Document:

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                                                                    Exhibit 10.3

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT  AGREEMENT,  dated as of July 7, 2003,  between  Theodore H.
Banzhaf,  an individual  residing at 1801 Gough Street #403, San  Francisco,  CA
94109  ("EMPLOYEE"),  and  SPATIALIGHT,  INC.,  a New  York  corporation,  whose
principal place of business is located at 5 Hamilton Landing, Suite 100, Novato,
California 94949 (the "COMPANY").

                              W I T N E S S E T H:
                               - - - - - - - - - -

         WHEREAS,  Employee  has  represented  that  Employee  has  considerable
experience and expertise in areas of investor corporate  development,  including
the structuring of management, seeking and implementing corporate strategies and
managing investor  relations,  which skills may be used to enhance the long term
objectives  of the  Company  in  developing  a  strategy  for the  growth of the
business and increasing the revenues and net income of the Company;

         WHEREAS, Employee shall render services to the Company in the corporate
development field and provide other executive services to the Company; and

         WHEREAS,  the Company  desires to confirm the employment of Employee as
its  Executive  Vice  President  of  Strategic  Planning,  to serve  and  assist
management  of the Company in the areas  described  in Section 1 hereof,  on the
terms and  conditions  hereinafter  set  forth,  and  Employee  desires to be so
employed upon such terms and conditions.

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
covenants and conditions  hereinafter  set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

         1.  EMPLOYMENT;  DUTIES.  The Company hereby confirms its employment of
Employee,  and Employee  hereby  confirms his acceptance of  employment,  as the
Executive Vice President of Strategic Planning of the Company,  on the terms and
subject to the conditions  hereinafter  set forth.  In such  capacity,  Employee
shall  continue,  subject to the ultimate  authority of the  Company's  Board of
Directors  (the "BOARD") and his  obligation  to report to the  Company's  Chief
Executive  Officer or such other principal  officers of the Company as the Board
may designate, to perform duties in the following areas:

                  (a) Employee shall review and undertake a study of the current
         business  operations,  financial  condition,  management  and  business
         prospects  of the  Company so as to enable  him to render the  services
         called for hereby;

                  (b)  Employee  shall  assist the Board in locating  and hiring
         qualified   senior   employees  to  administer  the  Company's   future
         operations;

                  (c) Employee  shall assist the  management of the Company with
         the development and  implementation of a strategy for the growth of its
         business which is focused on increasing  shareholder  value through the
         increase in the Company's revenues and net income; and

                  (d) Employee  will seek out,  examine and propose to the Board
         suitable  strategic  alliances for the Company involving joint ventures
         or other suitable  arrangements  with other suitable  business partners
         and/or appropriate contractual arrangements with manufacturing entities
         and other parties;

                  (e) Employee shall render services to enhance the value of the
         Company and its  outstanding  equity  securities for the benefit of its
         shareholders by:

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         (i)      Assisting the Board in improving and expanding  communications
                  to and with shareholders and  representatives of the financial
                  community; and

                           (ii) Using  Employee's  best  efforts to develop  the
                  interest of potential  investment in the Common  Shares,  $.01
                  par value per share (the "COMMON  SHARES") or other securities
                  of the Company by institutional investors.

                  (f) In rendering all of the services that are described in the
         foregoing  provisions  of this Section 1,  Employee  shall at all times
         comply with all legal  requirements,  including all relevant disclosure
         and other  requirements  under  federal and state  securities  laws and
         regulations.

                  (g)  Notwithstanding  any other  provision of this  Agreement,
         Employee  shall not have or  represent or hold himself out to any third
         party as having the express or implied power or authority,  beyond that
         which shall be expressly  conferred upon him by the Board,  to bind the
         Company  or any of  its  Affiliates  (as  hereinafter  defined)  to any
         agreement, commitments or obligations.

2. TERM; TERMINATION.

                  (a) Employee's  employment  pursuant to this  Agreement  shall
         become  effective as of July 7, 2003 (the  "EFFECTIVE  DATE") and shall
         continue,  unless earlier terminated  pursuant to any of the provisions
         of section 2 (b) hereof through the second anniversary of the Effective
         Date  (the  "EMPLOYMENT  TERM")  and  this  Agreement  shall  terminate
         automatically,  without further act of the parties,  on the last day of
         the Employment Term;  PROVIDED,  HOWEVER,  that the Company may, in its
         sole  discretion,  terminate  this  Agreement  at any time  during  the
         Employment  Term,  for any reason except for  termination  for Cause as
         defined in 2(b)(iii)  hereof) upon sixty (60) days prior written notice
         from the Company to Employee, except that the Company may not terminate
         this Agreement without Cause before June 7, 2004.

                  (b) In addition to the  expiration of the  Employment  Term as
         hereinabove  provided,  this Agreement and Employee's employment by the
         Company  shall  terminate   sooner  on  the  Date  of  Termination  (as
         hereinafter defined) by reason of the following events:

                    (i) automatically upon Employee's death;

                    (ii) at the  Company's  option if, as a result of Employee's
               incapacity  due to  physical or mental  illness,  he is unable to
               perform the duties of his  employment  hereunder for a continuous
               period of thirty  (30)  days,  after  giving  effect to  vacation
               periods or an  aggregate  of sixty  (60) days in any one  hundred
               eighty  (180) day period  (each  such  period  being  hereinafter
               referred to as a "DISABILITY PERIOD");

                    (iii)  at the  Company's  option,  at any  time  for  Cause.
               "CAUSE" shall mean:

                        (1)         theft,  dishonesty,  or falsification of any
                                    employment or Company records;

                        (2)         conviction  of a felony or any act involving
                                    moral turpitude;

                        (3)         consistent poor  performance,  as determined
                                    in the sole discretion of the Board,  which,
                                    if not cured,  again in the sole  discretion
                                    of  the  Board,   within  thirty  (30)  days
                                    following  written notice of such consistent
                                    poor performance from the Company;

                        (4)         improper  disclosure of Company  Information
                                    (as defined in Section 8 hereof);

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                        (5)         any  intentional  act by Employee that has a
                                    material detrimental effect on the Company's
                                    reputation or business, as determined in the
                                    sole discretion of the Board;

                        (6)         any breach of this Agreement,  which breach,
                                    if curable,  is not cured within thirty (30)
                                    days following written notice of such breach
                                    from the Company; and

                        (7)         any   violation  of  Section  1(g)  of  this
                                    Agreement.

                    (iv) as provided in Section  2(a) hereof,  at the  Company's
               option at any time on or after June 7, 2004 without Cause; and

                    (v) upon Employee's voluntary termination of employment.

                  (c) Any termination of this Agreement pursuant to Section 2(b)
         shall be communicated  by a written notice  indicating the provision of
         this  Agreement  upon  which  such  termination  is based (a "NOTICE OF
         TERMINATION").

                  (d)  As  appropriate   under  the   circumstances,   "DATE  OF
         TERMINATION"  shall mean,  as  applicable:  (A) the date of  Employee's
         death;  (B) thirty (30) days after a Notice of  Termination is given to
         Employee,  if Employee's  employment is terminated  pursuant to Section
         2(b)(ii)  above; or (C) the date specified in the Notice of Termination
         if  Employee's  employment  is  terminated  by the Company  pursuant to
         Section 2(b)(iii) or 2(b)(iv) above.

     3.  COMPENSATION.  In  order  to  induce  Employee  to be  employed  as the
Company's Executive Vice President of Strategic Planning:

     (a) The Company shall pay Employee annual compensation  ("SALARY") equal to
US$240,000 during the Employment, subject to any increases in compensation which
the Board, in its sole discretion, may approve and award to Employee. The Salary
shall be payable to Employee in equal semi-monthly or monthly installments of US
Dollars.  All such  compensation  payments  shall be  subject to  deduction  for
federal,  state and local  withholding  taxes and other charges  required  under
federal or state laws or regulations; and

     (b) The Company agrees to grant Employee equity  incentive  compensation in
the form of Stock  Options to purchase an  aggregate of 800,000  Common  Shares,
$.01 par value, of the Company  pursuant to the provisions of a Time Accelerated
Restricted  Stock Award Agreement in the form annexed hereto as EXHIBIT "1" (the
"TARSAP").

4. COMPENSATION UPON TERMINATION AND DURING DISABILITY.

     (a) If Employee's  employment shall be terminated by his death, the Company
shall pay to his estate  Employee's unpaid Salary for the period through the end
of the calendar month in which Employee's death occurs.

     (b) In the event of Employee's  physical or mental disability,  the Company
shall continue to pay Employee his Salary during the Disability  Period.  If the
Company terminates  Employee's  employment  following the Disability Period, the
Company  shall  continue  to pay  Employee  his Salary  for the period  from the
Company's regular payroll through the Date of Termination. In addition, Employee
shall  continue  to  participate  in  the  employee   benefit,   retirement  and
compensation  plans and receive  other  benefits,  including  the Stock  Options
referenced in Section 3(b) hereof through the Date of Termination.

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     (c) If Employee's  employment  shall be terminated for Cause by the Company
or shall be  voluntarily  terminated by Employee,  the Company shall continue to
pay Employee his Salary  through the Date of  Termination.  Notwithstanding  the
immediately preceding sentence or any other provision of this Agreement, nothing
set forth herein will  preclude or  adversely  restrict the Company from seeking
full  redress or  reimbursement  for any losses  which it may have  sustained by
reason of those actions of Employee which shall have resulted in his termination
of employment for Cause.

     (d) If Employee's  employment  is  terminated by the Company  without Cause
pursuant to Section 2(b)(iv) hereof,  the Company shall continue to pay Employee
his Salary  for a period  equal to the  lesser of the  remaining  portion of the
Employment Term or ninety (90) days following the Date of Termination.

     (e)  If  Employee  shall   terminate  his   employment   with  the  Company
voluntarily,  the Company shall pay his Salary  through the Date of  Termination
and  Employee  shall  not be  entitled  to any  further  compensation  from  the
Corporation  or to  participate in any benefits made available by the Company to
its employees from and after such Date.

     (f) Unless otherwise agreed by the Company and Employee,  all payments made
to Employee (or his estate,  as applicable)  pursuant to this Section 4, whether
during a Disability  Period or after the Date of  Termination,  shall be made in
the  amounts,  at the times and  subject to the terms and  conditions  otherwise
applicable  to  payments to  Employee  pursuant to Section 3 hereof,  as if such
payments were made to Employee during the Employment Term.

5. BENEFITS; REIMBURSEMENT OF EXPENSES.

     (a) Employee shall be entitled to receive  medical and other health related
benefits  to the same  extent  available  to  other  employees  of the  Company,
provided that such medical and health  benefits  shall only be made available by
the  Company  for  Employee  and not for his  spouse or any other  member of his
family.

     (b) In  addition  to the  compensation  and  benefits  provided to Employee
pursuant to other  provisions  of this  Agreement,  the Company  will  reimburse
Employee in a manner  consistent  with  established  policies of the Company for
reasonable  out-of-pocket  expenses  actually  incurred  or  paid  by his in the
performance  of  his  services  hereunder,   subject  to  presentation  of  such
reasonably detailed expense statements,  receipts,  vouchers or other supporting
information  as the Company may  reasonably  require and subject  further to the
requirement of prior Company approval for expenses  exceeding  US$1,000 proposed
to be expended by Employee for any one or series of related purposes.

     6. OTHER AGREEMENTS.  Employee  represents and warrants to the Company that
Employee is not a party to any  agreement,  written or oral, and is not bound by
the terms of any  written or oral  agreement  to which he is not a party,  which
prohibits him from  performing his duties under this Agreement or of serving the
Company in any other capacity.

     7. INTELLECTUAL PROPERTY AGREEMENT. Employee agrees promptly to disclose in
writing  to the  Company  all  ideas,  programs,  systems,  processes,  business
concepts and developments  (hereinafter referred to collectively as "CONCEPTS"),
whether  or not  protected  by  copyright  or  trademark  laws  of any  relevant
jurisdiction,  which Employee,  while employed hereunder,  conceives,  develops,
acquires or reduces to practice, whether alone or with others and whether during
or after usual working hours, and which are related to the Company's business or
interests,  or  are  used  or  usable  by the  Company,  or  arise  out of or in
connection  with the duties  performed by Employee  hereunder.  Employee  hereby
transfers and assigns to the Company all right, title and interest in and to all
Concepts  including  any and all  domestic  or foreign  patents,  copyrights  or
trademarks resulting therefrom.  On request of the Company,  Employee shall from

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time to time during or after the  expiration or termination of his employment by
the Company,  execute such further instruments  (including,  without limitation,
assignments  thereof) and do all such other reasonable and legal acts and things
as may be deemed necessary or desirable by the Company to protect and/or enforce
its rights in respect of the Concepts. All expenses of filing or prosecuting any
copyright or trademark  documents or application or assignment  thereof shall be
borne by the Company,  but Employee shall cooperate in filing and/or prosecuting
any such documents.  Employee shall receive no additional  compensation  for the
performance of his obligations  under this Section 7, except as may be agreed to
by the Company.

8. COVENANT REGARDING CONFIDENTIALITY.

     (a) All information,  data, records, and materials furnished  (irrespective
of the  form of  communication)  by the  Company  to  Employee  and  all  notes,
analyses,  compilations, data, studies, other documents prepared by any officer,
employee, agent or representative  (collectively,  the "Representatives") of the
Company for internal use or  otherwise,  containing or based in whole or in part
on any such furnished  information are  hereinafter  referred to as the "Company
Information".  The term "Company  Information"  does not include  information or
records which (i) was or becomes generally available to the public other than as
a result of  disclosure by the  Company's  Representatives,  (ii) was or becomes
available to Employee on a non-confidential basis prior to its disclosure by the
Representatives  or by the Company or (iii) was or becomes available to Employee
on a  non-confidential  basis from a source  (other than the Company)  which has
represented to Employee that it is not bound by a confidentiality agreement with
the  Company  or  otherwise  prohibited  from  transmitting  any  portion of the
information  by  a  contractual,   legal  or  fiduciary  obligation.   Upon  the
termination  of Employee's  employment  for any reason  whatsoever,  Employee or
Employee's  estate  shall  return  all  Company  Information  to the  Company as
promptly as practicable.

     (b) Employee hereby further  acknowledges his understanding that trading in
any of the securities of the Company while  Employee has Company  Information in
his possession that has not been appropriately  disclosed or disseminated to the
public  constitutes a violation of the federal and/or state  securities laws and
could cause  irreparable  harm to the Company and would  constitute  "Cause" for
terminating  Employee's  employment  hereunder.  Employee  hereby  covenants and
agrees not to engage in any such trading in the securities of the Company.

9. COVENANT NOT TO COMPETE.

     (a) During the Restricted Period (as hereinafter  defined),  Employee shall
not,  directly or indirectly,  engage in any business anywhere in the Restricted
Territory (as hereinafter  defined) either as a stockholder,  officer,  manager,
employee,  agent,  representative,  consultant,  partner, member,  proprietor or
principal  in any other  capacity,  in any  business  engaged  in the  assembly,
distribution  and sale of liquid  crystals  and similar  products  used for high
definition television and such other uses and applications as the Company or any
of its  Affiliates  implements  during the  Restricted  Period and all  business
activities  related  thereto  (the  "RESTRICTED  ACTIVITIES"),  or  directly  or
indirectly,  own any interest in, manage,  operate, join, control, lend money or
render  financial or other assistance to or participate in or be connected with,
as a partner, stockholder, member, proprietor, other principal, employee, agent,
representative, consultant or otherwise, any person that otherwise competes with
respect to the Restricted Activities with the Company or such Affiliates.

     (b) As a separate and independent  covenant,  Employee  further agrees with
the  Company  that,  during  the  Employment  Term and for a period  of one year
thereafter,  Employee  will not,  without  the  express  written  consent of the
Company,  in any way,  directly or indirectly,  for the purpose of conducting or
engaging in the  Restricted  Activities,  solicit,  advise or  otherwise  do, or
attempt to do, business with any customers of the Company or its Affiliates with
whom the Company or its  Affiliates  has had or had any dealings  during the two
(2)  year  period  immediately  preceding  such  solicitation  or  take  away or
interfere,  influence or attempt to interfere with or influence any employee (or
person who was an employee during

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the one (1) year period  preceding the date of attempted hiring or recruitment),
customer,  trade,  business or  patronage of the Company or its  Affiliates,  or
induce or attempt  to induce  any of them to leave the employ of the  Company or
its  Affiliates,  or violate  the terms of their  contracts,  or any  employment
arrangements,  with the  Company  or its  Affiliates.  Notwithstanding  anything
herein to the contrary, the ownership by Employee of not more than three percent
(3%) of any class of  outstanding  securities  of an issuer listed on a national
securities  exchange  or  regularly  traded on either of the two NASDAQ  markets
shall not constitute a violation of Sections 9(a) or 9(b) hereof.

     (c) Employee  agrees that remedies at law for any breach by Employee of the
covenants  contained  in Section 8 and this  Section 9 will be  inadequate,  and
that, in the event of a violation of the covenants  therein,  in addition to any
and all legal and equitable  remedies  which may be available to the Company and
its  Affiliates,  such  covenants  may be enforced by an injunction in a suit in
equity,  without the necessity of proving actual damage and without posting bond
or other undertaking  therefor.  If any other provision of Section 8 and/or this
Section 9 shall be deemed by an appropriate  court to be  unenforceable  for any
reason,  then  such  court  shall be  empowered  to  substitute,  to the  extent
enforceable, provisions similar thereto or other provisions so as to provide the
Company and its  Affiliates to the fullest extent  permitted by applicable  law,
the  benefits  intended by Section 8 and this Section 9.  Employee  acknowledges
that the covenants contained in this Section 9 are intended by the parties to be
in addition  to, and not in lieu or in  limitation  of, any other  agreement  or
covenant between Employee and the Company.  Each of the provisions of Sections 8
and 9 hereof shall survive the termination of this Agreement and the termination
of Employee's employment by the Company.

10.  DEFINITIONS.  Except as otherwise defined in this Agreement,  the following
terms shall have the following meanings:

     (a) "RESTRICTED  PERIOD" shall mean the Employment Term and for a period of
six  (6)  months  thereafter  whether  Employee's  employment  shall  have  been
terminated by reason of the expiration of this Agreement or otherwise; PROVIDED,
HOWEVER,  that, in the event  Employee's  employment  shall have been terminated
without Cause, the "Restricted Period" shall be for a period of ninety (90) days
after such termination of his employment;  PROVIDED, FURTHER, HOWEVER, that such
term shall mean the Employment Term and for a period of two (2) years thereafter
in the event that Employee's employment shall be terminated for Cause.

     (b) "RESTRICTED  TERRITORY" shall mean any location in the United States of
America,  and in any other  country,  state,  region,  county,  city or locality
thereof  where the  Company or any of its  Affiliates  is  transacting  business
during the Restricted Period or during a period of three (3) years prior thereto
has been transacting  business.  The parties agree and intend that the covenants
contained in Section 9 shall be construed as a series of separate covenants, one
for  each  applicable  region,  county,  city,  state  or  country.  Except  for
geographic  coverage,  each such separate  covenant shall be deemed identical in
terms.

     (c) "AFFILIATES"  shall mean any person directly or indirectly  controlling
the Company,  and other entities  (including  its majority  owned  subsidiaries)
controlled by, or under common control with, the Company.

11. NOTICES.  All notices and other communications given or made pursuant hereto
shall be in  writing  and shall be deemed to have been duly  given or made as of
the date  delivered or refused if  delivered  personally  or by facsimile  (with
confirmation),  or when  delivered  or  refused  if mailed by U.S.  first  class
registered or certified mail (postage prepaid,  return receipt requested) to the
parties at the  following  addresses  (or at such other  address  for a party as
shall be  specified  by like  notice,  except  that notice of changes of address
shall be effective upon the date of receipt or refusal):

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     If to the Company:

                  SpatiaLight, Inc.
                  Five Hamilton Landing, Suite 100
                  Novato, California 94949
                  Attn: Robert A. Olins
                  Telecopy No.:   (415) 883-3363
                  Telephone No.: (415) 883-1693

                  With a copy to:

                  Bryan Cave LLP
                  1290 Avenue of the Americas
                  New York, New York 10104
                  Attn: Melvin Katz, Esq.
                  Telecopy No.:   (212) 541-1408
                  Telephone No.: (212) 541-1155

                  If to Employee:

                  Theodore H. Banzhaf
                  1801 Gough Street , #403 San Francisco, CA 94109
                  Telephone No.: 415-775-3244

12. GENERAL.

     (a) The Section headings  contained herein are for reference  purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.

     (b) This  Agreement  together  with EXHIBIT "1" (the TARSAP) sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof,  and supersedes all prior agreements,  arrangements and  understandings,
written or oral, between the parties.

     (c) This  Agreement and the benefits  hereunder are personal to the Company
and Employee, and are not assignable or transferable, nor may the services to be
performed  hereunder  be  assigned  by  the  Company  to  any  person,  firm  or
corporation;  PROVIDED,  HOWEVER, that this Agreement and the benefits hereunder
may be assigned by the Company to any of its Affiliates  and/or will be assigned
(by  operation  of law) to any  person,  firm or  corporation  acquiring  all or
substantially  all of the assets or more than (50%)  percent of the  outstanding
voting capital stock of the Company or to any corporation into which the Company
may be merged or consolidated,  as long as no such assignment operates to expand
the Restricted Territory without the consent of Employee.

     (d) All  references in this  Agreement to amounts to be paid or benefits to
be provided to or on behalf of Employee are to the gross  amounts  thereof which
are due hereunder.  Except as otherwise  provided herein, the Company shall have
the right to deduct  therefrom  or collect  from  Employee all sums which may be
required to be deducted or withheld under any provision of law,  including,  but
not limited to, social security or similar payments, income tax withholding, any
other deduction required by law and any interest,  penalties or additions to tax
imposed with respect thereto.

     (e) This Agreement may be amended, modified, superseded,  canceled, renewed
or extended,  and the terms or covenants hereof may be waived, only by a written
instrument  executed by both parties hereto,  or in the case of a waiver, by the
party  waiving  compliance.  The failure of either  party at any time to require
performance of any provision  hereof shall in no manner affect the right of such
party at a later

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time to enforce the same. No waiver by either party of the breach of any term or
covenant  contained in this Agreement,  whether by conduct or otherwise,  in any
one or more  instances,  shall be deemed to be, or  construed  as, a further  or
continuing  waiver of any such  breach,  or a waiver of the  breach of any other
term or covenant contained in this Agreement.

     (f) This Agreement may be executed in counterparts,  each of which shall be
an original and all of which taken  together  shall  constitute one and the same
instrument.

     (g)  Subject to the  provisions  of Section 9 hereof,  if any term or other
provision of this  Agreement is invalid,  illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and provisions of this
Agreement  shall  nevertheless  remain in full  force and  effect so long as the
economic  or legal  substance  of the  transactions  contemplated  hereby is not
affected in any manner adverse to either party. Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect the  original  intent of the  parties as  closely  as  practicable  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the extent possible.

     (h) THIS AGREEMENT  SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE  WITH THE
LAWS OF THE STATE OF NEW YORK  APPLICABLE TO CONTRACTS  MADE AND TO BE PERFORMED
ENTIRELY  WITHIN SUCH STATE (WITHOUT  GIVING EFFECT TO ITS STATUTES OR DOCTRINES
OF CONFLICTS OF LAW (EXCEPT  SECTION 5-1401 OF THE NEW YORK GENERAL  OBLIGATIONS
LAW) OF SUCH STATE OR OF ANY OTHER JURISDICTION.

     (i) EACH OF THE  PARTIES  HERETO  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
SUBMITS TO THE  EXCLUSIVE  JURISDICTION  OF ANY NEW YORK STATE OR FEDERAL  COURT
SITTING IN THE CITY OF NEW YORK IN ANY ACTION OR  PROCEEDING  ARISING  OUT OF OR
RELATING TO THIS AGREEMENT,  INCLUDING ANY APPEAL AND ANY ACTION FOR ENFORCEMENT
OR  RECOGNITION  OF  ANY  JUDGMENT  RELATING  THERETO,  AND  EACH  PARTY  HEREBY
IRREVOCABLY  AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY
NOT BE HEARD OR  DETERMINED IN ANY COURT OR BEFORE ANY PANEL OTHER THAN SUCH NEW
YORK STATE OR FEDERAL COURT.

     (j) BY  EXECUTION  AND  DELIVERY  OF THIS  AGREEMENT,  THE  PARTIES  HERETO
IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE PERSONAL JURISDICTION OF EACH SUCH
COURT,  AND  IRREVOCABLY  AND  UNCONDITIONALLY  WAIVE (i) ANY  OBJECTION  TO THE
PROPRIETY  OF  JURISDICTION,  SERVICE OF PROCESS OR VENUE IN ANY OF SUCH COURTS,
(ii) ANY  RIGHT TO A JURY  TRIAL,  AND  (iii)  ANY  CLAIM  THAT  ANY  ACTION  OR
PROCEEDING  BROUGHT IN ANY OF SUCH  COURTS HAS BEEN  BROUGHT IN AN  INCONVENIENT
FORUM.  EACH OF THE  PARTIES  HERETO  AGREES  THAT A FINAL  JUDGMENT IN ANY SUCH
ACTION  OR  PROCEEDING  SHALL  BE  CONCLUSIVE  AND  MAY  BE  ENFORCED  IN  OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

     (k) EACH OF THE PARTIES HERETO  IRREVOCABLY  CONSENTS TO SERVICE OF PROCESS
IN ANY SUCH ACTION IN THE MANNER PROVIDED FOR THE DELIVERY OF NOTICES IN SECTION
11;  PROVIDED  THAT  NOTHING  HEREIN SHALL AFFECT THE RIGHT OF ANY SUCH PARTY TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

                                    * * * * *

                                       8
<PAGE>

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                                       9

<PAGE>

     IN  WITNESS  WHEREOF,  the  parties  have  duly  executed  this  Employment
Agreement as of the date first above written.

SPATIALIGHT, INC.

                                By:      _____________________________________
                                         Name: Robert A. Olins
                                         Title: Acting Chief Executive Officer

                                         _____________________________________
                                         Theodore H. Banzhaf
                                         Employee

                                       10

                                       7
<PAGE>

                                   EXHIBIT 1

       Attached hereto is the Time Accelerated Restricted Stock Award Plan

                                       11<PAGE>

                                                                    Exhibit 10.4
                                SPATIALIGHT, INC.

                  TIME ACCELERATED RESTRICTED STOCK AWARD PLAN

                                   ("TARSAP")

TARSAP (this  "AGREEMENT" or the "OPTION  AGREEMENT")  made as of the 7th day of
July,   2003   between   SPATIALIGHT,   INC.,  a  New  York   corporation   (the
"CORPORATION"),  whose  principal  place of  business  is  located at 5 Hamilton
Landing,  Suite 100,  Novato,  California  94949,  and  Theodore H. Banzhaf (the
"OPTIONEE") whose principal residence is located at 1801 Gough Street #403 , San
Francisco, CA 94109

                                    PREAMBLE

         The Corporation and Optionee have entered into an Employment  Agreement
effective as of the date of this Agreement (the  "EFFECTIVE  DATE")  pursuant to
which  Optionee  will serve as the  Corporation's  Executive  Vice  President of
Strategic   Planning  upon  the  terms  set  forth   therein  (the   "EMPLOYMENT
AGREEMENT").  As a material  inducement  for Optionee to become  employed as the
Corporation's  Executive Vice President of Strategic  Planning,  the Corporation
has agreed to grant  Optionee  options to purchase its Common  Shares,  $.01 par
value per share  (the  "SHARES")  subject  to the terms and  conditions  of this
Agreement.

     1. GRANT OF OPTIONS.

     (a) Upon the terms and subject to the conditions hereinafter set forth, the
Corporation  hereby grants to the Optionee the right and option to purchase from
the  Corporation  a total of Eight  Hundred  Thousand  (800,000)  Shares  of the
Corporation at an exercise (i.e.,  purchase) price  determined by the provisions
of  Section 6 hereof  (the  "OPTIONS").  The  Options  granted  hereby  shall be
exercisable  as  provided  in Sections 2 and 3 hereof  unless  terminated  at an
earlier  date in  accordance  with the terms of this  Agreement.  If the Options
shall  terminate  for any reason  without  having been  exercised  in full,  the
Corporation may use any then remaining unpurchased Shares reserved for the grant
of options to any other  employee or party selected by the Board of Directors of
the Corporation (the "BOARD") or for any other appropriate corporate purpose, as
determined  in the sole  discretion  of the  Board.  The  Options  shall  become
exercisable immediately upon vesting.

     (b) The Options granted by this Agreement are not, and shall not be deemed,
to have been granted under the  Corporation's  1999 Stock Option Plan (the "1999
PLAN"), the Corporation's 1993 Non-Statutory Stock Option Plan (the "1993 PLAN")
or any  other  stock  option  plan of the  Corporation  in effect as of the date
hereof or hereafter adopted (the "OTHER PLANS"),  and the number of Shares which
may be reserved for the  Optionee's  exercise of the Options  granted  hereunder
shall not  reduce the number of Shares  reserved  under the 1999 Plan,  the 1993
Plan or any Other Plans and, in the event the Options  granted  hereunder  shall
terminate for any reason without having been exercised in full, none of any then
remaining  unpurchased  Shares  subject to the Options shall  increase the total
number of Shares then reserved for purchase  under the 1999 Plan,  the 1993 Plan
or any Other Plan of the Corporation.

     (c) It is intended  both by the  Corporation  and Optionee that the Options
granted hereby shall be Non-Statutory Stock Options.

     2. EXERCISE OF OPTION.

     (a) Subject to the limitations  set forth in this  Agreement,  the Optionee
may exercise the Options, in whole or in part, to the extent then exercisable in
accordance with this Agreement,  by forwarding to the Corporation written notice
stating the Optionee's election of such exercise right and specifying the number
of whole Shares to be purchased,  accompanied by the Optionee's  payment in full
of the aggregate  option price of the Shares being  purchased in cash, by check,
or, in the discretion of the

<PAGE>

Board, by the delivery of Shares (such Shares to be credited  against the option
price in an amount  equal to their  aggregate  Fair  Market  Value as defined in
Section 13 hereof on the date of exercise) or any combination  thereof  ("NOTICE
OF  EXERCISE").  The  Optionee  shall be  responsible  for and  shall pay to the
Corporation  all withholding and other similar taxes which may be payable by the
Optionee upon exercise of the Options, if applicable.

     (b) As soon as practicable  after receipt by the  Corporation of the Notice
of  Exercise  and of full  payment of the  exercise  price for all  Shares  with
respect to which the Options are being exercised,  a certificate or certificates
representing  the  purchased  Shares shall be  registered  in the records of the
Corporation  in the name of the Optionee or his successor and shall be delivered
to the Optionee or his successor at the Optionee's  address shown in the payroll
records of the  Corporation  or at such other  address as may be  designated  in
writing by the  Optionee  in the  Optionee's  Notice of  Exercise.  Neither  the
Optionee nor his  successor or legal  representative  shall have any rights as a
shareholder  of the  Corporation  in  respect of any  Shares  issuable  upon the
exercise of this Option  prior to the record date as of which  certificates  for
such Shares shall have been issued by the Corporation as hereinabove provided.

     (c) Unless the Options are terminated  earlier in accordance with the terms
hereof, the Options and all rights thereunder shall expire on, and may no longer
be exercised  after,  the third (3rd)  anniversary  after each of the respective
dates upon which the percentages of the Options to purchase the number of Shares
designated  herein have vested and become  exercisable  in  accordance  with the
provisions of Section 3.

3. VESTING AND EXERCISABILITY OF OPTIONS.

Options to purchase an aggregate of 800,000 Shares of the Corporation shall vest
and be exercisable upon the occurrence of the following events,  satisfaction of
the following conditions and upon or by the following dates:

     (a) Options to purchase 125,000 Shares shall vest and be exercisable on the
Effective Date;

     (b) Options to purchase the  remaining  aggregate  of up to 675,000  Shares
shall vest and be exercisable on such dates upon which the following performance
tests shall have been satisfied;  provided,  however,  that the outside date for
the satisfaction of each such performance  shall be the second (2nd) anniversary
of the Effective Date and no such performance test may be satisfied, in whole or
in part, after such second (2nd) anniversary of the Effective Date:

                    (i) Options to purchase an additional  175,000  Shares shall
               vest and become  exercisable  if the  Shares  shall  achieve  and
               maintain  the Fair Market  Value of $5 per Share for a minimum of
               twenty  (20)  consecutive  trading  days  thereafter  (each  such
               period, a "FMV PERIOD");

                    (ii) Options to purchase an additional  225,000 Shares shall
               vest and become  exercisable  if the  Shares  shall  achieve  and
               maintain  the Fair Market  Value of $7.50 per Share for a minimum
               of a FMV Period;

                    (iii) Options to purchase an additional 275,000 Shares shall
               vest and become  exercisable  if the  Shares  shall  achieve  and
               maintain  the Fair Market Value of $12.50 per Share for a minimum
               of a FMV Period;

     PROVIDED, HOWEVER, that:

               (A) In the  event  that the  Shares  achieve  either  of the Fair
               Market Values set forth in Sections  3(b)(ii) or 3(b)(iii)  above
               before  satisfying  the Fair  Market  Value  test  under  Section
               3(b)(i)  above,  or in the event that the Shares achieve the Fair
               Market  Value test set forth in Section  3(b)(iii)  above  before
               satisfying  the Fair Market  Value test under  Section  3(b)(ii),
               then the Options to  purchase

                                      -2-

<PAGE>

               the  total  number  of  Shares  shall  vest  cumulatively  at the
               respective   exercise  prices  set  forth  in  Sections  3(b)(i),
               3(b)(ii) and/or 3(b)(iii), as the case may be; and

               (B) As used in this Section 3(b), for purposes of determining the
               twenty (20) trading days comprising the FMV Period,  any business
               day upon  which  there  shall be no  trading in the Shares of the
               Corporation shall not be counted.

     (c) In no event  shall any of the  Options  granted  hereunder  vest and be
exercisable  unless the Optionee is an Employee of the Corporation or any of its
Subsidiaries  on any such  vesting  date;  PROVIDED,  HOWEVER,  in the event the
Employee's   employment  is  terminated  by  the   Corporation  or  any  of  its
Subsidiaries  without  Cause  pursuant  to Section  2(b)(iv)  of the  Employment
Agreement,  the Options shall vest and be  exercisable  to the extent any of the
performance  tests set forth in Section  3(b)(i) through (iii),  inclusive,  are
satisfied during the ninety (90) day period  immediately  succeeding the date of
termination of his employment.

     (d)  Notwithstanding any of the provisions of Sections 3(a) or (b), none of
the Options  granted  hereunder,  including  any  Options  which have vested and
therefore  become  exercisable,  may be exercised until the  shareholders of the
Corporation  shall,  if  required  by New  York  law or the  regulations  of any
exchange or inter-dealer  system upon which the Company's  Shares will be listed
or in which such Shares shall be traded,  approve the grant of the Options which
are the  subject  of  this  Agreement  as  provided  in  Section  15(a)  of this
Agreement.

4. EXERCISE AFTER TERMINATION OF SERVICE.

After the Optionee ceases to be an Employee of the Corporation or any Subsidiary
of the  Corporation,  as the  case may be,  whether  as a  result  of  voluntary
termination,  termination by the Corporation or such Subsidiary or by the normal
retirement,  early retirement or disability  (excluding  Permanent Disability as
defined in Section 5 below) of the Optionee,  only such Options that have vested
and become  exercisable on or before the Date of Termination  (as defined in the
Employment Agreement) may be exercised by the Optionee, his attorney-in-fact, or
his guardian,  as appropriate,  at any time after the date on which the Optionee
ceases to be an Employee but no later than the earlier of ninety (90) days after
the Optionee  ceases to be employed by the Corporation or such Subsidiary or the
last day of the fixed term of the Option; PROVIDED,  HOWEVER, that, in the event
that the  employment  of  Optionee  is  terminated  for Cause (as defined in the
Employment Agreement), any then outstanding Options held by Optionee, whether or
not vested and  exercisable  by Optionee as of the date of such  termination  of
employment  for Cause,  shall  thereupon  be canceled  and  terminated  in their
entirety and be of no further force or effect and Optionee shall have no further
rights thereto or thereunder or under this Agreement.

5. EXERCISE IN CASE OF DEATH OR PERMANENT DISABILITY.

If the Optionee shall die or become  permanently and totally disabled within the
meaning of relevant provisions of the Employment Agreement (hereinafter referred
to as "PERMANENTLY  DISABLED" or a "PERMANENT  DISABILITY") while an employee of
the  Corporation or of a Subsidiary  thereof,  and Optionee,  at the time of the
Optionee's death or Permanent  Disability,  shall have been entitled to exercise
all or any portion of the  Options  granted  hereby,  then the Options may be so
exercised by the Optionee or his legal representative, as the case may be, or by
his estate,  or by a person who  acquires  the right to exercise  the Options by
bequest  or  inheritance,  at any time  after  the  date of  death or  Permanent
Disability  but no later than the earlier of (a) twelve  (12)  months  after the
date of death,  Permanent  Disability of the Optionee or (b) the last day of the
fixed term of the Options.

6. EXERCISE PRICE OF OPTIONS.

The exercise price of the Options (subject to adjustment by reason of any of the
events set forth in Section 7 hereof), shall equal:

                                      -3-

<PAGE>

     (a)  With  respect  to the  Options  described  in  Sections  3(a)  of this
Agreement,  the Fair  Market  Value of the Shares as of July 3, 2003 - - to wit,
Two Dollars and Fifty-five Cents ($2.55) per Share.

     (b) With  respect to the  Options  described  in  Sections  3(b)(i) of this
Agreement, Five Dollars ($5.00) per Share.

     (c) With  respect to the Options  described  in  Sections  3(b)(ii) of this
Agreement, Seven Dollars and Fifty Cents ($7.50) per Share.

     (d) With  respect to the Options  described  in Sections  3(b)(iii) of this
Agreement, Twelve Dollars and Fifty Cents ($12.50) per Share.

7. ADJUSTMENTS UPON CHANGE OF SHARES.

     (a)   In   the   event   of  a   reorganization,   merger,   consolidation,
reclassification, recapitalization, any combination or exchange of Shares, stock
split,   stock   dividend,   rights   offering  or  other  event  affecting  the
capitalization  of the Corporation,  the number and class of Shares then subject
to the Options as of the  effective  date or record date of any such event,  and
the price per Share  payable upon  exercise of the  Options,  shall be equitably
adjusted by the Board to reflect any such event.

     (b) Upon the effective date of any merger,  consolidation or reorganization
of the  Corporation  with one or more  corporations  or other legal  entities in
which the  Corporation is not the surviving  corporation or entity,  or upon the
effective  date  of any  liquidation  of the  Corporation  or of a  transfer  of
substantially  all of the assets or transfer of more than fifty percent (50%) of
the then  outstanding  Shares of the  Corporation to a theretofore  unaffiliated
third party (hereinafter  collectively  referred to as the  "TRANSACTION"),  any
Options granted hereby which have not vested and become exercisable (prior to or
by reason of the Transaction)  shall terminate unless  provisions have been made
in writing in connection  with any such  Transaction  for the assumption of such
unvested  Options by such  successor  employer  corporation or other entity or a
parent or subsidiary thereof or for the substitution of such unvested Options by
new  options  covering  shares  or  other  equity  interests  of such  successor
corporation or other entity, with appropriate adjustments as to the number, kind
and prices of shares or other  equity  interests,  in which  event the  unvested
Options  or the new  options  substituted  therefor,  as the case may be,  shall
continue  to be  exercisable  in the manner and upon the terms set forth in this
Agreement.  Prior to any such  termination of any then unvested Options upon the
effective date of any such  Transaction,  the Board may, in its sole discretion,
grant to the Optionee the right  immediately prior to the effective date of such
Transaction  to exercise the  Options,  in whole or in part,  provided  that all
conditions  precedent  to the  vesting  thereof  (prior  to or by  reason of the
Transaction)  set forth herein,  other than the passage of time, shall have been
satisfied. In any such event, the Corporation will mail or cause to be mailed to
the Optionee a notice (the "ACCELERATION  NOTICE")  specifying the date which is
to be fixed as of which all holders of record of the Shares shall be entitled to
exchange  their  Shares  for  securities,  cash or other  property  issuable  or
deliverable  pursuant to such  Transaction.  The  Acceleration  Notice  shall be
mailed at least  fifteen (15) days prior to such  specified  date.  In the event
that any then  outstanding  Options  which have  vested  and become  exercisable
(prior to or by reason of the  Transaction)  are not exercised in their entirety
on or before the date specified  therefor in the Acceleration  Notice,  all such
Options and all rights  thereunder  shall  terminate  and be canceled as of said
date and any Options which have not so vested and become  exercisable as of said
date  shall also  terminate  and be  canceled  in their  entirety.

     (c) Upon any  adjustment  made pursuant to this Section 7, the  Corporation
will,  upon request,  deliver to the Optionee or his successor a certificate  or
the Corporation's Secretary or an Assistant Secretary setting forth the adjusted
Option  price  thereafter  in effect and the  number  and kind of shares,  other
securities or other  property  thereafter  purchasable  upon the exercise of the
Options.

     (d) The determination of the Board with respect to any adjustments effected
pursuant to this Section 7 shall be conclusive and binding on the Optionee.

                                      -4-

<PAGE>

8. NON-TRANSFERABILITY OF OPTIONS

This  Option  Agreement  shall be binding  upon and inure to the  benefit of the
parties hereto and any successor to the business of the Corporation, but none of
the  Options  nor  any  rights  granted  to  the  Optionee  hereunder  shall  be
transferable or assignable,  in whole or in part, by the Optionee otherwise than
by will or by the laws of descent and distribution,  and, during the lifetime of
the Optionee,  the Options and rights  granted to the Optionee  hereunder may be
exercised only by his except as otherwise expressly provided for herein.

9. REGISTRATION OR QUALIFICATION OF SHARES.

The Options shall be subject to the  requirement  that, if at any time the Board
shall  determine,  in its sole  discretion,  that the listing,  registration  or
qualification of the Shares subject to the Options upon any securities exchange,
inter-dealer  quotation  market  system  or  under  any  state or  federal  law,
including the Securities Act of 1933, as amended (the "SECURITIES  ACT"), or the
consent or  approval  of any  governmental  regulatory  body,  is  necessary  or
desirable as a condition of, or in connection  with, the granting of the Options
or the  issue or  purchase  of Shares  hereunder,  then the  Options  may not be
exercised,   in  whole  or  in  part,   unless   such   listing,   registration,
qualification,  consent or approval shall have been effected or obtained free of
any  conditions not acceptable to the Board.  The  Corporation  may, in its sole
discretion,  at  any  time  and  from  time  to  time,  file  (or  maintain  the
effectiveness  of) a registration  statement under the Securities Act, and list,
register or qualify  under any other state or federal law, all or any portion of
the Options and the Shares issuable upon the exercise  thereof,  but nothing set
forth  herein  shall  obligate  the  Corporation  to file  or  effect  any  such
registration  under the  Securities  Act or  listing or  qualification  upon any
securities  exchange,  inter-dealer  quotation  market system or under any other
federal or state securities law.

10. COMPLIANCE WITH SECURITIES AND OTHER APPLICABLE LAW.

The grant of Options and the  issuance  of Shares  upon the  exercise of Options
shall be subject to  compliance  with all  applicable  requirements  of federal,
state and  foreign  law with  respect  to such  securities.  Options  may not be
exercised if the issuance of Shares upon exercise  would  constitute a violation
of any  applicable  federal,  state or foreign  securities  laws or other law or
regulations or the requirements of any stock exchange or inter-dealer  quotation
market system upon which the Shares may then be listed. In addition,  no Options
may be exercised  unless (a) a registration  statement  under the Securities Act
shall at the time or exercise  of the  Options be in effect with  respect to the
Shares  issuable  upon  exercise  of the  Options or (b) in the opinion of legal
counsel to the Corporation, the Shares issuable upon exercise of the Options may
be  issued in  accordance  with the terms of an  applicable  exemption  from the
registration   requirements   of  the  Securities  Act.  The  inability  of  the
Corporation  to  obtain  from  any  regulatory  body  having   jurisdiction  the
authority,  if any, deemed by the Corporation's legal counsel to be necessary to
the  lawful  issuance  and  sale  of any  Shares  hereunder  shall  relieve  the
Corporation  of any  liability  in respect of the  failure to issue or sell such
shares as to which such requisite  authority shall not have been obtained.  As a
condition to the exercise of any of the Options, the Corporation may require the
Optionee to satisfy any qualifications that may be necessary or appropriate,  to
evidence  compliance  with  any  applicable  law or  regulation  and to make any
representation  or  warranty  with  respect  hereto as may be  requested  by the
Corporation.

11. REPRESENTATIONS AT TIME OF EXERCISE: LEGEND.

The Board may require,  as a condition  to the  exercise of the Options  granted
pursuant to this Agreement,  in whole or in part,  that the Corporation  receive
from Optionee or his successor, such representations, warranties and agreements,
at the time of any such  exercise,  to the effect that all Shares  acquired upon
exercise of the Options,  or any part  thereof,  shall be sold,  transferred  or
otherwise disposed of only upon compliance with the registration requirements of
the Securities Act or in reliance on an exemption therefrom which is the subject
of an opinion from the Corporation's  legal counsel.  The certificate  issued to
evidence  such  Shares  shall  bear   appropriate   legends   summarizing   such
restrictions on the disposition thereof.

                                      -5-

<PAGE>

12. RESERVATION OF SHARES.

The  Corporation  shall be under no obligation to reserve  Shares to satisfy the
Options granted pursuant to this Agreement. The grant of Options to the Optionee
hereunder shall not be construed to constitute the  establishment  of a trust of
such  Shares and no  particular  Shares  shall be  identified  as  optioned  and
reserved for the Optionee  hereunder.  The  Corporation  shall be deemed to have
complied  with the  terms of this  Agreement  if,  at the time of  issuance  and
delivery  of  the  Shares  pursuant  to  the  exercise  of an  option,  it has a
sufficient  number of Shares  authorized  and unissued (or held in its treasury)
for purposes of this  Agreement,  irrespective of the date when such Shares were
authorized.

13. DEFINITIONS.

Except as otherwise  defined in this  Agreement,  the following terms shall have
the following meanings:

     (a) "CODE" means the US Internal Revenue Code of 1986 as amended to date.

     (b) "BOARD" means the Board of Directors of the Corporation.

     (c)  "EMPLOYEE"  means any person  treated  as an  Employee  (including  an
officer or  director  of the  Corporation)  who is treated as an Employee on the
records of the  Corporation and is deemed to be an Employee at Common Law and as
interpreted by the U.S. Internal Revenue Service under the Code.

     (d) "FAIR MARKET VALUE" means as of any date the value of the Shares of the
Corporation as determined by the Board in its discretion,  or by the Corporation
in its discretion, subject to the following:

                           If, on such date, the Shares are listed on a national
                   or regional  securities  exchange or quoted in a inter-dealer
                   quotation market system,  the Fair Market Value of each Share
                   shall be the  closing  price of a Share (or the mean  between
                   the closing bid and asked price of a Share if the Share is so
                   quoted instead) as quoted on the NASDAQ National Market,  the
                   NASDAQ  Small Cap Market or such other  national  or regional
                   securities  exchange or inter-dealer  quotation market system
                   constituting the primary market for the Shares as reported in
                   the  Wall  Street  Journal  or  such  other  sources  as  the
                   Corporation  deems  reliable.  If the relevant  date does not
                   fall on a date on which the Shares  have been  traded on such
                   securities exchange or been quoted in such market system, the
                   date on which Fair Market Value shall be established shall be
                   the last date on which the Shares were so traded prior to the
                   relevant  date,  or such other  appropriate  date as shall be
                   determined  by the Board in its sole  discretion;  and, if on
                   such date, there is no public market for the Shares, the Fair
                   Market Value of a Share shall be as  determined  by the Board
                   in good faith without regard to any restriction  other than a
                   restriction which, by its terms, will never lapse.

     (e)  "NON-STATUTORY  STOCK OPTION" means a stock option not intended to be,
or which does not qualify,  as an Incentive  Stock Option  within the meaning of
Section 422 ET SEQ. of the Code.

     (f) "SUBSIDIARY" or "SUBSIDIARIES" means any corporation or entity in which
the Corporation  owns  beneficially  more than 50% of the voting equity interest
therein.

14. NOTICES.

All notices under this  Agreement  and the Plan shall be in writing,  and, if to
the Corporation,  shall be mailed to its principal office at 5 Hamilton Landing,
Suite 100, Novato,  California 94949, Attn.: Secretary,  and if to the Optionee,
shall be delivered personally or mailed to the Optionee at his address appearing
in the payroll  records of the  Corporation  or its Subsidiary as of the date of
such  notice.  The  address  of any party may be  changed at any time by written
notice to the other party given in accordance  with this Section 14. All notices
and other written communications required hereunder shall be deemed to have been
given when personally  delivered or mailed,  postage  prepaid,  by registered or
certified mail

                                      -6-

<PAGE>

15. MISCELLANEOUS.

     (a) TERMINATION. Anything contained herein to the contrary notwithstanding,
in the event that the  shareholders of the Corporation do not ratify and approve
the grant of the  Options to the  Optionee  pursuant  to this  Agreement  within
twelve  (12)  months  after the  Effective  Date at the next  Annual or  Special
Meeting of Shareholders of the Corporation,  unless shareholders approval of the
grant of the  Options to Optionee  under this  Agreement  is no longer  required
under the New York Business  Corporation Law or any other applicable New York or
California  statute,  law or  regulation  and/or by the record  date of any such
Shareholders Meeting,  subject,  however, to the provisions of Section 162(m) of
the Code, then this Agreement and the Options granted hereby shall automatically
terminate,  be canceled in their  entirety  and the Optionee  shall  forfeit all
rights with  respect  thereto or  otherwise  under this  Agreement  and be of no
further force of effect.

     (b) ACKNOWLEDGMENT.  The Options may not be exercised, to the extent vested
and  exercisable,  until the  Optionee  dates,  signs and returns a copy of this
Agreement to the Corporation.

     (c) NO RIGHT AS  SHAREHOLDER.  Neither the Optionee nor his successor shall
have any rights as a shareholder of the  Corporation  with respect to any Shares
subject  to the  Options  before  the  date of  issuance  to the  Optionee  of a
certificate or certificates  for such Shares in the name of the Optionee or such
successor.

     (d) NO RIGHT TO CONTINUED EMPLOYMENT. The Options shall not confer upon the
Optionee any express or implied right with respect to  continuance of employment
by the Corporation or any Subsidiary thereof, for any specific or minimum period
of time under the  Employment  Agreement  or  otherwise,  nor shall the grant or
existence of such Options interfere in any way with the right of the Corporation
or such Subsidiary to terminate such employment at any time.

     (e)   COUNTERPARTS.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of which shall be deemed to be an original  and all of which
together shall constitute but one and the same instrument  provided that each of
the parties hereto executes such counterpart.

     (f) CHOICE OF LAW. This Agreement and the respective rights and obligations
of the Optionee and the  Corporation  hereunder shall be governed by the laws of
the State of New York with respect to agreements  to be performed  wholly in the
State of New York and without  giving effect to the  conflicts of law,  statutes
and  doctrines  of New York  (except for Section  5-1401 of the New York General
Obligations Law) or of any other jurisdiction.

                                  * * * * * * *

                                      -7-

<PAGE>

     IN WITNESS  WHEREOF,  the  parties  have duly  executed  this Stock  Option
Agreement as of the date first above written.

                                          SPATIALIGHT, INC.

                                          By:________________________________
                                          Name: Robert A. Olins
                                          Title: Acting Chief Executive Officer

                                          OPTIONEE

                                          By:________________________________
                                          Name: Theodore H. Banzhaf

                                      -8-

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