Document:

Exhibit

                                                                            EXHIBIT
      10.1

    

    Summary
      of Talk America Holdings, Inc. Non-Employee Director Compensation

    (Effective
      as of January 1, 2006)

    

    Cash
      Compensation

    

    Annual
      Retainer:                                                   
$40,000

    

    Annual
      Chair Fees:

    

      Non-Employee
      Chairman of the
      Board           
$40,000

    Audit
      Committee
      Chair                
$
      5,000

    

    Equity
      Compensation

    

    Each
      year, non-employee directors may receive award(s) for a number of shares granted
      by the Board. Subject to limits in the various Company Plan terms, the Board
      has
      the discretion to determine the form and terms of awards to non-employee
      directors.

    

    Other
      Information

    

    Non-employee
      directors' compensation is paid based on a January to December annual period.
      The cash annual retainer and annual Chairman of the Board fees are each paid
      in
      equal quarterly installments; the Audit Committee Chair fee is payable in one
      lump sum. Talk America Holdings, Inc. reimburses directors for their travel
      and
      related expenses in connection with attending Board and Board committee meetings
      and Board- and committee-related activities. The non-employee Chairman of the
      Board is also provided with access to and use of an office and related services
      in the Company’s offices and cellular phone service and, provided with, or
      reimbursed for the costs of, health benefits comparable to those provided to
      senior executive officers of the Company.Non-Qualified Stock Option

                                                                            EXHIBIT
    10.2

    NON-QUALIFIED
      STOCK OPTION

     

    
 

    To:         
      __________________

    Name

    

    __________________
      

    Address

    

    

    Exercise
      Price:  $_________  

    

    Date
      of
      Grant:  __________    

     

    1. You
      (“Optionee”) are hereby granted, subject to the terms hereof, effective as of
      the date of grant, an option to purchase [ ] shares of common stock, $.01 par
      value (“Stock”), of Talk America Holdings, Inc. (the “Company”) at the exercise
      price shown above pursuant to the Company’s 2003 Long Term Incentive Plan (the
“Plan”). This Option shall vest and become fully exercisable in
      installments, as follows: (i) [ ] shares of common stock may be purchased on
      the
      first anniversary of the Date of Grant and, (ii) [ ] shares of common stock
      may
      be purchased on the second anniversary of the Date of Grant, and (iii) [ ]
      shares of common stock may be purchased on the third anniversary of the Date
      of
      Grant. In addition, the Option will vest in full (less any component or portion
      which would otherwise be vested or exercisable and any portion previously vested
      and exercised) upon a
“Change
      of Control”, as defined below. Notwithstanding the foregoing the Board of
      Directors of the Company (the “Board”) or its designees may accelerate or waive
      such vesting date with respect to any or all of the shares of Common Stock
      covered by the Option. A
“Change
      in Control” shall be deemed to have occurred if: 

     

    
      	 	
                       
                (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 (or a
                Significant Subsidiary as defined below) becomes the Beneficial Owner
                (as
                defined in Rule 13d-3 under the Exchange Act; 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 60 day period referred to in Rule 13d-3 under
                the
                Exchange Act), directly or indirectly, of securities of the Company
                or any
                Significant Subsidiary (as defined below) representing 50% or more
                of the
                combined voting power of the Company’s or such Significant Subsidiary’s
                then outstanding securities;

            

    

     

    	(b)  	
            during
              any period of two years, individuals who at the beginning of such period
              constitute the Board of Company 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 (i), (iii), or
              (iv)
              of this paragraph) whose election by the Board or nomination for election
              by stockholders was approved by a vote of at least two-thirds 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 (as such terms are used in
              Rule
              14a-11 of Regulation 14A under the Exchange Act) or other actual or
              threatened solicitation of proxies or consents by or on behalf of an
              individual, corporation, partnership, group, associate or other entity
              or
              Person other than the Board, cease for any reason to constitute at
              least a
              majority of the Board of the Company;

          

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    	(c)  	
            the
              consummation of a merger or consolidation of the Company or any subsidiary
              owning directly or indirectly all or substantially all of the consolidated
              assets of the Company ( a “Significant Subsidiary”) with any other entity,
              including 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 50% of
              the
              combined voting power of the surviving or resulting entity outstanding
              immediately after such merger or
              consolidation;

          

     

    
      	 	
                      
                (d)

            	
              the
                stockholders of the Company approve a plan or agreement for the sale
                or
                disposition of all or substantially all of the consolidated assets
                of the
                Company in which case the Board shall determine the effective date
                of the
                Change of Control resulting therefrom;
                and

            

    

    

    
      	 	
                       
                (e)

            	
              any
                other event occurs which the Board determines, in its discretion,
                would
                materially alter, the structure of the Company or its
                ownership.

            

    

    

    2. The
      Optionee 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 the Optionee specifies that the Optionee wishes to purchase. 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”; (b)
      (unless prohibited by the Board) certificates representing shares of Common
      Stock of the Company, which will be valued by the Secretary of the Company
      at
      the fair market value per share of the Company’s Common Stock on the date of
      delivery of such certificates of the Company, accompanied by an assignment
      of
      the stock to the Company; or (c) (unless prohibited by the Board) any
      combination of cash and Common Stock of the Company valued as provided in clause
      (b). 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 deems such guarantees necessary or
      desirable.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3. The
      Company agrees to use commercially reasonable efforts to file a Form S-8 and
      register the shares issuable upon the exercise of the Options contemplated
      herein under the Securities Act of 1933 and any applicable state securities
      registration requirements and to cause such shares to be listed on NASDAQ (if
      such shares are not already listed or so registered).

    

    4. Your
      Option will, to the extent not previously exercised by you, as to any shares
      purchasable hereunder (i.e. vested) expire on the tenth anniversary of the
      Date
      of Grant

    

    5. In
      the
      event of any change in the outstanding shares of the Common Stock of the Company
      by reason of a stock dividend, stock split, combination of shares,
      recapitalization, merger, 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 subject to this Option and the
      exercise price of such shares 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 except as designated by Optionee or by will or the laws
      of
      descent and distribution, and is exercisable during the Optionee’s lifetime only
      by the Optionee, including, for this purpose, the Optionee’s legal guardian or
      custodian in the event of disability. Until the exercise price has been paid
      in
      full pursuant to due exercise of this Option and the purchased shares are
      delivered to the Optionee, the Optionee does not have any rights as a
      stockholder of the Company. The Company reserves the right not to deliver to
      the
      Optionee the shares purchased by virtue of the exercise of this Option during
      any period of time in which the Company deems, in its sole discretion, that
      such
      would violate a federal, state, local or securities exchange rule, regulation
      or
      law.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    7. Notwithstanding
      anything to the contrary contained herein, this Option is not exercisable
      without the consent of the Company until all the following events occur and
      during the following periods of time:

    

    	(a)  	
            Until
              this Option and the optioned shares are approved and/or registered
              with
              such federal, state and local regulatory bodies or agencies and securities
              exchanges as the Company may deem necessary or desirable;
              or

          

    

    	(b)  	
            During
              any period of time in which the Company deems that the exercisability
              of
              this Option, the offer to sell the shares optioned hereunder, or the
              sale
              thereof, may violate a federal, state, local or securities exchange
              rule,
              regulation or law, or may cause the Company to be legally obligated
              to
              issue or sell more shares than the Company is legally entitled to issue
              or
              sell.

          

    

    
      	   	
                       
                (c)

            	
              Until
                the Optionee has paid or made suitable arrangements to pay (i) all
                federal, state and local income tax withholding required to be withheld
                by
                the Company in connection with the Option exercise and (ii) the Optionee’s
                portion of other federal, state and local payroll and other taxes
                due in
                connection with the Option
                exercise.

            

    

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	 	
                   
                (a)

            	
              The
                Optionee hereby agrees, warrants and represents that he will acquire
                the
                Common 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 of such shares, except as hereafter
                permitted. The Optionee further agrees that he will not at any time
                make
                any offer, sale, transfer, pledge or other disposition of such Common
                Stock to be issued hereunder 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
                to the effect that the proposed transaction will be exempt from such
                registration. The Optionee 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 Common Stock to be issued to the Optionee 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 Securities Act of 1933, as amended, and under any applicable state laws
      or
      upon receipt of any 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
      Securities Act of 1933, as amended, and any applicable state securities
      laws.

    

    10. It
      is the
      intention of the Company and the Optionee that this Option shall not be an
      “Incentive Stock Option” as that term is used in Section 422 of the Code and the
      regulations thereunder. This Option is granted pursuant to the Plan. The Board
      and the Compensation Committee or similar committee thereof (the “Committee”)
shall
      have plenary authority to interpret the Plan and Option, 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. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    11. This
      Option constitutes the entire understanding between the Company and the Optionee
      with respect to the subject matter hereof and no amendment, modification or
      waiver of this Option, in whole or in part, shall be binding upon the Company
      unless in writing and signed by an authorized officer of the Company. This
      Option and the performances of the parties hereunder shall be construed in
      accordance with and governed by the laws of the State of Delaware.

    

    Please
      sign the copy of this Option and return it to the Company’s Secretary, thereby
      indicating your understanding of and agreement with its terms and
      conditions.

    

    TALK
      AMERICA HOLDINGS, INC.

    

    

    By:
      _______________________     

          
      Aloysius T. Lawn IV

          
      Executive Vice President-General

          
      Counsel and Secretary 

    

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

    

    

    

    ________________                                                           
      _______________

    Optionee       Date

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