Exhibit 10.3

SECURITY AGREEMENT

     This Security Agreement (this “Security Agreement”) is made effective as of
January 6, 2010 (“Effective Date”), by and between DayStar Technologies, Inc., a
Delaware corporation (“Debtor”), and Michael Moretti as beneficiary (“Secured
Party”), with reference to the essential facts stated in the Recitals below.

RECITALS

     A. Pursuant to the terms of that certain Purchase Agreement dated January
6, 2010 (the “Purchase Agreement”), the Secured Convertible Promissory Note of
even date herewith (the “Note”), the warrant of even date herewith (the
“Warrant”), and the Registration Rights Agreement of even date herewith (the
“Registration Rights Agreement”), all between Debtor and Secured Party, Secured
Party is loaning to Debtor a total amount of $250,000 (the “Loan”). This
Security Agreement, the Purchase Agreement, the Note, the Warrants and the
Registration Rights Agreement 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”), 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 (including, but not limited to, any liquidated
damages that may be payable by the Company pursuant to Section 1.2(b) of the
Registration Rights Agreement), (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,

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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.

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 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; (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, and
(iii) a security interest held by Peter Lacey, an individual, as evidenced by
the Amended and Restated Security Agreement, effective as of December 17, 2009
((i), (ii), and (iii) collectively, the “Prior Liens”). The Secured Party
acknowledges that the Company may have entered into one or more additional
secured financing transactions (each, a “Bridge Financing” as defined in the
Purchase Agreement) and may enter into additional bridge financing transactions
within 120 days following the execution of this Agreement. In light of the
foregoing, the Secured Party recognizes that each participant in the bridge
financing is also a secured party on a pari passu basis, up to $4 million in
total indebtedness with the Secured Party and Prior Lien holders, as is found in
Schedule 1 attached hereto.

     (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 Lien;

     (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 or Debtor with respect to the Collateral is true
and correct in all material respects.

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4.      Covenants of Debtor and 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;

     (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 and to deliver promptly to Secured
Party all originals of Collateral or proceeds consisting of chattel paper or
instruments including but not limited to one or more UCC-1 financing statements,
leasehold deeds of trust and patent and trademark collateral filings, all in a
form reasonably requested by Secured Party;

     (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 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

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(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 rights of the secured party under the Prior Lien:

     (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

     (b) recover from 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 governed by and
construed in accordance with the laws of New York State without giving effect to
conflicts of laws principles that would require the application of the law of
another jurisdiction.

     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. All terms with their initial letters capitalized and
not otherwise defined herein shall have the meaning as set forth in the Loan
Documents.

[SIGNATURE PAGE FOLLOWS]

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     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:

PARTY

By: /s/ Michael Moretti
Name: Michael Moretti
Title: Authorized Signatory

[SIGNATURE PAGE TO SECURITY AGREEMENT]

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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

[EXHIBIT A TO SECURITY AGREEMENT]

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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 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”);

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     (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 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.

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Insurance. All policies of insurance covering or relating in any manner to any
of the property described in this Exhibit A, all of which policies are hereby
assigned to Secured Party as security for the payment and performance of the
Obligations.

Products. All products and produce of any of the above.

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SCHEDULE 1. Secured Parties

Name, Address and Facsimile Number

TD Waterhouse RRSP Account 230832S, in trust for Peter Alan Lacey as beneficiary
c/o Peter Alan Lacey

Peter A. Lacey

Michael Moretti

SCHEDULE 1 TO SECURITY AGREEMENT

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