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
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1.2. That it has the
full power and authority to enter into this
Agreement and perform its contractual
obligations; that its representative who
is signing this Agreement has been duly
authorized to do so pursuant to a valid
power of attorney, board of directors'
resolution or other valid corporate
action effecting the same.
2.
PRODUCT PURCHASES
LGE agrees to purchase from SpatiaLight, in accordance with the
prices,
quantities, dates and other terms and
conditions set forth herein, sets of three
(3) SpatiaLight LCoS Chips combined with
necessary SpatiaLight Analog ASICs and
a Flex and Mount Set (as hereinafter
defined), which form a SpatiaLight LCoS Set
("LCoS Set").
3. DELIVERY DATES OF
PRODUCTS
3.1. Initial
Deliveries
SpatiaLight shall deliver a total of one hundred twenty (120) sets
of
three (3) trial production LCoS Chips
(which shall not include a SpatiaLight
Analog ASIC) (the "Qualification Sets") to
LGE by September 30, 2004 (the
"Qualification Date") and one hundred (100)
sets of three (3) trial production
LCoS Chips (which shall include a
SpatiaLight Analog ASIC) ("Pre-Production
Sets") by November 30, 2004, according to
the following delivery schedule;
provided, however, that either party may,
in its sole discretion, elect to
change any or all of the delivery dates set
forth in this Section 3.1 by not
greater than thirty (30) days sooner or
later than such delivery dates as set
forth in this Section 3.1.
-------------------------------------------------------------------------------
Month
Quantity
-------------------------------------------------------------------------------
July 2004
20 Qualification Sets
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September 2004
100 Qualification Sets
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November 2004
100 Pre-Production Sets
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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 are [*] and therefore [*] the
[*] that SpatiaLight [*] for [*].
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[*] Represents redacted information -
confidential treatment requested.
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<PAGE>
4.
TERM
The term of this Agreement shall commence on the Effective Date
and
terminate on December 31, 2006, subject to
LGE's right to cancel set forth in
Section 5 hereof and subject further to
early termination by mutual written
consent and agreement as set forth in
Section 11.1 hereof.
5.
QUALIFICATION AND RIGHT OF CANCELLATION
5.1. LGE's obligations
to purchase LCoS Sets under this Agreement
shall be expressly conditioned upon the
Qualification Sets meeting LGE's Final
Specifications set forth in Exhibit 1
hereto. LGE shall have until October 31,
2004 (the "Determination Date"; and the
Effective Date through the Determination
Date, the "Qualification Period") to
perform final qualification tests on the
Qualification Sets. In the event that the
Qualification Sets meet the Final
Specifications, LGE shall give written
notice thereof to SpatiaLight and LGE
shall be required to purchase from
SpatiaLight the LCoS Sets in accordance with
all of the provisions of this Agreement. In
the event that the Qualification
Sets do not meet the agreed upon Final
Specifications, LGE may cancel this
Agreement by providing written notice to
SpatiaLight not later than October 31,
2004 ("Notice of Cancellation"). If LGE
does not provide a Notice of
Cancellation, the Qualification Sets shall
be considered to meet the Final
Specifications and LGE shall be required to
purchase and SpatiaLight shall be
required to sell the LCoS Sets in
accordance with all of the provisions of this
Agreement. SpatiaLight and LGE agree to
work together to the extent necessary
during the Qualification Period to assure
that the Qualification Sets meet LGE's
Final Specifications. LGE may elect, in its
sole discretion, to change the
Determination Date by not greater than
thirty (30) days sooner or later than the
Determination Date set forth in this
Section 5.1.
5.2. LGE shall remain
fully responsible for all of its obligations to
SpatiaLight under this Agreement through
the end of the Qualification Period
regardless of whether it gives Notice of
Cancellation.
6.
CONTRACTUAL OBLIGATIONS
Following the Qualification Period and in the event that there is
no
Notice of Cancellation, LGE hereby
covenants and agrees to purchase SpatiaLight
LCoS Sets pursuant to this Agreement as
follows:
6.1. From January 2005
through June 2005, LGE shall purchase
SpatiaLight LCoS Sets according to the
following schedule (the "Commitment
Schedule"), and such Commitment Schedule
shall be updated for each of the months
of July 2005 through December 2006
according to the terms and conditions of
Section 6.3 and Section 6.4 (if applicable)
below:
--------------------------------------------------------------------------------
Minimum
Monthly
Month
Monthly
Price Per
Purchase Price
Commitment
LCoS Set
Commitment
(Quantity of
(United States
(United States
LCoS Sets)
Dollars)
Dollars)
--------------------------------------------------------------------------------
January 2005
2,000
[*]
[*]
--------------------------------------------------------------------------------
February 2005
2,000
[*]
[*]
--------------------------------------------------------------------------------
March 2005
2,000
[*]
[*]
--------------------------------------------------------------------------------
April 2005
5,000
[*]
[*]
--------------------------------------------------------------------------------
May 2005
5,000
[*]
[*]
--------------------------------------------------------------------------------
June 2005
5,000
[*]
[*]
--------------------------------------------------------------------------------
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[*] Represents redacted information -
confidential treatment requested.
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<PAGE>
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:
--------------------------------------------------------------------------------
Month
Monthly
Price Per
Monthly Forecast
Forecast
LCoS Set
Purchase Price
(Quantity of
(United States
(United States
LCoS Sets)
Dollars)
Dollars)
--------------------------------------------------------------------------------
July 2005
10,000
[*]
[*]
--------------------------------------------------------------------------------
August 2005
10,000
[*]
[*]
--------------------------------------------------------------------------------
September 2005
10,000
[*]
[*]
--------------------------------------------------------------------------------
October 2005
10,000
[*]
[*]
--------------------------------------------------------------------------------
November 2005
10,000
[*]
[*]
--------------------------------------------------------------------------------
December 2005
10,000
[*]
[*]
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6.3. Commencing on
January 1, 2005, on the first day of each month of
delivery set forth in this Section 6, LGE
shall be required to update the
Commitment Schedule for the calendar month
six months in advance of such month
and LGE shall be required to update the
non-binding Forecast Schedule for the
calendar month twelve months in advance of
such month (i.e., on January 1, 2005,
LGE shall provide its monthly LCoS Set
quantity commitment for July 2005 and
shall provide its monthly non-binding
demand forecast for January 2006). All
such updated commitments required under
this Section 6.3 shall be fully binding
upon LGE. All updated commitments required
under this Section 6.3 and Section
6.4 (if applicable) hereof shall be sent by
LGE to SpatiaLight via facsimile or
email.
6.4. Commencing on
June 20, 2005, the parties shall use their mutual
best efforts and cooperation to negotiate
and agree upon the purchase prices of
the LCoS Sets scheduled for delivery
pursuant to this Agreement between January
2006 and December 2006. In the event that
the parties shall not have agreed in
writing with respect to the second delivery
year purchase prices for LCoS Sets
by September 20, 2005, by the terms of this
Agreement the terms and conditions
of Section 11 hereof shall then take
effect. In such event, commencing on
October 1, 2005, on the first day of each
month of delivery set forth in this
Section 6, LGE shall continue to be
required to update the Commitment Schedule
for the calendar month six (6) months in
advance of such month (i.e., on October
1, 2005, LGE shall provide its monthly LCoS
Set quantity commitment for April
2006); provided, that LGE's commitment for
each such delivery month shall be in
accordance with the terms and conditions of
Section 11 and the other terms and
conditions of this Agreement. All such
updated commitments required under this
Section 6.4 shall be fully binding upon
LGE.
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[*] Represents redacted information -
confidential treatment requested.
-4-
<PAGE>
7.
PRICE PER SPATIALIGHT LCOS SET
7.1. LGE agrees to pay
SpatiaLight the purchase price of $[*] for each
Qualification Set and Pre-Production Set
sold prior to LGE commencing to
manufacture LCoS Televisions for the
quantities as set forth in Section 3.1
hereof.
7.2. Following the
Qualification Period, for the months of January
2005 to June 2005, LGE agrees to purchase
and SpatiaLight agrees to sell LCoS
Sets for manufacturing LCoS Televisions at
the purchase prices set forth in
Section 6.1 hereof.
7.3. For the months of
July 2005 to December 2005, LGE agrees to
purchase and SpatiaLight agrees to sell
LCoS Sets for manufacturing LCoS
Televisions at the purchase price set forth
in Section 6.2 hereof; provided,
however, it is expressly agreed that in the
event that LGE purchases a quantity
of LCoS Sets that is less than its monthly
forecast for any of such months, then
the purchase price of $[*] per LCoS Set
shall apply to a monthly order of up to
3,999 LCoS Sets and the purchase price of
$[*] per LCoS Set shall apply to a
monthly order of between 4,000 and 9,999
LCoS Sets in such months.
7.4 The purchase
prices of the LCoS Sets scheduled for delivery
pursuant to this Agreemen
