-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GEm2t5Z8Muj9FHJ/48tbNdg+MInnSNNg5+7uZX/z/pUu3mFW3KYgHFxIItfkO0J6 lwJjH9t4avJsFzzcgwD3fQ== 0001144204-05-033174.txt : 20051028 0001144204-05-033174.hdr.sgml : 20051028 20051028163022 ACCESSION NUMBER: 0001144204-05-033174 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051024 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051028 DATE AS OF CHANGE: 20051028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON STAR DEVELOPMENT, INC. CENTRAL INDEX KEY: 0001307624 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870427336 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-51012 FILM NUMBER: 051163595 BUSINESS ADDRESS: STREET 1: 175 SOUTH MAIN STREET, NO. 1212 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 BUSINESS PHONE: 801-532-6200 MAIL ADDRESS: STREET 1: 175 SOUTH MAIN STREET, NO. 1212 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 8-K 1 v027968_8k.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported) October 24, 2005 --------------------------------------------------------------------- IRON STAR DEVELOPMENT, INC. --------------------------- (Exact name of Registrant as specified in its charter) Utah 000-51012 87-0427336 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation or organization) File number) Identification No.) 175 South Main St., No. 1212, Salt Lake City, UT 84111 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) (801) 597-3337 -------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Address If Changed since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation for the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Section 1 - Registrant's Business and Operations Item 1.01. Entry into a Material Definitive Agreement. On October 24, 2005, Iron Star Development, Inc. (the "Registrant") entered into a term sheet (the "Bridge Term Sheet") with Highgate House Funds, Ltd. ("Highgate"). Pursuant to the Bridge Term Sheet, the Registrant agreed to issue bridge notes to Highgate in an amount of up to $800,000 (the "Bridge Notes") and to issue Highgate warrants for up to 160,000 shares of the Registrant's common stock for a period of three years with an exercise price of $0.001 (the "Warrants"). In exchange for the purchase of the Bridge Notes, the Registrant will grant Highgate a security interest in all of its assets and will issue shares of common stock in an amount equal to five times the total amount of the Bridge Notes to be held in escrow in the event of a default under the Bridge Notes (the "Escrow Shares"). Pursuant to the Bridge Term Sheet, the Bridge Notes will have a term of eighteen months from the date of issuance and shall bear an interest of ten percent per annum. The Registrant may redeem the Bridge Notes at any time prior to their maturity at a price equal to 120% of the face amount redeemed plus any accrued interest. Highgate may at its option convert all or some of the Bridge Notes plus any accrued and unpaid interest into shares of the Registrant's common stock at the price of $1.00 per share. As a condition to closing, the Registrant shall have entered into a Standby Equity Distribution Agreement ("SEDA") with Cornell Capital Partners, LP ("Cornell"), agreed to a written use of the proceeds from the Bridge Notes and executed all documents related to the Bridge Notes. On October 24, 2005, the Registrant entered into a term sheet with Cornell pursuant to which Cornell shall commit to purchase over the course of two years from the date of the effectiveness of a registration statement described below up to $10,000,000 of the Registrant's common stock in increments of up to $1,000,000 (each such increment, an "Advance"). The purchase price for this common stock shall be 97% of the lowest daily volume weighted average price of the common stock during the five consecutive trading days after notice is given requesting an Advance. The Registrant shall file a registration statement with the Securities and Exchange Commission to register the resale of the Registrant's common stock issued to Cornell pursuant to the SEDA. The registration statement shall also include the shares of common stock underlying the Warrants and the Escrow Shares. On October 24, 2005, the Registrant entered into a term sheet (the "Merger Term Sheet") with CallKey Group Limited ("CallKey") pursuant to which it is bound to enter into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and among Registrant, CallKey, and a to be formed wholly-owned subsidiary of the Registrant ("Merger Corp."). As contemplated by the Merger Term Sheet, Merger Corp. will merge with and into CallKey (the "Merger"), as a result of which Registrant will acquire all of the issued and outstanding shares of CallKey and CallKey will become a wholly-owned subsidiary of the Registrant. 2 In connection with the Merger, the holders of CallKey common stock, will receive 10,776,080 shares of the Registrant's common stock and the shareholders of Registrant immediately prior to the Merger will retain 307,888 shares of common stock of Registrant, 115,542 of which shares will be returned by Wallace Boyack to the CallKey's treasury. The Registrant shall issue its consultant, Viking Investments Group II, Inc., 1,231,552 share of the Registrant's common stock in consideration for its services. After giving effect to the Merger, the shares of common stock into which the Bridge Notes are convertible and the Warrants, Registrant will have 13,275,520 shares of common stock issued and outstanding. Among its other provisions, the Merger Term Sheet provides that the Board of Directors of Registrant following the closing of the Merger shall consist of five members. On the closing date of the Merger, all of the current officers and directors of Registrant shall resign and, simultaneously with such resignation, appoint a new Board of Directors and such executive officers, a majority of which shall be determined CallKey. All securities issued pursuant to the Merger will be "restricted" stock and be subject to all applicable re-sale restrictions specified by federal and state securities laws. The parties' obligations to consummate the Merger are subject to certain closing conditions including: (i) obtaining all necessary board, shareholder and third party consents; and (ii) satisfactory completion by Registrant and CallKey of all necessary technical and legal due diligence. From and after the date of execution of the Merger Term Sheet and continuing through January 22, 2006 (the "Exclusivity Period"), CallKey has agreed that it will not enter into any agreement or consummate any transaction with any third party, in whatever form, other than in the ordinary course of business (including, without limitation, joint venture, sale, license, distribution agreement, etc.) or enter into any other transaction that would preclude the consummation of the transactions contemplated by the Merger Agreement. 3 Item 9.01. Financial Statement and Exhibits. 10.1 Letter of Intent, dated October 24, 2005, regarding the Merger by and among CallKey Group Limited, Iron Star Development, Inc., Highgate House Funds, Ltd. and Wallace Boyack. 10.2 Term Sheet, dated October 24, 2005, regarding the Bridge Notes between Iron Star Development, Inc. and Highgate House Funds, Ltd. 10.3 Term Sheet, dated October 24, 2005, regarding the SEDA between Iron Star Development, Inc. and Cornell Capital Partners, LP 4 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IRON STAR DEVELOPMENT, INC. Date: October 28, 2005 By: /s/ Wallace Boyack ----------------------------------- Wallace Boyack Chief Executive Officer 5 EXHIBIT INDEX Exhibit Number Document - ------ -------- 10.1 Letter of Intent, dated October 24, 2005, regarding the Merger by and among CallKey Group Limited, Iron Star Development, Inc., Highgate House Funds, Ltd. and Wallace Boyack. 10.2 Term Sheet, dated October 24, 2005, regarding the Bridge Notes between Iron Star Development, Inc. and Highgate House Funds, Ltd. 10.3 Term Sheet, dated October 24, 2005, regarding the SEDA between Iron Star Development, Inc. and Cornell Capital Partners, LP 6 EX-10.1 2 v027968_ex10-1.txt October 24, 2005 Board of Directors CallKey Group Ltd. Attention Niles Helmboldt Unit 3b Isle of Man Freeport Ballasalla Isle of Man IM9 2AP British Isles Gentlemen: We are pleased to submit this Term Sheet with respect to the transactions described below whereby CallKey Group Ltd. ("CallKey") and Iron Star Development, Inc., a US publicly traded company, together with its newly formed acquisition subsidiary (collectively "Iron Star"), will enter into a reverse triangular merger agreement. In connection with the merger transaction, Highgate House Funds, Ltd. ("HHF") and other investors (collectively the "Investors") will invest $800,000 in CallKey. We agree that this Term Sheet supersedes and replaces any and all prior oral and/or written agreements. Item Description - -------------------------------------------------------------------------------- 1. Structure. Iron Star, a publicly traded company listed on the NASD OTC Bulletin Board, will enter into a reverse triangular merger with CallKey pursuant to which Iron Star will acquire all the outstanding shares of CallKey (the "Merger") in exchange for shares of Iron Star common stock ("Common Stock") with an anticipated closing date on or before October 31, 2005 (the "Closing Date"). Following the Closing Date, Iron Star will change its name to such other alternate name as shall be determined by CallKey. As a condition to CallKey's obligations to closing, on the date of closing of the Merger, Iron Star shall be (i) fully current in all of its required regulatory filings and (ii) shall not have any liabilities, or future obligations, contingent, contractual or otherwise, except as otherwise disclosed herein, including but not limited to notes payable and accounts payable. As a further condition to closing, CallKey shall have satisfactorily completed its due diligence on Iron Star. On or prior to the Closing Date, Iron Star shall have executed definitive documents relating to the private placement offerings ("PPO"), as defined below. The above-described transactions will hereinafter be referred to as the "Transaction" or "Transactions." Item Description - -------------------------------------------------------------------------------- 2. Merger The definitive merger agreement among Iron Star, CallKey and the acquisition subsidiary (the "Merger Agreement") will contain customary representations and warranties for a transaction of this type. In particular, Iron Star will represent, warrant and covenant to CallKey that on the date of the Merger Agreement and on the Closing Date, that Iron Star (and the acquisition subsidiary as applicable): (a) is a US corporation in good standing whose shares are presently trading for quotation on the NASD OTC Bulletin Board and not subject to any notice of suspension or delisting; (b) has complied with all applicable material federal and state securities laws and regulations, including being current in all of its reporting obligations under federal securities laws and regulations; (c) to the best of its knowledge, has not, and the past and present officers, directors and affiliates of Iron Star have not, been the subject of, nor does any officer or director of Iron Star have any reason to believe that Iron Star or any of its officers, directors or affiliates will be the subject of, any civil or criminal proceeding or investigation by any federal or state agency alleging a violation of securities laws; (d) has not been the subject of any voluntary or involuntary bankruptcy proceeding, nor has it been a party to any material litigation; (e) has not, and the past and present officers, directors and affiliates of Iron Star have not, been the subject of, nor does any officer or director of Iron Star have any reason to believe that Iron Star or any of its officers, directors or affiliates will be the subject of, any civil, criminal or administrative investigation or proceeding brought by any federal or state agency having regulatory authority over such entity; (f) will discontinue all of its business operations without any material adverse effect upon Iron Star, and Iron Star has no material liabilities, contingent or otherwise in any way related to any such business operations; (g) does not, on the Closing Date, have any liabilities, contingent or otherwise, including but not limited to notes payable and accounts payable, except as otherwise discussed herein, and is not a party to any executory agreements; and (h) is not a "blank check company" as such term is defined by Rule 419 of the Securities Act and has not offered any securities pursuant to Rule 419 of the Securities Act. The Merger Agreement will contain customary indemnification provisions to secure breaches of representations and warranties. 2 Item Description - -------------------------------------------------------------------------------- 3. Consideration In consideration for the Merger, the stockholders of CallKey shall receive Ten Million Seven Hundred Seventy-Six Thousand Eighty (10,776,080) shares of Common Stock of Iron Star in exchange for all the shares of common stock of CallKey. The shares of Common Stock of Iron Star received by the stockholders of CallKey shall represent eighty seven and one-half percent (87.5%) of the shares of Common Stock of Iron Star on a fully diluted basis after giving effect to the Merger but not the shares of Common Stock issued in the PPO. In consideration for the Merger, the existing stockholders of Iron Star will retain Three Hundred Seven Thousand Eight Hundred Eighty-Eight (307,888) shares of Common Stock of Iron Star, of which One Hundred Fifteen Thousand Five Hundred and Forty One (115,541) shares of Common Stock owned by Wallace Boyack will be returned to Iron Star's Treasury (the "Repurchase Shares"). Iron Star will use Five Hundred Thousand Dollars ($500,000) of the proceeds from the Bridge Note (as defined below), to purchase the Repurchase Shares. Excluding the Repurchase Shares, the existing stockholders of Iron Star will retain approximately one and six-tenths percent (1.6%) of the shares of Common Stock of Iron Star on a fully diluted basis after giving effect to the Merger but not the shares of Common Stock issued in the PPO. Simultaneous with the Merger, the Iron Star will issue One Hundred Thousand (100,000) shares of Common Stock to HHF as a structuring fee (the "Structuring Fee"), representing approximately eight-tenths of a percent (0.8%) of the shares of Common Stock of Iron Star on a fully diluted basis after giving effect to the Merger but not the shares of Common Stock issued in the PPO. In consideration for service related to the Merger, Viking Investment Group II, Inc. will receive up to One Million Two Hundred Thirty-One Thousand Five Hundred Fifty-Two (1,231,552) shares of Common Stock of Iron Star representing ten percent (10.0%) of the shares of Common Stock of Iron Star on a fully diluted basis after giving effect to the Merger but not the shares of Common Stock issued in the PPO. Subject to the cancellation of the shares of Common Stock held in escrow as provided above, the total shares of Common Stock of Iron Star outstanding after giving effect to the Transactions on a fully diluted basis will be Twelve Million Three Hundred and Fifteen Thousand Five Hundred and Twenty (12,315,520) not including any shares that are issued in connection with the financings herein involving HHF or Cornell Capital Partners (as defined herein). 4. Private Placement HHF will provide a bridge financing for the gross amount Offerings of Eight Hundred Thousand dollars ($800,000) subject to the terms and conditions as detailed in attached Exhibit A (the "Bridge Note") upon the execution of this Term Sheet and the execution of the definitive documents related thereto by Iron Star and HHF. Iron Star will use Five Hundred Thousand dollars ($500,000) from the proceeds of the Bridge Note to purchase the Repurchase Shares and the remainder will be used for the purpose of covering costs related to the merger transaction and for general working capital purposes. 3 Item Description - -------------------------------------------------------------------------------- Upon closing, Cornell Capital Partners, LP will commit to an equity credit line financing for Ten Million dollars ($10,000,000) known as a "Stand-By Equity Distribution Agreement" and attached herein as Exhibit B ("SEDA"). 5. Financial On or prior to the Closing Date, CallKey shall provide Statements any such audited or unaudited financial statements as of CallKey may be required under applicable U.S. Securities Exchange Commission ("SEC") regulations for inclusion of such statements in Iron Star's SEC and other regulatory filings. 6. Signing Date It is contemplated that the definitive agreement (the "Merger Agreement") will be signed on or before the last day of the Exclusivity Period (hereinafter defined). The Merger Agreement shall contain such terms and provisions as shall be mutually agreed upon between CallKey and Iron Star consistent with the provisions in this Term Sheet. 7. Board of Directors The Board of Directors shall consist of not less than five members, one of whom shall be David Rector. On the Closing Date, all of the current officers and directors of Iron Star shall resign and, simultaneously therewith, a new Board of Directors and officers shall be appointed. 8. Restriction on All securities issued pursuant to the Merger will be Sale "restricted" stock and be subject to all applicable resale restrictions specified by federal and state securities laws. The shares of Common Stock of the current executive shareholders of CallKey will be restricted for a period of twenty four (24) months from the Closing Date. 9. Conditions to The Merger shall include certain closing conditions Closing including the following: (i) consummation of all required definitive instruments and agreements, including, but not limited to, the Merger Agreement; (ii) obtaining all necessary board, shareholder and third party consents and the filing of an Information Statement with the SEC in connection with the shareholder consents; (iii) satisfactory completion by Iron Star and CallKey of all necessary technical and legal due diligence; and (iv) the purchase by Iron Star of the Repurchase Shares. 10. Pre-Closing Iron Star and CallKey shall each cooperate with each Covenants other and use their best efforts to complete and sign the Merger Agreement as soon as possible and to thereafter satisfy each of the conditions to closing specified there under. 11. Employment Each of executive officers of CallKey shall have Agreements employment agreements mutually satisfactory to CallKey and Iron Star, each of which such agreement shall be assumed by CallKey upon completion of the Merger. 4 Item Description - -------------------------------------------------------------------------------- 12. Closing Costs: All fees and expenses relating to the Transactions, including but not limited to legal and accounting fees, will be payable at Closing from the proceeds of the PPO, except for the Structuring Fee which is to be paid in shares of Iron Star shares of Common Stock. The Parties understand that Gottbetter & Partners ("G&P") shall be engaged by Iron Star to serve as its securities counsel ("G&P Retainer") with respect to the Merger Agreement and PPO Transaction. Fees and expenses of G&P incurred by Iron Star will similarly be payable at Closing from the proceeds of the PPO. The terms and conditions of the G&P Retainer will be subject to a written agreement to be acceptable to Iron Star and the CallKey. 13. Exclusivity From and after the date of execution of this Term Sheet and during a period of 120 days thereafter (the "Exclusivity Period"), CallKey hereby covenants and agrees that it will not enter into any agreement or consummate any transaction with any third party, in whatever form, or enter into any other transaction that would preclude the consummation of the Merger Agreement consistent with the terms set forth in this Term Sheet. During the Exclusivity Period, Iron Star will incur additional legal and other costs and expenses in connection with the negotiation of the Transaction and certain due diligence activities relating thereto. 14. Governing Law This Agreement shall be governed and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts or choice of laws thereof. [SIGNATURE PAGE TO IMMEDIATELY FOLLOW] 5 This Term Sheet sets forth the principal terms of the Transaction and constitutes a binding contract on the part of the parties hereto. All of these binding obligations of the parties with respect to the Transaction shall be further memorialized by the execution and delivery of the definitive Merger Agreement and the related PPO documentation. We look forward to working with you to complete the Transaction successfully and expeditiously. If the foregoing correctly sets forth your understanding, please evidence your agreement to this Term Sheet by executing a copy of this Term Sheet in the space set forth below. AGREED TO AND ACCEPTED: This 24th day of October, 2005. CALLKEY GROUP LTD. By: /s/ Niles Helmboldt ------------------------------------ Name: Niles Helmboldt Title: Chief Financial Officer IRON STAR By: /s/ Wallace Boyack ------------------------------------ Name: Wallace Boyack Title: President HIGHGATE HOUSE FUNDS, LTD., with regard to Exhibit A and Exhibit B only By: /s/ Adam Gottbetter ------------------------------------ Name: Adam Gottbetter Title: Portfolio Manager WALLACE BOYACK, with regard to Section 3, Paragraph 2 only By: /s/ Wallace Boyack ------------------------------------ Name: Wallace Boyack 6 EX-10.2 3 v027968_ex10-2.txt CONFIDENTIAL TERM SHEET BRIDGE NOTE Issuer: Iron Star Development, Inc. Investor: Highgate House Funds, Ltd. Securities: Eight Hundred Thousand ($800,000) (the "Gross Proceeds") of securities in the form of a promissory note convertible (the "Note"), into shares of the Issuer's common stock ("Common Stock"). Term: Eighteen (18) months from the date of closing ("Maturity'). Upon Maturity, the Issuer shall repay one hundred eight percent (108%) of the Gross Proceeds ("Repayment Premium") Interest: Ten percent (10%) per annum ("Interest"). Warrants: Issuer shall issue to the Investor warrants to purchase shares of Common Stock for a period of three (3) years with an exercise price equal to $.001 per share equal to twenty percent (20%) of the Gross Proceeds (the "Warrants"). The shares underlying the Warrants shall be included on the registration statement to be filed by the Issuer as described below. Security: The Issuer will grant to the Investor a perfected security interest in the assets of the Issuer as evidenced by a UCC-1 filing or a second lien on the assets where the UCC-1 is not available. The Issuer will also issue shares of Common Stock equal to five (5) times the Gross Proceeds to be held in escrow in the event of default ("Escrow Shares"). Closing Date: The closing date will be the date on which definitive documents are signed by and between the Issuer and Investor ("Closing Date"). It is estimated that the Closing Date shall take place within a reasonable amount of time from the execution of this term sheet, notwithstanding any and all due diligence and documentation issues that can arise. Disbursement: The Gross Proceeds shall be disbursed, subject to the deduction of any and all fees upon Closing. Redemption: The Issuer shall have the right, in its sole discretion, to redeem the Note at any time prior to Maturity, upon three (3) business days prior written notice, any or all-outstanding Note remaining in its sole discretion. The redemption price shall be one hundred twenty (120%) of the face amount redeemed plus accrued interest, subject to the maximum amount of interest allowed to be charged by law ("Redemption Price"). Payments: The Issuer will begin making monthly payments of principal and Interest one hundred eighty (180) days from the Closing Date. The amount of each monthly payment shall be equal to the principal balance of the Note and the Repayment Premium divided by the number of months remaining to Maturity, plus accrued Interest (collectively "Payments"). Event of Default: In the event the Issuer does not make timely Payments on the Note, then the Note will be deemed in default ("Event of Default"). Upon such event, the Investor may at its sole option take the Escrow Shares as satisfaction of the Note, subject to certain conversion limitations. Conversion: The Investor may at its sole option convert any or all of the face amount still outstanding of the Note plus Interest, compounded monthly, from the Closing Date to the date of conversion ("Conversion Amount"). The number of shares of Common Stock of the Issuer to be received upon conversion, and delivered from the Escrow Shares, will be determined by dividing the Conversion Amount by the Conversion Price, as defined below. Conversion Price: The Note is convertible into Common Stock at $1.00 (the "Fixed Price"). In the Event of Default, the Investor, at its sole option, may take the Escrow Shares in satisfaction of the Note. Registration: Promptly, but no later than forty-five (45) calendar days from the Closing Date, the Issuer shall file a registration statement (on Form SB-2, or similar form) with the United States Securities & Exchange Commission ("SEC") covering the shares of Common Stock underlying the Warrants, the Escrow Shares and the shares to be issued in accordance with the Standby Equity Distribution Agreement, as defined below (the "Registration Statement"). The Issuer shall use its best efforts to ensure that such Registration Statement is declared effective within one hundred twenty (120) calendar days of filing with the SEC. In the event the Registration Statement is not declared effective within one hundred twenty (120) calendar days, then the Issuer shall pay to the Investor a cash amount within three (3) business days from the end of the month equal to two percent (2%) per month of the outstanding principal amount of the Note as liquidated damages and not as a penalty. The Issuer shall keep the Registration Statement "Evergreen" for the life of the Note or until Rule 144(k) of the Securities Act of 1933, as amended, is available to the Investor, whichever is later. The Issuer shall retain, and pay at its sole expense, a law firm to file the Registration Statement from a list of approved law firms provided by the Investor. Upon an Event of Default, the Investor will have the right to demand registration of the Common Stock to be issued upon conversion of the Note including the Escrow Shares. Conditions: The Issuer shall have previously entered into an agreement with Cornell Capital Partners, LP, for a $10,000,000 Standby Equity Distribution Agreement ("SEDA"), execute all documents thereto on or before the Closing Date and agree to a written use of proceeds for the Gross Proceeds. Share Issuance: At all times, the Issuer shall keep available Common Stock duly authorized for issuance against the Note including the Escrow Shares. If at any time, the Issuer does not have available an amount of authorized and non-issued Common Stock necessary to satisfy issuance of the Escrow Shares, the Issuer shall call and hold a special meeting within thirty (30) days of such occurrence, for the sole purpose of increasing the number of shares of Common Stock authorized. Management of the Issuer shall recommend to shareholders to vote in favor of increasing the number of Common Stock authorized. Management shall also vote all of its shares in favor of increasing the number of Common Stock authorized. No Shorting: Neither the Investor nor its affiliates has an open short position in the Common Stock of the Issuer, and the Investor agrees that it will not, and that it will cause its affiliates not to, engage in any short sales of, or hedging transactions with respect to the Common Stock. Banker's Fees: The Investor shall receive cash compensation equal to ten percent (10%) of the Gross Proceeds of the Note to be paid directly from escrow from Disbursement as described above for the SEDA commitment. Legal Fee: The Issuer agrees to pay a legal fee of $10,000 in connection with this transaction. The Issuer shall bear all of its own legal and professional fees and expenses, including but not limited to those associated with the filing of its Registration Statement as contemplated herein. Expenses: The Issuer agrees to pay to a non-refundable due diligence fee of $10,000 upon execution of the Term Sheet. Confidentiality: The existence of this Term Sheet and all of its individual terms and conditions are of a confidential nature and shall not be disclosed to anyone, except the Issuer, the Issuer's management, board of directors, legal counsel and accounting auditors without the express written consent of the Investor. If the terms and conditions contained herein in this four (4) page Term Sheet as of the date first written above are satisfactory, then please sign as indicated below. We appreciate this opportunity to work with you on this investment. IRON STAR DEVELOPMENT, INC. By: /s/ Wallace Boyack -------------------------------------- Name: Wallace Boyack Its: President HIGHGATE HOUSE FUNDS, LTD. By: /s/ Adam Gottbetter -------------------------------------- Name: Adam S. Gottbetter Title: Portfolio Manager EX-10.3 4 v027968_ex10-3.txt CORNELL CAPITAL PARTNERS, LP 101 HUDSON STREET, SUITE 3700 JERSEY CITY, NEW JERSEY 07302 October 5, 2005 PERSONAL AND CONFIDENTIAL Board of Directors CallKey Group Ltd. Attention Nile Helmboldt Unit 3b Isle of Man Freeport Ballasalla Isle of Man IM9 2AP British Isles Gentlemen: On the terms and subject to the conditions set forth below, Cornell Capital Partners, LP (the "Investor") will commit to purchase up to ten ($10,000,000) million dollars of the common stock of Iron Star Development Incorporated, (the "Issuer") on the principal terms set forth below. This letter is subject to the parties negotiating and entering into formal agreements setting forth their respective rights and obligations. Such agreements will contain customary representations, warranties and indemnifications. The material terms of the offering are set forth below: Issuer Iron Star Development (ISDV) Investor Cornell Capital Partners, LP Securities Common Stock Commitment Amount The Investor shall commit to purchase up to ten ($10,000,000) million of Common Stock of the Issuer over the course of twenty-four (24) months after an effective registration of the Common Stock. The Issuer shall have the right, but not the obligation, to sell Common Stock to the Investor. Each right to sell Common Stock is called an "Advance." Each Advance may be up to one million ($1,000,000) dollars. Standby Equity Distribution Agreement proceeds may be used by CallKey for purposes such as paying off existing capital debt. Iron Star Development Incorporated October 4, 2005 Page 2 Advance Notice In order to request an Advance, the Issuer will submit a written notice (an "Advance Notice") to the Investor. The Advance Notice will specify the amount of the Advance. Advance Notices may be delivered to the Investor every seven (7) trading days after the Common Stock is registered with the Securities and Exchange Commission. The date the Advance Notice is delivered to the Investor is called an "Advance Notice Date." Purchase Price The Issuer will sell to the Investor the Common Stock at a purchase price equal to ninety-seven percent (97%) of the Market Price. The "Market Price" is the lowest closing bid price of the Common Stock during the five (5) consecutive trading days after the Advance Notice Date (the "Pricing Period"). Advance Date The Advance Date is the date on which the sale of the Common Stock and the payment of the Purchase Price are completed. Each Advance Date will be on the first (1st) trading day after the end of the relevant Pricing Period. On each Advance Date, the Issuer will cause the delivery of whole shares of Common Stock to the Investor or its designees via DWAC, against payment therefore to the Issuer's designated account by wire transfer of immediately available funds (provided that the shares of stock are received by the Investor no later than 1:00 pm EST) or next day available funds if the shares are received thereafter. No Short Sales The Investor will not, nor cause, nor permit any of its affiliates to, engage in any short sales with respect to the Common Stock. Iron Star Development Incorporated October 4, 2005 Page 3 Registration Rights The Issuer shall file a registration statement with the Securities and Exchange Commission to register the resale of shares of Common Stock to be issued to the Investor. The Issuer shall use its best effort to get the registration statement effective. The Issuer shall continuously maintain the effectiveness of the registration statement for a period of twenty-four (24) months after the effective date. The Issuer shall pay all offering expenses in connection with the registration (the "Registration Statement"). Warrants The Investor shall be granted 50,000 Warrants for each one million ($1,000,000) draw down of the Standby Equity Distribution of which each 50,000 tranche shall be exercisable at 102% of the average "Market Price on a cash basis. Warrants shall be valid for a period of five years from each traunches vesting at time of full draw down. Structuring Fee The Issuer will pay to the Investor a structuring fee of $20,000. Except for the Structuring Fee, each party will be responsible for all its own fees and expenses in this transaction. Commitment Fees Upon closing, the Issuer shall issue to the Investor restricted shares to the Issuer's common stock in an amount equal to five percent (5%) of the Commitment Amount based on the closing bid of the Issuer's Common Stock on the closing date. These shares shall have "piggy-back" and demand registration rights and will be included in the Registration Statement. Upon each Advance, the Investor shall receive directly from escrow cash compensation equal to five percent (5%) of the gross proceeds of such Advance. Iron Star Development Incorporated October 4, 2005 Page 4 Confidentiality The existence of this term sheet and the individual terms and conditions are of a confidential nature and shall not be disclosed to anyone, except the Issuer, the Issuer's management, Board of Directors, legal counsel and accounting advisors. [SIGNATURE PAGE TO IMMEDIATELY FOLLOW] Iron Star Development Incorporated October 4, 2005 Page 5 If the terms and conditions contained herein are satisfactory, please sign as indicated below. We appreciate this opportunity to work with you. We look forward to an expeditious and successful closing of this transaction. Sincerely, CORNELLCAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo ------------------------------------ Name: Mark Angelo Title: Portfolio Manager AGREED TO AND ACCEPTED: IRON STAR DEVELOPMENT, INC. By: /s/ Wallace Boyack ------------------------------------ Name: Wallace Boyack Title: President CALLKEY GROUP LTD. By: /s/ Niles Hemlboldt ------------------------------------ Name: Niles Hemlboldt Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----