Mikel has been the subject of a bitter transfer dispute
Chelsea have signed Nigerian youngster Jon Obi Mikel in a £16m transfer.
Chelsea will pay £12m to Manchester United as well as £4m to Norwegian club Lynn Oslo, who had reached a deal to sell Mikel to United in April 2005.
The agreement resolves the future of the 19-year-old midfielder, who has been the subject of a bitter dispute between the three clubs.
United have agreed "to terminate their option agreement" with Mikel, whose registration goes to Chelsea.
"Under the terms of this agreement, Chelsea will pay Manchester United £12m, half payable now and half in 12 months, and Lyn £4m, half payable now and half payable in 12 months' time," said a United statement.
United thought they had secured Mikel's transfer from Oslo after he signed a pre-contract agreement with them in April 2005.
But the Nigerian subsequently claimed he had been pressured into signing the contract and wanted to join Chelsea instead.
A statement from Chelsea said: "As a result of this settlement all claims in this matter, which Chelsea were never an official party to, are now withdrawn.
"The payments do not in any way imply the acceptance of any such claims and have been made solely so that Mikel can resume his career.
"United will support Chelsea in any work permit application, if necessary.
"All parties have agreed that there will be no further comment on the settlement or any of the allegations or claims."
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