SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

EXHIBIT 10.1

SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

          This Settlement Agreement and Mutual General Release (the " Agreement ") is entered into as of January 1, 2009 (the " Effective Date ") by and between Dutchess Private Equities Fund, Ltd., a Cayman Islands exempt company (" Creditor "), and NatureWell, Incorporated, a Delaware corporation (" Debtor "), with reference to the following facts:

RECITALS

          A.     Debtor and Creditor desire that Debtor restructure its existing debt and capital structure (the " Restructuring "); and

          B.     As of the Effective Date Creditor is owed monies from Debtor pursuant to seventeen (17) senior secured notes for which there is an aggregate remaining balance due, including all accrued and unpaid interest and/or penalties, if any, in the amount of approximately $5,298,139 (" Amount Due "); and

          C.     Creditor and Debtor agree that the Amount Due represents all monies, services and/or any other form of consideration owed to Creditor by Debtor as of the Effective Date; and

          D.     As part of the Restructuring, Debtor desires to issue to Creditor a new Senior Note, along with its underlying security agreement, face value $300,000, a form of which is attached hereto as Exhibit A , a second new Senior Note, along with its underlying security agreement, face value $1,883,000, a form of which is attached hereto as Exhibit B (together the " Senior Notes "), and 3,115 shares of its Series E Preferred Stock (together the Senior Notes and Series E Preferred Stock are the " Consideration ") as full payment and final settlement of the Amount Due and any and all other Claims (as defined in Section 4 below) Creditor may have, and Creditor desires to accept such Consideration as full payment and final settlement of the Amount Due and any and all other Claims it may have.

          NOW THEREFORE, in consideration of the mutual promises and agreements set forth herein, and other good valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties hereby agree as follows:

          1.      Representations and Warranties . Creditor represents and warrants that: (i) as of the Effective Date, it has not previously assigned or transferred in any manner, or purported to have assigned or transferred in any manner, any Claim (as defined in Section 4 below) or right set forth in this Agreement and/or arising out of the Amount Due, (ii) the Amount Due represents all monies, services and/or any other form of consideration owed to Creditor by Debtor as of the Effective Date, (iii) it understands that by signing this Agreement, and subject only to cancellation of this Agreement pursuant to Section 3(d) below, Creditor is irrevocably agreeing to accept the Consideration as full payment and final settlement of the Amount Due and any and all other Claims Creditor may have, (iv) upon payment of the Consideration, Creditor shall have received full and complete payment for the Amount Due and Creditor shall have no further claims against Debtor (other than pursuant to the instruments received as the Consideration), for monies owed, services rendered or otherwise, (v) notwithstanding any other provision contained in this Agreement, Creditor agrees that the Intercreditor, Subordination and Standby Agreement dated September 2, 2003, as amended (the " Intercreditor Agreement "), which it has previously signed in its capacity as a holder of Senior Debt issued by Debtor, shall remain in full force and effect and binding upon Debtor and Creditor as to the Senior Notes, (vi) Creditor is an "accredited investor" (or a corporation or entity not formed for the purpose of investing in Debtor) as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, (vii) Debtor has made available to Creditor the opportunity to (A) ask questions of and receive answers from Debtor concerning Debtor and the activities of Debtor, and (B) otherwise obtain any additional information, to the extent that Debtor possesses such information and can lawfully provide such to Creditor or could acquire it without unreasonable effort or expense, and (viii) Creditor is acquiring the Consideration for its own account for investment only and not with a view towards, or in connection with, the public sale or distribution thereof, except pursuant to sales registered, or exempt from registration, under the Securities Act of 1933 and applicable state securities laws.

          2.      Debtor Covenants . In consideration of the mutual covenants and agreements set forth in this Agreement, Debtor shall promptly issue to Creditor the Consideration upon receipt by the Debtor of an executed version of this Agreement.

          3.      Other Covenants . The parties agree that:

               (a)  by entering into this Agreement and upon payment of the Consideration all previous agreements or arrangements between Debtor and Creditor for the payment of any monies or other forms of consideration are cancelled and replaced by the terms of this Agreement and the instruments and documents executed in connection herewith; and

               (b)  upon payment of the Consideration any and all Claims, trade payables or instruments of indebtedness held by Creditor (whether named or described in Recital B) including, but not limited to, any promissory note(s) and/or debenture(s) that have been previously issued to Creditor by Debtor, shall be cancelled and rendered null and void; and

               (c)  until the Consideration has been paid to Creditor the Amount Due shall remain owed to Creditor under its original terms and conditions, and all promissory notes, debentures, trade payables or other evidences of indebtedness and all agreements and documentation associated therewith ( the " Instruments of Indebtedness ") shall remain in full force and effect, provided however, upon payment of the Consideration all such Instruments of Indebtedness shall be cancelled and rendered null and void; and

               (d)  if for any reason the Consideration is not paid within ninety (90) days after the Effective Date, then this Agreement shall be cancelled and rendered null and void in its entirety; and

               (e)  the Mutual General Release contained in this Agreement shall become effective as of the date that the Consideration was paid; and

               (f)  for purposes of this Agreement, the date that the Consideration was mailed via US Mail or sent by overnight courier shall be the date for determining when the Consideration was paid or payment of the Consideration was made.

          4.      Release .

               (a)  In consideration of the mutual covenants and agreements set forth herein, and except with respect to obligations arising under this Agreement, the parties, on their own behalf and on behalf of their respective predecessors, current or former successors-in-interest, assigns, transferees, affiliates, representatives, partners, shareholders, officers, directors, employees and agents (collectively " !Affiliated Parties "), hereby fully and forever release, remise and discharge each other and each of their Affiliated Parties, and each of them of and from any and all liabilities, claims, demands, actions, causes of action, rights, obligations, compensation, expenses, contracts, agreements and debts, whether or not direct or indirect, contingent, accrued, inchoate, liquidated or unliquidated, foreseen, or unforeseen, matured or unmatured, or known or unknown (collectively " Claims ") which the parties and the Affiliated Parties has or may have against the others and their Affiliated Parties from the beginning of time up to the date that this Release becomes effective (see section 3(e) above).

                (b)  The parties on their own behalf and on the behalf of their Affiliated Parties hereby agree that all rights under Section 1542 of the Civil Code of the State of California are hereby waived by each of them and their Affiliated Parties. Section 1542 provides as follows:

"A general release does not extend to claims which a creditor does not know of or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."

          5.      Attorneys' Fees . In the event any dispute arises under this Agreement or the documents or instruments executed and delivered in connection with this Agreement, and the parties hereto resort to litigation to resolve such dispute, the prevailing party in any such litigation, in addition to all other remedies at law or in equity, shall be entitled to an award of costs and fees from the other party, which costs and fees shall include, without limitation, reasonable attorneys' fees and legal costs.

          6.      Choice of Law; Venue . This Agreement will be construed and enforced in accordance with and governed by the laws of the State of California and the federal law of the United States without reference to principles of conflicts of law. The parties agree that, in the event of any dispute arising out of this Agreement or the transactions contemplated thereby, venue for such dispute shall be in the state or federal courts located in San Diego, California, and that each party hereto waives any objection to such venue based on forum non conveniens.

          7.      Severability . Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable, such provision(s) shall (i) be modified to the minimum extent necessary to render it valid and enforceable, or (ii) if it cannot be so modified, be deemed not to be a part of this Agreement and shall not affect the validity or enforceability of the remaining provisions.

          8.      Further Assurances . Each party shall perform or cause to be performed any further acts and execute and deliver any documents that may be reasonably necessary or advisable to carry out the provisions of this Agreement.

          9.      Entire Agreement . This Agreement fully and completely expresses the entire agreement between the parties hereto with respect to the subject matter hereof. There are no writings, conversations, representations, warranties, or agreements, which the parties intend to be a part hereof except as expressly set forth in this Agreement or to be set forth in the instruments or other documents delivered or to be delivered hereunder. This Agreement represents the entire agreement between the parties hereto and supersedes any and all previous written or oral agreements or discussions between the parties and any other person or legal entity concerning the transactions contemplated herein.

          10.     Counterparts/Facsimile Signatures . This Agreement may be executed in one or more counterparts, each of which when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument. In lieu of the original, a facsimile transmission or copy of the original shall be as effective and enforceable as the original.

          IN WITNESS WHEREOF, the parties hereto have executed this Settlement Agreement and Mutual General Release as of the day and year first written above.

DEBTOR:

CREDITOR:

NatureWell, Incorporated
a Delaware Corporation

Dutchess Private Equities Fund, Ltd.,
a Cayman Islands exempt company

By:  _____________________________
     James R. Arabia, CEO

By:  _____________________________
     Douglas H. Leighton, Director

EXHIBIT A

PROMISSORY NOTE

FACE AMOUNT

$300,000

PRICE

$300,000

INTEREST RATE

6% per annum

NOTE NUMBER

January - 2009 -- 101

ISSUANCE DATE

January 1, 2009

MATURITY DATE

January 1, 2012

FOR VALUE RECEIVED, Naturewell, Incorporated, a Delaware corporation, and all of its subsidiaries (the "Company") (OTC BB: NAWL) hereby promises to pay to the order of Dutchess private equities fund, lTD. (collectively, the "Holder") by the Maturity Date, or earlier, the Face Amount of Three Hundred Thousand Dollars ($300,000) U.S., (this "Note") in such amounts, at such times and on such terms and conditions as are specified herein (sometimes hereinafter the Company and the Holder are referred to collectively as "the Parties").

Article 1       Method of Payment

Section 1.1     Payments made to the Holder by the Company in satisfaction of this Note (referred to as a "Payment," or "Payments") in minimum amounts of six thousand dollars ($6,000) (the "Payment Amount") until the Face Amount is paid in full, minus any fees due. The First Payment will be due on March 1, 2009 and each subsequent Payment will be made at the first business day of the month ("Payment Date" or "Payment Dates") until this Note is paid in full. Notwithstanding any provision to the contrary in this Note, the Company may pay in full to the Holder the Face Amount, or any balance remaining thereon, in readily available funds at any time and from time to time without penalty.

Section 1.2     After Closing, the Company must make a Prepayment to the Holder when the aggregate amount of financing ("Financing") received by the Company is in excess of five hundred thousand dollars ($500,000) ("Threshold Amount"). The Company agrees to pay one hundred percent (100%) of any proceeds raised by the Company over the Threshold Amount toward the Prepayment of the Note, Interest and any penalties until the Face Amount is paid in full. The Prepayments shall be made to the Holder within one (1) business day of the Company's receipt of the Financing. Failure to do so will result in an Event of Default. The Threshold Amount shall also pertain to any assets sold, transferred or disposed of by the Company and any cash balances in the Company bank or brokerage accounts at the end of each month.

Article 2      Collateral

Section 2.1     Those assets listed in the Security Agreement dated May 16, 2006 between the Company and the Holder.

Section 2.2     As further security and collateral for this Note the Company will grant to Holder a security interest in the properties, assets and rights named in that certain Intercreditor Agreement dated as of September 2, 2003, as amended (the "Additional Collateral"). Holder has executed the Intercreditor Agreement and agreed to be bound by its terms. The Parties hereby agree that if the terms of this Note and the Intercreditor Agreement conflict, the Intercreditor Agreement shall prevail.

Article 3      Unpaid Amounts

Section 3.1     In the event that on the Maturity Date the Company has any remaining amounts unpaid on this Note (the "Residual Amount"), the Holder can exercise its right to increase the Face Amount by ten percent (10%) as an initial penalty and an additional two and one-half percent (2.5%) per month paid, pro rata for partial periods, compounded daily, as liquidated damages ("Liquidated Damages"). If a Residual Amount remains, the Company is in Default and the Holder may elect remedies as set forth in Article 4, below. The Parties acknowledge that Liquidated Damages are not interest and should not constitute a penalty.

Article 4      Defaults and Remedies

Section 4.1      Events of Default. An "Event of Default" occurs if any one of the following occur:

                    (a)  The Company does not make a Payment within two (2) business days of (i) a Payment Date; or, (ii) a Residual Amount on the Note exists on the Maturity Date; or

                    (b)  The Company, pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian (as hereinafter defined) of the Company or for its property; (iv) makes an assignment for the benefit of its creditors; or (v) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company or for its property; or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for sixty (60) calendar days; or

                    (c)  The Company's $0.0001 par value regular common stock (the "Common Stock") is suspended or is no longer listed on any recognized exchange, including an electronic over-the-counter bulletin board, for in excess of two (2) consecutive trading days; or

                    (d)  Any of the Company's representations or warranties contained in this Note were false when made; or

                    (e)  The Company breaches this Note, and such breach, if and only if such breach is subject to cure, continues for a period of five (5) business days.

As used in this Section 4.1, the term "Bankruptcy Law" means Title 11 of the United States Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

Section 4.2      Remedies. In the Event of Default, the Holder may elect to garnish Revenue from the Company in an amount that will repay the Holder on the schedules outlined in this Agreement and fully enforce the Security Agreement dated |May 16, 2006, between the Holder and the Company.

          For each and every Event of Default, as outlined in this Agreement, the Holder can exercise its right to increase the Face Amount of the Note by ten percent (10%) as an initial penalty. In addition, the Holder may elect to increase the Face Amount of the Note by two and one-half percent (2.5%) as Liquidated Damages, compounded daily. The Parties acknowledge that Liquidated Damages are not interest under the terms of this Agreement, and shall not constitute a penalty.

          In the event of a Default hereunder, the Holder, at its sole election, shall have the right, but not the obligation, to either:

                    (a)  Switch the Residual Amount to a three-year ("Convertible Maturity Date"), eighteen percent (18%) interest bearing convertible debenture at the terms described hereinafter (the "Convertible Debenture"). In the Event of Default, the Convertible Debenture shall be considered closed ("Convertible Closing Date"), as of the date of the Event of Default. If the Holder chooses to convert the Residual Amount to a Convertible Debenture, the Company shall have twenty (20) business days after notice of default from the Holder (the "Notice of Convertible Debenture") to file a registration statement covering an amount of shares equal to three hundred percent (300%) of the Residual Amount. Such registration statement shall be declared effective under the Securities Act of 1933, as amended (the "Securities Act"), by the Securities and Exchange Commission (the "Commission") within sixty (60) business days of the Convertible Closing Date. In the event the Company does not file such registration statement within twenty (20) business days of the Holder's request, or such registration statement is not declared by the Commission to be effective under the Securities Act within the time period described above the Residual Amount shall increase by five thousand dollars ($5,000) per day. In the event the Company is given the option for accelerated effectiveness of the registration statement, the Company will cause such registration statement to be declared effective as soon as reasonably practicable and will not take any action to delay the registration to become effective. In the event that the Company is given the option for accelerated effectiveness of the registration statement, but chooses not to cause such registration statement to be declared effective on such accelerated basis, the Residual Amount shall increase by five thousand dollars ($5,000) per day commencing on the earliest date as of which such registration statement would have been declared to be effective if subject to accelerated effectiveness; or

                    (b)   Acceleration . If an Event of Default occurs, the Holder by notice to the Company may declare the remaining principal amount of this Debenture, together with all accrued interest and any liquidated damages, to be immediately due and payable in full.

Section 4.3     Conversion Privilege

                    (a)  The Holder shall have the right to convert the Convertible Debenture into shares of Common Stock at any time following the Convertible Closing Date and before the close of business on the Convertible Maturity Date. The number of shares of Common Stock issuable upon the conversion of the Convertible Debenture shall be determined pursuant to Section 4.4, but the number of shares issuable shall be rounded up to the nearest whole share.

                    (b)  The Holder may convert the Convertible Debenture in whole or in part, at any time and from time to time.

                    (c)  In the event all or any portion of the Convertible Debenture remains outstanding on the Convertible Maturity Date (the "Debenture Residual Amount"), the unconverted portion of such Convertible Debenture will automatically be converted into shares of Common Stock on such date in the manner set forth in Section 4.4.

Section 4.4     Conversion Procedure

                    (a)  The Holder may elect to convert the Residual Amount in whole or in part any time and from time to time following the Convertible Closing Date. Such conversion shall be effectuated by providing the Company, or its attorney, with that portion of the Convertible Debenture to be converted together with a facsimile or electronic mail of the signed notice of conversion (the "Notice of Conversion"). The date on which the Notice of Conversion is effective ("Conversion Date") shall be deemed to be the date on which the Holder has delivered to the Company a facsimile or electronically mailed the Notice of Conversion. The Holder can elect to either reissue the Convertible Debenture, or continually convert the existing Debenture. Any Notice of Conversion faxed or electronically mailed by the Holder to the Company on a particular day shall be deemed to have been received no later than the previous business day (receipt being via a confirmation of the time such facsimile or electronic mail to the Company is received).

                    (b)  C ommon Stock to be Issued. Upon the conversion of any Convertible Debentures by the Holder, the Company shall instruct its transfer agent to issue stock certificates without restrictive legends or stop transfer instructions, if, at that time, the aforementioned registration statement described in Section 4.2 has been declared effective (or with proper restrictive legends if the registration statement has not as yet been declared effective), in specified denominations representing the number of shares of Common Stock issuable upon such conversion. In the event that the Debenture is deemed saleable under Rule 144 of the Securities Exchange Act of 1933, the Company shall, upon a Notice of Conversion, instruct the transfer agent to issue free trading certificates without restrictive legends, subject to other applicable securities laws. The Company is responsible for all costs associated with the issuance of the shares, including but not limited to the opinion letter, FedEx of the certificates and any other costs that arise. The Company shall act as registrar of the Shares of Common Stock to be issued and shall maintain an appropriate ledger containing the necessary information with respect to each Convertible Debenture. The Company warrants that no instructions have been given or will be given to the transfer agent which limit, or otherwise prevent resale and that the Common Stock shall otherwise be freely resold, except as may be set forth herein or subject to applicable law.

                    (c)   Conversion Rate. The Holder is entitled to convert the Debenture Residual Amount, plus accrued interest and penalties, anytime following the Convertible Closing Date, at the lesser of either (i) fifty percent (50%) of the lowest closing bid price during the fifteen (15) trading days immediately preceding the Notice of Conversion, or (ii) 100% of the lowest bid price for the twenty (20) trading days immediately preceding the Convertible Closing Date ("Fixed Conversion Price"). No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded up to the nearest whole share.

                    (d)  Nothing contained in the Convertible Debenture shall be deemed to establish or require the Company to pay interest to the Holder at a rate in excess of the maximum rate permitted by applicable law. In the event that the rate of interest required to be paid exceeds the maximum rate permitted by governing law, the rate of interest required to be paid thereunder shall be automatically reduced to the maximum rate permitted under the governing law and such excess shall be returned with reasonable promptness by the Holder to the Company. In the event this Section 4.4(d) applies, the Parties agree that the terms of this Note shall remain in full force and effect except as is necessary to make the interest rate comply with applicable law.

                    (e)  It shall be the Company's responsibility to take all necessary actions and to bear all such costs to issue the Common Stock as provided herein, including the responsibility and cost for delivery of an opinion letter to the transfer agent, if so required. The Holder shall be treated as a shareholder of record on the date the Company is required to issue the Common Stock to the Holder. If prior to the issuance of stock certificates, the Holder designates another person as the entity in the name of which the stock certificates requesting the Convertible Debenture are to be issued, the Holder shall provide to the Company evidence that either no tax shall be due and payable as a result of such transfer or that the applicable tax has been paid by the Holder or such person. If the Holder converts any part of the Convertible Debentures, or will be, the Company shall issue to the Holder a new Convertible Debenture equal to the unconverted amount, immediately upon request by the Holder.

                    (f)  Within three (3) business days after receipt of the documentation referred to in this Section, the Company shall deliver a certificate, for the number of shares of Common Stock issuable upon the conversion. In the event the Company does not make delivery of the Common Stock as instructed by Holder within three (3) business days after the Conversion Date, the Company shall pay to the Holder an additional one percent (1%) per day in cash of the full dollar value of the Debenture Residual Amount then remaining after conversion, compounded daily.

                    (g)  The Company shall at all times reserve (or make alternative written arrangements for reservation or contribution of shares) and have available all Common Stock necessary to meet conversion of the Convertible Debentures by the Holder of the entire amount of Convertible Debentures then outstanding. If, at any time, the Holder submits a Notice of Conversion and the Company does not have sufficient authorized but unissued shares of Common Stock (or alternative shares of Common Stock as may be contributed by stockholders of the Company) available to effect, in full, a conversion of the Convertible Debentures (a "Conversion Default," the date of such default being referred to herein as the "Conversion Default Date"), the Company shall issue to the Holder all of the shares of Common Stock which are available. Any Convertible Debentures, or any portion thereof, which cannot be converted due to the Company's lack of sufficient authorized common stock (the "Unconverted Debentures"), may be deemed null and void upon written notice sent by the Holder to the Company. The Company shall provide notice of such Conversion Default ("Notice of Conversion Default") to the Holder, by facsimile, within one (1) business days of such default.

                    (h)  The Company agrees to pay the Holder payments for a Conversion Default ("Conversion Default Payments") in the amount of (N/365) multiplied by .24 multiplied by the initial issuance price of the outstanding or tendered but not converted Convertible Debentures held by the Holder where N = the number of days from the Conversion Default Date to the date (the "Authorization Date") that the Company authorizes a sufficient number of shares of Common Stock to effect conversion of all remaining Convertible Debentures. The Company shall send notice ("Authorization Notice") to the Holder that additional shares of Common Stock have been authorized, the Authorization Date, and the amount of Holder's accrued Conversion Default Payments. The accrued Conversion Default shall be paid in cash or shall be convertible into Common Stock at the conversion rate set forth in the first sentence of this paragraph, upon written notice sent by the Holder to the Company, which Conversion Default shall be payable as follows: (i) in the event the Holder elects to take such payment in cash, cash payment shall be made to the Holder within five (5) business days, or (ii) in the event Holder elects to take such payment in stock, the Holder may convert at the conversion rate set forth in the first sentence of this paragraph until the expiration of the conversion period.

                    (i)  The Company acknowledges that its failure to maintain a sufficient number of authorized but unissued shares of Common Stock to effect in full a conversion of the Convertible Debentures in full will cause the Holder to suffer irreparable harm, and that the actual damages to the Holder will be difficult to ascertain. Accordingly, the parties agree that it is appropriate to include in this Agreement a provision for liquidated damages. The Parties acknowledge and agree that the liquidated damages provision set forth in this section represents the parties' good faith effort to quantify such damages and, as such, agree that the form and amount of such liquidated damages are reasonable, and under the circumstances, do not constitute a penalty. The payment of liquidated damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant to the terms of this Convertible Debenture.

                    (j)  If, by the third (3rd) business day after the Conversion Date, any portion of the shares of the Convertible Debentures have not been delivered to the Holder and the Holder purchases, in an open market transaction or otherwise, shares of Common Stock (the "Covering Shares") necessary to make delivery of shares which would had been delivered