MATERIAL CHANGE REPORT

1 Reporting Issuer

Atlantis Communications Inc.
65 Heward Avenue
Toronto Ontario
M4M 2T5

2 Date of Material Change

July 19, 1998

3 Press Release

Issued by Canada News Wire on July 20, 1998

4 Summary of Material Change

Atlantis Communications Inc. (“Atlantis”) and Alliance Communications Corporation (“Alliance”) have agreed to merge to form Alliance Atlantis Communications Inc. (“Alliance Atlantis”).

5 Description of Material Change

Atlantis Communications Inc. and Alliance Communications Corporation have agreed to merge to form Alliance Atlantis. The transaction will be effected by means of a “three-cornered” amalgamation by way of a plan of arrangement under the Canada Business Corporations Act. Atlantis will amalgamate with a wholly-owned subsidiary of Alliance, and Atlantis shareholders will receive 0.5 shares of the new company for each share of Atlantis held. The Atlantis multiple voting shares will be exchanged for Class A Alliance Voting Shares. The Atlantis subordinate voting shares will be exchanged for newly created Class C Alliance Subordinate Voting Shares having, effectively, 1/20th of a vote per share. The Class C shares will not be listed on any stock exchange, but will be immediately convertible into Alliance Class B Non-Voting Shares which are listed on The Toronto Stock Exchange, The Montreal Exchange and the Nasdaq National Market. The transaction will be treated for accounting purposes as a purchase of Atlantis by Alliance.

Michael Macmillan, the Chairman and CEO of Atlantis, will become the Chairman and CEO of Alliance Atlantis. Lewis Rose, President of Atlantis, will serve as President of Alliance Atlantis.

Robert Lantos, the current Chairman and CEO of Alliance, will not be an officer or director of the new company. He has entered into a termination agreement which provides that he will resign as an officer and employee of Atlantis and in consideration therefore he will receive a termination payment. He has also agreed to accept the honorary title of Chairman Emeritus in recognition of his past contributions and will provide consulting services to Alliance Atlantis for three years for nominal consideration. In addition, he has signed a production agreement pursuant to which Alliance Atlantis will convey to Mr. Lantos, for nominal consideration, seven feature films currently in development at Alliance and two existing television projects for which Mr. Lantos will act as producer and Alliance Atlantis will receive world-wide distribution rights. Under the terms of the production agreement, Mr. Lantos is entitled to identify and develop up to eight additional feature film projects. Alliance Atlantis has agreed to finance Mr. Lantos’ productions in return for the world-wide distribution rights to all films made from projects financed by it for 30 years. Victor Loewy, the current Vice-Chairman and President of Alliance Motion Picture Distribution, will serve as a director of Alliance Atlantis and continue as head of Alliance Motion Picture Distribution. He has entered into a three year employment contract with Alliance.

The transaction is subject to the approval of Atlantis and Alliance shareholders by special resolution (and, in the case of the approval by the shareholders of Alliance, by a majority of the votes cast at the meeting other than those held by Robert Lantos, and Victor Loewy and their associates. A Joint Management Information Circular describing the terms of the transaction will be mailed to shareholders of both companies shortly. The transaction is expected to be completed in September.

Other material terms of the transaction are as follows:

• six members of the senior management of Atlantis will acquire 330,000 Class A Voting Shares of Alliance Atlantis at a price of $29.32 per share from Robert Lantos and Victor Loewy, so that such senior management will own 2,448,750 Class A Voting Shares of Alliance Atlantis on completion of the merger;
• Robert Lantos and Victor Loewy have agreed to sell, under certain conditions, 465,284 Class B Non-Voting Shares of Alliance Atlantis by way of subscription receipts to a syndicate led by CIBC Wood Gundy Securities Inc.;
• between 1,325,472 and 1,855,622 preferred shares of Alliance Atlantis having a face amount of $27.97 (being a 10 per cent premium to the “20 day market price” of Alliance’s Class B Non-Voting shares immediately prior to the announcement of the transaction) will be issued to Robert Lantos and Victor Loewy in exchange for their remaining shares of Alliance, either immediately or pursuant to their exercise of currently outstanding options. Their remaining outstanding options to purchase shares of Alliance will be converted into options to acquire preferred shares of Alliance Atlantis. The preferred shares will be a new class of Alliance Atlantis shares which are retractable at their face amount after one year, have a three-year term, are non-voting (unless four quarterly dividends or a retraction payment are missed and not cured) and are convertible into Class B Non-Voting shares of Alliance Atlantis at a 15 per cent premium to face value;
• completion of the merger will be subject to satisfaction of typical conditions, including applicable regulatory approvals;
• the Boards of Directors of each of Alliance and Atlantis, having received the unanimous recommendation of independent committees established to consider the merger, are recommending the merger;
• Alliance and Atlantis have arranged, on behalf of Alliance Atlantis after completion of the merger, financing by way of a fully underwritten committed facility of $545 million led by Royal Bank of Canada;
• Alliance Atlantis’ Board of Directors will be composed of an equal number of representatives from the Boards of each of Alliance and Atlantis;
• five members of the senior management of Atlantis (including the four individuals who indirectly control Atlantis through Atlantis Multiple Voting Shares held by Atcan Investments Inc.), Robert Lantos and Victor Loewy and a significant shareholder of Atlantis which holds approximately 23% of the Atlantis Subordinate Voting Shares have signed agreements providing that they will not vote their respective shares against the resolutions proposed in connection with the merger;
• pending CRTC approval of the transaction, each of Alliance and Atlantis, or their respective subsidiaries, will appoint a trustee in respect of their respective interests in four specialty broadcasting channels;
• the transaction is conditional on no more than 5% of the shareholders of either company exercising their dissent rights under applicable corporate law;
• the merger agreement will terminate if the transaction has not been completed by November 30, 1998;
• upon the transaction becoming effective, each of the voting trust agreement among certain significant Atlantis shareholders, the trust agreement providing take-over bid protection to Atlantis’ Subordinate Voting Shares and the Alliance shareholders rights plan will terminate;
• outstanding Atlantis stock options will become options to acquire shares of Alliance Atlantis, with appropriate adjustments to reflect the share exchange ratio to the exercise price and the number of shares to be acquired upon the exercise of such options;
• upon the transaction becoming effective, all outstanding Alliance stock options will vest and become fully exercisable, regardless of whether such options would otherwise have vested;
• if the shareholders of one of the parties do not approve, or the board of directors do not recommend the approval of, the merger, such party shall pay to the other party a fee of $2 million. In addition, if the merger is not completed by one of the parties because it terminates the merger agreement to complete a competing transaction, such party shall pay to the other party a break fee equal to 4% of the value of the competing transaction less the $2 million amount referred to above (if paid previously);
• the parties will not solicit any other merger, take-over bid or similar transaction involving either of them or their material subsidiaries;
• the parties have agreed not to effect or participate in certain transactions involving each other (including certain acquisitions of shares of each other) for one year;
• the holder of the convertible debentures of Alliance has agreed, when the merger becomes effective, to convert $8,794,000 principal amount of debentures to Class A Voting Shares of Alliance Atlantis. It will also be permitted to convert the remaining $8,794,000 principal amount of debentures (which are currently convertible into Class B Non-Voting Shares of Alliance) into debentures which will be convertible into Class A Voting Shares of Alliance Atlantis and it has agreed with an affiliate of Atcan Investments Inc. (the controlling shareholder of Atlantis) that any Class A Voting Shares of Alliance Atlantis acquired on the conversion of the new debentures will not be voted by it, except on special matters, until after the fourth anniversary of the merger becoming effective.

6 Reliance on Section 75(3) of the Securities Act:

Not applicable.

7 Omitted Information

None.

8 Senior Officer

Additional information may be obtained from Kerri Golden, the chief financial officer of Atlantis, at 416-462-0246.

9 Statement of Senior Officer

The foregoing accurately discloses the material change referred to herein.

Dated this 29th day of July, 1998.

“Kerri Golden”Chief Financial Officer