EXHIBIT 10.3


                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT  ("Agreement") is made and entered into as of the
13th day of  October,  1998  between  Tel-Save,  Inc.  ("TSI"),  a  Pennsylvania
corporation   and  a  wholly-owned   subsidiary  of  Tel-Save   Holdings,   Inc.
("Holdings"), Holdings, having its principal place of business at Route 202, New
Hope,  PA 18938  ("Principal  Place of  Business"),  and  Aloysius  T. Lawn,  IV
("Employee").  TSI and  Holdings  shall be  collectively  referred  to herein as
"Company"

                              Preliminary Statement

     WHEREAS,  the term of the current employment  agreement between the Company
and Employee is scheduled to terminate;

     WHEREAS,  Company  desires to continue  to employ  Employee,  and  Employee
desires to continue to be employed by Company; and

     WHEREAS,  Company and Employee  desire to enter into this  Agreement  which
sets forth the terms and conditions of said continued employment.

     1. Employment. Company agrees to employ Employee, and Employee accepts such
employment  and agrees to serve  Company,  on the terms and conditions set forth
herein. Except as otherwise specifically provided herein,  Employee's employment
shall be subject to the  employment  policies and practices of Company in effect
from time to time during the Term of Employee's  employment hereunder (including
without limitation its practices as to reporting and withholding).

     2. Term of Agreement.  The term of Employee's  employment  hereunder  shall
commence on December 1, 1998 (the "Effective Date") and shall continue in effect
for a period of two years thereafter, except as hereinafter provided ("Term").

     3.  Position  and Duties.  Except as may  otherwise  be agreed upon between
Company and Employee, Employee shall perform such duties and responsibilities of
General Counsel and Secretary of Company or such duties and  responsibilities as
may be  reasonably  assigned or  delegated  to him from time to time,  including
without  limitation  service as an employee,  officer or director of Company and
affiliates of Company  without  additional  compensation.  Employer  agreed that
Employee shall perform such duties and  responsibilities  at the Principal Place
of Business or such other place as  mutually  agreed by Employee  and  Employer.
References  in this  Agreement to  Employee's  employment  with Company shall be
deemed to refer to  employment  with  Company or an  affiliate.  Employee  shall
perform  his  duties  and  responsibilities  to the best of his  abilities  in a
diligent, trustworthy, business like and efficient manner. Employee shall devote
substantially all of his working time and efforts to the business and affairs of
Company;  provided,  however,  that nothing in this Agreement shall preclude the
Employee from (i) engaging in charitable  activities  and community  affairs and
(ii) managing his personal investments and affairs.


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     4.   Compensation and Related Matters.

          4.1 Base Salary. During the Term of his employment hereunder,  Company
shall pay to  Employee  an  annualized  base  salary of not less than  $200,000,
subject  to review  from time to time by  Company's  Board of  Directors  ("Base
Salary").  Base Salary  shall be paid in  accordance  with  Company's  usual and
customary payroll practices.

          4.2  Benefit  Plans and  Arrangements.  Employee  shall be entitled to
participate in and to receive  benefits under Company's  employee  benefit plans
and arrangements  (including bonus plans) as are made available to the Company's
senior executives in effect during the Term of his employment  hereunder,  which
may be altered from time to time at the discretion of Company.

          4.3 Perquisites. During the Term of his employment hereunder, Employee
shall be  entitled  to receive  fringe  benefits  as are made  available  to the
Company's senior executives.

          4.4 Expenses. Company shall promptly reimburse Employee for all normal
out-of-pocket  expenses related to Company's  business that are actually paid or
incurred by him in the performance of his services under this Agreement and that
are incurred,  reported and documented in accordance with Company's policies. In
addition,  during the Term of his  employment  hereunder,  the Company agrees to
provide  Employee with an automobile,  as the Company shall  determine,  and the
Company  shall  keep  such  automobile  fully  insured  in  accordance  with the
Company's practices for similarly situated employees.

          4.6 Stock Options. (a) Employee shall be granted an option to purchase
50,000 shares of common stock of Holdings (the "Option") in accordance  with the
Stock Option  Agreement  attached  hereto as Exhibit A. The Option shall have an
exercise  price equal to $5.75  which is equal to the fair  market  value of the
common stock of Holdings on the date hereof.  The Option shall be subject to and
conditional  upon the Option  receiving  (i) the  approval  of the  Compensation
Committee of the Board of Directors of Holdings and (ii)the  affirmative vote of
a majority of all  outstanding  shares of Holdings at the next annual meeting of
the  stockholders  of Holdings  of the Long Term  Incentive  Plan  ("Stockholder
Approval") and the Option shall be null and void if such approval or Stockholder
Approval is not obtained.  The Option shall be exercisable (A) in  installments,
as follows:  (i) 25,000  shares of common  stock may be  purchased  on the first
anniversary  hereof and,  (ii) 25,000 shares of common stock may be purchased on
the second anniversary  hereof;  and (B) in full upon a "Change of Control",  as
defined  below.  A "Change in Control"  shall be deemed to have occurred if: (i)
any person (as defined in Section  3(a)(9) under the Securities  Exchange Act of
1934,  as amended  (the  "Exchange  Act")),  other than the Company or Holdings,
becomes the  Beneficial  Owner (as defined in Rule 13d-3 under the Exchange Act;
provided, that a Person shall be deemed to be the Beneficial Owner of all shares
that any such  Person  has the right to acquire  pursuant  to any  agreement  or
arrangement or upon exercise of conversion rights,



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<PAGE>


warrants, options or otherwise,  without regard to the 60 day period referred to
in Rule 13d-3 under the Exchange Act), directly or indirectly,  of securities of
Holdings,   the  Company  or  any  Significant  Subsidiary  (as  defined  below)
representing  50% or  more  of the  combined  voting  power  of  Holdings',  the
Company's or such  subsidiary's  then  outstanding  securities;  (ii) during any
period of two years,  individuals who at the beginning of such period constitute
the Board of Holdings  cease for any reason to constitute at least a majority of
the  Board  of  either   Holdings;   (iii)  the  consummation  of  a  merger  or
consolidation  of Holdings,  the Company or any  subsidiary  owning  directly or
indirectly all or substantially all of the consolidated  assets of the Company (
a  "Significant  Subsidiary")  with any  other  entity,  other  than a merger or
consolidation  which would result in the voting securities of the Holdings,  the
Company  or a  Significant  Subsidiary  outstanding  immediately  prior  thereto
continuing  to  represent  more  than 50% of the  combined  voting  power of the
surviving  or  resulting  entity  outstanding  immediately  after such merger or
consolidation;  (iv) the shareholders of the Company approve a plan or agreement
for the sale or  disposition  of all or  substantially  all of the  consolidated
assets of the Company in which case the Board shall determine the effective date
of the Change of Control resulting  therefrom;  (v) any other event occurs which
the Board determines,  in its discretion,  would materially alter, the structure
of the Company or its ownership and (vi) Daniel  Borislow ceases to be the Chief
Executive Officer of Holdings and/or TSI.


               (b)  Company  agrees to file  with the  Securities  and  Exchange
Commission  a  Registration  Statement  on  Form  S-8  (or  if  unavailable,   a
registration  statement  on Form S-3) to  register  the  shares  issueable  upon
exercise of the Option under the Securities Act of 1933  ("Securities  Act") and
any  applicable  state  securities  or "Blue  Sky" laws on or  before  the first
anniversary of the date hereof. Notwithstanding the foregoing, the Company shall
be  entitled  to  postpone  for a  reasonable  period of time the  filing or the
effectiveness  of such  registration  statement if the Board of Directors of the
Company shall determine in good faith that such filing or effectiveness would be
materially detrimental to the Company's business interest.

     5.  Termination.  The  Term  of  Employee's  employment  hereunder  may  be
terminated under the following circumstances:

          5.1 Death. The Term of Employee's employment hereunder shall terminate
upon his death.

          5.2   Disability.   Company  may  terminate  the  Term  of  Employee's
employment  hereunder as a result of Employee's physical or mental incapacity in
accordance with Company's disability policy.




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<PAGE>



          5.3 Cause. (a) Upon written notice,  Company may terminate the Term of
Employee's  employment  hereunder  for Cause.  For  purposes of this  Agreement,
Company shall have "Cause" to terminate Employee's employment hereunder upon (i)
material  breach of any  material  provision  of this  Agreement;  (ii)  willful
misconduct as an employee of Company in  connection  with  misappropriating  any
funds or property of Company or  attempting  to  willfully  obtain any  personal
profit from any  transaction  in which Employee has an interest which is adverse
to the interests of Company;  or (iii) gross neglect or unreasonable  refusal to
perform the duties assigned to Employee under or pursuant to this Agreement.

          5.4 By Employee.

               (i) Employee may terminate the Term of his  employment  hereunder
upon sixty days' prior written notice to Company, provided that, upon the giving
of such  notice by  Employee,  Company  may  establish  an earlier  date for the
termination of the Term and such termination under this Section 5.4.

               (ii) Employee may terminate  employment hereunder for Good Reason
immediately  and with  notice to  Company.  "Good  reason"  for  termination  by
Employee shall include, but is not limited to, the following:

                    (a)  Material  breach of any provision of this  Agreement by
                         Company,  which  breach  shall not have  been  cured by
                         Company  within  thirty (30) days of receipt of written
                         notice of said material breach;

                    (b)  Failure to maintain Employee in a position commensurate
                         with that referred to in Section 3 of this Agreement;

                    (c)  Change of the Principal Place of Business to a location
                         outside  the  metropolitan  Philadelphia  area  or  the
                         inability of Employer and Employee to mutually agree to
                         a location  other than the Principal  Place of Business
                         from which  Employer to perform his duties  pursuant to
                         Section 3 of this Agreement; or

                    (d)  The  assignment to Employee of any duties  inconsistent
                         with the  Employee's  position,  authority,  duties  or
                         responsibilities  as  contemplated by Section 3 of this
                         Agreement, or any other action by Company which results
                         in a diminution of such position,  authority, duties or
                         responsibilities.

          5.5  Without  Cause.  Company  may  otherwise  terminate  the  Term of
Employee's employment at any time upon written notice to Employee.


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<PAGE>



     6.  Compensation  In the  Event  of  Termination.  In the  event  that  the
Employee's  employment pursuant to this Agreement terminates prior to the end of
the Term of this Agreement,  the Company shall pay the Employee  compensation as
set forth below:

          6.1 By Employee  for Good Reason;  By Company  Without  Cause.  In the
event  that  the  Employee's  employment  hereunder  is  terminated:  (i) by the
Employee  for good reason or (ii) by the  Company  without  Cause,  then (A) the
Company shall continue to pay and provide Employee his compensation and benefits
as set forth in Section 4 in the same  manner as before  termination,  and for a
period of time ending on the earlier of the date when the Term of this Agreement
would  otherwise have expired in accordance with Section 2 of this Agreement and
the  second  anniversary  of the date of such  termination  and (B) one  hundred
percent (100%) of the  outstanding  stock options  granted to Employee which are
unvested  shall  immediately  vest and Employee shall have the right to exercise
any vested stock options  during the period ending on the second  anniversary of
the date of such  termination  or for the remainder of the exercise  period;  if
less.

          6.2 By Company for Cause; By Employee Without Cause. In the event that
the Company  shall  terminate  the  Employee's  employment  hereunder  for Cause
pursuant  to Section  5.3 hereof or  Employee  shall  terminate  his  employment
hereunder  without Good Reason,  all compensation and benefits,  as specified in
Section 4 of this  Agreement,  heretofore  payable or provided  to the  Employee
shall cease to be payable or provided,  except for salary and benefits which may
have been  earned and are due and payable but which have not been paid as of the
date of  termination  and  reimbursements  for  expenses  which  may  have  been
incurred, reported and documented but which have not been paid as of the date of
termination.

          6.3 Death.  In the event of Employee's  death the Company shall not be
obligated to pay Employee or his estate or beneficiaries any compensation except
for salary and  benefits  which may have been earned and are due and payable but
which have not been paid as of the date of termination  and  reimbursements  for
expenses  which may have been  incurred,  reported and documented but which have
not been  paid as of the  date of  termination;  provided,  however,  that  upon
termination due to death, all outstanding  stock options granted to the Employee
which  are  unvested  shall  immediately  vest  and  the  Employee's  estate  or
beneficiaries  as the case may be,  shall have the right to exercise  any vested
stock options during the period ending on the second  anniversary of the date of
such termination or, for the remainder of the exercise period, if less.

          6.4  Disability.  In the event of Employee's  disability,  the Company
shall not be  obligated  to pay  Employee  or his  estate or  beneficiaries  any
compensation  except for: (a) salary and benefits which may have been earned and
are due and payable but which have not been paid as of the date of  termination;
and (b)  reimbursement  for expenses which may have been incurred,  reported and
documented but which have not been paid as of the date of termination.

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<PAGE>

          6.5 No Mitigation. In the event of any termination of employment under
Section 5, the Employee  shall be under no obligation to seek other  employment;
provided,  however,  to the extent that  Employee  does obtain other  employment
subsequent to the  termination  of Employee's  employment  hereunder,  Company's
obligations under this Agreement shall terminate.

     7. Unauthorized  Disclosure.  Employee shall not, without the prior written
consent of Company,  disclose or use in any way,  either  during the  Employee's
employment with Company or thereafter,  except as required in the course of such
employment,  any confidential  business or technical information or trade secret
acquired  in the  course of such  employment,  whether  or not  conceived  of or
prepared  by him,  which is related to any service or business of Company or any
Company  affiliate;  provided,  that  the  foregoing  shall  not  apply  to  (i)
information  which is not unique to the Company or which is  generally  known to
the industry or the public other than as a result of  Employee's  breach of this
covenant, (ii) information known to the Employee prior to the Effective Date, or
(iii)  information  which  Employee  is  required  to  disclose  to  or  by  any
governmental or judicial  authority;  provided,  however,  if Employee should be
required in the course of judicial or administrative proceedings to disclose any
information  Employee  shall give Company  prompt written notice thereof so that
Company  may seek an  appropriate  protective  order  and/or  waive  in  writing
compliance with the  confidentiality  provisions of this  Agreement.  If, in the
absence  of a  protective  order  or the  receipt  of a waiver  by the  Company,
Employee is  nonetheless,  in the written  opinion of its counsel,  compelled to
disclose  information  to a court or  tribunal  or  otherwise  stand  liable for
contempt or suffer other serious censure or penalty,  Employee may disclose such
information  to such court or  tribunal  without  liability  to any other  party
hereto.

     8. Tangible Items. All files, records,  documents,  manuals,  books, forms,
reports, memoranda, studies, data, calculations,  recordings, correspondence, in
whatever  form they may exist,  and all copies,  abstracts  and summaries of the
foregoing  and all  physical  items  related to the  business of Company and its
affiliates, other than merely personal items, whether of a public nature or not,
and whether  prepared by Employee  or not,  are and shall  remain the  exclusive
property  of Company  and its  affiliates  and shall not be  removed  from their
premises, except as required in the course of employment by Company, without the
prior  written  consent of Company,  and the same shall be promptly  returned by
Employee on the termination of Employee's employment with Company or at any time
prior thereto upon the request of Company.

     9.   Inventions  and  Patents.   Employee   agrees  that  all   inventions,
innovations,  improvements,  developments, methods, designs, analyses, drawings,
reports,  and all  similar or related  information  which  relates to  Company's
actual or anticipated  business,  research and development or existing or future
products or services  and which are  conceived,  developed  or made by or at the
direction  of  Employee  while  employed  by Company  will be owned by  Company.
Employee also agrees to promptly perform all reasonable actions (whether before,
during or after the Term)  necessary to establish and confirm such ownership (to
the extent of such ownership).




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<PAGE>



     10. Certain Restrictive Covenants. For a period ending six (6) months after
the earlier of the Employee's  termination  of employment  hereunder or the Term
Employee  agrees  that,  he will not act  either  directly  or  indirectly  as a
partner,  officer,  director,  substantial  stockholder  or employee,  or render
advisory or other services for, or in connection with, or become  interested in,
or make any substantial financial investment in any firm, corporation,  business
entity or business enterprise  competitive with the business of Company,  except
with the express written consent of the Board of Directors of Company.  Employee
further  agrees that in the event of the  termination  of his  employment  under
Section 5, for a period of one year  thereafter,  he will not employ or offer to
employ,  call on,  solicit,  actively  interfere  with  Company's or any Company
affiliate's relationship with, or attempt to divert or entice away, any employee
of Company or any Company affiliate.

     11. Employee  Representations.  Employee hereby  represents and warrants to
Company that (i) the  execution,  delivery and  performance of this Agreement by
Employee does not and will not conflict with, breach, violate or cause a default
under any contract,  agreement,  instrument,  order, judgment or decree to which
Employee is a party or by which he is bound, (ii) except as disclosed to Company
in writing prior to the execution of this Agreement,  Employee is not a party to
or bound by any employment  agreement,  non-compete agreement or confidentiality
agreement  with any other  person or entity,  and (iii) upon the  execution  and
delivery of this  Agreement by Company,  this  Agreement  shall be the valid and
binding obligation of Employee, enforceable in accordance with its terms.

     12. Company  Representations.  The Company represents and warrants (i) that
it is duly authorized and empowered to enter into this Agreement,  (ii) that the
performance  of its  obligations  under  this  Agreement  will not  violate  any
agreement  between it and any other person,  firm or organization and (iii) upon
the execution and delivery of this  Agreement by the  Employee,  this  Agreement
shall be the  valid  and  binding  obligation  of the  Company,  enforceable  in
accordance in accordance with its terms.

     13. Remedies.  Employee  acknowledges  that the restrictions and agreements
contained  in this  Agreement  are  reasonable  and  necessary  to protect  that
legitimate  interests of Company,  and that any violation of this Agreement will
cause  substantial  and  irreparable   injury  to  Company  that  would  not  be
quantifiable and for which no adequate remedy would exist at law and agrees that
injunctive  relief,  in  addition  to all  other  remedies,  shall be  available
therefor.

     14. Effect of Agreement on Other Benefits.  Except as specifically provided
in this  Agreement,  the existence of this Agreement shall not be interpreted to
preclude,  prohibit  or  restrict  the  Employee's  participation  in any  other
employee benefit or other plans or programs in which he currently participates.




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<PAGE>


     15. Rights of Executive's Estate. If the Employee dies prior to the payment
of all  amounts  due and owing to him under  the terms of this  Agreement,  such
amounts shall be paid to such  beneficiary or  beneficiaries as the Employee may
have last  designated  in writing filed with the Secretary of the Company or, if
the Employee has made no beneficiary designation, to the Employee's estate. Such
designated  beneficiary  or the  executor of his estate,  as the case my be, may
exercise all of the Employee's rights hereunder.  If any beneficiary  designated
by  the  Employee  shall  predecease  the  Employee,  the  designation  of  such
beneficiary  shall be deemed  revoked,  and any  amounts  which  would have been
payable  to such  beneficiary  shall be paid to the  Employee's  estate.  If any
designated  beneficiary  survives the Employee,  but dies before  payment of all
amounts due hereunder,  such payments shall,  unless the Employee has designated
otherwise,  be made to such beneficiary's estate. In the event of the Employee's
death or judicial determination of his incompetence, reference in this Agreement
to the Employee shall be deemed where appropriate,  to refer to his beneficiary,
estate or other legal representative.

     16. Severability.  It is the intent and understanding of the parties hereto
that if, in any action before any court or agency  legally  empowered to enforce
this  Agreement,  any term,  restriction,  covenant,  or  promise is found to be
unreasonable  and for that reason  unenforceable,  then such term,  restriction,
covenant, or promise shall not thereby be terminated but that it shall be deemed
modified to the extent  necessary to make it enforceable by such Court or agency
and,  if it cannot be so  modified,  that it shall be deemed  amended  to delete
therefrom such provision or portion  adjudicated to be invalid or unenforceable,
such  modification  or  amendment in any event to apply only with respect to the
operation  of this  Agreement  in the  particular  jurisdiction  in  which  such
adjudication is made.

     17. Notice.  For the purposes of this Agreement,  notices,  demands and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when  received  if  delivered  in person or by
overnight  courier or if mailed by United States registered mail, return receipt
requested, postage prepaid, to the following addresses:

         If to Employee:

         Mr. Aloysius T. Lawn, IV
         1409 Bramble Lane
         West Chester, PA  19380

         If to Company:

         Tel-Save, Inc.
         6805 Route 202
         New Hope, Pennsylvania 18938
         Attn: President

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Either  party may change its address for notices by written  notice to the other
party in accordance with this Section 17.

     18. Miscellaneous.  No provision of this Agreement may be modified,  waived
or  discharged  unless such  waiver,  modification  or discharge is agreed to in
writing signed by Employee and Company.  No waiver by either party hereto at any
time of any  breach by the  other  party  hereto  of, or  compliance  with,  any
condition  or  provision  of this  Agreement to be performed by such other party
shall be deemed a waiver of similar or  dissimilar  provisions  or conditions at
the same or at any  prior or  subsequent  time.  The  validity,  interpretation,
construction  and performance of this Agreement shall be governed by the laws of
Pennsylvania relating to contracts made and to be performed entirely therein.

     19.  Headings.  The headings in this Agreement are inserted for convenience
only and shall have no significance in the interpretation of this Agreement.

     20.  Successors.  This  Agreement  shall be  binding  upon and inure to the
benefit of the parties  hereto and their  heirs,  personal  representatives  and
successors,  including  without  limitation  any  affiliate to which Company may
assign  this  Agreement.  Employee  may not  assign or  transfer  his  rights to
compensation  and  benefits,  except by will or operation of law and,  except as
provided in Section 15 above.

     21.   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original  but all of which
together will constitute one and the same instrument.

     IN WITNESS WHEREOF,  each of the parties hereto has executed this Agreement
as of the day and year first written above.


                                         Tel-Save, Inc.

                                         By:
                                            ------------------------------------
                                            Daniel Borislow
                                            Chairman and Chief Executive Officer



                                            ------------------------------------
                                            Aloysius T. Lawn, IV



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