$1,000,000 May 24, 2002
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VALCOM, INC. AND VALENCIA
ENTERTAINMENT, L.L.C., THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE SECURED BY
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
FIXTURES, AND SECURITY AGREEMENT
FOR VALUE RECEIVED, VALCOM, INC., a Delaware corporation ("ValCom") and Valencia Entertainment
International, L.L.C., a California limited liability company and a wholly owned subsidiary of ValCom ("Valencia"
and, collectively with ValCom, the "Borrower"), jointly and severally, hereby promises to pay to LAURUS
MASTER FUND, LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House,
South Church Street, Grand Cayman, Cayman Islands, Fax:
345-949-9877 (the "Holder" or "Lender") on order, without demand, the sum of One Million Dollars
($1,000,000), with any accrued and unpaid interest on May 24, 2004 (the "Maturity Date").
Five Hundred Thousand Dollars ($500,000) of this Note shall be held back by the Lender until receipt by the
Lender of the fully executed Subordination and Nondisturbance Agreements, pursuant to Section 4.9 of the
Purchase Agreement (as defined below). In the event the Lender does not receive the fully executed
Subordination and Nondisturbance Agreements then the Lender shall not provide the Borrower with the
additional Five Hundred Thousand Dollars ($500,000) and the principal amount of this note shall be reduced by
such amount. The interest on the additional Five Hundred Thousand Dollars ($500,000) shall not accrue until the
Borrower has received such funds.
The following terms shall apply to this Note: