Exhibit
        10.1

       

    

    SETTLEMENT
      AGREEMENT 

    


    This
      SETTLEMENT AGREEMENT (this “Agreement”)
      is
      made as of the 13th
      day of
      May, 2008, by and among Elephant Talk Communications, Inc. (the “Company”)
      and
      Rising Water Capital, AG (“RWC”).
      The
      Company and RWC are sometimes referred to as the “Parties”.
      

    


    Reference
      is made to the RWC $3.5 million convertible promissory note (the “$3.5
      Million Note”),
      the
      RWC $3.0 million convertible promissory note (the “$3.0
      Million Note”),
      the
      Stock Purchase Agreement dated as of June 30, 2005 (the “Original
      Agreement”)
      and a
      Settlement Agreement dated October 31, 2006 (the “Settlement
      Agreement”),
      each
      by and between the Parties. The Parties desire to amend the Original Agreement
      and Settlement Agreement as follows:

    


    1. All
      terms
      not otherwise defined herein shall have the meaning ascribed to such terms
      in
      the Original Agreement and Settlement Agreement, as applicable.

    


    2. The
      Parties acknowledge and agree that of the 195,947,395 shares
      of
      common stock issuable to RWC pursuant to the Original Agreement, as of the
      date
      hereof, 100,000,000 shares have been issued. RWC is entitled to receive an
      additional 95,947,396 shares of common stock (“Issuable
      Shares”).
      The
      Company has not issued the Issuable Shares due to a lack of authorized but
      unissued shares of common stock.

    


    3. The
      Parties acknowledge that the Company intends to effect a twenty five to one
      reverse stock split (the “Reverse
      Split”).

    


    4. The
      Parties agree that the amount of Issuable Shares shall be reduced proportionally
      with the Reverse Split to 3,837,895, and that the Company shall issue the
      Issuable Shares as soon as practicable after the Reverse Split.

    


    5. The
      Parties acknowledge and agree that, pursuant to the Settlement Agreement, the
      Company is obligated to issue to RWC 258,546,313 shares of common stock (the
      “Settlement
      Shares”).
      The
      Company has not issued the Settlement Shares due to a lack of authorized but
      unissued shares of common stock.

    


    6. The
      Parties agree that the Settlement Shares issuable to RWC shall be reduced
      proportionally with the Reverse Split to 10,341,852, and that the Company shall
      issue the Settlement Shares as soon as practicable after the Reverse
      Split.

    


    7. RWC
      agrees to fund the remaining balance of approximately $15,937 under the $3.0
      Million Note.

    


    8. RWC
      shall
      convert the $3.5 Million Note, including accrued interest, promptly after the
      effective date of the Reverse Split.

    


    9. 
      The
      Company agrees to adjust the conversion price (the “Adjusted
      Conversion Price”)
      of the
      $3.0 Million Note to such price at which the Company offers its securities
      in an
      equity financing, or such price at which the debt security is convertible in
      a
      debt financing in the amount of at least U.S. $1 million, consummated in a
      single closing (the “Financing”).

     

    
      
         

      

      
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      Exhibit
        10.1

    

     

    10. RWC
      agrees to convert the $3.0 Million Note, including accrued interest,
      simultaneously with the closing of the Financing; provided, however, that the
      Adjusted Conversion Price shall not be in excess of $1.75 on a post Reverse
      Split basis. 

    


    11. Upon
      conversion of the $3.0 Million Note, RWC shall be paid an incentive payment
      (the
“Rising
      Water Incentive Payment”)
      commensurate with any fees paid and any cost incurred in connection with the
      Financing. All or a portion of the Rising Water Incentive Payment may be payable
      in shares of common stock of the Company, at the option of Rising Water. The
      Rising Water Incentive Payment shall be pro rata based upon the aggregate amount
      raised in the Financing. For example, if $6 million is raised in the Financing
      and $100,000 is paid in fees and cost, then the Rising Water Incentive Payment
      shall be $50,000.

    


    12. As
      a
      condition to induce RWC to enter into this Agreement, the Company agrees to
      use
      its best efforts to retain the respective officers and directors of the Company
      listed below until fiscal year ending 2011, by issuing up to an aggregate of
      167,000,000 shares of the Company’s common stock for a consideration at the same
      price per share as RWC is converting its $ 3.0 Million Note, presently estimated
      at $ 0.042 per share, as compensation for their present and future services
      rendered. 

    


    Steven
      van der Velden, Chairman, CEO & President

    Bruce
      Barren, Vice Chairman

    Willem
      Ackermans, Director & CFO

    Martin
      Zuurbier, Director & CTO

    Roderick
      de Greef, Director

    Johan
      Dejager, Director

    Yves
      van
      Sante, Director

    Mark
      Nije, General Manager Europe

    Alexander
      Lancee, CMO

    Alex
      Vermeulen, General Counsel

    COO,
      to
      be appointed

    Additional
      Independent Directors, to be appointed from the date hereof until the fiscal
      year ending 2011.

    


    Nothing
      herein shall be deemed to confer any third party rights onto the officers and
      directors listed above.

    


    13.
      All
      other terms and conditions of the Original Agreement and Settlement Agreement
      shall remain in full force and effect.

    


    14.
       This
      Agreement may be executed in several counterparts or by separate instruments
      and
      by facsimile transmission or other means of electronic transmission, and all
      of
      such counterparts and instruments shall constitute one agreement, binding on
      all
      of the parties hereto.

    


    15.
       This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York, with regards to the conflicts of law principals thereof,
      and
      shall be binding upon the Parties hereto.

    


    [SIGNATURES
      TO FOLLOW]

    



    
      
         

      

      
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    Exhibit
      10.1

     

    IN
      WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
      and
      year first above written.

    


    


    ELEPHANT
      TALK COMMUNICATIONS, INC.  

    


    By:
      /s/
      Steven van der Velden  

    Name:Steven
      van der Velden

    Title:
      Chairman, CEO & President

    


     

    


    Agreed
      to
      and accepted by:

    


    RISING
      WATER CAPITAL AG

     

    By:
      Marion
      Schumacher_  

    Name:Marion
      Schumacher

     

    
      
         

      

      
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