Document:

Unassociated Document

     

    
      GETFUGU,
INC.

       

      BOARD
OF DIRECTORS

      SERVICE
AND INDEMNIFICATION AGREEMENT

       

      THIS
GETFUGU, INC., BOARD OF DIRECTORS SERVICE AND INDEMNIFICATION AGREEMENT
(“Agreement”) is executed and entered into as of the date set forth below by and
between GetFugu, Inc., a Nevada corporation, (the “Company”), and the
undersigned, an individual (“Director”).  The Agreement is effective
as of the date the Director was elected to the board of directors of the Company
(the “Board”) with reference to the following facts:

      

      A. The
Company has requested that Director serve on its Board as a
director.

       

      B. In order
to induce Director to serve on the Board, the Company has agreed to
contractually obligate itself to indemnify Director to the fullest extent
permitted by applicable law so that Director will serve or continue to serve the
Company free from undue concern that he will not be so indemnified; and Director
has agreed to serve on the Board in consideration of the foregoing.

       

      NOW,
THEREFORE, in consideration of the premises and the covenants contained herein,
the Company and Director hereby covenant and agree as follows:

      

      1. Service
By Director.  Director agrees to serve as a member of the
Board, for the Term, subject to the right of Director to resign from the Board
at any time, and other terms and conditions of this Agreement set forth below.
Notwithstanding the foregoing, Director may at any time and for any reason
resign from such position, subject to the provisions of this Agreement and any
contractual or other obligation imposed by operation of law.

       

      1.1 Duties.  As
an independent member of the Board, Director shall use his reasonable best
efforts to perform the duties commonly incident to the office and as set forth
in the Company Bylaws, including, without limitation:

       

      1.1.1 attending
(in person or telephonically) in all regular and

       

      special
meetings of the Board;

       

      1.1.2 reviewing
the performance of the officers of the Company;

      

      1.1.3 making
himself reasonably available for consultation with the officers of the Company
immediately before and after Board meetings, as needed; and

       

      1.1.4 doing all
other things reasonably requested by the Board in order to advance the business
and economic interests of the Company and its shareholders.

       

      1.2 Fiduciary
Duty.  Director acknowledges and agrees that in his capacity as a
member of the Board, he has a fiduciary duty to the Company and its
shareholders. Director further covenants and agrees to use his reasonable best
efforts to comply with and abide by all written policies, procedures, guidelines
and governing principles as may be adopted by the Board from time to time; to
serve the Company faithfully and to the best of his ability; and to devote that
amount of time, attention and effort to the Company which is reasonably
necessary in order to satisfy the requirements of the Board.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      2. Term.  This
Agreement shall be effective as of the date first set forth below (the
“Effective Date”) and shall continue for so long as Director shall serve on the
Board as a director (the “Termination Date”). This Agreement will terminate
automatically without the necessity of further notice or action of any kind upon
the Termination Date, or earlier upon Director’s resignation or removal from the
Board in accordance with the Company’s Bylaws and applicable law. Following the
Termination Date, the Company shall continue to indemnify Director in accordance
with the indemnification rights provided in Section 4, for actions pertaining to
the period prior to the Termination Date and the obligation of the Company under
Section 4 shall remain in full force and effect.

       

      3. Protection
of Company Property.

       

      3.1 Restriction
on Use.  Director recognizes and acknowledges that he will have
access to Confidential Information (as defined below) relating to the business
or interest of the Company or of persons with whom the Company may have business
relationships. Except as permitted herein or as may be approved by the Company
from time to time, the Director will not during the Term of this Agreement or at
any time thereafter, use, disclose or permit to be known by any other person or
entity, any Confidential Information of the Company (except as required by
applicable law or regulations or in connection with the performance of the
Director’s duties and responsibilities hereunder). If Director is requested or
becomes legally compelled to disclose any of the Confidential Information, he
will give (to the extent permitted by law) prompt notice of such request or
legal compulsion to the Company. The Company may waive compliance with this
Section 3 or will then provide Director with legal counsel, reasonably
acceptable to the Director, at no cost or expense to Director (all such costs
and expenses to be paid by the Company) to seek an appropriate
remedy.

       

      3.2 Confidential
Information Defined.  The term “Confidential Information” means
information relating to the Company’s business affairs, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, vendor and
supplier lists, employee lists, employment agreements (other than this
Agreement), personnel policies, the substance of agreements with customers,
suppliers and others, marketing arrangements, customer lists, commercial
arrangements, or any other information relating to the Company’s business that
is not generally known to the public or to actual or potential competitors of
the Company. Confidential Information shall not include information that becomes
publicly known, other than pursuant to a breach of this Section 3 by
Director.

       

      4. Indemnification.  The
Company shall indemnify Director and hold the Director harmless to the fullest
extent permitted by applicable law in effect on the Effective Date or as such
laws may from time to time be amended. Without diminishing the scope of the
indemnification provided by this Section 4, the rights of indemnification of the
Director provided hereunder shall include, but shall not be limited to, those
rights set forth hereinafter, except to the extent expressly prohibited by
applicable law.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.1 Action
Other Than by or in the Right of the Company.  The Director
shall be entitled to the indemnification rights provided in this Section 4.1 if
he is a party or is threatened to be made a party to any threatened, pending or
completed action, suit, investigation, or proceeding, whether civil, criminal,
administrative or investigative in nature, other than an action by or in the
right of the Company, by reason of the fact that he is or was a director of the
Company or is or was serving at the request of the Company as a director,
officer, employee, agent, partner or fiduciary of any other entity or by reason
of anything done or not done by him in any such capacity. Pursuant to this
Section 4.1, the Director shall be indemnified against and held harmless from
all costs and expenses, including, without limitation, attorneys’ fees and
disbursements, costs, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding (including, but not limited to, the investigation, defense or appeal
thereof), if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, he had no reasonable cause to believe his conduct
was unlawful. The Director agrees promptly to notify the Company in writing upon
being personally served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any matter which may be
subject to indemnification covered hereunder, either civil, criminal or
investigative.

       

      4.2 Actions
by or in the Right of the Company.  The Director shall be
entitled to the indemnification rights provided in this Section 4.2 if he is a
person who was or is made a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding brought by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was a director of the Company or is or was serving at the request
of the Company as a director, officer, employee, agent, partner or fiduciary of
any other entity by reason of anything done or not done by him in any such
capacity. Pursuant to this Section 4.2, the Director shall be indemnified
against and held harmless from all costs and expenses, including, without
limitation, attorneys’ fees and disbursements and costs actually and reasonably
incurred by him in connection with such action or suit (including, but not
limited to, the investigation, defense, settlement or appeal thereof) if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company; provided, however, that no such
indemnification shall be made in respect of any claim, issue or matter as to
which applicable law expressly prohibits such indemnification by reason of an
adjudication of liability of the Director to the Company, unless, and only to
the extent that the court in which such action or suit was brought or an
independent committee duly appointed by the Board shall determine upon
application that, despite such adjudication of liability but in view of all the
circumstances of the case, the Director is fairly and reasonably entitled to
indemnification for such expenses and costs as such court shall deem
proper.

       

      4.3 Indemnification
for Costs, Charges and Expenses.  Notwithstanding the other
provisions of this Agreement and in addition to the rights to indemnification
set forth in Sections 4.1 and 4.2 hereof, to the extent that the Director has
served as a witness on behalf of the Company or with respect to any matter
relating to or arising from his services as a director or has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action, suit or proceeding without prejudice, in defense of any action, suit or
proceeding referred to in Sections 4.1 and 4.2 hereof, or in defense of any
claim, issue or matter therein, he shall be indemnified against all costs,
charges and expenses, including attorneys’ fees and disbursements, actually and
reasonably incurred by him or on his behalf in connection
therewith.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.4 Partial
Indemnification.  In addition to the rights to indemnification
set forth in Sections 4.1 and 4.2 hereof, if the Director is only partially
successful in the defense, investigation, settlement or appeal of any action,
suit, investigation or proceeding described in Section 4.2 or 4.3 hereof, and as
a result is not entitled under Section 4.1, 4.2 or 4.3 hereof to indemnification
by the Company for the total amount of the expenses, including, without
limitation, attorneys’ fees and disbursements, costs, judgments, penalties,
fines, and amounts paid in settlement actually and reasonably incurred by him,
the Company shall nevertheless indemnify the Director, as a matter of right
pursuant to Section 4.3 hereof, to the extent that the Director has been
partially successful.

       

      4.5 Request
for Indemnification; Presumptions.  In order to be eligible for
indemnification pursuant to this Agreement, Director shall promptly provide
written notice regarding the existence of any action, suit, proceeding or claim
(each a “Claim”), after the Director obtains actual knowledge thereof, for which
indemnification is being sought pursuant to this Agreement, together with a
written request for indemnification to the Board. Such notice shall also include
all documentation or information regarding the Claim which is reasonably in
possession and control of the Director. Upon delivery of such written notice and
request, the Director shall be presumed to be entitled to indemnification
pursuant to this Agreement and shall be indemnified hereunder.

       

      4.6 Advancement
of Expenses and Costs.  All reasonable expenses and costs
incurred by the Director (including, without limitation, attorneys’ fees and
disbursements, retainers and advances of disbursements required of the Director)
in connection with the defense of any Claim shall be paid by the Company in
advance of the final disposition of such Claim, at the request of the Director
within ten (10) days after the receipt by the Company of a statement or
statements from the Director from time to time requesting such advances. Such
statement or statements shall reasonably evidence the expenses and costs
incurred by Director in connection therewith and shall include or be accompanied
by an undertaking by or on behalf of the Director to repay such amount if it is
ultimately determined that the Director is not entitled to be indemnified
against such expenses and costs by the Company as provided by this Agreement or
otherwise.

       

      4.7 Remedies
of Director.  In the event that a determination is made that
the Director is not entitled to indemnification hereunder or if expenses are not
advanced pursuant to this Agreement, the Director shall be entitled to a final
adjudication in an appropriate court of the State of Nevada or any other court
of competent jurisdiction of his entitlement to such indemnification or advance.
Alternatively, the Director at his option may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association, such award to be made within 60 days
following the filing of the demand for arbitration. In either case, Director
shall be presumed to be entitled to indemnification and the Company shall have
the burden of proof in the making of any determination contrary to such
presumption. In addition, the Company shall not oppose the Director’s right to
seek any such adjudication or award in arbitration or any other claim, but may
only oppose the Director’s right to indemnification. Such judicial proceeding or
arbitration shall be made de novo and the Director shall not be prejudiced by
reason of a determination (if so made) that he is not entitled to
indemnification. Notwithstanding any other term or provision of this Agreement,
upon the filing of any such action or complaint by Director, pending final
adjudication of the issue, the Company shall pay and advance all reasonable
expenses and costs incurred by Director in accordance with Section 4.6 of this
Agreement, as well as all other amounts payable on Director’s behalf pursuant to
Sections 4.1 and 4.2 of this Agreement. If the court or arbitrator shall
determine that the Director is entitled to any indemnification hereunder, the
Company shall pay all reasonable costs and expenses, including, without
limitation, attorneys’ fees and disbursements actually incurred by the Director
in connection with such adjudication or award in arbitration (including, but not
limited to, any appellate proceedings).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.8 Other
Rights to Indemnification. The indemnification and advancement of
expenses, including attorneys’ fees and disbursements, and costs provided by
this Agreement shall not be deemed exclusive of any other rights to which the
Director may now or in the future be entitled under any provision of the
by-laws, agreement, provision of the Articles of Incorporation, vote of
stockholders or disinterested directors, provision of law or otherwise and shall
be in addition to such other rights.

       

      4.9 Insurance.  The
Company shall at all times during the Term of this Agreement maintain a standard
ocurrence based policy of D&O insurance covering the actions of the Board,
including those of Director, on behalf of the Company, in an amount to be
determined by the Board.

       

      5. General
Provisions.

       

      5.1 Modification
and Waiver.  No supplement, modification, waiver or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

       

      5.2 Counterparts.  This
Agreement may be executed in any number of 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 agreement.

       

      5.3 Severability.  If
any provision of this Agreement (or any portion thereof) is held by an
arbitrator or court of competent jurisdiction to be invalid, illegal or
unenforceable for any reason whatever: (a) such provision shall be limited or
modified in its application to the minimum extent necessary to avoid the
invalidity, illegality or unenforceability of such provision and such modified
provision shall be reduced to a writing and signed by the parties hereto; (b)
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby; and (c) to the
fullest extent possible, the provisions of this Agreement shall be construed so
as to give effect to the intent manifested by the provision (or portion thereof)
held invalid, illegal or unenforceable.

       

      5.4 Notices.  Any
notice or other communication in connection with this Agreement may be made and
is deemed to be given as follows: (i) if in writing and delivered in person or
by courier, on the date when it is delivered; (ii) if by facsimile, when
received at the correct number (proof of which shall be an original facsimile
transmission confirmation slip or equivalent); or (iii) if sent by certified or
registered mail or the equivalent (return receipt requested), on the date such
mail is delivered, unless the date of that delivery is not a Business Day or
that communication is delivered on a Business Day but after the close of
business on such Business Day in which case such communication shall be deemed
given and effective on the first following Business Day. Any such notice or
communication given pursuant to this Section 5.4 shall be addressed if to
Company, at its main office, attention President, and if to Director, at his
address as maintained on file with Company.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.5 Governing
Law; Venue.  This Agreement shall be governed by and construed
in accordance with the laws of the state of incorporation, without regard to
conflicts of law principles thereof. Venue for any suit or action to enforce or
interpret this Agreement shall lie exclusively in the State and Federal courts
of Los Angeles County, California.

       

      5.6 Attorney
Fees.  If any suit or action is instituted to enforce or
interpret this Agreement, the prevailing party shall be entitled, in addition to
the cost of disbursements otherwise allowed by law, such sum as the court or
arbitrator may adjudge as reasonable attorneys’ fees and expenses in such suit
or action.

       

      5.7 Entire
Agreement. This Agreement and the exhibit hereto constitute the agreement
of the parties as it relates to this subject matter and does hereby supersede
all other agreements of the parties relating to the subject matter
hereof.

      

      IN
WITNESS WHEREOF, the parties hereto have executed this Board of Directors
Service and Indemnification Agreement as of the Effective Date.

      

      

      Dated:
_________________________, 20___

       

       

      
        
          	GETFUGU,
      INC., 	 	 	DIRECTOR	 
	A
      Nevada corporation	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                   

                	 	 	
                   

                	 
	By:	
                   

                	 	 	Print
      Name:	
                   

                	 
	Its:Unassociated Document

    
       

      
        	
                CONFIDENTIAL
      TREATMENT REQUESTED

                WITH RESPECT TO
      CERTAIN PORTIONS HEREOF

                DENOTED WITH
      “***”

              	
                 Exhibit
      10.1

              

      

    

     

     

    

    

     

    
      	
              ***CONFIDENTIAL
      TREATMENT REQUESTED***

               

              
                Note:  The
      portions hereof for which confidential treatment are being requested are
      denoted with highlighted, bold and underlined
    language

              

            

    

     

     

    
      
        
        

    

    

    

    
      	
               

              (1)
      ELEPHANT TALK COMMUNICATIONS, INC.

              (2)
      THE SHAREHOLDERS OF VALIDSOFT LIMITED

              and

              (3)
      VALIDSOFT LIMITED

              HEADS
      OF TERMS

               

               

              relating
      to proposed acquisition of Validsoft Limited

               

              Date:
      November 2, 2009

            

    

     

     

     

     

     

     

     

     

    
 

    
      	
              Brierly
      Place, New London Road,

              Chelmsford,
      Essex  CM2 0AP

               

              Tel
      01245 211211   Fax 01245 354764

              DX
      89703
  Chelmsford   www.wollastons.co.uk

            

    

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
       

      CONFIDENTIAL
TREATMENT REQUESTED 

      WITH RESPECT TO CERTAIN
PORTIONS HEREOF

      DENOTED WITH
“***”

       

      BETWEEN:

    

     

    (1)           Elephant
Talk Communications, Inc. ("Buyer");

     

    (2)           The
Shareholders of Validsoft Limited as listed in Appendix 1 attached hereto
(the"Shareholders");
and

     

    (3)           Validsoft
Limited (the "Company").

     

    

     

    Date:
November 2, 2009

     

    

     

    Dear
Sirs,

     

    Proposed
acquisition of all of the outstanding shares in ValidSoft Limited (a private
company incorporated in the Republic of Ireland) by Elephant Talk
Communications, Inc.

     

    Further
to our recent discussions, these heads of terms set out the principal terms and
conditions on, and subject to which Buyer is willing to purchase all of the
outstanding shares in the Company from the Shareholders, with the intention of
owning 100 per cent. of the Company, all subject to the agreement and signing by
the parties of detailed, legally binding documentation (the "Proposed
Transaction").

     

    These
heads of terms are not exhaustive, and are not intended to be legally binding
between Buyer and the Company and/or the Shareholders except as specifically set
out in this letter.

     

    
      	
              1
      

            	
              Shares
      to be acquired

            

    

     

    Buyer
proposes to acquire, and the Shareholders propose to sell, all of the
outstanding shares in the Company free from all encumbrances.

     

    
      	
              2
      

            	
              Consideration
      for shares

            

    

     

    
      	
               
      

            	
              2.1

            	
              Subject
      to clause 2.2, the consideration (the “Acquisition
      Consideration”) for the acquisition of the share interests in the
      Company shall be as follows:

            

    

     

    
      	
               
      

            	
              2.1.1

            	
              common
      shares of Buyer equal to 20 per cent. of the issued and outstanding common
      shares of Buyer as of February 1, 2009 (“Buyer
      Shares”);

            

    

     

    
      	
               
      

            	
              2.1.2

            	
              warrants
      to purchase common shares of Buyer (such consideration warrants to have
      the terms set forth in clause 2.6) equal
to;

            

    

     

    
      	
               
      

            	
              2.1.2.1

            	
              20
      per cent. of the issued and outstanding warrants of Buyer as of February
      1, 2009; and

            

    

     

    
      	
               
      

            	
              2.1.2.2

            	
              20
      per cent. of the issued and outstanding options of Buyer as of February 1,
      2009,

            

    

     

    (“Buyer
Warrants”).

     

    
      	
               
      

            	
              2.2

            	
              75
      per cent. of the Buyer Shares and Buyer Warrants set forth in clause 2.1
      shall be issued to the Shareholders at completion.  The
      remaining 25 per cent. of the Buyer Shares and Buyer Warrants
      (collectively, the “Contingent
      Consideration”) shall be issued to the Shareholders at completion
      but shall be placed into escrow and released to the Shareholders from
      escrow as follows:

            

    

    
       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    
      	
               
      

            	
              2.2.1

            	
              subject
      to clause 2.2.2, in the event that the Company achieves actual cumulative
      gross revenues (the "Company Revenues") of a
      percentage of the actual cumulative gross revenues achieved by Buyer
      (including landline & customized mobile services) over the calendar
      periods 2010 to 2012 (the “Buyer Revenues”) as set
      out on the x-axis set out at Appendix 2, then the amount of the Contingent
      Consideration set out on the y-axis in Appendix 2 which intersects with
      the relevant x-axis value on the graph line set out in Appendix 2 (the
      "Graph") shall be
      released to the Shareholders. For the avoidance of doubt, the existing
      high revenue, low margin telephone PRS land line business will only be
      included at 15 per cent. of the cumulative gross revenue generated by
      Buyer.

            

    

     

    In
addition, for the avoidance of doubt, in respect of revenues generated under the
collaboration agreement between Buyer and the Company dated June 30, 2009 (the
"Collaboration
Agreement") ***,
the revenues earned by the Company and the Buyer will be in accordance with the
Net Revenue percentage split as per the Collaboration Agreement *** save that the party
introducing the business will be additionally entitled to the "Marketing &
Commissions" revenue.  By way of example only of the revenue
calculations in respect of revenue generated under the Collaboration Agreement,
and referring to the table set out in Appendix 3, then in Year 1 if the revenue
is generated from business introduced by the Company, the relevant revenues for
the Company would be the aggregate sum of Euros *** (highlighted in light blue
as "Marketing & Commissions") and Euros *** (highlighted in light blue
as "Net Revenue – ValidSoft"), and the relevant revenues for the Buyer would be
Euros *** (highlighted
in yellow as "Net Revenue – ET").  Revenues as reflected will be
determined as per audited US GAAP statements; and

     

    
      	
               
      

            	
              2.2.2

            	
              in
      the event that the Company Revenues exceed US$*** at any time between
      completion and the end of calendar year 2012, then the whole of the
      Contingent Consideration shall immediately be released to the
      Shareholders.

            

    

     

    
      	
               
      

            	
              2.3

            	
              In
      the event none of the performance criteria set forth in clause 2.2 has
      been achieved at the end of calendar year 2012, the Contingent
      Consideration shall be forfeited by the Shareholders, released from escrow
      to Buyer and cancelled.

            

    

     

    
      	
               
      

            	
              2.4

            	
              While
      in escrow, the Contingent Consideration shall be deemed to be issued and
      outstanding and the Shareholders shall have all the rights and privileges
      as though such shares and warrants were not in escrow (including without
      limitation all dividend and distribution rights and the right to vote the
      Buyer Stock at any meeting of the shareholders of
  Buyer).

            

    

     

    
      	
               
      

            	
              2.5

            	
              In
      the event of a change of control in Buyer at any time after completion and
      prior to the end of calendar year 2012, the Contingent Consideration will
      vest as follows:

            

    

     

    
      	
               
      

            	
              2.5.1

            	
              subject
      to clause 2.5.2, the Company Revenues between the date of completion and
      the date on which the change of control becomes unconditional shall be
      assessed as a percentage of the Buyer Revenues in accordance with clause
      2.2.1 and the result shall be increased pro rata as though such levels of
      performance of the Company and Buyer over such period had continued to be
      achieved over the full calendar periods 2010 to 2012.  The
      resulting percentage shall be multiplied by 1.5, and the result of that
      calculation shall be applied to the x-axis in Appendix 2 and there shall
      be released to the Shareholders the amount of Contingent Consideration
      shown on the y-axis of Appendix 2 which intersects with such x-axis value
      on the Graph;

            

    

     

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    
      	
               
      

            	
              2.5.2

            	
              in
      the event of a change of control of Buyer within the first 12 months from
      the date of completion, a minimum of half of the Contingent Consideration
      shall be released to the Shareholders (where that is greater than would
      otherwise be released pursuant to clause
2.5.1).

            

    

     

    Notwithstanding
the foregoing, in no event will the more than the 25 per cent. of the Buyer
Shares and Buyer Warrants that constitutes the Contingent Consideration vest
upon a change of control of Buyer.  For purposes of this clause,
"change of control" means: (i) the sale, transfer, assignment or other
disposition (including by merger or consolidation, but excluding any sales by
shareholders made as part of an underwritten public offering of the common stock
of Buyer) by the shareholders of Buyer, in one transaction or a series of
related transactions, of more than 50 per cent. of the voting power represented
by the then outstanding capital stock of Buyer to one or more persons; or (ii)
the sale of substantially all the assets of Buyer (other than a transfer of
financial assets made in the ordinary course of business for the purpose of
securitization).

     

    
      	
               
      

            	
              2.6

            	
              The
      Buyer Warrants shall have a maximum term of 3 years from the date of issue
      and an exercise price of US$0.63 per share.  The Buyer Warrants
      shall set forth that the warrants must be immediately
      exercised  in the event the average sales prices of the common
      shares of Buyer during the preceding 20 trading day period equals or
      exceeds US$3.75 per share.  The exercise price of the Buyer
      Warrants may be paid in cash or through a cashless exercise.  If
      there is a variation of the share capital of the Buyer following the date
      of issue of the Buyer Warrants (including without limitation a
      capitalisation issue, consolidation or sub-division), the number and
      description of Buyer Warrants shall be adjusted in an appropriate manner
      in line with such variation (though the total amount payable on exercise
      shall not be increased).

            

    

     

    
      	
               
      

            	
              2.7

            	
              The
      payment set out in clause 2.1 above is predicated on the consolidated net
      asset value position of the Company and its group on January 31, 2009
      being zero.

            

    

     

    
      	
               
      

            	
              2.8

            	
              The
      Acquisition Consideration shall be subject to a 2-year post-completion
      restriction placed upon the Company’s management and either (i) a 12-month
      post-completion restriction or (ii) a 6-month restriction to run from
      completion of Buyer’s rights offering (whichever expires first) upon the
      Company’s other shareholders regarding the sale, transfer and disposition
      of the Buyer Shares.

            

    

    
       

      
        	
                3

              	
                      
                  Conditions

                

              

      

       

    

    The
Proposed Transaction is conditional on the parties signing
detailed and legally binding documentation in relation to the Proposed
Transaction.

     

    
      	
              4
      

            	
              Conduct
      of Business and Exclusivity

            

    

     

    
      	
               
      

            	
              4.1

            	
              This
      paragraph 4 is legally binding.

            

    

     

    
      	
               
      

            	
              4.2

            	
              Until
      the completion of the Proposed Transaction, or delivery of written notice
      that negotiations between the parties with respect to the Proposed
      Transaction contemplated hereunder have ended, whichever is earlier, (i)
      the Shareholders shall cause the Company to conduct its business in the
      ordinary course, consistent with its past practices, (ii) the Company
      shall not engage in any extraordinary transactions without Buyer’s prior
      written consent, which consent shall not unreasonably be withheld or
      delayed, and (iii) the Shareholders shall not subject the equity of the
      Company or any of the Company’s assets to any lien, charge or other
      encumbrance.

            

    

    
       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

         

      

    

    
      	
               
      

            	
              4.3

            	
              In
      consideration of Buyer devoting time and resources to due diligence
      activities and the negotiating the Proposed Transaction, the Company and
      each Shareholder agrees that for a period from the date hereof until 31
      December 2009, or upon delivery of written notice that the negotiations
      between the parties with respect to the Proposed Transaction has ended,
      whichever is first, it, he or she will not, and it, he or she will cause
      the Company to not, directly or indirectly, solicit or entertain offers
      from, negotiate with, or in any manner initiate, encourage, discuss,
      accept or consider any proposal of any other individual or entity relating
      to the acquisition of the Company’s equity, the assets of the Company, or
      the equity or assets of any subsidiary of the Company, whether through
      direct purchase, merger, consolidation or other business combination or
      transaction.  The Company and each Shareholder further agrees to
      suspend any pre-existing discussion with all parties other than Buyer
      regarding any such solicitation or offer, whether for the equity of the
      Company, the Company’s assets or the equity or assets of any subsidiary of
      the Company.

            

    

     

    
      	
               
      

            	
              4.4

            	
              Each
      party acknowledges that the other party will incur significant costs,
      expenses and outgoings in relation to the proposed acquisition and
      Negotiations (as defined in clause 6.2 below) after the date of this
      letter, and in consideration of the parties continuing discussions in
      relation to the proposed acquisition, unless Buyer and the Company
      otherwise agree in writing or unless the Company is the subject of a
      bankruptcy proceeding, if a party (the "Withdrawing Party") (i)
      breaches clauses 4.2 or 4.3, (ii) terminates Negotiations with respect to
      the Proposed Transaction before 31 December 2009 without Good Cause, or
      (iii) that party does not complete or advises that they are unable to
      complete the Proposed Transaction substantially upon the terms set out
      herein by 31 December 2009, a break fee of Euros 2,000,000 (the "Break Fee") shall be
      payable by Buyer (if Buyer is the Withdrawing Party) or by the Company (if
      the Withdrawing Party is the Company or one or more of the
      Shareholders).

            

    

     

    "Good Cause" shall
mean:

     

    
      	
               
      

            	
              4.4.1

            	
              in
      respect of Buyer, (i) that would result in the breach of a statutory,
      fiduciary or other duty of a director of Buyer, (ii) the failure to obtain
      approval by the board of directors of Buyer or (iii) that would result in
      the violation of applicable law.

            

    

     

    
      	
               
      

            	
              4.4.2

            	
              in
      respect of the Company or any Shareholder, as applicable, shall be (i)
      that would result in the breach of a statutory, fiduciary or other duty of
      a director of such party, (ii) the failure to obtain approval by the board
      of directors of the Company or (iii) that would result in the violation of
      applicable law.

            

    

     

    
      	
               
      

            	
              4.5

            	
              A
      payment of the Break Fee must be made within five business days of receipt
      of a written demand from the relevant
party.

            

    

     

    
      	
               
      

            	
              4.6

            	
              If
      Buyer or the Company, as the case may be, pays the Break Fee to the other,
      the paying party will have no further or other liability to the other
      party in connection with any breach of this paragraph
  4

            

    

     

    
      	
               
      

            	
              4.7

            	
              Subject
      to the Shareholder’s statutory and fiduciary duty to the Company in his or
      her capacity as a director of the Company, if applicable, each of the
      Shareholders confirms that he/she/it shall not exercise any right of veto
      or consent or similar right, whether under a contract or agreement with
      the Company or any other Shareholders or under the Company's articles of
      association or otherwise, with a view to opposing or preventing the
      Proposed Transaction from taking place substantially on the terms set out
      herein or withholding any consent required in connection therewith, and to
      the extent that his/her/its shareholding allows it shall exercise all
      rights in respect thereof with a view to facilitating the Proposed
      Transaction substantially on the terms set out
  herein.

            

    

     

    
       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    
      	
              5
      

            	
              General

            

    

     

    
      	
               
      

            	
              5.1

            	
              This
      paragraph 5 is legally binding.

            

    

     

    
      	
               
      

            	
              5.2

            	
              Subject
      to the provisions of clause 4 above in respect of the Break Fee, Buyer is
      responsible for its costs and the Company is responsible for its and the
      Shareholders' costs in connection with the Proposed Transaction, whether
      or not it proceeds (including (without limitation) the preparation and
      negotiation of these heads of terms and any documents contemplated by
      them).

            

    

     

    
      	
               
      

            	
              5.3

            	
              "Confidential
      Information" includes (without limitation) these heads of terms and
      all and any information in whatever form (including in written, oral,
      visual or electronic form, or on tape or disk) relating to the party
      disclosing such information, or any entity that is (or was at the date of
      this agreement) in the disclosing party’s group, that has been directly or
      indirectly disclosed, whether before or after the date of this agreement,
      to the party receiving such information or any of its officers, directors,
      employees, representatives or agents by the disclosing party or any of its
      officers, directors, employees, representatives or
  agents.

            

    

     

    
      	
               
      

            	
              5.4

            	
              Subject
      as may be required by law and save in respect of any matter which is at
      the relevant time in the public domain or may be released to the public
      domain otherwise than by way of a breach of this clause 5, the receiving
      party shall not at any time disclose or make use of any knowledge of any
      Confidential Information other than for the purpose of evaluating,
      negotiating, entering into and completing the Proposed
      Transaction.

            

    

     

    
      	
               
      

            	
              5.5

            	
              The
      receiving party shall indemnify and hold harmless the disclosing party and
      its directors, officers, employees, affiliates and agents from and against
      any and all (direct but not consequential) losses, claims, damages and
      liabilities, including but not limited to reasonable attorneys’ fees and
      litigation expenses, to which any such person may become subject arising
      out of, or in connection with, the receiving party’s breach of this
      paragraph 5.

            

    

    
       

      
        	
                6

              	
                
                  Governing
      Law, Counterparts and Third Party
Rights

                

              

      

       

    

    
      	
               
      

            	
              6.1

            	
              This
      paragraph 6 is legally binding.

            

    

     

    
      	
               
      

            	
              6.2

            	
              These
      heads of terms and the negotiations in connection with the proposed
      acquisition (the "Negotiations"),
      shall be governed by, and construed in accordance with, the laws of New
      York.  The governing law for the definitive agreement and any
      ancillary agreements related thereto shall be the laws of New
      York.

            

    

     

    
      	
               
      

            	
              6.3

            	
              Each
      party irrevocably agrees to submit to the exclusive jurisdiction of the US
      federal courts situated in New York, as regards any claim or matter
      arising under, or in connection with, these heads of terms and the
      Negotiations.  The parties further agree that service of process
      shall be proper if served by hand delivery or reputable overnight carrier
      to a party at the address provided
herein.

            

    

     

    
      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    
      	
               
      

            	
              6.4

            	
              These
      heads of terms may be executed in any number of counterparts, each of
      which is an original and which together shall have the same effect as if
      each party had signed the same
document.

            

    

     

    
      	
               
      

            	
              6.5

            	
              These
      heads of terms are made for the benefit of the parties to them and are not
      intended to benefit, or be enforceable by, anyone
  else.

            

    

     

    
      	
               
      

            	
              6.6

            	
              These
      heads of terms and all attached Appendices constitute the entire agreement
      of the parties with respect to the subject matter hereof, superseding all
      prior agreements and understandings of the parties, written and verbal,
      and may be amended or supplemented only in writing and signed by the
      parties.  For the avoidance of doubt, these heads of terms
      supersede the Heads of Terms between the parties dated February 23, 2009,
      as amended by that certain side letter of April 24, 2009 and extension
      agreement dated June 30, 2009.  The clause headings contained in
      these heads of terms are for convenience of reference
      only.  Unless required by applicable law, no party hereto shall
      issue a press release regarding the transactions set forth herein without
      the consent of the other parties, which consent shall not be unreasonably
      withheld and/or delayed.

            

    

     

    
      	
               
      

            	
              6.7

            	
              Except
      as specifically set out in this letter, the parties acknowledge that these
      heads of terms are not intended to constitute a binding agreement and that
      an agreement will not exist unless and until the parties have executed
      detailed and legally binding documentation for the proposed
      acquisition.  The parties agree to undertake Negotiations in
      good faith and use good faith efforts to enter into a detailed and legally
      binding documentation for the proposed acquisition within 30 days from the
      date of this letter.

            

    

    
       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    APPENDIX
1

     

    Shareholders

     

    
      	
              Shareholder

            	
              Address

            
	
              Patrick
      Carroll

            	
              403
      Altmore House, Tara Street, Tullamore, Co Offaly

            
	
              Joseph
      Farrell

            	
              19
      Newlands Drive, Clondalkin, Dublin 22

            
	
              Philip
      Kelly

            	
              Dun
      Dalgan, Ross Road, Screggan, Tullamore, Co. Offaly.

            
	
              Kenneth
      Leonard Shovell

            	
              64
      Adam & Eve Mews, London W8 6UJ, UK

            
	
              Michael
      James Skells

            	
              Rose
      House, Link Lane, Bentley, Suffolk, 1PQ 2DP, UK

            
	
              Matthew
      James Peddlesden

            	
              257
      Harrow Road, Leytonstone, London E11 EQA UK

            
	
              Donall
      Macdara O’Suilleabhain

            	
              1
      Roseberry, Newbridge, Co Kildare

            
	
              John
      Robert Petersen

            	
              5A
      Crabtree Lane, London SW6 6LT UK

            
	
              Jonathan
      Mark Alford

            	
              79
      Nightingale Lane, London SW6, 6LT UK

            
	
              Jonathan
      Mark Murphy

            	
              Cider
      Press Cottage, Blakeney Hill, Gloucestershire, GL15 4BS,
  UK

            
	
              Gregory
      Jude Marks

            	
              57
      Jamestown Park, Ratoath, Co Meath

            
	
              Seamus
      Kane

            	
              27
      Glendanial, Rathan Road, Tullamore, Co Offaly

            
	
              Luke
      Carberry

            	
              Spollenstown,
      Tullamore, Co Offaly

            
	
              Terence
      Williams

            	
              Hembury
      Mount Avenue, Shenfield, Essex CM13 2PB

            
	
              Hank
      Uberoi

            	
              321
      Upper Mountain Ave, Montclair New Jersey 07043 USA

            
	
              Enterprise
      Ireland

            	
              Wilton
      Park House, Wilton Place, Dublin 2

            
	
              Timothy
      Neo Poh Thiam

            	
              56
      Bridport Avenue, Singapore 559346

            
	
              Phil
      Hickman

            	
              27
      Peaks Hill, Purley Street, Surrey CR8
3JG

            

    

     

    
      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

    

     

    APPENDIX
2

     

    Graph

     

    y-axis

     

    

     

    

     

    

     

    ***

     

    

     

    

     

    

     

    

     

    x-axis

     

    
      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      CONFIDENTIAL
TREATMENT REQUESTED 

      WITH RESPECT TO CERTAIN
PORTIONS HEREOF

      DENOTED WITH
“***”

    

    
       

    

     

    APPENDIX
3

     

    Sample
Revenues Table

     

    

     

    

     

    ***

     

    
       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

    

     

    
      	
              Signed:
      ......................................................

               

              Print
      name: ........................................

               

              on
      behalf of Elephant Talk
      Communications, Inc.

               

              Address:
      Schiphol Boulevard 249, 1118 BH Luchthaven Schiphol,
      Netherlands

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Print
      name: .......................................

               

              on
      behalf of Validsoft
      Limited

               

              Address:
      Victoria House, 64 Paul Street, London EC2A 4NG

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Patrick
      Carroll

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Joseph
      Farrell

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Philip
      Kelly

               

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Kenneth
      Leonard Shovell

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Michael
      James Skells

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Matthew
      James Peddlesden

            	 
      	 
      

    

     

    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    
      	
               

              Signed:
      ...................................................

               

              Donall
      Macdara O’Suilleabhain

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              John
      Robert Petersen

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Jonathan
      Mark Alford

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Jonathan
      Mark Murphy

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Gregory
      Jude Marks

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Seamus
      Kane

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Luke
      Carberry

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Terence
      Williams

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Hank
      Uberoi

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Print
      name: ........................................

               

              on
      behalf of Enterprise
      Ireland

               

            	 
      	 
      

    

     

    
       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
TREATMENT REQUESTED 

        WITH RESPECT TO CERTAIN
PORTIONS HEREOF

        DENOTED WITH
“***”

      

    

     

    
      	
               

              Signed:
      ...................................................

               

              Timothy
      Neo Poh Thiam

            	 
      	 
      
	
               

              Signed:
      ...................................................

               

              Phil
      Hickman

            	 
      	 
      

    

     

     

    
 

    
      
        
        

      

      
        13

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