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                                                                   Exhibit 10.16

                                    EXHIBIT A


THE PRINCIPAL AMOUNT OF THE INDEBTEDNESS EVIDENCED OR SECURED BY THIS INSTRUMENT
IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED
IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE SUBORDINATION AGREEMENT DATED
AS OF JANUARY 17, 2002 BY AND AMONG ARTISAN ENTERTAINMENT, INC., ARTISAN
PICTURES, INC., ARTISAN HOME ENTERTAINMENT, INC., THE OTHER GUARANTORS LISTED ON
THE SIGNATURE PAGE THEREOF, VIALTA, INC., AND JPMORGAN CHASE BANK, AS AGENT.

                          SUBORDINATED PROMISSORY NOTE

$10,000,000                                  Date of Issuance:  January 17, 2002

      Artisan Entertainment Inc., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Vialta, Inc., a Delaware corporation ("
Lender"), the principal amount of $10,000,000 (or $5,000,000, if the second
sentence of Paragraph 1 below is applicable) together with interest thereon, in
accordance with the provisions of this Subordinated Promissory Note (this
"Note").

1.    Loan. Lender agrees, upon the terms and conditions hereof, to loan to
      Company the principal amount available hereunder upon the request of
      Company. Notwithstanding the foregoing, in the event that Lender delivers
      to Company an Exploitation Notice for Programming Package 1 under the
      License Agreement prior to Lender's making the loan under this Note
      (including if such Exploitation Notice is delivered during the five
      business day period after Company has provided a Borrowing Certificate to
      Lender and prior to Lender having made the Loan under this Note), the
      maximum principal amount that may be borrowed under this Note shall be
      limited to $5,000,000. Company shall provide to Lender a Borrowing
      Certificate in the form of Exhibit A attached hereto at least five
      business days' prior to the date upon which the Loan under this Note is to
      be made. Only one Loan shall be made hereunder. Company must provide the
      Borrowing Certificate to Lender on or prior to July 15, 2002 in order to
      borrow under this Note. Except as otherwise expressly provided in
      paragraph 4(b) hereof, interest shall accrue at the rate of seven and
      one-half percent (7.5%) per annum (computed on the basis of the actual
      number of days elapsed over a year of 360 days), compounded quarterly on
      the last day of each March, June, September and December (each, an
      "Interest Payment Date"), beginning on the date upon which the Loan under
      this Note is made, on the unpaid principal amount of this Note (plus any
      accrued but unpaid interest that has been compounded) outstanding from
      time to time. Unless this Note has been previously repaid, Company shall
      make an initial cash interest payment to the holder of this Note equal to
      accrued interest under the Note on the last business day of September,
      2004, (unless earlier payment of cash interest is permitted under Senior
      Debt Agreements, in which case such cash payments shall commence on such
      earlier Interest Payment Date)
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      and shall make quarterly cash payments to the holder of this Note
      thereafter on each Interest Payment Date.

2.    Payment of Principal on Note.

      (a)   Scheduled Payments. The Company shall pay the principal amount of
            $10,000,000 (or such lesser principal amount then outstanding) to
            the holder of this Note on the third anniversary of the date upon
            which the Loan under this Note is made, together with all accrued
            and unpaid interest on the principal amount being repaid (and any
            accrued but unpaid interest that has been compounded).

      (b)   Voluntary Prepayments. The Company shall have the right to prepay
            principal of this Note on the following terms and conditions:

            (i)   Subject to subparagraph (b)(ii) below, the Company may, at any
                  time and from time to time without premium or penalty, prepay
                  all or any portion of the outstanding principal amount of this
                  Note.

            (ii)  The Company shall send written notice (the "Prepayment
                  Notice") of its election to make a prepayment on this Note
                  (and the amount to be prepaid) to the holder of this Note by
                  registered or certified mail, return receipt requested, or by
                  reputable overnight courier, at least 10 days prior to the
                  date of prepayment.

            (iii) The Company may, at any time and from time to time, without
                  premium or penalty, prepay all or any portion of any accrued
                  but unpaid interest on this Note (and any accrued but unpaid
                  interest that has been compounded).

      (c)   Prepayments By Way of Offset. To the extent permitted under Senior
            Debt Agreements, so long as any amounts are outstanding under this
            Note, any "License Fees" payable by the holder hereof under the
            License Agreement shall, when due, automatically be offset (i)
            first, against payment of any costs and expenses due the holder
            hereof under paragraph 21 hereof, (ii) second, against any interest
            payment due to the holder hereof under paragraph 1 hereof, (iii)
            third, against prepayment of this Note pursuant to paragraph 2
            hereof, and/or (iv) finally, against payment of any other amounts
            due the holder hereof under or with respect to this Note. For the
            technical purposes of effecting such offsets, any such obligations
            of the holder hereof to Artisan shall be offset against Artisan's
            obligations as a Guarantor of the obligations of the Company to the
            holder hereof. The Company shall notify the holder hereof in writing
            of any offset effected pursuant to the foregoing provisions,
            provided that such notices shall be for informational purposes only
            and shall not be binding if in error. Nothing herein shall limit any
            otherwise validly existing right of the Company to offset any bona
            fide debts due and owing from the holder of this Note against any
            amounts due

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            and owing to such person or entity and its affiliates including but
            not limited to any amounts owed under the License Agreement.

3.    Subordination. All amounts (including all principal, interest, premiums
      and other payments) payable by the Company with respect to the Note, or
      payable by the Guarantors with respect to the Guaranty, and the priority
      of all liens on Collateral in favor of the holder of this Note, and all
      rights and remedies thereunder or with respect thereto, are and shall be
      subordinate and junior in right of payment and priority to the prior
      payment in full of the Senior Debt, and to the priority of the liens in
      favor of the holders of Senior Debt or their representatives, to the
      extent and in the manner set forth in one or more subordination agreements
      between the holders of the Senior Debt and the holder of this Note. Lender
      agrees to negotiate in good faith and execute subordination agreements
      reasonably acceptable to the holders of Senior Debt consistent with the
      first sentence of this paragraph 3 (it being understood that Lender will
      approve and agree to execute any subordination agreement with terms that
      are no less favorable to it than those set forth on Exhibit B attached
      hereto). The holder of this Note hereby agrees to execute any and all
      agreements, documents and instruments reasonably requested by the Company
      or the holders of the Senior Debt in furtherance of, and consistent with,
      this paragraph 3.

4.    Events of Default.

      (a)   Definition. For purposes of this Note, an Event of Default shall be
            deemed to have occurred if:

            (i)   any Credit Party fails to pay when due and payable (whether at
                  maturity or otherwise) any amount payable under any
                  Transaction Document and such failure to pay is not cured
                  within ten (10) business days after the occurrence thereof;

            (ii)  any Credit Party fails to duly observe or perform any
                  covenant, condition or agreement contained in this Note or any
                  other covenant, condition or agreement contained in any other
                  Transaction Document and such failure is not cured within
                  thirty (30) days after notice thereof has been given to the
                  Company by the holder of this Note; or;

            (iii) any Credit Party makes an assignment for the benefit of
                  creditors or admits in writing its inability to pay its debts
                  generally as they become due; or an order, judgment or decree
                  is entered adjudicating any Credit Party bankrupt or
                  insolvent; or any order for relief with respect to any Credit
                  Party is entered under the Federal Bankruptcy Code; or any
                  Credit Party petitions or applies to any tribunal for the
                  appointment of a custodian, trustee, receiver or liquidator of
                  such Credit Party, or of any substantial part of the assets of
                  such Credit Party, or commences any proceeding relating to
                  such Credit Party under any bankruptcy reorganization,
                  arrangement, insolvency, readjustment of debt, dissolution


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                  or liquidation law of any jurisdiction; or any such petition
                  or application is filed, or any such proceeding is commenced,
                  against any Credit Party and either (A) such Credit Party by
                  any act indicates its approval thereof, consent thereto or
                  acquiescence therein or (B) such petition, application or
                  proceeding is not dismissed within 60 days;

            (iv)  any representation or warranty made by any Credit Party in any
                  Transaction Document or in connection with any financial
                  statement, certificate or other document required to be
                  furnished by or on behalf of any Credit Party to the holder of
                  this Note in connection with any Transaction Document shall
                  prove to have been false and misleading in any material
                  respect when made, deemed to be made or delivered.

            (v)   default shall be made with respect to any payment of any
                  monetary obligation of any Credit Party in excess of
                  $2,500,000 when due, or the performance of any other
                  obligation incurred in connection with any such monetary
                  obligation, if the effect of such default is to accelerate the
                  maturity of such monetary obligation or to permit the holder
                  thereof to cause such monetary obligation to become due prior
                  to its stated maturity, or if such monetary obligation has
                  become due at its stated maturity, and if such default shall
                  not have been remedied, cured, waived or consented to by the
                  holder of such monetary obligation within the period of grace
                  with respect thereto;

            (vi)  final judgment(s) for the payment of money in excess of
                  $500,000 shall be rendered against any Credit Party which
                  within thirty (30) days from the entry of such judgment shall
                  not have been discharged or stayed pending appeal or which
                  shall not have been discharged or bonded in full within thirty
                  (30) days from the entry of a final order of affirmance on
                  appeal; or

The foregoing shall constitute Events of Default whatever the reason or cause
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.

      (b)   Consequences of Events of Default.

            (i)   If any Event of Default has occurred and continued for ten
                  (10) business days, without limiting any other remedies
                  hereunder or at law, the interest rate on this Note shall
                  increase immediately by an increment of one (1) percentage
                  point, to the extent permitted by law. Thereafter, until such
                  time as all Events of Default have been cured or waived, the
                  interest rate shall increase automatically at the end of each
                  succeeding ninety-day period by an additional increment of one
                  (1) percentage point, to the extent


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                  permitted by law (but in no event shall the interest rate
                  exceed 12.0% and, accordingly, the last such permitted
                  incremental increase in the interest rate shall be one half of
                  one percentage point from 11.5% to 12.0%). Any increase of the
                  interest rate resulting from the operation of this
                  subparagraph shall terminate as of the close of business on
                  the date on which all Events of Default have been cured or
                  waived (subject to subsequent increases pursuant to this
                  subparagraph).

            (ii)  If an Event of Default of the type described in subparagraph
                  4(a)(iii) has occurred with respect to the Company only, the
                  aggregate principal amount of this Note (together with all
                  accrued interest thereon and all other amounts due and payable
                  with respect thereto) shall become immediately due and payable
                  without any action on the part of the holder of this Note.

            (iii) If any Event of Default (other than under subparagraph
                  4(a)(iii) with respect to the Company) has occurred and is
                  continuing, subject to the provisions of paragraph 3 hereof,
                  the holder of this Note may declare all or any portion of the
                  outstanding principal amount of this Note (together with all
                  accrued interest thereon and all other amounts due and payable
                  with respect thereto) to be immediately due and payable and
                  may demand immediate payment of all or any portion of the
                  outstanding principal amount of this Note (together with all
                  such other amounts then due and payable).

5.    Security. At such time that either (i) the Canyon Note is repaid in full
      or (ii) a lien in favor of the holder hereof is permitted under the Senior
      Debt Agreements, Guarantor shall execute and deliver to the holder hereof
      such documents as may be necessary for the holders to either (i) obtain an
      interest in the Collateral equivalent to Canpartners' interest in the
      Collateral under the Canyon Note or (ii) to have perfected liens on all of
      the Collateral, subject in priority only to the liens in favor of the
      holders of Senior Debt and other priority liens expressly permitted by the
      Senior Debt Agreements.

6.    Amendment and Waiver. Except as otherwise expressly provided herein, the
      provisions of this Note may be amended and the Company or the Parent may
      take any action herein prohibited, or omit to perform any act herein
      required to be performed by it, only if the Company or the Parent has
      obtained the written consent of the holder of this Note.

7.    Definitions. For purposes of this Note, the following capitalized terms
      have the following meaning:

      "Artisan" means Artisan Home Entertainment Inc.


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      "Authorized Officer" shall mean, with respect to any Credit Party, such
      Credit Party's Chief Executive Officer, President, Chief Financial Officer
      or Chief Operating Officer.

      "Canpartners " means Canpartners Investments IV, LLC.

      "Canyon Note" means the Note and Stock Purchase Agreement dated as of July
      9, 1997, as amended to date.

      "Change in Control" shall be defined as set forth in the Senior Debt
      Agreements.

      "Collateral" means any present or future property or asset of any Credit
      Party of any type or nature, whether real or personal, tangible or
      intangible, subject to a lien under any Senior Debt Agreements.

      "Credit Parties" means the Company and the Guarantors, and each of them,
      and any one or more of them.

      "Default" means any event that, with the giving of notice or passage of
      time, or both, could constitute or give rise to an Event of Default.

      "Guarantors" means Artisan Pictures Inc., and each Person (other than the
      Company) that is a guarantor of the obligations of Artisan Pictures Inc.
      pursuant to the Senior Debt Agreements, and each of them, and any one or
      more of them.

      "Guaranty" means the General Continuing Guaranty in the form attached
      hereto as Exhibit C whereby the Guarantors guaranty to the holder hereof
      payment and performance of the obligations of the Company under the Note.

      "License Agreement" means that certain License Agreement dated as of
      January 17, 2002, between the holder hereof and Artisan Home Entertainment
      Inc.

      "Person " means an individual, a partnership, a corporation, a limited
      liability company, an association, a joint stock company, a trust, a joint
      venture, an unincorporated organization and a governmental entity or any
      department, agency or political subdivision thereof.

      "Senior Debt" means all Senior Obligations of the Company as defined in
      the Subordination Agreement dated as of January 18, 2002 attached hereto
      as Exhibit B.

      "Senior Debt Agreements" means any and all documents, instruments and
      agreements evidencing or relating to Senior Debt, as such Agreements may
      be amended from time to time.



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<PAGE>
      "Subsidiary" means, with respect to any Person, any corporation, limited
      liability company, partnership, association or other business entity of
      which (i) if a corporation, a majority of the total voting power of shares
      of stock entitled (without regard to the occurrence of any contingency) to
      vote in the election of directors, managers or trustees thereof is at the
      time owned or controlled, directly or indirectly, by that Person or one or
      more of the other Subsidiaries of that Person or a combination thereof, or
      (ii) if a limited liability company, partnership, association or other
      business entity, a majority of the partnership or other similar ownership
      interest thereof is at the time owned or controlled, directly or
      indirectly, by any Person or one or more Subsidiaries of that Person or a
      combination thereof. For purposes hereof, a Person or Persons shall be
      deemed to have a majority ownership interest in a limited liability
      company, partnership, association or other business entity if such Person
      or Persons shall be allocated a majority of limited liability company,
      partnership, association or other business entity gains or losses or shall
      be or control any managing director or general partner of such limited
      liability company, partnership, association or other business entity.

      "Transaction Documents" means this Note, the Guaranty and any documents
      evidencing the security interest in the Collateral entered into pursuant
      to Paragraph 7 hereof, as they may from time to time be amended, modified,
      supplemented, renewed or restated.

8.    Cancellation. After all principal and accrued interest at any time owed on
      this Note has been paid in full or otherwise converted, this Note shall be
      surrendered to the Company for cancellation and shall not be reissued.

9.    Payments. All payments to be made to the holder of this Note shall be made
      in the lawful money of the United States of America in immediately
      available funds.

10.   Place of Payment. Payments of principal and interest shall be delivered to
      the holder at the following address:

                           Vialta, Inc.
                           48461 Fremont Boulevard
                           Fremont, California  95438

or to such other address or to the attention of such other person as specified
by prior written notice to the Company.

11.   Business Days. If any payment is due, or any time period for giving notice
      or taking action expires, on a day which is a Saturday, Sunday or legal
      holiday in the State of California, the payment shall be due and payable
      on, and the time period shall automatically be extended to, the next
      business day immediately following such Saturday, Sunday or legal holiday,
      and interest shall continue to accrue at the required rate hereunder until
      any such payment is made.



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<PAGE>
12.   Usury Laws. It is the intention of the Company and the holder of this Note
      to conform strictly to all applicable usury laws now or hereafter in
      force, and any interest payable under this Note shall be subject to
      reduction to the amount not in excess of the maximum legal amount allowed
      under the applicable usury laws as now or hereafter construed by the
      courts having jurisdiction over such matters. If the maturity of this Note
      is accelerated by reason of an election by the holder hereof resulting
      from an Event of Default, voluntary prepayment by the Company or
      otherwise, then earned interest may never include more than the maximum
      amount permitted by law, computed from the date hereof until payment, and
      any interest in excess of the maximum amount permitted by law shall be
      canceled automatically and, if theretofore paid, shall at the option of
      the holder hereof either be rebated to the Company or credited on the
      principal amount of this Note, or if this Note has been paid, then the
      excess shall be rebated to the Company. The aggregate of all interest
      (whether designated as interest, service charges, points or otherwise)
      contracted for, chargeable, or receivable under this Note shall under no
      circumstances exceed the maximum legal rate upon the unpaid principal
      balance of this Note remaining unpaid from time to time. If such interest
      does exceed the maximum legal rate, it shall be deemed a mistake and such
      excess shall be canceled automatically and, if theretofore paid, rebated
      to the Company or credited on the principal amount of this Note, or if
      this Note has been repaid, then such excess shall be rebated to the
      Company. Reference is made to Section 25118 of the California Corporations
      Code, which creates an exemption from California's usury laws. It is the
      intention of the Company and of the holder of this Note that this Note be
      exempt from California's usury laws by virtue of such Section 25118, and
      the Company hereby represents and warrants to the holder of this Note that
      the criteria set forth in such Section 25118 for the exemption contained
      therein to be applicable are met with respect to the transaction evidenced
      by this Note.

13.   Severability. Whenever possible, each provision of this Note shall be
      interpreted in such manner as to be effective and valid under applicable
      law, but if any provision of this Note is held to be prohibited by or
      invalid under applicable law, such provision shall be ineffective only to
      the extent of such prohibition or invalidity, without invalidating the
      remainder of this Note.

14.   Counterparts. This Note may be executed simultaneously in two or more
      counterparts, any one of which need not contain the signatures of more
      than one party, but all such counterparts taken together shall constitute
      one and the same Note.

15.   Descriptive Headings; Interpretation. The descriptive headings of this
      Note are inserted for convenience only and do not constitute a substantive
      part of this Note. The use of the word "including" in this Note shall be
      by way of example rather than by limitation.

16.   Governing Law. The corporate law of the State of Delaware shall govern all
      issues and questions concerning the relative rights and obligations of the
      Company and its


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      stockholders. All other issues and questions concerning the construction,
      validity, enforcement and interpretation of this Note and the exhibits and
      schedules hereto shall be governed by, and construed in accordance with,
      the laws of the State of California, without giving effect to any choice
      of law or conflict of law rules or provisions (whether of the State of
      California or any other jurisdiction) that would cause the application of
      the laws of any jurisdiction other than the State of California.

17.   No Assignment. Without the prior written consent of the Company, this Note
      may not be assigned, pledged or otherwise transferred.

18.   Withholding. All amounts required to be paid by the Company hereunder, and
      all securities required to be issued hereunder, shall be subject to any
      required withholding.

19.   Notices. All notices, demands or other communications to be given or
      delivered under or by reason of the provisions of this Note shall be in
      writing and shall be deemed to have been given when delivered personally
      to the recipient, sent to the recipient by reputable overnight courier
      service (charges prepaid) or facsimile or mailed to the recipient by
      certified or registered mail, return receipt requested and postage
      prepaid. Such notices, demands and other communications shall be sent to
      each holder of Notes and to the Company at the following addresses:

                           To Company:

                           Artisan Entertainment
                           2700 Colorado Avenue
                           2nd Floor
                           Santa Monica, CA  90404
                           Attn: Legal Department
                           Fax: (310) 255-3840

                           To Lender:

                           Vialta, Inc.
                           48461 Fremont Boulevard
                           Fremont, California  95438
                           Attn:  Didier Pietri
                           Fax: (510) 492-1679


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                           With Courtesy Copy to:

                           Sheri Jeffrey
                           Kaye Scholer LLP
                           1999 Avenue of the Stars
                           Suite 1700
                           Los Angeles, CA 90067
                           (310) 788-1206

20.   Obligations Absolute and Unconditional. No reference herein and no
      provision of this Note shall alter or impair the obligation of the
      Company, which is absolute and unconditional, to pay the principal of and
      interest on this Note at the times, place and rate, and in the coin or
      currency, as prescribed herein.

21.   Costs and Expenses; Delay Not Waiver. The Company promises to pay all
      costs and expenses, including reasonable attorneys' fees incurred in the
      collection of this Note. The Company and any endorsers of this Note hereby
      consent to renewals and extension of time at or after the maturity hereof,
      without notice, and hereby waive diligence, presentment, protest, demand
      and notice of every kind and, to the full extent permitted by law, the
      right to plead any statute of limitations as a defense to any demand
      hereunder.

22.   WAIVER OF JURY TRIAL. THE COMPANY AND THE HOLDER HEREOF WAIVE THE RIGHT TO
      A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS NOTE OR ANY ACTION
      OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY,
      REGARDLESS OF WHICH PARTY INITIATES ANY SUCH ACTION OR PROCEEDING.

23.   Representations and Warranties of the Company. To induce the holder hereof
      to make the loan to the Company evidenced hereby, the Company hereby
      represents and warrants to the holder hereof as follows:

      (a)   Corporate Existence and Power. Each of the Credit Parties is a
            corporation duly organized, validly existing and in good standing
            under the laws of its jurisdiction of incorporation and is in good
            standing as a foreign corporation in all jurisdictions where both
            the nature of its properties or business so requires. Each of the
            Credit Parties has the corporate power and authority to own its
            respective properties and carry on its respective businesses as now
            being conducted, to execute, deliver and perform, as applicable, its
            obligations under this Note and other documents contemplated hereby
            to which it is or will be a party as provided.

      (b)   Corporate Authority and No Violation. The issuance of the Note and,
            in the case of each Guarantor, the guaranty of the obligations as
            contemplated herein (i) have been duly authorized by all necessary
            corporate action on the part of each such Credit Party, (ii) will
            not constitute a violation by such Credit Party of any


                                       10
<PAGE>
            provision of Applicable Law or any order of any court or other
            agency of the United States or any state thereof applicable to such
            Credit Party or any of its properties or assets which violation
            would have a material adverse effect upon the financial condition or
            the business of the Credit Parties taken as a whole, (iii) will not
            violate any provision of the Certificate of Incorporation or By-Laws
            of such Credit Party, indenture, agreement, bond, note or other
            similar instrument to which such Credit Party is a party or by which
            such Credit Party or its properties or assets are bound which
            violation would have a material adverse effect upon the financial
            condition or the business of the Credit Parties taken as a whole,
            and (iv) will not be in conflict with, result in a breach of or
            constitute (with due notice or lapse of time or both) a default
            under or create any right to terminate any such indenture,
            agreement, bond, note or other instrument which violation could have
            a material adverse effect upon the financial condition or the
            business of the Credit Parties taken as a whole.

      (c)   Governmental Approval. All authorizations, approvals, registrations
            or filings with any governmental or public regulatory body or
            authority of the United States or any state thereof required for the
            issuance of the Notes have been duly obtained or made, or duly
            applied for and are in full force and effect, and if any such
            further authorizations, approvals, registrations or filings should
            hereafter become necessary, the Credit Parties shall obtain or make
            all such authorizations, approvals, registrations or filings.

      (d)   Financial Statements, Etc. The audited Consolidated balance sheets
            of the Parent and its Consolidated Subsidiaries at December 31, 2000
            and the unaudited Consolidated balance sheet of the Parent and its
            Consolidated Subsidiaries at September 30, 2001, together with the
            related statements of cash flows and Stockholders' Equity and the
            related notes have been prepared in accordance with GAAP, except as
            otherwise indicated in the notes to such financial statements. All
            of such financial statements fairly present in all material respects
            the Consolidated financial condition or the results of operations of
            the Parent and its Consolidated Subsidiaries at the dates or for the
            periods indicated, subject (in the case of unaudited statements) to
            changes resulting from normal year-end and audit adjustments, and
            (in the case of balance sheets) reflect (including the notes
            thereto) all known liabilities, contingent or otherwise, as of such
            dates required in accordance with GAAP to be shown or reserved
            against, or disclosed in the notes to the financial statements. As
            of the date hereof, Company has no Senior Debt outstanding other
            than Senior Debt evidenced by the Canyon Note and Senior Debt
            outstanding under the Senior Debt Documents to which Chase Manhattan
            Bank is a party referred to in the definition of "Senior Debt."

      (e)   No Material Adverse Change. There has been no material adverse
            change with respect to the business, operations, performance,
            assets, properties or condition (financial or otherwise) of the
            Credit Parties taken as a whole from


                                       11
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            September 30, 2001, except for changes due to seasonality that are
            consistent with the corresponding periods in prior years.

24.   Affirmative Covenants of the Credit Parties. From and after the date
      hereof and for so long as any obligations of the Credit Parties under the
      Note remain outstanding, the Company agrees, and each Guarantor by
      executing the Guaranty agrees, that each Credit Party, unless the holder
      hereof otherwise consents in writing, shall:

      (a)   Financial Statements and Reports. Furnish or cause to be furnished
            to the holder of the Note:

            (i)   Within 120 days after the end of the current fiscal year of
                  the Parent and within 95 days after the end of each subsequent
                  fiscal year of the Parent the audited consolidated balance
                  sheet of the Parent and its Consolidated Subsidiaries as at
                  the end of, and the related statements of income,
                  Stockholders' Equity and cash flows for, such year, and the
                  corresponding figures as at the end of, and for, the preceding
                  fiscal year, accompanied by an unqualified opinion of Price
                  Waterhouse LLP or such other independent public accountants of
                  recognized standing as shall be retained by the Parent, which
                  report and opinion shall be prepared in accordance with
                  generally accepted auditing standards relating to reporting
                  and which report and opinion shall contain no material
                  exceptions or qualifications except for qualifications
                  relating to accounting changes (with which such independent
                  public accountants concur) in response to FASB releases or
                  other authoritative pronouncements;

            (ii)  Within 50 days after the end of each of the first three fiscal
                  quarters of each of its fiscal years the unaudited
                  consolidated balance sheets of the Parent and its Consolidated
                  Subsidiaries as at the end of, and the related unaudited
                  consolidated statements of income and cash flow for, such
                  quarter, and for the portion of the fiscal year through the
                  end of such quarter, and the corresponding figures as at the
                  end of such quarter, and for, the corresponding period in the
                  preceding fiscal year, together with a certificate signed by
                  an Authorized Officer of the Parent, on behalf of the Parent,
                  to the effect that such financial statements, while not
                  examined by independent public accountants, reflect, in the
                  opinion of the Parent, all adjustments necessary to present
                  fairly in all material respects the financial position of the
                  Parent and its Consolidated Subsidiaries as at the end of the
                  fiscal quarter and the results of its operations for the
                  quarter then ended in conformity with GAAP, subject to normal
                  year-end audit adjustments and the absence of footnotes;

            (iii) Simultaneously with the delivery of the statements referred to
                  in paragraphs 24(a)(i) and (ii) above, a certificate of an
                  Authorized Officer of the Parent, on behalf of the Parent
                  stating whether or not such Authorized


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<PAGE>
                  Officer has knowledge, after due inquiry, of any condition or
                  event which would constitute an Event of Default or Default
                  has occurred and, if so, specifying each such condition or
                  event and the nature thereof;

            (iv)  Promptly upon their becoming available, copies of (i) all
                  registration statements, proxy statements, and all reports
                  which any Credit Party shall file with the Securities and
                  Exchange Commission or any successor agency and (ii) all
                  reports, financial statements, press releases and other
                  information which any Credit Party shall release, send or make
                  available to its common stockholders generally;

      (b)   Corporate Existence. Do or cause to be done all things necessary to
            preserve, renew and keep in full force and effect its corporate
            existence, rights, material licenses, material permits and material
            franchises, and comply with all applicable statutes, regulations and
            orders of, and all applicable restrictions imposed by, any
            Governmental Authority, except as otherwise permitted under the
            Senior Debt Agreements.

      (c)   Maintenance of Properties. Keep its tangible properties which are
            material to its business in good repair, working order and condition
            (ordinary wear and tear excepted) and, from time to time (i) make
            all necessary and proper repairs, renewals, replacements, additions
            and improvements thereto and (ii) comply at all times with the
            provisions of all material leases and other material agreements to
            which it is a party so as to prevent any loss or forfeiture thereof
            or thereunder unless compliance therewith, is being currently
            contested in good faith by appropriate proceedings; provided,
            however, that nothing shall prevent any Credit Party from
            discontinuing the use, operation or maintenance of such properties
            or disposing of them if such discontinuance, or disposal is, in the
            judgment of its Board of Directors, desirable in the conduct of the
            business.

      (d)   Books and Records. Maintain or cause to be maintained at all times
            true and complete books and records of its financial operations.

25.   Negative Covenants of the Credit Parties. From and after the date hereof
      and for so long as any obligations of the Credit Parties under the Note
      remain outstanding, the Company agrees, and each Guarantor by executing
      the Guaranty agrees, that each Credit Party, unless the holder hereof
      otherwise consents in writing, shall not:

      (a)   Limitations on Indebtedness. Incur, create, assume or suffer to
            exist any preferred stock or Indebtedness or permit any partnership
            or joint venture in which any Credit Party is a general partner to
            incur create, assume or suffer to exist any Indebtedness other than
            Senior Debt and other Indebtedness permitted under the Senior Debt
            Agreements.


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<PAGE>
      (b)   Limitations on Liens. Incur, create, assume or suffer to exist any
            Lien on its revenue stream, property or assets, whether now owned or
            hereafter acquired, except for Liens in connection with Senior Debt
            or other Liens permitted under the Senior Debt Agreements.

      (c)   Restricted Payments. Declare, make or incur any liability to make
            any Restricted Payments other than Restricted Payments in connection
            with Senior Debt or permitted under the Senior Debt Agreements.

      (d)   Transactions with Affiliates. Except for transactions permitted
            under the Senior Debt Agreements, effect any transaction with an
            affiliate other than a Credit Party on a basis less favorable to
            such Credit Party than would have been the case if such transaction
            had been effected on an arms-length basis (and if involving more
            than $100,000, without a resolution approving each such transaction
            from the Board of Directors of each Credit Party involved).

      (e)   Change in Control. Except for transactions permitted under the
            Senior Debt Agreements, effect any transaction that results in a
            Change in Control of the Parent.

                                    * * * * *



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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this Note as of
January 17, 2002.

                                                 ARTISAN ENTERTAINMENT INC.



                                                 By:____________________________

                                                 Its:___________________________


Accepted and acknowledged:

VIALTA, INC.


By: ________________________

Its: _______________________






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