Document:

THIS  WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN  REGISTERED  UNDER  THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"),  OR  ANY  STATE  SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED  UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES  LAWS  SHALL  BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION  UNDER  THE  SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. SUBJECT TO COMPLIANCE
WITH  THE  REQUIREMENTS  OF  THE  SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
BE  PLEDGED  OR  HYPOTHECATED  IN  CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER  LOAN  SECURED  BY  THIS  WARRANT  OR  ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE  OF  THIS  WARRANT.

                        WARRANT TO PURCHASE COMMON STOCK

                                       OF

                         CITADEL SECURITY SOFTWARE INC.

Issue Date: February 10, 2004                                 Warrant No. ____

     THIS  CERTIFIES  that  Satellite Strategic  Finance  Associates, LLC or any
                            ---------------------------------------------
subsequent  holder hereof (the "Holder"), has the right to purchase from CITADEL
                                ------
SECUIRTY  SOFTWARE  INC.,  a
Delaware  corporation  (the  "Company"),  up  to  1,200,000  fully  paid  and
                              -------
nonassessable  shares  of  the Company's common stock, par value $0.01 per share
(the  "Common  Stock"), subject to adjustment as provided herein, at a price per
       -------------
share  equal  to the Exercise Price (as defined below), at any time beginning on
the  date  on which this Warrant is issued (the "Issue Date") and ending at 6:00
                                                 ----------
p.m., eastern time, on the date that is the fifth (5th) anniversary of the Issue
Date  (the  "Expiration Date").  This Warrant is issued pursuant to a Securities
             ---------------
Purchase  Agreement,  dated  as  of  February 10, 2004 (the "Securities Purchase
                                     ------------            -------------------
Agreement").  Capitalized terms used herein and not otherwise defined shall have
---------
the  respective  meanings  set  forth  in  the  Securities  Purchase  Agreement.

     1.     Exercise.
            --------

     (a)     Right to Exercise; Exercise Price.  The Holder shall have the right
             ---------------------------------
to  exercise  this  Warrant  at any time and from time to time during the period
beginning  on  the Issue Date and ending on the Expiration Date as to all or any
part  of  the shares of Common Stock covered hereby (the "Warrant Shares").  The
                                                          --------------
"Exercise  Price"  for  each  Warrant  Share  purchased  by  the Holder upon the
 ---------------
exercise  of  this Warrant shall be equal to $5.15 subject to adjustment for the
events  specified  in  Section  6  below.

<PAGE>
     (b)     Exercise  Notice.  In  order  to  exercise this Warrant, the Holder
             ----------------
shall  send  by  facsimile transmission, at any time prior to 6:00 p.m., eastern
time,  on  the  Business  Day on which the Holder wishes to effect such exercise
(the "Exercise Date"), to the Company an executed copy of the notice of exercise
      -------------
in  the form attached hereto as Exhibit A (the "Exercise Notice"), and a copy of
                                                ---------------
the  original  Warrant,  and, in the case of a Cash Exercise (as defined below),
shall  forward to the Company the Exercise Price. The Exercise Notice shall also
state  the name or names (with address) in which the shares of Common Stock that
are  issuable  on  such exercise shall be issued. In the case of a dispute as to
the  calculation  of the Exercise Price or the number of Warrant Shares issuable
hereunder  (including,  without  limitation,  the  calculation of any adjustment
pursuant to Section 6 below), the Company shall promptly issue to the Holder the
number  of  Warrant  Shares  that are not disputed and shall submit the disputed
calculations  to  its  certified  public accounting firm within two (2) Business
Days  following  the  date  on  which  the  Exercise  Notice is delivered to the
Company. The Company shall cause such accountant to calculate the Exercise Price
and/or the number of Warrant Shares issuable hereunder and to notify the Company
and  the  Holder of the results in writing no later than three (3) Business Days
following  the  day  on which such accountant received the disputed calculations
(the  "Dispute  Procedure").  Such  accountant's  calculation  shall  be  deemed
       ------------------
conclusive absent manifest error. The fees of any such accountant shall be borne
by  the  party  whose  calculations  were  most  at  variance with those of such
accountant.

     (c)     Holder of Record.  The Holder shall, for all purposes, be deemed to
             ----------------
have  become the holder of record of the Warrant Shares specified in an Exercise
Notice  on  the  Exercise  Date  specified  therein, irrespective of the date of
delivery  of  such  Warrant  Shares.  Except  as  specifically  provided herein,
nothing  in this Warrant shall be construed as conferring upon the Holder hereof
any  rights  as  a  stockholder  of  the  Company  prior  to  the Exercise Date.

     (d)     Cancellation  of  Warrant.  This Warrant shall be canceled upon its
             -------------------------
exercise  and,  if  this Warrant is exercised in part, the Company shall, at the
time  that it delivers Warrant Shares to the Holder pursuant to such exercise as
provided  herein,  issue  a new warrant, and deliver to the Holder a certificate
representing  such  new  warrant,  with  terms identical in all respects to this
Warrant  (except  that  such new warrant shall be exercisable into the number of
shares  of  Common  Stock  with  respect  to  which  this  Warrant  shall remain
unexercised);  provided,  however, that the Holder shall be entitled to exercise
               --------   -------
all  or  any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such  new  warrant  or  delivered  to  the  Holder  a  certificate  therefore.

     2.     Delivery  of  Warrant  Shares  Upon  Exercise.  Upon  receipt  of an
            ---------------------------------------------
Exercise  Notice pursuant to Section 1 above, the Company shall, (A) in the case
of  a Cash Exercise no later than the close of business on the later to occur of
(i)  the  third (3rd) Business Day following the Exercise Date set forth in such
Exercise  Notice  and  (ii)  such  later  date  on  which the Company shall have
received  payment  of the Exercise Price, (B) in the case of a Cashless Exercise
(as  defined  below),  no  later  than  the close of business on the third (3rd)
Business  Day following the Exercise Date set forth in such Exercise Notice, and
(C)  with respect to Warrant Shares that are the subject of a Dispute Procedure,
the  close  of  business  on  the  third  (3rd)  Business  Day  following  the
determination made pursuant to Section 1(b) (each of the dates specified in (A),
(B)  or (C) being referred to as a "Delivery Date"), issue and deliver or caused
                                    -------------
to  be  delivered  to

                                        2
<PAGE>
the  Holder  the  number  of  Warrant  Shares as shall be determined as provided
herein. The Company shall effect delivery of Warrant Shares to the Holder by, as
long  as the Transfer Agent participates in the Depository Trust Company ("DTC")
                                                                           ---
Fast  Automated  Securities  Transfer program ("FAST"), crediting the account of
                                                ----
the  Holder  or  its  nominee  at  DTC  (as specified in the applicable Exercise
Notice)  with  the  number  of Warrant Shares required to be delivered, no later
than the close of business on such Delivery Date. In the event that the Transfer
Agent  is  not a participant in FAST, or if the Warrant Shares are not otherwise
eligible for delivery through FAST, or if the Holder so specifies in an Exercise
Notice or otherwise in writing on or before the Exercise Date, the Company shall
effect  delivery  of  Warrant  Shares by delivering to the Holder or its nominee
physical  certificates representing such Warrant Shares, no later than the close
of  business  on  such  Delivery  Date.

     3.     Failure  to  Deliver  Warrant  Shares.
            -------------------------------------

     (a)     In  the  event  that the Company fails for any reason to deliver to
the  Holder  the  number  of Warrant Shares specified in the applicable Exercise
Notice  on  or  before  the Delivery Date therefore (an "Exercise Default"), and
                                                         ----------------
such  default  continues  for  seven  (7)  Business Days following delivery of a
written  notice  of such default by the Holder to the Company, the Company shall
pay  to  the  Holder payments ("Exercise Default Payments") in the amount of (i)
                                -------------------------
(N/365)  multiplied  by  (ii) the aggregate Exercise Price of the Warrant Shares
         --------------
which  are the subject of such Exercise Default multiplied by (iii) the lower of
                                                -------------
fifteen  percent  (15%)  and  the  maximum rate permitted by applicable law (the
"Default  Interest  Rate"),  where "N" equals the number of days elapsed between
 -----------------------
the  original  Delivery Date of such Warrant Shares and the date on which all of
such Warrant Shares are issued and delivered to the Holder. Cash amounts payable
hereunder  shall  be  paid  on  or  before  the  fifth (5th) Business Day of the
calendar  month  following  the calendar month in which such amount has accrued.

     (b)     In  the  event  that  the  Holder  has  not  received  certificates
representing  the  Warrant Shares by the seventh (7th) Business Day following an
Exercise  Default,  the  Holder  may,  upon  written  notice  to the Company (an
"Exercise  Default Notice"), regain on the date of such notice the rights of the
 ------------------------
Holder  under  the exercised portion of this Warrant that is the subject of such
Exercise  Default, in which case the Exercise Price upon any subsequent exercise
of  such  portion  of this Warrant will be equal to the lesser of (x) the lowest
Exercise  Price  occurring  during the period beginning on related Delivery Date
and  ending on the date on which the Exercise Default Notice is delivered to the
Company and (y) the Exercise Price in effect on the applicable Exercise Date (it
being  understood  that  the  Holder  may deliver an Exercise Notice at any time
following  delivery  of  an  Exercise  Default  Notice to the Company).  In such
event,  the  Holder  shall  retain  all of the Holder's rights and remedies with
respect  to  the  Company's  failure  to  deliver such Warrant Shares (including
without  limitation  the right to receive the cash payments specified in Section
3(a)  above).

     (c)     Nothing  herein  shall  limit  the  Holder's right to pursue actual
damages  for  the  Company's  failure to issue and deliver Warrant Shares on the
applicable Delivery Date (including, without limitation, damages relating to any
purchase  of  Common  Stock by the Holder to make delivery on a sale effected in
anticipation of receiving Warrant Shares upon exercise, such damages to be in an
amount equal to (A) the aggregate amount paid by the Holder for the

                                        3
<PAGE>
Common  Stock  so  purchased  minus (B) the aggregate amount of net proceeds, if
                              -----
any,  received  by  the Holder from the sale of the Warrant Shares issued by the
Company  pursuant  to  such  exercise),  and  the Holder shall have the right to
pursue  all  remedies  available  to  it at law or in equity (including, without
limitation,  a  decree  of  specific  performance  and/or  injunctive  relief);
provided,  however,  that,  in  the  event,  following  an Exercise Default, the
--------   -------
Company delivers to the Holder the Warrant Shares that are required to be issued
by  the  Company  pursuant  to  such exercise, the Holder shall use commercially
reasonable  efforts  to  sell  such  shares  promptly  following  such delivery.

     4.     Exercise  Limitations.  In no event shall the Holder be permitted to
            ---------------------
exercise  this  Warrant,  or part thereof, if, upon such exercise, the number of
shares of Common Stock beneficially owned by the Holder (other than shares which
would  otherwise  be  deemed  beneficially  owned  except for being subject to a
limitation  on  conversion  or exercise analogous to the limitation contained in
this Section 4), would exceed 4.99% of the number of shares of Common Stock then
issued and outstanding. As used herein, beneficial ownership shall be determined
in  accordance  with  Section  13(d)  of the Securities Exchange Act of 1934, as
amended,  and  the rules thereunder. To the extent that the limitation contained
in  this  Section  4 applies, the submission of an Exercise Notice by the Holder
shall  be  deemed  to  be  the  Holder's  representation  that  this  Warrant is
exercisable  pursuant  to  the terms hereof and the Company shall be entitled to
rely  on  such  representation  without making any further inquiry as to whether
this Section 4 applies. Nothing contained herein shall be deemed to restrict the
right  of  a  Holder  to exercise this Warrant, or part thereof, at such time as
such exercise will not violate the provisions of this Section 4.  This Section 4
may  not  be  amended  unless  such  amendment  is  approved by the holders of a
majority  of  the  Common  Stock  then outstanding; provided, however, that this
                                                    --------  -------
Section  4 shall not apply, effective upon written notice from the Holder to the
Company,  at  any  time after the public announcement of a Major Transaction (as
defined  below).

     5.     Payment  of  the  Exercise Price; Cashless Exercise.  The Holder may
            ---------------------------------------------------
pay  the  Exercise Price in either of the following forms or, at the election of
Holder,  a  combination  thereof:

     (a)     through  a  cash  exercise  (a  "Cash  Exercise")  by  delivering
                                              --------------
immediately  available  funds,  or

     (b)     if  an  effective  Registration  Statement is not available for the
resale  of  all of the Warrant Shares issuable hereunder at the time an Exercise
Notice  is  delivered  to  the Company, through a cashless exercise (a "Cashless
                                                                        --------
Exercise").  The  Holder  may  effect  a  Cashless Exercise by surrendering this
--------
Warrant  to the Company and noting on the Exercise Notice that the Holder wishes
to  effect a Cashless Exercise, upon which the Company shall issue to the Holder
the  number  of  Warrant  Shares  determined  as  follows:

               X  = Y  x  (A-B)/A

where:         X  = the number of Warrant Shares to be issued to the Holder;

                                        4
<PAGE>
               Y  =  the  number  of  Warrant  Shares with respect to which this
                     Warrant is being exercised;

               A  =  the  Market  Price  as  of  the  Exercise  Date;  and

               B  =  the  Exercise  Price.

For  purposes  of  Rule  144,  it  is intended and acknowledged that the Warrant
Shares  issued  in  a Cashless Exercise transaction shall be deemed to have been
acquired  by  the Holder, and the holding period for the Warrant Shares required
by  Rule  144  shall  be  deemed  to  have  been  commenced,  on the Issue Date.

     6.     Anti-Dilution Adjustments; Distributions; Other Events. The Exercise
            ------------------------------------------------------
Price  and  the  number of Warrant Shares issuable hereunder shall be subject to
adjustment  from  time to time as provided in this Section 6.  In the event that
any adjustment of the Exercise Price or the number of Warrant Shares as required
herein  results  in  a fraction of a cent or fraction of a share, as applicable,
such  Exercise  Price or number of Warrant Shares shall be rounded up or down to
the  nearest  cent  or  share,  as  applicable.

     (a)     Subdivision or Combination of Common Stock.  If the Company, at any
             ------------------------------------------
time  after  the  Issue  Date,  subdivides  (by any stock split, stock dividend,
recapitalization,  reorganization,  reclassification or otherwise) its shares of
Common  Stock into a greater number of shares, then after the date of record for
effecting  such  subdivision,  the Exercise Price in effect immediately prior to
such  subdivision  will be proportionately reduced.  If the Company, at any time
after  the  initial  issuance of this Warrant, combines (by reverse stock split,
recapitalization,  reorganization,  reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting  such  combination,  the Exercise Price in effect immediately prior to
such  combination  will  be  proportionally  increased.

     (b)     Distributions.  If  the  Company  shall  declare  or  make  any
             -------------
distribution  of  its  assets  (or  rights  to acquire its assets) to holders of
Common  Stock  as  a  partial  liquidating  dividend or otherwise (including any
dividend  or  distribution  to  the Company's stockholders in cash or shares (or
rights  to acquire shares) of capital stock of a subsidiary) (a "Distribution"),
                                                                 ------------
the  Company  shall deliver written notice of such Distribution (a "Distribution
                                                                    ------------
Notice")  to the Holder at least fifteen (15) Business Days prior to the earlier
------
to  occur  of  (i) the record date for determining stockholders entitled to such
Distribution (the "Record Date") and (ii) the date on which such Distribution is
                   -----------
made (the "Distribution Date").  The Holder shall be entitled to receive, at its
           -----------------
option (to be exercised by written notice delivered to the Company following the
date  on which a Distribution Notice is delivered to the Holder), either (A) the
same  amount and type of assets being distributed in such Distribution as though
the  Holder  were a holder on the Record Date therefore of a number of shares of
Common Stock into which this Warrant is exercisable as of such Record Date (such
number  of  shares  to  be  determined  at the Exercise Price then in effect and
without  giving  effect  to  any  limitations on such exercise contained in this
Warrant or the Securities Purchase Agreement) or (B) a reduction in the Exercise
Price as of the Record Date therefore, such reduction to be effected by reducing
the  Exercise  Price  in  effect  on  the Business Day immediately preceding the
Record  Date  by  an  amount  equal  to  the  fair  market

                                        5
<PAGE>
value  of the assets to be distributed divided by the number of shares of Common
                                       ----------
Stock  as to which such Distribution is to be made, such fair market value to be
reasonably  determined in good faith by the independent members of the Company's
Board  of  Directors.  Notwithstanding  anything  herein to the contrary, if the
Holder  does not notify the Company of whether the Holder has elected clause (A)
or  (B)  in  the  preceding  sentence  on or prior to the Distribution Date, the
Holder  shall  be  deemed  to have elected clause (B) of the preceding sentence.

     (c)     Dilutive  Issuances.
             -------------------

          (i)     Adjustment  Upon Dilutive Issuance.  If, at any time after the
                  ----------------------------------
Issue Date, the Company issues or sells, or in accordance with subparagraph (ii)
of  this  Section  6(c),  is deemed to have issued or sold, any shares of Common
Stock  for  no  consideration  or  for  a  consideration per share less than the
Exercise Price on the date of such issuance or sale (or deemed issuance or sale)
(a  "Dilutive  Issuance"), then the Exercise Price shall be adjusted as follows:
     ------------------

               (A)     If  such  Dilutive Issuance occurs prior to the Effective
     Date  (as  defined  in  the  Registration Rights Agreement), then effective
     immediately  upon  the  Dilutive  Issuance,  the  Exercise  Price  shall be
     adjusted  so  as  to  equal the consideration received or receivable by the
     Company (on a per share basis) for the additional shares of Common Stock so
     issued,  sold or deemed issued or sold in such Dilutive Issuance (which, in
     the  case  of  a deemed issuance or sale, shall be calculated in accordance
     with  subparagraph (ii) below). Notwithstanding the foregoing, prior to the
     Effective  Date, the Company shall not engage in any transaction that would
     result  in the issuance or deemed issuance of shares of Common Stock (other
     than  Excluded  Securities  (as  defined  below)  for  no  consideration.

          (B)     If  such  Dilutive  Issuance  occurs on or after the Effective
     Date,  then  effective immediately upon the Dilutive Issuance, the Exercise
     Price  shall be adjusted so as to equal an amount determined by multiplying
     such  Exercise  Price  by  the  following  fraction:

               N0 + N1
               -------
               N0 + N2

     where:

               N0 = the  number  of  shares  of  Common  Stock  outstanding
                    immediately  prior  to the issuance, sale or deemed issuance
                    or  sale  of  such additional shares of Common Stock in such
                    Dilutive Issuance (without taking into account any shares of
                    Common  Stock issuable upon conversion, exchange or exercise
                    of any securities or other instruments which are convertible
                    into  or  exercisable  or  exchangeable  for  Common  Stock
                    ("Convertible  Securities")  or  options,  warrants or other
                      -----------------------
                    rights  to  purchase  or  subscribe  for  Common  Stock  or
                    Convertible  Securities  ("Purchase  Rights");
                                               ----------------

                                        6
<PAGE>
               N1 = the  number  of  shares  of Common Stock which the aggregate
                    consideration, if any, received or receivable by the Company
                    for  the  total  number  of such additional shares of Common
                    Stock  so  issued,  sold  or  deemed  issued or sold in such
                    Dilutive  Issuance  (which, in the case of a deemed issuance
                    or sale, shall be calculated in accordance with subparagraph
                    (ii)  below)  would purchase at the Exercise Price in effect
                    immediately  prior  to  such  Dilutive  Issuance;  and

               N2 = the  number  of  such  additional  shares of Common Stock so
                    issued,  sold  or  deemed  issued  or  sold in such Dilutive
                    Issuance.

               Notwithstanding  the  foregoing,  no  adjustment  shall  be  made
     pursuant  hereto  if  such  adjustment  would  result in an increase in the
     Exercise  Price.

          (ii)     Effect  On Exercise Price Of Certain Events.  For purposes of
                   -------------------------------------------
determining  the  adjusted Exercise Price under subparagraph (i) of this Section
6(c),  the  following  will  be  applicable:

               (A)     Issuance  Of  Purchase  Rights.  If the Company issues or
                       ------------------------------
     sells  any Purchase Rights, whether or not immediately exercisable, and the
     price  per  share  for  which Common Stock is issuable upon the exercise of
     such  Purchase  Rights  (and  the  price  of  any conversion of Convertible
     Securities, if applicable) is less than the Exercise Price in effect on the
     date  of  issuance  or sale of such Purchase Rights, then the maximum total
     number  of  shares  of  Common Stock issuable upon the exercise of all such
     Purchase  Rights  (assuming  full  conversion,  exercise  or  exchange  of
     Convertible  Securities,  if  applicable)  shall,  as  of  the  date of the
     issuance  or  sale of such Purchase Rights, be deemed to be outstanding and
     to  have  been issued and sold by the Company for such price per share. For
     purposes  of  the preceding sentence, the "price per share for which Common
     Stock  is  issuable  upon  the  exercise  of such Purchase Rights" shall be
     determined by dividing (x) the total amount, if any, received or receivable
     by  the  Company  as  consideration  for  the  issuance or sale of all such
     Purchase  Rights,  plus the minimum aggregate amount (without giving effect
     to  anti-dilution  provisions) of additional consideration, if any, payable
     to  the Company upon the exercise of all such Purchase Rights, plus, in the
                                                                    ----
     case  of Convertible Securities issuable upon the exercise of such Purchase
     Rights,  the  minimum  aggregate amount of additional consideration payable
     upon  the  conversion,  exercise  or  exchange  of  all  such  Convertible
     Securities  (determined in accordance with the calculation method set forth
     in  subparagraph  (ii)(B) below), by (y) the maximum total number of shares
     of  Common  Stock  issuable  upon  the exercise of all such Purchase Rights
     (assuming  full conversion, exercise or exchange of Convertible Securities,
     if  applicable).  Except  as  provided  in  Section  6(c)(ii)(C) hereof, no
     further  adjustment  to  the  Exercise  Price shall be made upon the actual
     issuance  of such Common Stock upon the exercise of such Purchase Rights or
     upon  the  conversion,  exercise  or  exchange  of  Convertible  Securities
     issuable  upon  exercise  of  such  Purchase  Rights.

                                        7
<PAGE>
               (B)     Issuance  Of  Convertible  Securities.  If  the  Company
                       -------------------------------------
     issues  or  sells  any  Convertible  Securities, whether or not immediately
     convertible, exercisable or exchangeable, and the price per share for which
     Common Stock is issuable upon such conversion, exercise or exchange is less
     than  the  Exercise Price in effect on the date of issuance or sale of such
     Convertible  Securities,  then the maximum total number of shares of Common
     Stock  issuable  upon  the  conversion,  exercise  or  exchange of all such
     Convertible  Securities (without giving effect to anti-dilution provisions)
     shall,  as  of  the  date  of  the  issuance  or  sale  of such Convertible
     Securities, be deemed to be outstanding and to have been issued and sold by
     the  Company  for  such  price  per share. If the Convertible Securities so
     issued  or  sold  do not have a fluctuating conversion or exercise price or
     exchange  ratio,  then  for  the  purposes  of  the  immediately  preceding
     sentence, the "price per share for which Common Stock is issuable upon such
     conversion,  exercise  or exchange" shall be determined by dividing (A) the
     total  amount,  if  any,  received  or  receivable  by  the  Company  as
     consideration  for the issuance or sale of all such Convertible Securities,
     plus  the  minimum  aggregate  amount  of additional consideration, if any,
     payable  to  the  Company  upon the conversion, exercise or exchange of all
     such  Convertible Securities (determined in accordance with the calculation
     method  set  forth  in this subparagraph (ii)(B)), by (B) the maximum total
     number  of shares of Common Stock issuable upon the exercise, conversion or
     exchange  of all such Convertible Securities. If the Convertible Securities
     so  issued  or  sold  have  a  fluctuating  conversion or exercise price or
     exchange  ratio (a "Variable Rate Convertible Security"), then for purposes
                         ----------------------------------
     of  the  first  sentence of this subparagraph (ii)(B), the "price per share
     for  which  Common  Stock  is  issuable  upon  such conversion, exercise or
     exchange"  shall  be deemed to be the lowest price per share which would be
     applicable  (assuming  all  holding  period  and  other  conditions  to any
     discounts  contained  in  such Variable Rate Convertible Security have been
     satisfied)  if  the  conversion  price  of  such  Variable Rate Convertible
     Security  on the date of issuance or sale thereof were seventy-five percent
     (75%)  of  the  actual conversion price on such date (the "Assumed Variable
                                                                ----------------
     Market Price"), and, further, if the conversion price of such Variable Rate
     ------------
     Convertible  Security at any time or times thereafter is less than or equal
     to  the  Assumed  Variable Market Price last used for making any adjustment
     under  this  Section  6(c)  with  respect  to any Variable Rate Convertible
     Security,  the Exercise Price in effect at such time shall be readjusted to
     equal  the Exercise Price which would have resulted if the Assumed Variable
     Market  Price  at  the  time  of  issuance of the Variable Rate Convertible
     Security had been seventy-five percent (75%) of the actual conversion price
     of  such  Variable  Rate  Convertible  Security existing at the time of the
     adjustment required by this sentence. No further adjustment to the Exercise
     Price  shall  be  made  upon  the actual issuance of such Common Stock upon
     conversion,  exercise  or  exchange  of  such  Convertible  Securities.

               (C)     Change In Option Price Or Conversion Rate.  If there is a
                       -----------------------------------------
     change at any time in (x) the amount of additional consideration payable to
     the  Company  upon  the  exercise of any Purchase Rights; (y) the amount of
     additional  consideration,  if  any,  payable  to  the  Company  upon  the
     conversion,  exercise  or  exchange  of  any  Convertible  Securities  the
     adjustment  for  which  is  not otherwise covered under Section 6(c)(ii)(B)
     above;  or (z) the rate at which any Convertible Securities are convertible
     into  or  exercisable  or  exchangeable  for Common Stock, then in any such
     case,  the  Exercise  Price  in  effect at the time of such change shall be
     readjusted  to  the  Exercise  Price  which  would

                                        8
<PAGE>
     have  been  in  effect at such time had such Purchase Rights or Convertible
     Securities  still  outstanding  provided  for  such  changed  additional
     consideration or changed conversion, exercise or exchange rate, as the case
     may  be,  at  the  time  initially  issued  or  sold.

               (D)     Calculation  Of  Consideration  Received.  If  any Common
                       ----------------------------------------
     Stock,  Purchase  Rights  or  Convertible Securities are issued or sold for
     cash,  the  consideration received therefore will be the amount received by
     the  Company  therefore.  In  case  any  Common  Stock,  Purchase Rights or
     Convertible  Securities  are issued or sold for a consideration part or all
     of  which shall be other than cash, including in the case of a strategic or
     similar  arrangement in which the other entity will provide services to the
     Company, purchase services from the Company or otherwise provide intangible
     consideration  to  the  Company, the amount of the consideration other than
     cash  received  by  the  Company  (including  the  net present value of the
     consideration  expected  by  the  Company  for  the  provided  or purchased
     services)  shall  be  the  fair  market value of such consideration, except
     where  such  consideration consists of securities, in which case the amount
     of  consideration  received  by the Company will be the average of the last
     sale  prices thereof on the principal market for such securities during the
     period  of  ten  Trading Days immediately preceding the date of receipt. In
     case any Common Stock, Purchase Rights or Convertible Securities are issued
     in  connection with any merger or consolidation in which the Company is the
     surviving corporation, the amount of consideration therefore will be deemed
     to  be the fair market value of such portion of the net assets and business
     of  the  non-surviving corporation as is attributable to such Common Stock,
     Purchase  Rights  or  Convertible  Securities,  as  the  case  may  be. The
     independent  members  of  the  Company's Board of Directors shall calculate
     reasonably  and  in good faith, using standard commercial valuation methods
     appropriate  for  valuing  such  assets,  the  fair  market  value  of  any
     consideration other than cash or securities; provided, however, that if the
     Holder  does  not  agree to such fair market value calculation within three
     Business Days after receipt thereof from the Company, then such fair market
     value  shall  be  determined in good faith by an investment banker or other
     appropriate  expert  of  national  reputation  selected  by  the Holder and
     reasonably  acceptable  to the Company, with the costs of such appraisal to
     be  borne  by  the  Company.

          (iii)     Exceptions To Adjustment Of Exercise Price.  Notwithstanding
                    ------------------------------------------
the  foregoing,  no  adjustment  to the Exercise Price shall be made pursuant to
this  Section  6(c)  upon the issuance of any Excluded Securities.  For purposes
hereof,  "Excluded  Securities"  means  (I)  securities  purchased  under  the
          --------------------
Securities  Purchase  Agreement;  (II)  securities  issued  upon  conversion  or
exercise  of  the  Preferred Stock or the Warrants; (III) shares of Common Stock
issuable or issued to employees, consultants or directors from time to time upon
the exercise of options, in such case granted or to be granted in the discretion
of  the  Board  of  Directors  pursuant  to  one  or  more stock option plans or
agreements  or  restricted  stock  plans or agreements in effect as of the Issue
Date  and  up to an additional 500,000 shares of Common Stock issuable or issued
to  employees or directors from time to time upon the exercise of options, which
may  be  granted  in the discretion of the Board of Directors pursuant to one or
more  stock  option  plans or agreements or restricted stock plans or agreements
approved by the independent directors of  the Board of Directors after the Issue
Date;  (IV)  shares  of  Common Stock issued in connection with any stock split,
stock  dividend  or  recapitalization  of  the Company; and (V) shares of Common
Stock  issued  in  connection  with  the  acquisition  by  the  Company  of  any
corporation  or other

                                        9
<PAGE>
entity occurring after the Effective Date and as long as a fairness opinion with
respect  to  such  acquisition  is  rendered  by  an investment bank of national
recognition.

          (iv)     Notice  Of  Adjustments.  Upon  the  occurrence  of  each
                   -----------------------
adjustment  or  readjustment of the Exercise Price pursuant to this Section 6(c)
resulting  in  a  change in the Exercise Price by more than one percent (1%), or
any  change  in  the  number  or type of stock, securities and/or other property
issuable  upon  exercise  of  this  Warrant,  the Company, at its expense, shall
promptly  compute  such  adjustment  or  readjustment  or change and prepare and
furnish  to  the  Holder  a  certificate  setting  forth  such  adjustment  or
readjustment  or  change  and  showing  in  detail  the  facts  upon  which such
adjustment  or  readjustment  or  change  is based.  The Company shall, upon the
written  request  at  any  time  of  the  Holder,  furnish  to the Holder a like
certificate  setting  forth  (i) such adjustment or readjustment or change, (ii)
the  Exercise  Price  at  the  time  in effect and (iii) the number of shares of
Common  Stock  and  the amount, if any, of other securities or property which at
the  time  would  be  received  upon  exercise  of  this  Warrant.

     (d)     Major  Transactions.  In  the  event  of  a  merger, consolidation,
             -------------------
business  combination,  tender  offer,  exchange  of  shares,  recapitalization,
reorganization,  redemption  or other similar event, as a result of which shares
of  Common  Stock  of  the Company shall be changed into the same or a different
number  of shares of the same or another class or classes of stock or securities
or  other  assets of the Company or another entity or the Company shall sell all
or  substantially  all  of  its  assets  (each  of  the foregoing being a "Major
                                                                           -----
Transaction"),  the  Company  will  give  the  Holder  at least thirty (30) days
-----------
written  notice  prior  to  the  closing of such Major Transaction, and: (i) the
Holder  shall  be  permitted to exercise this Warrant in whole or in part at any
time prior to the record date for the receipt of such consideration and shall be
entitled  to receive, for each share of Common Stock issuable to Holder for such
exercise,  the  same  per  share  consideration  payable to the other holders of
Common  Stock  in connection with such Major Transaction, and (ii) if and to the
extent that the Holder retains any portion of this Warrant following such record
date, the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
the  obligations of the Company under this Warrant, with such adjustments to the
Exercise Price and the securities covered hereby as may be necessary in order to
preserve  the  economic  benefits  of  this  Warrant  to  the  Holder.

     (e)     Adjustments; Additional Shares, Securities or Assets.  In the event
             ----------------------------------------------------
that  at any time, as a result of an adjustment made pursuant to this Section 6,
the Holder of this Warrant shall, upon exercise of this Warrant, become entitled
to  receive  securities  or  assets  (other  than  Common  Stock) then, wherever
appropriate,  all references herein to shares of Common Stock shall be deemed to
refer  to  and  include  such  shares  and/or  other  securities  or assets; and
thereafter  the number of such shares and/or other securities or assets shall be
subject  to  adjustment  from  time to time in a manner and upon terms as nearly
equivalent  as  practicable to the provisions of this Section 6.  Any adjustment
made  herein  other  than  pursuant  to  Section  6(c)  hereof that results in a
decrease  in the Exercise Price shall also effect a proportional increase in the
number  of  shares  of  Common  Stock  into  which  this Warrant is exercisable.

     7.     Fractional  Interests.
            ---------------------

                                       10
<PAGE>
          No  fractional shares or scrip representing fractional shares shall be
issuable upon the exercise of this Warrant, but on exercise of this Warrant, the
Holder  hereof  may purchase only a whole number of shares of Common Stock.  If,
on exercise of this Warrant, the Holder hereof would be entitled to a fractional
share  of Common Stock or a right to acquire a fractional share of Common Stock,
the  Company  shall,  in  lieu  of issuing any such fractional share, pay to the
Holder  an  amount  in cash equal to the product resulting from multiplying such
fraction  by  the  Market  Price  as  of  the  Exercise  Date.

     8.   Transfer  of  this  Warrant.
          ---------------------------

          The  Holder may sell, transfer, assign, pledge or otherwise dispose of
this  Warrant, in whole or in part, as long as such sale or other disposition is
made  pursuant  to  an effective registration statement or an exemption from the
registration  requirements  of the Securities Act, and applicable state security
laws,  and is otherwise made in accordance with the applicable provisions of the
Securities  Purchase  Agreement.  Upon  such  transfer or other disposition, the
Holder  shall deliver this Warrant to the Company together with a written notice
to the Company, substantially in the form of the Transfer Notice attached hereto
as  Exhibit  B (the "Transfer Notice"), indicating the person or persons to whom
                     ---------------
this  Warrant  shall  be  transferred  and,  if less than all of this Warrant is
transferred,  the  number  of  Warrant  Shares to be covered by the part of this
Warrant to be transferred to each such person. Within three (3) Business Days of
receiving  a Transfer Notice and the original of this Warrant, the Company shall
deliver to the transferee designated by the Holder a Warrant or Warrants of like
tenor  and  terms for the appropriate number of Warrant Shares and, if less than
all  this  Warrant is transferred, shall deliver to the Holder a Warrant for the
remaining  number  of  Warrant  Shares.

     9.   Benefits  of  this  Warrant.
          ---------------------------

          This Warrant shall be for the sole and exclusive benefit of the Holder
of  this  Warrant  and nothing in this Warrant shall be construed to confer upon
any  person  other than the Holder of this Warrant any legal or equitable right,
remedy  or  claim  hereunder.

     10.  Loss,  theft,  destruction  or  mutilation  of  Warrant.
          -------------------------------------------------------

          Upon  receipt  by  the  Company  of  evidence  of  the  loss,  theft,
destruction  or  mutilation  of this Warrant, and (in the case of loss, theft or
destruction)  of  indemnity  reasonably  satisfactory  to  the Company, and upon
surrender of this Warrant, if mutilated, the Company shall execute and deliver a
new  Warrant  of  like  tenor  and  date.

     11.  Notice  or  Demands.
          -------------------

          Any notice, demand or request required or permitted to be given by the
Company  or the Holder pursuant to the terms of this Warrant shall be in writing
and  shall  be  deemed  delivered (i) when delivered personally or by verifiable
facsimile  transmission,  unless  such  delivery  is made on a day that is not a
Business  Day, in which case such delivery will be deemed to be made on the next
succeeding  Business Day, (ii) on the next Business Day after timely delivery to
an  overnight  courier  and  (iii)  on  the  Business  Day  actually received if
deposited  in

                                       11
<PAGE>
the  U.S.  mail (certified or registered mail, return receipt requested, postage
prepaid),  addressed  as  follows:

          If to the Company:

          Citadel  Security  Software  Inc.
          8750 N. Central Expy.
          Suite 100
          Dallas, TX 75231
          Attn: Steven B. Solomon, Chief Executive Officer
          Phone: (214) 750-2454
          Fax: (214) 520-0034

          with a copy to:

          David Allen Wood, P.C.
          12770 Coit Road, Suite 1100
          Dallas, Texas 75251
          Attn:  David A. Wood
          Tel:   (972) 458-0300
          Fax: (972) 458-0301

and  if  to  the Holder, to such address as shall be designated by the Holder in
writing  to  the  Company.

     12.  Applicable  Law.
          ---------------

          This Warrant is issued under and shall for all purposes be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts  made  and  to  be  performed  entirely  within the State of New York.

     13.  Amendments.
          ----------

          No  amendment,  modification  or  other  change  to,  or waiver of any
provision  of,  this  Warrant may be made unless such amendment, modification or
change  is  (A) set forth in writing and is signed by the Company and the Holder
and  (B) agreed to in writing by the holders of at least two-thirds (2/3) of the
number  of shares into which the Warrants are exercisable (without regard to any
limitation contained herein on such exercise), it being understood that upon the
satisfaction  of  the  conditions  described  in (A) and (B) above, each Warrant
(including  any  Warrant  held  by  the Holder who did not execute the agreement
specified  in  (B)  above)  shall  be  deemed  to  incorporate  any  amendment,
modification,  change  or  waiver  effected  thereby  as  of  the effective date
thereof.

     14.   Entire  Agreement.
           -----------------

                                       12
<PAGE>
     This  Warrant,  the  Securities  Purchase  Agreement,  the Certificate  of
Designation,  the  Registration  Rights  Agreement,  and  the  other Transaction
Documents  constitute the entire agreement among the parties hereto with respect
to  the  subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein.  This  Warrant,  the  Securities Purchase Agreement, the Certificate of
Designation,  the  Registration  Rights  Agreement,  and  the  other Transaction
Documents  supersede  all  prior agreements and understandings among the parties
hereto  with  respect  to  the  subject  matter  hereof  and  thereof.

     15.   Headings.
           --------

     The  headings  in  this Agreement are for convenience of reference only and
shall  not  limit  or  otherwise  affect  the  meaning  hereof.

                           [Signature Page to Follow]

                                       13
<PAGE>
     IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.

                              CITADEL SECURITY SOFTWARE INC.

                              By:     /s/     Steven B. Solomon
                                      -------------------------------
                                      Name:   Steven B. Solomon
                                      Title:  Chief Executive Officer

                                       14
<PAGE>

                                                            EXHIBIT A to WARRANT
                                                            --------------------

                                 EXERCISE NOTICE
                                 ---------------

     The  undersigned  Holder  hereby  irrevocably  exercises  the  right  to
purchase___________  of the shares of Common Stock ("Warrant Shares") of Citadel
                                                     --------------
Security  Software  Inc.  evidenced  by  the  attached  Warrant (the "Warrant").
                                                                      -------
Capitalized  terms  used  herein  and  not  otherwise  defined  shall  have  the
respective  meanings  set  forth  in  the  Warrant.

     1.     Form  of  Exercise  Price.  The  Holder  intends that payment of the
Exercise  Price  shall  be  made  as:

          ______  a  Cash  Exercise  with  respect  to _________________ Warrant
                     --------------
Shares;  and/or

          ______  a  Cashless Exercise with respect to _________________ Warrant
                     -----------------
Shares,  as  permitted  by  Section  5(b)  of  the  attached  Warrant.

     2.     Payment of Exercise Price.  In the event that the Holder has elected
a  Cash  Exercise with respect to some or all of the Warrant Shares to be issued
pursuant  hereto,  the  Holder  shall  pay  the  sum of $________________ to the
Company  in  accordance  with  the  terms  of  the  Warrant.

Date:  ______________________

____________________________________
     Name  of  Registered  Holder

By:  _______________________________
     Name:
     Title:

                                       15
<PAGE>
                                                            EXHIBIT B to WARRANT
                                                            --------------------

                                 TRANSFER NOTICE
                                 ---------------

FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns  and  transfers  unto  the  person  or  persons named below the right to
purchase __________ shares of the Common Stock of Citadel Security Software Inc.
evidenced  by  the  attached  Warrant.

Date:  ______________________

____________________________________
     Name  of  Registered  Holder

By:  _______________________________
     Name:
     Title:

Transferee Name and Address:

____________________________________

____________________________________

____________________________________

                                       16
<PAGE>REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement"),  dated  as  of
                                              ---------
February 10,  2004,  by  and  between CITADEL SECURITY SOFTWARE INC., a Delaware
corporation  (the "Company"), and each of the entities whose names appear on the
                   -------
signature  pages  hereof.  Such  entities  are  each  referred  to  herein as an
"Investor"  and,  collectively,  as  the  "Investors".
 --------                                  ---------

     The  Company  has  agreed,  on  the terms and subject to the conditions set
forth  in  the Securities Purchase Agreement, dated as of February 10, 2004 (the
"Securities  Purchase  Agreement"),  to  issue  and  sell to each Investor named
 -------------------------------
therein  Series  A  5.0% Convertible Preferred Stock (the "Preferred Stock") and
                                                           ---------------
Warrants  (the  "Warrants").
                 --------

     The  shares of Preferred Stock are convertible into shares (the "Conversion
                                                                      ----------
Shares")  of  the Company's common stock, par value $0.01 per share (the "Common
------                                                                    ------
Stock").  The Warrants are exercisable into shares of Common Stock (the "Warrant
-----                                                                    -------
Shares")  in  accordance  with  their  terms.
------

     In  order  to  induce  each  Investor to enter into the Securities Purchase
Agreement,  the  Company has agreed to provide certain registration rights under
the  Securities  Act  of  1933,  as  amended  (the  "Securities Act"), and under
                                                     --------------
applicable  state  securities  laws.  Capitalized  terms  used  herein  and  not
otherwise defined shall have the respective meanings set forth in the Securities
Purchase  Agreement.

     In  consideration  of  each  Investor entering into the Securities Purchase
Agreement,  and  other  good  and  valuable  consideration,  the  receipt  and
sufficiency  of  which  are  hereby  acknowledged, the parties agree as follows:

1.     DEFINITIONS.
       -----------

     For purposes of this Agreement, the following terms shall have the meanings
specified:

          (a)      "Effective  Date"  means  the  date on which the Registration
                    ---------------
     Statement  is  declared effective by the Securities and Exchange Commission
     (the  "Commission");
            ----------

          (b)     "Filing  Deadline"  means  the  thirtieth  (30th) calendar day
                   ----------------
     following  the  Closing  Date;

          (c)     "Holder"  means  any  person  owning  or  having  the right to
                   ------
     acquire,  through  conversion  of  the  Preferred  Stock or exercise of the
     Warrants  or  otherwise,  Registrable  Securities, including initially each
     Investor  and  thereafter  any  permitted  assignee  thereof;

          (d)     "Registrable  Securities"  means the Conversion Shares and the
                   -----------------------
     Warrant  Shares  and  any other shares of Common Stock issuable pursuant to
     the terms of the Preferred Stock or the Warrants, and any shares of capital
     stock  issued  or  issuable  from  time  to  time (with any adjustments) in
     replacement  of,  in exchange for or otherwise in respect of the Conversion
     Shares  or  the  Warrant  Shares;

<PAGE>
          (e)     "Registration Deadline" means the one hundred and thirty fifth
                   ---------------------
     (135th)  calendar  day  following  the  Closing  Date;

          (f)     "Registration  Period"  has the meaning set forth in paragraph
                   --------------------
2(b)  below;  and

          (g)     "Registration  Statement"  means the Registration Statement to
                   -----------------------
be  filed  hereunder relating to resales of the Registrable Securities issued or
issuable  under  the  Preferred  Stock  or  the  Warrants.

     2.     REGISTRATION.
            ------------

          (a)     Registration Statement.  On or before the Filing Deadline, the
                  ----------------------
Company  shall  prepare and file with the Commission a Registration Statement on
Form S-3 as a "shelf" registration statement under Rule 415 under the Securities
Act  ("Rule  415")  covering  the  resale  of  a number of shares of Registrable
       ---------
Securities  equal  to one hundred and twenty six and 25/100 percent (126.25%) of
the  number  of  shares of Common Stock issuable on the Closing Date pursuant to
the  conversion  of  the  Preferred Stock and the exercise of the Warrants (such
number  to  be  determined  using  the  Conversion  Price  or Exercise Price, as
applicable, in effect on such dates and without regard to any restriction on the
ability  of any Holder to convert such Holder's Preferred Stock or exercise such
Holder's  Warrant  as  of such date). The Registration Statement shall state, to
the  extent  permitted by Rule 416 under the Securities Act, that it also covers
such  indeterminate  number  of  additional shares of Common Stock as may become
issuable upon the conversion of the Preferred Stock and exercise of the Warrants
in  order  to  prevent  dilution resulting from stock splits, stock dividends or
similar  events.  If  the  Company  is  not  eligible  to use Form S-3, then the
Company  shall  prepare  and file a Registration Statement on such form as it is
eligible to use; provided that the Company shall use its best efforts as soon as
practicable following the date on which it becomes eligible to use Form S-3 (but
in  no  event  later than ten (10) Business Days after such date) to convert the
Registration  Statement  to  a Form S-3, or file a new registration statement on
such  form,  covering  at  least  one  hundred and twenty six and 25/100 percent
(126.25%)  of  the number of shares of Common Stock issuable on the date of such
conversion  or  filing pursuant to the conversion of the Preferred Stock and the
exercise  of  the  Warrants  (such  number to be determined using the Conversion
Price  or  Exercise  Price,  as  applicable, in effect on such dates and without
regard  to any restriction on the ability of any Holder to convert such Holder's
Preferred  Stock  or  exercise  such  Holder's  Warrant  as  of  such  date).

          (b)     Effectiveness.  The  Company  shall  use  its  best efforts to
                  -------------
cause  the  Registration  Statement  to  become effective as soon as practicable
following  the  filing  thereof,  but  in  no  event later than the Registration
Deadline. The Company shall respond promptly to any and all comments made by the
staff  of  the Commission on the Registration Statement, and shall submit to the
Commission,  within one (1) Business Day after the Company learns that no review
of  the  Registration  Statement  will be made by the staff of the Commission or
that  the  staff  of  the Commission has no further comments on the Registration
Statement,  as  the case may be, a request for acceleration of the effectiveness
of the Registration Statement to a time and date not later than two (2) Business
Days  after  the  submission of such request; provided that at any time prior to

                                      -2-
<PAGE>
the  end  of  the  Registration  Deadline, the Company may delay its request for
effectiveness  for a period of up to ten days if the Company is required to file
an  Exchange  Act  report  within such ten (10) day period that would require an
amendment  to the Registration Statement or a supplement to the Prospectus to be
used  in  connection with the Registration Statement.  The Company will maintain
the  effectiveness  of  the Registration Statement until the earlier to occur of
(i)  the  date  on  which  all of the Registrable Securities eligible for resale
thereunder have been publicly sold pursuant to either the Registration Statement
or  Rule  144  and  (ii)  the  date  on  which all of the Registrable Securities
remaining to be sold under the Registration Statement (in the reasonable opinion
of  counsel  to  the  Holder)  may  be immediately sold to the public under Rule
144(k)  or  any successor provision, assuming that all Warrant Shares are issued
by  means  of  a  cashless exercise of the Warrants (the period beginning on the
Closing  Date  and  ending  on  the  earlier to occur of (i) or (ii) above being
referred  to  herein  as  the  "Registration  Period").
                                --------------------

          (c)     Registration  Default.  If  (A)  the Registration Statement is
                  ---------------------
not  filed  on  or  before  the  Filing  Deadline  or  declared effective by the
Commission  on  or  before the Registration Deadline, (B) after the Registration
Statement  has  been declared effective by the Commission and during a period in
which  an  Allowed  Delay  (as  hereinafter  defined) is not in effect, sales of
Registrable  Securities  cannot  be  made  by  a  Holder  under the Registration
Statement  for any reason not within the exclusive control of such Holder (other
than  such  Registrable  Securities as are then freely saleable pursuant to Rule
144(k)),  or  (C)  an  amendment  to  the  Registration  Statement,  or  a  new
registration  statement, required to be filed pursuant to the terms of paragraph
4(k)  below is not filed on or before the date required by such paragraph, (each
of  (A),  (B) and (C) being referred to herein as a "Registration Default"), the
                                                     --------------------
Company  shall  make cash payments to each Holder equal to one percent (1.0%) of
the  Liquidation  Preference of the Preferred Stock then held by such Holder for
each thirty (30) day period in which a Registration Default occurs (prorated for
any  period  of  less  than thirty days). Each such payment shall be made within
five  (5)  Business Days following the last day of the calendar month in which a
Registration  Default occurs. Any such payment shall be in addition to any other
remedies  available  to each Holder at law or in equity, whether pursuant to the
terms hereof, the Securities Purchase Agreement, the Certificate of Designation,
or  otherwise.

          (d)     Allowed  Delay.  The  Company  may  delay  the  disclosure  of
                  --------------
material  non-public  information,  and  suspend  the  availability  of  the
Registration  Statement, for no more than (i) five (5) consecutive Business Days
or  (ii) twenty (20) calendar days in any twelve (12) month period, in the event
of  a  proposed  merger,  reorganization  or  similar  transaction involving the
Company,  as  long as its board of directors (A) has determined, upon the advice
of  counsel,  that  such  information  would  be  required to be disclosed in an
offering  registered under the Securities Act and (B) reasonably deems it in the
Company's  best interests not to disclose such information publicly (an "Allowed
                                                                         -------
Delay").  In addition, until the Company becomes eligible to file a registration
-----
statement on Form S-3, each time the Company files a post-effective amendment to
the  Registration  Statement  for  the  purpose  of  updating  the  Registration
Statement  in  connection with the public filing by the Company of any report or
other  document with the Commission (such post-effective amendment, an "Updating
                                                                        --------
Amendment"),  the  Company may also suspend the availability of the Registration
---------
Statement  until  such  Updating  Amendment  is  declared effective and any such
suspension  shall  also  be  deemed an Allowed Delay for all purposes under this
Agreement  as  long as such Updating Amendment is filed within five (5) Business
Days  following  the  event  or

                                      -3-
<PAGE>
circumstance  requiring  such amendment and the Company promptly responds to any
comments made thereon by the staff of the Commission. The Company shall promptly
(i)  notify  each  Holder  in  writing  of  the existence of material non-public
information  giving rise to an Allowed Delay (but in no event, without the prior
written consent of such Holder, shall the Company disclose to such Holder any of
the  facts or circumstances regarding any material non-public information), (ii)
advise  each  Holder  in  writing  to  cease  all  sales  under the Registration
Statement  until  the  termination  of  the  Allowed Delay and (iii) notify each
Holder  in  writing immediately upon the termination or expiration of an Allowed
Delay.

          (e)     Allocation  of  Conversion  Shares  and  Warrant  Shares.  The
                  --------------------------------------------------------
initial  number  of  Conversion  Shares  and  Warrant  Shares  included  in  any
Registration  Statement and each increase in the number thereof included therein
shall  be  allocated pro rata among the Holders based on the aggregate number of
                     --------
Registrable  Securities  issuable  to  each  Holder at the time the Registration
Statement  covering  such  initial  number of Registrable Securities or increase
thereof  is  declared  effective by the Commission (such number to be determined
using  the  Conversion Price or Exercise Price, as applicable, in effect at such
time and without regard to any restriction on the ability of a Holder to convert
such  Holder's  Preferred  Stock  or  exercise  such Holder's Warrant as of such
date).  In  the  event  that  a  Holder sells or otherwise transfers any of such
Holder's  Registrable Securities, each transferee shall be allocated the portion
of  the  then  remaining  number  of  Registrable  Securities  included  in such
Registration  Statement  allocable  to  the  transferor.

          (f)     Registration of Other Securities.  During the period beginning
                  --------------------------------
on  the  date hereof and ending on the Effective Date, the Company shall refrain
from  filing  any  new  registration  statement (other than (i) the Registration
Statement  or  (ii)  a  registration statement on Form S-8 with respect to stock
option  plans  and  agreements and stock plans currently in effect and disclosed
pursuant  to  the  terms  of  the  Securities  Purchase  Agreement).

     3.     PIGGYBACK  REGISTRATION.
            ------------------------

     If  at any time prior to the expiration of the Registration Period, (i) the
Company  proposes to register shares of Common Stock under the Securities Act in
connection  with  the  public  offering  of  such  shares  for cash (a "Proposed
                                                                        --------
Registration")  other  than  a registration statement on Form S-8 or Form S-4 or
------------
any  successor  or  other  forms  promulgated  for  similar  purposes and (ii) a
Registration Statement covering the sale of all of the Registrable Securities is
not  then  effective and available for sales thereof by the Holders, the Company
shall,  at  such time, promptly give each Holder written notice of such Proposed
Registration.  Each Holder shall have ten (10) Business Days from its receipt of
such notice to deliver to the Company a written request specifying the amount of
Registrable  Securities  that  such  Holder  intends  to  sell and such Holder's
intended  method  of  distribution.  Upon  receipt  of such request, the Company
shall use its best efforts to cause all Registrable Securities which the Company
has  been requested to register to be registered under the Securities Act to the
extent  necessary  to  permit their sale or other disposition in accordance with
the  intended  methods  of distribution specified in the request of such Holder;
provided, however, that the Company shall have the right to postpone or withdraw
--------  -------
any  registration  effected pursuant to this Section 3 without obligation to the
Holder.  If, in connection with any underwritten public offering for the account
of  the  Company or for stockholders of the Company that have contractual rights
to  require  the  Company  to  register  shares  of  Common  Stock, the managing
underwriter(s)  thereof  shall

                                      -4-
<PAGE>
impose  a  limitation  on  the  number  of  shares  of Common Stock which may be
included  in  a  registration  statement  because,  in  the  judgment  of  such
underwriter(s),  marketing or other factors dictate such limitation is necessary
to  facilitate  such offering, then the Company shall be obligated to include in
the  registration  statement  only  such  limited  portion  of  the  Registrable
Securities  with  respect to which each Holder has requested inclusion hereunder
as  such  underwriter(s)  shall  permit. Any exclusion of Registrable Securities
shall  be  made  pro  rata  among  the  Holders  seeking  to include Registrable
Securities  in  a  registration  statement,  in  proportion  to  the  number  of
Registrable Securities sought to be included by such Holders; provided, however,
that the Company shall not exclude any Registrable Securities unless the Company
has  first  excluded  all  outstanding  securities, the holders of which are not
entitled  to  inclusion  of such securities in the registration statement or are
not  entitled  to  pro  rata  inclusion  with  the  Registrable  Securities; and
provided,  further,  that,  after  giving  effect  to  the immediately preceding
proviso,  any  exclusion  of  Registrable Securities shall be made pro rata with
holders  of  other securities having the right to include such securities in the
registration  statement.  In  no  event shall the Company include any securities
other  than  the  Registrable Securities on the Registration Statement or on any
registration statement filed by the Company on behalf of the Holders pursuant to
the  terms  hereof  (other  than  in  connection  with the exercise of currently
outstanding  piggyback  registration  rights  as  disclosed  in  the  Securities
Purchase  Agreement).

     4.     OBLIGATIONS  OF  THE  COMPANY.
            -----------------------------

     In  addition  to  performing  its  obligations hereunder, including without
limitation  those  pursuant  to  paragraphs 2(a), (b) and (c) above, the Company
shall:

          (a)     prepare  and  file  with  the  Commission  such amendments and
supplements  to the Registration Statement and the prospectus used in connection
with  the  Registration  Statement  as  may  be  necessary  to  comply  with the
provisions  of  the  Securities  Act  or  to  maintain  the effectiveness of the
Registration  Statement  during  the Registration Period (subject to any Allowed
Delays),  or  as may be reasonably requested by a Holder in order to incorporate
information  concerning  such  Holder  or  such  Holder's  intended  method  of
distribution;

          (b)      after the Common Stock has been listed on the Nasdaq National
Market,  the  Nasdaq  SmallCap Market, the New York Stock Exchange, or any other
market  or  exchange,  secure  the listing of all Registrable Securities on such
market  of  exchange,  and provide each Holder with reasonable evidence thereof;

          (c)     upon  the effectiveness of the Registration Statement, furnish
to  each  Holder  such  number  of  copies  of  the  prospectus  included in the
Registration  Statement,  including a preliminary prospectus, in conformity with
the  requirements of the Securities Act, and such other documents as such Holder
may  reasonably  request in order to facilitate the disposition of such Holder's
Registrable  Securities;

          (d)     use all commercially reasonable efforts to register or qualify
the  Registrable  Securities  under  the  securities  or "blue sky" laws of such
jurisdictions  within  the  United  States  as  shall be reasonably requested in
writing  from  time to time by a Holder, and do any and all other acts or things
which  may  be  necessary  or  advisable to enable such Holder to consummate the
public  sale

                                      -5-
<PAGE>
or  other  disposition  of  the  Registrable  Securities  in such jurisdictions;
provided  that the Company shall not be required in connection therewith or as a
condition  thereto  to  qualify  to  do business or to file a general consent to
service  of  process  in  any  such  jurisdiction;

          (e)     in  the  event  of  an  underwritten  public  offering  of the
Registrable  Securities,  enter  into  (together  with  all Holders proposing to
distribute  Registrable  Securities  through  such underwriting) and perform its
obligations  under  an  underwriting  agreement,  in  usual  and  customary form
reasonably  acceptable  to  the  Company,  with the managing underwriter of such
offering;

          (f)     notify  each  Holder  immediately  after becoming aware of the
occurrence  of  any  event  (but shall not, without the prior written consent of
such  Holder,  disclose  to  such Holder any facts or circumstances constituting
material non-public information) as a result of which the prospectus included in
the  Registration  Statement, as then in effect, contains an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary  to  make  the  statements  therein  not  misleading  in  light of the
circumstances then existing, and (except during an Allowed Delay) as promptly as
practicable  prepare,  and file with the Commission and furnish to each Holder a
reasonable  number  of copies of a supplement or an amendment to such prospectus
as may be necessary so that such prospectus does not contain an untrue statement
of  material fact or omit to state a material fact required to be stated therein
or  necessary  to  make  the  statements  therein not misleading in light of the
circumstances  then  existing;

          (g)     use  all  commercially  reasonable  efforts  to  prevent  the
issuance  of  any  stop order or other order suspending the effectiveness of the
Registration Statement and, if such an order is issued, to obtain the withdrawal
thereof  at the earliest possible time and to notify each Holder of the issuance
of  such  order  and  the  resolution  thereof;

          (h)     furnish  to  each  Holder,  on  the date that the Registration
Statement,  or  any  successor  registration statement, becomes effective, (x) a
letter,  dated  such date, from the Company addressed to such Holder, confirming
such effectiveness and, to the knowledge of the Company, the absence of any stop
order,  and  (y) in the case of an underwriting, (A) a copy of an opinion, dated
such date, of such outside counsel, in such form and substance as is required to
be  given to the underwriters, and (B) a copy of a letter, dated such date, from
the  Company's  independent  certified  public  accountants,  in  such  form and
substance  as  is  required  to  be given by the Company's independent certified
public  accountants  to  such  underwriters;

          (i)     provide  to  each  Holder  and  its  representatives,  upon
reasonable  prior  notice and execution of a reasonable non-disclosure agreement
by  Holder,  the  opportunity  to  conduct a reasonable inquiry of the Company's
financial  and other records during normal business hours and make available its
officers  for  questions  regarding information which such Holder may reasonably
request  in  order  to  fulfill  any  due  diligence  obligation  on  its  part;

          (j)     permit  counsel  for  each  Holder  to review the Registration
Statement  and  all amendments and supplements thereto, and any comments made by
the  staff  of  the  Commission  concerning  such Holder and/or the transactions
contemplated  by  the Transaction Documents and the Company's responses thereto,
within a reasonable period of time (but in no event less than three (3)

                                      -6-
<PAGE>
Business Days after such Holder has received such documents) prior to the filing
thereof  with  the  Commission (or, in the case of comments made by the staff of
the Commission, within a reasonable period of time following the receipt thereof
by  the  Company);  and

          (k)     in the event that, at any time, the number of shares available
under  the  Registration  Statement  is insufficient to cover one hundred twenty
five  percent  125%  of  the  Registrable  Securities issuable under the related
Preferred  Stock and Warrants (such number to be determined using the Conversion
Price  or  Exercise  Price,  as  applicable,  in effect at such time and without
regard  to any restriction on the ability of any Holder to convert such Holder's
Preferred  Stock  or  exercise such Holder's Warrant) the Company shall promptly
amend  the  Registration  Statement or file a new registration statement, in any
event  as soon as practicable, but not later than the tenth (10th) day following
notice  from  a Holder of the occurrence of such event, so that the Registration
Statement  or  such new registration statement, or both, covers no less than one
hundred  fifty  percent (150%) of the Registrable Securities eligible for resale
thereunder  and  issuable  under  the related Preferred Stock and Warrants (such
number  to  be  determined  using  the  Conversion  Price  or Exercise Price, as
applicable, in effect at the time of such amendment or filing and without regard
to  any  restriction  on  the  ability  of  any  Holder to convert such Holder's
Preferred  Stock  or exercise such Holder's Warrant).  The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to become
effective  as soon as practicable following the filing thereof. Any Registration
Statement  filed pursuant to this paragraph 4(k) shall state that, to the extent
permitted by Rule 416 under the Securities Act, such Registration Statement also
covers  such  indeterminate  number  of additional shares of Common Stock as may
become  issuable  upon  conversion  of  the  Preferred Stock and exercise of the
Warrants  in  order  to  prevent  dilution  resulting  from  stock splits, stock
dividends or similar events. Unless and until such amendment or new Registration
Statement  becomes  effective,  each  Holder  shall have the rights described in
Section  2(c)  above.

     5.     OBLIGATIONS  OF  EACH  HOLDER.
            -----------------------------

     In connection with the registration of Registrable Securities pursuant to a
Registration  Statement,  each  Holder  shall:

          (a)  timely  furnish  to  the  Company  in  writing  such  information
regarding  itself  and  the  intended  method of disposition of such Registrable
Securities  as  the  Company  shall  reasonably  request  in order to effect the
registration  thereof;

          (b)  upon  receipt  of any notice from the Company of the happening of
any  event  of  the  kind  described  in  paragraphs  4(f)  or 4(g), immediately
discontinue  any  sale  or  other  disposition  of  such  Registrable Securities
pursuant  to  such  Registration  Statement  until the filing of an amendment or
supplement  as  described  in  paragraph  4(f)  or  withdrawal of the stop order
referred  to  in  paragraph  4(g),  and  use  commercially reasonable efforts to
maintain  the  confidentiality  of  such  notice  and  its  contents;

          (c)  in  the  event  of  an  underwritten offering of such Registrable
Securities  in  which  such  Holder  participates,  enter  into  a customary and
reasonable  underwriting  agreement  and  execute

                                      -7-
<PAGE>
such  other  documents  as  the  Company  and  the managing underwriter for such
offering  may  reasonably  request;

          (d)  to the extent required by applicable law, deliver a prospectus to
the  Investor  of  such  Registrable  Securities;

          (e)  notify  the  Company  when  it  has  sold  all of the Registrable
Securities  held  by  it;  and

          (f)  notify  the Company in the event that any information supplied by
such  Holder  in writing for inclusion in such Registration Statement or related
prospectus  is  untrue  or  omits to state a material fact required to be stated
therein  or  necessary  to  make such information not misleading in light of the
circumstances  then  existing;  immediately  discontinue  any  sale  or  other
disposition  of  such  Registrable  Securities  pursuant  to  such  Registration
Statement  until  the filing of an amendment or supplement to such prospectus as
may be necessary so that such prospectus does not contain an untrue statement of
material  fact or omit to state a material fact required to be stated therein or
necessary  to  make  the  statements  therein  not  misleading  in  light of the
circumstances  then  existing; and use commercially reasonable efforts to assist
the Company as may be appropriate to make such amendment or supplement effective
for  such  purpose.

     6.     INDEMNIFICATION.
            ---------------

     In the event that any Registrable Securities are included in a Registration
Statement  under  this  Agreement:

          (a)     To  the  extent  permitted by law, the Company shall indemnify
and  hold  harmless  each Holder, the officers, directors, employees, agents and
representatives  of  such  Holder,  and  each  person, if any, who controls such
Holder  within  the meaning of the Securities Act or the Securities Exchange Act
of  1934,  as amended (the "Exchange Act"), against any losses, claims, damages,
                            ------------
liabilities  or  reasonable  out-of-pocket  expenses  (whether joint or several)
(collectively,  including  legal  or  other  expenses  reasonably  incurred  in
connection  with investigating or defending same, "Losses"), insofar as any such
                                                   ------
Losses arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement, including
any  preliminary  prospectus  or  final  prospectus  contained  therein  or  any
amendments  or  supplements thereto, or (ii) the omission or alleged omission to
state  therein  a  material  fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading.  Subject  to the provisions of paragraph 6(c) below, the
Company  will  reimburse such Holder, and each such officer, director, employee,
agent,  representative  or  controlling  person,  for  any  legal  or  other
out-of-pocket  expenses  as  reasonably incurred by any such entity or person in
connection with investigating or defending any Loss; provided, however, that the
foregoing indemnity shall not apply to amounts paid in settlement of any Loss if
such  settlement  is  effected without the consent of the Company (which consent
shall  not  be  unreasonably  withheld),  nor  shall the Company be obligated to
indemnify any person for any Loss to the extent that such Loss is (i) based upon
and is in conformity with written information furnished by such person expressly
for use in such Registration Statement or (ii) based on a failure of such person
to  deliver  or  cause  to  be  delivered  the final prospectus contained in the
Registration  Statement  and  made

                                      -8-
<PAGE>
available  by  the  Company,  if  such  delivery  is required by applicable law.

          (b)     To  the  extent  permitted by law, each Holder who is named in
such  Registration  Statement as a selling stockholder, acting severally and not
jointly, shall indemnify and hold harmless the Company, the officers, directors,
employees,  agents  and representatives of the Company, and each person, if any,
who  controls  the  Company  within  the  meaning  of  the Securities Act or the
Exchange Act, against any Losses to the extent (and only to the extent) that any
such  Losses are based upon and in conformity with written information furnished
by  such Holder expressly for use in such Registration Statement. Subject to the
provisions  of  paragraph  6(c)  below,  such Holder will reimburse any legal or
other  expenses  as  reasonably  incurred  by  the Company and any such officer,
director,  employee, agent, representative, or controlling person, in connection
with  investigating  or  defending  any  such  Loss; provided, however, that the
foregoing  indemnity  shall  not apply to amounts paid in settlement of any such
Loss  if  such  settlement is effected without the consent of such Holder (which
consent  shall not be unreasonably withheld); and provided, further, that, in no
event  shall  any  indemnity  under this subsection 6(b) exceed the net proceeds
resulting  from the sale of the Registrable Securities sold by such Holder under
such  Registration  Statement.

          (c)     Promptly  after  receipt  by  an  indemnified party under this
Section  6  of  notice  of  the  commencement  of  any  action  (including  any
governmental action), such indemnified party will, if a claim in respect thereof
is  to  be  made against any indemnifying party under this Section 6, deliver to
the  indemnifying  party  a  written  notice of the commencement thereof and the
indemnifying  party  shall  have  the  right to participate in and to assume the
defense  thereof  with  counsel  mutually satisfactory to the parties; provided,
however,  that  an  indemnified  party  shall  have  the right to retain its own
counsel,  with the reasonably incurred fees and expenses of one such counsel for
all  indemnified parties to be paid by the indemnifying party, if representation
of  such  indemnified  party  by  the counsel retained by the indemnifying party
would be inappropriate under applicable standards of professional conduct due to
actual or potential conflicting interests between such indemnified party and any
other  party  represented  by  such  counsel in such proceeding.  The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement  of  any  such  action, to the extent prejudicial to its ability to
defend  such  action,  shall relieve such indemnifying party of any liability to
the  indemnified party under this Section 6 with respect to such action, but the
omission so to deliver written notice to the indemnifying party will not relieve
it  of  any  liability  that it may have to any indemnified party otherwise than
under this Section 6 or with respect to any other action unless the indemnifying
party  is  materially  prejudiced  as  a  result  of  not receiving such notice.

          (d)     In  the  event that the indemnity provided in paragraph (a) or
(b)  of  this  Section  6  is  unavailable  or  insufficient to hold harmless an
indemnified  party  for any reason, the Company and each Holder agree, severally
and  not  jointly, to contribute to the aggregate Losses to which the Company or
such  Holder  may be subject in such proportion as is appropriate to reflect the
relative  fault of the Company and such Holder in connection with the statements
or  omissions  which resulted in such Losses; provided, however, that in no case
shall  such  Holder  be responsible for any amount in excess of the net proceeds
resulting  from  the  sale  of  the  Registrable Securities sold by it under the
Registration  Statement.  Relative  fault  shall  be  determined by reference to
whether any alleged untrue statement or omission relates to information provided
by  the  Company  or  by such

                                      -9-
<PAGE>
Holder.  The  Company  and  each  Holder  agree  that  it  would not be just and
equitable  if  contribution  were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred  to  above.  Notwithstanding  the  provisions of this paragraph (d), no
person  guilty  of  fraudulent  misrepresentation (within the meaning of Section
11(f)  of  the Securities Act) shall be entitled to contribution from any person
who  is  not  guilty  of such fraudulent misrepresentation. For purposes of this
Section  6,  each  person who controls a Holder within the meaning of either the
Securities  Act  or the Exchange Act and each officer, director, employee, agent
or  representative  of such Holder shall have the same rights to contribution as
such  Holder,  and  each  person  who controls the Company within the meaning of
either  the  Securities  Act  or  the  Exchange  Act and each officer, director,
employee,  agent  or representative of the Company shall have the same rights to
contribution  as  the  Company, subject in each case to the applicable terms and
conditions  of  this  paragraph  (d).

          (e)     Notwithstanding  the  foregoing,  to  the  extent  that  the
provisions  on  indemnification  and  contribution  contained in an underwriting
agreement entered into in connection with an underwritten public offering are in
conflict  with  the  foregoing  provisions,  the  provisions in the underwriting
agreement  shall  control.

          (f)     Unless  otherwise  superceded  by  an  underwriting  agreement
entered into in connection with an underwritten public offering, the obligations
of the Company and each Holder under this Section 6 shall survive the conversion
of  the  Preferred Stock and exercise of the Warrants in full, the completion of
any  offering  or  sale  of  Registrable  Securities  pursuant to a Registration
Statement  under  this  Agreement,  or  otherwise.

     7.     REPORTS.
            -------

          With  a  view  to making available to each Holder the benefits of Rule
144  under  the  Securities  Act  ("Rule  144")  and  any  other similar rule or
                                    ---------
regulation  of  the  Commission  that may at any time permit such Holder to sell
securities of the Company to the public without registration, the Company agrees
to:

          (a)     make and keep public information available, as those terms are
understood  and  defined  in  Rule  144;

          (b)     file  with  the  Commission in a timely manner all reports and
other  documents  required  of  the  Company  under  the  Securities Act and the
Exchange  Act;  and

          (c)     furnish  to  such  Holder,  so  long  as  such Holder owns any
Registrable Securities, promptly upon written request (i) a written statement by
the  Company,  if  true, that it has complied with the reporting requirements of
Rule  144,  the  Securities  Act  and  the  Exchange Act, (ii) to the extent not
publicly  available  through the Commission's EDGAR database, a copy of the most
recent  annual  or  quarterly  report  of the Company and such other reports and
documents  so  filed  by the Company, and (iii) such other information as may be
reasonably  requested by such Holder in connection with such Holder's compliance
with  any  rule or regulation of the Commission which permits the selling of any
such  securities  without  registration.

                                      -10-
<PAGE>
     8.     MISCELLANEOUS.
            -------------

          (a)     Expenses of Registration.  Except as otherwise provided in the
                  ------------------------
Securities  Purchase Agreement, all reasonable expenses, other than underwriting
discounts and commissions and fees and expenses of counsel and other advisors to
each  Holder,  incurred  in  connection  with  the  registrations,  filings  or
qualifications  described  herein,  including  (without  limitation)  all
registration,  filing and qualification fees, printers' and accounting fees, the
fees  and  disbursements  of  counsel  for  the  Company,  and  the  fees  and
disbursements  incurred  in  connection with the opinion and letter described in
paragraph  4(h)  hereof,  shall  be  borne  by  the  Company.

          (b)     Amendment;  Waiver.  Except  as  expressly  provided  herein,
                  ------------------
neither  this  Agreement  nor  any  term  hereof may be amended or waived except
pursuant  to  a written instrument executed by the Company and the Holders of at
least  two-thirds  (2/3)  of  the  Registrable  Securities into which all of the
Preferred  Stock  and  Warrants  then outstanding are convertible or exercisable
(without regard to any limitation on such conversion or exercise). Any amendment
or  waiver effected in accordance with this paragraph shall be binding upon each
Holder,  each  future  Holder  and  the  Company.

          (c)     Notices.  Any  notice, demand or request required or permitted
                  -------
to  be  given  by  the  Company  or  an  Investor  pursuant to the terms of this
Agreement  shall  be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission, unless such delivery is made
on  a day that is not a Business Day, in which case such delivery will be deemed
to  be  made  on the next succeeding Business Day, (ii) on the next Business Day
after  timely  delivery  to  an  overnight courier and (iii) on the Business Day
actually  received  if deposited in the U.S. mail (certified or registered mail,
return  receipt  requested,  postage  prepaid),  addressed  as  follows:

          If to the Company:

          Citadel Security Software Inc.
          8750 N. Central Expy.
          Suite 100
          Dallas, TX 75231
          Attn: Steven B. Solomon, Chief Executive Officer
          Phone: (214) 750-2454
          Fax: (214) 520-0034

          with a copy to:

          David Allen Wood, P.C.
          12770 Coit Road, Suite 1100
          Dallas, Texas 75251
          Attn: David A. Wood
          Tel:  (972) 458-0300

                                      -11-
<PAGE>
          Fax:  (972) 458-0301

and  if  to  a  Holder, to such address as shall be designated by such Holder in
writing  to  the  Company.

          (d)     Assignment.  Upon  the  transfer  of  any  Preferred  Stock,
                  ----------
Warrants  or  Registrable  Securities  by  a  Holder,  the rights of such Holder
hereunder  with  respect  to  such  securities  so transferred shall be assigned
automatically  to the transferee thereof, and such transferee shall thereupon be
deemed  to  be  a  "Holder"  for purposes of this Agreement, as long as: (i) the
Company  is,  within  a  reasonable  period  of  time  following  such transfer,
furnished  with  written notice of the name and address of such transferee, (ii)
the  transferee  agrees  in  writing  with the Company to be bound by all of the
provisions  hereof,  and  (iii)  such  transfer  is  made in accordance with the
applicable requirements of the Securities Purchase Agreement; provided, however,
                                                              --------  -------
that  the registration rights granted in this Agreement shall not be transferred
to  any  person  or  entity  that  receives  any  Preferred  Stock,  Warrants or
Registrable  Securities  in  a  public  transaction  pursuant  to  an  effective
registration  statement  under  the  Securities  Act  or  pursuant  to Rule 144.

          (e)     Counterparts.  This Agreement may be executed in counterparts,
                  ------------
each  of  which  shall be deemed an original, and all of which together shall be
deemed  one  and the same instrument.  This Agreement, once executed by a party,
may  be  delivered  to  any  other  party  hereto  by  facsimile  transmission.

          (f)     Governing  Law.  This  Agreement  shall  be  governed  by  and
                  --------------
construed  in  accordance  with  the laws of the State of New York applicable to
contracts  made  and  to  be  performed  entirely  within the State of New York.

          (g)     Holder  of Record.  A person is deemed to be a Holder whenever
                  -----------------
such  person owns or is deemed to own of record such Registrable Securities.  If
the  Company receives conflicting instructions, notices or elections from two or
more  persons with respect to the same Registrable Securities, the Company shall
act  upon the basis of instructions, notice or election received from the record
owner  of  such  Registrable  Securities.

          (h)     Entire  Agreement.  This  Agreement,  the  Securities Purchase
                  -----------------
Agreement,  the  Certificate  of  Designation,  the  Warrants,  and  the  other
Transaction  Documents  constitute the entire agreement among the parties hereto
with  respect  to  the  subject  matter  hereof  and  thereof.  There  are  no
restrictions,  promises,  warranties or undertakings, other than those set forth
or  referred  to  herein  and  therein.  This Agreement, the Securities Purchase
Agreement,  the  Certificate  of  Designation,  the  Warrants,  and  the  other
Transaction  Documents  supersede  all prior agreements and understandings among
the  parties  hereto  with  respect  to  the  subject matter hereof and thereof.

          (i)     Headings.  The  headings in this Agreement are for convenience
                  --------
of  reference  only  and shall not limit or otherwise affect the meaning hereof.

          (j)     Third Party Beneficiaries.  This Agreement is intended for the
                  -------------------------
benefit  of  the  parties  hereto  and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by,  any  other  person.

                                      -12-
<PAGE>
                           [Signature Pages to Follow]

                                      -13-
<PAGE>

     IN  WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date  first-above  written.

CITADEL SECURITY SOFTWARE INC.

By:   /s/     Steven B. Solomon
      -------------------------
     Name:    Steven B. Solomon
     Title:   Chief Executive Officer

INVESTOR NAME: Satellite Strategic Finance Associates, LLC
               -------------------------------------------

By:  _________________________
     Name:
     Title:

                                      -14-
<PAGE>

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