ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On February 28, 2009, SteelCloud, Inc. ("SteelCloud" or the "Company") entered into an Employment Agreement Amendment (the "Amended Agreement") with Kevin Murphy, the Company's current Chief Financial Officer, pursuant to which the terms of Mr. Murphy's employment agreement, dated June 8, 2004, as amended on October 26, 2007 and December 31, 2008, were amended. Under the terms of the Amended Agreement, Mr. Murphy's annual base salary was reduced to $193,500, from $215,000 and Mr. Murphy's monthly general business allowance was reduced to $500, from $1,000. The terms of the Amended Agreement further provide that (a) Mr. Murphy agrees to forfeit options to purchase an aggregate of 225,000 shares of the Company's common stock, $0.001 par value per share (the "Common Stock"),
(b) Mr. Murphy shall enter into a separate Incentive Stock Option agreement with the Company, pursuant to which Mr. Murphy shall be granted an option to purchase 150,000 shares of Common Stock, which shall vest quarterly in arrears over a one year period, and (c) Mr. Murphy shall enter into a separate Restricted Stock Agreement with the Company, pursuant to which Mr. Murphy shall receive 90,000 shares of restricted Common Stock which shall vest ratably over 12 months, or 7,500 shares per month, so long as Mr. Murphy is employed by the Company on the last day of each month.

A copy of Mr. Murphy's Amended Agreement is filed herewith as Exhibit 10.1.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

10.1 Employment Agreement Amendment, dated February 28, 2009.

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