Document:

STOCK PURCHASE
AGREEMENT

     

    THIS STOCK PURCHASE AGREEMENT (the
“Agreement”) is made as of March 31, 2010 (the
“Execution
Date”), by and among
CALEDONIA CAPITAL
CORPORATION, a Delaware
corporation (the “Purchaser”), and STEELCLOUD,
INC., a Virginia
corporation (the “Company”)).

    

    RECITALS

     

    WHEREAS, the Company desires to sell to
Purchaser and Purchaser desires to acquire from the Company certain shares of
Common Stock in the Company.

    

    NOW,
THEREFORE, in consideration
of the premises and of the mutual representations, warranties and
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

    

    1.           SALE
OF SHARES AND PURCHASE PRICE.

    

    a.    Transfer of
Shares. At the Closing (as
defined in Section 2), the Company shall deliver or cause to be delivered to the
Purchaser duly executed original certificate(s) representing 2,000,000 fully
paid and non -assessable shares (the “Shares”) of the Company’s Common Stock,
par value $0.001 per share (the “Common Stock”), free and clear of any and all
liens, encumbrances, charges or claims.

    

    b.    Purchase
Price and Payment. In
consideration of the sale by the Company to Purchaser of the Shares and in
reliance upon the representations, warranties and covenants of the Company
herein contained and subject to the satisfaction of all of the conditions
contained herein, Purchaser agrees to pay the Company Two Hundred Thousand and
No/100 Dollars ($200,000) (the “Purchase
Price”) for the Shares at
the Closing by good check or by wire transfer of immediately available
funds.

    

    2.           Closing.

    

    a.    Location,
Date and Time. The closing
of the purchase and sale of the Shares and the other transactions contemplated
by this Agreement (the “Closing”) will take place at the offices of the
Company, 20110 Ashbrook Place, Ashbrook, VA 20147, on or before March 31, 2010,
or such other date and location as the parties may mutually agree (the
“Closing Date”).

     

    b.    Items
Delivered by the Company.
At the Closing, and as a condition to the Purchaser’s obligations hereunder, and
subject to the terms and conditions hereof, the Company shall deliver the
following to Purchaser:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              i.

            	
              certificates representing the
      Shares;

            

    

    

    
      ii.    a  certificate  of  the  Secretary
of the  Company  which  shall  certify
the names of the officers of the Company
authorized to sign this Agreement and the other documents, instruments or
certificates to be delivered pursuant to this Agreement by the Company or any
its officers, together with the true signatures of such
officers;

    

    

    iii.    resolution(s) duly
adopted by the Company’s Board of Directors and/or shareholders evidencing the
appointment of Edward M. Murchie as a member of the Company’s Board of
Directors;

    

    
      	
               
      

            	
              iv.

            	
              the Warrant;
      and

            

    

    

    
      v.    such other supporting documents and
certificates as Purchaser may reasonably request and as may be
required pursuant to this Agreement.

    

    

    c.    Items
Delivered by the Purchaser.
At the Closing, and as a condition to the Shareholders’ obligations hereunder,
and subject to the terms and condition hereof, the Purchaser shall deliver the
Purchase Price.

    

    d.    Closing
Conditions of Purchaser.
The obligations of Purchaser to consummate the Closing shall be subject to
compliance by the Company with the agreements herein contained and to the
fulfillment to the satisfaction of, or waiver by, Purchaser, as applicable, on
or before and at the Closing Date of the following
conditions:

    

    i. the representations and warranties of
the Company and the Shareholders contained in this Agreement shall be true and
correct; and

    

    ii. the Board of Directors of the
Company shall have taken all action necessary for the purpose of authorizing the
Company to consummate all of the transactions contemplated
hereby.

    

    3.    Representations
and Warranties of the Company: The Company makes the following
representations and warranties to Purchaser:

    

    a.    The Company is duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and is in good standing and authorized to do business
in each state in which any of its respective activities are conducted. The
Company has all required corporate power and authority to carry on its business
as presently conducted, to enter into and perform this Agreement and the
agreements contemplated hereby to which it is a party and to carry out the
transactions contemplated hereby and thereby. The copies of the Articles of
Incorporation, certified by the Secretary of State Corporation Commission of the
Commonwealth of Virginia, and the Bylaws, certified by the Secretary of the
Company, have been furnished to Purchaser by the Company, are correct and
complete as of the date hereof, and the Company is not in violation of any term
of its Articles of Incorporation or Bylaws.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    b.    The Board of
Directors of the Company (i) has authorized the signatory below, with full power
and authority to act on behalf of the Company, to execute and enter into this
Agreement, and (ii) has taken all action necessary to authorize the transactions
effected hereby.

     

    c.           Upon  issuance  to  Purchaser,  the  Shares  will  be  fully  paid  and  non-assessable.

    

    4.    Representations
and Warranties of Purchaser. Purchaser represents and warrants to
Shareholder as follows:

    

    a.    Purchaser has the
power to perform all of its duties and obligations under this Agreement and the
transaction documents.

    

    b.    The execution and
delivery of this Agreement and each transaction document, and the performance of
the transactions contemplated hereby and thereby, have been duly authorized and
approved by Purchaser. Purchaser has full power to enter into and perform this
Agreement and each transaction document and the transactions contemplated hereby
and thereby. This Agreement and each transaction document constitutes a valid
and binding agreement of Purchaser in accordance with its
terms.

     

    
      5.    Covenants
and Further Agreements.

    

    

    a.    Issuance of
Warrants. As a further
condition of Purchaser’s agreement to Purchase the Shares from the Company, the
Company hereby agrees to grant to Purchaser the right to purchase from time to
time up to 2,000,000 shares of Common Stock at a purchase price of $0.15 for
each share of Common Stock so purchased, in accordance with the terms of a
certain Common Stock warrant in the form set forth as Exhibit I attached hereto
and made a part hereof (the “Warrant”).

    

    b.    Registration
Rights. The Company does
hereby grant the Purchaser “piggy back” and “demand” registration rights in
accordance with the terms and conditions set forth in Exhibit II attached hereto
and made a part hereof with respect to (i) all Shares issued to Purchaser
pursuant to the terms of this Agreement, (ii) all shares of Common Stock that
may hereafter be acquired by Lender upon exercise of all or any part of (a) that
certain Common Stock Purchase Warrant dated July 1, 2009 granting to Lender the
right to purchase from time to time up to 625,000 shares of Common Stock at a
purchase price of $0.15 for each share of Common Stock so purchased, (b) that
certain Common Stock Purchase Warrant dated November 4, 2009 granting to Lender
the right to purchase from time to time up to 150,000 shares of Common Stock at
an original purchase price of $0.25 for each share of Common Stock so purchased
(which purchase price has been reduced to $0.15 for each share of Common Stock
so purchased pursuant to that certain Loan Modification and Extension Agreement
of even date herewith between Purchaser and Seller), and (c) that certain Common
Stock Purchase Warrant dated November 23, 2009 granting to Lender the right to
purchase from time to time up to 225,000 shares of Common Stock at an original
purchase price of $0.25 for each share of Common Stock so purchased (which
purchase price has been reduced to $0.15 for each share of Common Stock so
purchased pursuant to that certain Loan Modification and Extension Agreement of
even date herewith between Purchaser and Seller), (iii) all shares of Common
Stock that may hereafter be acquired by Purchaser upon exercise of all or any
part of the Warrant issued to Purchaser pursuant to Section 5a hereof, and (iv)
all shares of Common Stock that may hereafter be acquired by Purchaser upon
conversion of (a) that 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), and/or (b) that 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).

     

    
      
        
        

      

      
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    6.    Further
Assurances. Upon the
request of either party from time to time, the Shareholder and the
Purchaser shall execute and
deliver all documents or instruments, make all truthful oaths, testify in any
proceedings and do all other acts that may be reasonably necessary or desirable,
in the opinion of the requesting party, to perfect the title of the Purchaser to
the Shares, and take any and all further action which any party may request from
time to time to carry out the transactions and agreements contemplated by this
Agreement.

    

    10.      
  Miscellaneous
Provisions.

    

    a.    Governing
Law. This Agreement shall
be deemed to be a contract made under, and shall be construed in accordance
with, the laws of the Commonwealth of Virginia, without giving effect to
conflict of laws principles thereof.    

    

    b.    Counterparts. This Agreement may be executed in any
number of counterparts and each will be considered an original, and together
they will constitute one Agreement.

     

    c.    Entire
Agreement. This Agreement
constitutes the entire agreement among the parties in respect to the
transactions contemplated hereby, and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof. No
covenant or condition not expressed in this Agreement will affect or be
effective to interpret, change or restrict this Agreement.

    

    d.    Headings. The section headings and subheadings
contained in this Agreement are for convenient reference only, and will not in
any way affect the interpretation of this Agreement.

        

    e.    Binding
Nature. All of the terms,
covenants, representations, warranties and conditions of this Agreement will be
binding upon, and inure to the benefit of and be enforceable by, the parties
hereto and their respective successors, assigns or other legal representatives,
but this Agreement and the rights and obligations hereunder may only be assigned
with the prior written consent of the parties.

        

      
        
           

        

        
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    f.    Expenses. Any other separate legal, accounting
and other professional expenses incurred individually by any Shareholder and
Purchaser in connection with this Agreement and the transactions
contemplated hereby shall be borne individually by the party contracting for
such services, as the case may be. No party will charge or request reimbursement
from the other for any cost of preparing and consummating this Agreement and the
transactions contemplated hereby. Each party also agrees to bear its own
expenses for commissions, finder’s fees, or similar claims in connection with
this transaction and agree to indemnify the other parties against any claims for
the same. The Company shall not be liable or responsible for any costs
associated with consummating the transaction contemplated
hereby.

    

    g.    Survival. If any term or provision of this
Agreement, or the application thereof to any person or circumstances, shall be
invalid or unenforceable to any extent, the remainder of this Agreement or the
application of this Agreement to persons or circumstances other than those
against whom or which such term or provision is invalid or unenforceable shall
not be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permissible by
law.

    

    IN WITNESS WHEREOF, Purchaser, Company
and Shareholders have executed this Agreement or caused this Agreement to be
executed, all as of the date and year first above written, by the signatures
below.

     

    
      
        	 
      	
                PURCHASER:

              
	 
      	 
      
	 
      	
                Caledonia Capital
      Corporation

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ Edward M.
      Murchie   

              
	 
      	 
      	
                Edward M. Murchie,
      President

              
	 
      	 
      
	 
      	
                COMPANY:

              
	 
      	 
      
	 
      	
                SteelCloud,
      Inc.

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ Brian
  Hajost  

              
	 
      	 
      	
                Brian Hajost,
      President

              

      

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    EXHIBIT I

    

    WARRANT

    

    ATTACHED

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
II

      

      Demand and Piggy-Back Registration
Rights

      

      Section 1.
Interpretation
and Definitions. All references to “Sections” in this
Exhibit II are to Sections hereof, and all
references to the term “Act” are
to the Securities Act as defined in the Company’s By-laws. In addition, in this
Exhibit II, the following terms shall have the following
meanings:

      

      “Advice” has the meaning set forth in Section
2.2(d).

      

      “Business
Day” means any day other
than (a) a Saturday or Sunday, or (b) a day on which commercial banks are
authorized by law to close in New York, New York.

      

      “Capital
Securities” means shares of
the Company’s capital stock, including all classes and series of common,
ordinary, preferred, voting and nonvoting capital stock.

      

      “Commission” has the meaning set forth in Section
2.1(a)(i)(1).

      

      “Demand Registration” has the meaning set forth in Section
2.1(b).

      

      “Exchange
Act” means the United
States Securities Exchange Act of 1934, as amended.

      

      “Expenses” has the meaning set forth in Section
2.5(a).

      

      “Holders” means Caledonia Capital Corporation, a
Delaware corporation and its permitted transferees.

      

      “Initial
Public Offering” means the
closing of the first public offering of Capital Securities for the Company’s
account under the securities law of any jurisdiction.

      

      “Listed” or “Listing” means the initial listing of the
Common Stock.

      

      “Person” means any individual, firm,
corporation, partnership, company, trust, incorporated or unincorporated
association, joint venture, or other entity of any kind and shall include any
successor (by merger or otherwise) of such entity.

      

      “Piggyback
Registration” has the
meaning set forth in Section 2.1(a)(i).

      

      “Prospectus” means any prospectus contained in a
Registration Statement.

      

      “Registrable
Securities” means the
Common Shares and all securities issued in respect thereof upon any conversion,
stock split, stock dividend, recapitalization or other similar event, but with
respect to any such Registrable Security, only until such time as such
Registrable Security: (a) has been effectively registered under the Act; or (b)
has been sold to the public pursuant to Rule 144 (or any similar provision then
in force) under the Securities Act; or (c) has become eligible for sale in
accordance with Rule 144(k) (or any similar provision then in force) under the
Act.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      “Registration” means any Piggyback Registration or
Demand Registration.

      

      “Registration
Statement” means a
registration statement relating to a Registration on any appropriate form under
the Act.

      

      Section 2.1   
 Registration
Rights.

      

      
        	
                (a)

              	
                Piggyback
      Rights.

              

      

      

      (i)          
If the Company proposes to:
register any Capital Securities with the United States Securities and Exchange
Commission (the “Commission”) under the Act (a “Registration”), the Company will give written notice
to all Holders, at least thirty (30) days prior to the anticipated filing date
of its intention to effect such Registration, which notice will specify the
proposed offering price, the kind and number of securities proposed to be issued
in connection with such registration, the distribution arrangements and such
other information that at the time would be appropriate to include in such
notice, and will, subject to Section 2.1(a)(vi) below, include in such
registration all Registrable Securities with respect to which the Company has
received from the Holders written requests for inclusion therein (the
“Piggyback
Registration”) within
twenty (20) days after delivery of the Company's notice.

      

      (ii)    
      Except as may otherwise be provided in
this Exhibit II, Registrable Securities with respect to which a request for
inclusion in a Registration made in accordance with Section 2.1(a)(i) has been
received will be included by the Company and offered to the public in a
Piggyback Registration pursuant to this Section 2.1 on terms and conditions at
least as favorable as those applicable to the Registration of Capital Securities
to be sold by the Company and by any other person selling under such
Registration.

      

      (iii)       
  Notwithstanding the
foregoing, if at any time after giving written notice of its intention to effect
a Registration and before the effectiveness of any Registration Statement filed
in connection with such Registration, the Company determines for any reason
either not to effect such Registration or to delay such Registration, the
Company may, at its election, by delivery of a written notice to each Holder:
(A) in the case of a determination not to effect such Registration, relieve
itself of its obligation to include the Registrable Securities in connection
with such Registration; or (B) in the case of a determination to delay such
Registration, delay the inclusion of such Registrable Securities for the same
period as the delay in the Registration of such other shares of Capital
Securities.

      

      (iv)       
  If a Holder of Registrable
Securities requests inclusion in a Registration pursuant to this Section 2.1(a),
such Holder may at any time at least five (5) Business Days before the effective
date of the Registration Statement relating to such Registration, revoke such
request by delivering written notice of such revocation to the Company (which
notice shall be effective only upon receipt by the Company).

       

      
        
          
          

        

        
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                (b)

              	
                Demand
      Registration.

              

      

      

      (i)         
  If the Company shall receive at any time a written request from the
Holder that the Company file a registration statement under the Securities Act
covering the registration of Registrable Securities, then the Company shall,
subject to the limitations of Section 2.2, use its best efforts to file as soon
as practicable, and in any event within ninety (90) days of the
receipt of such request, a
registration statement under the Securities Act covering all Registrable
Securities which the Holders request in writing to be registered within fifteen
(15) days of the mailing of such notice by the Company (a “Demand
Registration”). A demand
for registration under this Section 2.1(b) will not count as such until it has
become effective and unless the Holder is able to register and sell all of the
Registrable Securities included by such Holder in such registration
statement.

      

      (ii)       
   If the Holder intends
to distribute the Registrable Securities covered by its request by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to this Section 2.1(b) and the Company shall include such information
in the written notice referred to in Section 2.1(b)(i). The underwriter will be
selected by the Holder and shall be reasonably acceptable to the Company. In
such event, the right of any Holder to include such Holder’s Registrable
Securities in such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided
herein.

      

      (iii)       
  Notwithstanding the
foregoing, if the Company shall furnish to the Holder requesting a registration
pursuant to this Section 2.1(b) a certificate signed by the Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, it
would be seriously detrimental to the Company and its stockholders or members
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holder; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.

      

      Section 2.2   
 Registration
Procedures.

      

      (a)         
With respect to any Registration under the Act, the Company will, subject to
Section 2.1, as expeditiously as practicable:

      

      (i)       
    prepare and file
with the Commission a Registration Statement on an appropriate form, which form
shall be available for the sale of the Registrable Securities in accordance with
the intended method or methods of distribution thereof and use reasonable
efforts to cause such Registration Statement to become
effective;

      

      (ii)       
   use reasonable
efforts to keep such Registration Statement continuously effective and provide
all requisite financial statements for the applicable period; upon the
occurrence of any event that would cause any such Registration Statement or any
Prospectus contained therein (A) to contain a material misstatement or omission
or (B) not to be effective and usable for resale of Registrable Securities
during the period required by this Exhibit II, the Company shall prepare and
file an appropriate amendment to such Registration Statement and supplement to
the Prospectus, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use reasonable efforts
to cause such amendment to be declared effective and such Registration Statement
and the related Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter;

       

      
        
          
          

        

        
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      (iii)         
prepare and file with the
Commission such amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration Statement effective for a
period of at least ninety (90) days or such shorter period as will terminate
when all Registrable Securities covered by
such Registration Statement have been sold and there is no continuing prospectus
delivery requirement, and cause the Prospectus to be supplemented by any
required Prospectus supplement, and to comply with the applicable provisions of
Rules 424 and 430A under the Act in a timely manner;

      

      (iv)         
advise the managing underwriters, if any, and the selling Holders promptly and,
if requested by such persons, to confirm such advice in writing: (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective; (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto;
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the suspension
by any state securities commission of the qualification of the Registrable
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes; and (D) of the existence of any
fact or the happening of any event that makes any statement of a material fact
made in the Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration Statement
or the Prospectus in order to make the statements therein not
misleading.

      

      If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration Statement,
or any state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the
Registrable Securities under state securities or Blue Sky laws, the Company
shall use reasonable efforts to obtain, as promptly as practicable, the
withdrawal or lifting of such order at the earliest possible
time;

      

      (v)       
   furnish to each
selling Holder of Registrable Securities in such Registration and each of the
managing underwriters, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference), which documents will be subject to the
review of such selling Holder and managing underwriters, if any, for a period of
at least five (5) Business Days before filing, and the Company will not file any
such Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder covered by such
Registration Statement or the managing underwriters, if any, shall reasonably
object within five (5) Business Days after the receipt
thereof;

      

      (vi)       
  make available at
reasonable times for inspection by each selling Holder, any managing underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by such selling Holder or any of the
managing underwriters, pertinent financial and other records, pertinent
corporate documents and properties of the Company and cause the Company's
officers, directors and employees to supply information reasonably requested by
any such selling Holder, managing underwriter, attorney or accountant in
connection with such Registration Statement subsequent to the filing thereof and
prior to its effectiveness;

      

      
        
          
          

        

        
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      (vii)       
 if requested by any selling
Holder or the managing underwriters, if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holder and managing
underwriters, if any, may reasonably
request to have included therein relating to the selling Holder, the “Plan of
Distribution” of the Registrable Securities, information with respect to the
amount of Registrable Securities being sold to such managing underwriters, the
purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment;

       

      (viii)       
furnish to each selling Holder and
each of the managing underwriters, if any, without charge, one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein);

       

      (ix)       
  deliver to each selling
Holder and each of the managing underwriters, if any, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such persons reasonably may request; the
Company hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the managing
underwriters, if any, in connection with the offering and the sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto;

       

      (x)   (A)  enter into customary
agreements (including an underwriting agreement in customary form in the case of
an underwritten offering); (B) make such representations and warranties to the
selling Holders and underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in secondary underwritten offerings;
and (C) upon the reasonable request of any selling Holder or the managing
underwriter, if any, use reasonable efforts to obtain a “comfort” letter, an
opinion or opinions from counsel for the Company in customary form and a
certificate of a principal financial or accounting officer of the Company,
confirming, as of the date thereof, such representations, warranties and other
matters as the selling Holder or managing underwriters, if any, may reasonably
request;

       

      (xi)         
prior to any public offering of
Registrable Securities, cooperate with the selling Holders, the managing
underwriters, if any, and their respective counsel in connection with the
registration and qualification of the Registrable Securities under the
securities or Blue Sky laws of such jurisdictions as the selling Holders or
managing underwriters, if any, may request and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration
Statement;

      

      (xii)       
 cooperate with the selling
Holders and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as the
selling Holders or the managing underwriters, if any, may request at least two
(2) Business Days prior to any sale of Registrable Securities made by such
managing underwriters;

      

      (xiii)       
cause all Registrable Securities
covered by the Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then listed if requested
by the Holders of a majority in aggregate amount of Registrable Securities being
offered in the offering or the managing underwriters, if any;
and

       

      
        
           

        

        
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      (xiv)       
provide promptly to each selling Holder, upon request, each document filed with
the Commission pursuant to the requirements of Section 13 and Section 15 of the
Exchange Act during such period as such selling Holder is required to deliver a
prospectus.

      

      (b)         
 The Company may require each selling Holder of Registrable Securities as
to which any Registration is being effected to furnish to the Company such
information regarding the proposed distribution of such securities as the
Company may from time to time reasonably request in writing.

      

      Section 2.3   
 Registration
Expenses.

      

      (a)         
 To the extent not inconsistent with applicable law, all expenses incident
to the Company's performance of or compliance with this Exhibit II will be borne
by the Company regardless of whether a Registration Statement becomes effective,
of the following, if any, incurred in connection with conducting such
Registration): (i) all registration and filing fees and expenses; (ii) all fees
and expenses of the Company’s compliance with applicable securities laws; (iii)
all expenses of printing, messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company; (v) all listing and
filing fees, if any, in connection with listing the Registrable Securities on a
securities exchange or automated quotation system pursuant to the requirements
of this Exhibit II; (vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any management
review or cold comfort letters); (vii) expenses of printing certificates for the
Registrable Securities in a form eligible for deposit with Depositary Trust
Company; (viii) internal expenses (including all salaries and expenses of the
Company’s officers and employees performing legal or accounting duties); (ix)
securities acts liability insurance (if the Company elects to obtain such
insurance); and (x) the reasonable fees and expenses of any special experts
retained by the Company in connection with such
registration.

       

      Section 2.4 
  Rule
144.

       

      The Company agrees that it will endeavor
to file in a timely manner all reports required to be filed by it pursuant to
the Act and the Exchange Act and will take such further action as any Holder of
Registrable Securities may reasonably request in order that such Holder may
effect sales of its Common Shares pursuant to Rule 144. At any reasonable time
and upon request of any Holder of Registrable Securities, the Company will
furnish all such Holders with such information as may be necessary to enable
such Holders to effect sales of Common Shares pursuant to Rule 144 under the Act
and will deliver to all such Holders a written statement as to whether it has
complied with such requirements.

      
        
           

        

        
          - 6
-Warrant

    

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.

    

    COMMON
STOCK PURCHASE WARRANT

    

    To
Purchase 2,000,000 Shares of Common Stock of

    

    SteelCloud,
Inc.

    

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES
that, for value received, Caledonia Capital Corporation, a Delaware corporation,
(the “Holder”),
is entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date of this
Warrant (the “Initial
Exercise Date”) and on or prior to the fourth anniversary of the Initial
Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from SteelCloud, Inc., a
corporation incorporated in the Commonwealth of Virginia (the “Company”), up to
2,000,000 shares (the “Warrant Shares”) of
Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The
purchase price of each share of Common Stock (the “Exercise Price”)
issuable upon the exercise of this Warrant shall be $0.15, subject to adjustment
hereunder. The Exercise Price and the number of Warrant Shares for which the
Warrant is exercisable shall be subject to adjustment as provided
herein.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    1. Title to Warrant.
Prior to the Termination Date and subject to compliance with applicable laws and
Section 7 of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed. The
transferee shall sign an investment letter in form and substance reasonably
satisfactory to the Company.

    

    2. Authorization of
Shares. The Company covenants that all Warrant Shares which may be issued
upon the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).

    

    3.   Exercise of
Warrant.

    

    (a)
Subject to Section 3(b), exercise of the purchase rights represented by this
Warrant may be made at any time or times on or after the Initial Exercise Date
and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise/Exchange Form annexed hereto
(or such other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder appearing on the
books of the Company); provided, however, within 5
business days of the date said Notice of Exercise is delivered to the Company, the
Holder shall have surrendered this Warrant to the Company and the Company shall
have received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank.
Certificates for shares purchased hereunder shall be delivered to the Holder
within the earlier of (i) 5 business days after the date on which the Notice of
Exercise shall have been delivered by facsimile copy or (ii) 3 business dates
from the delivery to the Company of the Notice of Exercise Form by facsimile
copy, surrender of this Warrant and payment of the aggregate Exercise Price as
set forth above (“Warrant Share Delivery Date”); provided, however, in the
event the Warrant is not surrendered or the aggregate Exercise Price
is not received by the Company within 5 business days after the date on which
the Notice of Exercise shall be delivered by facsimile copy, the Warrant Share
Delivery Date shall be extended to the extent such 5 business day period is
exceeded. This Warrant shall be deemed to have been exercised on the later of
the date the Notice of Exercise is delivered to the Company by facsimile copy
and the date the Exercise Price is received by the Company. The Warrant Shares
shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price and all taxes required to be
paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such
shares, have been paid. If the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 3(a) by the third Trading Day following the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (b)    If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

    

    4. No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an amount equal
to such fraction multiplied by the Exercise Price.

    

    5. Charges, Taxes and
Expenses. Issuance of certificates for Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

    

    6. Closing of Books. The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.

    

    7.   Transfer, Division and
Combination.

    

    (a)    Subject to
compliance with any applicable securities laws and the conditions set forth in
Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

    

    (b)    This Warrant
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section 7(a), as to
any transfer which may be involved in such division or combination, the Company
shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such
notice.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (c)    The Company
shall prepare, issue and deliver at its own expense (other than transfer taxes)
the new Warrant or Warrants under this Section 7.

    

    (d)    The Company
agrees to maintain, at its aforesaid office, books for the registration and the
registration of transfer of the Warrants.

    

    (e)    If, at the
time of the surrender of this Warrant in connection with any transfer of this
Warrant, the transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions and reasonably acceptable to the Company) to the effect
that such transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act.

    

    8. No Rights as Shareholder
until Exercise. This Warrant does not entitle the Holder to any voting
rights or other rights as a shareholder of the Company prior to the exercise
hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price (or by means of a cashless exercise), the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the record owner
of such shares as of the close of business on the later of the date of such
surrender or payment.

    

    9. Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

    

    10. Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of any action
or the expiration of any right required or granted herein shall be a Saturday,
Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day that is not a Saturday, Sunday or legal
holiday.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    11. Adjustments of Exercise
Price and Number of Warrant Shares; Stock Splits, etc. The number and
kind of securities purchasable upon the exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time upon the happening of any of
the following. In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution
in shares of Common Stock to holders of its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which it would have owned or
have been entitled to receive had such Warrant been exercised in advance
thereof. Upon each such adjustment of the kind and number of Warrant Shares or
other securities of the Company which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant Share
or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.

    

    12. Reorganization,
Reclassification, Merger, Consolidation or Disposition of Assets. In case the
Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with
or into another corporation (where the Company is not the surviving corporation
or where there is a change in or distribution with respect to the Common Stock
of the Company), or sell, transfer or otherwise dispose of any of its property,
assets or business to another corporation (including by way of a spinoff) and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (“Other Property”), are
to be received by or distributed to the holders of Common Stock of the Company,
then the Holder shall have the right thereafter to receive, at the option of the
Holder upon exercise of this Warrant, the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
to which the holder of the securities deliverable upon the exercise of this
Warrant would have been entitled in such reorganization, reclassification,
merger, consolidation or disposition of assets if this Warrant had been
exercised immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, “common stock of the successor or acquiring corporation” shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 12 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    13. Voluntary Adjustment by the
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

    

    14. Notice of Adjustment.
Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall give notice thereof to the
Holder, which notice shall state the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.

    

    15. Notice of Corporate
Action.  If at any time:

    

    (a)    the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of stock
of any class or any other securities or property, or to receive any other right,
or

    

    (b)    there shall
be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company to, another
corporation or,

    

    (c)    there shall
be a voluntary or involuntary dissolution, liquidation or winding up of the
Company;

    

    then, in
any one or more of such cases, the Company shall give to Holder the same notice
given to the record holders of its Common Stock. Each such written notice shall
be sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
17(d).

    

    16. Authorized Shares.
The Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be issued as
provided
herein without violation of any applicable law or regulation, or of any
requirements of the trading market upon which the Common Stock may be
listed.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b) take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.

    

    Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

    

    17. Miscellaneous.

    

    (a)    Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the Commonwealth of Virginia, without regard to the
principles of conflicts of law thereof.

    

    (b)    Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

    

    (c)    Nonwaiver. No course
of dealing or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise prejudice
Holder’s rights, powers or remedies, notwithstanding all rights hereunder
terminate on the Termination Date.

    

    (d)    Notices. Any notice,
request or other document required or permitted to be given or delivered to the
Holder by the Company shall be delivered in accordance with the
following:

    

    If to the
Company:

    SteelCloud,
Inc.

    21110
Ashbrook Place

    Ashburn,
VA 20147

    Attention:
Steven Snyder, Chief Financial Officer

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    If to the
Holder:

    Caledonia
Capital Corporation

    19441
Golf Vista Plaza

    Suite
360

    Leesburg,
VA 20176

    Attention:
Edward M. Murchie

    

    (e)    Limitation of
Liability. No provision hereof, in the absence of any affirmative action
by Holder to exercise this Warrant or purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

    

    (f)    Remedies. Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.

    

    (g)    Successors and
Assigns. Subject to applicable securities laws, this Warrant and the
rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.

    

    (h)    Amendment. This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

    

    (i)    Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.

    

    (j)    Headings. The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    18. Registration
Rights.  Commencing on or about August 31, 2009, the Company shall
prepare and file a registration statement with respect to the issuance and the
resale of the Warrant Shares on an appropriate form for an offering to be made
on a continuous basis pursuant to Rule 415 under the Securities Act (the “Registration
Statement”) and shall use its best efforts to cause the Registration
Statement to be declared effective on or as soon as practicable
thereafter, and to keep such Registration Statement continuously effective for a
period ending upon all Warrant Shares having been otherwise transferred in a
transaction that would constitute a sale thereof under the Securities Act, the
Company has delivered a new certificate or other evidence of ownership for
Warrant Shares not bearing the Securities Act restricted stock legend and such
Warrant Shares may be resold without restriction under the Securities
Act.

    

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.

    

    Dated:  March
31, 2010

     

    
      
        
          
            
              
                
                  	 
      	
                          STEELCLOUD,
      INC.

                        	 
	 
      	 
      	 
      	 
	 
      	
                          By:

                        	/s/
      Steven Snyder 	 
	 
      	
                          Name:
      Steven Snyder

                        	 
	 
      	
                          Title:  Chief
      Financial Officer

                        	 

                

              

            

            
              
                 

              

              
                9

                
                  

                

              

              
                 

              

            

          

        

      

    

     

    NOTICE
OF EXERCISE/EXCHANGE

    

    To:      SteelCloud,
Inc.

    

    (1) The
undersigned hereby elects to purchase ________ Warrant Shares of SteelCloud,
Inc. pursuant to the terms of the attached Warrant (only if exercised in full),
and tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

    

    (2)
Payment shall take the form of (check applicable box):

    

    o in lawful money of the
United States; or

    

    o the cancellation of
such number of Warrant Shares as is necessary, in accordance with the formula
set forth in subsection 3(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 3(c).

    

    (3)
Please issue a certificate or certificates representing said Warrant Shares in
the name of the undersigned or in such other name as is specified
below:

    

    _______________________________

    

    The
Warrant Shares shall be delivered to the following:

    

    _______________________________

    

    _______________________________

    

    (4) Accredited Investor.
The undersigned is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as amended.

     

    
      
        
          
            	 
      	
                    [PURCHASER]

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	 
      
	 
      	
                    Name:

                  
	 
      	
                    Title:

                  

          

        

      

    

    Dated:  ________________________

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

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

    

    _______________________________________________
whose address is

    

    _______________________________________________________________.

    

    _______________________________________________________________

    

    Dated:  ______________,
_______

    

    
      	
            	
              Holder's Signature: 

            	
              _____________________________

            

    

    

    
      
        
          	
                	
                  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 Warrant, 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
Warrant.

    
      
         

      

      
        11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]