SECURITIES PURCHASE AGREEMENT


            THIS SECURITIES  PURCHASE  AGREEMENT,  dated as of April 6, 1998, is
entered  into by and  between  ATLANTIC  INTERNATIONAL  ENTERTAINMENT,  LTD.,  a
Delaware corporation,  with headquarters located at 200 East Palmetto Park Road,
Suite 200, Boca Raton,  Florida 33432 (the "Company"),  and the undersigned (the
"Buyer").

                              W I T N E S S E T H:

            WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance  with and in reliance upon the exemption from securities
registration  afforded,  inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange  Commission (the
"SEC") under the  Securities  Act of 1933,  as amended (the "1933 Act"),  and/or
Section 4(2) of the 1933 Act; and

            WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this  Agreement,  5% Convertible  Preferred  Stock,  $.001 par
value per share (the "Convertible  Preferred Stock"),  of the Company which will
be  convertible  into shares of Common  Stock,  $.001 par value per share of the
Company (the "Common  Stock"),  upon the terms and subject to the  conditions of
such Convertible Preferred Stock, and subject to acceptance of this Agreement by
the Company;

            NOW  THEREFORE,  in  consideration  of the  premises  and the mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  the parties agree as
follows:

            1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

            a. Purchase; Certain Definitions.  (i) The undersigned hereby agrees
to purchase from the Company shares of the  Convertible  Preferred  Stock in the
amount set forth on the signature page of this Agreement (the "Initial Preferred
Stock"),  out of a total  offering of $3,000,000 of such  Convertible  Preferred
Stock,  and  having the terms and  conditions  set forth in the  Certificate  of
Designations,  Voting  Powers,  Preferences  and  Rights to the  Certificate  of
Incorporation  of the Company  attached  hereto as Annex I (the  "Certificate of
Designations").  The purchase price for the Initial  Preferred Stock shall be as
set forth on the  signature  page  hereto  (the  "Purchase  Price") and shall be
payable in United States Dollars.

               (ii) As used herein, the term "Preferred Stock" means the Initial
Preferred Stock and the Additional Preferred Stock (as defined below),  together
with all shares, if any, of the Convertible  Preferred Stock issued as dividends
thereon, unless the context otherwise requires.


<PAGE>
               (iii) As used herein,  the term "Securities"  means the Preferred
Stock and the Common Stock issuable upon conversion of the Preferred Stock.

            b. Form of Payment.  The Buyer shall pay the purchase  price for the
Initial Preferred Stock by delivering immediately available good funds in United
States Dollars to the escrow agent (the "Escrow Agent")  identified in the Joint
Escrow   Instructions   attached   hereto  as  Annex  II  (the   "Joint   Escrow
Instructions").  No later than the Closing Date (as defined below),  the Company
shall deliver one or more certificates  representing the Initial Preferred Stock
duly executed on behalf of the Company (collectively,  the "Certificate") to the
Escrow Agent. By signing this Agreement,  the Buyer and the Company, and subject
to  acceptance  by the  Escrow  Agent,  each  agrees  to all  of the  terms  and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

            c. Method of Payment.  Payment into escrow of the Purchase Price for
the Initial Preferred Stock shall be made by wire transfer of funds to:

            Bank of New York
            350 Fifth Avenue
            New York, New York 10001

            ABA# 021000018
            For credit to the account of Krieger & Prager, Esqs.
              - Shaar Fund Ltd.
            Account No.:   637-1657965

Not later than 1:00 p.m.,  New York time,  on the date which is one (1) New York
Stock Exchange  trading day after the Company shall have accepted this Agreement
and  returned a signed  counterpart  of this  Agreement  to the Escrow  Agent by
facsimile,  the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Initial  Preferred Stock, in immediately  available funds. Time is
of the essence  with respect to such  payment,  and failure by the Buyer to make
such payment shall allow the Company to cancel this Agreement.

            d. Escrow Property. The Purchase Price and the Certificate delivered
to the Escrow Agent as contemplated by Sections 1(b) and (c) hereof are referred
to as the "Escrow Property."


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<PAGE>
            2. BUYER REPRESENTATIONS,  WARRANTIES,  ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.

            The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:

            a. Without  limiting Buyer's right to sell the Common Stock pursuant
to the  Registration  Statement  (as that term is  defined  in the  Registration
Rights Agreement defined below), the Buyer is purchasing the Preferred Stock and
will be acquiring  the shares of Common Stock  issuable  upon  conversion of the
Preferred Stock (the  "Converted  Shares") for its own account for investment or
as Agent for  other  "accredited  investors",  and not with a view  towards  the
public  sale  or  distribution  thereof  and not  with a view to or for  sale in
connection with any distribution thereof.

            b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3),  (ii) experienced in making investments of the kind described in
this Agreement and the related documents,  (iii) able, by reason of the business
and  financial  experience  of its  officers  (if an  entity)  and  professional
advisors (who are not  affiliated  with or compensated in any way by the Company
or any of its  affiliates  or selling  agents),  to protect its own interests in
connection with the  transactions  described in this Agreement,  and the related
documents,  and (iv) able to afford the  entire  loss of its  investment  in the
Securities.

            c. All  subsequent  offers and sales of the Preferred  Stock and the
shares of Common  Stock  representing  the  Converted  Shares (such Common Stock
sometimes  referred to as the  "Shares") by the Buyer shall be made  pursuant to
registration  of the Shares under the 1933 Act or pursuant to an exemption  from
registration.

            d. The Buyer  understands that the Initial Preferred Stock are being
offered and sold to it in reliance on specific  exemptions from the registration
requirements  of United States  federal and state  securities  laws and that the
Company is relying upon the truth and  accuracy  of, and the Buyer's  compliance
with,  the   representations,   warranties,   agreements,   acknowledgments  and
understandings  of the  Buyer  set  forth  herein  in  order  to  determine  the
availability  of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.

            e. The Buyer and its advisors,  if any, have been furnished with all
materials  relating to the business,  finances and operations of the Company and
materials  relating to the offer and sale of the Initial Preferred Stock and the
offer of the Shares which have been  requested by the Buyer,  including  Annex V
hereto.  The Buyer and its advisors,  if any, have been afforded the opportunity
to ask  questions of the Company and have  received  complete  and  satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Buyer has also had the

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<PAGE>
opportunity  to obtain  and to review the  Company's  (i) the  Company's  annual
report on Form 10-K for the year ending  December 31, 1996,  (ii) the  Company's
quarterly report on Form 10-Q for the quarterly period ending September 30, 1997
(the "SEC  Reports");  and the Buyer  understands  that its  investments  in the
Shares involves a high degree of risk;

            f. The  Buyer  understands  that its  investment  in the  Securities
involves a high degree of risk.

            g. The Buyer  understands  that no United  States  federal  or state
agency or any other government or governmental  agency has passed on or made any
recommendation or endorsement of the Securities.

            h. This Agreement has been duly and validly authorized, executed and
delivered  on behalf of the Buyer and is a valid and  binding  agreement  of the
Buyer enforceable in accordance with its terms,  subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.

            i.  Notwithstanding the provisions hereof or of the Preferred Stock,
in no event (except (i) with respect to an automatic conversion of the Preferred
Stock as provided in the  Certificate of  Designations or (ii) if the Company is
in default of any of its  obligations  under the  Preferred  Stock or any of the
Transaction  Agreements,  as  defined  below)  shall the holder be  entitled  to
convert any Preferred Stock to the extent that, after such  conversion,  the sum
of (1) the number of shares of Common Stock  beneficially owned by the Buyer and
its  affiliates  (other  than  shares  of  Common  Stock  which  may  be  deemed
beneficially  owned  through the  ownership  of the  unconverted  portion of the
Preferred Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the  Preferred  Stock with respect to which the  determination  of
this proviso is being made,  would result in  beneficial  ownership by the Buyer
and its affiliates of more than 9.9% of the outstanding  shares of Common Stock.
For purposes of the proviso to the immediately  preceding  sentence,  beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"),  except as otherwise provided
in clause (1) of such proviso.

            3. COMPANY REPRESENTATIONS, ETC.

                          The Company represents and warrants to the Buyer that:

            a.  Concerning the Preferred  Stock and the Shares.  The Convertible
Preferred  Stock has been duly  authorized  and,  when issued,  will be duly and
validly issued,  fully paid and  non-assessable  and will not subject the holder
thereof  to  personal  liability  by reason of being such  holder.  There are no
preemptive  rights of any  stockholder  of the Company,  as such, to acquire the
Preferred Stock or the Shares.



                                       4
<PAGE>
            b.  Reporting  Company  Status.  The Company is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware and has the  requisite  corporate  power to own its  properties  and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign  corporation to do business and is in good standing in each jurisdiction
where the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business,  operations
or  prospects  or  condition  (financial  or  otherwise)  of the Company and its
subsidiaries,  taken as a whole.  The Company has  registered  its Common  Stock
pursuant  to  Section  12 of the 1934 Act,  and the  Common  Stock is listed and
traded on the NASDAQ/SmallCap market. The Company has received no notice, either
oral or written,  with respect to the continued  eligibility of the Common Stock
for such  listing,  and the  Company has  maintained  all  requirements  for the
continuation of such listing.

            c. Authorized  Shares.  The Company has at April 1, 1998,  _________
shares of Common Stock outstanding,  and has sufficient  authorized and unissued
Shares as may be reasonably  necessary to effect the conversion of the Preferred
Stock and exercise of the Warrants at [75% of Market Price on 1st Closing Date].
The Conversion Shares have been duly authorized and, when issued upon conversion
of, or as interest on, the Preferred Stock in accordance with its terms, will be
duly and validly issued,  fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder.

            d. Securities Purchase Agreement;  Registration Rights Agreement and
Stock. This Agreement and the Registration  Rights Agreement,  the form of which
is attached hereto as Annex IV (the "Registration  Rights  Agreement"),  and the
transactions  contemplated  hereby  and  thereby,  have  been  duly and  validly
authorized by the Company,  this  Agreement has been duly executed and delivered
by the  Company  and  this  Agreement  is,  and  the  Preferred  Stock,  and the
Registration  Rights  Agreement,  when executed and delivered by or on behalf of
the Company, will be, valid and binding agreements of the Company enforceable in
accordance  with their  respective  terms,  subject,  as to  enforceability,  to
general  principles of equity and to  bankruptcy,  insolvency,  moratorium,  and
other similar laws affecting the enforcement of creditors' rights generally.

            e.  Non-contravention.  The execution and delivery of this Agreement
and the  Registration  Rights  Agreement  by the  Company,  the  issuance of the
Securities,  and the  consummation  by the  Company  of the  other  transactions
contemplated by this  Agreement,  the  Registration  Rights  Agreement,  and the
Preferred  Stock do not and will not conflict  with or result in a breach by the
Company of any of the terms or provisions  of, or constitute a default under (i)
the articles of  incorporation  or by-laws of the Company,  each as currently in
effect,  (ii) except as disclosed in Annex V, any indenture,  mortgage,  deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its  properties  or assets  are  bound,  including  any
listing  agreement for the Common Stock  (except as herein set forth),  (iii) to
its  knowledge,  any  existing  applicable  law,  rule,  or  regulation  or  any
applicable  decree,  judgment,  or order of any court,  United States federal or
state regulatory body,  administrative


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<PAGE>
agency, or other  governmental body having  jurisdiction over the Company or any
of its properties or assets, or (iv) any listing agreement for its Common Stock,
except such conflict,  breach or default which would not have a material adverse
effect on the transactions contemplated herein.

            f. Approvals.  No  authorization,  approval or consent of any court,
governmental body,  regulatory agency,  self-regulatory  organization,  or stock
exchange or market or the stockholders of the Company is required to be obtained
by the  Company  for the  issuance  and sale of the  Securities  to the Buyer as
contemplated  by this  Agreement,  except  such  authorizations,  approvals  and
consents that have been obtained.

            g. SEC Filings. None of the Company's SEC Reports contained,  at the
time they were filed,  any untrue  statement of a material fact or omit to state
any  material  fact  required  to be stated  therein  or  necessary  to make the
statements  made  therein in light of the  circumstances  under  which they were
made,  not  misleading.  Except as set forth on Annex V hereto,  the Company has
since  October 1, 1996 timely filed all  requisite  forms,  reports and exhibits
thereto with the SEC.

            h. Absence of Certain  Changes.  Since December 31, 1998,  there has
been no material  adverse  change and no  material  adverse  development  in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries,  taken as a whole,  except as
disclosed in Annex V or in the Company's SEC Reports.  Since  December 31, 1998,
the Company has not (i) incurred or become  subject to any material  liabilities
(absolute or contingent) except  liabilities  incurred in the ordinary course of
business  consistent  with past  practices;  (ii)  discharged  or satisfied  any
material  lien or  encumbrance  or paid any  material  obligation  or  liability
(absolute or contingent),  other than current  liabilities  paid in the ordinary
course of business  consistent with past  practices;  (iii) declared or made any
payment or distribution  of cash or other property to stockholders  with respect
to its capital  stock,  or  purchased  or redeemed,  or made any  agreements  to
purchase or redeem,  any shares of its  capital  stock;  (iv) sold,  assigned or
transferred any other tangible assets,  or canceled any debts or claims,  except
in the ordinary course of business consistent with past practices;  (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business,  or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material  problems with labor or management in connection with the terms and
conditions of their  employment.

            i. Full  Disclosure.  There is no fact known to the  Company  (other
than general  economic  conditions known to the public generally or as disclosed
in the  Company's SEC  Reports),  that has not been  disclosed in writing to the
Buyer that (i) would reasonably be expected to have a material adverse effect on
the business or financial  condition of the Company or (ii) would  reasonably be
expected  to  materially  and  adversely  affect the  ability of the  Company to
perform its  obligations  pursuant to this  Agreement  or any of the  agreements
contemplated hereby  (collectively,  including this Agreement,  the "Transaction
Agreements").


                                       6

<PAGE>
            j. Absence of Litigation. Except as set forth in Annex V hereto, and
in the Company's SEC Reports, which the Buyer has reviewed,  there is no action,
suit, proceeding,  inquiry or investigation before or by any court, public board
or body  pending or, to the  knowledge  of the  Company,  threatened  against or
affecting the Company, wherein an unfavorable decision,  ruling or finding would
have  a  material  adverse  effect  on the  properties,  business  or  financial
condition. results of operation or prospects of the Company and its subsidiaries
taken  as a whole or the  transactions  contemplated  by any of the  Transaction
Agreements or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, any of
the Transaction Agreements.

            k.  Absence  of  Events of  Default.  Except as set forth in Annex V
hereto and Section 3(e) hereof, no Event of Default (or its equivalent term), as
defined in the  respective  agreement  to which the  Company is a party,  and no
event  which,  with the giving of notice or the  passage of time or both,  would
become an Event of  Default  (or its  equivalent  term) (as so  defined  in such
agreement), has occurred and is continuing,  which would have a material adverse
effect on the Company's financial condition or results of operations.

            l. Prior  Issues.  Except as set forth in Annex V, during the twelve
(12) months  preceding  the date  hereof,  the Company has not issued any Common
Stock or  convertible  securities  in capital  transactions  which have not been
fully  disclosed in the Company's  filings with the SEC. All such issuances have
been fully  converted  into shares of common stock and there are no  outstanding
unconverted debt or convertible securities from those transactions.

            m.  No  Undisclosed  Liabilities  or  Events.  The  Company  has  no
liabilities  or  obligations  other than those  disclosed in the  Company's  SEC
Reports or those incurred in the ordinary course of the Company's business since
December 31, 1998, and which,  individually or in the aggregate, do not or would
not have a  material  adverse  effect  on the  properties,  business,  condition
(financial or otherwise),  results of operations or prospects of the Company and
its  subsidiaries,  taken as a whole. No event or circumstances  has occurred or
exists  with  respect to the  Company  or its  properties,  business,  condition
(financial or  otherwise),  results of operations  or  prospects,  which,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
prior to the date  hereof by the  Company  but  which  has not been so  publicly
announced  or  disclosed.

            n. No Default.  The Company is not in default in the  performance or
observance  of  any  material  obligation,   agreement,  covenant  or  condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound.

            o.  No  Integrated  Offering.  Neither  the  Company  nor any of its
affiliates  nor any  person  acting  on its or their  behalf  has,  directly  or
indirectly, at any time since June 1997, made any offer or sales of any security
or  solicited  any offers to buy any  security  under  circumstances  that would
eliminate the availability of the exemption from registration under Regulation D
in connection with the offer and sale of the Securities as contemplated hereby.


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<PAGE>
            p. Dilution.  The number of Shares  issuable upon  conversion of the
Preferred Stock may increase substantially in certain circumstances,  including,
but not necessarily  limited to, the  circumstance  wherein the trading price of
the Common Stock declines prior to the  conversion of the Preferred  Stock.  The
Company's executive officers and directors have studied and fully understand the
nature of the  Securities  being  sold  hereby  and  recognize  that they have a
potential  dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company.  The Company  specifically  acknowledges  that its obligation to
issue the Shares upon  conversion  of the  Preferred  Stock is binding  upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.

            4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

            a.  Transfer  Restrictions.  The  Buyer  acknowledges  that  (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration  Rights Agreement,  the
Shares have not been and are not being  registered  under the 1933 Act,  and may
not be  transferred  unless (A)  subsequently  registered  thereunder or (B) the
Buyer shall have  delivered  to the  Company an opinion of  counsel,  reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred  may be sold or transferred  pursuant to an
exemption  from  such  registration;  (2)  any  sale of the  Securities  made in
reliance  on Rule  144  promulgated  under  the  1933  Act  may be made  only in
accordance  with  the  terms  of said  Rule  and  further,  if said  Rule is not
applicable,  any  resale of such  Securities  under  circumstances  in which the
seller,  or the  person  through  whom the sale is made,  may be deemed to be an
underwriter,  as that term is used in the 1933 Act, may require  compliance with
some other  exemption under the 1933 Act or the rules and regulations of the SEC
thereunder;  and (3)  neither  the  Company  nor any  other  person is under any
obligation to register the Securities  (other than pursuant to the  Registration
Rights  Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.

            b. Restrictive  Legend.  The Buyer  acknowledges and agrees that the
Preferred  Stock and,  until such time as the Common  Stock has been  registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
pursuant  to  an  effective  Registration  Statement,   certificates  and  other
instruments  representing any of the Securities shall bear a restrictive  legend
in  substantially  the following form (and a  stop-transfer  order may be placed
against transfer of any such Securities):

            THESE   SECURITIES  (THE   "SECURITIES")   HAVE  NOT  BEEN
            REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
            (THE  "SECURITIES  ACT"),  OR THE  SECURITIES  LAWS OF ANY
            STATE  AND  MAY NOT BE SOLD  OR  OFFERED  FOR  SALE IN THE
            ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT  FOR THE
            SECURITIES  OR AN OPINION  OF  COUNSEL  OR OTHER  EVIDENCE
            ACCEPTABLE TO THE  CORPORATION  THAT SUCH  REGISTRATION IS
            NOT REQUIRED.

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<PAGE>
            c. Registration Rights Agreement.  The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.

            d. Filings.  The Company undertakes and agrees to make all necessary
filings in connection  with the sale of the  Preferred  Stock to the Buyer under
any United States laws and regulations,  or by any domestic  securities exchange
or trading  market,  and to provide a copy thereof to the Buyer  promptly  after
such filing.

            e. Reporting Status.  So long as the Buyer  beneficially owns any of
the Preferred  Stock,  the Company  shall file all reports  required to be filed
with the SEC  pursuant  to Section 13 or 15(d) of the 1934 Act,  and the Company
shall not terminate  its status as an issuer  required to file reports under the
1934 Act even if the 1934 Act or the  rules  and  regulations  thereunder  would
permit such termination.

            f. Use of Proceeds.  The Company will use the proceeds from the sale
of the Preferred  Stock  (excluding  amounts paid by the Company for legal fees,
finder's fees and escrow agent fees in connection with the sale of the Preferred
Stock) for general capital purposes and acquisitions, but shall not, directly or
indirectly,  use such proceeds for investment in any other affiliate or to repay
debt to affiliates.

            g. Future Purchases. (i) The Company unconditionally and irrevocably
agrees  to  issue,  if  the  Buyer  desires  to  purchase,  up to an  additional
$2,500,000  liquidation  amount of Preferred  Stock (the  "Additional  Preferred
Stock") in three tranches of $500,000 ("Tranche 2"),  $1,000,000  ("Tranche 3"),
and  $1,000,000  ("Tranche  4") (the  "Additional  Tranches"),  on the terms and
subject to the conditions hereinafter provided.

            (ii) The closing for each  Additional  Tranche shall occur on a date
(the "Additional  Closing Date"),  which date shall be not later than (a) thirty
(30) days after the effectiveness of the Company's listing on the American Stock
Exchange as to Tranche 2; (b) ninety (90) days after the Closing of Tranche 2 as
to Tranche 3; (c) one hundred and eighty (180) days after the Closing of Tranche
2 as to Tranche 4; or (d) as otherwise  mutually  agreed upon by the Company and
the Buyer.  The closing of the  Additional  Tranche shall be conducted  upon the
same terms and conditions as those applicable to the Initial Preferred Stock..

            (iii)  On  each  Additional   Closing  Date,  (A)  the  Registration
Statement  required to be filed under the  Registration  Rights  Agreement shall
continue to be effective,  (B) the representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
(and the Company's  issuance of the Additional  Preferred Stock shall constitute
the Company's making each such representation and warranty as of such date), and
(C)


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<PAGE>
there shall have been no material  adverse  changes  (financial or otherwise) in
the  business or  conditions  of the Company  from the Closing  Date through and
including  in the  Additional  Closing Date (and the  Company's  issuance of the
Additional   Preferred  Stock  shall   constitute  the  Company's   making  such
representation and warranty as of such date), and the Common Stock issuable upon
conversion of the Additional Preferred Stock and upon exercise of the Additional
Warrants,  together  with the  Common  stock  issuable  upon  conversion  of the
Preferred  Stock and  exercise of the Warrants  previously  issued will not at a
conversion or exercise price equal to 75% of the Market Price on such Additional
Closing  Date,  result  in the  issuance  of  more  than  20%  of the  Company's
outstanding Common Stock in accordance with NASDAQ Rule 4310(c)(25)(H)(i)(d)(2),
or any similar rule of a securities  exchange on which the Common Stock may then
be listed ("Cap Regulations").

            (iv) The term "Market Price of the Common Stock" means,  the closing
bid price of the  Common  Stock as  reported,  at the  option of the  Buyer,  by
Bloomberg, LP or the National Association of Securities Dealers.

            h. Certain Agreements.  (i) The Company covenants and agrees that it
will not,  without  the prior  written  consent  of the  Buyer,  enter  into any
subsequent or further  offer or sale of Common Stock or  securities  convertible
into  Common  Stock with any third  party until the earlier of the date which is
two hundred ten (210) days after the  effectiveness of the Company's  listing on
the American Stock Exchange.

            (ii) The  provisions  of  subparagraph  (g)(i) will not apply to (w)
Common Stock issued pursuant to Rule 144, provided the holder thereof holds such
Common  Stock for at least one year from the date of  issuance;  (x) a secondary
public  offering  of  shares of  Common  Stock at  market;  (y) an  offering  of
convertible  debentures  at market or above;  or (z) the issuance of  securities
(other  than for  cash) in  connection  with a  merger,  consolidation,  sale of
assets,  disposition  or the exchange of the capital stock for assets,  stock or
other joint venture interests;  provided,  such securities would not be included
in  the  Registration  Statement  relating  to  the  Shares  and a  registration
statement  in respect of such stock  shall not be filed prior to sixty (60) days
after the Effective Date.

            (iii) The term  "Effective  Date"  means the  effective  date of the
Registration  Statement  covering the Registrable  Securities (as defined in the
Registration Rights Agreement).

            (iv) In the event the Company  breaches  the  provisions  of this P.
4(h),  the  Conversion  Price  shall be  amended  to be the lesser of 68% of the
lowest five (5) day average closing bid for the  twenty-five  (25) days prior to
the  Conversion  Notice,  but at no time in  excess  of 100% of the five (5) day
average  bid price prior to Closing,  and  Purchaser  may require the Company to
immediately  redeem all  outstanding  Preferred Stock in accordance with Section
4(k)(y).

            (v)  Limitations  on  Conversion.  (a)  Solely  with  respect to the
Initial  Preferred



                                       10
<PAGE>
Stock,  if the  closing  bid price of the Common  Stock on the last  trading day
immediately  preceding  the date of delivery of a Notice of  Conversion  is less
than $1.50 per share or as adjusted (as herein  defined) (such notice date being
the  Limitation  Notice  Date),  then the  number of  shares  of 5%  Convertible
Preferred  Stock which may be  converted  by the holder  requesting  conversion,
shall be limited to an amount which does not exceed an aggregate of twenty (20%)
percent  of the amount of shares of 5%  Convertible  Preferred  Stock  initially
purchased  by the  requesting  holder  (such  limitation  being the  "Conversion
Limitation").  The  Conversion  Limitation  shall be for a period of thirty (30)
calendar  days  commencing  on  the  Limitation  Notice  Date  (the  "Limitation
Period").  The Conversion  Limitation  shall be measured as of each notice date,
notwithstanding  the fact that the closing  bid price may be greater  than $1.50
per  share  (or  as  adjusted)   subsequent  to  the  Limitation   Notice  Date.
Notwithstanding  anything  to the  contrary  contained  herein,  the  Conversion
Limitation of this  paragraph  shall not be  applicable  for more than three (3)
Limitation Periods with respect to any shareholder.

            (b) Solely with respect to the Additional  Preferred  Stock,  if the
closing bid price of the Common Stock on the ten (10)  trading days  immediately
preceding  the date of delivery of a Notice of Conversion is less than $1.50 per
share or as adjusted (as herein  defined) (such notice date being the Limitation
Notice Date), then the number of shares of 5% Convertible  Preferred Stock which
may be converted by the holder requesting conversion at a Market Price of $1.50,
shall be limited to an amount  which does not exceed an aggregate of fifty (50%)
percent  of the amount of shares of 5%  Convertible  Preferred  Stock  initially
purchased  by the  requesting  holder  (such  limitation  being the  "Conversion
Limitation"),  and the holder may require  that the balance of the shares  under
such  Notice of  Conversion  be redeemed  at the  Original  Issue Price plus all
unpaid and accrued dividends.

            i. Available Shares.  The Company shall have at all times authorized
and reserved for issuance,  free from preemptive rights,  shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock  issuable  at  conversion  and upon  exercise  of the  Warrants  as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Preferred Stock for all outstanding  shares of Preferred Stock
and upon exercise of the Warrants.

            j.  Warrants.  The Company agrees to issue to Buyer at each Closing,
transferable   divisible   warrants  with  cashless  exercise   provisions  (the
"Warrants")  for 45,000  shares of Common Stock per  $1,000,000  pro rata.  Such
Warrants shall bear an exercise price per share of Common Stock as follows: 120%
of the  Market  Price on the  Initial  Closing  Date,  and shall be  exercisable
immediately upon issuance,  and for a period of three (3) years  thereafter,  in
the form annexed  hereto as Exhibit VI,  together with  piggy-back  registration
rights, and demand registration rights under the Registration Rights Agreement.

            k.  Limitation on Issuance of Shares.  The Company may be limited in
the  number of shares  of  Common  Stock it may issue by the "Cap  Regulations".
Without limiting the other provisions thereof, the Preferred Stock shall provide
that  (i) the  Company  will  take all  steps


                                       11
<PAGE>
reasonably  necessary  to be in a position  to issue  shares of Common  Stock on
conversion  of the  Preferred  Stock  and/or  exercise of the  Warrants  without
violating  the Cap  Regulations  and (ii) if,  despite  taking such  steps,  the
Company  still can not issue such shares of Common Stock  without  violating the
Cap  Regulations,  the holder of Preferred  Stock and Warrants  which can not be
converted as result of the Cap  Regulations  (each such share,  an  "Unconverted
Preferred  Stock") shall have the option,  exercisable in such holders' sole and
absolute discretion, to elect either of the following remedies:

               (x) require the Company to issue shares of Common Stock
         in accordance  with such  holder's  notice of conversion at a
         conversion purchase price equal to the average of the closing
         bid  price  per  share  of  Common  Stock  for the  five  (5)
         consecutive   trading  days  (subject  to  certain  equitable
         adjustments for certain events  occurring during such period)
         preceding the date of notice of conversion; or

               (y)  require  the  Company to redeem  each  Unconverted
         Preferred  Stock  for an  amount  in  cash  (the  "Redemption
         Amount") equal to:


                              V                 x        M
                             --
                             CP
where:

               "V" means the  principal  of an  Unconverted  Preferred
         Stock plus any accrued but unpaid interest thereon;

               "CP" means the  conversion  price in effect on the date
         of redemption (the "Redemption Date") specified in the notice
         from the holder of the  Unconverted  Preferred Stock electing
         this remedy; and

               "M" means the  highest  closing  bid price per share of
         the  Common  Stock   during  the  period   beginning  on  the
         Redemption  Date and  ending  on the date of  payment  of the
         Redemption Amount.

The Preferred Stock shall contain provisions  substantially  consistent with the
above  terms,  with such  additional  provisions  as may be  consented to by the
Buyer.  The  provisions of this paragraph are not intended to limit the scope of
the provisions  otherwise  included in the Preferred  Stock.  Additionally,  the
Company may redeem all or less than all,  upon  twenty  (20) days prior  written
notice  during the one (1) year period after the Initial  Closing  Date,  at the
Redemption Premium.

            5. TRANSFER AGENT INSTRUCTIONS.

            a.  Promptly  following  the delivery by the Buyer of the  aggregate
purchase price for the Initial  Preferred  Stock in accordance with Section 1(c)
hereof, the Company will


                                       12

<PAGE>
irrevocably  instruct its transfer agent to issue Common Stock from time to time
upon conversion of the Preferred Stock in such amounts as specified from time to
time by the  Company to the  transfer  agent,  bearing  the  restrictive  legend
specified in Section 4(b) of this Agreement  prior to registration of the Shares
under the 1933 Act,  registered  in the name of the Buyer or its  nominee and in
such  denominations  to be  specified  by the  Buyer  in  connection  with  each
conversion  of the Preferred  Stock.  The Company  warrants that no  instruction
other than such  instructions  referred to in this  Section 5 and stop  transfer
instructions  to give effect to Section  4(a) hereof prior to  registration  and
sale of the  Shares  under  the 1933 Act  will be  given by the  Company  to the
transfer agent and that the Shares shall otherwise be freely transferable on the
books  and  records  of  the  Company  as and to the  extent  provided  in  this
Agreement,  the Registration  Rights  Agreement,  and applicable law. Nothing in
this Section  shall affect in any way the Buyer's  obligations  and agreement to
comply with all applicable securities laws upon resale of the Securities. If the
Buyer provides the Company with an opinion of counsel reasonably satisfactory to
the Company that  registration of a resale by the Buyer of any of the Securities
in  accordance  with  clause  (1)(B) of Section  4(a) of this  Agreement  is not
required under the 1933 Act, the Company shall (except as provided in clause (2)
of Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Converted Shares, promptly instruct the Company's transfer agent
to issue one or more  certificates  for Common Stock without legend in such name
and in such denominations as specified by the Buyer.

            b. (i) The Company  will  permit the Buyer to exercise  its right to
convert the Preferred  Stock by telecopying an executed and completed  Notice of
Conversion  to the  Company  and  delivering  within  three  (3)  business  days
thereafter,  the original Notice of Conversion and the certificates representing
the Preferred  Stock being converted to the Company by express  courier,  with a
copy to the transfer agent.

            (ii)  The  term  "Conversion   Date"  means,  with  respect  to  any
conversion  elected by the holder of the  Preferred  Stock  after the  Effective
Date, the date  specified in the Notice of Conversion,  provided the copy of the
Notice of Conversion  is telecopied to or otherwise  delivered to the Company in
accordance  with the provisions  hereof so that is received by the Company on or
before such specified date. The Conversion Date for any mandatory  conversion at
maturity shall be the Maturity Date of the Preferred Stock.

            (iii) The Company will transmit the  certificates  representing  the
Converted  Shares issuable upon conversion of any Preferred Stock (together with
Preferred  Stock not being so  converted) to the Buyer via express  courier,  by
electronic transfer or otherwise, within five (5) business days after receipt by
the  Company  of  the  original   Notice  of  Conversion  and  the   certificate
representing the Preferred Stock being converted (the "Delivery Date").

            c.  The  Company  understands  that a delay in the  issuance  of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late  payments  to the Buyer for late  issuance  of Shares  upon  Conversion  in
accordance  with the  following  schedule  (where


                                       13

<PAGE>
"No.  Business  Days Late" is defined as the number of business days beyond five
(5) business days from Delivery Date:

                                                  Late Payment For Each 10,000
                                                  of Preferred Stock Liquidation
 No. Business Days Late                           Amount Being Converted
 ----------------------                           ----------------------

           1                                      $100
           2                                      $200
           3                                      $300
           4                                      $400
           5                                      $500
           6                                      $600
           7                                      $700
           8                                      $800
           9                                      $900
          10                                      $1,000
Less than 10                                      $1,000 +$200 for each Business
                                                  Day Late beyond 10 days

The Company shall pay any payments  incurred  under this Section in  immediately
available  funds upon demand.  Nothing  herein shall limit the Buyer's  right to
pursue actual damages for the Company's  failure to issue and deliver the Common
Stock to the Buyer. Furthermore,  in addition to any other remedies which may be
available  to the Buyer,  in the event that the Company  fails for any reason to
effect  delivery of such shares of Common Stock  within five (5)  business  days
after the  Delivery  Date,  the Buyer will be  entitled  to revoke the  relevant
Notice  of  Conversion  by  delivering  a notice to such  effect to the  Company
whereupon  the Company and the Buyer shall each be restored to their  respective
positions immediately prior to delivery of such Notice of Conversion.

            d. In lieu of  delivering  physical  certificates  representing  the
unlegended securities issuable upon conversion,  provided the Company's transfer
agent is  participating  in the Depository  Trust Company ("DTC") Fast Automated
Securities  Transfer program,  upon request of the Buyer and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend  and the Buyer  thereof  is not  obligated  to return  such
certificate  for the  placement of a legend  thereon,  the Company shall use its
best efforts to cause its transfer agent to  electronically  transmit the Common
Stock issuable upon  conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.

            e. The original  certificate  representing the Preferred Stock shall
be delivered by the Buyer to the Company  simultaneous  with the final Notice of
Conversion.

                                       14

<PAGE>
            6. DELIVERY INSTRUCTIONS.

            The Initial Preferred Stock shall be delivered by the Company to the
Escrow  Agent  pursuant to Section 1(b) hereof,  on a delivery  against  payment
basis, no later than on the Closing Date.

            7. CLOSING DATE.

            (i) The closing of the  issuance  and sale of the Initial  Preferred
Stock  shall  occur on the date (the  "Closing  Date")  which is the first  NYSE
trading day after the fulfillment or waiver of all closing  conditions  pursuant
to  Sections 8 and 9 hereof or such other  date and time as is  mutually  agreed
upon by the Company and the Buyer. The date of the Additional Closing Date shall
be the date  specified  by either  party upon at least five (5)  business  days'
advance  notice  to the  other  party;  PROVIDED,  HOWEVEr,  that it  shall be a
condition of the Additional Closing Date that (i) the conditions of Section 4(g)
be satisfied,  and (ii) each of the conditions  contemplated by Sections 8 and 9
hereof shall have been satisfied or waived on or before such date.

            (ii) Each closing of the  purchase  and issuance of Preferred  Stock
shall occur on the Closing Date or the Additional  Closing Date, as the case may
be, at the offices of the Escrow  Agent and shall take place no later than 12:00
Noon,  New York time, on such day or such other time as is mutually  agreed upon
by the Company and the Buyer.

            (iii) Notwithstanding anything to the contrary contained herein, the
Escrow  Agent will be  authorized  to  release  the  Escrow  Property  only upon
satisfaction of the conditions set forth in Sections 8 and 9 hereof.

            8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

            The Buyer  understands  that the  Company's  obligation  to sell the
Preferred  Stock on the Closing Date and  Additional  Closing Dates to the Buyer
pursuant to this Agreement is conditioned upon:

            a. The  receipt and  acceptance  by the Buyer of this  Agreement  as
evidenced by execution of this  Agreement by the buyer for at least Five Hundred
Thousand  ($500,000)  Dollars in principal  amount of  Preferred  Stock (or such
lesser amount as the Company,  in its sole  discretion,  shall  determine on the
Closing Date);

            b.  Delivery  by the  Buyer to the  Escrow  Agent  of good  funds as
payment in full of an amount equal to the Purchase Price for the Preferred Stock
in accordance with Section 1(c) hereof;

            c. The accuracy on the Closing Date and each Additional Closing Date
of the


                                       15

<PAGE>
representations  and  warranties of the Buyer  contained in this Agreement as if
made on the Closing Date and each  Additional  Closing Date, and the performance
by the Buyer on or before the Closing Date and each  Additional  Closing Date of
all covenants and  agreements of the Buyer required to be performed on or before
the Closing Date and each Additional Closing Date;

            d.  There  shall  not be in  effect  any  law,  rule  or  regulation
prohibiting or restricting the transactions  contemplated  hereby,  or requiring
any consent or approval which shall not have been obtained.

            9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

            The Company  understands that the Buyer's obligation to purchase the
Preferred  Stock  on the  Closing  Date  and  each  Additional  Closing  Date is
conditioned upon:

            a.  Acceptance  by the  Company  of this  Agreement  for the sale of
Preferred Stock, as indicated by execution of this Agreement;

            b.  Delivery by the Company to the Escrow  Agent of the  appropriate
Preferred  Stock in accordance  with this Agreement and the warrants  within ten
(10) days subsequent to Closing;

            c. The  accuracy in all  material  respects on the Closing  Date and
each  Additional  Closing  Date of the  representations  and  warranties  of the
Company  contained  in this  Agreement  as if made on the Closing  Date and such
Additional  Closing  Date and the  performance  by the  Company on or before the
Closing Date and each Additional Closing Date of all covenants and agreements of
the Company  required  to be  performed  on or before the Closing  Date and such
Additional  Closing Date, and as to Additional  Preferred  Stock, the conditions
set forth in ss.4j; and

            d. On the Closing Date and each  Additional  Closing Date, the Buyer
having  received an opinion of counsel for the  Company,  dated the Closing Date
and each  Additional  Closing  Date,  in form,  scope and  substance  reasonably
satisfactory to the Buyer, to the effect set forth in Annex III attached hereto,
and on the Initial Closing Date only, the Registration  Rights Agreement annexed
hereto as Annex IV and the Warrants.

            e. No statute, rule, regulation,  executive order, decree, ruling or
injunction  shall be enacted,  entered,  promulgated or endorsed by any court or
governmental  authority of competent  jurisdiction  which prohibits or adversely
effects  any  of  the  transactions   contemplated  by  this  Agreement  or  the
Transaction  Documents,  and no  proceeding  or  investigation  shall  have been
commenced or threatened  which may have the effect of  prohibiting  or adversely
effecting  any  of  the  transactions  contemplated  by  this  Agreement  or the
Transaction Documents.

            f. From and  after the date  hereof  to and  including  the  initial
Closing Date and each  Additional  Closing Date, the trading of the Common Stock
shall not have been  suspended


                                       16
<PAGE>
by the SEC,  or the NASD and  trading in  securities  generally  on the New York
Stock Exchange or NASDAQ/SmallCap  shall not have been suspended or limited, nor
shall minimum prices been established for securities traded on NASDAQ/Small Cap,
nor shall there be any  outbreak or  escalation  of  hostilities  involving  the
United States or any material  adverse  change in any  financial  market that in
either case in the reasonable  judgment of the Buyer makes it  impracticable  or
inadvisable to purchase the initial Preferred Stock or the Additional  Preferred
Stock, as the case may be.

            10. GOVERNING LAW: MISCELLANEOUS.

            a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware for  contracts to be wholly  performed in
such state and without  giving effect to the  principles  thereof  regarding the
conflict  of laws.  Each of the  parties  consents  to the  jurisdiction  of the
federal courts whose districts encompass any part of the City of New York or the
state  courts  of the  State  of New  York  sitting  in the  City of New York in
connection with any dispute  arising under this Agreement and hereby waives,  to
the maximum  extent  permitted by law, any  objection,  including  any objection
based on forum non  conveniens,  to the bringing of any such  proceeding in such
jurisdictions.

            b. A facsimile  transmission of this signed Agreement shall be legal
and binding on all parties hereto.

            c. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.

            d. The headings of this  Agreement are for  convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

            e.  If  any  provision  of  this  Agreement   shall  be  invalid  or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

            f. This  Agreement  may be amended only by an  instrument in writing
signed by the party to be charged with enforcement thereof.

            g. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.

            11.  NOTICES.  Any notice  required or permitted  hereunder shall be
given in  writing  (unless  otherwise  specified  herein)  and  shall be  deemed
effectively given on the earliest of


                                       17
<PAGE>
                  (i) the date delivered,  if delivered by personal  delivery as
                  against  written  receipt  therefor or by confirmed  facsimile
                  transmission,

                  (ii) the seventh business day after deposit,  postage prepaid,
                  in the United States Postal Service by registered or certified
                  mail, or

                  (iii) the third  business day after  mailing by  international
                  express courier, with delivery costs and fees prepaid,

in each case,  addressed to each of the other parties thereunto  entitled at the
following  addresses (or at such other  addresses as such party may designate by
ten (10)  days'  advance  written  notice  similarly  given to each of the other
parties hereto):

COMPANY:                ATLANTIC INTERNATIONAL ENTERTAINMENT, INC.
                        200 East Palmetto Park Road
                        Suite 200
                        Boca Raton, Florida 33432
                        ATTN:
                        Telecopier No.: (561) 393-6685
                        Telephone No.: (561) 393-1485

                        with a copy to:

                        Harry Winderman, Esq/
                        2295 Corporate Boulevard, N.W.
                        Suite 140
                        Boca Raton, FL 33431
                        Telecopier No.:  561-241-5266
                        Telephone No.:  561-241-0332

BUYER:                  At the address set forth on the  signature  page of this
                        Agreement.

ESCROW AGENT:           Krieger & Prager, Esqs.
                        319 Fifth Avenue
                        New York, New York 10016
                        Telecopier No. (212) 213-2077

            12.  SURVIVAL  OF  REPRESENTATIONS  AND  WARRANTIES.  The  Company's
representations  and warranties  herein shall survive the execution and delivery
of this  Agreement  and the  delivery of the  Preferred  Stock and the  Purchase
Price,  and shall  inure to the  benefit  of the Buyer  and its  successors  and
assigns.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       18
<PAGE>
            IN WITNESS  WHEREOF,  this  Agreement  has been duly executed by the
Buyer or one of its officers  thereunto duly authorized as of the date set forth
below.

NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED:         5,000

AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK:           $500,000.00

                            SIGNATURES FOR ENTITIES

            IN WITNESS  WHEREOF,  the undersigned  represents that the foregoing
statements are true and correct and that it has caused this Securities  Purchase
Agreement to be duly executed on its behalf this 4th day of April, 1998.


-----------------------------                -----------------------------------
-----------------------------                Printed Name of Subscriber
Address
                                             By: /s/
                                                 -------------------------------
Telecopier No. _________________                (Signature of Authorized Person)

                                             ----------------------------------
--------------------------------             Printed Name and Title
Jurisdiction of Incorporation
or Organization

As of the date set forth below,  the  undersigned  hereby accepts this Agreement
and  represents  that the foregoing  statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.

ATLANTIC INTERNATIONAL ENTERTAINMENT, INC.

By:          /s/ Richard Iamunno
             -----------------------------
Title:       President and C.E.O.
             -----------------------------
Date:        04/03/98
             -----------------------------

<PAGE>

            ANNEX I                 CERTIFICATE OF DESIGNATIONS

            ANNEX II                JOINT ESCROW INSTRUCTIONS

            ANNEX III               OPINION OF COUNSEL

            ANNEX IV                REGISTRATION RIGHTS AGREEMENT

            ANNEX V                 COMPANY DISCLOSURE MATERIALS

            ANNEX V                 COMPANY DISCLOSURE



                          [TO BE SUPPLIED BY COMPANY]



<PAGE>
                                                                        ANNEX IV
                                                                              TO
                                                             SECURITIES PURCHASE
                                                                       AGREEMENT


                          REGISTRATION RIGHTS AGREEMENT

         THIS  REGISTRATION  RIGHTS  AGREEMENT,  dated as of April 6, 1998 (this
"Agreement"), is made by and between ATLANTIC INTERNATIONAL ENTERTAINMENT, INC.,
a Delaware  corporation (the  "Company"),  and the entity named on the signature
page hereto (the "Initial Investor").

                              W I T N E S S E T H:

         WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement,  dated as of April 6, 1998, between the Initial Investor and
the  Company  (the  "Securities  Purchase  Agreement";   capitalized  terms  not
otherwise  defined  herein  shall  have  the  meanings  ascribed  to them in the
Securities Purchase Agreement),  the Company has agreed to issue and sell to the
Initial Investor $4,000,000  liquidation  preference of 5% Convertible Preferred
Stock,  par value $.001 per share of the Company (the  "Preferred  Stock," which
term,  as used herein  shall have the meaning  ascribed to it in the  Securities
Purchase Agreement); and

         WHEREAS,  the Company  has agreed to issue the  Warrants to the Initial
Investor in connection with the issuance of the Preferred Stock; and

         WHEREAS, the Preferred Stock is convertible into shares of Common Stock
(the "Conversion Shares") upon the terms and subject to the conditions contained
in the Certificate of Designations  and the Warrants to be issued to the Initial
Investor  may be  exercised  for the  purchase  of shares of Common  Stock  (the
"Warrant Shares") upon the terms and conditions of the Warrants; and

         WHEREAS,  to induce the  Initial  Investor  to execute  and deliver the
Securities  Purchase  Agreement,  the  Company  has  agreed to  provide  certain
registration rights under the Securities Act of 1933, as amended,  and the rules
and regulations thereunder, or any similar successor statute (collectively,  the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Initial Investor hereby agree as follows:


<PAGE>
         1.  DEFINITIONS.  As used in this Agreement,  the following terms shall
have the following meanings:

         (a) "Investor" means the Initial Investor and any permitted  transferee
or assignee who agrees to become bound by the  provisions  of this  Agreement in
accordance with Section 9 hereof.

         (b)  "Potential  Material  Event" means any of the  following:  (i) the
possession by the Company of material  information  not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such  information in
the  registration  statement would be detrimental to the business and affairs of
the Company;  or (ii) any material  engagement  or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely  affected by disclosure in a  registration  statement at such time,
which  determination  shall be accompanied by a good faith  determination by the
Board of  Directors  of the Company  that the  registration  statement  would be
materially misleading absent the inclusion of such information.

         (c)   "Register,"   "Registered,"   and   "Registration"   refer  to  a
registration  effected  by  preparing  and filing a  Registration  Statement  or
Statements in compliance  with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering  securities on a
continuous  basis ("Rule 415"), and the declaration or ordering of effectiveness
of such  Registration  Statement by the United  States  Securities  and Exchange
Commission (the "SEC").

         (d)  "Registrable  Securities"  means  the  Conversion  Shares  and the
Warrant Shares.

         (e)  "Registration  Statement"  means a  registration  statement of the
Company under the Securities Act.

         2. REGISTRATION.

         (A) MANDATORY REGISTRATION. The Company shall prepare and file with the
SEC, as soon as possible  after the Closing Date,  but no later than thirty (30)
days following the Closing Date, either a Registration Statement on Form SB-2 or
an amendment to any such pending Registration  Statement  registering for resale
by the Investor all of the Registrable Securities, but in no event less than the
aggregate  number  of  shares  into  (i)  which  the  Preferred  Stock  would be
convertible  at the time of filing of the Form SB-2  (assuming for such purposes
that all shares of Preferred  Stock had been eligible to be  converted,  and had
been converted,  into Conversion Shares in accordance with their terms,  whether
or not such eligibility or conversion had in fact occurred as of such date), and
(ii) which would be issued upon  exercise of all of the  Warrants at the time of
filing of the Form SB-2  [assuming  for such purposes that all Warrants had been
eligible to be exercised and had been exercised in accordance  with their terms,
whether or not such  eligibility  or  exercise  had in fact  occurred as of such
date]. Such Registration  Statement or amended Registration Statement shall also
state that, in  accordance  with Rule 416 and 457 under the  Securities  Act, it
also covers such  indeterminate  number of additional  shares of Common Stock as
may become  issuable upon


                                       2

<PAGE>
conversion  of the  Preferred  Stock and the exercise of the Warrants  resulting
from  adjustment in the Conversion  Price or the Warrant  exercise price, as the
case may be, or to  prevent  dilution  resulting  from  stock  splits,  or stock
dividends.  The  Company  will use its  reasonable  best  efforts  to cause such
Registration  Statement to be declared  effective no later than ninety (90) days
after the Closing Date. If at any time the number of shares of Common Stock into
which the  Preferred  Stock may be  converted  and  which  would be issued  upon
exercise of the Warrants  exceeds the aggregate number of shares of Common Stock
then registered,  the Company shall, within ten (10) business days after receipt
of a written  notice  from any  Investor,  either  (i)  amend  the  Registration
Statement  filed by the Company  pursuant  to the  preceding  sentence,  if such
Registration  Statement has not been declared effective by the SEC at that time,
to  register  all  shares of Common  Stock into  which the  Preferred  Stock may
currently or in the future be converted  and which would be issued  currently or
in the  future  upon  exercise  of the  Warrants,  or (ii) if such  Registration
Statement has been declared effective by the SEC at that time, file with the SEC
an additional  Registration  Statement on Form SB-2, as may be  appropriate,  to
register the shares of Common Stock into which the Preferred Stock may currently
or in the future be  converted  and which  would be issued  currently  or in the
future upon exercise of the Warrants that exceed the aggregate  number of shares
of Common  Stock  already  registered.  Such  Registration  Statement  shall not
include any shares other than the Registrable  Securities without the consent of
the Investor.

         (B) PAYMENTS BY THE COMPANY.

         (i) If the Registration  Statement covering the Registrable  Securities
is not filed in proper  form with the SEC by thirty  (30) days after the Closing
Date (the "Required  Filing  Date"),  then the Company will make payments to the
Initial  Investor  in such  amounts  and at such  times as  shall be  determined
pursuant to this Section 2(b).

         (ii) If the Registration  Statement covering the registrable securities
is not effective (a) within the earlier of (1) five (5) days after notice by the
SEC that it may be declared  effective,  or (2) ninety (90) days  following  the
Closing Date (the "Required  Effective  Date"), or (b) after a suspension period
(as defined below),  then the Company will make payments to the Initial Investor
in such  amounts  and at such  times  as shall be  determined  pursuant  to this
Section 2(b).

         (iii) The amount (the  "Periodic  Amount") to be paid by the Company to
the Initial Investor shall be determined as of each computation date (as defined
below) and such amount  shall be equal to (A) two percent  (2%) of the  Purchase
Price paid by the Initial  Investor  (the  "Purchase  Price") for all  Preferred
Stock  then  purchased  and  outstanding  pursuant  to the  Securities  Purchase
Agreement on the Required  Filing Date or the Required  Effective  date,  as the
case may be, to the first relevant  computation date, and (B) three percent (3%)
of  the  Purchase  Price  on  each  Computation  Date  thereafter.   By  way  of
illustration  and  not in  limitation  of  the  foregoing,  if the  Registration
Statement  is  timely  filed but is not  declared  effective  until one  hundred
sixty-five (165) days after the Closing Date, the Periodic Amount will aggregate
eight (8%) percent of the Purchase  Price of the Preferred  Stock (2% on day 91,
plus 3% on days 120 and 150).

                                       3

<PAGE>
                  (iv)  Additionally,  if (a) the Registration  Statement is not
filed within sixty (60) days from the Closing Date or (b) the Required Effective
Date is greater than one hundred fifty (150) days after the Closing Date, or (c)
the  effectiveness  of the Registration  Statement is not maintained  during the
Registration  Period as  hereinafter  defined,  Purchaser  may,  at its  option,
require  the Company to redeem the  Preferred  Stock in full,  within  three (3)
days, in cash, in accordance  with Section  4(k)(y) of the  Securities  Purchase
Agreement.

                  (v) Each  Periodic  Amount will be payable to the  Investor by
the Company in cash or other  immediately  available  funds,  upon demand of the
Investor.

                  (vi) The parties  acknowledge  that the  damages  which may be
incurred  by the  Investor  if the  Registration  Statement  is not filed by the
Required  Filing Date or if the  Registration  Statement  has not been  declared
effective by the Required  Registration Date may be difficult to ascertain.  The
parties agree that the Periodic Amount  represents a reasonable  estimate on the
part of the  parties,  as of the date of this  Agreement,  of the amount of such
damages and the sole and  exclusive  remedy of the Investor with respect to such
default by the Company.

                  (vii)  Notwithstanding  the foregoing,  the amounts payable by
the Company  pursuant to this  provision  shall not be payable to the extent any
delay in the  effectiveness of the  Registration  Statement occurs because of an
act of, or a failure  to act or to act  timely by the  Initial  Investor  or its
counsel if the Company timely  forwards to counsel any required  documents or in
the event all of the Registrable  Securities may be sold pursuant to Rule 144 or
another available exemption under the Act.

                  (viii)  "Computation  Date"  means  (i) the date  which is the
earlier of (A) thirty (30) days after the Required  Filing Date and the Required
Effective  Date,  as the case may be, or (B) the date after the Required  Filing
Date or the Required  Registration  Date on which the Registration  Statement is
filed (with respect to payments due as  contemplated  by Section 2(b)(i) hereof)
or declared  effective  (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (ii) each date which is the earlier of
(A) thirty (30) days after the previous  Computation  Date or (B) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as  contemplated  by Section 2(b)(i) hereof) or declared
effective  (with  respect to payments due as  contemplated  by Section  2(b)(ii)
hereof), as the case may be.

            3.  OBLIGATIONS OF THE COMPANY.  IN CONNECTION WITH THE REGISTRATION
OF THE REGISTRABLE SECURITIES, THE COMPANY SHALL DO EACH OF THE FOLLOWING.

            (a) Prepare  promptly,  and file with the SEC by the Required Filing
Date,  a  Registration  Statement  with  respect  to not less than the number of
Registrable  Securities  provided in Section 2(a) above,  and thereafter use its
reasonable  best  efforts  to cause  each  Registration  Statement  relating  to
Registrable  Securities to become  effective by the Required  Effective Date and
keep the Registration  Statement  effective at all times until the earliest (the
"Registration  Period")  of (i) the date that is two (2) years after the Closing
Date, (ii) the date when the Investors may sell all


                                       4

<PAGE>
Registrable  Securities under Rule 144 or (iii) the date the Investors no longer
own any of the Registrable  Securities,  which Registration Statement (including
any amendments or supplements thereto and prospectuses  contained therein) shall
not contain any untrue  statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances in which they were made, not misleading;

            (b)  Prepare  and  file  with  the SEC  such  amendments  (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus  used  in  connection  with  the  Registration  Statement  as  may be
necessary  to  keep  the   Registration   effective  at  all  times  during  the
Registration  Period,  and,  during the  Registration  Period,  comply  with the
provisions  of  the  Securities  Act  with  respect  to the  disposition  of all
Registrable  Securities  of the Company  covered by the  Registration  Statement
until such time as all of such  Registrable  Securities have been disposed of in
accordance  with the intended  methods of  disposition  by the seller or sellers
thereof as set forth in the Registration Statement;

            (c) The Company shall permit a single firm of counsel  designated by
the Initial  Investors to review the  Registration  Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business  days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.

            (d) Notify the Holders of Registrable  Securities to be sold,  their
Counsel and any managing  underwriters  immediately  (and, in the case of (i)(A)
below,  not less than five (5) days prior to such filing) and (if request by any
such  Person)  confirm such notice in writing no later than one (1) Business Day
following  the day (i)(A) when a  Prospectus  or any  Prospectus  supplement  or
post-effective  amendment to the Registration Statement is proposed to be filed;
(B)  whenever  the  Commission  notifies  the  Company  whether  there will be a
"review" of such Registration  Statement;  (C) whenever the Company receives (or
representatives  of the  Company  receive  on its  behalf)  any oral or  written
comments from the Commission respect of a Registration  Statement (copies or, in
the  case  of oral  comments,  summaries  of such  comments  shall  be  promptly
furnished  by  the  Company  to  the  Holders);  and  (D)  with  respect  to the
Registration Statement or any post-effective amendment, when the same has become
effective;  (ii) of any request by the  Commission or any other Federal or state
governmental  authority  for  amendments  or  supplements  to  the  Registration
Statement or Prospectus or for additional information;  (iii) of the issuance by
the  Commission  of  any  stop  order   suspending  the   effectiveness  of  the
Registration  Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings  for that purpose;  (iv) if at any time any of the
representations  or  warranties  of  the  Company  contained  in  any  agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all  material  respects;  (v) of the  receipt  by the  Company of any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification  of  any of  the  Registrable  Securities  for  sale  in any
jurisdiction,  or the  initiation  or  threatening  of any  Proceeding  for such
purpose;  and (vi) of the  occurrence of any event that to the best knowledge of
the Company makes any statement made in the Registration Statement or Prospectus
or any document  incorporated or deemed to be incorporated  therein by reference
untrue  in  any  material   respect  or  that  requires  any  revisions  to  the
Registration  Statement,  Prospectus or other  documents so that, in the case of
the  Registration  Statement or the Prospectus,  as the case


                                       5

<PAGE>
may be, it will not contain any untrue  statement of a material  fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.  In addition,  the Company shall furnish the Holders with copies
of all intended written responses to the comments  contemplated in clause (C) of
this  Section  3(d) not later than one (1) Business Day in advance of the filing
of such  responses  with the  Commission  so that  the  Holders  shall  have the
opportunity to comment thereon.

            (e)  Furnish  to each  Investor  whose  Registrable  Securities  are
included in the Registration  Statement and its legal counsel  identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC,  or  received  by the  Company,  one (1) copy of the  Registration
Statement,  each  preliminary  prospectus and prospectus,  and each amendment or
supplement  thereto,  and (ii) such  number of copies of a  prospectus,  and all
amendments and supplements  thereto and such other  documents,  as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;

            (f) As promptly as  practicable  after becoming aware of such event,
notify  each  Investor  of the  happening  of any event of which the Company has
knowledge,  as a result of which the  prospectus  included  in the  Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material  fact  required to be stated  therein or  necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading,  and use its best efforts promptly to prepare a supplement
or amendment to the Registration  Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;

            (g) As promptly as  practicable  after becoming aware of such event,
notify each  Investor who holds  Registrable  Securities  being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of  Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration  Statement at
the earliest possible time;

            (h)  Notwithstanding  the foregoing,  if at any time or from time to
time after the date of effectiveness of the Registration Statement,  the Company
notifies  the  Investors  in writing of the  existence  of a Potential  Material
Event,  the Investors  shall not offer or sell any  Registrable  Securities,  or
engage  in any  other  transaction  involving  or  relating  to the  Registrable
Securities,  from the time of the giving of notice  with  respect to a Potential
Material Event until such Investor receives written notice from the Company that
such  Potential  Material  Event  either has been  disclosed to the public or no
longer  constitutes a Potential  Material  Event;  PROVIDED,  HOWEVER,  that the
Company may not so suspend the right to such holders of  Registrable  Securities
for more than two twenty (20) day periods in the  aggregate  during any 12-month
period  ("Suspension  Period")  with at least a ten (10)  business  day interval
between such periods,  during the periods the Registration Statement is required
to be in effect;



                                       6
<PAGE>
            (i) Use its reasonable  efforts to secure NASDAQ/OTC  Bulletin Board
authorization  and  quotation  for  such  Registrable  Securities  and,  without
limiting the  generality  of the  foregoing,  to arrange for at least two market
makers to register with the National  Association  of Securities  Dealers,  Inc.
("NASD") as such with respect to such Registrable Securities;

            (j) Provide a transfer  agent and  registrar,  which may be a single
entity, for the Registrable  Securities not later than the effective date of the
Registration Statement;

            (k) Cooperate  with the Investors  who hold  Registrable  Securities
(or, subject to receipt by the Company of appropriate  notice and documentation,
as may be required by the  Securities  Purchase  Agreement,  the  Certificate of
Designations,  the  Warrants  or this  Agreement,  securities  convertible  into
Registrable  Securities) being offered to facilitate the timely  preparation and
delivery of certificates  for the Registrable  Securities to be offered pursuant
to the Registration  Statement and enable such  certificates for the Registrable
Securities  to be in such  denominations  or  amounts as the case may be, as the
Investors may reasonably  request,  and,  within three (3) business days after a
Registration   Statement  which  includes  Registrable   Securities  is  ordered
effective by the SEC, the Company shall  deliver,  and shall cause legal counsel
selected by the Company to deliver,  to the transfer  agent for the  Registrable
Securities  (with  copies  to the  Investors  whose  Registrable  Securities  or
securities   convertible  into  Registrable  Securities  are  included  in  such
Registration  Statement) an appropriate instruction and opinion of such counsel;
provided,  however,  that  nothing in this  subparagraph  (j) shall be deemed to
waive any of the provisions  regarding the conditions or method of conversion of
Preferred Stock or exercise of Warrants into Registrable Securities; and

            (l) Take all other  reasonable  actions  necessary  to expedite  and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.

            4. OBLIGATIONS OF THE INVESTORS. In connection with the Registration
of  the  Registrable   Securities,   the  Investors  shall  have  the  following
obligations:

            (a) It shall be a  condition  precedent  to the  obligations  of the
Company to complete the registration  pursuant to this Agreement with respect to
the  Registrable  Securities of a particular  Investor that such Investor  shall
furnish to the  Company  such  information  regarding  itself,  the  Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities  held  by  it,  as  shall  be  reasonably   required  to  effect  the
registration of such Registrable  Securities and shall execute such documents in
connection  with such  registration  as the Company may reasonably  request.  At
least  five  (5)  days  prior  to  the  first  anticipated  filing  date  of the
Registration   Statement,   the  Company  shall  notify  each  Investor  of  the
information  the  Company  requires  from each  such  Investor  (the  "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration  Statement. If at least two (2) business
days  prior to the  filing  date the  Company  has not  received  the  Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;


                                       7
<PAGE>
            (b) Each Investor,  by such Investor's acceptance of the Registrable
Securities,  agrees to cooperate with the Company as reasonably requested by the
Company  in  connection  with the  preparation  and  filing of the  Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such  Investor's  election  to  exclude  all  of  such  Investor's   Registrable
Securities from the Registration Statement; and

            (c) Each Investor  agrees that,  upon receipt of any notice from the
Company of the  happening of any event of the kind  described in Section 3(e) or
3(f),  above,  such  Investor  will  immediately   discontinue   disposition  of
Registrable  Securities  pursuant to the  Registration  Statement  covering such
Registrable  Securities  until  such  Investor's  receipt  of the  copies of the
supplemented or amended prospectus  contemplated by Section 3(e) or 3(f) and, if
so directed by the Company,  such Investor  shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate  of
destruction)  all  copies  in  such  Investor's  possession,  of the  prospectus
covering  such  Registrable  Securities  current  at the time of receipt of such
notice.

            5. Expenses of Registration. (a) All reasonable expenses (other than
underwriting discounts and commissions of the investor and legal fees of counsel
to  the  Investor)  incurred  in  connection  with  registrations,   filings  or
qualifications  pursuant  to  section  3,  including,  without  limitation,  all
registration,  listing,  and qualifications  fees, printers and accounting fees,
the fees and  disbursements  of counsel for the company,  and a fee for a single
counsel for the Investor not exceeding $3,500, shall be borne by the Company.

            (b) Except as and to the extent  specifically  set forth in Schedule
5(b) attached hereto, neither the Company nor any of its subsidiaries has, as of
the date hereof, nor shall the Company nor any of its subsidiaries,  on or after
the  date of this  Agreement,  enter  into any  agreement  with  respect  to its
securities that is  inconsistent  with the rights granted to the Holders in this
Agreement or otherwise  conflicts with the provisions  hereof.  Except as and to
the extent specifically set forth in Schedule 5(b) attached hereto,  neither the
Company nor any of its  subsidiaries  has previously  entered into any agreement
granting any  registration  rights with respect to any of its  securities to any
Person.  Without  limiting the generality of the foregoing,  without the written
consent  of the  Holders  of a  majority  of the  then  outstanding  Registrable
Securities,  the Company  shall not grant to any person the right to request the
Company to register  any  securities  of the Company  under the  Securities  Act
unless the rights so granted are subject in all  respects to the prior rights in
full of the  holders  set forth  herein,  and are not  otherwise  in conflict or
inconsistent with the provisions of this Agreement.

            6.  Indemnification.  in the event any  registrable  securities  are
included in a registration statement under this agreement:

            (a) To the extent  permitted by law, the Company will  indemnify and
hold  harmless  each  Investor  who  holds  such  Registrable  Securities,   the
directors,  if any, of such  Investor,  the officers,  if any, of such Investor,
each  person,  if any,  who  controls  any  Investor  within the  meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act")  (each,  an  "Indemnified  Person" or  "Indemnified  Party"),  against any
losses,  claims,  damages,  liabilities


                                       8

<PAGE>
or expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar  as such  Claims  (or  actions  or  proceedings,  whether  commenced  or
threatened,  in  respect  thereof)  arise  out of or are  based  upon any of the
following statements,  omissions or violations in the Registration Statement, or
any post-effective  amendment thereof, or any prospectus  included therein:  (i)
any untrue statement or alleged untrue statement of a material fact contained in
the  Registration  Statement  or any  post-effective  amendment  thereof  or the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements therein not misleading,  (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final  prospectus  (as amended or  supplemented,  if the  Company  files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state  therein any material  fact  necessary to make the  statements
made therein,  in light of the circumstances  under which the statements therein
were made,  not  misleading or (iii) any  violation or alleged  violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or  regulation  under the  Securities  Act,  the  Exchange Act or any state
securities  law (the matters in the  foregoing  clauses (i) through (iii) being,
collectively,  "Violations").  Subject  to  clause  (b) of this  Section  6, the
Company shall  reimburse the  Investors,  promptly as such expenses are incurred
and  are due and  payable,  for any  legal  fees or  other  reasonable  expenses
incurred by them in connection with  investigating  or defending any such Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained in this Section 6(a) shall not (I) apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with  information  furnished  in writing  to the  Company by or on behalf of any
Indemnified  Person  expressly for use in connection with the preparation of the
Registration  Statement or any such amendment thereof or supplement  thereto, if
such  prospectus  was timely made  available by the Company  pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the  prospectus  made available
by the  Company;  or (III) apply to amounts paid in  settlement  of any Claim if
such  settlement is effected  without the prior written  consent of the Company,
which consent shall not be unreasonably  withheld.  Each Investor will indemnify
the Company and its officers,  directors and agents  against any claims  arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with  information  furnished in writing to the Company,  by or on behalf of such
Investor,   expressly  for  use  in  connection  with  the  preparation  of  the
Registration  Statement,  subject  to such  limitations  and  conditions  as are
applicable  to the  Indemnification  provided by the Company to this  Section 6.
Such  indemnity  shall  remain  in  full  force  and  effect  regardless  of any
investigation  made by or on behalf of the Indemnified  Person and shall survive
the transfer of the Registrable  Securities by the Investors pursuant to Section
9.

            (b) Promptly after receipt by an  Indemnified  Person or Indemnified
Party  under  this  Section  6 of  notice  of the  commencement  of  any  action
(including any  governmental  action),  such  Indemnified  Person or Indemnified
Party  shall,  if a  Claim  in  respect  thereof  is  to  be  made  against  any
indemnifying  party under this  Section 6, deliver to the  indemnifying  party a
written notice of the commencement thereof and the indemnifying party shall have
the right to  participate  in,  and,  to the  extent the  indemnifying  party so
desires,  jointly with any other indemnifying party similarly noticed, to assume
control  of the  defense  thereof  with  counsel  mutually  satisfactory  to the
indemnifying  party and the Indemnified  Person or the Indemnified Party, as the
case may be. In case any such action is



                                       9
<PAGE>

brought against any Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement  thereof,  the indemnifying party will be
entitled to  participate  in, and, to the extent that it may wish,  jointly with
any other  indemnifying  party similarly  notified,  assume the defense thereof,
subject to the provisions  herein stated and after notice from the  indemnifying
party to such  Indemnified  Person or  Indemnified  Party of its  election so to
assume the defense thereof,  the  indemnifying  party will not be liable to such
Indemnified  Person or  Indemnified  Party under this Section 6 for any legal or
other  reasonable   out-of-pocket   expenses   subsequently   incurred  by  such
Indemnified  Person or Indemnified  Party in connection with the defense thereof
other than reasonable  costs of  investigation,  unless the  indemnifying  party
shall not pursue the action of its final conclusion.  The Indemnified  Person or
Indemnified  Party shall have the right to employ  separate  counsel in any such
action and to  participate in the defense  thereof,  but the fees and reasonable
out-of-pocket  expenses  of such  counsel  shall  not be at the  expense  of the
indemnifying  party if the  indemnifying  party has  assumed  the defense of the
action  with  counsel  reasonably  satisfactory  to the  Indemnified  Person  or
Indemnified  Party.  The failure to deliver  written notice to the  indemnifying
party within a reasonable time of the  commencement of any such action shall not
relieve such  indemnifying  party of any liability to the Indemnified  Person or
Indemnified  Party  under  this  Section  6,  except  to  the  extent  that  the
indemnifying  party is  prejudiced  in its  ability to defend such  action.  The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the  investigation  or defense,  as such
expense, loss, damage or liability is incurred and is due and payable.

            7.   Contribution.   To  the  extent  any   indemnification   by  an
indemnifying  party is  prohibited  or limited by law,  the  indemnifying  party
agrees to make the maximum contribution with respect to any amounts for which it
would  otherwise be liable under  Section 6 to the fullest  extent  permitted by
law;  provided,   however,   that  (a)  no  contribution  shall  be  made  under
circumstances  where the maker  would not have been  liable for  indemnification
under the fault  standards set forth in Section 6; (b) no seller of  Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any seller
of   Registrable   Securities   who  was   not   guilty   of   such   fraudulent
misrepresentation;  and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.

            8. Reports under  Exchange  Act. With a view to making  available to
the Investors the benefits of Rule 144  promulgated  under the Securities Act or
any other  similar rule or regulation of the SEC that may at any time permit the
Investors to sell  securities of the Company to the public without  registration
("Rule 144"), the Company agrees to:

            (a) make and keep public information  available,  as those terms are
understood and defined in Rule 144;

            (b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and

                                       10

<PAGE>
            (c)  furnish  to  each  Investor  so  long  as  such  Investor  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company that it has complied  with the reporting  requirements  of Rule 144, the
Securities  Act and the Exchange  Act,  (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other  information as may be reasonably  requested to
permit  the  Investors  to sell such  securities  pursuant  to Rule 144  without
registration.

            9.  Assignment of the  Registration  Rights.  The rights to have the
Company  Register  Registrable  Securities  pursuant to this Agreement  shall be
automatically  assigned by the Investors to any  transferee  of the  Registrable
Securities (or all or any portion of any Preferred Stock of the Company which is
convertible  into such  securities)  permitted  or allowable by the terms of the
Securities  Purchase  Agreement only if: (a) the Investor agrees in writing with
the  transferee or assignee to assign such rights,  and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment,  (b)
the Company is,  within a  reasonable  time after such  transfer or  assignment,
furnished with written notice of (i) the name and address of such  transferee or
assignee and (ii) the securities with respect to which such registration  rights
are being  transferred or assigned,  (c) immediately  following such transfer or
assignment  the further  disposition  of such  securities  by the  transferee or
assignee is restricted  under the Securities Act and applicable state securities
laws,  and (d) at or before the time the company  received  the  written  notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing  with or in favor of the  Company  to be bound by all of the  provisions
contained  herein, a copy of which shall be provided to the Company.  The copies
referred to in clauses (a) and (d) of the immediately  preceding sentence may be
redacted  to delete  certain  financial  and other  details  of the  transaction
between the Investor and the  transferee if the same is included in the document
to be  provided  to the  Company.  In  the  event  of any  delay  in  filing  or
effectiveness of the Registration Statement as a result of such assignment,  the
Company  shall not be liable for any damages  arising  from such  delay,  or the
payments set forth in Section 2(c) hereof.

            10.  Amendment  of  Registration   Rights.  Any  provision  of  this
Agreement  may be  amended  and the  observance  thereof  may be waived  (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  only with the written  consent of the Company and Investors who
hold an  eighty  (80%)  percent  interest  of the  Registrable  Securities.  Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.

            11. Miscellaneous.

            (a) A person or  entity  is  deemed  to be a holder  of  Registrable
Securities  whenever  such  person or entity  owns of  record  such  Registrable
Securities.  if  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or more  persons  or  entities  with  respect  to the  same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

            (b) Notices  required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently  given when personally  delivered
(by  hand,  by  courier,  by  telephone


                                       11
<PAGE>
line  facsimile  transmission,  receipt  confirmed,  or other  means) or sent by
certified mail,  return receipt  requested,  properly  addressed and with proper
postage pre-paid (i) if to the Company,  Atlantic  International  Entertainment,
Inc., 200 East Palmetto Park Road, Suite 200, Boca Raton,  Florida 33432,  ATTN:
President, Telecopier No.: (561) 393-6685; with a copy to Harry Winderman, Esq.,
2295 Corporate Boulevard, N.W., Suite 140, Boca Raton, Florida 33431, Telecopier
No.: (561) 241-5266;  (ii) if to the Initial Investor,  at the address set forth
under  its name in the  Securities  Purchase  Agreement,  with a copy to  Samuel
Krieger,  Esq.,  Krieger & Prager,  319 Fifth Avenue,  Third Floor, New York, NY
10016,  Telecopier No.: (212) 213-2077;  and (iii) if to any other Investor,  at
such address as such Investor shall have provided in writing to the Company,  or
at such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective, when personally delivered, upon
receipt and,  when so sent by registered  or certified  mail,  four (4) calendar
days after deposit with the United States Postal Service.

            (c) Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            (d)  This  Agreement   shall  be  governed  by  and  interpreted  in
accordance  with the laws of the State of Delaware  for  contracts  to be wholly
performed  in such state and without  giving  effect to the  principles  thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state  courts of the State of New York sitting in the City of New York in
connection with any dispute  arising under this Agreement and hereby waives,  to
the maximum  extent  permitted by law, any  objection,  including  any objection
based on FORUM NON  COVENIENS,  to the bringing of any such  proceeding  in such
jurisdictions.

            (e)  If  any  provision  of  this  Agreement  shall  be  invalid  or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

            (f) Subject to the requirements of Section 9 hereof,  this Agreement
shall inure to the benefit of and be binding upon the  successors and assigns of
each of the parties hereto.

            (g) All pronouns and any variations  thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

            (h) The headings in this Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning thereof.

            (i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which shall  constitute  one and
the same agreement.  This Agreement,  once executed by a party, may be delivered
to the other party hereto by telephone line


                                       12
<PAGE>
facsimile  transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.

            (j) The  Company  acknowledges  that any  failure by the  Company to
perform  its  obligations  under  Section  3(a)  hereof,  or any  delay  in such
performance could result in loss to the Investors,  and the Company agrees that,
in  addition  to any  other  liability  the  Company  may have by reason of such
failure or delay,  the Company shall be liable for all direct  damages caused by
any such  failure  or delay,  unless  the same is the  result of force  majeure.
Neither party shall be liable for consequential damages.

            (k) This  Agreement  constitutes  the  entire  agreement  among  the
parties  hereto  with  respect  to  the  subject  matter  hereof.  There  are no
restrictions,  promises, warranties or undertakings,  other than those set forth
or  referred to herein.  This  Agreement  supersedes  all prior  agreements  and
understandings  among the  parties  hereto with  respect to the  subject  matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





                                       13
<PAGE>
            IN WITNESS  WHEREOF,  the parties  have caused this  Agreement to be
duly executed by their respective  officers  thereunto duly authorized as of the
day and year first above written.

                                      ATLANTIC INTERNATIONAL ENTERTAINMENT, INC.


                                      By:
                                         ---------------------------------------
                                      Name:
                                      Title:

                                      ------------------------------------------


                                      By:
                                         ---------------------------------------
                                      Name:
                                      Title:
<PAGE>
                           CERTIFICATE OF DESIGNATION
                            PREFERENCES AND RIGHTS OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.

               (Pursuant to Section 151 of the General Corporation
                          Law of the State of Delaware)

            ATLANTIC INTERNATIONAL ENTERTAINMENT,  LTD., a corporation organized
and existing  under the General  Corporation  Law of the State of Delaware  (the
"Corporation"),  hereby certifies that,  pursuant to the authority  contained in
Article Five of its Certificate of Incorporation,  as amended, and in accordance
with the provisions of Section 151 of the General  Corporation  Law of the State
of  Delaware,  its Board of  Directors  has  adopted  the  following  resolution
creating a series of its  Preferred  Stock  designated  as Series A  Convertible
Preferred Stock:

            RESOLVED,  that a series of the class of authorized  preferred Stock
of the  Corporation  be, and hereby is,  created,  and that the  designation and
amount  thereof  and  the  voting  powers,   preferences   and   qualifications,
limitations or restrictions thereof, are as follows.

            (1)  Designation  and  Amount.  The shares of such  series  shall be
designated  as "Series A Convertible  Preferred  Stock" (the "Series A Preferred
Stock") and the number of shares  constituting such series shall be Four Million
(4,000,000).  The number of shares of Series A Preferred  Stock may be decreased
(but not  below the  number  of  shares  then  outstanding)  or  increased  by a
certificated executed,  acknowledged,  filed and recorded in accordance with the
General  Corporation Law of the State of Delaware setting forth a statement that
a  specified  decrease  or  increase,  as the  case  may be,  thereof  had  been
authorized and directed by a resolution or  resolutions  adopted by the Board of
Directors pursuant to authority  expressly vested in it by the provisions of the
Certificate of Incorporation of the Corporation.

            (2)  Dividends.  The holders of shares of Series A  Preferred  Stock
shall be  entitled to receive  quarterly,  out of any assets  legally  available
therefor,  cumulative  dividends,  at the rate of Five percent (5%) per annum of
the  Original  issue Price of the Series A Preferred  Stock (as defined  below),
payable  at the  holder's  option,  in cash or in Common  Stock at the  Series A
Conversion Price (as defined below).

            (3) Liquidation Preference.

            (a) In the event of any  liquidation,  dissolution  or winding up of
the Corporation,  whether voluntary or involuntary,  the holders of the Series A
Preferred  Stock shall be entitled to receive,  prior and in  preference  to any
distribution  of any of the assets or surplus  funds of the  Corporation  to the
holders of the Common Stock by reason of their ownership thereof,  an amount per
share  equal to the sum of (A) $100.00  for each  outstanding  share of Series A
Preferred  Stock (the "Original  Issue Price" for the Series A Preferred  Stock)
and (B) an amount equal to declared but unpaid  dividends on such share. If upon
the occurrence of such


<PAGE>
event,  the  assets  and funds thus  distributed  among the  holders of the full
aforesaid  preferential  amount,  then  the  entire  assets  and  funds  of  the
Corporation  legally  available for  distribution  shall be distributed  ratably
among  the  holders  of the  Series  A  Preferred  Stock  in  proportion  to the
preferential amount of each such holder is otherwise entitled to receive.

            (b) After payment to the holders of the Series A Preferred  Stock of
the amounts set forth in Section  3(a) above,  the entire  remaining  assets and
funds of the Corporation  legally available for  distribution,  if any, shall be
distributed among the holders of the Common Stock in proportion to the shares of
Common Stock then held by them.

            (c) For  purposes of the Section  (3),  (I) any  acquisition  of the
Corporation  by means of merger or other  form of  corporate  reorganization  in
which  outstanding  shares of the  Corporation  are exchanged for  securities or
other  consideration,   issued,  or  caused  to  be  issued,  by  the  acquiring
corporation or its subsidiary  (other than a mere  reincorporation  transaction)
and following which the  stockholders of the  Corporation  immediately  prior to
such  transaction own less than a majority of the voting shares of the surviving
corporation  or (ii) a sale of all or  substantially  all of the  assets  of the
Corporation, shall be treated as a liquidation, dissolution or winding up of the
Corporation and shall entitle the holders of Series A Preferred Stock to receive
at the  closing in cash,  securities  or other  property  (valued as provided in
Section (3)(d) below) amounts as specified in Section (3)(a) above.

            (d) Whenever the distribution provided for in this Section (3) shall
be  payable  in  securities  or  property  other  than  cash,  the value of such
distribution shall be the fair market value of such securities or other property
as determine4d in good faith by the Board of Directors.

            (4) Redemption.

            (a) At any time after the date of issuance of the Series A Preferred
Stock and prior the conversion  thereof (as provide in Section (6) below),  this
Corporation  may redeem,  from any source of funds legally  available  therefor,
some or all of the  outstanding  Series A Preferred Stock (the date of each such
redemption  being  referred to herein as the "Series A  Redemption  Date").  The
Corporation  shall effect such  redemptions  on the Series A Redemption  Date by
paying in exchange for each share of Series A Preferred  Stock to be redeemed an
amount in cash (the "Series A Redemption Price") equal to:

                             V           x        M
                           ----
                            CP

where

            "V" means the Original Issue Price for the Series A Preferred  Stock
plus any declared but unpaid dividends on such share;

            "CP" means the Series A Conversion Price (as defined in Section 6(a)
below); and

                                       2
<PAGE>
            "M"  means the  highest  closing  bid price per share of the  Common
Stock during the period  beginning on the Redemption Date and ending on the date
of payment of the Series A Redemption Price.

Any  redemption  effected  pursuant to this  Section  (4)(a)  shall be made on a
pro-rata  basis among the holders of the Series A Preferred  Stock in proportion
to the share of Series A Preferred Stock then held by them.

            (b) At least 20 days prior to the  Redemption  Date  written  notice
shall be mailed,  first class postage prepaid,  to each holder of record (at the
close of business on the business day next  preceding the day on which notice is
given) of the Series A Preferred Stock to be redeemed, at the address last shown
on the records of the Corporation for such holder,  notifying such holder of the
redemption to be effected,  specifying  the number of shares to be redeemed from
such holder,  the Redemption  Date, the Series A Redemption  Price, the place at
which  payment may be obtained  and calling upon such holder to surrender to the
Corporation,  in the  manner and at the place  designated,  his  certificate  or
certificates  representing the shares to be redeemed (the "Redemption  Notice").
Except as provided in Section  (4)(c),  on or after the  Redemption  Date,  each
holder  of  Series A  Preferred  Stock to be  redeemed  shall  surrender  to the
Corporation  the certificate or certificates  representing  such shares,  in the
manner and at the place designated in the Redemption  Notice,  and thereupon the
Series A  Redemption  Price of such shares  shall be payable to the order of the
person  whose name  appears on such  certificate  or  certificates  as the owner
thereof and each surrendered  certificate shall be cancelled.  In the event less
than all the shares  represented  by any such  certificate  are redeemed,  a new
certificate shall be issued representing the unredeemed shares.

            (c) From and after the Redemption Date, unless there shall have been
a default in payment of the Series A Redemption Price, all rights of the holders
of  shares  of  Series  A  Preferred  Stock  designated  for  redemption  in the
Redemption  Notice as holders of Series A Preferred  Stock  (except the right to
receive the Series A Redemption  Price without  interest upon surrender of their
certificate or certificates)  shall cease with respect to such shares,  and such
shares shall not thereafter by transferred on the books of the Corporation or be
deemed to be  outstanding  for any  purpose  whatsoever.  The shares of Series A
Preferred  Stock not redeemed shall remain  outstanding  and entitled to all the
rights and preferences provided herein.

            (d) If on the  Redemption  Date,  the  Corporation  does not pay the
Series A Redemption Price, the holder of Series A Preferred Stock may thereafter
convert any or all or part of his Series A Preferred  Stock at the lesser of (I)
the Series A Conversion  Price (as defined in Section 6(a) hereof),  or (ii) 78%
of the five-day average closing bid price for the Corporation's Common Stock for
the five (5) trading days prior to the delivery of the Notice of Redemption.

         (5) Voting  Rights.  Each  holder of shares of the  Series A  Preferred
Stock  shall be entitled to the number of votes equal to the number of shares of
Common  Stock  into  which  such  shares of Series A  Preferred  Stock  could be
converted and shall have voting rights and powers equal to the voting rights and
powers of the Common Stock (except as otherwise  expressly provided herein or as
required by law,  voting  together  with the Common Stock as a


                                       3
<PAGE>
single  class) and shall be entitled to notice of any  stockholders'  meeting in
accordance  with the  Bylaws of the  Corporation.  Fractional  votes  shall not,
however,  be permitted and any fractional voting rights resulting from the above
formula  (after  aggregating  all shares into which shares of Series A Preferred
Stock held be each holder  could be  converted)  shall be rounded to the nearest
whole number (with one-half being rounded upward).

         (6) Conversion.  The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):

             (a) Right to Convert.  Each share of Series A Preferred Stock shall
be convertible,  at the option of the holder thereof, at any time after the date
of  issuance  of such  share  and on or  prior  to the  fifth  day  prior to any
Redemption  date, if any, as may have been fixed in any  Redemption  Notice with
respect to the Series A Preferred Stock, at the office of the Corporation or any
transfer agent for such stock,  into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Original Issue Price for
the Series A Preferred Stock by the Conversion  Price  applicable to such share,
determined as hereinafter  provided,  in effect on the date conversion  shall be
deemed to have been made (the "Conversion  Date"), as specified by the holder of
Series A Preferred  Stock in his Notice of Conversion  (as defined  below).  The
price at which shares of Common Stock shall be  deliverable  upon  conversion of
shares of the Series A Preferred  Stock (the "Series A Conversion  Price") shall
be 78% of the lowest not necessarily  consecutive  three day average closing bid
price for the  Corporation's  Common Stock listed and traded on the NASDAQ/Small
Cap  market,   or  such  other  national   securities   exchange  on  which  the
Corporation's  Common Stock is then listed,  for the 25-day  period prior to the
Conversion  Date.  In no event shall the Series A Conversion  Price be less than
$1.50 per share of Common Stock.


             (b) Automatic  Conversion.  Each share of Series A Preferred  Stock
shall  automatically  be  converted  into  shares  of  Common  Stock at the then
effective  Series A Conversion  Price three (3) years after the issuance of such
share.

             (c) Mechanics of Conversion.

                 (i)  Before  any holder of Series A  Preferred  Stock  shall be
entitled to convert the same into shares of Common Stock,  he shall  telecopy an
executed  and  completed   notice  (each  a  "Notice  of   Conversion")  to  the
Corporation,  specifying the number of shares of Series A Preferred  Stock to be
converted,  the  Conversion  Date,  the name or names  in  which he  wishes  the
certificate or  certificates  for shares of Common Stock to be issued,  and such
other  information  as the  Corporation  may reasonably  request.  The holder of
Series A Preferred  Stock shall  deliver  within three (3)  business  days after
transmitting  the Notice of  Conversion  by  telecopy,  the  original  Notice of
Conversion by express courier, with a copy to the Corporation's transfer agent.

                 (ii) The Corporation  shall,  or its expense,  take all actions
and use all means  necessary  and diligent to cause its transfer  agent to issue
and deliver a  certificate  or  certificates  representing  the shares of Common
Stock issuable upon  conversion of the Series A Preferred Stock (together with a
certificate or certificates  representing the Series A Preferred Stock



                                       4

<PAGE>
not being so converted)  to such holder of Series A Preferred  Stock via express
courier, by electronic transfer or otherwise,  within three (3) business days of
the  later of (i)  receipt  by the  transfer  agent of the copy of the  original
Notice of Conversion, and (ii) the Conversion Date (the "Delivery Date").

                 (iii)  Conversion shall be deemed to have been made immediately
prior to the close of business on the Conversion Date, and the person or persons
entitled to receive the shares of Common  Stock  issuable  upon such  conversion
shall be  treated  for all  purposes  as the  second  holders or holders of such
shares of Common Stock on such date.

                 (iv) The Corporation agrees to pay late payments in the amounts
and as set forth herein to the holder of Series A Preferred Stock satisfying the
prerequisites  for  conversion  of the  Series A  Preferred  Stock  set forth in
Section  6(c)(i)  hereof in the event  that due  entirely  to the  Corporation's
direct or indirect  actions or its failure to act (the  Corporation's  Actions")
the  transfer  agent  does not  issue  and  deliver  to such  holder of Series A
Preferred Stock  certificates  representing  the shares of Common Stock issuable
upon conversion of the Series A Preferred  Stock, in the manner and as set forth
in Section  6(c)(ii)  hereof,  by the Delivery  Date. The late payments shall be
paid in accordance with the following  schedule (where "No.  Business Days Late"
is defined as the number of business  days beyond  five (5)  business  days from
Delivery Date:

                                                Late Payment for each $10,000
                                                Of Preferred Stock Liquidation
          No. Business Days Late                Amount Being Converted
--------------------------------------------------------------------------------

                1                               $100.00
                2                               $200.00
                3                               $300.00
                4                               $400.00
                5                               $500.00
Greater than    5                               $500 + $200 for each Business
                                                Day Late beyond Five (5)
                                                days from Delivery Date

The  Corporation  shall pay any  payments  incurred  under  this  subsection  in
immediately  available funds upon demand.  Nothing herein shall limit the holder
of Series A Preferred  Stock from pursing actual  damages for the  Corporation's
Actions  resulting  in the  transfer  agent's  failing to issue and  deliver the
Common  Stock to such  holder  of  Series A  Preferred  Stock.  Furthermore,  in
addition to any other  remedies  that may be available to the holder of Series A
Preferred  Stock,  in the event that  delivery of such shares of Common Stock is
not made within  five (5)  business  days after the  Delivery  Date,  due to the
Corporation's  Actions,  the holder of Series A Preferred Stock will be entitled
to revoke the  relevant  Notice of  Conversion  by  delivering  a notice to such
effect to the Corporation  whereupon the Corporation and such holder of Series A
Preferred Stock shall each be restored to their respective positions immediately
prior to  delivery  of such  Notice of  Conversion,  and the  holder of Series A
Preferred  Stock may then  require the  Corporation  to  immediately  redeem all
outstanding Series A Preferred Stock in accordance with Section 4 hereof.

                                       5
<PAGE>
                  (v)  If,  by  the   relevant   Delivery   Date,   due  to  the
Corporation's Actions,  delivery of the shares of Common Stock to be issued upon
conversion of the Series A Preferred  Stock is not made, and after such Delivery
Date the holder of the Series A  Preferred  Stock  purchases,  in an open market
transaction  or  otherwise,  shares of Common Stock (the  "Covering  Shares") in
order to make delivery in  satisfaction of a sale of Common Stock by such holder
of Series A Preferred Stock (the "Sold  Shares").  Which delivery such holder of
Series A Preferred Stock anticipated to make using the shares of Common Stock to
be issued upon such  conversion  of Series A Preferred  Stock (a "Buy In"),  the
Corporation  shall pay to such holder of the Series A Preferred Stock the Buy in
Adjustment  Amount (as defined  below).  The "Buy In  Adjustment  Amount" is the
amount  equal to the  excess,  if any,  of (x) the holder of Series A  Preferred
Stock's total purchase price (including brokerage  commissions,  if any) for the
Covering Shares over (y) te net proceeds (after brokerage  commissions,  if any)
received by such  holder of Series A  Preferred  Stock from the sale of the Sold
Shares.  The Corporation shall pay the Buy-In Adjustment Amount to the holder of
Series A Preferred Stock in immediately  available funds immediately upon demand
by such holder of Series A Preferred  Stock. By way of  illustration  and not in
limitation of the foregoing, if the holder of Series A Preferred Stock purchases
shares  of Common  Stock  having a total  purchase  price  (including  brokerage
commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock
is sold for net  proceeds of $10,000,  the Buy-In  Adjustment  Amount  which the
Corporation  will be required to pay to such holder of Series A Preferred  Stock
will be $1,000.

                  (vi) Subject to the completeness and accuracy of the holder of
Series A Preferred  Stock's  representations  and  warranties  herein,  upon the
conversion of any Series A Preferred Stock by a person who is a non U.S. Person,
and following the expiration of any applicable Restricted Period (as those terms
are defined in Regulation S), the Corporation  shall, at its expenses,  take all
necessary  action  (including  the  issuance of an opinion of counsel) to assure
that the  Corporation's  transfer agent shall issue stock  certificates  without
restrictive  legends  or stop  orders  in the name of such  holder  of  Series A
Preferred  Stock  (or its  nominee  (being a non U.S.  Person)  or such non U.S.
Persons as may be designated by such holder of Series A Preferred  Stock) and in
such  denominations  to be specified at  conversion  representing  the number of
shares of Common Stock issuable upon such conversion, as applicable.  Nothing in
this  Section  6,  however,  shall  affect  in any way any  holder  of  Series A
Preferred Stock's or such nominee's obligations and agreement to comply with all
applicable  securities  laws upon  resale of the  shares  of Common  Stock.  The
remedies set forth in subsections 4(c)(iv), (v) and (vi) shall be cumulative.

                  (vii) In lieu of delivering physical certificates representing
the unlegended  securities issuance upon conversion,  provided the Corporation's
transfer agent is  participating  in the Depository  Trust Company  ("DTC") Fast
Automated  Securities  Transfer program,  upon request of the holder of Series A
Preferred  Stock  and its  compliance  with  the  provisions  contained  in this
subsection,  so long as the certificates  therefor do not bear a legend and such
holder of Series A  Preferred  Stock  thereof is not  obligated  to return  such
certificate for the placement of a legend thereon, the Corporation shall use its
best efforts to cause its transfer agent to  electronically  transmit the Common
Stock  issuable  upon  conversion  to the holder of



                                       6
<PAGE>
Series A Preferred  Stock by  crediting  the account of the Prime Broker of such
holder of Series A Preferred Stock with DTC through its Deposit Withdrawal Agent
Commission System.

                  (vii) The original  certificate or  certificates  representing
the Series A Preferred  Stock shall be  delivered  by the holder  thereof to the
Corporation concurrently with delivery of the Final Notice of Conversion.

            (d) No  Impairment.  The  Corporation  will not, by amendment of its
Certificate  of  Incorporation  or through  reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation,  but will at
all times in good faith assist in the carrying out of all the provisions of this
Section  (6)  and in the  taking  of all  such  action  as may be  necessary  or
appropriate  in order to protect  the  Conversion  Rights of the  holders of the
Series A Preferred Stock against impairment.

            (e) Notice of Record Date. In the event that the  Corporation  shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock,  whether in cash, property,  stock or other securities,  whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for  subscription pro rata to the holders of any class or series of its
tock any  additional  shares of stock of any  class or  series or other  rights;
(iii) to effect any  reclassification  or  recapitalization  of its Common Stock
outstanding  involving  a  change  in the  Common  Stock;  or (iv) to  merge  or
consolidate  with  or  into  any  corporation   other  than  the   Corporation's
subsidiaries,  or sell, lease or convey all or substantially  all of its assets,
or to liquidate, dissolve or wind up:

            Then, in connection with each such event, the Corporation shall send
to the holders of Series A Preferred  Stock: (1) at least twenty (20) days prior
written  notice of the date on which a record shall be taken for such  dividend,
distribution  or  subscription  rights  (and  specifying  the date on which  the
holders of Common Stock shall be entitled thereto) or for determining  rights to
vote, if any, in respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters  referred  to in (iii) and (iv)  above,  at least
twenty (20) days prior written notice of the date when the same shall take place
( and specifying the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event).

            (f) Issue  Taxes.  The  Corporation  shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common  Stock on  conversion  of  shares of Series A  Preferred  Stock  pursuant
hereto;  provided,  however,  that the Corporation shall not be obligated to pay
any  transfer  taxes  resulting  from any  transfer  requested  by any holder in
connection with any such conversion.

            (g) Reservation of Stock Issuable Upon  Conversion.  The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock,  solely for the purpose of effecting  the  conversion of
the shares of the Series A Preferred Stock,  such number of its shares of Common
Stock as shall from time to time be sufficient  to effect the  conversion of all
outstanding  shares  of the  Series A  Preferred  Stock;  and if at any time


                                       7

<PAGE>
the  number of  authorized  but  unissued  shares of Common  Stock  shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
A Preferred  Stock,  the Corporation  will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient  for such
purpose, including,  without limitation,  engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to this Certificate.

            (h) Fractional  Shares. No fractional share shall be issued upon the
conversion  of any share or shares of Series A  Preferred  Stock.  All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred  Stock by a holder  thereof  shall be aggregated
for purposes of determining  whether the conversion would result in the issuance
of  any  fractional  share.  If,  after  the  aforementioned  aggregation,   the
conversion  would  result in the  issuance  of a  fraction  of a share of Common
Stock, the Corporation  shall, in lieu of issuing any fractional  share, pay the
holder  otherwise  entitled  to such  fraction  a sum in cash  equal to the fair
market value of such fraction on the date of conversion  (as  determined in good
faith by the Board of Directors).

            (i) Notices.  Any notice  required by the provisions of this Section
(6) to be given to he holders  of shares of Series A  Preferred  Stock  shall be
deemed given if  deposited  in the United  States  mail,  postage  prepaid,  and
addressed to each holder of record at his address  appearing on the books of the
Corporation.

         (7) Restrictions and Limitations.

            (a) So long as any shares of Preferred Stock remain outstanding, the
Corporation  shall not, without the vote or written consent by the holders of at
least 66 and 2/3% of the  then  outstanding  shares  of the  Series A  Preferred
Stock, voting together as a single class:

                  (i) Redeem,  purchase or  otherwise  acquire for value (or pay
into or set aside for a sinking fund for such  purposes)  any share or shares of
Preferred  Stock  otherwise  than by redemption  in accordance  with Section (6)
hereof or by conversion in accordance with Section (4) hereof;

                  (ii) Redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose),  any of the Common Stock,  provided,
however,  that this  restriction  shall not apply to the repurchase of shares of
Common Stock from employees,  officers, directors,  consultants or other persons
performing services for the Corporation or any subsidiary pursuant to agreements
under which the  Corporation  has the option to repurchase  such shares upon the
occurrence of certain events, such as the termination of employment;

                  (iii)  Authorize or issue,  or obligate  itself to issue,  any
other equity security  (including any security  convertible  into or exercisable
for any equity  security)  senior to or on a parity  with the Series A Preferred
Stock as to voting rights, dividend rights, conversion rights, redemption rights
or liquidation preferences;

                                       8

<PAGE>
                  (iv) Declare or pay any dividend or make any distribution with
regard to any share of Common Stock;

                  (v)  Sell,  convey,  lease  or  otherwise  dispose  of  all or
substantially all of its property or business; liquidate dissolve or wind up the
Corporation's  business; or merge into or consolidate with any other corporation
(other than a wholly owned subsidiary corporation); or effect any transaction or
series of related  transaction in which more than 50% of the voting power of the
corporation is disposed of (a "Corporate Transaction"), unless the corporation's
stockholders  of  record  as  constituted  immediately  prior to such  Corporate
Transaction will, immediately after such Corporate Transaction,  hold at lease a
majority of the voting power of the surviving or acquiring entity;

                  (vi)  Permit  any  subsidiary  to issue or sell,  or  obligate
itself  to  issue  or  sell,  except  to the  Corporation  or any  wholly  owned
subsidiary, any stock of such subsidiary;

                  (vii)  Increase  or  decrease  (other  than by  redemption  or
conversion) the total number of authorized shares of Preferred Stock; or

                  (viii) Alter or change the rights,  preferences  or privileges
of the shares of Preferred Stock so as to affect adversely the shares.

         (8) No  Reissuance of Series A Preferred  Stock.  No share or shares of
Series A Preferred  Stock  acquired by the  Corporation by reason of redemption,
purchase,  conversion or otherwise shall be reissued,  and all such shares shall
be cancelled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.

IN WITNESS WHEREOF, ATLANTIC INTERNATIONAL  ENTERTAINMENT,  LTD. has caused this
Certificate  of  Designation,  Preferences  and  Rights of Series A  Convertible
Preferred  Stock to be duly  executed by its  President  and  attested to by its
Assistant  Secretary and has caused it corporate  seal to be affixed hereto this
3rd day of April, 1998.

                           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD




                           By:_____________________________________________


(Corporate Seal)

                           By:_____________________________________________

ATTEST:


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