Exhibit 10.5

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of the 21st day
of September, 2009, between DayStar Technologies, Inc., a Delaware corporation
(the “Company”), and the individual listed on Schedule I (the “Purchaser”). The
Company and the Purchaser are sometimes referred to individually as a “Party”
and collectively as the “Parties”.

RECITALS

A. The Company and the Purchaser are parties to that certain Purchase Agreement
dated September 18, 2009 (the “Purchase Agreement”) pursuant to which the
Company has agreed to sell, and the Purchaser has agreed to purchase, (a) a
secured convertible note of the Company (the “Note”), (b) a warrant to purchase
1,500,000 shares of common stock of the Company (the “First Warrant”), and a
warrant to purchase 1,666,667 shares of common stock of the Company (the “Second
Warrant” and, together with the First Warrant, the “Warrants”).

B. In connection with the purchase by the Purchaser of the Note and the Warrants
pursuant to the Purchase Agreement, the Company desires to grant to the
Purchaser and his successors and permitted assigns certain registration rights
with respect to shares of common stock of the Company (“Common Stock”).

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Parties agree as follows.

ARTICLE I.

REGISTRATION RIGHTS

Section 1.1 Definitions. For purposes of this Agreement:

“Affiliate” means, with respect to any Person, (i) any other Person of which
securities or other ownership interests representing more than 50% of the voting
interests are, at the time such determination is being made, owned, Controlled
or held, directly or indirectly, by such Person or (ii) any other Person which,
at the time such determination is being made, is Controlling, Controlled by or
under common Control with, such Person. “Control”, whether used as a noun or
verb, refers to the possession, directly or indirectly, of the power to direct,
or cause the direction of, the management or policies of a Person, whether
through the ownership of voting securities or otherwise.

“Holder” means a Person that (i) is a party to this Agreement (or a permitted
transferee under Section 2.2) and (ii) owns Registrable Securities; provided,
however, that for purposes of this Agreement, Holders of Registrable Securities
will not be required to convert the Note or exercise the Warrants into Common
Stock to exercise the registration rights granted hereunder, until immediately
before the closing of the offering to which the registration relates.

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“Participating Holders” means Holders participating, or electing to participate,
in an offering of Registrable Securities.

“Person” means any individual, firm, corporation, company, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and will include any successor (by merger
or otherwise) of any such entity.

“Registrable Securities” means any shares of Common Stock (i) issued or issuable
upon conversion of the Note; (ii) issued or issuable upon exercise of the
Warrants; (iii) otherwise held or which could be held upon conversion or
exercise by the Purchaser; and (iv) issued or issuable with respect to the
securities referred to in clauses (i) - (iii) above by virtue of any stock
split, combination, stock dividend, merger, consolidation or other similar
event; provided, however, that shares of Common Stock that are considered to be
Registrable Securities will cease to be Registrable Securities (A) upon the sale
thereof pursuant to an effective registration statement, (B) upon the sale
thereof pursuant to Rule 144 (or successor rule) under the Securities Act where
the purchaser thereof receives unrestricted securities, (C) when such securities
cease to be outstanding or (D) in a private transaction where the transferor’s
rights under this Agreement are not assigned.

“Registration Expenses” mean all expenses (other than underwriting discounts and
commissions) arising from or incident to the performance of or compliance with
this Agreement, including without limitation (i) SEC, stock exchange, the
Financial Industry Regulatory Authority (“FINRA”) and other registration and
filing fees, (ii) all fees and expenses incurred in connection with complying
with any securities or blue sky laws, (iii) all printing, messenger and delivery
expenses, (iv) the fees, charges and disbursements of counsel to the Company and
of its independent public accountants and any other accounting and legal fees,
charges and expenses incurred by the Company (including, without limitation, any
expenses arising from any special audits or “comfort letters” required in
connection with or incident to any registration), (v) the fees, charges and
disbursements of any special experts retained by the Company in connection with
any registration pursuant to the terms of this Agreement, (vi) all internal
expenses of the Company, (vii) the fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange,
(viii) fees, charges and disbursements of one firm of counsel to all of the
Participating Holders participating in any underwritten public offering
(provided that such fees, charges and disbursements of counsel to the
Participating Holders will not exceed $35,000), in each case regardless of
whether any Registration Statement is declared effective.

“Registration Statement” will mean any Registration Statement of the Company
filed with the SEC on the appropriate form pursuant to the Securities Act which
covers any of the shares of Common Stock and any other Registrable Securities
pursuant to the provisions of this Agreement and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.

“SEC” means the United States Securities and Exchange Commission.

 

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“Selling Expenses” will mean the underwriting fees, discounts, selling
commissions and stock transfer taxes applicable to all Registrable Securities
registered by the Participating Holders.

Section 1.2 Filing of Shelf Registration Statement.

(a) Obligation to File Registration Statement. The Company will, as soon as
practicable, but no later than October 31, 2009 (the “Filing Deadline”), file a
Registration Statement under the Securities Act covering the sale or other
distribution of all or any portion of the Registrable Securities pursuant to
Rule 415 under the Securities Act. The Company will use its reasonable best
efforts to have such Registration Statement declared effective by the SEC as
soon as practicable thereafter, but in any event within 60 days after the filing
thereof (the “Effectiveness Deadline”). Without the consent of the Holders, the
Company will refrain from filing any other Registration Statements, other than
pursuant to a Registration Statement on Form S-4 or S-8 (or similar or successor
forms), with respect to any other securities of the Company until such date
which is 120 days following effectiveness of such Registration Statement.

(b) Liquidated Damages. To the extent (a) the Registration Statement required
pursuant to this Section 1.2 is not filed with the SEC on or prior to the Filing
Deadline, (b) such Registration Statement has not been declared effective by the
SEC on or prior to the Effectiveness Deadline, or (c) such Registration
Statement is filed and declared effective but thereafter ceases to be effective
or fails to be usable for its intended purpose without being succeeded within
five days by a post-effective amendment thereto that cures such failure and that
is itself declared effective within five days of filing such post-effective
amendment (each, a “Registration Default”), then the Company will pay to each
Holder liquidated damages in an amount equal to $20,000 for each month or
portion thereof that the Registration Default continues.

Section 1.3 Piggyback Registrations.

(a) Right to Include Registrable Securities. In the event that a Registration
Default has occurred and is continuing, and thereafter the Company from time to
time proposes for any reason to register any of its Common Stock under the
Securities Act, either for its own account or for the account of a stockholder
other than pursuant to a Registration Statement on Forms S-4 or S-8 (or similar
or successor forms) (a “Proposed Registration”), the Company will promptly give
written notice thereof to all of the Holders (which notice will be given not
less than 30 days prior to the expected effective date of the Company’s
Registration Statement) and will offer such Holders the right to request
inclusion of any of such Holder’s Registrable Securities in the Proposed
Registration. No registration pursuant to this Section 1.3 will relieve the
Company of its obligation to register Registrable Securities pursuant to
Section 1.2.

(b) Piggyback Procedure. Each Holder of Registrable Securities will have 20 days
from the date of receipt of the Company’s notice referred to in Section 1.3(a)
to deliver to the Company a written request specifying the number of Registrable
Securities such Holder intends to sell and such Holder’s intended method of
disposition. Any Holder will have the right to withdraw such Holder’s request
for inclusion of such holder’s Registrable Securities in any Registration
Statement pursuant to this Section 1.3 by giving written notice to the Company
of

 

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such withdrawal. Subject to Section 1.3(d), the Company will use commercially
reasonable efforts to include in such Registration Statement all such
Registrable Securities so requested to be included therein; provided, however,
that the Company may at any time withdraw or cease proceeding with any such
Proposed Registration if it will at the same time withdraw or cease proceeding
with the registration of all other shares of Common Stock originally proposed to
be registered. If the Proposed Registration by the Company is, in whole or in
part, an underwritten public offering of securities of the Company, any request
under this Section 1.3(b) will specify that the Registrable Securities be
included in the underwriting on the same terms and conditions as the shares, if
any, otherwise being sold through underwriters under such registration.

(c) Selection of Underwriters. The managing underwriter for any Proposed
Registration that involves an underwritten public offering will be one or more
reputable nationally recognized investment banks selected by the Company and
reasonably acceptable to a majority in interest of the Holders.

(d) Priority for Piggyback Registration. Notwithstanding any other provision of
this Article 1, if the managing underwriter of an underwritten public offering
determines and advises the Company and the Holders that the inclusion of all
Registrable Securities proposed to be included by the Holders of Registrable
Securities in such offering would materially and adversely interfere with the
successful marketing of the Company’s securities, then the Holders of
Registrable Securities will not be permitted to include any Registrable
Securities in excess of the amount, if any, of Registrable Securities which the
managing underwriter of such offering will reasonably and in good faith agree in
writing to include in such offering in addition to the amount of securities to
be registered for the Company. The Company will include in such Registration
Statement, as to each Holder, only a portion of the Registrable Securities such
Holder has requested be registered equal to the ratio which such Holder’s
requested Registrable Securities bears to the total number of Registrable
Securities requested to be included in such Registration Statement by all
Holders. Pursuant to the foregoing provision, the securities to be included in a
registration initiated by the Company will be allocated: (i) first, to the
Company; (ii) second, pari passu to the Holders; and (iii) third, to any others
requesting registration of securities of the Company.

Section 1.4 Registration Procedures.

(a) Obligations of the Company. Whenever registration of Registrable Securities
is required pursuant to this Agreement, the Company will use its reasonable best
efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended method of distribution thereof as promptly as
possible, and in connection with any such request, the Company will, as
expeditiously as possible:

(i) Preparation of Registration Statement; Effectiveness. Prepare and file with
the SEC a Registration Statement on any form on which the Company then
qualifies, which counsel for the Company will deem appropriate and pursuant to
which such offering may be made in accordance with the intended method of
distribution thereof (except that the Registration Statement will contain such
information as may reasonably be requested for marketing or other purposes by
the managing underwriter), and use reasonable best efforts to cause any
registration required hereunder to become effective as soon as practicable after
the initial filing thereof

 

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(unless a specific time period is otherwise set forth herein) and remain
effective for a period of not less than one year from the effective date thereof
or such shorter period in which all Registrable Securities have been sold in
accordance with the methods of distribution set forth in the Registration
Statement; provided that, in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such one-year period will be extended, if necessary, to keep the
Registration Statement effective until all such Registrable Securities are sold,
provided that Rule 415, or any successor rule under the Securities Act, permits
an offering on a continuous or delayed basis;

(ii) Participation in Preparation. Provide any Participating Holder, any
underwriter participating in any disposition pursuant to a Registration
Statement, and any attorney, accountant or other agent retained by any
Participating Holder or underwriter (collectively, the “Inspectors”), the
opportunity to participate in the preparation of such Registration Statement,
each prospectus included therein or filed with the SEC and each amendment or
supplement thereto;

(iii) Due Diligence. For a reasonable period prior to the filing of any
Registration Statement pursuant to this Agreement, make available for inspection
and copying by the Inspectors such financial and other information and books and
records, pertinent corporate documents and properties of the Company and its
subsidiaries and cause the officers, directors, employees, counsel and
independent certified public accountants of the Company and its subsidiaries to
respond to such inquiries and to supply all information reasonably requested by
any such Inspector in connection with such Registration Statement, as will be
reasonably necessary, in the judgment of the respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; provided,
however, that if requested by the Company, each Inspector will enter into a
confidentiality agreement with the Company prior to the Company’s release or
disclosure of confidential information to such Inspector;

(iv) General Notifications. Promptly notify in writing the Participating
Holders, the sales or placement agent, if any, therefor and the managing
underwriter of the securities being sold, (A) when such Registration Statement
or the prospectus included therein or any prospectus amendment or supplement or
post-effective amendment has been filed, and, with respect to any such
Registration Statement or any post-effective amendment, when the same has become
effective, (B) when the SEC notifies the Company whether there will be a
“review” of such Registration Statement and (C) of any comments (oral or
written) by the SEC and by the blue sky or securities commissioner or regulator
of any state with respect thereto or (D) of any request by the SEC for any
amendments or supplements to such Registration Statement or the prospectus or
for additional information;

(v) 10b-5 Notification. Promptly notify in writing the Participating Holders,
the sales or placement agent, if any, therefor and the managing underwriter of
the securities being sold pursuant to any Registration Statement at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act upon discovery that, or upon the happening of any event as a
result of which, any prospectus included in such Registration Statement (or
amendment or supplement thereto) contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
under which they were made, and the Company will

 

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promptly prepare a supplement or amendment to such prospectus and file it with
the SEC (in any event no later than ten days following notice of the occurrence
of such event to each Participating Holder, the sales or placement agent and the
managing underwriter) so that after delivery of such prospectus, as so amended
or supplemented, to the purchasers of such Registrable Securities, such
prospectus, as so amended or supplemented, will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they were made;

(vi) Notification of Stop Orders; Suspensions of Qualifications and Exemptions.
Promptly notify in writing the Participating Holders, the sales or placement
agent, if any, therefor and the managing underwriter of the securities being
sold of the issuance by the SEC of (A) any stop order issued or threatened to be
issued by the SEC or (B) any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and the Company will use reasonable best efforts to
(x) prevent the issuance of any such stop order, and in the event of such
issuance, to obtain the withdrawal of any such stop order and (y) obtain the
withdrawal of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any Registrable Securities
included in such Registration Statement for sale in any jurisdiction at the
earliest practicable date;

(vii) Amendments and Supplements; Acceleration. Prepare and file with the SEC
such amendments, including post-effective amendments, as may be necessary to
keep each Registration Statement continuously effective for the applicable time
period required hereunder and if applicable, file any Registration Statements
pursuant to Rule 462(b) under the Securities Act; cause the related prospectus
to be supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement as so amended or in such prospectus as so
supplemented;

(viii) Copies. Furnish as promptly as practicable to each Participating Holder
and Inspector prior to filing a Registration Statement or any supplement or
amendment thereto, copies of such Registration Statement, supplement or
amendment as it is proposed to be filed, and after such filing such number of
copies of such Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus) and such other
documents as each such Participating Holder or underwriter may reasonably
request;

(ix) Blue Sky. Use reasonable best efforts to, prior to any public offering of
the Registrable Securities, register or qualify (or seek an exemption from
registration or qualifications) such Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any Participating Holder or
underwriter may request, and to continue such qualification in effect in each
such jurisdiction for as long as is permissible pursuant to the laws of such
jurisdiction, or for as long as a Participating Holder or underwriter requests
or until all of

 

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such Registrable Securities are sold, whichever is shortest, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
any Participating Holder to consummate the disposition in such jurisdictions of
the Registrable Securities;

(x) Other Approvals. Use reasonable best efforts to obtain all other approvals,
consents, exemptions or authorizations from such governmental agencies or
authorities as may be necessary to enable the Participating Holders and
underwriters to consummate the disposition of Registrable Securities;

(xi) “Cold Comfort” Letter. Obtain a “cold comfort” letter from the Company’s
independent public accountants in customary form and covering such matters of
the type customarily covered by “cold comfort” letters as the managing
underwriter may reasonably request, and reasonably satisfactory to a majority in
interest of the Participating Holders;

(xii) Legal Opinion. Furnish, at the request of any underwriter of Registrable
Securities on the date such securities are delivered to the underwriters for
sale pursuant to such registration, an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, addressed to the
Holders, and the placement agent or sales agent, if any, thereof and the
underwriters, if any, thereof, covering such legal matters with respect to the
registration in respect of which such opinion is being given as such underwriter
may reasonably request and as are customarily included in such opinions, and
reasonably satisfactory to a majority in interest of the Participating Holders;

(xiii) Certificates, Closing. Provide officers’ certificates and other customary
closing documents;

(xiv) FINRA. Cooperate with each Participating Holder and each underwriter
participating in the disposition of such Registrable Securities and
underwriters’ counsel in connection with any filings required to be made with
the FINRA;

(xv) Listing. Use its best efforts to cause all such Registrable Securities to
be listed on each securities exchange on which similar securities issued by the
Company are then listed and if not so listed, to be listed on the
over-the-counter system;

(xvi) Private Sales. Use reasonable best efforts to assist a Holder in
facilitating private sales of Registrable Securities by, among other things,
providing officers’ certificates and other customary closing documents
reasonably requested by a Holder; and

(xvii) Best Efforts. Use reasonable best efforts to take all other actions
necessary to effect the registration of the Registrable Securities contemplated
hereby.

(b) Seller Information. The Company may require each Participating Holder as to
which any registration of such Holder’s Registrable Securities is being effected
to furnish to the Company with such information regarding such Participating
Holder and such Participating Holder’s method of distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing.

 

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(c) Notice to Discontinue. Each Participating Holder whose Registrable
Securities are covered by a Registration Statement filed pursuant to this
Agreement will, upon receipt of written notice from the Company of the happening
of any event of the kind described in Section 1.6(a)(v), forthwith discontinue
the disposition of Registrable Securities until such Participating Holder’s
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 1.6(a)(v) or until it is advised in writing by the Company that the use
of the prospectus may be resumed and has received copies of any additional or
supplemental filings which are incorporated by reference into the prospectus. If
the Company will give any such notice, the Company will extend the period during
which such Registration Statement is to be maintained effective by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 1.6(a)(v) to and including the date when the Participating
Holder will have received the copies of the supplemented or amended prospectus
contemplated by, and meeting the requirements of, Section 1.6(a)(v).

Section 1.5 Registration Expenses. Except as otherwise provided herein, all
Registration Expenses will be borne by the Company. All Selling Expenses
relating to Registrable Securities registered will be borne by the Participating
Holders of such Registrable Securities pro rata on the basis of the number of
shares so registered.

Section 1.6 Indemnification

(a) Indemnification by the Company. Notwithstanding termination of this
Agreement, the Company will indemnify and hold harmless to the fullest extent
permitted by law, each Holder, each of its directors, officers, employees,
advisors, agents and general or limited partners (and the directors, officers,
employees, advisors and agents thereof), their respective Affiliates and each
Person who controls (within the meaning of the Securities Act or the Exchange
Act) any of such Persons, and each underwriter and each Person who controls
(within the meaning of the Securities Act or the Exchange Act) any underwriter
(collectively, “Holder Indemnified Parties”) from and against any and all
losses, claims, damages, expenses (including, without limitation, reasonable
costs of investigation and fees, disbursements and other charges of counsel, any
amounts paid in settlement effected with the Company’s consent, which consent
will not be unreasonably withheld or delayed and any costs incurred in enforcing
the Company’s indemnification obligations hereunder) or other liabilities
(collectively, “Losses”) to which any such Holder Indemnified Party may become
subject under the Securities Act, Exchange Act, any other federal law, any state
or common law or any rule or regulation promulgated thereunder or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) are resulting from or arising out of or based
upon (i) any untrue, or alleged untrue, statement of a material fact contained
in any Registration Statement, prospectus or preliminary prospectus (as amended
or supplemented) or any document incorporated by reference in any of the
foregoing or resulting from or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in
light of the circumstances under which they were made), not misleading or
(ii) any violation by the Company of the Securities Act, Exchange Act, any other
federal law, any state or common law or any rule or regulation promulgated
thereunder or otherwise incident to any registration, qualification or
compliance and in any such case, the Company will promptly reimburse each such
Holder Indemnified Party for any legal and any other Losses reasonably incurred
in

 

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connection with investigating, preparing or defending any such claim, loss,
damage, liability, action or investigation or proceeding (collectively, a
“Claim”); provided, however, that the Company will not be liable to any Holder
Indemnified Party for any Losses that arise out of or are based upon (x) written
information provided by a Holder Indemnified Party expressly for use in the
Registration Statement or (y) sales of Registrable Securities by a Holder
Indemnified Party to a person to whom there was not sent or given, at or before
the written confirmation of such sale, a copy of the prospectus (excluding
documents incorporated by reference) or the prospectus as then amended or
supplemented (excluding documents incorporated by reference) if the Company has
previously furnished in a timely manner a reasonable number of copies thereof to
such Holder Indemnified Party in compliance with this Agreement and the Losses
of such Holder Indemnified Party results from an untrue statement or omission of
a material fact contained in such preliminary prospectus which was corrected in
the prospectus (or the prospectus as then amended or supplemented). Such
indemnity will remain in full force and effect regardless of any investigation
made by or on behalf of the Holder Indemnified Parties and will survive the
transfer of Registrable Securities by such Holder Indemnified Parties.

(b) Indemnification by Holders. In connection with any proposed registration in
which a Holder is participating pursuant to this Agreement, each such Holder
will furnish to the Company in writing such information with respect to such
Holder as the Company may reasonably request or as may be required by law for
use in connection with any Registration Statement or prospectus or preliminary
prospectus to be used in connection with such registration and each Holder,
severally and not jointly, will indemnify and hold harmless the Company, any
underwriter retained by the Company and their respective directors, officers,
partners, employees, advisors and agents, their respective Affiliates and each
Person who controls (within the meaning of the Securities Act or the Exchange
Act) any of such Persons to the same extent as the foregoing indemnity from the
Company to the Holders as set forth in Section 1.6(a) (subject to the exceptions
set forth in the foregoing indemnity, the proviso to this sentence and
applicable law), but only with respect to any such information furnished in
writing by such Holder expressly for use therein; provided, however, that the
liability of any Holder under this Section 1.6(b) will be limited to the amount
of the net proceeds received by such Holder in the offering giving rise to such
liability. Such indemnity obligation will remain in full force and effect
regardless of any investigation made by or on behalf of the Holder Indemnified
Parties (except as provided above) and will survive the transfer of Registrable
Securities by such Holder.

(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder (the “Indemnified Party”) will give prompt written
notice to the indemnifying party (the “Indemnifying Party”) after the receipt by
the Indemnified Party of any written notice of the commencement of any action,
suit, proceeding or investigation or threat thereof made in writing for which
the Indemnified Party intends to claim indemnification or contribution pursuant
to this Agreement; provided, however, that, the failure so to notify the
Indemnifying Party will not relieve the Indemnifying Party of any liability that
it may have to the Indemnified Party hereunder unless and to the extent such
Indemnifying Party is materially prejudiced by such failure. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party will be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such

 

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Indemnified Party. The Indemnified Party will have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel will be paid by the Indemnified Party unless
(i) the Indemnifying Party will pay the same, (ii) the Indemnifying Party fails
to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any
such action (including, but not limited to, any impleaded parties) reasonably
believe that the representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct. In the case of clause (ii) above and (iii) above, the
Indemnifying Party will not have the right to assume the defense of such action
on behalf of such Indemnified Party. No Indemnifying Party will be liable for
any settlement entered into without its written consent, which consent will not
be unreasonably withheld. No Indemnifying Party will, without the written
consent of the Indemnified Party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the Indemnified Party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(A) includes an unconditional release of the Indemnified Party from all
liability arising out of such action or claim and (B) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of any Indemnified Party. The rights afforded to any Indemnified
Party hereunder will be in addition to any rights that such Indemnified Party
may have at common law, by separate agreement or otherwise.

(d) Contribution. If the indemnification provided for in this Section 1.6 from
the Indemnifying Party is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any Losses referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, will
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and the Indemnified Party, as well as any other
relevant equitable considerations. The relative faults of the Indemnifying Party
and Indemnified Party will 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, was
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the Indemnifying Party’s and Indemnified Party’s relative
intent, knowledge, access to information and opportunity to correct or prevent
such action; provided, however, that the liability of any Holder under this
Section 1.6(d) will be limited to the amount of the net proceeds received by
such Holder in the offering giving rise to such liability. The amount paid or
payable by a party as a result of the Losses or other liabilities referred to
above will be deemed to include, subject to the limitations set forth in
Sections 1.6(a), 1.8(b) and 1.6(c), any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. The Parties agree that it would not be just and equitable if
contribution pursuant to this Section 1.6(d) 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 foregoing. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution pursuant to this
Section 1.6(d).

 

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Section 1.7 Rule 144 and Rule 144A; Other Exemptions. With a view to making
available to the Holders the benefits of Rule 144 and Rule 144A promulgated
under the Securities Act and other rules and regulations of the SEC that may at
any time permit a Holder to sell securities of the Company to the public without
registration, the Company covenants that it will (i) file in a timely manner all
reports and other documents required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the SEC thereunder
and (ii) take such further action as each Holder may reasonably request
(including, but not limited to, providing any information necessary to comply
with Rule 144 and Rule 144A, if available with respect to resales of the
Registrable Securities under the Securities Act), at all times from and after
the date which is 90 days following the Company’s IPO, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (x) Rule 144 and Rule 144A (if available with respect to
resales of the Registrable Securities) under the Securities Act, as such rules
may be amended from time to time or (y) any other rules or regulations now
existing or hereafter adopted by the SEC.

Section 1.8 Certain Limitations On Registration Rights. No Holder may
participate in any Registration Statement hereunder unless such Holder completes
and executes all questionnaires and other documents reasonably required and will
sell such Holder’s Registrable Securities on the basis provided in any
underwriting agreement approved by the Holder or Holders entitled hereunder to
approve such arrangements. Such Holders of Registrable Securities to be sold by
such underwriters may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of the
Company to and for the benefit of such underwriters, will also be made to and
for the benefit of such Holders and that any or all of the conditions precedent
to the obligations of the underwriters under the underwriting agreement be
conditions precedent to the obligations of the Holders.

Section 1.9 Limitations on Subsequent Registration Rights. The Company
represents and warrants that it has not granted registration rights prior to the
date hereof that have not yet been satisfied and agrees that it will not,
without the prior written consent of the Holders of at least a majority in
interest of the Registrable Securities then outstanding, enter into any
agreement (or amendment or waiver of the provisions of any agreement) with any
holder or prospective holder of any securities of the Company that would grant
such holder registration rights that are more favorable, pari passu or senior to
those granted to the Purchaser hereunder.

ARTICLE II.

GENERAL PROVISIONS

Section 2.1 Entire Agreement. This Agreement, together with the Schedules hereto
and any certificates, documents, instruments and writings that are delivered
pursuant hereto, constitutes the entire agreement and understanding of the
Parties in respect of the subject matter hereof and supersedes all prior
understandings, agreements or representations by or among the Parties, written
or oral, to the extent they relate in any way to the subject matter hereof.

Section 2.2 Assignment; Binding Effect. No Party may assign either this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of the other Party; provided that the rights of a Holder
may be transferred or assigned in connection

 

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with a transfer of Registrable Securities to the extent that all of the
following additional conditions are satisfied: (a) such transfer or assignment
is effected in accordance with applicable securities laws; (b) such transferee
or assignee agrees in writing to become subject to the terms of this Agreement;
and (c) the Company is given written notice by such Holder of such transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the Registrable Securities with respect to which such rights are
being transferred or assigned. All of the terms, agreements, covenants,
representations, warranties and conditions of this Agreement are binding upon,
and inure to the benefit of and are enforceable by, the Parties and their
respective successors and permitted assigns.

Section 2.3 Notices. All notices or other communications to a Party required or
permitted hereunder will be in writing and will be delivered personally or by
facsimile (receipt confirmed electronically) to such Party (or, in the case of
an entity, to an executive officer of such party) or will be sent by a reputable
express delivery service or by certified mail, postage prepaid with return
receipt requested, addressed as follows:

If to the Purchaser, to the address set forth on Schedule I.

If to the Company:

DayStar Technologies, Inc.

2972 Stender Way

Santa Clara, California

Attn: Mr. Robert Aldrich

                  Interim Chief Executive Officer and Chairman

with a copy to:

Phillips Lytle LLP

30 South Pearl Street

Albany, New York 12207

Attn: Richard E. Honen, Esq.

Any party may change the above specified recipient and/or mailing address by
notice to all other parties given in the manner herein prescribed. All notices
will be deemed given on the day when actually delivered as provided above (if
delivered personally or by facsimile, provided that any such facsimile is
received during regular business hours at the recipient’s location) or on the
day shown on the return receipt (if delivered by mail or delivery service).

Section 2.4 Specific Performance; Remedies. Each Party agrees that the other
Party would be damaged irreparably if any provision of this Agreement were not
performed in accordance with its specific terms or were otherwise breached.
Accordingly, the Parties will be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and its provisions in any action or proceeding instituted any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity. Except as expressly provided herein, the rights,
obligations and remedies created by this

 

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Agreement are cumulative and in addition to any other rights, obligations or
remedies otherwise available at law or in equity. Except as expressly provided
herein, nothing herein will be considered an election of remedies.

Section 2.5 Governing Law; Waiver of Jury Trial. This Agreement will be governed
by construed under the laws of the State of California, as applied to agreements
among California residents, made and to be performed entirely within the State
of California, without giving effect to conflicts of laws principles that would
require the application of the laws of any other jurisdiction. THE PARTIES EACH
HEREBY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, WAIVE THEIR
RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM
RELATING TO THE TRANSACTIONS.

Section 2.6 Headings. The titles and headings to the Sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. This Agreement
will be construed without regard to any presumption or other rule requiring
construction hereof against the party causing this Agreement to be drafted.

Section 2.7 Amendments. This Agreement may not be amended or modified without
the written consent of the Company and at least a majority in interest of the
Holders.

Section 2.8 Extensions; Waivers. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising because of any prior or subsequent such occurrence.
Neither the failure nor any delay on the part of any party to exercise any right
or remedy under this Agreement will operate as a waiver thereof, nor will any
single or partial exercise of any right or remedy preclude any other or further
exercise of the same or of any other right or remedy.

Section 2.9 Severability. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof; provided
that if any provision of this Agreement, as applied to any party or to any
circumstance, is judicially determined not to be enforceable in accordance with
its terms, the Parties agree that the court judicially making such determination
may modify the provision in a manner consistent with its objectives such that it
is enforceable, and/or to delete specific words or phrases, and in its modified
form, such provision will then be enforceable and will be enforced.

Section 2.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

Section 2.11 Adjustments for Stock Splits, Etc. Wherever in this Agreement there
is a reference to a specific number of shares of the Company’s capital stock of
any class or series,

 

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then, upon the occurrence of any subdivision, combination or stock dividend of
such class or series of stock, the specific number of shares so referenced in
this Agreement will automatically be proportionally adjusted to reflect the
effect of such subdivision, combination or stock dividend on the outstanding
shares of such class or series of stock.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Parties have executed this Registration Rights Agreement
as of the date first above written.

 

COMPANY:     DAYSTAR TECHNOLOGIES, INC.     By:  

/s/ William S. Steckel

    Name:   William S. Steckel     Title:   Chief Financial Officer PURCHASER:  
 

TD WATERHOUSE ACCOUNT 240832S

in trust for Peter Alan Lacey as beneficiary

    By:  

/s/ Peter Alan Lacey

    Name:   Peter Alan Lacey     Title:   Authorized Signatory

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SCHEDULE I

PURCHASER

Name, Address and Facsimile Number

TD Waterhouse RRSP Account 240832S

c/o Peter Alan Lacey

RR#2 Site 19

Box 6 Red Deer AB

T4N 5E2

FAX: (403) 567-0392