Secured Convertible Promissory Note



 Exhibit 10.2 
 NEITHER THIS PROMISSORY NOTE, NOR ANY SECURITIES ISSUABLE UPON CONVERSION HEREOF, HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM. 

SECURED CONVERTIBLE PROMISSORY NOTE 
  

					
	US $225,000	  	 	January 25, 2012	  

 For value received DayStar Technologies, Inc., a Delaware corporation
(“Payor”), promises to pay to Michael Moretti (“Holder”), or his heirs or assigns, the principal sum of US $225,000 on the terms set forth below. Interest on the outstanding
principal amount shall accrue at the rate of 10% per annum (“Interest Rate”) or at the Default Rate, as herein defined. Interest shall commence on the date hereof and shall continue on the outstanding principal until
paid in full. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed. 
 This
secured convertible promissory note (this “Note”) is issued pursuant to the terms of that certain Securities Purchase Agreement (the “Purchase Agreement”) dated as of January 25, 2012 between
Payor and Holder. This Note shall be secured by Payor’s grant of a security interest and lien to Holder of all of Payor’s assets as more fully set forth on Exhibit A to that certain Security Agreement by and between Payor and Holder (and
incorporated herein by reference the “Security Agreement”). 
 1. Definitions. The following terms shall
have the meanings herein specified: 
 “Capital Stock” means any of the current or
future authorized class or series of capital stock of Payor. 
 “Common Stock” means
authorized common stock, $.01 par value, of Payor, and shall include any other class or series of capital stock of Payor that is not limited to a fixed sum in respect of the rights of the holder thereof to participate in the liquidation or winding
up of Payor. 
 “Conversion Notice” shall have the meaning set forth in
Section 2(a). 
 “Conversion Price” shall mean the per share price(s) at which some
or all of the outstanding principal amount plus all accrued interest thereon is converted or convertible pursuant to Section 2(a), and in all cases as adjusted pursuant to Section 2(d). 

“Conversion Shares” means the shares of Common Stock, or such other shares of Capital Stock,
issuable upon conversion of this Note. 
 “Event of Default” means an event specified in
Section 4 hereof. 







 “Excluded Securities” means (i) securities
issued as a result of any stock split, stock dividend or reclassification of Capital Stock, distributable on a pro rata basis to all holders of Capital Stock; (ii) securities issued pursuant to a stock option plan, deferred compensation plan,
or other compensation arrangement approved by the Board of Directors of Payor to consultants (as defined in the Payor’s Equity Incentive Plan), employees, officers or directors of the Payor; or (iii) securities issued by Payor upon the
conversion or exercise of options, warrants, or convertible securities issued by Payor on or before the issuance date of this Note and on or after the payment in full of the principal and interest on the Note. 

“Fundamental Transaction” means a transaction (a) in which Payor, directly or indirectly, in
one or more related transactions, (i) consolidates or merges with or into (whether or not the Payor is the surviving corporation) another person or persons, or (ii) sells, assigns, transfers, conveys or otherwise disposes of all or
substantially all of the properties or assets of the Payor to another person, or (iii) allows another person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Common Stock
(not including any shares of Common Stock held by the person or persons making or party to, or associated or affiliated with the persons making or party to, such purchase, tender or exchange offer), or (iv) consummates a stock purchase
agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than the 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock purchase agreement or other business combination),
or (v) reorganizes, recapitalizes or reclassifies its Common Stock or (b) in which any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”)) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate Common Stock. 

“Holder” means Michael Moretti, and each endorsee, pledgee, assignee, owner and holder of this
Note, as such; and any consent, waiver or agreement in writing by the then Holder with respect to any matter or thing in connection with this Note, whether altering any provision hereof or otherwise, shall bind all subsequent Holders.
Notwithstanding the foregoing, Payor may treat the registered holder of this Note as Holder for all purposes. 
 Words of one gender include the
other gender; the singular includes the plural; and the plural includes the singular, unless the context otherwise requires. 
 2.
Conversion of the Note. 
 a. Election to Convert. Common Stock. Holder may, at its
option exercisable by written notice (the “Conversion Notice”) to Payor at any time prior to payment in full hereof, except as set forth in Section 2(e), elect to convert all or any part of the entire outstanding
principal amount of this Note plus the accrued interest on the then outstanding balance into shares of Common Stock at a conversion price equal to $0.25 per share (subject to adjustment in the event of any stock splits, stock dividends or other
recapitalization of Common Stock subsequent to the date of such sale or issuance). 

  
 -2-









 b. Delivery of Conversion Shares. The Conversion Shares shall be
delivered as follows: 
 1. As promptly as practicable after conversion, Payor shall deliver to Holder, or to
such person or persons as are designated by Holder in the Conversion Notice, (1) a certificate or certificates representing the number of shares of Capital Stock into which this Note or portion thereof is to be converted, in such name or names
as are specified in the Conversion Notice and (2) in the case of conversion of the entire remaining principal balance plus accrued unpaid interest hereof, any cash payable in respect of a fractional share. Such conversion shall be deemed to
have been effected at the close of business on the date when this Note shall have been surrendered to Payor for conversion, so that the person entitled to receive such Conversion Shares shall be treated for all purposes as having become the record
holder of such Conversion Shares at such time. 
 2. In the event that less than the entire outstanding
principal and accrued unpaid interest of this Note is converted hereunder pursuant to subsection (a) above, this Note shall not be surrendered for cancellation but shall have the fact and amount of conversion recorded on the face of this Note
by writing acknowledged by Holder and Payor. If less than the entire principal balance of this Note is converted, the amount of principal converted shall be reduced to the nearest amount that results in no fractional shares. 

c. Reservation of Shares. Payor agrees that, during the period within which this Note may be converted, Payor will
at all times have authorized and in reserve, and will keep available solely for delivery upon the conversion of this Note, a sufficient number of shares of Capital Stock and other securities and properties as from time to time shall be receivable
upon the conversion of this Note, free and clear of all restrictions on issuance, sale or transfer other than those imposed by law and free and clear of all pre-emptive rights. Payor agrees that the Conversion Shares shall, at the time of such
delivery, be validly issued and outstanding, fully paid and non-assessable, and Payor will take all such action as may be necessary to assure that the stated value or par value per share of the Conversion Shares is at all times equal to or less than
the Conversion Price. 
 d. Adjustments. 

1. In the event of a Fundamental Transaction while any principal or accrued interest remains outstanding under this Note,
then Payor shall use its reasonable best efforts to cause the Payor or such successor entity, as the case may be, to (i) execute with Holder an agreement providing that Holder shall have the right thereafter to receive upon conversion of this
Note solely the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such consolidation, merger, sale, lease or conveyance by a holder of the number of shares of Capital Stock for which
this Note might have been converted immediately prior to such consolidation, merger, sale, lease or conveyance, (ii) make effective provision in its organizational documents or otherwise, if necessary, in order to effect such agreement, and
(iii) set aside or reserve, for the benefit of Holder, the stock, securities, property and cash to which Holder would be entitled upon conversion of this Note. 

  
 -3-









 2. If the Payor at any time on or after the issuance date of this Note
subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding Capital Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the issuance date of this Note combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding Capital Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be proportionately increased. 
 e.
Stockholder Approval. The Company shall not issue or sell any Common Stock or securities convertible into Common Stock pursuant to this Note, and the Purchaser shall not purchase or acquire any such securities pursuant to this Note, to the
extent that, after giving effect thereto, the aggregate number of shares of Common Stock that would be issued pursuant to this Note , together with all shares of Common Stock issued pursuant to any transactions that may be aggregated with the
transactions contemplated by the Purchase Agreement under applicable rules of The Nasdaq Stock Market would exceed the maximum number of securities that the Company may issue pursuant to the Purchase Agreement without breaching the Company’s
obligations under the listing rules or regulations of The Nasdaq Stock Market (the number of shares which may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not
apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the Nasdaq Stock Market, unless and until the Company elects to solicit stockholder approval of the transactions contemplated by the
Purchase Agreement and the stockholders of the Company have in fact approved such transactions in accordance with the applicable rules of The Nasdaq Stock Market. 
 3. Payment of the Note – Principal and Interest 

a. Term. All principal and all unpaid accrued interest that has not been converted into Capital Stock pursuant to
Section 2 above shall be due and payable on the second anniversary following the issuance date of this Note (the “Maturity Date”). The Maturity Date may be extended by Holder, at the option of Holder and in its sole
discretion, effective upon written notice of such extension by Holder to Payor not less than 15 calendar days prior to the original Maturity Date. At any time after the Maturity Date (as it may be extended pursuant to this Section 3(a)), Holder
may proceed to collect such unconverted principal and accrued interest. All payments of interest and principal shall be in lawful money of the United States of America and shall be made to Holder at the address stated in Section 9 below. All
payments shall be applied first to accrued interest, and thereafter to principal. 
 b. Payment on Event of
Default. If any Event of Default occurs hereunder, then, at the option and upon the declaration of Holder of this Note and upon written notice to Payor (which election and notice shall not be required in the case of an Event of Default under
Section 4(c) or 4(d) or in a re-occurring Event of Default under Section 4(a) or 4(b)) and Payor’s subsequent failure to cure any such Event of Default under Section 4(d) within the referenced 60-day period, this Note shall
accelerate and all principal and unpaid accrued interest that has not been converted into Common Stock pursuant to Section 2 above shall become due and payable, and, at any time thereafter, Holder may proceed to collect such unconverted
principal and accrued interest and/or proceed with its remedies under any collateral document. 

  
 -4-









 c. Default Interest Rate. In the event Payor fails to pay the entire
unpaid principal balance when due or interest when due, Payor shall pay a default penalty (the “Default Penalty”) in an amount equal to 2% of the then outstanding principal and accrued and outstanding interest under this Note
and the entire unpaid principal balance, accrued and outstanding interest, and the Default Penalty (if not paid) shall thereafter bear interest at a default interest rate equal to the lower of 12% per annum or the highest rate permitted by law
(the “Default Rate”). 
 d. Prepayment. Payor may prepay this Note at any
time after one month following the date hereof; provided that Payor shall give Holder at least 30 calendar days advance written notice of Payor’s intent so to prepay and Holder shall have the right to convert all or any portion of this Note, as
applicable, pursuant to Section 2(b) at any time during such 30 calendar day period. 
 e.
Attorney’s Fees. If an Event of Default shall occur hereunder, Payor shall pay all reasonable attorneys’ fees and court costs incurred by Holder in enforcing and collecting this Note. 

4. Events of Default. The occurrence of any one or more of the following, if uncured within twenty (20) days from written notice
thereof with respect to subsections (a) and (b) only and only in the first instance of such failure or breach and any instance thereafter, upon the occurrence, shall constitute an “Event of Default”: 

a. Payor fails to pay timely any of the principal amount due under this Note on the date the same becomes due and payable
or any accrued interest or other amounts due under this Note on the date the same becomes due and payable; 
 b.
Payor breaches any of its representations, warranties, covenants (including failure to issue shares upon conversion of the Note) or agreements set forth in the Agreement, the Security Agreement, the Purchase Agreement, this Note or any other
agreement between Payor and Holder; 
 c. Payor files any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the
foregoing; or 
 d. An involuntary petition is filed against Payor under any bankruptcy statute now or hereafter
in effect, unless such petition is dismissed or discharged within sixty (60) days thereafter, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or
control of any property of Payor. 
 5. Transfer. 

a. In order to transfer this Note, Holder, or its duly authorized representative, shall provide Payor a copy of an
assignment duly executed by Holder hereof, but in no event shall this Note be transferred to a third party unrelated to Holder, unless (i) an Event of Default under Section 4(a) of this Note has been declared by Holder and (ii) Payor
shall have received prior 

  
 -5-









 
written notice of such transfer. In the event that Holder seeks to make a transfer of this Note to an unrelated party in the absence of registration under the Securities Act of 1933, as amended
(the “1933 Act”) and any applicable state securities laws, Holder shall furnish an opinion of counsel satisfactory in form and in substance to Payor that such transfer is exempt from registration under the 1933 Act and any
applicable state securities laws 
 b. This Note is, and each certificate representing Conversion Shares shall
be, stamped or otherwise imprinted with a legend substantially in the following form: 
 “The securities represented hereby
have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws and may not be reoffered, sold, transferred, pledged, or otherwise disposed of except pursuant to (1) registration under such act or laws
or (2) an exemption from registration under such act or laws.” 
 6. Rights Upon a Fundamental Transaction. In addition
to the provisions of Section 2(d) hereof, for so long as any amounts remain outstanding under this Note, if Payor enters into any agreement in connection with a Fundamental Transaction with a holder of unsecured or secured debt (whether of the
Company or another party to the Fundamental Transaction) which provides for benefits or terms more favorable than those contained in this Note with regard to a Fundamental Transaction, then this Note shall be deemed to be modified to provide Holder
with those more favorable benefits and terms. The Company shall notify Holder promptly of the existence of such more favorable benefits and terms and Holder shall have the right to receive the more favorable benefits and terms immediately. If
requested in writing by Holder, the Company shall amend this Note to contain the more favorable terms and conditions. 
 7. Loss or
Mutilation of Note. Upon receipt by Payor of evidence reasonably satisfactory to Payor of the loss, theft, destruction or mutilation of this Note, together with an indemnity reasonably satisfactory to Payor, in the case of loss, theft, or
destruction, or the surrender and cancellation of this Note, in the case of mutilation, Payor shall execute and deliver to Holder a new Note of like tenor and denomination as this Note. 
 8. Waiver or Amendment. Any term of this Note may be amended or waived with the written consent of Payor and Holder. The failure of Holder to enforce at any time any of the provisions of
this Note shall not, absent an express written waiver signed by Holder specifying the provision being waived, be construed to be a waiver of any such provision, nor in any way to affect the validity of this Note or any part hereof or the right of
Holder thereafter to enforce each and every such provision. No waiver of any breach of this Note shall be held to be a waiver of any other or subsequent breach. 
 9. Taxes. Payor agrees that it will pay, when due and payable, any and all stamp, original issue or similar taxes which may be payable in respect of the issue of this Note and/or any
Conversion Shares or certificates therefor. Payor shall not, however, be required to pay any stamp, original issue or similar tax which may be payable in respect of any transfer involved in the transfer and delivery of stock certificates to a person
other than of Holder. 

  
 -6-









 10. Compliance with Usury Laws. It is the intention of the parties to conform strictly to the
applicable usury laws, whether pursuant to state, federal or other applicable law, that are applicable to this Note. All agreements between Payor and Holder, whether now existing or hereafter arising and whether oral or written, are hereby expressly
limited so that in no event, shall the amount paid or agreed to be paid to Holder under this Note, exceed the maximum amount permissible under applicable usury laws. If, under any circumstances, fulfillment of any provision hereof at the time
performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity; and if under any circumstances Holder shall ever receive
an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing hereunder and not to
the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and such other indebtedness, the excess shall be deemed to have been a payment made by mistake and shall be refunded to the Payor. The terms and
provisions of this Section shall control and supersede every other provision of this Note, as applicable. 
 11. Notices. All
notices or other communications to a party required or permitted hereunder shall be in writing and shall 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 shall be sent by a reputable express delivery service or by certified mail, postage prepaid with return receipt requested, addressed as follows: 
 if to Holder to: 
 Michael Moretti 

[                      
  ] 

[                      
  ] 
 if to Payor to: 
 DayStar Technologies, Inc. 
 3567 Benton Street, Suite 367 

Santa Clara, California 95051 
 Attn: Christopher T. Lail 

          Chief Financial Officer 

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 shall 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). 
 12. 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 Note. This Note shall be construed without regard to any presumption or other rule
requiring construction hereof against the party causing this Note to be drafted. 

  
 -7-









 13. Governing Law; Waiver of Jury Trial. This Note shall be governed by and construed under
the laws of the State of New York, 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. 

14. Usury. Notwithstanding anything to the contrary contained herein, no provisions of this Note shall require the payment or permit the
collection of interest in excess of the Maximum Lawful Rate. If any excess of interest in such respect is herein provided for, or shall be adjudicated to be so provided, in this Note or otherwise in connection with this loan transaction, the
provisions of this Section 12 shall govern and prevail, and neither Payor nor the sureties, guarantors, successors or assigns of Payor shall be obligated to pay the excess amount of such interest, or any other excess sum paid for the use,
forbearance or detention of sums loaned pursuant hereto. If for any reason interest in excess of the Maximum Lawful Rate shall be deemed charged, required or permitted by any court of competent jurisdiction, any such excess shall be applied as a
payment and reduction of the principal of indebtedness evidenced by this Note; and, if the principal amount hereof has been paid in full, any remaining excess shall forthwith be paid to Payor. In determining whether or not the interest paid or
payable exceeds the Maximum Lawful Rate, Payor and Holder shall, to the extent permitted by applicable law and subject to section 3(b) above, (i) characterize any non-principal payment as an expense, fee, or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of the indebtedness evidenced by
this Note so that the interest for the entire term does not exceed the Maximum Lawful Rate. As used herein, the term “Maximum Lawful Rate” shall mean the maximum lawful rate of interest which may be contracted for, charged, taken,
received or reserved by Holder in accordance with the applicable laws of the State of New York. 
 [the remainder of this page
is intentionally left blank] 

  
 -8-









 IN WITNESS WHEREOF, the Payor has executed this Note as
of the date first written above. 
  

			
	 DayStar Technologies, Inc.

	 a Delaware corporation

		
	 By:
	 	 /s/ Christopher T. Lail

		 	Name: Christopher T. Lail
		 	Title: Chief Financial Officer


  
  
 [SIGNATURE PAGE TO SECURED PROMISSORY NOTE]