2006 Equity Incentive Plan



 Exhibit 10.36 
 DAYSTAR TECHNOLOGIES, INC. 
 2006 EQUITY INCENTIVE PLAN 
 ARTICLE 1. INTRODUCTION. 
 The purpose of the Plan is to promote the long-term success of the Company and the creation of
stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional
qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares,
Stock Units, Options (which may constitute incentive stock options or nonstatutory stock options) or stock appreciation rights. 
 The Plan shall
become effective upon its adoption by the Board of Directors; provided, however, that the stockholders of the Company shall approve the Plan in accordance with Delaware law within twelve (12) months of its adoption by the Board of Directors.

 The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except their choice-of-law provisions).

 ARTICLE 2. ADMINISTRATION. 
 2.1 Committee
Composition. The Committee shall administer the Plan. The Committee shall consist exclusively of two or more directors of the Company, who shall be appointed by the Board. A majority of the directors on the Committee shall be Outside
Directors. In addition, at all times that the Company is subject to Section 16 of the Exchange Act, the composition of the Committee shall satisfy: 
 (a) Such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and 

(b) Such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption
under section 162(m)(4)(C) of the Code. 
 2.2 Committee Responsibilities. The Committee shall (a) select the Employees, Outside
Directors and Consultants who are to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such Awards, (c) interpret the Plan and (d) make all other decisions
relating to the operation of the Plan. The Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. Any action taken by the Committee with respect to the implementation, interpretation or administration of the Plan
shall be final, conclusive and binding. 
 2.3 Committee for Non-Officer Grants. The Board may also appoint a secondary committee of the
Board, which shall be composed of one or more directors of the Company who need not satisfy the requirements of Section 2.1. Such secondary committee may administer the Plan with respect to Employees and Consultants, who are not considered
officers or directors of the Company under section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and Consultants and may determine all features and conditions of such Awards. Within the limitations of this
Section 2.3, any reference in the Plan to the Committee shall include such secondary committee. 
 ARTICLE 3. SHARES AVAILABLE FOR GRANTS. 
 3.1 Basic Limitation. Common Shares issued pursuant to the Plan may be authorized but unissued shares. The aggregate number of Options, SARs, Stock
Units and Restricted Shares awarded under the Plan shall not 

  

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exceed 17.5% of the Company’s authorized common shares subject to the restriction that the 2006 Plan Committee shall not award any grants exceeding 17.5% of the
Company’s total issued and outstanding common shares as of the time of and including the grant, subject to adjustment pursuant to Article 10. 
 3.2 Additional Shares. If Restricted Shares or Common Shares issued upon the exercise of Options are forfeited, then such Common Shares shall again become available for Awards under the Plan. Any Option shall be treated as
exercisable until such Option is exercised in full, or terminates or expires under the provisions of the Plan, or by agreement of the parties to the pertinent Option Agreement. If Stock Units, Options or SARs are forfeited or terminate for any other
reason before being exercised, then the corresponding Common Shares shall again become available for Awards under the Plan. If Stock Units are settled, then only the number of Common Shares (if any) actually issued in settlement of such Stock Units
shall reduce the number available under Section 3.1 and the balance shall again become available for Awards under the Plan. If SARs are exercised, then only the number of Common Shares (if any) actually issued in settlement of such SARs shall
reduce the number available under Section 3.1 and the balance shall again become available for Awards under the Plan. The foregoing notwithstanding, the aggregate number of Common Shares that may be issued under the Plan upon exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are forfeited. 
 3.3 Dividend Equivalents. Any dividend equivalents
paid or credited under the Plan shall not be applied against the number of Restricted Shares, Stock Units, Options or SARs available for Awards, whether or not such dividend equivalents are converted into Stock Units. 
 ARTICLE 4. ELIGIBILITY. 
 4.1 Incentive Stock Options. All
Incentive Stock Options (“ISO”) (a) must be granted within ten (10) years from the date the Plan is adopted by the Board of Directors, and (b) must be exercised within ten (10) years of the grant thereof, in the case of
an Optionee other than a Ten Percent Stockholder, and (ii) five (5) years of the grant thereof, in the case of an Optionee who is a Ten Percent Stockholder. Only Employees who are common-law employees of the Company, a Parent or a
Subsidiary shall be eligible for the grant of ISOs. 
 4.2 Other Grants. Only Employees, Outside Directors and Consultants shall be
eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs. 
 4.3 Change of Status. Employees who change their status from
employee to consultant may, for the period of time in which they are a consultant, continue to hold options in the Company granted to them when they were employees, and will not trigger any obligation to purchase shares underlying such options until
they cease to be an employee or consultant of the Company. Upon final termination of any employment or consultancy with the Company, any options granted to an employee will terminate if not exercised within thirty (30) days of termination.
Employees that subsequently become consultants will not continue to vest in any options granted to them during the period in which they serve as a consultant, unless otherwise determined by the Committee. 
 ARTICLE 5. OPTIONS. 
 5.1 Stock Option Agreement. Each grant of an
Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the
Plan. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in
the Optionee’s other compensation. A Stock Option Agreement may provide that a new Option will be granted automatically to the Optionee when he or she exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2. 
 5.2 Number of Shares. Each Stock Option Agreement shall specify the number of Common Shares subject to the Option and shall
provide for the adjustment of such number in accordance with Article 10. 
  

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 5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise
Price under an ISO shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant and the Exercise Price under an NSO shall in no event be less than 85% of the Fair Market Value of a Common Share on the date of
grant. In the case of an NSO, a Stock Option Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the NSO is outstanding. 
 5.4 Exercisability and Term. Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant. A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other
events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. 
 5.5 Effect of Change in Control. The Committee may determine, at the time of granting an
Option or thereafter, that such Option shall become exercisable as to all or part of the Common Shares subject to such Option in the event that a Change in Control occurs with respect to the Company or in the event that the Optionee is
subject to an Involuntary Termination after a Change in Control. However, in the case of an ISO, the acceleration of exercisability shall not occur without the Optionee’s written consent. In addition, acceleration of exercisability may be
required under Section 10.3. 
 5.6 Modification or Assumption of Options. Within the limitations of the Plan, the Committee may modify,
extend or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new options for the same or a different number of shares and at the same or a
different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such Option. 
 5.7 Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish. 
 5.8. Compliance with Law. An Option may be exercised only if compliance with all applicable federal and state securities laws is obtained, and may be
exercised only by an Optionee’s (or if permitted by an Option Agreement, such Optionee’s Estate’s) completion, execution and delivery of an investment letter and payment of the exercise price with respect thereto. 
 ARTICLE 6. PAYMENT FOR OPTION SHARES. 
 6.1 General Rule. The
entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased, except as follows: 
 (a) In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made in any form(s) described in this Article 6. 
 (b) In the
case of an NSO, the Committee may at any time accept payment in any form(s) described in this Article 6. 
 6.2 Surrender of Stock. To the
extent that this Section 6.2 is applicable, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Common Shares that are already owned by the Optionee. Such Common Shares shall be valued at their
Fair Market Value on the date when the new Common Shares are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, 

  

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Common Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with
respect to the Option for financial reporting purposes. 
 6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable, all or any
part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased
under the Plan and to deliver all or part of the sales proceeds to the Company. 
 6.4 Exercise/Pledge. To the extent that this Section 6.4
is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to pledge all or part of the Common Shares being purchased under the Plan to a
securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company. 
 6.5
Promissory Note. To the extent that this Section 6.5 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) a full-recourse promissory note. However,
the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents. 
 6.6 Other Forms of
Payment. To the extent that this Section 6.6 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid in any other form that is consistent with applicable laws, regulations and rules. 
 ARTICLE 7. STOCK APPRECIATION RIGHTS. 
 7.1 SAR Agreement. Each
grant of an SAR under the Plan shall be evidenced by an SAR Agreement between the Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various SAR Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Optionee’s other compensation. 
 7.2 Number of Shares. Each SAR Agreement shall specify the number of Common Shares to which the SAR pertains and shall provide for the adjustment of such
number in accordance with Article 10. 
 7.3 Exercise Price. Each SAR Agreement shall specify the Exercise Price. An SAR Agreement may specify
an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. 
 7.4 Exercisability and Term. Each SAR
Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR. An SAR Agreement may provide for accelerated exercisability in the event of the
Optionee’s death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s Service. SARs may be awarded in combination with Options, and such an
Award may provide that the SARs will not be exercisable unless the related Options are forfeited. An SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. An SAR granted under the
Plan may provide that it will be exercisable only in the event of a Change in Control. 
 7.5 Effect of Change in Control. The Committee may
determine, at the time of granting an SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that the Company is subject to a Change in Control or in the event that the Optionee is
subject to an Involuntary Termination after a Change in Control. In addition, acceleration of exercisability may be required under Section 10.3. 
  

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 7.6 Exercise of SARs. Upon exercise of an SAR, the Optionee (or any person having the right to exercise the
SAR after his or her death) shall receive from the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Common Shares
received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Common Shares subject to the SARs exceeds the Exercise Price. If, on the date when an SAR expires, the
Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such
portion. 
 7.7 Modification or Assumption of SARs. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding
SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an SAR shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such SAR. 
 ARTICLE 8. RESTRICTED SHARES. 
 8.1 Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be
evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. 
 8.2 Payment for Awards. Subject to
the following sentence, Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future
services. To the extent that an Award consists of newly issued Restricted Shares, the consideration shall consist exclusively of cash, cash equivalents or past services rendered to the Company (or a Parent or Subsidiary) or, for the amount in excess
of the par value of such newly issued Restricted Shares, full-recourse promissory notes, as the Committee may determine. 
 8.3 Vesting
Conditions. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may
provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares or thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to the Company or in the event that the Participant is subject to an Involuntary Termination after a Change in Control. 
 8.4 Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the
Company’s other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the dividends were paid. 
 ARTICLE 9. STOCK UNITS. 
 9.1 Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the recipient and the Company. Such
Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical.
Stock Units may be granted in consideration of a reduction in the recipient’s other compensation. 
 9.2 Payment for Awards. To the extent
that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients. 
  

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 9.3 Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur,
in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events.
The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that the Company is subject to a Change in Control or in the event that the Participant is subject
to an Involuntary Termination after a Change in Control. In addition, acceleration of vesting may be required under Section 10.3. 
 9.4 Voting
and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash dividends paid on one Common Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents
may be made in the form of cash, in the form of Common Shares, or in a combination of both. Prior to distribution, any dividend equivalents that are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they
attach. 
 9.5 Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash,
(b) Common Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined
performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Common Shares over a series of trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Article 10. 
 9.6 Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the recipient’s beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form
with the Company at any time before the Award recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after the recipient’s death
shall be distributed to the recipient’s estate. 
 9.7 Creditors’ Rights. A holder of Stock Units shall have no rights other than
those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement. 
 ARTICLE 10. PROTECTION AGAINST DILUTION. 
 10.1 Adjustments. In the
event of a subdivision of the outstanding Common Shares, a declaration of a dividend payable in Common Shares or a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common
Shares, corresponding adjustments shall automatically be made in each of the following: 
 (a) The number of Options, SARs, Restricted
Shares and Stock Units available for future Awards under Article 3; 
 (b) The number of Common Shares covered by each outstanding
Option and SAR; 
 (c) The Exercise Price under each outstanding Option and SAR; or 
 (d) The number of Stock Units included in any prior Award that has not yet been settled. 
  

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 In the event of a declaration of an extraordinary dividend payable in a form other than Common Shares in an amount
that has a material effect on the price of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of the foregoing. Except as
provided in this Article 10, a Participant shall have no rights by reason of any issuance by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 
 10.2 Dissolution or
Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. 
 10.3 Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Such agreement shall provide for (a) the continuation of the outstanding Awards by the Company, if the Company is a surviving corporation, (b) the assumption of the outstanding Awards by the surviving corporation
or its parent or subsidiary, (c) the substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards, (d) full exercisability or vesting and accelerated expiration of the outstanding
Awards, or (e) settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards. 
 ARTICLE 11.
DEFERRAL OF AWARDS. 
 The Committee (in its sole discretion) may permit or require a Participant to: 
 (a) Have cash that otherwise would be paid to such Participant as a result of the exercise of an SAR or the settlement of Stock Units credited to a
deferred compensation account established for such Participant by the Committee as an entry on the Company’s books; 
 (b) Have
Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or 
 (c) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of
Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of such
Common Shares as of the date when they otherwise would have been delivered to such Participant. 
 A deferred compensation account established under
this Article 11 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such
an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Article 11.

 ARTICLE 12. AWARDS UNDER OTHER PLANS. 
 The Company may
grant awards under other plans or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units
and shall, when issued, reduce the number of Common Shares available under Article 3. 
 ARTICLE 13. PAYMENT OF DIRECTOR’S FEES IN SECURITIES. 

13.1 Effective Date. No provision of this Article 13 shall be effective unless and until the Board has determined to implement such provision. 

 

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 13.2 Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive
his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued
under the Plan. An election under this Article 13 shall be filed with the Company on the prescribed form. 
 13.3 Number and Terms of NSOs,
Restricted Shares or Stock Units. The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner
determined by the Board. The Board shall also determine the terms of such NSOs, Restricted Shares or Stock Units. 
 ARTICLE 14. LIMITATION ON RIGHTS.

 14.1 Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an
Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the Service of any Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable
laws, the Company’s certificate of incorporation and by-laws and a written employment agreement (if any). 
 14.2 Stockholders’
Rights. A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, if
applicable, the time when he or she becomes entitled to receive such Common Shares by filing any required notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record
date is prior to such time, except as expressly provided in the Plan. 
 14.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to
restrict, in whole or in part, the delivery of Common Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration, qualification or listing or to an exemption
from registration, qualification or listing. 
 14.4 Burden and Benefit. The terms and provisions of the Plan shall be binding upon, and shall
inure to the benefit of each Participant and their respective Estates. 
 ARTICLE 15. WITHHOLDING TAXES. 
 15.1 General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations
are satisfied. 
 15.2 Share Withholding. To the extent that applicable law subjects a Participant to tax withholding obligations, the Committee
may permit such Participant to satisfy all or part of such obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he
or she previously acquired. Such Common Shares shall be valued at their Fair Market Value on the date when they are withheld or surrendered. 
 ARTICLE 16. FUTURE
OF THE PLAN. 
 16.1 Term of the Plan. The Plan, as set forth herein, shall become effective as of the date it is adopted by the Board, and
shall remain in effect until it is terminated under Section 16.2, except that no ISOs shall be 

  

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granted on or after the 10th anniversary of the later of (a) the date when the Board adopted the Plan or (b) the date when the Board adopted the most recent
increase in the number of Common Shares available under Article 3 that was approved by the Company’s stockholders. 
 16.2 Amendment or
Termination. The Board may, at any time and for any reason, amend or terminate the Plan. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or
rules. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan. 
 ARTICLE 17. LIMITATION ON PAYMENTS. 
 17.1 Scope of Limitation.
This Article 17 shall apply to an Award only if: 
 (a) The after-tax value of such Award to the Participant, taking into account the
effect of all federal, state and local income taxes, employment taxes and excise taxes applicable to the Participant (including the excise tax under section 4999 of the Code), will be greater after the application of this Article 17 than it was
before the application of this Article 17; or 
 (b) The Committee, at the time of making an Award under the Plan or at any time
thereafter, specifies in writing that such Award shall be subject to this Article 17 (regardless of the after-tax value of such Award to the Participant). 
 If this Article 17 applies to an Award, it shall supersede any contrary provision of the Plan or of any Award granted under the Plan. 
 17.2
Basic Rule. In the event that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a “Payment”) would be nondeductible by the Company for federal income tax purposes because of the provisions
concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Article 17, the “Reduced
Amount” shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of section 280G of the Code. 
 17.3 Reduction of Payments. If any Payment would be nondeductible by the Company because of section 280G of the Code, then the Company shall promptly give
the Participant notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount, and the Participant may then elect, in his or her sole discretion, which and how much of the Payments shall be eliminated or reduced (as
long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall advise the Company in writing of his or her election within 10 days of receipt of notice. If no such election is made by the Participant
within such 10-day period, then the Company may elect which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 17, present value shall be determined in accordance with section 280G(d)(4) of the Code. All determinations made by the Committee under this Article 17 shall be binding upon the
Participant and shall be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following such determination and the elections hereunder, the Company shall pay or transfer to or for the benefit of
the Participant such amounts as are then due to him or her under the Plan and shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under the Plan. 
 17.4 Overpayments and Underpayments. In the event of uncertainty in the application of section 280G of the Code at the time of an Award, it is possible that
Payments will have been made by the Company which should not have been made (an “Overpayment”) or that additional Payments which will not have been made by 

  

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the Company could have been made (an “Underpayment”), consistent in each case with the calculation of the Reduced Amount hereunder. In the event of an
assertion of a deficiency by the Internal Revenue Service against the Company or the Participant that the Committee reasonably believes has a high probability of success, such that the Committee determines that an Overpayment has been made, such
Overpayment shall be treated for all purposes as a loan to the Participant that he or she shall repay to the Company, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code; provided, however, that no amount
shall be payable by the Participant to the Company if and to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event that the Committee determines that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company to or for the benefit of the Participant, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. 
 17.5 Related Corporations. For purposes of this Article 17, the term “Company” shall include affiliated corporations to the extent determined by
the Committee in accordance with section 280G(d)(5) of the Code. 
 ARTICLE 18. DEFINITIONS. 
 18.1 “Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.

 18.2 “Award” means any award of an Option, an SAR, a Restricted Share or a Stock Unit under the Plan. 
 18.3 “Board” means the Company’s Board of Directors, as constituted from time to time. 
 18.4 “Cause” means (a) the unauthorized use or disclosure of the confidential information or trade secrets of the Company, which use or disclosure
causes material harm to the Company, (b) conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof, (c) gross negligence, (d) willful misconduct or
(e) a failure to perform assigned duties that continues after the Participant has received written notice of such failure from the Board or its designee. The foregoing, however, shall not be deemed an exclusive list of all acts or omissions
that the Company (or the Parent, Subsidiary or Affiliate employing the Participant) may consider as grounds for the discharge of the Participant without Cause. 
 18.5 “Change in Control” means: 
 (a) The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity; 
 (b) The sale, transfer or other disposition of all or substantially all of the Company’s assets; 
 (c) A change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either (i) had
been directors of the Company on the date 12 months prior to the date of the event that may constitute a Change in Control (the “original directors”) or (ii) were elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or 
 (d) Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing at least 30% of the total voting power represented by the Company’s then outstanding voting securities. For purposes of this Paragraph (d), the term “person” shall have the same
meaning as when used in sections 13(d) and 14(d) of 

  

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the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Parent or Subsidiary
and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. 
 A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. 
 18.6 “Code” means the Internal Revenue Code of 1986, as amended. 
 18.7 “Committee” means a committee of the Board, as
described in Article 2. 
 18.8 “Common Share” means one share of the common stock of the Company. 
 18.9 “Company” means DayStar Technologies, Inc., a Delaware corporation. 
 18.10 “Consultant” means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor. Service as a Consultant shall be considered
employment for all purposes of the Plan, except as provided in Section 4.1. 
 18.11 “Employee” means a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate. 
 18.12 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 

18.13 “Exercise Price,” in the case of an Option, means the amount for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of an SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in determining
the amount payable upon exercise of such SAR. 
 18.14 “Fair Market Value” means the market price of Common Shares, determined by the
Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in The Wall Street Journal. Such determination shall be conclusive and
binding on all persons. 
 18.15 “Involuntary Termination” means the termination of the Participant’s Service by reason of: 

(a) The involuntary discharge of the Participant by the Company (or the Parent, Subsidiary or Affiliate employing him or her) for reasons other
than Cause; or 
 (b) The voluntary resignation of the Participant following (i) a material adverse change in his or her title,
position, authority or responsibilities with the Company (or the Parent, Subsidiary or Affiliate employing him or her), (ii) a material reduction in his or her base salary or (iii) receipt of notice that his or her principal workplace will
be relocated by more than 30 miles. 
 18.16 “ISO” means an incentive stock option described in section 422(b) of the Code. 
 18.17 “NSO” means a stock option not described in sections 422 or 423 of the Code. 
 18.18 “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Common Shares. 
 18.19 “Optionee” means an individual or estate that holds an Option or SAR. 
  


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 18.20 “Outside Director” means a member of the Board who is not an Employee. Service as an Outside
Director shall be considered employment for all purposes of the Plan, except as provided in Section 4.1. 
 18.21 “Parent” means any
corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. 
 18.22 “Participant” means an individual or estate that holds an Award. 
 18.23 “Plan” means this DayStar Technologies, Inc. Equity Incentive Plan, as amended from time to time. 
 18.24
“Restricted Share” means a Common Share awarded under the Plan. 
 18.25 “Restricted Stock Agreement” means the agreement between
the Company and the recipient of a Restricted Share that contains the terms, conditions and restrictions pertaining to such Restricted Share. 
 18.26
“SAR” means a stock appreciation right granted under the Plan. 
 18.27 “SAR Agreement” means the agreement between the Company and
an Optionee that contains the terms, conditions and restrictions pertaining to his or her SAR. 
 18.28 “Service” means service as an
Employee, Outside Director or Consultant. 
 18.29 “Stock Option Agreement” means the agreement between the Company and an Optionee that
contains the terms, conditions and restrictions pertaining to his or her Option. 
 18.30 “Stock Unit” means a bookkeeping entry representing
the equivalent of one Common Share, as awarded under the Plan. 
 18.31 “Stock Unit Agreement” means the agreement between the Company and
the recipient of a Stock Unit that contains the terms, conditions and restrictions pertaining to such Stock Unit. 
 18.32 “Subsidiary” means
any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 ARTICLE 19. EXECUTION. 
 To record the adoption of the Plan
by the Board on March 29, 2006, the Company has caused its duly authorized officer to execute this document in the name of the Company. 
  

			
	DAYSTAR TECHNOLOGIES, INC.
		
		 	
	By:	 	 /s/ Stephen A. Aanderud
  

	Title: 	 	Chief Financial Officer and Secretary


  

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