EXHIBIT 10.16
SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASES
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This
Settlement Agreement and Mutual General Releases (the "Agreement")
is
made as of August 15, 2007 by and between: (a) Gold Leaf Homes,
Inc. a Texas
corporation, ("Gold Leaf"), (b) BlueStar Health, Inc. a Colorado
corporation
("BlueStar"), (c) Alfred L. Oglesby ("Oglesby"), (d) Bluestar
Acquisition, Inc.
a Texas corporation, ("Bluestar Acq."), and (e) Thomas Redmon
("Redmon"). Each
of the foregoing persons and entities is hereinafter referred to as
a "Party"
and all of them collectively as the "Parties."
RECITALS
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This
Agreement is made with reference to the following facts and
circumstances:
A.
On October 17, 2005, BlueStar, Oglesby, Gold Leaf and Redmon
entered
into a Reorganization and Purchase Agreement ("Reorganization
Agreement") which
provided for BlueStar's purchase of all of the issued and
outstanding capital
stock of Gold Leaf and certain related transactions between various
of the
Parties;
B.
On February 13, 2006, BlueStar, Bluestar Acquisition, Inc., a
wholly
owned subsidiary of BlueStar, Gold Leaf, and Redmon entered into an
Asset
Purchase Agreement ("Asset Agreement") and certain related
agreements between
and among various of the Parties, which replaced the Reorganization
Agreement of
October 15, 2005 and substituted a purchase of the home building
assets of Gold
Leaf for the purchase of the stock of Gold Leaf;
C.
Subsequent to the execution of the Asset Agreement the Parties
recognized that the purchase of Gold Leaf's assets by BlueStar was
impracticable
due to the inability to obtain audited financial statements for
Gold Leaf;
D.
No assets of Gold Leaf were actually transferred to BlueStar or
Bluestar
Acquisition, Inc. pursuant to the Reorganization Agreement or Asset
Agreement
and no shares of BlueStar common stock were issued to Gold Leaf or
Redmon; and
E.
No operations of Gold Leaf were ever conducted under the name
BlueStar
or Bluestar Acquisition, Inc., and all Gold Leaf operations were
conducted as
they had been prior to execution of the Reorganization Agreement
and Asset
Agreement; and
F.
Disputes between the Parties related to misrepresentation, fraud
and
other claims have arisen related to the Reorganization Agreement,
Asset
Agreement, related transaction documents and the actions of the
Parties (the
"Transaction Claims"); and
G.
This Agreement is entered into solely for the purpose of settlement
and
compromise, and each Party hereto expressly acknowledges and agrees
that the
Parties hereto have not admitted, and by execution and performance
of this
Agreement, do not admit, and in fact expressly deny, any and all
liability or
obligation to the other Party, except for those rights and
obligations
specifically provided in this Agreement.
TERMS OF AGREEMENT
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NOW,
THEREFORE, for and in consideration of the mutual covenants and
representations contained herein, and for other good and valuable
consideration,
the receipt and sufficiency of which is hereby acknowledged, the
Parties agree
as follows:
1.
Incorporation of Recitals. The Recitals set forth above are
incorporated
into and made part of this Agreement, by this reference.
2.
Effect and Effective Date of This Agreement. This Agreement shall
become
effective and all obligations and claims arising out of the
Reorganization
Agreement, Asset Agreement and related transaction agreements
("Transaction
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Documents"), except as otherwise specifically stated as remaining
in full force
and effect, and the Transaction Claims, shall be cancelled,
rescinded and
terminated upon completion of the following acts: (a) execution of
this
Agreement by all Parties hereto; (b) the execution and delivery of
the general
releases as provided in Sections 4 herein; (c) the delivery of the
promissory
note in the form attached hereto as Exhibits A by Gold Leaf in
accordance with
Sections 3 and 5 herein and payments of all amounts due thereunder;
(d) the
delivery of the escrow instructions by Redmon in accordance with
Sections 3 and
5. The date on which the documents described in Section 3 have been
fully
executed and delivered to the other Parties counsel pursuant to
Section 3 shall
be referenced herein as the "Effective Date" of this Agreement. If
the events
specified in this Section 2 as necessary for this Agreement to
become effective
do not occur by August 20, 2007 (unless such date is extended one
or more times
by written agreement of all parties, or one or more of the
necessary conditions
for effectiveness waived, in writing (i) by Gold Leaf, or its
counsel, for all
acts under this Agreement to be performed or fulfilled by BlueStar
or (ii) by
BlueStar, or its counsel, for all acts under this Agreement to be
performed or
fulfilled by persons other than BlueStar, then (x) this Agreement
shall be null
and void ab initio and all Parties restored to their positions as
they existed
on the date first written above; (y) all documents and/or other
things exchanged
pursuant to this Agreement shall be returned to the respective
Party that
executed each; and (z) this Agreement shall not be cited or
referred to for any
purpose. If BlueStar or Gold Leaf, as the case may be, elects to
waive a
condition otherwise necessary for this Agreement to become
effective, such
waiver will only apply to such act being a condition precedent to
the
effectiveness of this Agreement and shall not relieve any Party of
its
contractual obligation under this Agreement actually to perform
such act.
3.
Exchange of Settlement Documents. Executed copies of this
Agreement, the
releases by Gold Leaf and Redmon described in Section 2(b) and 4,
and the
Promissory Notes and Escrow Instructions described in Section 5
shall be
delivered to counsel for BlueStar, and executed copies of this
Agreement and the
releases by BlueStar, Bluestar Acquisition, Inc., and Oglesby shall
be delivered
to counsel for Gold Leaf. All of the executed documents shall be
held by counsel
for the Parties in escrow, and not released to the Parties until
counsel have
confirmed that all required documents have been executed and
delivered to the
other Parties counsel.
4.
Mutual and General Releases. Except for their respective rights
to
enforce the obligations and other terms of this Agreement, and/or
to a seek
judicial interpretation of this Agreement:
(a) Simultaneously upon executing this Agreement, BlueStar,
Bluestar
Acquisition, Inc., and Oglesby shall separately execute and deliver
to counsel
for Gold Leaf and Redmon, as escrow agent, a general release in
favor of Gold
Leaf and Redmon and each of their respective Representatives (as
defined below),
in the form attached hereto as Exhibit C.
(b) Simultaneously
upon executing this Agreement, Gold Leaf and Redmon
shall separately execute and deliver to counsel for BlueStar,
Bluestar
Acquisition, Inc. and Oglesby, as escrow agent, a general release
in favor of
BlueStar, Bluestar Acquisition, Inc. and Oglesby and their
Representatives, in
the form attached hereto as Exhibit D.
(c) Simultaneously upon executing this Agreement, Gold Leaf
shall
separately execute and deliver to counsel to BlueStar, as escrow
agent,
promissory notes in the form attached hereto as Exhibits A and
escrow
instructions as described in Section 5.
(d) The term "Representatives", as used in this Section 4, and
elsewhere
in this Agreement, refers to and means, as applicable, all agents,
servants,
officers, directors, shareholders, partners, members, employees,
contractors,
insurers, guarantors, sureties, affiliates, predecessors,
successors, assigns,
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attorneys, accountants, spouse, children, heirs, representatives
and all other
persons and entities acting with authority of or otherwise on
behalf of the
particular Party.
5.
Promissory Notes and Escrow Instructions. Gold Leaf shall execute
and
deliver promissory notes in the form attached as Exhibits A in the
amount of
$100,000 payable to BlueStar. Gold Leaf and Redmon shall execute a
letter of
instruction to The Lebrecht Group, APLC, "Lebrecht" in the form
attached as
Exhibit E ("Escrow Instructions".
6.
Oglesby Payment/Credit. Oglesby shall make a payment towards or
otherwise reduce the principle balance owed by $65,000 on the
liability of Gold
Leaf and Redmon under a promissory note issued by Gold Leaf to a
creditor
identified on the promissory note described in Exhibit F
("Obligation"). No
payments shall be made directly to Gold Leaf or Redmon pursuant to
this
provision and the means of reducing the Obligation shall be within
the
reasonable discretion of Oglesby if acceptable to the creditor. To
the extent
Oglesby has not already taken action regarding the Obligation, he
shall refrain
from any action related to the Obligat
