COLLABORATION AGREEMENT

“ Intellectual Property ” shall mean: (a) patents, patent applications of any kind, patent rights, inventions, discoveries and invention disclosures (whether or not patented);  (b) rights in registered and unregistered trademarks, service marks, trade names, trade dress, logos, packaging design, slogans and Internet domain names, and registrations and applications for registration of any of the foregoing; (c) copyrights in both published and unpublished works, including without limitation all compilations, databases and computer programs, manuals and other documentation and all copyright registrations and applications, and all derivatives, translations, adaptations and combinations of the above; (d) rights in know-how, trade secrets, confidential or proprietary information, research in progress, algorithms, data, designs, processes, formulae, drawings, schematics, blueprints, flow charts, models, strategies, prototypes, techniques, Beta testing procedures and Beta testing results; (e) any and all other intellectual property rights and/or proprietary rights relating to any of the foregoing; and (f) goodwill, franchises, licenses, permits, consents, approvals, and claims of infringement and misappropriation against third parties, in each case which subsist or will subsist now or in the future in any part of the world.

“ Collaborative Business ” the business to be pursued by the parties pursuant to this Agreement, for the parties to co-operate and act together for the marketing and sale of their respective products, which are to be coupled for joint benefit.

“ Losses ” shall have the meaning set forth in Section 6.1(a) .

“ Net Revenue ” shall mean the amount of profits and revenues actually collected by or on behalf of Elephant Talk or Validsoft, as the case may be, for sales of Products, less the following deductions with respect to Products:

(i)           value added , excise, sales and other consumption taxes and customs duties to the extent included in the invoice price to customers or paid by Elephant Talk or Validsoft, as the case may be (excluding taxes based on Elephant Talk’s and Validsoft’s income);

(ii)           all reasonable freight, postage and shipping, insurance and other transportation charges to the extent included in the invoice price to customers or paid by Elephant Talk or Validsoft, as the case may be;

(iii)           all amounts repaid or credited by reason of recalls, rejections or return of Products;

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(iv)           to the extent agreed between the Parties or included in any agreed business plan, direct and external accounting, legal, administrative and marketing costs and expenses relating to the distribution, marketing and sale of Products reasonably incurred by Elephant Talk or Validsoft, as the case may be;

(v)           all Commissions payable to Elephant Talk, Validsoft, mobile network operators and/or any other reseller; and

(vi)           any direct third party costs paid or due to be paid to carriers which are necessary for sales and paid by either party, and which shall be recognized in the actual currency of billing with respect to such costs.

“ Net Sales Price ” shall mean the sales price of each Product sold and collected by, or on behalf of, Elephant Talk or Validsoft, as the case may be, less the following deductions:

(i)           value added ,   excise, sales and other consumption taxes and customs duties to the extent included in the invoice price to customers or paid by Elephant Talk or Validsoft, as the case may be (excluding taxes based on Elephant Talk’s and Validsoft’s income);

(ii)           all reasonable freight, postage and shipping, insurance and other transportation charges to the extent included in the invoice price to customers or paid by Elephant Talk or Validsoft, as the case may be;

(iii)           all amounts repaid or credited by reason of recalls, rejections or return of Products;

(iv)           to the extent agreed between the Parties or included in any agreed business plan, direct and external accounting, legal, administrative and marketing costs and expenses relating to the distribution, marketing and sale of Products reasonably incurred by Elephant Talk or Validsoft, as the case may be; and

(v)           any direct third party costs paid or due to be paid to carriers which are necessary for sales and paid by either party, and which shall be recognized in the actual currency of billing with respect to such costs.

“ Person ” shall mean any individual, corporation, limited liability company, limited liability partnership, general partnership, limited partnership, company, joint venture, voluntary association, unincorporated organization, trust, estate, other entity or government (or any agency, instrumentality or political subdivision thereof).

“ Products ” shall mean products developed, distributed, marketed and sold by or on behalf of Elephant Talk or Validsoft that encompasses or bundles together any Elephant Talk Products and any Validsoft Products in the Collaborative Business.

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“ Target Markets ” shall be the following:

to the financial services industry, government, government agencies and semi-state bodies.

“ Validsoft IP ” means all Intellectual Property owned by Validsoft relating to or arising from any and all Validsoft Products.

VALid-POS™ - Card-Present, ATM and POS (point of sale) fraud prevention solution from Validsoft that provides Real-Time fraud detection, false positive reduction and utilizes the underlying VALid® functionality to also provide real-time resolution. VALid-POS provides invisible transaction verification capability that assists banks in determining whether the genuine customer is conducting the card-based transaction.

VALid® - Real-Time Interactive Voice Response (IVR) Internet mutual authentication and transaction verification solution that provides holistic multi-channel approach to fraud prevention. VALid-IVR provides outbound and inbound telephony all with configurable Transaction Verification. VALid-IVR integrates with Text-To-Speech (TTS), Speech Recognition and Voice Biometrics functionality to provide the highest level of secure authentication. VALid® provides the Real-Time Resolution capability for VALid-POS™.

VALid-VPN – Real-Time telecommunications based Virtual Private Network client that allows users to gain secure remote access to an organization’s protected network. Remote network access is becoming a greater issue for many organizations through the growth of home working, remote workers, extended enterprises and disaster recovery and business disruption planning. VALid-VPN supports major VPN servers including Citrix (multiple) and Juniper.

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VALid-OWA - Real-Time telecommunications based Outlook Web Access client that provides secure access for Microsoft Exchange remote users. Currently many Exchange sites disallow remote access through OWA due to security concerns. VALid-OWA solves this problem and, through its zero client-footprint model, enables instant wide scale distribution.

2.1            Management .  The annual budget of Elephant Talk and Validsoft devoted to the distribution, marketing and sale of Products shall be determined and mutually agreed upon by the parties.   Each party shall comply with all laws, rules and regulations applicable to it in the development, distribution, marketing and sale of Products.  Any amendment to any business plan previously agreed upon by the parties shall require consent of both parties.

2.2            Target Markets .  The parties shall concentrate the distribution, marketing and sale of Products in the Target Markets.

2.3            Pricing .  The prices for Products shall be mutually agreed upon by the parties.

2.4            Elephant Talk Obligations .  Elephant Talk shall be responsible for the following:

(a)           dealings with telecom elements and the recruitment of mobile network operators as resellers;

(b)           jointly with Validsoft, software development (including where Validsoft agrees using Elephant Talk’s China operations on an outsource basis, at a cost plus *** ); and

(c)           jointly with Validsoft, the re-applying and relevant integration and joining of the Elephant Talk Products and Validsoft Products to form the Products and to expand the Products for the Target Market, at all times to mutual advantage.

2.5            Validsoft Obligations .  Validsoft shall be responsible for the following:

(a)           jointly with Elephant Talk, software development (including where Validsoft agrees using Elephant Talk’s China operations on an outsource basis, at a cost plus 10% price); and

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2.6            License .  Elephant Talk hereby grants to Validsoft a non-exclusive, worldwide, fully paid-up, royalty free license with respect to the Elephant Talk IP to the extent necessary for the distribution, marketing and sale of Products.  Validsoft hereby grants to Elephant Talk a non-exclusive, worldwide, fully paid-up, royalty free license with respect to the Validsoft IP to the extent necessary for the distribution, marketing and sale of Products.

2.7            Resellers and Distributors .  Upon mutual agreement by the parties, the parties may appoint, on a non-exclusive basis, mobile network operators, resellers and other distributors to market, distribute and sell Products.

2.8            Non-Exclusivity .  Nothing in this Agreement shall be construed or deemed to restrict or prohibit Elephant Talk from developing, marketing, distributing or selling any Elephant Talk Products or any of its other products.  Nothing in this Agreement shall be construed or deemed to restrict or prohibit Validsoft from developing, marketing, distributing or selling any Validsoft Products or any of its other products.

2.9           Restricted Business . In order to assure to the other the full benefit of this Agreement, each Party undertakes on its own behalf, and undertakes to procure that each of its Affiliates, shall not directly or indirectly (whether as principal, shareholder, partner, employees, agents or otherwise), and whether on its own account or in conjunction with or on behalf of any other Person, during the Restricted Period carry on or be engaged, concerned or interested in a business which competes with the sale of the Products, and further that it will not enter into any agreement or arrangement with any third party which is engaged in business in competition with the other party to this Agreement in relation to the Target Market, the intent or effect of which is to be materially prejudicial to the interests of the other party.  For the purpose of this Section 2.9, the Restricted Period shall be the term of this Agreement, and a period of 12 months thereafter.

2.10            Reasonable Endeavors .  Each party undertakes to the other to use all reasonable endeavors to promote and extend sales of the Products, and to exploit the rights arising in the Collaborative Business to the intent of maximization of Net Revenues to the benefit of both of the parties.

3.1            Representations and Warranties of Elephant Talk .  Elephant Talk represents to Validsoft as follows:

(a)             Organization and Corporate Power .  Elephant Talk is a corporation duly organized, validly existing and in good standing under the laws of the State of California.

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            (b)             Authority; No Violation .  Elephant Talk has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution, delivery and performance by Elephant Talk of this Agreement has been duly and validly authorized and approved by all necessary actions of Elephant Talk.  Neither the execution, delivery or performance of this Agreement by Elephant Talk, nor compliance by Elephant Talk with any of the terms or provisions hereof, will violate, conflict with, or result in a breach or default under any provision of the organizational documents of Elephant Talk or violate any applicable law, rules or regulations.

(c)            Ownership of Intellectual Property .  Elephant Talk (i) is the owner of the Elephant Talk IP, and (ii) no Person has asserted any infringement or ownership claim, formal or informal, with respect to the Elephant Talk IP and (iii) any Intellectual Property rights or interests of any Persons in or to any part of the Elephant Talk Product is and will remain properly and lawfully licensed for all purposes contemplated by this Agreement.

3.2            Representations and Warranties of Validsoft .  Validsoft represents to Elephant Talk as follows:

(a)             Organization and Corporate Power .  Validsoft is a corporation duly organized, validly existing and in good standing under the laws of the Republic of Ireland.

(b)             Authority; No Violation .  V