Exhibit 10.3

               SETTLEMENT AGREEMENT AND FULL RELEASE OF ALL CLAIMS

      This Settlement Agreement and Full Release of All Claims (the "Agreement")
is made effective as of the 11th day of January, 2001, by and between ANTs
software inc., a Delaware corporation (the "Company") and Frederick D. Pettit
("Pettit"). Its purpose is to set forth the parties' agreement regarding
Pettit's separation from employment as the President, Chief Executive Officer,
Chairman and a director and agent of the Company on December 12, 2000, the
benefits he is to receive in connection with that separation, and the mutual
waivers and releases the parties are giving each other.

      In consideration of the mutual promises and undertakings contained in this
Agreement, the parties agree as follows:

      1. Employment. Pettit understands and agrees that he resigned on December
12, 2000 and that his separation from his employment with the Company as the
President, Chief Executive Officer, Chairman and a director of the Company shall
not give rise to any claim on his part against the Company or any of the
employees, officers, directors or agents of the Company. Pettit further
understands and agrees that, effective immediately, he will no longer represent
or hold himself out to any person or entity as being an agent, representative,
employee or Board member of the Company for any purpose.

      2. Separation Benefits. In consideration for the release Pettit is
providing to the Company in this Agreement and subject to the waiting period and
other requirements set forth in paragraph 6, below, the Company agrees that
Pettit shall be given the following separation benefits:

            2.1 Loan. The Company shall forgive on August 4, 2001 and each 1
year anniversary thereof, until the entire amount of principal and interest have
been discharged, $45,000 of the principal amount and all accrued interest of
that certain loan to Mr. Pettit made in August 1999 in original principal face
amount of $225,000 and in aggregate principal amount currently due and payable
of $180,000, plus accrued and unpaid interest. In the event of a change in
control of the Company in which one party or concert parties obtain a majority
interest in the Company, any remaining balance of Pettit's loan shall be
immediately discharged. In the event the Company fails to meet any financial
obligation in a timely manner, such as, but not restricted to payment of
salaries, leasehold obligations, legal fees, accounting fees, utility bills, or
taxes, then any remaining balance of Pettit's loan shall be immediately
discharged.

            2.2 Cash Payment. The Company shall pay Pettit the sum of $300,000,
payable $75,000 per year for four (4) years on August 4 of each year, without
interest and without withholding.

            2.3 Continued Benefits. All Company contributions to health and
other insurance premiums will cease, but Pettit may, at his election, and
subject to his timely payment of all required premiums, elect continuation
health coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act
of 1985 (COBRA).


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      3. General Mutual Release. In exchange for the consideration provided in
this Agreement, the adequacy of which is hereby acknowledged, each party hereto,
on behalf of himself or itself and his or its heirs, successors and assigns,
hereby fully releases and forever discharges the other party hereto, including
each of their officers, directors, agents, employees, attorneys, parents,
affiliates and/or subsidiaries, from any and all claims, actions and liabilities
of any kind or character whatsoever, arising in law or in equity, known or
unknown, suspected or unsuspected, that such party has ever had, now has or may
now have against the other party, including, without limitation, all claims
directly or indirectly related to or arising out of Pettit's employment by the
Company, the performance of his duties during that employment, and/or the
termination of or his resignation from that employment. This waiver and release
specifically includes, but is not limited to, all claims, if any, whether
arising in tort or in contract, related to Pettit's employment, including any
and all claims for wrongful discharge or wrongful termination; claims for
alleged violation of public policy or breach of implied covenant of good faith
and fair dealing; claims for breach of fiduciary duty; claims for negligent or
intentional infliction of emotional distress; claims arising in connection with
Pettit's compensation, benefits, warrants and/or stock options; claims for
breach of express or implied contract or for further monetary compensation by
way of additional salary or bonus allegedly due Pettit by reason of his
employment with the Company; and all other claims, based on common law or
federal or state statute, including claims for discrimination based on age
arising under state statute or the federal Age Discrimination in Employment Act,
the Older Workers' Benefits Protection Act, or any similar federal or state law
prohibiting age discrimination.

      Each party further understands and expressly agrees that this Agreement
specifically extends to all claims, whether those claims are presently known to
the party or not, or suspected by the party or not. By signing below, each party
expressly waives the benefits of Section 1542 of the California Civil Code,
which provides:

            "A general release does not extend to claims which the creditor does
      not know 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."

      Pettit agrees that he has not assigned or transferred, in whole or in
part, any of the claims, actions or liabilities released by him herein.

      4. No Admission of Liability. The parties deny that either one of them has
any liability to the other. Neither this Agreement, nor the consideration the
parties are receiving under it, shall be deemed or construed as an admission of
liability by any party.

      5. Confidentiality. Each party agrees that the terms and conditions of
this Agreement are and shall remain strictly confidential, and that none of
them, nor anyone acting on his or its behalf, will disclose those terms and
conditions to any third party (i) except for Pettit's tax or legal advisors or
his spouse, or (ii) unless compelled by law to do so.

      6. Waiting Period. Pettit acknowledges that the Company has specifically
advised him to consult with an attorney of his own choosing in order to review
this Agreement and advise


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him of his rights concerning it. Pettit further acknowledges that the Company
has further advised him that he has twenty-one (21) days from the date this
Agreement was originally presented to him in which to consider whether to sign
it, and that if he chooses to do so, he will be given an additional seven (7)
days from the date he signs it in which to revoke it. Unless revoked by Pettit,
this Agreement shall become effective the day immediately after the expiration
of the seven (7) day period set forth above (the "Effective Date"). Pettit
understands and agrees that this Agreement will not become effective before the
Effective Date. The offer contained in this Agreement will expire and may not be
accepted by Pettit following the expiration of twenty-one (21) days after this
Agreement was first presented to him.

      7. Continuing Obligations; Non-Disclosure; Non-Disparagement. Pettit
expressly agrees that, during two years, he will fully cooperate with the
Company at the Company's expense in the event of any litigation brought against
the Company or any of its officers, directors, agents or employees arising out
of any matters of which he had knowledge or in which he was personally involved
by reason of his employment with the Company. Pettit further acknowledges his
continuing obligation to the Company, to preserve the confidentiality of and not
to disclose to any third party or use in any way in any subsequent employment or
self-employment or for any other purpose, any of the Company's confidential or
proprietary information, including without limitation any of its trade secrets,
financial information, business plans or strategies, customer or client lists,
or any other information of a confidential or proprietary nature learned by him
during the course of his employment with the Company. Pettit agrees not to make
any disparaging remarks of any sort or otherwise communicate any disparaging
comments about the Company or any of its officers, directors, agents, employees,
parents, affiliates and/or subsidiaries to any third party, including without
limitation any of its employees, shareholders, vendors, competitors, clients or
any other person or entity. Pettit agrees not to interfere in any way with the
employment or business relationship that the Company, or any of their officers,
directors, agents, employees, parents, affiliates and/or subsidiaries has with
any past, current or future employees, shareholders, vendors, competitors,
clients or any other person or entity.

      8. Indemnification. Each party shall indemnify, defend and hold harmless
the other and his or its assignees against, and in respect of, any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and reasonable
attorneys' fees (collectively "Losses") that the other or his or its assignees
may incur which arise, result from or relate to any breach or failure by such
party to perform any of such party's covenants contained in this Agreement.

      9. Voluntary Agreement. Pettit expressly acknowledges and warrants that he
has read and fully understands this Agreement; that he has had the opportunity
to consult with legal counsel of his own choosing in order to have the terms and
conditions of this Agreement fully explained to him; that he is not executing
this Agreement in reliance on any promises, representations or inducements other
than those set forth herein; that he understands he is giving up legal rights by
signing this Agreement; and that he is executing it voluntarily, free of any
duress or coercion, after due deliberation, with a full understanding of what it
means to do so.

      10. Miscellaneous.


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            10.1 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the respective heirs, executors, representatives, successors
and assigns of the parties hereto.

            10.2 Further Assurances. The parties shall execute and deliver, such
instruments and take such other actions as may be reasonably be necessary in
order to carry out the intent of this Agreement.

            10.3 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.

            10.4 Headings. The subject headings of the sections and subsections
of this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.

            10.5 Waivers. Any party to this Agreement may waive any right it may
have hereunder or any breach or default hereunder by any other party hereto;
provided that no such waiver will be effective against the waiving party unless
it is in writing and specifically refers to this Agreement. No waiver will be
deemed to be a waiver of any subsequent or other right, breach or default of the
same or similar nature.

            10.6 Entire Agreement. This Agreement, including the documents and
things anticipated to be delivered hereby embodies the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersedes all prior or contemporaneous agreements or understandings
(whether written or oral) among the parties, in respect to the subject matter
contained herein. This Agreement may not be modified, amended or terminated
except by written agreement signed by both parties specifically referring to
this Agreement.

            10.7 Governing Law. This Agreement is deemed to have been made in
the State of California and shall be governed by, and construed in accordance
with, the laws of the State of California for contracts made and to be performed
within California.

            10.8 Assignment. Pettit may not assign this Agreement, or assign his
rights or delegate his duties hereunder, without the prior written consent of
the Company.

            10.9 Severability. Any provision of this Agreement which is illegal,
invalid or unenforceable shall be ineffective to the extent of such illegality,
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.

            10.10 No Rules of Construction. No rules of construction are
intended by the parties hereto or shall be invoked in the interpretation hereof
and, for all purposes, the parties hereto shall all be deemed to be joint
authors hereof.


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            10.11 Notices. All notices, demands and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing and
shall be personally delivered.

            10.12 Remedies. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law. The party against whom enforcement is
sought shall pay on demand all losses, costs and expenses, if any, of the party
seeking enforcement (including attorney's and other professional's fees actually
incurred) in connection with the enforcement of this Agreement.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers or representatives thereunto duly
authorized, this Agreement to become effective as of the date first above
written.

                                            ANTS SOFTWARE INC.
                                            a Delaware Corporation


                                        By: ____________________________________
                                            Joan Elizabeth Cronin, Executive
                                            Vice President and Managing Director
                                            of Human Resources

                                   Address: 801 Mahler Road, Suite G
                                            Burlingame, CA 94010


                                            ____________________________________
                                            Frederick D. Pettit

                                   Address: 330 Eucalyptus Avenue
                                            Hillsborough, CA 94010


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