EXHIBIT
      10.3


**LCOS
      SUPPLY AGREEMENT**




("Agreement")




Dated
      as
      of: July 1, 2004 (the "Effective Date")




**THE
      SELLER** :   **SPATIALIGHT,
      INC** .,
      a New
      York corporation


(hereinafter referred to as "SpatiaLight")




Address: 5 Hamilton Landing, Suite 100, Novato, CA 94949, U.S.A.


Tel: (415) 883-1693      Fax: (415)
      883-3363




**THE
      PURCHASER** : **LG
      ELECTRONICS INC** .,
      an
      enterprise of the Republic of Korea


(hereinafter
      referred to as "LGE")




Address: 20 Youido-Dong Yeongdeungpo-Gu, Seoul, Republic of Korea


Tel:
      82-2-3777-1114     Fax: 82-2-3777-5150




WHEREAS,
      SpatiaLight is the creator, developer and manufacturer and the owner of all
      right, title and interest in and to SpatiaLight’s active matrix liquid crystal
      on silicon (“LCoS”) microdisplay device having an active matrix of 1920 pixels
      by 1080 pixels ("LCoS Chip"), and when three (3) LCoS Chips are fitted onto
      a
      light engine, they may be used in display application products such as high
      definition televisions and home screen projection systems.




WHEREAS,
      LGE is a leading Korean electronics manufacturer that intends to enter the
      global market for LCoS televisions (“LCoS Televisions”) using SpatiaLight LCoS
      Sets (as hereinafter defined) fitted onto a light engine of LGE’s design and
      manufacture (“LG Light Engine”).




WHEREAS,
      SpatiaLight specially developed its LCoS Sets for use in LGE’s LCoS televisions
      (16 by 9 aspect ratio) pursuant to a Memorandum of Understanding entered into
      on
      May 12, 2003, between the parties hereto, providing for the parties to work
      jointly in developing the LCoS Sets.




WHEREAS,
      LGE and SpatiaLight entered into a mutual Non-Disclosure Agreement dated May
      12,
      2003 (“Non-Disclosure Agreement”) and the parties agree to continue to be fully
      bound by the terms and conditions set forth in that Non-Disclosure
      Agreement.




WHEREAS,
      LGE desires to purchase LCoS Sets from SpatiaLight pursuant to and subject
      to
      the terms and conditions set forth herein.




NOW,
      THEREFORE, in consideration of the mutual covenants and agreements contained
      herein and for other good and valuable consideration, the receipt and
      sufficiency of which is hereby acknowledged, the parties hereto agree as
      follows:




1.            
      **REPRESENTATIONS**




Each
      of
      SpatiaLight and LGE hereby warrants and represents to the other as
      follows:


1.1.  That
        it
        is a legal person validly existing in its jurisdiction of establishment;
        and


[***] -- Confidential portion omitted
and filed separately with SEC.





1.2.  That
      it
      has the full power and authority to enter into this Agreement and perform its
      contractual obligations; that its representative who is signing this Agreement
      has been duly authorized to do so pursuant to a valid power of attorney, board
      of directors' resolution or other valid corporate action effecting the
      same.




2.            
      **PRODUCT
      PURCHASES**




LGE
      agrees to purchase from SpatiaLight, in accordance with the prices, quantities,
      dates and other terms and conditions set forth herein, sets of three (3)
      SpatiaLight LCoS Chips combined with necessary SpatiaLight Analog ASICs and
      a
      Flex and Mount Set (as hereinafter defined), which form a SpatiaLight LCoS
      Set
      ("LCoS Set").




3.           
      **DELIVERY
      DATES OF PRODUCTS**




3.1.  Initial
      Deliveries




SpatiaLight
      shall deliver a total of one hundred twenty (120) sets of three (3) trial
      production LCoS Chips (which shall not include a SpatiaLight Analog ASIC) (the
      “Qualification Sets”) to LGE by September 30, 2004 (the "Qualification Date")
      and one hundred (100) sets of three (3) trial production LCoS Chips (which
      shall
      include a SpatiaLight Analog ASIC) (“Pre-Production Sets”) by November 30, 2004,
      according to the following delivery schedule; provided, however, that either
      party may, in its sole discretion, elect to change any or all of the delivery
      dates set forth in this Section 3.1 by not greater than thirty (30) days sooner
      or later than such delivery dates as set forth in this Section 3.1.




Month
            QuantityJuly
                2004
            20
                Qualification SetsSeptember
                2004
            100
                Qualification SetsNovember
                2004
            100
                Pre-Production Sets





3.2.  Subsequent
      Deliveries of LCoS Sets




Subsequent
      deliveries of SpatiaLight LCoS Sets shall be made in accordance with the rolling
      commitment schedule set forth in Section 6 of this Agreement for each month
      of
      January 2005 through December 2006.




3.3.  Trial
      Light Engine Deliveries




LGE
      shall
      deliver to SpatiaLight twenty-five (25) trial Fitted LGE Light Engines (as
      hereinafter defined) in November 2004. The LCoS Sets to be incorporated into
      such trial Fitted LGE Light Engines shall be delivered by SpatiaLight to LGE
      in
      October 2004 and shall be in addition to the Qualification Sets and
      Pre-Production Sets. The purchase price for each trial Fitted LGE Light Engine
      shall be determined by the parties at a later date; provided, however, that
      such
      purchase price shall not exceed [***] (not including the cost of the LCoS Sets).
      It is hereby agreed that such twenty-five (25) trial Fitted LGE Light Engines
      are pre-production products and therefore may not meet the exact technical
      specifications that SpatiaLight would require for commercial sale
      products.




-2-
 [***] -- Confidential portion omitted
and filed separately with SEC.




4.            **TERM**




The
      term
      of this Agreement shall commence on the Effective Date and terminate on December
      31, 2006, subject to LGE’s right to cancel set forth in Section 5 hereof and
      subject further to early termination by mutual written consent and agreement
      as
      set forth in Section 11.1 hereof.




5.           
      **QUALIFICATION
      AND RIGHT OF CANCELLATION**




5.1.  LGE’s
      obligations to purchase LCoS Sets under this Agreement shall be expressly
      conditioned upon the Qualification Sets meeting LGE’s Final Specifications set
      forth in Exhibit 1 hereto. LGE shall have until October 31, 2004 (the
“Determination Date”; and the Effective Date through the Determination Date, the
“Qualification Period”) to perform final qualification tests on the
      Qualification Sets. In the event that the Qualification Sets meet the Final
      Specifications, LGE shall give written notice thereof to SpatiaLight and LGE
      shall be required to purchase from SpatiaLight the LCoS Sets in accordance
      with
      all of the provisions of this Agreement. In the event that the Qualification
      Sets do not meet the agreed upon Final Specifications, LGE may cancel this
      Agreement by providing written notice to SpatiaLight not later than October
      31,
      2004 ("Notice of Cancellation"). If LGE does not provide a Notice of
      Cancellation, the Qualification Sets shall be considered to meet the Final
      Specifications and LGE shall be required to purchase and SpatiaLight shall
      be
      required to sell the LCoS Sets in accordance with all of the provisions of
      this
      Agreement. SpatiaLight and LGE agree to work together to the extent necessary
      during the Qualification Period to assure that the Qualification Sets meet
      LGE’s
      Final Specifications. LGE may elect, in its sole discretion, to change the
      Determination Date by not greater than thirty (30) days sooner or later than
      the
      Determination Date set forth in this Section 5.1.




5.2.  LGE
      shall
      remain fully responsible for all of its obligations to SpatiaLight under this
      Agreement through the end of the Qualification Period regardless of whether
      it
      gives Notice of Cancellation.




6.           
      **CONTRACTUAL
      OBLIGATIONS**




Following
      the Qualification Period and in the event that there is no Notice of
      Cancellation, LGE hereby covenants and agrees to purchase SpatiaLight LCoS
      Sets
      pursuant to this Agreement as follows:




6.1.  From
      January 2005 through June 2005, LGE shall purchase SpatiaLight LCoS Sets
      according to the following schedule (the “Commitment Schedule”), and such
      Commitment Schedule shall be updated for each of the months of July 2005 through
      December 2006 according to the terms and conditions of Section 6.3 and Section
      6.4 (if applicable) below:




Month
            MinimumMonthly
              Commitment
              (Quantity
                of LCoS Sets)
            Price
                Per LCoS Set
              (United
                States Dollars)
            Monthly
                Purchase Price Commitment
              (United
                States Dollars)January 2005
            2,000
            [***]
            [***]February
                2005
            2,000
            [***]
            [***]March
                2005
            2,000
            [***]
            [***]April
                2005
            5,000
            [***]
            [***]May
                2005
            5,000
            [***]
            [***]June
                2005
            5,000
            [***]
            [***]




-3- [***] -- Confidential portion omitted
and filed separately with SEC.




6.2.  From
      July
      2005 through December 2005, LGE forecasts that it will purchase SpatiaLight
      LCoS
      Sets at the agreed upon purchase price and quantities set forth in the following
      schedule (the “Forecast Schedule”). LGE is not bound to purchase and SpatiaLight
      is not bound to sell the quantities of LCoS Sets set forth in the Forecast
      Schedule:




Month
            Monthly
                Forecast
              (Quantity
                of LCoS Sets)
            Price
                Per LCoS Set
              (United
                States Dollars)
            Monthly
                Forecast Purchase Price
              (United
                States Dollars)July
                2005
            10,000
            [***]
            [***]August
                2005
            10,000
            [***]
            [***]September
                2005
            10,000
            [***]
            [***]October
                2005
            10,000
            [***]
            [***]November
                2005
            10,000
            [***]
            [***]December
                2005
            10,000
            [***]
            [***]







6.3.  Commencing
      on January 1, 2005, on the first day of each month of delivery set forth in
      this
      Section 6, LGE shall be required to update the Commitment Schedule for the
      calendar month six months in advance of such month and LGE shall be required
      to
      update the non-binding Forecast Schedule for the calendar month twelve months
      in
      advance of such month (i.e., on January 1, 2005, LGE shall provide its monthly
      LCoS Set quantity commitment for July 2005 and shall provide its monthly
      non-binding demand forecast for January 2006). All such updated commitments
      required under this Section 6.3 shall be fully binding upon LGE. All updated
      commitments required under this Section 6.3 and Section 6.4 (if applicable)
      hereof shall be sent by LGE to SpatiaLight via facsimile or email.




6.4.  Commencing
      on June 20, 2005, the parties shall use their mutual best efforts and
      cooperation to negotiate and agree upon the purchase prices of the LCoS Sets
      scheduled for delivery pursuant to this Agreement between January 2006 and
      December 2006. In the event that the parties shall not have agreed in writing
      with respect to the second delivery year purchase prices for LCoS Sets by
      September 20, 2005, by the terms of this Agreement the terms and conditions
      of
      Section 11 hereof shall then take effect. In such event, commencing on October
      1, 2005, on the first day of each month of delivery set forth in this Section
      6,
      LGE shall continue to be required to update the Commitment Schedule for the
      calendar month six (6) months in advance of such month (i.e., on October 1,
      2005, LGE shall provide its monthly LCoS Set quantity commitment for April
      2006); provided, that LGE’s commitment for each such delivery month shall be in
      accordance with the terms and conditions of Section 11 and the other terms
      and
      conditions of this Agreement. All such updated commitments required under this
      Section 6.4 shall be fully binding upon LGE.




-4- [***] -- Confidential portion omitted
and filed separately with SEC.




7.           
      **PRICE
      PER SPATIALIGHT LCOS SET**




7.1.  LGE
      agrees to pay SpatiaLight the purchase price of $[***]  for
      each
      Qualification Set and Pre-Production Set sold prior to LGE commencing to
      manufacture LCoS Televisions for the quantities as set forth in Section 3.1
      hereof.




7.2.  Following
      the Qualification Period, for the months of January 2005 to June 2005, LGE
      agrees to purchase and SpatiaLight agrees to sell LCoS Sets for manufacturing
      LCoS Televisions at the purchase prices set forth in Section 6.1
      hereof.




7.3.  For
      the
      months of July 2005 to December 2005, LGE agrees to purchase and SpatiaLight
      agrees to sell LCoS Sets for manufacturing LCoS Televisions at the purchase
      price set forth in Section 6.2 hereof; provided, however, it is expressly agreed
      that in the event that LGE purchases a quantity of LCoS Sets that is less than
      its monthly forecast for any of such months, then the purchase price of
      $[***]  per
      LCoS
      Set shall apply to a monthly order of up to 3,999 LCoS Sets and the purchase
      price of $[***] per LCoS Set shall apply to a monthly order of between 4,000
      and
      9,999 LCoS Sets in such months.




7.4.  The
      purchase prices of the LCoS Sets scheduled for delivery pursuant to this
      Agreement for the months of January 2006 through December 2006 shall be
      determined in accordance with Section 6.4 and Section 11 of this
      Agreement.




8.           
      **PURCHASE
      ORDERS**




8.1.  Within
      two weeks following the Effective Date, LGE shall issue a purchase order (the
      “Qualification Purchase Order”) to SpatiaLight for LGE’s purchase and
      SpatiaLight’s sale of the Qualification Sets and Pre-Production
      Sets.




8.2.  In
      the
      event that LGE does not provide Notice of Cancellation pursuant to Section
      5.1
      hereof, LGE shall issue, no later than December 15, 2004, a purchase order
      (the
“Rolling Purchase Order”; and together with the Qualification Purchase Order,
      the “Purchase Orders”) to SpatiaLight for LGE's purchase and SpatiaLight’s sale
      of the entire quantity of LCoS Sets set forth in Section 6.1
      hereof.




8.3.  Commencing
      on January 15, 2005, on the fifteenth (15 th )
      day of
      each month of delivery set forth in this Agreement, LGE shall be required to
      reissue the Rolling Purchase Order to reflect LGE’s additional commitment made
      pursuant to and in accordance with Section 6.3 and Section 6.4 (if applicable)
      hereof.




8.4.  The
      parties shall use their mutual best efforts to negotiate and agree upon the
      terms and conditions of the Purchase Orders. Such terms and conditions shall
      include, without limitation, terms and means of payment, packing, shipping
      terms, insurance, taxes, destination and inspection.




9.           
      **ADDITIONAL
      LIGHT ENGINES**




The
      parties acknowledge and agree that the right of SpatiaLight to purchase Fitted
      LGE Light Engines (as defined below) from LGE set forth in this Section 9
      constitutes a consideration for the agreed upon purchase prices set forth in
      Section 6 hereof.




-5- [***] -- Confidential portion omitted
and filed separately with SEC.


9.1.  The
      parties hereby acknowledge and agree that SpatiaLight desires to purchase from
      LGE quantities of LGE Light Engines fitted with sets of three (3) SpatiaLight
      LCoS Chips (may be LCoS Chips with active matrix of 1920 pixels by 1080 pixels
      or 1280 pixels by 720 pixels, at SpatiaLight’s sole discretion) and a UHP lamp
      and ballast (“Fitted LGE Light Engines”) for the purpose of sale of such product
      to other customers and potential customers of SpatiaLight in only the following
      territories: China, Taiwan and Hong Kong. The parties covenant and agree to
      provide LGE’s current bill of materials cost for producing one (1) Fitted LGE
      Light Engine (the “Fitted Engine BOM Cost”) and SpatiaLight’s current bill of
      materials cost for producing one (1) LCoS Set (the “LCoS Set BOM Cost”) to the
      other party on December 1, 2004; provided, however, that the Fitted Engine
      BOM
      Cost does not include the cost of the LCoS Set incorporated into such Fitted
      LGE
      Light Engine.




9.2.  LGE
      hereby covenants and agrees to sell a maximum of 5,000 Fitted LGE Light Engines
      to SpatiaLight during each month in 2005 and a minimum of 10,000 Fitted LGE
      Light Engines to SpatiaLight during each month in 2006, provided, however,
      that
      the parties shall not have any rights or obligations under this Section 9 in
      the
      event that LGE gives Notice of Cancellation. It is expressly agreed and
      understood that SpatiaLight is under no immediate obligation and is not
      immediately committed in any way to acquire any Fitted LGE Light Engines (other
      than the trial Fitted LGE Light Engines) from LGE throughout the term of this
      Agreement; provided, however, that SpatiaLight shall be required, no later
      than
      December 1, 2004, to provide LGE with a six (6) month rolling commitment
      schedule and twelve (12) month rolling forecast schedule for Fitted LGE Light
      Engines. Such rolling commitment and forecast shall commence in January 2005
      and
      shall be thereafter updated by SpatiaLight on a monthly basis throughout the
      term of this Agreement and shall be fully binding upon the parties
      hereto.




9.3.  LGE
      agrees to sell all of such Fitted LGE Light Engines to SpatiaLight at a purchase
      price not greater than the same percentage in excess of the Fitted Engine BOM
      Cost as the percentage in excess of the LCoS Set BOM Cost that SpatiaLight
      sells
      LCoS Sets to LGE under this Agreement. The parties acknowledge and agree that
      the bill of materials cost may change over time, and therefore agree to review
      and reset the bill of materials costs of the Fitted LGE Light Engines and the
      LCoS Sets in light of then prevailing market conditions on each six (6) month
      anniversary date of the Effective Date throughout the term of this
      Agreement.




10.         
**EXCLUSIVITY**




10.1.  The
      parties covenant and agree that LGE shall have the exclusive right in the
      Republic of Korea to purchase SpatiaLight LCoS Sets (applies only to SpatiaLight
      LCoS Chips with active matrix of 1920 pixels by 1080 pixels) commencing on
      the
      Effective Date and terminating on June 30, 2005 (“LGE’s Right of Exclusivity”),
      unless extended pursuant to the provisions of Section 10.2 hereof.




10.2.  In
      the
      event that LGE fulfills its commitment to purchase an aggregate of 21,000 LCoS
      Sets during the first six months of delivery as set forth in Section 6 hereof,
      then LGE’s Right of Exclusivity shall be extended through December 31, 2005. In
      the event that LGE’s aggregate commitment to purchase LCoS Sets for the months
      of July 2005 to December 2005 is equal to or greater than its aggregate monthly
      forecast for such months (60,000 LCoS Sets) and in the further event that LGE
      fulfills its commitment for such months, then LGE’s Right of Exclusivity shall
      be extended through June 30, 2006. In the event that LGE’s aggregate commitment
      to purchase LCoS Sets for the months of January 2006 to June 2006 is equal
      to or
      greater than its aggregate monthly forecast for such months, as will be provided
      pursuant to Section 6.3 hereof, and in the further event that LGE fulfills
      its
      commitment for such months, then LGE’s Right of Exclusivity shall be extended
      through December 31, 2006.




-6- [***] -- Confidential portion omitted
and filed separately with SEC.


10.3.  The
      parties covenant and agree that SpatiaLight shall be the exclusive provider
      of
      LCoS products, limited to a three (3) panel type, to LGE throughout the entire
      term of this Agreement (“SpatiaLight Exclusivity”); provided, however, that in
      the event that LGE’s Right of Exclusivity shall terminate during the term of
      this Agreement, the terms of Section 10.4 shall then take effect; provided,
      further, however, that in the event that the parties shall not have agreed
      in
      writing with respect to the second delivery year purchase prices for LCoS Sets
      by September 20, 2005 pursuant to the terms and conditions of Section 6.4
      hereof, then the terms and conditions of Section 11 shall supercede the terms
      and conditions of this Section 10 only with respect to the delivery months
      of
      January 2006 through December 2006.




10.4.  In
      the
      event that LGE’s Right of Exclusivity shall terminate during the term of this
      Agreement pursuant to the terms of this Section 10, SpatiaLight shall then
      have
      the right, in its sole discretion, to elect to continue SpatiaLight Exclusivity
      throughout the remaining term of this Agreement by notifying LGE in writing
      within fifteen (15) days following such termination.




(a)  In
      the
      event that SpatiaLight so elects to extend SpatiaLight Exclusivity, LGE shall
      then have the first priority right to purchase from SpatiaLight: (i) all of
      the
      quantities of LCoS Sets that LGE has committed to purchase from SpatiaLight
      as
      of the date that LGE’s Right of Exclusivity was terminated, and (ii) fifty
      percent (50%) of the quantities of LCoS Sets that LGE has forecast to purchase
      from SpatiaLight as of such termination date.




(b)  In
      the
      event that SpatiaLight does not so elect to extend SpatiaLight Exclusivity,
      then
      SpatiaLight Exclusivity shall terminate as of the date that LGE’s Right of
      Exclusivity terminated and LGE shall not have any priority rights with respect
      to purchasing LCoS Sets.




10.5.  The
      parties covenant and agree that SpatiaLight shall not contract to sell LCoS
      Sets
      to Samsung Electronics Co., Ltd. and/or any or all of its domestic or foreign
      subsidiaries or affiliates at any time during which LGE’s Right of Exclusivity
      is in effect pursuant to this Agreement.




11.         
**ALTERNATIVE
      RIGHTS AND OBLIGATIONS IN THE SECOND DELIVERY
      YEAR**




Solely
      in
      the event that the parties shall not have agreed in writing with respect to
      the
      second delivery year purchase prices for LCoS Sets by September 20, 2005
      pursuant to the terms and conditions of Section 6.4 hereof, then,
      notwithstanding the provisions of Section 10 hereof, for the delivery months
      January 2006 through December 2006, the parties covenant and agree
      that:




11.1.  The
      matter of the pricing of LCoS Sets to be sold and purchased under and in
      accordance with this Section 11 and the other provisions of this Agreement
      shall
      immediately be submitted to binding arbitration, in accordance with Section
      21
      hereof; provided, however, that the parties shall have the right to mutually
      agree in writing to terminate this Agreement with respect to all of the rights
      and obligations of the parties hereunder scheduled to occur after December
      31,
      2005. Such termination shall only be effective in the event that LGE and
      SpatiaLight mutually agree to it in writing between the dates of June 20, 2005
      and September 19, 2005.




-7- [***] -- Confidential portion omitted
and filed separately with SEC.


11.2.  LGE’s
      Right of Exclusivity and SpatiaLight Exclusivity shall terminate on December
      31,
      2005 (provided that such rights of exclusivity had not previously terminated
      pursuant to the terms and conditions of Section 10 hereof).




11.3.  LGE
      shall
      be obligated to purchase from SpatiaLight a minimum of fifty percent (50%)
      of
      the LCoS products, limited to a three (3) panel type, that LGE may purchase
      from
      any LCoS supplier in each such delivery month and SpatiaLight commits to sell
      such LCoS Sets to LGE in each such delivery month in accordance with the terms
      and conditions of this Agreement and at such prices as shall be determined
      by
      arbitration in accordance with Section 11.1 and Section 21 hereof. LGE shall
      have the right to fill the remaining fifty percent (50%) of its demand for
      LCoS
      products from any second sources that it so elects.




11.4.  SpatiaLight
      shall be obligated to grant LGE the first priority right, with respect to
      SpatiaLight’s LCoS production output, to purchase from SpatiaLight all of the
      quantities of LCoS Sets that LGE commits to purchase from SpatiaLight in
      accordance with Section 6.4 hereof.




11.5.  The
      parties shall have the right, in their respective discretion, to agree to sell
      and purchase to and from each other any additional LCoS Sets and Fitted LGE
      Light Engines that the parties are not obligated to sell and purchase to and
      from each other according to the terms and conditions of this Section 11 and
      Section 9 hereof.




12.         
**[Intentionally
      Omitted]**




13.         
**DIGITAL
      ASICS**




SpatiaLight
      covenants and agrees to provide LGE with the codes for the required Digital
      ASICs and Digital FPGA and updates to such codes, as they become available,
      throughout the term of this Agreement. It is expressly agreed that SpatiaLight’s
      agreement to provide such codes to LGE constitutes a consideration for the
      agreed upon purchase prices set forth in Section 6 hereof.




14.         
**LCOS
      SET COMPONENT COSTS**




The
      parties covenant and agree to use their mutual best efforts throughout the
      term
      of this Agreement, following the Qualification Period, to assist SpatiaLight
      to
      obtain and procure LCoS Set components to be used by SpatiaLight in connection
      with this Agreement at lower costs than SpatiaLight currently incurs and to
      obtain other favorable procurement terms and conditions for SpatiaLight. Such
      best efforts assistance shall include, without limitation, leveraging of LGE’s
      purchasing power for SpatiaLight’s and LGE’s benefit. The parties covenant and
      agree to form a joint task force with representatives from both of the parties
      hereto for the purpose of furthering the objectives set forth in this Section
      14.




15.         
**PATENT
      INDEMNIFICATION**




SpatiaLight
      shall defend and fully indemnify LGE from any suit, cause of action, judgment,
      demand, liability, loss, damage, cost, expense (including reasonable attorneys'
      fees and court costs) or other actual or alleged claim of any kind, whether
      direct or indirect, that arises out of a claim by a third party against LGE
      alleging that the LCoS Sets delivered to LGE under this Agreement infringes
      any
      United States of America, European Union, China and/or Republic of Korea patent
      of a third party. The indemnity applies whether or not legal proceedings are
      instituted, irrespective of the means, manner or nature of any settlement,
      compromise or determination. This indemnity obligation does not apply to any
      claims based on the use of the LCoS Sets in violation of this Agreement, or
      in
      combination with any software, hardware, network or system not recommended
      for
      use by SpatiaLight with the LCoS Sets, or in connection with SpatiaLight’s
      compliance with LGE’s instructions, designs or specifications.




-8- [***] -- Confidential portion omitted
and filed separately with SEC.




16.         
**SHARING
      OF INFORMATION**




The
      parties agree that they will continue to work jointly throughout the term of
      this Agreement to achieve its business objectives. The parties agree to remain
      in regular contact with the other and to meet and share information as
      appropriate. Such sharing of information shall include, without limitation,
      information that SpatiaLight has concerning the digital ASIC which LGE intends
      to incorporate into its LCoS high definition television sets.




17.         
**WARRANTIES**




17.1.  SpatiaLight
      shall warrant that LCoS Sets will be: (i) in accordance with the Final
      Specifications; (ii) free from any material defect or failure of a material
      kind
      or nature in design, materials and workmanship; and (iii) merchantable, fit
      and
      sufficient for the purpose intended.




17.2.  The
      warranties made by SpatiaLight with respect to the LCoS Sets set forth in this
      Section 17 shall commence on the date of the consumer sale by LGE of the LCoS
      Televisions containing such LCoS Sets and shall remain in effect for the shorter
      of (i) the same period of time that LGE warrants such LCoS Televisions to the
      consumer; or (ii) a period of two years following the consumer sale by LGE
      of
      LCoS Televisions containing such LCoS Sets.




17.3.  In
      case
      that any of the LCoS Sets delivered under this Agreement are not in material
      compliance with the above warranties, SpatiaLight shall either, at LGE's option,
      (i) repair or replace such LCoS Set; or (ii) refund to LGE the amount paid
      for
      such LCoS Set by LGE.




17.4.  Except
      as
      set forth in this Section 17, SpatiaLight makes no other warranties to LGE,
      express or implied.




18.         
**FORCE
      MAJEURE**




18.1.  Neither
      Party shall be liable to the other for any delay or non-performance of its
      obligations hereunder in the event and to the extent that such delay or
      non-performance is due to an event of Force Majeure ("Force Majeure
      Events").




18.2.  Force
      Majeure Events are events beyond the control of the party which occur after
      the
      date of signing of this Agreement and which were not reasonably foreseeable
      at
      the time of signing of this Agreement and whose effects are not capable of
      being
      overcome without unreasonable expense and/or loss of time to the party
      concerned. Force Majeure Events shall include (without being limited to) war,
      civil unrest, acts of government, natural disasters, exceptional weather
      conditions, breakdown or general unavailability of transport facilities,
      accidents, fire, explosions, terrorist acts, political risks and general
      shortages of energy.




-9- [***] -- Confidential portion omitted
and filed separately with SEC.




19.         
**CONFIDENTIALITY**




Either
      party (“Recipient”) acknowledges that it has had and may continue to have access
      to certain Confidential Information of the other party (“Discloser”). For
      purposes of this Agreement, "Confidential Information" shall include, but not
      be
      limited to, information concerning Discloser 's business, plans, designs,
      customers, potential customers, sales, marketing, the terms of this Agreement
      including, but not limited to pricing, quantities and dates, and other related
      information. Recipient shall not use or appropriate in any way, for its own
      account or the account of any third party, nor disclose to any third party,
      any
      of the Confidential Information and shall take all necessary precautions to
      protect the confidentiality of such Confidential Information. Recipient hereby
      acknowledges that misappropriation or disclosure to any third party of any
      Confidential Information would cause irreparable harm to Discloser.
      Notwithstanding the provisions of this Section 18, the parties shall, if
      required by applicable securities laws and Nasdaq rules and regulations,
      publicly disclose such information as shall be in compliance with such laws
      and
      regulations.




20.         
**GOVERNING
      LAW**




This
      Agreement shall be governed by the laws of the State of New York in the United
      States, as if the Agreement were wholly executed and performed in the State
      of
      New York, without giving effect to the conflicts of law statutes and conflicts
      of law doctrines of New York (except for Section 5-1401 of the New York General
      Obligations Law, which shall be applicable and binding on the parties) or of
      any
      other jurisdiction.




21.         
**ARBITRATION
      OF ALL CLAIMS AND DISPUTES AS SOLE REMEDY**




The
      sole
      remedy for disposing of any claim, dispute or controversy arising out of or
      in
      connection with this Agreement, if not resolved by the parties within thirty
      (30) days of written notice of such claim or dispute, including any question
      regarding the existence, validity or termination of this Agreement, shall be
      referred to and finally resolved by arbitration under the applicable rules
      of
      the International Chamber of Commerce, which rules are deemed to be incorporated
      by reference into this clause. There shall be a total of three arbitrators
      and
      the place where the arbitration shall take place shall be New York City, in
      the
      United States. The language to be used in the arbitral proceedings shall be
      the
      English language.




22.         
**CURRENCY**




Purchase
      price and all monies paid to SpatiaLight shall be paid in United States Dollars
      without regard to any currency fluctuation.




23.         
**PRESS
      RELEASE**




23.1.  The
      parties agree that SpatiaLight shall, on July 1, 2004, or within thirty (30)
      days thereafter, issue a press release with respect to this Agreement, which
      press release SpatiaLight has undertaken to draft and LGE has reviewed and
      LGE
      hereby consents to the contents thereto. LGE agrees to participate in such
      press
      release, without limitation, by making members of LGE’s senior management
      available to make statements with respect to this Agreement that may be used
      as
      quotations in such press release. During the term of this Agreement, the parties
      shall, if required by applicable securities laws and Nasdaq rules and
      regulations, file such reports at such dates and containing such information
      as
      shall be in compliance with such laws and regulations.




-10- [***] -- Confidential portion omitted
and filed separately with SEC.




23.2.  The
      parties covenant and agree that the parties shall issue a joint press release
      and shall hold a joint press conference with respect to this Agreement by not
      later than the scheduled date of commencement of the Consumer Electronics Show
      in Las Vegas, Nevada in January 2005, and SpatiaLight shall undertake to draft
      such press release and shall submit such draft to LGE for review and approval
      before its public release.




24.          
**INTEGRATION
      OF ACTIONS**




This
      Agreement constitutes the entire agreement between the parties with respect
      to
      the subject matter hereof and supersedes any and all prior oral or written
      agreements and negotiations between them. Notwithstanding the foregoing, the
      Non-Disclosure Agreement by and between SpatiaLight and LGE shall remain in
      full
      force and effect and the parties shall be fully bound thereby for the term
      set
      forth therein.




25.         
**AMENDMENTS
      AND MODIFICATIONS**




No
      amendment or modification of this Agreement shall be valid unless set forth
      in
      writing and signed by both of the parties hereto.




26.         
**NOTICES**




All
      notices required or permitted under this Agreement shall be in writing and
      personally delivered or mailed, by certified mail, return receipt requested,
      and
      addressed as follows:




(a)      
              If to LGE:
            Young
                Woon Kim
              Digital Display Research Lab, LG Electronics
                Inc.
              16
                Woomyeon-dong Seocho-gu, Seoul 137-724, Republic of
                Korea
              Tel:
                82-2-526-4612Fax: 82-2-572-3086  (b)If
              to SpatiaLight:
            Robert A. Olins
              5
                Hamilton Landing, Suite 100
              Novato,
                CA 94949, U.S.A.
              Tel:
                (415) 883-1693   Fax: (415)
                883-1125





27.          **NO**N-ASSIGNABILITY;
      BINDING EFFECT




This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective successors and permitted assigns. Neither this
      Agreement, nor any of the rights or obligations of the parties hereto shall
      be
      assignable by either party hereto without the prior written consent of the
      other
      party.




28.          **SEVERABILITY**




In
      case
      any provision of this Agreement shall be invalid, illegal or unenforceable,
      it
      shall, to the extent practicable, be modified in such manner as to be valid,
      legal and enforceable, subject to the condition that, as so modified, there
      shall be no material alteration in or to this Agreement with respect to the
      business terms or objectives of the parties hereto.







[Remainder
      of page intentionally left blank]




-11- [***] -- Confidential portion omitted
and filed separately with SEC.




IN
      WITNESS WHEREOF, the undersigned, intending to be bound hereby, have caused
      this
      LCoS Supply Agreement to be duly executed by their officers thereunto duly
      authorized, on the date first above written.





LG
              ELECTRONICS
              INC.By:
            /s/ Eunho
              YooName: Eunho Yoo
              Title:
                Director Digital Display Research Laboratory


By:
            /s/ Robert
              A.
              OlinsName: Robert A. Olins
              Title:
                Chief Executive Officer







-12- [***] -- Confidential portion omitted
and filed separately with SEC.