Exhibit 10.12

SETTLEMENT AGREEMENT

This Agreement is made as of this 25th day of July, 2005, by and between YAK
COMMUNICATIONS INC., a Florida corporation (“Yak”), YAK COMMUNICATIONS (CANADA),
INC., a Canadian corporation (“Yak Canada”) and DIGITAL WAY, S.A., a company
organized under the laws of Peru (“DWSA”). Yak, Yak Canada and DWSA are
collectively referred to herein as the “Parties.”

RECITALS

WHEREAS, Yak and DWSA entered into that certain Commercial Services and
Marketing Agreement, dated as of November 12, 2002 (the “CSM Agreement”) and Yak
Canada and DWSA entered into that certain Telecommunications Services and
Disbursement Agreement, dated as of November 12, 2002 (the “TSD Agreement” and
together with the CSM Agreement, the “Principal Agreement”);

WHEREAS, pursuant to the terms and conditions of the Principal Agreements, a
venture was formed whereby the parties would establish a “Dial Around” and/or
“Call by Call” telecommunications business in Lima, Peru (the “Venture”);

WHEREAS, subsequent to the execution of the Principal Agreements the Parties
entered into various additional agreements with respect to the Venture
including, without limitation, Guaranty Agreement, Sweep Agreement, Mortgage
Agreement, Collateral Assignment of Contracts, Pledge Agreement each dated as of
April 28, 2003, Acknowledgment of Obligations dated July 16, 2003, Trust
Management Agreement entered into by the Parties and Banco Sudamericano dated
November 19, 2003 and Agreement dated January 28, 2005, along with all other
documents entered into by the Parties relating to or arising from the Venture
(collectively, the “Ancillary Documents”);

WHEREAS, as of April 13, 2005 the Venture has been terminated and the Parties
have proceeded to wind down its operations; and

WHEREAS, the Parties desire to set settle all matters with respect to Venture
and the relationship of the Parties pursuant to 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.

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2. Settlement Terms. The Parties agree as follows:

(a) Upon the execution of this Agreement, the Principal Agreements and the
Ancillary Documents shall be terminated and shall be deemed null and void with
no further effect and the Parties shall have no further obligations or rights
thereunder.

(b) Upon the execution of this Agreement, ownership of the telecommunications
equipment described in Schedule “A” attached hereto (the “Equipment”) shall be
transferred to DWSA. Yak shall take such action as may be necessary or
appropriate to vest in DWSA good and valid title to the Equipment. The Equipment
is transferred to DWSA on an “AS IS, WHERE IS” basis and neither Yak nor Yak
Canada makes any representations or warrantees as to the condition of the
Equipment or its fitness of use.

3. Representations, Warranties and Acknowledgments of the Parties. Each of the
Parties hereby acknowledges, represents, warrants, covenants and agrees as
hereinafter set forth:

(a) Each of the Parties has full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of each of the Parties
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
requires the approval or consent of any third party, whether governmental or
otherwise.

(b) The execution, delivery and performance of this Agreement and the
transactions contemplated by this Agreement will not conflict with, or
constitute or result in a breach, default or violation of (i) any law,
ordinance, regulation or rule applicable to any of the Parties; (ii) any order,
judgment, injunction or other decree by which any of the Parties is bound; or
(iii) any written or oral contract, agreement, or commitment to which any of the
Parties is a party.

(c) The representations and warranties contained in this section do not contain
any untrue statement of a material fact or omit to state a material fact
required or necessary to be stated therein to make the statements made therein,
in light of the circumstances in which they were made, not misleading.

4. Mutual Release. In consideration of the provisions hereof, each of the
Parties, for and on behalf of itself and its attorneys, officers, directors,
shareholders, employees, representatives, agents, predecessors, successors,
assigns, Affiliates, subsidiaries and related entities (collectively, the
“Releasing Parties”), does hereby agree to unconditionally and irrevocably
waive, remise, acquit, satisfy, release and forever discharge the other Parties,
and their respective attorneys, officers, directors, shareholders, employees,
representatives, agents, predecessors, successors, assigns, Affiliates,
subsidiaries and related entities (collectively, the “Released Parties”), of and
from any and all claims, demands, dues, sums of money, reckonings, bonds, bills,
specialties, agreements, contracts, covenants, actions, suits, causes of action,

 

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obligations, controversies, promises, variances, trespasses, executions, debts,
costs, expenses, accounts, damages, judgments, losses and liabilities, of
whatever kind or nature, in law, equity or otherwise, whether known or unknown,
whether or not concealed or hidden, absolute or contingent, liquidated or
unliquidated, which any of the Releasing Parties, had, may have had, now have or
can, shall or may have against each of the Released Parties, for upon or by
reason of any matter, cause or thing whatsoever relating to or otherwise
associated with the Venture, from the beginning of the world until and including
the time and date hereof. Notwithstanding the foregoing, nothing herein shall be
deemed to release any of the Released Parties from any of the obligations of the
Released Parties (or any claims arising by virtue of the Released Parties breach
of any such obligations) under the terms of this Agreement. Each of the
Releasing Parties represents that it has not previously sold, transferred,
conveyed, exchanged, or otherwise disposed of any claims it may have against any
of the Released Parties.

5. Survival and Indemnification.

(a) The representations, warranties, covenants and agreements contained herein
to be performed or complied with after the closing of the transactions
contemplated hereby shall survive without limitation as to time, unless the
covenant or agreement specifies a term, in which case such covenant or agreement
shall survive until the expiration of such specified term.

(b) From and after the closing of the transactions contemplated hereby, each
Party shall indemnify, defend and hold harmless the other (the party seeking
indemnification being referred to as the “Indemnified Party”) from, against and
in respect of any and all claims, losses, liabilities and damages, including,
without limitation, amounts paid in settlement, reasonable costs of
investigation and reasonable fees and disbursements of counsel (whether at the
pre-trial, trial or appellate levels) which the Indemnified Party shall suffer,
sustain or become subject to by virtue of or which arises our of, or results
from the breach of any representation, warranty, covenant or agreement, set
fourth in this Agreement or contained in any instrument or certificate delivered
pursuant hereto. To the extent incurred prior to a settlement or conclusion of
any litigation arising hereunder, such reasonable costs and fees shall be paid
by the Indemnifying Party as incurred by the Indemnified party. Without limiting
the foregoing, DWSA agree that the foregoing agreement to defend and indemnify
Yak and Yak Canada shall include, without limitation, any and all claims,
losses, liabilities and damages which Yak or Yak Canada may suffer, incur,
sustain or become subject to as a result of any pending or anticipated legal
proceeding brought against any of the Parties arising from the operations of the
Venture in Peru including, without limitation, any claim instituted by any third
party service provider (including, without limitation, IMPSAT, Telefonica de
Peru and Banco Sudamericano) engaged by DWSA in connection with the Venture.

(c) The Indemnified Party shall promptly provide the Indemnifying Party with the
Indemnification Notice, specifying in detail the basis of such claim, the facts
pertaining thereto and, if known, the amount, or an estimate of the amount, of
the liability arising therefrom. The Indemnified Party shall provide to the
Indemnifying Party as promptly as practicable thereafter all information and
documentation necessary to support and verify the

 

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claim asserted and the Indemnifying Party shall be given reasonable access to
all books and records in the possession or control of the Indemnified Party or
any of its affiliates which the Indemnifying Party reasonably determines to be
related to such claim.

6. Injunction. It is recognized and hereby acknowledged by the Parties hereto
that a breach by any Party of any of the covenants contained herein will cause
irreparable harm and damage to the non-breaching Parties, the monetary amount of
which may be virtually impossible to ascertain. As a result, each of the Parties
recognize and hereby acknowledge that in the event of a breach the non-breaching
Parties shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in this Agreement and that such right to injunction shall be
cumulative and in addition to whatever other remedies the Parties may possess
hereunder or pursuant to applicable law.

7. Litigation. If any legal action is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement or
the transactions contemplated hereby, the successful or prevailing Party or
Parties shall be entitled to recover reasonable attorney fees, paralegal fees
and other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled. The Parties hereby agree that any
such legal action shall be brought in a court of competent jurisdiction in
Miami-Dade County, Florida.

8. Governing Law. This Agreement shall be interpreted, construed and governed by
and under the laws of the State of Florida and any dispute hereunder must be
commenced in Miami-Dade County, Florida.

9. Severability. If any provision or clause of this Agreement is held to be
invalid by a court of competent jurisdiction, then such provision shall be
severed herefrom and such invalidity shall not affect any other provision of
this Agreement, the balance of which shall remain and have its intended full
force and effect. However, if such invalid or unenforceable provision would have
been valid and enforceable if it had been restricted to a shorter time or narrow
geographic territory, then such time and territory shall be deemed reduced to
the maximum time and territory enforceable by law.

10. Headings. The headings and titles of the sections of this Agreement are not
a part of this Agreement but are for convenience only and are not intended to
define, limit or construe the contents of the various paragraphs.

11. Entire Agreement; Amendment. This Agreement, upon execution by all of the
Parties, sets forth the entire understanding of the Parties hereto and
supersedes all prior agreements, whether oral or written, pertaining to the
subject matter hereof. No provision of this Agreement shall be modified except
by a written instrument duly signed and acknowledged by each of the Parties
hereto.

12. Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, and all of which together shall constitute
one and the same agreement.

 

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13. No Interpretive Presumption Based on Drafting. The drafting and negotiation
of this Agreement has been participated in by each of the Parties hereto for all
purposes and this Agreement shall be deemed to have been drafted equally and
jointly by each of said Parties. All Parties have been advised and have had the
opportunity to consult with and have this Agreement reviewed by separate and
independent counsel prior to the execution hereof and by each party’s execution
and delivery of this Agreement such party shall be deemed to either have had
such a review or to voluntarily waive such review. The Parties acknowledge that
they have executed this Agreement only after due consideration and they were not
coerced or intimidated to execute this Agreement, and that in executing this
Agreement, the Parties and their respective counsel have not relied upon any
oral or written statements or acts made by any other party other than as
expressly set forth in this Agreement.

14. Confidentiality of Agreement. At all times following the date of the
execution of this Agreement, the Parties hereby agree to hold in strict
confidence the existence of this Agreement as well as all business and other
information relating to the terms and provisions of this Agreement and, except
as otherwise required by law, or in connection with an action brought to enforce
this Agreement, or as to information which becomes publicly available other than
from the Parties, not to disclose or otherwise reveal the existence of this
Agreement or any information contained herein to any other person or entity
(except for their respective attorneys and accountants) without, in each
instance, the prior written consent of the non-disclosing party.

15. No Third Party Beneficiaries. Except as specifically provided herein,
nothing contained in this Agreement shall be deemed to create any benefit,
obligation or contractual relationship between one or more of the Parties hereto
and any third party; nor shall anything contained in this Agreement be deemed to
give any third party any claim or right of action against any party hereto which
does not otherwise exist without regard to this Agreement.

16. Additional Acts. The Parties shall execute and deliver any other instruments
or documents and take any further actions after the execution of this Agreement,
which may be reasonably required for the implementation of this Agreement and
the transactions contemplated hereby.

17. Binding Effect. This Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.

18. Expiration. In the event that this Agreement is not fully executed by the
Parties on or prior to 5:00 PM EST, Monday, July 25, 2005, this Agreement will
expire with no further force and effect.

[Signatures Begin on Following Page]

 

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IN WITNESS WHEREOF, the Parties hereto have each executed and delivered this
Agreement as of the day and year first above written.

 

YAK COMMUNICATIONS INC. By:  

/s/ Charles Zwebner

  Charles Zwebner   Chief Executive Officer YAK COMMUNICATIONS (CANADA) INC. By:
 

/s/ Charles Zwebner

  Charles Zwebner   Chief Executive Officer DIGITAL WAY, S.A. By:  

/s/ Jose A. de Izcue

  Jose A. de Izcue   Managing Director

 

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SCHEDULE A

Description of Equipment

 

Description

1 Gateways Cisco AS5300/4 E1s 1 Gateways Cisco AS5300/4 E1s 1 Router (in Impsat)
Cable Serial Central to Server 1 IVR for Call Centre with EI card and hardware
from Canada Racks-Equipment YDW in DW Additional Energy Source Cards E y M with
Installation 1 SQL Server 2000 – English 1 HP Proliant ML370G3 Server 5 PCs P4
2.4 Ghz WIN XP 1 Meridian Switchboard Option 11 5 Headsets Linksys 16 ports
10/100 1 Netscreen 5XT Firewall 1 Laser Printer Adaption of 5 cubicles Cabling -
Terminals & additional Phones Cables for Switchboard IBM Hard Drive (for call
center)

 

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