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Exhibit
10.1
SETTLEMENT
AGREEMENT
THIS SETTLEMENT AGREEMENT
(the “Agreement”) is entered into on this 3
rd day of March, 2005, by and among Yak
Communications (Canada) Inc., a corporation incorporated under the
laws of the Province of Ontario, Canada (“Yak”),
Consortio, Inc., a corporation incorporated under the laws of the
State of Delaware and Convenxia Limited, a corporation incorporated
under the laws of the United Kingdom (“Convenxia”).
Yak, Consortio and Convenxia are collectively referred to herein as
the “Parties.”
RECITALS
WHEREAS, the Parties entered
into that certain Software Acquisition Agreement, dated as of June
20, 2003 (the “Acquisition Agreement”) whereby Yak
acquired from Consortio and Convenxia certain software (including
enhancements and derivative works relating thereto) used by Yak in
the provision of telecommunication services (the
“Software”);
WHEREAS, a portion of the
purchase price under the Acquisition Agreement is evidenced by a
promissory note (the “Note”) in the original principal
amount of $8,535,000 executed by Yak in favor of
Consortio;
WHEREAS, in connection with
the Acquisition Agreement, the Parties entered into that certain
Joint Venture Agreement whereby (i) Convenxia was granted a license
by Yak to exploit the Software outside of Canada; (ii) the Parties
agreed to further develop and enhance the Software; and (iii) the
Parties agreed to share certain revenues arising from the use of
the Software (the “Joint Venture
Agreement”);
WHEREAS, Yak and Convenxia
entered into that certain Professional Services Agreement, dated as
of April 7, 2004, whereby Yak has engaged Convenxia to perform
certain services in connection with the further development of the
Software for commercial use (the “Professional Services
Agreement”);
WHEREAS, due to certain
circumstances which have arisen since the entry into the
Acquisition Agreement, including the inability of Convenxia and
Consortio to market and sell the Software for commercial use, the
Parties’ use of the Software has diverged;
WHEREAS, the sole recourse on
the Note by Convenxia is to take possession of the Software, which,
as a result of the divergent uses by the parties, makes it highly
unlikely that Yak will pay the Note, leaving Convenxia with its
sole remedy being to repossess the Software;
WHEREAS, as a result of this
change in circumstances, the Parties desire to cancel the Note and
modify certain terms of the Joint Venture Agreement in exchange for
Yak’s continuing development efforts with respect to the
Software pursuant to the terms of the Professional Services
Agreement (and the statements of work (“SOWs”) issued
pursuant thereto) despite the divergence in the utilization of the
Software; and
WHEREAS, the Parties desire
to set forth their respective rights and obligations with respect
to the Software, under the terms and conditions contained
herein.
NOW THEREFORE, in
consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree that the foregoing
preliminary statements are true and correct and further agree as
follows:
AGREEMENT
1. Recitals .
The foregoing recitals are true and correct and are hereby
incorporated herein by this reference.
2. Settlement
Terms . The Parties agree as follows:
(a) Consortio hereby agrees
that the Note is hereby cancelled and that all amounts currently
outstanding thereunder including the entire outstanding principal
amount thereof and any accrued and unpaid interest thereon is
hereby satisfied. Upon the execution of this Agreement, the Note
shall be deemed null and void with no further effect and Consortio
shall deliver the original Note to Yak for cancellation.
(b) Upon the execution of
this Agreement, Yak shall make a payment to Consortio in the amount
of $150,000 in consideration of Consortio and Convenxia’s
entry into this Agreement.
(c) Except as expressly
provided herein (specifically with respect to the cancellation of
the Note and the modifications to the Joint Venture Agreement set
forth below), the Acquisition Agreement, Joint Venture Agreement
and Professional Services Agreement along with any outstanding SOWs
(in substantially the same form as set forth in Schedule A attached
hereto) issued pursuant thereto, together with any documents or
instruments executed in connection therewith (collectively, the
“Transaction Documents”) are hereby reaffirmed and
ratified in all respects. In the event of any conflict between the
terms or provisions of this Agreement and the Transaction
Documents, then this Agreement shall prevail in all respects.
Otherwise, the provisions of the Transaction Documents shall remain
in full force and effect.
3. Modification to the
Joint Venture Agreement . The terms and conditions of
Article 5 of the Joint Venture Agreement shall be modified as
follows:
(a) Section 5.1(a) is hereby
deleted in its entirety; Convenxia shall have no further obligation
to pay Yak the technology access fee described therein.
(b) Section 5.1(b) is hereby
deleted in its entirety and replaced with the following:
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“(b) |
during the period commencing July 1, 2003 and ending June 30,
2006, an amount, determined and paid quarterly, equal to 4% of
Gross Revenue.” |
(c) Section 5.1(c) is hereby
deleted in its entirety and replaced with the following:
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“(c) |
during the period after June 30, 2006, an amount, determined
and paid quarterly, equal to 2.75% of Gross
Revenue.” |
4. Rights and
Obligations of the Parties with Respect to the
Software.
(a) The Parties hereby
recognize, acknowledge and reaffirm that Yak is the sole owner of
the Software (including all enhancements relating thereto), the
Source Code, the Object Code, the Derivative Works, the Marks and
Yak’s Proprietary Rights (as such terms are defined in the
Joint Venture Agreement).
(b) The Parties hereby
recognize, acknowledge and reaffirm that Yak has the unrestricted
right and authority to exploit and otherwise utilize the Software
(along with the associated rights described in subsection 4(a),
above) all in accordance with the provisions of the Joint Venture
Agreement, particularly Article 2 thereof.
(c) The Parties hereby
recognize, acknowledge and reaffirm that Yak is not subject to any
noncompetition or other restrictive covenant with respect to the
exploitation or utilization of the Software for its internal
purposes, for use by its customers or other third parties or
through resellers or distributors (whether or not in competition
with the joint venture created pursuant to the Joint Venture
Agreement).
(d) The Parties acknowledge
that the initial two phases of the development of the Software have
been completed pursuant to the SOWs issued under the Professional
Services Agreement (copies of which are attached hereto as Schedule
A). The Parties shall continue to develop and enhance the Software
pursuant to the terms and conditions of the Professional Services
Agreement and the statements of work issued pursuant thereto from
time-to-time. Specifically, Yak hereby commits to fund an amount
not to exceed $350,000 for the completion of “Phase 3”
of the further development of the Software for commercialization,
payable in four equal payments of $87,500 for March 15, April 15,
May 15 and June 15. Notwithstanding the foregoing, the Parties
acknowledge that any further development or enhancement of the
Software shall be in Yak’s sole and absolute discretion and
Yak shall not be obligated to make any further development or
enhancement except as set forth herein.
5. Books and
Records . Each of the Parties shall maintain, at their
respective principal executive office, separate books and records
relating to the ownership, development or utilization of the
Software. Such books and records shall be open to inspection and
examination at reasonable times by each of the Parties and their
duly authorized representatives for any purpose reasonably related
to the development, sale or utilization of the Software and each of
the Parties shall cause their respective officers, employees,
accountants, attorneys, engineers, agents and other representatives
to furnish to the requesting Party with such financial and
operating data and other information with respect to the Softwares
the requesting Party may from time to time reasonably request. Each
of the Parties agrees to keep all such information confidential and
not to disclose such information to any other person other than
such Party’s adv
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