AOL shares closed at 40-1/8 a share, up 2-5/8 from the previous day.
Under the agreement, the service's Digital City sites will promote Banyan's Switchboard as its online phone directory beginning in January. Digital City, a joint venture of AOL and the Tribune Company, offers local news, sports, and other regional information.
Digital City will be Switchboard's exclusive sales partner for local ads in major cities, an agreement that is expected to drive ad revenues for AOL.
The news was also a boost to Banyan, which is undergoing tough times. Last month, Banyan said it would lay off 15 percent of its work force to streamline its troubled network operating system business. The company also announced it would seek a new chief executive to replace the founder, who was stepping down in light of the company's waning financial health.