[" * * * " indicates  that material has been deleted  pursuant to a confidential
treatment request and filed separately with the Commission]



                                                                    CONFIDENTIAL










                     TELECOMMUNICATIONS MARKETING AGREEMENT

                                  by and among

                                 TEL-SAVE, INC.

                             TEL-SAVE HOLDINGS, INC.

                                       and

                              AMERICA ONLINE, INC.

                                February 22, 1997




<PAGE>




                                                                    CONFIDENTIAL






                     TELECOMMUNICATIONS MARKETING AGREEMENT


         This TELECOMMUNICATIONS  MARKETING AGREEMENT,  dated as of February 22,
1997, is made by and among:  (i) America  Online,  Inc., a Delaware  corporation
("AOL"),  on the one hand, and (ii) Tel-Save,  Inc., a Pennsylvania  corporation
("TS"), and Tel-Save Holdings, Inc., a Delaware corporation ("Holdings"), on the
other hand (each, a "party" and, collectively,  the "parties"),  with respect to
the following:

         WHEREAS,  AOL  is in the  business  of  providing  online  services  to
consumers in the United States;

         WHEREAS, TS is in the business of providing telecommunications services
and is a wholly owned subsidiary of Holdings;

         WHEREAS,  AOL and TS wish to enter into this Agreement whereby AOL will
market  telecommunications  services to customers of AOL's online  service under
one or more brand names to be owned by it and TS will provide  such  services on
the terms and subject to the conditions herein set forth; and

         WHEREAS,  Holdings has agreed to guarantee all of the obligations of TS
hereunder.

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




                                    ARTICLE I
                                   DEFINITIONS

                  A. Definitions.

         For  purposes of this  Agreement  and in addition to the terms  defined
elsewhere in this  Agreement,  the  following  terms shall have the meanings set
forth below:

                           1. "Actual  Services Costs" for any calendar  quarter
means the  aggregate of the  respective  costs set forth in, and  calculated  in
accordance  with,  Schedule  A hereto in respect of the  provision  of  Services
during such calendar quarter.



<PAGE>







                                                                    CONFIDENTIAL



                           2.  "Additional  Warrant"  shall have the meaning set
forth in Section X.B.2 hereof.

                           3. "Ad Values" at any time shall mean * * *

                           4.  "affiliate"  means,  with  respect to a specified
person,  any other  person  that  directly  or  indirectly  through  one or more
intermediaries,  controls, or is controlled by, or is under common control with,
such  specified   person,   provided  that,  for  purposes  of  this  Agreement,
"affiliate" shall not include natural persons.

                           5.   "Agreement"   means   this    Telecommunications
Marketing Agreement.

                           6. "AOL" has the meaning set forth in the preamble to
this Agreement.

                           7. "AOL Marks" means the service marks to be owned by
AOL under which the Services will be marketed,  which are presently contemplated
by the  parties to include a  reference  to AOL's name and shall be as  mutually
agreed to in writing by the parties hereto.

                           8. "AOL  Performance  List" has the meaning set forth
in Section II.B.1.

                           9. "AOL Service" means AOL's online service  provided
to subscribers  (including,  without limitation,  individuals and businesses) in
the United States under the America  Online(R)  brand name,  including,  without
limitation,  electronic  mail,  conferencing,  news,  sports,  weather and stock
quotes,   accessed  by  consumers  through  computers  using  AOL's  proprietary
software, as it exists on the date hereof and any online service provided by AOL
or any of its affiliates that is a successor thereto or substitute therefor.

                           10.  "Applicable  Profit Percentage" for any calendar
quarter means the percentage of Pre-Tax  Profit for such calendar  quarter equal
to:

                                   (a) for each quarter in which * * *, 50%; and

                                   (b) for each quarter in which * * *, 50% plus

                                       2
<PAGE>

                           an additional 2% for each * * *;

provided that in no event will the Applicable Profit Percentage exceed 70%.

                           11. "AT&T" means AT&T Corporation.

                           12.  "Checklist Items" are the items set forth in the
list attached as Schedule B hereto.

                           13.  "Commercial  Launch  Date"  means  the date upon
which AOL makes the  Services  generally  available  to  subscribers  of the AOL
Service (i.e., to at least * * * % of the subscribers to the AOL Service).

                           14.  "Commercial  Mobile  Radio  Services"  means the
services  defined  as such,  from time to time,  by the  Federal  Communications
Commission, including related features, functions and services.

                           15. "Dedicated CIC" means the carrier  identification
code (CIC) to be made  available  by TS for use in respect  of the  Services  as
provided herein.

                           16.  "Effective  Date" has the  meaning  set forth in
Section IX.A.1. hereof.

                           17. "End User" means,  during the Term,  any customer
of the Services or any part thereof and, after the Term, any such customer as of
the last day of the Term so long as such  customer  continues  as a customer  of
such Services.

                           18.  "Extension  Period"  shall have the  meaning set
forth in Section X.B.1 hereof.

                           19. "Gross  Revenues" for any calendar  quarter shall
mean * * *.

                           20. "Holdings" has the meaning set forth in the first
paragraph of this Agreement.

                           21.   "Initial   Launch   Period"  means  the  period
beginning  at the end of the Test  Launch  Period and  ending on the  Commercial
Launch Date.

                           22.  "Initial  Payment"  has the meaning set forth in
Section V.A.1.


                                       3
<PAGE>

                           23. "Internet Telephony" means voice service provided
or initiated over one or more data networks where the end user initiates a voice
call to, or  receives  a voice call  from,  another  party over one or more data
networks  using a modem  or CODEC or over a data  network  interfacing  with the
public switched telephone network using a modem or CODEC.

                           24.  "Introductory  Period"  means  the * * *  period
starting a mutually  agreed number of days prior to the  anticipated  Commercial
Launch Date. The parties  currently  anticipate that the Commercial  Launch Date
will be no later than * * * , subject to  adjustment  from time to time upon the
mutual consent of the parties or as otherwise provided herein.

                           25.  "Local  Telecommunications  Services"  means the
provision of telephone  exchange service or exchange access,  including  related
features, functions and services.

                           26. "Long Distance Telecommunications Services" means
intrastate   telephone   toll   service,   interstate   telephone   service  and
international  telephone service,  including private line service, and including
related features, functions and services, as well as:

         Calling Card calls,  meaning those calls billed to the customer account
         which has been  established  to allow  for the use of an  authorization
         code for direct dialed calls using any toll free number,  0+ access, or
         operator  assisted  calls  using  a  service  provider's  calling  card
         authorization  platform for billing to the customer  account at a later
         date.

         Operator  Handled  calls,  meaning  all  calls  where  an  operator  or
         automated  mechanized  system provides the end user with the ability to
         place collect calls,  calls billed to a third party,  person to person,
         conference calling and operator assisted directory assistance,  but not
         including party lines and off-line chat.

         Toll Free services,  meaning inbound  residential or business telephone
         services  where the  subscriber/recipient  pays for all calls placed by
         callers dialing their subscribed  number,  and such calls are billed to
         the subscribing customer.

         Directory  Assistance  calls,  meaning  calls made by the  customer  to
         obtain names, addresses or phone numbers from a long distance directory
         assistance service.

                           27. "Marginable Revenues" means * * * .


                                       4
<PAGE>

                           28. "Multiplier  Adjustment Date" has the meaning set
forth in Section IV.E.1.

                           29.  "OBN"  means One  Better  Net or OBN,  TS's long
distance  telecommunications network based on telecommunications  switches owned
or leased by TS or its affiliates.

                           30.  "Performance Lists" has the meaning set forth in
Section II.B.I.

                           31. "Pop-Up Ads" means * * * .

                           32. "Pre-Launch Period" means the period beginning on
the Effective  Date and ending on the date AOL and TS begin testing the Services
with approximately * * * testers.

                           33.  "Pre-Tax Profit" for any calendar quarter  means
* * * .

                           34.  "Quarterly  Payment  Amount" as to any  calendar
quarter means the  Applicable  Profit  Percentage of the Pre-Tax Profit for such
quarter.

                           35. "Quarterly  Shortfall Amount" has the meaning set
forth in Section V.B.1(b).

                           36. "Restricted  Services" means,  collectively,  (a)
Long Distance Telecommunications Services, (b) Local Telecommunications Services
and (c) Commercial Mobile Radio Services, and, each, a "Restricted Service".

                           37. "RMG" means the remote managed gateway between TS
and AOL and related  systems (or any similar  system  agreed to by the parties),
including  a high speed  dedicated  telecommunications  line,  developed  by the
parties pursuant to Section II.B hereof,  for the purpose of providing End Users
the ability,  through screens and/or other  functionality on the AOL Service, to
access  monthly  and  historical  billing  information  and  to  transmit  order
information to TS.

                           38. * * * .

                           39. "Services" means the telecommunications services,
including the Restricted Services, provided, from time to time,


                                       5
<PAGE>

pursuant to this Agreement by TS, as the carrier,  and marketed by AOL as herein
provided  under the AOL Marks; * * * .

                           40. "Supplemental  Warrant" has the meaning set forth
in Section VI.A. hereof.

                           41.  "Term" means the period  commencing  on the date
hereof and ending on June 30,  2000,  unless  such  period is extended or sooner
terminated  pursuant to Article X, in which  event such period  shall end at the
termination date or the last day of the final extension, as the case may be.

                           42. "Test Launch  Period" means the period  beginning
at the end of the Pre-Launch  Period and ending on the date AOL begins marketing
the Services to approximately * * * of its subscribers.

                           43. "TS" has the meaning set forth in the preamble of
this Agreement.

                           44. "TS  Performance  List" has the meaning set forth
in Section II.B.1.

                           45.  "Unamortized Amount"  as of any  date  means * *
* .

                           46.  "Warrants"  has the meaning set forth in Section
VI.A. hereof.



                     AI ROLLOUT SCHEDULE; PERFORMANCE LISTS

                  A. Description of Rollout.

         This Article II sets out the process by which the parties will roll out
the Long  Distance  Telecommunications  Services  described  on Schedule C. With
respect to such Long  Distance  Telecommunications  Services,  the parties  will
proceed  through the following  sequence of periods,  leading to an  anticipated
Commercial Launch Date of * * * :


                                       6
<PAGE>

                           1.   Pre-Launch   Period  --  completion  of  initial
Checklist  Item  tasks and  initial  development  of the  Performance  Lists (as
further described below).

                           2. Test Launch Period -- testing of the Long Distance
Telecommunications Services with approximately * * * testers.

                           3.  Initial  Launch  Period --  marketing of the Long
Distance  Telecommunications  Services to  approximately  * * * % of AOL Service
subscribers (with incremental ramp-up to * * * % of AOL Service subscribers).

                           4. Commercial Launch Date -- general  availability of
the Long Distance  Telecommunications Services to AOL Service subscribers (i.e.,
to at least * * * % of the subscribers to the AOL Service).

         In addition,  prior to the  Commercial  Launch  Date,  the parties will
mutually  establish the date for  commencement of AOL's  marketing  obligations,
(i.e., the beginning of the Introductory Period), which are further described in
Article III.

                  B. Pre-Launch Period.

                           1. During the Pre-Launch Period,  each of the parties
shall perform all of the Checklist Item tasks  designated on Schedule B as being
its  responsibility  during  the  Pre-Launch  Period  with  respect  to the Long
Distance  Telecommunications  Services  described in Schedule C. With respect to
each task involving the development of a definition,  procedure or standard, the
responsible  party  shall  generate a detailed  written  guideline  that will be
applicable  to the  appropriate  party  and  will  be  set  forth  in a list  of
standards,  procedures and/or obligations to be observed by such party (the "AOL
Performance List" and the "TS Performance List", respectively, and together, the
"Performance  Lists").  Each such guideline set forth in the  Performance  Lists
shall be subject to the mutual agreement of the parties,  not to be unreasonably
withheld. With respect to Checklist Item tasks that are designated on Schedule B
as the joint  responsibility of TS and AOL during the Pre-Launch  Period, TS and
AOL shall work jointly in good faith to develop the  appropriate  guidelines and
to allocate responsibilities thereunder to the appropriate Performance List.

                           2. The  Pre-Launch  Period  shall  commence  promptly
following  the Effective  Date and shall not end until  completion of all of the
Checklist Item tasks designated for completion  during the Pre-Launch  Period on
Schedule  B. If any such  Checklist  Item  task  remains  uncompleted  or if any
guideline has not been agreed to as of * * * , the  anticipated  date  therefor,
the period for such  completion may be extended by up to * * * at the request of
either party.


                                       7
<PAGE>

                  C. Test Launch Period.

                           1. During the Test Launch Period, each of the parties
shall perform all of the Checklist Item tasks  designated on Schedule B as being
its  responsibility  during  the Test  Launch  Period  with  respect to the Long
Distance  Telecommunications  Services  described in Schedule C. With respect to
each task involving the development of a definition,  procedure or standard, the
responsible  party  shall  generate a detailed  written  guideline  that will be
applicable  to the  appropriate  party  and  will  be  added  to its  respective
Performance  List. Each such guideline shall be subject to the mutual  agreement
of the parties, not to be unreasonably withheld.  With respect to Checklist Item
tasks that are  designated on Schedule B as the joint  responsibility  of TS and
AOL during the Test Launch  Period,  TS and AOL shall work jointly in good faith
to  develop  the  appropriate   guidelines  and  to  allocate   responsibilities
thereunder to the appropriate Performance List.

                           2.  The  Test  Launch  Period  shall   commence  upon
completion of the Pre-Launch Period and shall not end until completion of all of
the Checklist Item tasks designated for completion during the Test Launch Period
on Schedule B. If any such  Checklist  Item tasks remain  uncompleted  as of the
date that is * * * after the commencement of the Test Launch Period,  the period
for such  completion  may be  extended  by up to * * * at the  request of either
party.

                  D. Initial Launch Period.

                           1. During the Initial Launch Period, the parties will
commence  marketing and make the Services  available to approximately * * * % of
the AOL Service subscribers (or such higher number as AOL may determine, subject
to TS's  reasonable  capacity  limitations)  during * * * of the Initial  Launch
Period;  approximately  * * * % of the AOL Service  subscribers  (or such higher
number as AOL may determine  subject to TS's  reasonable  capacity  limitations)
during * * * of the Initial Launch Period;  and approximately * * * % of the AOL
Service  subscribers (or such higher number as AOL may determine subject to TS's
reasonable  capacity  limitations)  during the  remainder of the Initial  Launch
Period.  AOL shall  determine the specific  roll-out plan for the Initial Launch
Period in consultation  with TS in order to efficiently and effectively  perform
the  Initial   Launch  Period   Checklist  Item  tasks  listed  on  Schedule  B.
Notwithstanding the anticipated * * * periods above, AOL may, in each such case,
delay marketing to a larger portion of the AOL Service subscriber base until AOL
is satisfied, in its reasonable discretion,  that the guidelines included in the
parties' respective Performance Lists are met or are likely to be met during any
such period.


                                       8
<PAGE>

                           2.  During the  Initial  Launch  Period,  each of the
parties shall perform all of the Checklist  Item tasks  designated on Schedule B
as being its responsibility during the Initial Launch Period with respect to the
Long Distance  Telecommunications Services described in Schedule C. With respect
to tasks involving the development of a definition,  procedure or standard,  the
responsible  party  shall  generate a detailed  written  guideline  that will be
applicable  to the  appropriate  party  and  will  be  added  to its  respective
Performance  List. Each such guideline shall be subject to the mutual  agreement
of the parties, not to be unreasonably withheld.  With respect to Checklist Item
tasks that are  designated on Schedule B as the joint  responsibility  of TS and
AOL,  TS and AOL shall work  jointly in good  faith to develop  the  appropriate
guidelines  and to  allocate  responsibilities  thereunder  to  the  appropriate
Performance List.

                           3. The Initial  Launch  Period  shall  commence  upon
completion of the Test Launch  Period.  The Initial  Launch Period shall not end
until  completion of all of the Checklist  Item tasks  designated for completion
during the Initial  Launch Period on Schedule B. If any such Checklist Item task
remains  uncompleted  or if any  guideline has not been agreed to as of the date
that is * * * after the  commencement  of the Initial Launch Period,  the period
for such  completion  may be  extended  by up to * * * at the  request of either
party.

                  E. Performance Lists.

                           1. The Performance  Lists may be modified at any time
during the Term as mutually agreed by the parties.

                           2. The parties shall  reasonably  cooperate  with one
another  in  facilitating  the  preparation  of the  Performance  Lists  and the
guidelines included therein and the completion of the Checklist Item tasks.

                           3. Each party  shall be  responsible  for  performing
substantially  in accordance  with the  guidelines  contained in its  respective
Performance List from time to time.

                  F.  New  Services.  As  new  Services  are  added  under  this
Agreement,  the  procedures  set forth in this Article II, as may be  reasonably
applicable  to such  new  Services,  shall  be  followed  with  respect  to such
Services.

                  G. Failure to Agree on  Guidelines.  If the parties are unable
to reach  agreement  with  respect to any  guideline to be included in a party's
Performance List, the matter shall be submitted for resolution pursuant to XI.D.


                                       9
<PAGE>



                                AI AOL MARKETING

                  A. Services Marketing.

         On and after the first day of the Introductory  Period,  AOL shall have
the sole right to,  and shall,  market  the  Services  generally  across the AOL
Service in the United States,  through online  advertising  and marketing on the
AOL Service and  otherwise  as the  parties  may agree,  through  mass media and
direct marketing media, as follows:

                           1. During each of the months during the  Introductory
Period,  AOL  shall  include  for  subscribers  to  the  AOL  Service  on-screen
promotions and advertisements for the Long Distance Telecommunications Services,
including   Pop-Up  Ads,  (a)  in  substance   (the   specific   Long   Distance
Telecommunications Services to be offered and the terms thereof and the terms on
which they are offered)  developed and prepared by TS in consultation  with AOL,
and (b) in form (how the offered Services are packaged and presented)  developed
and prepared by AOL in consultation  with TS and subject to the mutual agreement
of the  parties,  with an Ad  Value of at  least $ * * * . Such  promotions  and
advertisements shall include * * * . Such promotions and advertisements shall be
spaced as evenly as practicable  over each such month,  provided that TS and AOL
shall consult as to the manner in which such online advertising will be included
in such advertising opportunities.  The parties recognize that in some months, a
$ * * * promotion and advertising campaign may not represent the best allocation
of   promotion   and   advertising   resources.   Accordingly,   the   foregoing
notwithstanding,  subject to the mutual  agreement of the  parties,  some of the
promotional  and  advertising  resources,  * * *, allocated to the  Introductory
Period may be reallocated  among the months  occurring  during the  Introductory
Period and among the * * * months following the Introductory Period and shall be
in addition to the resources required otherwise to be provided in such months.

                           2.  During  each  of  the  months  subsequent  to the
Introductory  Period and during the Term,  AOL shall include for  subscribers to
the AOL Service on-screen  promotions and  advertisements  for the Long Distance
Telecommunications  Services,   including,  at  AOL's  option  (subject  to  the
requirements of


                                       10
<PAGE>


Section  III.A.4  hereof),  Pop-Up Ads,  (a) in  substance  (the  specific  Long
Distance Telecommunications Services to be offered and the terms thereof and the
terms on which they are offered)  developed  and prepared by TS in  consultation
with AOL, and (b) in form (how the offered  Services are packaged and presented)
developed and prepared by AOL in consultation  with TS and subject to the mutual
agreement of the parties,  with an Ad Value of at least $ * * * . Any Pop-Up Ads
included by AOL  subsequent  to the  Introductory  Period and during the Term in
excess  of * * * per month  shall not be  counted  toward  meeting  this $ * * *
requirement.  AOL will work  cooperatively with TS during this period to develop
strategies for targeting the Services to new subscribers to the AOL Service most
effectively.  Such  promotions and  advertisements  shall be spaced as evenly as
practicable  over each such month,  provided that TS and AOL shall consult as to
the manner in which such online advertising will be included in such advertising
opportunities.

                           3.   During   the   Term,   AOL  may   also   include
advertisements and promotions for the Long Distance Telecommunications Services,
in substance  (the  specific  Long  Distance  Telecommunications  Services to be
offered and the terms thereof and the terms on which they are offered) developed
and prepared by TS in consultation  with AOL, and form (how the offered Services
are packaged and presented)  developed and prepared by AOL in consultation  with
TS and subject to the mutual  agreement of the parties,  in or with any of AOL's
mass  media  advertising  of any of its  services  or with any of  AOL's  direct
marketing  efforts,   including,   without  limitation,  mail  solicitations  of
customers  for  any of its  services  and any  joint  advertising  or  marketing
programs with other  companies and any other  advertisements  and  solicitations
done in conjunction  with other companies;  provided that,  unless TS shall have
specifically  agreed with AOL to share  responsibility  for any such advertising
and  promotions,  TS shall  have no  responsibility  for any  part of the  costs
thereof.

                           4. With respect to Pop-Up Ads:

                                (a) Any  Pop-Up  Ad  * * *  to  be  included  or
                           provided by AOL shall contain * * * .

                                (b) * * * .


                                       11
<PAGE>


                                (c) * * * .

                           5.  During  the Term,  the  parties  shall  also,  in
consultation  with each other,  explore  additional  marketing  and  promotional
opportunities  related to the  Services,  including  utilizing  new  advertising
techniques  and  mechanisms,  as they are  developed by AOL and  utilizing  TS's
existing marketing channels.  The parties also will, in good faith,  explore the
following  additional  marketing  opportunities  (the  more  specific  terms and
conditions of which to be as set forth in writing between the parties):

                                (a) Online marketing of bundled offerings of the
                           Services  and the AOL Service by AOL,  with  mutually
                           agreed revenue sharing;

                                (b)  Telemarketing and direct marketing by TS of
                           the AOL Service to TS's  business  customers,  with a
                           mutually agreed bounty paid to TS; and

                                (c)  Telemarketing and direct marketing by TS of
                           bundled   offerings  of  the  Services  and  the  AOL
                           Service,   with  generally  mutually  agreed  revenue
                           sharing.

                           6. AOL shall make  available  to End Users who obtain
services from TS other than the Services in accordance  with this  Agreement,  a
hyper-text  internet link in the Dedicated  Area (as defined  below) solely to a
billing  area on a TS-hosted  web site for billing of such  services  other than
Services,  which such site shall not include  any links or other  traffic out to
other areas other than a return link to the AOL Service.

                           7. AOL commits to  provide,  in  connection  with its
activities described in Sections III.A.1, 2, 4, 5 and 6, III.C and III.D hereof,
in addition to AOL key words on the AOL Service and E-mail  (including a monthly
reminder  sent to End-Users  concerning  their  statement and a hyperlink to the
Dedicated Area described below), links throughout the AOL Service, including the


                                       12
<PAGE>

possibility of a small telephone icon that pervasively  appears on the tool bar,
welcome screen,  channel page or similarly-viewed  pages, to a dedicated area on
the AOL Service (the  "Dedicated  Area") in order to facilitate ease of location
and access to this area for End Users and prospective customers.

         B. AOL Reports.

                           1. During the Term, AOL shall provide summary monthly
reports to TS evidencing compliance with the foregoing advertising and marketing
requirements,   including   information   concerning  the  type  and  volume  of
advertising  and marketing on the AOL Service,  and concerning  AOL's mass media
and direct marketing activities, if any, during such month.

                           2. AOL shall  keep for two (2) years from the date of
each advertising and marketing expenditure made pursuant to Sections III.A.1 and
2 above  complete  and  accurate  records  in  sufficient  detail to allow TS to
determine if AOL has made the expenditures  required  thereunder.  TS shall have
the right for a period of two (2) years  after  receiving  any  report  provided
pursuant to Section  III.B.1 above to inspect such records.  AOL shall make such
records  available for inspection during regular business hours at its principal
place of business,  upon reasonable  notice from TS. Such inspection right shall
not be exercised  more than once in any calendar year and shall not be exercised
more than once with respect to any particular records furnished by AOL to TS. TS
agrees to hold in strict confidence all information learned in the course of any
such  inspection,  except  to  the  extent  necessary  for  TS  to  reveal  such
information in order to enforce its rights under this Agreement or if disclosure
is required by law. TS shall pay for such inspections,  except that in the event
any such  inspection  reveals that AOL expended  less than * * *% of what it was
required to expend in any quarter,  AOL shall pay the  reasonable  costs of such
inspection.  If AOL and TS are unable to agree on the amount AOL expended,  then
the dispute  shall be resolved by  arbitration  pursuant to Section XI.D hereof.
This Section shall survive expiration or termination of this Agreement.

                           3. Within one quarter after it has been determined as
a result of an inspection  pursuant to Section  III.B.2 above or otherwise  that
AOL failed to expend the minimum  commitment for  advertising and marketing in a
given month, and such failure is not attributable to TS's  unreasonable  failure
to agree to the marketing program proposed by AOL, AOL shall, in addition to any
other  advertising  and  marketing  expenditure  commitments  it has under  this
Agreement,  expend an additional  amount for  advertising and marketing equal to
* * * % of the shortfall from such commitment.

                           4. AOL shall  advise TS in writing  or by  electronic
means of any End User  that  ceases to be a  subscriber  of the AOL  Service  as
promptly as reasonably  practicable  after receiving  notice  thereof.  TS shall
continue servicing each such End User


                                       13
<PAGE>


according  to a service  plan  that TS deems  appropriate,  subject  to such End
User's continued credit-worthiness,  in TS's sole discretion. To the extent that
TS incurs  incremental  costs  associated with the billing of such End Users, TS
shall,  at its sole  discretion,  either (i) pass such costs through to such End
Users or (ii) adjust payments to AOL under Section V.B or X.D.2, as the case may
be, to put AOL in the same economic  position as if such  incremental  costs had
not been incurred.

         C. Offering of Services.

                           1.  AOL  shall   include  on  the  AOL  Service  such
materials and  opportunities as TS shall  reasonably  request to permit users of
the AOL  Service  who wish to become  End Users to elect so to become End Users,
including,  without  limitation,  any  agreements by any such user to (i) switch
from their existing  telecommunications  carrier, (ii) charge their payments for
the  Services  to  credit,  charge  or debit  cards  and/or  (iii)  verify  such
arrangements.

         D. Services Billings; Credit Card Agreements.

                           1. For so long as any End User is a  customer  of the
AOL Service (and  notwithstanding  the termination of this  Agreement,  it being
understood  that  this  obligation  shall  survive  such  termination  if AOL is
receiving  payments  pursuant  to  Section  X.D.2),  AOL shall  provide  for the
inclusion  online in the AOL Service to such End User of such End User's billing
information  provided by TS and any necessary  opportunity  for such End User to
authorize  any payment and to dispute any charges for  Services  with TS (all as
mutually  agreed to with respect to the RMG developed by TS and AOL  hereunder);
provided  that  AOL  shall  not  be  required  to  incur  material  costs  after
termination to alter its inclusion of such  information due to material  changes
made to the RMG by TS.

                           2. AOL shall use all reasonable  efforts to cause the
credit,  charge and debit card  companies  through which AOL bills its customers
for the AOL  Service  to charge  the same rates for  Services  billings  as they
charge for billings for the AOL Service.

                           3. AOL shall use all reasonable  efforts to cause the
credit,  charge and debit card  companies  through which AOL bills its customers
for the AOL Service to enter into direct  arrangements  with TS with  respect to
the billing for the Services,  including provision for continuation thereof with
respect to any End Users that cease to be  subscribers of the AOL Service or any
other services billed to such End User by AOL.

                           4. With respect to any End Users who do not pay their
bills for the AOL Service  through a credit,  charge or debit  card,  AOL shall,
subject  to  applicable  law and AOL's  terms of service  with its  subscribers,
provide to TS all information available to


                                       14
<PAGE>


AOL with respect to such End Users as TS may reasonably  request to permit TS to
bill such End Users for the Services.

         E. Use of AOL Marks.

                           1.  AOL  hereby  grants  to TS an  exclusive  license
(subject  to the  right  of AOL and its  affiliates  to use  the  AOL  Marks  in
connection  with the  Services) for TS to use the AOL Marks solely in connection
with its operation of the Services for which TS is then the  exclusive  provider
under this Agreement;  and AOL hereby grants to TS an exclusive license (subject
to the right of AOL and its  affiliates to use the AOL Marks in connection  with
the  Services)  for TS to use  the AOL  Marks  solely  in  connection  with  its
operation of the Services for which TS is then the provider under this Agreement
on a non-exclusive  basis, unless the parties mutually agree (such agreement not
to  be   unreasonably   withheld)   that  the  license  with  respect  to  those
non-exclusive  Services  should itself be  non-exclusive;  provided that in both
cases TS (i) does not create a unitary  composite  mark  involving the AOL Marks
without the prior written  approval of AOL and (ii) displays symbols and notices
clearly and  sufficiently  indicating the trademark  status and ownership of the
AOL Marks in accordance with applicable trademark law and practice; and provided
further that AOL retains the right to use the AOL Marks in  connection  with the
services provided as part of the core business of ANS CO+RE Systems,  Inc. as of
the  date  hereof.  The  foregoing  license  is  personal  to TS and  may not be
sublicensed,  assigned or  otherwise  transferred  except as provided by Section
XII.F.  TS  acknowledges  that:  (i) the AOL Marks are and shall remain the sole
property of AOL; (ii) nothing in this Agreement shall confer in TS, and TS shall
not represent that it has, any right of ownership in the AOL Marks; and (iii) TS
shall not now or in the future contest the validity of the AOL Marks.

                           2. TS further  acknowledges and agrees that no use of
the AOL Marks by TS shall  impair the rights of AOL in the AOL Marks.  TS agrees
to  reasonably  assist AOL, at AOL's  expense,  to the extent  necessary  in the
enforcement  and  protection  of  AOL's  rights  in the AOL  Marks.  If a senior
executive  officer of TS learns of any infringements or uses of marks similar to
the AOL Marks,  such officer shall inform AOL as soon as reasonably  practicable
and TS shall cooperate with AOL as AOL reasonably requests, at AOL's expense, to
protect AOL's rights in the AOL Marks.

                           3. AOL agrees to take all reasonable  steps necessary
to register and protect the AOL Marks.

                           4. Use by TS of the AOL Marks  with  respect  to form
and appearance  shall be subject to the prior written approval of AOL, not to be
unreasonably withheld.


                                       15
<PAGE>


                           5. TS acknowledges  that,  except as provided herein,
it is not  authorized  hereunder to use the AOL name or logo. Any such use shall
require the prior written consent of AOL and shall be subject to such conditions
and restrictions as AOL deems appropriate.

         F. TS Trademarks and Service Marks.

         This Agreement shall not convey a license to AOL to use any trademarks,
service  marks,  trade names or logos  owned or  otherwise  used by TS.  Nothing
herein  shall  give  AOL  any  right,  title  and  interest  in and to any  such
trademarks,  service marks,  trade names or logos owned or otherwise used by TS,
other than the right to display such trademarks,  service marks,  trade names or
logos in connection with the marketing of the Services.

         G. Expenses.

                  Except as otherwise  provided  herein or agreed by the parties
in writing,  all costs and expenses of providing the  marketing and  advertising
services referred to in Section III.A. shall be borne exclusively by AOL.

                  H.   Representatives.    AOL   shall   appoint   a   technical
representative,  a  marketing  representative,  a billing and  customer  service
representative  and a project  manager to  interface  with their  respective  TS
counterparts. If TS is dissatisfied with any of the foregoing representatives or
manager,  it  shall so  inform  AOL and AOL  shall  replace  him/her  as soon as
reasonably  practicable,  consistent with a smooth transition and AOL's staffing
commitments.  TS shall not be entitled to have more than one  representative  or
manager replaced in any six-month period.  Except as may be the case pursuant to
Section XII.H, no AOL manager or representative  appointed  hereunder shall have
any right,  power or authority to enter into any  agreement for or on behalf of,
or incur any obligation or liability of, or to otherwise bind, AOL.

                  I.  Limitation  on AOL  Authority.  AOL  shall  have no right,
authority or power, and shall not hold itself out as having the right,  power or
authority,  to create any contract or  obligation,  express or implied,  binding
upon TS,  including,  but not  limited  to,  accepting  orders for  Services  or
agreeing  to or offering  prices,  terms or  conditions  of sale that are not in
compliance  with the prices and terms and conditions  that TS, or TS and AOL, as
the case may be, have developed and prepared as provided elsewhere herein.

                  J. Insurance.  So long as AOL shall have executory obligations
under  this  Agreement,  AOL  shall  maintain  insurance  in  amounts  and types
customary within its industry for companies of comparable size.


                                       16
<PAGE>



                                   ARTICLE IV
                                  TS SERVICES

         A. Services.

                           1. The telecommunications  services to be provided by
TS hereunder initially shall be the Long Distance  Telecommunications  Services.
Such Long  Distance  Telecommunications  Services  initially  will  include  the
services  described  in Schedule C.  Subject to Article  VII, the Services to be
provided by TS hereunder  will be expanded to include  Local  Telecommunications
Services and  Commercial  Mobile Radio  Services as and to the extent offered by
TS.

         B. Provision of Services.

                           1. TS shall  provide the Services to all  subscribers
to the AOL Service that elect to become End Users, provided that the initial and
continued  provisioning  of any such  customer  will be subject  to such  credit
approvals as TS may, in its sole discretion, apply.

         C. Terms of Services.

                           1.  The  Services  will  be  offered  by  TS,  as the
carrier, under the AOL Marks.

                           2. Notwithstanding anything to the contrary set forth
in this Agreement,  the quality,  timeliness and efficiency of Services provided
hereunder and the performance by TS of its other obligations hereunder shall, at
a  minimum,  be  consistent  with  telecommunications  common  carrier  industry
standards,  government regulations and sound business practices and generally of
no lesser  quality  than the best  comparable  services  provided by TS to other
customers.

                           3. The  specific  types of  Services  other than Long
Distance  Telecommunications  Services,  Local  Telecommunications  Services and
Commercial Mobile Radio Services shall be determined from time to time by mutual
agreement of the parties.

                           4. The rates to be charged by TS for Services subject
to telecommunications regulation shall be determined from time to time by TS, in
its sole  discretion.  TS shall give AOL reasonable  prior notice of prospective
rate  changes  and a  reasonable  opportunity  to consult  with  respect to such
prospective rate changes.  TS's current  intention is that its initial rates for
Long  Distance  Telecommunications  Services  will be as set forth in Schedule D
hereto.  To  the  extent  the  parties  reasonably  agree  that  it  is  legally
permissible to do so with respect to any


                                       17
<PAGE>


specific Services, the rates for those Services shall be determined from time to
time by mutual agreement of the parties.

         5. Customer Service.

               a. TS shall provide customer service 24 hours per day, 7 days per
                  week.

               b. TS  shall  comply  with  the   applicable   customer   service
                  provisions of the TS Performance  List  developed  pursuant to
                  Article II.

               c. If TS fails to conform to the customer  service  standards set
                  forth in this Section  IV.C.5.  above within  thirty (30) days
                  following notice of such  non-conformance  from AOL, AOL shall
                  have the right,  at its discretion and as one of its available
                  remedies,  either  to assume  the  customer  service  function
                  itself or to outsource it to a third party  provider.  In that
                  event,  (a) TS  shall,  at  TS's  expense,  assist  AOL in the
                  transition  of  the  customer  service  function  as  AOL  may
                  reasonably  request,  and (b) TS shall reimburse AOL for AOL's
                  reasonable  costs and expenses  associated  with providing the
                  customer service function.  Notwithstanding the foregoing, if,
                  at any time,  AOL shall  have  assumed  the  customer  service
                  function or  outsourced  it to a third party  provider  and TS
                  shall thereafter demonstrate to AOL's reasonable  satisfaction
                  that  it  can  conform  to  the  applicable  customer  service
                  standards,  TS shall have the right to resume the provision of
                  the  customer   service  function  and  AOL  shall  cause  the
                  transition of the customer service function back to TS.

                           6. AT&T Reseller  Services.  It is anticipated by the
parties that the Services will include initially, and TS initially shall provide
as part thereof,  AT&T-based operator services,  directory  assistance,  calling
card  services  and  international.  In the event TS  replaces  such  AT&T-based
services,  TS shall ensure that the  replacement  services are of  substantially
equivalent or better quality and price.

                           7.  Network  Integrity.  TS  shall  comply  with  the
applicable  network  integrity  provisions of the TS Performance  List developed
pursuant to Article II.


                                       18
<PAGE>


         8. Billing.

               a. TS shall comply with the applicable  billing provisions of the
TS Performance List developed pursuant to Article II.

               b. If TS fails to  conform  to the  billing  services  guidelines
developed  as part of the  applicable  Performance  List  pursuant to Article II
within thirty (30) days following notice of such  non-conformance  from AOL, AOL
shall have the right,  at its discretion  and as one of its available  remedies,
either to assume the billing  services  function  itself or to outsource it to a
third provider. In that event, (a) TS shall, at TS's expense,  assist AOL in the
transition of the billing service  function as AOL may reasonably  request,  and
(b) TS shall reimburse AOL for AOL's  reasonable  costs and expenses  associated
with providing the billing service function.  Notwithstanding the foregoing, if,
at any time, AOL shall have assumed the billing services  function or outsourced
it to a third  party  provider  and TS  shall  thereafter  demonstrate  to AOL's
reasonable  satisfaction that it can conform to the applicable  billing services
standards,  TS shall  have the  right to resume  the  provision  of the  billing
services  function and AOL shall cause the  transition  of the billing  services
function back to TS.

                           9. TS shall  provide to AOL as promptly as reasonably
practicable  after the end of each month an updated  roster of End Users at such
month-end in order to facilitate  performance  by AOL of its  obligations  under
Section III.B.4.

                           10. TS shall,  where  possible,  make  available  the
Dedicated CIC and shall route all Services to End Users thereunder and shall not
route any other  customers  of its  telecommunications  services  based  thereon
(excluding customers (i) in Alaska,  Hawaii, Puerto Rico and the Virgin Islands,
(ii) in other areas in the 48  contiguous  states of the United States where OBN
is not  loaded  and  (iii) in  overflow  situations  where  required  to  manage
capacity).  All non-OBN  traffic shall be carried on the AT&T network.  TS shall
use its best efforts to at all times have the  capability to route the Dedicated
CIC over a redundant network.

         D. Regulatory.

                           1.  TS  shall  be   responsible   for  obtaining  and
maintaining  all  federal,  state and local  consents,  approvals  and  licenses
required to be obtained or maintained  by TS for TS's  provision of the Services
hereunder  other  than any  consents  and  approvals  or  licenses  required  by
applicable law to be obtained or maintained by AOL by reason of its  performance
of its  obligations  hereunder  or  otherwise,  for all of  which  AOL  shall be
responsible,  and all expenses of obtaining and maintaining such,  including all
tariffs, taxes, filings and fees with respect thereto, shall be


                                       19
<PAGE>


borne exclusively by the party so responsible for obtaining or maintaining such.

                           2. TS  shall  file any  required  state  and  federal
tariffs in accordance with applicable law and regulations.

                           3. TS shall pay all  federal,  state and local  taxes
required by applicable law or tariff.

         E. AT&T.

                  1.   * * * .

                           2. TS shall  notify  AOL as  promptly  as  reasonably
practicable  of any  changes  in its  relationship  with AT&T that  could have a
material  adverse effect on the  performance of the parties'  obligations  under
this Agreement and/or the provision of the Services to End Users.

         F. LOAs.

                           1.  TS  shall  be  the   contracting   party  to  the
telecommunication letters of agency (and any other contracts and agreements with
the customers for the provision of telecommunications services to the End Users,
collectively,  "LOAs") and thereby be entitled to all rights deriving therefrom.
Except in connection  with an assignment of this Agreement  permitted by Section
XII.F, TS shall not assign any of the LOAs, i.e., not sell any of the End Users.

         G. Representatives.

                           1. TS shall  appoint a  technical  representative,  a
marketing  representative,  a billing and customer service  representative and a
project manager to interface with their respective AOL  counterparts.  If AOL is
dissatisfied with any of the foregoing  representatives or manager,  it shall so
inform  TS and TS  shall  replace  him/her  as soon as  reasonably  practicable,
consistent with a smooth transition and TS's staffing commitments. AOL shall not
be entitled to have more than one  representative or manager replaced in any six
month period. Except as may be the


                                       20
<PAGE>


case  pursuant  to Section  XII.H,  no TS manager  or  representative  appointed
hereunder  shall have any right,  power or authority to enter into any agreement
for or on behalf of, or incur any  obligation  or liability  of, or to otherwise
bind, TS.

                  H.  Limitation  on TS  Authority.  TS  shall  have  no  right,
authority or power, and shall not hold itself out as having the right,  power or
authority,  to create any contract or  obligation,  express or implied,  binding
upon AOL.

                  I. Insurance.  So long as TS shall have executory  obligations
under this Agreement, TS shall maintain insurance in amounts and types customary
within its industry for companies of comparable size.




                                    ARTICLE V
                                PAYMENTS TO AOL

         A. Initial Payment to AOL.

                           1. On the date hereof, TS shall pay to AOL an initial
payment in the amount of $100,000,000 (the "Initial Payment"). Up to $57,000,000
of the  Initial  Payment  shall be  earned  by AOL over  time in  increments  in
accordance with the performance milestones set forth in Schedule E.

         B. Marketing Payments to AOL.

                           1.  In  partial   consideration   of  AOL   providing
marketing  services and  exclusivity  commitments  hereunder,  TS shall make the
following  payments  in  immediately  available  funds  wired to  AOL's  account
pursuant to the wiring  instructions  attached as Schedule F (which instructions
may be modified in writing by AOL on five (5) days notice):

                                    a. For each calendar quarter ending on March
31, June 30,  September 30 and December 31,  commencing  with the Effective Date
and so long as this Agreement shall not have terminated or been  terminated,  TS
shall pay to AOL, in accordance  with the procedures set forth in Section V.B.3,
the Quarterly Payment Amount for such quarter.

                                    b.  Against the amount of each such  payment
to be made to AOL for any calendar  quarter after  December 31, 1997 and through
(and  including)  the  calendar  quarter  ending June 30,  2000,  there shall be
credited  to TS, as of the last day of such  quarter,  a portion of the  Initial
Payment equal to the lesser of (a) the Quarterly Payment Amount for such quarter
and (b) $ * * *, and such amount so credited shall, for all purposes,  be deemed
to have been paid by TS to AOL and to have satisfied  TS's  obligation to AOL in
such amount. The amount, if any, by which $ * * *


                                       21
<PAGE>


exceeds the Quarterly  Payment  Amount in any such calendar  quarter is called a
"Quarterly Shortfall Amount".

                           2. If this  Agreement  shall be  terminated by either
party prior to the end of the Term,  TS' only  obligation  to pay AOL  hereunder
(exclusive  of any  damages  to which  AOL may be  entitled  as a result of such
termination) shall be as set forth in Articles X and XI hereof.

                           3.  Within  thirty  (30)  days  after  the end of any
period  for which  payment  is to be made  pursuant  to  Section  V.B.1 or V.B.2
hereof,  TS shall deliver to AOL a statement of the Applicable Profit Percentage
(for periods prior to any termination hereof) and Pre-Tax Profit for such period
and the amount, if any, payable to AOL with respect to such period,  showing the
manner  in which  it was  determined  and  certified  as  correct  by the  Chief
Financial Officer of TS. Such statement shall be accompanied by a payment of any
such amount.  This Section V.B.3 shall survive the  termination or expiration of
this Agreement.

                           4. TS shall  keep for two (2) years  from the date of
each payment to AOL pursuant to Section V.B.1  complete and accurate  records in
sufficient  detail to allow AOL to determine if TS has computed Gross  Revenues,
Actual  Services Costs and Pre-Tax Profit  accurately.  AOL shall have the right
for a period of two (2) years  after  receiving  any  report or  statement  with
respect  to payment  due to inspect  such  records.  TS shall make such  records
available for inspection during regular business hours at its principal place of
business,  upon reasonable  notice from AOL. Such inspection  right shall not be
exercised  more than once in any calendar  year and shall not be exercised  more
than once with  respect to any  particular  records  furnished by TS to AOL. AOL
agrees to hold in strict confidence all information learned in the course of any
such  inspection,  except  to  the  extent  necessary  for  AOL to  reveal  such
information in order to enforce its rights under this Agreement or if disclosure
is required by law. AOL shall pay for such inspections, except that in the event
there is any upward  adjustment  in payments  owed for any quarter shown by such
inspection  of more than two percent (2%) of the amount  paid,  TS shall pay the
reasonable  costs of such  inspection.  If AOL and TS are unable to agree on the
amount  owed,  then the dispute  shall be resolved  by  arbitration  pursuant to
Section  XI.D  hereof.  Payments  not made  within the time  period set forth in
Section V.B.3 hereof shall bear interest at a rate of one percent (1%) per month
or the highest  rate  permitted by law,  whichever  is lower,  from the due date
until  paid in full.  This  Section  V.B.4  shall  survive  the  termination  or
expiration of this Agreement.

                           5. It is  understood  and agreed  that the  foregoing
payment  terms  and  conditions  in this  Section  V.B.  are in  respect  of the
provision of Long Distance Telecommunications Services only and that the parties
are to  mutually  agree as to  payment  terms and  conditions  in respect of the
provision of Services of any other


                                       22
<PAGE>


nature at the time such other Services are to be offered hereunder.




                                   ARTICLE VI
              WARRANTS; WARRANT HOLDER AND STOCKHOLDERS AGREEMENT

                  A.  Warrants.  On the date  hereof  and to induce AOL to enter
into the ongoing  business  relationship  represented  by this  Agreement and as
partial   consideration   therefor,   Holdings  is  entering  into  two  Warrant
Agreements, each dated as of the date hereof (collectively, the "Warrants"), one
giving AOL the right to acquire  5,000,000  shares of Holdings Common Stock (the
"Holdings Common Stock") on the terms and subject to the conditions thereof, and
the other  (the  "Supplemental  Warrant")  giving AOL the right to acquire up to
7,000,000  shares of  Holdings  Common  Stock on the terms  and  subject  to the
conditions thereof.

                  B.  Warrantholder  and  Stockholders  Agreement.  On the  date
hereof,   AOL,  TS  and  Holdings  are  entering  into  the   Warrantholder  and
Stockholders  Agreement,  dated as of the date hereof (the  "Warrantholders  and
Stockholders Agreement").




                                   ARTICLE VII
                          EXCLUSIVITY; NON-COMPETITION

         A. Exclusive Arrangement.

                           1. * * * .

                           2. * * * .


                                       23
<PAGE>


                           3. * * * .

                           4. * * * .

                           5. * * * .

                           6. * * * .


                                       24
<PAGE>


                           7. * * * .

                           8. * * * .

                           9. * * * .

                                       25
<PAGE>


         B. Confidentiality.

                           1. Each party hereto shall treat, and shall cause its
respective  directors,   officers,   employees,   agents,   representatives  and
consultants to treat, as the other party's confidential  property and not use or
disclose  to  others or  permit  its  directors,  officers,  employees,  agents,
representatives and consultants to use or disclose to others,  without the prior
written consent of such other party, any non-publicly  available  information or
data of such other party  (including,  but not  limited to, the  identity of End
Users or  subscribers  to the AOL  Service  from time to time  hereunder  or any
information  with respect thereto or any technical  information or data provided
by such other  party) that may have  heretofore  or hereafter  been  provided or
disclosed  by  such  other  party  in  connection  with  this   Agreement,   any
negotiations  pertaining  thereto  or to any of  the  transactions  contemplated
hereby.

                           2. The  foregoing  Section  VII.B.1 shall not prevent
any party hereto from using or disclosing to others information:  (i) which such
party  can show has  become  part of the  public  domain  other  than by acts or
omissions  of  such  party,   its  directors,   officers,   employees,   agents,
representatives and consultants;  (ii) which has been furnished to such party by
third  parties as a matter of right,  without  restriction  on disclosure or use
known to such party;  (iii) which was lawfully in such party's  possession prior
to the time AOL and TS first  entered into  discussions  relating to the subject
matter of this Agreement and that was not acquired by such party, its directors,
officers,  employees,  agents,   representatives  and  consultants  directly  or
indirectly from the other party, its employees or agents; (iv) which a party can
prove was developed by it  independently  of any information  received from such
other party, its directors,  officers,  employees,  agents,  representatives and
consultants,  either directly or indirectly;  (v) that such party is required to
disclose by applicable law or regulation, in which case the party so required to
disclose  shall give the other party prompt  notice of such  requirement  in all
cases with  sufficient  time for such other party to seek a protective  order or
other  limit  on  disclosure   (unless  the  party  subject  to  the  disclosure
requirement  would  suffer  penalties or  sanctions  for failure to  immediately
disclose such  information).  It is further  understood and agreed that specific
information  shall not be deemed available to the public or in any party's prior
possession merely because it is embraced by more general  information  available
to the public or in such party's prior possession;  or (vi) as necessary for the
enforcement of this  Agreement.  In addition,  (1) 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 its (or  Holdings')  status as a public company and
with  transactions  involving the offering of its (or Holdings')  securities and
(2) either party may disclose the terms of this Agreement to third


                                       26
<PAGE>


parties  as  necessary  in  connection   with  other  financing  or  merger  and
acquisition activities,  provided that, in the case of clauses (1) and (2) above
it seeks to protect the confidentiality of such confidential  information in the
same manner and to the same degree as its own confidential  information,  to the
full extent that such  confidential  treatment is consistent with the purpose of
the disclosure.  If either party becomes aware of any motion or other regulatory
or court  proceeding  that might require it to disclose any of the terms of this
Agreement,  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 terms  hereof.  For purposes of this  paragraph,  "third
party",  does not include a person (other than a direct  competitor of AOL or TS
or their  respective  affiliates)  retained by either  party to provide  advice,
consultation,  analysis,  legal counsel or any other services in connection with
this  Agreement,  if such  person  agrees  to be  bound  by the  confidentiality
obligations of this Agreement.

                           3. In the event that this  Agreement  is  terminated,
any and all  notes,  memoranda,  records,  drawings,  tracings,  specifications,
sketches, reports or other documents, including, without implied limitation, all
copies, excerpts or reproductions thereof,  furnished or made available by TS to
AOL, or AOL to TS, as the case may be,  their  respective  directors,  officers,
employees, agents, representatives and consultants or developed thereby (except,
in any case,  for  information  necessary  to complete the  performance  of such
party's  obligations  under  this  Agreement  and,  in the  case of TS,  for any
information  relating to any End User  hereunder  with respect to the  Services,
and, in the case of AOL, any  information  relating to any subscriber to the AOL
Service  with respect to the AOL  Service)  shall be promptly  destroyed by such
party at such other party's request and such party shall advise such other party
in writing that such destruction has been completed.  This Section shall survive
any termination of this Agreement.

         C. Public Announcement.

                           1.   No   press   release,    public    announcement,
confirmation  or other  information  regarding this Agreement or the Warrants or
the  contents  hereof or thereof  shall be made by any party  without  the prior
written  consent of the other party,  which  consent  shall not be  unreasonably
withheld.  It is agreed and  understood  that the parties shall work together to
prepare  any  such  press   release  or  public   announcement.   The  foregoing
notwithstanding,  if a party is required pursuant to applicable  securities laws
to make  such a  public  announcement  or press  release,  such  party  shall be
permitted to do so provided  that such party has  furnished the other party with
the text of such public announcement or press release sufficiently in advance of
such public  announcement  or press release as to afford the  receiving  party a
reasonable opportunity to review such public announcement or press release


                                       27
<PAGE>


and such party, to the extent consistent with its legal disclosure  obligations,
modifies such public  announcement  or press release as reasonably  requested by
the other party.




                   ARTICLE VIII REPRESENTATIONS AND WARRANTIES

                  A. AOL Representations  and Warranties.  AOL hereby represents
and warrants to TS as follows:

                           1. Due  Organization;  Etc. AOL (a) is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
state of its organization; (b) is duly qualified or licensed to do business as a
foreign  corporation  and is in good standing in each  jurisdiction in which its
ownership  or lease of property or its conduct of business  requires it so to be
qualified or licensed; (c) has all licenses,  authorizations,  consents, orders,
approvals and qualifications  necessary to conduct its business; and (d) has the
corporate  power and authority to own its  properties and assets and to carry on
its business as now conducted.

                           2.   Authorization.   The  execution,   delivery  and
performance  by AOL of this  Agreement are within its corporate  powers and have
been duly authorized by all necessary corporate action.

                           3.  No   Conflict.   The   execution,   delivery  and
performance  by AOL of this Agreement (i) do not contravene any provision of its
charter or by-laws; and (ii) do not violate or conflict with any law, regulation
or contractual restriction to which it is subject or result in a violation of or
conflict  with  any  other  agreement  to  which it is a party or by which it is
bound.

                           4. Enforceability. This Agreement is the legal, valid
and binding  obligation of AOL,  enforceable  against AOL in accordance with its
terms,  except as such  enforceability may be limited by applicable  bankruptcy,
insolvency,  moratorium,  reorganization,  or other  laws  affecting  creditors'
rights generally or by the availability of equitable remedies.

                           5. Acquisition for Investment.  AOL is an "accredited
investor"  within the meaning of Rule 501 of Regulation D promulgated  under the
Securities  Act.  AOL is acquiring  the  Warrants and the Holdings  Common Stock
issuable upon exercise  thereof for its own account for  investment  and not for
the  account  of  others  or with a view to the  distribution  or resale of such
Warrants or Holdings  Common Stock.  AOL has such  knowledge  and  experience in
financial and business  matters  generally that AOL is capable of evaluating the
merits and risks of an investment in the


                                       28
<PAGE>


Warrants and Holdings  Common Stock.  AOL is aware that neither the Warrants nor
the  Holdings  Common  Stock  issuable  upon  exercise  thereof  may be  sold or
otherwise  transferred  absent  registration  under  the  Securities  Act  or an
exemption  therefrom.  AOL  acknowledges  that it has received from Holdings all
financial and other information regarding its investment in the Warrants and the
Holdings  Common Stock issuable upon exercise  thereof that it has requested and
has been afforded the opportunity to discuss such investment with Holdings.  The
only  representations  and  warranties  that  have been  made  with  respect  to
Holdings,  its  subsidiaries,  including TS, or their respective  businesses and
assets or otherwise in connection with the transactions  herein contemplated are
those contained in this Agreement and in the Warrants.

                  B. TS Representations and Warranties. TS hereby represents and
warrants to AOL as follows:

                           1. Due  Organization;  Etc.  TS (a) is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
state of its organization; (b) is duly qualified or licensed to do business as a
foreign  corporation  and is in good standing in each  jurisdiction in which its
ownership  or lease of property or its conduct of business  requires it so to be
qualified or licensed; (c) has all licenses,  authorizations,  consents, orders,
approvals and qualifications  necessary to conduct its business; and (d) has the
corporate  power and authority to own its  properties and assets and to carry on
its business as now conducted.

                           2.   Authorization.   The  execution,   delivery  and
performance  by TS of this  Agreement are within its  corporate  powers and have
been duly authorized by all necessary corporate action.

                           3.  No   Conflict.   The   execution,   delivery  and
performance  by TS of this  Agreement (i) do not contravene any provision of its
charter or by-laws; and (ii) do not violate or conflict with any law, regulation
or contractual restriction to which it is subject or result in a violation of or
conflict  with  any  other  agreement  to  which it is a party or by which it is
bound.

                           4. Enforceability. This Agreement is the legal, valid
and binding  obligation of TS,  enforceable  against TS in  accordance  with its
terms,  except as such  enforceability may be limited by applicable  bankruptcy,
insolvency,  moratorium,  reorganization,  or other  laws  affecting  creditors'
rights generally or by the availability of equitable remedies.

                           5. AOL Representations.  The only representations and
warranties  that have been made with respect to AOL, its  subsidiaries  or their
respective businesses and assets or


                                       29
<PAGE>


otherwise in connection  with the  transactions  herein  contemplated  are those
contained in this Agreement.




                          ARTICLE IX THE EFFECTIVE DATE

         A. The Effective Date

                  1. * * * . This  Agreement and the  obligations of the parties
shall become  effective for all purposes at 5:00 p.m., EST, on February 27, 1997
if, on or before such time on such date, AOL shall not have given written notice
to TS that it had elected not to proceed with this Agreement, accompanied by the
return of the full  amount of the Initial  Payment to TS and of the  Warrants to
Holdings and (ii) TS has provided to AOL a legal opinion  reasonably  acceptable
to AOL with respect to the valid issuance and due  authorization of the Warrants
and (iii) the check  representing  the Initial  Payment  delivered to AOL on the
date hereof shall have cleared so long as it was  deposited in a bank on Monday,
February  24,  1997.  Such  time on such date that  this  Agreement  so  becomes
effective,  or such earlier time as the parties shall agree in writing that this
Agreement shall be effective, is called the "Effective Date."

                  2. If AOL shall elect, as provided  above,  not to proceed and
shall, on or before 5:00 p.m., EST, on February 27, 1997, have returned the full
amount of the Initial Payment to TS and the Warrants to Holdings, this Agreement
and the Warrants  shall be void and of no further force and effect,  without any
further obligation on the part of any party hereto.

         B. Announcement.

                  Immediately  following the Effective  Date, if it shall occur,
TS  and  AOL  shall  publicly   announce  the  entering  into  the  relationship
contemplated by this Agreement, subject to the parties' mutual agreements on the
content of such announcement and the procedures for the same pursuant to Section
VII.C.


                                       30
<PAGE>



                         ARTICLE X TERM AND TERMINATION

         A. Term of Agreement.

                           1. The term of this Agreement  shall be for the Term;
provided  that,  notwithstanding  anything  set forth in this  Agreement  to the
contrary, so long as any End User shall be using any Service, each of TS and AOL
shall continue to perform its obligations  under Article IV and Section III.D.1,
respectively,  with  respect  to End  Users  post such Term as well as any other
obligations that survive termination or expiration of this Agreement pursuant to
Section XI.K.

         B. Extension of the Term.

                           1. * * * .

                           2. In connection with each of the first two Extension
Periods, if any, elected by AOL, and in consideration  thereof and to induce AOL
so to extend,  Holdings  shall deliver to AOL, on or before the first day of the
applicable  Extension  Period, a warrant (each, an "Additional  Warrant" and the
Additional  Warrant that is issued with respect to the first  Extension  Period,
the "First  Additional  Warrant" and the Additional  Warrant that is issued with
respect to the second  Extension  Period,  the "Second  Additional  Warrant") to
purchase up to 1,000,000  shares (as such number would have been adjusted  after
the  date  hereof  pursuant  to the  terms  of  the  Supplemental  Warrant,  the
"Additional  Warrant  Number") of Holdings  Common Stock,  at an exercise  price
equal to the average of the closing prices of such Common Stock for the ten (10)
consecutive  business days before the issuance of such Additional  Warrant,  and
substantially in the form of the Supplemental Warrant,


                                       31
<PAGE>


except that (a) the "Vesting  Multiplier"  thereunder shall be 1 (as such number
would have been  adjusted  after the date  hereof  pursuant  to the terms of the
Supplemental Warrant), (b) the "Termination Date" shall be the fifth anniversary
of the issuance  date of such  Additional  Warrant and (c) the "Warrant  Shares"
thereunder shall mean at any time such number of shares of Common Stock as shall
have vested as of such time as follows:

                  (i) such  number of shares of Common  Stock as shall equal the
              product of the "Vesting  Multiplier" times the amount by which (x)
              the number (the "First  Quarter  Number") of End Users for whom TS
              is  providing  Services  as of the  last  day of  the  first  full
              calendar  quarter of such  Extension  Period (the  "First  Vesting
              Date") exceeds (y) the number of End Users (the "Starting Number")
              for  whom TS was  providing  services  as of the  last  day of the
              calendar quarter next preceding such Extension Period,  shall vest
              and shall be Warrant  Shares  thereunder  as of such First Vesting
              Date; and

                  (ii) such number of shares of Common  Stock as shall equal the
              product of the "Vesting  Multiplier" times the amount by which (x)
              the number of End Users (each, a "Subsequent  Quarter Number") for
              whom TS is  providing  Services  as of the last  day of each  full
              calendar  quarter  (each,  a "Subsequent  Vesting Date") after the
              First  Vesting  Date  and on or  before  the  last day of the full
              calendar  quarter in which this Agreement is  terminated,  exceeds
              (y) the greatest of the Starting Number,  the First Quarter Number
              and any prior Subsequent  Quarter Number,  shall vest and shall be
              Warrant Shares thereunder as of such Subsequent Vesting Date;

provided that in no event will the aggregate number of Warrant Shares exceed the
Additional  Warrant  Number,  subject  to  further  adjustment  as  provided  in
Paragraph 6 of such  Additional  Warrant and to  successive  reduction  upon any
exercise of such Additional  Warrant as provided in such Additional  Warrant and
provided,  further,  that no Warrant Shares under the Second Additional  Warrant
shall vest until all  Warrant  Shares  have  vested  under the First  Additional
Warrant  (and no  Warrant  Shares  shall vest  under any  Additional  Warrant on
account of any End User that was the basis of any Warrant  Share  vesting  under
the other Additional Warrant).

         C. Termination of Agreement.

                  1. This Agreement may be terminated as follows:

                         a. TS and AOL may terminate  this Agreement at any time
by mutual written consent.


                                       32
<PAGE>


                         b. Either TS or AOL may terminate this Agreement at any
time upon 30 days prior  written  notice to the other upon a material  breach by
the other in the  performance of its agreements  and  obligations  hereunder and
such other  party's  failure to cure such  breach  within 30 days after  written
notice  thereof,  provided that the party giving notice  pursuant to this clause
(b) is not in such breach of this  Agreement  as would permit the other party to
give a notice pursuant to this clause (b).

                         c. * * * .

                         d. If,  at any time  during  the Term,  AT&T  ceases to
provide  long  distance  telecommunications  services  to TS, TS shall  promptly
inform AOL in writing and AOL may,  upon thirty (30) days  written  notice to TS
given  within  fourteen  (14)  days  after  AOL  receives  notice  of such  AT&T
termination  from  TS,  plus  payment  by AOL to TS of an  amount  equal  to the
aggregate of all amounts  theretofore paid to AOL by TS pursuant to Section V.B.
hereof,  if any (i.e.,  not  including  the  Initial  Payment),  terminate  this
Agreement;  provided,  however,  that AOL shall have no  obligation  to make the
foregoing payment if TS shall not have contracted for viable substitute services
to replace those formerly provided by AT&T.

                         e. If, as the result,  direct or indirect,  of an event
described in Section XII.O, which event is either incurable or has continued for
at  least  60  days,  the  performance  of  this  Agreement   substantially   as
contemplated  hereby is rendered  impracticable,  either AOL or TS may terminate
this Agreement by 30 days prior written notice to the other.

       D. Effects of Termination.

              1.  Except  as  otherwise  provided  below,  upon  termination  or
expiration of this Agreement,  neither party shall have any further liability or
obligation  to the other,  other than for  amounts  accrued but unpaid as of the
date of expiration on termination,  liabilities for any damages to which a party
may be entitled in connection with a termination  pursuant to Section  X.C.1(b),
obligations   contemplated  to  be  performed  or  observed  subsequent  to  any
termination   or  expiration  of  this  Agreement  and   obligations   that  are
specifically described herein as surviving termination of this Agreement.


                                       33
<PAGE>


              2. Upon the expiration or any  termination of this Agreement after
the  first  day of the Test  Launch  Period,  and  provided  that AOL  elects to
continue  to provide to TS online  billing  services of the types  described  in
Section  III.D.  hereof,  TS  shall  pay to AOL,  for each  subsequent  calendar
quarter,  in arrears at the time and in accordance with the procedures set forth
in Section  V.B.3 hereof,  an amount equal to * * * % of the Pre-Tax  Profit for
such quarter  derived by TS, or any successor to TS, or any third party to which
TS may  assign  customers  who were End  Users as of the date of  expiration  or
termination of this Agreement, from telecommunication  services in the nature of
the  Services  provided  to  customers  who  were  End  Users  as of the date of
expiration or  termination  of this  Agreement.  Such election shall be made not
less than 30 days prior to expiration or 10 days prior to the effective  date of
termination,  as the case may be, by written notice to TS. Against the amount of
each  payment to be made to AOL by TS pursuant to this  Section for any calendar
quarter,  there shall be credited to TS, as of the last day of such quarter,  in
accordance  with the terms of this  Agreement,  an amount equal to the lesser of
(a) * * * of the amount that, but for this  provision,  was to be paid to AOL in
respect of such quarter  pursuant to this Section X.D.2 and (b) the amount of* *
* .

              3. If this Agreement  shall have been terminated by TS pursuant to
Section X.C.1(b) hereof by reason of a material breach by AOL or by AOL pursuant
to Section  X.C.1(c)  hereof or by either  party  pursuant  to Section  X.C.1(e)
hereof,  AOL  shall,  within  10  days  after  such  termination,  pay  to TS in
immediately available funds, the amount, if any, equal to the Unamortized Amount
at the time of such termination.

              4. * * * .


                                       34
<PAGE>



              5. If at any time  subsequent to the  expiration or termination of
this  Agreement,  TS shall  make or  receive  any offer to  transfer  or assign,
directly or indirectly,  all or any portion of its rights to provide Services to
End Users,  which shall in any event  include  assumption by the offeror of TS's
responsibilities  to End Users and  obligations to AOL hereunder,  TS shall give
AOL  written  notice of such  offer,  stating  the name of the  third  party and
describing the offer's material terms. If AOL shall not, within thirty (30) days
after  receiving  such  notice,  offer to  acquire  such  rights  on  terms  and
conditions  substantially similar to those offered by or to such third party (it
being  understood  that  if the  offer  to or  from  the  third  party  includes
securities  of such third party,  AOL shall have no  obligation  to provide such
securities  as part of its offer but shall be  required  to  provide  equivalent
value), TS shall be free to transfer or assign such


                                       35
<PAGE>


rights to such third  party,  provided  that any such  transaction  is completed
within a period of ninety (90) days after  expiration  of the  foregoing  thirty
(30) day period.  Otherwise,  AOL shall have the right,  exercisable  for thirty
(30) days, to acquire such rights upon the terms set forth in AOL's offer.

                   6.  Termination  without  Cause.   Notwithstanding   anything
provided in this Section  X.D.6 or otherwise in this  Agreement,  neither TS nor
AOL has the right to terminate this Agreement without cause.

                           a. If AOL should nonetheless terminate this Agreement
                        without cause, TS may elect as its sole remedy,  in lieu
                        of its other  remedies in law and equity,  to be awarded
                        liquidated   compensatory   damages   in  an  amount  of
                        * * * less amounts  previously  credited to AOL pursuant
                        to Section  V.B.1(b).  The  parties  have agreed to this
                        liquidated  damage clause  because of the  difficulty of
                        ascertaining  with accuracy,  in advance,  the amount of
                        damages  that TS would  suffer if AOL were to  terminate
                        this contract  without cause.  The parties further agree
                        that (i) these  liquidated  damage  payments  are wholly
                        compensatory  in  nature  and  constitute  a  reasonable
                        approximation of the damages TS would actually suffer in
                        the event of a termination  by AOL, and (ii) as a result
                        of a termination by AOL, TS would lose funds that it had
                        invested   in  its   arrangement   with  AOL  and  these
                        liquidated damages would provide the funds necessary for
                        TS to  establish  and finance a  comparable  arrangement
                        with another online service if it elects to do so.

                           b. If TS should nonetheless  terminate this Agreement
                        without cause,  AOL, as a remedy in addition to those it
                        already possesses in equity and in law, shall be able to
                        require  TS to provide  180 days of  Service  under this
                        Agreement  from the date of  termination  or  notice  of
                        termination,  whichever is earlier.  The purpose of this
                        180-day period is to provide AOL with the time necessary
                        reasonably  to  transfer  End Users to other  comparable
                        telecommunications   carrier(s)   with  a   minimum   of
                        disruption.

                           c. For  purposes  of this  Section  X.D.6  only,  the
                        parties further agree that a termination  made by either
                        party  with a good  faith  belief  that such party has a
                        right  to  terminate  pursuant  to a  provision  of this
                        Agreement   (a   "Permitted   Termination"),   which  is
                        ultimately determined not to have been effected pursuant
                        to a provision of this Agreement,  will not constitute a
                        termination  without cause for purposes of this Section.
                        A  termination  without  cause shall be any  termination
                        other than a Permitted Termination.


                                       36
<PAGE>




                                   ARTICLE XI
                                    REMEDIES

         A. Indemnification.

                           1.  Subject  to the  terms  and  conditions  of  this
Article  XI, AOL hereby  indemnifies  and agrees to defend and hold  harmless TS
from and against all losses,  costs,  damages and expenses,  including,  without
limitation,  reasonable attorneys' fees (collectively "Damages"), incurred by TS
resulting from or relating to (i) a breach of any  representation or warranty of
AOL contained in this Agreement,  (ii) the  non-performance of any obligation to
be performed  by AOL under this  Agreement or (iii) any claim that the AOL Marks
that are authorized by this Agreement infringe the intellectual  property rights
of any third party.

                           2.  Subject  to the  terms  and  conditions  of  this
Article XI, TS hereby  indemnifies  and agrees to defend and hold  harmless  AOL
from and against all Damages incurred by AOL resulting from or relating to (i) a
breach of any representation or warranty of TS contained in this Agreement, (ii)
the  non-performance  of any covenant or  obligation to be performed by TS under
this Agreement or (iii) any claim that any TS trademarks,  service marks,  trade
names or logos  displayed  in  connection  with the  marketing  of the  Services
infringe the intellectual property rights of any third party.

         B. Conditions of Indemnification.

                           1.  The  party  seeking  indemnification  under  this
Agreement (the "Indemnified  Party") shall promptly notify the party expected to
provide  indemnification  under this Agreement (the "Indemnifying Party") of the
facts and circumstances upon which the Indemnified Party intends to base a claim
for indemnification hereunder ("Notice of Claim"). Notice shall in all events be
considered  prompt  if given  (a) no later  than  thirty  (30)  days  after  the
Indemnified  Party learns of such facts and  circumstances,  or (b) if later, in
sufficient time to allow the Indemnifying  Party to exercise its rights pursuant
to this  subpart 3 without any  material  impairment  of, or  prejudice  to, the
Indemnifying Party in the exercise of such rights.

         C. Defense of Third-Party Claims.

                           1. Subject to subsection (b) below,  if Damages arise
out of a third party claim seeking  recovery of money damages (a "Money Claim"),
the Indemnifying Party shall have the right and obligation,  at its expense,  to
assume sole control of the defense of such Money Claim with  counsel  reasonably
acceptable  to  the  Indemnified  Party.   Notwithstanding  the  foregoing,  the
Indemnified Party shall have the right to employ its own counsel in any such


                                       37
<PAGE>


case,  but the fees and expenses of such counsel  shall be at the expense of the
Indemnified  Party unless (x) the  employment  of such  counsel  shall have been
authorized in writing by the  Indemnifying  Party in connection with the defense
of such action at the expense of the Indemnifying Party, or (y) the Indemnifying
Party  shall not have  employed  counsel to have  charge of the  defense of such
action  within a reasonable  time after the Notice of Claim is given,  or having
assumed such  defense,  fails to pursue it within  reasonable  time,  or (z) the
named parties to such claim include both the  Indemnified  and the  Indemnifying
Parties  and the  Indemnified  Party  shall have been  advised  by counsel  that
counsel employed by the Indemnifying Party would, under applicable  professional
standards,  have a conflict in representing both the Indemnifying  Party and the
Indemnified  Party,  in any of  which  events  such  fees  and  expenses  of one
additional  counsel for the Indemnified Party shall be borne by the Indemnifying
Party.  The  Indemnified  Party shall have the right to settle or compromise any
Money Claim and recover the amount paid in such settlement from the Indemnifying
Party without the consent of the Indemnifying Party if the Indemnified Party has
given written  notice  thereof to the  Indemnifying  Party and the  Indemnifying
Party has failed to assume the defense of the Money Claim or, having assumed the
defense,  has failed to pursue it diligently within a reasonable length of time.
The  Indemnifying  Party shall have the right to settle or compromise  any Money
Claim against the Indemnified Party without the consent of the Indemnified Party
provided  that the  terms  of such  settlement  or  compromise  provide  for the
unconditional  release of the Indemnified Party and require the payment of money
damages only by the Indemnifying Party.

                           2.  If  Damages  arise  out of a  third  party  claim
seeking  equitable  relief alone or in addition to monetary damages and, if such
equitable  relief,  standing alone, if obtained,  would materially and adversely
affect  the  business,   operations,   assets  or  financial  condition  of  the
Indemnified  Party  (an  "Equitable  Claim"),  the  Indemnified  Party  shall be
entitled to defend such Equitable  Claim with counsel  reasonably  acceptable to
the Indemnifying Party in a reasonable manner under the circumstances and at the
reasonable  expense of the Indemnifying  Party. The Indemnifying  Party shall be
provided by counsel to the Indemnified Party with regular information  regarding
the  costs  of such  defense.  The  Indemnifying  Party  shall  be  entitled  to
participate at its own expense in the defense of any such Equitable  Claim.  The
Indemnified  Party  shall  make  no  settlement,   compromise,   admission,   or
acknowledgment   which  would  give  rise  to  liability  on  the  part  of  the
Indemnifying Party without the prior written consent of the Indemnifying  Party,
which shall not be unreasonably withheld or delayed.

                           3. The parties shall extend reasonable cooperation to
one another in connection with the defense of any third-party  claim pursuant to
this  Article XI and, in  connection  therewith,  shall  furnish  such  records,
information, and testimony and attend


                                       38
<PAGE>


such conferences, discovery proceedings, hearings, trials, and appeals as may be
reasonably requested.

                           4. Notwithstanding anything else in this Agreement or
elsewhere  contained,  IT IS  EXPRESSLY  UNDERSTOOD  AND AGREED  THAT EXCEPT FOR
LIABILITY  AMONG THE PARTIES HERETO ARISING UNDER SECTIONS IIIE,  IIIF, VIIB AND
VIIC HEREOF, NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY OR ANY OTHER PERSON FOR
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING,
WITHOUT LIMITATION,  LOSS OF GOODWILL OR LOSS OF PROFITS,  ARISING IN ANY MANNER
FROM THIS AGREEMENT OR THE  PERFORMANCE  OR  NONPERFORMANCE  OF ITS  OBLIGATIONS
HEREUNDER.

         D. Arbitration.

                           1. If the parties are unable to resolve any  dispute,
controversy  or claim  arising  under this  Agreement  (excluding,  any disputes
relating to intellectual property rights or confidentiality) (each a "Dispute"),
such  Dispute  will be  submitted  to senior  executive  officers of each of the
parties  for  resolution.  If such  officers  are unable to resolve  the Dispute
within ten (10) days after  submission to them,  the dispute shall be solely and
finally  settled by  arbitration in accordance  with the Commercial  Arbitration
Rules of the American Arbitration  Association ("AAA") then obtaining;  provided
that the Federal Rules of Evidence  shall apply in toto to any such Dispute and,
subject to the  arbitrators'  limiting  the time for and scope of  discovery  to
comply with the time limit set forth in Section  XI.D.4,  the  Federal  Rules of
Civil Procedure shall apply with respect to discovery.

                           2. The  arbitration  panel shall be composed of three
arbitrators,  one of whom shall be chosen by AOL, one by TS and the third by the
two so chosen.  If both or either of AOL or TS fails to choose an  arbitrator or
arbitrators  within seven (7) days after  receiving  notice of  commencement  of
arbitration or if the two arbitrators fail to choose a third  arbitrator  within
seven (7) days after their  appointment,  the then director of the office of the
American  Arbitration  Association in the District of Columbia  shall,  upon the
request  of both or  either  of the  parties  to the  arbitration,  appoint  the
arbitrator or arbitrators required to complete the board.

                           3.  Unless  the  parties  to  the  arbitration  shall
otherwise agree to a place of arbitration,  the place of arbitration shall be in
the District of Columbia.

                           4. The arbitration  panel shall commence  proceedings
no later than sixty (60) days after the appointment of the third arbitrator. All
discovery  shall  be  completed  prior  to  commencement  of  proceedings.  Such
proceedings  shall be  conducted  for no less than  three (3) full days per week
until completed.


                                       39
<PAGE>


                           5. The  arbitration  panel is empowered to render the
following  awards in accordance with the terms and conditions of this Agreement:
(i) enjoining a party from performing any act prohibited,  or compelling a party
to  perform  any act  required,  by the  terms of this  Agreement  and any order
entered pursuant to this Agreement or deemed necessary by the arbitration  panel
to resolve  disputes  arising under or relating to this  Agreement or any order;
(ii)  where,  and only  where,  violations  of this  Agreement  have been found,
shortening or lengthening any period established by this Agreement or any order;
(iii)  monetary  awards and (iv) ordering such other legal or equitable  relief,
including  any  provisional  legal  or  equitable  relief,  or  specifying  such
procedures as the arbitrators deem appropriate, to resolve any Dispute submitted
to it for  arbitration.  The  arbitration  panel shall not be empowered to award
consequential  or punitive  damages and shall not be empowered to award specific
performance  in  the  event  that  such  performance  would  have  a  materially
detrimental  effect on aspects of the  party's  business  that are not  directly
related hereto.

                           6. When resolving a Dispute  arising under Article II
hereof and  resulting  from the failure of the  parties to  mutually  agree on a
guideline to be included on the  Performance  List of one of the  parties,  each
party  shall  submit  to the  arbitrators  a form  of the  particular  guideline
proposed by such party. The arbitrators'  decision in any such instance shall be
limited to designating  one of the proposals as being the most  consistent  with
generally  accepted  industry  practice  in the context of  comparable  business
arrangements.  The proposed  guideline so designated by the arbitrators shall be
included in the Performance List of the appropriate party.

                           7. The arbitrators shall render their decision within
thirty (30) days after  submission  of all  evidence and the  conclusion  of all
testimony. The decision of the arbitrators shall be by majority vote and, at the
request of either  party,  the  arbitration  panel shall issue to both parties a
written  explanation  of the reasons for the award and a full  statement  of the
facts as found and the rules of law applied in reaching its decision.

                           8. Any  monetary  awards  shall be made and  shall be
payable in U.S. dollars free of any tax or any other deduction (except as may be
required by law). Monetary awards shall include interest from the date of breach
or other violation of this Agreement to the date when the award is paid in full.
The interest rate or rates applied  during such period shall be the lower of 12%
per annum or the maximum rate permitted by applicable law (the "Interest Rate").

                           9. The  award of the  arbitration  panel  will be the
sole and exclusive  remedy between the parties  regarding any and all claims and
counterclaims with respect to the subject matter of the arbitrated  dispute.  An
award rendered in connection with an


                                       40
<PAGE>


arbitration  shall be final and binding upon the parties,  and any judgment upon
such  an  award  may  be  entered  and   enforced  in  any  court  of  competent
jurisdiction. The parties hereby waive all jurisdictional defenses in connection
with any arbitration  hereunder or the enforcement of an order or award rendered
pursuant  thereto  (assuming that the terms and  conditions of this  arbitration
clause have been complied  with),  defenses  based on the general  invalidity of
this Agreement or this arbitration  clause.  With respect to any order issued by
the arbitration  panel pursuant to this Agreement,  the parties  expressly agree
and consent (i) to the  bringing of an action by one party  against the other in
the  federal  courts of the forum  state  agreed to above to enforce and confirm
such  order;  and (ii) that any  federal  court  sitting in such state may enter
judgment and enforce such order, whether pursuant to the U.S. Arbitration Act or
otherwise.

                           10.  Neither  party shall be excused from  performing
its obligations hereunder during the pendency of such arbitration.

                  E. Reservation of Remedies.  Except where otherwise  expressly
specified,  the rights and remedies  granted to a party under this Agreement are
cumulative  and in addition to, and not in lieu of, any other rights or remedies
which the party may possess at law or in equity.

                  F. Survival. This Article XI shall survive termination of this
Agreement.




                                   ARTICLE XII
                                    GENERAL

                  A.  Regulatory  Filings.  Each of TS and AOL will cooperate to
the extent  reasonably  practicable in the  preparation  and filing of any other
regulatory  filings  necessary or advisable to permit the proposed  transactions
and the provision of the Services hereunder,  including, without limitation, the
provision of any information as may reasonably be necessary therefor.

                  B.  Notices.  All notices and other  communications  hereunder
shall be given by telephone  and  immediately  confirmed in writing and shall be
deemed given if delivered  personally or mailed by registered or certified  mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):


                                       41
<PAGE>


                           1. if to TS or Holdings:

                           Tel-Save Holdings, Inc.
                           Law Department
                           6805 Route 202
                           New Hope, Pennsylvania  18938
                           Attention:        General Counsel

                           Telephone Number:  (215) 862-1500
                           Facsimile Number:  (215) 862-1515

                           2. if to AOL:

                           America Online Inc.
                           22000 AOL Way
                           Dulles, Virginia  20166-9323
                           Attention:  General Counsel
                           Telephone Number:  (703) 265-2739
                           Facsimile Number:  (703) 265-2208

                           with a copy to:

                           Head of Business Affairs
                           AOL Networks
                           22000 AOL Way
                           Dulles, Virginia 20166-9323
                           Telephone Number:  (703) 265-2365
                           Facsimile Number:  (703) 265-1206

                  C.  Interpretation.  The headings  contained in this Agreement
are for  reference  purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections, Articles and Schedules
refer to  sections,  articles and exhibits of this  Agreement  unless  otherwise
stated.

                  D.  Severability.   If  any  term,   provision,   covenant  or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants,  and  restrictions  of this Agreement  shall remain in full force and
effect and shall in no way be affected,  impaired or invalidated and the parties
shall  negotiate  in good faith to modify this  Agreement  to  preserve,  to the
fullest  extent  legally  permitted,   each  party's  anticipated  benefits  and
obligations  under this  Agreement.  If the parties are unable to so agree,  the
matter shall be resolved pursuant to Article XI.D hereof.

                  E. Entire Agreement.  This Agreement,  together with the other
agreements referred to herein and the schedules attached hereto, constitutes the
entire  agreement,  and supersedes all other prior agreements and  undertakings,
both  written and oral,  among the parties  with  respect to the subject  matter
hereof.


                                       42
<PAGE>


                  F.  Assignments.  This Agreement (i) is not intended to confer
upon any other  person any rights or remedies  hereunder;  and (ii) shall not be
assigned  by  operation  of law  or  otherwise  except  (a)  to a  wholly  owned
subsidiary  (provided such subsidiary becomes a party to this Agreement and that
the transferring  party agrees and acknowledges that it is not released from its
obligations  hereunder),   or  (b)  to  any  entity  that  may  acquire  all  or
substantially all of the assets of a party hereto. This Agreement, together with
the other agreements referred to herein and the schedules attached hereto, shall
inure to the benefit of and be binding upon the parties'  respective  successors
and permitted assigns.

                  G.  Governing  Law.  This  Agreement  shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of New York,  without  giving effect to the  principles of conflict of
laws thereof.

                  H. Amendments.  No provision of this Agreement may be amended,
modified  or waived  except by written  agreement  duly  executed by each of the
parties,  by, in the case of AOL, an officer of at least equal  standing to that
officer who signed this Agreement on behalf of AOL.

                  I. Independent Contractors.  The parties to this Agreement are
independent contractors.  Neither party is an agent, representative,  or partner
of the other party.  Neither  party shall have any right,  power or authority to
enter  into any  agreement  for or on  behalf  of, or incur  any  obligation  or
liability of, or to otherwise bind, the other party. This Agreement shall not be
interpreted  or construed to create an  association,  agency,  joint  venture or
partnership between the parties or to impose any liability  attributable to such
a relationship upon either party.

                  J. No Waiver.  The  failure of either  party to insist upon or
enforce strict performance by the other party of any provision of this Agreement
or to exercise any right under this Agreement shall not be construed as a waiver
or  relinquishment to any extent of such part's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.

                  K.   Survival.   Any   provision  of  this   Agreement   which
contemplates  performance or observance  subsequent to, or otherwise states that
it would survive,  any  termination or expiration of this Agreement will survive
the termination or expiration of this Agreement.  This Article XII shall survive
termination of this Agreement.

                  L. Third Party  Beneficiaries.  This Agreement is intended for
the benefit of the  parties  hereto and  thereto,  as the case may be, and their
respective successors and permitted assigns, and are


                                       43
<PAGE>


not for the benefit of nor may any  provision  hereof be enforced  by, any other
person,  including,  without limitation,  any End User (such End Users having no
rights whatsoever herein).

                  M. Counterparts.  This Agreement may be executed in any number
of counterparts,  each of which shall constitute an original, but together shall
be construed as one document.

                  N. Nonsolicitation.  Neither party, for itself, or through any
third party shall, directly or indirectly, solicit or attempt to solicit, entice
or  persuade  any  employee  of or  consultant  to the other  party to leave the
services of such other party.

                  O.  Force  Majeure.  Neither  Party  shall be held  liable for
failure to perform any of its  obligations  hereunder if such failure is (i) due
to an Act of  God,  fire,  explosion,  accident,  flood,  landslide,  lightning,
earthquake,  storm,  civil  disturbance,  power  failure,  strike or other labor
disturbance  affecting a party other than TS or AOL,  act of war (whether war be
declared  or  not),  national  defense  requirement,   failure  of  a  non-party
telecommunications  carrier,  failure or disruption  of machinery,  apparatus or
systems;  acts,  injunction,  or  restraint  of  government  (whether or not now
threatened) and (ii) beyond the reasonable  control of such party.  For purposes
of this Section XII.O, a failure shall not be deemed to be beyond the reasonable
control of the party affected if

                                    (i) such failure would not have occurred had
the affected  party been  performing in accordance  with the  provisions of this
Agreement,  including its  Performance  List, or in  accordance  with  generally
accepted industry practice; or

                                    (ii) with  respect to acts,  injunctions  or
restraints  of  governments,  such  failure  results  from the  unlawful  act or
omission of the affected party (other than actions  contemplated  by the parties
in furtherance of this Agreement).

Upon  such  an  occurrence,  the  party  whose  performance  is  affected  shall
immediately  give written notice of the occurrence to the other party, and shall
thereafter  exert all  reasonable  efforts to overcome the occurrence and resume
performance  of this  Agreement.  If,  despite such efforts,  the affected party
cannot overcome the occurrence and resume  performance  within 90 days following
notification  given  hereunder,  then unless  either party has  terminated  this
Agreement in accordance with Section X.C.1(e),  the parties shall mutually agree
on an equitable resolution. If the parties are unable to reach mutual agreement,
the matter shall be submitted for resolution in accordance with Section XI.D.


                                       44
<PAGE>




                                  ARTICLE XIII
                               HOLDINGS GUARANTEE

                  Holdings hereby unconditionally guarantees to AOL (i) the full
and prompt  payment of all amounts which may become due and owing to AOL from TS
pursuant  to this  Agreement  and (ii) the due  performance  by TS of all of its
obligations  under this  Agreement,  (all of the  foregoing,  collectively,  are
hereinafter  referred to as the  "Guaranteed  Obligations").  The obligations of
Holdings  under  this  Article  shall  not  be  impaired  by  any  modification,
supplement,  extension or amendment of any contract or agreement between AOL and
TS, whether now existing or hereafter arising,  including,  without  limitation,
this Agreement,  nor by any modification,  release or other alteration of any of
the  Guaranteed  Obligations or of any security  therefor,  and the liability of
Holdings  shall apply to the  Guaranteed  Obligations  as so altered,  modified,
supplemented,    extended   or   amended.   No   invalidity,   irregularity   or
unenforceability  of all or any  part of the  Guaranteed  Obligations  or of any
security therefor (including, without limitation, as a result of the bankruptcy,
reorganization  or insolvency of the TS, or pursuant to any  assignment  for the
benefit of creditors,  receivership, or similar proceeding) shall affect, impair
or be a defense to the obligations of Holdings under this Article XIII which are
a primary  obligations of Holdings,  and nothing shall  discharge or satisfy the
liability of Holdings  hereunder  except the full payment and performance of the
Guaranteed  Obligations.  This Article XIII shall  survive  termination  of this
Agreement.




                                       45
<PAGE>



         IN WITNESS  WHEREOF,  the undersigned  have caused this Agreement to be
signed on their behalf as of the day and year first written above.

AMERICA ONLINE INC.


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


TEL-SAVE, INC.


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


TEL-SAVE HOLDINGS, INC.

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





                                       46
<PAGE>



                                                                    CONFIDENTIAL

                                   Schedule A

                                 Services Costs

                                      * * *



<PAGE>


                                                                    CONFIDENTIAL


                                   Schedule B

                            Checklist Items Schedule

                                      * * *





<PAGE>



                                                                    CONFIDENTIAL


                                   SCHEDULE C


                         Initial Long Distance Services

                           1. Outbound and inbound long distance,  including but
not limited to interlata,  intralata,  intrastate,  international  and toll-free
services.

                           2.  Calling  cards,  including  but  not  limited  to
domestic and international, credit and debit cards

                           3. Operator  services,  including but not limited to,
collect calling, etc.

                           4. Directory assistance.

                           5. Conference calling.

                           6. Private line and dedicated services.

                           7. Online Billing and paper Billing  Services for all
telecom services.



<PAGE>




                                                                    CONFIDENTIAL



                                   Schedule D

                                  Rate Schedule

                                      * * *




<PAGE>


                                                                    CONFIDENTIAL


                                   Schedule E

                             Performance Milestones


                                      * * *