Document:

EX 10.2

    EXHIBIT
      10.2

    

    FARMOUT
      AGREEMENT

    

    THIS
      AGREEMENT,
      made
      and entered into as of the ______ day
      of
           ,
      2007,
      by and between ALTAMONT
      OIL & GAS, INC.,
      P.O. Box
      488, Cut Bank, MT 59427 and NUMBERS,
      INC.,
      1500
      Manulife Place, 10180 - 202 Street, Edmonton, AB T5J 4K1, referred to as
“FARMOR”,
      and
MAJESTIC
      OIL & GAS, INC., CBM
      Building, Cut Bank, MT 59427, hereafter referred to as “FARMEE”,

    

    WITNESSETH:

    

    WHEREAS,
      Farmor
      is the owner and holder of undivided interests in certain Oil and Gas Leases
      covering lands situated in Pondera County-, Montana, more particularly described
      on Exhibit “A” attached hereto, which lands are hereinafter referred to as the
“Subject
      Lands”;
      and

    

    WHEREAS,
      Farmee
      has proposed the drilling of test wells to explore for oil or gas at locations
      on the Subject Lands, which wells are hereinafter referred to as “Test
      Wells”;
      and

    

    WHEREAS,
      Farmor
      is
      interested in seeing the Test Wells drilled, and, if drilled in accordance
      with
      the terms and condi-tions hereof, Farmee shall have earned interests in the
      Subject Lands to the extent hereinafter provided;

    

    NOW,
      THEREFORE, in
      consideration of the mutual covenants, agreements, conditions and obligations
      herein contained, it is agreed as follows:

    

    ARTICLE
      I.

    

    Titles

    

    1.1
      Farmor makes no representations and warranties, either express or implied,
      as to
      the title or ownership of the Subject Lands. Farmor will furnish Farmee a copy
      of any title opinions, leases, assignments, rental receipts or other title
      data
      which Farmor may have in its files concerning the Subject Lands. In the event
      that Farmee desires to obtain and examine any other title data or to have
      performed any title curative work, it may do so but at no cost or expense to
      Farmor.

    

    ARTICLE
      II.

    

    Initial
      Test Well

     

    2.1
      Farmee, at its sole cost, risk and expense, shall commence or cause to be
      commenced, the actual drilling of a Test Well at a location of its choice on
      the
      Subject Lands or on lands pooled or communitized therewith on or before
 ,
      2007,
      and shall thereafter drill the Test Well with due diligence and in a workmanlike
      manner and in accordance with good oil field practices to a depth sufficient
      to
      penetrate the 4th Bow Island formation and shall complete the Test Well as
      a
      producing well, shut-in gas well, or dry hole within a reasonable time after
      commence-ment. In the event Farmee should fail to timely commence the drilling
      of Test Well or complete the Test Well as specified herein, then the only
      consequence of such failure to perform shall be the forfeiture of
      any

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    interest
      to be earned by Farmee in the Subject Lands and the automatic termination of
      this Agreement and all rights and privileges of Farmee hereunder.

    

    2.2
      In
      the Event Farmee is unable to reach the objective depth -in drilling any Test
      Well due to conditions beyond Farmee's control encountered subsurface, Farmee
      may commence a substitute Test Well within thirty (30) days from the cessation
      of drilling on the abandoned Test Well on a location of Farmee's choice on
      the
      Subject Lands and such substitute Test Well shall take the place of the
      abandoned Test Well for all purposes hereof.

    

    2.3
      Notwithstanding the foregoing, Farmee shall remain liable for and indemnify
      Farmor from any and all damages, liabili-ties or cause of action resulting
      from
      Farmee's actions relating to the Subject Lands.

    

    ARTICLE
      III.

    

    Subsequent
      Test Wells

    

    3.1
      If
      Farmee timely and properly drills the Initial Test Well provided for in Article
      II hereof, whether completed as a producer of oil or gas, or plugged and
      abandoned as a dry hole, Farmee shall have the exclusive right to drill
      additional test wells on the Subject Lands, or on lands pooled or communitized
      therewith, at locations of Farmee’s choice in the same manner as provided for
      drilling the Initial Test Well, provided, however, that Farmee shall drill
      at
      least two additional test wells per calendar year.

    

    3.2
      Farmee shall have the continuing option to drill and earn interests in the
      Subject Lands by drilling a minimum of two test wells per calendar year. In
      the
      event Farmee fails to drill two wells in any year, the only consequence shall
      be
      the forfeiture of any interest to be earned by Farmee in the Subject Lands
      remaining undrilled by Farmee, but Farmee shall have and be entitled to all
      interests theretofore earned under the terms of this Agreement.

    

    ARTICLE
      IV.

    

    Assignments
      of Interest

     

    4.1
      If
      and when any Test Well is completed as a well capable of production, at Farmee’s
      request, Farmor shall execute and deliver to Farmee the following assignments
      as
      may be appropriate, to wit:

     

    4.1.1
      Subject to Paragraphs 4.1.2 and 4.1.3 below, if any Test Well is completed
      as a
      well capable of producing oil or gas in paying quantities, Farmor shall assign
      to Farmee fifty percent (50%) of Farmor’s leasehold working interest in the
      production spacing unit applicable to said well as established by the
      appropriate regulatory authority from the surface to the base of the lowest
      stratigraphic horizon penetrated by drilling. In default of a production spacing
      unit, said assignment shall cover the 40 acres upon which the well was
      drilled.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    4.1.2
      Each Test Well shall earn the interest set forth in Paragraph 4.1.1 only in
      zones which do not have a produc-ible well existing in the Test Well’s spacing
      unit or 40 acre tract at the time the Test Well is drilled. Farmor shall exclude
      any such zones containing a producible well in the assignment made to Farmee
      hereunder.

    

    4.1.3
      The
      leasehold working interest assigned from Farmor to Farmee pursuant to Paragraph
      4.1.1 hereof shall be made subject to landowner’s royalty and overriding royalty
      burdens existing of record and as may be additionally created to convey to
      Farmee its interests in an eighty percent (80%) net revenue interest lease.
      -
      Such assignment shall be in recordable form and/or on a form approved for
      assignment by the State of Montana Department of Natural Resources and
      Conservation and/or the U. S. Bureau of Land Management as and when applicable.
      

    

    4.2
      With
      respect to any assignment made by Farmor to Farmee pursuant to Paragraph 4.1.1
      hereof relative to a producing oil or gas well, then, as to each such well,
      and
      its permanent production spacing unit (as defined hereinafter), Farmor shall
      be
      deemed to have relinquished to Farmee, effective as of the date of first
      production from such well, all of Farmor’s retained working interest and to such
      well, the operating rights therein, and all equipment associated therewith,
      and
      all working interest production from said well, until such Test Well reaches
      payout (as hereinafter defined). For purposes of this Agreement, “permanent
      production spacing unit” shall be the spacing unit established by the Montana
      Board of Oil and Gas Conservation or the participating area established by
      the
      federal government, whichever of the foregoing tracts is
      applicable. Provided however, not withstanding anything contained herein, when the payout is achieved on any well, the Working Interest in such well shall be 50% to the Farmee and 50% to the Farmor (25% to Altamont Oil & Gas, Inc and 25% to Numbers, Inc).

     

    4.3 “Payout”
      shall be defined as that point in time, at the close of a calendar month, in
      which the total costs and expenses of drilling, testing, completing, equipping
      and operating the Test Well shall have been fully recovered by Farmee from
      the
      net revenue interest production accruing from such well to Farmee. However,
      in
      computing the net revenue interest production accruing to Farmee, no additional
      burdens against Farmee’s working interest shall be included except for
      pre-existing landowner’s royalty and overriding royalty burdens, it being agreed
      that all net revenue interest calculations shall be made on the basis of an
      eighty percent (80%) net revenue interest lease.

    

    4.4 Farmee
      shall maintain complete and accurate records of oil, gas, casing head gas,
      and
      other associated hydrocarbon substances produced, saved and marketed from each
      such Test Well and shall furnish Farmor quarterly statements with sufficient
      details to enable Farmor at all times to be currently informed as to the status
      of the recovery of Farmee’s costs of drilling, testing, equipping, completing
      and operating such Test Well.

    

    ARTICLE
      V.

    

    Operating
      Provisions

    

    5.1
      In
      the event Farmee earns an assignment of interest in the Subject Lands, the
      parties hereto shall enter into an Operating Agreement providing for operations
      and sharing of costs and benefits on the Subject Lands within the production
      spacing unit on which the Test Well is located or upon which future wells are
      drilled. Such Operating Agreement shall be effective as to each Test Well and
      its production spacing unit from and after the date of first production from
      such well Such Operating Agreement shall be the AAPL-610 Model Form Operating
      agreement attached hereto as Schedule I.

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    5.2
      Altamont Oil & Gas, Inc. shall be designated as the Operator under the
      Operating Agreement adopted by the parties hereto for operations on the Subject
      Lands. It is understood and agreed, however, that said Operating Agreement
      shall
      be subject to the terms and provisions of this Agreement and whenever this
      Agreement is inconsistent with the terms and provisions of said Operating
      Agreement, then this Agreement shall prevail.

    

    ARTICLE
      VI.

    

    Well
      Information

     

    6.1
      At
      all times during the drilling of any Test Well, Farmor, or its duly authorized
      representatives shall, at Farmor's sole risk, have access to the derrick floor
      and shall be entitled to receive all information during such operation,
      including daily drilling reports showing the progress made in the Well and
      such
      other information as may be obtained in the conduct of any and all operations
      on
      the Well. Farmee shall furnish Farmor, at Farmee's cost and expense, copies
      of
      all logs run on the Well. Farmee shall take such cores and make such tests
      as
      would a reasonable and prudent operator under the same or similar circumstances,
      and shall give Farmor hereto reasonable notice and sufficient time to have
      a
      representative present before any testing, coring or logging of a prospective
      oil or gas zone. All such geological information shall be kept
      confidential.

    

    ARTICLE
      VII.

    

    Rentals

    

    7.1
      Farmee shall reimburse Farmor of one hundred percent (100%) of all rental
      payments, if any, coming due and payable by Farmor as to the Subject Lands
      during the time this Agreement is in force and effect. Upon Farmee earning
      an
      interest in the Subject Lands, subsequent rental or shut-in royalties will
      be
      paid by Farmee and shared in propor-tion to the parties respective working
      interests therein.

    

    7.2
      The
      party hereto responsible for payment of rentals shall diligently attempt to
      make
      proper payment, but shall not be liable to the other parties in damages for
      the
      loss of any lease or interest therein if, through mistake or oversight, any
      rental payment is not paid or is erroneously paid.

    

    ARTICLE
      VIII.

    

    Liability
      of the Parties

    

    8.1
      Farmee shall, and does hereby indemnify and hold Farmor harmless from and
      against any and all liens, encumbrances or claims for property damage, personal
      injury or other damages to third parties resulting from or arising out of the
      drilling, testing and completing of any Test Well. Farmee shall carry on all
      operations hereunder as a prudent operator in accordance with good oil field
      practices in strict compliance with all applicable laws, rules and regulations
      of any governmental body or board having jurisdiction in the area of
      operation.

    

    8.2
      The
      liabilities of the parties hereto shall be separate and not joint or collective,
      and each party shall be responsible for its obligations as set out herein.
      This
      Agreement does not create or

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    evidence
      any sort of a partnership, mining partnership, association or joint enterprise.
      Each Party hereto elects to be excluded from the application of all provisions
      of SubChapter K of Chapter 1, Subtitle A of the Internal Revenue Code of 1986
      as
      amended and makes the same election with respect to any state income tax laws
      where such election is permitted.

    

    ARTICLE
      IX.

    

    Insurance

     

    9.1
      At
      all times during the drilling, testing and completing of any Test Well, Farmee
      shall comply and cause subcontractors to comply, with the provisions of the
      applicable workmen’s compensa-tion laws and shall carry and cause subcontractors
      to carry insurance with reputable insurance companies meeting the following
      minimum requirements.

    

    9.1.1
      Employer liability insurance covering each employee to the extent of $300,000.00
      for each employee not covered by Workmen’s Compensation.

    

    9.1.2
      Public liability and property damage insurance or comprehensive general
      liability insurance to the extent of $300,000.00 for injuries or death to one
      person; $500,000.00 for injuries or death in any one accident; and $300,000.00
      for property damage.

    

    9.1.3
      Automobile and public liability and property damage insurance covering all
      automotive units to the extent of $300,000.00 for injuries or death to one
      person; $500,000.00 for injuries or death in any one accident; and $300,000.00
      for property damage.

    

    ARTICLE
      X.

    

    Notices

    

    19.1
      All
      notices, reports, information, data and other communications required or
      permitted by the provisions of this Agreement to be given or sent by any party
      hereto shall be deemed properly given or sent when delivered personally or
      by
      telephone, or if required to be in writing, mailed by certified or registered
      mail, postage prepaid or given by telegram addressed to the party or parties
      intended to receive the same at the respective addresses as
      follows:

    

    
      	
              Altamont
                Oil & Gas, Inc.

            	
              Majestic
                Oil & Gas, Inc.

            
	
              P.
                O. Box 488

            	
              CBM
                Building

            
	
              Cut
                Bank, MT 59427

            	
              Cut
                Bank, MT 59427

            
	
              Telephone:
                (406) 873-9000

            	
              Telephone:
                (406) 873-5580

            

    

    

    

    ARTICLE
      XI.

    

    General
      Provisions

    

    11.1
      The
      article headings in this Agreement are for the purpose of convenience and
      reference only and shall not be construed as interpretations of the
      text.

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    11.2
      No
      waiver on behalf of any of the parties hereto of any breach of the covenants,
      conditions and provisions herein contained shall be effective or binding upon
      such party unless the same be expressed in writing. Any waiver so expressed
      shall not limit or affect such party's rights with respect to any other or
      future breach.

     

    11.3
      Time
      shall be of the essence hereof.

    

    11.4
      All
      of the terms and conditions of this Agreement shall be construed as and shall
      constitute covenants running with the oil and gas leasehold estate in the
      subject lands and shall be binding upon and enure to the benefit of the parties
      hereto and their respective successors and assignees.

    

    IN
      WITNESS WHEREOF, this
      Agreement is executed by the parties herein as of the day and year first above
      written.

    

    
      	FARMOR	 	FARMEE
	 	 	 	 	 
	ALTAMONT
              OIL & GAS, INC.	 	MAJESTIC
              OIL & GAS, INC.
	 	 	 	 	 
	 	 	 	 	 
	By:	  
	 	By:  	   

	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	NUMBERS,
              INC.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	  
	 	 	 

    

    
 

    
      
         

      

        -6-EQUITY
      CREDIT AGREEMENT

    BY
      AND BETWEEN

    SPATIALIGHT,
      INC.

    

    AND

    

    THE
      INVESTORS LISTED ON SCHEDULE A

    

    Dated

    April
      24, 2007

    

    THIS
      EQUITY CREDIT AGREEMENT
      is
      entered into as of the 24th day of April 2007 (this "AGREEMENT"), by and among
      each of the Investors, severally and not jointly, in the percentages set forth
      on Schedule A and SPATIALIGHT, INC., a corporation organized and existing under
      the laws of the State of New York (the "COMPANY").

    

    W
      I T N E S S E T H :

    

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Investors, from time to time
      as
      provided herein, and the Investors shall purchase in the aggregate, up to
      Fifteen Million Four Hundred Thousand Dollars ($15,400,000) of the Common Stock
      (as defined below).

    

    NOW,
      THEREFORE,
      the
      parties hereto agree as follows:

    

    ARTICLE
      I

    CERTAIN
      DEFINITIONS

    

    Section
      1.1  DEFINED
      TERMS. As
      used
      in this Agreement, the following terms shall have the following meanings
      specified or indicated (such meanings to be equally applicable to both the
      singular and plural forms of the terms defined).

    

    "AGREEMENT"
      shall have the meaning specified in the preamble hereof.

    

    "BY-LAWS"
      shall have the meaning specified in Section 4.7.

    

    "CERTIFICATE"
      shall have the meaning specified in Section 4.7

    

    "CLAIM
      NOTICE" shall have the meaning specified in Section 9.3(a).

    

    "CLOSING"
      shall mean one of the closings of a purchase and sale of shares of Common Stock
      pursuant to Section 2.3.

    

    "CLOSING
      DATE" shall mean the fifth Trading Day following the Put Date, unless otherwise
      agreed between the Investor and the Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “CLOSING
      PRICE” shall mean, for any Trading Day, the closing bid price of the Common
      Stock on the Principal Market for such Trading Day.

     

    "COMMITMENT
      PERIOD" shall mean the period commencing on the date hereof, and ending on
      the
      earlier of (i) the date on which the Investors shall have purchased Put Shares
      pursuant to this Agreement for an aggregate Purchase Price of the Maximum
      Commitment Amount, (ii) the date this Agreement is terminated pursuant to
      Section 2.4, or (iii) the date occurring eighteen (18) months from the date
      hereof.

    

    "COMMON
      STOCK" shall mean the Company's common stock, $.01 par value per share, and
      any
      shares of any other class of common stock whether now or hereafter authorized,
      having the right to participate in the distribution of dividends (as and when
      declared) and assets (upon liquidation of the Company).

    

    "COMMON
      STOCK EQUIVALENTS" shall mean any securities that are convertible into or
      exchangeable for Common Stock or any options or other rights to subscribe for
      or
      purchase Common Stock or any such convertible or exchangeable
      securities.

     

    "COMPANY"
      shall mean SpatiaLight, Inc.

    

    "CONDITION
      SATISFACTION DATE" shall have the meaning specified in Section 7.2.

    

    "DAMAGES"
      shall mean any loss, claim, damage, liability, costs and expenses (including,
      without limitation, reasonable attorneys' fees and disbursements and costs
      and
      expenses of expert witnesses and investigation).

    

    "DISCOUNT"
      shall mean (i) with respect to the first $3,700,000 of Common Stock purchased
      pursuant to this Agreement, zero and (ii) with respect to the next $11,700,000
      of Common Stock purchased pursuant to this Agreement, 5%.

    

    "DISPUTE
      PERIOD" shall have the meaning specified in Section 9.3(a).

    

    "DTC"
      shall the meaning specified in Section 2.2.

    

    "DWAC"
      shall the meaning specified in Section 2.3.

    

    "EXCHANGE
      ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules
      and regulations promulgated thereunder.

    

    “EXCESS
      PUT SHARES” shall mean the excess of the Interim Put Shares over the Put
      Shares.

    

    "FAST"
      shall have the meaning specified in Section 2.2.

      

    
      
        
        

      

      
        -
          2 -

        
          

        

      

      
        
        

      

       

    

    "INDEMNIFIED
      PARTY" shall have the meaning specified in Section 9.3(a).

    

    "INDEMNIFYING
      PARTY" shall have the meaning specified in Section 9.3(a).

    

    "INDEMNITY
      NOTICE" shall have the meaning specified in Section 9.3(b).

    

    "INTERIM
      PUT SHARES" shall be the number of Put Shares equal to (i) the Put Amount
divided
      by
      (ii) (A)
      the average of the three lowest Closing Prices for the five (5) Trading Days
      immediately preceding the Put Date minus
      (B) the
      result in the preceding clause (ii)(A) multiplied
      by the
      Discount.

    

    "INVESTOR"
      shall have the meaning specified in the preamble to this Agreement.

    

    "MAXIMUM
      COMMITMENT AMOUNT" shall mean Fifteen Million Four Hundred Thousand Dollars
      ($15,400,000) in the aggregate.

    

    "MATERIAL
      ADVERSE EFFECT" shall mean any effect on the business, operations, properties,
      prospects or financial condition of the Company that is material and adverse
      to
      the Company or to the Company and such other entities controlling or controlled
      by the Company, taken as a whole, and/or any condition, circumstance, or
      situation that would prohibit or otherwise materially interfere with the ability
      of the Company to enter into and perform its obligations under this
      Agreement.

    

    "NASD"
      shall mean the National Association of Securities Dealers, Inc.

    

    "NASDAQ"
      shall mean The Nasdaq Stock Market, Inc.

    

    "OUTSTANDING"
      shall mean, with respect to the Common Stock, at any date as of which the number
      of shares of Common Stock is to be determined, all issued and outstanding shares
      of Common Stock, including all shares of Common Stock issuable in respect of
      outstanding options, warrants, convertible securities, scrip or any certificates
      representing fractional interests in shares of Common Stock; provided, however,
      that Outstanding shall not include any shares of Common Stock then directly
      or
      indirectly owned or held by or for the account of the Company or held in escrow.
      

    

    "PERSON"
      shall mean an individual, a corporation, a partnership, an association, a trust
      or other entity or organization, including a government or political subdivision
      or an agency or instrumentality thereof. 

    

    "PRINCIPAL
      MARKET" shall mean the Nasdaq Global Select Market, the Nasdaq Global Market,
      the Nasdaq Capital Market, the Over the Counter Bulletin Board, the American
      Stock Exchange or the New York Stock Exchange, whichever is at the time the
      principal trading exchange or market for the Common Stock.

    

    
      
        
        

      

      
        -
          3 -

        
          

        

      

      
        
        

      

       

    

    "PURCHASE
      PRICE" shall mean the Closing Price for each Trading Day set forth in the Put
      Notice
      minus
      the
      product of the Discount and the Closing Price for each Trading Day set forth
      in
      the Put Notice.

     

    "PUT"
      shall mean each occasion that the Company elects to exercise its right to tender
      a Put Notice requiring Investor to purchase shares of Common Stock, subject
      to
      the terms and conditions of this Agreement.

    

    "PUT
      AMOUNT" shall mean, with respect to any Put, Sixty Thousand Dollars ($60,000),
      for each of the Trading Days set forth in the Put Notice unless otherwise agreed
      by the Investor and the Company.

    

    "PUT
      DATE" shall mean the Trading Day during the Commitment Period that a Put Notice
      is deemed delivered pursuant to Section 2.2(b).

    

    "PUT
      NOTICE" shall mean a written notice, substantially in the form of Exhibit A
      hereto, to Investor setting forth the Put Amount with respect to which the
      Company intends to require Investor to purchase shares of Common Stock pursuant
      to the terms of this Agreement.

    

    "PUT
      SHARES" shall mean the number of shares of Common Stock to be purchased by
      the
      Investor on the applicable Closing Date.

    

    "REGISTRABLE
      SECURITIES" shall mean the (a) Put Shares and (b) any securities issued or
      issuable with respect to the Put Shares by way of exchange, stock dividend
      or
      stock split or in connection with a combination of shares, recapitalization,
      merger, consolidation or other reorganization or otherwise. As to any particular
      Registrable Securities, once issued such securities shall cease to be
      Registrable Securities when (i) a Registration Statement has been declared
      effective by the SEC and such Registrable Securities have been disposed of
      pursuant to a Registration Statement, (ii) such Registrable Securities have
      been
      sold under circumstances under which all of the applicable conditions of Rule
      144 are met, (iii) such time as such Registrable Securities have been otherwise
      transferred to holders who may trade such shares without restriction under
      the
      Securities Act, and the Company has delivered a new certificate or other
      evidence of ownership for such securities not bearing a restrictive legend
      or
      (iv) in the opinion of counsel to the Company, which counsel shall be reasonably
      acceptable to Investor, such Registrable Securities may be sold without
      registration under the Securities Actor the need for an exemption from any
      such
      registration requirements and without any time, volume or manner limitations
      pursuant to Rule 144(k) (or any similar provision then in effect) under the
      Securities Act.

    

    "REGISTRATION
      STATEMENT" shall mean the Company’s registration statement on Form S-3,
Registration
      No. 333-137100,
      covering the registration of the issuance to each Investor of the Registrable
      Securities under the Securities Act.

    

    "REMAINDER
      PUT SHARES" shall mean the number of Put Shares required to be delivered by
      the
      Company on the Closing Date minus
      the
      Interim Put Shares.

    

    
      
        
        

      

      
        -
          4 -

        
          

        

      

      
        
        

      

       

    

    "SEC"
      shall mean the Securities and Exchange Commission.

    

    "SECURITIES
      ACT" shall mean the Securities Act of 1933, as amended and the rules and
      regulations promulgated thereunder.

    

    "SEC
      DOCUMENTS" shall mean, as of a particular date, all reports and other documents
      filed by the Company pursuant to the Securities Act and Section 13(a) or 15(d)
      of the Exchange Act since the beginning of the Company's then most recently
      completed fiscal year as of the time in question (provided that if the date
      in
      question is within ninety days of the beginning of the Company's fiscal year,
      the term shall include all documents filed since the beginning of the second
      preceding fiscal year).

    

    "THIRD
      PARTY CLAIM" shall have the meaning specified in Section 9.3(a).

    

    "TRADING
      DAY" shall mean any day during which the Principal Market shall be open for
      business.

    

    "TRANSACTION
      DOCUMENTS" means the Equity Credit Agreement and the Closing
      Certificate.

    

    "TRANSFER
      AGENT" shall mean the transfer agent for the Common Stock (and to any substitute
      or replacement transfer agent for the Common Stock upon the Company's
      appointment of any such substitute or replacement transfer agent). 

    

    "UNDERWRITER"
      shall mean any underwriter participating in any disposition of the Registrable
      Securities on behalf of Investor pursuant to a Registration
      Statement.

    

    ARTICLE
      II

    PURCHASE
      AND SALE OF COMMON STOCK

    

    Section
      2.1  INVESTMENTS.
      Upon the
      terms and conditions set forth herein (including, without limitation, the
      provisions of Article VII), on any Put Date the Company may exercise a Put
      by
      the delivery of a Put Notice and each Investor shall purchase Put Shares based
      upon the product of the Put Amount multiplied
      by
      the
      percentage set forth opposite such Investor’s name on Schedule A. 

    

    Section
      2.2  MECHANICS.

    

    (a) PUT
      NOTICE. At
      any
      time during the Commitment Period, the Company may deliver a Put Notice to
      the
      Investors, subject to the conditions set forth in Section 7.2. Each Put Notice
      shall be for the Put Amount for up to five (5) Trading Days including the date
      that the Put Notice is deemed to be delivered pursuant to Section 2.2(b) and
      up
      to four (4) of the Trading Days thereafter. The Purchase Price shall be
      determined for each Trading Day set forth in the Put Notice based upon the
      Put
      Amount for each such Trading Day. Unless otherwise agreed by the Investor,
      the
      Company shall not be entitled to deliver a Put Notice more than once every
      five
      (5) Trading Days.

    

    
      
        
        

      

      
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    (b) DATE
      OF DELIVERY OF PUT NOTICE. A
      Put
      Notice shall be deemed delivered on the later of: (i) the Trading Day it is
      received by facsimile or otherwise by the Investor if such notice is received
      on
      or prior to 2:00 PM New York time, or the immediately succeeding Trading Day
      if
      it is received by facsimile or otherwise after 2:00 PM New
      York
      time on a Trading Day or at anytime on a day which is not a Trading Day and
      (ii)
      the delivery to the Investor of the Interim Put Shares through the Depository
      Trust Company (“DTC”) Fast Automated Securities Transfer Program (“FAST”), as
      described in Section 2.3.

    

    Section
      2.3 CLOSINGS.
      On
      each
      Closing Date (a) the Investor shall provide the Company with transaction
      confirmations showing the number of Put Shares sold and the price at which
      the
      Put Shares were sold on each Trading Day, (b) a computation of whether the
      Put
      Shares are greater or less than the Interim Put Shares, (c) the Company shall
      authorize the transfer to the Remainder Put Shares to the Investors, in the
      manner described below, or the Investor shall deliver to the Company the Excess
      Put Shares, as the case may be, and (d) provided all conditions to Closing
      have
      been satisfied by the Company, Investor shall deliver to the Company the Put
      Amount, by wire transfer of immediately available funds. In the event that
      all
      of the conditions to Closing are not met, then the Investor shall return the
      Interim Put Shares to the Company or deliver the Put Amount to the Company
      with
      respect to the Interim Put Shares, at the option of the Investor. In lieu of
      delivering physical certificates representing the Put Shares and the Interim
      Put
      Shares, the Company shall cause the Transfer Agent to electronically transmit,
      on the Put Date or the Closing Date, as the case may be, the Interim Put Shares
      or the Remainder Put Shares, as the case may be, by crediting the account of
      the
      Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission
      ("DWAC") system, and provide proof satisfactory to the Investor of such
      delivery. In addition, on such Closing Date, each of the Company and Investor
      shall deliver all documents, instruments and writings required to be delivered
      or reasonably requested by either of them pursuant to this Agreement in order
      to
      implement and effect the transactions contemplated herein. 

    

    Section
      2.4  TERMINATION
      OF INVESTMENT OBLIGATION.
      The
      obligation of Investor pursuant to this Agreement to purchase shares of Common
      Stock shall terminate permanently (including with respect to a Closing Date
      that
      has not yet occurred) in the event that (a) there shall occur any stop order
      or
      suspension of the effectiveness of the Registration Statement for an aggregate
      of thirty (30) Trading Days during the Commitment Period, (b) the Company shall
      at any time fail to comply with the requirements of Section 6.3, 6.4, or 6.6
      and
      such failure shall continue for more than thirty (30) days, or (c) in the event
      of a breach or an event of default by the Company with respect to any agreement
      entered into with an Investor or the occurrence of an event that with notice
      or
      lapse of time or both would become a default and the same is not cured by the
      Company within thirty (30) days after written notice.

    

    
      
        
        

      

      
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    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES OF INVESTOR

    

    Each
      Investor represents and warrants, severally and not jointly, to the Company
      that:

    

    Section
      3.1  INTENT.
      Investor
      is entering into this Agreement for its own account and Investor has no present
      arrangement (whether or not legally binding) at any time to sell the Common
      Stock to or through any person or entity; provided, however, Investor reserves
      the right to dispose of the Common Stock at any time in accordance with federal
      and state securities laws applicable to such disposition. 

    

    Section
      3.2  SOPHISTICATED
      INVESTOR. Investor
      is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation
      D)
      and an accredited investor (as defined in Rule 501 of Regulation D), and
      Investor has such experience in business and financial matters that it is
      capable of evaluating the merits and risks of an investment in the Common Stock.
      Investor acknowledges that an investment in the Common Stock is speculative
      and
      involves a high degree of risk.

    

    Section
      3.3  AUTHORITY.
      (a)
      Investor has the requisite power and authority to enter into and perform its
      obligations under this Agreement and the transactions contemplated hereby in
      accordance with its terms; (b) the execution and delivery of this Agreement
      and
      the consummation by it of the transactions contemplated hereby have been duly
      authorized by all necessary action and no further consent or authorization
      of
      Investor is required; and (c) this Agreement has been duly authorized and
      validly executed and delivered by Investor and is a valid and binding agreement
      of Investor enforceable against it in accordance with its terms, subject to
      applicable bankruptcy, insolvency, or similar laws relating to, or affecting
      generally the enforcement of, creditors' rights and remedies or by other
      equitable principles of general application. 

    

    Section
      3.4  NOT
      AN AFFILIATE.
      Except
      as set forth on Schedule 3.4, Investor is not an officer, director or
      "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
      the
      Company or any other Investor as of the time of signing of this document.

    

    Section
      3.5  ORGANIZATION
      AND STANDING.
      Investor is duly organized, validly existing and in good standing under the
      laws
      of its jurisdiction of organization, and has all requisite power and authority
      to own, lease and operate its properties and to carry on its business as now
      being conducted. Investor is duly qualified as a foreign corporation to do
      business and is in good standing in every jurisdiction in which the nature
      of
      the business conducted or property owned by it makes such qualification
      necessary, other than those in which the failure so to qualify would not have
      a
      material adverse effect on Investor.

    

    Section
      3.6  ABSENCE
      OF CONFLICTS. The
      execution and delivery of this Agreement and any other document or instrument
      contemplated hereby, and the consummation of the transactions contemplated
      hereby and thereby, and compliance with the requirements hereof and thereof,

      will not (a) violate any law, rule, regulation, order, writ, judgment,
      injunction, decree or award binding on Investor, (b) violate any provision
      of
      any indenture, instrument or agreement to which Investor is a party or is
      subject, or by which Investor or any of its assets is bound, or conflict with
      or
      constitute a material default thereunder, (c) result in the creation or
      imposition of any lien pursuant to the terms of any such indenture, instrument
      or agreement, or constitute a breach of any fiduciary duty owed by Investor
      to
      any third party, or (d) require the approval of any third-party (that has not
      been obtained) pursuant to any material contract, instrument, agreement,
      relationship or legal obligation to which Investor is subject or to which any
      of
      its assets, operations or management may be subject.

    

    
      
        
        

      

      
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    ARTICLE
      IV

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

    

    The
      Company represents and warrants to Investor that, except as disclosed in the
      SEC
      Documents:

    

    Section
      4.1  ORGANIZATION
      OF THE COMPANY.
      The
      Company is a corporation duly organized and validly existing and in good
      standing under the laws of the State of New York, and has all requisite power
      and authority to own, lease and operate its properties and to carry on its
      business as now being conducted. The Company is duly qualified as a domestic
      corporation to do business and is in good standing in every jurisdiction in
      which the nature of the business conducted or property owned by it makes such
      qualification necessary, other than those in which the failure so to qualify
      would not have a Material Adverse Effect.

    

    Section
      4.2  AUTHORITY.
      (a)
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement and to issue the Put Shares; (b)
      the execution and delivery of this Agreement by the Company and the consummation
      by it of the transactions contemplated hereby have been duly authorized by
      all
      necessary corporate action and no further consent or authorization of the
      Company or its Board of Directors or stockholders is required, except for the
      stockholder approval to issue Put Shares after the Investors have purchased
      Put
      Shares having an aggregate Purchase Price of $3,700,000; and (c) this Agreement
      has been duly executed and delivered by the Company and constitutes valid and
      binding obligations of the Company enforceable against the Company in accordance
      with its respective terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, or similar laws relating to, or affecting
      generally the enforcement of, creditors' rights and remedies or by other
      equitable principles of general application.

    

    Section
      4.3  CAPITALIZATION.
      As
      of the
      date hereof, the authorized capital stock of the Company consists of 100,000,000
      shares of Common Stock, $.01 par value, of which 47,773,092 shares were issued
      and outstanding. Except for options, warrants and conversion rights to purchase
      15,390,727 shares of Common Stock, there are no options, warrants, or rights
      to
      subscribe to, securities, rights or obligations convertible into or exchangeable
      for or giving any right to subscribe for any shares of capital stock of the
      Company. All of the outstanding shares of Common Stock of the Company have
      been
      duly and validly authorized and issued and are fully paid and
      nonassessable.

    

    Section
      4.4  COMMON
      STOCK.
      The
      Company has registered the Common Stock pursuant to Section 12(b) or 12(g)
      of
      the Exchange Act and is in full compliance with all reporting requirements
      of
      the Exchange Act, and, except as disclosed in the SEC Documents, the Company
      has
      maintained all requirements for the continued listing or quotation of the Common
      Stock, and such Common Stock is currently listed or quoted on the Principal
      Market. As of the date of this Agreement, the Principal Market is
      NASDAQ.

    

    
      
        
        

      

      
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    Section
      4.5  SEC
      DOCUMENTS.
      The
      Company has delivered or made available to Investor true and complete copies
      of
      the SEC Documents on file as of the date hereof. As of their respective dates,
      the SEC Documents complied in all material respects with the requirements of
      the
      Securities Act or the Exchange Act, as the case may be, and other federal,
      state
      and local laws, rules and regulations applicable to such SEC Documents, and
      none
      of the SEC Documents contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company included
      in the SEC Documents comply as to form and substance in all material respects
      with applicable accounting requirements and the published rules and regulations
      of the SEC or other applicable rules and regulations with respect thereto.
      Such
      financial statements have been prepared in accordance with generally accepted
      accounting principles applied on a consistent basis during the periods involved
      (except (a) as may be otherwise indicated in such financial statements or the
      notes thereto or (b) in the case of unaudited interim statements, to the extent
      they may not include footnotes or may be condensed or summary statements) and
      fairly present in all material respects the financial position of the Company
      as
      of the dates thereof and the results of operations and cash flows for the
      periods then ended (subject, in the case of unaudited statements, to normal
      year-end audit adjustments). The Registration Statement covers the issuance
      of
      the Put Shares. The Registration Statement covering the issuance of the Put
      Shares was declared effective on February 14, 2007 by the Commission and neither
      the Commission nor any state regulatory authority has issued, or threatened
      to
      issue, any order preventing or suspending the use of the Registration Statement
      or the prospectus contained therein or has instituted or, to the Company’s
      knowledge, threatened to institute any proceedings with respect to such an
      order. 

    

    Section
      4.6  VALID
      ISSUANCES.
      When
      issued and paid for as herein provided, the Put Shares shall be duly and validly
      issued, fully paid, and nonassessable. Neither the sales of the Put Shares
      pursuant to, nor the Company's performance of its obligations under, this
      Agreement shall (a) result in the creation or imposition of any liens, charges,
      claims or other encumbrances upon the Put Shares or any of the assets of the
      Company, or (b) entitle the holders of Outstanding Common Stock to preemptive
      or
      other rights to subscribe to or acquire the Common Stock or other securities
      of
      the Company. The Put Shares shall not subject Investor to personal liability
      by
      reason of the ownership thereof.

    

    Section
      4.7  CORPORATE
      DOCUMENTS.
      The
      Company has furnished or made available to Investor true and correct copies
      of
      the Company's Certificate of Incorporation, as amended and in effect on the
      date
      hereof (the "CERTIFICATE"), and the Company's By-Laws, as amended and in effect
      on the date hereof (the "BY-LAWS").

    

    
      
        
        

      

      
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    Section
      4.8  NO
      CONFLICTS. The
      execution, delivery and performance of this Agreement by the Company and the
      consummation by the Company of the transactions contemplated hereby will not
      (a)
      result in a violation of the Certificate or By-Laws or (b) conflict with, or
      constitute a default (or an event that with notice or lapse of time or both
      would become al default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any material agreement, indenture,
      instrument or any "lock-up" or similar provision of any underwriting or similar
      agreement to which the Company is a party, or (c) result in a violation of
      any
      federal, state, local or foreign law, rule, regulation, order, judgment or
      decree (including federal and state securities laws and regulations) applicable
      to the Company or by which any property or asset of the Company is bound or
      affected nor is the Company otherwise in violation of, conflict with or in
      default under any of the foregoing. The business of the Company is not being
      conducted in violation of any law, ordinance or regulation of any governmental
      entity. Except as set forth on Schedule 4.8, the Company is not required under
      federal, state or local law, rule or regulation to obtain any consent,
      authorization or order of, or make any filing or registration with, any court
      or
      governmental agency in order for it to execute, deliver or perform any of its
      obligations under this Agreement or issue and sell the Common Stock in
      accordance with the terms hereof (other than any SEC, NASD, state securities
      filings or filings with the Principal Market that may be required to be made
      by
      the Company subsequent to any Closing).

    

    Section
      4.9  NO
      MATERIAL ADVERSE CHANGE.
      Since
      March 16, 2007, no event has occurred that would have a Material Adverse Effect
      on the Company, except as disclosed in the SEC Documents. 

    

    Section
      4.10  NO
      UNDISCLOSED LIABILITIES. The
      Company has no liabilities or obligations that are material, individually or
      in
      the aggregate, and that are not disclosed in the SEC Documents on file on the
      date hereof or otherwise publicly announced, other than those incurred in the
      ordinary course of the Company's businesses since March 16, 2007 and which,
      individually or in the aggregate, do not or would not have a Material Adverse
      Effect on the Company.

    

    Section
      4.11  NO
      UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
      March 16, 2007, no event or circumstance has occurred or exists with respect
      to
      the Company or its businesses, properties, prospects, operations or financial
      condition, that, under applicable law, rule or regulation, requires public
      disclosure or announcement prior to the date hereof by the Company but which
      has
      not been so publicly announced or disclosed in the SEC Documents.

    

    Section
      4.12  LITIGATION
      AND OTHER PROCEEDINGS.
      Except
      as may be set forth in the SEC Documents, there are no lawsuits or proceedings
      pending or to the best knowledge of the Company threatened, against the Company,
      nor has the Company received any written or oral notice of any such action,
      suit, proceeding or investigation, which would have a Material Adverse Effect.
      Except as set forth in the SEC Documents, no judgment, order, writ, injunction
      or decree or award has been issued by or, so far as is known by the Company,
      requested of any court, arbitrator or governmental agency which would have
      a
      Material Adverse Effect.

    

    Section
      4.13  NO
      MISLEADING OR UNTRUE COMMUNICATION.
      Neither
      this Agreement nor the Exhibits and schedules hereto contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements, in the light of the circumstances under which
      they
      were made, not misleading.

    

    
      
        
        

      

      
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    ARTICLE
      V

    COVENANTS
      OF INVESTOR

    

    Section
      5.1  COMPLIANCE
      WITH LAW.
      Investor's and all of Investor’s affiliates trading activities with respect to
      shares of the Common Stock will be and have been in compliance with all
      applicable state and federal securities laws, rules and regulations and the
      rules and regulations of the NASD and the Principal Market on which the Common
      stock is listed. Investor acknowledges that it will be an underwriter with
      respect to the Put Shares and will have the obligations and responsibilities
      of
      an underwriter under the Securities Act. 

    

    ARTICLE
      VI

    COVENANTS
      OF THE COMPANY

    

    Section
      6.1  REGISTRATION
      STATEMENT.
      The
      Company shall use its best efforts to avoid the issuance of, or, if issued,
      obtain the withdrawal of (i) any order suspending the effectiveness of the
      Registration Statement, or (ii) any suspension of the qualification (or
      exemption from qualification) of any of the Registerable Securities for sale
      in
      any jurisdiction.

    

    Section
      6.2  RESERVATION
      OF COMMON STOCK.
      The
      Company shall have available and the Company shall reserve and keep available
      at
      all times, free of preemptive rights, shares of Common Stock for the purpose
      of
      enabling the Company to satisfy any obligation to issue the Put
      Shares.

    

    Section
      6.3  LISTING
      OF COMMON STOCK.
      The
      Company shall use its best efforts to maintain the listing of the Common Stock
      on a Principal Market and, if applicable, will cause the Put Shares to be listed
      on the Principal Market. The Company further shall, if the Company applies
      to
      have the Common Stock traded on any other Principal Market, include in such
      application the Put Shares and shall take such other action as is necessary
      or
      desirable in the reasonable opinion of Investor to cause the Common Stock to
      be
      listed on such other Principal Market as promptly as possible. The Company
      shall
      use its commercially reasonable efforts to continue the listing and trading
      of
      the Common Stock on the Principal Market (including, without limitation,
      maintaining sufficient net tangible assets) and will comply in all respects
      with
      the Company's reporting, filing and other obligations under the bylaws or rules
      of the NASD and the Principal Market. 

    

    Section
      6.4  EXCHANGE
      ACT REGISTRATION. The
      Company shall cause the Common Stock to continue to be registered under Section
      12(g) or 12(b) of the Exchange Act, and will comply in all material respects
      with its reporting and filing obligations under said Act, and will not take
      any
      action or file any document (whether or not permitted by said Act or the rules
      thereunder) to terminate or suspend such registration or to terminate or suspend
      its reporting and filing obligations under said Act.

    

    Section
      6.5  ISSUANCE.
      The
      sale
      of the Put Shares to the Investor shall be registered pursuant to the
      Registration Statement. The Put Shares shall be free of legends and no
      instructions or "stop transfers orders," so called, "stock transfer
      restrictions," or other restrictions have been or shall be given to the
      Company's transfer agent.

    

    
      
        
        

      

      
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    Section
      6.6  CORPORATE
      EXISTENCE. The
      Company shall take all commercially reasonable steps necessary to preserve
      and
      continue the corporate existence of the Company.

    

    Section
      6.7  NOTICE
      OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT.
      The
      Company shall promptly notify Investor upon the occurrence of any of the
      following events in respect of a registration statement or related prospectus
      in
      respect of an offering of Registrable Securities: (a) receipt of any request
      for
      additional information by the SEC or any other federal or state governmental
      authority during the period of effectiveness of the registration statement
      for
      amendments or supplements to the registration statement or related prospectus;
      (b) the issuance by the SEC or any other federal or state governmental authority
      of any stop order suspending the effectiveness of any Registration Statement
      or
      the initiation of any proceedings for that purpose; (c) receipt of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Securities for sale in any
      jurisdiction or the initiation or threatening of any proceeding for such
      purpose; (d) the happening of any event that makes any statement made in such
      Registration Statement or related prospectus or any document incorporated or
      deemed to be incorporated therein by reference untrue in any material respect
      or
      that requires the making of any changes in the registration statement, related
      prospectus or documents so that, in the case of a Registration Statement, it
      will not contain any untrue statement of a material fact or omit to state any
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, and that in the case of the related prospectus, it
      will
      not contain any untrue statement of a material fact or omit to state any
      material fact required to be stated therein or necessary to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading; and (e) the Company's reasonable determination that a post-effective
      amendment to the registration statement would be appropriate, and the Company
      shall promptly make available to Investor any such supplement or amendment
      to
      the related prospectus. The Company shall not deliver to Investor any Put Notice
      during the continuation of any of the foregoing events.

    

    Section
      6.8  CONSOLIDATION;
      MERGER. The
      Company shall not, at any time after the date hereof, effect any merger or
      consolidation of the Company with or into, or a transfer of all or substantially
      all of the assets of the Company to, another entity unless the resulting
      successor or acquiring entity (if not the Company) assumes by written instrument
      the obligation to deliver to Investor such shares of Common Stock and/or
      securities as Investor is entitled to receive pursuant to this
      Agreement.

    

    Section
      6.9  DILUTION.
      The
      number of shares of Common Stock issuable as Put Shares may increase
      substantially in certain circumstances as a result of a decline in the trading
      price. The Company's executive officers and directors have studied and fully
      understand the nature of the transactions contemplated by this Agreement and
      recognize that they have a potential dilutive effect. The board of directors
      of
      the Company has concluded, in its good faith business judgment that such
      issuance is in the best interests of the Company. The Company specifically
      acknowledges that its obligation to issue the Put Shares is binding upon the
      Company and enforceable regardless of the dilution such issuance may have on
      the
      ownership interests of other shareholders of the Company.

    

    
      
        
        

      

      
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    Section
      6.10 USE
      OF PROCEEDS. The
      Company may not use any proceeds from the sale of Put Shares for the repayment
      of the principal amount of the indebtedness represented by the Senior Secured
      Convertible Notes dated November 30, 2004 or the principal amount of any notes
      payable to Argyle Capital Management Corporation.

    

    ARTICLE
      VII

    CONDITIONS
      TO DELIVERY OF

    PUT
      NOTICES AND CONDITIONS TO CLOSING

    

    Section
      7.1  CONDITIONS
      PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON STOCK.
      The
      obligation hereunder of the Company to issue and sell the Put Shares to Investor
      incident to each Closing is subject to the satisfaction, at or before each
      such
      Closing, of each of the conditions set forth below.

    

    (a)
       ACCURACY
      OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
      representations and warranties of Investor shall be true and correct in all
      material respects as of the date of this Agreement and as of the date of each
      such Closing as though made at each such time.

    

    (b) PERFORMANCE
      BY INVESTOR. Investor
      shall have performed, satisfied and complied in all respects with all covenants,
      agreements and conditions required by this Agreement to be performed, satisfied
      or complied with by Investor at or prior to such Closing.

    

    (c) EFFECTIVE
      REGISTRATION STATEMENT.
      The
      Registration Statement shall be effective and (i) neither the Company nor
      Investor shall have received notice that the SEC has issued or intends to issue
      a stop order with respect to such Registration Statement or that the SEC
      otherwise has suspended or withdrawn the effectiveness of such Registration
      Statement, either temporarily or permanently, or intends or has threatened
      to do
      so, and (ii) no other suspension of the use or withdrawal of the effectiveness
      of such Registration Statement or related prospectus shall exist.

    

    (d) NO
      VIOLATION OF LAW. The
      sale
      or delivery of the Put Shares would not violate any applicable law.

    

    Section
      7.2  CONDITIONS
      PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION
      OF INVESTOR TO PURCHASE PUT SHARES. The
      right
      of the Company to deliver a Put Notice and the obligation of Investor hereunder
      to acquire and pay for the Put Shares incident to a Closing is subject to the
      satisfaction, on (a) the date of delivery of such Put Notice and (b) the
      applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of
      the
      following conditions:

    

    
      
        
        

      

      
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    (a)
       EFFECTIVE
      REGISTRATION STATEMENT.
      The
      issuance of the Put Shares to the Investor shall be registered pursuant to
      the
      Registration Statement. The Registration Statement shall be effective on each
      Condition Satisfaction Date and (i) neither the Company nor Investor shall
      have
      received notice that the SEC has issued or intends to issue a stop order with
      respect to such Registration Statement or that the SEC otherwise has suspended
      or withdrawn the effectiveness of such Registration Statement, either
      temporarily or permanently, or intends or has threatened to do so, and (ii)
      no
      other suspension of the use or withdrawal of the effectiveness of such
      Registration Statement or related prospectus shall exist. 

    

    (b)
       ACCURACY
      OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of each Condition Satisfaction Date as though made at
      each
      such time (except for representations and warranties specifically made as of
      a
      particular date) with respect to all periods, and as to all events and
      circumstances occurring or existing to and including each Condition Satisfaction
      Date.

    

    (c)
       PERFORMANCE
      BY THE COMPANY.
      The
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by this Agreement to
      be
      performed, satisfied or complied with by the Company at or prior to each
      Condition Satisfaction Date.

    

    (d) NO
      BANKRUPTCY. The
      Company has not (i) made an assignment for the benefit of its creditors; (ii)
      filed a voluntary bankruptcy petition; (iii) become the subject of an order
      for
      relief or been declared insolvent in any federal or state bankruptcy or
      insolvency proceedings; (iv) filed a petition or answer seeking reorganization,
      arrangement, composition, readjustment, liquidation, dissolution, termination,
      or similar relief under any law; (v) filed an answer or other pleading admitting
      or failing to contest the material allegations of a petition filed against
      the
      Company in any proceeding; or (vi) sought, consented to, or acquiesced in the
      appointment of a trustee, receiver, or liquidator of all or any substantial
      part
      of the Company's properties; and no proceeding seeking reorganization,
      arrangement, composition, readjustment, liquidation, dissolution, or similar
      relief under any law has been filed that has not been dismissed within one
      hundred twenty (120) after filing or with respect to which a trustee, receiver,
      or liquidator of any substantial part of the Company's properties has been
      appointed and ninety (90) days have expired without the appointment being
      vacated or stayed, or ninety (90) days have expired after the date of expiration
      of a stay, if the appointment has not previously been vacated.

    

    (e)
       NO
      INJUNCTION.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or adopted by any court or governmental
      authority of competent jurisdiction that prohibits or directly and materially
      adversely affects any of the transactions contemplated by this Agreement, and
      no
      proceeding shall have been commenced that may have the effect of prohibiting
      or
      materially adversely affecting any of the transactions contemplated by this
      Agreement.

    

    
      
        
        

      

      
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    (f)
       ADVERSE
      CHANGES. Since
      the
      date of filing of the Company's most recent SEC Document, no event that had
      or
      is reasonably likely to have a Material Adverse Effect has occurred.

    

    (g)
       NO
      SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
      The
      trading of the Common Stock shall not have been suspended by the SEC, the
      Principal Market or the NASD and the Common Stock shall have been approved
      for
      listing or quotation on and shall not have been delisted from the Principal
      Market. Investors acknowledge that the Company has received a delisting notice
      from the NASD and may be delisted from the NASDAQ Capital Market.

    

    (h)
       LEGAL
      OPINION. The
      Company shall have caused to be delivered to Investor, an opinion of the
      Company's legal counsel in the form of Exhibit B hereto, addressed to
      Investor.

    

    (i)
       TEN
      PERCENT LIMITATION.
      Notwithstanding anything to the contrary contained herein, if, on any Closing
      Date, the number of Put Shares then to be purchased pursuant to a Put Notice
      by
      Investor would, when aggregated with all other shares of Common Stock then
      held
      by Investor (including, for the purposes of this Section 7.2(h), Common Stock
      issuable upon conversion, exercise or exchange, as applicable, of Common Stock
      Equivalents then held by Investor), cause Investor to beneficially own in excess
      of 9.99% of the total number of issued and outstanding shares of Common Stock
      after giving effect to the Put (the "Percentage
      Cap"),
      then
      the number of Put Shares shall be reduced to the extent necessary for Investor's
      beneficial ownership of Common Stock, after giving effect to the Put, not to
      exceed the Percentage Cap. For such purposes, beneficial ownership shall be
      determined in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder. In the event the number of Put Shares
      with respect to any Put are required to be reduced pursuant to this Section
      7.2(h), Investor shall provide, via facsimile, as soon as possible on the
      Closing Date, and in no event later than 12:00 p.m. EST, a notice to the Company
      setting forth the maximum number of shares issuable pursuant to such Put which
      would not result in Investor's beneficial ownership exceeding the Percentage
      Cap
      and shall return to the Company any Excess Put Shares. In the event that the
      amount of any Put Amount is limited as a result of this paragraph, at
      SpatiaLight’s option, the maximum Put Amount thereafter shall be increased,
      subject to the Percentage Cap, until such time as the total Put Amount available
      under the terms of this Agreement shall be equal to the amount that would have
      been available in the absence of the Percentage Cap.

     

    (j)
       SHAREHOLDER
      VOTE.
      The
      issuance of shares of Common Stock with respect to the applicable Closing,
      if
      any, shall not violate the shareholder approval requirements of the Principal
      Market. In the event that the Company desires to put shares of Common Stock
      to
      the Investors having an aggregate Purchase Price in excess of $3,700,000
      commencing on the date of this Agreement, then the Company shall be obligated
      to
      obtain shareholder approval to issue Put Shares in excess of such
      amount.

    

    (k)
       OTHER.
      On
      each
      Condition Satisfaction Date, Investor shall have received and been reasonably
      satisfied with such other certificates and documents as shall have been
      reasonably requested by Investor in order for Investor to confirm the Company's
      satisfaction of the conditions set forth in this Section 7.2., including,
      without limitation, a certificate in substantially the form and substance of
      Exhibit C hereto, executed by an executive officer of the Company and to the
      effect that all the conditions to such Closing shall have been satisfied as
      at
      the date of each such certificate.

    

    
      
        
        

      

      
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    (l) NO
      BREACH. On
      each
      Condition Satisfaction Date, there shall not (i) be an uncured event of default
      or a breach of any agreement between the Company and an Investor or (ii) have
      occurred an event that with notice or lapse of time or both would become a
      default or a breach of an agreement between the Company and the Investor which
      is uncured.

    

    Section
      7.3  DUE
      DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
      INFORMATION.

    

    (a)
       The
      Company shall make available for inspection and review by Investor, advisors
      to
      and representatives of Investor (who may or may not be affiliated with Investor
      and who are reasonably acceptable to the Company), and any Underwriter, any
      Registration Statement or amendment or supplement thereto or any blue sky,
      NASD
      or other filing, all financial and other records, all SEC Documents and other
      filings with the SEC, and all other corporate documents and properties of the
      Company as may be reasonably necessary for the purpose of such review, and
      cause
      the Company's officers, directors and employees to supply all such information
      reasonably requested by Investor or any such representative, advisor or
      Underwriter in connection with such Registration Statement (including, without
      limitation, in response to all questions and other inquiries reasonably made
      or
      submitted by any of them), prior to and from time to time after the filing
      and
      effectiveness of such Registration. 

    

    (b)
       Notwithstanding
      anything contained herein to the contrary, each of the Company, its officers,
      directors, employees and agents shall in no event disclose non-public
      information to Investor, advisors to or representatives of
      Investor.

    

    (c)
       Nothing
      herein shall require the Company to disclose non-public information to Investor
      or its advisors or representatives, and the Company represents that it does
      not
      disseminate non-public information to any investors who purchase stock in the
      Company in a public offering, to money managers or to securities analysts;
      provided, however, that notwithstanding anything herein to the contrary, the
      Company shall, as hereinabove provided, immediately notify the advisors and
      representatives of Investor and any Underwriters of any event or the existence
      of any circumstance (without any obligation to disclose the specific event
      or
      circumstance) of which it becomes aware, constituting non-public information
      (whether or not requested of the Company specifically or generally during the
      course of due diligence by such persons or entities), which, if not disclosed
      in
      the prospectus included in a Registration Statement would cause such prospectus
      to include a material misstatement or to omit a material fact required to be
      stated therein in order to make the statements therein, in light of the
      circumstances in which they were made, not misleading. Nothing contained in
      this
      Section 7.3 shall be construed to mean that such persons or entities other
      than
      Investor (without the written consent of Investor prior to disclosure of such
      information) may not obtain non-public information in the course of conducting
      due diligence in accordance with the terms and conditions of this Agreement
      and
      nothing herein shall prevent any such persons or entities from notifying the
      Company of their opinion that based on such due diligence by such persons or
      entities, any Registration Statement contains an untrue statement of a material
      fact or omits a material fact required to be stated in such Registration
      Statement or necessary to make the statements contained therein, in light of
      the
      circumstances in which they were made, not misleading.

     

    
      
        
        

      

      
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    ARTICLE
      VIII

    COVER

    

    Section
      8.1  COVER.
      If the
      Company fails for any reason to deliver the Put Shares within two Trading Days
      after a Closing Date and the Investor purchases, in an open market transaction
      or otherwise, shares of Common Stock (the "Covering Shares") in order to make
      delivery in satisfaction of a sale of Common Stock by such Investor (the "Sold
      Shares"), which delivery such Investor anticipated to make using the Put Shares
      (a "Buy-In"), then the Company shall pay to such Investor, in addition to all
      other amounts contemplated in other provisions of the Transaction Documents,
      and
      not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The
      "Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x)
      such Investor's total purchase price (including brokerage commissions, if any)
      for the Covering Shares over (y) the net proceeds (after brokerage commissions,
      if any) received by such Investor from the sale of the Sold Shares. The Company
      shall pay the Buy-In Adjustment Amount to such Investor in immediately available
      funds immediately upon demand by such Investor. By way of illustration and
      not
      in limitation of the foregoing, if such Investor purchases Covering Shares
      having a total purchase price (including brokerage commissions) of $11,000
      to
      cover a Buy-In with respect to shares of Common Stock that it sold for net
      proceeds of $10,000, the Buy-In Adjustment Amount that the Company will be
      required to pay to such Investor will be $1,000.

     

    ARTICLE
      IX

    NOTICES;
      INDEMNIFICATION

    

    Section
      9.1  NOTICES.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (a) personally served, (b) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (c)
      delivered by reputable air courier service with charges prepaid, or (d)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice given in accordance herewith. Any notice or other
      communication required or permitted to be given hereunder shall be deemed
      effective (i) upon hand delivery or delivery by facsimile, with accurate
      confirmation generated by the transmitting facsimile machine, at the address
      or
      number designated below (if delivered on a business day during normal business
      hours where such notice is to be received), or the first business day following
      such delivery (if delivered other than on a business day during normal business
      hours where such notice is to be received) or (ii) on the second business day
      following the date of mailing by express courier service or on the fifth
      business day after deposited in the mail, in each case, fully prepaid, addressed
      to such address, or upon actual receipt of such mailing, whichever shall first
      occur. The addresses for such communications shall be: 

    

    
      
        
        

      

      
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          17 -

        
          

        

      

      
        
        

      

       

    

    If
      to the
      Company:

    

    SpatiaLight,
      Inc.

    Five
      Hamilton Landing,

    Novato
      CA
      94949

    Facsimile
      No. (415) 883-3363

    

    with
      a
      copy (which shall not constitute notice) to:

    

    Lawrence
      E. Wilson, Esq.

    Franklin,
      Cardwell & Jones

    1001
      McKinney, 18th Floor

    Houston,
      Tx 77002

    Facsimile:
      713-222-0938

    

    If
      to
      Investor at the address set forth on Schedule A; with a copy (which shall not
      constitute notice):

    

    Marc
      G.
      Rosenberg, Esq.

    McLaughlin
      & Stern, LLP

    260
      Madison Avenue

    New
      York,
      New York 10016

    Facsimile:
      800-933-0981

    

    Either
      party hereto may from time to time change its address or facsimile number for
      notices under this Section 9.1 by giving at least ten (10) days' prior written
      notice of such changed address or facsimile number to the other party
      hereto.

    

    Section
      9.2  INDEMNIFICATION.
      The
      Company agrees to indemnify and hold harmless Investor and its officers,
      directors, employees, and agents, and each Person or entity, if any, who
      controls Investor within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act, and the officers, directors, agents and
      employees of each such controlling person, from and against any Damages, and
      any
      action in respect thereof to which any of such persons becomes subject to,
      resulting from, arising out of or relating to (i) any untrue statement or
      alleged untrue statement of a material fact contained in the Registration
      Statement, any prospectus contained therein or in any amendment or supplement
      thereto or arising out of or relating to any omission or alleged omission of
      a
      material fact required to be stated therein or necessary to make the statements
      therein (in the case of any prospectus or supplement thereto, in light of the
      circumstances under which they were made) not misleading or (ii) any
      misrepresentation, breach of warranty or nonfulfillment of or failure to perform
      any covenant or agreement on the part of Company contained in this Agreement,
      in
      each such case as such Damages are incurred, except to the extent such Damages
      result solely from Investor's failure to perform any covenant or agreement
      contained in this Agreement or Investor's or its officer's, director's,
      employee's, agent's gross negligence or willful misconduct ( to the extent
      that
      it shall be finally determined by a court of competent jurisdiction which
      determination is not subject to appeal or further review). 

     

    
      
        
        

      

      
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    Section
      9.3  METHOD
      OF ASSERTING INDEMNIFICATION CLAIMS.
      All
      claims for indemnification by any Indemnified Party (as defined below) under
      Section 9.2 shall be asserted and resolved as follows: 

    

    (a)
      (i) In
      the
      event any claim or demand in respect of which any person claiming
      indemnification under any provision of this Article IX (an "INDEMNIFIED PARTY")
      might seek indemnity under this Article is asserted against or sought to be
      collected from such Indemnified Party by a person other than a party hereto
      or
      an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall
      deliver a written notification, enclosing a copy of all papers served, if any,
      and specifying the nature of and basis for such Third Party Claim and for the
      Indemnified Party's claim for indemnification that is being asserted under
      any
      provision of this Article against any person (the "INDEMNIFYING PARTY"),
      together with the amount or, if not then reasonably ascertainable, the estimated
      amount, determined in good faith, of such Third Party Claim (a "CLAIM NOTICE")
      with reasonable promptness to the Indemnifying Party. If the Indemnified Party
      fails to provide the Claim Notice with reasonable promptness after the
      Indemnified Party receives notice of such Third Party Claim, the Indemnifying
      Party shall not be obligated to indemnify the Indemnified Party with respect
      to
      such Third Party Claim to the extent that the Indemnifying Party's ability
      to
      defend has been irreparably and materially prejudiced by such failure of the
      Indemnified Party. 

    

    (ii) The
      Indemnifying Party shall notify the Indemnified Party as soon as practicable
      within the period ending thirty (30) calendar days following receipt by the
      Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
      below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes its
      liability or the amount of its liability to the Indemnified Party under this
      Article and whether the Indemnifying Party desires, at its sole cost and
      expense, to defend the Indemnified Party against such Third Party
      Claim.

    

    (A)
       If
      the
      Indemnifying Party notifies the Indemnified Party within the Dispute Period
      that
      the Indemnifying Party desires to defend the Indemnified Party with respect
      to
      the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying
      Party shall have the right to defend, with counsel reasonably satisfactory
      to
      the Indemnified Party, at the sole cost and expense of the Indemnifying Party,
      such Third Party Claim by all appropriate proceedings, which proceedings shall
      be vigorously and diligently prosecuted by the Indemnifying Party to a final
      conclusion or will be settled at the discretion of the Indemnifying Party (but
      only with the consent of the Indemnified Party in the case of any settlement
      that provides for any relief other than the payment of monetary damages or
      that
      provides for the payment of monetary damages as to which the Indemnified Party
      shall not be indemnified in full pursuant to this Article). The Indemnifying
      Party shall have full control of such defense and proceedings, including any
      compromise or settlement thereof; provided, however, that the Indemnified Party
      may, at the sole cost and expense of the Indemnified Party, at any time prior
      to
      the Indemnifying Party's delivery of the notice referred to in the first
      sentence of this clause (i), file any motion, answer or other pleadings or
      take
      any other action that the Indemnified Party reasonably believes to be necessary
      or appropriate to protect its interests; and provided further, that if requested
      by the Indemnifying Party, the Indemnified Party will, at the sole cost and
      expense of the Indemnifying Party, provide reasonable cooperation to the
      Indemnifying Party in contesting any Third Party Claim that the Indemnifying
      Party elects to contest. The Indemnified Party may participate in, but not
      control, any defense or settlement of any Third Party Claim controlled by the
      Indemnifying Party pursuant to this clause (A), and except as provided herein,
      the Indemnified Party shall bear its own costs and expenses with respect to
      such
      participation. Notwithstanding the foregoing, the Indemnified Party may takeover
      the control of the defense or settlement of a Third Party Claim at any time
      if
      it irrevocably waives its right to indemnity under this Article with respect
      to
      such Third Party Claim. Notwithstanding the foregoing, an Indemnified Party
      shall have the right to employ separate counsel in any such proceeding and
      to
      control and participate in the defense thereof and the expense thereof shall
      be
      borne by the Indemnifying Party: (1) if the Indemnifying Party has agreed in
      writing to pay such fees and expenses; or (2) the named parties to any such
      proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest is likely to exist if the same counsel
      were to represent such Indemnified Party and the Indemnifying Party (in which
      case, if such Indemnified Party notifies the Indemnifying Party in writing
      that
      it elects to employ separate counsel at the expense of the Indemnifying Party,
      the Indemnifying Party shall not have the right to assume the defense thereof
      and the reasonable fees and expenses of one separate counsel, (but no more
      than
      one separate counsel on behalf of all of the Indemnified Parties) shall be
      at
      the expense of the Indemnifying Party).

    

    
      
        
        

      

      
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    (B) If
      the
      Indemnifying Party fails to notify the Indemnified Party within the Dispute
      Period that the Indemnifying Party desires to defend the Third Party Claim
      pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice
      but
      fails to prosecute vigorously and diligently or settle the Third Party Claim,
      or
      if the Indemnifying Party fails to give any notice whatsoever within the Dispute
      Period, then the Indemnified Party shall have the right to defend, at the sole
      cost and expense of the Indemnifying Party, the Third Party Claim by all
      appropriate proceedings, which proceedings shall be prosecuted by the
      Indemnified Party in a reasonable manner and in good faith or will be settled
      at
      the discretion of the Indemnified Party (with the consent of the Indemnifying
      Party, which consent will not be unreasonably withheld). The Indemnified Party
      will have full control of such defense and proceedings, including any compromise
      or settlement thereof; provided, however, that if requested by the Indemnified
      Party, the Indemnifying Party will, at the sole cost and expense of the
      Indemnifying Party, provide reasonable cooperation to the Indemnified Party
      and
      its counsel in contesting any Third Party Claim which the Indemnified Party
      is
      contesting. Notwithstanding the foregoing provisions of this clause (B), if
      the
      Indemnifying Party has notified the Indemnified Party within the Dispute Period
      that the Indemnifying Party disputes its liability or the amount of its
      liability hereunder to the Indemnified Party with respect to such Third Party
      Claim and if such dispute is resolved in favor of the Indemnifying Party in
      the
      manner provided in clause (C) below, the Indemnifying Party will not be required
      to bear the costs and expenses of the Indemnified Party's defense pursuant
      to
      this clause (B) or of the Indemnifying Party's participation therein at the
      Indemnified Party's request, and the Indemnified Party shall reimburse the
      Indemnifying Party in full for all reasonable costs and expenses incurred by
      the
      Indemnifying Party in connection with such litigation. The Indemnifying Party
      may participate in, but not control, any defense or settlement controlled by
      the
      Indemnified Party pursuant to this clause (B), and the Indemnifying Party shall
      bear its own costs and expenses with respect to such participation.

    

    
      
        
        

      

      
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    (C) 
      If the
      Indemnifying Party notifies the Indemnified Party that it does not dispute
      its
      liability or the amount of its liability to the Indemnified Party with respect
      to the Third Party Claim under this Article or fails to notify the Indemnified
      Party within the Dispute Period whether the Indemnifying Party disputes its
      liability or the amount of its liability to the Indemnified Party with respect
      to such Third Party Claim, the amount of Damages specified in the Claim Notice
      shall be conclusively deemed a liability of the Indemnifying Party under this
      Article and the Indemnifying Party shall pay the amount of such Damages to
      the
      Indemnified Party on demand. If the Indemnifying Party has timely disputed
      its
      liability or the amount of its liability with respect to such claim, the
      Indemnifying Party and the Indemnified Party shall proceed in good faith to
      negotiate a resolution of such dispute; provided, however, that if the dispute
      is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
      Party shall be entitled to institute such legal action as it deems
      appropriate.

    

    (b)
       In
      the
      event any Indemnified Party should have a claim under this Article against
      the
      Indemnifying Party that does not involve a Third Party Claim, the Indemnified
      Party shall deliver a written notification of a claim for indemnity under this
      Article specifying the nature of and basis for such claim, together with the
      amount or, if not then reasonably ascertainable, the estimated amount,
      determined in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable
      promptness to the Indemnifying Party. The failure by any Indemnified Party
      to
      give the Indemnity Notice shall not impair such party's rights hereunder except
      to the extent that the Indemnifying Party demonstrates that it has been
      irreparably prejudiced thereby. If the Indemnifying Party notifies the
      Indemnified Party that it does not dispute the claim or the amount of the claim
      described in such Indemnity Notice or fails to notify the Indemnified Party
      within the Dispute Period whether the Indemnifying Party disputes the claim
      or
      the amount of the claim described in such Indemnity Notice, the amount of
      Damages specified in the Indemnity Notice will be conclusively deemed a
      liability of the Indemnifying Party under this Article and the Indemnifying
      Party shall pay the amount of such Damages to the Indemnified Party on demand.
      If the Indemnifying Party has timely disputed its liability or the amount of
      its
      liability with respect to such claim, the Indemnifying Party and the Indemnified
      Party shall proceed in good faith to negotiate a resolution of such dispute;
      provided, however, that if the dispute is not resolved within thirty (30) days
      after the Claim Notice, the Indemnifying Party shall be entitled to institute
      such legal action as it deems appropriate.

    

    (c)
       The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar rights of the Indemnified Party against the Indemnifying
      Party
      or others which would be available to the Indemnified Party at law or in equity,
      and (ii) any liabilities the Indemnifying Party may be subject to.

     

    ARTICLE
      X

    MISCELLANEOUS

    

    Section
      10.1  GOVERNING
      LAW; JURISDICTION. This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York without regard to the principles of conflicts of law.
      Each
      of the Company and Investor hereby submit to the exclusive jurisdiction of
      the
      United States Federal and state courts located in the State of New York, County
      of New York with respect to any dispute arising under this Agreement, the
      agreements entered into in connection herewith or the transactions contemplated
      hereby or thereby.

    

    
      
        
        

      

      
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    Section
      10.2  JURY
      TRIAL WAIVER.
      The
      Company and the Investor hereby waive a trial by jury in any action, proceeding
      or counterclaim brought by either of the parties hereto against the other in
      respect of any matter arising out of or in connection with the Transaction
      Documents. 

    

    Section
      10.3  Omitted

     

    Section
      10.4  ASSIGNMENT.
      Neither
      this Agreement nor any rights of Investor or the Company hereunder may be
      assigned by either party to any other person.

    

    Section
      10.5  THIRD
      PARTY BENEFICIARIES.
      This
      Agreement is intended for the benefit of the Company and Investor, and is not
      for the benefit of, nor may any provision hereof be enforced by, any other
      person.

    

    Section
      10.6  TERMINATION.
      This
      Agreement shall terminate at the end of the Commitment Period or as otherwise
      provided herein (unless extended by the agreement of the Company and the
      Investors); provided, however, that the provisions of Article VI, VIII, IX
      and X
      shall survive the termination of this Agreement.

    

    Section
      10.7  ENTIRE
      AGREEMENT. This
      Agreement together with schedules and exhibits hereto, and the instruments
      referenced herein contain the entire understanding of the Company and Investor
      with respect to the matters covered herein and therein and, except as
      specifically set forth herein or therein, neither the Company nor Investor
      makes
      any representation, warranty, covenant or undertaking with respect to such
      matters.

    

    Section
      10.8  FEES
      AND EXPENSES. Except
      as
      otherwise provided in this Agreement or any of the exhibits hereto, each of
      the
      Company and Investor agrees to pay its own expenses in connection with the
      preparation of this Agreement and performance of its obligations hereunder
      provided, however, that the Company agrees to the fees and expenses of an
      Investor’s counsel not to exceed $30,000 and shall be payable in three equal
      installments, 30, 60 and 90 days from the date hereof. In addition, the Company
      shall pay all reasonable fees and expenses incurred by the Investor in
      connection with any amendments, modifications or waivers of this Agreement.
      The
      Company shall pay all stamp or other similar taxes and duties levied in
      connection with issuance of the Shares pursuant hereto.

    

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

    

    
      
        
        

      

      
        -
          22 -

        
          

        

      

      
        
        

      

       

    

    Section
      10.10  NO
      BROKERS.
      The
      Company agrees to indemnify the Investors against, and hold the Investors
      harmless from, any judgments entered against Investors for fees in connection
      with this transaction based on agreements between the Company and any broker
      or
      finder. 

    

    Section
      10.11 COUNTERPARTS.
      This
      Agreement may be executed in multiple counterparts, each of which may be
      executed by less than all of the parties and shall be deemed to be an original
      instrument which shall be enforceable against the parties actually executing
      such counterparts and all of which together shall constitute one and the same
      instrument. This Agreement, once executed by a party, may be delivered to the
      other parties hereto by electronic transmission of a portable document format
      (“PDF”) copy or facsimile transmission of a copy of this Agreement bearing the
      signature of the parties so delivering this Agreement.

    

    Section
      10.12 SURVIVAL;
      SEVERABILITY. The
      representations, warranties, covenants and agreements of the Company hereto
      shall survive each Closing hereunder. In the event that any provision of this
      Agreement becomes or is declared by a court of competent jurisdiction to be
      illegal, unenforceable or void, this Agreement shall continue in full force
      and
      effect without said provision; provided that such severability shall be
      ineffective if it materially changes the economic benefit of this Agreement
      to
      any party.

    

    Section
      10.13 FURTHER
      ASSURANCES. Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    Section
      10.14  NO
      STRICT CONSTRUCTION.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

    

    Section
      10.15  TITLE
      AND SUBTITLES. The
      titles and subtitles used in this Agreement are used for the convenience of
      reference and are not to be considered in construing or interpreting this
      Agreement. 

    

    Section
      10.16  REPORTING
      ENTITY FOR THE COMMON STOCK.
      The
      reporting entity relied upon for the determination of the trading price of
      the
      Common Stock on any given Trading Day for the purposes of this Agreement shall
      be Bloomberg L.P. or any successor thereto.

    

    Section
      10.17  PUBLICITY.
      The
      Company and Investor shall consult with each other in issuing any press releases
      or otherwise making public statements with respect to the transactions
      contemplated hereby and no party shall issue any such press release or otherwise
      make any such public statement without the prior written consent of the other
      parties, which consent shall not be unreasonably withheld or delayed, except
      that no prior consent shall be required if such disclosure is required by law,
      in which such case the disclosing party shall provide the other parties with
      prior notice of such public statement. Notwithstanding the foregoing, the
      Company shall not publicly disclose the name of Investor without the prior
      written consent of such Investor, except to the extent required by law. Investor
      acknowledges that this Agreement and all or part of the Transaction Documents
      may be deemed to be "material contracts" as that term is defined by Item
      601(b)(10) of Regulation S-K, and that the Company may therefore be required
      to
      file such documents as exhibits to reports or registration statements filed
      under the Securities Act or the Exchange Act. Investor further agrees that
      the
      status of such documents and materials as material contracts shall be determined
      solely by the Company, in consultation with its counsel.

     

    
      
        
        

      

      
        -
          23 -

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Equity Credit Agreement to be executed by the
      undersigned, thereunto duly authorized, as of the date first set forth
      above.

     

     

    
      	 	
              SPATIALIGHT,
                INC.

              

              By: 
                /s/ David Hakala

              
                

              

              Name: 
                David Hakala

              Title: 
                CEO

              

              SOUTHRIDGE
                PARTNERS LP

              

              By: 
                /s/ Steve Hicks

              
                

              

              Name: 
                Steve Hicks

              Title:

              

              SOUTHSHORE
                CAPITAL FUND LTD.

               

              By: 
                /s/ David Sims

              
                

              

              
              

              Name: 
                David Sims

              Title:

              

              PIERCE
                DIVERSIFIED STRATEGY MASTER FUND, LLC, ENA

              

              By: 
                /s/ Brendan O' Neil

              
                

              

              Name: 
                Brendan O' Neil

              Title:

            

    

     

    
      
        
        

      

      
        -
          24 -

        
          

        

      

      
        
        

      

       

    

    
      	 	
              ENABLE
                OPPORTUNITY PARTNERS LP

              

              By: 
                /s/ Brendan O' Neil

              
                

              

              Name: 
                Brendan O' Neil

              Title:

              

              ENABLE
                GROWTH PARTNERS LP

              

              By: 
                /s/ Brendan O' Neil

              
                

              

              
              

              Name: 
                Brendan O' Neil

              Title:

              

              IROQUOIS
                MASTER FUND LTD.

              

              By: 
                /s/ Joshua Silverman

              
                

              

              Name: 
                Joshua Silverman

              Title:

            

    

    
 

    
      
        
        

      

      
        -
          25 -

        
          

        

      

      
        
        

      

    

    EXHIBITS

    

      
        	
                EXHIBIT
                  A

              	
                Put
                  Notice

              
	 	 
	
                EXHIBIT
                  B

              	
                Opinion

              
	 	 
	
                EXHIBIT
                  C

              	
                Closing
                  Certificate

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    EXHIBIT
      A

    

    PUT
      NOTICE

    

    
      	
            	TO:	
              SOUTHRIDGE
                PARTNERS LP

            

    

    SOUTHSHORECAPITAL
      FUND LTD.

    PIERCE
      DIVERSIFIED STRATEGY MASTER FUND, LLC, ENA

    ENABLE
      OPPORTUNITY PARTNERS LP

    ENABLE
      GROWTH PARTNERS LP

    IROQUOIS
      MASTER FUND LTD.

    

    We
      refer
      to the Equity Credit Agreement dated April 24, 2007 (the "Agreement") by and
      among SpatiaLight, Inc. (the “Company”) and the Investors listed on Schedule A
      annexed thereto.

    

    We
      hereby
      give the Investors notice that the Investors are required to purchase Put Shares
      in the Put Amount, based upon the percentages set forth in Schedule A to the
      Agreement, in accordance with the terms of the Agreement for the following
      Trading Days:

    

    Place
      check mark next to the applicable Trading Days:

    

    
      	ü	
              Put
                Date

            

    

    
      	ü	
              First
                Trading Day Following Put Date

            

    

    
      	ü	
              Second
                Trading Day Following Put Date

            

    

    
      	ü	
              Third
                Trading Day Following Put Date

            

    

    
      	ü	
              Fourth
                Trading Day Following Put Date

            

    

    

    The
      Company is simultaneously delivering the Interim Put Shares in accordance with
      the Agreement.

    

    The
      conditions set forth in Section 7.2 of the Agreement have been
      satisfied.

    

    Unless
      the context otherwise requires, capitalized terms utilized herein shall have
      the
      meanings ascribed to such terms in the Agreement.

    

    IN
      WITNESS WHEREOF,
      this
      instrument has been executed as of the 27th day of April,
      2007.

     

     

    
      	 	
              SPATIALIGHT,
                INC.

               

              By: 
                /s/ David Hakala

              
                

              

              Name: 
                David Hakala

              Title: 
                CEO

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    

    FORM
      OF OPINION

    

    
      	
              Re:

            	
              Equity
                Credit Agreement dated April 24, 2007 (the “Agreement”)
                by and among SpatiaLight, Inc. (the “Company”)
                and the Investors listed on Schedule A annexed
                thereto

            

    

    

    Ladies
      and Gentlemen:

    

    We
      have
      acted as counsel to SpatiaLight, Inc., a New York corporation (the "Company"),
      in connection with (i) the preparation and filing by the Company with the
      Securities and Exchange Commission of the Company’s registration statement (the
“Registration Statement”) on Form S-3, Registration No. 333-137100 under the
      Securities Act. of 1933, as amended (the “Act”), relating to the offering on a
      continuous basis of up to $75,000,000 of the Company’s Common Stock, warrants,
      units and/or subscription rights, and (ii) the negotiation and preparation
      of
      the Agreement. Unless the context otherwise requires, capitalized terms utilized
      herein shall have the meanings ascribed to such terms in the Agreement.

    

    We
      have
      examined original, photostatic or certified copies of such records of the
      Company as we have deemed relevant and necessary for purposes of the opinions
      hereinafter set forth. In such examination, we have assumed the genuineness
      of
      all signatures, the authenticity of all documents and instruments submitted
      to
      us as originals and the conformity to authentic originals of all documents
      and
      instruments submitted to us as certified or photostatic copies. As to various
      questions of fact material to our opinions we have relied upon representations
      made to us by various officers and directors of the Company and we have not
      conducted or received independent verification of those facts.

    

    Based
      on
      the foregoing, we are of the opinion that:

    

    (1) The
      Registration Statement has become effective under the Act and, to our knowledge
      after due inquiry, no stop order suspending the effectiveness of the
      Registration Statement or suspending or preventing the use of the prospectus
      which forms a part thereof, has been issued and no proceedings for that purpose
      have been instituted or are pending or threatened under the Act. 

    

    (2) Any
      required filing of the prospectus and any supplement thereto pursuant to Rule
      424(b) of the Rules and Regulations under the Act has been made in the manner
      and within the time period required by such Rule 424(b). 

     

    (3) The
      sale
      of the Put Shares to the Investors pursuant to the Registration Statement is
      covered by the Registration Statement and, subject to the prospectus delivery
      requirements and the limitations on actions by underwriters under the Act,
      the
      Put Shares may be sold by the Investors without restriction under the
      Act.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    

    CLOSING
      CERTIFICATE

    

    The
      undersigned, David F. Hakala, hereby certifies, with respect to the Put Shares
      of SpatiaLight, Inc., Inc. (the "Company") issuable in connection with the
      Put
      Notice, dated April 27, 2007 (the "Notice"), delivered pursuant to the Equity
      Credit Agreement dated April 24, 2007 (the "Agreement") by and among
      SpatiaLight, Inc. (the “Company”) and the Investors listed on Schedule A annexed
      thereto as follows:

    

    
      	
              1.
                

            	
              The
                undersigned is the duly elected President of the
                Company.

            

    

    

    
      	
              2.
                

            	
              The
                representations and warranties of the Company set forth in the Agreement
                are true and correct in all material respects as though made on and
                as of
                the date hereof.

            

    

     

    
      	
              3.
                

            	
              The
                Company has performed in all material respects all covenants and
                agreements to be performed by the Company on or prior to the Closing
                Date
                related to the Notice and has complied in all material respects with
                its
                obligations contained in the
                Agreement.

            

    

    

    
      	
              4.

            	
              The
                conditions set forth in Section 7.2 of the Agreement have been
                satisfied.

            

    

    

    

      Unless
      the context otherwise requires, capitalized terms utilized herein shall have
      the
      meanings ascribed to such terms in the Agreement.

    

    IN
      WITNESS WHEREOF,
      this
      instrument has been executed as of the 24th
      day of
      April, 2007

     

    
      	 	
              
                SPATIALIGHT,
                  INC.

              

               

              By: 
                /s/ David Hakala

              
                

              

              Name: 
                David F. Hakala

              Title: 
                CEO

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      A

    

    
      	
              INVESTOR

            	
              PERCENTAGE

            	
              ADDRESS
                FOR NOTICE

            
	 	 	 
	
              Southridge
                Partners LP

            	
              40.79%

            	
              Southridge
                Partners LP

              90
                Grove Street 

              Ridgefield,
                CT 06877

              Fax:
                203-431-8301

            
	 	 	 
	
              Southshore
                Capital Fund Ltd.

            	
              13.60%

            	
              Southshore
                Capital Fund Ltd.

              Harbour
                House, 2nd
                Floor

              Waterfront
                Drive

              P.O.
                Box 972

              Road
                Town, Tortola

              BVI
                

              Fax:
                284-494-4771

            
	 	 	 
	
              Pierce
                Diversified Strategy 

              Master
                Fund, LLC, ENA

            	
              1.34%

            	
              Enable
                Capital Management 

              One
                Ferry Building, Suite 255

              San
                Francisco, CA 94111

              Fax:
                415-677-1580

            
	 	 	 
	
              Enable
                 Opportunity Partners LP

            	
              2.68%

            	
              Enable
                Capital Management 

              One
                Ferry Building, Suite 255

              San
                Francisco, CA 94111

              Fax:
                415-677-1580

            
	 	 	 
	
              Enable
                Growth Master Fund Ltd.

            	
              22.77%

            	
              Enable
                Capital Management 

              One
                Ferry Building, Suite 255

              San
                Francisco, CA 94111

              Fax:
                415-677-1580

            
	 	 	 
	
              Iroquois
                Master Fund Ltd. 

            	
              18.83%

            	
              Iroquois
                Master Fund Ltd. 

              641
                Lexington Avenue, 

              26th
                Floor

              New
                York, New York 10022

              Fax:
                212-207-3452

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      3.4

    AFFILIATES
      OF COMPANY

    

    Pierce
      Diversified Strategy Master Fund, LLC, ENA, Enable Opportunity Partners LP
      and
      Enable Growth Partners LP are managed by Enable Capital Management.

    
       

      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.8

    REQUIRED
      CONSENTS

    

    None

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