Exhibit 4.37
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Serial No. 2002-A, B, C and D

THIS  DEBENTURE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED (THE "ACT"),  OR UNDER ANY STATE  SECURITIES  LAWS. THESE SECURITIES ARE
SUBJECT  TO  RESTRICTIONS  ON   TRANSFERABILITY   AND  RESALE  AND  MAY  NOT  BE
TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION  STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE ACT
OR APPLICABLE STATE  SECURITIES  LAWS, OR AN OPINION OF COUNSEL  SATISFACTORY TO
THE ISSUER THAT ANY PROPOSED  TRANSFER OR RESALE IS IN  COMPLIANCE  WITH THE ACT
AND ANY APPLICABLE STATE  SECURITIES LAWS.  BUYERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE  FINANCIAL  RISKS OF THIS  INVESTMENT  FOR AN INDEFINITE
PERIOD OF TIME.

                          9.0% CONVERTIBLE SUBORDINATED
                               DEBENTURE DUE 2005

$275,000                                                        January 10, 2003

         For value received,  ATSI Communications,  Inc., a Delaware corporation
(the "Company"),  with principal offices at 6000 Northwest  Parkway,  Suite 110,
San Antonio,  Texas 78249,  hereby promises to pay to Dennis Long, or registered
assigns the sum of Seventy five thousand and No/100  Dollars  ($75,000),  hereby
promises to pay to Thomas Bryan,  or registered  assigns the sum of Seventy five
thousand  and No/100  Dollars  ($75,000),  hereby  promises to pay to Bancorp of
Rantoul,  or  registered  assigns the sum of Seventy  five  thousand  and No/100
Dollars  ($75,000),  hereby  promises to pay to Steven  Combest,  or  registered
assigns  the sum of  fifty  thousand  and  No/100  Dollars  ($50,000).  Prior to
maturity,  this  Debenture  will bear  interest at a rate equal to 9% per annum.
Interest shall accrue on this Debenture  commencing May 6, 2002 and shall be due
and  payable  quarterly  on the  last day of each  March,  June,  September  and
December until the Maturity Date (as defined herein), commencing March 31, 2003.
The principal  amount of this Debenture,  and any interest  accrued thereon then
remaining  unpaid,  shall be due and payable in full on the Maturity Date at the
principal  offices  of the  Company  in  lawful  money of the  United  States of
America,  unless this Debenture shall have been previously converted pursuant to
Section 2 hereof.  All past due amounts owing  hereunder will bear interest at a
rate equal to 18% per annum.

         This  Debenture  is one of a series of  debentures  (the  "Debentures")
issued pursuant and subject to the terms, and entitled to the benefits,  of that
certain  Securities  Purchase  Agreement  dated  as of  January  10,  2003  (the
"Securities Purchase Agreement"),  by and among the Company and the Buyers named
therein.

         1.  DEFINITIONS.  Unless otherwise  defined herein,  capitalized  terms
defined in the  Securities  Purchase  Agreement  and used herein  shall have the
meaning given to them in the Securities Purchase Agreement:

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         "Affiliate"  of the Company means any person or entity which,  directly
or  indirectly,  is in control of, is controlled  by, or is under common control
with,  the Company.  For purposes of this  definition,  "control" of a person or
entity means the power, directly or indirectly, to direct or cause the direction
of the management and policies of such Person,  whether through the ownership of
voting  securities,  by contract or otherwise;  and the terms  "controlling" and
"controlled" have meanings correlative of the foregoing.

         "Capitalized  Lease  Obligation"  means, the obligations of the Company
under a lease that are required to be  classified  and  accounted for as capital
lease obligations under GAAP and, for purposes of this definition, the amount of
such obligations at any date shall be the capitalized amount of such obligations
at such date, determined in accordance with GAAP.

         "Common  Stock"  means  any  and  all  shares,   interests,   or  other
participations in, and other equivalents  (however designated and whether voting
or  non-voting)  of the  Company's  common  stock,  par value  $0.001 per share,
whether  outstanding  on the date hereof or issued  after the date  hereof,  and
includes, without limitation, all series and classes of such common stock.

         "Company" means ATSI Communications,  Inc., a Delaware corporation,  as
defined above, and includes any corporation which shall succeed to or assume the
obligations of the Company under this Debenture.

         "Conversion  Price"  means  $0.135  per  share  of  Common  Stock.  The
Conversion Price is subject to adjustment as provided herein.

         "Conversion  Stock"  means the shares of the  Company's  Common  Stock,
issuable upon conversion of this  Debenture.  The number and character of shares
of Conversion Stock are subject to adjustment as provided  herein,  and the term
"Conversion  Stock" shall include stock and other securities and property at any
time receivable or issuable upon conversion of this Debenture in accordance with
its terms.

         "Currency Agreement" means any foreign exchange contract, currency swap
agreement  or other  similar  agreement or  arrangement  designed to protect the
Company against fluctuations in currency values.

         "Debenture" means this Convertible Subordinated Debenture.

         ""GAAP" means generally accepted accounting principles set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial  Accounting  Standards  Board or in such other  statements by such
other  entity as may be  approved  by a  significant  segment of the  accounting
profession of the United States, as in effect from time to time.

         "Holder"  means  any  person  who  shall at the time be the  registered
holder of this Debenture.

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         "Indebtedness"  means, without duplication,  (i) all Obligations of the
Company for borrowed  money,  (ii) all  Obligations of the Company  evidenced by
bonds,  debentures,  or other similar  instruments,  (iii) all Capitalized Lease
Obligations  of the  Company,  (iv) all  Obligations  of the  Company  issued or
assumed  as the  deferred  purchase  price of  property,  all  conditional  sale
obligations  and all  Obligations  under  any  title  retention  agreement  (but
excluding trade accounts  payable and other accrued  liabilities  arising in the
ordinary  course of  business  that are not  overdue  by 180 days or more or are
being contested in good faith by appropriate  proceedings),  (v) all Obligations
for  the  reimbursement  of  any  obligor  on any  letter  of  credit,  banker's
acceptance or similar credit  transaction,  (vi) guarantees and other contingent
obligations in respect of  indebtedness of other persons or entities of the type
referred to in clauses (i) through (v) above and clause (viii) below,  (vii) all
Obligations of any other person or entity of the type referred to in clauses (i)
through  (vi)  which are  secured  by any lien on any  property  or asset of the
Company, the amount of such Obligation being deemed to be the lesser of the fair
market  value of such  property  or asset or the  amount  of the  Obligation  so
secured,  and (viii) all Obligations under Currency Agreements and Interest Swap
Obligations of the Company.

         "Interest  Swap  Obligations"  means  the  obligations  of the  Company
pursuant to any arrangement with any other person or entity,  whereby,  directly
or  indirectly,  the Company is entitled to receive  from time to time  periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated  notional  amount in exchange for periodic  payments made by such other
person or entity  calculated  by applying a fixed or a floating rate of interest
on the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.

         "Market  Price" in reference  to the Common  Stock means,  in the event
such   stock  is  traded  on  a   national   securities   exchange   or  in  the
over-the-counter  market as reported by the National  Association  of Securities
Dealers  Automated  Quotation  System  (stock being so traded or reported  being
referred to herein as  "Publicly  Traded"),  the  average  closing bid and asked
price of such stock on the five (5) trading days immediately  preceding the date
as of which such value is to be determined, and in the event the Common Stock is
not  Publicly  Traded,  the value of such  stock on a  going-concern  basis,  as
determined  by the Board of  Directors  of the  Company in good faith or, in the
Company's  discretion,  by an appraiser  mutually agreeable to the Holder and to
the Company,  the  determination of such appraiser to be final in the absence of
fraud or bad faith.

         "Maturity Date" means December 31, 2005.

         "Obligations" means all obligations for principal,  premium,  interest,
penalties,  fees,  commissions,  indemnifications,  reimbursements,  damages and
other liabilities payable under the documentation governing any Indebtedness.

         "Registration  Rights Agreement" means that certain Registration Rights
Agreement  dated as of  _______________,  2002 by and among the  Company and the
Buyers.

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         "Senior Indebtedness" means the principal of, premium in respect of, if
any, and interest (including any interest accruing subsequent to the filing of a
petition  of  bankruptcy  or the  commencement  of any  bankruptcy,  insolvency,
reorganization,  receivership  or other similar  proceeding at the rate provided
for in the documentation  with respect thereto,  whether or not such interest is
an allowed claim under applicable law) on, fees and expenses (including costs of
collection) in respect of,  indemnity  obligations on, and all other amounts and
obligations  owing in  respect  of, any  Indebtedness  of the  Company,  whether
outstanding  on the date  hereof or  hereafter  created,  incurred  or  assumed,
unless, in the case of any particular  Indebtedness,  the instrument creating or
evidencing  the same or  pursuant  to which  the same is  outstanding  expressly
provides that such Indebtedness  shall not be senior in right of payment to this
Debenture.   Without   limiting  the  generality  of  the   foregoing,   "Senior
Indebtedness"  shall also include the  principal  of,  premium in respect of, if
any,  interest  (including any interest  accruing  subsequent to the filing of a
petition  of  bankruptcy  or the  commencement  of any  bankruptcy,  insolvency,
reorganization,  receivership  or other similar  proceeding at the rate provided
for in the documentation  with respect thereto,  whether or not such interest is
an allowed  claim under  applicable  law),  on, and all other  amounts  owing in
respect of, (x) all Interest  Swap  Obligations  and (y) all  Obligations  under
Currency  Agreements,  in each case  whether  outstanding  on the date hereof or
hereafter incurred.  Notwithstanding the foregoing,  "Senior Indebtedness" shall
not include (i) any  Indebtedness  of the Company to a subsidiary of the Company
or any Affiliate of the Company or any of such  Affiliate's  subsidiaries,  (ii)
Indebtedness  of the Company to, or  guaranteed by the Company on behalf of, any
stockholder who beneficially owns more than ten percent of the equity securities
of the Company  pursuant to Rule 13d-3 under the Securities Act of 1933 (as such
Rule may be amended, and any rule replacing such Rule), or any director, officer
or employee of the Company or any subsidiary of the Company (including,  without
limitation,  amounts  owed  for  compensation),   (iii)  Indebtedness  to  trade
creditors and other trade payables  incurred in connection with obtaining goods,
materials or services, and (iv) any liability for federal, state, local or other
taxes owed or owing by the Company.

         2.       CONVERSION.

              2.1 Voluntary  Conversion.  This Debenture may be converted at any
time this Debenture remains  outstanding,  in the sole discretion of the Holder,
into shares of Conversion Stock at the Conversion Price. The number of shares of
Common Stock issuable upon  conversion of this Debenture  shall equal the unpaid
principal amount hereof being converted  divided by the Conversion Price. At the
time of such conversion, all accrued and unpaid interest shall be payable by the
Company.

              2.2  Exercise of  Conversion  Privilege.  In order to convert this
Debenture,  the Holder shall present this Debenture to the Company at the office
of the  Company,  accompanied  by written  notice to the Company that the Holder
elects to convert this  Debenture,  or if less than the entire unpaid  principal
amount hereof (and accrued  interest  thereon) is to be  converted,  the portion
hereof to be  converted.  Such  notice  shall also state the name or names (with
address) in which the certificate or certificates for shares of Conversion Stock
which  shall  be  issuable  on  such  conversion  shall  be  issued.  As soon as
practicable  after the  receipt of such  notices  and the  presentation  of this
Debenture,  the Company shall issue to the Holder a certificate or  certificates
for the number of shares of Conversion  Stock  issuable  upon the  conversion of
this Debenture (or portion hereof). Such conversion shall be deemed to have been
effected  immediately  prior to the close of  business on the date on which such
notice  shall have been  received by the Company and this  Debenture  shall have

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<PAGE>

been presented as aforesaid,  and conversion shall be at the Conversion Price in
effect at such time, and at such time the rights of the Holder of this Debenture
as the holder of such Debenture  shall cease (to the extent this Debenture is so
converted)  and the person or persons in whose name or names any  certificate or
certificates  for  shares  of  Conversion  Stock  shall be  issuable  upon  such
conversion shall be deemed to have become the holder or holders of record of the
shares of Common Stock  represented  thereby.  Upon conversion of only a part of
the unpaid principal  amount of this Debenture (and accrued  interest  thereon),
appropriate  notation shall be made on this Debenture of the principal amount so
converted,  and this  Debenture  shall be retained by the Holder  following such
notation.  Upon  conversion  of the  balance  of the  principal  amount  of this
Debenture  (and  accrued  interest  thereon),  the Holder shall  surrender  this
Debenture to the Company.

         3.  ISSUANCE  OF  CONVERSION   STOCK.  As  soon  as  practicable  after
conversion of this Debenture or any part thereof,  the Company,  at its expense,
will  cause  to be  issued  in the  name  of and  delivered  to  the  Holder,  a
certificate  or  certificates  for the number of shares of  Conversion  Stock to
which the Holder shall be entitled upon such conversion (bearing such legends as
may be required by applicable  state and federal  securities laws in the opinion
of legal  counsel  of the  Company),  together  with any  other  securities  and
property to which the Holder is entitled upon such conversion under the terms of
this  Debenture.  No  fractional  shares will be issued upon  conversion of this
Debenture.  If upon any conversion of this Debenture a fraction of a share would
otherwise result, then in lieu of such fractional share the Company will pay the
cash value of that fractional  share,  calculated on the basis of the applicable
Conversion Price.

         4.  ADJUSTMENT  PROVISIONS.  The  number  and  character  of  shares of
Conversion  Stock  issuable upon  conversion of this Debenture (or any shares of
stock or other  securities  or property at the time  receivable or issuable upon
conversion of this Debenture) and the Conversion Price therefor,  are subject to
adjustment  upon  occurrence  of the  following  events  between  the date  this
Debenture is issued and the date it is converted:

              4.1 Stock Dividends,  Splits,  Combinations and Reclassifications.
If the Company  shall (i) declare a dividend  or other  distribution  payable in
securities of the Company, (ii) split its outstanding Common Stock into a larger
number,  (iii) combine its outstanding  Common Stock into a smaller  number,  or
(iv)  increase  or  decrease  the  number  of shares  of its  Common  Stock in a
reclassification  of the Common Stock  (including any such  reclassification  in
connection with a merger,  consolidation or other business  combination in which
the  Company is the  continuing  entity),  then the  Conversion  Price in effect
immediately prior to such dividend or other distribution,  split, combination or
reclassification, as the case may be, shall forthwith be proportionally adjusted
so that the  Holder  shall be  entitled  to  receive  the  number  of  shares of
Conversion  Stock which the Holder would have owned or been  entitled to receive
had this Debenture been converted  immediately prior to the record date for such
dividend  or  other  distribution,   split,   combination  or  reclassification.
Successive  adjustments  to the  Conversion  Price  shall be made upon each such
dividend or other distribution, split, combination or reclassification.

              4.2 Adjustment for Other Dividends and Distributions.  In case the
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other  distribution  payable

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in respect to the  Conversion  Stock  that is payable in (a)  securities  of the
Company  (other than  issuances  with respect to which  adjustment is made under
Section 4.1), or (b) assets (other than cash  dividends  paid or payable  solely
out of  retained  earnings),  then,  and in each such  case,  the  Holder,  upon
conversion of this Debenture at any time after the consummation,  effective date
or record  date of such  event,  shall  receive,  in  addition  to the shares of
Conversion  Stock  issuable upon such  conversion,  the securities or such other
assets of the  Company to which the Holder  would have been  entitled  upon such
date if the Holder had converted this Debenture  immediately  prior thereto (all
subject to further adjustment as provided in this Debenture).

              4.3   Adjustment  for  Merger,   Consolidation   Etc.  Other  Than
Acquisition.  In the  event  of  any  merger,  consolidation  or  other  similar
transaction,  then the Holder, upon the conversion of this Debenture at any time
after the  consummation of such  transaction,  shall be entitled to receive,  in
lieu  of the  stock  or  other  securities  and  property  receivable  upon  the
conversion  of this  Debenture  prior to such  consummation,  the stock or other
securities  or property to which the Holder  would have been  entitled  upon the
consummation  of such  transaction  if the Holder had converted  this  Debenture
immediately prior thereto, all subject to further adjustment as provided in this
Debenture,  and the successor or purchasing  corporation or other entity in such
transaction  (if other than the  Company)  shall duly execute and deliver to the
Holder a supplement hereto  acknowledging  such  corporation's or other entity's
obligations  under  this  Debenture;  and in each  such  case,  the terms of the
Debenture  shall be  applicable  to the shares of stock or other  securities  or
property receivable upon the conversion of this Debenture after the consummation
of such transaction.

              4.4  Conversion  of Stock.  In case all of the  authorized  Common
Stock of the Company is  converted,  pursuant to the  Company's  Certificate  of
Incorporation,  into other  securities  or  property,  or the  Conversion  Stock
otherwise  ceases to exist,  then, in such case, the Holder,  upon conversion of
this  Debenture at any time after the date on which the  Conversion  Stock is so
converted or ceases to exist (the "Termination Date"), shall receive, in lieu of
the number of shares of Conversion Stock that would have been issuable upon such
exercise  immediately  prior  to the  Termination  Date,  the  stock  and  other
securities  and property to which the Holder would have been entitled to receive
upon the Termination Date if the Holder had converted this Debenture immediately
prior to the Termination Date (all subject to further  adjustment as provided in
this Debenture).

              4.5  Sale of Securities Below Conversion Price or Market Price.

              (a) In case the  Company  shall at any time after the date of this
Debenture issue for  consideration  any shares of Common Stock or any securities
or other rights  convertible  into or exercisable for shares of its Common Stock
or any other equity  security  entitled to participate  with Common Stock in the
earnings or assets of the  Company  (but not any equity  security  entitled to a
fixed preference in such earnings or assets rather than a participation therein)
(such other securities or rights herein called "Common Stock Equivalents") for a
price per share  less than the  greater  of (i) the  Conversion  Price in effect
immediately  preceding  the issuance of such  additional  Common Stock or Common
Stock Equivalents,  and (ii) the Market Price of the Common Stock as of the date
of this  Debenture  (either of such  events  being a "Dilutive  Issuance"),  the
Conversion Price in effect  immediately prior to the issuance of such additional
shares of Common Stock or Common Stock Equivalents shall forthwith be reduced to
a price  determined by multiplying the Conversion  Price by a fraction,  (i) the
numerator  of which is an amount equal to the sum of (x) the number of shares of
Common Stock outstanding prior to the Dilutive  Issuance,  plus (y) the quotient

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of the  aggregate  consideration  received  by the  Company  upon such  Dilutive
Issuance  divided by the greater of (1) the Conversion  Price and (2) the Market
Price of the Common Stock in effect  immediately prior, and (ii) the denominator
of which is the total  number  of  shares  outstanding  immediately  after,  the
Dilutive Issuance.

              4.6 Exception to Anti-dilution  Adjustments.  No adjustment to the
Conversion Price will be made (i) upon the exercise of any warrants,  options or
convertible securities granted,  issued and outstanding on the date of the First
Closing;  (ii) upon the grant or exercise of any stock options  exercised  under
any employee  benefit plan or otherwise  issued to employees or other Affiliates
of the Company;  (iii) upon  issuances of securities in an  underwritten  public
offering;  (iv) upon issuances of any of the Debentures or Warrants to be issued
under and  pursuant to the terms of the  Securities  Purchase  Agreement  at any
closing  after the First  Closing  pursuant to the terms  thereof;  and (v) upon
issuances of securities as consideration for a merger, consolidation or purchase
of assets in connection with any strategic alliance,  relationship,  partnership
or joint  venture,  or in connection  with the  disposition  or acquisition of a
business, product, line of business or license by the Company.

              4.7 Notice of Adjustments. The Company shall promptly give written
notice to the Holder of each adjustment or readjustment of the Conversion  Price
or the number of shares of Conversion  Stock or other  securities  issuable upon
conversion  of this  Debenture.  The notice  shall  describe the  adjustment  or
readjustment and show in reasonable  detail the facts on which the adjustment or
readjustment is based.

              4.8 No Change  Necessary.  The form of this  Debenture need not be
changed  because of any adjustment in the  Conversion  Price or in the number of
shares of Conversion Stock issuable upon its conversion.

              4.9  Reservation of Stock.  If at any time the number of shares of
Conversion Stock or other securities  issuable upon conversion of this Debenture
shall not be sufficient to effect the conversion of this Debenture,  the Company
will take such  corporate  action as may,  in the  opinion  of its  counsel,  be
necessary to increase its authorized but unissued shares of Conversion  Stock or
other  securities  issuable  upon  conversion  of this  Debenture  as  shall  be
sufficient for such purpose.

         5. NO RIGHTS OR LIABILITIES AS STOCKHOLDER.  This Debenture does not by
itself  entitle the Holder to any voting rights or other rights as a stockholder
of the Company. In the absence of conversion of this Debenture, no provisions of
this  Debenture,  and no  enumeration  herein of the rights or privileges of the
Holder,  shall  cause the  Holder to be a  stockholder  of the  Company  for any
purpose.

         6. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
of Incorporation or Bylaws, or through  reorganization,  consolidation,  merger,
dissolution,  issue or sale of securities, sale of assets or any other voluntary
action, willfully avoid or seek to avoid the observance or performance of any of
the terms of this  Debenture,  but will at all times in good faith assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary or appropriate in order to protect the rights of the Holder under this
Debenture against wrongful impairment.

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         7.  SUBORDINATION.  This Debenture is expressly  subordinated to Senior
Indebtedness of the Company, as follows:

              7.1.  Agreement of  Subordination.  Payment of the  principal  and
interest on this Debenture is hereby expressly  subordinated,  to the extent and
in the manner in this Section  hereinafter set forth, in right of payment to the
prior payment in full of all Senior Indebtedness of the Company.

              No  payment on account of the  principal  of or  interest  on this
Debenture  shall be made, and the holder hereof shall not be entitled to receive
any such  payment if full  payment for  amounts  then due for  principal  of and
interest  on  Senior  Indebtedness  has not been  made (a  "Senior  Indebtedness
Default").

              In the event of any insolvency or bankruptcy proceedings,  and any
receivership,  liquidation,  reorganization  or  other  similar  proceedings  in
connection therewith,  relative to the Company or to its creditors,  as such, or
to the  Company's  property,  or in the event of any  proceedings  for voluntary
liquidation,  dissolution,  or other  winding up of the Company,  whether or not
involving  insolvency  or  bankruptcy  (each  of the  foregoing  an  "Insolvency
Event"), the holders of Senior Indebtedness shall be entitled to receive payment
in  full  of all  principal,  premium,  if  any,  and  interest  on  all  Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) before the Holder of this Debenture is
entitled to receive any payment on account of  principal  or interest  upon this
Debenture,  and to that end the holders of Senior Indebtedness shall be entitled
to receive for application to the payment of the Senior Indebtedness any payment
or  distribution  of any  kind  or  character,  whether  in  cash,  property  or
securities  (other  than  shares  of  stock of the  Company  as  reorganized  or
readjusted or securities of the Company or any other corporation provided for by
a plan of reorganization  or readjustment,  distributions on account of which or
the payment of which are subordinated to the payment of all Senior  Indebtedness
which may at the time be outstanding) which may be payable or deliverable in any
such proceedings in respect of this Debenture.

              In the event  that this  Debenture  is  declared  due and  payable
before its expressed maturity for any reason (a "Debenture Acceleration") (under
circumstances  when the  provisions  of the  preceding  paragraph  shall  not be
applicable),  the  holders of Senior  Indebtedness  shall be entitled to receive
payment in full of all  principal,  premium,  if any, and interest on all Senior
Indebtedness  before the Holder of this  Debenture  is  entitled  to receive any
payment on account of the principal or interest upon this Debenture.

              In the event that,  notwithstanding the foregoing,  any payment or
distribution of assets of the Company,  whether in cash,  property or securities
(other than  shares of stock of the  Company as  reorganized  or  readjusted  or
securities  of the Company or any other  corporation  provided  for by a plan of
reorganization  or  readjustment,  the payment of which is  subordinated  to the
payment of all Senior Indebtedness which may at the time be outstanding),  shall
be  received  by  the  Holder  of  this  Debenture  at a  time  which  a  Senior
Indebtedness  Default,  an  Insolvency  Event or a  Debenture  Acceleration  has
occurred and is continuing and before all Senior  Indebtedness  is paid in full,
or provision made for its payment in cash, such payment or distribution shall be
held in trust for the  benefit of, and shall be paid over or  delivered  to, the

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holders of such Senior Indebtedness or their  representative or representatives,
or to the trustee or trustees  under any indenture  under which any  instruments
evidencing any of such Senior Indebtedness may have been issued, for application
to the  payment  of all  Senior  Indebtedness  remaining  unpaid  to the  extent
necessary  to pay all  such  Senior  Indebtedness  after  giving  effect  to any
concurrent payment or distribution, or provision for payment thereof in cash, to
the holders of such Senior Indebtedness.

              The Holder of this  Debenture,  for itself and its  successors and
assigns,  expressly for the benefit of the present and future  holders of Senior
Indebtedness,  by purchasing this Debenture, agrees to and shall be bound by the
subordination  provisions of this Section,  and agrees to execute and deliver to
holders of Senior  Indebtedness,  upon written request,  separate  subordination
agreements consistent with the provisions of this Section.

              7.2.  Effect of  Subordination.  No right of any present or future
holder of any Senior  Indebtedness to enforce  subordination  as herein provided
shall at any time in any way be  prejudiced or impaired by any act or failure to
act on the part of the  Company or by any act or failure to act,  in good faith,
by any such  holder,  or by the  noncompliance  by the  Company  with the terms,
provisions and covenants of this Debenture  regardless of any knowledge  thereof
which such holder may have or otherwise be charged  with.  Nothing  contained in
this Section or elsewhere in this  Debenture is intended to or shall impair,  as
between  the  Company,   its   creditors   other  than  the  holders  of  Senior
Indebtedness,  and the Holder of this Debenture,  the obligation of the Company,
which is absolute and unconditional,  to pay to the Holder of this Debenture the
principal  of (and  premium,  if any)  and the  interest  on this  Debenture  in
accordance with its terms, or is intended to or shall affect the relative rights
of the Holders of this Debenture and the creditors of the Company other than the
holders of Senior Indebtedness, nor shall anything herein or therein prevent the
Holder of this Debenture from  exercising  all remedies  otherwise  permitted by
applicable law upon default under this Debenture, subject to the rights, if any,
under this  Section of the holders of Senior  Indebtedness,  in respect of cash,
property or  securities  of the Company  received  upon the exercise of any such
remedy.

              7.3.  Subrogation.  Subject  to the  payment in full of all Senior
Indebtedness,  the rights of the Holder of this Debenture shall be subrogated to
the  rights of the  holders  of  Senior  Indebtedness  to  receive  payments  or
distributions of cash, property,  or securities of the Company applicable to the
Senior  Indebtedness  until the principal  amount of (and  premium,  if any) and
interest on this Debenture  shall be paid in full; and, for the purposes of such
subrogation,  no  payments  or  distributions  to  the  holders  of  the  Senior
Indebtedness  of any cash,  property or  securities  to which the Holder of this
Debenture  would be entitled  except for the provisions of this Section,  and no
payment over pursuant to the provisions of this Section to or for the benefit of
the holders of Senior  Indebtedness by the Holder of this  Debenture,  shall, as
between the Company,  its creditors  other than holders of Senior  Indebtedness,
and the Holder of this  Debenture be deemed to be a payment by the Company to or
on account of the Senior  Indebtedness.  It is understood that the provisions of
this Section are and are solely for the purpose of defining the relative  rights
of the Holder of this  Debenture on the one hand,  and the holders of the Senior
Indebtedness, on the other.

                                       9
<PAGE>

              7.4. Reliance of Subsequent Holders of Senior  Indebtedness.  Each
holder of Senior Indebtedness  whether outstanding at the date of this Debenture
or incurred after the date hereof,  shall be deemed to have acquired such Senior
Indebtedness in reliance upon the subordination provisions contained herein.


         8. REDEMPTION. This Debenture is not redeemable prior to June 30, 2003.
This Debenture may be redeemed,  in whole or in part,  upon not less than 20 nor
more than 60 days  notice at any time on or after June 30, 2003 at the option of
the  Company,  at a price  equal  to  105.0%  of the  principal  amount  of this
Debenture  then  outstanding  plus  any  interest  accrued  but  unpaid  to  the
redemption date.

         On and after the  Redemption  Date,  interest  ceases to accrue on this
Debenture or the portion of this  Debenture  called for  redemption,  unless the
Company defaults in payment of the redemption price on the redemption date.

         Notice of  redemption  will be given by the  Company  to the  Holder as
provided in the Securities Purchase Agreement.

         9. ADDITIONAL  INTEREST.  On each December 31, commencing  December 31,
2003,  and ending  December  31,  2005,  the  Company  will pay to the Holder an
additional  interest payment equal to the lesser of (i) the Additional  Interest
Payment (as defined  herein)  with respect to the twelve  calendar  month period
ending  on the last day of the  month of  November  immediately  preceding  such
December  31  ("Relevant  Twelve-Month  Period")  or (ii) 6% of the  outstanding
principal amount of this Debenture on such December 31. For purposes hereof, the
"Additional  Interest  Payment"  for a  particular  December  31 shall  mean the
product obtained by multiplying the Total  Additional  Interest Owed (as defined
herein) with respect to such  December 31 on such  December 31  multiplied  by a
fraction the numerator of which is the then outstanding principal amount of this
Debenture  and the  denominator  of which  is the  principal  amount  of all the
Debentures issued pursuant to the Securities  Purchase Agreement and outstanding
on such date. For purposes  hereof,  the "Total  Additional  Interest Owed" with
respect  to a  particular  December  31  shall  equal  the  amount  obtained  by
multiplying  (i) the Annual  Gross  Revenue (as defined  herein) with respect to
such December 31 multiplied by (ii) the product of (a) 0.00015 multiplied by (b)
a fraction the numerator of which is the outstanding principal amount of all the
Debentures issued under the Securities  Purchase Agreement and outstanding as of
such date and the  denominator  of which is  $1,000,000.  For  purposes  hereof,
"Annual Gross  Revenue" with respect to a particular  December 31 shall mean all
operating  revenues accrued by the Company for services provided to customers on
for the  Relevant  Twelve-Month  Period  with  respect  to such  December  31 as
determined by the Company based on audited financial statements for the portions
of such period for which audited  financial  statements  are  available,  and on
un-audited  financial  statements  for the  portions  of such  period  for which
audited financial statements are not available.

         10. WAIVERS. The Company and each surety (including all guarantors with
respect to this  Debenture  and all persons  pledging  collateral to secure this
Debenture),  if any, hereby waives (i) all demands and presentments for payment,
(ii) all notices of non-payment,  intention to accelerate maturity, acceleration
of maturity,  protest and dishonor,  and (iii) diligence in taking any action to
collect  amounts  hereunder and in the handling of any collateral  securing this
Debenture.

                                       10
<PAGE>

         11.  ATTORNEYS'  FEES. In the event the Holder  engages the services of
attorneys for the purpose of enforcing this Debenture, or any provision thereof,
the prevailing  party shall be entitled to recover its  reasonable  expenses and
costs, including attorneys' fees.

         12.  DENOMINATION,   TRANSFER  AND  EXCHANGE.   This  Debenture  is  in
registered form, without coupons,  and must be in denominations of $1,000.00 and
integral  multiples of  $1,000.00.  A Holder  shall  register the transfer of or
exchange of this Debenture in accordance with the Securities Purchase Agreement.
The Company, as registrar,  may require a Holder, among other things, to furnish
appropriate  endorsements  and transfer  documents  and to pay certain  transfer
taxes or  similar  governmental  charges  payable  in  connection  therewith  as
required by law and/or as permitted by the Securities  Purchase  Agreement.  The
Company,  as  registrar,  need not  register the transfer of or exchange of this
Debenture  or  any  portion  hereof  selected  for  redemption  except  for  the
unredeemed  portion in the event this  Debenture  is  redeemed.  The  registered
Holder of this Debenture  shall be treated as the owner of the Debenture for all
purposes.

         13.  GOVERNING LAW. THIS  DEBENTURE  SHALL BE GOVERNED BY AND CONSTRUED
UNDER  THE  INTERNAL  LAWS  OF THE  STATE  OF  DELAWARE,  WITHOUT  REFERENCE  TO
PRINCIPLES OF CONFLICT OF LAWS OR CHOICE OF LAWS.

         14. HEADINGS. The headings and captions used in this Debenture are used
for convenience  only and are not to be considered in construing or interpreting
this Debenture.

         15.  NOTICES.   Unless  otherwise  provided,  any  notice  required  or
permitted  under this  Debenture  shall be given in writing  and shall be deemed
effectively  given upon  personal  delivery  to the party to be notified or upon
deposit with a recognized  international  courier, fees prepaid and addressed to
the Holder at the last address furnished to the Company by the Holder in writing
or, in the case of the Company,  at the principal offices of the Company,  or at
such other  address as any party may  designate by giving ten (10) days' advance
written notice to the other party.

         16. AMENDMENTS AND WAIVERS.  Any term of this Debenture may be amended,
and the observance of any term of this Debenture may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the  written  consent of the  Company  and the  holder(s)  of a majority  of the
outstanding principal amount of the Debentures. Any amendment or waiver effected
in  accordance  with  this  Section  shall be  binding  upon the  Holder of this
Debenture, each future holder of this Debenture.

                                       11
<PAGE>

         17. SEVERABILITY.  If one or more provisions of this Debenture are held
to be unenforceable under applicable law, such provision(s) shall be enforced to
the maximum extent permitted by applicable law, and the balance of the Debenture
shall remain in full force and effect.

         18. USURY  SAVINGS  CLAUSE.  The Company and the Holder intend that the
loan evidenced by this Debenture (the "Loan") shall be in strict compliance with
applicable  usury laws. If at any time any interest  contracted for,  charged or
received under this Debenture or otherwise in connection  with the Loan would be
usurious  under  applicable  law,  then  regardless  of any  provisions  of this
Debenture or the  Securities  Purchase  Agreement,  or any other document or any
action  or  event  (including,  without  limitation,   prepayment  of  principal
hereunder  or  acceleration  of  maturity)  which may occur with respect to this
Debenture  or the Loan,  it is  agreed  that all sums  that  otherwise  would be
usurious shall be  immediately  credited by the Holder as a payment of principal
hereunder,  or if this Debenture has already been paid,  immediately refunded to
the Company. All compensation which constitutes interest under applicable law in
connection with the Loan shall be amortized, prorated, allocated and spread over
the full period of time any indebtedness is owing by the Company under the Loan,
to the  greatest  extent  permissible  without  exceeding  the  maximum  rate of
interest  allowed by  applicable  law in effect  from time to time  during  such
period.


                                       12
<PAGE>

         IN WITNESS WHEREOF,  the Company has caused this Debenture to be signed
in its name as of the date first above written.


                                    ATSI COMMUNICATIONS, INC.



                                    By: /S/ J.Christopher Cuevas
                                    ----------------------------
                                    J. Christopher Cuevas, Vice President,
                                    Corporate Controller and Treasurer



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