EXHIBIT 10 MUTUAL RELEASE AND SETTLEMENT AGREEMENT This Mutual Release and Settlement Agreement (this "AGREEMENT") is entered into effective as of the last date of execution below (the "EFFECTIVE DATE") by and between Medical Discoveries, Inc., a Utah corporation ("MDI") and Harvest Group, L.L.C., a Utah limited liability company ("HARVEST"), Hydromedics, Inc., a Utah corporation (formerly known as Advance Sales Company) ("HYDROMEDICS"). R E C I T A L S A. MDI, MDI Healthcare Systems, Inc., a Nevada corporation and a wholly-owned subsidiary of MDI ("MHSI"), and Hydromedics entered into that certain Exclusive Sales Agency Agreement dated as of December 14, 1999 (the "SALES AGREEMENT"), pursuant to which Hydromedics was to market certain skincare products of MDI and MHSI. B. MDI borrowed certain sums of money from Harvest as evidenced by those certain Promissory Notes dated as of October 27, 1999, December 12, 1999, January 24, 2000, March 29, 2000, and June 19, 2000 (collectively, the "NOTES"), copies of which are attached hereto as EXHIBIT A. C. Harvest and Hydromedics contend that the parties entered into that certain JV Agreement originally dated as of June 28, 2000 and later dated as of July 12, 2000 (the "JV AGREEMENT"). D. MDI contends that the JV Agreement was never consummated and the parties have a dispute as to the relative rights and obligations of each of the parties thereunder. E. On December 26, 2000, Harvest filed a demand for arbitration seeking specific performance of the JV Agreement or damages. F. MDI has threatened to bring certain counterclaims against Harvest, Hydromedics and the principals of each. Harvest and Hydromedics maintain MDI has no basis for any counterclaims. G. MDI, Harvest and Hydromedics now desire to terminate all obligations of all parties under the Sales Agreement, the Notes, and the JV Agreement and enter into a full and final settlement of any and all claims which either of them has made, could have made, or may in the future make arising out of or in any way connected with the Sales Agreement, the Notes or the JV Agreement and all related matters, as well as settle any other existing or potential claims between them. AGREEMENT NOW, THEREFORE, in consideration of the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MDI, Harvest and Hydromedics hereby agree as follows: 1. Convertible Note. Upon receipt of an executed original of this Agreement, MDI shall deliver to Harvest a convertible promissory note in the principal sum of Five Hundred Thousand Dollars ($500,000) in the form attached hereto as EXHIBIT B (the "CONVERTIBLE NOTE"). 2. Inventory. Within five (5) business days of the Effective Date, Harvest will make available for pick-up by MDI all inventories held by Harvest and Hydromedics (or either of them) of products developed by MDI or MHSI, and Harvest shall cooperate reasonably with MDI to arrange for a specific time and location for such pick-up by MDI. 3. Furnishings. Within five (5) business days of the Effective Date, Harvest will make available for pick-up by MDI all office furniture, equipment and furnishings held by Harvest and Hydromedics (or either of them) that were contributed by MDI toward the joint effort of the parties to consummate the JV Agreement, and Harvest shall cooperate reasonably with MDI to arrange for a specific time and location for such pick-up by MDI. 4. Termination of Agreements. The parties hereby terminate the Sales Agreement, the JV Agreement and any and all other agreements, licenses, understandings and commitments between them, written or oral, including specifically, but without limitation, any and all licenses for the sale of products developed by MDI or its subsidiaries. All such agreements, licenses, understandings and commitments are of no further force and effect as of the Effective Date. Notwithstanding any terms to the contrary in any such agreement, license, understanding or commitment, no provisions, terms or conditions of any such agreement, license, understanding or commitment shall survive the Effective Date and neither party shall have any further obligations or liability to the other thereunder. 5. Satisfaction of Notes. The Notes are hereby deemed satisfied in full and MDI shall have no further obligations or liability under the Notes or under any other loans, advances or borrowings from Harvest or Hydromedics, whether or not documented with promissory notes. Within five (5) business days of the Effective Date, Harvest shall deliver the original Notes to MDI. 6. Stock Certificates. The parties acknowledge that representatives of Harvest and/or Hydromedics may have inadvertently included one or more stock certificates of Hydromedics (the "CERTIFICATES") in file materials delivered to MDI. MDI hereby represents and warrants to Hydromedics that (i) MDI has made a diligent search for the Certificates and has been unable to find or recover the Certificates; (ii) assuming the Certificates were ever in MDI's possession, MDI believes the Certificates are now lost, stolen or destroyed; and (iii) MDI has not sold, assigned, transferred, hypothecated, pledged, deposited under any agreement, or otherwise disposed of the Certificates in whole or in part, or endorsed or delivered the Certificates to any person. If MDI ever finds any of the Certificates, MDI shall immediately deliver the same to Hydromedics. 7. Further Assurances. In case at any time after the Effective Date any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of assignments, bills of sale, instruments and documents) as the other party reasonably may request. 8. Release by MDI and MHSI. On its own behalf and on behalf of MHSI and each of their respective successors and assigns, MDI hereby releases, acquits and forever discharges Harvest, Hydromedics and each of their respective present and former assigns, predecessors, successors, parents, subsidiaries, affiliates, partners, members, shareholders, directors, officers, servants, employees (whether presently employed or formerly employed), attorneys, insurers, agents, and all other persons, firms, corporations, or organizations to whom and for whose conduct the parties released hereby are or may be liable, obligated or responsible, directly or indirectly (collectively referred to hereinafter as the "HARVEST RELEASEES") from and of any and all actions, causes of action, claims, demands, rights, damages, costs, losses, expenses, compensation and liabilities of any kind or nature whatsoever (whether in contract or in tort; whether at law or equity; whether known or unknown; whether suspected or unsuspected; whether accrued or unaccrued; whether alleged or unclaimed) for, on account of, or in any way arising, in whole or in part, from any and all events from the beginning of time to the Effective Date including, without limitation, the following: A. Any claim arising from, in any way connected with, or relating to, either directly or indirectly, the claims asserted, assertable or which may become assertable in the future related to the Sales Agreement or the JV Agreement; and B. Any other claims arising from or relating to, either directly or indirectly, any acts or omissions of any of the Harvest Releasees, whether intentional or unintentional, whether related or unrelated, which MDI contends or may contend have caused it injury, damage and/or loss of any kind or nature whatsoever, including both personal injury and property damage. 9. Release by Harvest. On its own behalf and on behalf of its respective successors and assigns, Harvest hereby releases, acquits and forever discharges MDI, MHSI and each of their respective present and former assigns, predecessors, successors, parents, subsidiaries, affiliates, partners, members, shareholders, directors, officers, servants, employees (whether presently employed or formerly employed), attorneys, insurers, agents, and all other persons, firms, corporations, or organizations to whom and for whose conduct the parties released hereby are or may be liable, obligated or responsible, directly or indirectly (collectively referred to hereinafter as the "MDI RELEASEES") from and of any and all actions, causes of action, claims, demands, rights, damages, costs, losses, expenses, compensation and liabilities of any kind or nature whatsoever (whether in contract or in tort; whether at law or equity; whether known or unknown; whether suspected or unsuspected; whether accrued or unaccrued; whether alleged or unclaimed) for, on account of, or in any way arising, in whole or in part, from any and all events from the beginning of time to the Effective Date including, without limitation, the following: A. Any claim arising from, in any way connected with, or relating to, either directly or indirectly, the claims asserted, assertable or which may become assertable in the future related to the Sales Agreement, the JV Agreement or any of the Notes; and B. Any other claims arising from or relating to, either directly or indirectly, any acts or omissions of any of the MDI Releasees, whether intentional or unintentional, whether related or unrelated, which Harvest contends or may contend have caused it injury, damage and/or loss of any kind or nature whatsoever, including both personal injury and property damage. 10. Release by Hydromedics. On its own behalf and on behalf of its respective successors and assigns, Hydromedics hereby releases, acquits and forever discharges the MDI Releasees from and of any and all actions, causes of action, claims, demands, rights, damages, costs, losses, expenses, compensation and liabilities of any kind or nature whatsoever (whether in contract or in tort; whether at law or equity; whether known or unknown; whether suspected or unsuspected; whether accrued or unaccrued; whether alleged or unclaimed) for, on account of, or in any way arising, in whole or in part, from any and all events from the beginning of time to the Effective Date including, without limitation, the following: A. Any claim arising from, in any way connected with, or relating to, either directly or indirectly, the claims asserted, assertable or which may become assertable in the future related to the Sales Agreement, the JV Agreement or any of the Notes; and B. Any other claims arising from or relating to, either directly or indirectly, any acts or omissions of any of the MDI Releasees, whether intentional or unintentional, whether related or unrelated, which Hydromedics contends or may contend have caused it injury, damage and/or loss of any kind or nature whatsoever, including both personal injury and property damage. 11. Unknown Matters. MDI, Harvest and Hydromedics understand and agree that there may be claims and damages with respect to the matters released herein, the existence of which and the consequences of which are presently unknown, but which may become known in the future, and which if known at present may have materially affected their respective decisions to enter into this Agreement. MDI, Harvest and Hydromedics, nevertheless, intend to and do hereby release the MDI Releasees and the Harvest Releasees from any and all claims, for any and all injuries and damages, whether known or unknown, whether now in existence or hereinafter to arise, and whether if known at present such claims may have materially affected their respective decisions to execute this Agreement; provided, however, that this Agreement does not release claims arising specifically out of this Agreement or the Convertible Note. 12. Comprehensive Release of Claims. This Agreement is a full release of each, every and all claims of every kind and nature which MDI, Harvest and Hydromedics ever had or now have, or may have, which arose, accrued or which may arise or accrue, from the beginning of time to the present against the MDI Releasees or the Harvest Releasees. MDI, Harvest and Hydromedics each hereby represent and warrant, one to the other, that no claim, right, cause of action or demand is reserved, and the release provided herein waives and releases any and all claims, damages, demands, costs, expenses, causes of action, compensation and liability of every kind and nature which MDI, Harvest or Hydromedics, respectively, may be entitled to or have in the future as a result of any events which have occurred from the beginning of time to the Effective Date against the MDI Releasees and the Harvest Releasees. 13. Settlement of Disputed Claims. This Agreement is a compromise of disputed claims, and the consideration provided for in paragraphs 1-5 above, the releases provided for in paragraphs 8-10 above, and the other promises set forth herein, are not intended to, nor should they be, construed as an admission of liability on the part of any party hereto, both of whom expressly deny liability to one another. MDI, Harvest and Hydromedics each understand that each is making the promises to the other set forth herein in lieu of and to avoid the expense and uncertainty of litigation. 14. Mutual Representations, Warranties, Covenants and Indemnities. MDI on the one hand and Harvest and Hydromedics on the other hand each hereby represent, warrant, covenant and indemnify one another as follows: A. That each of them is the sole holder and owner of the claims and matters released herein; that no other person or entity has any interest in the claims and matters released pursuant to this Agreement; and that neither has, nor will it, assign to any person or party any claim or matter within the scope of the releases contained herein; B. That neither has, nor will it, individually or with any other person or entity, or in any way, file, make, otherwise commence, aid in any way, prosecute, cause or permit to be prosecuted against the MDI Releasees or the Harvest Releasees any complaint, lawsuit, charge, claim, demand, cause of action, obligation, damage or liability (hereinafter collectively referred to as a "CLAIM") which is the subject of the releases provided for in this Agreement; C. That in the event of a breach of the covenants set forth in subparagraph B of this paragraph, each hereby agrees and consents to the dismissal or withdrawal, with prejudice, of any such Claim that has been or may in the future be filed by either or on its behalf. In the event that either files any Claim within the scope of those matters described in subparagraph B above, it shall be liable to the other party or parties against whom the Claim is wrongfully filed and shall indemnify and save each such party harmless from all costs and expenses, including, without limitation, attorneys' fees incurred by such party or its officers, agents, employees, directors and/or any other person affiliated or associated with such parties, if any, in defending or responding to any such Claim, regardless of whether such defense or response is before a local, state, or federal court or administrative agency, and regardless of who might ultimately be deemed to be the prevailing party as to any such Claim; D. That each relies wholly upon its own judgment, belief and knowledge of the nature, extent and duration of the claims released herein, and that neither has been influenced to any extent whatsoever in making this Agreement by any representation or statement regarding damages or deficiencies, or regarding any other matters, made by the other, any person or persons representing the other, or by any attorney or expert employed by the other. E. That each has carefully read this Agreement, and all of its provisions, has received and accepted the advice of its own independent legal counsel with respect hereto, and has entered into this Agreement freely and voluntarily intending that it and the parties for whom its acts be legally bound hereby; F. That each is a corporation or limited liability company, as applicable, duly formed and in good standing under the laws of the State of Utah; G. That the execution, delivery and performance of this Agreement by each, and the consummation of the releases and transactions contemplated hereby, have been duly authorized by all necessary entity action; H. That this Agreement has been duly and validly executed and delivered by each and constitutes the legal, valid and binding obligation of each; and, I. That each of the covenants and warranties set forth in this paragraph are material terms of this Agreement without which the parties would not have made the promises set forth herein. 15. Enforcement of Release. In any action brought to enforce, construe or seek damages for breach of this Agreement, or to rescind this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs, and expenses of litigation in addition to any other monetary relief or other amount to which it may be entitled, regardless of whether legal action is actually commenced or not. The amount recoverable includes, without limitation, the preparation of any affirmative claims or defenses, counterclaims, cross-claims or third-party complaints. 16. Governing Law and Forum Selection. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah without reference to any of its conflicts of law provisions. Any action brought to enforce, construe or seek damages for breach of this Agreement, or to rescind this agreement, shall be brought exclusively in the state courts of the State of Utah or in the United States District Court for the District of Utah. Each party hereto consents to the personal jurisdiction of such courts for the limited purposes set forth herein. 17. Attorneys' Fees and Costs. Each party hereto shall bear its own attorneys' fees and costs arising from the actions of its counsel in connection with this Agreement and all matters and documents referred to herein. This provision does not, however, apply to attorneys' fees and costs that may be awarded upon a breach or other violation of this Agreement as specifically provided for herein. Attorneys' fees and costs may be awarded to the prevailing party, as provided in paragraph 15 above, notwithstanding a rescission of this Agreement, and this provision shall be severed from the remainder of this Agreement in such event. 18. Severability. Any provision of this Agreement, or any portion of any provision, that is deemed to be illegal or unenforceable or both shall be severed from this Agreement, without affecting the validity of the remainder of this Agreement. In such event, all other provisions or parts of provisions of this Agreement shall remain in full force and effect. 19. Entire Agreement; Successors in Interest. This Agreement and the Convertible Note and other documents as may be required hereby constitute the final written expression of all of the terms of the settlement of the claims of MDI, Harvest and Hydromedics against the MDI Releasees and the Harvest Releasees, and it is the complete and exclusive statement of the terms of such settlement. MDI, Harvest and Hydromedics hereby acknowledge this Agreement and the Convertible Note and other documents required hereby shall be binding upon and inure to the benefit of the executors, administrators, personal representatives, heirs, successors, agents and assigns of each party hereto and each party released hereby. 20. Counterpart Originals. This Agreement may be executed in counterpart originals and shall be deemed to be final once each party hereto has executed an original of this Agreement. Dated this 28th day of November, 2001. MEDICAL DISCOVERIES, INC. By: /s/ Judy Robinett -------------------------------- Its: CEO ---------------------------- Dated this 29th day of November, 2001. HARVEST GROUP, L.L.C. By: /s/ Rustin Howard -------------------------------- Its: ---------------------------- Dated this 29th day of November, 2001. HYDROMEDICS, INC. By: /s/ Rustin Howard -------------------------------- Its: ---------------------------- EXHIBIT A [TO BE PROVIDED UPON REQUEST] EXHIBIT B THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (the "ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES MAY NOT BE SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER CONCURRED IN BY COUNSEL FOR THE COMPANY THAT REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. MEDICAL DISCOVERIES, INC. CONVERTIBLE NOTE $500,000 Salt Lake City, Utah November ________, 2001 Medical Discoveries, Inc., a Utah corporation (the "Company"), for value received, hereby promises to pay to Harvest Group, L.L.C., a Utah limited liability company (the "Holder"), the principal amount of $500,000, without interest, in accordance with the following terms and conditions: 1. Due Date. The outstanding principal balance will be due and payable on July 8, 2002, (the "Due Date") unless converted in accordance with the terms of Section 4. 2. Prepayment. This Convertible Note may be prepaid in whole or in part by the Company at any time without penalty. Any prepayment of this Convertible Note shall be made upon no less than three days' prior written notice from the Company to the Holder, which notice shall indicate the place designated and the date fixed for such prepayment. At such place and on such date, the Company shall make payment to the Holder of the principal amount of this Convertible Note intended to be prepaid and, in the case of a prepayment in full, the Holder shall surrender this Convertible Note to the Company. 3. Prohibition on Certain Transfers of Patented Technologies. Until the earlier to occur of (i) the date the Company pays in full the principal sum due hereunder or (ii) the Due Date, the Company shall not sell, assign, encumber, hypothecate or otherwise transfer (any such sale, assignment, encumbrance, hypothecation or transfer herein a "Transfer") any of the Company's patented technologies unless, pursuant to such Transfer, the Company receives consideration sufficient to repay any principal balance then outstanding on this Convertible Note and does so repay such balance simultaneously with and as a condition of closing such Transfer. Notwithstanding the foregoing, the Company is permitted to license any and all of its technologies (any such license herein a "License Transaction"), at any time, on any terms satisfactory to the Company, in its sole and absolute discretion, so long as all of the net profits (as determined by the Company in its reasonable discretion) to the Company of such License Transaction are applied toward this Convertible Note simultaneously with and as a condition of closing such License Transaction; provided, however, that the Company must obtain the written consent of the Holder, which consent shall not be unreasonably withheld or delayed, prior to agreeing to any License Transaction that (y) is for a duration of longer than one year and cannot be terminated by the Company within one years' notice to the licensee; or (z) is exclusive to the licensee and is for a duration of longer than one year. 4. Conversion. (a) If the principal sum due hereunder is not paid in full on or before the Due Date, then, subject to the procedures of Section 4(c), the principal sum outstanding shall convert to a number of shares of the Company's common stock equal to a percentage of the total number of shares then issued and outstanding (taking into account the issuance of shares pursuant to this Section 4(a)), on a fully-diluted basis (including any unexercised, outstanding stock options or other rights to acquire stock), as follows: