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                          REGISTRATION RIGHTS AGREEMENT





     Registration  Rights  Agreement  (the  "Agreement"), dated as of August 10,

2004,  by and between Nighthawk Systems, Inc., a corporation organized under the

laws  of  State  of  Nevada,  with  its  principal executive office at Nighthawk

Systems,  Inc.,  10715  Gulfdale,  Suite  200,  San  Antonio,  Texas 78216, (the

"Company"),  and  Dutchess  Private  Equities Fund, II, L.P., a Delaware limited

partnership  with  its  principal  office at 312 Stuart Street, Boston, MA 02116

(the  "Holder").



     WHEREAS,  upon  the terms and subject to the conditions of the Subscription

Agreement between the Holder and the Company (the "Subscription Agreement"), the

Company has agreed to issue and sell to the Holder convertible debentures of the

Company  (the "Debentures"), which will be convertible into shares of the common

stock,  no  par  value  per  share  (the  "Common  Stock"),  of  the  Company.



     WHEREAS,  to  induce  the  Holder  to  execute and deliver the Subscription

Agreement,  the  Company has agreed to provide certain registration rights under

the  Securities  Act  of  1933,  as  amended,  and  the  rules  and  regulations

thereunder, or any similar successor statute (collectively, the "1933 Act"), and

applicable  state  securities  laws,  with respect to the shares of Common Stock

issuable  pursuant  to  the  Subscription  Agreement  and  Debenture.



     NOW,  THEREFORE,  in consideration of the foregoing premises and the mutual

covenants  contained  hereinafter and other good and valuable consideration, the

receipt  and  sufficiency  of which are hereby acknowledged, the Company and the

Holder  hereby  agree  as  follows:





1.           DEFINITIONS.



     As  used  in  this  Agreement, the following terms shall have the following

meanings:



a.  "Closing  Date" means the date funds are received by the Company pursuant to

the  Subscription  Agreement.



b.  "Holder"  means  Dutchess  Private  Equities  Fund,  II,  LP.



c.   "Person"  means a corporation, a limited liability company, an association,

a  partnership,  an  organization,  a business, an individual, a governmental or

political  subdivision  thereof  or  a  governmental  agency.



d.  "Potential Material Event" means any of the following: (i) the possession by

the  Company  of  material information not ripe for disclosure in a Registration

Statement, which shall be evidenced by determinations in good faith by the Board

of  Directors  of  the  Company  that  disclosure  of  such  information  in the

Registration  Statement  would be detrimental to the business and affairs of the

Company, or (ii) any material engagement or activity by the Company which would,

in  the  good  faith  determination of the Board of Directors of the Company, be

adversely affected by disclosure in a Registration Statement at such time, which

determination shall be accompanied by a good faith determination by the Board of

Directors  of  the  Company  that the Registration Statement would be materially

misleading  absent  the  inclusion  of  such  information.



e.  "Principal  Market"  means either The American Stock Exchange, Inc., The New

York  Stock  Exchange,  Inc.,  the  Nasdaq  National Market, The Nasdaq SmallCap

Market  or  the National Association of Securities Dealer's, Inc. OTC electronic

bulletin  board  whichever  is the principal market on which the Common Stock is

listed.



f.  "Register,"  "Registered,"  and  "Registration"  refer  to  a  registration

effected  by preparing and filing with the United States Securities and Exchange

Commission  (the  "SEC")  one or more Registration Statements in compliance with

the  1933  Act and pursuant to Rule 415 under the 1933 Act or any successor rule

providing  for  offering  securities  on  a  continuous  basis ("Rule 415"), and

effectiveness  of  such  Registration  Statement(s).



g.  "Registrable Securities" means the shares of Common Stock issued or issuable

(i)  pursuant  to  the  Subscription Agreement, (ii) any shares of capital stock

issued or issuable with respect to the such shares of Common Stock and Warrants,

if  any,  as  a  result  of  any  stock split, stock dividend, recapitalization,

exchange  or  similar  event or otherwise, which have not been (x) included in a

Registration  Statement that has been declared effective by the SEC, or (y) sold

under circumstances meeting all of the applicable conditions of Rule 144 (or any

similar  provision  then  in  force)  under  the  1933  Act.



h.  "Registration Statement" means a registration statement of the Company filed

under  the  1933  Act.

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