American Entertainment & Animation Corporation Announces Agreement Between Cyper Entertainment Inc. and Words & Pictures Productions Inc.

Business Editors

MARKHAM, Ontario, Canada--(BUSINESS WIRE)--July 23, 2002

American Entertainment & Animation Corporation's (Pink Sheets:AEAC) wholly owned subsidiary, Cyper Entertainment Inc., has signed a Term Sheet with Florida based Words & Pictures Productions Inc. to co-produce a one-hour 3D animated Christmas special.

The animated feature will be based on the book, "Uncle Mugsy and the Terrible Twins of Christmas," written by Eric Metaxas and illustrated by Tim Raglin, and will be adapted for film, broadcast, cable television and home video distribution.

Eric Metaxas worked in creative development and as a writer for Big Idea Productions, creators of VeggieTales children's videos. Lyle the Kindly Viking, which Eric co-wrote, was recently named Best Direct-to-Home video production at the World Animation Conference. Eric has also authored many children's books including The Bible ABC (Tommy Nelson) and the best-selling and Angel Award-winning Prince of Egypt A-Z, a tie-in to DreamWorks SKG's animated feature film. Amazon honored Eric's Squanto and The Miracle of Thanksgiving with their "Number One Bestseller" award for Thanksgiving 1999.

Tim has illustrated many children's picture books including Deputy Dan (Random House) and the Five Funny Frights series (Scholastic), which have collectively sold over two million copies to date. His most recent works include Go Track a Yak (Simon and Schuster), The Wolf Who Cried Boy (Viking Penguin), William Shakespeare's Twelfth Night (Dial Books) and The Thirteen Days of Halloween (Troll). Tim's illustrations have also been commissioned by well-known periodicals including: The New York Times, Sports Illustrated, Smithsonian, Rolling Stone, Sesame Street and Time magazines and the Walt Disney Corporation.

The Term Sheet provides that Cyper will finance the co-production with a budget of approximately US$3 Million. The budget includes the cost of a 60 second animated demo which is being developed in order to showcase the Uncle Mugsy concept. The Term Sheet further provides that, subject to the terms of the distribution agreement, Cyper will receive the first monies out in order to reimburse it for production costs and will thereafter receive 70% of revenues generated through licensing of the rights associated with film, broadcast, cable television, home video, publishing, merchandising and all other media related rights. AEAC intends to assist in the financing of the production through debt and equity financing.

"With many such creative properties in the pipeline, Words & Pictures looks forward to a long and prosperous relationship with its animation partner Cyper Entertainment", stated Marie-Noel Bastien, President and CEO of Words and Pictures.

"Now that the production deal has been agreed to, as agent for Words & Pictures, we will be quite focused on choosing a suitable distribution partner for the Picture", stated John Silbersach, Senior Vice President, Trident Media Group.

"We are extremely pleased to announce Cyper's first Agreement with an American producer that will allow us to demonstrate our capabilities in the world's largest market for high quality animated productions. Now that the Term Sheet has been signed, we will be meeting with top distributors in order to achieve the best possible distribution agreement for the feature," stated Marc Hazout, President and CEO.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained herein which are not historical are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, certain delays beyond the company's control with respect to market acceptance of new technologies or products, delays in testing and evaluation of products, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.