**EXHIBIT
        10.1**
 
 **AGREEMENT
        OF COMPROMISE, SETTLEMENT AND RELEASE**
 
 
 **PARTIES** **:**
 
 The
        parties to this AGREEMENT OF COMPROMISE, SETTLEMENT AND RELEASE (hereinafter
        the
“Settlement Agreement” or “Agreement”) are:
  ·
              ATSI
                  Communications, Inc., a Delaware corporation, now known as ATSI
                  Communications, Inc., a Nevada corporation, via merger with corporate
                  offices in San Antonio, Texas (hereinafter “ATSI”),
                  and
 
 ·
              Ntera
                  Holdings, Inc., a Delaware corporation with corporate offices in
                  Miami,
                  Florida (hereinafter “Ntera”)
 
 **RECITALS** :
 
 WHEREAS,
        Ntera and ATSI have had a bilateral business relationship in which each has
        provided telecommunications services and has terminated telecommunications
        traffic for the other, including a Reciprocal Network Carrier Services Agreement
        dated July 20, 2004 (the “Carrier Agreement”) under which Ntera asserts monies
        are still owing to it by ATSI and for which ATSI asserts it is allowed to
        offset
        same by providing termination or other telecommunications services for Ntera;
        and
  WHEREAS,
        the parties have asserted their respective claims more specifically in an
        arbitration proceeding initiated by ATSI before the American Arbitration
        Association in Case No. 70 181 00476 05 pending before arbitrator Tower in
        Bexar
        County, Texas (hereinafter “Arbitration Proceeding”); and
  1
 WHEREAS,
        the papers in said Arbitration Proceeding are incorporated herein regarding
        the
        asserted claims and counterclaims by ATSI and Ntera as more particularly
        set
        forth in said Arbitration Proceeding initiated by ATSI; and
  WHEREAS,
        bona fide disputes and controversies exist between the parties as to the
        amount
        owed Ntera by ATSI and the appropriate alternative methods by which to pay
        same,
        and
  WHEREAS,
        by reason of such disputes and controversies the parties hereto desire to
        compromise and settle all claims and causes of action of any kind whatsoever
        between the parties relating to the claims and defenses or potential
        counterclaims asserted or which could have been asserted in the Arbitration
        Proceeding and any and all other claims, known or unknown, if any, either
        party
        hereto may have against the other.
  NOW,
        THEREFORE, to buy peace and for the mutual agreements and understandings
        herein
        expressed, the receipt of which is hereby acknowledged, Ntera and ATSI do
        hereby
        contract and agree as follows:
  1.  The
        parties agree that the agreed current balance owing by ATSI to Ntera is $83,000
        for which ATSI will pay such indebtedness and/or provide or make available
        telecommunication services to Ntera as set forth herein.
  2.  ATSI
        will
        pay $5,000 substantially contemporaneously with the execution of this Agreement,
        reducing the balance to $78,000.
  2
 3.  As
        to the
        indebtedness of $78,000 owing by ATSI to Ntera following the execution of
        this
        Agreement and payment of $5,000 to Ntera, ATSI may pay off such indebtedness
        as
        follows:
  ·
              Beginning
                  June 10, 2006 through September 10, 2006, Ntera shall tender to
                  ATSI an
                  opportunity to terminate telecommunications traffic at the rates
                  and
                  destinations set forth inExhibit
                  Aattached hereto and incorporated herein. ATSI shall provide such
                  termination services for Ntera to “burn” or reduce $78,000 in indebtedness
                  to Ntera as set forth herein. The markings in the margins of Exhibit
                  A
                  reference the destinations and rates Ntera has indicated it will
                  most
                  likely use in connection with presentment of minutes to ATSI to
                  be
                  terminated per this Agreement. However, Ntera will not be barred
                  from
                  tendering minutes for termination to the other destinations at
                  the rates
                  published in Exhibit A hereto.
 
 ·
              The
                  rates in Exhibit A are considered by the parties hereto to be
                  substantially at market rates within the telecommunications industry.
                  The
                  rates in Exhibit A will control unless properly adjusted. If ATSI
                  believes
                  in good faith that the industry market rates hereafter meaningfully
                  increase such that the rates in Exhibit A should be fairly adjusted
                  upward
                  to reflect a meaningful change in market rates for such destination,
                  ATSI
                  will give Ntera 5 business days notice of a rate change as to such
                  destination. Such rate change shall be effective unless disputed
                  by Ntera
                  via written (email notification, fax, or mail, effective upon delivery).
                  If Ntera believes market rates hereafter change such that a rate
                  to a
                  destination in Exhibit A hereafter becomes lower than market for
                  the
                  industry and that ATSI should therefore drop its rate to reflect
                  prevailing market industry rates as to a particular destination
                  in Exhibit
                  A, then Ntera may give ATSI notice of its requested lower rate
                  change and
                  such rate change will become effective within 5 business days unless
                  disputed by ATSI in writing (email notification will suffice).
                  Email and
                  addresses for each party, for the purpose of such notification,
                  is as
                  follows:
 
 Notification
                to ATSI:
              Art
                  Smith, President of ATSI
 8600
        Wurzbach Rd, Ste 700W
 San
        Antonio, Texas 78249
 Fax:
        (210) 614-7264
 Email:
        Art Smith: asmith@atsi.net
  3
 
  Notification
                    to Ntera:
                  Tolga
                      Alemdar, President of
                      Sales
 For
        Ntera, Holdings, Inc.
 1020
        NW
        163 rd Drive
 Miami,
        Florida 33169
 Fax:
        305-503-9329
 Email:
        talemdar@nteraholdings.com
 and:
        routing@nteraholdings.com
  ·
              If
                  Ntera tenders more telecommunications traffic for termination by
                  ATSI in
                  such period than is required to burn off or reduce the indebtedness
                  owed
                  by ATSI to Ntera, Ntera shall be responsible to ATSI for such services
                  at
                  the rates set forth in Exhibit A unless a new carrier services
                  agreement
                  or other written agreement is hereafter executed between the parties
                  that
                  augments or replaces this Agreement.
 
 ·
              Ntera
                  is not required to tender sufficient telecommunications traffic
                  to ATSI
                  within the above-referenced approximately 90-day period to reflect
                  $78,000
                  worth of traffic; however, failure to do so will not avoid ATSI’s
                  discharge of such $78,000, unless the cause of Ntera’s failure is
                  attributable to ATSI’s refusal and/or failure to accept Ntera’s
                  telecommunications traffic and/or to provide Ntera with telecommunications
                  services in accordance with industry standard, quality-of-service
                  benchmarks. Ntera must tender the traffic to ATSI on or before
                  September
                  10, 2006. This use-it-or-lose-it provision is designed such that,
                  barring
                  any material breach by ATSI, ATSI will owe no amount to Ntera as
                  of
                  September 11, 2006.
 
 ·
              ATSI’s
                  refusal and/or failure to accept Ntera’s telecommunications traffic and/or
                  to provide Ntera with telecommunications services in accordance
                  with
                  industry standard, quality-of-service benchmarks shall constitute
                  a
                  material breach of the Settlement
                  Agreement.
 
 ·
              Every
                  other week beginning the week of July 3, 2006 during the above-referenced
                  90 day period, ATSI will provide Ntera a written report identifying
                  the
                  number of minutes by destination and dollar amounts attributable
                  to the
                  telecommunications traffic that Ntera transits over ATSI’s
                  telecommunications and/or VOIP network(s) under this
                  Agreement..
  ·
              Ntera
                  must file a notice (email notice per above will suffice) of dispute
                  with
                  ATSI on or before the tenth (10) day following the receipt of the
                  bi-weekly reports specifying in particular if Ntera disputes any
                  portion
                  of such report. ATSI must file a notice of dispute with Ntera on
                  or before
                  September 20, 2006 if it believes Ntera owes ATSI net monies under
                  this
                  Agreement. Failure by either party hereto to timely provide such
                  notice
                  will bar any claim as to such dispute. In the event that any dispute
                  by
                  one party hereto is determined to be valid as against the other,
                  the party
                  who owes the valid claim will pay the other the amount owed within
                  ten
                  (10) calendar days from the date upon which the disputes was deemed
                  valid.
                  After the completion of this Agreement, any validly disputed amounts
                  owed
                  by one party to the other, if any, will accrue interest at an annual
                  rate
                  of eight percent (8%).
 
 4
 4.  Ntera
        and
        ATSI and their successors, affiliates, attorneys, agents, and assigns, and
        those
        in privity with them, do hereby release, acquit and discharge each other
        and
        their successors, affiliates, attorneys (including but not limited to Langley
        & Banack, Inc., Peter Kilpatrick, Perlman Yevoli & Albright P.L., and
        Paul Turner), agents, and assigns (including all current and former officers
        and
        directors of each company), and those in privity with them, of and from any
        and
        all claims, known or unknown, contingent or uncontingent, liquidated or
        unliquidated, demands and/or causes of action growing out of their prior
        relationship with each other, including but not limited to all matters set
        forth
        in the Arbitration Proceeding, it being understood that the only obligations
        remaining by and between the parties hereto are that as narrowly set forth
        in
        this Settlement Agreement.
  5.  The
        parties hereto expressly warrant that they are the sole and exclusive owners
        of
        their respective claims herein being released
        and that no portion has been sold, transferred, conveyed, or hypothecated.
  6.  Nothing
        contained in this Settlement Agreement shall ever be construed as an admission
        of liability of wrongdoing by ATSI or Ntera .
        This Settlement Agreement is confidential
        and shall not be revealed to anyone not a party to this Settlement Agreement
        except to an
        arbitrator or court to the
        extent necessary
        to resolve any dispute under this Settlement Agreement, or
        as may
        be reasonably necessary to prepare state or federal income tax
        returns.
  5
 7.  Upon
        the
        consummation of this Settlement Agreement, the parties will direct their
        attorneys to promptly seek dismissal of all claims and counterclaims by the
        parties in the Arbitration by preparing the appropriate joint request or
        motion
        and order of dismissal of all claims and counterclaims in the Arbitration
        Proceeding.
  8.  This
        Settlement Agreement represents the entire agreement between the parties.
        The
        parties further contract and agree that no oral agreement exists between
        the
        parties and that this Settlement Agreement may only be amended as by a writing
        signed by all of the parties to be bound.
  9.  Although
        all claims and counterclaims in the Arbitration Proceeding are hereby released
        and dismissed with prejudice - with the only claims against each other, if
        any,
        arising only out of the failure to perform this Agreement - the parties will
        use
        their best efforts not to dismiss the Arbitration Proceeding any sooner than
        September 25, 2006, at which time the parties will agree to jointly dismiss
        such
        Arbitration Proceeding as soon as practical after September 10, 2006. In
        the
        hopefully unlikely event there is a dispute involving a material and substantial
        breach by either party hereto arising out of or relating to this Agreement,
        assuming the AAA will allow the parties to abate such Arbitration Proceeding
        pending the performance of this Agreement, the parties may amend their claims
        in
        the Arbitration Proceeding and attach a copy of this Agreement and for all
        practical purposes assert completely new claims limited to alleged breach
        of
        this Agreement. In the event the AAA dismisses the Arbitration Proceeding
        referenced above despite the good faith efforts of the parties hereto to
        seek
        abatement of such proceeding pending the performance of the parties’ obligations
        herein, a binding arbitration may be pursued by either party against the
        other
        via an agreed single arbitrator in Bexar County, Texas utilizing the same
        arbitrator, Bill Tower and said arbitration can but need not be via the American
        Arbitration Association, in which case Mr. Tower can utilize the AAA rules
        as a
        guide to the extent he wishes. If no party amends their arbitration claim
        against the other as of September 25, 2006, the Arbitration Proceeding shall
        be
        dismissed and the parties will have no other claims against the other arising
        out of or relating to this Agreement.
  6
 10.  ATSI
        agrees and covenants not to hereafter disparage Ntera or its officers and
        members of its Board of Directors and Ntera agrees and covenants not to
        hereafter disparage ATSI or its officers and members of its Board of
        Directors.
  11.  The
        parties to this Settlement Agreement covenant and agree that they will execute
        such other instruments and documents that are or may become necessary or
        convenient to effect and carry out this Settlement Agreement.
  12.  No
        contract or other agreement survives as between the parties hereto except
        for
        this Agreement.
  7
 13.  Any
        ambiguities in this Settlement Agreement shall not be strictly construed
        against
        the parties herein released.
  14.  This
        Settlement Agreement shall be binding
        on and inure to the benefit of the parties and their respective heirs,
        executors, administrators, legal representatives, successors, and assigns
        when
        permitted by this Settlement Agreement.
  15.  In
        any
        action brought to enforce the terms of this Settlement Agreement, the prevailing
        party shall be entitled to recover all costs of enforcement in any arbitration,
        including, but not limited to, reasonable attorney’s fees. As used in this
        Settlement Agreement, the term “prevailing party” means that party whose
        position is substantially upheld in a final judgment rendered in any litigation,
        arbitration, or proceeding, or, if the final judgment is appealed, that party
        whose positions are substantially upheld by the decision of the final appellate
        body that considers the appeals.
  16.  ATSI
        must
        use reasonable diligence to maintain its network so as to reasonably provide
        capacity and quality services to Ntera as to the destinations set forth in
        Exhibit A hereto. However, if network capacity significantly changes during
        such
        90-day period beyond ATSI’s reasonable control, ATSI’s inability to terminate
        such calls to such destinations shall not be considered a breach
        of
        this Agreement if ATSI reasonably notifies Ntera of deletions of certain
        destinations from Exhibit A because of meaningful changes in network capacity
        beyond ATSI’s reasonable control. No failure or omission by either party to
        carry out or observe any of the terms and conditions of this Settlement
        Agreement (other than payment obligation) shall give rise to any claim against
        such party or be deemed a breach of this Settlement Agreement if such failure
        or
        omission arises from an Act of God, an act of Government, any unforeseeable
        cause reasonably beyond the control of a party, or any other circumstance
        commonly known as a force
        majeure.
  8
 17.  This
        Settlement Agreement shall be binding on and inure to the benefit of the
        parties
        and their respective heirs, executors, administrators, legal representatives,
        successors, and assigns when permitted by this Settlement
        Agreement.
  18.  In
        case
        any one or more of the provisions contained in this Settlement Agreement
        is for
        any reason held to be invalid, illegal, or unenforceable in any respect,
        such
        invalidity, illegality, or unenforceability shall not affect any other provision
        of this Settlement Agreement, and this Settlement Agreement shall be construed
        as if such invalid, illegal, or unenforceable provision had never been a
        part
        hereof.
  19.  Wherever
        the context shall so require, all words in this Settlement Agreement in the
        male
        gender shall be deemed to include the female or neuter gender, all singular
        words shall include the plural, and all plural words shall include the
        singular.
  20.  T his
        Settlement Agreement may be executed in counterparts and via facsimile and
        each
        of such counterparts and facsimile copy shall for all purposes be deemed
        to be
        an original. All signatories hereto represent and warrant that they have
        the
        authority to execute the binding promises and releases in this Agreement.
  21.  This
        Agreement is not binding on any one party unless signed by or on behalf of
        both
        parties and approved by their counsel before June 3, 2006.
 
 9
  **AGREED:**
  **ATSI
                  COMMUNICATIONS, INC.**
                a
                  Nevada corporation, formerly a
                Delaware
                  corporation
              **NTERA
                  HOLDINGS, INC.**
                a
                  Delaware corporationBy:/s/
                  Art Smith
              By:/s/
                  Ali G. KivilcimArt
                  Smith, Its President and
              Ali
                  G. Kivilcim, Its Vice PresidentChief
                  Executive Officer
              Signed:
                  May 31, 2006Signed:
                  May 31, 2006
  **APPROVED:**
 
 **Langley
        & Banack, Inc.**
 Trinity
        Plaza II, Ninth Floor
 745
        East
        Mulberry
 San
        Antonio, Texas 78212-3166
 (210)
        736-6600
 (210)
        735-6889 - Fax
 
 
 By:
              /s/
                  Peter L Kilpatrick
 Peter
        L
        Kilpatrick
 Texas
        Bar
        No. 11416545
 **Attorneys
        for ATSI Communications, Inc.**
 
 
 **Perlman,
        Yevoli & Albright, P.** L.
 1500
        N.
        Federal Highway, Suite 250
 Fort
        Lauderdale, Florida 33304
 (954)
        566-7117
 (954)
        566-7115 - Fax
 
 
 By:
              /s/
                  Paul D. Turner
 Paul
        D.
        Turner
 Florida
        Bar No. 113743
 **Attorneys
        for Ntera Holdings, Inc.**