Term Sheet for Reverse Triangular Merger Among CallKey Group Ltd., Iron Star Development, Inc., and Highgate House Funds, Ltd.

Summary

This term sheet outlines a planned reverse triangular merger in which Iron Star Development, Inc., a U.S. public company, will acquire CallKey Group Ltd. by exchanging shares. After the merger, Iron Star will change its name and issue new shares, with CallKey shareholders receiving a majority stake. Highgate House Funds, Ltd. and other investors will invest $800,000 in CallKey, with part of the funds used to repurchase shares from an existing Iron Star shareholder. The agreement includes standard representations, warranties, and conditions for closing, with an anticipated closing date on or before October 31, 2005.

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