Exhibit 10.5
CONFIDENTIAL TREATMENT REQUESTED
LCOS SUPPLY AGREEMENT
("Agreement")
Dated as
of: July 1, 2004 (the "Effective Date")
THE SELLER: SPATIALIGHT, INC., a
New York corporation
(hereinafter referred to as "SpatiaLight")
Address: 5 Hamilton Landing, Suite 100, Novato, CA 94949,
U.S.A.
Tel: (415)883-1693
Fax: (415)883-3363
THE PURCHASER: LG ELECTRONICS
INC., an enterprise of the Republic of Korea
(hereinafter referred to as "LGE")
Address: 20 Youido-Dong Yeongdeungpo-Gu, Seoul, Republic of
Korea
Tel: 82-2-3777-1114
Fax: 82-2-3777-5150
WHEREAS,
SpatiaLight is the creator, developer and manufacturer and
the
owner of all right, title and
interest in and to SpatiaLight's active matrix
liquid crystal on silicon
("LCoS") microdisplay device having an active matrix
of 1920 pixels by 1080 pixels
("LCoS Chip"), and when three (3) LCoS Chips are
fitted onto a light engine,
they may be used in display application products
such as high definition
televisions and home screen projection systems.
WHEREAS,
LGE is a leading Korean electronics manufacturer that intends
to
enter the global market for
LCoS televisions ("LCoS Televisions") using
SpatiaLight LCoS Sets (as
hereinafter defined) fitted onto a light engine of
LGE's design and manufacture
("LG Light Engine").
WHEREAS,
SpatiaLight specially developed its LCoS Sets for use in
LGE's
LCoS televisions (16 by 9
aspect ratio) pursuant to a Memorandum of
Understanding entered into on
May 12, 2003, between the parties hereto,
providing for the parties to
work jointly in developing the LCoS Sets.
WHEREAS,
LGE and SpatiaLight entered into a mutual Non-Disclosure
Agreement dated May 12, 2003
("Non-Disclosure Agreement") and the parties agree
to continue to be fully bound
by the terms and conditions set forth in that
Non-Disclosure
Agreement.
WHEREAS,
LGE desires to purchase LCoS Sets from SpatiaLight pursuant
to
and subject to the terms and
conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and
agreements
contained herein and for
other good and valuable consideration, the receipt and
sufficiency of which is
hereby acknowledged, the parties hereto agree as
follows:
1.
REPRESENTATIONS
Each of
SpatiaLight and LGE hereby warrants and represents to the other
as
follows:
1.1. That it is a legal person validly existing in its
jurisdiction
of establishment;
and
1.2. That it has the full power and authority to enter into
this
Agreement and perform its
contractual obligations; that its representative who
is signing this Agreement has
been duly authorized to do so pursuant to a valid
power of attorney, board of
directors' resolution or other valid corporate
action effecting the
same.
2. PRODUCT
PURCHASES
LGE agrees
to purchase from SpatiaLight, in accordance with the
prices,
quantities, dates and other
terms and conditions set forth herein, sets of three
(3) SpatiaLight LCoS Chips
combined with necessary SpatiaLight Analog ASICs and
a Flex and Mount Set (as
hereinafter defined), which form a SpatiaLight LCoS Set
("LCoS Set").
[*] Represents redacted
information - confidential treatment requested.
<PAGE>
3. DELIVERY DATES OF
PRODUCTS
3.1.
Initial
Deliveries
SpatiaLight shall deliver a
total of one hundred twenty (120) sets of
three (3) trial production
LCoS Chips (which shall not include a SpatiaLight
Analog ASIC) (the
"Qualification Sets") to LGE by September 30, 2004 (the
"Qualification Date") and one
hundred (100) sets of three (3) trial production
LCoS Chips (which shall
include a SpatiaLight Analog ASIC) ("Pre-Production
Sets") by November 30, 2004,
according to the following delivery schedule;
provided, however, that
either party may, in its sole discretion, elect to
change any or all of the
delivery dates set forth in this Section 3.1 by not
greater than thirty (30) days
sooner or later than such delivery dates as set
forth in this Section
3.1.
------------------------------
--------------------------
Month
Quantity
------------------------------
--------------------------
July 2004
20 Qualification Sets
------------------------------
--------------------------
September 2004
100 Qualification Sets
------------------------------
--------------------------
November 2004
100 Pre-Production Sets
------------------------------
--------------------------
3.2.
Subsequent Deliveries
of LCoS Sets
Subsequent
deliveries of SpatiaLight LCoS Sets shall be made in
accordance
with the rolling commitment
schedule set forth in Section 6 of this Agreement
for each month of January
2005 through December 2006.
3.3.
Trial Light Engine
Deliveries
LGE shall
deliver to SpatiaLight twenty-five (25) trial Fitted LGE
Light
Engines (as hereinafter
defined) in November 2004. The LCoS Sets to be
incorporated into such trial
Fitted LGE Light Engines shall be delivered by
SpatiaLight to LGE in October
2004 and shall be in addition to the Qualification
Sets and Pre-Production Sets.
The purchase price for each trial Fitted LGE Light
Engine shall be determined by
the parties at a later date; provided, however,
that such purchase price
shall not exceed $3,000 (not including the cost of the
LCoS Sets). It is hereby
agreed that such twenty-five (25) trial Fitted LGE
Light Engines [*] and
therefore [*] that SpatiaLight [*].
4. TERM
The term
of this Agreement shall commence on the Effective Date
and
terminate on December 31,
2006, subject to LGE's right to cancel set forth in
Section 5 hereof and subject
further to early termination by mutual written
consent and agreement as set
forth in Section 11.1 hereof.
5. QUALIFICATION AND
RIGHT OF CANCELLATION
5.1. LGE's
obligations to purchase LCoS Sets under this Agreement shall
be
expressly conditioned upon
the Qualification Sets meeting LGE's Final
Specifications set forth in
Exhibit 1 hereto. LGE shall have until October 31,
2004 (the "Determination
Date"; and the Effective Date through the Determination
Date, the "Qualification
Period") to perform final qualification tests on the
Qualification Sets. In the
event that the Qualification Sets meet the Final
Specifications, LGE shall
give written notice thereof to SpatiaLight and LGE
shall be required to purchase
from SpatiaLight the LCoS Sets in accordance with
all of the provisions of this
Agreement. In the event that the Qualification
Sets do not meet the agreed
upon Final Specifications, LGE may cancel this
Agreement by providing
written notice to SpatiaLight not later than October 31,
2004 ("Notice of
Cancellation"). If LGE does not provide a Notice of
Cancellation, the
Qualification Sets shall be considered to meet the Final
Specifications and LGE shall
be required to purchase and SpatiaLight shall be
required to sell the LCoS
Sets in accordance with all of the provisions of this
Agreement. SpatiaLight and
LGE agree to work together to the extent necessary
during the Qualification
Period to assure that the Qualification Sets meet LGE's
Final Specifications. LGE may
elect, in its sole discretion, to change the
Determination Date by not
greater than thirty (30) days sooner or later than the
Determination Date set forth
in this Section 5.1.
5.2. LGE
shall remain fully responsible for all of its obligations
to
SpatiaLight under this
Agreement through the end of the Qualification Period
regardless of whether it
gives Notice of Cancellation.
6. CONTRACTUAL
OBLIGATIONS
Following
the Qualification Period and in the event that there is
no
Notice of Cancellation, LGE
hereby covenants and agrees to purchase SpatiaLight
LCoS Sets pursuant to this
Agreement as follows:
<PAGE>
6.1. From
January 2005 through June 2005, LGE shall purchase
SpatiaLight
LCoS Sets according to the
following schedule (the "Commitment Schedule"), and
such Commitment Schedule
shall be updated for each of the months of July 2005
through December 2006
according to the terms and conditions of Section 6.3 and
Section 6.4 (if applicable)
below:
<TABLE>
<CAPTION>
-----------------------
----------------------------------
------------------------------------
------------------------------
Month
Minimum
Price Per LCoS Set
Monthly Purchase Price
Monthly Commitment(Quantity of
(United States Dollars)
Commitment(United States
LCoS Sets)
Dollars)
-----------------------
----------------------------------
------------------------------------
------------------------------
<S>
<C>
<C>
<C>
January 2005
2,000
[*]
[*]
-----------------------
----------------------------------
------------------------------------
------------------------------
February 2005
2,000
[*]
[*]
-----------------------
----------------------------------
------------------------------------
------------------------------
March 2005
2,000
[*]
[*]
-----------------------
----------------------------------
------------------------------------
------------------------------
April 2005
5,000
[*]
[*]
-----------------------
----------------------------------
------------------------------------
------------------------------
May 2005
5,000
[*]
[*]
-----------------------
----------------------------------
------------------------------------
------------------------------
June 2005
5,000
[*]
[*]
-----------------------
----------------------------------
------------------------------------
------------------------------
</TABLE>
6.2 From
July 2005 through December 2005, LGE forecasts that it
will
purchase SpatiaLight LCoS
Sets at the agreed upon purchase price and quantities
set forth in the following
schedule (the "Forecast Schedule"). LGE is not bound
to purchase and SpatiaLight
is not bound to sell the quantities of LCoS Sets set
forth in the Forecast
Schedule:
<TABLE>
<CAPTION>
-----------------------------
---------------------------- ------------------------------------
------------------------------
Month
Monthly Forecast (Quantity Price Per LCoS
Set(United States Monthly
Forecast Purchase
of LCoS Sets)
Dollars)
Price (United States Dollars)
-----------------------------
---------------------------- ------------------------------------
------------------------------
<S>
<C>
<C>
<C>
July 2005
10,000
[*]
[*]
-----------------------------
---------------------------- ------------------------------------
------------------------------
August 2005
10,000
[*]
[*]
-----------------------------
---------------------------- ------------------------------------
------------------------------
September 2005
10,000
[*]
[*]
-----------------------------
---------------------------- ------------------------------------
------------------------------
October 2005
10,000
[*]
[*]
-----------------------------
---------------------------- ------------------------------------
------------------------------
November 2005
10,000
[*]
[*]
-----------------------------
---------------------------- ------------------------------------
------------------------------
December 2005
10,000
[*]
[*]
-----------------------------
---------------------------- ------------------------------------
------------------------------
</TABLE>
6.3.
Commencing on January 1, 2005, on the first day of each month
of
delivery set forth in this
Section 6, LGE shall be required to update the
Commitment Schedule for the
calendar month six months in advance of such month
and LGE shall be required to
update the non-binding Forecast Schedule for the
calendar month twelve months
in advance of such month (i.e., on January 1, 2005,
LGE shall provide its monthly
LCoS Set quantity commitment for July 2005 and
shall provide its monthly
non-binding demand forecast for January 2006). All
such updated commitments
required under this Section 6.3 shall be fully binding
upon LGE. All updated
commitments required under this Section 6.3 and Section
6.4 (if applicable) hereof
shall be sent by LGE to SpatiaLight via facsimile or
email.
6.4.
Commencing on June 20, 2005, the parties shall use their mutual
best
efforts and cooperation to
negotiate and agree upon the purchase prices of the
LCoS Sets scheduled for
delivery pursuant to this Agreement between January 2006
and December 2006. In the
event that the parties shall not have agreed in
writing with respect to the
second delivery year purchase prices for LCoS Sets
by September 20, 2005, by the
terms of this Agreement the terms and conditions
of Section 11 hereof shall
then take effect. In such event, commencing on
October 1, 2005, on the first
day of each month of delivery set forth in this
Section 6, LGE shall continue
to be required to update the Commitment Schedule
for the calendar month six
(6) months in advance of such month (i.e., on October
1, 2005, LGE shall provide
its monthly LCoS Set quantity commitment for April
2006); provided, that LGE's
commitment for each such delivery month shall be in
accordance with the terms and
conditions of Section 11 and the other terms and
conditions of this Agreement.
All such updated commitments required under this
Section 6.4 shall be fully
binding upon LGE.
7. PRICE PER SPATIALIGHT
LCOS SET
7.1. LGE
agrees to pay SpatiaLight the purchase price of $[*] for
each
Qualification Set and
Pre-Production Set sold prior to LGE commencing to
manufacture LCoS Televisions
for the quantities as set forth in Section 3.1
hereof.
7.2.
Following the Qualification Period, for the months of January 2005
to
June 2005, LGE agrees to
purchase and SpatiaLight agrees to sell LCoS Sets for
manufacturing LCoS
Televisions at the purchase prices set forth in Section
6.1
hereof.
7.3. For
the months of July 2005 to December 2005, LGE agrees to
purchase
and SpatiaLight agrees to
sell LCoS Sets for manufacturing LCoS Televisions at
the purchase price set forth
in Section 6.2 hereof; provided, however, it is
expressly agreed that
i
