Exhibit 10.7

DAYSTAR TECHNOLOGIES, INC.

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of January 19,
2007 and effective as of the Closing Date (as defined in the Securities Purchase
Agreement (as hereinafter defined) by and among Daystar Technologies, Inc., a
Delaware corporation, (the “Company”), and each investor listed on Schedule 1
hereto (each such investor, individually, an “Investor” and, collectively, the
“Investors”).

WHEREAS, the Company has agreed to issue and sell to the Investors, and the
Investors have agreed to purchase from the Company, 2,500,000 shares (the
“Shares”) of the Company’s common stock, $0.01 par value per share (including
any securities into which or for which such shares may be exchanged for, or
converted into, pursuant to any stock dividend, stock split, stock combination,
recapitalization, reclassification, reorganization or other similar event, the
“Common Stock”), at a price and upon the terms and conditions set forth in the
Securities Purchase Agreement (the “Securities Purchase Agreement”) dated as of
the date hereof by and between the Company and the Investors; and

WHEREAS, the terms of the Securities Purchase Agreement provide that it shall be
a condition precedent to the closing of the transactions thereunder, for the
Company and the Investors to execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:

1. DEFINITIONS. The following terms shall have the meanings provided therefor
below or elsewhere in this Agreement as described below:

“Affiliates” means any Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, a
Person, as such terms are used and construed under Rule 144.

“Board” means the Board of Directors of the Company.

“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other governmental action to
close.

“Closing Date” has the meaning set forth in the Securities Purchase Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and all of
the rules and regulations promulgated thereunder.

“Person” (whether or not capitalized) means an individual, partnership, limited
liability company, corporation, association, trust, joint venture,
unincorporated organization, and any government, governmental department or
agency or political subdivision thereof.

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“Prospectus” means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Shares covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

“Registrable Shares” means, at the relevant time of reference thereto, the
Shares (including any shares of capital stock that may be issued in respect
thereof pursuant to a stock split, stock dividend, recombination,
reclassification or the like), provided, however, that the term “Registrable
Shares” shall not include any of the Shares that are actually sold pursuant to a
registration statement that has been declared effective under the Securities Act
by the SEC.

“Registration Statement” means the Mandatory Registration Statement, any Demand
Registration on Form S-3, and any additional registration statements
contemplated by this Agreement, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such registration statement or Prospectus.

“Rule 144” means Rule 144 promulgated under the Securities Act and any successor
or substitute rule, law or provision.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and all of the
rules and regulations promulgated thereunder.

2. MANDATORY REGISTRATION.

(a) As promptly as possible after the date hereof, and in any event prior to the
date that is five (5) days following the Stockholder Approval (as such term is
defined in the Securities Purchase Agreement) (the “Mandatory Filing Date”), the
Company shall prepare and file with the SEC a Registration Statement on Form
S-3, S-1 or other appropriate form, for the purpose of registering under the
Securities Act all of the Registrable Shares for resale by, and for the account
of, each Investor as an initial selling stockholder thereunder (the “Mandatory
Registration Statement”). The Mandatory Registration Statement shall permit the
Investors to offer and sell, on a delayed or continuous basis pursuant to Rule
415 under the Securities Act, any or all of the Registrable Shares. The Company
agrees to use its best efforts to cause the Mandatory Registration Statement to
be declared effective as soon as possible but in no event later than the date
that is one hundred twenty (120) days following the Mandatory Filing Date (the
“Mandatory Effective Date”) (including filing with the SEC, within three
(3) Business Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the SEC that the Mandatory Registration
Statement will not be “reviewed” or will not be subject to further review, a
request for acceleration of effectiveness in accordance with Rule 461
promulgated under the Securities Act (an “Acceleration Request”), which request
shall request

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an effective date that is within three (3) Business Days of the date of such
request). The Company shall notify each Investor in writing promptly (and in any
event within one (1) Business Day) after the Company’s submission of an
Acceleration Request to the SEC. The Company shall be required to keep the
Mandatory Registration Statement continuously effective (including through the
filing of any required post-effective amendments) until the earlier to occur of
(i) the date after which all of the Registrable Shares registered thereunder
shall have been sold and (ii) the date as of which all Investors may sell all
the Registrable Shares without restriction pursuant to Rule 144(k) of the
Securities Act (or any successor rule thereto); provided, that in either case
such date shall be extended by the amount of time of any Suspension Period (as
defined below). Thereafter, the Company shall be entitled to withdraw the
Mandatory Registration Statement and, upon such withdrawal and notice to the
Investors, the Investors shall have no further right to offer or sell any of the
Registrable Shares pursuant to the Mandatory Registration Statement (or any
prospectus relating thereto).

(b) Notwithstanding anything in this Section 2 to the contrary, if the Company
shall furnish to the Investors a certificate signed by the President or Chief
Executive Officer of the Company stating that the Board has made the good faith
determination (i) that the continued use by the Investors of the Mandatory
Registration Statement for purposes of effecting offers or sales of Registrable
Shares pursuant hereto would require, under the Securities Act and the rules and
regulations promulgated thereunder, premature disclosure in the Mandatory
Registration Statement (or the Prospectus relating thereto) of material,
nonpublic information concerning the Company, its business or prospects or any
proposed material transaction involving the Company, (ii) that such premature
disclosure would be materially adverse to the Company, its business or prospects
or any such proposed material transaction or would not be in the best interests
of the Company and (iii) that it is therefore essential to suspend the use by
the Investors, of the Mandatory Registration Statement (and the Prospectus
relating thereto), then the right of the Investors to use the Mandatory
Registration Statement (and the Prospectus relating thereto) for purposes of
effecting offers or sales of Registrable Shares pursuant thereto shall be
suspended for a period (the “Suspension Period”) not greater than twenty
(20) consecutive Business Days during any consecutive twelve (12) month period.
During the Suspension Period, the Investors shall not offer or sell any
Registrable Shares pursuant to or in reliance upon the Mandatory Registration
Statement (or the Prospectus relating thereto). The Company agrees that, as
promptly as possible, but in no event later than one (1) Business Day, after the
consummation, abandonment or public disclosure of the event or transaction that
caused the Company to suspend the use of the Mandatory Registration Statement
(and the

Prospectus relating thereto) pursuant to this Section 2(c), the Company will as
promptly as possible lift any suspension, provide the Investors with revised
Prospectuses, if required, and will notify the Investors of their ability to
effect offers or sales of Registrable Shares pursuant to or in reliance upon the
Mandatory Registration Statement.

(c) It shall be a condition precedent to the obligations of the Company to
register Registrable Shares for the account of an Investor pursuant to this
Section 2, Section 2A or Section 3 that such Investor furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the method of disposition of such securities as shall be required to effect the
registration of such Investor’s Registrable Securities.

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(d) If (i) the Mandatory Registration Statement is not filed on or prior to the
Mandatory Filing Date, or (ii) the Mandatory Registration Statement filed or
required to be filed hereunder is not declared effective by the Commission by
the Mandatory Effective Date (any such failure or breach being referred to as an
“Event”, and for purposes of clause (i) or (ii) the date on which such Event
occurs, referred to as “Event Date”), then on each such Event Date and on each
monthly anniversary of each such Event Date (if the applicable Event shall not
have been cured by such date) until the applicable Event is cured, the Company
shall pay to each Investor an amount in cash, as liquidated damages and not as a
penalty, equal to 1% of the aggregate purchase price paid by such Investor
pursuant to the Securities Purchase Agreement for any Registrable Shares then
held by such Investor assuming for such purposes that such calculation is based
on a fully converted basis. The parties agree that (1) in no event will the
Company be liable for liquidated damages under this Agreement in excess of 1% of
the Aggregate Purchase Price of the Investors in any 30-day period and (2) the
maximum aggregate liquidated damages payable to an Investor under this Agreement
shall be twelve percent (12%) of the Aggregate Purchase Price paid by such
Investor pursuant to the Securities Purchase Agreement. If the Company fails to
pay any partial liquidated damages pursuant to this Section in full within seven
days after the date payable, the Company will pay interest thereon at a rate of
18% per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Investor, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The liquidated damages pursuant to the terms hereof shall
apply on a daily pro-rata basis for any portion of a month prior to the cure of
an Event. Notwithstanding anything in this agreement to the contrary, the
Investors’ sole remedy at law for the failure of the Company to file a Mandatory
Registration Statement and cause such Mandatory Registration Statement to become
effective in accordance with Section 2(a) hereof shall be the liquidated damages
described in this Section 2(d).

2A. MANDATORY S-3 REGISTRATION RIGHTS.

(a) If, at any time any Registrable Shares are not able to be resold pursuant to
an effective Registration Statement, (i) Form S-3 (or other equivalent form) is
then available for the registration of such Registrable Shares and (ii) the
Company shall receive from any Investor or Investors (including for this purpose
its Affiliates) who holds (or who together hold) at least twenty-five percent
(25%) of the then outstanding Registrable Shares a written request or requests
(a “Demand Notice”) that the Company effect a registration on Form S-3 (a
“Demand Registration”), or any successor or substitute form, with respect to all
or a part of the Registrable Shares owned by such Investor(s), then the Company
will promptly give written notice of the proposed registration and the
Investor’s or Investors’ request therefor to all other Investors, and use best
efforts to effect such registration, as soon as practicable and in any event
within thirty (30) days, of all or such portion of such Investors’ Registrable
Shares as are specified in such request, together with all or such portion of
the Registrable Shares of any other Investor or Investors joining in such
request as are specified in a written request given by such other Investor or
Investors within ten (10) Business Days after receipt of such written notice
from the Company; provided, however, that the Company may temporarily suspended
the use of such registration statement for the same reasons and on the same
terms as described in Section 2(b) above. The Company shall not be required to
effect more than three (3) registrations pursuant to this Section 2A(a) during
any consecutive twelve (12) month period.

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(b) It shall be a condition precedent to the obligations of the Company to
register Registrable Shares for the account of an Investor pursuant to this
Section 2 or Section 3 that such Investor furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
method of disposition of such securities as shall be required to effect the
registration of such Investor’s Registrable Securities.

3. “PIGGYBACK REGISTRATION”.

(a) If at any time any Registrable Shares are not able to be resold pursuant to
an effective Registration Statement, and the Company proposes to register any of
its Common Stock under the Securities Act, whether as a result of an offering
for its own account or the account of others (but excluding any registrations to
be effected on Forms S-4 or S-8 or other applicable successor Forms), the
Company shall, each such time, give to the Investors twenty (20) days’ prior
written notice of its intent to do so, and such notice shall describe the
proposed registration and shall offer such Investors the opportunity to register
such number of Registrable Shares as each such Investor may request. Upon the
written request of any Investor given to the Company within fifteen (15) days
after the receipt of any such notice by the Company, the Company shall include
in such Registration Statement all or part of the Registrable Shares of such
Investor, to the extent requested to be registered.

(b) If a registration pursuant to Section 3 hereof involves an underwritten
offering and the managing underwriter shall advise the Company in writing that,
in its opinion, the number of shares of Common Stock requested by the Investors
to be included in such registration is likely to affect materially and adversely
the success of the offering or the price that would be received for any shares
of Common Stock offered in such offering, then, notwithstanding anything in this
Section 3 to the contrary, the Company shall only be required to include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
shares of Common Stock requested to be included in such registration for the
account of any stockholders of the Company (including the Investors), pro rata
among such stockholders on the basis of the number of shares of Common Stock
that each of them has requested to be included in such registration, and
(ii) second, any shares of Common Stock proposed to be included in such
registration for the account of the Company.

(c) In connection with any offering involving an underwriting of shares, the
Company shall not be required under this Section 3 or otherwise to include the
Registrable Shares of any Investor therein unless such Investor accepts and
agrees to the terms of the underwriting, which shall be reasonable and
customary, as agreed upon between the Company and the underwriters selected by
the Company.

4. OBLIGATIONS OF THE COMPANY. In connection with the Company’s registration
obligations hereunder, the Company shall, as expeditiously as practicable:

(a)(i) furnish to each Investor copies of all documents filed with the SEC prior
to their being filed with the SEC, (ii) use commercially reasonable best efforts
to cause its officers and directors, counsel and certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
such Investor, to conduct a reasonable

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investigation within the meaning of the Securities Act, and (iii) notify the
Investors of any stop order issued or threatened by the SEC and use best efforts
to prevent the entry of such stop order or to remove it if entered.

(b)(i) prepare and file with the SEC (electronically on EDGAR) such amendments
and supplements, including post-effective amendments, to each Registration
Statement and the Prospectus used in connection therewith as may be necessary to
comply with the Securities Act and to keep the Registration Statement
continuously effective as required herein, and prepare and file with the SEC
such additional Registration Statements as necessary to register for resale
under the Securities Act all of the Registrable Shares (including naming any
permitted transferees of Registrable Shares as selling stockholders in such
Registration Statement); (ii) cause any related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as possible
to any comments received from the SEC with respect to each Registration
Statement or any amendment thereto and as promptly as possible provide the
Investors true and complete copies of all correspondence from and to the SEC
relating to the Registration Statement (other than correspondence containing
material nonpublic information); and (iv) comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Shares covered by such Registration Statement as so amended or in
such Prospectus as so supplemented.

(c) Notify the Investors and Investors’ Counsel as promptly as possible:

(i) when the SEC notifies the Company whether there will be a “review” of a
Registration Statement and whenever the SEC comments in writing on such
Registration Statement; and (ii) when a Registration Statement, or any
post-effective amendment or supplement thereto, has become effective, and after
the effectiveness thereof: (A) of any request by the SEC or any other federal or
state governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (B) of the issuance by
the SEC or any state securities commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Shares or the initiation of any proceedings for that purpose; (C )
of a pending proceeding against the Company under Section 8A of the Securities
Act in connection with the offering of the Registrable Shares; and (D) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Shares
for sale in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose. Without limitation of any remedies to which the Investors may
be entitled under this Agreement, if any of the events described in
Section 4(c)(ii)(A), 4(c)(ii)(B), and 4(c)(ii)(C) occur, the Company shall use
best efforts to respond to and correct the event.

(d) Notify the Investors and their counsel as promptly as possible of the
happening of any event as a result of which the Prospectus included in or
relating to a Registration Statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading;
and, thereafter, the Company will as promptly as possible prepare (and, when
completed, give notice to each Investor) a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such Prospectus will not contain an untrue statement of a
material fact or

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omit to state any fact necessary to make the statements therein not misleading;
provided that upon such notification by the Company, the Investors will not
offer or sell Registrable Shares pursuant to such Prospectus until the Company
has notified the Investors that it has prepared a supplement or amendment to
such Prospectus and delivered copies of such supplement or amendment to the
Investors (it being understood and agreed by the Company that the foregoing
proviso shall in no way diminish or otherwise impair the Company’s obligation to
as promptly as possible prepare a Prospectus amendment or supplement as above
provided in this Section 4(d) and deliver copies of same as above provided in
Section 4(h) hereof), and it being further understood that, in the case of the
Mandatory Registration Statement, any such period during which the Investors are
restricted from offering or selling Registrable Shares shall constitute a
Suspension Period.

(e) Upon the occurrence of any event described in Section 4(d) hereof, as
promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading.

(f) Use best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of, (i) any order suspending the effectiveness of any Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Shares for sale in any jurisdiction, as
promptly as possible (it being understood that, in the case of the Mandatory
Registration Statement, any period during which the effectiveness of the
Mandatory Registration Statement or the qualification of any Registrable Shares
is suspended shall constitute a Suspension Period).

(g) Furnish to the Investors and their counsel, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto, and
all exhibits to the extent requested by such Investor or their counsel
(including those previously furnished or incorporated by reference) as promptly
as possible after the filing of such documents with the SEC.

(h) As promptly as possible furnish to each selling Investor, without charge,
such number of copies of a Prospectus, including a preliminary Prospectus, in
conformity with the requirements of the Securities Act, and such other documents
(including, without limitation, Prospectus amendments and supplements) as each
such selling Investor may reasonably request in order to facilitate the
disposition of the Registrable Shares covered by such Prospectus and any
amendment or supplement thereto. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Investors in connection with the offering and sale of the Registrable Shares
covered by such Prospectus and any amendment or supplement thereto to the extent
permitted by federal and state securities laws and regulations.

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(i) Use best efforts to register and qualify (or obtain an exemption from such
registration and qualification) the Registrable Shares under such other
securities or blue sky laws of the states of residence of each Investor and such
other jurisdictions as each Investor shall reasonably request, to keep such
registration or qualification (or exemption therefrom) effective during the
periods each Registration Statement is effective, and do any and all other acts
or things which may be reasonably necessary or advisable to enable each Investor
to consummate the public sale or other disposition of Registrable Shares in such
jurisdiction, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions where
it is not then qualified or subject to process.

(j) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates representing the Registrable Shares to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Securities Purchase Agreement and
applicable law, of all restrictive legends, and to enable such Registrable
Shares to be in such denominations and registered in such names as such
Investors may request.

(k) Cooperate with any reasonable due diligence investigation undertaken by the
Investors, any managing underwriter participating in any disposition pursuant to
a Registration Statement, Investors’ Counsel and any attorney, accountant or
other agent retained by Investors or any managing underwriter, in connection
with the sale of the Registrable Shares, including, without limitation, making
available any documents and information; provided, however, that the Company
will not deliver or make available to any Investor material, nonpublic
information unless such Investor specifically requests and consents in advance
in writing to receive such material, nonpublic information and, if requested by
the Company, such Investor agrees in writing to treat such information as
confidential.

(l) At the request of an Affiliate, the Company shall amend any Registration
Statement to include such Affiliate as a selling stockholder in such
Registration Statement.

(m) Comply with all applicable rules and regulations of the SEC in all material
respects.

5. EXPENSES OF REGISTRATION. The Company shall pay for all expenses incurred in
connection with a registration pursuant to this Agreement and compliance with
Section 4 of this Agreement, including without limitation (i) all registration,
filing and qualification fees and expenses (including without limitation those
related to filings with the SEC, The NASDAQ Stock Market, or any national
securities exchange upon which the Company’s securities are listed and in
connection with applicable state securities or blue sky laws), (ii) all printing
expenses, (iii) all messenger, telephone and delivery expenses incurred by the
Company, (iv) all fees and disbursements of counsel for the Company and
Investors’ Counsel, and (v) all fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement.

6. DELAY OF REGISTRATION. Subject to Section 11(d) hereof, the Investors and the
Company (other than with respect to Section 4(d) hereof) shall not take any
action to

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restrain, enjoin or otherwise materially delay any registration as the result of
any controversy which might arise with respect to the interpretation or
implementation of this Agreement.

7. INDEMNIFICATION. In the event that any Registrable Shares of the Investors
are included in a Registration Statement pursuant to this Agreement:

(a) To the fullest extent permitted by law, the Company will indemnify and hold
harmless each Investor and each officer, director, fiduciary, agent, investment
advisor, employee, member (or other equity holder), general partner and limited
partner (and affiliates thereof) of such Investor, each broker, underwriter or
other person acting on behalf of such Investor and each person, if any, who
controls such Investor within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, (the “Losses”) to
which they may become subject under the Securities Act or otherwise, insofar as
such Losses (or actions in respect thereof) arise out of or relate to any untrue
or alleged untrue statement of any material fact contained in the Registration
Statement, or arise out of or relate to the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or any violation by the Company of
the Securities Act or state securities or blue sky laws applicable to the
Company and leading to action or inaction required of the Company in connection
with such registration or qualification under such Securities Act or state
securities or blue sky laws; and, subject to the provisions of Section 7(c)
hereof, the Company will reimburse on demand such Investor, such broker or other
person acting on behalf of such Investor or such officer, director, fiduciary,
employee, member (or other equity holder), general partner, limited partner,
affiliate or controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 7(a) shall not apply to amounts paid in
settlement of any such Losses if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, damage, liability or
action to the extent that it solely arises out of or is based upon an untrue
statement of any material fact contained in the Registration Statement or
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, in reliance upon and in
conformity with written information furnished by such Investor expressly for use
in connection with such Registration Statement.

(b) To the fullest extent permitted by law, each Investor, severally (as to
itself) and not jointly, will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, and all other Investors against any Losses to which the Company
or any such director, officer or controlling person or other Investor may become
subject to, under the Securities Act or otherwise, insofar as such Losses (or
actions in respect thereto) solely arise out of or are based upon any untrue
statement of any material fact contained in the Registration Statement, or
solely arise out of or relate to the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent that such untrue statement or alleged
untrue statement

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or omission or alleged omission was made in the Registration Statement in
reliance upon and in conformity with written information furnished by such
Investor expressly for use in connection with such Registration Statement; and,
subject to the provisions of Section 7(d) hereof, such Investor will reimburse
on demand any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, or other Investor in connection with
investigating or defending any such Losses, provided, however, that the maximum
aggregate amount of liability of such Investor under this Section 7 shall be
limited to the proceeds (net of underwriting discounts and commissions, if any)
actually received by such Investor from the sale of Registrable Shares covered
by such Registration Statement; and provided, further, however, that the
indemnity agreement contained in this Section 7(b) or 7(e) shall not apply to
amounts paid in settlement of any such Losses if such settlement is effected
without the consent of such Investor against which the request for indemnity is
being made (which consent shall not be unreasonably withheld).

(c) As promptly as possible after receipt by an indemnified party under this
Section 7 of notice of the threat, assertion or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and, to the extent the indemnifying party desires,
jointly with any other indemnifying party similarly noticed, to assume at its
expense the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that, the failure to notify an indemnifying party promptly of
the threat, assertion or commencement of any such action shall not relieve such
indemnifying party of any liability to the indemnified party under this
Section 7 except (and only) to the extent that it shall be finally determined by
a court of competent jurisdiction (which determination is not subject to appeal
or further review) that such failure shall have proximately and materially
adversely prejudiced the indemnifying party.

(d) If any indemnified party shall have reasonably concluded that there may be
one or more legal defenses available to such indemnified party which are
different from or additional to those available to the indemnifying party, or
that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 7, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, and such indemnifying party shall reimburse
such indemnified party and any person controlling such indemnified party for the
fees and expenses of counsel retained by the indemnified party which are
reasonably related to the matters covered by the indemnity agreement provided in
this Section 7. Subject to the foregoing, an indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Company for that section or participations.

(e) If the indemnification provided for in this Section 7 from the indemnifying
party is applicable by its terms but unavailable to an indemnified party
hereunder in respect of any Losses, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall, subject to the maximum aggregate
liability of any Investor as set forth in Section 7(b), contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of

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the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Sections 7(a), 7(b) 7(c) and 7(d), any
legal or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section 7(e)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph.

(f) The indemnity and contribution agreements contained in this Section are in
addition to any liability that any indemnifying party may have to any
indemnified party.

8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit the Investors to sell the Registrable Shares to the
public without registration, the Company agrees to use best efforts to: (i) make
and keep public information available, as those terms are understood and defined
in Rule 144, (ii) file with the SEC in a timely manner all reports and other
documents required to be filed by an issuer of securities registered under the
Securities Act or the Exchange Act; (iii) as long as any Investor owns any
Shares or Warrant Shares, to furnish in writing upon such Investor’s request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, and to
furnish to such Investor a copy of the most recent annual and quarterly reports
of the Company, and such other reports and documents so filed by the Company as
may be reasonably requested in availing such Investor of any rule or regulation
of the SEC permitting the selling of any such Shares without registration, and
(iv) undertake any additional actions reasonably necessary to maintain the
availability of a Registration Statement, including any successor or substitute
forms, or the use of Rule 144.

9. TRANSFER OF REGISTRATION RIGHTS. Each Investor may assign or transfer any or
all of its rights under this Agreement to any Person, provided such assignee or
transferee agrees in writing to be bound by the provisions hereof that apply to
such assigning or transferring Investor. Upon any such, and each successive,
assignment or transfer to any permitted assignee or transferee in accordance
with the terms of this Section 9, such permitted assignee or transferee shall be
deemed to be an “Investor” for all purposes of this Agreement.

10. ENTIRE AGREEMENT. This Agreement, together with the Securities Purchase
Agreement, constitutes and contains the entire agreement and understanding of
the parties with respect to the subject matter hereof, and it also supersedes
any and all prior negotiations, correspondence, agreements or understandings
with respect to the subject matter hereof.

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11. MISCELLANEOUS.

(a) This Agreement, and any right, term or provision contained herein, may not
be amended, modified or terminated, and no right, term or provision may be
waived, except with the written consent of (i) the holders of at least 50% of
the then outstanding Registrable Shares and (ii) the Company; provided that any
amendment or modification that is materially and disproportionately adverse to
any particular Investor (as compared to all Investors as a group) shall require
the consent of such Investor.

(b) This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York, as such laws are applied to contracts
entered into and wholly to be performed within the State of New York and without
giving effect to any principles of conflicts or choice of law that would result
in the application of the laws of any other jurisdiction. This Agreement shall
be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns and transferees, provided that
the terms and conditions of Section 9 hereof are satisfied. Notwithstanding
anything in this Agreement to the contrary, if at any time any Investor
(including any successors or assigned) shall cease to own any Registrable
Shares, all of such Investor’s rights under this Agreement shall immediately
terminate.

(c) Any notices to be given pursuant to this Agreement shall be in writing and
shall be given by certified or registered mail, return receipt request. Notices
shall be deemed given when personally delivered or when mailed to the addresses
of the respective parties as set forth on Exhibit A or Schedule 1 hereto, as
applicable, or to such changed address of which any party may notify the others
pursuant hereto, except that a notice of change of address shall be deemed given
when received. An electronic communication (“Electronic Notice”) shall be deemed
written notice for purposes of this Section 11(c) if sent with return receipt
requested to the electronic mail address specified by the receiving party on
Exhibit A or Schedule 1 hereto, as applicable. Electronic Notice shall be deemed
received at the time the party sending Electronic Notice receives verification
of receipt by the receiving party.

(d) The parties acknowledge and agree that in the event of any breach of this
Agreement, remedies at law will be inadequate, and each of the parties hereto
shall be entitled to specific performance of the obligations of the other
parties hereto and to such appropriate injunctive relief as may be granted by a
court of competent jurisdiction. All remedies, either under this Agreement or by
law or otherwise afforded to any of the parties, shall be cumulative and not
alternative.

(e) This Agreement may be executed in a number of counterparts. All such
counterparts together shall constitute one Agreement, and shall be binding on
all the parties hereto notwithstanding that all such parties have not signed the
same counterpart. The parties hereto confirm that any facsimile copy of another
party’s executed counterpart of this Agreement (or its signature page thereof)
will be deemed to be an executed original thereof.

(f) Except as contemplated in Section 9 hereof, this Agreement is intended
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or

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create any rights in favor of, any Person (including, without limitation, any
stockholder or debt holder of the Company) other than the parties hereto or
their permitted transferees or assignees.

(g) If any provision of this Agreement is invalid, illegal or unenforceable,
such provision shall be ineffective to the extent, but only to the extent of,
such invalidity, illegality or unenforceability, without invalidating the
remainder of such provision or the remaining provisions of this Agreement,
unless such a construction would be unreasonable.

(h) This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their permitted successors and assigns.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement as of the date and year first above written.

 

DAYSTAR TECHNOLOGIES, INC. By:  

/s/ Stephan DeLuca

Name:   Stephan DeLuca Title:   Chief Executive Officer INVESTORS: MILLENNIUM
PARTNERS, L.P. By: Millennium Management, L.L.C. By:  

/s/ Terry Feeney

Name:   Terry Feeney Title:   Chief Operating Officer PHOENIX PARTNERS LP By:  

/s/ John C. Waterfall

Name:   John C. Waterfall Title:   Authorized Agent PHOENIX PARTNERS II, LP By:
 

/s/ John C. Waterfall

Name:   John C. Waterfall Title:   Authorized Agent

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]]

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PHAETON INTERNATIONAL (BVI), LTD. By:  

/s/ John C. Waterfall

Name:   John C. Waterfall Title:   Authorized Agent PreX CAPITAL PARTNERS, LLC
By:  

/s/ Michael Dura

Name:   Michael Dura Title:   Managing Member

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]]

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Exhibit A

All correspondence to the Company shall be addressed as follows:

DayStar Technologies, Inc.

13 Corporate Drive

Halfmoon, New York 12065

Attn:

with a copy (which shall not constitute notice) to:

Goodwin Procter LLP

Exchange Place

Boston, Massachusetts 02109

Attn: Stephen T. Adams

All correspondence to the Investors shall be addressed as set forth in Schedule
1 below

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Schedule 1

List of Investors

Investor

Millennium Partners, L.P.

Phoenix Partners, LP

Phoenix Partners II, LP

Phaeton International (BVI), Ltd.

Michael Dura