EXHIBIT 10.40

                      NON-QUALIFIED STOCK OPTION AGREEMENT

To:                 ("Employee")
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    Name


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    Address

Date of Grant: December 12, 2000
Exercise Price: $ 2.00 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")  under the 2000 Long-Term  Incentive Plan ("Plan") of Talk.com Inc., a
Delaware  corporation  (the  "Company"),  at the  exercise  price  shown  above.
Capitalized  terms  used  herein  without  other  definition  have the  meanings
assigned in the  employment  agreement  dated as of October 13, 1998 between the
Company  and  Employee  (as  amended  to  the  date  hereof,   the   "Employment
Agreement").

         1. Employee is hereby  granted  options to purchase  137,500  shares of
Stock (the  "Option").  The Option shall have an exercise  price equal to $ 2.00
per share (the "Exercise Price") and, subject to Section 2, below, shall vest in
its entirety on the earlier of:

         (a) December 11, 2005; and

         (b) the date the Company  announces its results of  operations  for the
first  quarter of 2001, if the Company has achieved the  following:  (i) bundled
services  revenue of $48 million for the first quarter of 2001,  (ii) a total of
335,000  local lines at the end of the first  quarter  and (iii)  EBIDTA of $3.5
million for the first quarter of 2001. For purposes of the foregoing clause (b),
"bundled  services  revenue"  and  "EBITDA"  shall be  defined  as in the Credit
Facility  Agreement,  dated as of October 20, 2000, by and among the Company and
several of its affiliates and MCG Finance Corporation.

 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 5.3 of
the  Employment  Agreement  or a  similar  provision  in any  future  Employment
Agreement) or by Employee for Good Reason (as defined in Section  5.4(ii) of the
Employment Agreement or a similar provision in any future 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 defined in Section  4.5.1
of the Employment  Agreement) 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.

         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 reasonably satisfactory to the Chief Executive Officer of the
Company, including guarantees of signature(s) and payment of all transfer taxes,
if the Chief Executive Officer of the Company deems such guarantees necessary or
desirable.

         4. The Option will, to the extent not previously exercised by Employee,
expire on December 11, 2010.

         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.  Except as  otherwise  provided  by the Board or the  Committee  (as
defined below),  this 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:

<PAGE>

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

<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  granted  pursuant  to the Plan and is  subject  to the terms and
conditions  thereof,  except as  expressly  provided  herein.  The Board and the
Compensation Committee or similar committee thereof (the "Committee") shall have
plenary  authority  to  interpret  each of the Plan,  the  Option and this stock
option agreement, prescribe, amend and rescind rules and regulations relating to
it, and make all other  determinations  deemed  necessary or  advisable  for the
administration and/or exercise of the Option and this stock option agreement.

         11. This  agreement,  the Employment  Agreement and the Plan 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 Chief  Executive  Officer 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  State of
Delaware.  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:
   ---------------------------------------
   Name:
   Title:

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.



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As of December  __, 2000