EXHIBIT 10.5
 
 
SETTLEMENT AGREEMENT AND GENERAL RELEASE

This Settlement Agreement and General Release (this “Agreement”), dated December
__, 2010, is entered into by and between Arkados Group, Inc., a Delaware
corporation (the “Company”), and ___________________ (“Creditor”).

RECITALS

WHEREAS, Creditor has loaned funds to the Company pursuant to the Released
Transaction Documents (as defined below); and
 
WHEREAS, the Company has defaulted under the terms of the Released Transaction
Documents by failing to make payments to Creditor when due; and
 
WHEREAS, the Company desires to enter into an Asset Purchase Agreement (the
“Asset Purchase Agreement”) and License Agreement (the “License Agreement”) with
STMicroelectronics Inc. (“ST”), and the execution and delivery of this Agreement
is a condition precedent to such agreements; and
 
WHEREAS, the parties hereto and their counsel, after negotiations, have
successfully conferred for the purpose of arriving at a mutually satisfactory
resolution of all claims existing between them.
 
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
 
SETTLEMENT TERMS AND CONDITIONS
 
1.  Settlement Amount; Payment.  Subject to the Company entering into the
License Agreement and the Asset Purchase Agreement with ST [on or before
December 31, 2010,] the Company hereby agrees to pay the amount set forth on the
signature page hereto beneath the Creditor’s signature (the “Settlement Amount”)
contemporaneously with [the payment of the license fee under the License
Agreement/the closing of the Asset Purchase Agreement] (the “Payment Date”).
 
2.  General Release of Company.  In consideration of and subject to receipt of
the Settlement Amount [on or before December 31, 2010,] Creditor, for
[himself/herself/itself] and [his/her/its] heirs, executors, administrators,
personal representatives, successors and assigns does hereby release, remise,
acquit and forever discharge the Company and its parents, subsidiaries,
affiliates, stockholders, and each of its and their predecessors and successors
in interest, and the present and former directors, managers, officers,
employees, representatives and agents of any of the foregoing, and the heirs,
executors, administrators, successors and assigns thereof, in whatever capacity
any of them may have acted in connection with the Company (collectively, the
“Company Released Parties”), of and from any and all claims, demands,
obligations, judgments, actions, causes of action, debts, damages, losses,
expenses, costs, attorneys’ fees and liabilities of any kind whatsoever, whether
known or unknown, vested or
 
 
 

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contingent, in law, equity or otherwise, which the Creditor ever had, now has or
may have in the future against the Company Released Parties, including, but not
limited to, all claims relating to amounts owing to Creditor and any rights
previously granted to Creditor to acquire securities of the Company by exercise
of option, warrant, conversion right or any other means under the: (i)
Securities Purchase Agreement, dated December 28, 2005 (the “First Purchase
Agreement”), as amended on February 1, 2006, February 24, 2006, March 31, 2006,
June 30, 2006, September 26, 2006, October 28, 2006, November 30, 2006, January
8, 2007, June 8, 2007, February 28, 2007, March 6, 2007, May 7, 2007, May 30,
2007, May 31, 2007, December 6, 2007, December 15, 2007, December 28, 2007,
April 2, 2008 and August 7, 2008, (ii) Securities Purchase Agreement, dated June
30, 2005 (the “Second Purchase Agreement” and together with the First Purchase
Agreement, the “Purchase Agreements”), as amended on September 26, 2006, October
28, 2006, November 30, 2006, January 8, 2007June 8, 2007, February 28, 2007,
March 6, 2007, May 2, 2007, May 30, 2007, May 31, 2007, December 6, 2007,
December 15, 2007, December 28, 2007 April 2, 2008 and August 7, 2008 and (iii)
the “Transaction Documents” as defined in the Purchase Agreements (collectively
the “Released Transaction Documents”).
 
3.  General Release of Creditor.  In consideration of the settlement of the
Released Transaction Documents by the Creditor and release granted hereunder,
the Company, for itself and its heirs, executors, administrators, personal
representatives, successors and assigns does hereby release, remise, acquit and
forever discharge the Creditor and its parents, subsidiaries, affiliates,
stockholders, investment advisors and each of its and their predecessors and
successors in interest, and the present and former directors, managers,
officers, employees, representatives and agents of any of the foregoing, and the
heirs, executors, administrators, successors and assigns thereof, in whatever
capacity any of them may have acted (collectively, the “Creditor Released
Parties”), of and from any and all claims, demands, obligations, judgments,
actions, causes of action, debts, damages, losses, expenses, costs, attorneys’
fees and liabilities of any kind whatsoever, whether known or unknown, vested or
contingent, in law, equity or otherwise, which the Company ever had, now has or
may have in the future against the Creditor Released Parties, including, but not
limited to, all claims relating to the Released Transaction Documents.
 
4.  Unknown Claims.  The parties hereby expressly waive and relinquish, with
respect to all of the claims related to the Company and released hereunder, all
rights and benefits under any statute or common law principle of any
jurisdiction purporting to limit the effect of a general release to claims which
releasor does not know or suspect to exist in the releasor’s favor at the time
of executing the release, which if known by the releasor would have materially
affected the releasor’s settlement with the releasees.
 
5.  Release of Liens; No Further Interest in Company Property.  Upon payment of
the Settlement Amount by the Company in connection herewith [on or before
December 31, 2010,] (a) the Released Transaction Documents are hereby terminated
as between the parties hereto, and all liens, security interests, encumbrances,
charges, pledges and mortgages on the properties and assets of the Company and
its affiliates granted to or held by Creditor in connection with the Released
Transaction Documents or otherwise (the “Creditor Liens”) are released,
terminated and discharged, and the Company, its affiliates, and their respective
counsel, agents and representatives are authorized to file such Uniform
Commercial Code termination statements (to be prepared by the Company or its
representatives) as are necessary to effect the release and termination, as of
record, of the Uniform Commercial Code financing statements filed by Creditor in
respect of the Creditor Liens and (b) Creditor acknowledges and agrees that
[it/he/she] will have no ownership interest, security interest or other interest
in any assets of the Company or its parents, subsidiaries or affiliates.
 
 
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6.  Covenant Not to Sue.  [Provided the Settlement Amount is received prior to
December 31, 2010,] each party covenants not to sue or to institute or cause to
be instituted any action in any federal, state, or local agency or court against
the other party, including, but not limited to, any of the claims released in
paragraphs 2, 3, 4 and/or 5 of this Agreement.  Notwithstanding the foregoing,
nothing herein shall prevent Creditor, any Creditor Released Party, the Company
or any Company Released Party from instituting any action required to enforce
the terms of this Agreement, and in the event of a party’s breach of the terms
of this Agreement, without prejudice to such other party’s other rights and
remedies available at law or in equity, except as prohibited by law, such party
shall be liable for all costs and expenses (including, without limitation,
reasonable attorney’s fees and legal expenses, including such costs and expenses
related to investigation) incurred by the other party as a result of such
breach.
 
7.  Consent to Transaction.  Creditor hereby consents to the transactions
between the Company, ST contemplated by the Asset Purchase Agreement and the
License Agreement and waives any rights it may have under the Released
Transaction Documents arising out of or triggered by such transactions.
 
8.  Confidential Nature of Release.  Each party hereby acknowledges that the
terms of this Agreement are confidential and agrees not to discuss, publicize or
otherwise disclose the existence of, or any of the terms and conditions
contained in, this Agreement without the express written consent of the other
party; provided, however, that each party may disclose the terms and conditions
of this Agreement: (a) as required by any court or other governmental body; (b)
as required by applicable law or regulation; (c) in confidence, to legal
counsel, accountants, banks, and potential financing sources and their
respective advisors; (d) in connection with the enforcement of this Agreement;
or (e) in confidence, in connection with an actual or proposed merger,
acquisition, or similar transaction.
 
9.  No Reliance Upon Representations.  Each party represents and acknowledges
that in executing this Agreement, [he/she/it] does not rely and has not relied
upon any representation or statement made by the other party or by any of the
other party’s past or present affiliates, agents, representatives, employees or
attorneys with regard to the subject matter, basis or effect of this Agreement,
other than as set forth in this Agreement.
 
10.  Acknowledgement.  Each party acknowledges that (a) it has been represented
by independent counsel in reviewing this Agreement, (b) it understands the
provisions of this Agreement and knowingly and voluntarily agrees to be bound by
them, (c) the consideration recited is all that the parties are to receive, (d)
this Agreement shall not be subject to any claim of mistake of fact and (e) this
Agreement expresses a full and complete settlement of any liability and is
intended to avoid litigation and so be final and complete.  [Notwithstanding
anything herein to the contrary, the provisions of this Agreement shall not
extend to a Company Released Party in connection with any claims the Creditor
may have against such Company Released Party in connection with any role such
Company Released Party has with Xandros, Inc., a Delaware corporation; provided
that in no event shall Creditor bring any claim against ST or any of its
affiliates with respect to the foregoing.]
 
 
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11.  Third-Party Beneficiaries.  Creditor acknowledges that the execution and
delivery of this Agreement is a condition precedent to the License Agreement and
the Asset Purchase Agreement, and accordingly, in addition to the Company
Released Parties, ST and its affiliates shall be third-party beneficiaries
hereunder, including, but not limited to, the covenant not to sue contained in
Section 6 of this Agreement, as if ST and its affiliates were Company Released
Parties, without the need to join any Company Released Party to any action.  [In
consideration therefor, ST hereby agrees to be bound by the same terms as the
Company’s release of the Creditor pursuant to Section 3 and the Company’s
obligation not to sue the Creditor pursuant to Section 6 of this Agreement.]
 
12.  Representations and Warranties. Each party to this Agreement represents and
warrants as follows: (a) such party has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder [or,
if such party is an individual, such party has the legal capacity to execute and
deliver this Agreement and to perform [his/her] obligations hereunder]; (b) the
execution and delivery of this Agreement by such party and the consummation of
the transactions contemplated hereby do not require the consent of any person or
entity that has not been obtained; (c) this Agreement is the valid and binding
agreement of such party enforceable against such party in accordance with its
terms, except to the extent that enforceability thereof may be limited by
general equitable principles or the operation of bankruptcy, insolvency,
reorganization, moratorium or similar laws; and (d) the execution and delivery
of this Agreement by such party and the consummation of the transactions
contemplated hereby do not contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give rise to any right to terminate
or modify any contract to which the such party is a party or is bound.
 
13.  Further Assurances.  From time to time hereafter, each party shall, and
shall cause [its/his/her] affiliates to, execute and deliver such additional
documents, instruments, conveyances and assurances and take such further actions
as may be reasonably required to carry out the provisions hereof and give effect
to the transactions contemplated by this Agreement, including, without
limitation, executing and delivering such additional releases, powers,
instruments, documents or agreements, as the other party may reasonably request
to carry into effect the release of the Creditor Liens.
 
14.  Forebearance; Standstill.
 
                      (a)           From the date hereof until [the earlier of]
the Payment Date [and December 31, 2010,] Creditor (i) agrees to forbear from
the exercise of any remedies available to [it/he/she] under the Released
Transaction Documents or otherwise in [its/his/her] capacity as a creditor of
the Company, (ii) shall not sell any of the Company’s indebtedness held by
[it/him/her] or convert any of the Company’s indebtedness into, or exercise any
options or warrants for, common stock of the Company unless simultaneously with
such conversion or exercise [it/he/she] agrees to vote any shares issued in
connection therewith in favor of the Asset Purchase Agreement, the License
Agreement and the transactions contemplated thereby, in the event a stockholder
vote is required in connection therewith, and (iii) shall not, and shall not
 
 
 
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authorize or permit any of its affiliates or any of its or their representatives
or agents to, directly or indirectly, encourage, solicit, initiate, facilitate
or continue inquiries regarding an Acquisition Proposal.  For purposes hereof,
“Acquisition Proposal” means any inquiry, proposal or offer from any person or
entity (other than ST or any of its affiliates) relating to the direct or
indirect disposition, whether by sale, merger or otherwise, of all or any
portion of the Company’s business.  [Additionally, until the consummation or
termination of the Asset Purchase Agreement, Creditor agrees that [it/he/she]
will not exercise any options or warrants for common stock of the Company unless
simultaneously with such conversion or exercise [it/he/she] agrees to vote any
shares issued in connection therewith in favor of the Asset Purchase Agreement,
the License Agreement and the transactions contemplated thereby, in the event a
stockholder vote is required in connection therewith.]
 
(b)           In addition to the other obligations under this Section 14,
Creditor shall promptly advise Buyer orally and in writing of any inquiries with
respect to the purchase of the Company’s indebtedness or any inquiry with
respect to an Acquisition Proposal, the material terms and conditions of such
request or inquiry, and the identity of the person or entity making the same.
 
15. Specific Performance.  The parties agree that the rights and remedies for
noncompliance with this Agreement shall include having the provisions hereof
specifically enforced by any party or any Company Released Party or Creditor
Released Party in any court having jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach shall cause irreparable injury
to the other party and that money damages would not provide an adequate remedy
to the other party.
 
16. Miscellaneous.  This Agreement (a) shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
entered into and to be performed wholly within said State, (b) constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof, superseding all prior agreements, written or oral, (c) may not be
amended, except in writing, (d) may be executed in counterparts, (e) shall be
enforceable, notwithstanding the unenforceability of any particular provision
hereof, with respect to all other provisions hereof, (f) may not be assigned by
either party, except with the prior written consent of the other party, and (g)
is binding upon and shall inure to the benefit of anyone who succeeds to the
rights, interests or responsibilities of the parties.
 
 [Signature page follows]
 
 
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year above written.

 

 
[CREDITOR]

By:        ________________________________
Name:
Title:

Settlement Amount:  ______________

 

ARKADOS GROUP, INC.

By:        _________________________
Name:
Title: