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                                                                   EXHIBIT 10.10

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT dated as of December 1, 1999 ("Security
Agreement"), is made by SPATIALIGHT, INC., a New York corporation, and by
SPATIALIGHT OF CALIFORNIA, INC., a California corporation (Spatialight, Inc.,
and Spatialight of California, Inc. are hereinafter referred to collectively as
"Grantor") for Jimmie H. Harvey, as collateral agent (Jimmie H. Harvey in his
capacity as collateral agent hereunder, and together with his successors and
assigns in such capacity, is hereinafter referred to as "Secured Party") in
favor of the lenders listed on Schedule A annexed hereto, as now existing and as
hereafter amended from time to time (the "Lenders").

                                    RECITALS

         WHEREAS, Grantor and the Lenders have entered into one or more
Convertible Secured Loan Agreements, dated of even date herewith (as the same
may be amended, modified, supplemented or renewed from time to time herein
individually and collectively called the "Loan Agreements"), pursuant to which
the Lenders have severally agreed to lend to Grantor an aggregate principal sum
of up to $2,875,000, and Grantor, to evidence its indebtedness to the Lenders
under the Loan Agreements, has executed and delivered to the Lenders its
Convertible Secured Notes, dated of even date herewith (herein collectively
called the "Notes"), in the aggregate principal amount of $2,875,000 to mature
on or before June 30, 2001 said Notes being payable to the order of the
respective Lenders, bearing interest at the rate provided for therein and
containing provisions for payment of attorney's fees and acceleration of
maturity in the event of default, as therein set forth;

         WHEREAS, as a condition precedent to the making of the loans under the
Loan Agreements, Grantor is required to execute and deliver this Security
Agreement; and

         WHEREAS, Grantor has duly authorized the execution, delivery and
performance of this Security Agreement.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
Grantor hereby represents, warrants, covenants and agrees as follows:

         1. Defined Terms. When used in this Security Agreement the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):

         "Collateral" shall have the meaning assigned to such term in Section 2
of this Security Agreement.



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         "Contracts" means all contracts, undertakings, franchise agreements or
other agreements in or under which Grantor now holds or hereafter acquires any
right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.

         "Copyright License" means any written agreement, in which Grantor now
holds or hereafter acquires any interest, granting any right in or to any
Copyright or Copyright registration (whether Grantor is the licensee or the
licensor thereunder) including, without limitation, licenses pursuant to which
Grantor has obtained the exclusive right to use a copyright owned by a third
party.

         "Copyrights" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or any other country; (b) registrations, applications, recordings and
proceedings in the United States Copyright Office or in any similar office or
agency of the United States, any State thereof or any other country; (c) any
continuations, renewals or extensions thereof; (d) any registrations to be
issued in any pending applications; (e) prior versions of works covered by
copyright and all works based upon, derived from or incorporating such works;
(f) income, royalties, damages, claims and payments now and hereafter due and/or
payable with respect to copyrights, including, without limitation, damages,
claims and recoveries for past, present or future infringement; (g) rights to
sue for past, present and future infringements of any copyright; and (h) any
other rights corresponding to any of the foregoing rights throughout the world.

         "Event of Default" means any "Event of Default" as defined in the
Notes;

         "License" means any Copyright License, Patent License, Trademark
License or other license of intellectual property rights or interests now held
or hereafter acquired by Grantor.

         "Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.

         "Patent License" means any written agreement, in which Grantor now
holds or hereafter acquires any interest, granting any right with respect to any
invention on which a Patent is in existence (whether Grantor is the licensee or
the licensor thereunder).

         "Patents" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
any other country, all registrations and recordings thereof and all applications
for letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
Sates, any State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all



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petty patents, divisionals and patents of addition; and (d) all patents to issue
in any such applications; (e) income, royalties, damages, claims and payments
now and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.

         "Secured Obligations" means (a) the obligation of Grantor to repay the
Lenders all of the unpaid principal amount of, and accrued interest on
(including any interest that accrues after the commencement of bankruptcy), any
amounts due pursuant to the Notes; (b) the obligations of Grantor to pay any
fees, costs and expenses of the Lenders under the Notes, and under Section 6.2
hereof; and (c) all other indebtedness, liabilities and obligations of Grantor
to the Lenders, whether now existing or hereafter incurred, and whether created
under, arising out of or in connection with any written agreement or otherwise.

         "Trademark License" means any written agreement, in which Grantor now
holds or hereafter acquires any interest, granting any right in and to any
Trademark or Trademark registration (whether Grantor is the licensee or the
licensor thereunder).

         "Trademarks" means any of the following in which Grantor now holds or
hereafter acquires any interest: (a) any trademarks, trade names, corporate
names, company names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof and any applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United Sates
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country (collectively, the "Marks"); (b)
any reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to sue for past, present and
future infringements of the Marks.

         "UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Secured Party's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.

         In addition, the following terms shall be defined terms having the
meaning set forth for such terms in the UCC: "Account Debtor"; "Accounts";
"Chattel Paper"; "Deposit



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Accounts"; "Documents"; "Equipment"; "Financial Assets"; "Fixtures"; "General
Intangibles"; "Instruments"; "Inventory"; "Investment Property"; "Proceeds".
Each of the foregoing defined terms shall include all of such items now owned,
or hereafter acquired, by Grantor.

         Unless otherwise defined herein, in the Loan Agreements or in the
Notes, all capitalized terms used herein shall have the respective meanings
given to them in the UCC.

         2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations, Grantor hereby
assigns, conveys, mortgages, pledges, hypothecates and transfers to Secured
Party for the ratable benefit of the holders of the Secured Obligations, and
hereby grants to Secured Party for the ratable benefit of the holders of the
Secured Obligations, a security interest in all of Grantor's right, title and
interest in, to and under the following, whether now owned or hereafter acquired
(all of which being collectively referred to herein as the "Collateral"):


                  (a) All Accounts of Grantor;

                  (b) All Chattel Paper of Grantor,

                  (c) All Contracts of Grantor,

                  (d) All Deposit Accounts of Grantor,

                  (e) All Documents of Grantor,

                  (f) All Equipment of Grantor;

                  (g) All Financial Assets of Grantor;

                  (h) All Fixtures of Grantor;

                  (i) All General Intangibles of Grantor, including, without
limitation, all Copyrights, Patents, Trademarks, Licenses, designs, drawings,
technical information, marketing plans, customer lists, trade secrets,
proprietary or confidential information, inventions (whether or not patentable),
procedures, know-how, models and data;

                  (j) All Instruments of Grantor;

                  (k) All Inventory of Grantor;

                  (1) All Investment Property of Grantor,



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                  (m) All property of Grantor held by Secured Party, or any
other party for whom Secured Party is acting as agent hereunder, including,
without limitation, all property of every description now or hereafter in the
possession or custody of or in transit to Secured Party or such other party for
any purpose, including, without limitation, safekeeping, collection or pledge,
for the account of Grantor, or as to which Grantor may have any right or power;

                  (n) All other goods and personal property of Grantor, wherever
located, whether tangible or intangible, and whether now owned or hereafter
acquired, existing, leased or consigned by or to Grantor; and

                  (o) To the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions to, substitutions and replacements for and
rents, profits and products of each of the foregoing, as well as all payments
under insurance (whether or not Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.

         3. Rights of Secured Party; Collection of Accounts.

                  3.1 Performance of Contracts and Licenses. Notwithstanding
anything contained in this Security Agreement to the contrary, Grantor expressly
agrees that it shall remain liable under each of its Contracts and each of its
Licenses to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and that it shall perform all of its
duties and obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract or License. Secured Party shall not
have any obligation or liability under any Contract or License by reason of or
arising out of this Security Agreement or the granting to Secured Party of a
lien therein or the receipt by Secured Party of any payment relating to any
Contract or License pursuant hereto, nor shall Secured Party be required or
obligated in any manner to perform or fulfill any of the obligations of Grantor
under or pursuant to any Contract or License, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.

                  3.2 Collection of Accounts. Secured Party authorizes Grantor
to collect its Accounts, provided that such collection is performed in a prudent
and businesslike manner, and Secured Party may, upon the occurrence and during
the continuation of any Event of Default and without notice, limit or terminate
said authority at any time. Upon the occurrence and during the continuance of
any Event of Default, at the request of Secured Party, Grantor shall deliver all
original and other documents evidencing and



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relating to the performance of labor or service which created such Accounts,
including, without limitation, all original orders, invoices and shipping
receipts.

                  3.3 Notification to Third Parties. Secured Party may at any
time, upon the occurrence and during the continuance of any Event of Default,
after due notice to Grantor of its intention to do so, notify Account Debtors of
Grantor, parties to the Contracts of Grantor, obligors in respect of Instruments
of Grantor and obligors in respect of Chattel Paper of Grantor that the Accounts
and the right, title and interest of Grantor in and under such Contracts,
Instruments and Chattel Paper have been assigned to Secured Party and that
payments shall be made directly to Secured Party. Upon the request of Secured
Party, Grantor shall so notify such Account Debtors, parties to such Contracts,
obligors of such Instruments and obligors in respect of such Chattel Paper. Upon
the occurrence and during the continuance of any Event of Default, Secured Party
may, in its name or in the name of others, communicate with such Account
Debtors, parties to such Contracts, obligors in respect of such Instruments and
obligors in respect of such Chattel Paper to verify with such parties, to
Secured Party's satisfaction, the existence, amount and terms of any such
Accounts, Contracts, Instruments or Chattel Paper.

         4. Representations and Warranties. Grantor, to its knowledge, hereby
represents and warrants as of the date hereof that:

                  4.1 Title. Except for the security interest granted to Secured
Party under this Security Agreement, and except as set forth on Schedule 4.1
hereto: (a) Grantor is the sole legal and equitable Owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all Liens; and (b)
no effective security agreement, financing statement, equivalent security or
lien instrument or continuation statement covering all or any part of the
Collateral exists, except such as may have been filed by Grantor in favor of
Secured Party pursuant to this Security Agreement.

                  4.2 Security Interest. This Security Agreement creates a legal
and valid security interest on and in all of the Collateral in which Grantor now
has rights. Upon the making of the required filings, Secured Party will have a
fully perfected security interest for the ratable benefit of the holders of the
Secured Obligations in all of the Collateral in which Grantor now has rights.
This Security Agreement will create a legal and valid and fully perfected
security interest in the Collateral in which Grantor later acquires rights, when
Grantor acquires those rights and makes additional filings to be made with the
United States Copyright and/or Patent and Trademark Office as are necessary to
perfect Secured Party's security interest in subsequent ownership rights and
interests of Grantor in Copyrights, Patents, Trademarks and Licenses.

                  4.3 Location of Collateral. Grantor's chief executive office,
principal place of business and the place where the Grantor maintains its
records concerning the Collateral are presently located at the address set forth
on the signature page hereof. The



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Collateral is presently located at such address and at such additional addresses
set forth on Schedule 4.3 attached hereto.

                  4.4 List of Intellectual Property. All Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses now owned,
held or in which Grantor otherwise has any interest are listed on Schedule 4.4
attached hereto.

                  4.5 Intellectual Property Collateral. With respect to the
Copyrights, Patents, Trademarks and Licenses granted to Secured Party hereunder
(the "Intellectual Property Collateral"), the loss, impairment or infringement
of which might have a materially adverse effect on the financial condition,
operation, assets, business, properties or prospects of the Grantor, except as
set forth on Schedule 4.5:

                           (a) such Intellectual Property Collateral is
subsisting and has not been adjudged invalid or unenforceable, in whole or in
part;

                           (b) Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property Collateral;

                           (c) Grantor is the Owner of the entire and
unencumbered right, title and interest in and to such Intellectual Property
Collateral and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party;

                           (d) Grantor has performed and will continue to
perform acts and has paid and will continue to pay all required fees and taxes
to maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.

                           (e) There are in full force and effect
confidentiality and noncompetition agreements between Grantor and its current
and former employees prohibiting the unauthorized disclosure or dissemination of
any information relating to the Intellectual Property Collateral, as well as
enforceable intellectual property ownership agreements between Grantor and its
current employees.

                           (f) Grantor will continue to take all reasonable
measures to protect against any unauthorized disclosure or dissemination of
information relating to the Intellectual Property Collateral by its current and
future employees.

                  4.6 Authorization, Approval, Etc. Except as set forth on
Schedule 4.6 hereto, no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (a) for the grant by the Grantor of the security interest
granted hereby or for the execution, delivery, and performance of this Security
Agreement by the Grantor, or (b) for the perfection of or the exercise by the
Secured Party of its rights and remedies hereunder.



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                  4.7 Compliance with Laws. Except as set forth on Schedule 4.7
hereto, the Grantor is in compliance with the requirements of all applicable
laws (including, without limitation, the provisions of the Fair Labor Standards
Act), rules, regulations and orders of every governmental authority, the
non-compliance with which might materially adversely affect the business,
properties, assets, operations, condition (financial or otherwise) or prospects
of the Grantor or the value of the Collateral or the worth of the Collateral as
collateral security.

                  4.8 List of Investment Property. All investment property now
owned, held or in which Grantor otherwise has any interest exceeding $10,000 is
listed on Schedule 4.8 attached hereto.

                  4.9 No Conditions Precedent. There are no conditions precedent
to the effectiveness of this Security Agreement that have not been satisfied or
waived.

         5. Covenants. Grantor covenants and agrees with Secured Party that from
and after the date of this Security Agreement and until the Secured Obligations
have been performed and paid in full:

                  5.1 Disposition of Collateral. Grantor shall not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt to contract
to do so without the consent of the Secured Party, other than (a) the sale of
Inventory, (b) the granting of nonexclusive Licenses, (c) the disposal of
worn-out or obsolete Equipment, all in the ordinary course of Grantor's business
and (d) the granting of a security interest of equal priority to the security
interest granted hereunder to one or more lenders loaning Grantor an aggregate
of $2,125,000.

                  5.2 Relocation of Business or Collateral. Grantor shall not
relocate its chief executive office, principal place of business or its records,
or allow the relocation of any Collateral (except as allowed pursuant to Section
5.1 immediately above) from such address(es) provided to Secured Party pursuant
to Section 4.3 above without twenty (20) days prior written notice to Secured
Party.

                  5.3 No Liens on Collateral. Grantor shall not, directly or
indirectly, create, permit or suffer to exist, and shall defend the Collateral
against and take such other action as is necessary to remove, any Lien on the
Collateral, except (i) the Lien granted to Secured Party under this Security
Agreement, and (ii) the Liens described on Schedule 4.1 hereto.

                  5.4 Insurance. Grantor shall maintain insurance policies
insuring the Collateral against loss or damage from such risks and in such
amounts and forms and with such companies as are customarily maintained by
businesses similar to Grantor.



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                  5.5 Taxes, Assessments, Etc. Grantor shall pay promptly when
due all property and other taxes, assessments and government charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Equipment, Fixtures, or Inventory, except to the extent
the validity thereof is being contested in good faith and adequate reserves are
being maintained in connection therewith.

                  5.6 Maintenance of Records. Grantor shall keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral.

                  5.7 Registration of Intellectual Property Rights. Grantor
shall promptly register or cause to be registered (to the extent not already
registered) the most recent version of any Copyright and any Copyright License
and any Patent, Patent License, Trademark or Trademark License, which,
individually or in the aggregate, is material to the conduct of Grantor's
business, with the United States Copyright Office or Patent and Trademark
Office, applicable, including, without limitation, in all such cases the filing
of applications for renewal, affidavits of use, affidavits of noncontestability
and opposition and interference and cancellation proceedings. Grantor shall
register or cause to be registered with the United States Copyright Office or
Patent and Trademark Office, as applicable, those additional rights and
interests developed or acquired by Grantor, after the date of this Security
Agreement, including, without limitation, any additions to the rights and
interests of Grantor listed on Schedule 4.4 hereto, prior to the sale or
licensing of any product containing such rights and interests. Grantor may take
into account the factors set forth on Schedule 5.7 hereto in assessing the
materiality of intellectual property for purposes of this Section 5.7.

                  5.8 Notification Regarding Changes in Intellectual Property.
Grantor shall promptly advise Secured Party of any subsequent ownership right or
interest of the Grantor in or to any Copyright, Patent, Trademark or License not
specified on Schedule 4.4 hereto and hereby authorizes and appoints Secured
Party as Grantor's attorney-in-fact to modify or amend such Schedule, as
necessary, to reflect any addition or deletion to such ownership rights.

                  5.9 Defense of Intellectual Property. Grantor shall (a)
protect, defend, and maintain the validity and enforceability of the Copyrights,
Patents and Trademarks, (b) use its best efforts to detect infringements of the
Copyrights, Patents and Trademarks and promptly advise Secured Party in writing
of material infringements detected and (c) not allow any Copyrights, Patents, or
Trademarks to be abandoned, forfeited, or dedicated to the public without the
written consent of Secured Party.

                  5.10 Further Assurances; Reimbursement. At any time and from
time to time, upon the written request of Secured Party, and at the sole expense
of Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such action as Secured Party may
reasonably deem necessary or desirable to obtain the full benefits of this
Security Agreement, including, without limitation, facilitating the filing of
UCC-1 Financing Statements in all applicable



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jurisdictions and this Security Agreement (and any amendment hereto) with the
United States Copyright Office and/or Patent and Trademark Office, as
applicable. Grantor agrees to reimburse Secured Party, upon demand, for any
payment made or any expense incurred by Secured Party in making any such filings
or for the discharge of any taxes, liens, or other encumbrances at any time
levied or placed on the Collateral or any part thereof or any other payment made
by Secured Party for the maintenance and preservation of the Collateral. Grantor
agrees that a carbon or photostatic copy of this Security Agreement may be filed
as a financing statement in any public office.

         6. Rights and Remedies Upon Default.

                  6.1 General. Upon the occurrence of any Event of Default and
while such Event of Default is continuing, Secured Party may exercise in
addition to all other rights and remedies granted to it under this Security
Agreement, all rights and remedies of a secured party under the UCC.

                  6.2 Right to Fees, Costs and Expenses. Grantor also agrees to
pay all reasonable fees, costs and expenses of Secured Party, including, without
limitation, reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder, including, without
limitation, in any litigation, bankruptcy, or insolvency proceedings.

                  6.3 Priorities Upon Disposition of Collateral. The proceeds of
any sale, disposition or other realization upon all or any part of the
Collateral shall be distributed by Secured Party in the following order of
priorities:

                           (a) First, to Secured Party in an amount sufficient
to pay in full the reasonable costs of Secured Party in connection with such
sale, disposition or other realization, including all fees, costs, expenses,
liabilities and advances incurred or made by Secured Party in connection
therewith, including, without limitation, reasonable attorneys' fees;

                           (b) Second, to the Lenders in an amount equal to the
then unpaid Secured Obligations; and

                           (c) Finally, upon payment in full of the Secured
Obligations, to Grantor or its representatives, in accordance with the UCC or as
a court of competent jurisdiction may direct.

         7. Secured Party Appointed Attorney-in-fact. Grantor hereby appoints
Secured Party the Grantor's attorney-in-fact, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Secured Party's discretion, upon the occurrence and during the
continuance of an Event of Default, to take any action and to execute any
instrument which the Secured Party may deem



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necessary or advisable to accomplish the purposes of this Security Agreement,
including, without limitation:

                  (a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral;

                  (b) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection therewith; and

                  (c) to file any claims or take any action or institute any
proceedings which Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Secured Party with respect to any of the Collateral.

         8. Indemnity. Grantor agrees to defend, indemnify and hold harmless
Secured Party, and its officers, employees, attorney, agents, members, and each
person who controls any of the foregoing against (a) all obligations, demands,
claims and liabilities claimed or asserted by any other party in connection with
the transactions contemplated by this Security Agreement and (b) all losses or
expenses in any way suffered, incurred or paid by Secured Party as a result of
or in any way arising out of, following or consequential to transactions between
Secured Party and Grantor, whether under this Security Agreement or otherwise
(including, without limitation, reasonable attorneys' fees and expenses), except
for losses arising from or out of Secured Party's gross negligence or willful
misconduct.

         9. Limitation on Secured Party's Duty in Respect of Collateral. Secured
Party shall be deemed to have acted reasonably in the custody, preservation, and
disposition of any of the Collateral if it takes such action as Grantor requests
in writing, but failure to comply with any such request shall not in itself be
deemed a failure to act reasonably and no failure of Secured Party to do any act
not so requested shall be deemed a failure to act reasonably.

         10. Reinstatement. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a trustee
or receiver be appointed for all or any significant part of Grantor's property
and assets and shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Secured Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount or
must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance" or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured



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Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

         11. Miscellaneous.

                  11.1 No Waiver; Cumulative Remedies. Secured Party shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
respective rights or remedies hereunder, nor shall any single or partial
exercise of any right or remedy hereunder on any one occasion preclude the
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently and are not exclusive of any rights and remedies provided
by law.

                  11.2 Entire Agreement. This Security Agreement and the
Intercreditor Agreement of even date herewith constitute the entire agreement
between the parties relating to the subject matter hereof. None of the terms or
provisions of this Security Agreement may be waived, altered, modified or
amended except by an instrument in writing, duly executed by Grantor and Secured
Party.

                  11.3 Termination of this Security Agreement. Subject to
Section 10 hereof, this Security Agreement shall terminate upon the payment and
performance in full of the Secured Obligations, at which time all rights to the
Collateral shall revert to Grantor and to any other secured parties with rights
to the Collateral equal or subordinate to the rights of Secured Party. Upon such
a termination, the Secured Party shall, at Grantor's sole expense, execute and
deliver to Grantor such documents as the Grantor shall reasonably request to
evidence such termination.

                  11.4 Successors and Assigns. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Secured
Party hereunder, inure to the benefit of Secured Party, any future holder of any
of the indebtedness and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the Lien granted
to Secured Party hereunder.

                  11.5 Headings. The headings in this Security Agreement are for
the convenience of reference only and will not affect the construction of this
Security Agreement.

                  11.6 Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.



                                       12
<PAGE>   13
                  11.7 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument. Execution and delivery by facsimile
shall constitute good and valid execution and delivery unless and until replaced
or substituted by an original executed instrument.

                  11.8 Governing Law. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York, excluding conflicts of
laws principles.

                  11.9 Collateral Agent. Pursuant to the terms of a Note
Holders' Representative Agreement by and among the Lenders dated of even date
herewith, the Lenders have designated Jimmie H. Harvey to act as their
collateral agent hereunder, and the Lenders have reserved the right to designate
or elect a successor person or entity to serve as their collateral agent and as
Secured Party under this Security Agreement. Upon the appointment or designation
of a successor to serve as collateral agent for the Lenders hereunder, such
successor shall thereupon succeed to and become vested with all the rights,
powers and privileges of the Secured Party hereunder as collateral agent for the
Lenders. Lenders or the Secured Party shall notify Grantor of the designation or
election of any such person or entity to serve as the successor of the Secured
Party hereunder.



                     (Signatures to follow on the next page)



                                       13
<PAGE>   14
         IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.



Spatialight, Inc., a New York corporation     Address of Spatialight, Inc., a
                                              Grantor:

By:  /s/ MICHAEL H. BURNEY                    Spatialight, Inc.
    -----------------------------             9 Commercial Blvd., Suite 200
        Michael H. Burney                     Novato, CA  94949
        Chief Executive Officer


Spatialight of California, Inc.,              Address of Spatialight of
California, a California corporation          Inc., a Grantor:

By:  /s/ MICHAEL H. BURNEY                    Spatialight of California, Inc.
    -----------------------------             9 Commercial Blvd., Suite 200
        Michael H. Burney                     Novato, CA  94949
        Chief Executive Officer

<PAGE>   15
FOR THE LENDERS:

/s/ JIMMIE H. HARVEY
------------------------
Jimmie H. Harvey, as Collateral Agent



<PAGE>   16
                                   SCHEDULE A

                                    LENDERS



<TABLE>
<CAPTION>
             Name                       Loan Amount                    Address
             ----                       -----------                    -------
<S>                                     <C>                   <C>
Jimmie H. Harvey, M.D.                    $250,000            3741 E. Fairway Drive
                                                              Birmingham, AL  35213
                                                              Fax: 205-599-3408

Hilliard Limited Partnership              $100,000            Attn:  Dan Hilliard
                                                              2555 S. Trillium
                                                              Green Bay, WI  54313
                                                              Fax: 920-490-2710

David A. Twiford                          $75,000             871 Ridgeway Loop, #107
                                                              Memphis, TN  38120
                                                              Fax: 901-684-1237

Paul Klister                              $50,000             1308 East Shade Tree Lane
                                                              Appleton, WI  54915
                                                              Fax: 920-830-6640

Marcia K. Tripp                           $225,000            35 Indian Forest Road
                                                              Indian Springs, AL  35124
                                                              Fax: 205-402-0873

Wayne P. Tripp Trust,                     $250,000            35 Indian Forest Road
Marcia K. Tripp, Trustee                                      Indian Springs, AL  35124
                                                              Fax: 205-402-0873

Steven F. Tripp Trust,                    $250,000            35 Indian Forest Road
Marcia K. Tripp, Trustee                                      Indian Springs, AL  35124
                                                              Fax: 205-402-0873

Lisa Marie Tripp Trust,                   $175,000            35 Indian Forest Road
Marcia K. Tripp, Trustee                                      Indian Springs, AL  35124
                                                              Fax: 205-402-0873

Robert E. Woods                           $250,000            922 10th Street SW
                                                              Alabaster, AL  35007

Weyers Family Limited                     $100,000            500 AMS Court
Partnership                                                   Green Bay, WI  54313
                                                              Fax: 920-434-5811

Robert J. Weyers                          $100,000            500 AMS Court
                                                              Green Bay, WI  54313
                                                              Fax: 920-434-5811

Jeffrey J. Weyers                         $100,000            500 AMS Court
                                                              Green Bay, WI  54313
                                                              Fax: 920-434-5811
</TABLE>

                                       16
<PAGE>   17
<TABLE>
<S>                                     <C>                   <C>
Ronald A. Weyers                          $100,000            500 AMS Court
                                                              Green Bay, WI  54313
                                                              Fax: 920-434-5811

Llew Ann King                             $100,000            6600 Murray Lane
                                                              Brentwood, TN  37027
                                                              Fax: 615-376-4127

Matthew A. King                           $37,500             Agent:  Jack Nuismer
Charitable Remainder                                          Raymond James Financial
Unitrust DTD 5/29/97                                          Services
                                                              2103 Crestmoor Road
                                                              Nashville, TN  37215
                                                              Fax: 615-292-7317

Agt. C.T. Williams,                       $37,500             Agent: Kirk Scobey
TUA 11/1/76                                                   SunTrust Equitable Trust
FBO Matthew A. King                                           Co.
Account 10830                                                 800 Nashville City Center
                                                              Nashville, TN
                                                              37219 Fax:
                                                              615-780-9327

Robert O. Rolfe                           $150,000            J.C. Bradford Company
                                                              330 Commerce Street
                                                              Nashville, TN  37201
                                                              Fax: 615-271-1422

John W. Eakin                             $175,000            520 Jackson Boulevard
                                                              Nashville, TN  37205
                                                              Fax: 615-298-6609

Jefferson R. Cobb                         $100,000            204 Aspen Meadow Drive
                                                              Edwards, CO  81632
                                                              Fax: 970-926-0474

Bryan B. Starr, Sr. SEP IRA               $50,000             c/o Healthcare Realty Mgmt
                                                              1400 Urban Center Dr.#400
                                                              Birmingham, AL  35242
                                                              Fax: 205-969-0104

Performance Futures PSP                   $50,000             1400 Urban Center Dr.#415
DTD 1/1/93 FBO Bryan B.                                       Birmingham, AL  35242
Starr, Jr.                                                    Fax: 205-969-0104

Birmingham Hematology and                 $150,000            790 Montclair Road
Oncology Associates, SLB Flex                                 Suite 100
Prototype P/S Plan DTD                                        Birmingham, AL  35213
10/27/85 FBO Jimmie H.
Harvey, M.D.
</TABLE>



                                       17
<PAGE>   18

                                  Schedule 4.1

                                 Existing Liens


<TABLE>
<CAPTION>
             SECURED PARTY                             DESCRIPTION
             -------------                             -----------
<S>                                               <C>
Newcourt Leasing (formerly AT&T Capital)          Office Furniture

Colonial Pacific Leasing                          Fluke Combiscope

Colonial Pacific Leasing                          Office Furniture

GF Funding (formerly Granite Financial)           Office Furniture

Hewlett Packard                                   HP logic analyzer

Hewlett Packard                                   HP 750 Plotter

Hewlett Packard                                   Training on logic analyzer

Hewlett Packard                                   HP logic scope

Hewlett Packard                                   HP timing logic card & pattern generator

Argyle Capital Management Corporation             Security interest covering all of the
                                                  assets of the Company
</TABLE>



                                       18
<PAGE>   19
                                  Schedule 4.3

                             Location of Collateral


SpatiaLight, Inc.
9 Commercial Blvd., Suite 200
Novato, CA  94949



                                       19
<PAGE>   20
                                  Schedule 4.4

                        List of All Intellectual Property

                                     PATENTS

<TABLE>
<CAPTION>
  PATENT                                              FILING
    NO.                      TITLE                     DATE         INVENTOR          ASSIGNEE
  ------                     -----                    ------        --------          --------
<S>          <C>                                     <C>        <C>                <C>
5,396,261    Polysilicon Gate Bus With               03/07/95   W.A. Hastings      Spatialight of
             Interspersed Buffers For Driving a                 III(1)             California,
             Row of Pixels in an Active Matrix                                     Inc.
             Liquid Crystal Display

5,396,262    Polysilicon Gate Bus with               03/07/95   W.A. Hastings      Spatialight of
             Interspersed Buffers for Driving a                 III(1)             California,
             Row of Pixels in an Active Matrix                                     Inc.
             Liquid Crystal Display

5,365,355    Light Blocking Pixel Enhancement and    11/15/94   W.A. Hastings      Spatialight of
             Photocurrent Reduction in Active                   III(1)             California,
             Matrix Liquid Crystal Displays                                        Inc.

5,784,038    Color Projection System Employing       07/21/98   Dean Irwin(1)      Spatialight of
             Dual Monochrome Liquid Crystal                                        California,
             Displays with Misalignment Correction                                 Inc.

5,903,248    Active Matrix Display Having Pixel      05/11/99   Dean Irwin         SpatiaLight,
             Driving Circuits With Integrated                                      Inc.
             Charge Pumps
</TABLE>

                               PATENT APPLICATIONS

<TABLE>
<CAPTION>
   APPLICATION                                            FILING
    SERIAL NO.                    TITLE                    DATE       INVENTOR
   -----------                    -----                   ------      --------
<S>               <C>                                    <C>        <C>
  08/734,230      Technique for Driving Dot-Matrix       10/21/96   Dean Irwin
                  Liquid Crystal Displays by Phase
                  Shifting a Front Electrode Voltage
                  One-Half a Refresh Cycle
</TABLE>


                                   TRADEMARKS

<TABLE>
<CAPTION>
 TRADEMARK                                                 ISSUE            OWNER OF
    NO.                         TITLE                       DATE             RECORD
 ---------                      -----                       ----             ------
<S>               <C>                                     <C>            <C>
2,041,178         Liquid Crystal Displays and Liquid      02/25/97         SpatiaLight of
                  Crystal Light Modulations                               California, Inc.

2,006,653         Remote Controllers in the Audio         10/08/96       Sayett Group, Inc.
                  Visual Field

2,018,018         Video or Computer Controlled            11/19/96       Sayett Group, Inc.
                  Projectors
</TABLE>


--------

(1) Assigned to Spatialight of California, Inc. (formerly WAH-III Technology
Corporation)



                                       20
<PAGE>   21
                              Schedule 4.4 (cont.)

                             TRADEMARK APPLICATIONS

<TABLE>
<CAPTION>
   TRADEMARK
  APPLICATION                                                FILING           OWNER OF
      NO.                       TITLE                         DATE             RECORD
  -----------                   -----                        ------            -------
<S>               <C>                                     <C>            <C>
75/625,235        SPATIALIGHT IMAGENGINE                  01/21/99       SpatiaLight, Inc.

75/716,246        DISPLASIC                               05/27/99       SpatiaLight, Inc.
</TABLE>



                                       21
<PAGE>   22
                                  Schedule 4.5

                        Intellectual Property Collateral

Although the Company has noncompetition agreements in place, these agreements
may not be enforceable under California law.

At any time the Company may have intellectual property which could be
copyrighted, for which it does not have registered copyrights and which it is
not taking steps to register throughout the world.

The Company makes a determination whether to patent its intellectual property
from time to time based upon cost-benefit analyses, taking into account factors
such as cost and the length of time a patent is anticipated to give it a
competitive advantage and does not patent all intellectual property which
theoretically could be patented.



                                       22
<PAGE>   23
                                  Schedule 4.7

                              Compliance with Laws


                                      None



                                       23
<PAGE>   24
                                  Schedule 4.8

                               Investment Property

                                      None



                                       24
<PAGE>   25
                                  Schedule 5.7

                      Registration of Intellectual Property


The Company makes a determination whether and where to file patents, trademarks
or copyrights upon its intellectual property from time to time based upon
cost-benefit analyses, taking into account factors such as cost and the
anticipated competitive advantage generated by a filing and does not file
patents, trademarks or copyrights for all intellectual property which
theoretically could be protected.

At any time the Company may have intellectual property which could be
copyrighted, for which it does not have registered copyrights and which it is
not taking steps to register throughout the world.