Exhibit 10.21

INDEMNITY AGREEMENT

BETWEEN

MCLEODUSA INCORPORATED

AND

[            ]

DATED AS OF

[            ]

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TABLE OF CONTENTS

 

1.

   CERTAIN DEFINITIONS    1    1.1.    Change in Control    1    1.2.    Claim
   2    1.3.    Expenses    2    1.4.    Indemnifiable Event    2    1.5.   
Reviewing Party    2    1.6.    Voting Securities    2    1.7.    Special
Independent Counsel    2

2.

   BASIC INDEMNIFICATION ARRANGEMENT    2

3.

   CHANGE IN CONTROL    3

4.

   INDEMNIFICATION FOR ADDITIONAL EXPENSES,    4

5.

   LIMITATIONS ON SETTLEMENT AUTHORITY IN SOME CASES    4

6.

   PARTIAL INDEMNITY, ETC.    4

7.

   NO PRESUMPTION    5

8.

   NON-EXCLUSIVITY, ETC.    5

9.

   LIABILITY INSURANCE    5

10.

   PERIOD OF LIMITATIONS    5

11.

   AMENDMENTS, ETC.    5

12.

   SUBROGATION    6

13.

   NO DUPLICATION OF PAYMENTS    6

14.

   BINDING EFFECT, ETC.    6

15.

   SEVERABILITY    6

16.

   GOVERNING LAW    6

 

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INDEMNITY AGREEMENT

This Indemnity Agreement (this “Agreement”) is entered into as of [    ] between
McLeodUSA, Inc., a Delaware corporation (the “Corporation”), and [    ]
(“Director”), a director of the Corporation.

WHEREAS, both the Corporation and Director recognize the increased risk of
litigation and other claims being asserted against public companies in today’s
environment;

WHEREAS, basic protection against undue risk of personal liability of the
Corporation officers and directors is expected to be provided through insurance
coverage providing reasonable protection at reasonable cost, and Director
expects such coverage to be available, but as a result of substantial changes in
the marketplace for such insurance it has become increasingly more difficult to
obtain such insurance on terms providing reasonable protection at reasonable
cost;

WHEREAS, the Corporation’s Amended and Restated Certificate of Incorporation
(the “Certificate”) and/or Amended and Restated Bylaws (the “Bylaws”) require
the Corporation to indemnify and advance expenses to its directors and officers
to the full extent permitted by law, and Director has been serving as a director
or executive officer of the Corporation in part in reliance on such provisions;

WHEREAS, in recognition of Director’s need for substantial protection against
personal liability in order to insure and enhance Director’s continued service
to the Corporation in an effective manner, and Director’s reliance on the
aforesaid provisions in the Corporation’s Certificate and/or Bylaws, and in part
to provide Director with specific contractual assurance that the protection
promised by such provisions will be available to Director (regardless of, among
other things, any amendment to or revocation of such provisions of the
Certificate and/or Bylaws, any change in the composition of the Corporation’s
board of directors or the occurrence of any acquisition transaction relating to
the Corporation), the Corporation wishes to provide in this Agreement for the
effective indemnification of and the advancing of expenses to Director to the
fullest extent (whether partial or complete) permitted by law and as set forth
in this Agreement, and, to the extent insurance is maintained, for the continued
coverage of Director under the Corporation’s director and officer liability
insurance policies;

NOW THEREFORE, in consideration of the premises, and intending to be legally
bound hereby, the parties hereto agree as follows:

 

1. CERTAIN DEFINITIONS

 

  1.1. Change in Control

A “Change in Control” shall be deemed to have occurred if (i) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the board of directors of the Corporation and any new director whose
election by the board of directors or nomination for election by the
Corporation’s 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
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (ii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation which would result in
the Voting Securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Corporation or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation and
dissolution of the Corporation or an agreement for the sale or disposition by
the Corporation (in one transaction or a series of transactions) of all or
substantially all the Corporation’s assets; provided, however, that a would-be
Change in Control under (ii) herein which is approved and recommended in advance
by the Corporation’s board of directors shall not be deemed a Change in Control.

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  1.2. Claim

A “Claim” is any threatened, pending or completed action, suit or proceeding, or
any inquiry or investigation (whether conducted by the Corporation or any other
party) that Director in good faith believes might lead to the institution of any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or other.

 

  1.3. Expenses

“Expenses” include attorneys’ fees and all other costs, expenses and obligations
paid or incurred by or on behalf of Director (other than amounts paid or payable
directly or indirectly to Director or any person or entity controlled by
Director) in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend, be a witness in
or participate in any Claim relating to any Indemnifiable Event.

 

  1.4. Indemnifiable Event

An “Indemnifiable Event” shall be any event or occurrence related to the fact
that Director is or was a director, officer, employee, agent or fiduciary of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or
by reason of anything done or not done by Director in any such capacity.

 

  1.5. Reviewing Party

A “Reviewing Party” shall be any appropriate person or body consisting of a
member or members of the Corporation’s board or directors or any other person or
body selected hereunder (including Special Independent Counsel, as defined
below) who is not a party to the particular Claim for which Director is seeking
indemnification. If there has not been Change in Control, the Reviewing Party
shall be selected by the Corporation’s board of directors. If there has been
such a Change in Control, the Reviewing Party shall be Special Independent
Counsel.

 

  1.6. Voting Securities

“Voting Securities” are any securities of the Corporation which vote generally
in the election of directors.

 

  1.7. Special Independent Counsel

“Special Independent Counsel” is counsel selected by Director and approved by
the Corporation (which approval shall not be unreasonably withheld) and who has
not, unless waived by the Corporation and Director, otherwise performed services
for the Corporation or Director within the last ten years.

 

2. BASIC INDEMNIFICATION ARRANGEMENT

(a) In the event Director was, is or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Corporation shall indemnify Director to the fullest
extent permitted by law as soon as practicable but in any event no later than
thirty days after written demand is presented to the Corporation, against any
and all Expenses, judgments, fines, penalties and amounts paid or owing in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) paid or incurred by or on behalf of
Director in connection with such Claim. Director shall give the Corporation
written notice of all such Claims and the particulars thereof as soon as
practicable.

 

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(b) If so requested by Director, the Corporation shall advance (within two
business days of such request) any and all Expenses to Director (an “Expense
Advance”).

(c) Notwithstanding anything in this Agreement to the contrary, (i) Director
shall not be entitled to indemnification pursuant to this Agreement in
connection with any Claim (other than a claim for indemnification (including,
without limitation, indemnification pursuant to Section 4 of this Agreement),
Expense Advances, or expenses advanced pursuant to Section 4 of this Agreement)
initiated by Director against any party (other than the Corporation or any
director of officer of the Corporation) unless such Claim was authorized by the
board of directors of the Corporation, (ii) prior to a Change in Control,
Director shall not be entitled to indemnification pursuant to this Agreement in
connection with any Claim (other than a claim for indemnification (including,
without limitation, indemnification pursuant to Section 4 of this Agreement),
Expense Advances, or expenses advanced pursuant to Section 4 of this Agreement)
initiated by Director against the Corporation or any director or officer of the
Corporation unless the Corporation has joined in or consented to the initiation
of such Claim; (iii) the obligations of the Corporation under Section 2(a) shall
be subject to the condition that the Reviewing Party shall not have determined
in a writing stating the reasons therefor that Director would not be permitted
to be indemnified under applicable law; and (iv) the obligation of the
Corporation to make an Expense Advance pursuant to Section 2(b) shall be subject
to the condition that, if, when and to the extent that the Reviewing Party
determines that Director would not be permitted to be so indemnified under
applicable law, the Corporation shall be entitled to be reimbursed by Director
(who hereby agrees to reimburse the Corporation) for all such amounts
theretofore paid; provided, however, that if Director has commenced legal
proceedings in a court of competent jurisdiction to secure a determination that
Director should be indemnified under applicable law, any determination made by
the Reviewing Party that Director would not be permitted to be indemnified under
applicable law shall not be binding and Director shall not be required to
reimburse the Corporation for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed).

(d) If there has been no determination by the Reviewing Party or the Reviewing
Party determines that Director would not be permitted to be indemnified in whole
or in part under applicable law (such determination to be made by the Reviewing
Party independent of any position of the Corporation on any aspect of the
indemnification, including without limitation the appropriateness of the amount
of any settlement), Director shall have the right to commence litigation in any
court in the State of Delaware or in the State(s) of Director’s residence or
employment, having subject matter jurisdiction thereof, and in which venue is
proper, seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, and the Corporation
hereby consents to service of process and to appear in any such proceeding. The
Corporation and Director hereby agree that Director’s remedies at law are
inadequate in the event Director commences litigation to recover
indemnification, Expense Advances, or expenses to be advanced pursuant to
Section 4 of this Agreement, in each case withheld by the Corporation. Any
determination by the Reviewing Party otherwise shall be conclusive and binding
on the Corporation and Director.

 

3. CHANGE IN CONTROL

If there is a Change in Control of the Corporation, then with respect to all
matters thereafter arising concerning the rights of Director to indemnity
payments and Expense Advances under this Agreement or any other agreement, or
under the Corporation’s Certificate and/or Bylaws now or hereafter in effect,
relating to Claims for Indemnifiable Events, the Corporation shall seek legal
advice only from Special Independent Counsel. Such counsel, among other things,
shall render its written opinion to the Corporation and Director as to whether
and to what extent Director would

 

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be permitted to be indemnified under applicable law. The Corporation agrees to
pay the reasonable fees of the Special Independent Counsel referred to above and
to fully indemnify such counsel against any and all expenses (including
attorneys’ fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.

 

4. INDEMNIFICATION FOR ADDITIONAL EXPENSES,

The Corporation shall indemnify Director against any and all expenses (including
attorneys’ fees) and, if requested by Director, shall, within two business days
of such request, advance such expenses to Director, which are incurred by or on
behalf of Director (other than amounts paid or payable directly or indirectly to
Director or any person or entity controlled by Director) in connection with any
claim asserted against or action brought by Director for (i) indemnification
hereunder or advance payment of Expenses by the Corporation under this Agreement
(or any other agreement or the Corporation’s and/or Bylaws now or hereafter in
effect) relating to Claims for lndemnifiable Events, and/or (ii) recovery under
any director and officer liability insurance policies maintained by the
Corporation, regardless of whether Director ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance recovery,
as the case may be.

 

5. LIMITATIONS ON SETTLEMENT AUTHORITY IN SOME CASES

(a) If no Change in Control has occurred, Director shall not independently
negotiate settlement without first giving the Reviewing Party and the
Corporation twenty business days’ notice. Thereafter, Director may engage in
such negotiations and may settle the case unless the Reviewing Party and trial
counsel for the Corporation handling the case (and in cases where outside
counsel is used, such outside counsel) advise Director that they have
investigated the Director’s involvement in the event and have determined that
the matter is appropriate and legal for indemnity and all judgments, expenses
and costs will, if lawful, be paid by the Corporation; provided, however, that
such limitation on settlement negotiations shall not apply to actions by or in
the right of the Corporation against Director. The Reviewing Party and such
counsel shall also promptly give Director notice of any subsequent change or
reversal of any such prior determination of the Reviewing Party and such
counsel, stating the reasons for such change or reversal, after which notice
Director may independently negotiate and settle the case.

(b) In any case, the Corporation shall not unreasonably withhold its consent to
any proposed settlement.

 

6. PARTIAL INDEMNITY, ETC.

If Director is entitled under any provision of this Agreement to indemnification
by the Corporation for some or a portion of Expenses, judgments, fines,
penalties and amounts paid in settlement of a Claim but not, however, for all of
the total amount thereof, the Corporation shall nevertheless indemnify Director
for the portion thereof to which Director is entitled. Moreover, notwithstanding
any other provision of this Agreement, to the extent that Director has been
successful on the merits or otherwise in defense of any or all Claims relating
in whole or in part to an Indemnifiable Event or in defense of any issue or
matter therein, including dismissal without prejudice, Director shall be
indemnified against all Expenses incurred in connection therewith. In connection
with any determination by the Reviewing Party as to whether Director is entitled
to be indemnified hereunder, the burden of proof shall be on the Corporation to
establish that Director is not so entitled.

 

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7. NO PRESUMPTION

For purposes of this Agreement, the termination of any claim, action, suit or
proceeding, by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that Director did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law. The termination of a
suit by settlement shall be presumed to be a disposition favorable to Director
and in the best interests of the Corporation. In addition, neither the failure
of the Reviewing Party to have made a determination as to whether Director has
met any particular standard of conduct or had any particular belief, nor an
actual determination by the Reviewing Party that Director has not met such
standard of conduct or did not have such belief, prior to the commencement of
legal proceedings by Director to secure a judicial determination that Director
should be indemnified under applicable law shall be a defense to Director’s
claim or create a presumption that Director has not met any particular standard
of conduct or did not have any particular belief.

 

8. NON-EXCLUSIVITY, ETC.

The rights of Director hereunder shall be in addition to any other rights
Director may have under the Corporation’s Certificate, Bylaws, the Delaware
General Corporation Law or any other law or agreement. To the extent that a
change in applicable law (whether by statute or judicial decision) permits
greater indemnification by agreement than would be afforded currently, it is the
intent of the parties hereto that Director shall enjoy by this Agreement the
greater benefits so afforded by such change.

 

9. LIABILITY INSURANCE

To the extent the Corporation maintains an insurance policy or policies
providing director and officer liability insurance, Director shall be covered by
such policy or policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any the Corporation director or officer.

 

10. PERIOD OF LIMITATIONS

No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Corporation or any affiliate of the Corporation against
Director, Director’s spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Corporation or its
affiliate shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two-year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.

 

11. AMENDMENTS, ETC.

No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.

 

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12. SUBROGATION

In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Director, who shall execute all papers required and shall do everything that may
be necessary to secure such rights, including the execution of such documents
necessary to enable the Corporation effectively to bring suit to enforce such
rights.

 

13. NO DUPLICATION OF PAYMENTS

The Corporation shall not be liable under this Agreement to make any payment in
connection with any claim made against Director to the extent Director has
otherwise actually received payment (under any insurance policy, the
Corporation’s Certificate, Bylaws or otherwise) of the amounts otherwise
Indemnifiable hereunder.

 

14. BINDING EFFECT, ETC.

This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors (including any
direct or indirect successor by purchase, merger, consolidation or otherwise to
all or substantially all of the business and/or assets of the Corporation),
assigns, spouses, heirs, and personal and legal representatives. This Agreement
shall continue in effect regardless of whether Director continues to serve as an
officer or director of the Corporation or of any other enterprise at the
Corporation’s request.

 

15. SEVERABILITY

The provisions of this Agreement shall be severable in the event that any of the
provisions hereof (including any provision within a single section, paragraph or
sentence) are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, and the remaining provisions shall remain enforceable
to the fullest extent permitted by law.

 

16. GOVERNING LAW

This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed in such state, without giving effect to the principles of conflicts of
laws.

 

McLEODUSA INCORPORATED By:     Name: Title:

 

   Name: Title: DIRECTOR

 

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