STEELCLOUD, MEA JOINT VENTURE AGREEMENT

This JOINT VENTURE AGREEMENT (“Agreement”) is entered into on the 13 ^th day of October, 2008, by and among the members listed on Exhibit 1 with respect to the SteelCloud MEA Joint Venture (“Company”).

The parties agree to organize and operate the Company in accordance with the terms of, and subject to the conditions set forth in this Agreement.  Certain capitalized terms are defined in Paragraph 13.

NOW, THEREFORE, for valuable consideration, the parties, intending legally to be bound, agree as follows:

1.             Formation and Name; Office; Purpose; Term.

1.1.            Organization.   The parties confirm the organization of a Limited Liability Company pursuant to United Arab Emirates/Jebel Ali Free Zone laws, effective upon acceptance of the application of the organization submitted on or about 11 September 2008 by the Jebel Ali Free Zone.

1.2.            Name of the Company.   The name of the Company is "SteelCloud, MEA Joint Venture" and it shall be an FZCO.

1.3.            Purpose.   The purposes for which the Company is formed are to provide technology products produced by the Company or its members to end users and resellers in the United Arab Emirates, the Kingdom of Saudi Arabia, and elsewhere as the Company may determine, and to exercise and enjoy all of the powers, rights and privileges granted to, or conferred upon, limited liability companies of a similar character by the General Laws of United Arab Emirates/Jebel Ali Free Zone, now or hereinafter in force related to said Contract.

1.4.            Term.   The term of the Company began upon the acceptance of the application submitted on or about 11 September 2008 by the Jebel Ali Free Zone, and shall continue for 1 year, which automatically renew on its anniversary, unless terminated pursuant to Paragraph 9 of this Agreement.

1.5.            Principal Office.   The principal office of the Company shall be 14040 Park Center Drive, Suite 210, Herndon, VA 20171, USA, which is also the office of Member SteelCloud.

1.6.            Members.   The names, addresses, Membership Units and the Membership Percentages of the Members are set forth on Exhibit 1.

2.             Capital; Capital Accounts.

2.1.            Member Loans or Services.   Loans or services by any Member to the Company shall not be considered contributions to the capital of the Company and shall be upon such commercially reasonable terms as the Member and the Company may negotiate.

2.2.            No Interest on Capital Contributions.   Members shall not be paid interest on their Capital Contributions.

2.3.            Return of Capital Contributions.   Except as otherwise provided in this Agreement, no Interest Holder shall have the right to receive the return of any Capital Contribution.

2.4.            Capital Accounts.   A separate Capital Account shall be maintained for each Interest Holder as set forth in Paragraph 13.1 hereof.

2.5.            No Subsequent Capital Contributions.   No capital contribution shall be accepted from any Member that alters the ratio of profit and loss allocation from that established on Exhibit 1 as of the date of this Agreement.  Members shall have no obligation to contribute any capital to the Company other than the initial Capital Contribution.

3.             Currency, Profit, Loss, and Distributions.

3.1.            Accepted Currency.   All transactions involving the Company and its Members shall be determined in U.S. Dollars.  All distributions, dividends and payments due and payable to XSAT FZE shall be payable in Dubai at the address for XSAT FZE.

3.2.            Allocation of Profit or Loss.   Profit or Loss shall be allocated to the Interest Holders in proportion to their Membership Percentages.  Special and regulatory allocations are addressed in Paragraph 12.

3.3.            Distributions .  The Members, by majority vote, may decide how much, if any, and when distributions are made to the Members.

3.4.            Allocation and Distribution to Holder of Record.   All Profit and Loss shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Interest Holders as of the last day of the taxable year for which the allocation or distribution is to be made.  However, if there is a Transfer or an Involuntary Withdrawal during the taxable year, the Profit or Loss shall be allocated between the original Interest Holder and the successor on the basis of the number of days that each was an Interest Holder during the taxable year.

3.5.            Distributions Upon Liquidation.   Distributions upon liquidation of the Company are addressed in Paragraph 10.

4.               Member Meetings.

4.1.            Member Meetings.   There shall be at least two (2) semi-annual general meetings of the Members per year at a time determined by the Manager.

4.2.            Special Meetings.   Special meetings of the Members may be called at any time for any purpose or purposes upon the request in writing of the holders of any member or by the Manager.  Such request shall state the purpose or purposes of the meeting.  Business transacted at all special meetings of Members shall be confined to the purpose or purposes stated in the notice of the meeting.

4.3.            Place of Holding Meetings.   Unless otherwise agreed by holders of a majority of Membership Units of the Members, all meetings of Members shall be held at the principal office of the Company.  Members may attend meetings via teleconference or videoconference.

4.4.            Notice of Meetings.   Written notice of each meeting of the Members shall be mailed, or e-mailed, to each Member of record entitled to vote at his post office address or e-mail address, as it appears upon the books of the Company, at least ten (10) days before the meeting.  Each such notice shall state the place, day, and hour at which the meeting is to be held and, in the case of any special meeting, shall state briefly the purpose or purposes thereof.  Any notice of meeting may be waived by any Member.

4.5.            Quorum.   The presence in person or by proxy of Members holding of record a majority of the Membership Units shall constitute a quorum at all meetings of the Members, except as otherwise provided by law, by the Articles or by this Agreement.

4.6.            Voting.   At all meetings of Members, every Member entitled to vote shall have a vote equal to the number of his Membership Units.  Such vote may be either in person or by proxy appointed by an instrument in writing subscribed by such member or his duly authorized attorney-in-fact, bearing a date not more than three (3) months prior to said meeting, unless such instrument provides for a longer period.  Such proxy shall be signed and dated.  All elections shall be had and all questions shall be decided by a majority of the votes cast at a duly constituted meeting, except as otherwise provided by law or by this Agreement.

5.             Management of Joint Venture and Performance of Work.

5.1.            Management Generally.   Each party shall participate in the management of the Company.  SteelCloud is designated the managing venturer (“Manager”).  The parties designate Kevin Murphy, an employee of SteelCloud, as the Manager.  Should Murphy’s employment with SteelCloud terminate, the parties will cooperatively select a replacement who shall be an employee of SteelCloud.  SteelCloud shall maintain the books and records of the Company at the Company’s principal office, and shall account to the Members for all revenues and costs of the Company.

5.2.            Power, Authority and Duties of Manager.   The Manager shall have the right, power and authority, on behalf of the Company and in its name, to exercise all of the rights, powers and authority of the Company under the controlling law, and to adopt such rules and regulations for the conduct of their meetings and the management of the Company, subject to any express limitations set forth herein.  The Manager shall have the powers necessary for and shall perform all duties incident to the office of President under the laws of United Arab Emirates/Jebel Ali Free Zone.  The Manager will negotiate all contracts on behalf of the Company.

5.3.            Compensation of Manager.   The Manager shall not receive any compensation for any duties as Manager.

5.4.            Equipment and Facilities.   SteelCloud and XSAT shall provide the Company the equipment and facilities, if any, listed on Exhibit 2 as part of each Member’s capital contributions, at the values stated therein.

5.5.            Proposal Preparation.   The parties shall use their best effort to prepare proposals for presentation to clients.

5.6.            Performance Responsibilities.   The responsibilities of the Members with regard to Contract performance, source of labor, and negotiation of the Contract shall be as follows:

5.6.1.       SteelCloud’s Responsibilities .   SteelCloud will provide product and Intellectual Property; appropriate training, control record keeping, finance, administrative and legal matters; product training; production, assembly, testing and image loading of products to be sold by the Company; and provide sales functions and marketing assistance as needed.

5.6.2        X SAT’s Responsibilities . XSAT will provide a local presence (includes office space, signage, etc.) in the Territory; create demand for product; provide account management for Company customers; and represent the Company in the Territory.  XSAT will work with SteelCloud to ensure that its staff is trained to perform product warranty, support, and logistical services required by the Company.  XSAT will stock spare product units and parts, provide fulfillment and logistical administration on Company orders, and provide warranty services as directed by the Company.

5.7.            Liability and Indemnification.

5.7.1. The Manager shall at all times act in a fiduciary capacity for the Company.  The Manager shall not be liable, responsible or accountable, in damages or otherwise, to any Member or to the Company for any act performed with respect to Company matters, except for fraud, gross negligence or an intentional breach of this Agreement.

5.7.2. The Company shall indemnify the Manager to the fullest extent permitted by law for any act performed by the Manager with respect to Company matters, except for fraud, gross negligence or an intentional breach of this Agreement.

6.             Transfer of Interests and Withdrawal of Members.

6.1.          General Prohibition on Transfers.   A Member may not, without the prior written consent of all of the other Members, voluntarily or involuntarily, under any circumstances and in any manner whatsoever, dispose of or encumber any of the Membership Units which such Member now owns or hereafter at any time shall acquire, other than in strict accordance with the terms of this Agreement.  Any such attempted disposition or encumbrance in violation of this Agreement shall be void.

6.2.           Right of First Offer.   A Member shall have the right to sell his Membership Units to a third party so long as he first offers it to the other Members.

6.2.1. In the event that a Member (“Offering Member”) desires to sell all, but not less than all, of his Membership Units (“Offered Units”), the Offering Member shall notify the other Members in writing of such desire (“Offering Notice”).  The Offering Notice shall contain the price and terms that the Offering Member desires to accept.

6.2.2. The other Members shall have a period of fourteen (14) days to elect to purchase, on a pro rata basis according to the number of Membership Units owned by such Members, the Membership Units of the Offering Member at the Offer Terms.  Such election must be made in writing within such fourteen (14) day period.

6.2.3. In the event that some of the other Members do not exercise their options with respect to the purchase of some but not all of the Offered Units, the Members that exercised their options (“exercising Members”) shall have an additional option, for a period of seven (7) days after the expiration of such fourteen (14) day period, to purchase on a pro rata basis according to the number of Membership Units owned by such exercising Members, all of the balance of such Offered Units at the Offer Terms so that all the Membership Units of the Offering Member are purchased.  Such election must be made in writing within such additional seven (7) day period.  The closing of the purchase of the Offered Units shall take place at the offices of the Company no later than seven (7) days after the expiration of the final option period or by mail as may be appropriate.

6.2.4. If the other Members do not exercise their options to purchase all of the Offered Units, then the Offering Member shall be free, for a period of one hundred eighty  (180) days following the expiration of last period within which options could be exercised, to sell the Offered Units to a third party, provided, however, that the Offering Member may sell the Offered Units only for an amount equal to or greater than the price set forth in the Offer Terms and upon terms and conditions reasonably considered more favorable to the Offering Member.  In the event that the Offered Units are not sold within such one hundred eighty (180) day period, then the Offering Member shall be required to again comply with the provisions of this paragraph for any subsequent sale.

6.3.           Voluntary Withdrawal.   No Member shall have the right or power to voluntarily withdraw from the Company.

6.4.           Involuntary Withdrawal.   Immediately upon the occurrence of any of the following event