Document:

Exhibit
      10.3

     

    SETTLEMENT
      AGREEMENT 

    

    ATSI
      Communications, Inc., a Nevada corporation (“ATSI”), formerly a Delaware
      corporation, and Alfonso Torres Roqueñi, an individual residing in Mexico City,
      Mexico, (“Torres”) (collectively, the “Parties”), hereby enter into this
      Settlement Agreement (the “Settlement Agreement”).

     

    RECITALS

     

    WHEREAS,
      the
      Parties entered into a new Promissory Note on October 1, 2007 to restructure
      the
      previous Note executed by ATSI; and

    WHEREAS,
      the
      Parties desire to set forth their agreement in writing.

     

    NOW,
      THEREFORE,
      in
      consideration of the foregoing and the mutual covenants and agreements set
      forth
      herein, and further good and valuable consideration, the Parties hereby agree
      and covenant as follows:

     

    1. PROMISSORY
      NOTE.
      A new
      Promissory Note has been executed by ATSI as a replacement to the previous
      Note
      that was due on October 1, 2007. The parties have agreed to the
      following:

     

    
      	 	
              A.

            	
              Torres
                hereby agrees to waive $49,170 of accrued interest from the previous
                Note.

            

      	 	 	 

    

    
      	 	
              B.

            	
              ATSI
                shall pay Torres a total of $60,000 in cash spread out over three
                (3)
                months with the first payment to be made on November 2, 2007, the
                second
                30 days after the first payment and the third and final cash payment
                sixty
                days after the first payment. The three monthly payments shall be
                paid in
                equal amounts to Alfonso Torres Roqueñi & George Kauss.
                

            

      	 	 	 

    

    
      	 	
              C.

            	
              ATSI
                shall deliver to Torres a total of 130,435 shares of ATSI’s common stock
                in consideration of a “paydown” of the Note for $30,000. The Shares will
                be considered issued at $.23 per share, the average closing price
                of
                ATSI’s stock on October 1, 2007. 

            

    

     

    
      SETTLEMENT
        AGREEMENT

    

     

    
      
        
        

      

      
        Page
          1

        
          

        

      

      
        
        

      

    

     

    2. CONFIDENTIALITY.
      The
      Parties agree that they will not disclose the terms of this Settlement
      Agreement, unless necessary to enforce the terms of this Settlement Agreement
      or
      after receipt of judicial process or lawful discovery procedures. In the event
      that any Party is served with notice to disclose such information by subpoena
      or
      otherwise, that Party agrees promptly to notify the other Parties in writing
      of
      such notice. The Party or Parties so notified in writing shall thereafter
      undertake the cost and obligation to maintain the propriety and confidentiality
      of the terms of such information.

     

    3. ENTIRE
      AGREEMENT. This
      Settlement Agreement contains the entire understanding and agreement of the
      Parties hereto with respect to the subject matters herein, and may not be
      amended or modified in any respect other than in a writing which specifically
      refers to this Settlement Agreement and which is signed by all of the Parties
      hereto.

     

    4. GOVERNING
      LAW.
      This
      Settlement Agreement was negotiated in, and shall be governed by and construed
      according to, the laws of the State of Texas. In the event that any provision
      herein is deemed not enforceable, the remainder of this Settlement Agreement
      will remain unaffected. Venue for any action relating to the provisions of
      this
      Agreement shall be in Bexar County, Texas.

     

    5.
       NO
      ASSIGNMENT. By
      signing this Settlement Agreement, each of the Parties represents and warrants
      that it has not assigned or subrogated any of its claims or potential claims,
      in
      whole or in part, to any third party. 

     

    6. MODIFICATION
      AND ATTORNEY’S FEES.
      This
      Settlement Agreement shall not be suspended, amended, or modified in any manner
      except by an instrument in writing signed by all Parties to be bound. Should
      it
      become necessary to enforce this Settlement Agreement, or any portion of it,
      or
      to declare the effect of any provision of this Settlement Agreement, the
      prevailing Party shall be entitled to recover costs incurred including
      reasonable attorney’s fees.

     

    SETTLEMENT
      AGREEMENT

     

    
      
         

      

      
        Page
          2

        
          

        

      

      
         

      

    

     

    7. INFORMED
      CONSENT.
      The
      Parties acknowledge that they have had the opportunity to consult with their
      respective attorneys regarding the meaning and effect of this Settlement
      Agreement, and that none of the Parties has made any representations, written
      or
      oral, upon which another Party relies in executing this Settlement
      Agreement.

     

    8. COUNTERPARTS.
      This
      Settlement Agreement may be executed in multiple counterparts. A set of
      counterpart copies which collectively contains the signature and acknowledgment
      of all Parties shall constitute an original.

     

    EXECUTED
      by an authorized representative of ATSI Communications, Inc., a Nevada
      corporation, on the date written below.

    

    ATSI
      COMMUNICATIONS, INC.

    

    
      	
              By:

            	
              /s/
                Arthur L. Smith

            
	 	 
	
              Its:

            	
              President
                & CEO

            
	
              Date:
                

            	
              October
                1, 2007

            

    

    

    EXECUTED
      by Alfonso Torres Roqueñi
      on the
      date written below.

    

    ALFONSO
      TORRES ROQUEÑI

    

    
      	
              By:

            	
              /s/
                Alfonso Torres Roqueñi

            
	 	 
	
              Its:

            	
              President

            
	
              Date:

            	
              October
                1, 2007

            

    

     

    
      SETTLEMENT
        AGREEMENT

    

     

    
      
        
        

      

      
        Page
          3Exhibit:
      10.4

    

    PROMISSORY
      NOTE

    

    Principal
      Amount: $459,170

    Dated:
      October 1, 2007 

    

    This
      Promissory Note (“Note”) is made and entered into as of this 1st day of October,
      2007 by and between ATSI Communications, Inc., a Nevada corporation ("ATSI")
      with its principal place of business located at 3201 Cherry Ridge, Suite C-300,
      San Antonio, Texas, 78230 and Dr. Alfonso Torres Roqueñi, (“Lender”) of Blvd.
      Miguel Avila Camacho No. 184, Piso 16, Col. Lomas de San Isidro, Mexico City,
      Mexico. 

    

    For
      value
      received, ATSI promises to pay FOUR HUNDRED FIFTY NINE THOUSAND ONE HUNDRED
      AND
      SEVENTY U.S. Dollars ($459,170) to the order of Lender at Blvd. Miguel Avila
      Camacho No. 184, Piso 16, Col. Lomas de San Isidro, Mexico City, Mexico, or
      such
      other location as Lender may designate in writing, on October 1, 2010.

     

    Interest
      shall accrue at 6% (six percent) per annum. Lender shall not impose any penalty
      for ATSI’s pre-payment of this Note.

    

    Upon
      and
      at any time after any Default (as defined below) all amounts due under this
      Note, at the option of Lender and without demand, notice or legal process of
      any
      kind, may be declared and immediately shall become due and payable. "Default"
      shall mean the occurrence or existence of any one or more of the following
      events or conditions: (i) ATSI fails to pay when due any amount due under this
      Note and fails to cure such late payment within five (5) days following written
      receipt of notice of the late payment; or (ii) ATSI makes an assignment for
      the
      benefit of creditors, or any proceeding is filed or commenced by or against
      ATSI
      under any bankruptcy, reorganization, arrangement of debt insolvency,
      readjustment of debt or receivership law or statute, and any such proceeding
      remains undismissed or unstayed for a period of 30 days, or any of the actions
      sought in any such proceeding (including, without limitation, the entry of
      an
      order for relief against, or the appointment of a receiver, trustee, custodian
      or other similar official for, ATSI or for any substantial part of its property)
      shall occur, or ATSI shall take any action to authorize any of the actions
      set
      forth above in this subsection. 

    

    ATSI
      hereby waives presentment, demand of payment, protest or notice with respect
      to
      the indebtedness evidenced by this Note including, without limitation, notice
      that the Note or any portion thereof, is due. 

    

    If
      Lender
      prevails in any action to collect on or enforce this Note or claims arising
      from
      the execution of this Note, then Lender's reasonable attorneys' fees and costs
      will also be payable under this Note. 

    

    Neither
      party may assign this Note without the prior written consent of the other,
      which
      shall not be unreasonably withheld. 

    

    This
      Note
      may be modified only by a written document that refers specifically to this
      Note
      and is signed by both parties. A party's failure or delay in enforcing any
      provision of this Note will not be deemed a waiver of that party's rights with
      respect to that provision or any other provision of this Note. A party's waiver
      of any of its rights under this Note is not a waiver of any of its other rights
      with respect to a prior, contemporaneous or future occurrence, whether similar
      in nature or not. This Note shall be binding upon and inure to the benefit
      of
      the successors and assigns of the parties hereto. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    THIS
      NOTE
      SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, AND LENDER AGREES TO SUBMIT
      TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS FOR ALL PURPOSES. SOLE
      AND EXCLUSIVE VENUE FOR ANY DISPUTE OR DISAGREEMENT ARISING UNDER OR RELATING
      TO
      THIS NOTE SHALL BE IN A COURT SITTING IN BEXAR COUNTY, SAN ANTONIO, TEXAS.
      

    

    MADE
      this
      1st day of October, 2007

     

    
      	
              ATSI
                Communications, Inc.

            	 	
              Alfonso
                Torres Roqueñi/George Kauss

            
	 	 	 	 	 
	
              By:

            	
              /s/
                Arthur L. Smith 

            	 	
              By:

            	
              /s/
                Alfonso Torres Roqueñi

            
	 	
              Arthur
                L. Smith

            	 	 	
              Alfonso
                Torres Roqueñi

            
	 	
              CEO

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