EXHIBIT 10.3

                      NON-QUALIFIED STOCK OPTION AGREEMENT

To:                      Thomas M. Walsh ("Employee")
         ------------------------------------------------------------
                                      Name

                 313 Heatherfield Drive, Souderton, PA 18964
         ------------------------------------------------------------
                                     Address

Date of Grant:    August 7, 2000
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Exercise Price:            $4-5/8 per share
                           ----------------

         Employee is hereby granted the option described below,  effective as of
the above date of grant, to purchase shares of common stock,  $.01 par value per
share ("Stock"),  of Talk.com,  Inc. (the "Company") at the exercise price shown
above.  Capitalized  terms used  herein  without  definition  have the  meanings
assigned in the employment agreement dated as of the above date of grant between
the Company, Talk.com Holding Corp. and Employee (the "Employment Agreement").

         1. Employee is hereby  granted  options to purchase  160,000  shares of
Stock (the "Option").  The Option shall have an exercise price equal to four and
sixty-two and one-half cents dollars  ($4.625) per share (the "Exercise  Price")
and,  subject to  Section 2,  below,  shall vest with  respect to the  indicated
number of shares of Stock according to the following schedule:

                  (a) fifty-three  thousand three hundred  thirty-four  (53,334)
shares of Stock shall vest and become  exercisable upon the first anniversary of
the date of grant.

                  (b) fifty-three thousand three hundred  thirty-three  thousand
(53,333)  shares of Stock  shall  vest and  become  exercisable  upon the second
anniversary of the date of grant.

                  (c) fifty -three thousand three hundred thirty-three  thousand
(53,333)  shares  of Stock  shall  vest and  become  exercisable  upon the third
anniversary of the date of grant.

                  (d)  Notwithstanding  the  foregoing,  (i) any  portion of the
Option that was not previously  vested and exercisable shall become fully vested
and  exercisable on the effective  date of any  termination of the employment of
Employee under the Employment Agreement by the Company without Cause (as defined
in Section 6.3 of the  Employment  Agreement) or by Employee for Good Reason (as
defined in Section  6.4(b) of the  Employment  Agreement)  and (ii) the Board of
Directors of the Company (the "Board") or its designees may  accelerate or waive
the aforesaid  scheduled  vesting dates with respect to any or all of the shares
of Stock covered by the Option.

<PAGE>

         2. In the event of a "Change in Control" (as hereafter  defined) of the
Company,  any  portion  of  the  Option  that  was  not  previously  vested  and
exercisable on the effective  date of the Change in Control,  shall become fully
vested and  exercisable  on such  effective  date of such Change in  Control.  A
"Change in Control"  shall be deemed to have  occurred upon the happening of any
of the following events:

                  (a)      any Person (as defined in Section  3(a)(9)  under the
                           Securities  Exchange  Act of 1934,  as  amended  (the
                           "Exchange Act")), other than the Company, becomes the
                           Beneficial  Owner (as defined in Rule 13d-3 under the
                           Exchange Act), directly or indirectly,  of securities
                           of the  Company  or any  Significant  Subsidiary  (as
                           defined  below)  representing  fifty percent (50%) or
                           more of the combined  voting power of the  Company's,
                           or such Significant Subsidiary's, as the case may be,
                           then outstanding securities;  provided, that a Person
                           shall be  deemed  to be the  Beneficial  Owner of all
                           shares  that any such Person has the right to acquire
                           pursuant  to any  agreement  or  arrangement  or upon
                           exercise of conversion rights,  warrants,  options or
                           otherwise,  without  regard  to  the  sixty  (60)-day
                           period  referred to in Rule 13d-3 under the  Exchange
                           Act);

                  (b)      during any period of two  years,  individuals  who at
                           the beginning of such period constitute the Board and
                           any new director (other than a director designated by
                           a person who has entered into an  agreement  with the
                           Company to effect a transaction  described in clauses
                           (a), (b) or (d) of this Section 2) whose  election by
                           the Board or nomination for election by  stockholders
                           was approved by a vote of at least  two-thirds  (2/3)
                           of the directors then still in office who either were
                           directors at the beginning of the two-year  period or
                           whose   election  or  nomination   for  election  was
                           previously  so  approved,   but  excluding  for  this
                           purpose   any  such  new   director   whose   initial
                           assumption  of office occurs as a result of either an
                           actual or threatened election contest or other actual
                           or threatened  solicitation of proxies or consents by
                           or  on   behalf   of  an   individual,   corporation,
                           partnership, group, association or other entity other
                           than the Board, cease for any reason to constitute at
                           least  a  majority  of the  Board  of  either  or the
                           Company or a Significant Subsidiary;

                  (c)      the  consummation of a merger or consolidation of the
                           Company  or  any  subsidiary  of the  Company  owning
                           directly or indirectly  all or  substantially  all of
                           the   consolidated   assets   of  the   Company  (  a
                           "Significant  Subsidiary")  with  any  other  entity,
                           other  than a merger  or  consolidation  which  would
                           result in the voting  securities  of the Company or a
                           Significant Subsidiary outstanding  immediately prior
                           thereto  continuing  to  represent  more  than  fifty
                           percent  (50%) of the  combined  voting  power of the
                           surviving or resulting entity outstanding immediately
                           after such merger or consolidation;


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<PAGE>

                  (d)      the  shareholders  of the  Company  approve a plan or
                           agreement  for  the  sale  or  disposition  of  fifty
                           percent (50%) or more of the  consolidated  assets of
                           the Company in which case the Board  shall  determine
                           the effective date of the Change of Control resulting
                           therefrom;

                  (e)      any other event occurs which the Board determines, in
                           its discretion, would materially alter, the structure
                           of the Company or its ownership; and


         3.  Employee may exercise  the Option by giving  written  notice to the
Secretary of the Company on forms  supplied by the Company at its then principal
executive  office,  accompanied  by payment of the Exercise  Price for the total
number of shares  specified to be  purchased by Employee.  The payment may be in
any of the  following  forms:  (a) cash,  which may be  evidenced by a check and
includes cash received from a so-called  "cashless  exercise" of the Option; (b)
certificates  representing  shares  of Stock,  which  will be valued at the fair
market value (as defined in the Employment  Agreement) per share of the Stock on
the date of the Option  exercise in question,  accompanied  by an  assignment of
such Stock to the Company;  or (c) any  combination  of cash and Stock valued as
provided in clause (b), immediately above. Any assignment of Stock shall be in a
form and  substance  satisfactory  to the  Secretary of the  Company,  including
guarantees of  signature(s)  and payment of all transfer taxes, if the Secretary
of the Company deems such guarantees necessary or desirable.

         4. The Option will, to the extent not previously exercised by Employee,
expire on July 24,  2010 or ninety  (90) days  after  your  employment  with the
Company is terminated for any reason.

         5. In the event of any change in the outstanding shares of the Stock by
reason of a stock  dividend,  stock  split,  consolidation,  transfer of assets,
reorganization,  conversion or what the Board deems in its reasonable discretion
to be similar  circumstances,  the number and kind of shares of Stock subject to
the Option and the Exercise Price shall be appropriately adjusted in a manner to
be determined in the reasonable discretion of the Board.

         6. The Option is not transferable otherwise than by will or the laws of
descent and distribution,  and is exercisable during Employee's lifetime only by
Employee, including, for this purpose, Employee's legal guardian or custodian in
the event of the disability of Employee.  Until the Exercise Price has been paid
in full pursuant to due exercise of this Option and certificate(s)  representing
Employee's  ownership of the purchased  shares are issued to Employee,  Employee
does not have any rights as a shareholder of the Company.  The Company  reserves
the right not to deliver to  Employee  the  certificate(s)  representing  shares
purchased by virtue of the  exercise of the Option  during any period of time in
which the Company deems, based on the written opinion of its counsel,  that such
delivery  would violate a federal,  state,  local or securities  exchange  rule,
regulation or law.

         7.  Notwithstanding  anything to the  contrary  contained  herein,  the
Option is not exercisable:

                  (a)  During  any  period of time in which the  Company  deems,
based on the written


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<PAGE>

opinion of its counsel, that the exercisability of the Option, the offer to sell
the shares underlying the Option, or the sale thereof,  would violate a federal,
state, local or securities exchange rule, regulation or law; or

                  (b) Until Employee has paid or made suitable  arrangements  to
pay all federal,  state and local income tax withholding required to be withheld
by the Company in connection with the Option exercise.

         8. The following two  paragraphs  shall be applicable  if, on a date of
exercise of the Option,  the Stock to be purchased pursuant to such exercise has
not been  registered  under the  Securities Act of 1933, as amended (the "Act"),
and under  applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:

                  (a) Employee  hereby agrees,  warrants and represents  that he
will acquire the Stock to be issued hereunder for his own account for investment
purposes  only,  and not with a view to, or in  connection  with,  any resale or
other distribution of any shares of such Stock,  except as hereafter  permitted.
Employee  further  agrees  that he will not at any time  make any  offer,  sale,
transfer,  pledge or other  disposition  of such  Stock to be  issued  hereunder
without  an  effective  registration  statement  under  the Act,  and  under any
applicable  state  securities  laws or an opinion of counsel  acceptable  to the
Company to the effect  that the  proposed  transaction  will be exempt from such
registration.   Employee  shall  execute  such   instruments,   representations,
acknowledgments and agreements as the Company may, in its sole discretion,  deem
advisable to avoid any violation of federal, state, local or securities exchange
rule, regulation or law.

                  (b) The  certificates  for  Stock  to be  issued  to  Employee
hereunder shall bear the following legend:

                           "The shares  represented by this certificate have not
                  been registered  under the Securities Act of 1933, as amended,
                  or under  applicable  state  securities  laws. The shares have
                  been  acquired for  investment  and may not be offered,  sold,
                  transferred,  pledged  or  otherwise  disposed  of  without an
                  effective  registration  statement under the Securities Act of
                  1933, as amended,  and under any applicable  state  securities
                  laws or an opinion of counsel  acceptable  to the Company that
                  the   proposed   transaction   will  be   exempt   from   such
                  registration."

The foregoing  legend shall be removed upon  registration of the legended shares
under the Act and under any applicable  state laws or upon receipt of an opinion
of  counsel  acceptable  to the  Company  that  said  registration  is no longer
required.

         9. The sole purpose of the agreements, warranties,  representations and
legend  set forth in the two  immediately  preceding  paragraphs  is to  prevent
violations of the Act, and any applicable state securities laws.


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<PAGE>

         10. It is the  intention  of the Company and  Employee  that the Option
shall not be an "Incentive  Stock Option" as that term is used in Section 422 of
the Internal Revenue Code of 1986, as amended,  and the regulations  thereunder.
The Option is not granted pursuant to any stock option plan.

         11. This agreement and the Employment  Agreement  constitute the entire
understanding  between  the  Company and  Employee  with  respect to the subject
matter hereof and no amendment,  modification  or waiver of this  agreement,  in
whole or in part,  shall be  binding  upon the  Company  or  Employee  unless in
writing and signed by the Executive  Vice President of the Company and Employee.
This agreement and the performances of the parties  hereunder shall be construed
in  accordance   with,  and  governed  by  the  laws  of,  the  Commonwealth  of
Pennsylvania.

         Employee  shall  sign a copy of this  agreement  and  return  it to the
Company's  Secretary,   thereby  indicating  Employee's  understanding  of,  and
agreement with its terms and conditions.

                                                  TALK.COM INC,


                                                  By:___________________________





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<PAGE>

I hereby  acknowledge  receipt of a copy of the foregoing stock option agreement
and, having read it, hereby signify my understanding  of, and my agreement with,
its terms and conditions.

                                            August 5, 2000
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Thomas M. Walsh                             (Date)





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