EXHIBIT 10.41

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                              INVESTMENT AGREEMENT

                                 BY AND BETWEEN

                               TEL-SAVE.COM, INC.

                                       AND

                              AMERICA ONLINE, INC.

                             AS OF DECEMBER 31, 1998


                                  As amended on

                               February ___, 1999*




*    Amended items are preceded by "[as amended]" or "[as added]"

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                                TABLE OF CONTENTS

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<S>               <C>                                                                                            <C>
ARTICLE I         PURCHASE AND SALE OF COMMON STOCK...............................................................1
                  Section 1.1       Purchase and Sale of Common Stock.............................................1
                  Section 1.2.      Purchase Price................................................................2
                  Section 1.3.      Closing Date..................................................................2

ARTICLE II        REPRESENTATIONS AND WARRANTIES OF INVESTOR......................................................2
                  Section 2.1.      Organization, Standing, etc...................................................2
                  Section 2.2.      Authorization and Binding Effect..............................................3
                  Section 2.3.      No Violations; Consents and Approvals.........................................3
                  Section 2.4.      Transfer Restrictions.........................................................4
                  Section 2.5.      Investment Purposes Only......................................................5

ARTICLE III       REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................5
                  Section 3.1.      Organization, Standing, etc...................................................5
                  Section 3.2.      Authorization; Binding Effect.................................................5
                  Section 3.3.      Valid Issuance of Shares......................................................6
                  Section 3.4.      No Violations; Consents and Approvals.........................................6
                  Section 3.5       Litigation....................................................................7
                  Section 3.6.      Compliance with Applicable Law................................................7
                  Section 3.7.      Disclosure....................................................................8
                  Section 3.8.      Changes.......................................................................8
                  Section 3.9.      Nasdaq Listing................................................................9
                  Section 3.10.     Capitalization; Options and Warrants.........................................10
                  Section 3.11.     Subsidiaries.................................................................10
                  Section 3.12      Contracts....................................................................10
                  Section 3.13.     Brokers or Finders...........................................................11
                  Section 3.14.     Seniority of Obligations.....................................................11
                  Section 3.15.     Employment of Battista.......................................................11

ARTICLE IV        COVENANTS AND ADDITIONAL AGREEMENTS............................................................12
                  Section 4.1.      Ordinary Course..............................................................12
                  Section 4.2.      Access and Information.......................................................12
                  Section 4.3.      Further Actions..............................................................12
                  Section 4.4.      Further Assurances...........................................................13
                  Section 4.5.      Registration Rights..........................................................13
                  Section 4.6.      Termination of Voting Trust Agreement and Warrantholder and
                                    Stockholders Agreement.......................................................14
                  Section 4.7.      Nasdaq Listing...............................................................14
                  Section 4.8.      Removal of Legend............................................................14
                  Section 4.9.      Limitation on Obligations [as amended].......................................14
                  Section 4.10.     Perfection of Security Interest..............................................16
                  Section 4.11.     Contracts with Certain Stockholders..........................................16
</TABLE>



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<S>               <C>                                                                                            <C>
                  Section 4.12.     Subordination of Obligations under Exchange Agreement........................16

ARTICLE V         ADDITIONAL AGREEMENTS CONCERNING THE SHARES....................................................17
                  Section 5.1.      Make-Whole for Shares [as amended]...........................................17
                  Section 5.2.      Lock-up......................................................................20
                  Section 5.3.      Origination Fee..............................................................22
                  Section 5.4.      Call Right...................................................................22
                  Section 5.5.      Make-Whole on Occurrence of Certain Events...................................23

ARTICLE VI        WARRANTS.......................................................................................24
                  Section 6.1.      Terms on Warrants and Warrant Shares.........................................24
                  Section 6.2.      Number of Shares of Performance Warrant......................................25
                  Section 6.3.      Put Rights on Warrants.......................................................25
                  Section 6.4.      Required Exercise Rights on Warrants.........................................26
                  Section 6.5.      Make-Whole for Put/Call Warrants.............................................28
                  Section 6.6.      Registration of Put/Call Warrant Shares......................................29

ARTICLE VII       CONDITIONS PRECEDENT...........................................................................29
                  Section 7.1.      Each Party's Obligations.....................................................29
                  Section 7.2.      Conditions to the Obligations of the Company.................................29
                  Section 7.3.      Conditions to the Obligations of Investor....................................30

ARTICLE VIII      TERMINATION....................................................................................32
                  Section 8.1.      Termination..................................................................32
                  Section 8.2.      Effect of Termination........................................................33

ARTICLE IX        INDEMNIFICATION................................................................................33
                  Section 9.1.      Indemnification of the Investor..............................................33
                  Section 9.2.      Indemnification Procedures...................................................34
                  Section 9.3.      Survival of  Representations and Warranties..................................34

ARTICLE X         MISCELLANEOUS..................................................................................35
                  Section 10.1      Transfer and Other Taxes.....................................................35
                  Section 10.2.     Brokers; Expenses............................................................35
                  Section 10.3.     No Waivers; Amendments.......................................................35
                  Section 10.4.     Successors and Assigns.......................................................35
                  Section 10.5.     Severability.................................................................35
                  Section 10.6.     Notices......................................................................35
                  Section 10.7.     Entire Agreement.............................................................36
                  Section 10.8.     Governing Law................................................................36
                  Section 10.9.     Counterparts.................................................................36
                  Section 10.10.    Cooperation..................................................................36
                  Section 10.11.    Expenses and Remedies........................................................36
                  Section 10.12.    No Third Party Beneficiaries.................................................36
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SCHEDULES

Schedule 3.10  Outstanding  Rights to Cause the Company to  Register  Securities
               under Securities Act
Schedule 3.11  List of Subsidiaries of the Company
Schedule 3.12  Contracts

EXHIBITS

Exhibit A      Form of Registration Rights Agreement
Exhibit B      Form of Guaranty






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                              INVESTMENT AGREEMENT

     INVESTMENT AGREEMENT,  dated as of December 31, 1998 (the "Agreement"),  by
and between  TEL-SAVE.COM,  INC., a Delaware  corporation (the  "Company"),  and
AMERICA ONLINE, INC., a Delaware corporation (the "Investor").

                              W I T N E S S E T H:
                              --------------------

     WHEREAS,  the Company  desires to sell to Investor and Investor  desires to
purchase from the Company the number of shares of Common Stock,  par value $0.01
per share  ("Common  Stock"),  of the Company  described  in Section 1.1, on the
terms and conditions described herein; and

     WHEREAS,  the Investor  holds (i) a warrant,  dated as of February 22, 1997
(as amended and restated as of May 14, 1998),  to purchase  4,000,000  shares of
Common Stock (the "Base Warrant"), (ii) a warrant, dated as of February 22, 1997
(as amended and restated as of May 14,  1998),  to purchase as of September  30,
1998  2,798,000  vested shares of Common Stock (the  "Performance  Warrant") and
(iii) a warrant,  dated as of May 14,  1998,  to  purchase as of the date hereof
1,000,000  shares  of  Common  Stock  (the  "Further   Warrant"  and,  with  the
Performance Warrant, the "Warrants"); and

     WHEREAS,  the Company and the Investor  desire to set forth  certain  terms
governing their relationship and to provide the Investor with certain additional
rights.

     NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, the parties hereto agree as follows:

                                    ARTICLE I

                        PURCHASE AND SALE OF COMMON STOCK

     Section 1.1.  Purchase and Sale of Common Stock.  Pursuant to the terms and
subject to the  conditions  set forth in this  Agreement,  the  Investor  hereby
subscribes  for and agrees to purchase on the Closing  Date (as defined  below),
and the  Company  hereby  agrees to issue and sell to  Investor,  the  following
number of shares of Common Stock (the "Shares"):

          (i) 1,226,635 shares (the "Warrant Exchange Shares") plus

          (ii) 2,894,737 shares (the "Purchase  Shares") purchased at a price of
$19.00 per share (the "Per Share Purchase Price").



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     Section 1.2.  Purchase Price. In consideration of the sale of the Shares to
the Investor, and against delivery to the Investor of a certificate representing
the  Shares,  on the  Closing  Date the  Investor  shall (i) pay to the  Company
$55,000,000 in cash by wire transfer to an account  designated in writing by the
Company in exchange for the Purchase Shares, and (ii) deliver to the Company the
Base  Warrant  for   cancellation   and  1,076,016  shares  issuable  under  the
Performance  Warrant  for  cancellation  in exchange  for the  Warrant  Exchange
Shares,  thereby  reducing by 1,076,016 the number of shares  issuable under the
Performance Warrant,  leaving a balance of shares of Common Stock issuable as of
the date hereof under the Performance Warrant of 1,721,984 vested shares,  which
together with the 1,000,000  vested  shares of Common Stock  issuable  under the
Further  Warrant  equal  2,721,984  vested  shares of Common Stock (the "Warrant
Shares").

     Section 1.3. Closing Date.

          (a) The closing of the transaction contemplated by this Agreement (the
"Closing")  shall take place at the offices of America  Online,  Inc. in Dulles,
Virginia  on  January  5, 1999 (the  "Closing  Date") or on such  later  date as
mutually agreed upon by the parties hereto.

          (b) For all purposes,  the  transactions  set forth in this  Agreement
shall be deemed to have occurred in the following order:

          First,  the warrants  surrendered in exchange for the Warrant Exchange
          Shares shall be deemed to be surrendered;

          Second,  the  Warrant  Exchange  Shares  shall be  deemed to have been
          issued;

          Third,  the  Purchase  Shares shall be deemed to be issued in exchange
          for the purchase price therefor; and

          Fourth,  the Voting Trust  Agreement and the Warrant and  Stockholders
          Agreement shall be deemed to terminate as set forth in Section 4.6.

                                   ARTICLE II

                   REPRESENTATIONS AND WARRANTIES OF INVESTOR

     Investor hereby represents and warrants to the Company as follows:

     Section 2.1.  Organization,  Standing,  etc. The Investor is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Delaware and has all  requisite  corporate  power and authority to own,
lease and  operate its  properties  and to carry on its  business


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as presently conducted.

     Section  2.2.  Authorization  and  Binding  Effect.  The  Investor  has the
corporate power and authority to execute, deliver and perform this Agreement and
the   Registration   Rights   Agreement  and  to  consummate  the   transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the  Registration  Rights Agreement by the Investor have been duly
authorized by all necessary  corporate action on the part of the Investor.  This
Agreement constitutes,  and the Registration Rights Agreement,  when executed or
delivered  will be,  valid and  legally  binding  obligations  of the  Investor,
enforceable  against the Investor in  accordance  with their  respective  terms,
except as such may be limited by bankruptcy,  insolvency, fraudulent conveyance,
moratorium  or other  similar  laws  affecting  creditors'  rights and  remedies
generally and subject,  as to  enforceability,  to general principles of equity,
regardless whether enforcement is sought in a proceeding at law or in equity.

     Section 2.3. No Violations; Consents and Approvals.

          (a) Neither the execution,  delivery or performance by the Investor of
this Agreement or the  Registration  Rights  Agreement,  the consummation by the
Investor of the transactions contemplated hereby or thereby, nor the performance
by the Investor of its obligations  hereunder or thereunder (i) will result in a
violation or breach of the Investor's  Certificate of Incorporation or Bylaws or
(ii)  will  result  in a  violation  or  breach of (or give rise to any right of
termination,   revocation,  cancellation  or  acceleration  under  or  increased
payments under), or constitute a default (with or without due notice or lapse of
time or both) under,  or result in the creation of any lien,  mortgage,  charge,
encumbrance  or  security  interest  of any  kind  (a  "Lien")  upon  any of the
properties or assets of the Investor under, (A) any of the terms,  conditions or
provisions  of  any  note,  bond,  mortgage,  indenture,   contract,  agreement,
obligation,  instrument,  offer, commitment,  understanding or other arrangement
(each a "Contract")  or of any license,  waiver,  exemption,  order,  franchise,
permit or  concession  (each a "Permit")  to which the Investor is a party or by
which any of their  properties  or assets  may be bound,  or (B)  subject to the
governmental  filings and other  matters  referred  to in clause (b) below,  any
judgment,  order,  decree,  statute,  law,  regulation or rule applicable to the
Investor,  except,  in the  case  of  clause  (ii),  for  violations,  breaches,
defaults,  rights of  cancellation,  termination,  revocation or acceleration or
Liens that would not, individually or in the aggregate,  have a material adverse
effect on the Investor's business, properties,  operations, financial condition,
income or business  prospects  as  presently  being  conducted.  The  Investor's
investment  in the  Shares  and other  obligations  of the  Investor  under this
Agreement and the Registration Rights Agreement are permitted by applicable law.

          (b) No consent,  approval, order or authorization of, or registration,
declaration or filing with, any government or any court,  administrative  agency
or commission or other governmental authority or agency,  federal,  state, local
or foreign (a  "Governmental  Entity"),  (other  than  filings  required  by the
securities laws or any communication laws of any



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applicable  Governmental  Entity,   including  without  limitation  the  Federal
Communication Commission),  as a result of the transactions contemplated by this
Agreement,  is required  with  respect to the  Investor in  connection  with the
execution,  delivery or  performance  by the  Investor of this  Agreement or the
consummation by the Investor of the transactions contemplated hereby.

     Section 2.4. Transfer Restrictions.

     The Investor understands that:

          (a) the offer and sale of the Shares and the  Warrant  Shares have not
been  registered  under the Securities Act of 1933, as amended (the  "Securities
Act"),  or under the securities laws of any state of the United States or of any
foreign jurisdiction;

          (b) no resales of the Shares and the  Warrant  Shares may be  effected
unless the resale of any such shares is registered  under the  Securities Act or
an  exemption  therefrom  is  available  and all  applicable  state and  foreign
securities laws are complied with;

          (c)  the  following   restrictive   legend  shall  be  placed  on  the
certificates representing the Shares and the Warrant Shares acquired by Investor
hereunder:

     THE  SHARES   REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
     REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR ANY
     OTHER SECURITIES  LAWS. SUCH SHARES MAY NOT BE SOLD,  TRANSFERRED
     OR OTHERWISE  DISPOSED OF IN THE ABSENCE OF SUCH  REGISTRATION OR
     AN  EXEMPTION  FROM SAID ACT OR SUCH OTHER LAWS AND, IF REQUESTED
     BY THE ISSUER, AN OPINION OF COUNSEL  REASONABLY  SATISFACTORY TO
     THE ISSUER THAT SUCH  REGISTRATION IS NOT REQUIRED,  OR IS EXEMPT
     FROM SAID ACT OR SUCH OTHER LAWS. THE SHARES  REPRESENTED BY THIS
     CERTIFICATE  ARE  SUBJECT  TO THE  TERMS  AND  CONDITIONS  OF THE
     INVESTMENT AGREEMENT DATED AS OF DECEMBER 31, 1998 BY AND BETWEEN
     TEL-SAVE.COM, INC. AND AMERICA ONLINE, INC.

          (d)  appropriate  stop-transfer  instructions  will be  issued  to the
Company's transfer agent with respect to the Shares and the Warrant Shares until
such time as the  foregoing  legend is removed  from the Shares and the  Warrant
Shares pursuant to Section 4.8 hereto.


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     Section 2.5.  Investment  Purposes  Only. The Investor (a) is acquiring the
Shares for investment purposes only within the meaning of the Federal securities
laws and the Hart-Scott-Rodino  Antitrust  Improvements Act of 1976, as amended,
and (b) has no present  intention to influence,  control or otherwise direct the
business,  management or affairs or to otherwise influence or serve on the Board
of  Directors  of the  Company or any of its  Subsidiaries  other than as may be
contemplated  by this  Agreement  and  Amendment  No. 3 (as  defined  in Section
7.1(c)).

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to the Investor as follows:

     Section 3.1. Organization, Standing, etc. The Company is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Delaware. Each Subsidiary (as defined in Section 3.11 of this Agreement) is duly
organized and validly  existing and, if applicable,  is in good standing,  under
the laws of the jurisdiction of its  incorporation or organization.  Each of the
Company and its  Subsidiaries  is duly qualified or licensed and, if applicable,
is in good standing as a foreign corporation,  in each jurisdiction in which the
properties owned, leased or operated,  or the business conducted,  by it require
such qualification or licensing, except for any such failure so to qualify or be
in good  standing  which,  individually  or in the  aggregate,  would not have a
material  adverse  effect on the business,  properties,  financial  condition or
operations of the Company and its  Subsidiaries,  taken as a whole.  Each of the
Subsidiaries  has the requisite  power and authority to carry on its business as
it is now being  conducted.  The Company has  heretofore  made  available to the
Investor  complete and correct copies of the Certificate of Incorporation of the
Company (the  "Company  Charter")  and the By-laws of the Company (the  "Company
By-Laws") and the certificate of  incorporation  and by-laws,  or the comparable
organizational  documents, of each of its Subsidiaries,  each as amended to date
and currently in full force and effect.

     Section 3.2.  Authorization;  Binding Effect. The Company has the corporate
power and  authority  to execute,  deliver and perform  this  Agreement  and the
Registration  Rights  Agreement,  to consummate  the  transactions  contemplated
hereby and thereby,  and to issue and sell the Shares.  The execution,  delivery
and performance of this Agreement and the  Registration  Rights Agreement by the
Company and the issuance and delivery of the Shares have been duly authorized by
all  necessary  corporate  action  on the  part of the  Company.  The  Board  of
Directors,  being fully  informed of this  Agreement  and related  transactions,
including  the use of the proceeds of the Shares,  has approved the terms of the
Agreement and such related  transactions with a majority of the directors having
no interest in the  Agreement  or such related  transactions  voting in favor of
such  approval.   This  Agreement  constitutes,   and  the  Registration  Rights
Agreement,  when  executed  and  delivered  will  constitute,  valid and legally
binding  obligations  of  the  Company,   enforceable  against  the  Company  in
accordance  with  their  respective  terms,  except



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as  such  may be  limited  by  bankruptcy,  insolvency,  fraudulent  conveyance,
moratorium  or other  similar  laws  affecting  creditors'  rights and  remedies
generally and subject,  as to  enforceability,  to general principles of equity,
regardless whether enforcement is sought in a proceeding at law or in equity.

     Section 3.3. Valid Issuance of Shares.  The Shares and the Warrant  Shares,
when issued,  sold and delivered in accordance with the terms hereof,  will have
been  duly  authorized  by all  necessary  corporate  action  on the part of the
Company and will be validly issued, fully paid and nonassessable, free and clear
of any  liens,  charges,  claims or  encumbrances,  and will not be  subject  to
restrictions on transfer except as specifically provided by Sections 2.4 and 5.2
of this  Agreement.  The Shares and the  Warrant  Shares  will be  eligible  for
listing on the National Market System of the Nasdaq Stock Market.

     Section 3.4. No Violations; Consents and Approvals.

          (a) Neither the  execution,  delivery or performance by the Company of
this Agreement or the  Registration  Rights  Agreement,  the consummation by the
Company of the transactions  contemplated hereby or thereby, nor the performance
by the Company of its  obligations  hereunder or thereunder (i) will result in a
violation or breach of the Company Charter or the Company By-laws or the charter
or  by-laws  of any of the  Company's  Subsidiaries  or (ii)  will  result  in a
violation  or breach of (or give rise to any right of  termination,  revocation,
cancellation or acceleration under or increased payments under), or constitute a
default  (with or without due notice or lapse of time or both) under,  or result
in the creation of any Lien upon any of the  properties or assets of the Company
or any of its Subsidiaries under, (A) any of the terms, conditions or provisions
of any Contract or of any Permit to which the Company or any of its Subsidiaries
is a party or by which any of their  properties  or assets may be bound,  or (B)
subject to the governmental  filings and other matters referred to in clause (b)
below, any judgment,  order, decree, statute, law, regulation or rule applicable
to the Company or any of its  Subsidiaries,  except, in the case of clause (ii),
for  violations,  breaches,  defaults,  rights  of  cancellation,   termination,
revocation  or  acceleration  or Liens that would  not,  individually  or in the
aggregate,  have  a  material  adverse  effect  on  the  business,   properties,
operations, financial condition, income or business prospects of the Company and
its  Subsidiaries  as  presently  being  conducted.   No  third  party  has  any
pre-emptive  rights,  or rights of first refusal or first opportunity or similar
rights to purchase, or to offer to purchase, all or any part of the Shares.

          (b) No consent,  approval, order or authorization of, or registration,
declaration or filing with, any Governmental  Entity is required with respect to
the Company in connection  with the  execution,  delivery or  performance by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby.

          (c) No consent,  approval, order or authorization of, or registration,
declaration or filing with any applicable Governmental Entity, including without
limitation the



                                       6
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Federal Communication Commission,  under any communications laws and relating to
licenses  held by the  Company  is  required  with  respect to the  Investor  in
connection  with the  execution,  delivery or performance by the parties to this
Agreement and the consummation of the transactions contemplated hereby.

     Section  3.5.  Litigation.  As of the date of this  Agreement,  there is no
action,  suit,  proceeding  or  investigation  pending or  currently  threatened
against the Company  which  questions  the  validity  of this  Agreement  or the
Registration Rights Agreement or the right of the Company to enter into it or to
consummate the transactions  contemplated hereby or thereby. Except as disclosed
to the Investor in writing  within the five  business  days prior to the date of
this  Agreement or as disclosed in the SEC Filings (as defined in Section  3.7),
as of the  date of this  Agreement,  there is no  action,  suit,  proceeding  or
investigation  pending or currently  threatened  which,  individually  or in the
aggregate,  if the subject of an unfavorable decision,  ruling or finding, could
materially  adversely  affect the business,  properties,  operations,  financial
condition,  income or business  prospects  of the  Company or its  Subsidiaries.
Except as  disclosed to the Investor in writing  within the five  business  days
prior to the date of this  Agreement  or as  disclosed  in the SEC  Filings  (as
defined  in  Section  3.7),  as of the  date of  this  Agreement,  there  are no
outstanding  judgments,  orders,  decrees,  or injunctions  of any  Governmental
Entity  against  the  Company or any of its  Subsidiaries  that,  insofar as can
reasonably be foreseen,  individually  or in the aggregate,  in the future would
have  a  material  adverse  effect  on  the  business,  properties,  operations,
financial  condition,  income  or  business  prospects  of the  Company  and its
Subsidiaries.

     Section 3.6.  Compliance  with  Applicable  Law. Except as disclosed in the
Company SEC Filings,  each of the Company and its  Subsidiaries is in compliance
with all statutes,  laws, regulations,  rules, judgments,  orders and decrees of
all Governmental  Entities  applicable to it, including  without  limitation the
United States Federal Communications  Commission,  that relate to its respective
business,  and neither the Company nor any of its  Subsidiaries has received any
notice alleging  noncompliance  except,  with reference to all of the foregoing,
where  the  failure  to be in  compliance  would  not,  individually  or in  the
aggregate,  have  a  material  adverse  effect  on  the  business,   properties,
operations,  financial condition, income or business prospects of the Company or
its Subsidiaries.  Each of the Company and its Subsidiaries has all Permits that
are  required in order to permit it to carry on its  business as it is presently
conducted,  except  where the failure to have such  Permits or rights would not,
individually  or in  the  aggregate,  have  a  material  adverse  effect  on the
business,  properties,  operations,  financial  condition,  income  or  business
prospects of the Company or its Subsidiaries. All such Permits are in full force
and effect and the Company and its Subsidiaries are in compliance with the terms
of such  Permits,  except where the failure to be in full force and effect or in
compliance would not, individually or in the aggregate,  have a material adverse
effect on the business, properties,  operations,  financial condition, income or
business prospects of the Company or its Subsidiaries.


                                       7
<PAGE>



     Section 3.7.  Disclosure.  The Company has made  publicly  available or has
otherwise  provided to the Investor (i) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "1998 Annual Report"), as filed
with the Securities and Exchange  Commission  ("SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act");  (ii) the Company's proxy
statement  for its 1998  Annual  Meeting of  Stockholders;  (iii) the  Company's
reports on Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998
and September 30, 1998 (collectively,  the "Quarterly  Reports"),  as filed with
the  SEC  pursuant  to  the  Exchange  Act,  and  (iv)  all  other  reports  and
registration  statements,  if any,  as filed by the  Company  with the SEC since
September 30, 1998 (the  documents  referred to in clauses  (i)-(iv) above being
referred  to  hereinafter,  collectively,  as the  "SEC  Filings").  As of their
respective  dates,  the SEC Filings  (including  all documents  incorporated  by
reference  therein) did not contain any untrue  statement of a material  fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not misleading. Since December 31, 1997, the Company has timely filed with
the  SEC all  reports,  documents,  registration  statements,  definitive  proxy
statements  and all  other  filings  required  to be made with the SEC under the
rules and regulations of the SEC, and all such reports, documents,  registration
statements,  definitive  proxy  statements  and other  filings  complied  in all
material  respects with all applicable  requirements  of the Securities Act, and
the Exchange Act, as applicable.  The audited consolidated  financial statements
of the Company  included or  incorporated by reference in the 1998 Annual Report
and the unaudited  consolidated  financial statements contained in the Quarterly
Reports have been prepared in accordance with United States  generally  accepted
accounting  principles  applied on a  consistent  basis  throughout  the periods
indicated  and with each  other,  except as may be  indicated  therein or in the
notes thereto,  and fairly  present the financial  position of the Company as of
the dates thereof and the results of its operations, and subject, in the case of
the unaudited  interim  consolidated  financial  statements,  to normal year-end
adjustments.

     Section  3.8.  Changes.  Between  September  30,  1998 and the date of this
Agreement,  except as (1) contemplated by this Agreement and Amendment No. 3 (as
defined in Section 7.1 of this Agreement),  (2) disclosed in the SEC Filings and
(3) disclosed to the Investor in writing  within the five business days prior to
the date of this Agreement, there has not been:

          (a) any  changes  in the  assets,  liabilities,  financial  condition,
operating results or, to the best of the Company's  knowledge,  prospects of the
Company and its  Subsidiaries  from that  reflected  in the 1998 Annual  Report,
except  changes in the ordinary  course of business  that have not been,  in the
aggregate, materially adverse;

          (b) any  damage,  destruction  or  loss,  whether  or not  covered  by
insurance,  materially  and  adversely  affecting  the  business,  properties or
financial condition of the Company or any of its Subsidiaries;


                                       8
<PAGE>



          (c) any waiver or compromise by the Company or any of its Subsidiaries
of a material right or of a material debt owed to it;

          (d) any  satisfaction  or  discharge  of any  Lien or  payment  of any
obligation  by the Company or any of its  Subsidiaries,  except in the  ordinary
course  of  business  and  which  is not  materially  adverse  to the  business,
properties or financial  condition of the Company or any of its Subsidiaries (as
such business is presently conducted);

          (e) any  change to a material  contract  or  arrangement  by which the
Company or any of its  Subsidiaries  or any of their assets is bound or subject,
or any breach or waiver of any breach of or under any such contract or amendment
(or the occurrence of any event which would, as a result of the passage of time,
become or result in such a breach or waiver) which change,  breach or waiver has
a materially adverse effect on the Company and its Subsidiaries;

          (f) any sale,  assignment  or transfer to a third party that is not an
Affiliate  (as  hereinafter  defined)  of  any  material  patents,   trademarks,
copyrights,  trade secrets or other intangible assets for compensation  which is
less than fair value;

          (g) any mortgage, pledge, transfer of a security interest in, or Lien,
created by the Company or any of its  Subsidiaries,  with  respect to any of its
material properties or assets, except Liens for taxes not yet due or payable;

          (h) any declaration, setting aside or payment or other distribution in
respect of any of the Company's capital stock;

          (i) any event or  condition  of any type that has (or will as a result
of the  passage of time)  materially  and  adversely  affected  (or  affect) the
business,  properties,  financial  condition,  or to the  best of the  Company's
knowledge, the business prospects of the Company or any of its Subsidiaries.

     For purposes of this Agreement the term "Affiliate" means any individual or
entity directly or indirectly controlling, controlled by or under common control
with, a party to this Agreement.  Without limiting the foregoing,  the direct or
indirect  ownership of 50% or more of the  outstanding  voting  securities of an
entity,  or the right to receive  50% or more of the  profits or  earnings of an
entity, shall be deemed to constitute control.

     Section 3.9.  Nasdaq Listing.  The Common Stock is currently  traded on the
National  Market System of the Nasdaq Stock Market,  and the Company knows of no
reason or set of facts  which is likely  to  result in the  termination  of such
trading.  Nothing in this  Section  3.9 shall be  interpreted  to  preclude  the
Company from listing its Common Stock on any other national securities exchange.


                                       9
<PAGE>



     Section 3.10. Capitalization;  Options and Warrants. The authorized capital
stock of the Company  consists of 5,000,000 shares of Preferred Stock, par value
$0.01 per share,  and  300,000,000  shares of Common Stock,  par value $0.01 per
share,  of which no shares of Preferred  Stock and  55,267,719  shares of Common
Stock were issued and outstanding as of December 31, 1998, 10,728,810 options to
purchase  Common  Stock were  outstanding  as of such date,  and no  warrants to
purchase Common Stock other than the Base Warrant,  Performance  Warrant and the
Further  Warrant held by the Investor  were  outstanding  as of such date. As of
December 31, 1998, 9,711,896 shares of Common Stock are issuable upon conversion
of the  Convertible  Notes  (as  defined  in  Section  3.14  hereof).  Except as
disclosed in the SEC Filings,  and except for the  transactions  contemplated by
this  Agreement,  since  December 31,  1998,  neither the Company nor any of its
Subsidiaries  has  issued any shares of  capital  stock or granted  any  option,
warrants, rights (including conversion or preemptive rights), or similar rights,
to any person or entity to  purchase  or acquire  any shares or any rights  with
respect  to  any  shares  of  capital  stock  of  the  Company  or  any  of  its
Subsidiaries,  including the Shares. Except as set forth on Schedule 3.10, there
are no outstanding  rights to cause the Company to register the securities  held
by any person or entity under the Securities Act.

     Section 3.11. Subsidiaries.

     The Company has no equity interests with a value of $100,000 or more in any
person or entity other than its Subsidiaries  (other than any investment of less
than 5% of the outstanding  securities of any corporation if such securities are
regularly traded on a recognized  stock exchange),  and there are no commitments
on the part of the Company or any Subsidiary to contribute additional capital in
respect of any equity interest in any person or entity.  Each of the outstanding
shares of capital stock of each of the Subsidiaries has been duly authorized and
validly issued,  and is fully paid and  nonassessable.  Schedule 3.11 contains a
complete and correct  list of all  Subsidiaries  of the  Company.  Except as set
forth on Schedule 3.11, all of the  outstanding  shares of capital stock of each
Subsidiary are owned,  either  directly or  indirectly,  by the Company free and
clear of all Liens. For purposes of this Agreement the term "Subsidiary"  means,
as to any person or entity, any corporation at least a majority of the shares of
stock of which having general voting power under ordinary circumstances to elect
a  majority  of the Board of  Directors  of such  corporation  (irrespective  of
whether  or not at the time stock of any other  class or  classes  shall have or
might have voting power by reason of the  happening of any  contingency)  is, at
the time as of which the  determination  is being made,  owned by such person or
entity,  or one or more of its  Subsidiaries or by such person or entity and one
or more of its Subsidiaries.

     Section 3.12. Contracts.

          (a)  Except as set  forth on  Schedule  3.12(a)  and  except  for this
Agreement  and the  other  agreements  entered  into  in  connection  with  this
Agreement,  the



                                       10
<PAGE>



Company  has  filed as  exhibits  to the  Company's  SEC  Filings  all  material
agreements  required to be filed under the rules and regulations of the SEC (the
"Material  Contracts")  and  the  Company  has not  entered  into  any  material
contracts that will be required to be filed in future filings.

          (b) All Material Contracts are legal,  valid,  binding,  in full force
and effect and enforceable against each party thereto, except to the extent that
any  failure to be  enforceable,  individually  or in the  aggregate,  would not
reasonably  be  expected to have or result in a material  adverse  effect on the
business,  financial  condition,  operations,  properties,  income  or  business
prospects of the Company and its Subsidiaries,  taken as a whole,  provided that
no  representation  is  made  as to the  enforceability  of any  non-competition
provision in any employment  agreement.  There does not exist under any Material
Contract any violation,  breach or event of default, or event or condition that,
after notice or lapse of time or both, would  constitute a violation,  breach or
event  of  default  thereunder,  on  the  part  of any  of  the  Company  or its
Subsidiaries   or,  to  the  best  knowledge  of  the  Company  or  any  of  its
Subsidiaries,  any other person or entity, other than such violations,  breaches
or events of default  as would not,  individually  or in the  aggregate,  have a
material  adverse  effect  on the  business,  financial  condition,  operations,
properties,  income or business  prospects of the Company and its  Subsidiaries,
taken as a whole.  The  enforceability  of all  Material  Contracts  will not be
adversely  affected in any manner by the  execution,  delivery or performance of
this Agreement or the consummation of the transactions  contemplated hereby, and
no Material Contract contains any change in control or other terms or conditions
that will become  applicable or inapplicable as a result of the  consummation of
such transactions.  Except as set forth on Schedule 3.12(b), neither the Company
nor the  Subsidiaries  are a party to any  contract  prohibiting  or  materially
restricting the ability of the Company or any of its Subsidiaries to conduct its
business,  to engage in any  business  or  operate in any  geographical  area or
compete with any person.

     Section 3.13. Brokers or Finders.  No agent,  broker,  investment banker or
other firm is or will be entitled to any  broker's or finder's  fee or any other
commission  or  similar  fee  in  connection   with  any  of  the   transactions
contemplated by this Agreement.

     Section 3.14.  Seniority of  Obligations.  All payment  obligations  of the
Company  under  this  Agreement  shall  constitute  Senior  Debt as that term is
defined in the Indenture dated as of September 9, 1997 relating to the Company's
4 1/2%  Convertible  Subordinated  Notes due 2002 and the Indenture  dated as of
December 10, 1997 relating to the Company's 5%  Convertible  Subordinated  Notes
due 2004 (the "Indentures"), (collectively, the "Convertible Notes").

     Section  3.15.  Employment of Battista.  The failure of Daniel  Borislow to
resign as an executive officer of the Company shall not have any impact upon the
Company's employment relationship with Gabriel Battista.

                                   ARTICLE IV


                                       11
<PAGE>



                       COVENANTS AND ADDITIONAL AGREEMENTS

     Section  4.1.  Ordinary  Course.  During the  period  from the date of this
Agreement and continuing until the Closing,  the Company agrees as to itself and
its Subsidiaries that, except to the extent that the Investor otherwise consents
in writing,  the Company and its  Subsidiaries  shall conduct  their  respective
businesses in the ordinary course in substantially  the same manner as presently
conducted.

     Section  4.2.  Access and  Information.  So long as the  Investor  owns any
Shares or Warrant  Shares or has any  unexercised  Warrants  outstanding  or the
Company  has  any  obligations  outstanding  to the  Investor  pursuant  to this
Agreement, the Company will (and will cause each of its Subsidiaries and each of
their  respective  accountants,   counsel,  consultants,   officers,  directors,
employees, agents and representatives of or to any of the Subsidiaries, to) give
the  Investor  and its  representatives,  reasonable  access  during  reasonable
business hours to all of their respective properties,  assets, books, contracts,
reports and records relating to the Company and its Subsidiaries, and furnish to
them all such documents, records and information with respect to the properties,
assets and business of the Company and its  Subsidiaries,  as the Investor shall
from time to time reasonably  request and as the Company may already have in its
possession.  The Company will inform the  Investor  from time to time and at the
Investor's  request as to the business of the Company and its Subsidiaries.  Any
documents,  records and  information  made  available to the Investor under this
Section 4.2 shall be subject to the  provisions of Paragraph  VII.B of the Third
Amendment to the Telecommunications  Marketing Agreement and the Company and the
Investor shall have the same rights and  obligations  with respect to disclosure
of the  terms of this  Agreement  as are set  forth  with  respect  to the Third
Amendment in such paragraph VII.B.

     Section 4.3. Further Actions.

          (a) Each of the Company and the Investor shall use its reasonable best
efforts to take or cause to be taken all actions,  and to do or cause to be done
all other things, necessary, proper or advisable in order to fulfill and perform
its  obligations  in  respect  of this  Agreement  and the  Registration  Rights
Agreement,  or otherwise  to  consummate  and make  effective  the  transactions
contemplated hereby and thereby.

          (b)  Each of the  Company  and the  Investor  shall,  as  promptly  as
practicable, (i) make, or cause to be made, all filings and submissions required
under  any  law  applicable  to it or any of its  Subsidiaries,  and  give  such
reasonable undertakings as may be required in connection therewith, and (ii) use
all  reasonable  efforts to obtain or make, or cause to be obtained or made, all
Permits  necessary to be obtained or made by it or any of its  Subsidiaries,  in
each  case  in  connection  with  this  Agreement  and the  Registration  Rights
Agreement, the sale



                                       12
<PAGE>



and transfer of the Shares  pursuant  hereto and the  consummation  of the other
transactions contemplated hereby or thereby.

          (c)  Each  of the  Company  and  the  Investor  shall  coordinate  and
cooperate with the other party in exchanging such information and supplying such
reasonable  assistance  as may be  reasonably  requested  by such other party in
connection with the filings and other actions contemplated by this Agreement and
the Registration Rights Agreement.

          (d) At all  times  prior to the  Closing  Date,  the  Company  and the
Investor  shall  promptly  notify each other in writing of any fact,  condition,
event or occurrence  that could  reasonably be expected to result in the failure
of any of the conditions contained in Article VII to be satisfied, promptly upon
becoming aware of the same.

     Section 4.4.  Further  Assurances.  Following the Closing Date, the Company
shall,  from time to time,  execute and  deliver  such  additional  instruments,
documents,  conveyances  or  assurances  and take such other actions as shall be
necessary,  or otherwise reasonably be requested by the Investor, to confirm and
assure  the  rights  and  obligations  provided  for in this  Agreement  and the
Registration  Rights  Agreement  and render  effective the  consummation  of the
transactions  contemplated  hereby and  thereby,  or  otherwise to carry out the
intent and purposes of this Agreement.

     Section 4.5.  Registration  Rights.  As soon as practicable,  but within no
less  than 45 days  after  the  Closing  Date  and  pursuant  to the  terms  and
conditions of a registration rights agreement, dated as of the Closing Date (the
"Registration Rights Agreement"), by and among the Company and the Investor, the
Company shall file a  registration  statement  under the Securities Act with the
SEC, to register  the resale by the Investor of the Shares,  the Warrant  Shares
and the Put/Call  Warrant  Shares (as defined in Section  6.5),  and the Company
shall use its best efforts to cause such  registration  statement to be declared
effective  within 90 days after the Closing Date;  provided,  however,  that the
Company  shall not be required to request  that such  registration  statement be
declared  effective if it  determines,  on advice of its counsel,  that to do so
would  require  the  Company  to file its report on Form 10-K for the year ended
December 31, 1998 prior to March 31, 1999. The form of the  Registration  Rights
Agreement is attached  hereto as Exhibit A. The Company and Daniel  Borislow (on
his own behalf and on behalf of his Affiliates) hereby waive with respect to the
rights granted in the registration rights agreement, dated as of the date hereof
(the  "Borislow  Registration  Rights  Agreement"),  by and between the Company,
Daniel  Borislow,  Mark Pavol as Trustee of that  certain D&K  Grantor  Retained
Annuity  Trust dated June 15,  1998 and the Trustee of that  certain D&K Grantor
Retained  Annuity  Trust II, any  provision in any  agreement  between them that
restricts  the ability of the Company to file a  registration  statement  or any
amendment or supplement  thereto,  or to seek  effectiveness of any registration
statement. Nothing in the Borislow Registration Rights Agreement shall restrict,
prevent or otherwise  limit the Company's (i)  obligations  under Section 4.9 of
this  Agreement,  including  without  limitation  the Company's  obligations  to
deposit  50% of



                                       13
<PAGE>



the  proceeds of any  Indebtedness  incurred by it (other than a bank  revolving
loan in an amount not in excess of $50 million) up to $35,000,000,  and (ii) the
issuance of securities,  including  without  limitation the Shares,  the Warrant
Shares and the  Warrants  and any other  warrants,  to the  Investor  under this
Agreement  or any other  agreement  or to any other person or entity to fund the
Company's  obligations  to the  Investor  under  this  Agreement  or  any  other
agreement.

     Section 4.6.  Termination of Voting Trust Agreement and  Warrantholder  and
Stockholders  Agreement.  Effective  immediately  after the Closing,  the voting
trust agreement,  dated as of February 22, 1997 (the "Voting Trust  Agreement"),
among  Daniel  Borislow  (as  Trustee),  the  Investor  and the  Company and the
warrantholder  and  stockholders  agreement,  dated as of February 22, 1997 (the
"Warrantholder  and  Stockholders  Agreement"),  between  the  Investor  and the
Company are hereby terminated,  of no force and effect and are superseded by the
terms and  conditions set forth in this  Agreement and the  Registration  Rights
Agreement.  Notwithstanding  anything  to  the  contrary  in  the  Voting  Trust
Agreement or the Warrant and Stockholders Agreement neither (1) the restrictions
on transfer of shares of Common Stock set Section 4.1.  forth in the Warrant and
Stockholders Agreement nor (2) the Voting Trust and the restrictions on transfer
of  shares  of  Common  Stock set  forth in the  Voting  Trust  Agreement  shall
terminate until the earlier of their termination pursuant to this Section 4.6 or
the termination of this Agreement pursuant to Article VIII of this Agreement.

     Section  4.7.  Nasdaq  Listing.  As of the  Closing  Date,  the  Shares and
Put/Call  Warrant  Shares will be listed on the  National  Market  System of the
Nasdaq Stock Market.

     Section 4.8. Removal of Legend. The Company covenants and agrees that, with
respect to the Shares and the Warrant Shares, stop-transfer instructions and the
restrictive   legend  shall  be  promptly  removed  by  delivery  of  substitute
certificates  without  such  legend for such  shares  upon (i)  delivery  to the
Company  of  evidence  of the  transfer  of  such  shares  represented  by  such
certificate pursuant to a registration  statement under the Securities Act or in
accordance with the applicable  provisions of Rule 144 under the Securities Act,
or (ii) the  delivery by the  Investor to the Company of a letter from the staff
of  the  SEC,  or an  opinion  of  counsel  in  form  and  substance  reasonably
satisfactory  to the  Company,  to the effect  that such  shares do not  require
further  registration  under the Securities  Act for subsequent  transfer by the
holders thereof.

     Section 4.9. Limitation on Obligations [as amended].

          (a) Except as provided in subsection  (b), as long as (i) the Investor
owns any  Shares or  Warrant  Shares,  (ii) the  Investor  owns any  unexercised
Warrants,  or (iii) the Company has any obligations  outstanding to the Investor
pursuant  to this  Agreement,  the Company  shall not without the prior  written
consent of the Investor incur or permit any Subsidiary to incur any Indebtedness
(as that term is defined in the Indentures as of the date of this  Agreement) or
enter  into any  agreement  or  understanding  prohibiting  or  restricting  the
Company's ability or right to satisfy its obligations to the Investor hereunder.



                                       14
<PAGE>



          (b)  Notwithstanding the provisions of Section 4.9(a), the Company may
incur (and may permit its Subsidiaries to incur) Indebtedness if:

          (1) the Company  deposits  50% of the  proceeds of any such  borrowing
     (other than a Bank Debt,  Receivables  Facility (each as defined in Section
     4.10) and/or any  borrowing  from Borislow in an amount not in excess of an
     aggregate of $50 million) in an escrow to secure the Company's  obligations
     to the Investor  hereunder,  which escrow shall be on terms and  conditions
     satisfactory  to the Investor in its sole  discretion;  provided,  however,
     that the Company  shall have no  obligation  to deposit any proceeds to the
     extent the escrow  balance  (including  any  amounts  previously  deposited
     pursuant to this Section  4.9(b)(1) or otherwise and any amounts  withdrawn
     pursuant  to the  proviso  in  Section  5.1(h)(3),  but  excluding  amounts
     otherwise withdrawn) would exceed $35,000,000;

          (2) each of the  following  conditions is satisfied at or prior to the
     time the Indebtedness is incurred:

              (A)  either (i) the Investor holds a number of Shares and  Warrant
                   Shares that are less than  1,030,343  or (ii) the  Investor's
                   rights  set  forth  in  Section  5.1 of this  Agreement  have
                   terminated  by their  terms  (including  pursuant  to Section
                   5.1(h));

              (B)  the  Investor  holds a number of  Warrants  that is less than
                   680,496;

              (C)  the  Investor  has had the ability to exercise the rights set
                   forth in Section 6.3 for a period of at least six months; and

              (D)  the Company has no payment  obligations  under this Agreement
                   that have arisen and have not been paid; or

          (3) The  balance in the escrow  established  pursuant to clause (1) is
     $35,000,000  (less any amounts deducted  pursuant to the proviso in Section
     5.1(h)(3)).

          (c) The  Company's  obligation to deposit funds in escrow with respect
to Section  4.9(b)(1) shall be reduced to the extent of any amount  deposited in
escrow by Daniel  Borislow to secure the Company's  obligations  to the Investor
hereunder  if  such  escrow  is on  terms  and  conditions  satisfactory  to the
Investor.


                                       15
<PAGE>



     Section 4.10.  Perfection of Security Interest. No later than 20 days after
the Closing,  the Company  shall  execute a security  agreement  (the  "Security
Agreement")  for the benefit of the Investor to perfect the  security  interests
thereunder. The Security Agreement shall secure all of the Company's obligations
to the  Investor  under this  Agreement  and shall  pledge all of the  Company's
assets and shall be in form and  substance  satisfactory  to the Investor in its
sole  discretion;  provided,  however,  that the  Company  may,  subject  to the
limitations on indebtedness set forth on Section 4.9 of this Agreement, encumber
or pledge its accounts  receivable [as amended] its accounts  receivable  and/or
other assets  appropriate  for  securitization  in an  asset-based  financing in
connection with a receivables and/or other asset-based financing (a "Receivables
Financing") and the Company may encumber or pledge its assets in connection with
indebtedness  incurred  under a commercial  bank  facility  (the "Bank Debt") in
which the  obligations  under the Bank Debt may be  secured by any or all of the
assets of the Company and shall be senior to the Investor's  security interests.
If the Company  does incur Bank Debt or arranges a  Receivables  Financing,  the
Investor shall cooperate with requests of lenders providing the Bank Debt or the
Receivables Financing and shall enter into such lenders' standard  intercreditor
agreement to subordinate, to the extent permitted by Section 4.9, the Investor's
security  interests in the assets of the Company to the senior  interests of the
lenders  providing  the Bank Debt and/or the  Receivables  Financing;  provided,
however,  that the  Investor  shall not be required to consent to any  provision
that would limit or restrict its right to receive payments under this Agreement.
In the event that the security  interests  under the Security  Agreement are not
perfected as specified in this Section 4.10 within 20 days following the Closing
Date,  such  failure  shall be deemed a default  under  this  Agreement  and the
Company  may  not  incur  any  indebtedness  pursuant  to  Section  4.9 of  this
Agreement.

     Section 4.11.  Contracts with Certain  Stockholders.  The Company shall not
enter into any agreement, arrangement or understanding with any person or entity
who beneficially  owns (within the meaning of Rule 13d-3 under the Exchange Act)
in excess of 15% of the issued and outstanding Common Stock unless a majority of
the  disinterested  directors  of the Company  determines  that such  agreement,
arrangement or  understanding  is on terms no less favorable to the Company than
could have been  obtained in an  arms-length  transaction  with a  disinterested
third party.

     Section  4.12.  Subordination  of  Obligations  under  Exchange  Agreement.
Notwithstanding anything to the contrary in the exchange agreement,  dated as of
the date hereof (the "Exchange Agreement"),  by and among the Company, Tel-Save,
Inc.  (the "TS Sub") and Mark  Pavol as  Trustee  of that  certain  D&K  Grantor
Retained  Annuity  Trust  dated  June  15,  1998,  the  Company's  and TS  Sub's
obligations  under the Exchange  Agreement,  including  without  limitation  any
obligations  under Section 5 of that  agreement,  shall be  subordinated  to the
Company's obligations to the Investor under this Agreement.

                                    ARTICLE V


                                       16
<PAGE>



                   ADDITIONAL AGREEMENTS CONCERNING THE SHARES

     Section 5.1. Make-Whole for Shares. [as amended]

          (a) If, during the period (the "Make-Whole Period") commencing on June
1,  1999 and  ending on  September  30,  2000 (as such  period  may be  extended
pursuant to Section  5.1(e)  hereto),  the Investor  proposes to sell any of the
Shares,  it may notify the Company in writing of such intention.  Within two (2)
days of receipt by the Company of such notice, the Company may purchase from the
Investor such Shares proposed to be sold. The Company may exercise such purchase
right by paying the Investor in cash,  against receipt of the Shares proposed to
be sold, the product of (x) the number of Shares proposed to be sold, multiplied
by (y) the Current  Market Price (as defined in Section  5.1(d) below) per share
on the date of such  notice plus an amount per share (the  "Make-Whole  Amount")
equal to the excess,  if any, of the Per Share  Purchase  Price over the Current
Market Price per share, provided that:

               (i) with respect to the Purchase  Shares,  the Make-Whole  Amount
          shall not exceed $14.00 per share, and

               (ii) with respect to the Warrant Exchange Shares,  the Make-Whole
          Amount shall not exceed $11.00 per share.

          (b) If the Investor  gives the notice  provided for in paragraph  (a),
the Company does not exercise the purchase  right  described in paragraph (a) of
this Section 5.1, and the Investor  sells  (whether in a market  transaction,  a
privately negotiated  transaction or otherwise) any of the Shares so proposed to
be sold (X) after the earlier of (A) expiration of the two-day  period  referred
to in paragraph (a) or (B) Investor's receipt of notice from the Company that it
does not  intend to  exercise  the  purchase  right  and (Y)  within 90 days (as
extended by any Black-Out Period  Extension,  if any) of the date written notice
is given  pursuant to paragraph  (a) of this  Section  5.1,  the Company  shall,
within  three (3) trading  days of  receiving  notice of any such sale,  pay the
Investor a  Make-Whole  Amount  equal to the product of (x) the number of Shares
sold by the  Investor  during such 90-day  period in arm's  length  transactions
multiplied by (y) the excess,  if any, of (i) the Per Share  Purchase Price over
(ii) the price per share at which the Investor  actually sold such Shares,  less
any and all reasonable  expenses  actually  incurred by Investor in consummating
such sale (the "Sales Expense"), provided that:

               (i) with respect to the Purchase  Shares,  the Make-Whole  Amount
          shall not exceed  the sum of $14.00 per share plus the Sales  Expense,
          and


                                       17
<PAGE>



               (ii) with respect to the Warrant Exchange Shares,  the Make-Whole
          Amount  shall not  exceed  the sum of $11.00  per share plus the Sales
          Expense.

          (c) [as added] If, after using  commercially  reasonable efforts to do
so, the  Investor  is unable to sell any Shares as to which it has given  notice
pursuant to Section 5.1(a) within 30 days after giving such notice, the Investor
may, at any time until the  expiration of seven days after the conclusion of the
90-day  period set forth in  Section  5.1(b)  (as such  period may be  extended)
notify the Company of its  inability  to sell the Shares and the Company  shall,
within  three  trading  days of  receipt  of such  notice,  pay the  Investor  a
Make-Whole  Amount  calculated in accordance  with  paragraph (b) as though such
Shares were sold for $.01 per share and the Investor shall, upon receipt of such
payment, surrender the Shares to the Company for cancellation.

          (d) If the  Investor  does  not  sell any of the  Shares  pursuant  to
Section  5.1(b) or if the  Investor  has sold only a portion of its Shares,  the
provisions of this Section 5.1 shall continue to be in force with respect to any
remaining  Shares held by the Investor as long as the Investor  reinitiates  the
process specified in this Section 5.1 by providing notice to the Company.

          (e) The term  "Current  Market Price" with respect to any day shall be
deemed to be the average of the daily  closing  price per share of Common  Stock
for 10  consecutive  Nasdaq  National  Market  trading days before such day. The
closing  price for each day shall be the last sale price regular way or, in case
no such  reported sale takes place on such day, the average of the last reported
bid and lowest reported asked prices as reported by Nasdaq National  Market,  or
other similar organization if Nasdaq National Market is no longer reporting such
information, or if not so available, the fair market price as determined in good
faith by the Board of Directors of the Company.

          (f) In the  event  that any  shares of Common  Stock  received  by the
Investor are not freely tradable because the registration  statement under which
such shares would be sold is for any reason not deemed effective by the SEC, the
sale of any such shares  pursuant to the  registration  statement  is  suspended
pursuant to Section 2(c) of the Registration Rights Agreement,  or for any other
similar  reason (a "Black-Out  Period"),  the period of time for the sale of any
such  shares  shall be extended  for two (2) days for each day of the  Black-Out
Period  (a  "Black-Out  Period  Extension")  and the  Make-Whole  Period of this
Section  5.1 shall also be  extended  by the  Black-Out  Period  Extension  with
respect to any or all Shares.

          (g) Notwithstanding the foregoing, the Company, at its option, may pay
a portion of the amounts  due under this  Section 5.1 with a note of the Company
secured  by  adequate,  sufficient  and  satisfactory  assets of the  Company as
determined  solely by the Investor  and dated as of the date that payment  under
Section 5.1 would  otherwise be due,  payable to the


                                       18
<PAGE>



Investor in cash,  accruing  interest at an annual rate of 10% calculated on the
basis of 30 days and a year of 360 days,  maturing  six (6) months from the date
of issuance of the note;  provided that the amount of such note shall not exceed
the total  amount  owed under this  Section 5.1 minus 50% of the excess over $30
million  of  the  Company's   working  capital   (current  assets  less  current
liabilities),  determined  in  accordance  with  generally  accepted  accounting
principles consistently applied on the date of the note.

          (h) [as added] At such time as the  Company  (or,  pursuant to Section
4.9(c),  Borislow)  has  deposited  $35,000,000  in escrow  pursuant  to Section
4.9(b)(1),  the Company  shall  request that the Investor  accept a  Terminating
Payment in accordance  with this Section 5.1(h).  The Investor shall,  within 10
days of receipt of such request,  advise the Company whether it elects to accept
the Terminating Payment.

               (1) The  amount  of a  Terminating  Payment  shall  be,  for each
          Purchase Share and Warrant  Exchange Share held by the Investor at the
          time of the  payment,  an amount  equal to the Make Whole  Amount that
          would be  payable by the  Company  pursuant  to Section  5.1(a) if the
          Investor had given notice  pursuant to Section  5.1(a) on the date the
          Company requested that the Investor accept the Terminating Payment.

               (2) If the Investor  elects to receive a Terminating  Payment and
          (x) within five trading days of the receipt of the Terminating Payment
          notifies the Company  that it intends to sell any  Purchase  Shares or
          Warrant Exchange Shares and (y) the Investor sells any Purchase Shares
          or Warrant Exchange Shares during the 120-day period following receipt
          of the Terminating  Payment (as such 120-day period may be extended by
          a Black-Out  Period  Extension) or gives notice in the manner provided
          for in Section 5.1(c)  (irrespective  of whether the Make Whole rights
          in Section 5.1 are in effect) that it is unable to sell Shares, then

          (A)  if the  average  price per Share at which the  Investor  actually
               sold such Shares during the 120-day period,  less Sales Expenses,
               is less than the Current  Market  Price per share on the date the
               Company  requested  that  the  Investor  accept  the  Terminating
               Payment,  or if the  Investor  gives notice that it was unable to
               sell any Shares,  then the Company  shall,  within three  trading
               days of notice of such  sales or  inability  to sell  during  the
               120-day  period,  pay the Investor an additional  amount for each
               such  Share  equal to the excess of the Make  Whole  Amount  that
               would have been  payable  pursuant  to Section  5.1(b) or Section
               5.1(c) (as appropriate)  with respect to any



                                       19
<PAGE>



               such Shares over the amount  otherwise  paid  pursuant to Section
               5.1(h)(1); and

          (B)  if the  average  price per Share at which the  Investor  actually
               sold such Shares during the 120-day period,  less Sales Expenses,
               is greater than the Current Market Price per share on the date of
               the notice,  then the Investor shall within three trading days of
               the end of the 120-day  period  reimburse to the Company any such
               excess;

          provided, however, that the Investor shall not sell a number of Shares
          during  any five  trading-day  period in the  120-day  period  that is
          greater  than the number that is 10% of the number of Purchase  Shares
          plus  Warrant  Exchange  Shares  held by the  Investor on the date the
          Company requested that the Investor accept a Terminating Payment.

               (3) If the Investor elects to accept a Terminating Payment,  then
          upon  payment  of all  amounts  required  to be  paid  by the  Company
          pursuant to clauses  (1) and (2),  the  obligations  of the Company in
          Sections  4.9,  4.10,  5.1  and  5.5  shall  terminate,  the  Security
          Agreement and all security interests  thereunder shall be released and
          the restrictions and obligations on the Investor set forth in Sections
          5.2 and 5.4 shall terminate; provided, however, that amounts deposited
          in escrow  pursuant to Section  4.9(b)(1) shall not be released to the
          Company until all obligations of the Company  pursuant to Sections 6.3
          and 6.5 of this  Agreement  have either  expired or been paid in full;
          provided,  further, however, that, at the request of the Company, such
          amounts on deposit  shall be applied to the  satisfaction  of any cash
          obligations  of the Company  under Section 6.3 or 6.5 and that, at the
          request  of the  Company,  there  shall be  released  from the  escrow
          deposit,  from time to time,  any  amounts  in excess of the  existing
          maximum obligations under such Sections 6.3 and 6.5.


          (h) Nothing in this Section 5.1 shall restrict the Investor's  ability
to sell Shares at any time or from time to time or retain any proceeds  from any
such sale.

     Section 5.2.  Lock-up.  Until May 31, 1999, the Investor will not,  without
the prior written consent of the Company,  directly or indirectly,  offer, sell,
contract  to sell  (including,  without  limitation,  any short  sale),  pledge,
transfer,  establish any "put  equivalent  position"  within the meaning of Rule
16a-1(b)  under the Exchange Act, grant any option to purchase or otherwise sell
or dispose of (or announce any such transaction) any Purchased Shares; provided,
however,  that the limitations set forth in this Section 5.2 shall terminate and
the  Investor  shall have the right,  directly or  indirectly,  to offer,  sell,
contract  to sell  (including,  without  limitation,  any short  sale),  pledge,
transfer,  establish any "put  equivalent  position"  within the meaning of Rule
16a-


                                       20
<PAGE>



1(b) under the Exchange Act,  grant any option to purchase or otherwise  sell or
dispose of (or announce any such  transaction) any Purchased Shares in the event
that:

          (a) the Company has entered  into (i) a merger  agreement in which the
holders of the Common  Stock prior to the merger  would cease to hold a majority
of the voting  securities  of the  surviving  corporation,  (ii) [as amended] an
agreement or series of agreements of the Company  and/or its  Subsidiaries  that
results in the sale of all or substantially all of the assets of the Company and
its Subsidiaries  taken as a whole, or (iii) an agreement to be acquired,  or to
enter  unto  a  business   combination,   consolidation   or  any  such  similar
transaction,  in each case with any person or entity  other than a  wholly-owned
Subsidiary of the Company; provided, however, the restriction shall (A) continue
if the merger agreement is with a  majority-owned  Subsidiary of the Company and
the  Company  is to be  the  surviving  corporation  in  the  merger  or  (B) be
reinstated if such merger agreement or other agreements  referred to in sections
(i), (ii) or (iii) is subsequently  terminated or the transactions  contemplated
thereunder are not consummated;

          (b) a tender or exchange  offer is made by any  person,  entity or 13D
Group (as defined  below)  (other than an Affiliate  of, or any person or entity
acting in concert with, the Investor) to acquire Common Stock or any other class
of capital stock of the Company with the right to vote generally in the election
of directors (the "Voting  Securities") which, if added to the Voting Securities
(if any) already owned by such person,  entity or 13D Group,  would  result,  if
consummated  in  accordance  with its terms,  in the  Beneficial  Ownership  (as
defined  below)  by such  person,  entity  or 13D  Group of more than 50% of all
Voting Securities of the Company then outstanding,  provided that the limitation
shall be reinstated if such tender or exchange  offer is withdrawn or terminated
without such person, entity or 13D Group acquiring such 50% ownership level;

          (c)  a  materially   adverse  change  in  the  business,   properties,
operations, financial condition, income or business prospects of the Company and
its Subsidiaries, taken as a whole, has occurred;

          (d) any  executive  officer of the Company (as such term is defined in
Rule 3b-7 under the  Securities  Exchange Act of 1934, as amended) who commenced
service with the Company on or after  December 1, 1998,  directly or indirectly,
offers, sells, relinquishes,  contracts to sell (including,  without limitation,
any short sale), pledges,  transfers,  establishes any "put equivalent position"
within the meaning of Rule 16a-1(b) under the Exchange Act, grants any option to
purchase or otherwise  sells or disposes of (or announces  any such  transaction
of) any capital stock of the Company; or

          (e) any of the events listed in Section 5.5 occurs.


                                       21
<PAGE>



For purposes of this Agreement,  the term "13D Group" means any group of persons
or entities formed for the purpose of acquiring, holding, voting or disposing of
Voting  Securities  which would be required  under Section 13(d) of the Exchange
Act and the  rules and  regulations  thereunder  (as now in effect  and based on
present legal interpretations  thereof) to file a statement on Schedule 13D with
the SEC as a "person"  within the meaning of Section  13(d)(3)  of the  Exchange
Act; the term "Beneficial  Ownership" or any like expression with respect to any
securities means having "beneficial ownership" of such securities (as determined
pursuant  to Rule 13d-3  under the  Exchange  Act),  including  pursuant  to any
agreement, arrangement or understanding, whether or not in writing.

     Section 5.3.  Origination Fee.  Subject to Section 5.4 hereof,  the Company
shall pay to the Investor a fee for entering into the transactions  contemplated
by this  Agreement  equal to  $2,500,000,  which fee shall be payable in cash in
eight (8) quarterly  installments of $312,500 each,  commencing on April 1, 1999
and each 90 days  thereafter  until the full amount has been paid. The Company's
obligation  to pay the fee shall be reduced upon the sale by the Investor of any
Purchase  Shares in an amount  equal to the amount of the unpaid fee at the time
of the sale times a fraction,  the  numerator of which is the number of Purchase
Shares sold and the  denominator of which is the number of Purchase Shares owned
by the Investor  immediately  prior to such sale.  The amount of the fee will be
pro rated for any sales of Purchase  Shares sold during any quarter in which the
fee is due.

     Section 5.4. Call Right.

          (a)  During  the period  that  begins  April 1, 1999 and ends April 1,
2001,  the  Company,  by notice to the  Investor,  may at its option  request to
repurchase  any or all of the Shares at a price per share equal to the Per Share
Purchase  Price.  The  Investor  may reject such  request,  but if the  Investor
rejects  or does not  otherwise  respond  to such  request  within  10 days from
receipt of notice by the Company, the Company will be relieved of any obligation
to make any  payments  required  pursuant  to Section  5.3 above for any periods
following  the  date of the  Company's  request.  Any such  notice  given by the
Company shall be irrevocable  and the Company shall be obligated to purchase the
number of Shares specified in the notice in accordance with this Section 5.4. If
the Company for any reason  (other than the  Investor's  rejection or failure to
respond)  fails to purchase such Shares  pursuant to any such  request,  the fee
required  pursuant to Section 5.3 will not be  affected,  the Company will be in
default of its obligations and the Investor may pursue whatever  remedies it may
have at law or in equity.

          (b) At any time during the 12 months following the first date on which
(1) the  restrictions  on  transfer  of shares set forth in Section  5.2 of this
Agreement  have  terminated,   (2)  all  Shares  are  subject  to  an  effective
registration statement, (3) the right of the Investor to sell Shares pursuant to
the Registration  Statement is not suspended and (4) the closing market price of
the  Common  Stock on the Nasdaq  National  Market  has  exceeded  $21.85 for 20
consecutive  trading days, the Company may request that the Investor sell all or
any  portion of the Shares  within 90 days of the  receipt  by the  Investor  of
notice  of the  Company's  request,  provided



                                       22
<PAGE>



that the Company  shall pay the Investor  cash in an amount equal to the product
of (x) the number of Shares sold by the Investor  during such 90-day  period (as
extended by any Black-Out Period Extension, if any) in arm's length transactions
multiplied  by (y) the excess if any, of (i) the Per Share  Purchase  Price over
(ii) the price per share at which the Investor  actually sold such Shares,  less
the Sales  Expenses,  within  three  trading  days of  receipt of notice of such
deficiency.  If the  Investor  fails to sell Shares  pursuant  to the  Company's
request,  then the  Investor's  rights under  Section 5.1 shall  terminate  with
respect to that number of Shares covered by the Company's  request.  The Company
may only make one request  pursuant to this  Section  5.4(b) with respect to any
Share.  Nothing in this Section 5.4(b) shall restrict the Investor's  ability to
sell  Shares at any time or from time to time or retain  any  proceeds  from any
such sale.

     Section 5.5. Make-Whole on Occurrence of Certain Events.

          (a) If (v) there is a "Change of Control"  (as such term is defined in
the Indentures) of the Company,  (w) [as amended] the Company, any Subsidiary of
the Company or any authorized  officer of the Company or any of its Subsidiaries
discloses,  orally or in writing  through the issuance of a press release or any
other public disclosure,  including, without limitation,  filings required under
the U.S.  securities  laws,  any  litigation,  arbitration  or other  proceeding
commenced by the Company or any of its Subsidiaries against the Investor, (x) on
or after  January 15, 1999,  Daniel  Borislow is deemed an executive  officer as
defined in Rule 3b-7 under the  Exchange  Act, as amended,  with  respect to the
Company's [as added] or any Subsidiary's business or operations, (y) the Company
materially   breaches  its  obligations   under  this  Agreement  or  under  the
Telecommunications  Marketing  Agreement in  accordance  with the terms  thereof
(regardless  of whether  such breach  entitles  the  Investor to  terminate  the
Telecommunications  Marketing  Agreement)  or fails to honor any of its  payment
obligation under the  Telecommunications  Marketing Agreement and the applicable
notice and cure period  under the  Telecommunications  Marketing  Agreement  has
expired,  or (z) the Company [as added] or its  subsidiaries  commits a material
default under, or any action occurs that would  otherwise  constitute a material
default  (with or  without  due  notice  or lapse  of time or both)  under,  the
Indentures or any agreement evidencing  indebtedness for borrowed money; then at
any time  within  60 days  after  the  Investor  has  actual  knowledge  of each
occurrence  of any such event,  the Investor can elect to sell any or all of the
Shares  and put any or all of the  Warrants  to the  Company  by  notifying  the
Company in writing of such intention. The Company shall:

          (A) with respect to the Shares, at the option of the Investor, either:

          (i) within  seven (7) days of receipt  by the  Company of such  notice
purchase from the Investor such Shares  proposed to be sold by the Investor,  in
which event the Company  shall  purchase  such  shares,  against  receipt of the
Shares  proposed to be sold for a purchase  price per share in cash equal to the
Per Share Purchase Price; or

          (ii) if the  Investor  sells any of the Shares so  proposed to be sold
within 90 days (as extended by any Black-Out  Period  Extension,  if any) of the
date written  notice is given pursuant to this Section  5.5(a)(i),  within three
(3) trading days of receiving  notice of any



                                       23
<PAGE>



such sale,  pay the  Investor  cash in an amount equal to the product of (x) the
number of Shares sold by the Investor  during such 90 day period (as extended by
any Black-Out Period Extension,  if any) in arms length transactions  multiplied
by (y) the  excess,  if any, of (i) the Per Share  Purchase  Price over (ii) the
price per share at which the Investor actually sold such Shares,  less the Sales
Expense; and

          (B) with respect to the Warrants,  within seven (7) days of receipt by
     the Company of such notice pay the Investor in cash, against receipt of the
     Warrants,  the  "respective Put Price" (as described in Section 6.3 hereof)
     for each of the Warrants being put to the Company.

          (b) The Company shall promptly (and in no event more than one business
day  following  such  event)  notify the  Investor  in writing of (i) any events
giving rise to the rights  specified in this Section 5.5 and (ii) any event that
would otherwise have been deemed to be a commission by the Company of a material
default under, or any action that would  constitute a material  default (with or
without  due  notice  or lapse of time or both)  under,  the  Indentures  or any
agreement evidencing indebtedness for borrowed money, except for the granting of
a waiver by any party with respect to any such default.

          (c) Notwithstanding the foregoing,  the Company, at its option (except
in the case of an event  specified in clause (y) of Section  5.5(a)),  may pay a
portion of the  amounts  due under this  Section  5.5 with a note of the Company
secured  by  adequate,  sufficient  and  satisfactory  assets of the  Company as
determined  solely by the Investor  and dated as of the date that payment  under
Section 5.5 would  otherwise be due,  payable to the Investor in cash,  accruing
interest at an annual rate of 10%  calculated on the basis of a month of 30 days
and a year of 360 days, maturing six (6) months from the date of issuance of the
note;  provided  that the amount of such note shall not exceed the total  amount
owed under this  Section  5.5 minus 50% of the excess of the  Company's  working
capital (current assets less current liabilities), determined in accordance with
generally accepted accounting principles consistently applied on the date of the
note, over $30 million.

          (d) Nothing in this Section 5.5 shall restrict the Investor's  ability
to sell Shares at any time or from time to time or retain any proceeds  from any
such sale.

                                   ARTICLE VI

                                    WARRANTS

     Section 6.1. Terms on Warrants and Warrant Shares. The parties hereto agree
that the  provisions  set forth in this  Article VI supersede  any  inconsistent
provisions in any and all prior  agreements  entered into by the parties  hereto
with respect to the terms and  conditions of the Base Warrant,  the  Performance
Warrant  and the  Further  Warrant  (each a  "Warrant"  and,  collectively,  the
"Warrants") and the Warrant Shares.


                                       24
<PAGE>



     Section 6.2. Number of Shares of Performance Warrant. Concurrently with the
execution of Amendment No. 3, the  Performance  Warrant shall be, and hereby is,
further  amended to provide (a) that it is exercisable  only with respect to the
number of "Warrant Shares" (as defined in such Performance Warrant) as shall, in
accordance with the terms of such  Performance  Warrant,  have vested as of (and
including) September 30, 1998, which number of shares is agreed to be 2,798,000;
(b) that the term  "Warrant  Shares" as used  therein  shall for all purposes of
such Performance Warrant mean such number of shares of the Common Stock as shall
equal the 2,798,000 "Warrant Shares" so vested as of September 30, 1998; and (c)
that no further  adjustment  in the number of  "Warrant  Shares"  for which such
Performance  Warrant may be exercised  shall be made  (except  only  pursuant to
paragraph 6  thereof).  As of the Closing  Date,  the number of shares  issuable
under the  Performance  Warrant  will be reduced  by  1,076,016  to reflect  the
exchange set forth in Section 1.2.

     Section 6.3. Put Rights on Warrants. The Investor shall have the right (the
"Put  Right"),  with  respect  to all or any  portion  of  each  tranche  of the
Performance Warrants and the Further Warrant, at any time and from time to time,
after  the  termination  of  the  LD  Exclusivity  Period  (as  defined  in  the
Telecommunications Marketing Agreement) up until the date that is five (5) years
following  the  Closing  Date (and in any event,  the  Investor  shall have such
rights on the  earlier to occur of the date 30 days prior to (i) the  expiration
of each of the  respective  warrants  and (ii) the date  that is five (5)  years
following the Closing Date),  to require the Company (or any designee that shall
be  designated  by the  Company)  to  purchase  all or a portion  of any of such
Warrants  then held by the Investor for an amount  equal to the  respective  Put
Price (as hereinafter defined) therefor upon prior written notice to the Company
specifying  a closing  date (the "Put  Closing  Date") not sooner  than ten (10)
business days after such notice,  the specific Warrants to be put and the number
of shares of Common  Stock  thereunder  with  respect to which the  purchase  is
required. On the Put Closing Date, the Investor shall deliver to the Company the
specific  Warrants  being put on such date to the Company and the Company shall,
at its election, either (x) pay to the Investor in cash in immediately available
funds the  respective  Put Price for such Warrants so put, or (y) deliver to the
Investor a certificate,  registered in the  Investor's  name, for such number of
shares of Common Stock as shall then have a "Current  Market  Price" (as defined
in such  Warrant) on the Put Closing Date equal to the Put Price;  provided that
with  respect to the portion of the Put Price as equals the amount (the  "Excess
Amount") of the excess of the Put Price over the value (based on a Black-Scholes
calculation done on the same basis as the "Adjustment  Value" for share vestings
as determined  pursuant to Amendment No. 1, dated as of January 25, 1998, to the
Telecommunications  Marketing  Agreement,  but  without  regard  to  any  of the
provisions  hereof  as they may  affect  the  terms or  exercise  prices of such
Warrants)  on the Put Closing  Date of such Warrant (as to each Warrant on a Put
Closing Date, its "Current  Warrant  Value"),  the Company may, at its election,
deliver a Warrant Note (as defined  below) to the Investor in an amount equal to
such Excess  Amount in lieu of cash  pursuant to clause (x) above or delivery of
shares of Common Stock for such amount  pursuant to clause (y) above. A "Warrant
Note"  delivered  in respect of any Warrant put by the Investor on a Put Closing
Date shall mean a senior subordinated promissory note of the Company, dated such
Put Closing Date,  payable to the Investor in cash, in principal amount equal to
the amount of the Put Price


                                       25

<PAGE>



otherwise payable,  accruing interest at an annual rate of 10% calculated on the
basis of a month  of 30 days  and a year of 360  days,  maturing  on the  second
anniversary of such Put Closing Date,  mandatorily  payable on a quarterly basis
of accrued  interest  and equal  quarterly  amounts  of  principal  designed  to
amortize  the Warrant Note over the term of such Warrant Note and in full upon a
"Change in Control"  (as  defined in the  Warrants).  The Warrant  Note shall be
prepayable at any time and from time to time, in whole or in part by the Company
without  penalty,  with any such  prepayment  being applied first to accrued but
unpaid interest and then to principal payments in inverse order of maturity. The
"respective  Put  Price"  for each of the  Warrants  as of any date is an amount
equal to the respective Booked Amount for such Warrant.  The "respective  Booked
Amount" and "respective  Subject Shares" for each of the Warrants as of the date
of this Agreement are as follows:

<TABLE>
<CAPTION>
         Warrant                                                          Booked Amount           Subject Shares
         -------                                                          -------------           --------------
<S>                                                                        <C>                      <C>      
(i)      Performance Warrant                                               $24,034,002              1,721,984
         (in the aggregate), which
         consists of three tranches,
         respectively:
         Tranche A Performance Warrant                                     $ 2,544,501                206,870
         Tranche B Performance Warrant                                     $14,936,160                888,000
         Tranche C Performance Warrant                                     $ 6,553,341                627,114
(ii)     Further Warrant                                                   $12,290,000              1,000,000;
</TABLE>

provided,  however,  that the number of such respective  Subject Shares shall be
subject to  adjustment,  if any,  after the date of this  Agreement  pursuant to
paragraph 6 of the Warrants; and provided, further, that, if any of the Warrants
shall have been  exercised  by the Investor  (including  by reason of a Required
Exercise,  as defined below) in part prior to the exercise of any Put Right with
respect thereto, the respective Booked Amount thereof shall equal the product of
the Booked  Amount  therefor set forth above times a fraction,  the numerator of
which  shall be the number of shares of Common  Stock as to which  such  Warrant
then  continues  to be  exercisable  and the  denominator  of which shall be the
number of  respective  Subject  Shares for such Warrant set forth above (as such
number may then have been adjusted pursuant to paragraph 6 of the Warrants).

     Section 6.4. Required  Exercise Rights on Warrants.  The Company shall have
the right, at any time and from time to time, to the date that is the earlier to
occur of the date 30 days prior to (i) the  expiration  of the Warrants and (ii)
the date that is five (5) years  following the Closing Date, to require that the
Investor  exercise  (each,  a  "Required  Exercise")  all or any  portion of the
Warrants at the Adjusted  Exercise Price (as defined below)  therefor upon prior
written notice to the Investor specifying a closing date (the "Required Exercise
Closing  Date") not sooner than ten (10)  business  days after such notice,  the
specific  Warrants  required to be exercised  and the number of shares of Common
Stock  thereunder  with  respect  to which the  exercise  is  thereby  required;
provided,  however,  that the  Company  shall not have the right to  require  an
exercise



                                       26
<PAGE>



with respect to any Warrant (or any portion thereof) if the Current Market Price
(as  defined in such  Warrant) is less than two times the then  respective  Call
Amount (as defined below) per share for such Warrant. The giving of such notice,
unless it shall be  withdrawn  by the Company  prior to the  specified  Required
Exercise  Closing  Date,  shall be deemed for all purposes to be an  irrevocable
election  by the  Investor  to  exercise  such  Warrants  so  specified  on such
specified closing date with respect to such specified number of shares of Common
Stock at the Adjusted  Exercise  Price  therefor on such closing date,  provided
that the Investor shall have the right,  if the Company shall have given and not
withdrawn a notice of Required  Exercise  with respect to any such  Warrant,  to
elect to exercise such Warrant as to such  specified  number of shares of Common
Stock on a "net issuance  exercise" basis (as defined in such Warrant) by giving
the Company  written notice of such election within five (5) business days after
such notice of Required Exercise is given. On the Required Exercise Closing Date
specified in the Company's notice to the Investor, the Investor shall deliver to
the Company the Warrant  required to be exercised and, unless the Investor shall
have elected to exercise such Warrant on a "net  issuance  exercise"  basis,  an
amount  in cash in  immediately  available  funds  equal to the  product  of the
Adjusted Exercise Price per share for such Warrant times the number of shares of
Common  Stock as to which such  exercise  is  required,  and the  Company  shall
deliver to the Investor  (x) if the Investor  shall not have elected to exercise
such Warrant on a "net issuance  exercise"  basis, a certificate,  registered in
the  Investor's  name, for the number of shares of Common Stock as to which such
Warrant is so exercised  or (y) if the  Investor  shall have elected to exercise
such  Warrant on a "net  issuance  exercise"  basis,  either  (at the  Company's
election) (m) a certificate,  registered in the Investor's name, for such number
of shares of Common  Stock as shall equal (i) the quotient of (A) the product of
(1) the amount by which the then Current Market Price per share exceeds the then
Adjusted  Exercise  Price per  share,  times (2) the  number of shares of Common
Stock as to which  such  Warrant  is to be  exercised,  divided  by (B) the then
Current Market Price per share, or (n) an amount in immediately  available funds
equal to the Current Market Price per share for such shares that would otherwise
have been issued upon a "net  issuance  exercise"  basis as described in subpart
(y)(m) of this sentence.  The "Adjusted  Exercise Price" per share for a Warrant
at any time shall be the Current Market Price per share on the Required Exercise
Date (as defined in such Warrant)  minus the then Call Amount per share for such
Warrant.  For  purposes of this Section 6.4, the "then Call Amount" of a Warrant
shall be equal to the amount set forth for the Warrant in Section 6.3  increased
at a  semi-annually  compounded rate of five percent (5%) on the date of Closing
and on each six-month anniversary of the Closing Date, except that the then Call
Amount  for each  Warrant  for the six (6)  month  period  ending  on the  fifth
anniversary of the Closing Date shall be as follows:



                                       27
<PAGE>



                                                               Call Amount
                                                               -----------

         Performance Warrant
         (in the aggregate), consisting of:                    $39,704,227
                  Tranche A Performance Warrant                $ 4,203,522
                  Tranche B Performance Warrant                $24,674,571
                  Tranche C Performance Warrant                $10,826,134

         Further Warrant                                       $20,303,108.

     Section 6.5. Make-Whole for Put/Call Warrants.

          (a) If the Investor  notifies the Company in writing within 30 days of
its receipt of any of the shares  pursuant to Sections 6.3 or 6.4 (the "Put/Call
Warrant  Shares")  that it intends to sell any or all of such  Put/Call  Warrant
Shares,  the  Company,  within  seven (7) days of  receipt of such  notice,  may
purchase from the Investor such Put/Call  Warrant Shares  proposed to be sold by
the  Investor.  The  Company  may  exercise  such  purchase  right by paying the
Investor in cash, against receipt of such Put/Call Warrant Shares proposed to be
sold, the product of (x) the number of Put/Call  Warrant  Shares  proposed to be
sold,  multiplied  by (y) the Current  Market Price per share on the Put Closing
Date (for shares  received  pursuant to Section  6.3) or the  Required  Exercise
Closing Date (for shares received pursuant to Section 6.4).

          (b) If the Company does not exercise the purchase  right  described in
Section (a) of this Section 6.5 and the Investor sells [ as added] (whether in a
market transaction,  a privately negotiated transaction or otherwise) any of the
Put/Call  Warrant  Shares so proposed to be sold within 30 days (as  extended by
any Black-Out Period  Extension,  if any) of the later of (i) the date a written
response by the Company to the notice is  received by the  Investor  pursuant to
Section  (a) of this  Section  6.5 and (ii) the seven day  period  specified  in
Section (a) of this  Section 6.5,  the Company  shall,  within three (3) trading
days of receiving  notice of any such sale,  pay the Investor  cash in an amount
equal to the  product of (x) the number of Put/Call  Warrant  Shares sold by the
Investor  during  such  30 day  period  (as  extended  by any  Black-Out  Period
Extension,  if any) in arm's length transactions multiplied by (y) the amount by
which (i) the Current Market Price per share on the Put Closing Date (for shares
received  pursuant to Section  6.3) or the Required  Exercise  Closing Date (for
shares  received  pursuant to Section  6.4)  exceeds (ii) the price per share at
which the Investor  actually sold such Put/Call  Warrant Shares,  less the Sales
Expense for such shares.

          (c) [ as added] If, after using commercially  reasonable efforts to do
so, the  Investor is unable to sell any Put/Call  Warrant  Shares as to which it
has given  notice  pursuant to Section  6.5(a)  within 30 days after giving such
notice,  the Investor may, at any time until the  expiration of seven days after
the  conclusion of the 30-day period set forth in Section 6.5(b) (as such period
may be  extended)  notify the  Company  of its  inability  to sell the  Put/Call
Warrant  Shares and the Company  shall,  within three trading days of receipt of
such notice,  pay the Investor a Make-Whole Amount calculated in accordance with
paragraph  (b) as though  such



                                       28
<PAGE>



Put/Call  Warrant  Shares were sold for $.01 per share and the  Investor  shall,
upon  receipt of such  payment,  surrender  the Put/Call  Warrant  Shares to the
Company for cancellation.

     Section 6.6.  Registration of Put/Call Warrant Shares. Any Put/Call Warrant
Shares  received  by the  Investor  shall  be  subject  to an  effective  resale
registration  statement  at the  time of their  issuance  and  shall  be  freely
tradable.

                                   ARTICLE VII

                              CONDITIONS PRECEDENT

     Section 7.1. Each Party's  Obligations.  The obligations of the Company and
the Investor to consummate the transactions contemplated to occur at the Closing
shall  be  subject  to the  satisfaction  prior  to the  Closing  of each of the
following  conditions,  each  of  which  may be  waived  only  if it is  legally
permissible to do so:

          (a)  Approvals.  All  material  authorizations,  consents,  orders  or
approvals of, or  regulations,  declarations  or filings with, or expirations of
applicable waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions  contemplated  hereby, shall have been obtained
or filed or shall have occurred.

          (b) No  Litigation,  Injunctions,  or  Restraints.  No statute,  rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered,  promulgated,  enforced or
issued  by any  Governmental  Entity or other  legal  restraint  or  prohibition
preventing the consummation of the  transactions  contemplated by this Agreement
and the Registration Rights Agreement shall be in effect.

          (c) Amendment  No. 3.  Amendment  Number 3 ("Amendment  No. 3") to the
Telecommunications  Marketing  Agreement,  dated as of February 22, 1997, by and
among the Company,  Tel-Save, Inc. and the Investor, as heretofore corrected and
amended by letter,  dated April 23,  1997,  and amended by an  Amendment  No. 1,
dated  January 25, 1998,  and an Amendment No. 2, dated May 14, 1998 (as amended
from time to time, the  "Telecommunications  Marketing  Agreement"),  shall have
been  executed  by the  parties  thereto  and shall  have  become  effective  in
accordance with the terms and conditions thereof.

          (d) Nasdaq Listing. The Shares shall have been approved for listing on
the Nasdaq National Market System, subject only to official notice of issuance.

     Section 7.2. Conditions to the Obligations of the Company.  The obligations
of the  Company to  consummate  the  transactions  contemplated  to occur at the
Closing  shall be subject to the  satisfaction  by the Investor or waiver by the
Company prior to the Closing of each of the following conditions:


                                       29
<PAGE>



          (a) Representations and Warranties. The representations and warranties
of the Investor that are qualified as to materiality  shall be true and correct,
and those that are not so  qualified  shall be true and correct in all  material
respects,  as of the date of this Agreement and as of the time of the Closing as
though made at and as of such time,  except to the extent  such  representations
and  warranties  expressly  relate  to an  earlier  date  (in  which  case  such
representations  and warranties  that are qualified as to  materiality  shall be
true and correct,  and those that are not so qualified shall be true and correct
in all material respects,  on and as of such earlier date) and the Company shall
have received a certificate  signed by an authorized  officer of the Investor to
such effect.

          (b) Registration  Rights  Agreement.  The Investor shall have executed
and delivered the Registration Rights Agreement.

     Section 7.3. Conditions to the Obligations of Investor.  The obligations of
the Investor to consummate the transactions contemplated to occur at the Closing
shall be subject to the  satisfaction  by the Company or waiver by the  Investor
prior to the Closing of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties
of the Company set forth in this  Agreement that are qualified as to materiality
shall be true and correct, and those that are not so qualified shall be true and
correct in all material respects, as of the date of this Agreement and as of the
time of the Closing as though made at and as of such time,  except to the extent
such  representations  and  warranties  expressly  relate to an earlier date (in
which  case  such  representations  and  warranties  that  are  qualified  as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material  respects,  on and as of such earlier date),
and  Purchaser  shall have  received a  certificate  signed by the president and
chief financial officer of the Company to such effect.

          (b) Opinion of the Company's Counsel. The Investor shall have received
an opinion  dated as of the Closing of the General  Counsel of the  Company,  in
form and substance reasonably satisfactory to the Investor.

          (c) Registration Rights Agreement. The Company shall have executed and
delivered the Registration Rights Agreement.

          (d) Performance of Obligations of the Company.  The Company shall have
performed  or  complied  in all  material  respects  with  all  obligations  and
covenants  required to be performed or complied  with by the Company  under this
Agreement  and the  Investor  shall have  received a  certificate  signed by the
president and chief financial officer of the Company to such effect.

          (e) Corporate Proceedings. All corporate proceedings of the Company in
connection  with  the  transactions  contemplated  by  this  Agreement  and  the
Registration  Rights  Agreement,  and all  documents  and  instruments  incident
thereto,  shall be  satisfactory  in form and



                                       30
<PAGE>



substance  to the  Investor  and its  counsel,  and the Investor and its counsel
shall have  received all such  documents  and  instruments,  or copies  thereof,
certified or requested, as may be reasonably requested.

          (f) Board Resolutions.  The Investor shall have received a certificate
of the Secretary of the Company  certifying that the Board of Directors has duly
adopted  resolutions  by  unanimous  consent (i)  approving  the  execution  and
delivery of this Agreement and the transactions  contemplated  hereby,  and (ii)
approving  the  execution  and  delivery  of the  Borislow  Registration  Rights
Agreement,  the  severance  agreement  entered  into by the  Company  and Daniel
Borislow, the Exchange Agreement,  the purchase agreement regarding the stock of
Emergency  Transportation  Corporation  entered  into by the  Company and Jimlew
Capital,  L.L.C.,  the agreement of purchase and sale of real  property  entered
into by TS Sub and  Jimlew  Capital,  LLC and the  lease by and  between  Jimlew
Capital,  LLC  and  the  Company  and  all  of  the  transactions   contemplated
thereunder, all of which resolutions are currently in effect and are in form and
substance reasonably satisfactory to the Investor.

          (g) Guaranty.  Daniel  Borislow  shall have executed an  unconditional
guaranty of the Company's  obligations under Sections 5.1, 5.3, 5.5, 6.3 and 6.5
of this Agreement (the "Guaranty"), which Guaranty shall be substantially in the
form of Exhibit B hereto.

          (h)  Battista  Waiver.  The  Company  shall  have  furnished  evidence
satisfactory in form and substance to the Investor that Gabriel  Battista waives
any  provision  in his  employment  agreement  with  the  Company  that  he will
terminate  his  employment  with the Company in the event that  Daniel  Borislow
fails to resign as an executive officer of the Company.

          (i)  Material  Contracts.  The Company  shall have  provided  executed
copies  of each of the  Material  Contracts  set forth in  Schedule  3.12 to the
Investor and the Investor  shall have received a certificate of the Secretary of
the  Company  certifying  that each of the  Material  Contracts  received by the
Investor is a true and correct copy.

          (j) Review of Information. The Company shall have made such deliveries
as are called for by this  Agreement.  The Investor shall be fully  satisfied in
its sole  discretion  with the results of its review of all of the Schedules and
all  of  such   deliveries,   and  its  review  of,  and  other  due   diligence
investigations with respect to, the business,  operations,  affairs,  prospects,
properties, assets, existing and potential liabilities, obligations, profits and
condition (financial or otherwise) of the Company.



                                       31
<PAGE>



                                  ARTICLE VIII

                                   TERMINATION

     Section 8.1.  Termination.  This  Agreement  may be  terminated at any time
prior to the Closing:

          (a) by mutual written consent of the Investor and the Company;

          (b) by the Investor or the Company;

               (i) if there shall be any statute,  law,  regulation or rule that
     makes consummating the transactions  contemplated  hereby illegal or if any
     court or other  Governmental  Entity of competent  jurisdiction  shall have
     issued a judgment,  order, decree or ruling, or shall have taken such other
     action restraining,  enjoining or otherwise prohibiting the consummation of
     the transactions  contemplated  hereby and such judgment,  order, decree or
     ruling shall have become final and non-appealable; or

               (ii) if the  Telecommunications  Marketing  Agreement  shall have
     terminated;

          (c) by the Investor:

               (i) if the Closing shall not have  occurred  prior to January 15,
     1999, provided, that the right to terminate this Agreement pursuant to this
     clause (i) shall not be available if the Investor's  failure to fulfill any
     obligation  under this  Agreement  results in the failure of the Closing to
     occur;

               (ii) if the Company  shall have failed to perform in any material
     respect  any of its  obligations  hereunder  or shall have  breached in any
     respect  any  representation  or warranty  contained  herein  qualified  by
     materiality   or  shall  have   breached  in  any   material   respect  any
     representation or warranty not so qualified,  and the Company has failed to
     perform such obligation or cure such breach,  within 15 days of its receipt
     of written  notice  thereof from the Investor,  and such failure to perform
     shall not have been waived in accordance  with the terms of this Agreement;
     or

               (iii) if any of the  conditions  set forth in Section  7.1 or 7.3
     shall become impossible to fulfill (other than as a result of any breach by
     the Investor of the terms of this Agreement) and shall not have been waived
     in accordance with the terms of this Agreement;

          (d) by the Company:

               (i) if the  Closing  shall  not have  occurred  prior to June 30,
     1999, provided, that the right to terminate this Agreement pursuant to this
     clause (i) shall not be



                                       32
<PAGE>



     available if the  Company's  failure to fulfill any  obligation  under this
     Agreement results in the failure of the Closing to occur;

               (ii) if the Investor shall have failed to perform in any material
     respect  any of its  obligations  hereunder  or shall have  breached in any
     respect  any  representation  or warranty  contained  herein  qualified  by
     materiality   or  shall  have   breached  in  any   material   respect  any
     representation or warranty not so qualified, and the Investor has failed to
     perform such obligation or cure such breach,  within 15 days of its receipt
     of written  notice  thereof from the  Company,  and such failure to perform
     shall not have been waived in accordance  with the terms of this Agreement;
     or

               (iii) if any of the  conditions  set forth in Section  7.1 or 7.2
     shall become impossible to fulfill (other than as a result of any breach by
     the Company of the terms of this  Agreement) and shall not have been waived
     in accordance with the terms of this Agreement.

     Section 8.2.  Effect of  Termination.  In the event of  termination of this
Agreement by either the Company or the Investor as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect,  without any liability
or  obligation  on the  part of the  Investor  or the  Company,  other  than the
provisions  of this Section 8.2,  Section 10.12 and Article IX and except to the
extent that such  termination  results from the willful and material breach by a
party of any of its  representations,  warranties,  covenants or agreements  set
forth in this Agreement.

                                   ARTICLE IX

                                 INDEMNIFICATION

     Section 9.1.  Indemnification  of the Investor.  The Company  covenants and
agrees  to  defend,  indemnify  and  hold  harmless  each of the  Investor,  its
Affiliates  (other  than the  Company  and any of its  Subsidiaries),  and their
respective  officers,  directors,  partners,  employees,  agents,  advisers  and
representatives (collectively, the "Investor Indemnitees") from and against, and
pay or reimburse  the  Investor  Indemnitees  for, any and all claims,  demands,
liabilities,  obligations,  losses, costs,  expenses,  fines or damages (whether
absolute,  accrued,  conditional  or otherwise and whether or not resulting from
third party claims),  including  interest and penalties with respect thereto and
all expenses  incurred in the  investigation or defense of any of the same or in
asserting,  preserving or enforcing  any of their  respective  rights  hereunder
(collectively,  "Losses"),  resulting  from or based on (or allegedly  resulting
from or based on) (1) any breach by the Company of any representation, warranty,
covenant or  obligation  of the Company  hereunder or (2) any claim by any third
party arising out of any use or application of the proceeds of the investment of
the Investor  pursuant to this Agreement.  The Losses  described in this Section
9.1 are herein referred to as "Investor Indemnifiable Losses". The Company shall
reimburse the Investor  Indemnitees for any legal or other expenses  incurred by
such Investor Indemnitees in connection with investigating or defending any such
Investor Indemnifiable Losses as such expenses are incurred.


                                       33
<PAGE>



     Section  9.2.  Indemnification  Procedures.  Promptly  after  receipt by an
Investor  Indemnitee of notice of the  commencement of any action or the written
assertion of any claim,  such Investor  Indemnitee  shall, if a claim in respect
thereof is to be made against the Company, as the case may be (the "Indemnifying
Person"),  notify the Indemnifying  Person in writing of the commencement or the
written assertion  thereof.  Failure by an Investor  Indemnitee to so notify the
Indemnifying Person shall relieve the Indemnifying Person from the obligation to
indemnify  such  Investor  Indemnitee  only to the extent that the  Indemnifying
Person suffers actual and material  prejudice as a result of such failure but in
no event shall such  failure to notify the  Indemnifying  Person (i)  constitute
prejudice  suffered  by the  Indemnifying  Person if it has  otherwise  received
notice of the  actions  giving  rise to such  obligation  to  indemnify  or (ii)
relieve it from any liability or obligation  that it may otherwise  have to such
Investor  Indemnitee.  In case any such  action  or claim  shall be  brought  or
asserted  against any Investor  Indemnitee and it shall notify the  Indemnifying
Person of the commencement or assertion thereof,  the Indemnifying  Person shall
be entitled to participate therein but the defense of such action or claim shall
be conducted by counsel to the Investor Indemnitee,  provided, however, that the
Indemnifying  Person  shall  not,  in  connection  with any one such  action  or
proceeding or separate but substantially  similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate  firm of  attorneys at any time for all Investor  Indemnitees,
except to the extent that local  counsel,  in addition  to regular  counsel,  is
required in order to  effectively  defend  against such action or proceeding and
provided further that an Investor Indemnitee shall not enter into any settlement
of any such claim without the prior consent of the Company,  such consent not to
be  unreasonably  withheld or  delayed.  In no event shall the Company be liable
under this Article IX, and the  Company's  obligation  to defend,  indemnify and
hold  harmless  the  Investor  Indemnitee  shall not apply to: (a) any  special,
incidental or consequential  damages  resulting from or based upon any breach by
the  Company of any  representation,  warranty,  covenant or  obligation  of the
Company hereunder and (b) any Investor  Indemnifiable Losses until the aggregate
amount of such Losses exceeds  $100,000.  The remedies set forth in this Article
IX are cumulative and shall not be construed to restrict or otherwise affect any
other remedies that may be available to an Investor  Indemnitee or a Party under
any  other   agreement,   pursuant  to   statutory  or  common  law  or  equity.
Notwithstanding  anything  to the  contrary  in this  Agreement,  any  claim for
indemnification  under this Article IX must be brought  prior to  September  30,
1999,  except for claims  relating  to the  representations  and  warranties  in
Sections 3.2, 3.3 and 3.10 which can be brought any time prior to the expiration
of the applicable statute of limitations.

     Section   9.3.   Survival   of   Representations   and   Warranties.    The
representations  and warranties of the Company contained in this Agreement shall
expire for all purposes on September  30, 1999,  except for the  representations
and  warranties  contained in Sections  3.2, 3.3 and 3.10 which shall expire for
all purposes upon expiration of the applicable statute of limitations.

                                    ARTICLE X


                                       34
<PAGE>



                                  MISCELLANEOUS

     Section 10.1.  Transfer and Other Taxes.  The Company shall pay any and all
stamp,  transfer and other  similar taxes payable or determined to be payable in
connection  with the execution and delivery of this Agreement or the acquisition
by Investor of the Shares.  Notwithstanding the foregoing, the Company shall not
be  responsible  for any transfer  taxes in connection  with the transfer of the
Shares by Investor subsequent to their issuance to Investor.

     Section 10.2. Brokers;  Expenses. The Investor represents and warrants that
it has not utilized the services of any broker or finder in connection  with the
transactions  contemplated  hereby and that it will bear all of its own expenses
incurred in connection with such transactions.

     Section 10.3. No Waivers; Amendments.

          (a) No  failure  or delay on the part of any party in  exercising  any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial  exercise  thereof  preclude any other or further exercise
thereof or the exercise of any other right,  power or privilege.  The rights and
remedies  herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

          (b) Any  provision of this  Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Company and
the Investor.

     Section 10.4.  Successors  and Assigns.  The rights and  obligations of the
parties  hereto under this Agreement may not be assigned to any other person and
this Agreement  shall not be construed so as to confer any right or benefit upon
any person other than the parties to this Agreement; provided, however, that the
Investor may assign its rights hereunder to an Affiliate of the Investor and may
assign  its  rights  hereunder  to any  person or  entity  who  acquires  all or
substantially all of the assets of the Investor, provided that such Affiliate or
such person or entity,  as the case may be, agrees in writing to be bound by the
terms and conditions set forth herein.  This Agreement shall be binding upon the
parties hereto and their respective successors and assigns.

     Section 10.5.  Severability.  If any term or provision of this Agreement is
held by a court of competent  jurisdiction to be invalid, void or unenforceable,
the remainder of the terms and provisions  shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.

     Section 10.6. Notices.  All notices,  requests and other  communications to
any party  hereunder  shall be given in  writing  (including  on  telecopier  or
similar writing) and shall be given to such party at its address,  or telecopier
number  set forth on the  signature  pages  hereof,  or such other  address,  or
telecopier  number as such party may hereafter  specify for such  purpose.  Each



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<PAGE>



such notice,  request or other  communication shall be effective (i) if given by
telecopy,  when such  telecopy is  transmitted  to the telex or telecopy  number
specified on the signature  page hereto and the  appropriate  answer back (i.e.,
machine  confirmation or telephone  confirmation) is received,  (ii) if given by
mail, by registered mail only 72 hours after such  communication is deposited in
the mail with first class postage prepaid,  addressed as aforesaid,  or (iii) if
given  by any  other  means,  when  received  at the  address  specified  on the
signature page hereto.

     Section 10.7. Entire Agreement. This Agreement (including the documents set
forth in the Exhibits and Schedules hereto) constitutes the entire agreement and
understanding  among  the  parties  hereto  with  respect  to  the  transactions
contemplated   hereby  and   supersedes   any  and  all  prior   agreements  and
understandings, written or oral, relating to the subject matter hereof.

     Section 10.8. Governing Law. The laws of the State of New York shall govern
the  interpretation,  validity and  performance of the terms of this  Agreement,
regardless  of the law that  might be applied  under  applicable  principles  of
conflicts of laws.

     Section 10.9. Counterparts. This Agreement may be executed in counterparts,
each of which  shall be an original  with the same  effect as if the  signatures
thereto and hereto were upon the same instrument.

     Section 10.10. Cooperation.  The Investor and the Company agree to take, or
cause to be taken,  all such  further or other  actions as shall  reasonably  be
necessary to make effective and consummate the transactions contemplated by this
Agreement,  including, without limitation, making all required filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any.

     Section  10.11.  Expenses and  Remedies.  Whether or not the Closing  takes
place, all costs and expenses incurred in connection with this Agreement and the
transactions  contemplated  hereby  shall be borne by the party  incurring  such
expense.

     Section  10.12.  No Third Party  Beneficiaries.  Nothing  contained in this
Agreement is intended to confer upon any person or entity other than the parties
hereto and their respective successors and permitted assigns, any benefit, right
or remedies under or by reason of this Agreement;  provided,  however,  that the
parties hereto hereby acknowledge and agree that the Investor Indemnitees (other
than  the  Investor)  are  third  party  beneficiaries  of  Article  IX of  this
Agreement.




                                       36

<PAGE>

                          [Two Signature pages follow]

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed by their respective authorized officers or representatives,  as of
the date first above written.

TEL-SAVE.COM, INC.

By:                                 Address:
   --------------------------       Tel-Save.com, Inc.
   Name:                            6805 Route 202    
   Title:                           New Hope, Pennsylvania 18938
                                    Fax: 215-862-1515
                                    Attention: Chief Financial Officer

AMERICA ONLINE, INC.

By:                                 Address:
   --------------------------       America Online, Inc.
   Name:                            22000 AOL Way
   Title:                           Dulles, Virginia 20166
                                    Fax:  (703) 265-2208
                                    Attention: General Counsel

                                    With a copy to:
                                    America Online, Inc.
                                    22000 AOL Way
                                    Dulles, Virginia 20166
                                    Fax: (703) 265- 1202
                                    Attention:  Senior Vice President, Head of
                                                  Business Affairs

With  respect to the waiver of rights in
Section 4.5, the Voting Trust  Agreement
in Section  4.6 and with  respect to the
condition     in     Section     7.3(g),
acknowledged and accepted by:


--------------------------------
Daniel Borislow




                                       37
<PAGE>


             With respect to Section 4.12, acknowledged and accepted by:

             TEL-SAVE, INC.

             By:
                ----------------------------
             Name:

             D&K GRANTOR RETAINED ANNUITY TRUST DATED JUNE 15, 1998

             By:
                ----------------------------
             Name: Mark Pavol, Trustee







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