Document:

Exhibit 10.6

Exhibit
10.6

Summary
of 2004 Compensation Determinations

and
2005 Compensation Criteria

2004
Cash Bonus Awards

On May 6,
2005, the Compensation Committee approved cash bonus awards to the Chief
Executive Officer (“CEO”) and each of the other named executive officers, in
respect of the year ended December 31, 2004, payable in cash in May 2005. The
cash bonus awards were made pursuant to the Company’s Cash Bonus
Plan (the
“Cash Bonus Plan”). 

For 2004,
the Compensation Committee determined that the cash bonus component of the
potential incentive compensation award be a maximum of 50% of the CEO and each
of the other named executive officers’ base salary. The Compensation Committee
determined that 75% of the cash bonus award consisted of a Cash Available for
Distribution component (the “CAD Component”) and the remaining 25% was based on
the Compensation Committee’s subjective determination of the CEO and each of the
other named executive officers’ achievement of position specific goals that were
agreed to at the time of adopting the Cash Bonus Plan (the “Individual
Component”).

The table
sets forth the CAD hurdles and the amount of potential CAD that would be earned
by the named executive officers upon achieving those hurdles. 

 

	
      CAD
      HURDLES
	
      %
      of CAD Component Earned

	
      $13.6m
      up to $14.0m
	
      50%

	
      $14.0m
      up to $14.8m
	
      75%

	
      $14.8m
      or greater
	
      100%

The CAD
hurdles became unattainable by the end of 2004 due to acquisition timing and its
interplay with our stock offering later in the year in 2004: Because the CAD
fell short of the minimum $13.6 million for 2004, none of the named executive
officers were eligible for the CAD Component of the cash bonus.

The
Individual Component of the bonus, however, consisted of a well-tailored program
to meet many of the Company’s intermediate goals for the year, was very
successful. All named executive officers met the goals that were set by the
Compensation Committee and; therefore, each of the named executive officers was
eligible for payout of the Individual Component consisting of between 25% to 50%
of their 2004 base salary. This translated into a 12.5% cash bonus award for
2004 for the CEO and each of the other named executive officers.

Based
upon the foregoing, the 2004 cash bonus awards were as follows:

 

	
      Executive
      Officer
	 	
      CASH
      BONUS AWARD

	
      Hasu
      P. Shah
	 	
      $28,125

	
      Jay
      H. Shah
	 	
      $25,000

	
      Ashish
      R. Parikh
	 	
      $21,875

	
      Neil
      H. Shah
	 	
      $18,750

	
      Kiran
      P. Patel
	 	
      $6,250

	
      David
      L. Desfor
	 	
      $6,250

2005
Officer Compensation

On May 6,
2005, the Compensation Committee reviewed the total compensation packages
(including annual salary, restricted stock awards and potential bonus awards)
for each of the CEO and the other key officers of the Company and made the
following recommendations for fiscal year 2005, effective as of May 6,
2005:

 

	
      Named
      Executive Officer
	
      SALARY
	
      RESTRICTED
      STOCK
	
      POTENTIAL CASH
      BONUS
      AWARD

	
      Hasu
      P. Shah, Chief Executive Officer
	
      $300,000
	
      10,000
	
      25%
      - 50% of base salary

	
      Jay
      H. Shah, President and Chief Operating Officer
	
      $250,000
	
      25,000
	
      25%
      - 50% of base salary

	
      Neil
      H. Shah, Executive Vice President
	
      $200,000
	
      15,000
	
      25%
      - 50% of base salary

	
      Ashish
      R. Parikh, Chief Financial Officer
	
      $200,000
	
      15,000
	
      25%
      - 50% of base salary

	
      David
      L. Desfor, Treasurer
	
      $100,000
	
      5,000
	
      25%
      - 50% of base salary

	
      Kiran
      P. Patel, Secretary
	
      $50,000
	
      1,000
	
      25%
      - 50% of base salary

 

The
Compensation Committee determined that the CEO, who also serves as Executive
Chairman of the Board, and any other executive officers who serve on the Board
will not receive any board fees. 

On May 6,
2005, the Compensation Committee approved the above referenced grants of
restricted stock. The restricted stock awards vest 25% per year, but 100% of the
dividends are available to the each of the recipients upon the date of grant.
The restricted stock awards will be effective on June 1, 2005. 

2005
Cash Bonus Plan

In
addition, on May 6, 2005, the Compensation Committee, approved the 2005 Annual
Incentive Compensation Plan for executive officers and certain other key
employees of the Company (the “Cash Bonus Plan”). The Cash Bonus Plan is not set
forth in a written agreement. 

For
fiscal 2005, the Compensation Committee established opportunities for a cash
bonus of between 25% to 50% of base salary under the Cash Bonus Plan that could
be earned on the basis of certain financial metrics together with specific
individual performance objectives that will be determined by the Compensation
Committee. Eligibility for 25% of the bonus award occurs upon an FFO per share
increase of 5% from 2004, and 50% of the potential cash bonus award is achieved
upon an FFO increase of 10% from 2004. An additional threshold for eligibility
for a cash bonus award by the CEO and each of the named executive officers
include a dividend payout of less than or equal to 98% of FFO. The Compensation
Committee also established additional position specific financial and other
performance goals for each of the CEO and named executive officers. Bonus
payments under the Cash Bonus Plan will be paid in one annual payment shortly
after the end of the 2005 calendar year if the Compensation Committee determines
that the performance criteria are met.EXHIBIT  4.1

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: May 9, 2005

     THIS  CERTIFIES  that  ______________  or any subsequent holder hereof (the
"Holder"),  has  the  right  to  purchase from CITADEL SECUIRTY SOFTWARE INC., a
 ------
Delaware corporation (the "Company"), up to _______ 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 tenth (10th) anniversary of the Issue Date (the
"Expiration  Date").  This  Warrant  is issued pursuant to a Securities Purchase
 ----------------
Agreement,  dated  as  of  May  9,  2005  (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.
          --------

<PAGE>
     (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 $1.75, subject to adjustment for the
events  specified  in  Section  6  below.

     (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  an  independent  registered public accounting firm of national
recognition  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 therefor.

     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

                                        2
<PAGE>
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 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  therefor  (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

                                        3
<PAGE>
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 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.  The limitation
contained in this Section 4 shall cease to apply (x) upon sixty (60) days' prior
written  notice  from  the  Holder  to the Company, (y) immediately upon written
notice  from the Holder to the Company at any time after the public announcement
or  other  disclosure  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

                                        4
<PAGE>
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;

               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

                                        5
<PAGE>
type  of assets being distributed in such Distribution as though the Holder were
a  holder on the Record Date therefor 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  therefor,  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 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 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 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)  );  provided,  however, that until
                                                  --------   -------
Stockholder  Approval  is  obtained,  in  no event shall the Conversion Price be
adjusted  to  an  amount  that  is  less  than  the  Floor Price then in effect.

         (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  options, warrants, or other rights to purchase or subscribe for Common
     Stock  or  Convertible  Securities  ("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

                                        6
<PAGE>
     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.

               (B)  Issuance  Of  Convertible Securities.  If the Company issues
                    ------------------------------------
     or  sells  any securities or other instruments that are convertible into or
     exercisable  or  exchangeable for Common Stock" ("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

                                        7
<PAGE>
     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 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 therefor will be the amount received by the Company
     therefor.  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 therefor 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

                                        8
<PAGE>
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  and  securities issued upon conversion of the Series A
Preferred  Stock  or;  (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, directors,
consultants  or  lenders  from  time  to  time as shares or upon the exercise of
options  or  warrants,  which  may  be granted in the discretion of the Board of
Directors  pursuant  to one or more agreements, 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 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,  at its expense and 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

                                        9
<PAGE>
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.
          ---------------------

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

          If  to  the  Company:

          Citadel  Security  Software  Inc.
          Two  Lincoln  Centre,  Suite  1600
          5420  LBJ  Freeway
          Dallas,  TX  75240
          Attn: Steven B. Solomon
          Phone: (214) 750-2454
          Fax:  (214)  520-0034

          with  a  copy  to:

          Wood  &  Sartain,  LLP
          12655 North Central Expressway, Suite 325
          Dallas,  Texas  75243
          Attn:  David A. Wood
          Tel:   (972) 458-0300
          Fax:   (972) 701-0302

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.

                                       11
<PAGE>
     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  or  waiver  is (A) set forth in writing and is signed by the Company and
the  Holder  or  (B)  agreed to in writing by the holders of at least two-thirds
(2/3)  of the number of shares into which the Warrants issued in connection with
the  Series  B  Preferred  Stock  and  then outstanding 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) or (B) above, each
Warrant  (including  any  Warrant  held  by  the  Holder who did not execute the
agreement  specified in (A) above) shall be deemed to incorporate any amendment,
modification,  change  or  waiver  effected  thereby  as  of  the effective date
thereof.

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

     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.

     16.  Issue  Tax.
          ----------

     The  issuance  of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the Holder or such shares for any tax or
other  costs in respect thereof, provided that the Company shall not be required
to  pay  any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the holder of this
Warrant.

                           [Signature Page to Follow]

                                       12
<PAGE>
     IN  WITNESS  WHEREOF,  the  Company  has  duly  executed and delivered this
Warrant  as  of  the  Issue  Date.

                                CITADEL SECURITY SOFTWARE INC.

                                By:   __________________________
                                      Name:
                                      Title:

<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:

                                       14
<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:

________________________________________

________________________________________

________________________________________

                                      -15-

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