AMENDMENT NO. 2

     This AMENDMENT NO. 2 (this "Amendment"),  dated May 14,1998 (the "Amendment
Effective   Date"),   by  and  among  Tel-Save,   Inc.  ("TS"),  a  Pennsylvania
corporation,  and Tel-Save Holdings, Inc. ("Holdings"),  a Delaware corporation,
with their principal offices at 6805 Route 202, New Hope, Pennsylvania 18938, on
the one  hand,  and  America  Online,  Inc.,  a  Delaware  corporation  with its
principal offices at 22000 AOL Way, Dulles, Virginia 20166 ("AOL"), on the other
hand (each a "party" and, collectively, the "parties").

     WHEREAS,  TS,  Holdings  and  AOL  are  parties  to the  Telecommunications
Marketing Agreement,  dated as of February 22, 1997, as heretofore corrected and
amended by letter,  dated April 23,  1997,  and amended by an  Amendment  No. 1,
dated as of January 25, 1998 (as so  corrected  and amended to the date  hereof,
but without giving effect to this Amendment, the "Agreement"); capitalized terms
used in this Amendment without other definition are defined as in the Agreement.

     WHEREAS, the parties to the Agreement wish to make certain changes therein.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  other  good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereby agree as follows:

     A.   Extension Warrant to AOL

     1. Upon AOL's execution and delivery of this Amendment,  TS shall issue and
deliver to AOL a warrant to purchase  1,000,000  shares of Holdings Common Stock
at an exercise  price per share equal to $22.25,  which  warrant shall be in the
form of Appendix A to this Amendment.  This new warrant shall be a "Warrant" for
all purposes of the Warrantholder and Stockholders Agreement.

     B.   Agreement Amendments.  The Agreement is amended as follows,  effective
as of the Amendment Effective Date:

     1.   The references in the Agreement to "this Agreement" or "the Agreement"
          (including indirect references such as "hereunder," "hereby," "herein"
          and  "hereof')  shall be deemed to be  references  to the Agreement as
          amended by this Amendment.

     2.   Section  I.A.41.  of the  Agreement is hereby  amended to substitute a
          reference  to "June 30,  2001  (June  30,  2000  with  respect  to the
          parties'   rights   and   obligations    hereunder   regarding   Local
          Telecommunications   Services  and  Commercial  Mobile  Communications
          Services)" for the reference to "June 30, 2000" therein.


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     3.   Section III.A.1(c) of the Agreement is amended to read in its entirety
          as follows:

     "(c)  Notwithstanding  anything  to the  contrary  in this  Agreement,  the
     parties agree that, commencing May 15, 1998 and ending August 14, 1998, AOL
     shall provide the marketing and  promotions set forth in Schedule X to this
     Agreement."

          and the Agreement is amended to add as Schedule X thereto the Schedule
          X attached to this Amendment.

     4.   Section III.A.1.  of the Agreement is amended to add the following new
          subsection:

     "(g) Notwithstanding anything to the contrary herein:

               "(i)  Section   III.A.1(f)  of  this  Agreement  shall  apply  in
     connection  with all  marketing  efforts in  connection  with the Services,
     including any * * * efforts directed to subscribers to the AOL Service that
     may be provided under this Agreement.

               "(ii)  TS shall  not  contract  formally  or  informally  with or
     otherwise  make payments to vendors in connection  with * * * in connection
     with the Services. Except as otherwise agreed by AOL, AOL shall retain sole
     oversight  and  control  over such  vendors' * * * efforts,  including  any
     remote or on-site monitoring.

               "(iii) All AOL Service subscriber identity information  necessary
     to  perform  any * * * efforts in  connection  with the  Services  shall be
     provided to the * * * vendor by AOL and shall not be  disclosed  to TS, and
     TS  shall  not  purposefully   examine  or  take  possession  of  any  such
     information  or otherwise  encourage  any vendor or other party to disclose
     such information,  in each case in a manner inconsistent with AOL's privacy
     policies  (other than by virtue of TS's  contact  with any such  subscriber
     after such subscriber becomes an End User).

               "(iv)  All  marketing  activities  by TS in  connection  with the
     Services shall be performed,  and any subscriber information obtained by TS
     in  connection  with the  Agreement  shall be  handled in  accordance  with
     applicable  laws and  regulations  and in compliance  with AOL's  policies,
     including,  without  limitation,  AOL's  privacy  policies  and AOL's * * *
     procedures and guidelines.

     5.   Section  V.B. of the  Agreement  is amended to add the  following  new
          subsections:

          "7.  Commencing  with  April  1,  1998  and so  long as AOL  shall  be
     providing  the  marketing  and  promotions  described  in Schedule X hereto
     (including from and after August 14, 1998, as AOL may elect),  TS shall pay
     to AOL the amount of $20 for each  Qualified End User who subscribes to the
     Long Distance  Telecommunications  Services,  whether through the marketing
     described on Schedule X or otherwise,  after such commencement  date, which
     amounts will be paid,  with respect to any month, on or before the last day
     of the next succeeding month."


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<PAGE>



          "8. TS shall,  upon AOL's  request,  (a)  permit  AOL to monitor  TS's
     compliance with the provisions of Section  III.A.l.g hereof and (b) provide
     to AOL reports,  detailing Gross Revenues,  Actual Services Costs,  Pre-Tax
     Profit,  the gross numbers of End Users and Qualified End Users,  the gross
     numbers of Qualified  End Users since the end of the prior  quarter and net
     End  Users  from  the end of the  prior  period.  At AOL's  request,  given
     reasonably  in advance,  TS shall provide the  foregoing  information  at a
     frequency  of no more than once  every two weeks  with  respect to End User
     information  and no more than  once  every 45 days  with  respect  to Gross
     Revenues,  Actual Services Costs and Pre-Tax Profit. In addition,  TS shall
     provide the foregoing  information  with-respect  to any quarter  within 15
     days  following  the end of  such  quarter  and  will  provide  information
     regarding  Qualified End Users who subscribed  during the last month of any
     calendar  quarter and became End Users within 35 days after the last day of
     such month.  AOL has the right to inspect  TS's records with respect to the
     use and treatment of all  subscriber  information  in  accordance  with the
     procedures set forth in Section V.13.4."

     6.   The second  sentence  of Section  VII.A.5 is amended to  substitute  a
          reference to "solely through AOL or AOL's agents" for the reference to
          "directly or indirectly through a third party on its behalf."

     7.   Section  X.B.2.  of the  Agreement  is  amended  to  provide  that the
          reference  to "each  of the  first  two  Extension  Periods"  shall be
          deleted and replaced with a reference to "the first Extension  Period"
          and to the extent  required to reflect that there will be only one (1)
          "Additional Warrant".

     8.   Section  X.C.1.c.  of the  Agreement  is deleted in its  entirety  and
          replaced with the following:

     "c. * * * 

     9.   Section  X.D.4.  of the  Agreement is amended to replace the reference
          therein to "June 30, 2000" with a reference to "June 30, 2001".

     10.  * * * 


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     C.   Amendment of Other Documents.

     1. Upon  effectiveness  of this  Amendment,  the Warrant to Purchase Common
     Stock of Tel-Save Holdings, Inc, dated as of February 22, 1997, No. W-AOL-1
     (the "Base Warrant"), and the Supplemental Warrant shall be amended to read
     in their  entireties as set forth in Appendices B-1 and B-2,  respectively,
     to this Amendment.

     D.   Miscellaneous.

     This  Amendment does not, and shall not be construed to, modify any term or
     condition of the  Agreement  (including,  without  limitation,  any payment
     obligations  under the  Agreement)  other  than  those  specific  terms and
     conditions  expressly  referenced  in  this  Amendment.  Except  as  herein
     provided,  the  Agreement  shall  remain  unchanged  and in full  force and
     effect.  In the  event of any  inconsistency  or  discrepancy  between  the
     Agreement and this  Amendment,  the terms and  conditions set forth in this
     Amendment  shall  control.  Neither party shall be bound by, and each party
     specifically  objects to, any term,  condition or other  provision  that is
     different  from or in addition to the  provisions of this Amendment and the
     Agreement  (whether or not it would  materially alter this Amendment or the
     Agreement) and which is proffered by the other party in any  correspondence
     or other document, unless the party to be bound thereby specifically agrees
     to such provision in writing in accordance with the terms of the Agreement.
     This  Amendment  may be executed in  multiple  counterparts,  each of which
     shall be deemed an original, but all of which together shall constitute one
     and the same  document.  This  Amendment  shall be governed by the internal
     laws of the State of New York,  without  giving effect to the principles of
     conflict of laws thereof.




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     IN WITNESS WHEREOF, the undersigned have caused this Amendment to be signed
on their behalf as of the Amendment Effective Date.

                                                 AMERICA ONLINE, INC.

                                                 By:      /s/  David M. Colburn
                                                    ----------------------------
                                                 Name: David M. Colburn
                                                 Title: Senior Vice President

                                                 TEL-SAVE, INC.

                                                 By:      /s/  Daniel Borislow 
                                                    ----------------------------
                                                     Name:    Daniel Borislow
                                                     Title:   Chairman & CEO

                                                 TEL-SAVE HOLDINGS, INC.

                                                 By:      /s/  Daniel Borislow 
                                                    ----------------------------
                                                     Name:    Daniel Borislow
                                                     Title:   Chairman & CEO




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                                   SCHEDULE X

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