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                                                                   EXHIBIT 10.16


                       NONSTATUTORY STOCK OPTION AGREEMENT

         This NONSTATUTORY STOCK OPTION AGREEMENT is made February ___, 1998,
between BIRCH TELECOM, INC., a Delaware corporation (the "Company"), and
[___________________], an individual ("Optionee").

         The Company has adopted the 1998 Stock Option Plan (the "Plan") in
order to attract and retain the best available personnel for positions of
substantial responsibility and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates. Pursuant to
the Plan, certain employees of the Company and its Affiliates may be designated
by the Board of Directors of the Company to receive an option to purchase shares
of common stock of the Company ("Common Stock").

         The parties, intending to be legally bound, agree as follows:

         1. DEFINITIONS. Capitalized terms not explicitly defined in this
Agreement, but defined in the Plan, shall have the same definitions as in the
Plan. As used in this Agreement, the following terms shall have the following
meanings:

                  (A) "CAUSE" means any of the following: (i) Optionee's breach
         of a material obligation under any written employment, noncompetition
         or proprietary information agreement with the Company or any of its
         Affiliates; (ii) Optionee's failure to adhere in any material respect 
         to any written Company policy if such policy is material to the
         effective performance by Optionee of his or her duties, and if Optionee
         has been given a reasonable opportunity to cure his or her failure to
         comply within the thirty-day period preceding the termination of
         Optionee's employment, provided that if Optionee cures his or her
         failure to comply with such a policy and then fails again to comply
         with the same policy, no further opportunity to cure that failure shall
         be required; (iii) the appropriation (or attempted appropriation) of a
         material business opportunity of the Company or any of its Affiliates,
         including attempting to secure or securing any personal profit in
         connection with any transaction entered into on behalf of the Company
         or any of its Affiliates (other than through stock options, bonuses and
         other incentives provided by the Company or any of its Affiliates to
         Optionee); (iv) the misappropriation (or attempted misappropriation) of
         any of the funds or properties of the Company or any of its Affiliates;
         or (v) the conviction of, or the entering of a guilty plea or plea of
         no contest with respect to, a felony, or a crime involving moral
         turpitude, dishonesty, or fraud.

                  (B) "CHANGE IN CONTROL" means any of the following: (i) the
         sale of all or substantially all of the Company's (or its Affiliates')
         assets that results in the liquidation of the Company and the payment
         of liquidating distributions to the stockholders of the Company; (ii)
         the acquisition of the Company by another entity by means of a merger
         or


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         consolidation resulting in the exchange of the outstanding shares of
         the Company's capital stock for securities or consideration issued or
         paid or caused to be issued or paid by the acquiring entity or its
         subsidiary; or (iii) the acquisition from one or more of the
         stockholders of the Company of more than 50% of the voting stock of
         the Company by a single person or group of persons acting together.

                  (C) "GOOD REASON" means any of the following: (i) the material
         breach by the Company or any of its Affiliates of a material obligation
         under any written employment agreement with Optionee; (ii) the
         assignment of Optionee, without his or her consent, to a position,
         responsibilities, or duties of a materially lesser status or degree of
         responsibility than his or her position, responsibilities, or duties at
         the commencement of his or her employment.

         2. GRANT OF OPTION. The Company hereby grants to Optionee a
Nonstatutory Stock Option to purchase up to an aggregate of ___________ (______)
shares of Common Stock (the "Option"), in accordance with the vesting schedule
set forth in Section 3 of this Agreement.

         3. VESTING. Subject to the limitations contained in this Agreement,
6.25% of the shares subject to the Option will vest (become exercisable) on
____________, 1998 [THREE MONTHS FROM DATE OF GRANT], and an additional 6.25% of
the shares will then vest each [DATES UPON WHICH QUARTERS END] thereafter until
either (a) Optionee ceases to provide services to the Company or any of its
Affiliates for any reason, or (b) the Option becomes fully vested; provided,
however, that the unvested portion of the Option shall vest earlier and be
exercisable upon the earliest to occur of the following (subject to the
provisions of Section 8 of this Agreement): (i) a Change in Control, or (ii) the
termination of Optionee's Continuous Status as an Employee by the Company
without Cause or by Optionee for Good Reason.

         4. EXERCISE PRICE AND METHOD OF PAYMENT.

                  (A) EXERCISE PRICE. The exercise price of the Option is
         ___________________________ ($___________) per share, being the fair
         market value of the Common Stock on the date of grant of the Option.

                  (B) METHOD OF PAYMENT. Payment of the exercise price per share
         is due in full upon exercise of all or any part of each installment
         which has accrued to Optionee. Optionee may elect, to the extent
         permitted by applicable statutes and regulations, to make payment of
         the exercise price under one of the following alternatives:

                           (i) Payment of the exercise price per share in cash
                  (including check) at the time of exercise;



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                           (ii) Payment pursuant to a program developed under
                  Regulation T as promulgated by the Federal Reserve Board
                  which, prior to the issuance of Common Stock, results in
                  either the receipt of cash (or check) by the Company or the
                  receipt of irrevocable instructions to pay the aggregate
                  exercise price to the Company from the sales proceeds;

                           (iii) Payment by delivery of already-owned shares of
                  Common Stock, held for the period required to avoid a charge
                  to the Company's reported earnings, and owned free and clear
                  of any liens, claims, encumbrances or security interests,
                  which Common Stock shall be valued at its Fair Market Value on
                  the date of exercise;

                           (iv) Payment pursuant to the deferred payment
                  alternative as described in Section 4(c) of this Agreement; or

                           (v) Payment by a combination of the methods of
                  payment permitted by Sections 4(b)(i) through 4(b)(iv) of this
                  Agreement.

                  (C) CONDITIONS OF DEFERRED PAYMENT. In the event that Optionee
         elects to make payment of the exercise price pursuant to the deferred
         payment alternative:

                           (i) Not less than the aggregate par value of the
                  shares of Common Stock to be acquired pursuant to the exercise
                  of the Option shall be due at the time of exercise, not less
                  than 25% of the balance of said exercise price, plus accrued
                  interest, shall be due each year after the date of exercise,
                  and final payment of the remainder of the exercise price, plus
                  accrued interest, shall be due four (4) years from date of
                  exercise or, at the Company's election, upon termination of
                  Optionee's Continuous Status as an Employee with the Company
                  or an Affiliate of the Company;

                           (ii) Interest shall be payable at least annually and
                  shall be charged at the minimum rate of interest necessary to
                  avoid the treatment as interest, under any applicable
                  provisions of the Code, of any portion of any amounts other
                  than amounts stated to be interest under the deferred payment
                  arrangement; and

                           (iii) In order to elect the deferred payment
                  alternative, Optionee must, as a part of his or her written
                  notice of exercise, give notice of the election of this
                  payment alternative and, in order to secure the payment of the
                  deferred exercise price to the Company thereunder, if the
                  Company so requests, Optionee must tender to the Company a
                  promissory note and a security agreement covering the
                  purchased shares, both in form and substance satisfactory to
                  the Company, or such other or additional documentation as the
                  Company may request.



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         5. EXERCISE PRIOR TO VESTING.

                  (A) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of
         this Agreement, Optionee may elect at any time during his or her
         Continuous Status as an Employee to exercise the Option as to any part
         of all of the shares subject to the Option at any time during the term
         hereof, including a time prior to the date of earliest exercise
         ("vesting") stated in Section 3 of this Agreement; provided, however,
         that:

                           (i) a partial exercise of the Option shall be deemed
                  to cover vested shares first and then the earliest vesting
                  installment of unvested shares;

                           (ii) any shares so purchased from installments which
                  have not vested as of the date of exercise shall be subject to
                  the purchase option in favor of the Company as described in
                  the Early Exercise Stock Purchase Agreement attached hereto;
                  and

                           (iii) Optionee shall enter into any Early Exercise
                  Stock Purchase Agreement in the form attached to this
                  Agreement with a vesting schedule that will result in the same
                  vesting as if no early exercise had occurred.

                  (B) EXPIRATION OF EARLY EXERCISE ELECTION. The election
         provided in this Section 5 to purchase shares upon the exercise of the
         Option prior to the vesting dates shall cease upon the termination of
         Optionee's Continuous Status as an Employee and may not be exercised
         after the date thereof.

         6. WHOLE SHARES. The Option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.

         7. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, the Option may not be exercised unless the shares issuable
upon exercise of the Option are then registered under the Securities Act or, if
such Shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.

         8. TERM. The term of the Option commences on the date of this Agreement
and expires ten years thereafter (the "Expiration Date"), unless the Option
expires sooner as set forth below or in the Plan. In no event may the Option be
exercised on or after the Expiration Date. The Option shall terminate prior to
the Expiration Date as follows: three months after the termination of Optionee's
Continuous Status as an Employee with the Company or an Affiliate of the Company
for any reason or for no reason unless:


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                  (A) such termination of Continuous Status as an Employee is
         due to Optionee's permanent and total disability (within the meaning of
         Section 422(c)(6) of the Code), in which event the Option shall expire
         on the earlier of the Expiration Date set forth above or twelve months
         following such termination of Continuous Status as an Employee; or

                  (B) such termination of Continuous Status as an Employee is
         due to Optionee's death, or Optionee's death occurs within three months
         following Optionee's termination for any other reason, in which event
         the Option shall expire on the earlier of the Expiration Date set forth
         above or twelve months after Optionee's death; or

                  (C) during any part of such three month period the Option is
         not exercisable solely because of the condition set forth in Section 7
         of this Agreement, in which event the Option shall not expire until the
         earlier of the Expiration Date set forth above or until it shall have
         been exercisable for an aggregate period of three months after the
         termination of Continuous Status as an Employee; or

                  (D) exercise of the Option within three months after
         termination of Optionee's Continuous Status as an Employee would result
         in liability under Section 16(b) of the Exchange Act, in which case the
         Option will expire on the earlier of (i) the Expiration Date set forth
         above, (ii) the tenth day after the last date upon which exercise would
         result in such liability, or (iii) six months and ten days after the
         termination of your Continuous Status as an Employee.

However, the Option may be exercised following termination of Continuous Status
as an Employee only as to that number of shares as to which it was exercisable
on the date of termination of Continuous Status as an Employee under the
provisions of Section 3 of this Agreement.

         9. REPRESENTATIONS. By executing this Agreement, Optionee warrants and
represents that he or she (a) is acquiring the Option for his or her own account
and has no intention of distributing, transferring or selling all or any part of
the Option except in accordance with the terms of this Agreement, and (b) has
either (i) preexisting personal or business relationships with the Company or
any of its officers, directors or controlling persons, or (ii) the capacity to
protect his or her own interests in connection with the grant of the Option by
virtue of the business or financial expertise of any of Optionee's professional
advisors who are unaffiliated with and who are not compensated by the Company or
any of its affiliates, directly or indirectly.

         10. EXERCISE.

                  (A) The Option may be exercised, to the extent specified
         above, by delivering a notice of exercise (in a form designated by the
         Company) together with the exercise price to the Secretary of the
         Company, or to such other person as the Company may designate, during




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         regular business hours, together with such additional documents as the
         Company may then require pursuant to Section 6(f) of the Plan.

                  (B) By exercising the Option, Optionee agrees that:

                           (i) as a precondition to the completion of any
                  exercise of the Option, the Company may require Optionee to
                  enter an arrangement providing for the cash payment by
                  Optionee to the Company of any tax withholding obligation of
                  the Company arising by reason of: (1) the exercise of the
                  Option; (2) the lapse of any substantial risk of forfeiture to
                  which the shares are subject at the time of exercise; or (3)
                  the disposition of shares acquired upon such exercise.
                  Optionee also agrees that any exercise of the Option has not
                  been completed and that the Company is under no obligation to
                  issue any Common Stock until such an arrangement is
                  established or the Company's tax withholding obligations are
                  satisfied, as determined by the Company; and

                           (ii) the Company (or a representative of the
                  underwriters) may, in connection with the first underwritten
                  registration of the offering of any securities of the Company
                  under the Securities Act, require that Optionee not sell or
                  otherwise transfer or dispose of any shares of Common Stock or
                  other securities of the Company during such period (not to
                  exceed 180 days) following the effective date of the
                  registration statement of the Company filed under the
                  Securities Act as may be requested by the Company or the
                  representative of the underwriters. Optionee further agrees
                  that the Company may impose stop-transfer instructions with
                  respect to securities subject to the foregoing restrictions
                  until the end of such period.

         11. TRANSFERABILITY. The Option is not transferable, except (i) by will
or by the laws of descent and distribution, or (ii) by written instruction, in a
form accepted by the Company, to Optionee's spouse, children, lineal ancestors
and lineal descendants (or to a trust created solely for the benefit of Optionee
or any of the foregoing persons) or to an organization exempt from taxation
pursuant to Section 501(c)(3) of the Code or to which tax deductible charitable
contributions may be made under Section 170 of the Code (excluding such
organizations classified as private foundations under applicable regulations and
rulings), and is exercisable during Optionee's life only by Optionee or a
transferee satisfying these conditions. Notwithstanding the foregoing, by
delivering written notice to the Company, in a form satisfactory to the Company,
Optionee may designate a third party who, in the event of Optionee's death,
shall thereafter be entitled to exercise the Option.

         12. OPTION NOT A SERVICE CONTRACT. This Agreement is not an employment
contract and nothing in this Agreement shall be deemed to create any obligation
on Optionee's part to continue in the employ of the Company, or of the Company
to continue Optionee's employment with the Company.



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         13. NOTICES. Any notices provided for in this Agreement or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to Optionee, five (5) days after
deposit in the United States mail, postage prepaid, addressed to Optionee at the
address specified below or at such other address as Optionee hereafter
designates by written notice to the Company.

         14. GOVERNING PLAN DOCUMENT. This Agreement is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this Agreement, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, in the event
of any conflict between the provisions of this Agreement and those of the Plan,
the provisions of the Plan shall control, and this Agreement is further subject
to all interpretations, amendments, rules and regulations which may from time to
time be promulgated and adopted pursuant to the Plan. If however, the Plan is
amended or terminated after the date of this Agreement such amendment or
termination shall not affect the Option granted pursuant to this Agreement,
unless mutually agreed otherwise by Optionee and the Company, which agreement
shall be in writing and signed by Optionee and the Company.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date first written above.

                                     OPTIONEE

                                     ------------------------------------------
                                     [name]

                                     Address:
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                                     BIRCH TELECOM, INC.


                                     By:
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                                     David E. Scott, President




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