DayStar Technologies Executes Letter of Intent With EPOD Solar, Inc. and Enters Into Bridge Financing Agreement

SANTA CLARA, Calif., Sept. 21 /PRNewswire-FirstCall/ -- DayStar Technologies, Inc. (Nasdaq: DSTI) ("DayStar"), a developer of solar photovoltaic products based on CIGS thin-film deposition technology, announced today that it has executed a letter of intent ("Letter of Intent") with EPOD Solar Inc., a British Columbia corporation ("EPOD Solar"), regarding a proposed transaction or series of related transactions intended to result in the combination of the businesses of EPOD Solar and DayStar (the "Transaction"). Simultaneously with the execution of the Letter of Intent, and in connection with the Transaction, DayStar has also entered into a Purchase Agreement and Security Agreement with Mr. Peter Alan Lacey to provide a bridge loan of $2,000,000.

Upon successful completion of negotiations and due diligence, the parties intend to sign definitive agreements and complete the Transaction as soon as practicable following any required approval by the holders of DayStar's common stock.

EPOD Solar is a vertically integrated developer, owner and operator of solar parks throughout Europe and North America. EPOD Solar also manufactures amorphous silicon thin film modules for the sole purpose of supplying its developed solar projects. EPOD Solar has 35MW of annual PV panel production capacity and expects to expand to 90MW by Q3 2010. EPOD Solar has more than 150MW of solar park projects in its development pipeline.

The Transaction is premised on the mutual understanding of EPOD Solar and DayStar that their businesses are complementary. EPOD Solar has 35 MW of manufacturing capacity for its amorphous silicon technology, and its research and development arm is poised to deploy double and triple junction technology PV module manufacturing. Amorphous silicon PV modules are best suited for large utility-scale ground mount projects at competitive costs. DayStar's CIGS technology represents a high-potential thin-film technology.

Key benefits of the Transaction include:

    --  The combined company will utilize its collective financial and research
        and development resources to bring the CIGS technology to commercial
        production. This approach will allow parallel tracks to benefit from
        both technologies for the future growth of the fully integrated business
        model.
    --  The combined company will result in a vertically integrated solar
        company with existing, low cost manufacturing capability and a
        technology roadmap that leverages DayStar's CIGS PV technology.
    --  The combined company's growth plan is driven by the development of
        solar parks, which will be owned and operated as independent power
        producers.
    --  Immediate availability of EPOD Solar's low cost a-Si modules
        combined with the expansion of the technology portfolio to include
        DayStar's CIGS will result in long-term certainty for lower system
        installed costs to drive higher IRR for company-owned solar parks.

    --  Establishes a long-term technology road map to higher module efficiency
        and lower cost-per-watt with technology-compatible R&D and
        production facilities.

The Transaction

It is anticipated that as part of the Transaction, DayStar will purchase substantially all of the assets of EPOD Solar. Pursuant to the Letter of Intent, the total value of the Transaction will be approximately $300 million. DayStar will authorize and issue a new series of preferred shares to the shareholders of EPOD Solar. Each preferred share will be convertible into one share of DayStar common stock at a conversion price of $1.80 per share. In addition to receiving such preferred shares, such holder will also be entitled to receive a warrant to purchase 50% of the total number of shares of DayStar common stock issued upon such conversion. The warrant will have an exercise price of $1.80 per share. DayStar will either (a) enter into a registration rights agreement with respect to the registration of any DayStar Stock issued to EPOD Solar with the Securities and Exchange Commission granting both demand and piggyback registration rights to the holders of such DayStar Stock or (b) file a Registration Statement on Form S-4 with respect to the Transaction registering the issuance of any DayStar Stock to EPOD Solar.

Simultaneously with the execution of the Letter of Intent, and in connection with the Transaction, DayStar has also entered into a Purchase Agreement and Security Agreement with Mr. Peter Alan Lacey to provide a bridge loan of $2,000,000 for purposes of funding DayStar's ongoing research and development and related business operations during the negotiation of the Transaction. DayStar has issued to Mr. Lacey a Secured Convertible Promissory Note (the "Note") in the aggregate principal amount of the Loan, a first warrant to purchase 1,500,000 shares of DayStar common stock, and a second warrant to purchase 1,666,667, upon the satisfaction of certain conditions. The Note will be convertible into shares of DayStar common stock based on a $0.60 conversion price and the Warrants will have an exercise price of $0.50 per share and are subject to adjustment for certain dilutive transactions.. The common stock that may be issued under the Note and Warrants are to be registered pursuant to a Registration Rights Agreement between DayStar and Mr. Lacey

Upon completion of the bridge loan, Michael Matvieshen has been appointed Chief Executive Officer of DayStar Technologies, Inc. Mr. Robert G. Aldrich will remain in his role as Chairman.

Further details of the Letter of Intent and Bridge Loan will be disclosed in a Form 8-K to be filed with the Securities and Exchange Commission.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements in this release regarding DayStar's business that are not historical facts may be considered "forward-looking statements." The forward-looking statements in this news release are based on information available at the time the statements are made and/or management's belief as of that time with respect to future events and involve substantial risks and uncertainties that could cause actual results and outcomes to be materially different. These factors include any new material information based on due diligence which may adversely impact discussions by the parties, the inability of the Company to obtain shareholder approval to execute a transaction with EPOD Solar, or statements regarding the company's build-out manufacturing lines and product commercialization. Forward-looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties, which may cause DayStar's results to differ materially and adversely from the statements contained herein. Some of the potential risks and uncertainties are detailed in DayStar's annual report on Form 10-K for the year ended December 31, 2008 and quarterly report on Form 10-Q for the quarter ended June 30, 2009, and other filings made with the Securities and Exchange Commission. Some important risks specific to the Transaction include the satisfaction of closing conditions and the possibility that the transaction may not be completed, and potential difficulties associated with integrating the combined businesses. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. DayStar undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events.

    Contact:

    DayStar Technologies, Inc.

    William S. Steckel            Patrick J. Forkin III
    Chief Financial Officer       Sr. Vice President -
    408/582.7100                  Corporate Development & Strategy
    investor@daystartech.com      408/907.4633
                                  investor@daystartech.com

SOURCE DayStar Technologies, Inc.