International Keystone Entertainment Inc.

International Keystone Entertainment Inc.

VANCOUVER, May 11 /PRNewswire/ -- International Keystone Entertainment Inc. (the "Company") wishes to announce that it has entered into an agreement in principle to a buyout transaction (the "Transaction") with Keystone Pictures Inc. ("Keystone Pictures"), a private company wholly-owned by Robert Vince and Michael Strange, respectively, the Company's Chief Executive Officer and President. The Transaction contemplates Keystone Pictures acquiring all of the Company's issued and outstanding common shares in exchange for payment securities (the "Payment Securities") to be issued by the Company on a one-for-one basis. The Payment Securities will entitle the Company's shareholders to receive, pro rata, 75% of the revenue generated from sales and licensing of the distribution rights to the Company's existing film library. The balance of revenue generated from the film library will be paid to Keystone Pictures, as to 15%, and to Montgomery & Associates, an arms' length party, as to 10%, to a maximum of US$250,000. Following the payment of US$250,000 to Montgomery & Associates, the 10% of revenue previously payable to it will thereafter be paid to the holders of Payment Securities.

The Payment Securities will be issued as "participation rights", which will entitle the holders to receive revenue from the film library until their expiry on June 30, 2009 (the "Expiry Date"). The Payment Securities will be issued pursuant to a trust indenture and will have a floating charge over all rights comprising the film library, subject only to existing charges in favour of lending institutions. The Payment Securities will also be redeemable, at any time up to 30 days' prior to the Expiry Date, at an aggregate redemption price of US$7,000,000, less the total amount of film library revenue which has been previously paid as of the date of redemption.

Keystone Pictures is a private company owned by the Company's management and, accordingly, the Transaction is a "related party" transaction for purposes of applicable laws. It is intended that the Transaction will be carried out by way of a plan of arrangement, which will be subject to shareholder approval at a meeting convened to consider the Transaction. Pursuant to the terms of the agreement in principle, the Company's existing preferred shareholders will convert their preferred shares into common shares of the Company, and have further agreed to vote their common shares in favour of the Transaction. Any party determined to be a "related party" will not be permitted to vote on the Transaction.

The Company will provide to shareholders a notice of meeting, along with an information circular disclosing all material terms regarding the Transaction, in respect of a meeting to be convened to consider and, if deemed appropriate, approve the terms of the Transaction. Following the completion of the Transaction, it is intended that the Company will "go private" and cease to be a reporting issuer under applicable securities laws.

Robert Vince, Chief Executive Officer
International Keystone Entertainment Inc.
SEDAR: 00004136E

For further information: Michael Strange, President,
Tel: (310) 317-4883
or Email: investor@keypics.com

Source: International Keystone Entertainment Inc.

CONTACT: Michael Strange, President, Tel: (310) 317-4883
or Email: investor@keypics.com

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