MODIFICATION AGREEMENT


     THIS  AGREEMENT is made as of the 24TH day of February,  1997, by and among
PNC BANK, NATIONAL  ASSOCIATION,  a national banking association with offices at
1600 Market Street, Philadelphia, Pennsylvania 19103 (the "Bank") , and TEL-SAVE
HOLDINGS, INC., TS INVESTMENT CORPORATION and TEL-SAVE, INC. (the "Borrower")

                                   BACKGROUND

     Bank agreed to make available to Borrower a line of credit in the principal
amount of $50,000,000 (the "Line of Credit") pursuant to a letter loan agreement
dated March 22, 1996 (the "Loan Agreement").  The Line of Credit is evidenced by
Borrower's promissory note dated March 22, 1996 (the "Note") .

     Bank and Borrower  desire to amend the Note and Loan  Agreement to increase
the  amount  of the  Line of  Credit  and to make  certain  other  modifications
thereto, upon the terms and conditions set forth herein.

     NOW, THEREFORE,  the parties hereto,  intending to be legally bound hereby,
agree as follows:

                                    AGREEMENT

     1. Terms.  Capitalized  terms used herein and not otherwise  defined herein
shall have the meanings given to such terms in the Loan Agreement.

     2. Restated  Note.   Concurrently  with   the  execution  and  delivery  of
this Agreement,  Borrower shall execute and deliver to Bank a restated note (the
"Restated  Note") ,  evidencing  the Line of Credit in the  principal  amount of
$60,000,000  in the form of Exhibit A attached  hereto.  Upon receipt by Bank of
the  Restated  Note,  the original  Note shall be cancelled  and returned to the
Borrower; the Line of Credit and all accrued and unpaid interest on the original
Note shall  thereafter be evidenced by the Restated  Note; and all references to
the "Note,"  evidencing  the Line of Credit in any  documents  relating  thereto
shall thereafter be deemed to refer to the Restated Note.  Without  duplication,
the  Restated  Note  shall in no way  extinguish  the  Borrower's  unconditional
obligation to repay all  indebtedness,  including  accrued and unpaid  interest,
evidenced by the original Note.

     3.  Amendments to Loan  Agreement.  The Loan Agreement is hereby amended as
follows:
 

<PAGE>


            (a)  Paragraph 1 of the Loan  Agreement is hereby  amended such that
the maximum amount of the Line of Credit is hereby increased from $50,000,000 to
$60,000,000.

            (b) The  first sentence of  Paragraph 5(b)  of the Loan Agreement is
hereby amended and restated to read in full as follows:

               (b)  Euro-Rate Option.  A rate of interest per annum (computed on
          the basis of a year of 360 days and the actual number of days elapsed)
          equal to the sum of (i) the Euro-Rate plus (ii) (A)  eighty-seven  and
          one-half  (87.5)  basis points  (7/8%) per annum,  for Loans up to and
          including $50,000,000, and (B) one hundred (100) basis points (1%) per
          annum,  for Loans over  $50,000,000,  in each case,  for the Euro-Rate
          Interest Period in an amount equal to the Loan bearing  interest under
          the Euro-Rate option and having a comparable maturity as determined at
          or about 11 a.m.  (eastern  time) two (2)  Business  Days prior to the
          commencement of the Euro-Rate Interest Period.

     3. Loan Documents. Except where the context clearly requires otherwise, all
references to the Loan Agreement in the Note or any other document  delivered to
Bank in connection  therewith  shall be to the Loan Agreement as amended by this
Agreement.

     4.  Borrower's  Ratification.  Borrower  agrees  that it has no defenses or
set-offs  against  the  Bank,  its  officers,  directors,  employees,  agents or
attorneys with respect to the Note and the Loan  Agreement,  all of which are in
full force and effect and shall remain in full force and effect unless and until
modified or amended in writing in accordance  with their terms.  Borrower hereby
ratifies and confirms its obligations  under the Note and the Loan Agreement and
agrees that the execution and the delivery of this Agreement does not in any way
diminish or invalidate any of its obligations  thereunder.  WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING,  BORROWER  HEREBY RATIFIES AND CONFIRMS THE WARRANT
OF ATTORNEY GIVEN IN THE NOTE.

     5. Renresentations and Warranties. Borrower hereby certifies that:


            (a)  except  as  otherwise   previously   disclosed  to  Bank,   the
representations  and warranties made in the Note and the Loan Agreement are true
and correct as of the date hereof.





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<PAGE>
            (b) no Event of Default under the Note or the Loan  Agreement and no
event  which  with the  passage  of time or the  giving of notice or both  could
become an Event of Default, exists on the date hereof; and

(c) this  Agreement  has been duly  authorized,  executed and delivered so as to
constitute the legal, valid and binding  obligation of Borrower,  enforceable in
accordance with its terms.

All of the above representations and warranties shall survive the making of this
Agreement.

     6.  No  Waiver.  This  Agreement  does  not and  shall  not be  deemed  to
constitute  a waiver  by Bank of any  Event of  Default  under  the Note or Loan
Agreement,  or of any event  which  with the  passage  of time or the  giving of
notice or both would  constitute an Event of Default,  nor does it obligate Bank
to  agree  to any  further  modifications  of the  terms  of the  Note  and Loan
Agreement or constitute a waiver of any of Bank's other rights or remedies.

     7. Conditions to Effectiveness of Agreement. Bank's willingness to agree to
the  increase  and  modifications  contained  herein  are  subject  to the prior
satisfaction of the following conditions:

            (a) execution of this Agreement,  the Restated Note and a Disclosure
of Confession of Judgment,  each in form and substance satisfactory to the Bank;
and

            (b) delivery of resolutions of Borrowers  authorizing  execution and
delivery of this Agreement and the Restated Note.

     8. Miscellaneous

            (a) All terms, conditions, provisions and covenants in the Note, the
Loan  Agreement,  and all  other  documents  delivered  to  Bank  in  connection
therewith shall remain unaltered and in full force and effect except as modified
or amended hereby. To the extent that any term or provision of this Agreement is
or may be deemed expressly  inconsistent  with any term or provision in the Loan
Agreement,  the Note or any other document executed in connection therewith, the
terms and provisions hereof shall control.

            (b) This Agreement  shall be governed by and construed  according to
the laws of the Commonwealth of Pennsylvania.




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<PAGE>
            (c) This  Agreement  shall  inure to the  benefit of, and be binding
upon, the parties hereto and their respective  successors and assigns and may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.

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

                                             BORROWER                    
                                                                          
[SEAL]                                       TEL-SAVE HOLDINGS, INC.     
                                                                         
  Attest: /s/ Aloysius T. Lawn IV            By: /s/ Joseph A. Schenk
          -----------------------------           ------------------------------
                                                                                
  Title:  Secretary                          Title:   CFO
         ------------------------------              ---------------------------
                                                                                
                                                                      
[SEAL]                                       TS INVESTMENT CORPORATION   


 Attest: /s/ Aloysius T. Lawn IV             By: /s/ Joseph A. Schenk           
         -----------------------------           ------------------------------ 
                                                                                
 Title:  Secretary                           Title:   CFO                       
        ------------------------------              --------------------------- 
                                                                         

[SEAL]                                       TEL-SAVE, INC.              

                                                                         
 Attest: /s/ Aloysius T. Lawn IV             By: /s/ Joseph A. Schenk           
         -----------------------------           ------------------------------ 
                                                                                
 Title:  Secretary                           Title:   CFO                       
        ------------------------------              --------------------------- 
                                              
                                             BANK

                                             PNC BANK, NATIONAL ASSOCIATION

                                             By: /s/ David E. Hopkins
                                                 ----------------------------

                                             Title: Vice President
                                                   -------------------------
 
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