Document:

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                                                                 Exhibit 10.6

                                  PROXIM, INC.
                       1999 NONSTATUTORY STOCK OPTION PLAN
                      (AMENDED EFFECTIVE OCTOBER 15, 2001)

        The following constitutes the provisions of the 1999 Nonstatutory Stock
Option Plan of Proxim, Inc., as amended and restated by the Board of Directors
on January 23, 2001.

        1.     Purposes of the Plan. The purposes of this Nonstatutory Stock
Option Plan are:

               -      to attract and retain the best available personnel for
                      positions of substantial responsibility,

               -      to provide additional incentive to Employees, Directors
                      and Consultants, and

               -      to promote the success of the Company's business.

               Options granted under the Plan will be Nonstatutory Stock
Options.

        2.     Definitions. As used herein, the following definitions shall
               apply:

               (a)    "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.

               (b)    "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

               (c)    "Board" means the Board of Directors of the Company.

               (d)    "Code" means the Internal Revenue Code of 1986, as
amended.

               (e)    "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.

               (f)    "Common Stock" means the Common Stock of the Company.

               (g)    "Company" means Proxim, Inc., a Delaware corporation.

               (h)    "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.

               (i)    "Director" means a member of the Board.

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               (j)    "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

               (k)    "Employee" means any person, including Officers, employed
by the Company or any Parent or Subsidiary of the Company. A Service Provider
shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.

               (l)    "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

               (m)    "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

                      (i)    If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

                      (ii)   If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;

                      (iii)  In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

               (n)    "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.

               (o)    "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

               (p)    "Option" means a nonstatutory stock option granted
pursuant to the Plan, that is not intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

               (q)    "Option Agreement" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

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               (r)    "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.

               (s)    "Optioned Stock" means the Common Stock subject to an
Option.

               (t)    "Optionee" means the holder of an outstanding Option
granted under the Plan.

               (u)    "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

               (v)    "Plan" means this 1999 Nonstatutory Stock Option Plan.

               (w)    "Service Provider" means an Employee including an Officer,
Consultant or Director.

               (x)    "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.

               (y)    "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.

        3.     Stock Subject to the Plan. Subject to the provisions of Section
12 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is eight million (8,000,000) Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.

               If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

        4.     Administration of the Plan.

               (a)    Administration. The Plan shall be administered by (i) the
Board or (ii) a Committee, which committee shall be constituted to satisfy
Applicable Laws.

               (b)    Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:

                      (i)    to determine the Fair Market Value of the Common
Stock;

                      (ii)   to select the Service Providers to whom Options may
be granted hereunder;

                      (iii)  to determine whether and to what extent Options are
granted hereunder;

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                      (iv)   to determine the number of shares of Common Stock
to be covered by each Option granted hereunder;

                      (v)    to approve forms of agreement for use under the
Plan;

                      (vi)   to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

                      (vii)  to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;

                      (viii) to institute an Option Exchange Program;

                      (ix)   to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;

                      (x)    to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

                      (xi)   to modify or amend each Option (subject to Section
14(b) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;

                      (xii)  to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;

                      (xiii) to determine the terms and restrictions applicable
to Options;

                      (xiv)  to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable; and

                      (xv)   to make all other determinations deemed necessary
or advisable for administering the Plan.

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               (c)    Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

        5.     Eligibility. Options may be granted to Service Providers;
provided, however, that notwithstanding anything to the contrary contained in
the Plan, Options may not be granted to Officers and Directors.

        6.     Limitation. Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

        7.     Term of Plan. The Plan shall become effective upon its adoption
by the Board. It shall continue in effect for ten (10) years, unless sooner
terminated under Section 14 of the Plan.

        8.     Term of Option. The term of each Option shall be stated in the
Option Agreement.

        9.     Option Exercise Price and Consideration.

               (a)    Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator.

               (b)    Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised.

               (c)    Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. Such consideration may consist entirely of:

                      (i)    cash;

                      (ii)   check;

                      (iii)  promissory note;

                      (iv)   other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;

                      (v)    consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;

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                      (vi)   a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;

                      (vii)  such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws; or

                      (viii) any combination of the foregoing methods of
payment.

        10.    Exercise of Option.

               (a)    Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. An Option may not be exercised for a
fraction of a Share.

                      An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.

                      Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

               (b)    Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

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               (c)    Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement, to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

               (d)    Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

               (e)    Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

        11.    Non-Transferability of Options. Unless determined otherwise by
the Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

        12.    Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.

               (a)    Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in

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the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

               (b)    Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

               (c)    Merger or Asset Sale. Subject to the provisions of
paragraph (d) hereof, in the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, (i) each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation and (ii) twelve months of unvested shares, if any, subject
to such Option shall vest and become fully exercisable upon the Change in
Control. In the event that the successor corporation does not agree to assume
the Option or to substitute an equivalent option or right, the Optionee shall
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If an Option becomes
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Optionee shall be notified that the Option shall be
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option will terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, immediately
following the merger or sale of assets, the Option confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation and the
Optionee, provide for the consideration to be received upon the exercise of the
Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in Fair Market
Value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

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               (d)    Change in Control. At the time any Option is granted, the
Administrator may, in its sole discretion, provide that in the event of a
"Change in Control" of the Company, as defined in paragraph (e) below, then the
following acceleration and valuation provisions shall apply:

                      (i)    Such Option outstanding on the date such Change in
Control is determined to have occurred that is not yet exercisable and vested on
such date shall become fully exercisable and vested; or

                      (ii)   Such Option, to the extent it is exercisable and
vested (including any Option that shall become exercisable and vested pursuant
to subparagraph (i) above), shall be terminated in exchange for a cash payment
equal to the Change in Control Price, (reduced by the exercise price, if any,
applicable to such Options). These cash proceeds shall be paid to the Optionee
or, in the event of death of an Optionee prior to payment, to the estate of the
Optionee or to a person who acquired the right to exercise the Option by bequest
or inheritance.

               (e)    Definition of "Change in Control". For purposes of this
Section 12, a "Change in Control" means the happening of any of the following:

                      (i)    When any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) files or becomes obligated to file a Schedule 13D under the Exchange
Act or any amendment thereto (the "Filing") reporting that such person (or group
of affiliated persons) is or has become the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing forty percent (40%) or more of the total voting power
represented by the Company's then outstanding voting securities, and such person
(or group) indicates in connection with such Filing any plans or proposals to
effect any of the transactions or events enumerated in Item 4 of Schedule 13D;
or

                      (ii)   A merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least sixty percent (60%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets; or

                      (iii)  A change in the composition of the Board of
Directors of the Company occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of the date the Plan is approved by the stockholders, or (B) are elected, or
nominated for election, to the Board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).

<PAGE>

               (f)    Change in Control Price. For purposes of this Section 12,
"Change in Control Price" shall be, as determined by the Administrator, (i) the
highest Fair Market Value of a Share within the 60-day period immediately
preceding the date of determination of the Change in Control Price by the
Administrator (the "60-Day Period"), or (ii) the highest price paid or offered
per Share, as determined by the Administrator, in any bona fide transaction or
bona fide offer related to the Change in Control of the Company, at any time
within the 60-Day Period, or (iii) such lower price as the Administrator, in its
discretion, determines to be a reasonable estimate of the fair market value of a
Share.

        13.    Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

        14.    Amendment and Termination of the Plan.

               (a)    Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.

               (b)    Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to options
granted under the Plan prior to the date of such termination.

        15.    Conditions Upon Issuance of Shares.

               (a)    Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

               (b)    Investment Representations. As a condition to the exercise
of an Option the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

        16.    Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

<PAGE>

        17.    Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.<PAGE>
                                                                   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)
<PAGE>
      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

                                       2
<PAGE>
            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

                                       3
<PAGE>
                  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

                                       4
<PAGE>
                  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.

                                       5
<PAGE>
      "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.

                                       6
<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.

                                       7
<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

                                       8
<PAGE>
      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

                                       9
<PAGE>
                           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
<PAGE>
            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

                                       12
<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.

                                       13
<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.

                                    * * * * *

                                       14
<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: _______________________

                                       15

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