Exhibit 10.5


 


MUTUAL RELEASE AND SETTLEMENT
AGREEMENT


 


This MUTUAL RELEASE AND
SETTLEMENT AGREEMENT (“Agreement”), dated and effective August 3, 2005, is
made by and between Nathaniel Energy Corporation, a Delaware corporation (“Nathaniel”)
and Merrick & Company, a Colorado corporation (“Merrick”).  The parties to this Agreement are
collectively referred to as the “Parties.”


 


RECITALS


 


A.           On or about October 16, 2003, the
parties entered into a Client Agreement for Professional Services Short Form Contract
(“Contract”) pursuant to which Nathaniel engaged Merrick to perform certain
engineering and related services (“Services”), and to provide certain
deliverables on a time-and-material basis (“Deliverables”), in connection with
the project described in the Contract (“Project”);


 


B.             Merrick issued to Nathaniel a number of
invoices, billing statements, and/or demands for payment arising from or
relating to the Contract, Services, Deliverables, and/or Project (collectively “Invoices”).


 


C.             On or about August 1, 2004, to evidence
Invoices, Nathaniel executed a Promissory Note in favor of Merrick in the
principal amount of $126,153.30 (“$126,153.30 Note”);


 


D.            On or about September 8, 2004, to
evidence Invoices, Nathaniel executed a Promissory Note in favor of Merrick in
the principal amount of $199,626.96 (“$199,626.96 Note”);


 


E.              On or about December 21, 2004, to
evidence Invoices, Nathaniel executed a Promissory Note in favor of Merrick in
the principal amount of $461,135.35 (“$461,135.35 Note”);


 


F.              On or about December, 21, 2004, Nathaniel
executed a Promissory Note in favor of Merrick in the principal amount of
$325,780.26 (“$325,780.26 Note”), which superceded, replaced, and extinguished
the $126,153.30 Note and $199,626.96 Note;


 


G.             A number of significant disputes have arisen
between the Parties; and


 


H.            On the terms set forth in this Agreement,
Nathaniel and Merrick hereby desire and intend to settle and resolve all
disputes, issues, and claims between them through the effective date of this
Agreement, including but not limited to all claims arising from or relating to
the Contract, Services, Deliverables, Project, $126,153.30 Note, $199,626.96
Note, $461,135.35 Note, and $325,780.26 Note, as well as all claims, known or
unknown, that could have been asserted by Nathaniel or Merrick against the
other in any judicial, administrative, or like action or proceeding.


 


NOW THEREFORE, for and in
consideration of the foregoing recitals, the mutual promises and covenants
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:


 


1.             Settlement Payment
To Merrick.  Nathaniel shall pay
Merrick the principal sum of Seven
Hundred Twenty Eight Thousand Six Hundred Thirty Seven and No/100ths Dollars
($728,637.00), with interest on the unpaid principal balance from July 15,
2005, until paid, at the rate of eight percent (8%) per annum, in accordance
with the Promissory Note attached hereto as


 





















 


Exhibit “A”
(“Note”).  Principal and interest shall
be payable at P.O. Box 22026, Denver, Colorado 80222, or such other place
as Merrick may designate in writing, with a one-time payment of Sixty Five
Thousand and No/100ths Dollars ($65,000.00) upon execution of this Agreement,
the balance payable without demand or offset, abatement, or deduction, in
twenty four (24) equal monthly payments of Thirty Thousand Fourteen and
50/100ths Dollars ($30,014.50) in accordance with the schedule of payments
attached to the Note as Exhibit “A-1,” due on the fifteenth day of each
month, commencing August 15, 2005. 
Such payments shall continue until the entire indebtedness evidenced by
the Note is fully paid; provided, however, if not sooner paid, the entire
principal amount outstanding and accrued interest thereon, shall be due and
payable on July 16, 2007.  Pursuant
to the Note, Nathaniel shall have the right to prepay and satisfy all
its obligations hereunder by paying Merrick in good funds, before 5:00 p.m.
Mountain Time on September 15, 2005, the amount of Five Hundred Thousand
and No/100ths Dollars ($500,000.00), which amount shall be in addition to
amounts previously paid under the Note.


 


2.             Right To Prepay
Without Penalty/Sole Indebtedness. 
Nathaniel shall at all times have the right to prepay the amount due
under the Note without penalty.  It is
expressly understood and agreed that, notwithstanding any other term or
provision in this Agreement, the Note shall constitute the sole and exclusive
indebtedness from Nathaniel to Merrick following the effective date of this
Agreement, and that a breach by Nathaniel of this Agreement shall not give rise
to any independent liability, of any kind or nature, from Nathaniel to Merrick.


 


3.             Payment Default
(Nathaniel).  If any payment required
under the Note is not paid when due, Merrick may at any time thereafter declare
a default thereunder.  Such default must
be declared by written notice, state the payment(s) that were not timely made,
and be delivered by hand delivery or nationally recognized overnight carrier as
follows:  (a) to Nathaniel,
attention George Cretecos, 8001 S. InterPort Boulevard, Suite 260,
Englewood, Colorado 80112; and (b) to Nathaniel’s counsel, Foster, Graham &
Calisher, LLP, attention Daniel K. Calisher, 1226 Bannock Street, Denver,
Colorado 80204.


 


4.             Right To Cure
(Nathaniel).  Nathaniel shall have a
cure period of 5 business days from the date a notice of default is delivered
to Nathaniel and their counsel as specified above.  Nathaniel may cure any such default, without
penalty, within such 5 business day period by paying Merrick the payment(s)
specified in the notice.  If Nathaniel
fails to timely cure such a default, then it shall no longer be curable (“Irrevocable
Default”).  It is expressly understood
and agreed that, notwithstanding any other term or provision in this Agreement,
performance of this Agreement shall constitute the sole and exclusive duty from
Nathaniel to Merrick following the effective date of this Agreement.


 


5.             Irrevocable
Default/Judgment (Against Nathaniel). 
If Nathaniel commits an Irrevocable Default, Merrick may, according to
the terms of the Note, accelerate the remaining debt under the Note, causing
the total amount then owed to be immediately due and payable.  In that event, Merrick’s sole remedy shall be
specific performance of this Agreement and the Note including, without
limitation, seeking the entry of judgment against Nathaniel, and only
Nathaniel, in an action filed in the District Court for Arapahoe County,
Colorado (“Action”).  The Parties hereby
consent to jurisdiction and venue in the Action.  The amount of such a judgment shall be
calculated exclusively as follows: the entire principal amount outstanding and
accrued interest on the Note, plus all
reasonable costs and expenses of collection and or suit incurred by Merrick in
connection with the Note, including, but not limited to attorney’s and


 





















 


expert’s
fees. Nathaniel hereby waives all defenses and setoffs which would
otherwise be available to it in the Action, with the following exceptions:  (a) payment to Merrick in accordance
with the Note; and (b) Merrick’s breach of this Agreement (collectively “Defenses”).  In the event there are no Defenses available
to it, Nathaniel shall file an Answer in the Action consenting to the entry of
judgment on a forthwith basis according to the terms of this Agreement.  Service of process in the action may be
effectuated on Nathaniel or its counsel (identified herein).


 


6.             Satisfaction Of
Prior Promissory Notes & Invoices. 
Upon execution of this Agreement, the Invoices, $126,153.30 Note,
$199,626.96 Note, $461,135.35 Note, and $325,780.26 Note, as well as other
amounts owed by Nathaniel to Merrick, except as provided herein, shall be
deemed completely released, satisfied, and discharged.  Upon execution of this Agreement, Merrick
shall clearly and indelibly mark the original $126,153.30 Note, $199,626.96
Note, $461,135.35 Note, and $325,780.26 Note “Canceled” and “Paid In Full,” and
shall deliver the same to Nathaniel.


 


7.             Deliverables By
Merrick.  Upon Nathaniel making
payments on the Note such that less than Five Hundred Thousand and No/100ths
Dollars ($500,000.00) is owed thereunder, Merrick shall deliver to Nathaniel,
at no charge to Nathaniel, the Deliverables identified on Exhibit “B”
hereto.  Delivery in accordance with Exhibit “B” shall satisfy all of Merrick’s obligations
in connection with the Deliverables, Merrick being under no duty or obligation
to perform any additional services or work whatsoever in connection therewith.


 


8.             Default/Right To
Cure (Merrick).  If anything required
under this Agreement is not performed by Merrick when due, Nathaniel may at any
time thereafter declare a default hereunder. 
Such default must be declared by written notice, stating in detail the
default alleged, and be delivered by hand delivery or nationally recognized
overnight carrier as follows:  (a) to
Merrick, attention Ralph W. Christie, Jr., 2450 South Peoria St., Aurora,
Colorado 80014; and (b) to Merrick’s counsel, Philip A. Rouse, Jr.,
303 E. 17th Ave, Suite 800, Denver, Colorado 80203-1299.  Merrick shall have a cure period of 5
business days from the date a notice of default is delivered to Merrick and its
counsel as specified above.  Merrick may
cure any such default, without penalty, within such 5 business day period
specified in the notice.  If Merrick
fails to timely cure such a default, then it shall no longer be curable (“Irrevocable
Default”).  It is expressly understood
and agreed that, notwithstanding any other term or provision in this Agreement,
performance of this Agreement shall constitute the sole and exclusive duty from
Merrick to Nathaniel following the effective date of this Agreement.


 


9.             Irrevocable
Default/Judgment (Against Merrick). 
If Merrick commits an Irrevocable Default, Nathaniel’s sole remedy shall
be specific performance of this Agreement. 
In that event, Nathaniel shall be entitled to immediate specific
performance of this Agreement including, without limitation, injunctive relief against
Merrick in an action filed in the District Court for Arapahoe County, Colorado
(“Action”).  The Parties hereby consent
to jurisdiction and venue in the Action. 
In addition to an order for specific performance and/or injunctive
relief, Nathaniel shall be awarded all
reasonable costs and expenses of obtaining such relief, including but not
limited to attorney’s and expert’s fees. 
Merrick hereby waives all defenses which would otherwise be
available to it in the Action, with the following exceptions:  (a) complete and timely turnover to
Nathaniel of the deliverables identified in Exhibit “B”
hereto; and (b) Nathaniel’s breach of this Agreement (collectively “Merrick
Defenses”).  In the event there are no Merrick
Defenses available to it, Merrick shall file an Answer in the Action consenting
to the immediate


 





















 


entry of an order for
specific performance against Merrick including, without limitation, injunctive
relief.  Service of process in the Action
may be effectuated on Merrick or its counsel (identified herein).


 


10.           Release By Nathaniel.  Nathaniel, on behalf of itself and its predecessors, successors, insurers,
affiliates, and assigns, hereby releases Merrick (as well as its
officers, directors, shareholders, managers, members, partners, principals,
affiliates, subsidiaries, related entities, contractors, attorneys,
predecessors, successors, assigns, insurers, associates, agents,
representatives, employers, and employees) (collectively “Merrick Released
Parties”) from all actions, claims, damages, obligations, and liabilities (of
any kind or nature, without regard to amount, known or unknown, accrued or
unaccrued) through the effective date this Agreement, including but not limited
to all claims arising from or relating to the Contract, Services, Deliverables, Project, $126,153.30 Note,
$199,626.96 Note, $461,135.35 Note, and $325,780.26 Note (collectively “Merrick
Released Claims”).


 


11.           Release By Merrick.  Merrick, on behalf of itself and its predecessors, successors, insurers,
affiliates, and assigns, hereby releases Nathaniel (as well as its
officers, directors, shareholders, managers, members, partners, principals,
affiliates, subsidiaries, related entities, contractors, attorneys,
predecessors, successors, assigns, insurers, associates, agents,
representatives, employers, and employees) (collectively “Nathaniel Released
Parties”) from all actions, claims, damages, obligations, and liabilities (of
any kind or nature, without regard to amount, known or unknown, accrued or
unaccrued) through the effective date this Agreement, including but not limited
to all claims arising from or relating to the Contract, Services, Deliverables, Project, $126,153.30 Note,
$199,626.96 Note, $461,135.35 Note, and $325,780.26 Note (collectively “Nathaniel
Released Claims”).


 


12.           Separateness Of
Releases.  The releases given above
each represents and contains a separate release running from the releasor to
the releasee, as applicable, and from each of the persons and entities for whom
the releasor acts to each of the persons and entities released thereby.  Each party covenants that none of the claims,
rights, or interests which it has released or has caused to be released under
this Agreement has been assigned or transferred, in whole or in part, to any
person or entity, and each party agrees to indemnify, defend, and hold the other
party harmless from and against any breach of this covenant.


 


13.           Covenants Not To Sue.  Except as otherwise provided herein, each
party hereby covenants, on its own behalf as well as for those persons and
entities whom each acts and represents for purposes of Sections 10 and 11
above, not to sue upon, or otherwise assert in any judicial, administrative, or
like action or proceeding, any of the claims released herein, and each party
agrees to indemnify, defend, and to hold the other party harmless from damages,
liabilities, or costs, including attorney’s and expert’s fees, arising out of
or in any way connected with its breach
of this covenant.


 


14.           No Release For
Breach Of This Agreement.  Nothing
contained herein shall release any party hereto from any claims, rights, or
causes of action arising from or relating to a breach of this Agreement.


 


15.           Releases Valid Even
If Additional Or Different Facts. 
The Parties acknowledge they may discover facts which are additional to
or different from those which they now know or believe to be true regarding the
subject matter of this Agreement. 
Nonetheless, except as


 





















 


otherwise provided
herein, it is the parties’ intent to fully and finally compromise and settle
all claims which exist or may exist between them through the effective date of
this Agreement, including but not limited to all claims arising from or
relating to the Contract,
Services, Deliverables, Project, $126,153.30 Note, $199,626.96 Note,
$461,135.35 Note, $325,780.26 Note, Merrick Released Claims, and Nathaniel
Released Claims.  To effectuate that
intention, the releases given herein shall remain full and complete releases,
notwithstanding the discovery of any additional or different facts by any
party.


 


16.           No Representations:  The Parties acknowledge that no party, nor
agent, nor attorney of any party has made any promise or representation
whatsoever, express or implied, concerning the subject matter of this
Agreement, or to induce the execution of this Agreement, which is not expressly
set forth herein.  It is further
acknowledged that no party to this Agreement has relied upon any representation
made by any other party regarding any aspect of the other’s claims, including
but not limited to the nature, extent, or duration of any damages or injuries
suffered, nor the legal liability therefor.


 


17.           Contractual Nature.   The Parties hereby agree that the foregoing
provisions of release, indemnity, and the covenants not to sue are contractual
and are not mere recitals.


 


18.           Representations And Warranties.  Each
Party represents and warrants as follows:


 


(a)           Organization and
Good Standing.  It is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation.


 


(b)           Authority and
Binding Effect. The execution and delivery of this Agreement by it, the
consummation of the transaction, and the performance by the party of its
obligations hereunder are within its power and authority, will not contravene
or constitute a material default under any provision of its organizational
documents, and will not result in any material breach of any term, condition or
provision of, or constitute a material default under, any note, mortgage,
indenture, contract, agreement, agency agreement, judgment or order and, to it’s
knowledge, will not contravene any provision of applicable law or
regulation.  All actions required by it’s
articles of incorporation, any applicable agreements, or by laws necessary to
authorize the execution, delivery and performance of this Agreement by it and
the consummation of the transaction have been duly and validly taken on or
prior to the effective date hereof.  The
Secretary’s Certificate certifying minutes of the board of directors
authorizing and directing execution of this Agreement is attached hereto as Exhibit “C.”


 


(c)           Good
Faith Intent.  This transaction has
been undertaken in good faith, considering the obligations to the other party
hereto, whether or not the right(s) are reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, and each party has undertaken this
transaction without any intent to hinder, delay, or defraud any party.


 


(d)           Adequacy
Of Consideration and Negotiations. 
Each of party hereto acknowledges that the consideration it has given or
received hereunder is fair and adequate consideration for the covenants,
undertakings, forbearances, and promises contained herein, and that this
Agreement has been negotiated in good faith and at arm’s length.  Specifically, without limitation, in return
for the execution of this Agreement, each party hereto is waiving and foregoing
one or more legal rights or remedies they have or may have against the other.


 





















 


19.           Notices.  Except as otherwise specified herein, all
notices, requests, demands, and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day after mailing if mailed to the Party to whom notice is to be
given, by registered or certified, return receipt requested, postage prepaid,
and addressed as follows:


 


	
  Nathaniel:

  	
   

  	
  Nathaniel Energy
  Corporation

  
	
   

  	
   

  	
  Attn: George Cretecos, COO

  
	
   

  	
   

  	
  8001 South InterPort
  Blvd., Suite 260

  
	
   

  	
   

  	
  Englewood, Colorado 80112

  
	
   

  	
   

  	
  (303) 690-8300

  
	
   

  	
   

  	
  (303) 539-0741 Facsimile

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Foster, Graham &
  Calisher, LLP

  
	
  (which shall not

  	
   

  	
  Daniel K. Calisher

  
	
  constitute notice)

  	
   

  	
  1226 Bannock St.

  
	
   

  	
   

  	
  Denver, Colorado 80204

  
	
   

  	
   

  	
  (303) 333-9810

  
	
   

  	
   

  	
  (303) 333-9786 Facsimile

  
	
   

  	
   

  	
   

  
	
  Merrick:

  	
   

  	
  Merrick & Company

  
	
   

  	
   

  	
  Attn: Ralph W.
  Christie, Jr., President

  
	
   

  	
   

  	
  2450 S. Peoria Street

  
	
   

  	
   

  	
  Aurora, Colorado 80014

  
	
   

  	
   

  	
  (303) 751-0741

  
	
   

  	
   

  	
  (303) 751-7967 Facsimile

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Philip A. Rouse, Jr.

  
	
  (which shall not

  	
   

  	
  303 E. 17th Ave.,
  Suite 800

  
	
  constitute notice)

  	
   

  	
  Denver, Colorado
  80203-1299

  
	
   

  	
   

  	
  (303) 813-9333

  
	
   

  	
   

  	
  (303)830-6708

  



 


Any party may change its address for purposes
of this Section by giving the other party written notice of the new address
in the manner set forth above.


 


20.           Severability.   If
any provision of this Agreement is held or deemed to be invalid or
unenforceable to any extent when applied to any person or circumstance, the
remaining provisions hereof and the enforcement of such provision to other
persons or circumstances, or to another extent, shall not be affected thereby
and each provision hereof shall be enforced to the fullest extent allowed by
law. This Agreement shall be construed evenly, and not for or against any Party
in the event of an ambiguity.


 


21.           Superceding
Agreement.  This Agreement supercedes
all prior undertakings, negotiations, and agreements between the Parties
including, without limitation, the Contract, $126,153.30 Note, $199,626.96 Note, $461,135.35 Note, and $325,780.26
Note, and each party hereto stipulates that this Agreement constitutes
the entirety of their mutual and joint understanding with respect to the
subject matters hereof.  No modification
of this Agreement shall be effective unless in writing and signed by all
Parties.


 


22.           No Third Party
Beneficiaries.  There are no third
party beneficiaries to this Agreement including, without limitation, the
clients and creditors of a party. 
Nothing in this Agreement, whether express or implied is intended to
confer any rights or remedies under or by reason of this Agreement on any
persons other than the Parties, their respective predecessors,


 





















 


successors, and assigns,
and the persons and entities for whom releasors and releasees have specifically
acted, nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third person to any party to this Agreement, nor
shall any provision give any third persons any right to subrogation or action
against any party to this Agreement.


 


23.           Governing
Law/Successors/Attorney Fees.   This
Agreement shall be governed by the laws of the State of Colorado, without
application of its choice or conflict of law principles, and shall be binding
upon and shall inure to the benefit of all persons and entities deemed to be
releasors and releasees hereunder, and insurers, and reinsurers of each
party.  In the event of litigation
arising from or relating to this Agreement, the prevailing party in such
litigation shall be entitled to an award (from the non-prevailing party) of all
reasonable attorneys’ fees and costs incurred therein.


 


24.           Pronouns and Terms.  In this Agreement, the singular shall include
the plural, the plural the singular, and the use of any gender shall include
all genders.


 


25.           Headings.  The subject headings herein are included only
for the purposes of convenience, and shall not affect the construction or
interpretation of any of its provisions.


 


26.           Acknowledgment and
Authority.   Each of the parties
acknowledges that, through its authorized representative or agent, it has read
and understands all of the terms and provisions herein, and has consulted legal
counsel in connection herewith, and each person, by his signature below,
warrants and represents that the party for whom he is acting has the authority
to execute this Agreement and to bind itself to the terms and provisions
herein.


 


27.           Multiple
Counterparts.   This Agreement may be
executed in multiple, original or facsimile counterparts, each constituting and
serving as an original hereof.


 


28.           Parties To Bear
Their Own Fees And Costs.  Except as
otherwise and specifically provided herein, the parties shall each be
responsible for and pay all of their own fees and costs arising from or
relating to relating to the Contract,
Services, Deliverables, Project, $126,153.30 Note, $199,626.96 Note,
$461,135.35 Note, $325,780.26 Note, and this Agreement, including but
not limited to all attorneys’ fees.


 


29.           Denial Of Wrongdoing
Or Liability.  This Agreement is
entered into solely for purpose of effectuating a compromise, settlement, and
release.  Accordingly, each party
acknowledges that the other has admitted no fault, wrongdoing, liability, or
obligation.  In fact, each party
expressly denies such fault, wrongdoing, liability, or obligation.


 


30.           No Drafting Party:  No party shall be deemed the “drafting party”
of this Agreement.  Consequently, this
Agreement shall be construed as a whole, according to its fair meaning and
intent, and not strictly for or against any party hereto.


 





















 


IN WITNESS WHEREOF, the Parties execute this Agreement as of the
effective the date set forth above.


 


 


	
  Nathaniel Energy
  Corporation, Inc.

  
	
   

  
	
   

  
	
  /s/ George A. Cretecos

  	
   

  
	
  By: George Cretecos, Chief
  Operating Officer

  
	
   

  
	
   

  
	
  Merrick & Company

  
	
   

  
	
   

  
	
  /s/ Ralph W. Christie

  	
   

  
	
  By: Ralph W.
  Christie, Jr., President

  
	
   

  
	
  /s/ illegible Sr. VP

  	
   

  
	
  /s/ illegible

  	
   

  
	
   

  
	
  APPROVED AS TO FORM:

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Foster, Graham &
  Calisher, LLP

  
	
  Daniel K. Calisher

  
	
  1226 Bannock St.

  
	
  Denver, Colorado 80204

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Philip A.
  Rouse, Jr., Esq.

  
	
  303 E. 17th Ave.,
  Suite 800

  
	
  Denver, Colorado
  80203-1299