Item 1.01. Entry into a Material Definitive Agreement.
InterCloud Systems, Inc., a Delaware
corporation (the “Company,” “we,” “us,” or “our”) has embarked upon a plan to realign
its business strategy and reduce the convertible debt on its balance sheet. In that regard, the Company has sold a non-core business
division of one of its wholly-owned subsidiaries, ADEX Corporation (“ADEX”), and has used the proceeds to eliminate
$3,625,000 of secured convertible debt from its balance sheet.
Asset Purchase Agreement
On February 28, 2017, we entered into
an Asset Purchase Agreement (the “APA”) with ADEX and HWN, Inc., a Delaware corporation (“HWN”), pursuant
to which HWN purchased from ADEX and the Company ADEX’s High Wire Networks division, in consideration of a $4 million cash
payment (the “Purchase Price”) to the Company, with an expected additional $900,000 cash payment in respect of a working
capital adjustment to the Purchase Price to be paid to the Company in August 2017, all in accordance with the terms and conditions
of the APA.
Reduction of Debt Obligations to
Holder and Holder Affiliate
Consent
In connection with
the execution of the APA, we executed a Consent, dated as of February 28, 2017 (the “Consent”), with the Holders (as
defined below), in order to, among other things, (i) obtain the Holders’ consent to the Company’s execution of the
APA; (ii) amend that certain Debenture, dated December 29, 2015 (as subsequently amended and restated, the “Debenture”),
issued by the Company to the Holder party thereto (the “Holder), to modify the conversion price at which the Debenture converts
into Common Stock of the Company (“Common Stock”) from the lowest of (a) $0.2043 per share, (b) 80% of the average
VWAPs (as defined in the Debenture) for each of the five consecutive trading days immediately prior to the applicable conversion,
and (c) 85% of the VWAP (as defined in the Debenture) for the trading day immediately preceding the applicable conversion ((a)-(c),
the “Old Conversion Prices”), to the lower of (a) $0.04 per share and (b) 80% of the lowest daily VWAP (as defined
in the Debenture) for the thirty consecutive trading days immediately prior to the applicable conversion (the “New Conversion
Prices”); (iii) amend that certain Convertible Note, dated February 18, 2016 (as subsequently amended and restated, the “Convertible
Note”), issued by the Company and VaultLogix, LLC, a Delaware limited liability company (“VaultLogix”) to an
affiliate of the Holder (the “Holder Affiliate”, and together with the Holder, the “Holders”), to modify
the conversion price at which the Convertible Note converts into Common Stock from the Old Conversion Prices to the New Conversion
Prices; (iv) amend that certain Senior Secured Note, dated May 17, 2016 (as subsequently amended and restated, the “2.7 Note”),
issued by the Company to the Holder, to modify the conversion price at which the 2.7 Note converts into Common Stock from the Old
Conversion Prices to the New Conversion Prices; and (v) apply $3,625,000 of the Purchase Price received in connection with the
APA to payments to the Holder in respect of the Convertible Note, as more particularly set forth in the Consent.
Exchange Agreement
We also executed
a Securities Exchange Agreement, dated as of February 28, 2017 (the “Exchange Agreement”), with the Holder, pursuant
to which the Holder agreed to exchange its additional investment rights under Section 4.13 of that certain Securities Purchase
Agreement, effective as of December 29, 2015, by and between the Company and the Holder, in consideration of the Company’s
execution and delivery to the Holder of a warrant (the “Warrant”) to purchase from the Company up to a number of shares
of Common Stock that would result in the Company receiving aggregate proceeds from the exercise of the Warrant of $1 million. The
Warrant expires on November 28, 2018 and contains a cashless exercise feature. If the Warrant is exercised prior to May 29, 2017,
the exercise price per share is $0.04. If the Warrant is exercised on or after May 29, 2017, the exercise price per share is equal
to the lower of: (a) $0.04 and (b) 80% of the lowest daily VWAP (as defined in the Warrant) of the Common Stock for the thirty
(30) consecutive trading day period immediately preceding the applicable exercise date.
The foregoing description
of the APA, Consent, Exchange Agreement, and Warrant does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the full text of the APA, Consent, Exchange Agreement, and Warrant, copies of which are filed herewith as Exhibits
10.1, 10.2, and 10.3, and 10.4 respectively, and are incorporated by reference herein. The provisions of the APA, Consent, Exchange
Agreement, and Warrant, including the representations and warranties contained therein, are not for the benefit of any party other
than the parties to such agreements and are not intended as documents for investors and the public to obtain factual information
about our current state of affairs. Rather, investors and the public should look to other disclosures contained in our filings
with the SEC.