EXHIBIT 10.1


          THE SYMBOL "***" DENOTES  PLACES WHERE  PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED  PURSUANT TO A REQUEST FOR CONFIDENTIAL  TREATMENT.  SUCH MATERIAL
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.








                            MASTER CARRIER AGREEMENT

                                     BETWEEN

                                 TEL-SAVE, INC.

                                       AND

                                   AT&T CORP.


<PAGE>



                                TABLE OF CONTENTS
                                -----------------

                                                                            Page

1.  SERVICES DESCRIPTIONS AND RATES.............................................

    1.1.     Services Provided..................................................

    1.2.     Ancillary Support..................................................

    1.3.     Rates and Charges..................................................

    1.4.     Payphone Compensation..............................................

    1.5.     Tel-Save IXC Switch................................................

    1.6.     Discontinuance of Contract Tariff 1715.............................

2.  TERM OF AGREEMENT AND RELATED PROVISIONS....................................

    2.1.     Effective Date; Commencement Date..................................

    2.2.     Term of Agreement..................................................

3.  COMMITMENTS.................................................................

    3.1.     Minimum Annual Revenue Commitment..................................

    3.2.     Minimum Annual Percentage..........................................

    3.3.     MAP Audits.........................................................

    3.4.     Shortfall Charges Not Cumulative...................................

4.  USE OF SERVICES.............................................................

    4.1.     Resale of Services.................................................

    4.2.     Relationship and Communication with End Users......................


                                       i
<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                            Page

    4.3      Abuse of the Services..............................................
 
    4.4.     Fraudulent Use of the Services.....................................

    4.5.     Interference, Impairment or Improper Use of the Services...........

5.  DEFAULT AND TERMINATION.....................................................

    5.1.     Events of Default..................................................

    5.2.     Termination Without Liability by Tel-Save..........................

    5.3.     Termination Without Liability by AT&T..............................

6.  BILLING  ...................................................................

    6.1.     Billings and Payment...............................................

    6.2.     Bill Disputes......................................................

    6.3.     Deposits...........................................................

7.  LIMITATIONS OF LIABILITY; INDEMNIFICATION...................................

    7.1.     Limitations of Liability...........................................

    7.2.     Indemnification....................................................

    7.3.     Force Majeure......................................................

    7.4.     Limitation of Actions..............................................

    7.5.     Disclaimer of Warranties...........................................

    7.6.     Exclusive Remedies.................................................

                                       ii
<PAGE>


                                TABLE OF CONTENTS
                                -----------------

                                                                            Page

8.  INTELLECTUAL PROPERTY.......................................................

    8.1.     Restrictions Against Use of Name and Brand Identification..........

    8.2.     Inconsistent Use...................................................

    8.3.     No Patent or Software License......................................

9.  TAXES    ...................................................................

    9.1.     Taxes to be Billed by AT&T.........................................

    9.2.     Taxes Not To Billed by AT&T........................................

    9.3.     Gross Receipts Tax.................................................

10. ACCESS CHARGES AND RELATED SURCHARGES.......................................

    10.1.    Access Charges.....................................................

    10.2.    Special Access Surcharges..........................................

    10.3.    Other Surcharges...................................................

11. CONFIDENTIALITY.............................................................

    11.1.    Confidential Information...........................................

    11.2.    Protection of Confidentiality......................................

    11.3.    Disclosure to or by Affiliates or Subcontractors...................

    11.4.    Return or Destruction of Confidential Information..................

    11.5.    Disclosure to Consultants..........................................

    11.6.    Required Disclosure................................................


                                 iii
<PAGE>


                                TABLE OF CONTENTS
                                -----------------

                                                                            Page

    11.7.    Injunctive Remedy..................................................

12. DISPUTE RESOLUTION..........................................................

    12.1.    Mediation..........................................................

    12.2.    Arbitration........................................................

    12.3.    Injunctive Relief..................................................

    12.4.    Court Proceedings..................................................

13. GENERAL TERMS AND CONDITIONS................................................

    13.1.    Tel-Save Certification.............................................

    13.2.    Service Forecasting................................................

    13.3.    Assignment.........................................................

    13.4.    Third-Party Beneficiaries; Affiliates..............................

    13.5.    Relationship of the Parties........................................

    13.6.    Ackowledgement of Right to Compete.................................

    13.7.    Network Equipment..................................................

    13.8.    Removal of Property................................................

    13.9.    Notices............................................................

    13.10.   Detariffing........................................................

    13.11.   Compliance with Laws...............................................


                                  iv
<PAGE>

    13.12.   Export Regulation Compliance.......................................



                                TABLE OF CONTENTS
                                -----------------

                                                                            Page

    13.13.   Choice of Law......................................................

    13.14.   Severability.......................................................

    13.15.   Attachments Govern.................................................

    13.16.   Construction.......................................................

    13.17    Descriptive Headings...............................................

    13.18.   Survival of Terms..................................................

    13.19.   Modification And Waiver............................................

    13.20    Entire Agreement...................................................

    13.21.   Execution in Counterparts..........................................

    13.22.   Index of Defined Terms.............................................

ATTACHMENTS
-----------

    A                 AT&T Network Connection Platform

    B                 Fraud Notification and Blocking

    C                 Implementation Planning

    D                 Pricing

 

                                      v

<PAGE>
                            MASTER CARRIER AGREEMENT
                            ------------------------

     THIS  MASTER  CARRIER  AGREEMENT  is made and  entered  into by and between
Tel-Save,  Inc., a  corporation  organized  and  existing  under the laws of the
Commonwealth of  Pennsylvania  and having an office at 6805 Route 202, New Hope,
Pennsylvania  18938  ("Tel-Save"),  and AT&T Corp., a corporation  organized and
existing  under  the laws of the  State of New York and  having an office at 295
North Maple Avenue, Basking Ridge, New Jersey 07920 ("AT&T")

                       1. SERVICES DESCRIPTIONS AND RATES
                          -------------------------------

     AT&T shall provide,  and Tel-Save  shall  purchase,  certain  services (the
Services")  pursuant to the terms of this Master Carrier Agreement including the
Attachments hereto (collectively, the "Agreement"), and, to the extent necessary
to comply with applicable laws and regulations,  pursuant to the terms of AT&T's
tariffs governing the Services.

1.1. SERVICES PROVIDED.

     AT&T shall provide, and Tel-Save shall purchase, the following AT&T carrier
     services:

                  (a)  AT&T  Network  Connection  Services,  as  described  and,
     defined in Attachment A to this Agreement.

                  (b) AT&T Software  Defined Network (SDN) Services,  consisting
     of Custom SDN and Global  Software  Defined  Network  (GSDN)  Services,  as
     described and defined in AT&T Tariff F.C.C.  No. 1, as amended from time to
     time.

                  (c) AT&T  Distributed  Network Service (DNS), as described and
     defined in AT&T Tariff F.C.C. No. 1, as amended from time to time.



<PAGE>

                  (d) AT&T MEGACOM(R)  Service, as described and defined in AT&T
     Tariff F.C.C. No 1, as amended from time to time.

                  (e) AT&T 800 Services, as described and defined in AT&T Tariff
     F.C.C.  Nos. 2 and 14, as amended from time to time,  consisting  of: basic
     AT&T 800 Service-Domestic;  basic AT&T 800 Service-Canada; AT&T MEGACOM 800
     Service-Domestic;   AT&T  MEGACOM  800  Service-Canada,  AT&T  MEGACOM  800
     Service-Mexico,  AT&T MEGACOM 800  Service-Overseas;  AT&T 800 READYLINE(R)
     Service-Domestic,  AT&T 800  READYLINE  Service-Canada,  AT&T 800 READYLINE
     Service-Mexico, AT&T 800 READYLINE Service-Overseas, and AT&T 800 READYLINE
     Service-Puerto Rico and the U.S. Virgin Islands.

                  (f) AT&T Private Line Services  (AT&T ACCUNET T1.5 Service and
     AT&T ACCUNET T45  Service),  as defined and described in AT&T Tariff F.C.C.
     No. 9, as amended from time to time.

                  (g) AT&T  1.544 Mbps Echo  Cancellation.  AT&T 1.544 Mbps Echo
     Cancellation is an Office Function providing  non-frequency  selective echo
     cancellation  in AT&T's  central  office to improve  the quality of an AT&T
     T1.5 Inter Office Channel used for voice  transmissions.  Echo cancellation
     is disruptive to data transmissions at speeds of 64 kbps and higher, and is
     only  available on an AT&T T1.5 Inter Office  Channel that is designated by
     Tel-Save for use for voice  transmissions,  provided that the Local Channel
     associated  with the IOC  terminates  at a  Tel-Save  IXC  Switch.  If data
     transmissions  at speeds  below 64 kbps over an IOC  conditioned  with Echo
     Cancellation  are  disrupted, 


                                       2

<PAGE>

     AT&T will work with  Tel-Save  in an effort to  determine  the cause of the
     disruption.  No credit will be provided to Tel-Save as a result of any such
     disruption  if it would not have  occurred  if the IOC was not  conditioned
     with Echo Cancellation.

1.2. ANCILLARY SUPPORT.

     AT&T will furnish the following  ancillary  support in connection  with the
     Services:

         (a) Fraud  Notification  and Blocking as  described in  Attachment B to
     this Agreement.
 
         (b) Implementation  Planning pursuant to an Implementation Plan that is
     developed as described in Attachment C to this Agreement.


1.3. RATES AND CHARGES.

         (a)  Tel-Save  shall  pay the rates  and  charges  as set forth in this
     Agreement for all Services provided under this Agreement.

         (b) The Recurring and  Nonrecurring  Rates and Charges for the Services
     described  in Section 1.1 are the same as the  undiscounted  Recurring  and
     Nonrecurring  Rates and Charges under the  applicable  Tariffs,  as amended
     from time to time, except as specified in Attachment D to this Agreement.

         (c) The  rates  and  charges  set  forth in this  Agreement  may not be
     combined in any manner with rates,  charges,  credits or discounts  offered
     with respect to the Services  provided under this Agreement  under any AT&T
     general  tariff  (except  as  specifically  set  forth in this  Agreement),
     contract  tariff,  tariffed  promotion or other  offering.  As described in
     Section 3.2,  services that Tel-Save  obtains from AT&T under other serving

                                       3

<PAGE>

     arrangements will be included in the MAP  calculations;  such services will
     not be  counted in the MARC  calculations,  except as  provided  in Section
     3.l(a) with respect to AT&T Contract Tariff No 2039.

1.4. PAYPHONE COMPENSATION.

     AT&T  reserves  the right to  increase  from time to time the rates for the
Services  provided under this Agreement,  as a result of charges imposed on AT&T
stemming  from  an  order,  rule or  regulation  of the  Federal  Communications
Commission or a court having competent  jurisdiction relating to compensation of
payphone service  providers.  This provision is not intended to require Tel-Save
to pay the same  charge  twice for the same  call  (once to AT&T and once to the
payphone service provider).  This provision is intended to allow AT&T to recover
its costs of the  Services  under this  Agreement,  including  any  charges  and
additional costs, relating to the compensation of payphone service providers, so
long as AT&T provides  Tel-Save with the option of blocking  payphone-originated
calls,  to the same extent made  available to other AT&T  customers for the same
service(s).  It is not expected  that AT&T will offer  blocking for calling card
calls. 

1.5. TEL-SAVE IXC SWITCH.

     As  used  in  this  Agreement,  the  term  "Tel-Save  IXC  Switch"  means a
telecommunications  switch  (including all remote switching modules under common
control of the same central switch) with the following characteristics:

         (a) it is owned and  operated by Tel-Save or an  Affiliate of Tel-Save,
     or by an entity in which  Tel-Save or an  Affiliate  of  Tel-Save  holds an
     ownership interest of at least

                                       4

<PAGE>

     33%,  or by an entity  that holds an  ownership  interest in Tel-Save or an
     Affiliate  of Tel-Save  of at least 33% (it is agreed for  purposes of this
     Agreement  that Tel-Save or an Affiliate of Tel-Save shall be deemed to own
     any switch  that is the  subject  of a lease  transaction  under  which (1)
     Tel-Save or its  Affiliate  is the lessee,  (2) the  equipment  vendor or a
     financing company is the lessor,  (3) the lease term is at least two years,
     and (4) the entire switch is under the exclusive  possession and control of
     Tel-Save or its Affiliate);

         (b) it is used for the transmission of calls that are routed by a Local
     Exchange Carrier to the Tel-Save IXC Switch using Feature Group D Access or
     a functional  equivalent (a LEC access facility protocol is the "functional
     equivalent"  of  Feature  Group  D  Access  if it is  used  by a LEC  as an
     alternative  to Feature  Group D Access for routing  calls from the LEC end
     office or  access  tandem  to the IXC  point of  presence  based on the CIC
     associated  with the line on which the call  originated,  provided that the
     protocol is compatible with AT&T's network requirements);

         (c) It is capable of interconnecting  circuits or transferring  calling
     between circuits;

         (d) it has a maximum  capacity  of at least  100,000  access  lines and
     16,000 trunk lines;

         (e) it is  predominantly  used to provide  switched  telecommunications
     service on a Common Carrier basis; and

                                       5
<PAGE>

         (f) it has the  capability  to provide  signaling  interfaces  at CCITT
     standards of SS7 signaling.

Provided  the  Tel-Save IXC Switch  meets the  foregoing  definition,  it is not
necessary  that all  calls  routed  through  the  Tel-Save  IXC  Switch  satisfy
characteristic (b).

1.6.     DISCONTINUANCE OF CONTRACT TARIFF 1715

                  (a)   Effective  as  of  the   Commencement   Date,   Tel-Save
         discontinues its subscription to AT&T Contract Tariff 1715 ("CT 1715"),
         pursuant to CT 1715,  Section 6 E. A  Termination  Charge will apply as
         provided in that Section.  AT&T will provide a  limited-purpose  credit
         under  this  Agreement  in an  amount  equal  to  the  amount  of  such
         Termination  Charge. The credit will be applied to offset the amount of
         such  Termination  Charge,  and  cannot be  applied  against  any other
         charges.

                  (b) Except as specified in this  Section 1.6,  Tel-Save  shall
         not seek to discontinue without liability any AT&T term plans, Contract
         Tariffs, or other serving arrangements in connection with its order for
         service under this Agreement.

                   2. TERM OF AGREEMENT AND RELATED PROVISIONS
                      ----------------------------------------

2.1.     EFFECTIVE DATE; COMMENCEMENT DATE.

     The  "Effective  Date" of this  Agreement  shall be the date on which it is
executed by each party. The "Commencement Date" shall be May 1, 1998. The rates.
terms and  conditions  provided  under this  Agreement  will not apply until the
Commencement Date.

                                       6

<PAGE>


2.2. TERM OF AGREEMENT.

         The "Term" of this Agreement begins on the  Commencement  Date and ends
on the day before the third-year anniversary of the Commencement Date.

                                 3. COMMITMENTS
                                    -----------

3.1. MINIMUM ANNUAL REVENUE COMMITMENT.

         (a) The Minimum  Annual  Revenue  Commitment  ("MARC") is fifty million
     dollars  ($50,000,000)  for the first  and  second  years of the Term,  and
     thirty-five  million dollars  ($35,000,000) for the third year of the Term.
     Each such  year is  sometimes  referred  to as a "MARC  Period".  The total
     charges for the  Services  set forth in Sections  1.1 and 1.2(a),  together
     with the total charges incurred by Tel-Save for service under AT&T Contract
     Tariff No.  2039,  net of all  discounts  and  credits  other  than  credit
     allowances for interruptions and outages, ("Total Qualified Charges") shall
     be  applied  to  satisfy  the MARC for the year in which  the  charges  are
     incurred.

         (b) If,  at the end of any month in the  second  or third  years of the
     Term, the Total Qualified  Charges  incurred by Tel-Save during the Term is
     least one hundred and ten million  dollars  ($110,000,000)  and Tel-Save is
     current in payment to AT&T for all  telecommunications  services,  Tel-Save
     may, for the  remainder of the Term,  continue to purchase  Services  under
     this  Agreement,  without  any MARC or MAP  obligations.  Tel-Save  will be
     considered  current in payment to AT&T under this  Agreement  if all billed
     and outstanding  charges are paid, except for any amount for which the date
     for timely payment under Section 6.1(e) has not yet occurred.

                                       7

<PAGE>

         (c) In the  event  that  Tel-Save  exercises  its  right  to  terminate
     affected service  components under Section 5.2(b), the MARC will be reduced
     (for  the  then-current   MARC  Period)  by  the  average  monthly  charges
     associated  with such  service  components  during the three  full  billing
     months prior to the event giving rise to the right to terminate,  times the
     number of full or partial months  remaining in the MARC Period during which
     the service  components were terminated,  and (for each remaining full MARC
     Period)  by the  average  monthly  charges  associated  with  such  service
     components  during the three full billing  months prior to the event giving
     rise to the right to terminate, times twelve.

         (d) If,  at the end of any MARC  Period,  the Total  Qualified  Charges
     incurred by Tel-Save for that period have not  exceeded the MARC,  Tel-Save
     shall pay a MARC Shortfall  Charge.  The MARC Shortfall Charge will vary as
     follows:

<TABLE>
<CAPTION>
          -------------------------------------- -----------------------------------------  
          IF THE TOTAL QUALIFIED CHARGES ARE...    THE MARC SHORTFALL CHARGE IS...          
          -------------------------------------- -----------------------------------------  
          <S>                                   <C>                                         
          More than 80% of the MARC                3% of the Total Qualified Charges        
          -------------------------------------- -----------------------------------------  
          More than 60%, but not more than         5% of the Total Qualified Charges        
          80%, of the MARC                                                                  
          -------------------------------------- -----------------------------------------  
          More than 40%, but not more than         8% of the Total Qualified Charges        
          60%, of the MARC                                                                  
          -------------------------------------- -----------------------------------------  
          More than 20%, but not more than         10% of the Total Qualified Charges       
          40%, of the MARC                                                                  
          -------------------------------------- -----------------------------------------  
          10 or less of the MARC                   Two million five hundred thousand        
                                                   dollars                                  
          -------------------------------------- -----------------------------------------  
</TABLE>  

         (e) In the event that this Agreement is terminated during a MARC Period
     for any reason for which a Termination  Charge does not apply, the MARC for
     that partial 

                                       8

<PAGE>

     period  will be  adjusted  by  multiplying  the MARC by the  number of full
     months of service in the MARC Period prior to the date of termination,  and
     dividing  by 12.  For  purposes  of  determining  the  amount  of any  MARC
     Shortfall Charge, the adjusted MARC will apply for an adjusted MARC Period,
     consisting of the same months counted in Calculating the adjusted MARC. For
     example,  if this  Agreement is  terminated  during month ten of the second
     year of the Term,  adjusted  MARC  would be $50  million x 9 / 12, or $37.5
     million.  If the Total  Qualified  Charges  incurred by Tel-Save during the
     first nine full months of the MARC Period were only $28 million (75% of the
     adjusted MARC),  the MARC Shortfall  Charge would be 5% of $28 million,  or
     $1.4 million.

3.2. MINIMUM ANNUAL PERCENTAGE.

         (a) Except as provided in Section 3.l(b), the Minimum Annual Percentage
     ("MAP")  shall apply for each year of the Term,  each of which is sometimes
     referred to as a "MAP Period."

         (b) In the event that this  Agreement is  terminated  for any reason in
     the middle of a MAP  Period,  the MAP shall  apply for the  portion of that
     period ending as of the date of such termination

         (c) The MAP applies to Tel-Save and its Affiliates,  collectively.  (An
     entity  is an  "Affiliate"  of a party  if the  entity  owns a  controlling
     interest in the party or an Affiliate  of the party;  or if the party or an
     Affiliate  of the party owns a  controlling  interest  in the  entity.)  An
     entity  that ceases to be an  Affiliate  of  Tel-Save  will  continue to be
     subject to 

                                       9

<PAGE>

     the MAP  requirements  of this  Agreement  until AT&T receives  notice from
     Tel-Save advising that such entity is no longer a Tel-Save Affiliate.

         (d) The MAP shall be ninety percent (90%) for all domestic outbound and
     inbound voice InterLATA services ("MAP Services").

         (e)  Within  sixty  (60) days after the end of any period for which the
     MAP applies, Tel-Save shall certify to AT&T in writing:

              (1)  the  total  amount  of all  charges  (net  of all  discounts,
         credits,  taxes and  surcharges)  incurred  during  that same period by
         Tel-Save and its Affiliates for all MAP Services, and

              (2) the specific  amounts of such  charges (net of all  discounts,
         credits,  taxes and  surcharges)  that are claimed to be Exempt Charges
         pursuant to Section  3.2(e)(2).  

         (f) The amounts  certified by Tel-Save  pursuant to Section  3.2(e) are
     subject to audit as described in Section 3.3. Tel-Save has secured or shall
     secure the agreement of each Tel-Save Affiliate to permit AT&T to audit its
     expenditures for  telecommunications  services  pursuant to Section 3.3 for
     the period during which it is an Affiliate of Tel-Save.

         (g) The difference between the total amount of all charges incurred for
     MAP Services (the total amount properly certified in Section 3 2(e)(1)) and
     the total amount of any Exempt Charges (the total amount properly certified
     in Section 3.2(e)(2)) shall

                                       10
<PAGE>


     constitute the "Total Tel-Save Charges".  The "MAP Attainment Amount" shall
     be equal to the product of the MAP times the Total Tel-Save Charges:

--------------------------------------------------------------------------------
 MAP Attainment Amount = MAP x (Total Changes for MAP Services - Exempt Charges)
--------------------------------------------------------------------------------

         (h) In the event of a Change in Control of  Tel-Save,  Tel-Save (or its
     successor-in-interest)  may elect to either (1) convert the MAP  commitment
     to a fixed revenue  commitment or (2) eliminate the MAP and become  subject
     to a modified MARC Shortfall  Charge,  by providing  notice to AT&T of such
     election  within  thirty (30) days after such Change in Control  occurs.  A
     "Change in Control"  occurs in the event that either a single  third party,
     or a consortium of third parties  acting in concert,  acquires  possession,
     directly or indirectly, of (1) more than one-half of the outstanding voting
     securities of Tel-Save or its direct or indirect  corporate  parent, or (2)
     the power to direct the  management  or  operational  policies of Tel-Save,
     whether by voting securities or otherwise.

              (1) If Tel-Save  elects to convert the MAP  commitment  to a fixed
         revenue  commitment,  the MAP  Attainment  Amount  will  become a fixed
         amount,  equal to ninety  percent (90%) of the  difference  between the
         Total Charges for MAP Services and the Exempt Charges (each  determined
         by the certification and audit process set forth in Sections 3.2(e) and
         3 2(f)) for the three full  months  immediately  prior to the Change in
         Control. Section 3.2(g) and 3.2(k) will no longer apply.


                                       11

<PAGE>


              (2) If Tel-Save  elects to eliminate the MAP and become subject to
         a modified  MARC  Shortfall  Charge,  Section 3.2 will no longer apply,
         except that the following MARC Shortfall  Charge  provision shall apply
         in lieu of Section 3.1(d): If, at the end of any MARC Period, the Total
         Qualified  Charges  incurred  by  Tel-Save  for  that  period  have not
         exceeded the MARC,  Tel-Save shall pay a MARC Shortfall Charge equal to
         the  difference  between the MARC and the Total  Qualified  Charges for
         that  period.  

         (i)  The  total  charges  (net of all  discounts,  credits,  taxes  and
     surcharges)  for  MAP  Services  provided  by  AT&T  to  Tel-Save  and  its
     Affiliates  shall  constitute the  "Tel-Save's  AT&T Charges." In the event
     that  Tel-Save's  AT&T Charges do not exceed the MAP Attainment  Amount for
     any  MAP  Period,  Tel-Save  shall  pay a  Shortfall  Charge  equal  to the
     difference  between the MAP Attainment  Amount and Tel-Save's  AT&T Charges
     for that period.

         (j) If Tel-Save  obtains MAP Services from another  carrier as a result
     of  capacity  constraints  specifically  identified  by  AT&T  in  advance,
     Tel-Save may request that the parties engage in a joint MAP assessment.  In
     the course of any such  assessment,  the parties will review the nature and
     extent of the capacity  constraints and the level of traffic to be obtained
     from another carrier,  and will jointly determine whether any adjustment in
     the MAP Attainment Amount is appropriate under the circumstances.


                                       12


<PAGE>

         (k) For  purposes of  determining  whether  Tel-Save  has  attained the
     Attainment  Amount,  any charges  falling  within the following  categories
     shall be considered Exempt Charges:

              (1) charges  for  substitute  services  obtained by Tel-Save or an
         Affiliate of Tel-Save as a result of a force majeure condition pursuant
         to Section 7 3;

              (2) charges for  services  provided to Tel-Save or an Affiliate of
         Tel-Save  solely  using  interexchange  facilities  owned or leased and
         operated by Tel-Save or an Affiliate of Tel-Save  together with network
         equipment  (such as switches)  owned or leased and operated by Tel-Save
         or an Affiliate of Tel-Save;

              (3) charges for services  installed as a replacement  for services
         that are subject to partial discontinuance, pursuant to Section 5.2(b);

              (4) charges for services under commitment to another Interexchange
         Carrier if the  commitment was entered into by an entity that becomes a
         Tel-Save  Affiliate  after the Effective Date (and such  commitment was
         entered into before the entity  becomes a Tel-Save  Affiliate),  unless
         the charges  Tel-Save would incur to terminate such commitment would be
         less than $10,000; provided that such charges will be considered Exempt
         Charges  only to the extent (A) they do not exceed one  hundred and ten
         percent (110%) of the charges  necessary to avoid  incurring  liability
         for  shortfall  charges  and (B)  they  are  incurred  during  the term
         commitment  that  applied as of the date the  entity  became a Tel-Save
         Affiliate;

                                       13
<PAGE>


              (5) With respect to any entity which becomes a Tel-Save  Affiliate
         after the Effective Date,  charges for services obtained by that entity
         from another  Interexchange  Carrier under an  arrangement  that was in
         effect before the entity became a Tel-Save Affiliate, provided that (A)
         Tel-Save  submits  complete  service  orders  to AT&T to  convert  such
         services to AT&T Service under this  Agreement  within thirty (30) days
         after the entity becomes a Tel-Save  Affiliate,  and (B) this exemption
         shall cease to apply when AT&T is able to provide such service  (except
         that this  exemption  shall  remain in effect if,  within 30 days after
         AT&T's receipt of a complete service order from Tel-Save for conversion
         of  the  service  to  AT&T,  AT&T  fails  to  provide  to  Tel-Save  an
         installation date for that service that is within 180 days after AT&T's
         receipt of the complete service order); and

              (6) such other charges as an officer of AT&T agrees in writing are
         to be considered Exempt Charges under Section 3.2(k) of this Agreement.

3.3. MAP AUDITS.

         (a) Not more than once each twelve months, AT&T may audit the books and
     records  of  Tel-Save  and  its  Affiliates   directly  relating  to  their
     expenditures  for   telecommunications   services  (hereinafter   "Tel-Save
     Records"),  solely  for the  purposes  of  verifying  the  accuracy  of the
     certifications  submitted  by  Tel-Save  pursuant  to  Section  3.2(e)  and
     determining the MAP Attainment  Amount.  Any  information  obtained by AT&T
     pursuant to this audit may be used only for  purposes of this  Section 3.3,
     and

                                       14
<PAGE>


     may not be  provided  to or used by any  AT&T  personnel  not  involved  in
     carrying out Section 3.3.

         (b) Tel-Save and its Affiliates shall cooperate  reasonably in any AT&T
     audit,  providing  reasonable  access  to  any  and  all  Tel-Save  Records
     necessary  to  verify  the  accuracy  of the  certifications  submitted  by
     Tel-Save  pursuant to Section  3.2(e) and  determining  the MAP  Attainment
     Amount.

         (c) If any audit reveals that the certifications  submitted by Tel-Save
     pursuant to Section 3.2(e)  resulted in an error in the  calculation of the
     MAP Attainment  Amount in favor of Tel-Save  totaling three percent (3%) or
     more and results in Tel-Save owing AT&T a greater MAP Shortfall Charge than
     otherwise  would have been assessed,  Tel-Save shall reimburse AT&T for the
     reasonable cost of the audit,  including  out-of-pocket  costs and internal
     costs attributable to the conduct of the audit, not to exceed $50,000.00.

         (d)  Tel-Save may satisfy any audit  request  under this Section 3.3 by
     permitting an audit of Tel-Save  Records by an external auditor selected by
     the  parties  and  paid by AT&T in lieu  of  permitting  an  audit  by AT&T
     personnel.  The auditor must keep any  information it obtains from Tel-Save
     confidential,   and  provide  AT&T  only  with  information  verifying  (or
     refuting) the certification and determining the MAP Attainment Amount.


                                       15
<PAGE>


3.4. SHORTFALL CHARGES NOT CUMULATIVE.

         If for the same  period  there  is a MARC  Shortfall  Charge  and a MAP
Shortfall Charge, Tel-Save shall be liable only for the larger Shortfall Charge.

                               4. USE OF SERVICES
                                  ---------------

4.1. RESALE OF SERVICES.

         (a) Tel-Save may use the services provided under this Agreement for any
     lawful purpose consistent with the transmission and switching parameters of
     the  telecommunications  network, and may resell its use (or the use of any
     part thereof) to a third party in the normal course of Tel-Save's business,
     except as  specifically  prohibited  or limited  by law or this  Agreement.
     Tel-Save may use the AT&T Network  Connection  Services provided under this
     Agreement  as a  component  of its own end to end  service  to be  provided
     either to entities  that will use  Tel-Save's  services for purposes  other
     than  resale  (such  entities  are  referred to in this  Agreement  as "End
     Users") or to other carriers that will use Tel-Save's services for purposes
     of  resale  by  such  other  carriers  either  to  End  Users  or to  other
     intermediaries  for ultimate resale to End Users (such other carriers,  and
     any other  intermediaries  in the sales chain  between  Tel-Save and an End
     User are referred to in this Agreement as "Intermediate Carriers").

         (b) The AT&T Network Connection  Services provided under this Agreement
     have been designed  based on the specific  capacity  estimates  provided by
     Tel-Save.  AT&T Network  Connection - Outbound  Service is available  under
     this  Agreement  only for use in  

                                       16
<PAGE>

     connection with the following  Tel-Save Carrier  Identification  Codes (the
     "Authorized Tel-Save CICs"): 6746, 5453, 6060, and 6678.

4.2. RELATIONSHIP AND COMMUNICATION WITH END-USERS.

     AT&T  has no  relationship  under  this  Agreement  with  the End  Users or
Intermediate  Carriers  to  which  Tel-Save  may  provide  service.  AT&T has no
obligation  under this  Agreement to  communicate  with,  support,  or otherwise
interact  with  such End  Users  or  Intermediate  Carriers,  except  (a)  where
communications  between  AT&T and End Users is  necessary  for call  processing,
including  (to  the  extent  provided  by  AT&T)  operator  services,  directory
assistance,  and  calling  cards,  and  (b) as  specifically  provided  in  this
Agreement  or in AT&T Tariff  F.C.C.  No. I or AT&T Tariff F.C C. No 2, as those
tariffs may be amended  from time to time AT&T has No. 1 or AT&T  Tariff  F.C.C.
No. 2, as those tariffs may be amended from time to time. AT&T has no obligation
under this Agreement to communicate with,  support,  or otherwise  interact with
such  Intermediate  Carriers,  except that AT&T will accept orders from an agent
appointed by Tel-Save,  limited to one Intermediate  Carrier for SDN Service and
to one Intermediate Carrier for DNS Service. Tel-Save retains responsibility for
the acts or omissions of its agents. Other than as provided herein communicating
with, supporting, and otherwise interacting with such End-Users and Intermediate
Carriers shall be the sole responsibility of Tel-Save.

4.3. ABUSE OF THE SERVICES.

     Abuse of the Services is prohibited.  The following  activities  constitute
     abuse:

         (a) Using the Services to make calls that might  reasonably be expected
     to frighten, abuse, torment, or harass another,


                                       17
<PAGE>

         (b) Using the  Services in such a way that it  interferes  unreasonably
     with the use of AT&T's network by others,

         (c) Willfully  using AT&T MEGACOM  Service to carry domestic calls that
     originate  on the Tel-Save  network or network of another  facilities-based
     Interexchange  carrier other than AT&T and terminate  disproportionately to
     locations  for  which  the  incumbent  Local  Exchange  Carrier's  rate for
     terminating  switched  access is higher  than $0.03 per minute  constitutes
     abuse of service.

In the event that AT&T believes in good faith that such abuse is occurring, AT&T
will provide written notice of such abuse to Tel-Save,  including as much detail
as is reasonably  sufficient to enable Tel-Save to investigate  the matter.  If,
within five (5) business  days after its receipt of such  notice,  the abuse has
not ended, or Tel-Save has not  demonstrated to AT&T's  reasonable  satisfaction
that  the  abuse is not in fact  occurring,  AT&T may  terminate,  restrict,  or
suspend Service to the location(s), and only the location(s) at which such abuse
is occurring. 

4.4. FRAUDULENT USE OF THE SERVICES.

     The  fraudulent  use of, or the  intended or attempted  fraudulent  use of,
Service is prohibited. The Following activities constitute fraudulent use:

         (a) Using the  Services  to  transmit  any  message  or code,  locate a
     person,  or otherwise give or obtain  information,  without payment for the
     Services, or

         (b) Using or  attempting  to use the Services  with the intent to avoid
     the  payment,  either in whole or in part,  of any  charges by any means or
     device.  Fraudulent  use of AT&T  Private Line  Services  shall not include
     designing,  redesigning or 

                                       18
<PAGE>

     reconfiguring  Tel-Save's  network  or  facilities,  or those of any of its
     customers,  to improve their efficiency,  including the use of multiplexing
     equipment,  store and forward devices,  traffic concentrators,  and data or
     voice compression equipment.

4.5. INTERFERENCE, IMPAIRMENT OR IMPROPER USE OF THE SERVICES.

     Tel-Save  may not use the  Services in any manner that results in immediate
harm, or the risk of immediate harm, to the AT&T network or other AT&T services.
Harm to the AT&T network or other AT&T  services as used herein does not include
economic  harm to AT&T  that may  result  from  Tel-Save's  use or resale of the
Services as part of competitive offerings of Tel-Save.

                           5. DEFAULT AND TERMINATION
                              -----------------------

5.1.     EVENTS OF DEFAULT.

                  (a)      Tel-Save may declare AT&T to be in default if:

                           (1)  AT&T  breaches  any  material  warranty,   term,
                  condition or  obligation  of this  Agreement and fails to cure
                  such breach  within ninety (90) days after  Tel-Save  provides
                  notice to AT&T of prospective default under this provision;

                           (2)  either  (A)  any  license,  permit,  consent  or
                  approval  of  any  governmental  body,  authority,  agency  or
                  instrumentality is revoked,  withdrawn,  withheld,  materially
                  modified  or  otherwise  fails to  remain  in full  force  and
                  effect,  or (B) a foreign,  federal,  state or local  statute,
                  regulation   or  order  is  enacted,   

                                       19

<PAGE>

                  adopted or otherwise promulgated, with the result that AT&T is
                  unable to perform its  obligations  under this  Agreement  and
                  AT&T does not remedy or negate the effects of the  revocation,
                  withdrawal,  modification,  order,  adoption  or  promulgation
                  within one hundred eighty (180) days after  Tel-Save  provides
                  notice to AT&T of prospective default under this provision 

                  (b)      AT&T may declare Tel-Save to be in default if:

                           (1) Tel-Save  fails to pay make timely payment of any
                  invoice  and fails to cure its breach by making  the  required
                  payment  within  five (5) days after AT&T  provides  notice to
                  Tel-Save of prospective  default under this provision,  having
                  made its best  efforts to ensure  that an officer of  Tel-Save
                  receives  actual  timely  notice of such  prospective  default
                  under this provision;

                           (2) Tel-Save fails to cure a breach of the provisions
                  of Section 8.1 or 8.1(f)(3)  regarding  the use of AT&T's name
                  or Marks within thirty (30) days after AT&T provides notice to
                  Tel-Save of prospective default under this provision;

                           (3) Tel-Save  breaches any material  warranty,  term,
                  condition or  obligation  of this  Agreement and fails to cure
                  such breach within ninety (90) days after AT&T provides notice
                  to Tel-Save of prospective default under this provision;

                           (4)  either  (A)  any  license,  permit,  consent  or
                  approval  of  any  governmental  body,  authority,  agency  or
                  instrumentality is revoked,  withdrawn,  withheld,  materially
                  modified  or  otherwise  fails to  remain  in full  force  and
                  effect,  

                                       20

<PAGE>

                  or (B) a foreign, federal, state or local statute,  regulation
                  or order is enacted,  adopted or otherwise  promulgated,  with
                  the result that Tel-Save is unable to perform its  obligations
                  under this Agreement and,  notwithstanding its best efforts to
                  do so,  Tel-Save  does not remedy or negate the effects of the
                  revocation,  withdrawal,   modification,  order,  adoption  or
                  promulgation  within one hundred  and eighty  (180) days after
                  AT&T provides notice to Tel-Save of prospective  default under
                  this provision.  

                  (c)      For  the  purposes of  this Agreement either party to
          this Agreement shall be in default if such party:

                           (1) ceases to do business as a going concern;

                           (2) makes a general assignment for the benefit of, or
                  enters into any arrangement with creditors in lieu thereof;

                           (3)  is unable or  admits  in writing  its  inability
                  to pay its debts as they become due;

                           (4)  is  insolvent,  bankrupt  or  the  subject  of a
                  receivership;   

                           (5)  authorizes,   applies  for,  or  consents to the
                  appointment   of  a  trustee  or   liquidator  of  all,  or  a
                  substantial  part, of its assets,  or has proceedings  seeking
                  such appointment commenced against it which are not terminated
                  within ninety (90) days of such commencement;

                           (6) files a voluntary  petition  under any bankruptcy
                  or  insolvency  law or files a  voluntary  petition  under the
                  reorganization  of  arrangement  provisions of the 

                                       21
<PAGE>

                  laws of the United  States  pertaining  to  bankruptcy  or any
                  similar law of any  jurisdiction or has proceedings  under any
                  such law instituted against it which are not terminated within
                  sixty (60) days of such commencement; or

                           (7)  has  any   substantial   part  of  its  property
                  subjected to any levy,  seizure,  assignment or sale for or by
                  any  creditor  or  governmental   agency  without  such  levy,
                  seizure,  assignment or sale being released,  lifted, reversed
                  or satisfied  within ten (10) days.  


                  (d) The periods provided under this Section 5.1 for a party to
         cure a breach of this  Agreement  do not affect any rights  (other than
         the right to  terminate) or causes of action that may arise out of such
         breach.

5.2.     TERMINATION WITHOUT LIABILITY BY TEL-SAVE.

                  (a)  Tel-Save  shall have the right,  upon notice to AT&T,  to
         terminate this  Agreement with no termination  liability on the part of
         Tel-Save if AT&T  defaults as  described  in Section  5.1(a) or (c) and
         does not cure the  default  prior to  Tel-Save  providing  notice of it
         exercising its night to terminate.  Tel-Save must exercise its right to
         terminate  by  providing  AT&T  written  notice  of  termination.  Such
         termination  is effective 60 days after  written  notice is provided to
         AT&T.  All  provisions of this  Agreement will continue to apply during
         such 60-day period, except that the MARC and MAP shall not apply.

                                       22

<PAGE>

                  (b) Where less than a  material  portion  of the  Services  is
         affected  by the event of default,  Tel-Save's  right to  terminate  is
         limited to the affected  service  components or geographical  area, and
         the MARC shall be reduced as provided in Section 3.1(c).

5.3.     TERMINATION WITHOUT LIABILITY BY AT&T.

                  (a) AT&T shall have the right,  upon  notice to  Tel-Save,  to
         terminate this  Agreement with no termination  liability on the part of
         AT&T if Tel-Save  defaults as  described  in Section  5.1(b) or (c) and
         does not cure the default  within the time  allowed.  In the event of a
         default  under  Sections  5.l(b)(1)  or  5.l(b)(2),  AT&T may  cease to
         provide service under this Agreement immediately upon expiration of the
         cure  period  (provided  that  Tel-Save  has not cured at the time AT&T
         ceases  to  provide  service),  without  further  notice  to  Tel-Save,
         termination of the Agreement shall be effective immediately upon AT&T's
         giving written  notice of  termination  to Tel-Save.  In the event of a
         default under Sections 5.1(b)(3),  5.l(b)(4) (if legally permitted), or
         5.1(c), the termination shall be effective 60 days after written notice
         is provided to Tel-Save. All provisions of this Agreement will continue
         to apply during such 60-day period,  except that the MARC and MAP shall
         not apply.

                  (b) Where less than a  material  portion  of the  Services  is
         affected by the event of default,  AT&T's right to terminate is limited
         to the affected service components or geographical area.

                  (c) In the  event  that  AT&T  terminates  this  Agreement  as
         provided in this Section, Tel-Save shall pay a Termination Charge equal
         to  (1) if the  termination  occurs  in 


                                       23
<PAGE>

         the  first  year of the Term,  thirty-five  percent  of the  difference
         between  $110,000,000  and the  Total  Qualified  Charges  incurred  by
         Tel-Save  during  the  Term,  or (2) if the  termination  occurs in the
         second year of the Term,  twenty-five percent of the difference between
         $110,000,000  and the Total  Qualified  Charges  incurred  by  Tel-Save
         during the Term;  except that no  Termination  Charge will apply if the
         sole  reason for  termination  is a default by Tel-Save  under  Section
         5.1(b)(4).

                                   6. BILLING

6.1.     BILLING AND PAYMENT.

                  (a) For AT&T Network Connection  Services,  AT&T shall provide
         consolidated  summary  invoices and call detail  records to Tel-Save as
         provided in Attachment A. For other AT&T  services,  AT&T shall provide
         monthly invoices to a single Tel-Save location.

                  (b)  AT&T is not  obligated  to issue  any  bills  under  this
         Agreement to End User or Intermediate Reseller locations.  Tel-Save may
         request that AT&T deliver bills to locations designated by Tel-Save for
         AT&T 800 Services provided to Tel-Save under this Agreement,  for up to
         14,000  billing  accounts.  All or a majority of such  accounts will be
         converted  to a network  billing  arrangement  as  described in Section
         6.l(c). For any accounts (such as AT&T MasterLine(R)  Service accounts)
         that are unable to be converted  pursuant to Section  6.1(c),  Tel-Save
         may request that AT&T deliver  bills  without any AT&T Marks on them to
         locations  designated  by  Tel-Save.  Tel-Save  may  request  that 


                                       24

<PAGE>

         AT&T  deliver  bills to locations  designated  by Tel-Save for AT&T SDN
         Service, for up to 10,000 billing accounts. If AT&T issues bills to any
         Tel-Save  End Users,  AT&T may issue  bills  without  any AT&T Marks on
         them. All other bills for Service provided under this Agreement will be
         sent to one Tel-Save location.

                  (c)  The   parties   will  work   together   to  convert   the
         (approximately) 14,000 AT&T 800 billing accounts referred to in Section
         6.1(b)  from  a  location  billed   arrangement  to  a  network  billed
         arrangement  (i.e., an arrangement under which the billing  information
         is sent directly to Tel-Save) as described below. On or prior to May 7,
         1998,  AT&T shall  provide to Tel-Save  one or more  computer-generated
         files with billing and account  information for these accounts,  to the
         extent such  information is available to AT&T from existing  databases.
         Such files will be (1) provided on magnetic or  electronic  media,  (2)
         formatted in a  non-proprietary  database or flat file format,  and (3)
         arranged using a mutually  agreed upon record layout.  The parties will
         exercise  best efforts to  determine  in writing,  within seven days or
         less after the Effective Date,  mutually agreeable  parameters for such
         files  (i.e.,  the media,  format and record  layout) and for all other
         information in AT&T's  possession  reasonably  required by Tel-Save for
         purposes of effective billing and/or service conversion. If information
         in AT&T's possession is reasonably required by Tel-Save for purposes of
         effective  billing and/or service  conversion,  but is not available to
         AT&T from  existing  databases by May 7, 1998,  AT&T will exercise best
         efforts to obtain such information  from existing  databases as quickly
         as  possible.  AT&T  will  not  parse  or  manipulate  the  information
         available  from  existing  

                                       25
<PAGE>

         databases so it will be more useful to  Tel-Save,  except to the extent
         mutually agreed by the parties.  All bills for which all  timely-billed
         usage  occurs more than thirty  days after all such  information  as is
         necessary to effectively  bill and/or convert the accounts  (other than
         aged trial  balance  information,  which will be provided as  described
         below) is provided to Tel-Save  will be sent to one  Tel-Save  location
         (provided  any  additional   facilities   needed  to  accommodate   the
         conversion have been provisioned and tested,  and are available for use
         prior to the  conversion  date).  AT&T will provide aged trial  balance
         information to Tel-Save on a three-,  four- or five-business day a week
         basis  beginning  at  least  ten  days  prior  to the  first  scheduled
         conversion  date.  The parties will  exercise best efforts to implement
         this  conversion by May 15, 1998, for Tel-Save End Users located in the
         states of Florida, North Carolina,  New York, South Carolina,  Georgia,
         and Connecticut. Notwithstanding the provisions of Section 8.1 and 8.2,
         the first bill  issued by  Tel-Save to the  locations  being  converted
         pursuant  to  this  Section  may  include  the  phrase.  "Your  service
         continues  to be  provided  by  Network  Services  utilizing  the  AT&T
         network".  AT&T shall not use or make  available  for its own marketing
         efforts any  proprietary  information  that is or has been  provided by
         Tel-Save,  or  otherwise  obtained  by  AT&T  in  connection  with  the
         provision  of service to Tel-Save,  with respect to the accounts  being
         converted pursuant to this Section.

                  (d) Tel-Save acknowledges that any such bills rendered by AT&T
         are for services  provided by AT&T to  Tel-Save,  and that by rendering
         such  bills  to the  locations  designated  by  Tel-Save,  AT&T  is not
         providing a billing service to Tel-Save.  Tel-Save 


                                       26

<PAGE>

         understands  that the amounts stated on the bills will be calculated by
         AT&T  to  reflect  AT&T's  rates  and  charges  to  Tel-Save,  and  (as
         applicable)  the  taxes  due on  such  amounts.  Tel-Save  is  entirely
         responsible  for  its  own  compliance  with  any  tax  and  regulatory
         obligations  that may arise in connection with its provision of service
         to its customers.

                  (e)  Payment  of  charges  under this  Agreement  is due,  and
         Tel-Save's  obligation  to  pay  such  charges  is  enforceable,   upon
         presentation of a bill to Tel-Save.  Payment shall be considered timely
         if made within one month after the date of the bill, except if Tel-Save
         provides to AT&T,  within one month after the date of the bill on which
         a charge first appears,  a written  explanation of the basis for a Bill
         Dispute with respect to that charge, payment shall be considered timely
         if made within the later of (1) two months  after the date of the bill,
         (2) ten (10) days after the date of receipt of the written  explanation
         required by Section 6.2(b),  or (3) such later date as AT&T may specify
         in writing.

                  (f) Tel-Save shall be solely  responsible  for rendering bills
         to and collecting  charges from its own customers.  Failure of Tel-Save
         to bill or  collect  charges  shall  not  excuse  in  whole  or in part
         Tel-Save's responsibilities to AT&T under this Agreement, including but
         not limited to the  responsibility  to render to AT&T timely payment of
         charges.

                  (g) If Tel-Save does not make payment of any charge(s)  within
         45 days after the bill date, AT&T may apply a late payment charge equal
         to one percent (1%) of such  charge(s)  for each whole or partial month
         between such  forty-fifth day and the date on 

                                       27

<PAGE>


         which the payment is made to AT&T,  except that if such charge is found
         to be in excess of the maximum  amount  allowed by applicable  law, the
         late payment  charge shall be the maximum  amount allowed by applicable
         law.

                  (h) Tel-Save is responsible for safeguarding the Services from
         use by  unauthorized  persons,  and to pay all  charges  for use of the
         Services by any persons whether or not authorized by Tel-Save.

6.2.     BILL DISPUTES.

         A "Bill  Dispute"  is a bona fide  dispute of a billed  charge that has
been identified to AT&T in writing by Tel-Save.  A pending Bill Dispute does not
relieve  Tel-Save  of the  obligation  to pay the  disputed  charge,  except  as
provided in Section 6.1(e).  The following process shall apply for resolution of
Bill Disputes:

                  (a) When Tel-Save provides a written  explanation of the basis
         for a Bill Dispute,  AT&T shall promptly  commence an  investigation of
         the Bill Dispute in an effort to complete its investigation of the Bill
         Dispute  within  sixty  (60)  days  after  the date on  which  Tel-Save
         provides such written explanation.

                  (b) If, as a result of its investigation,  AT&T concludes that
         the  disputed  charge is  correct  (in whole or in  part),  AT&T  shall
         promptly provide to Tel-Save a written explanation of the basis for its
         conclusion. If, as a result of its investigation, AT&T concludes that a
         disputed charge is incorrect (in whole or in part), AT&T shall promptly
         process an appropriate billing credit.


                                       28

<PAGE>

                  (c) If Tel-Save  disagrees with AT&T's resolution of a Billing
         Dispute,  Tel-Save may initiate the dispute  resolution  procedures  of
         Section 12, including  specifically  proceedings for injunctive  relief
         pursuant to Section 12.3.

6.3.     DEPOSITS

         No initial deposit is required of Tel-Save. In the event of a change in
circumstances  that increases  AT&T's risk of non-payment  under this Agreement,
AT&T may  require  Tel-Save,  during  the term of this  Agreement,  to  tender a
deposit in an amount to be determined by AT&T in its reasonable discretion.  Any
deposit  will  be  held  by AT&T as a  guarantee  for  the  payment  of  charges
(including but not limited to potential shortfall  charges).  A deposit does not
relieve Tel-Save of the responsibility for the prompt payment of bills. Interest
(at the rate of 6% per year) will be paid to Tel-Save for any period that a cash
deposit is held by AT&T.  A failure of Tel-Save to post a deposit as required by
AT&T  pursuant  to this  Section  shall  constitute  a  material  breach of this
Agreement by Tel-Save.

                  7. LIMITATIONS OF LIABILITY: INDEMNIFICATION
                     -----------------------------------------

7.1.     LIMITATIONS OF LIABILITY.

                  (a)  AT&T's  liability,  if  any,  for  any  claim  or suit by
         Tel-Save   or  its   Affiliates   for  damages   associated   with  the
         installation,    provision,   termination,   maintenance,   repair   or
         restoration of any of the Services shall not exceed an amount equal to:

                           (1) for Services  subject to measured  usage charges,
                  the initial  period  charge for the call for the period during
                  which the call was affected;

                                       29
<PAGE>

                           (2) for all other Services,  the proportionate charge
                  under this  Agreement  for the Service  for the period  during
                  which the service was affected.

         Any liability for damages shall be in addition to any credit  allowance
         that may otherwise be due to Tel-Save.

                  (b)  AT&T  shall  not be  liable  for  damages  to a  premises
         resulting   from  the   furnishing  of  the  Services,   including  the
         installation and removal of equipment and associated wiring, unless the
         damage is caused by its negligence.

                  (c) IN NO EVENT SHALL AT&T OR TEL-SAVE BE LIABLE IN CONNECTION
         WITH  THE  PROVISION,  USE OR  RESALE  OF THE  SERVICES  FOR  INDIRECT,
         INCIDENTAL,  CONSEQUENTIAL,  RELIANCE  OR  SPECIAL  DAMAGES,  INCLUDING
         WITHOUT LMTATION DAMAGES FOR LOST PROFITS OR DIMINISHED BUSINESS VALUE,
         REGARDLESS  OF THE  FORM  OF  ACTION  WHETHER  IN  CONTRACT,  INDEMNITY
         WARRANTY,   STRICT  LIABILITY  OR  TORT,   INCLUDING  WITHOUT  LMTATION
         NEGLIGENCE OF ANY KIND WHETHER ACTIVE OR PASSIVE, PROVIDED THAT:

                           (1)  NOTHING  IN THIS  SECTION  7.1  SHALL  LIMIT THE
                  PARTIES'  RESPECTIVE RIGHTS AND OBLIGATIONS UNDER SECTION 7.2;
                  AND

                           (2) THE  LMTATIONS  OF  LIABILITY  DESCRIBED  IN THIS
                  SECTION 7.1 SHALL NOT RENDER INAPPLICABLE ANY CHARGES OR OTHER
                  LIABILITIES  FOR WHICH A PARTICULAR  AMOUNT,  FORMULA 

                                       30

<PAGE>

                  OR OTHER METHOD OF  CALCULATION  IS  SPECIFICALLY  PROVIDED IN
                  THIS AGREEMENT.

                  (d)  NOTHING IN THIS  AGREENIENT  SHALL LIMIT  EITHER  PARTY'S
         LIABILITY  IN  TORT  FOR  (1)  THAT  PARTY'S   WILLFUL  OR  INTENTIONAL
         MISCONDUCT  OR (2) DAMAGES TO  INDIVIDUALS  OR THEIR ESTATES FOR BODILY
         INJURY OR DEATH PROXIMATELY CAUSED BY THAT PARTY'S NEGLIGENCE.  NOTHING
         IN THIS  SECTON  7.1 SHALL  LIMIT THE  PARTIES'  RESPECTIVE  RIGHTS AND
         OBLIGATIONS UNDER SECTION 7.2.

                  (e)  The   limitations  of  liability  and  other  limited  or
         exclusive  remedies  set  forth in this  Agreement  shall  survive  any
         frustration of the essential purpose of the remedy.

7 2.     INDEMNIFICATION.

                  (a) AT&T shall be indemnified,  defended, and held harmless by
         Tel-Save against all claims,  losses, or damages awarded, to the extent
         that they arise from the use of the Services, regardless of the form of
         action,  whether in  contract,  tort,  warranty,  or strict  liability,
         involving:

                           (1) Claims for libel,  slander,  invasion of privacy,
                  or  infringement of copyright  arising from any  communication
                  not made by AT&T or its agent;

                           (2)  Claims  for  patent  infringement  arising  from
                  combining or using the Services in connection  with facilities
                  or  equipment  furnished by others,  provided  that such claim
                  would not have arisen if the Services had not been combined or
                  used in connection with  facilities or equipment  furnished by
                  others;

                                       31
<PAGE>

                           (3) Claims,  including  claims based on AT&T's active
                  or  passive  negligence,   brought  against  AT&T  by  any  of
                  Tel-Save's  customers,   Affiliates,   customers  of  Tel-Save
                  Affiliates, Intermediate Carriers or End Users, related to the
                  Services  provided  to  Tel-Save  under  this  Agreement;  

                  (b) Tel-Save shall be indemnified,  defended and held harmless
         by AT&T against all claims,  losses or damages  awarded,  to the extent
         that they arise from use of the  Services  involving  claims of patent,
         copyright,  trademark or trade secret infringements arising solely from
         the use of the Services.

                  (c) If,  in  connection  with any  claim,  lawsuit,  or demand
         brought  by a  third  party  against  either  party  (the  "Indemnified
         Party"),   the   Indemnified   Party   asserts   it  is   entitled   to
         indemnification  and  defense  from the other  party (the  "Indemnified
         Party  asserts it is entitled to  indemnification  and defense from the
         other party (the "Indemnified  Party") pursuant to this Agreement,  the
         Indemnified   Party  shall  provide   prompt   written  notice  to  the
         Indemnifying  Party of such claim,  lawsuit or demand, and shall tender
         the  defense  of such  claim,  lawsuit,  or demand to the  Indemnifying
         Party. The Indemnified Party shall cooperate in every reasonable manner
         with the defense or settlement of such claim,  lawsuit,  or demand. The
         Indemnifying   Party  shall  not  be  liable  for  settlements  by  the
         Indemnified  party of any such  claim,  demand,  or lawsuit  unless the
         Indemnifying Party has approved the settlement in advance or unless the
         defense  of the claim,  demand,  or lawsuit  has been  tendered  to the
         Indemnifying  Party, in writing,  and the Indemnifying Party has failed
         promptly to undertake the defense. Indemnified party of any such claim,
                                       32

<PAGE>

         demand,  or lawsuit  unless the  Indemnif3inc,  Party has  approved the
         settlement  in advance or urdess the defense of the claim,  demand,  or
         lawsuit has been tendered to the  Indemnifying  Party, in writing,  and
         the Indemnifying Party has failed promptly to undertake the defense.

7.3.     FORCE MAJEURE.

         Neither party nor its Affiliates or  subcontractors  shall be liable in
any way for delay, failure performance, loss or damage related to this Agreement
due to any of the following:  fire, strike, embargo,  explosion, power blackout,
lightning,  power  surges or  failures,  fuel or energy  shortages,  earthquake,
volcanic action, flood, war, water, the elements,  labor disputes, acts of civil
or military  authorities,  acts of God, acts of the public  enemy,  inability to
secure raw materials,  inability to secure products,  acts or omissions of other
carriers  (except,  for  Tel-Save,  the acts or  omissions  of its  Intermediate
Carriers), preemption of existing services to restore service in compliance with
Part 64,  Subpart D,  Appendix A, of the FCC's Rules and  Regulations,  or other
causes beyond its reasonable control, whether or not similar to the foregoing (a
"Force Majeure Condition");  provided, however, that any failure or inability by
Tel-Save to resell Services  provided under this Agreement or to collect payment
from its  Intermediate  Carriers or  End-Users  shall not be  considered a Force
Majeure  Condition.  Tel-Save  may suspend a MARC Period for any whole months in
which  Tel-Save's  use of the  Services  is  substantially  affected  by a Force
Majeure  Condition.  Tel-Save must notify AT&T within thirty (30) days after the
onset of a Force  Majeure  Condition of its election to suspend the MARC Period,
and must notify AT&T of the whole  months for which its use of the  Services was
substantially  affected within thirty (30) days 

                                       33
<PAGE>

after the cessation of the Force Majeure  Condition.  Any disputes regarding the
suspension of the MARC Period will be subject to arbitration pursuant to Section
12.2.  If a MARC Period is  suspended  under this  provision,  the whole  months
during which the  suspension is in effect will be excluded from the MARC Period,
and the affected MARC Period and the Term will be extended by the same number of
months.  All charges  incurred  by Tel-Save  during such months will be excluded
from all calculations  under Section 3.1. (The MAP Period will be extended to be
coterminous  with the MARC  Period  and will  continue  to apply for the  months
during  which the MARC  Period  is  suspended,  subject  to all  applicable  MAP
provisions,  including the exemption  described in Section 3.2(k)(1).) The party
experiencing any  experiencing any Force Majeure  Condition shall cooperate with
the reasonable  requests of the other party in such party's  efforts to minimize
the impact of such circumstances.

7.4.     LIMITATION OF ACTIONS.

         Neither party may bring a claim or action  arising out of or related to
this Agreement or the Services provided hereunder,  excluding any claim of fraud
or misrepresentation,  more than two (2) years after the cause of action arises.
The parties  hereby waive the right to invoke any  different  limitation  on the
bringing of actions  provided  under state or federal law.  

7.5.     DISCLAIMER  OF WARRANTIES.

         AT&T (INCLUDING ITS SUBSIDIARIES,  AFFILIATES, PREDECESSORS, SUCCESSORS
AND  ASSIGNS)  MAKES  NO  WARRANTIES,  EXPRESS  OR  IMPLIED,  EXCEPT  AS  MAY BE
SPECIFICALLY  SET  FORTH IN THIS  AGREEMEENT,  AND  

                                       34

<PAGE>

SPECIFICALLY  DISCLAIMS  ANY  WARRANTY  OF  MERCHANTABILITY  OR  FITNESS  FOR  A
PARTICULAR PURPOSE WITH RESPECT TO THE SERVICES.

7.6.     EXCLUSIVE REMEDIES.

         The remedies available to either party for any breach of this Agreement
by the other or for any other  claim  against  the  other  arising  out of or in
connection with the provision, use or resale of the Services shall be solely and
exclusively  limited to: (a)  monetary  damages  (including  unpaid  charges and
damages  pursuant to Section 8.2),  subject to the  limitations of liability set
forth in Section  7.1 of this  Agreement,  (b)  indemnification,  as provided in
Section  7.2 of  this  Agreement;  (c)  full  or  partial  termination  of  this
Agreement,  as provided  under  Sections 5.2 or 5.3 of this  Agreement,  and (d)
temporary and/or permanent  injunctive relief, as provided under Section 12.3 or
12 4 of this Agreement.

                            8. INTELLECTUAL PROPERTY
                               ---------------------

8.1.     RESTRICTIONS AGAINST USE OF NAME AND BRAND IDENTIFICATION.

                  (a) Neither Tel-Save nor AT&T shall use the other's  corporate

         or trade names, trademarks, service marks, trade dress or other symbols
         that serve to identify and distinguish such party from its competitors,
         ("Marks"), nor permit them to be displayed or used by third parties, in
         connection   with  the   advertising,   promotion,   marketing,   sale,
         provisioning,  or billing of telecommunications services, or associated
         customer care  activities,  except as provided in Section  8.1(d) (with
         respect to a legally required use of name), 8.1 (e) * * * , or 8.1(f) *
         * * , or except  with the prior  written  approval  of the 

                                       35

<PAGE>

         other party (which  approval may be withdrawn by such party at any time
         upon reasonable notice to the other party).  Either party may make fair
         use of the other's  corporate  or trade  names,  trademarks  or service
         marks in  comparative  commercial  advertising  solely to identify  the
         other party or its competing  services,  provided such use is made in a
         manner that is not likely to cause confusion.

                  (b) Neither  Tel-Save nor AT&T will (1) use the other  party's
         corporate  logos,  trade dress, or other symbols that serve to identify
         and  distinguish   such  other  party  from  its  competitors  (or  use
         confusingly   similar  corporate  logos,  trade  dress  or  such  other
         symbols),  or (2) conduct  business  under the other  party's Marks (or
         under  any  confusingly   similar  corporate  or  trade  names,  logos,
         trademarks, service marks, trade dress or such other symbols).

                  (c) Except as provided in Section  8.1(d)  (with  respect to a
         legally  required  use of  name),  8.1(e) * * * , or  8.1(f) * * * , or
         except  with the  prior  written  approval  of the other  party  (which
         approval  may be  withdrawn  by such party at any time upon  reasonable
         notice to the other party), * * *

                  (d) Legally  Required  Use:  Either  party may use the other's
         corporate  name to the extent it is  specifically  required by statute,
         regulation  or  other  government  requirement  to do so.  If  Tel-Save
         believes in good faith that it is legally  required to use AT&T's name,
         in  connection  with  the  advertising,   promotion,  marketing,  sale,
         provisioning or billing of  telecommunications  services, or associated
         customer  care  activities,   in  a  manner  that  would  otherwise  be
         inconsistent with the provisions of Section 8.1, Tel-Save shall provide

                                       36

<PAGE>

         prior written notice to AT&T,  providing a full detailed explanation of
         the manner in which  Tel-Save  believes  it is  required  to use AT&T's
         name,  the  basis for such  belief,  and why the  other  provisions  of
         Section 8.1 are  insufficient  to satisfy the legal  requirement.  Such
         notice shall include a specific  reference to this Section 8.1(d).  (To
         the extent practicable under the circumstances,  Tel-Save shall provide
         such  notice  to AT&T at  least  15 days  prior  to the  date on  which
         Tel-Save  believes it is  required  to begin using  AT&T's name in this
         manner.)  Following  its receipt of such notice,  AT&T may  institute a
         legal proceeding for a declaratory judgment and/or injunctive relief to
         prevent such use of name by Tel-Save.  Any dispute  arising  under this
         Section  8.1(d)  as to  the  nature  or  extent  of  any  statutory  or
         regulatory  requirement  that  Tel-Save  use  AT&T's  name shall not be
         subject to arbitration under Section 12.2.

                  (e)      * * *
  
                  (f)      * * *

                  (g)      Nothing in  this  Agreement creates in a party rights
         in the Marks of the other party.

8.2.     INCONSISTENT USE.

                  (a) If Tel-Save, in connection with its resale of the Services
         provided  under this  Agreement,  is using  AT&T's  corporate  or trade
         names, logos,  trademarks,  service marks, trade dress or other symbols
         that serve to identify and distinguish AT&T from its competitors,  in a
         manner   inconsistent   with  the   provisions   of  Section   8.1  (an
         "Inconsistent Use"), Tel-Save shall be liable for liquidated damages in
         the amount of $100,000 per day 

                                       37
<PAGE>


         until  such time as the  Inconsistent  Use has  ended,  subject  to the
         phase-in schedule  described in Section 8.2(b). If the Inconsistent Use
         consists  of * * * , the  liquidated  damages  will not apply  until 24
         hours after AT&T provides notice to Tel-Save of the Inconsistent Use.

                  (b)  Tel-Save's   liability  for  liquidated  damages  for  an
         Inconsistent Use shall be phased in according to the following schedule

                       * * *

                  (c)  Tel-Save  shall  take  such  steps  that  are  reasonably
         possible to ensure that no Intermediate Carriers takes any action that,
         if done directly by Tel-Save,  would constitute an Inconsistent Use. If
         an Intermediate Carrier does take such action,  Tel-Save shall take all
         steps as are reasonably  possible to cause the  Inconsistent Use by the
         Intermediate  Carrier to be ended or  corrected,  to AT&T's  reasonable
         satisfaction (the "Required Steps").  To comply with this obligation to
         take Required Steps section, Tel-Save will do the following:

                       * * * 

                  (d)  If AT&T  finds  that an  Intermediate  Carrier  has taken
         action  that,  if  done  directly  by  Tel-Save,  would  constitute  an
         Inconsistent  Use,  AT&T  shall  provide   reasonable  notice  of  such
         Inconsistent Use to Tel-Save.  If Tel-Save fails,  within 15 days after
         the  receipt  of such  notice,  to  substantiate  to AT&T's  reasonable
         satisfaction that the Inconsistent Use by the Intermediate Carriers has
         ended or has been  corrected  or that  Tel-
                                       38

<PAGE>

         Save  has  taken  the  Required  Steps,  Tel-Save  will be  liable  for
         liquidated  damages  in  the  amount  calculated  as  described  in the
         following  sentence,  for each day until such time as the  Inconsistent
         Use by the  Intermediate  Carrier  has ended or has been  corrected  to
         AT&T's  reasonable  satisfaction,  or  until  Tel-Save  has  taken  the
         Required Steps.  The amount of Liquidated  Damages applied per day will
         be equal to  $100,000  times a factor,  the  numerator  of which is the
         amount  of AT&T  charges  for  Services  provided  by AT&T  under  this
         Agreement that were resold by such  Intermediate  Carrier (to End Users
         or to other Intermediate Carriers) in the most recent billing month for
         which such amount is  available,  and the  denominator  of which is the
         total amount of AT&T  charges for Services  provided by AT&T under this
         Agreement in that same month.

                  (e)  Except to the extent  provided  in  Section  8.l(d),  the
         arbitration  process  described  in  Section  12.2 and 12.3 will be the
         exclusive means and remedy for settling any dispute between the parties
         as to whether a  particular  use  constitutes  an  Inconsistent  Use or
         whether  Tel-Save has failed to take Required  Steps with respect to an
         Inconsistent Use by an Intermediate Carrier.

8.3.     NO PATENT OR SOFTWARE LICENSE.

         No license under patents or software copyrights (other than the limited
license to use) is  granted  by AT&T or shall be  implied or arise by  estoppel,
with respect to the Services provided under this Agreement.

                                       39
<PAGE>

                                    9. TAXES
                                       -----

9.1.     TAXES TO BE BILLED BY AT&T.

                  (a) For purposes of this  Agreement,  the term  "Taxes"  shall
         include  but not be limited to Federal,  State,  or local  sales,  use,
         excise,  gross  receipts  or other taxes or  tax-like  fees  (including
         tariff surcharges)  imposed on or with respect to the Services provided
         under this Agreement,  excluding  however,  ad valorem  property taxes,
         state and local  privilege  and license  taxes based on gross  revenue,
         taxes  measured by net income,  and any taxes or amounts in lieu of the
         foregoing excluded items.

                  (b) To  the  extent  that  AT&T's  provision  of  Services  to
         Tel-Save is subject to any Taxes, AT&T shall calculate,  bill,  collect
         and remit such Taxes.  AT&T shall  collect such Taxes from  Tel-Save in
         the same  manner it  collects  such Taxes from other  customers  in the
         ordinary course of AT&T's business.

                  (c) If Tel-Save  disputes  the  taxability  of any Services or
         desires  to seek a refund  of any  Taxes  imposed  as a  result  of the
         existence or operation of this Agreement,  Tel-Save, at its own expense
         and in its own  name,  may  file a claim  for  refund  or  protest  the
         imposition of the disputed Taxes.

9.2.     TAXES NOT TO BILLED BY AT&T.

                  (a) To  the  extent  that  AT&T's  provision  of  Services  to
         Tel-Save  is exempt  from  Taxes in any  jurisdiction,  Tel-Save  shall
         provide  to AT&T  annually  for  each  such  jurisdiction  a valid  tax
         exemption  certificate or such other proof of tax-exempt  status as 

                                       40

<PAGE>

         may be required by the tax authorities in such jurisdiction. AT&T shall
         not bill Tel-Save for such Taxes.

                  (b)  Tel-Save  shall  calculate,  bill,  collect and remit any
         Taxes (and any related  interest  and  penalties)  which may apply as a
         result of the provision of service by Tel-Save to its  customers.  AT&T
         shall not include  such taxes in the Call Detail  Records  furnished to
         Tel-Save.

9.3.     GROSS RECEIPTS TAX.

         When utility or  telecommunications  assessments,  franchise  fees,  or
privilege, license, occupational,  excise, or other similar taxes or fees, based
on interstate receipts are imposed by certain taxing  jurisdictions upon AT&T or
upon Local Exchange  Companies and passed on to AT&T through or with  interstate
access  charges,  the  amounts  of such  taxes or fees  will be billed to AT&T's
customers  (including  Tel-Save)  in such a taxing  jurisdiction  on a  prorated
basis.  The  amount  of  charge  that is  prorated  to each  customer's  bill is
determined by the interstate  telecommunications services provided to and billed
to a customer service location in such a taxing  jurisdiction with the aggregate
of such charges  equal to the amount of the tax or fee imposed upon or passed on
to AT&T.  The taxing  jurisdictions  in which the charges will be applicable and
the  associated  tax factors are as specified  in AT&T's  Tariff  F.C.C.  No. 1,
Section 2.5.14.


                                       41
<PAGE>

                    10. ACCESS CHARGES AND RELATED SURCHARGES
                        -------------------------------------

10.1.    ACCESS CHARGES.

         As  described  more  fully in  Attachment  A,  certain  access  charges
associated with AT&T Network  Connection  Services will be the responsibility of
Tel-Save.  If, as a result of access  restructuring  (including  changes  to the
funding  mechanism for the Universal  Service Fund),  certain external costs are
shifted to AT&T, AT&T will pass those charges through to Tel-Save (to the extent
such charges arise from the Services provided by AT&T under this Agreement).  If
AT&T is required to pay  Presubscribed  Interexchange  Carrier Charges (PICC) in
connection with any of the Services provided under this Agreement, AT&T may pass
those  charges  through to Tel-Save.  This  provision is not intended to require
Tel-Save to pay the same access charge twice for the same call.  This  provision
is  intended  to allow AT&T to  recover,  as an  additional  sum,  a  reasonable
approximation  of the  actual  amount  of  Presubscribed  Interexchange  Carrier
Charges  incurred by AT&T to the extent  such  charges  arise from the  Services
provided by AT&T under this Agreement. 

10.2. SPECIAL ACCESS SURCHARGES.

         Tel-Save  will pay to AT&T the  amount of any  monthly  Special  Access
Surcharge which Local Exchange  Carriers may collect from AT&T on account of any
services or facilities used to provide the Services under this Agreement under a
Special Access  arrangement (i.e., a dedicated local channel from the End User's
premises  to the AT&T POP).  AT&T will bill  Tel-Save  the  appropriate  Special
Access  Surcharge in the amount(s)  specified in AT&T's  Tariff  F.C.C.  No. 11,

                                       42

<PAGE>

Section 5.2.4.,  unless the termination of the service  component is exempt from
the Surcharge for one of the following reasons:

                  (a)      by  the  nature of its operating characteristics, the
         service component could not make use of the local exchange network;

                  (b) the service component is interconnected either directly or
         indirectly to the local exchange  network where the usage is subject to
         Carrier Common Line charges; or

                  (c) the service component is not connected to a device capable
         of  interconnecting  with the local  exchange  network and  Tel-Save so
         certifies  this to AT&T  (either at the time the service  component  is
         installed   or  at  such  later  time  as  the  service   component  is
         reterminated or changed in such a manner that an exemption applies).

10.3.    OTHER SURCHARGES.

         AT&T may include in charges to Tel-Save  certain charges and surcharges
newly  imposed  after the  Effective  Date that are levied upon and paid by AT&T
with respect to the Services.  To be eligible for inclusion  under this Section,
the charges or surcharges  must be imposed by a  governmental  authority that is
imposing the charges or surcharges specifically on telecommunications  services,
and the  governing  law must not  prohibit  AT&T from  passing  the  charges  or
surcharges to Tel-Save.


                                       43

<PAGE>


                               11. CONFIDENTIALITY
                                   ---------------

11.1.    CONFIDENTIAL INFORMATION.

                  (a) Non-public information furnished or disclosed by one party
         or its agent or representative  (the "Originating  Party") to the other
         party  or its  agent  or  representative  (the  "Receiving  Party")  in
         connection with or in contemplation  of this Agreement,  or relating to
         current  or  anticipated  voice  and data  telecommunications  needs of
         Tel-Save  and its  Affiliates  or otherwise  obtained by the  Receiving
         Party as a result of performance  under this  Agreement  (including but
         not  limited  to  proposals,  contracts,  tariff and  contract  drafts,
         specifications, drawings, network designs and design proposals, pricing
         information,   strategic  plans,   computer   programs,   software  and
         documentation,  and other technical or business  information related to
         current and  anticipated  AT&T  products  and  services  or  Tel-Save's
         current  and  anticipated  voice  and  data  telecommunications  needs,
         network  designs  and  design  proposals,  business  plan and  customer
         information), shall be "Confidential Information".

                  (b) If such  information  is in written or other tangible form
         (including,  without limitation,  information  incorporated in computer
         software or held in  electronic  storage  media) when  disclosed to the
         Receiving  Party  it shall be  Confidential  Information  only if it is
         identified by clear and conspicuous  markings to be confidential and/or
         proprietary  information of the Originating Party;  provided,  however,
         that all written or oral  pricing,  contract or tariff  proposals,  and
         information  relating to new AT&T products or services  currently under
         development,   and  information   related  to  Customer's  current  and

                                       44

<PAGE>

         anticipated voice and data  telecommunications  needs,  network designs
         and  design  proposals,   business  plans,  and  customer  information,
         exchanged  between  the  parties or  obtained  in  connection  with the
         provision  of the  Services  pursuant to this  Agreement  also shall be
         deemed Confidential Information,  whether or not expressly indicated by
         markings or statements to be confidential or proprietary.

                  (c) If such  information  is not in writing or other  tangible
         form when disclosed to the Receiving  Party,  it shall be  Confidential
         Information  only if (1) the original  disclosure of the information is
         accompanied by a statement that the information is confidential  and/or
         proprietary,   and  (2)  the  Originating   Party  provides  a  written
         description  of the  information  so  disclosed,  in detail  reasonably
         sufficient to identify such information,  to the Receiving Party within
         thirty (30) days after such original disclosure.

                  (d) The terms and conditions of this Agreement shall be deemed
         Confidential  Information  as to  which  each  party  shall  be both an
         Originating Party and a Receiving Party.

                  (e) Confidential  Information  shall be deemed the property of
         the Originating  Party.  

                  (f)  Information  that was previously known to 
         the Receiving Party,  before being received from the Originating Party,
         free of any  obligation to keep it  confidential,  or is  independently
         developed  by the  Receiving  Party  shall not be  deemed  Confidential
         Information.

                                       45
<PAGE>

                  (g) Rights and obligations provided by this Section shall take
         precedence  over  specific   legends  or  statements   associated  with
         information when received.

11.2.    PROTECTION OF CONFIDENTIALITY.

         A Receiving Party shall hold all Confidential Information in confidence
during the Term and for a period of two (2) years following the end of the Term.
During that period, the Receiving Party:

                  (a)  shall  use  such  Confidential   Information   solely  in
         furtherance of the matters  contemplated  by this Agreement and related
         to either party's performance of this Agreement;

                  (b) shall reproduce such Confidential  Information only to the
         extent necessary for such purposes;

                  (c) shall restrict disclosure of such Confidential Information
         to such of its employees or its Affiliate's employees as have a need to
         know such information for such purposes only;

                  (d) shall  advise  any  employees  to whom  such  Confidential
         Information is disclosed of the obligations assumed in this Agreement;

                  (e) shall not disclose  any  Confidential  Information  to any
         third party  without prior written  approval of the  Originating  Party
         except as expressly provided in this Agreement; and


                                       46

<PAGE>

                  (f) shall use at least the same degree of care as it uses with
         regard to its own  proprietary or  confidential  information to prevent
         the disclosure,  use or publication of such Confidential Information in
         violation of this Agreement.  


         The  Receiving  Party shall not be required to hold in  confidence  any
Confidential  Information  which is made  public by the  Originating  Party or a
third  party.  The  Receiving  Party  shall  also  not be  required  to  hold in
confidence any Confidential Information which is provided to the Receiving Party
by a third party,  unless the Receiving Party knows, or should have known,  that
the third party was not entitled to provide the Confidential  Information to the
Receiving Party. 

11.3.    DISCLOSURE TO OR BY AFFILIATES OR SUBCONTRACTORS.

         In the  absence  of a contrary  instruction  by a party,  such  party's
Affiliates  and its  subcontractors  performing  work in  connection  with  this
Agreement  shall be deemed  agents of such  party for  purposes  of  receipt  or
disclosure of Confidential Information.  Accordingly,  any receipt or disclosure
of  Confidential  Information  by a  party's  Affiliate,  or  its  subcontractor
performing work in connection with this Agreement,  shall be deemed a receipt or
disclosure  by  the  party.   

11.4.    RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION.

                  (a) Upon termination of this Agreement,  or at an earlier time
         if the  information  is no longer needed for the purposes  described in
         Section   11.2((a)),   each  party  shall  cease  use  of  Confidential
         Information  received from the other party and,  upon specific  written
         request of the Originating Party, shall use its best efforts to destroy
         all such Confidential  

                                       47

<PAGE>


         Information,  including  copies  thereof,  then  in its  possession  or
         control.  Alternatively,  or at the written  request of the Originating
         Party,  the  Receiving  Party shall use its best  efforts to return all
         such Confidential Information and copies to the Originating Party.

                  (b)  Any   Confidential   Information  that  is  contained  in
         databases and/or mechanized systems in such a manner that it reasonably
         cannot be isolated for destruction or return, shall continue to be held
         in confidence subject to the provisions of this Agreement.

                  (c) The  rights  and  obligations  of the  parties  under this
         Agreement with respect to any Confidential  Information returned to the
         Originating   Party  shall  survive  the  return  of  the  Confidential
         Information.

11.5.    DISCLOSURE TO CONSULTANTS.

         A Receiving Party may disclose Confidential  Information to a person or
entity (other than a direct competitor of the Originating Party) retained by the
Receiving Party to provide advice, consultation,  analysis, legal counsel or any
other similar services ("Consulting Services") in connection with this Agreement
or the Services (such person or entity hereafter referred to as "Consultant") if
the Consultant agrees in writing to be bound by the confidentiality  obligations
of this Agreement and if the Originating  Party consents (such consent not to be
unreasonably  withheld) to the disclosure to Consultant  (except such consent or
written agreement shall not be required in connection with a disclosure to legal
counsel for  purposes of legal advice and a disclosure  by legal  counsel  shall
constitute a disclosure by the Receiving Party). 

                                       48

<PAGE>

11.6     Required Disclosure.

                  (a) A Receiving Party may disclose Confidential Information as
         may be  required  by law,  regulation  or  legal  process  or as may be
         necessary  for the  enforcement  of this  Agreement.  If  either  party
         becomes  aware of any motion or other  regulatory  or court  proceeding
         that might require it to disclose any  Confidential  Information,  that
         party will give  immediate  written notice of such motion or proceeding
         to the other and both  parties  shall act  cooperatively  to retain the
         confidentiality of the information.

                  (b) If the FCC or a state  regulatory  entity with  applicable
         jurisdiction  orders  either  party  to file  this  Agreement  with the
         Commission  or such  state  regulatory  entity  pursuant  to  authority
         granted by law or regulation,  the party charged with such filing shall
         provide notice to the other party as provided in Section 11.6((a)), and
         file the  Agreement to the extent  required.  Each party shall  request
         confidential treatment in connection with such filing.

                  (c) Either party may  disclose the terms of this  Agreement to
         the  extent  it  deems  such  disclosure   reasonably  necessary  under
         applicable federal and state securities laws,  regulations and policies
         in  connection  with the status of the party,  or an  Affiliate  of the
         party, as a public company and with transactions involving the offering
         of  securities of the party,  or its  Affiliates.  In addition,  either
         party may  disclose  the terms of this  Agreement  to third  parties as
         necessary in connection  with other financing or merger and acquisition
         activities,  provided that it seeks to protect the  confidentiality  of
         the terms  hereof in the same  manner and to the same degree as its own
         confidential information.

                                       49
<PAGE>


11.7.    INJUNCTIVE REMEDY.

         In the event of a breach or threatened  breach by a Receiving  Party or
its agent or  representative  of the terms of this  Section 11, the  Originating
Party shall be entitled to an injunction  prohibiting such breach in addition to
such other legal and equitable  remedies as may be available to it in connection
with such breach.  Each party acknowledges that the Confidential  Information of
the other Party is valuable  and unique and that the use or  disclosure  of such
Confidential  Information in breach of this Agreement will result in irreparable
injury to the other party.

                             12. DISPUTE RESOLUTION
                                 ------------------

         If a dispute arises  between the parties  relating to this Agreement or
to the Services  provided  under this  Agreement,  to a Bill Dispute,  or to the
provision, use, sale, or resale of the Services (a "Dispute"),  the parties will
used  good  faith  efforts  to  resolve  the  Dispute  promptly  and  fairly  by
negotiation.   If  the  parties  are  unable  to  resolve  the  Dispute  through
negotiation, the parties shall follow the dispute resolution procedures provided
in this Section. 

12.1.    MEDIATION.

         If the parties are unable to resolve a Dispute by  negotiation  and the
parties  then agree to mediate  the  Dispute,  the  parties  shall  submit it to
mediation  conducted by a mediator to be selected  jointly by the parties or, at
the option of either party, to be selected by the procedures  established  under
the then-current  rules of the CPR Institute for Dispute  Resolution ("CPR") for
the  selection  of  a  mediator.  The  parties,  their  representatives,   other
participants  and the mediator 

                                       50
<PAGE>

shall hold the existence, content and result of the mediation in confidence. The
mediation shall conclude at such time as either party (or the mediator) notifies
the other party (or, for the mediator, both parties) in writing that the parties
are at an impasse and that  continued  efforts at  mediation  are unlikely to be
productive. 

12.2. ARBITRATION.

                  (a) If a  Dispute  in which the  total  amount in  controversy
         (based on the written  positions  taken by the  parties) is ten million
         dollars  ($10,000,000)  or less, or if any Dispute  (regardless  of the
         amount in  controversy)  regarding  either the payment,  nonpayment  or
         applicability of charges (including  shortfall or termination  charges)
         or  a  claimed  Inconsistent  Use,  is  not  successfully  resolved  by
         negotiation  or any  agreed  upon  mediation,  it shall be  subject  to
         binding arbitration under the then-current rules and supervision of the
         CPR, except as provided in Section 8.1(d). The arbitration will be held
         in New York, New York. The Federal  Arbitration Act, 9 U.S C Sections 1
         to 16,  will  govern the  arbitrability  of all  claims.  The  arbitral
         decision  and award will be final and  binding,  and  either  party may
         enter it in any court with jurisdiction.

                  (b) The arbitration will be conducted by a single  arbitrator,
         except that either party may require that the  arbitration be conducted
         by a tribunal of three such arbitrators by providing  written notice of
         such a  demand  to the  other  party  before  a  single  arbitrator  is
         selected.  For claims arising under Section 8.1 and/or 8.1(f)(3),  each
         arbitrator   shall  be  a   practicing   attorney  or  a  former  judge
         knowledgeable in the law relating to trademark and related intellectual
         property  issues,  except as the parties may otherwise  agree.  For all


                                       51

<PAGE>

         other claims,  each arbitrator shall be a practicing attorney or former
         judge knowledgeable in the law relating to  telecommunications,  except
         as the parties may otherwise  agree. The  arbitrator(s)  may not limit,
         expand or  otherwise  modify the terms of this  Agreement  and will not
         have authority to award damages to either party beyond the  limitations
         of liability provided in this Agreement.

                  (c) Each party will bear its own  attorney's  fees and related
         costs and expenses  associated with the  arbitration.  The parties will
         pay the arbitrator(s)  fees and other similar costs and expenses of the
         arbitration as the rules of the CPR provide.

                  (d) The parties, their representatives, other participants and
         the arbitrator(s)  shall hold the existence,  content and result of the
         arbitration in confidence  except that the prevailing  party shall have
         the  right  to enter  the  arbitration  award  in a court of  competent
         jurisdiction  if such entry is  necessary  to enforce  the terms of the
         award.  Either  party may  disclose  the  existence  and  nature of the
         Dispute, and the content and result of the arbitration to the extent it
         deems such disclosure reasonably necessary under applicable federal and
         state securities laws,  regulations and policies in connection with the
         status of the party,  or an Affiliate of the party, as a public company
         and with  transactions  involving  the  offering of  securities  of the
         party,  or its Affiliates.  In addition,  either party may disclose the
         existence and nature of the Dispute,  and the content and result of the
         arbitration  to third  parties as  necessary in  connection  with other
         financing or merger and acquisition activities,  provided that it seeks
         to protect the  confidentiality  of the terms hereof in the same manner
         and to the same degree as its own confidential information.

                                       52

<PAGE>

                  (e) Neither party may bring legal  proceedings  before a court
         or  administrative  body in connection  with a Dispute  subject to this
         Section 12.2, except as provided in Section 12.3. If a party disregards
         this restriction,  files such a legal proceeding,  and fails to dismiss
         it promptly upon being notified of this provision,  that party will pay
         the  other  party's  costs and  expenses,  including  attorney's  fees,
         incurred after the notice in defending the legal proceeding.

12.3.    INJUNCTIVE RELIEF.

                  (a) In  connection  with a Dispute  subject to  Section  12.2,
         either party may request appropriate temporary injunctive relief (i.e.,
         a temporary restraining order or a preliminary  injunction) to maintain
         the status quo pending  arbitration.  The legal standards applicable to
         the request for temporary injunctive relief will be those applicable in
         the United States District Court for the Southern  District of New York
         under the  Federal  Rules of Civil  Procedure.  A party may include its
         request  for such  relief in its  initial  demand for  arbitration  (or
         counterclaim), or may request such relief after an arbitration has been
         initiated.  If the  request  is made  before  the  arbitrator  has been
         appointed,  the  requesting  party  shall  bring  the  request  to  the
         immediate attention of the other party and the CPR, with a request that
         the CPR immediately appoint a temporary Arbitrator. If the CPR receives
         such a request,  it shall  appoint  as  temporary  arbitrator  a single
         neutral  arbitrator  from the CPR panel of  arbitrators.  The temporary
         arbitrator shall serve until a permanent arbitrator is appointed.  Once
         appointed,  the permanent  arbitrator may modify 

                                       53
<PAGE>


         or  terminate  any  order  of the  temporary  arbitrator  granting  (or
         denying) temporary injunctive relief.

                  (b) If the need for temporary  injunctive  relief is so urgent
         that the procedure provided in Section 12.3(a) is unworkable, the party
         seeking  such  relief  may  file a Civil  Action  seeking  a  temporary
         restraining  order in the United States District Court for the Southern
         District of New York;  provided  that the party filing the Civil Action
         shall seek  appointment of a temporary  arbitrator  pursuant to Section
         12.3(a) as soon as possible. The temporary arbitrator,  once appointed,
         shall  reconsider the request for temporary  injunctive  relief on a de
         novo and  contested  basis,  and shall rule on such  request as soon as
         reasonably possible. Within three (3) business days after the temporary
         (or  permanent)  arbitrator  has ruled on the  request,  the party that
         filed the Civil  Action  shall file a notice of  dismissal of the Civil
         Action, without prejudice, and any temporary restraining order that may
         have been issued in such Civil Action shall be dissolved.

                  (c) The arbitrator(s) may grant permanent injunctive relief as
         deemed  appropriate  under applicable legal standards for granting such
         relief.

12.4.    COURT PROCEEDINGS.

         If a Dispute not subject to Section 12.2 is not  successfully  resolved
by  negotiation  or  mediation,  it may  be the  subject  of  legal  proceedings
(including  proceedings for injunctive or other equitable relief) brought before
a court or administrative body having jurisdiction over the Dispute, and will be
submitted to arbitration only by written agreement of the parties.

                                       54
<PAGE>


                        13. GENERAL TERMS AND CONDITIONS
                            ----------------------------

13.1.    TEL-SAVE CERTIFICATION.

         Tel-Save  certifies to AT&T that it is a "common carrier," as that term
is defined in the Communications Act of 1934, as amended.

13.2.    SERVICE FORECASTING.

         At least one month before the start of each calendar quarter,  Tel-Save
shall  provide to AT&T a good faith  written  forecast  of  anticipated  service
volumes for the AT&T Network  Connection  Services provided under this Agreement
for the following fifteen months. The quarterly forecast will include,  for each
Local Exchange  Carrier ("LEC")  serving area, the  information  required by the
Carrier  Solutions  Platform  Forecast  document,  which  AT&T will  provide  to
Tel-Save.  Tel-Save's obligations are established by this Agreement;  Tel-Save's
good faith written forecasts of anticipated service volumes provided pursuant to
this Section shall not obligate  Tel-Save to buy the minimum amounts forecast or
limit Tel-Save's purchases to the maximum amounts forecast.

13.3.    ASSIGNMENT.

                  (a) Neither party may assign,  delegate or otherwise  transfer
         its  rights or  obligations  under this  Agreement  in whole or in part
         without  the  prior  written  consent  of the  other  party,  except as
         expressly  provided  in this  Agreement.  In the  event of a Change  in
         Control of  Tel-Save,  Section  8.1(f) will cease to apply  thirty days
         after the Change in Control  occurs,  unless this  Agreement is amended
         (pursuant to Section 13.19(a)) to specifically provide to the contrary.


                                       55
<PAGE>


                  (b) Tel-Save may,  without further  permission but upon notice
         to  AT&T,   assign  its  rights  and  delegate  its  obligations  to  a
         successor-in-interest,  subject  to AT&T's  right to  require a deposit
         pursuant to Section 6.3, if appropriate under the circumstances.

                  (c) AT&T shall not  unreasonably  withhold  its  consent to an
         assignment of this Agreement to an Affiliate of Tel-Save.

                  (d) AT&T may,  without  further  permission but upon notice to
         Tel-Save,  assign its rights to receive payment.  AT&T may delegate its
         performance   obligations  to  its  Affiliates,   to  the  extent  such
         delegation  does not create a legal or  regulatory  burden for Tel-Save
         and  does  not  otherwise   prejudice   Tel-Save's  rights  under  this
         Agreement.

                  (e) This  provision  shall  not  affect  Tel-Save's  resale or
         shared  use  of the  services  provided  pursuant  to  this  Agreement.
         Further,  any resale,  shared use,  delegation or assignment  shall not
         release either party from its obligations under this Agreement.

13.4.    THIRD-PARTY BENEFICIARIES; AFFILIATES.

         This  Agreement  shall be binding  upon and inure to the benefit of the
parties hereto and their respective  successors or assigns.  This Agreement does
not provide any third parties with any remedy,  claim, right of action, or other
right.  Each party shall ensure that its  Affiliates  comply with the applicable
provisions of this  Agreement  and do not take any action which,  if done by the
party,  would constitute a breach of this Agreement.  

13.5.    RELATIONSHIP OF THE PARTIES.

         The  relationship  established  by  this  Agreement  shall  in  no  way
constitute AT&T (or its agents or employees) as a partner, agent or fiduciary of
Tel-Save or any Tel-Save  Affiliate (or any 


                                       56

<PAGE>


of their agents or employees).  The  relationship  established by this Agreement
shall in no way constitute  Tel-Save or any Tel-Save  Affiliate (or any of their
agents or employees) as a partner,  agent or fiduciary of AT&T (Or its agents or
employees).  The  provision  of Service  described  in this  Agreement  does not
establish  any  joint   undertaking,   joint   venture,   pooling   arrangement,
partnership,  agency,  fiduciary relationship or formal business organization of
any kind. Tel-Save and AT&T shall be independent contractors with each other for
all  purposes at all times and neither  shall act as or hold itself out as agent
for the other or create or attempt to create liabilities for the other.

13.6.    ACKNOWLEDGEMENT OF RIGHT TO COMPETE.

         Each party  acknowledges  and understands  that it remains at all times
solely  responsible  for the success and profits of its  business,  and that the
other party makes no promises,  warranties or representations regarding business
success or prospects of business success in connection with the provision of the
service pursuant to this Agreement. Each party acknowledges and understands that
the other party will continue to market services directly to the public and that
such  marketing  may from time to time bring the parties into direct or indirect
competition.  Each party also markets its services to  competitors  of the other
party.  Each party  acknowledges  and understands that nothing in this Agreement
diminishes  or  restricts  in any way the rights of the other party to engage in
competition  for customers or to market its services to competitors of the first
party.

13.7.    NETWORK EQUIPMENT.

         AT&T shall retain title to all of its equipment and facilities  used to
provide the  Services.  Tel-Save  shall retain title to all of its equipment and
facilities used to connect to the Services 


                                       57
<PAGE>

13.8.    REMOVAL OF PROPERTY.

         At the end of the Term,  each party that has  installed  or located any
equipment or other property on the other party's  premises  shall,  at the other
party's  request,  remove  such  property  within a  reasonable  time after such
request.  Any such property not removed  within sixty (60) days after the end of
the Term shall be deemed  abandoned.  The party removing such property shall use
reasonable  care in doing so,  and,  unless  otherwise  agreed in writing by the
party on whose premises the property was installed, shall return the premises to
their original condition, reasonable wear and tear excepted. 

13.9.    NOTICES.

         Any notice to the other  party under this  Agreement  shall be given in
writing to the following  individual or such individual's  designated agent, and
either (a) delivered by hand, (b) sent by United States  certified mail,  return
receipt requested,  (c) sent by a recognized  overnight delivery service, to the
following  address,  or (d) transmitted by facsimile to the following  facsimile
number:

                  If to AT&T:

                       Pat McIntyre
                       AT&T
                       300 Atrium Drive
                       Somerset, New Jersey  08873
                       Facsimile Number:  732-805-5720


                                       58
<PAGE>


                   with a copy to:

                       Richard Meade
                       AT&T Law Department (BMD - Wholesale Markets)
                       Room 3226B2
                       295 North Maple Avenue
                       Basking Ridge, New Jersey 07023
                       Facsimile Number: 908-953-8360

                  If to Tel-Save:

                        Daniel Borislow
                        C.E.O.
                        Tel-Save, Inc.
                        6805 Route 202
                        New Hope, Pennsylvania  18938
                        Facsimile Number:  215-862-1515

         The name,  address  or  facsimile  number  for notice may be changed by
giving notice in accordance with this Section. If mailed in accordance with this
Section,  notice shall be deemed given when actually  received by the individual
addressee  or  designated  agent or  three  (3)  business  days  after  mailing,
whichever  is earlier.  If  transmitted  by  facsimile  or sent by a  recognized
overnight  delivery  service in accordance  with this  Section,  notice shall be
deemed given when actually  received by the  individual  addressee or designated
agent or one (1)  business  day after  transmission  or  sending,  whichever  is
earlier. 

13.10.   DETARIFFING.

         If,  during the Term,  any of the  tariffs of AT&T  referenced  in this
Agreement are  canceled,  in whole or in part,  pursuant to a statutory  change,
order or  requirement  of a  governmental  or judicial  authority  of  competent
jurisdiction  requiring  detariffing,  then,  following such  cancellation,  any
rates,  terms and  conditions  of such tariffs that had been  applicable  to the
Services  provided  


                                       59
<PAGE>


under this  Agreement  will  continue  to apply,  based on the  language  of the
tariffs in effect as of the date of cancellation.

13.11.   COMPLIANCE WITH LAWS.

                  (a) Each party is responsible  for its own compliance with all
         laws and regulations affecting its business.

                  (b) Nothing  contained in this Agreement  shall require either
         party to take any action prohibited or omit to take any action required
         by applicable law, the Federal  Communications  Commission or any other
         regulatory authority.

13.12.   EXPORT REGULATION COMPLIANCE.

         The parties  acknowledge  that any  products,  software,  and technical
information  (including,  but not limited to,  services and  training)  provided
under this Agreement are subject to U.S. export laws and regulations and any use
of or transfer of such  products,  software and  technical  information  must be
authorized  under  those  regulations.  Tel-Save  agrees  that it  will  not use
distribute, transfer or transmit the products, software or technical information
(even if incorporated into other products) except in compliance with U.S. export
regulations.  If  requested  by  AT&T,  Tel-Save  also  agrees  to sign  written
assurances  and other  export-related  documents  as may be required for AT&T to
comply with U.S. export regulations. 


13.13.   CHOICE OF LAW.

         The domestic law of the State of New York, except its  conflict-of-laws
rules,  shall govern the construction,  interpretation,  and performance of this
Agreement except to the extent superseded by federal law.


                                       60

<PAGE>


13.14.   SEVERABILITY.

         If any  portion  of this  Agreement  shall be found  to be  invalid  or
unenforceable, such portion shall be void and of no effect, but the remainder of
the Agreement shall continue in full force and effect unless the Agreement fails
of  its  essential  purpose  without  the  voided  portion.  If the  invalid  or
unenforceable provision is deemed essential, the parties will begin negotiations
for a replacement of the invalid or unenforceable  portion.  


13.15.   ATTACHMENTS GOVERN.

         The   Attachments   are  intended  to  complement  the  Master  Carrier
Agreement. To the extent they are in conflict, the provisions of the Attachments
shall control the rights and obligations of the parties.

13.16.   CONSTRUCTION.

         In the event of any conflict or  inconsistency  between the language or
intent of the  provisions of this Agreement and the provisions of an AT&T Tariff
expressly made  applicable  hereunder,  the  provisions of this Agreement  shall
control. 

13.17.   DESCRIPTIVE HEADINGS.

         Descriptive  headings in this  Agreement are for  convenience  only and
shall not affect the content or construction of this Agreement.

13.18.   SURVIVAL OF TERMS.

         The  provisions  of this  Agreement  will  apply  with  respect  to all
Services  provided  during the Term. The terms and provisions  contained in this
Agreement that by their sense and context 


                                       61
<PAGE>

are intended to survive this  Agreement  shall so survive,  without  limitation,
provisions for  indemnification,  confidentiality  and the making of any and all
payments due hereunder. 

13.19.   MODIFICATION AND WAIVER.

                  (a) This  Agreement and the terms under which the Services are
         provided  may be  modified  only  by a  writing  signed  by  authorized
         representatives of both parties.

                  (b) The  failure  of a party to waive  notice of default or to
         enforce or insist upon  compliance  with any of the terms or conditions
         of  this  Agreement,  or the  granting  of an  extension  of  time  for
         performance  shall not  constitute a continuing or permanent  waiver of
         any  such  term  or  condition,  and  this  Agreement  and  each of the
         provisions  hereof  shall  remain at all times in full force and effect
         unless and until modified by the parties in writing.

13.20.   ENTIRE AGREEMENT.

         This Agreement, including the Attachments hereto, constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
all prior written or oral agreements, proposals, representations,  statements or
understandings.  Neither  party  is  relying  on  any  representation,  promise,
inducement  or  statement  of  intention  made by the other  party  which is not
embodied in this  Agreement.  This  Agreement does not affect (a) any agreements
that may exist for the provision of billing services to Tel-Save by AT&T College
and University  Systems or (b) a Data Connection  Agreement to be executed at or
about the same time as this Agreement. 

                                       62


<PAGE>

13.21.   EXECUTION IN COUNTERPARTS.

         This  Agreement may be executed in  counterparts,  which together shall
constitute the original Agreement.

13.22.   INDEX OF DEFINED TERMS.

         The  following  terms are defined in this  Agreement  at the  indicated
page:


         Affiliate, 13                           LEC,  61                      
         Agreement, 5                            Map,  13                      
         AT&T, 5                                 MAP Attainment  Amount, 14    
         Authorized  Tel-Save CICs, 20           MAP Period, 13                
         Bill  Dispute, 29                       MAP Services, 13              
         Change in Control, 14                   MARC, 11                      
         Commencement Date, 10                   Marc Period, 11               
         Confidential Information, 51            Marks, 36                     
         Consultant, 55                          Originating Party, 50         
         Consulting Services, 55                 Receiving Party, 50           
         CPR, 57                                 Required Steps, 45            
         CT 1715, 10                             Services, 5                   
         Dispute, 56                             Taxes, 47                     
         Effective Date, 10                      Tel-Save, 5                   
         End Users, 19                           Tel-Save IXC Switch, 8        
         Force Majeure Condition, 34             Tel-Save Records, 18          
         Inconsistent Use, 43                    Tel-Save's  AT&T  Charges, 15 
         Indemnified  Party, 33                  Term, 10                      
         Indeminifying Party, 33                 Total Qualified Charges, 11   
         Intermediate Carriers, 19               Total Tel-Save Charges 14     
         
Other terms not listed above may be defined in the Agreement.

                                      * * *


         AT&T and Tel-Save, acting through their duly authorized represetatives,
hereby  agree to the terms set forth in this  Agreement,  and warrant that their
respective  signatories

                                       63

<PAGE>

whose  signatures  appear below have been and are of the date of this  Agreement
duly  authorized by all necessary and  appropriate  corporate  action to execute
this Agreement.

         TEL-SAVE                             AT&T CORP.

         By: /s/ Emanuel De Maio              By:  /s/ Barbara Peda
            ------------------------             -------------------------------



         Emanuel DeMaio                       Barbara Peda
         ---------------------------          ----------------------------------
         (Typed or printed name)              (Typed or printed name)



         C.O.O.                               Vice President - Wholesale Markets
         ---------------------------          ----------------------------------
         (Title)                              (Title)


         4/22/98                              4/22/98
         ---------------------------          ----------------------------------
         (Date)                               (Date)

                                       2
<PAGE>


AT&T Network Connection Platform                                    ATTACHMENT A
                                                                    PAGE 1 OF 16

                        AT&T NETWORK CONNECTION PLATFORM

                             1. SERVICE DESCRIPTIONS
                                --------------------
                                      * * *








                                       1
<PAGE>


Fraud & Uncollectibes Management Services                          ATTACHMENT B
                                                                    PAGE 1 OF 6

                            AT&T NETWORK CONNECTION -

                   FRAUD & UNCOLLECTIBLES MANAGEMENT SERVICES
                   ------------------------------------------

                                      * * *






                                       1

<PAGE>


IMPLEMENTATION PLAN RESPONSIBILITIES                                ATTACHMENT C
                                                                     PAGE 1 OF 4

                      IMPLEMENTATION PLAN RESPONSIBILITIES
                      ------------------------------------

                                      * * *









                                       1



<PAGE>


PRICING                                                             ATTACHMENT D
                                                                    Page 1 of 48


                                    PRICING
                                    -------

                                     * * *