CONFIDENTIAL TREATMENT REQUESTED

                              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:


[*] Represents redacted information - confidential treatment requested.
<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

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

      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                              Quantity

      --------------------------------------------------------------------
            July 2004                          20 Qualification Sets
      --------------------------------------------------------------------
            September 2004                     100 Qualification Sets
      --------------------------------------------------------------------
            November 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.


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

      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 $3,000 (not including the cost of the
LCoS Sets).  It is hereby  agreed that such  twenty-five  (25) trial  Fitted LGE
Light Engines [*] and therefore [*] that SpatiaLight [*].

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:


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                             Minimum Monthly                                            Monthly Purchase
                                Commitment                Price Per LCoS Set            Price Commitment
       Month             (Quantity of LCoS Sets)        (United States Dollars)     (United States Dollars)
------------------------------------------------------------------------------------------------------------
<S>                               <C>                                <C>                          <C>
    January 2005                  2,000                              [*]                          [*]
------------------------------------------------------------------------------------------------------------
    February 2005                 2,000                              [*]                          [*]
------------------------------------------------------------------------------------------------------------
    March 2005                    2,000                              [*]                          [*]
------------------------------------------------------------------------------------------------------------
    April 2005                    5,000                              [*]                          [*]
------------------------------------------------------------------------------------------------------------
    May 2005                      5,000                              [*]                          [*]
------------------------------------------------------------------------------------------------------------
    June 2005                     5,000                              [*]                          [*]
------------------------------------------------------------------------------------------------------------
</TABLE>

      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:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                                         Monthly Forecast
                             Monthly Forecast              Price Per LCoS Set             Purchase Price
       Month             (Quantity of LCoS Sets)        (United States Dollars)     (United States Dollars)
------------------------------------------------------------------------------------------------------------
<S>                               <C>                                <C>                          <C>
    July 2005                     10,000                             [*]                          [*]
------------------------------------------------------------------------------------------------------------
    August 2005                   10,000                             [*]                          [*]
------------------------------------------------------------------------------------------------------------
    September 2005                10,000                             [*]                          [*]
------------------------------------------------------------------------------------------------------------
    October 2005                  10,000                             [*]                          [*]
------------------------------------------------------------------------------------------------------------
    November 2005                 10,000                             [*]                          [*]
------------------------------------------------------------------------------------------------------------
    December 2005                 10,000                             [*]                          [*]
------------------------------------------------------------------------------------------------------------
</TABLE>

      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.


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

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.


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

      8.3.  Commencing on January 15, 2005, on the fifteenth  (15th) 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.    [*]

      The parties acknowledge and agree that the [*] set forth in this Section 9
[*] set forth in Section 6 hereof.

      9.1. The parties hereby  acknowledge  and agree that [*] at  SpatiaLight's
sole discretion) and a [*] for the purpose of [*] in only the following [*]. The
parties  covenant  and agree to provide [*] 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 [*] the cost of the
LCoS Set [*].

      9.2.  LGE hereby  covenants  and agrees to [*]to  SpatiaLight  during each
month in 2005 and a [*] 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 [*] and is not [*] in any way [*] throughout the term
of this Agreement;  provided,  however,  [*], no later than December 1, 2004, to
provide [*] shall  commence in [*] and shall be thereafter  [*]  throughout  the
term of this Agreement and shall be fully binding upon the parties hereto.

      9.3. [*] all of such [*]  SpatiaLight  [*] not greater than the [*] as the
[*]  SpatiaLight  sells  LCoS  Sets to LGE under  this  Agreement.  The  parties
acknowledge  and agree that the [*] may change over time, and therefore agree to
[*] of the [*] and the [*] 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.


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

      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 [*]  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.


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

      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.


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<PAGE>

                        CONFIDENTIAL TREATMENT REQUESTED

15.   [*]

      SpatiaLight  shall [*] or other [*],  whether  [*],  that [*] that the [*]
this  Agreement [*] of a [*]. The [*] or not [*] of the [*] of any [*]. This [*]
does not apply [*] on the [*] of the [*], or in [*] with any [*] by  SpatiaLight
with the [*], or in [*] with [*].

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.


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                        CONFIDENTIAL TREATMENT REQUESTED

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.


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                        CONFIDENTIAL TREATMENT REQUESTED

      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:

<TABLE>
<S>                                <C>
            (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: 82-2-526-4612      Fax: 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
</TABLE>

27.   NON-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.


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                        CONFIDENTIAL TREATMENT REQUESTED

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.

--------------------------------------------------------------------------------

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                        CONFIDENTIAL TREATMENT REQUESTED

      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 Yoo
                                        ----------------------------------------
                                        Name:  Eunho Yoo
                                        Title: Director Digital Display Research
                                               Laboratory

                                     SPATIALIGHT, INC.


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


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                        CONFIDENTIAL TREATMENT REQUESTED

                                    Exhibit 1

 Final Specifications of SpatiaLight Qualification Sets and Pre-Production Sets

                                   [Attached]


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