Exhibit 10.1

EMPLOYMENT AGREEMENT

between

DayStar Technologies, Inc.

and

Ratson Morad

EMPLOYMENT AGREEMENT (“Agreement”), executed as of February 19, 2008
(“Commencement Day”) between Ratson Morad (“Executive”), having an address of
4157 Solana Drive, California 94306, and DayStar Technologies, Inc., a Delaware
corporation (the “Company”), having its principal office at 2972 Stender Way,
Santa Clara, CA 95054.

WHEREAS, the Company desires to obtain the services of Executive as its
President and Chief Operating Officer, and to enter into an employment agreement
embodying the terms of such relationship; and

WHEREAS, Executive is willing to accept such employment by the Company upon the
terms and conditions as hereinafter set forth; and

WHEREAS, the Company and Executive desire to enter into this Agreement in order
to reflect the terms and conditions of Executive’s employment by the Company,

NOW, THEREFORE, in consideration of the agreements and covenants contained
herein, the Executive and the Company hereby agree as follows:

ARTICLE I Employment and Term

Section 1.01 Position; Responsibilities.

(a) The Company hereby employs Executive as its President and Chief Operating
Officer upon the terms and conditions hereinafter set forth.

(b) Executive shall at all times hold the position described above or other
senior management level positions as determined by the Board of Directors of the
Company (the “Board”) or its designee, and perform the duties, responsibilities
and authorities customarily associated with such positions or such other senior
management level duties as determined by the Board or its designee, so long as
such other duties are consistent with the Executive’s skills and there is no
reduction in Executive’s base pay and bonus target amount. Executive shall
report directly to the Chief Executive Officer.

Section 1.02 Performance of Duties/Other Commitments and Activities.

(a) Executive shall at all times endeavor to perform duly and faithfully all of
his duties hereunder to the best of his abilities.

(b) Executive shall devote his full business time, best efforts and business
judgment, skill and knowledge to the advancement of the Company’s interests and
to the discharge of his duties and responsibilities hereunder; provided,
however, that nothing herein shall be construed as preventing Executive from
engaging in any of the activities described in clauses (i), (ii), (iii) and/or
(iv) below so long as such activities do not violate any other agreements
between Executive and the Company:

(i) investing his assets in such form or manner as shall not require any
material services on his part in the operations or affairs of the companies or
the other entities in which such investments are made;

 

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(ii) serving on the board of directors of any company; provided that he obtains
the prior written approval of a majority of the Board of Directors and shall not
be required to render any material services with respect to the operations or
affairs of any such company;

(iii) engaging in religious, charitable, educational or other community or
nonprofit activities which do not impair his ability to fulfill his duties and
responsibilities under this Agreement; or

(iv) serving in such capacities as may be reasonably necessary for Executive to
maintain his active professional licensing as a member of any professional
organization that reasonably relates to his employment with and the business of
the Company, so long as such activities do not impair his ability to fulfill his
duties and responsibilities under this Agreement.

(c) Executive’s base of operations under this Agreement shall be the Company’s
headquarters offices which shall be located in the San Francisco, California bay
area.

Section 1.03 Term. Executive’s term of employment under this Agreement (the
“Term”) shall commence on the Commencement Date and shall expire on the third
anniversary of the Commencement Date; provided, however, that the Term shall be
automatically extended for an additional one (1) year period on the third
anniversary of the Commencement Date, and annually thereafter unless the
Executive or the Company has received a written Notice of Non-Renewal delivered
no later than thirty (30) days prior to the anniversary date, pursuant to
Section 6.01 below. In the event Executive’s employment under this Agreement is
terminated during the Term, and prior to, or in the absence of, a Change of
Control, by the Company other than for Cause or by Executive for Good Reason,
then the provisions of paragraph of 3.09 (c) below shall apply.

Section 1.04 Representations and Warranty of Executive. Executive hereby
represents and warrants to the Company that he is not aware of any presently
existing fact, circumstance or event (including, but without limitation, any
health condition or legal constraint) which would preclude or restrict him from
providing to the Company the services contemplated by this Agreement, or which
would give rise to any breach of any term or provision hereof, or which could
otherwise result in the termination of his employment hereunder for Cause or
Good Reason (as such terms are defined in Article 3). Any and all agreements
between Executive and any prior employer as well as any agreements to which
Executive is a party containing any restriction upon Executive’s ability to use
or disclose confidential information or engages in any business activity are
listed in Appendix “A” and shall be promptly made available to the Company upon
request.

Section 1.05 Representations and Warranty of Company. The Company hereby
represents and warrants to Executive that it has received all authorizations and
has taken all actions, necessary or appropriate for the due execution, delivery
and performance of this Agreement.

ARTICLE II Compensation

Section 2.01 General. The Company shall compensate Executive for all of his
services under this Agreement, as set forth herein.

Section 2.02 Basic Compensation. Executive’s initial salary (“Base Salary”) when
annualized shall be at the rate of $240,000 and shall be payable in bi-weekly or
other installments in accordance with the Company’s normal payment schedule for
senior management (but not less frequently than monthly). The Executive’s
performance and compensation shall be subject to annual review on each July 1st
following the first anniversary of the Commencement Date thereafter.

Section 2.03 Incentive Compensation. Executive shall be eligible to participate
in an annual Management Incentive Program for senior management of the Company
currently offered or as subsequently modified by the Board from time to time in
its discretion (“Management Incentive Program”). The Executive and the Company
agree that Executive’s performance goals pursuant to the Management Incentive
Program shall consist of the Company’s annual performance goals and other
specific performance goals for the Executive, as determined by the

 

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Board in its discretion. The target incentive compensation payment (the
“Incentive Payment”) for meeting all such goals shall be a percentage of the
Base Salary, as deemed appropriate by the Board.

Section 2.04 Other Benefits.

(a) During the Term, Executive shall be entitled to participate in all employee
benefit plans, including retirement programs, if any, group health care plans,
and all fringe benefit plans, of the Company. Such plans shall at all times be
comparable to those made available to the senior-most management of the Company.

(b) In addition, the Company shall provide Executive with the following benefits
during the Term: (i) Reimbursement for travel (including overnight
accommodations as reasonably deemed necessary by Executive); (ii) Company paid
cell phone and home office communication equipment (fax, internet access, etc.
without any requirement to maintain records of specific use); and
(iii) Reimbursement for reasonable out-of-pocket home office expenses.

(c) During the Term, Executive shall be entitled to 15 days per year of paid
vacation in accordance with the Company’s Vacation Policy and calculations as
set forth in the Company Employee Handbook. After four (4) years of service
Executive shall be entitled to an additional 5 days of paid vacation in each
calendar year. With respect to all unused vacation time, unless otherwise
approved by the Board of Directors and the Compensation Committee of such Board,
Executive shall carry over unused vacation time for periods prior to the
calendar year in accordance with the Company’s Employee Handbook or supplemental
written policies, as determined from time to time.

(d) Executive shall also be entitled to such paid holidays and paid sick leave
as shall be authorized by the Company for its senior-most officers pursuant to
its written policies, as determined from time to time.

Section 2.05 Expense Reimbursements. The Company shall reimburse Executive for
all proper expenses incurred by him in the performance of his duties hereunder
in accordance with the policies and procedures of the Company as in effect from
time to time.

Section 2.06 Excise Tax. Notwithstanding any other provision of this Agreement,
if the aggregate present value of the “parachute payments” to the Executive,
determined under Section 280G(b) of the Internal Revenue Code of 1986, as
amended (the “Code”) would be, but for this Section 2.06, at least three times
the “base amount” determined under such Section 280G, then the parachute
payments otherwise payable under this Agreement (and any other amount payable
hereunder or any other severance plan, program, policy or obligation of the
Company) shall be reduced so that the aggregate present value of the parachute
payments to the Executive determined under Section 280G, does not exceed 2.99
times the base amount. In no event, however, shall any benefit provided
hereunder be reduced to the extent such benefit is specifically excluded from
treatment under Section 280G of the Code as a “parachute payment” or as an
“excess parachute payment”. Any decisions regarding the requirement or
implementation of such reductions shall be made by the tax counsel and
accounting firm retained by the Company.

Section 2.07 Withholding. The Base Salary and all other payments to Executive
for his services to the Company shall be subject to all withholding and
deductions required by federal, state or other law (including those authorized
by Executive but not otherwise required by law), including but not limited to
state, federal and local income taxes, unemployment tax, Medicare and FICA,
together with such deductions as Executive may from time to time specifically
authorize under any employee benefit program which may be adopted by the Company
for the benefit of its senior executives or Executive.

ARTICLE III Termination of Employment

Section 3.01 Right to Terminate. Executive’s employment hereunder shall be
terminable by either party at any time, with or without Cause or Good Reason,
and any such termination shall not constitute a breach of this Agreement,
provided the notice set forth in subsection 3.02 is provided.

 

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Section 3.02 Notice. Executive shall give the Company at least sixty (60) days’
advance written notice prior to any termination by Executive other than for Good
Reason.

Section 3.03 Termination for Good Reason. The Executive may terminate employment
for Good Reason or without Good Reason. “Good Reason” means:

(i) the assignment to the Executive of any duties or any other action by the
Company that results in a material diminution in the Executive’s position or
authority, duty, titles, or responsibilities, that is not permitted under
Section 1.01(b) of this Agreement that is not remedied by the Company within
sixty (60) days after receipt of written notice thereof from the Executive;

(ii) any material failure (any failure, whether or not material, following a
Change of Control, as defined below) by the Company to comply with any provision
of Section 2 of this Agreement that is not remedied by the Company within sixty
(60) days after receipt of written notice thereof from the Executive;

(iii) any failure of the Company to use its best efforts to maintain directors’
and officers’ liability insurance coverage for Executive.

Section 3.04 Procedure for Termination for Good Reason. A termination of
employment by the Executive for Good Reason shall be effectuated by giving the
Company written notice (“Notice of Termination for Good Reason”) of the
termination, setting forth in reasonable detail the specific conduct of the
Company that constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the sixtieth (60th) day
following the date when the Notice of Termination for Good Reason is given,
unless the act or admission that constitutes the Good Reason is cured prior to
the expiration of said period and the Executive is given written notice thereof,
the notice sets forth a later date or the Company accepts the Executive’s
termination for Good Reason on an earlier date.

Section 3.05 Termination for Cause. The Company shall have the right to
terminate Executive’s employment hereunder for Cause. For purposes hereof,
“Cause” shall be defined as the Board’s good faith determination that the
Executive has: (i) been convicted of or entered a plea of nolo contendere with
respect to a criminal offense constituting a felony; (ii) committed one or more
acts or omissions constituting fraud, embezzlement or breach of a fiduciary duty
to the Company; (iii) committed one or more acts constituting gross negligence
or willful misconduct; (iv) habitually abused alcohol or any controlled
substance or reported to work under the influence of alcohol or any controlled
substance (other than a controlled substance which Executive is properly taking
under a current prescription), (v) engaged in harassment of any employee or
customer of the Company in violation of Company policy; (vii) committed a
material violation of any Company policy; (viii) been insubordinate or
dishonest; (ix) engaged in self-dealing or in any act constituting a conflict of
interest; (ix) exposed the Company to criminal liability through negligence or
wrongdoing of any kind; (x) disclosed the Company’s confidential information in
violation of his obligations under this Agreement; or (xi) failed, after written
warning specifying in reasonable detail the breach(es) complained of, to
substantially perform his duties under this Agreement.

Notwithstanding the foregoing in the event of a Change of Control, a termination
by the Company of the Executive for any reason during the twelve (12) month
period immediately following the Change of Control, other than an intentional
and malicious act or omission resulting in material adverse consequences to the
Company, shall be deemed to be a termination without Cause for all purposes
under this Agreement.

Section 3.06 Procedure for Termination for Cause. A termination of the
Executive’s employment for Cause shall be effected in accordance with the
following procedures. The Company shall give the Executive written notice
(“Notice of Termination for Cause”) of its intention to terminate the
Executive’s employment for Cause, setting forth in reasonable detail the
specific conduct of the Executive that it considers to constitute Cause and the
specific provision(s) of this Agreement on which it relies and stating the date,
time and place of the Special Board Meeting. The “Special Board Meeting” means a
meeting of the Board called and held specifically for the purpose of considering
the Executive’s termination for Cause that takes place not less than thirty
(30) and not more than sixty (60) days after the Executive receives the Notice
of Termination for Cause. The Executive shall be given an opportunity, together
with counsel, to be heard at the Special Board Meeting. The Executive’s
termination for Cause

 

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shall be effective when and if a resolution is duly adopted at the Special Board
Meeting, stating that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in the Notice of Termination for Cause, such
conduct constitutes Cause under this Agreement and in the case of a termination
for Cause as defined in subsection 3.05(xi), such conduct has not ceased or been
cured between the date the Executive received the Notice of Termination for
Cause and the date of the meeting.

Section 3.07 Death. In the event that the Executive dies while employed under
this Agreement, the Company’s obligations to Executive under this Agreement
shall immediately cease. All benefits accrued to the date of death, including
vested securities, health and disability benefits shall inure to the benefit of
Executive’s heirs and assigns.

Section 3.08 Disability. In the event that the Board determines in its sole
discretion that Executive has been disabled from substantially performing his
duties for any one hundred and twenty (120) days within any twelve (12) month
period while employed under this Agreement, the Company may terminate
Executive’s employment for Cause.

Section 3.09 Severance Package.

(a) Change of Control Severance Package. In the event Executive’s employment
under this Agreement is terminated during the Term, after a Change of Control
(as defined below) and prior to the thirty (30) day period immediately following
the first anniversary of the Change of Control, by the Company other than for
Cause or by Executive for Good Reason, then:

(i) As and for a change of control severance package (“Change of Control
Severance Package”) Executive shall receive two hundred percent (200%) of the
aggregate of (x) Executive’s annual Base Salary for the year in which such
termination occurs, and (y) the target (i.e., at 100% goal attainment) amount of
any Incentive Payment payable to Executive for the year in which such
termination occurs under the Management Incentive Program applicable to
Executive. Such amount shall be paid either in a single lump sum payment or
ratably in accordance with the Company’s normal salary payment schedule for
senior management (but not less frequently than monthly) over eighteen
(18) months, at the sole discretion of the Executive. During such 18 month
period, the Company shall also provide to Executive under COBRA all Company-paid
medical insurance benefits available to other senior executives of the Company,
all costs of which shall be paid by the Company; and

(ii) All unvested warrants, options or restricted stock then held by Executive,
if any, shall vest automatically with the termination of Executive’s employment.
Executive shall in all events be paid all accrued but unpaid Base Salary, earned
but unpaid Incentive Compensation for any prior years, reimbursable expenses and
other accrued benefits, if any, through the date of termination.

(b) Definition of Change in Control.

“Change in Control” shall mean the occurrence of any of the following events:
(A) any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or which contemplates that all or
substantially all of the business and/or assets of the Company shall be
controlled by another corporation, in either case where the continuing,
surviving or other corporation both (i) is not directly or indirectly owned by
holders of at least 50% of the combined voting power of the Company’s securities
outstanding immediately prior to such consolidation or merger and (ii) does not
have a board of directors approved by or consisting of more than one-half of the
Company’s Board members as the Board was constituted immediately prior to the
transaction, (B) a recapitalization (including an exchange of Company equity
securities by the holders thereof), in either case, in which any “Person” (as
such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities
having the right to vote in the election of directors and the Company does not
have a board of directors approved by or consisting of more than one-half of the
Company’s Board members as the Board was constituted immediately prior to the
transaction; (C) any sale, lease, exchange or transfer (in one transaction or in
a series of related transactions) of all or substantially all of the assets of
the Company and its subsidiaries; D) approval by the shareholders of the Company
of any plan or proposal for the liquidation or dissolution of the Company,

 

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unless such plan or proposal is abandoned within 60 days following such
approval; or (E) any “Person” (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) shall become the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of the
Company representing more than 50% of the combined voting power of the Company’s
then outstanding securities having the right to vote in the election of
directors.

(c) Regular Severance Package.

Subject to the conditions set forth in subsection 3.09(d), in the event
Executive’s employment under this Agreement is terminated during the Term, and
prior to or in the absence of a Change of Control (as defined above) by the
Company, by Executive for Good Reason or other than for Cause, then as and for a
severance package (“Regular Severance Package”), Executive shall receive:

(i) one hundred percent (100%) of the aggregate of (x) Executive’s annual Base
Salary for the year in which such termination occurs, and (y) the amount of any
Incentive Payment paid to Executive for the prior year under the Management
Incentive Program applicable to Executive. Such amount shall be paid either in a
single lump sum payment or ratably in accordance with the Company’s normal
salary payment schedule for senior management (but not less frequently than
monthly) over eighteen (18) months, at the sole discretion of the Company. The
foregoing payment is referred to herein as the “Regular Severance Pay”. During
such 18 month period, the Company shall also provide to Executive under COBRA
(subject to Executive’s eligibility under COBRA) all Company-paid medical
insurance benefits available to other senior executives of the Company, all
costs of which shall be paid by the Company; and

(ii) All unvested warrants, options or restricted stock then held by Executive,
if any, that would vest in the twelve (12) month period immediately following
the cessation of Executive’s employment shall vest automatically on the date
three (3) months following the termination of Executive’s employment. All other
unvested warrants, options or restricted stock shall immediately be forfeited
(subject, however, to any contrary determination of the Board in its sole
discretion).

(d) Conditions for Regular Severance Package.

Executive shall receive the payments, benefits and vesting of unvested warrants,
options or restricted stock described in subsection 3.09(c), if and only if
(i) Executive duly executes, returns to the Company (and does not revoke if a
revocation period is included in the sole discretion of the Company) a
termination agreement (“Termination Agreement”) satisfactory to the Company in
its sole discretion, which shall include a general release of any and all claims
arising out of Executive’s employment or cessation of employment against the
Company and any other persons or entities designated by the Company, other than
for payments and benefits set forth in section 3(c) and, in the Company’ s sole
discretion, provisions requiring the Executive not to disparage the Company or
its employees and Board, not use or disclose information deemed confidential by
the Company, to reasonably cooperate with the Company in transitioning business
matters and handling claims and litigation ; and (ii) Executive complies with
his obligations under this Agreement and the Termination Agreement.

(e) Severance Package – Company Non-Renewal of Term.

Subject to the conditions set forth in 3.09(f), in the event that the Company
provides the Executive with Notice of Non-Renewal then as and for a Severance
Package (“Non-Renewal Severance Package”), Executive shall receive:

(i) if on the last day of the Term the Company terminates Executive’s employment
without Cause or the Executive resigns from employment on the last day of the
Term, the product of the Regular Severance Pay multiplied by a fraction, (a) the
numerator of which shall be the number equal to fifty-two (52) minus the number
of full weeks from the date Executive received the Notice of Termination until
the last day of the term (“Weeks of Notice”), and (b) the denominator of which
shall be fifty-two (52). The foregoing payment is referred to herein as
“Non-Renewal Severance Pay”. (Accordingly, Notice of Non-Renewal received by
Executive forty-two (42) full weeks prior to the last day of the Term and
Regular Severance Pay totaling $280,000 would result in Non-Renewal

 

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Severance Pay in the amount of $53,846 (10/52 x $280,000 = $53,846)). Such
amount shall be paid in a single lump sum payment or ratably in accordance with
the Company’s normal salary payment schedule for Senior management (but not less
frequently than monthly), during the number of weeks equal to fifty-two
(52) minus the number of Weeks of Notice (“The Severance Period”). During the
Severance Period, the Company shall also provide to Executive under COBRA
(subject to Executive’s eligibility under COBRA) all Company-paid medical
insurance benefits available to other senior executives of the Company, all
costs of which shall be paid by the Company; and

(ii) in addition, if on the last day of the Term the Company terminates
Executive’s employment without Cause or the Executive resigns from employment on
or before the last day of the Term, as to the unvested warrants, options or
restricted stock then held by Executive, if any, that would vest within the
ninety (90) day period immediately after the Term expires, a portion of (the
“Vested Portion”) such warrants, options or restricted stock shall vest as of
the date three (3) months following the cessation of the Executive’s employment.
For these purposes, the “Vested Portion” shall be the number of unvested shares
on the date Executive’s employment ceases that would vest within the ninety
(90) day period immediately after the Term expires, multiplied by a fraction,
(a) the numerator of which shall be the number of full weeks during the final
fifty-two (52) weeks of the Term prior to the Executive’s cessation of
employment, and (b) the denominator of which shall be fifty-two (52). This
vesting schedule shall supercede any contrary vesting schedule or vesting
provision set forth in the documents granting the foregoing equity interests or
the applicable plan documents as amended from time to time. All other unvested
warrants, options or restricted stock shall immediately be forfeited (subject,
however, to any contrary determination of the Board in its sole discretion).

(f) Conditions for Non-Renewal Severance Package.

Executive shall receive the payments and benefits described in subsection
3.09(e), if and only if (i) Executive duly executes, returns to the Company (and
does not revoke if a revocation period is included in the sole discretion of the
Company) a termination agreement (“Termination Agreement”) satisfactory to the
Company in its sole discretion, which shall include a general release of any and
all claims arising out of Executive’s employment or cessation of employment
against the Company and any other persons or entities designated by the Company,
other than for payments and benefits set forth in section 3(e) and, in the
Company’ s sole discretion, provisions requiring the Executive not to disparage
the Company or its employees and Board, not use or disclose information deemed
confidential by the Company, to reasonably cooperate with the Company in
transitioning business matters and handling claims and litigation; and
(ii) Executive complies with his obligations under this Agreement and the
Termination Agreement.

3.10 Accrued Payments. In the event Executive’s employment under this Agreement
is terminated during the Term, by the Company other than for Cause or by
Executive for Good Reason, Executive shall in all events be paid all accrued but
unpaid Base Salary, earned but unpaid Incentive Compensation for any prior year,
reimbursable expenses and other accrued benefits, if any, through the date of
termination.

Section 3.11 No Additional Payment or Reduction Due to Mitigation. The parties
agree that the foregoing shall be Executive’s sole and exclusive entitlement
under this Agreement by reason of termination by Executive for Good Reason or by
the Company other than for Cause. Such payments shall not be reduced or limited
by amounts Executive might earn or be able to earn from other employment or
ventures.

Section 3.12 Rights on Termination for Cause or Without Good Reason. No Regular
Severance Package or Change of Control Severance Package shall be due or owing
to Executive in the event that the Company shall duly terminate Executive’s
employment for Cause or in the event that Executive shall terminate his
employment with the Company for reasons other than Good Reason; provided,
however, that Executive shall in all events be paid all accrued but unpaid Base
Salary, earned but unpaid Incentive Compensation for any prior year,
reimbursable expenses and other accrued benefits, if any, through the date of
termination. In addition, in the event that the Company shall terminate
Executive’s employment for Cause or in the event that Executive shall terminate
his employment with the Company for reasons other than Good Reason, then all
unvested Options or restricted stock then held by Executive, if any, shall
automatically be forfeited (subject, however, to any contrary determination of
the Board in its sole discretion). The parties agree that the foregoing shall be
Executive’s sole and exclusive entitlement under this Agreement by reason of
termination by Executive for other than Good Reason or by the

 

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Company for Cause. Such payments shall not be reduced or limited by amounts
Executive might earn or be able to earn from other employment or ventures.

ARTICLE IV Confidential Information; Intellectual Property;

Inducing Company Employees; Non-Solicitation

Section 4.01 Confidential Information. Without the prior written consent of
Company, except as shall be necessary in the performance of Executive’s assigned
duties, Executive shall not disclose Company Confidential Information (as
hereinafter defined) to any third party or use the Company Confidential
Information for Executive’s direct or indirect benefit or the direct or indirect
benefit of any third party, and Executive shall maintain in strict confidence,
both during and after Executive’s employment, the confidentiality of any and all
Company Confidential Information. “Company Confidential Information” means any
information (written, oral or stored in any information storage and/or retrieval
medium or device) that the Company treats as confidential or proprietary,
including, but not limited to, all of the Company’s trade secrets (including,
without limitation, any trade secrets relating to thin film
copper-indium-gallium-di-selenide solar cells, other related thin film
photovoltaic technologies, and sputtering techniques) and any information
constituting or relating to: the Inventions (as hereinafter defined); research
and development plans; manufacturing or production designs, protocols,
processes, methods and data; existing and proposed products or services; product
plans, sketches, and blueprints; tests and test results; computer codes or
instructions (including source and object code, program logic algorithms,
subroutines, modules and related documentation, including program notation);
business studies; business development plans and efforts; business procedures;
financial data (including, but not limited to, revenue and cost data,
projections and/or forecasts); marketing and sales data, methods, plans and
efforts; the identities of customers, resellers, independent contractors, and
suppliers and prospective customers, resellers, independent contractors, and
suppliers; the terms of contracts and agreements with customers, resellers,
independent contractors, and suppliers; any information or data provided by or
on behalf of independent contractors, resellers, customers, prospective
customers, prospective resellers, or others subject to the terms of a
confidentiality, non-disclosure or similar agreement or the reasonable
expectation that such information or data would be treated as “confidential” or
non-public information or data; information with respect to Company’s employees
and independent contractors, including, but not limited to, their skills,
abilities, assignments, performance, compensation, and benefits, as well as the
nature and other terms and conditions of their relationship with the Company;
and any other information used or developed by Company that has not been made
available by Company to the general public. Failure to mark any of the Company
Confidential Information as confidential or proprietary shall not affect its
status as Company Confidential Information under the terms of this Agreement.
Additionally, Executive shall comply with the confidentiality requirements of
any client of Company and shall execute such policies, procedures or agreements
as such client requires. Company shall at all times retain any and all right,
title and interest in and to the Company Confidential Information and Executive
shall have no rights to or in the Company Confidential Information. In the event
of any dispute between Executive and the Company or between Executive or the
Company and others, Executive shall cooperate with the Company as to redaction
or other protective measures with respect to any unnecessary public disclosure
of any Company Confidential Information.

Section 4.02 Intellectual Property.

(a) Inventions Retained and Licensed. Executive has attached hereto, as
Attachment “1”, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by Executive prior
to the date of this Agreement (collectively referred to as “Prior Inventions”),
which are owned by Executive alone or jointly with others, which relate in any
way to Company’s existing or proposed business, products or research and
development, and which are not assigned to Company hereunder and/or were not
previously assigned by Executive to Company. If no items are listed in
Attachment “1,” Executive agrees and represents that there are no Prior
Inventions which are owned by Executive or in which Executive has any interest.
If in the course of Executive’s employment with Company, Executive incorporates
into a Company product, process or machine a Prior Invention owned by Executive
or in which Executive has an interest, Company is hereby granted and shall have
a worldwide, non-exclusive, royalty-free, irrevocable, perpetual, assignable,
transferable, and sublicenseable license to make, have made, modify, use and
sell such Prior Inventions as part of or in connection with such product,
process or machine.

(b) Assignment of Inventions. Executive shall promptly make full written
disclosure to Company, will hold in trust for the sole right and benefit of
Company, and hereby assigns, transfers, conveys, grants and sets

 

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over to Company, or its designee, all Executive’s worldwide right, title, and
interest in and to any and all inventions, original works of authorship,
developments, concepts, improvements or trade secrets, including, but not
limited to, all writings, documents, discoveries, computer programs or
instructions (whether in source code, object code, or any other form), plans,
memoranda, tests and test results, research, designs, graphical elements,
graphic layouts and designs, website designs, computer graphics, computer
animations, artwork models, advertisements, marketing materials, specifications,
data, diagrams, sales and marketing techniques, customer training materials and
techniques, flow charts, and/or other techniques (whether reduced to written
form or otherwise) that Executive may solely or jointly create, make, record,
discover, conceive, develop or reduce to practice, or cause to be created, made,
recorded, discovered, conceived, developed or reduced to practice, whether
during working hours at Company’s facility or at any other time or location,
whether upon the request or suggestion of Company or otherwise, and whether or
not patentable or registrable under copyright or similar laws, from the date
Executive’s employment with Company commenced until Executive’s cessation of
employment with Company, which relate in any way to Company’s existing or
proposed business, products or research and development, including, but not
limited to, the work that Executive performs for Company (collectively referred
to as “Inventions”). The Inventions shall include any and all intellectual
property rights inherent in the Inventions and appurtenant thereto including,
without limitation, all patent rights, copyrights, trademarks, know-how and
trade secrets (collectively referred to as “Intellectual Property Rights”).
Executive further acknowledges that all original works of authorship which are
made by Executive (solely or jointly with others) from the date Executive’s
employment with Company commenced until Executive’s cessation of employment with
Company that relates in any manner to the current or future business of Company
and which are protectable by copyright are “works made for hire,” as that term
is defined in the United States Copyright Act.

(c) Maintenance of Records. Executive shall keep and maintain adequate and
current records of all Inventions made by Executive (solely or jointly with
others) during Executive’s employment with Company. The records will be in the
form of notes, sketches, drawings, and any other format that may be specified by
Company. The records will be available to and remain the sole and exclusive
property of Company at all times.

(d) Further Assurances. Upon the request and at the expense of Company,
Executive shall execute and deliver all instruments and documents and take such
other acts as may be necessary or desirable to document all assignments and
transfers contemplated in this Agreement and to enable Company to secure its
rights in the Inventions and all Intellectual Property Rights relating thereto
in any and all jurisdictions, or to apply for, prosecute and enforce
Intellectual Property Rights in any and all jurisdictions with respect to any
Inventions, or to obtain any extension, validation, re-issue, continuance or
renewal of any such Intellectual Property Rights. Executive further agrees that
Executive’s obligation to execute or cause to be executed, when it is in
Executive’s power to do so, any such instrument or papers shall continue after
the termination of this Agreement. If Company is unable for any other reason to
secure Executive’s signature to apply for or to pursue any application for any
United States or foreign patent, trademark, copyright or other registration
covering Inventions assigned to Company as above, then Executive hereby
irrevocably designates and appoints Company and its duly authorized officers and
agents as Executive’s agent and attorney-in-fact, to act for and in Executive’s
behalf and stead to execute and file any such applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters
patent or trademark, copyright or other registrations thereon with the same
legal force and effect as if executed by Executive.

Section 4.03 Non-solicitation of Employees.

(a) During Executive’s employment with the Company and for the periods set forth
below after the termination of his employment with Company for any reason
whatsoever, Executive shall not, directly or indirectly, without the Company’s
prior written consent, and at the Company’s sole and absolute discretion:

(i) for a period of one (1) year after such termination, on his own behalf or in
the service or on behalf of others, solicit, encourage, recruit or attempt to
persuade any person to terminate such person’s employment with the Company,
whether or not such person is a full-time employee or whether or not such
employment is pursuant to a written agreement or is at-will.

(b) Executive acknowledges and agrees that the Company shall have the right, in
addition to any other rights either may have under applicable law, to obtain
from any court of competent jurisdiction preliminary and permanent injunctive
relief to restrain any breach or threatened breach of, or otherwise to
specifically enforce any

 

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such covenant or any other obligations of Executive under Article IV of this
Agreement, as well as to obtain damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled.

(c) If the period of time or scope of any restriction set forth in this
Agreement should be adjudged unreasonable in any proceeding, then the period of
time shall be reduced by such number of months or the scope of the restriction
shall be modified, or both, by a court of competent jurisdiction so that such
restrictions may be enforceable for such time and in the manner to the fullest
extent adjudged to be reasonable.

Section 4.04 Returning Company Documents and Property.

During the period of Executive’s employment and thereafter, Executive shall not
remove from Company’s offices or premises any documents, records, notebooks,
files, correspondence, reports, memoranda, computer tapes, computer disks or
similar materials of or containing Company Confidential Information, or other
materials or property of any kind, unless necessary in accordance with
Executive’s duties and responsibilities of employment, and in the event that any
of such material or property is removed, Executive shall return all of the
foregoing to their proper files or places of safekeeping as promptly as possible
after the removal shall have served its specific purpose; nor shall Executive
make, retain, remove or distribute any copies of any of the foregoing for any
reason whatsoever, except as may be necessary in the discharge of Executive’s
assigned duties; and upon the termination of Executive’s employment with
Company, Executive shall return to Company all originals, copies and extracts of
the foregoing, then in Executive’s possession or under Executive’s direct or
indirect control, and shall delete or destroy any of the foregoing in
Executive’s possession or under Executive’s direct or indirect control stored on
magnetic or other media or on any information storage or retrieval device,
whether prepared by Executive or by others. In the event Company provides
Executive with any equipment, including but not limited to a laptop computer or
other computer hardware, such property shall at all times remain the property of
Company and Executive shall promptly return any such property to Company upon
termination of Executive’s employment with Company. Executive agrees that, at
the time of leaving the employ of the Company, or earlier upon request, he shall
deliver to the Company (and will not keep in his possession or control or
deliver to anyone else) any and all records, data, notes, reports, information,
proposals, lists, correspondence, e-mails, specifications, drawings, blueprints,
sketches, materials, other documents (including, but not limited to, on computer
discs or drives) of any aforementioned items either developed by Executive
pursuant to his employment with the Company or otherwise relating to the
business of the Company, retaining neither copies nor excerpts thereof.
Executive also agrees that, at the time of leaving the employ of the Company, or
earlier upon request, he shall deliver to the Company all Company property in
his possession, including cell phones, computers, computer discs, drives and
other equipment.

ARTICLE V Arbitration.

Section 5.01 Arbitration. In order to obtain the many benefits of arbitration
over court proceedings, including speed of resolution, lower costs and fees and
more flexible rules of evidence, all disputes (except those relating to
unemployment compensation or workers compensation, and except as provided in
Section 5.02 below) arising out of Executive’s employment or concerning the
interpretation or application of this Agreement or its subject matter (including
without limitation those relating to workplace discrimination and/or harassment
on any basis, whatsoever, including but not limited to age, race, sex, religion,
national origin, disability or perceived disability, as well as any claimed
violation of any federal, state or local law, regulation or ordinance, such as
Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the
Americans with Disabilities Act and their state and local counterparts, if any,
including but not limited to any claims of retaliation thereunder) shall be
resolved exclusively by binding arbitration at a location in reasonable
proximity to Executive’s last place of employment with the Company, pursuant to
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association. The parties expressly waive their rights to have any
such claim resolved by jury trial. The Company shall bear the cost of the
Arbitrator’s fee. The Company shall initially bear its filing fees, as well as
Executive’s filing fees in excess of $75.00 upon Executive’s written request to
the Company’s Board. Arbitration must be demanded within three hundred
(300) days of the time when the demanding party knows or should know of the
events giving rise to the claim. The decision of the Arbitrator shall be in
writing and set forth the findings and conclusions upon which the decision is
based. Notwithstanding the foregoing, the requirement to arbitrate does not
apply to the filing of a claim with a federal, state or local administrative
agency. The decision of the Arbitrator shall be final and binding and may be
enforced under the terms of the Federal Arbitration Act (9

 

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U.S.C. Section 1 et seq.), but may in addition be set aside or modified by a
reviewing court in the event of a material error of law. Judgment upon the award
may be entered, confirmed and enforced in any federal or state court of
competent jurisdiction.

Section 5.02 Equitable Remedies. Executive agrees that if he breaches or
threatens to breach any of the obligations set forth in Article IV, the Company
will have available, in addition to any other right or remedy available, the
right to obtain injunctive and equitable relief of any type from a court of
competent jurisdiction, including but not limited to restraining such breach or
threatened breach and to specific performance of any such provision of this
Agreement. Executive may seek declaratory judgment or other equitable relief
with respect to Article IV from a court of competent judgment.

ARTICLE VI Miscellaneous

Section 6.01 Notices. All notices, requests or other communications provided for
in this Agreement shall be made, if to the Company, to the Secretary of the
Company at the Company’s principal executive office, and if to Executive, to his
address on the books of the Company (or to such other address as the Company or
Executive may give to the other for purposes of notice hereunder). Copies of all
notices given to Executive shall be sent to such person as Executive may
designate by written notice to the Company. All notices, requests or other
communications required or permitted by this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by mailing
via certified mail, postage prepaid, return receipt requested, in the United
States mails to the last known address of the party entitled thereto, (c) by
reputable overnight courier service, or (d) by facsimile with confirmation of
receipt. The notice, request or other communication shall be deemed to be
received upon actual receipt by the party entitled thereto; provided, however,
that if a notice, request or other communication is not received during regular
business hours, it shall be deemed to be received on the next succeeding
business day of the Company.

Section 6.02 Assignment and Succession. The Company may assign this Agreement in
connection with any sale or merger (whether a sale or merger of stock or assets
or otherwise) of the Company or the business of the Company. Executive expressly
consents to the assignment of the Agreement, including, but not limited to the
restrictions which apply subsequent to the termination of Executive’s
employment, to any new owner of the Company’s business or purchaser of the
Company. Executive’s rights and obligations hereunder are personal and may not
be assigned, provided, however, in the event of the Executive’s death or
permanent disability, the Executive’s representative may exercise any
unexercised Options, and any benefits accrued to the date of death or permanent
disability, if any, to the extent permitted by the relevant Option plan
agreement or this Agreement. This Agreement shall inure to the benefit of and be
enforceable by Executive’s heirs, beneficiaries and/or legal representatives.

Section 6.03 Headings. The Article, Section, paragraph and subparagraph headings
in this Agreement are for convenience of reference only and shall not define or
limit the provisions hereof.

Section 6.04 Invalidity. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality or enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.

Section 6.05 Waivers. No omission or delay by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof—or the exercise of any other
right, power or privilege.

Section 6.06 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

Section 6.07 Entire Agreement. Except as otherwise provided or referred to
herein, this Agreement contains the entire understanding of the parties and
supersedes all prior agreements and understandings relating to

 

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the subject matter hereof. This Agreement may not be amended, except by a
written instrument hereafter signed by each of the parties hereto.

Section 6.08 Interpretation. The parties hereto acknowledge and agree that each
party and its or his counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its drafting. Accordingly, (a) the rules
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement,
and (b) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto and not in favor of or against any party regardless of
which party was generally responsible for the preparation of this Agreement.
Except where the context requires otherwise, all references herein to Sections,
paragraphs and clauses shall be deemed to be reference to Sections, paragraphs
and clauses of this Agreement. The words “include”, “including” and “includes”
shall be deemed in each case to be followed by the phrase “without limitation.”
The words “hereof”, “herein” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.

Section 6.09 Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the internal laws of the State of
California without reference to principles of conflict of laws. Any court action
instituted by Executive or on his behalf relating in any way to this Agreement
or his employment with the Company shall be filed exclusively in federal or
state court in the County of Santa Clara California and he consents to the
jurisdiction and venue of these courts in any action instituted by the Company
against him.

Section 6.10 Indemnification. In addition to any additional benefits provided
under applicable state law to Executive as a director and officer of the
Company, Executive shall be entitled to the benefits of: (a) those provisions of
the Restated Articles of Incorporation and By-Laws of the Company, as amended,
which provide for indemnification of directors and officers of the Company (and
no such provision shall be amended in any way to limit or reduce the extent of
indemnification available to Executive as a director or officer of the Company),
and (b) any Indemnification Agreement between the Company and Executive. The
rights of Executive under such indemnification obligations shall survive the
termination of this Agreement and be applicable for so long as Executive may be
subject to any claim, demand, liability, cost or expense, which the
indemnification obligations referred to in this Section are intended to protect
and indemnify him against.

The Company shall, at no cost to Executive, use its best efforts to at all times
include Executive, during the term of Executive’s employment hereunder and for
so long thereafter as Executive may be subject to any such claim, as an insured
under any directors’ and officers’ liability insurance policy maintained by the
Company, which policy shall provide such coverage in such amounts as the Board
shall deem appropriate for coverage of all directors and officers of the
Company.

Section 6.11 Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable by an arbitrator or court of competent jurisdiction, such
invalidity or unenforceability shall not affect any other provision or
application of this Agreement which can be given effect without the invalid or
unenforceable provision or application and shall not invalidate or render
unenforceable such provision or application in any other jurisdiction.

Section 6.12 Executive Acknowledgement. Executive acknowledges and agrees
(i) that he has had the opportunity to consult with independent counsel of his
own choice concerning this Agreement and has been advised to do so by the
Company, and (ii) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its
duly authorized officer and the Executive has signed this Agreement as of the
day and year first above written.

 

DayStar Technologies, Inc.     Executive: By:   /s/ Stephan J. DeLuca     By:  
/s/ Ratson Morad

Name:

Title:

 

Stephan J. DeLuca, Ph.D.

CEO

    Name:   Ratson Morad Date: February 19, 2008     Date: February 19, 2008

 

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