Exhibit 10.3

SECURITY AGREEMENT

     This Security Agreement (this “Security Agreement”) is made effective as of
December 2, 2009 (“Effective Date”), by and between DayStar Technologies, Inc.,
a Delaware corporation (“Debtor”), and Peter Alan Lacey (“Secured Party”), with
reference to the essential facts stated in the Recitals below.

RECITALS

     A. Pursuant to the terms of that certain Purchase Agreement of even date
herewith (the “Purchase Agreement”) and the Secured Promissory Note of even date
herewith (the “Note”), all between Debtor and Secured Party, Secured Party is
loaning to Debtor a total amount of $150,000 (the “Loan”). This Security
Agreement, the Purchase Agreement and the Note shall collectively be referred to
as the “Loan Documents”. B. As a condition to receiving the Loan, the terms of
the Loan Documents require that Debtor enter into this Security Agreement.

     C. As security for the payment and performance of Debtor’s obligations to
Secured Party under the Loan Documents, and as a condition precedent to Secured
Party’s obligation to make the Loan, it is the intent of Debtor to create and
grant to Secured Party and a security interest in certain property as
hereinafter provided.

AGREEMENT

     NOW, THEREFORE, in consideration of the Loan, the above recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor hereby agrees as follows:

     1. Grant of Security Interest. As security for the full and timely payment
and performance of the obligations of Debtor to Secured Party described in
Section 2 below (such obligations, collectively and severally, the
“Obligations”), subject to the Prior Liens (as defined herein), Debtor hereby
pledges and grants to Secured Party a security interest (“Security Interest”) in
and to (a) all of Debtor’s right, title and interest in and to contracts to
which Debtor is a party, and all other contracts relating to Debtor’s assets,
business and operations, (b) all of Debtor’s intellectual property and rights
therein and thereto, (c) all of Debtor’s other assets, and all assets used and
useful in Debtor’s business and operations, and (d) all other items identified
in Exhibit A hereto and incorporated herein by this reference (collectively and
severally, the “Collateral”).

     2. Obligations. The Obligations secured by this Security Agreement shall
consist of (a) the Loan Documents, (b) any additional monies advanced to or
borrowed by Debtor from Secured Party, (c) this Security Agreement, and (d) all
amendments or extensions or renewals of such documents, whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly owed with
others, direct or indirect, absolute or contingent, liquidated or unliquidated,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred.

--------------------------------------------------------------------------------

Exhibit 10.3

3.      Representations and Warranties. Debtor hereby represents and warrants
that: (a) Debtor is the owner of the Collateral and no other person has any
right, title,  

claim or interest (by way of security interest or other lien or charge or
otherwise) in, against or to the Collateral, except liens for taxes, assessments
and other government charges not yet due and payable; except (i) a security
interest held by Banc of America Leasing & Capital, LLC in certain of the
Collateral as described in that certain UCC 1 financing statement filed on
October 22, 2008 in the Office of the Secretary of State of the State of
Delaware under filing number 83561188 and (ii) a security interest held by TD
Waterhouse RRSP Account 230832S, in trust for Peter Alan Lacey as beneficiary,
(the “Lacey RRSP Account”) as evidenced by that certain Security Agreement,
effective as of September 21, 2009, by and between Debtor and the Lacey RRSP
Account, as secured party ((i) and (ii) collectively, the “Prior Liens”); (b)
Debtor will not sell or offer to sell or otherwise transfer the Collateral or
any interest therein without the prior written consent of Secured Party, except
as may be permitted under the Prior Liens; (c) Debtor will not create or permit
to exist any future lien on or security interest in the Collateral in favor of
any third party with priority over Secured Party, without the prior written
consent of Secured Party; except in connection with the Prior Liens; (d) Debtor
will, upon Secured Party’s request, remove any unauthorized lien or security
interest on the Collateral, and defend any claim affecting the Collateral; (e)
Debtor will pay all charges against the Collateral, including, but not limited
to, taxes, assessments, encumbrances, and insurance, and upon Debtor’s failure
to do so, Secured Party may pay any such charge as it deems necessary and add
the amount paid to the indebtedness of Debtor secured hereunder; (f) Debtor will
not use or permit any Collateral to be used unlawfully or in violation of any
provision of the Loan Documents, this Security Agreement, or any applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral; and (g) all information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Debtor with respect to the Collateral is true
and correct in all material respects.

4.      Covenants of Debtor. Debtor hereby agrees:     (a) to do all acts that
may be necessary to maintain, preserve and protect the  

Collateral;

     (b) to notify Secured Party promptly of any change in Debtor’s name or
place of business, or, if Debtor has more than one place of business, its head
office, or office in which Debtor’s records relating to the Collateral are kept;

--------------------------------------------------------------------------------

Exhibit 10.3

     (c) to procure, execute and deliver from time to time any endorsements,
assignments, financing statements and other writings deemed necessary or
appropriate by Secured Party to perfect, maintain and protect its security
interest hereunder and the priority thereof; (d) to appear in and defend any
action or proceeding which may affect its title to or Secured Party’s interest
in the Collateral; (e) to keep separate, accurate and complete records of the
Collateral and to provide Secured Party with copies of such records and such
other reports and information relating to the Collateral as Secured Party may
reasonably request from time to time; (f) not to cause or permit any waste or
unusual or unreasonable depreciation of the Collateral; and (g) at any
reasonable time, upon reasonable request by Secured Party, to exhibit to and
allow inspection by Secured Party (or persons designated by Secured Party) of
the Collateral.

     5. Events of Default. The occurrence of the following event (“Event of
Default”) shall constitute an Event of Default under this Agreement: (a) Debtor
shall default in its performance of any covenant under this Security Agreement;
(b) Debtor fails to pay when due any sum payable under the terms of the Loan
Documents or this Security Agreement and Debtor has failed to cure such
nonpayment within ninety (90) days after such sum has become due and payable;
(c) Debtor files any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law or any other law for the relief of,
or relating to, debtors, now or hereafter in effect, or makes any assignment for
the benefit of creditors or takes any corporate action in furtherance of any of
the foregoing; or (d) An involuntary petition is filed against Debtor under any
bankruptcy statute now or hereafter in effect, unless such petition is dismissed
or discharged within sixty (60) days thereafter, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of Debtor.

     6. Remedies. Upon the occurrence of any Event of Default, Secured Party
may, at its option, and without further notice to or demand on Debtor and in
addition to all rights and remedies available to Secured Party under the Loan
Documents or under law, do any one or more of the following, subject, however,
to the respective rights of the secured parties under the Prior Liens: (a)
foreclose or otherwise enforce Secured Party’s security interest in the
Collateral in any manner permitted by law, or provided for in this Security
Agreement; and

--------------------------------------------------------------------------------

Exhibit 10.3

     (b) recover from Debtor or Debtor all costs and expenses, including,
without limitation, reasonable attorney’s fees, incurred or paid by Secured
Party in exercising any right, power or remedy provided by this Security
Agreement or by law;

     7. Entire Agreement, Severability. This Security Agreement and the Loan
Documents contain the entire agreement between Secured Party and Debtor with
respect to the Collateral which is the subject of this Security Agreement. If
any of the provisions of this Security Agreement shall be held invalid or
unenforceable, this Security Agreement shall be construed as if not containing
those provisions and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.

     8. Choice of Law. This Security Agreement shall be construed in accordance
with and governed by the laws of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.

     9. Notice. Any written notice, consent or other communication provided for
in this Security Agreement shall be delivered to the addresses and sent in the
manner as set forth in the Loan Documents. Such addresses may be changed by
written notice given as provided in the Loan Documents.

     10. Interpretation; Rules of Construction. All terms with their initial
letters capitalized and not otherwise defined herein shall have the meaning as
set forth in the Loan Documents. The words “include”, “includes” and “including”
when used in this Security Agreement shall be deemed in each case to be followed
by the words “without limitation”. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The parties hereto agree that they have been
represented by legal counsel during the negotiation and execution of this
Security Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document shall be construed against the party drafting such agreement or
document

[SIGNATURE PAGE FOLLOWS]

--------------------------------------------------------------------------------

Exhibit 10.3

     IN WITNESS WHEREOF, Debtor and Secured Party have executed this Security
Agreement effective as of the date first above written.

DEBTOR:

DayStar Technologies, Inc.,
a Delaware corporation

By: /s/ William S. Steckel
Name: William S. Steckel
Title: Chief Executive Officer

SECURED PARTY:

/s/ Peter A. Lacey

Name: Peter Alan Lacey

[SIGNATURE PAGE TO SECURITY AGREEMENT]

--------------------------------------------------------------------------------

Exhibit 10.3

EXHIBIT A

COLLTERAL LIST

All of Debtor’s right, title and interest, whether now owned or existing or
hereafter acquired or arising, and wherever located in the following described
property: Equipment. All Equipment, as that term is defined in the Uniform
Commercial Code as in effect in California (the “UCC”). Investment Property. All
Investment Property, as that term is defined in the UCC.

 * Deposit Accounts. All Deposit Accounts, as that term is defined in the UCC.
 * Documents and Instruments. All Documents and Instruments, as those terms

  are defined in the UCC.

Letter-of-Credit Rights. All Letter-of-Credit Rights, as that term is defined in
the UCC.

 * Inventory Etc. All Inventory, as that term is defined in the UCC.
 * Accounts. All Accounts, as that term is defined in the UCC.
 * General Intangibles. All General Intangibles, as that term is defined in the

UCC, including but not limited to all federal, state, local and foreign,
registered or unregistered rights in: (i) all copyrights, rights and interests
in copyrights, works protectable by copyrights, copyright registrations and
copyright applications, and all renewals of any of the foregoing, all income,
royalties, damages and payments now and hereafter due and/or payable under or
with respect to any of the foregoing, including, without limitation, all damages
and payments for past, present and future infringement of any of the foregoing
and the right to sue for past, present and future infringement of any of the
foregoing; (ii) all patents, processes, patent rights and patent applications,
including, without limitation, the inventions and improvements described and
claimed therein, all patentable inventions and the reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing and all income, royalties, damages, and payments now or hereafter due
and/or payable under or with respect to any of the foregoing, including, without
limitation, damages and payments for past, present and future infringement of
any of the foregoing and the right to sue for past, present and future
infringement of any of the foregoing; (iii) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, mask works, logos and other business identifiers, prints
and labels on which any of the foregoing have appeared or appear; all
registrations and recordings thereof, and all applications in connection
therewith, and all renewals thereof, and all income, royalties, damages and
payments now or hereafter due and/or payable

--------------------------------------------------------------------------------

Exhibit 10.3

under or with respect to any of the foregoing, including, without limitation,
damages and payments for past, present and future infringement of any of the
foregoing and the right to sue for past, present and future infringement of any
of the foregoing; (iv) all moral or similar rights; compilations; sui generis
rights; rights under treaties, conventions, directives and the like (including
but not limited to rights under the Berne Convention for the Protection Of
Literary and Artistic Works, GATT, and all European Union directives, including
but not limited to directives regarding the legal protection of databases);
trade secrets; derivative works; tangible or intangible intellectual property
being or to be developed; schematics; know-how; technology; rights in computer
software programs or applications (in both source and object code form and in
escrow or otherwise); software and firmware listings; fully commented and
updated software source code, and complete system build software and
instructions related to all software described herein; designs; sounds; lyrics;
soundtracks; music and musical compositions; motion picture synchronization
rights; scripts; continuities; testing procedures and results; fabrication and
manufacturing methods; supplier lists; registrations and applications relating
to any of the foregoing; employee and independent contractor lists; customer
lists; sales prospects; sales, advertising, marketing and promotional
information, materials, brochures, presentations, white papers, case studies,
seminar materials, workbooks, brochures, training manuals and materials; website
content; documents, records and files relating to design, end user
documentation; manufacturing, quality control, sales, marketing and customer
support for all Intellectual Property described herein; business and financial
information and strategies; proprietary and other information in or with respect
to which Debtor has any interest or rights of any nature; and data and
databases; all exclusive and nonexclusive licenses for any of the foregoing
intellectual property as described in this Annex A including any subsection
hereof, to the extent such licenses may be assigned as security without the
consent of the licensor (under their terms or, notwithstanding their terms,
under existing or future Laws), or to the extent the consent of the licensor is
now or hereafter obtained by Secured Party or Debtor; and all other tangible or
intangible information and intellectual property, media (whether now or
hereafter existing or invented), copies and languages (including foreign and
computer languages) in which any of the foregoing is now or hereafter recorded,
copied, translated, encoded or otherwise stored or utilized in any manner (all
of the property described in subsections (i), (ii), (iii) and (iv) is hereafter
referred to collectively as “Intellectual Property”); (v) all (a) contracts and
rights therein, including without limitation rights under software, information
and other development contracts; (b) royalties; (c) documents, documents of
title, drafts, checks, acceptances, bonds, letters of credit, notes and other
negotiable and non-negotiable instruments, bills of exchange, security deposits,
certificates of deposit, insurance policies and any other writings evidencing a
monetary obligation or security interest in or lease

--------------------------------------------------------------------------------

Exhibit 10.3

of personal property; (d) licenses, leases, rents, contracts or agreements,
government entitlements and subsidies and tax refunds; (e) investment property,
including, but not limited to, all certificated or uncertificated securities,
security entitlements, securities accounts, commodity contracts and commodity
accounts; (f) deposit accounts; (g) guarantees, bonds and other personal
property securing the payment or performance of any of the foregoing; (h)
chattel paper; (i) general intangibles as such term is defined in the Uniform
Commercial Code, which shall, in any event, include, without limitation, all
right, title and interest in or under any contracts, models, drawings, materials
and records, claims, literary rights, goodwill, rights of performance,
warranties, rights under insurance policies and rights of indemnification; and
(j) Internet domain names and other identifiers of Debtor and all rights
connected therewith; (vi) all advertising and promotional materials, training
manuals, workbooks, case studies and other materials prepared in connection with
and/or relating to Debtor’s consulting business, including, but not limited to
design, development, implementation and sale of software, applications,
enhancements, frameworks, methodologies, training, marketing, sales and other
services that incorporate or utilize any element of the Intellectual Property
pursuant to any existing or future license or other agreement in which Debtor
now or hereafter has any interest or right of any nature whatsoever (including,
without limitation, rights which do not amount to a property right), whether or
not used or to be used by Debtor (including without limitation any interest of
Debtor as seller or buyer, manufacturer, developer, licensee or licensor, or
lessee or lessor); and all whether registered, filed or recorded or not; all
whether any or all of the foregoing is eligible for intellectual property
protection (including but not limited to whether any of the foregoing is
copyrighted or copyrightable).

Books and Records. All books, correspondence, credit files, records, invoices,
and other documents, including without limitation all tapes, cards, computer
runs and other papers or documents in the possession or control of Debtor; and
all balances, credits, deposits, accounts or monies of or in the name of Debtor
in the possession or control of, or in transit to the Secured Party, and all
records and data relating to anything described in this Exhibit A, whether in
the form of a writing, photograph, microfilm, microfiche, or electronic or other
media, together with all of Debtor’s assignable right, title, and interest in
and to all computer software and hardware required to utilize, create, maintain,
and process any such records or data on electronic media.

 * Fixtures. All Fixtures, as that term is defined in the UCC.
 * Products. All products and produce of any of the above.

--------------------------------------------------------------------------------