**SECURITIES
      PURCHASE AGREEMENT**





This
      Securities Purchase Agreement (this “ Agreement ”)
      is
      dated as of August 9, 2006, among SpatiaLight, Inc., a New York corporation
      (the
“ Company ”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “ Purchaser ”
and
      collectively the “ Purchasers ”).





WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”)
      and Rule 506 promulgated thereunder, the Company desires to issue and sell
      to
      each Purchaser, and each Purchaser, severally and not jointly, desires to
      purchase from the Company, securities of the Company as more fully described
      in
      this Agreement.





NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Purchaser agree as
      follows:





ARTICLE
      I.


DEFINITIONS





1.1  Definitions .
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings indicated in this Section
      1.1:





“ Action ”
shall
      have the meaning ascribed to such term in Section 3.1(j).





“ Affiliate ”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person as such
      terms are used in and construed under Rule 144. With respect to a Purchaser,
      any
      investment fund or managed account that is managed on a discretionary basis
      by
      the same investment manager as such Purchaser will be deemed to be an Affiliate
      of such Purchaser.





“ Closing ”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.





“ Closing
      Date ”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.





“ Closing
      Price ”
means
      on any particular date (a) the last reported closing bid price per share of
      Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
      at 4:15 PM (New York time)), or (b) if there is no such price on such date,
      then
      the closing bid price on the Trading Market on the date nearest preceding such
      date (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if
      the Common Stock is not then listed or quoted on the Trading Market and if
      prices for the Common Stock are then reported in the “pink sheets” published by
      the National Quotation Bureau Incorporated (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported, or (d) if the shares of Common Stock
      are not then publicly traded the fair market value of a share of Common Stock
      as
      determined by an appraiser selected in good faith by the Purchasers of a
      majority in interest of the Shares then outstanding.





**1**





“ Commission ”
means
      the U.S. Securities and Exchange Commission.





“ Common
      Stock ”
means
      the common shares of the Company, par value $0.01 per share, and any other
      class
      of securities into which such securities may hereafter have been reclassified
      or
      changed into.





“ Common
      Stock Equivalents ”
means
      any securities of the Company or the Subsidiaries which would entitle the holder
      thereof to acquire at any time Common Stock, including, without limitation,
      any
      debt, preferred shares, rights, options, warrants or other instrument that
      is at
      any time convertible into or exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.





“ Company
      Counsel ”
means
      Bryan Cave LLP.





“ Disclosure
      Schedules ”
means
      the Disclosure Schedules of the Company delivered concurrently
      herewith.





“ Effective
      Date ”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.





“ Evaluation
      Date ”
shall
      have the meaning ascribed to such term in Section 3.1(r).





“ Exchange
      Act ”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.





“ Exempt
      Issuance ”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      by a
      majority of the non-employee members of the Board of Directors of the Company
      or
      a majority of the members of a committee of non-employee directors established
      for such purpose, (b) securities upon the exercise or exchange of or conversion
      of any Securities issued hereunder and/or securities exercisable or exchangeable
      for or convertible into shares of Common Stock issued and outstanding on the
      date of this Agreement, provided that such securities have not been amended
      since the date of this Agreement to increase the number of such securities
      or to
      decrease the exercise, exchange or conversion price of any such securities,
      except in accordance with the anti-dilution provisions of such securities,
      and
      (c) securities issued pursuant to acquisitions or strategic transactions,
      provided any such issuance shall only be to a Person which is, itself or through
      its subsidiaries, an operating company in which the Company receives benefits
      in
      addition to the investment of funds, but shall not include a transaction in
      which the Company is issuing securities primarily for the purpose of raising
      capital or to an entity whose primary business is investing in
      securities.





**2**


“ GAAP ”
shall
      have the meaning ascribed to such term in Section 3.1(h).





“ Intellectual
      Property Rights ”
shall
      have the meaning ascribed to such term in Section 3.1(o).





“ Liens ”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.





“ Material
      Adverse Effect ”
shall
      have the meaning assigned to such term in Section 3.1(b).





“ Material
      Permits ”
shall
      have the meaning ascribed to such term in Section 3.1(m).





“ Per
      Share Purchase Price ”
equals
      $2.25, subject to adjustment for reverse and forward stock splits, stock
      dividends, stock combinations and other similar transactions of the Common
      Stock
      that occur after the date of this Agreement.





“ Person ”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.





“ Proceeding ”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.





“ Purchaser
      Party ”
shall
      have the meaning ascribed to such term in Section 4.9.





“ Registration
      Rights Agreement ”
means
      the Registration Rights Agreement, dated the date hereof, among the Company
      and
      the Purchasers, in the form of Exhibit
      A attached
      hereto.





“ Registration
      Statement ”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchasers of the Shares.





“ Rule
      144 ”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.





“SEC
      Filings” shall
      have the meaning ascribed to such term in Section 3.1.





“ SEC
      Reports ”
shall
      have the meaning ascribed to such term in Section 3.1(h).





“ Securities ”
means
      the Shares.





“ Securities
      Act ”
means
      the Securities Act of 1933, as amended.





**3**





“ Shareholder
      Approval ”
means
      such approval as may be required by the applicable rules and regulations of
      the
      Nasdaq SmallCap Market (or any successor entity) from the shareholders of the
      Company with respect to the transactions contemplated by the Transaction
      Documents, including the issuance of all of the Shares in excess of 19.99%
      of
      the issued and outstanding Common Stock on the Closing Date.





“ Shares ”
means
      the shares of Common Stock issued or issuable to each Purchaser pursuant to
      this
      Agreement.





“ Short
      Sales ”
shall
      include all “short sales” as defined in Rule 200 of Regulation SHO under the
      Exchange Act.





“ Subscription
      Amount ”
means,
      as to each Purchaser, the aggregate amount to be paid for Shares purchased
      hereunder as specified below such Purchaser’s name on the signature page of this
      Agreement and next to the heading “Subscription Amount”, in United States
      Dollars and in immediately available funds.





“Subsequent
      Offering Notice” shall
      have the meaning ascribed to such term in Section 4.13.





“ Subsidiary ”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a) .





“ Trading
      Day ”
means
      a
      day on which the Common Stock is traded on a Trading Market.





“ Trading
      Market ”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Nasdaq SmallCap Market, the American
      Stock Exchange, the New York Stock Exchange, or the Nasdaq National
      Market.





“ Transaction
      Documents ”
means
      this Agreement and the Registration Rights Agreement and any other documents
      or
      agreements executed in connection with the transactions contemplated
      hereunder.





ARTICLE
      II.


PURCHASE
      AND SALE





2.1  Closing.
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, concurrent with the execution and delivery of this Agreement by the
      parties hereto, the Company agrees to sell, and each Purchaser agrees to
      purchase in the aggregate, severally and not jointly, 761,500 Shares. Upon
      the
      acceptance and execution of this Agreement by the Company, the Company shall
      deliver to each Purchaser their respective Shares as determined pursuant to
      Section 2.2(a) and the other items set forth in Section 2.2. Immediately upon
      receipt of the Shares, each Purchaser will deliver to the Company via wire
      transfer or a certified check immediately available funds equal to their
      Subscription Amount. Upon satisfaction of the conditions set forth in Sections
      2.2 and 2.3, the Closing shall occur at the offices of the Bryan Cave LLP,
      1290
      Avenue of the Americas, New York, NY, or such other location as the parties
      shall mutually agree.





**4**





2.2  Deliveries





(a)  On
      the
      Closing Date, the Company shall deliver or cause to be delivered to the
      Purchasers the following:





(i)  this
      Agreement duly executed by the Company;





(ii)  a
      certificate evidencing a whole number of Shares equal to such Purchaser’s
      Subscription Amount divided by the Per Share Purchase Price, registered in
      the
      name of such Purchaser or the nominee name thereof; and





(iii)  the
      Registration Rights Agreement duly executed by the Company.





(b)  Within
      ten (10) Trading Days after the Closing Date, the Company shall deliver or
      cause
      to be delivered to the Purchasers a legal opinion in the form agreed to by
      the
      Purchasers, the Company and Company Counsel .





(c)  On
      the
      Closing Date, each Purchaser shall deliver or cause to be delivered to the
      Company the following:





(i)  this
      Agreement duly executed by such Purchaser;





(ii)  the
      Registration Rights Agreement duly executed by such Purchaser.





(iii)  immediately
      upon receipt of the Shares, such Purchaser’s Subscription Amount by wire
      transfer to the account as specified in writing by the Company.





2.3  Closing
      Conditions.





(a)  The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions being met:





(i)  the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Purchasers contained herein;





(ii)  all
      obligations, covenants and agreements of the Purchasers required to be performed
      at or prior to the Closing Date shall have been performed; and





(iii)  the
      delivery by the Purchasers of the items set forth in Section 2.2(c) of this
      Agreement.





**5**





(b)  The
      respective obligations of the Purchasers hereunder in connection with the
      Closing are subject to the following conditions being met:





(i)  the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained herein;





(ii)  all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed;





(iii)  the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement;





(iv)  there
      shall have been no Material Adverse Effect with respect to the Company between
      the date hereof through the Closing Date; and





(v)  from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission (except for any suspension of trading of limited
      duration agreed to by the Company, which suspension shall be terminated prior
      to
      the Closing), and, at any time prior to the Closing Date, trading in securities
      generally as reported by Bloomberg Financial Markets shall not have been
      suspended or limited, or minimum prices shall not have been established on
      securities whose trades are reported by such service, or on any Trading Market,
      nor shall a banking moratorium have been declared either by the United States
      or
      New York State authorities nor shall there have occurred any material outbreak
      or escalation of hostilities or other national or international calamity of
      such
      magnitude in its effect on, or any material adverse change in, any financial
      market which, in each case, in the reasonable judgment of each Purchaser, makes
      it impracticable or inadvisable to purchase the Shares at the
      Closing.





ARTICLE
      III.


REPRESENTATIONS
      AND WARRANTIES





3.1  Representations
      and Warranties of the Company. Except
      as
      set forth under the corresponding section of the Disclosure Schedules and except as disclosed in the Company’s filings with the Commission
      made pursuant to the Securities Act or the Exchange Act (the “SEC
      Filings ”) , which
      Disclosure Schedules and SEC
      Filings shall be
      deemed a part hereof, the Company hereby makes the representations and
      warranties set forth below to each Purchaser :





(a)  Subsidiaries .
      The
      Company has no direct or indirect Subsidiaries other than as specified in the
      SEC Reports. Except as disclosed in Schedule 3.1(a), the Company owns, directly
      or indirectly, all of the capital stock of each Subsidiary free and clear of
      any
      and all Liens, and all the issued and outstanding shares of capital stock of
      each Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights.





**6**





(b)  Organization
      and Qualification .
      The
      Company and each Subsidiary are duly incorporated or otherwise organized,
      validly existing and in good standing under the laws of the jurisdiction of
      its
      incorporation or organization (as applicable), with the requisite power and
      authority to own and use its properties and assets and to carry on its business
      as currently conducted. Neither the Company nor any Subsidiary is in violation
      of any of the provisions of its respective certificate or articles of
      incorporation, bylaws or other organizational or charter documents. Each of
      the
      Company and each Subsidiary is duly qualified to conduct its respective
      businesses and are in good standing as a foreign corporation or other entity
      in
      each jurisdiction in which the nature of the business conducted or property
      owned by it makes such qualification necessary, except where the failure to
      be
      so qualified or in good standing, as the case may be, will not, individually
      or
      in the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT" means except as
      disclosed in the Company's SEC Reports, the financial statements and notes
      thereto furnished to the Purchasers, or otherwise disclosed herein or in the
      Disclosure Schedules or Exhibits hereto, any material adverse effect on the
      business, properties, assets, operations, results of operations, condition
      (financial or otherwise) or prospects of the Company and its Subsidiaries,
      taken
      as a whole, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents.





(c)  Authorization;
      Enforcement .
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations thereunder. The execution and
      delivery of each of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of the Company and no further
      action is required by the Company in connection therewith. Each Transaction
      Document has been (or upon delivery will have been) duly executed by the Company
      and, when delivered in accordance with the terms hereof, will constitute the
      valid and binding obligation of the Company enforceable against the Company
      in
      accordance with its terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
      application.





(d)  No
      Conflicts . Except
      as
      set forth in Schedule 3.1(d), the execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated thereby
      do
      not and will not (i) conflict with or violate any provision of the Company’s or
      any Subsidiary’s certificate or articles of incorporation, bylaws or other
      organizational or charter documents, or (ii) conflict with, or constitute a
      default (or an event that with notice or lapse of time or both would become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or both)
      of,
      any agreement, credit facility, debt or other instrument (evidencing a Company
      or Subsidiary debt or otherwise) or other understanding to which the Company
      or
      any Subsidiary is a party or by which any property or asset of the Company
      or
      any Subsidiary is bound or affected, or (iii) result in a violation of any
      law,
      rule, regulation, order, judgment, injunction, decree or other restriction
      of
      any court or governmental authority to which the Company or a Subsidiary is
      subject (including federal and state securities laws and regulations), or by
      which any property or asset of the Company or a Subsidiary is bound or affected;
      except in the case of each of clauses (ii) and (iii), such as could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect.





**7**





(e)  Filings,
      Consents and Approvals .
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) the filing with the Commission of one
      or
      more Registration Statements in accordance with the requirements of the
      Registration Rights Agreement, (ii) filings required by state securities laws,
      (iii) the filing of a Notice of Sale of Securities on Form D with the Commission
      under Regulation D of the Securities Act, and (iv) those that have been made
      or
      obtained prior to the date of this Agreement.





(f)  Issuance
      of the Securities .
      The
      Securities have been duly authorized and, when issued and paid for in accordance
      with the Transaction Documents, will be duly and validly issued, fully paid
      and
      nonassessable, free and clear of all Liens. The Company has reserved from its
      duly authorized capital stock the shares of Common Stock issuable pursuant
      to
      this Agreement in order to issue the Shares.





(g)  Capitalization .
      The
      number of shares and type of all authorized, issued and outstanding capital
      stock of the Company, and all shares of Common Stock reserved for issuance
      under
      the Company’s various option and incentive plans, is specified in the SEC
      Reports. Except as specified in the SEC Reports, no securities of the Company
      are entitled to preemptive or similar rights, and no Person has any right of
      first refusal, preemptive right, right of participation, or any similar right
      to
      participate in the transactions contemplated by the Transaction Documents.
      Except as specified in the SEC Reports, there are no outstanding options,
      warrants, scrip rights to subscribe to, calls or commitments of any character
      whatsoever relating to, or securities, rights or obligations convertible into
      or
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock, or contracts, commitments, understandings or
      arrangements by which the Company or any Subsidiary is or may become bound
      to
      issue additional shares of Common Stock, or securities or rights convertible
      or
      exchangeable into shares of Common Stock. The issue and sale of the Securities
      will not, immediately or with the passage of time, obligate the Company to
      issue
      shares of Common Stock or other securities to any Person (other than the
      Investors) and will not result in a right of any holder of Company securities
      to
      adjust the exercise, conversion, exchange or reset price under such
      securities.





**8**


(h)  SEC
      Reports; Financial Statements .
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the twelve months preceding the date hereof (or such shorter period as
      the
      Company was required by law to file such reports) (the foregoing materials
      being
      collectively referred to herein as the “SEC Reports” and, together with the
      Schedules to this Agreement (if any), the “Disclosure Materials”) on a timely
      basis or has timely filed a valid extension of such time of filing and has
      filed
      any such SEC Reports prior to the expiration of any such extension. Except
      as
      disclosed Schedule 3.1(h), as of their
      respective dates, the SEC Reports complied in all material respects with the
      requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company included
      in the SEC Reports comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing. Such financial statements have
      been
      prepared in accordance with United States generally accepted accounting
      principals applied on a consistent basis during the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto, and fairly present in all material respects the financial position
      of
      the Company and its consolidated Subsidiaries as of and for the dates thereof
      and the results of operations and cash flows for the periods then ended,
      subject, in the case of unaudited statements, to normal, immaterial, year-end
      audit adjustments.





(i)  Material
      Changes .
      Since
      the date of the latest audited financial statements included in the SEC Reports,
      except as specifically disclosed in the SEC Reports subsequent financial
      statements, or otherwise disclosed herein or on the schedules or exhibits
      thereto, (i) there has been no event, occurrence or development that has had
      or
      that could reasonably be expected to result in a Material Adverse Effect, (ii)
      the Company has not incurred any liabilities (contingent or otherwise) other
      than (A) trade payables, accrued expenses and other liabilities incurred in
      the
      ordinary course of business consistent with past practice and (B) liabilities
      not required to be reflected in the Company’s financial statements pursuant to
      GAAP or required to be disclosed in the SEC Reports, which are either not
      material or are included in the Disclosure Schedules, (iii) the Company has
      not
      altered its method of accounting except in accordance with GAAP or the identity
      of its auditors, (iv) the Company has not declared or made any dividend or
      distribution of cash or other property to its stockholders or purchased,
      redeemed or made any agreements to purchase or redeem any shares of its capital
      stock, and (v) the Company has not issued any equity securities to any officer,
      director or Affiliate, except pursuant to existing Company stock option plans.
      The Company does not have pending before the Commission any request for
      confidential treatment of information.





(j)  Litigation .
      There
      is no action, suit, proceeding, investigation or notice of violation (“Action”)
      which (i) adversely
      affects or challenges the legality, validity or enforceability of any of the
      Transaction Documents or the Securities or (ii) except as specifically disclosed
      in the SEC Reports and
      Schedule 3(j) ,
      could,
      if there were an unfavorable decision, individually or in the aggregate, have
      or
      reasonably be expected to result in a Material Adverse Effect. Neither the
      Company nor any Subsidiary, nor any director or officer thereof (in his or
      her
      capacity as such), is or has been the subject of any Action involving a claim
      of
      violation of or liability under federal or state securities laws or a claim
      of
      breach of fiduciary duty, except as specifically disclosed in the SEC Reports.
      There has not been, and to the knowledge of the Company, there is not pending
      any investigation by the Commission involving the Company or any current or
      former director or officer of the Company (in his or her capacity as such).
      The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.





**9**





(k)  Labor
      Relations .
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company.





(l)  Compliance .
      Neither
      the Company nor any Subsidiary (i) is ,
      except
      as disclosed in Schedule 3.1(l), in
      default under or in violation of (and no event has occurred that has not been
      waived that, with notice or lapse of time or both, would result in a default
      by
      the Company or any Subsidiary under), nor has the Company or any Subsidiary
      received notice of a claim that it is in default under or that it is in
      violation of, any indenture, loan or credit agreement or any other agreement
      or
      instrument to which it is a party or by which it or any of its properties is
      bound (whether or not such default or violation has been waived), (ii) is in
      violation of any order of any court, arbitrator or governmental body, or (iii)
      is or has been in violation of any statute, rule or regulation of any
      governmental authority, including without limitation all foreign, federal,
      state
      and local laws relating to taxes, environmental protection, occupational health
      and safety, product quality and safety and employment and labor matters, except
      in each case as could not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect. The Company is in compliance
      with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
      and the rules and regulations thereunder, that are applicable to it, except
      where such noncompliance could not have or reasonably be expected to result
      in a
      Material Adverse Effect.





(m)  Regulatory
      Permits .
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect (“Material Permit”), and neither the Company nor any
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such permits.





(n)  Title
      to Assets .
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to their respective businesses
      and
      good and marketable title in all personal property owned by them that is
      material to their respective businesses, in each case free and clear of all
      Liens, except for Liens as do not materially affect the value of such property
      and do not materially interfere with the use made and proposed to be made of
      such property by the Company and the Subsidiaries. Any real property and
      facilities held under lease by the Company and the Subsidiaries are held by
      them
      under valid, subsisting and enforceable leases of which the Company and the
      Subsidiaries are in compliance, except as could not, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.





**10**





(o)  Patents
      and Trademarks .
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      copyrights, licenses and other similar rights that are necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports and which the failure to so have could, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse Effect
      (collectively, the “Intellectual Property Rights”). Neither the Company nor any
      Subsidiary has received a written notice that the Intellectual Property Rights
      used by the Company or any Subsidiary violates or infringes upon the rights
      of
      any Person. Except as set forth in the SEC Reports, to the knowledge of the
      Company, all such Intellectual Property Rights are enforceable and there is
      no
      existing infringement by another Person of any of the Intellectual Property
      Rights.





(p)  Insurance .
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as management
      of the Company believes are prudent. The Company has no reason to believe that
      it will not be able to renew its and the Subsidiaries’ existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business on terms
      consistent with market for the Company’s and such Subsidiaries’ respective lines
      of business.





(q)  Transactions
      With Affiliates and Employees .
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner.





(r)  Internal
      Accounting Controls .
      Except
      as disclosed in **** Schedule
      3.1(r) **,** the
      Company and the Subsidiaries maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization, and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. Except as disclosed in Schedule
      3.1(r) ,
      the
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
      disclosure controls and procedures to ensure that material information relating
      to the Company, including its Subsidiaries, is made known to the certifying
      officers by others within those entities, particularly during the period in
      which the Company’s Form 10-K or 10-Q, as the case may be, is being prepared.
      The Company’s certifying officers have evaluated the effectiveness of the
      Company’s controls and procedures in accordance with Item 307 of Regulation S-K
      under the Exchange Act for the Company’s most recently ended fiscal quarter or
      fiscal year-end (such date, the “Evaluation Date”). The Company presented in its
      most recently filed Form 10-K or Form 10-Q the conclusions of the certifying
      officers about the effectiveness of the disclosure controls and procedures
      based
      on their evaluations as of the Evaluation Date. Since the Evaluation Date,
      there
      have been no significant changes in the Company’s internal controls (as such
      term is defined in Item 308(c) of Regulation S-K under the Exchange Act) or,
      to
      the Company’s knowledge, in other factors that could significantly affect the
      Company’s internal controls.





**11**





(s)  Certain
      Fees .
      Except
      as described in Schedule
      3.1(s) ,
      no
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement. The Investors shall have no obligation with
      respect to any fees or with respect to any claims (other than such fees or
      commissions owed by an Investor pursuant to written agreements executed by
      such
      Investor which fees or commissions shall be the sole responsibility of such
      Investor) made by or on behalf of other Persons for fees of a type contemplated
      in this Section that may be due in connection with the transactions contemplated
      by this Agreement.





(t)  Certain
      Registration Matters .
      Assuming the accuracy of the Investors’ representations and warranties, no
      registration under the Securities Act is required for the offer and sale of
      the
      Shares by the Company to the Investors under the Transaction Documents. The
      Company is eligible to register its Common Stock for resale by the Investors
      under Form S-3 or Form S-1 promulgated under the Securities Act. Except as
      specified in Schedule
      3.1(t) ,
      the
      Company has not granted or agreed to grant to any person any rights (including
      “piggy ‐ back”
      registration rights) to have any securities of the Company registered with
      the
      Commission or any other governmental authority that have not been
      satisfied.





(u)  Listing
      and Maintenance Requirements .
      Except
      as specified in the SEC Reports, the Company has not, in the two years preceding
      the date hereof, received notice from any Trading Market to the effect that
      the
      Company is not in compliance with the listing or maintenance requirements
      thereof. The Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with the listing and
      maintenance requirements for continued listing of the Common Stock on the
      Trading Market on which the Common Stock is currently listed or quoted. The
      issuance and sale of the Securities under the Transaction Documents does not
      contravene the rules and regulations of the Trading Market on which the Common
      Stock is currently listed or quoted, and no approval of the shareholders of
      the
      Company thereunder is required for the Company to issue and deliver to the
      Investors the Securities contemplated by Transaction Documents.





**12**


(v)  Investment
      Company. The
      Company is not, and is not an Affiliate of, and immediately following the
      Closing will not have become, an “investment company” within the meaning of the
      Investment Company Act of 1940, as amended.





(w)  Application
      of Takeover Protections .
      The
      Company has taken all necessary action, if any, in order to render inapplicable
      any control share acquisition, business combination, poison pill (including
      any
      distribution under a rights agreement) or other similar anti ‐ takeover
      provision under the Company’s Certificate of Incorporation (or similar charter
      documents) or the laws of its state of incorporation that is or could become
      applicable to the Investors as a result of the Investors and the Company
      fulfilling their obligations or exercising their rights under the Transaction
      Documents, including without limitation the Company’s issuance of the Securities
      and the Investors’ ownership of the Securities.





(x)  No
      Additional Agreements .
      The
      Company does not have any agreement or understanding with any Investor with
      respect to the transactions contemplated by the Transaction Documents other
      than
      as specified in the Transaction Documents.





(y)  Foreign
      Corrupt Practices. Neither the Company, nor to the knowledge of the Company,
      any
      agent or other person acting on behalf of the Company, has (i) directly or
      indirectly, used any funds for unlawful contributions, gifts, entertainment
      or
      other unlawful expenses related to foreign or domestic political activity,
      (ii)
      made any unlawful payment to foreign or domestic government officials or
      employees or to any foreign or domestic political parties or campaigns from
      corporate funds, (iii) failed to disclose fully any contribution made by the
      Company (or made by any person acting on its behalf of which the Company is
      aware) which is in violation of law, or (iv) violated in any material respect
      any provision of the Foreign Corrupt Practices Act of 1977, as
      amended.





(z)  Acknowledgment
      Regarding Purchasers' Purchase of Securities .
      The
      Company acknowledges and agrees that each of the Purchasers is acting solely
      in
      the capacity of an arm's length purchaser with respect to the Transaction
      Documents and the transactions contemplated hereby. The Company further
      acknowledges that no Purchaser is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to this Agreement and
      the
      transactions contemplated hereby and any advice given by any Purchaser or any
      of
      their respective representatives or agents in connection with this Agreement
      and
      the transactions contemplated hereby is merely incidental to the Purchasers'
      purchase of the Securities. The Company further represents to each Purchaser
      that the Company's decision to enter into this Agreement has been based solely
      on the independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.





(aa)  Manipulation
      of Price .
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of the
      Securities, or (iii) paid or agreed to pay to any person any compensation for
      soliciting another to purchase any other securities of the Company.





**13**





(bb)  Disclosure . The
      Company confirms that neither it nor any Person acting on its behalf has
      provided any Investor or its respective agents or counsel with any information
      that the Company believes constitutes material, non-public information except
      insofar as the existence and terms of the proposed transactions hereunder may
      constitute such information. The Company understands and confirms that the
      Investors will rely on the foregoing representations and covenants in effecting
      transactions in securities of the Company. All disclosure provided to the
      Investors regarding the Company, its business and the transactions contemplated
      hereby, furnished by or on behalf of the Company (including the Company’s
      representations and warranties set forth in this Agreement) are true and correct
      and do not contain any untrue statement of a material fact or omit to state
      any
      material fact necessary in order to make the statements made therein, in light
      of the circumstances under which they were made, not misleading.





3.2  Representations
      and Warranties of the Purchasers .
      Each
      Purchaser hereby, for itself and for no other Purchaser, represents and warrants
      as of the date hereof and as of the Closing Date to the Company as
      follows:





(a)  Organization;
      Authority .
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The execution, delivery and
      performance by such Purchaser of the transactions contemplated by this Agreement
      have been duly authorized by all necessary corporate or similar action on the
      part of such Purchaser. Each Transaction Document to which it is a party has
      been duly executed by such Purchaser, and when delivered by such Purchaser
      in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of such Purchaser, enforceable against it in accordance with its
      terms, except (i) as limited by general equitable principles and applicable
      bankruptcy, insolvency, reorganization, moratorium and other laws of general
      application affecting enforcement of creditors’ rights generally, (ii) as
      limited by laws relating to the availability of specific performance, injunctive
      relief or other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.





(b)  Own
      Account .
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Securities as principal for its own account and not
      with a view to or for distributing or reselling such Securities or any part
      thereof in violation of the Securities Act or any applicable state securities
      law, has no present intention of distributing any of such Securities in
      violation of the Securities Act or any applicable state securities law and
      has
      no arrangement or understanding with any other persons regarding the
      distribution of such Securities (this representation and warranty not limiting
      such Purchaser’s right to sell the Securities pursuant to the Registration
      Statement or otherwise in compliance with applicable federal and state
      securities laws) in violation of the Securities Act or any applicable state
      securities law. Such Purchaser is acquiring the Securities hereunder in the
      ordinary course of its business. Such Purchaser does not have any agreement
      or
      understanding, directly or indirectly, with any Person to distribute any of
      the
      Securities.





**14**





(c)  Purchaser
      Status .
      At the
      time such Purchaser was offered the Securities, it was, and at the date hereof
      it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1),
      (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
      institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
      Purchaser is not required to be registered as a broker-dealer under Section
      15
      of the Exchange Act.





(d)  Experience
      of Such Purchaser .
      Such
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of such
      investment.





(e)  General
      Solicitation .
      Such
      Purchaser is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities published in
      any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or any other general solicitation or general
      advertisement.





(f)  Short
      Sales and Confidentiality Prior To The Date Hereof .
      Other
      than the transaction contemplated hereunder, such Purchaser has not directly
      or
      indirectly, nor has any Person acting on behalf of or pursuant to any
      understanding with such Purchaser, executed any disposition, including Short
      Sales , in
      the securities of the Company within
      the fifteen months prior to the Closing Date. Each Purchaser has maintained the confidentiality of all disclosures made to it
      in
      connection with this transaction (including the existence and terms of this
      transaction).





The
      Company acknowledges and agrees that each Purchaser does not make or has not
      made any representations or warranties with respect to the transactions
      contemplated hereby other than those specifically set forth in this Section
      3.2.





ARTICLE
      IV.


OTHER
      AGREEMENTS OF THE PARTIES





4.1  Transfer
      Restrictions.





(a)  The
      Securities may only be disposed of in compliance with state and federal
      securities laws. In connection with any transfer of Securities other than
      pursuant to an effective registration statement or Rule 144, to the Company,
      or
      to an affiliate of a Purchaser or in connection with a pledge as contemplated
      in
      Section 4.1(b), the Company may require the transferor thereof to provide to
      the
      Company an opinion of counsel selected by the transferor and reasonably
      acceptable to the Company, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Securities under the Securities
      Act. As a condition of transfer, any such transferee shall agree in writing
      to
      be bound by the terms of this Agreement and shall have the rights of a Purchaser
      under this Agreement and the Registration Rights Agreement.





**15**





(b)  The
      Purchasers agree to the imprinting, so long as is required by this Section
      4.1(b), of a legend on any of the Securities in the following form:





THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
      SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.





The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured Securities to the
      pledgees or secured parties. Such a pledge or transfer would not be subject
      to
      approval of the Company and no legal opinion of legal counsel of the pledgee,
      secured party or pledgor shall be required in connection therewith. Further,
      no
      notice shall be required of such pledge. At the appropriate Purchaser’s expense,
      the Company will execute and deliver such reasonable documentation as a pledgee
      or secured party of Securities may reasonably request in connection with a
      pledge or transfer of the Securities, including, if the Securities are subject
      to registration pursuant to the Registration Rights Agreement, the preparation
      and filing of any required prospectus supplement under Rule 424(b)(3) under
      the
      Securities Act or other applicable provision of the Securities Act to
      appropriately amend the list of Selling Stockholders thereunder.





**16**





(c)  Certificates
      evidencing the Shares shall not contain any legend (including the legend set
      forth in Section 4.1(b)), (i) following a sale or transfer of the Shares
      pursuant to an effective registration statement, or (ii) following any sale
      of
      such Shares pursuant to Rule 144 to any Person who is not an Affiliate of the
      Company, or (iii) if such Shares are eligible for sale under Rule 144(k), or
      (iv) if such legend is not required under applicable requirements of the
      Securities Act (including judicial interpretations and pronouncements issued
      by
      the staff of the Commission). The Company shall cause its counsel to issue
      a
      legal opinion to the Company’s transfer agent promptly after the Effective Date
      if required by the Company’s transfer agent to effect the removal of the legend
      hereunder. The
      Company may not make any notation on its records or give instructions to any
      transfer agent of the Company that enlarge the restrictions on transfer set
      forth in this Section. Certificates for Securities subject to legend removal
      hereunder shall be transmitted by the transfer agent of the Company to the
      Purchasers by crediting the account of the Purchaser’s prime broker or custodian
      with the Depository Trust Company System.





(d)  Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      the
      removal of the restrictive legend from certificates representing Securities
      as
      set forth in this Section 4.1 is predicated upon the Company’s reliance that the
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom.





4.2  Furnishing
      of Information .
      As long
      as any Purchaser owns Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
      the
      Company is not required to file reports pursuant to the Exchange Act, it will
      prepare and furnish to the Purchasers and make publicly available in accordance
      with Rule 144(c) such information as is required for the Purchasers to sell
      the
      Securities under Rule 144. The Company further covenants that it will take
      such
      further action as any holder of Securities may reasonably request, all to the
      extent required from time to time to enable such Person to sell such Securities
      without registration under the Securities Act within the limitation of the
      exemptions provided by Rule 144.





4.3  Integration .
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers or that would be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market such that it would require shareholder approval prior to the
      closing of such other transaction unless shareholder approval is obtained before
      the closing of such subsequent transaction.





4.4  Securities
      Laws Disclosure; Publicity. The Company shall, in compliance with applicable
      securities laws, issue a Current Report on Form 8-K, reasonably acceptable
      to
      each Purchaser, disclosing the material terms of the transactions contemplated
      hereby, and shall attach the Transaction Documents thereto. The Company and
      each
      Purchaser shall consult with each other in issuing any other press releases
      with
      respect to the transactions contemplated hereby. In no event ,
      shall
      the Company be entitled to use the name of the Purchaser or Wellington
      Management Company LLP in any press release without **** such
      Purchaser’s prior
      consent.





**17**





4.5  Shareholder
      Rights Plan. No claim will be made or enforced by the Company or, to the
      knowledge of the Company, any other Person that any Purchaser is an “Acquiring
      Person” under any shareholder rights plan or similar plan or arrangement in
      effect or hereafter adopted by the Company, or that any Purchaser could be
      deemed to trigger the provisions of any such plan or arrangement, by virtue
      of
      receiving Securities under the Transaction Documents or under any other
      agreement between the Company and the Purchasers. The Company shall conduct
      its
      business in a manner so that it will not become subject to the Investment
      Company Act.





4.6  Non-Public
      Information. The Company covenants and agrees that other
      pursuant to Section 4.13, neither
      it nor any other Person acting on its behalf will provide any Purchaser or
      its
      agents or counsel with any information that the Company believes constitutes
      material non-public information, unless prior thereto such Purchaser shall
      have
      executed a written agreement regarding the confidentiality and use of such
      information. The Company understands and confirms that each Purchaser shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the
      Company. With respect to information disclosed in a Subsequent Offering Notice
      (as defined in Section 4.13), each Purchaser covenants that it shall keep
      confidential, shall not act upon or use in any manner (except in accordance
      with
      the terms of Section 4.13), and shall not share or further disclose to any
      other
      party the information disclosed by the Company pursuant to Section 4.13 until
      such information has been publicly disclosed by the
      Company.





4.7  Use
      of
      Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company
      shall use the net proceeds from the sale of the Securities hereunder for working
      capital purposes and not for the satisfaction of any portion of the Company’s
      debt (other than payment of trade payables in the ordinary course of the
      Company’s business and prior practices or regularly scheduled interest payments
      on existing Indebtedness), to redeem any Common Stock or Common Stock
      Equivalents or to settle any outstanding litigation.





4.8  Indemnification
      of Purchasers. Subject to the provisions of this Section 4.8, the Company
      will indemnify and hold each Purchaser and its directors, officers,
      shareholders, members, partners, employees and agents (each, a “Purchaser
      Party”) harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation (collectively, “Losses”) that any such Purchaser Party may suffer
      or incur as a result of or relating to any breach in any material respect of
      any
      of the representations, warranties, covenants or agreements made by the Company
      in this Agreement or in the other Transaction Documents. If any action shall
      be
      brought against any Purchaser Party in respect of which indemnity may be sought
      pursuant to this Agreement, such Purchaser Party shall promptly notify the
      Company in writing, and the Company shall have the right to assume the defense
      thereof with counsel of its own choosing. Any Purchaser Party shall have the
      right to employ separate counsel in any such action and participate in the
      defense thereof, but the fees and expenses of such counsel shall be at the
      expense of such Purchaser Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) in such action there is, in the reasonable opinion
      of
      such separate counsel, a material conflict on any material issue between the
      position of the Company and the position of such Purchaser Party. But in no
      event shall the Company be obligated to bear fees and disbursements of more
      than
      one law firm per Purchaser Party under the provisions of Section 4.9 or
      otherwise. The Company will not be liable to any Purchaser Party under this
      Agreement (i) for any settlement by a Purchaser Party effected without the
      Company’s prior written consent, which shall not be unreasonably withheld or
      delayed; or (ii) to the extent, but only to the extent that a loss, claim,
      damage or liability is attributable to any Purchaser Party’s breach of any of
      the representations, warranties, covenants or agreements made by the applicable
      Purchaser in this Agreement or in the other Transaction Documents.





**18**





4.9  Listing
      of Common Stock. The
      Company hereby agrees to use best efforts to maintain the listing of the Common
      Stock on a Trading Market, and as soon as reasonably practicable following
      the
      Closing (but not later than the earlier of the Effective Date and the first
      anniversary of the Closing Date) to list all of the Shares on such Trading
      Market. The Company further agrees, if the Company applies to have the Common
      Stock traded on any other Trading Market, it will include in such application
      all of the Shares, and will take such other action as is necessary to cause
      all
      of the Shares to be listed on such other Trading Market as promptly as possible.
      The Company will take all action reasonably necessary to continue the listing
      and trading of its Common Stock on a Trading Market and will comply in all
      respects with the Company’s reporting, filing and other obligations under the
      bylaws or rules of the Trading Market.





4.10  Equal
      Treatment of Purchasers. No consideration shall be offered or paid to any
      person to amend or consent to a waiver or modification of any provision of
      any
      of the Transaction Documents unless the same consideration is also offered
      to
      all of the parties to the Transaction Documents. For clarification purposes,
      this provision constitutes a separate right granted to each Purchaser by the
      Company and negotiated separately by each Purchaser, and is intended to treat
      for the Company the Purchasers as a class and shall not in any way be construed
      as the Purchasers acting in concert or as a group with respect to the purchase,
      disposition or voting of Securities or otherwise.





4.11  Short
      Sales and Confidentiality After The Date Hereof. Each Purchaser severally
      and not jointly with the other Purchasers covenants that neither it nor any
      affiliates acting on its behalf or pursuant to any understanding with it will
      execute any Short Sales during the period after the execution
      of this Agreement and
      ending three months after the Closing Date.  Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      until such time as the transactions contemplated by this Agreement are publicly
      disclosed by the Company as described in Section 4.4, such Purchaser will
      maintain, the confidentiality of all disclosures made to it in connection with
      this transaction (including the existence and terms of this transaction). Each
      Purchaser understands and acknowledges, severally and not jointly with any
      other
      Purchaser, that the Commission currently takes the position that coverage of
      short sales of shares of the Common Stock “against the box” prior to the
      Effective Date of the Registration Statement with the Securities is a violation
      of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under
      Section A, of the Manual of Publicly Available Telephone Interpretations, dated
      July 1997, compiled by the Office of Chief Counsel, Division of Corporation
      Finance.





**19**





4.12  Delivery
      of Securities Upon Closing. Immediately upon closing each Purchaser will
      deliver a wire transfer corresponding to its Purchase Amount set forth in the
      signature pages hereto





4.13  Right
      of Participation. For a period of twelve (12) months following the Closing
      Date, each of the Purchasers shall have the aggregate right to participate
      in up
      to 35 %
      of any
      offerings of equity securities or securities convertible into equity securities
      by the Company **** (such
      offering being a “Subsequent Offering”) . The
      Purchasers acknowledge that any right of participation conferred by this Section
      4.13 is subject to all pre-existing rights of participation, rights of first
      offer, rights of first refusal, and other pre-emptive rights that the Company
      may have granted to other Purchasers, and the Company represents and warrants
      that all of such rights have been disclosed in the Company’s SEC Filings. At
      least seven business days prior to the closing of any Subsequent Offering,
      the
      Company shall deliver to each Purchaser, notice (the “Subsequent Offering
      Notice”) of the proposed or intended Subsequent Offering. The Subsequent
      Offering Notice shall (i) identify and describe the securities being offered
      in
      the Subsequent Offering, (ii) describe the price and other terms upon which
      they
      are to be issued, sold, or exchanged, and (iii) set forth the amount of
      securities which are to be issued, sold, or exchanged under the Subsequent
      Offering. In the event that a Purchaser wishes to participate in the Subsequent
      Offering, such Purchaser shall deliver written notice to the Company of such
      Purchaser’s intention to participate within three business days of receipt of
      the Subsequent Offering Notice, and each of the Purchasers acknowledge that
      it
      may participate in the Subsequent Offering only upon the same price and terms
      at
      which the Subsequent Offering is made available to other investors in such
      offering. If the Purchasers wish to purchase more than 35% of such offering
      in
      the aggregate, the amounts to be so purchased shall be cut back proportionately
      from all Purchasers who are seeking to purchase in excess of their respective its
      pro
      rata shares (based on the Purchasers’ respective ownership of Common Stock of
      the Company at the time) of such offering until the aggregate amount to be
      so
      purchased is equal to 35% of such offering. Any
      information set forth in a Subsequent Offering Notice and any discussions
      relating to or arising from the Subsequent Offering Notice shall be deemed
      to be
      information delivered as part of the Subsequent Offering Notice and therefore
      subject to the provisions of Section 4.6 hereof.





4.14  Additional
      Offering. Within thirty (30) days after the Closing, the Company shall
      prepare and file with the Commission a registration statement providing for
      the
      Company to, amongst other things, have the ability to offer and issue
      subscription rights to purchase a minimum of $20,000,000 of Common Stock (the
      “Shelf Registration Statement”). The Shelf Registration Statement shall be on
      Form S-3 (except if the Company is not then eligible to register on Form S-3,
      in
      which case such registration shall be on another appropriate form in accordance
      herewith). The Company shall use its best efforts to cause the Shelf
      Registration Statement to be declared effective under the Securities Act as
      promptly as possible after the filing thereof. Within 30 days of the Shelf
      Registration Statement being declared effective under the Securities Act, the
      Company agrees that it shall offer subscription rights to purchase at least
      $20,000,000 of Common Stock to then current holders of Common Stock; provided,
      however, in the event that, subsequent to the Closing and prior to the date
      30
      days after the Shelf Registration Statement shall have been declared effective
      under the Securities Act, the Company shall have raised a minimum of $10,000,000
      in additional financing, through offerings of Common Stock or non-convertible
      debt securities pursuant to the Shelf Registration Statement or otherwise,
      then
      the Company shall not be required to offer such subscription rights to purchase
      Common Stock.





**20**





4.15  Future
      Offerings. From the Closing Date until the date that is twelve (12) months
      after the Closing Date, the Company will not, directly or indirectly, offer
      or
      sell any debt securities that are, at any time during its life and under any
      circumstances, convertible into or exchangeable for Common Stock, without the
      prior written consent of a majority of the Purchasers.





ARTICLE
      V.


MISCELLANEOUS





5.1  Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before August 16, 2006;
      provided, however, that no such termination will affect the right of any party
      to sue for any breach by the other party (or parties).





5.2  Fees
      and Expenses. Except as expressly set forth in the Transaction Documents to
      the contrary, each party shall pay the fees and expenses of its advisers,
      counsel, accountants and other experts, if any, and all other expenses incurred
      by such party incident to the negotiation, preparation, execution, delivery
      and
      performance of this Agreement. The Company shall pay all transfer agent fees,
      stamp taxes and other taxes and duties levied in connection with the delivery
      of
      any Securities.





5.3  Entire
      Agreement. The Transaction Documents, together with the exhibits and
      schedules thereto, contain the entire understanding of the parties with respect
      to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.





5.4  Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
      2 nd Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.





5.5  Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in a
      written instrument signed, in the case of an amendment, by the Company and
      each
      Purchaser or, in the case of a waiver, by the party against whom enforcement
      of
      any such waiver is sought. No waiver of any default with respect to any
      provision, condition or requirement of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any subsequent default or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of either party to exercise any right hereunder in any manner
      impair the exercise of any such right.





**21**





5.6  Headings.
      The headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party.





5.7  Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of the parties and their successors and permitted assigns. The Company may
      not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Purchaser. Any Purchaser may assign any or all of its
      rights under this Agreement to any Person to whom such Purchaser assigns or
      transfers any Securities, provided such transferee agrees in writing to be
      bound, with respect to the transferred Securities, by the provisions hereof
      that
      apply to the “Purchasers”.





5.8  No
      Third-Party Beneficiaries. This Agreement is intended for the benefit of the
      parties hereto and their respective successors and permitted assigns and is
      not
      for the benefit of, nor may any provision hereof be enforced by, any other
      Person, except as otherwise set forth in Section 4.9.





5.9  Governing
      Law. All questions concerning the construction, validity, enforcement and
      interpretation of the Transaction Documents shall be governed by and construed
      and enforced in accordance with the internal laws of the State of New York,
      without regard to the principles of conflicts of law thereof. Each party agrees
      that all legal proceedings concerning the interpretations, enforcement and
      defense of the transactions contemplated by this Agreement and any other
      Transaction Documents (whether brought against a party hereto or its respective
      affiliates, directors, officers, shareholders, employees or agents) shall be
      commenced exclusively in the state and federal courts sitting in the City of
      New
      York. Each party hereby irrevocably submits to the exclusive jurisdiction of
      the
      state and federal courts sitting in the City of New York, borough of Manhattan
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein (including with respect
      to the enforcement of any of the Transaction Documents), and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is improper or inconvenient venue for such
      proceeding. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof via registered or certified mail or overnight delivery
      (with evidence of delivery) to such party at the address in effect for notices
      to it under this Agreement and agrees that such service shall constitute good
      and sufficient service of process and notice thereof. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. The parties hereby waive all rights to a trial by jury. If
      either party shall commence an action or proceeding to enforce any provisions
      of
      the Transaction Documents, then the prevailing party in such action or
      proceeding shall be reimbursed by the other party for its attorneys’ fees and
      other costs and expenses incurred with the investigation, preparation and
      prosecution of such action or proceeding.





**22**





5.10  Execution.
      This Agreement may be executed in two or more counterparts, all of which when
      taken together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.





5.11  Severability.
      If any provision of this Agreement is held to be invalid or unenforceable in
      any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefore, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.





5.12  Rescission
      and Withdrawal Right. Notwithstanding anything to the contrary contained in
      (and without limiting any similar provisions of) the Transaction Documents,
      whenever any Purchaser exercises a right, election, demand or option under
      a
      Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then such Purchaser may rescind
      or withdraw, in its sole discretion from time to time upon written notice to
      the
      Company, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights.





5.13  Replacement
      of Securities. If any certificate or instrument evidencing any Securities is
      mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
      issued in exchange and substitution for and upon cancellation thereof, or in
      lieu of and substitution therefore, a new certificate or instrument, but only
      upon receipt of evidence reasonably satisfactory to the Company of such loss,
      theft, or destruction and customary and reasonable indemnity, if requested.
      The
      applicants for a new certificate or instrument under such circumstances shall
      also pay any reasonable third-party costs associated with the issuance of such
      replacement Securities.





5.14  Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, each of the Purchasers and the Company
      will be entitled to specific performance under the Transaction Documents. The
      parties agree that monetary damages may not be adequate compensation for any
      loss incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.





5.15  Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a Purchaser enforces or
      exercises its rights thereunder, and such payment or payments or the proceeds
      of
      such enforcement or exercise or any part thereof are subsequently invalidated,
      declared to be fraudulent or preferential, set aside, recovered from, disgorged
      by or are required to be refunded, repaid or otherwise restored to the Company,
      a trustee, receiver or any other person under any law (including, without
      limitation, any bankruptcy law, state or federal law, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.





**23**


5.16  Independent
      Nature of Purchasers’ Obligations and Rights. The obligations of each
      Purchaser under any Transaction Document are several and not joint with the
      obligations of any other Purchaser, and no Purchaser shall be responsible in
      any
      way for the performance of the obligations of any other Purchaser under any
      Transaction Document. Nothing contained herein or in any Transaction Document,
      and no action taken by any Purchaser pursuant thereto, shall be deemed to
      constitute the Purchasers as a partnership, an association, a joint venture
      or
      any other kind of entity, or create a presumption that the Purchasers are in
      any
      way acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Transaction Documents. Each Purchaser shall
      be
      entitled to independently protect and enforce its rights, including without
      limitation, the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Purchaser
      to
      be joined as an additional party in any proceeding for such purpose. Each
      Purchaser has been represented by its own separate legal counsel in their review
      and negotiation of the Transaction Documents. The Company has elected to provide
      all Purchasers with the same terms and Transaction Documents for the convenience
      of the Company and not because it was required or requested to do so by the
      Purchasers.





5.17  Construction.
      The parties agree that each of them and/or their respective counsel has reviewed
      and had an opportunity to revise the Transaction Documents and, therefore,
      the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.








*(Signature
      Pages Follow)*





**24**


IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.














**SPATIALIGHT,
                INC.**
            Address
                for Notice:By:/s/
                David F. Hakala
              Name:
                David F. Hakala
              Title:
                Chief Operating Officer
            5
                Hamilton Landing, Suite 100
              Novato,
                CA 94949With
                a copy to (which shall not constitute notice):
              Melvin
                Katz, Esq.
              Bryan
                Cave, LLP
              1290
                Avenue of the Americas
              New
                York, NY 10104
              Telephone:
                212-541-1155







[REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]





**25**







Legal
                Name
            Shares
            Purchase
                Price
            Registration
                Name
            Delivery
                Instructions (US Physical)SEI
                U.S. Small Companies Fund
            12,500
            $
                28,125.00
            SEI
                U.S. Small Companies Fund c/o BBH&Co, PO Box 1536, Pine Street Sta.
                New York, NY, 10268
            Brown
                Brothers Harriman & Co.Attn: BBH Physical Securities handling team 140
                Broadway Street New York, NY 10005-1101 Ref:SEI GMF US Small Companies
                Fund/Wellington Asset Mgt A/C: 6165104Optimix
                Investment Management Limited
            9,500
            $
                21,375.00
            GERLACH
                & CO
            Citibank
                NA, 333 West 34th Street, 3rd Floor Securities Vault, New York, New
                York,
                10001, NZ Funds Global Small Companies Trust,
                799551/OPSWSOGoldman
                Sachs Global Manager Strategies
            11,000
            $
                24,750.00
            Hare
                & Co
            The
                Bank of New York 1 Wall Street - 3rd Floor, Window A New York, NY
                10286
                A/C: GS GMS SMALL CAP ADVISERS 2-WELLINGTON A/C Number:
                260378JB
                Were Global Small Companies Fund - CFS
            20,000
            $
                45,000.00
            GERLACH
                & CO
            Citibank
                NA, 333 West 34th Street 3rd Floor Securities Vault, New York, New
                York,
                10001, JB Were Global Small Companies Fund - CFS,
                7953760000/097172NZ
                Funds Global Small Companies Trust
            8,000
            $
                18,000.00
            GERLACH
                & CO
            Citibank
                NA, 333 West 34th Street, 3rd Floor Securities Vault, New York, New
                York,
                10001, NZ Funds Global Small Companies Trust,
                7802050000/096208SEI
                Institutional Investments Trust, Small Cap Fund
            88,000
            $
                198,000.00
            HARE
                & CO
            The
                Bank of New York One Wall Street 3rd Floor, Window A Wachovia AC
                071-395
                FFC # 09303-53-LSEI
                Institutional Managed Trust, Small Cap Growth Fund
            110,000
            $
                247,500.00
            HARE
                & CO
            The
                Bank of New York One Wall Street 3rd Floor, Window A First Union
                Acct #
                05822-62-LSEI
                Institutional Investments Trust, Small/Mid Cap Equity Fund
            59,000
            $
                132,750.00
            HARE
                & CO
            The
                Bank of New York One Wall Street 3rd Floor, Window A First Union
                Acct #
                09303-69-LSeligman
                Global Fund Series, Inc. - Global Smaller Companies Fund
            43,000
            $
                96,750.00
            CUDD
                & CO
            JP
                Morgan Chase 4 New York Plaza Ground Floor Window New York, NY 10004
                Reference: Account# 31030/P85074 Account Name: Seligman Global Fund
                Series, Inc. - Global Smaller Companies Fund,
                31030/P85074Retail
                Employees Superannuation Trust
            34,500
            $
                77,625.00
            CUDD
                & CO
            JP
                Morgan Chase 4 New York Plaza Ground Floor Window New York, NY 10004
                Retail Employees Superannuation Trust, 24850/PS75350Australian
                Retirement Fund
            29,500
            $
                66,375.00
            CUDD
                & CO
            JP
                Morgan Chase 4 New York Plaza Ground Floor Window New York, NY 10004,
                Australian Retirement Fund, PS35827/27858Central
                States, Southeast and Southwest Areas Pension Fund
            83,000
            $
                186,750.00
            Mac
                & Co
            Mellon
                Securities Trust Company 120 Broadway, 13th Floor New York, NY 10271,
                Central States, Southeast and Southwest Areas Pension Fund,
                CGBF2002692Talvest
                Small Cap Cdn. Equity Fund
            3,500
            $
                7,875.00
            Mac
                & Co
            Mellon
                Securities Trust Co. 120 Broadway, 13th Floor, New York, NY 10271,
                Talvest
                Small Cap Cdn. Equity Fund, YTAF1138002TALVEST
                Global Small Cap Fund
            10,000
            $
                22,500.00
            Mac
                & Co
            Mellon
                Securities Trust Co. 120 Broadway, 13th Floor, New York, NY 10271,
                TALVEST
                Global Small Cap Fund, YTAF1141002Maritime
                Life Discovery Fund
            17,500
            $
                39,375.00
            Mac
                & Co
            Mellon
                Securities Trust Co. 120 Broadway, 13th Floor, New York, NY 10271,Maritime
                Life Discovery Fund , MFOF1024002BC
                Telecom Pension Plan for Management and Exempt Employees
            5,000
            $
                11,250.00
            Mac
                & Co
            Mellon
                Securities Trust Co. 120 Broadway, 13th Floor, New York, NY 10271,
                BC
                Telecom Pension Plan for Management and Exempt Employees,
                GTDF8001002Pension
                Plan for Management and Professionals of TELUS Corp-Alpha
            10,000
            $
                22,500.00
            Mac
                & Co
            Mellon
                Securities Trust Co. 120 Broadway, 13th Floor, New York, NY 10271,
                Pension
                Plan for Management and Professionals of TELUS Corp-Alpha,
                TLDF0026002Telstra
                Super Pty Ltd
            25,000
            $
                56,250.00
            Hare
                & Co
            The
                Bank of New York, Securities Department, One Wall Street, 3rd floor
                -
                Window "A", 10286  New York, New York, Telstra Super Pty Ltd,
                620239/TSWIGEStichting
                Bedrijfstakpensionefonds Voor Het Veroepsvervoer Over De
                Weg
            16,500
            $
                37,125.00
            Booth
                & Co.
            The
                Northern Trust Company 40 Broad Street 8th Floor attn: Physical Securities
                SPV19 / 17-27761 / Stich. Bedrijfstak Pensioen Fonds Ber New York,
                NY
                10004J
                B
                Were Global Small Companies Pooled Fund
            125,500
            $
                282,375.00
            Hare
                & Co
            The
                Bank of New York One Wall Street 3rd Floor, Window A Acct: 298365
                Attn:
                richard RE 212-635-4555WTC-CTF
                Smaller Companies Portfolio
            20,500
            $
                46,125.00
            FINWELL
                + CO
            DTCC/New
                York Window 55 Water Street New York, NY 10041 Attn: Robert Mendez
                for the
                account of State Street (reference W75U)Wellington
                Management Portfolios (Dublin) - Global Smaller Companies
                Equity
            20,000
            $
                45,000.00
            SQUIDLAKE
                + CO
            DTCC/New
                York Window 55 Water Street New York, NY 10041 Attn: Robert Mendez
                for the
                account of State Street (reference YW5J)761,500
            $
                1,713,375.00