**EMPLOYMENT
        AGREEMENT**
 
 THIS
        EMPLOYMENT AGREEMENT (“ Agreement ”),
        executed this 2 nd day of
        January 2008 (the “ Effective
        Date ”)
        is
        between ATSI Communications, Inc., a Nevada corporation (the “ Employer ”),
        and
        Ruben Caraveo,  an
        individual resident of the State of Texas (“ Employee ”).
 
 **R** **E** **C** **I** **T** **A** **L** **S** :
 
 A.
              Employer
                  considers the maintenance of a sound and effective management team,
                  including Employee, essential to protecting and enhancing its best
                  interests and those of its
                  stockholders.
 
 B.
              Employer
                  desires to offer employment to Employee and Employee desires to
                  be
                  employed by Employer.
 
 C.
              Employer
                  and Employee agree to enter into an Employment Agreement providing
                  for a
                  one-year term with automatic annual renewal on the terms and conditions
                  herein provided.
 
 NOW,
        THEREFORE, in consideration of Employer’s agreement to employ Employee pursuant
        to the terms of this Agreement and Employee’s future employment with Employer,
        and other good and valuable consideration, the parties agree as
        follows:
 
 **Section
        1** .  **Employment.** Employer
        hereby employs Employee, and Employee hereby accepts employment, upon the
        terms
        and subject to the conditions stated in this Agreement.
 
 **Section
        2** .  **Duties.** Employee
        shall be employed as the Sr. Vice President of Technology and Operations
        of
        Employer, or such other comparable positions with Employer to which he may
        be
        appointed by the Board of Directors of Employer (the “Board”). Employee shall
        have such duties and responsibilities as are normally associated with the
        foregoing position and such additional duties and responsibilities as he
        may be
        assigned from time to time by the Board. It is understood that Employee may
        be
        requested from time to time to provide assistance or services to subsidiary
        and
        affiliated companies of Employer or other company that are wholly or partially
        owned by Employer (each an “ Affiliate ”).
        Employee shall perform such services without additional compensation other
        than
        the compensation set forth in this Agreement. Employee agrees to devote his
        full
        work time and best efforts to the performance of the duties as an employee
        of
        Employer and to the performance of such other duties as assigned him from
        time
        to time by Employer.
 
 **Section
        3** .  **Term.** The
        Agreement shall commence on the Effective Date and continue until the last
        day
        of the fiscal year in which the Effective Date occurs (the “ Initial
        Term ”).
        Unless Employer or Employee shall provide the other with at least 60 days
        written notice, this Agreement shall automatically renew thereafter on the
        first
        day of each fiscal year of Employer for an additional one year term commencing
        on such first day of each fiscal year and continuing until the last day of
        such
        fiscal year (each, an “ Extension
        Term ”
and
        together with the Initial Term, the “ Employment
        Period ”).
        The
        foregoing notwithstanding, the Employment Period may be terminated early
        in
        accordance with Section 6 of this Agreement.
  
  **Section
        4** .  **Compensation
        and Benefits.** In
        consideration for the services of Employee hereunder, Employer shall compensate
        Employee as follows during the Employment Period:
 
 (a)  *Base
        Salary* .  Employer
        shall pay Employee a base salary at the rate of at least $135,000 per year,
        payable in accordance with the regular payroll practices of Employer for
        executives. The Base Salary shall be reviewed annually by the Board during
        the
        first quarter of each fiscal year and shall be increased by such amount as
        the
        Board shall deem appropriate effective as of the first day of such fiscal
        year;
        provided that such increase shall be in an amount of not less than the increase,
        if any, in the Consumer Price Index as of the previous December 31 using
        the
        December 31, 2007 as the base year. The Base Salary may not be decreased
        at any
        time during the Employment Period.
 
 (b)  *Executive
        Bonus Plan* .  Employee
        shall be eligible to receive from Employer such management incentive bonuses
        as
        may be provided in management incentive bonus plans adopted from time to
        time by
        Employer or approved by the Board.
 
 (c)  *Stock*  *Options* .  Employee
        shall participate in the stock compensation plan adopted by the Board to
        provide
        management and employees with long-term stock-based compensation. The number
        and
        terms of any options or other stock compensation granted to Employee under
        the
        stock compensation plan shall be determined by the Board in its discretion.
 
 (d)  *Vacation* .  Employee
        shall be entitled time off in accordance with Employee’s vacation and absence
        policy, as it may be modified from time to time during Employee’s employment
        hereunder; provided that Employee will have no less than three (3) weeks
        of paid
        vacation during the Initial Term or any Extension Term of this Agreement.
        Any
        time off not used within the Initial Term or any Extension Term shall be
        accumulated and may be used during any subsequent Extension Term up to an
        aggregate amount of five (5) weeks during any Extension Term.
 
 (e)  *Group
        Insurance Benefits* .  Employee
        shall be entitled to participate in Employer’s group health, life and disability
        programs as are made available to Employer’s ** other
        executives and Employee’s participation in such programs shall be at the same
        rates that are available to Employer’s other executives. Nothing herein shall be
        deemed to require Employer to adopt and maintain a group health, life and
        disability program or to limit or prohibit Employer’s right to amend or
        terminate any group health, life or disability program adopted by
        Employer.
 
 (f)  *Savings
        Plans.* Employee
        shall be entitled to participate in Employer’s 401(k) savings plan, profit
        sharing plan, or other retirement or savings plans as are made available
        to
        Employer’s other executives on the same terms that are available to Employer’s
        other executives. Nothing herein shall be deemed to require Employer to adopt
        and maintain a 401(k) savings plan or other retirement or savings plans or
        to
        limit or prohibit Employer’s right to amend or terminate any 401(k) savings plan
        or other retirement or savings plans adopted by Employer.
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            2 -
  **Section
        5** .  **Expenses.** The
        parties anticipate that in connection with the services to be performed by
        Employee pursuant to the terms of this Agreement, Employee will be required
        to
        make payments for travel, entertainment of business associates and similar
        expenses. Employer shall reimburse Employee for all appropriate and reasonable
        expenses authorized by Employer and incurred by Employee in the performance
        of
        his duties hereunder. Employee shall comply with such budget limitations
        and
        approval and reporting requirements with respect to expenses as Employer
        may
        establish from time to time.
 
 **Section 6** .  **Termination.**
 
 (a)  *General* .  Employee’s
        employment hereunder shall commence on the Effective Date and continue until
        the
        end of the Employment Period, except that the employment of Employee hereunder
        shall terminate prior to such time in accordance with the
        following:
 
 (i)  *Death
        or Disability* .  Upon
        the death of Employee during the Employment Period or, at the option of
        Employer, in the event of Employee’s Disability, upon 30 days’ notice to
        Employee. “Disability” with respect to Employee shall be deemed to exist if
        Employee meets the definition of either “disabled” or “disability” under the
        terms of Employer’s long-term disability benefit program (including the
        definitions for total or partial disability) or if there is no such definition
        or program, if Employee is unable to perform his obligations under this
        Agreement for a period of 30 consecutive days or 60 days in any twelve month
        period. Any refusal by Employee to submit to a reasonable medical examination
        to
        determine whether Employee is so disabled shall be deemed to constitute
        conclusive evidence of Employee’s disability.
 
 (ii)  *For
        Cause* .  Immediately
        upon written notice from Employer specifying that one or more of the following
        events has occurred (except that Employee shall have 30 days after such notice
        to cure or otherwise resolve the occurrence of the events set forth in
        paragraphs 3, 4 or 5):
  (1)
              Employee
                  is convicted of fraud, bribery, embezzlement or other material
                  dishonesty
                  with the respect to the business of Employer, or Employer discovers
                  that
                  Employee has been convicted of any such act in the past with respect
                  to a
                  previous employer; or
 
 (2)
              Employee
                  is convicted of a felony or any criminal act involving moral turpitude
                  or
                  Employer discovers that Employee has been convicted of any such
                  act in the
                  past; or
 
 (3)
              Employee
                  commits a material breach of any of the covenants, representations,
                  terms
                  or provisions hereof; or
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            3 -
  (4)
              Employee
                  violates any material instructions or policies of Employer with
                  respect to
                  the operation of its business or affairs or Employee fails in a
                  material
                  way to obey written directions delivered to Employee by the Board;
                  or
 
 (5)
              Employee
                  commits or omits to perform any act the performance of which, or
                  the
                  omission of which, constitutes substantial failure of Employee
                  to
                  diligently and effectively perform his duties to Employer or has
                  a
                  material adverse effect or could materially adversely affect Employer’s
                  business reputation; or
 
 (6)
              Employee
                  uses illegal drugs.
  (iii)  *By
        Employee for Good Reason* .  Employee
        may terminate his employment hereunder for Good Reason upon written notice
        to
        the Company setting forth the nature of such Good Reason in reasonable detail
        (except that Employer shall have 15 days after such notice to cure or otherwise
        resolve the occurrence of the events set forth in paragraphs 1, 2, 3). “Good
        Reason” shall mean:
 
 (1)
              Employer
                  commits a material breach of any of the covenants, representations,
                  terms
                  or provisions hereof or fails to provide Employee the Base Salary
                  and
                  incentive compensation and benefits in accordance with the terms
                  of
                  Section 4 herein; or
 
 (2)
              any
                  material and adverse diminution in Employee’s duties or responsibilities
                  with Employer; or
 
 (3)
              any
                  relocation of Employee from San Antonio, Texas without Employee’s consent;
                  or
 
 (4)
              at
                  any time upon written notice by Employee to Employer within 12
                  months
                  after (A) a merger or consolidation of Employer with any person; or
                  (B) the sale, lease, or other disposition of all or substantially all
                  of Employer’s assets to any person; unless in each case, the board of
                  directors or other governing body of the surviving person or acquirer,
                  as
                  the case may be, is the same as the Board immediately before such
                  transaction; or
 
 (5)
              the
                  acquisition by any person of voting securities constituting 20%
                  or more of
                  the outstanding voting securities issued by Employer or the right
                  to
                  elect, by ownership of voting securities or otherwise, more than
                  33% of
                  the persons that make up the Board.
 
 (iv)  *Voluntary
        Termination.* Either
        Party may voluntarily terminate the employment of Employee upon thirty (30)
        days’ written notice to the other. Any such termination by Employer shall be
        without Cause if the notice of termination fails to specify one of the reasons
        set forth in Section 6(a)(ii) (or if any such reason is specified that may
        be cured by Employee has been cured within the applicable cure period). Any
        such
        termination by Employee shall be without Good Reason if the notice of
        termination fails to specify one of the reasons set forth in
        Section 6(a)(iii) (or if any such reason is specified that may be cured by
        Employer has been cured within the applicable cure period).
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            4 -
  (b)  *Severance
        Benefits* .
 
 (i)  In
        the
        event that Employee’s employment hereunder is terminated as a result of
        Employee’s death or disability pursuant to Section 6(a)(i), Employer shall
        pay Employee (or his estate) a cash amount equal to Employee’s Base Salary for
        the lesser of (A) the period prior to the commencement of benefits under
        any death or disability insurance provided by Employer; or (B) the
        remaining term of this Agreement or sixty (60) days from the date of such
        death
        or disability, whichever is greater. In addition to the payment under the
        first
        sentence of this subsection, Employer shall pay all unpaid expense
        reimbursements under Section 5 for expenses incurred in accordance with the
        terms hereof prior to termination and compensation and all accrued and unused
        vacation time as of the date of termination.
 
 (ii)  In
        the
        event that Employee’s employment hereunder is terminated by Employer for Cause
        pursuant to Section 6(a)(ii), Employee provides Employer notice that
        Employee that the Agreement will not be renewed for any Extension Term, or
        voluntarily by Employee pursuant to Section 6(a)(iv), Employer shall have
        no obligation to make any payments to Employee except for payments of Employee’s
        Base Salary accruing prior to the date of termination.
 
 (iii)  In
        the
        event that Employee’s employment hereunder is terminated by Employee for Good
        Reason pursuant to Section 6(a)(iii), Employer provides Employee with
        notice that the Agreement will not be renewed for any Extension Term, or
        voluntarily by Employer pursuant to Section 6(a)(iv), Employer shall pay
        Employee a cash amount equal to Employee’s Base Salary for a period of twelve
        (12) months plus one (1) month for each year of employment by Employer;
        (B) Employer shall continue coverage under Employer’s group health, life
        and disability plan and contribute the Employer’s cost of such coverage for a
        period of twelve (12) months plus one (1) month for each year of employment
        by
        Employer (or pay such amount to Employee as reimbursement for the costs of
        continuing coverage under COBRA or obtaining comparable independent coverage);
        and (C) all options, grants, or other rights issued to Employee under
        Employer’s Stock Compensation Plan, incentive compensation plan, or other
        benefit plans shall immediately vest and be exercisable for the lesser of
        twelve
        (12) months plus one (1) month for each year of employment by Employer or
        the
        remaining term of such rights, whichever is less. For the purposes of this
        paragraph 6(b)(iii), Employee will be deemed to have been employed by Employer
        on May 1, 2001.
 
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            5 -
  **Section 7** .  *Inventions;
        Assignment* .
 
 (a)  *Inventions
        Defined* .  All
        rights to discoveries, inventions, improvements, designs and innovations
        (including all data and records pertaining thereto) that relate to the business
        of Employer, including its Affiliates, whether or not able to be patented,
        copyrighted or reduced to writing, that Employee may discover, invent or
        originate during the term of his employment hereunder, and for a period of
        six
        (6) months thereafter, either alone or with others and whether or not during
        working hours or by the use of the facilities of Employer (“ Inventions ”),
        shall
        be the exclusive property of Employer. Employee shall promptly disclose all
        Inventions to Employer, shall execute at the request of Employer any assignments
        or other documents Employer may deem necessary to protect or perfect its
        rights
        therein, and shall assist Employer, at Employer’s expense, in obtaining,
        defending and enforcing Employer’s rights therein. Employee hereby appoints
        Employer as his attorney-in-fact to execute on his behalf any assignments
        or
        other documents deemed necessary by Employer to protect or perfect its rights
        to
        any Inventions.
 
 (b)  *Covenant
        to Assign and Cooperate* .  Without
        limiting the generality of the foregoing, Employee shall assign and transfer
        to
        Employer the worldwide right, title and interest of Employee in the Inventions.
        Employee agrees that Employer may apply for and receive patent rights (including
        Letters Patent in the United States) for the Inventions in Employer’s name in
        such countries as may be determined solely by Employer. Employee shall
        communicate to Employer all facts known to Employee relating to the Inventions
        and shall cooperate with Employer’s reasonable requests in connection with
        vesting title to the Inventions and related patents exclusively in Employer
        and
        in connection with obtaining, maintaining and protecting Employer’s exclusive
        patent rights in the Inventions.
 
 (c)  *Successors
        and Assigns* .  Employee’s
        obligations under this Section 7 shall inure to the benefit of Employer,
        its
        Affiliates and their respective successors and assigns and shall survive
        the
        expiration of the term of this Agreement for such time as may be necessary
        to
        protect the proprietary rights of Employer and its Affiliates in the
        Inventions.
 
 **Section
        8** .  **Confidential
        Information.**
 
 (a)  *Acknowledgment
        of Proprietary Interest* .  Employee
        acknowledges the proprietary interest of Employer and its Affiliates in all
        Confidential Information (as defined below). Employee agrees that all
        Confidential Information learned by Employee during his employment with Employer
        or otherwise, whether developed by Employee alone or in conjunction with
        others
        or otherwise, is and shall remain the exclusive property of Employer. Employee
        further acknowledges and agrees that his disclosure of any Confidential
        Information will result in irreparable injury and damage to
        Employer.
 
 (b)  *Confidential
        Information Defined* .  “Confidential
        Information” means all trade secrets, copyrightable works, confidential or
        proprietary information of Employer or its Affiliates, including without
        limitation, (i) information derived from reports, investigations,
        experiments, research and work in progress, (ii) methods of operation,
        (iii) market data, (iv) proprietary computer programs and codes,
        (v) drawings, designs, plans and proposals, (vi) marketing and sales
        programs, (vii) the identities of clients or customers,
        (viii) historical financial information and financial projections,
        (ix) pricing formulae and policies, (x) all other concepts, ideas,
        materials and information prepared or performed for or by Employer and
        (xi) all information related to the business, services, products, purchases
        or sales of Employer or any of its suppliers and customers, other than
        information that is publicly available.
  -
            6 -
  (c)  *Covenant
        Not To Divulge Confidential Information* .  Employer
        is entitled to prevent the disclosure of Confidential Information. As a portion
        of the consideration for the employment of Employee and for the compensation
        being paid to Employee by Employer, Employee agrees to hold in strict confidence
        and not to disclose or allow to be disclosed to any person, firm or corporation,
        other than to persons engaged by Employer to further the business of Employer,
        and not to use except in the pursuit of the business of Employer, the
        Confidential Information, without the prior written consent of
        Employer.
 
 (d)  *Return
        of Materials at Termination* .  In
        the event of any termination or cessation of his employment with Employer
        for
        any reason, Employee shall promptly deliver to Employer all documents, data
        and
        other information derived from or otherwise pertaining to Confidential
        Information. Employee shall not take or retain any documents or other
        information, or any reproduction or excerpt thereof, containing or pertaining
        to
        any Confidential Information.
 
 **Section 9** .  **Non-Solicitation.**
 
 (a)  *Solicitation
        of Employees* .  During
        Employee’s employment with Employer and for a period equal to the greater of
        (i) six (6) months after termination of such employment at any time and for
        any reason, or (ii)  the term of any severance benefits payable under
        Section 6 hereof, Employee shall not solicit, participate in or promote the
        solicitation of any person who was employed by Employer or any of its Affiliates
        at the time of Employee’s termination of employment with Employer to leave the
        employ of Employer or any of its Affiliates, or, on behalf of himself or
        any
        other person, hire, employ or engage any such person. Employee further agrees
        that, during such time, if an employee of Employer or any of its Affiliates
        contacts Employee about prospective employment, Employee will inform such
        employee that he or she cannot discuss the matter further without the consent
        of
        Employer (and the applicable affiliate).
 
 (b)  *Solicitation
        of Clients, Customers, Etc* .  During
        Employee’s employment with Employer and for a period of six (6) months after
        termination of Employee’s employment at any time and for any reason, Employee
        shall not, directly or indirectly, solicit any person who either during any
        portion of the time of Employee’s employment or at the time of termination of
        Employee’s employment with Employer, was a client, customer, policyholder,
        vendor, consultant or agent of Employer or its Affiliates to discontinue
        business, in whole or in part, with Employer or its Affiliates. Employee
        further
        agrees that, during such time, if such a client, customer, policyholder,
        vendor,
        or consultant or agent contacts Employee about discontinuing business with
        Employer or moving that business elsewhere, Employee will inform such client,
        customer, policyholder, vendor, consultant or agent that he or she cannot
        discuss the matter further without the consent of Employer (and the applicable
        affiliate).
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            7 -
  **Section
        10** .  **Non-Compete.** Employer
        agrees to disclose to Employee and Employee agrees to receive from Employer
        Confidential Information (as set forth above) which would provide competitors
        of
        Employer with an unfair advantage. In consideration for such disclosure by
        Employer, Employee agrees as follows:
 
 (a)  *Competition
        During Employment* .  Employee
        agrees that during the term of his employment with Employer, neither he nor
        any
        of his Affiliates (Employee’s Affiliates is defined as any legal entity in which
        Employee owns, controls, holds a financial interest in or is the beneficiary
        of)
        will directly or indirectly compete with Employer or its Affiliates in any
        way
        in any business in which Employer or its Affiliates is engaged or intends
        to
        engage, and that he will not act as an officer, director, employee, consultant,
        shareholder, lender, or agent of any entity which is engaged in any business
        of
        the same nature as, or in competition with, the businesses in which Employer
        and
        its Affiliates are now engaged or in which Employer or its Affiliates become
        engaged during the term of employment; provided, however, that this
        Section 10(a) shall not prohibit Employee or any of his Affiliates from
        purchasing or holding an aggregate equity interest of up to 10% in any publicly
        traded business in competition with Employer and its Affiliates, so long
        as
        Employee and his Affiliates combined do not purchase or hold an aggregate
        equity
        interest of more than 10%. Furthermore, Employee agrees that during the term
        of
        employment, he will not accept any board of director seat or undertake any
        planning for the organization of any business activity competitive with Employer
        and Employee will not combine or conspire with any other employees of Employer
        and its Affiliates for the purpose of the organization of any such competitive
        business activity.
 
 (b)  *Competition
        Following Employment* .  In
        order to protect Employer against the unauthorized use or the disclosure
        of any
        Confidential Information of Employer and its Affiliates presently known or
        hereinafter obtained by Employee during his employment under this Agreement,
        Employee agrees that for a period equal to the greater of (i) six (6)
        months after the termination or cessation of his employment with Employer
        at any
        time and for any reason, other than cessation of his employment caused by
        Employer’s filing for reorganization under the bankruptcy laws of the United
        States, and regardless of whether any payments are made to Employee under
        this
        Agreement as a result of such termination, or (ii) the period for which any
        severance benefits are payable under Section 6 hereof, neither Employee nor
        any of his Affiliates, shall, directly or indirectly, for itself or himself
        or
        on behalf of any other corporation, person, firm, partnership, association,
        or
        any other entity (whether as an individual, agent, servant, employee, employer,
        officer, director, shareholder, investor, principal, consultant or in any
        other
        capacity):
 
 (i)  engage
        or
        participate in any business which engages in competition with such businesses
        being conducted by Employer or any of its Affiliates during the term of
        employment anywhere in any state in the United States or in any foreign country
        where Employer or any of its Affiliates is engaged; or
 
 (ii)  assist
        or
        finance any person or entity in any manner or in any way inconsistent with
        the
        intents and purposes of this Agreement.
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            8 -
  **Section
        11** .  **General.**
 
 (a)  *Notices* .  All
        notices and other communications hereunder shall be in writing or by written
        telecommunication, and shall be deemed to have been duly given if delivered
        personally or if mailed by certified mail, return receipt requested or by
        written telecommunication, to the relevant address set forth below, or to
        such
        other address as the recipient of such notice or communication shall have
        specified to the other party in accordance with this Section 11(a):
 
 If
        to
        Employer, to:
 
 ATSI
        Communications, Inc.
 3201
        Cherry Ridge, Suite C300
 San
        Antonio, Texas, 78230
 Attention:
        President
  If
        to
        Employee, to Employee’s last known address appearing on Employer’s
        records.
 
 (b)  *Withholding* .  All
        payments required to be made to Employee by Employer under this Agreement
        shall
        be subject to the withholding of such amounts, if any, relating to federal,
        state and local taxes as may be required by law and such amounts, if any,
        as
        Employee shall authorize in connection with benefit plans in which Employee
        is a
        participant.
 
 (c)  *Equitable
        Remedies* .  Each
        of the parties hereto acknowledges and agrees that upon any breach by Employee
        of his obligations under any of Sections 7, 8, 9, and 10 Employer shall suffer
        immediate, great and irreparable injury and shall have no adequate remedy
        at
        law. Accordingly, in event of such breach or threatened breach, Employer
        shall
        be entitled, in addition to other remedies and without showing actual damages,
        to specific performance and other appropriate injunctive and equitable relief.
        Employer shall not be obligated to provide a bond for any such
        injunction.
 
 (d)  *Severability* .  If
        any provision of this Agreement is held to be illegal, invalid or unenforceable,
        such provision shall be modified as to duration or geography to the minimum
        extent necessary to make it legal, valid and enforceable and as so modified
        enforced. If any such provision cannot be modified to be made legal, valid
        and
        enforceable, such provisions shall be fully severable, and this Agreement
        shall
        be construed and enforced as if such illegal, invalid or unenforceable provision
        never comprised a part hereof, and the remaining provisions hereof shall
        remain
        in full force and effect and shall not be affected by the illegal, invalid
        or
        unenforceable provision or by its severance. Furthermore, in lieu of such
        illegal, invalid or unenforceable provision, there shall be added automatically
        as part of this Agreement a provision as similar in its terms to such illegal,
        invalid or unenforceable provision as may be possible and be legal, valid
        and
        enforceable.
 
 (e)  *Effect
        on Other Agreements.* This
        Agreement modifies and amends, to the extent necessary to give effect to
        the
        provisions hereof, any Stock Option Agreement, Stock Grant, or other contract
        relating to the issuance of benefits under Employer’s benefit
        plans.
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            9 -
  (f)  *Waivers* .  No
        delay or omission by either party in exercising any right, power or privilege
        hereunder shall impair such right, power or privilege, nor shall any single
        or
        partial exercise of any such right, power or privilege preclude any further
        exercise thereof or the exercise of any other right, power or
        privilege.
 
 (g)  *Counterparts* .  This
        Agreement may be executed in multiple counterparts, each of which shall be
        deemed an original, and all of which together shall constitute one and the
        same
        instrument.
 
 (h)  *Captions* .  The
        captions in this Agreement are for convenience of reference only and shall
        not
        limit or otherwise affect any of the terms or provisions hereof.
 
 (i)  *Interpretation
        of Agreement* .  This
        Agreement shall be construed according to its fair meaning and not for or
        against either party. The Parties have each been represented by counsel (or
        advised of their right to be represented by counsel and waived such right)
        and
        have participated in the drafting of this Agreement. No rule of construction
        or
        interpretation shall be applied that construes any provision against a Party
        because it was drafted by such Party. Use of the words “herein,” “hereof,”
“hereto,” “hereunder” and the like in this Agreement refer to this Agreement
        only as a whole and not to any particular section or subsection of this
        Agreement, unless otherwise noted. The masculine gender shall be deemed to
        denote the feminine or neuter genders, the singular to denote the plural,
        and
        the plural to denote the singular, where the context so permits.
 
 (j)  *Binding
        Agreement* ; *Assignment.* This
        Agreement shall be binding upon and inure to the benefit of the parties and
        shall be enforceable by the personal representatives and heirs of Employee
        and
        the successors and assigns of Employer. The Affiliates of Employer shall
        be
        considered third party beneficiaries of this Agreement with respect to any
        services provided by Employee to them and in connection with Employee’s
        covenants in Sections 7, 8, 9 and 10 hereof. Employer may assign this Agreement
        to any person. If Employee dies while any amounts would still be payable
        to him
        hereunder, such amounts shall be paid to Employee’s estate. This Agreement is
        not otherwise assignable by Employee.
 
 (k)  *Entire
        Agreement* .  This
        Agreement contains the entire understanding of the parties, supersedes all
        prior
        agreements and understandings relating to the subject matter hereof and may
        not
        be amended except by a written instrument hereafter signed by each of the
        parties hereto.
 
 (l)  *Governing
        Law* .  This
        Agreement and the performance hereof shall be construed and governed in
        accordance with the laws of the State of Texas, without regard to its choice
        of
        law principles.
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  (m)  *Arbitration.* Without
        limiting Employer’s right to seek equitable remedies under Section 11(c)
        above, Employer and Employee agree that any dispute or controversy arising
        under
        or in connection with this Agreement shall be settled first by attendance
        at a
        mandatory mediation process and, if not resolved by mediation, by arbitration.
        If the parties are unable to agree on a mediator, either party may petition
        a
        Bexar County state district court judge for assistance in selecting a mediator.
        Arbitration under this Agreement shall be governed by the Federal Arbitration
        Act and proceed in San Antonio, Texas in accordance with the rules of the
        American Arbitration Association (“ AAA ”).
        Arbitration will be conducted before a panel of three neutral arbitrators
        selected from an AAA list of proposed arbitrators with business law experience.
        Either party may take any legal action needed to protect any right pending
        completion of the arbitration. The arbitrator will determine whether an issue
        is
        arbitrate able and will give effect to applicable statutes of limitation.
        The
        arbitrator has the discretion to decide, upon documents only or with a hearing,
        any motion to dismiss for failure to state a claim or any motion for summary
        judgment. Discovery shall be governed by the Federal Rules of Civil Procedure
        and the Federal Rules of Evidence. All information developed by the arbitration
        or litigation shall be held in confidence subject to such protective orders
        as
        the arbitrator deems useful to ensure complete confidentiality. The decision
        of
        the arbitrator shall be final and binding on all parties to this Agreement,
        and
        judgment thereon may be entered in any court having jurisdiction over the
        parties. The party against whom the arbitrator decides shall pay all costs
        of
        the arbitration proceeding or litigation to enforce the arbitration
        award.
 
 (n)  *Employee
        Representations.* Employee
        represents and certifies to Employer that he: (i) has received a copy of
        this Agreement for review and study and has had ample time to review it before
        signing; (ii) has read this Agreement carefully; (iii) has been given
        a fair opportunity to discuss and negotiate the terms of this Agreement;
        (iv) understands its provisions; (v) has had the opportunity to
        consult his attorney; (vi) has determined that it is in his best interest
        to enter into his Agreement; (vii) has not been influenced to sign this
        Agreement by any statement or representation by Employer or its counsel not
        contained in this Agreement; and (viii) enters into this Agreement
        knowingly and voluntarily.
 
 EXECUTED
        as of the date and year first above written.




EMPLOYER:ATSI
              Communications, Inc.By:
            /s/ Arthur
              L. SmithName: Arthur L. SmithTitle: President & CEOEMPLOYEE:/s/ Ruben
              CaraveoRuben
                Caraveo




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