Committees

Audit Committee Charter

The Board of Directors of DayStar Technologies, Inc. (the "Corporation") will annually appoint from its members an Audit Committee. This Charter of the Audit Committee supplements the provisions of Section 3.12 of the Corporation's Bylaws and further defines the role, authority and responsibility of the Audit Committee.

Number of Members and Appointment

The Audit Committee will be composed of at least three independent members of the Board of Directors. Members of the Committee will be appointed annually by the Board of Directors. Vacancies will be filled by the Board of Directors. The Chairman of the Audit Committee will be elected by the Audit Committee, pursuant to the procedures outlined below.

Qualifications of Members

Each member of the Audit Committee will be a Director who, in the judgment of the Board of Directors, is financially literate and possesses the ability to read and understand the fundamental financial statements of the Corporation and its subsidiaries, including balance sheets, income statements and cash flow statements. At least one member of the Audit Committee will, in the judgment of the Board of Directors, have accounting or related financial management expertise, which may include employment experience in finance or accounting, certification in accounting or any other comparable experience, including being, or having been, a chief executive officer or other senior officer of a Corporation with financial oversight responsibilities.

Independence of Members

Members of the Audit Committee will be free from any relationship to the Corporation or its subsidiaries that, in the judgment of the Board of Directors, may interfere with the exercise of their independence from management of the Corporation. Other than in their capacity as members of the Board of Directors, members of the Audit Committee will not be affiliates, officers, or employees of the Corporation or any of its subsidiaries and may not accept from the Corporation or any of its subsidiaries any consulting, advisory or other compensatory fees. Appointments to the Audit Committee will be consistent with standards for determining independence promulgated by the Securities and Exchange Commission and the NASDAQ Stock Market, or such other national securities market as will be the principal market for trading of the Corporation's securities.

Meetings, Quorum, Informal Actions, Minutes

The Audit Committee will meet on a regular basis, at least four times per year. Special meetings may be called by the Chairman of the Audit Committee. A majority of the members of the Audit Committee will constitute a quorum. Concurrence of a majority of the quorum (or, in case a quorum at the time consists of two members of the Committee, both members present) will be required to take formal action of the Audit Committee. Written minutes will be kept for all formal meetings of the Committee.

The Audit Committee will meet separately in executive session, periodically, with each of management, the principal internal auditor of the Corporation and the outside auditing firm.

As permitted by section 141 of the Delaware General Corporation Law, the Audit Committee may act by unanimous written consent, and may conduct meetings via conference telephone or similar communication equipment.

Members of the Audit Committee may meet informally with officers or employees of the Corporation and its subsidiaries and with the Corporation's independent auditors, and may conduct informal inquiries and studies without the necessity of holding a formal meeting. The Audit Committee may delegate to its Chairman or to one or more of its members the responsibility for performing routine functions as, for example, review of press releases announcing results of Corporation operations.

Outside Advisors

The Audit Committee will have the authority to retain such outside counsel, accountants, experts and other advisors as it determines appropriate to assist the Audit Committee in the performance of its functions. The Audit Committee will have sole authority to approve related fees and retention terms.

Responsibilities

The Corporation's independent auditors are ultimately accountable to the Audit Committee. The Audit Committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the Corporation's independent auditors.

The Audit Committee will oversee the independence and performance of the Corporation's independent auditors. The Committee will ensure that the independent auditors periodically submit to the Audit Committee a formal written statement delineating all relationships between the auditors and the Corporation and will engage in an active dialogue with the auditors with respect to any disclosed relationships or services that may impact the auditor's independence or objectivity. The Audit Committee will determine the appropriate action in response to the auditors' report to satisfy itself of the auditors' independence.

The Audit Committee will oversee the accounting and financial reporting processes of the Corporation and the audits of the financial statements of the Corporation.

The Audit Committee will annually prepare and submit, for inclusion in management's proxy statement to stockholders in connection with the Corporation's annual meeting of stockholders, a report in conformity with Item 306 of Securities and Exchange Commission Regulation S-B.

Without limiting the generality of the foregoing, the Audit Committee will:

  • Be directly responsible, in its capacity as a committee of the Board, for the appointment, compensation and oversight of the outside auditing firm. In this regard, the Audit Committee will have the sole authority to (a) appoint and retain, (b) determine the funding for, and (c) when appropriate, terminate, the outside auditing firm, which will report directly to the Audit Committee.
  • Approve in advance all audit services to be provided by the outside auditing firm, including any written engagement letters related thereto.
  • Establish policies and procedures for the engagement of the outside auditing firm to provide permissible non-audit services, which will require pre-approval by the Audit Committee of all permissible non-audit services to be provided by the outside auditing firm.
  • Consider, at least annually, the independence of the outside auditing firm, including whether the outside auditing firm's performance of permissible non-audit services is compatible with the auditor's independence; obtain and review a report by the outside auditing firm describing any relationships between the outside auditing firm and the Corporation or any other relationships that may adversely affect the independence of the auditor; discuss with the outside auditing firm any disclosed relationships or services that may impact the objectivity and independence of the auditor; and present to the Board of directors the Audit Committee's conclusions with respect to the independence of the outside auditing firm.
  • Review and discuss with the outside auditing firm: (i) the scope of the audit, the results of the annual audit examination by the auditor and any accompanying management letters, and any difficulties the auditor encountered in the course of their audit work, including any restrictions on the scope of the outside auditing firm's activities or on access to requested information, and any significant disagreements with management; and (ii) any reports of the outside auditing firm with respect to interim periods.
  • Review and discuss with management and the outside auditing firm the annual audited and quarterly unaudited financial statements of the Corporation, including: (i) an analysis of the auditor's judgment as to the quality of the Corporation's accounting principles, setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements; (ii) the Corporation's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," including the development, selection and reporting of accounting policies that may be regarded as critical; and (iii) major issues regarding the Corporation's accounting principles and financial statement presentations, including any significant changes in the Corporation's selection or application of accounting principles and financial statement presentations.
  • Recommend to the board based on the review and discussion described above, whether the financial statements should be included in the Annual Report on Form 10-K.
  • Periodically review and discuss the adequacy of the Corporation's internal controls, any significant deficiencies in internal controls, and significant changes in such controls; and review and discuss with the principal internal auditor of the Corporation and such others as the Audit Committee deems appropriate, the scope and results of the internal audit program.
  • Periodically review and discuss the adequacy and effectiveness of the Corporation's disclosure controls and procedures and management reports thereon.
  • Review and discuss with management and the outside auditors any material financial or non-financial arrangements of the Corporation which do not appear on the financial statements of the Corporation.
  • Review and approve any related party transactions involving directors or executive officers of the Corporation.
  • Review, with the General Counsel, material pending legal proceedings involving the Corporation and other contingent liabilities.
  • Establish procedures for receiving and handling complaints regarding accounting, internal accounting controls and auditing matters, including procedures for confidential, anonymous submission of concerns by employees regarding accounting and auditing matters.
  • Establish policies for the hiring of employees and former employees of the outside auditing firm.
  • Report the Committee's activities to the full Board of Directors on a regular basis.
  • Review and assess the performance of the Audit Committee and the adequacy of this Charter on an annual basis.

Committee Resources

The Audit Committee is authorized to employ the services of such counsel, consultants, experts and personnel, including persons already employed or engaged by the Corporation, as the Committee may deem reasonably necessary to enable it to fully perform its duties and fulfill its responsibilities.

Nominating and Governance Committee Charter

Role

The Nominating and Governance Committee of the Board of Directors (the ýýýCommitteeýýý) of DayStar Technologies, Inc. (the ýýýCompanyýýý) has the responsibility to determine the slate of nominees for election to the Company's Board of Directors, to recommend candidates to fill vacancies occurring between annual shareholder meetings, to review, evaluate and recommend changes to the Company's corporate governance guidelines, and to review the Company's policies and programs that relate to matters of corporate responsibility. The Committee also assists the Board in conducting evaluations for the Company's executive officers and evaluations of the effectiveness of the Board as a whole.

Membership

The Committee is composed of a minimum of three, but not more than five directors, all of whom are independent (as defined by applicable laws, regulations, and listing requirements) non-employee, outside (as defined by Rule 16b of the Securities and Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code) directors as appointed by the Board of Directors. The Board may designate one or more independent directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee.

Operations

The Committee meets at least three times each year. The Committee shall meet at the call of its Chairperson, preferably in conjunction with regular Board meetings as appropriate to bring matters before the Board. Meetings and actions of the Committee will be governed by, and held and taken in accordance with, the provisions of Section 4.5 of the Company's Amended and Restated Bylaws. The Chairperson of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over Committee meetings, making Committee assignments and reporting the Committee's actions to the Board. The Committee shall keep written minutes of its meetings, which shall be recorded or filed with the books and records of the Company. Any member of the Board shall be provided with copies of such Committee minutes if requested.

Authority

The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has the sole authority to retain, compensate and terminate consultants and advisors to assist the Committee in fulfilling its responsibilities, including conducting or authorizing investigations into or studies of corporate governance matters. The Committee shall have sole authority to retain and terminate any search firm to be used to identify director or officer candidates, including the authority to negotiate and approve the fees and retention terms of such search firm. The Committee shall have authority to delegate responsibilities listed herein to subcommittees of the Committee if the Committee determines such delegation would be in the best interest of the Company. The Committee may ask members of management or others whose advice and counsel are relevant to address the issues then being considered by the Committee. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.

The Nominating and Governance Committee, in order to assist the Board in the discharge of its fiduciary responsibilities relating to determining the slate of nominees for election to the Company's Board of Directors, drafting and implementing the Company's corporate governance guidelines, and conducting evaluations for the Company's executive officers and evaluations of the effectiveness of the Board as a whole, will:

  • Determine the desired qualities of Board members to ensure appropriate board composition, including candidate independence as defined by applicable stock exchange regulations;
  • Identify, interview, and certify qualified candidates, whether identified by the Board or a shareholder, as potential Board members or in the event of a vacancy before the Annual Shareholder Meeting, prospective director candidates to the Board;
  • Develop plans regarding the size and composition of the Board and its committees and evaluate Board performance, including conduct of Board meetings and the adequacy and timeliness of information provided to Board members for meetings;
  • Review and assess management succession plans;
  • Develop and recommend corporate governance policies and principles applicable to the Company, review established corporate governance guidelines on an annual basis, monitor trends in corporate governance principles, and assist the Board in implementing those practices
  • Undertake such other specific duties as the Board of Directors may from time-to-time prescribe.

Responsibilities

The principal responsibilities of the Committee include:

  • Board Candidates and Nominees
    • Propose nominees for election by the shareholders at the Annual Shareholder Meeting to the Board, whether by the Board or by a shareholder in accordance with the criteria set out in Exhibit B to this Charter, and prospective director candidates in the event of the vacancy or a change in Board composition requirements;
    • Periodically review and develop criteria for the selection of new directors and nominees for vacancies on the Board, including procedures for reviewing potential nominees proposed by shareholders, in accordance with the current criteria set out in Exhibit A to this Charter;
    • Review and propose to the Board the desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into account current Board members and the specific needs of the Company and the Board, in accordance with the current criteria set out in Exhibit A to this Charter;
    • Conduct candidate searches, interview prospective candidates and conduct programs to introduce candidates to the Company, its management and operations, confirm the appropriate level of interest of such candidates, and certify that the candidates meet the minimum criteria for Board membership;
    • Recommend to the Board qualified Board candidates who bring the background, knowledge, experience, skill sets and expertise that would strengthen and increase the diversity of the Board;
    • Review whether a Board member is suitable for continued service as a director when he or she has a significant change in status, such as an employment change, and recommend whether or not such director should be re-nominated;
    • Work with senior management to provide an orientation and education program for directors.
  • Board and Committees
    • Periodically review and recommend to the Board changes as appropriate, including policies and procedures pertaining to the roles, responsibilities, tenure and removal of directors;
    • Monitor the size and composition of the Board members and determine whether or not each director and prospective director is an ýýýindependent director,ýýý and that the majority of the directors are ýýýindependent directorsýýý within the meaning of any rules and laws applicable to the Company;
    • Review and evaluate potential conflicts of interests that may arise between the Company and any director or member of the Company's senior management;
    • Review the need for changes in this Charter and recommend any proposed changes to the Board for approval; and
    • Recommend to the Board establishment of such special committees as may be necessary or appropriate to address ethical, legal or other matters that may arise.
    • Annually assess its performance to confirm that it is meeting its responsibilities under this Charter.
  • Evaluations and Management Development
    • Develop a process for and to assist the Board with conducting evaluations of the effectiveness of the Board as a whole;
    • Develop a process for and to assist the Board with conducting evaluations of the Company's management;
    • Review and assess the Company's management succession plans to help assure proper management planning; and
    • Review the Chief Executive Officer's recommendations for senior officer positions, and to make recommendations to the Board, as requested.
  • Corporate Governance

    Each year, the Committee shall:

    • Review the advisability or need for any changes in the number and composition of the Board;
    • Review the advisability or need for any changes in the number, charters or titles of committees of the Board;
    • Recommend to the Board the composition of each committee of the Board and, if in its discretion it so desires, the individual director to serve as chairperson of each committee;
    • Procure that the chairperson of each committee report to the Board about his/her committee's annual evaluation of its performance and evaluation of its charter;
    • Receive comments from all directors and report to the Board an assessment of the Board's performance, to be discussed with the full Board following the end of each fiscal year; and
    • Review and reassess the adequacy of the Corporate Governance Principles of the Company and recommend any proposed changes to the Board for approval.

Exhibit A

to the Nominating and Governance Committee Charter

Director Qualification Standards

The Nominating and Governance Committee, with the Board of Directors, annually reviews the personal characteristics and professional competencies required of Board Members. The Nominating and Governance Committee and the Board have determined that a director should have the following characteristics:

  • Comprehension of the Company's strategic goals and leadership to guide the Company towards the accomplishment of those goals;
  • A history of conducting their personal and professional affairs with the utmost integrity and observing the highest standards of values, character and ethics;
  • Time availability for in-person or telephonic participation in Board or Committee meetings, as well as the Annual Shareholder Meeting;
  • Willingness to demand that the Company's officers and employees operate with honest and ethical conduct throughout the Company;
  • Knowledge of, and experience with at least some of:
    • facilities, loans and securities, including any lending and financing activities related thereto;
    • public company regulations imposed by state and federal governmental authorities and relevant market exchanges;
    • the major geographic locations within which the Company operates or plans to operate;
    • sound business practices;
    • accounting and financial reporting;
    • strategic human capital management; and
    • one or more of the principal lines of business in which the Company is engaged; and,
  • Ability to satisfy criteria for independence established by the relevant governmental authorities, Securities and Exchange Commission and/or relevant Stock Exchange, as they may be amended from time to time.

Exhibit B

to the Nominating and Governance Committee Charter Shareholder Nominations

The Nominating and Governance Committee will consider any candidate recommended by a shareholder. Only persons who are nominated in accordance with the Company Bylaws will be eligible for election as directors.

To be in proper written form, a stockholder's notice to the Secretary or the Committee must:

  1. Set forth as to each person whom the stockholder proposes to nominate for election as a director
    1. the name, age, business address and residence address of the nominee;
    2. the principal occupation or employment of the nominee,
    3. the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the nominee, and
    4. any other information relating to the nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities and Exchange Act of 1934, as amended (the ýýýExchange Actýýý), and the rules and regulations promulgated thereunder; and
  2. set forth as to the stockholder giving the notice
    1. the name and record address of such stockholder,
    2. the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder,
    3. a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination or nominations are to be made by such stockholder,
    4. a representation that such stockholder intends to appear in person or by proxy at the annual meeting to nominate the persons named in the notice, and
    5. any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a signed written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
  3. In making its determination whether to recommend that the Board nominates a candidate who had been recommended by a shareholder, the Nominating and Governance Committee will consider, among other things,
    1. the appropriateness of adding another director to the Board, or of replacing a currently sitting director, and
    2. the candidate's background and qualifications.

The Nominating and Governance Committee will conduct an independent investigation, review and evaluation of the background and qualifications of a candidate recommended by a shareholder and request an interview with the candidate where appropriate. The Nominating and Governance Committee will not determine whether to recommend that the Board nominate a candidate until the Committee completes what it believes to be a reasonable investigation, even if that delays the recommendation until after it is too late for the candidate to be nominated with regard to a particular meeting of stockholders. When the Nominating and Governance Committee determines not to recommend that the Board nominate a candidate, or the Board determines to nominate or not to nominate a candidate, the Nominating and Governance Committee will notify the recommending shareholder and the candidate of the determination. The decision by the Nominating and Governance Committee whether or not to recommend a nominee by a shareholder for election is entirely within the sole and unlimited discretion of the Committee.

Compensation Committee Charter

Role

The Compensation Committee of the Board of Directors (the "Committee") of DayStar Technologies, Inc. (the "Company") has the responsibility to develop criteria and goals for, and review and approve, the compensation of the Company's officers and directors, including but not limited to, management incentive and employee incentive programs . The Committee also develops and establishes equity and other benefit plans, and reviews and establishes director compensation.

Membership

The Committee is composed of a minimum of three independent (as defined by applicable laws, regulations, and listing requirements) non-employee, outside (as defined by Rule 16b of the Securities and Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code) directors as appointed by the Board of Directors. The Board may designate one or more independent directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee.

Operations

The Committee meets at least three times each year. The Committee will, at its discretion, meet at each regularly scheduled meeting in executive session without Company management present. Meetings and actions of the Committee will be governed by, and held and taken in accordance with, the provisions of Section 4.5 of the Company's Amended and Restated Bylaws. The Chairperson of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over Committee meetings, making Committee assignments and reporting the Committee's actions to the Board. The Committee shall keep written minutes of its meetings, which shall be recorded or filed with the books and records of the Company. Any member of the Board shall be provided with copies of such Committee minutes if requested. The Company's President or Chief Executive Officer will not be present at any meeting in which deliberations or voting on the President and Chief Executive Officer's compensation takes place.

Authority

The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has the sole authority to retain, compensate and terminate consultants, legal counsel and other advisors to assist the Committee in fulfilling its responsibilities, including the authority to negotiate and approve the fees and retention terms. The Committee shall have authority to delegate responsibilities listed herein to subcommittees of the Committee if the Committee determines such delegation would be in the best interest of the Company. The Committee may ask members of management or others whose advice and counsel are relevant to address the issues then being considered by the Committee. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.

The Compensation Committee, in order to assist the Board in the discharge of its fiduciary responsibilities relating to the compensation of the executives and other key employees of the Company, will:

  1. Review and approve the Company's compensation policies;
  2. Review and approve the Company's incentive compensation program, plans and awards;
  3. Administer the Company's incentive plans and other stock or stock-based plans;
  4. Review and recommend for approval by the Board general employee compensation and benefit plans on an as-needed basis; and
  5. Undertake such other specific duties as the Board of Directors may from time-to-time prescribe.

Responsibilities

The principal responsibilities of the Committee include:

  • Periodically reviewing and approving compensation to be awarded to the Chief Executive Officer and other officers. Periodically assessing whether total compensation paid to the Company's principal officers and other key employees is reasonable to ensure (a) the attraction and retention of executives, (b) the motivation of executives to achieve the Company's long-term business objectives, and (c) the alignment of the interests of key leadership with the long-term interests of the Company's shareholders.
  • Assist the Board in establishing CEO annual goals and objectives, and consider the results of the CEO performance review conducted by the Nominating and Governance Committee in recommending CEO compensation to the other independent members of the Board for approval and consistent with the Company's compensation plan. Review, approve and evaluate achievement of performance goals and objectives by the Chief Executive Officer and other officers in connection with these officers' cash and equity compensation.
  • Review trends in executive compensation, oversee the development of new compensation plans, and when necessary, approve the revision of existing plans.
  • Make recommendations to the Board of Directors with respect to amendments to the Equity Incentive Plans and Management Incentive Plans of the Company and changes in the terms, vesting, qualifications and number of shares reserved for issuance thereunder.
  • Review and approve compensation packages for new executive officers and termination packages for executive officers.
  • Establish, administer and review compensatory benefit plans for executive officers and directors.
  • Recommend Board or stockholder approval of incentive compensation and equity-based plans.
  • Periodically review the compensation paid to non-employee directors and make recommendations to the Board for any adjustments. No member of the Committee will act to fix his or her own compensation except for uniform compensation to directors for their services as directors.
  • Monitor the regulatory compliance of the Equity Incentive Plan, or any other benefit plan.
  • Prepare, review and approve public disclosure related to compensation of Company executives.
  • Prepare reports conforming to the Securities and Exchange Commission's requirements, to be included as the Committee's annual executive compensation report in the Company's proxy statement filed with the SEC.
  • Obtain or perform an annual evaluation of the Committee's performance and make applicable recommendations.