lender’s
exercise of its remedies hereunder is subject to the provisions of that certain
Intercreditor Agreement by and among Clipper Investors LLC, Lender and the
Company.

     

    No act of omission or commission by
Lender, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by Lender and
then only to the extent specifically recited therein.  A waiver or
release with reference to any one event shall not be construed as continuing, as
a bar to, or as a waiver or release of, any subsequent right, remedy or recourse
as to a subsequent event.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the Company has executed this Second Amended and Restated Note
as of the date first above written.

     

    
      	 	BORROWER:	 
	 	 	 
	 	STEELCLOUD,
      INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/
      Brian H. Hajost	 
	 	 	Name:
      Brian H. Hajost 	 
	 	 	Title:
      President & CEO	 


    

     

     

    
      
        	 	LENDER:	 
	 	 	 
	 	CALEDONIA
      CAPITAL CORPORATION	 
	 	 	 	 
	
                 

              	
                By:
      

              	      
                /s/ Edward M.
      Murchie

              	 
	 	 	      
                Edward
      M. Murchie, President

              	 


      

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    EXHIBIT
A

    


    ASSIGNMENT
FORM

     

    (To
assign the foregoing Note, execute

    this form
and supply the required information.)

     

    FOR VALUE
RECEIVED, the foregoing Note and all rights evidenced thereby are hereby
assigned to

     

    


    _______________________________________________
whose address is

     

    _______________________________________________________________

    


    _______________________________________________________________

     

    Dated:  ______________,
_______

     

    Holder’s
Name:                         
_______________________

     

    Signature of Holder

    or Authorized
Signatory:          _______________________

     

    Title (if
applicable):                   
_______________________

     

    Holder’s
Address:                     _______________________

     

     

    Signature
Guaranteed:  ___________________________________________

     

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Note, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Note.

     

    
      
         

      

      
        7