Exhibit 10.3


 


MCLEODUSA INCORPORATED


STOCK OPTION AGREEMENT


 


STOCK OPTION AGREEMENT (the “Agreement”) by and between McLeodUSA
Incorporated (the “Company”) and [NAME] (the “Optionee”), dated as of [DATE]
(the “Date of Grant”) under the McLeodUSA Incorporated 2006 Omnibus Equity Plan
(the “Plan”).


 


1.                                       Definitions.
Capitalized terms which are not defined herein shall have the meaning set forth
in the Plan.


 


2.                                       Number
of Shares and Exercise Price. The Company hereby grants to the Optionee an
option (the “Option”), subject to the terms and conditions set forth herein and
in the Plan, to purchase [         ]
shares of Company Stock (“Shares”), subject to adjustment in accordance with
Section 3 of the Plan, at a price (the “Exercise Price”) of $[AMOUNT] per Share
(subject to adjustment in accordance with Section 3 of the Plan). The Option is
a nonqualified stock option.


 


3.                                       Term
of Option and Conditions of Exercise.


 


(a)                                  Term
of Option. Unless the Option is earlier terminated pursuant to this
Agreement, the term of the Option shall commence on the Date of Grant and
terminate upon the tenth anniversary of the Date of Grant.


 


(b)                                 Option
Vesting. Subject to the provisions of this Agreement and the Plan and the
Optionee’s continued employment (or in the case of a nonemployee director,
service) with the Company on the applicable vesting dates, the Option will
become exercisable with respect to [one fourth of Shares subject thereto
immediately on the Date of Grant and with respect to an additional one fourth
of such shares on each of the first three anniversaries of the Date of Grant]
[one fourth of Shares subject thereto on each of the first four anniversaries
of the Date of Grant].(1)


 


(c)                                  Vesting
Upon Change in Control. Notwithstanding the foregoing, any outstanding and unvested
portion of the Option shall become fully vested and exercisable upon the
occurrence of a Change in Control.


 


(d)                                 Condition
to Acceptance; Exercise. If, at the time of exercise of all or any portion
of the Option, the Board or Committee determines that it is desirable to
require the Optionee to enter into the Company’s Stockholders Agreement, it
shall be a condition to the exercise of the Option that the Optionee join such
Stockholders Agreement by executing a joinder agreement in the form provided by
the Company.


 






(1) Vesting schedule to be customized.


 


	
  Grant
  Agreement-Board Members, VP non-ESSP

  	
  as of February 27, 2007

  



 

















 


4.                                       Rights
and Obligations Upon Termination of Employment or Service.


 


(a)                                  The
entire Option (whether or not vested and exercisable) shall terminate and
expire (and may not be exercised) at the commencement of business on the date
of termination of the Optionee’s employment (or in the case of a nonemployee
director, service) with the Company for Cause. For purposes of this Agreement, “Cause”
shall have the meaning set forth in an employment or similar agreement between
the Company and the Optionee, or, if no such agreement is in effect, shall mean
a termination by the Company following the Optionee’s (i) engaging in a
criminal act involving the Company; (ii) engaging in willful misconduct that
the Committee determines in its good faith discretion is, or has the potential
to be, materially injurious to the Company, monetarily or otherwise including,
without limitation, reputation; (iii) breach of fiduciary duty involving
personal profit, including, without limitation, embezzlement, misappropriate or
conversion of assets or opportunities of the Company or any of its affiliates
or subsidiaries; or (iv) material breach of the Company’s Code of Business
Conduct and Ethics or other Company policy.


 


(b)                                 If
the Optionee’s employment (or in the case of a nonemployee director, service)
terminates due to the Optionee’s death or Disability, the Option will become
fully vested immediately prior to such termination and shall remain exercisable
for one year thereafter (subject to Section 3(a)). For purposes of this
Agreement, “Disability” shall have the meaning set forth in the Company’s
long-term disability plan in which the Optionee participates, or, if there is
no such plan, shall be determined by the Committee in good faith.


 


(c)                                  If
the Optionee’s employment (or in the case of a nonemployee director, service)
with the Company terminates for any reason other than Cause, death or
Disability, the vested portion of the Option shall remain exercisable for
ninety (90) days following the date of such termination (subject to Section
3(a)), and at the end of such period the vested portion of the Option shall
terminate, unless such termination occurs prior to the first anniversary of the
Date of Grant, in which case (i) both the vested and unvested portion of the
Option shall terminate immediately upon termination of employment (or in the
case of a nonemployee director, service) and (ii) notwithstanding the provisions
of Section 9(a)(2) of the Plan, the Repurchase Price shall be the Original
Cost, rather than the Fair Market Value. The unvested portion of the Option
shall terminate and may not be exercised following the termination of the
Optionee’s employment (or in the case of a nonemployee director, service) with
the Company.


 


5.                                       Nontransferability
of Option; Conditions to Transfer of Option Shares. The Option shall not be
assignable or transferable otherwise than by a duly executed and attested will
or by the laws of descent and distribution; and the Option may be exercised,
during the lifetime of the Optionee, only by the Optionee or the Optionee’s
legal representative.


 


6.                                       Exercise
of Option. The Option shall be exercised by a written notice delivered to the
Secretary of the Company at the Company’s principal executive offices in
accordance


 


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with Section 8, specifying the portion of the
Option to be exercised and accompanied by payment therefor. The exercise price
for any Shares purchased pursuant to the exercise of the Option shall be paid
in the manner set forth in the Plan.


 


7.                                       Rights
as a Shareholder.


 


(a)                                  By
accepting the Option, the Optionee acknowledges that the Optionee is and will
be subject to the applicable provisions of the Plan with respect to Shares
acquired pursuant to such exercise, including, without limitation, the
provisions of Section 9 of the Plan, and that the Optionee has read and
understood such provisions and the provisions referenced therein.


 


(b)                                 Other
Restrictions. Notwithstanding anything to the contrary contained herein,
all repurchases of and payments for the Shares by the Company shall be subject
to applicable legal restrictions and any restrictions in the Company’s and its Affiliates’
debt and equity financing agreements. If any such restrictions prohibit the
repurchase of or payment for the Shares hereunder, the Company shall make such
repurchases or payments as soon as it is permitted to do so under such
restrictions.


 


8.                                       Notices.
All notices and other communications under this Agreement shall be in writing
and shall be given by hand delivery to the other party, by confirmed facsimile
transmission or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:


 


If to the Optionee:


 


 


If to the Company:               One
Martha’s Way


                Hiawatha, Iowa 52233


                Attention: Option Plan Administrator-HR


 


Either party may furnish to the other in writing a substitute address
and phone and fax numbers for delivery of notice in accordance with Section 8. Notices
and communications shall be effective when actually received by the addressee.


 


9.                                       Incorporation
of Plan; Acknowledgment. The Plan is hereby incorporated herein by
reference and made a part hereof, and the Option and this Agreement are subject
to all terms and conditions of the Plan. In the event of any inconsistency
between the Plan and this Agreement, the provisions of the Plan shall govern. By
signing this Agreement, the Optionee acknowledges having received and read a
copy of the Plan.


 


10.                                 Adjustment
of Option. The Option shall be subject to the adjustment provisions set
forth in Section 3 of the Plan.


 


11.                                 Governing
Law. This Agreement shall be governed by and construed according to the
laws of the State of Delaware, without regard to the conflicts of law rules
thereof.


 


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12.                                 Amendment
and Termination. Rights and obligations under this Agreement shall not be
adversely altered or impaired by termination or amendment of the Plan, except
with the consent of the Optionee.


 


13.                                 Representations.


 


(a)                                  The
Optionee hereby represents and warrants that, upon exercise of the Option, the
Optionee will be acquiring Shares for investment solely for his own account and
not with a view to, or for resale in connection with, the distribution or other
disposition thereof. The Optionee agrees and acknowledges that he will not,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of any Shares, or solicit any offers to purchase or otherwise
acquire or take a pledge of any Shares, unless such offer, transfer, sale,
assignment, pledge, hypothecation or other disposition complies with (A) the
provisions of the Plan and this Agreement and (B) the Securities Act or an
exemption therefrom.


 


(b)                                 The
Optionee acknowledges and represents that he has been advised by the Company
that (i) the offer and sale of the Shares have not been registered under the
Securities Act; (ii) if acquired, the Shares must be held indefinitely and the
Optionee must continue to bear the economic risk of the investment in the
Shares; (iii) a restrictive legend with respect to the foregoing shall be
placed on the certificates representing the Shares; and (iv) a notation shall
be made in the appropriate records of the Company indicating that the Shares
are subject to restrictions on transfer and, if the Company should at some time
in the future engage the services of a securities transfer agent, appropriate
stop-transfer instructions will be issued to such transfer agent with respect
to the Shares.


 


14.                                 Counterparts.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original and said counterparts shall constitute but one and the same
instrument.


 


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year set forth first above.


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MCLEODUSA INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Optionee

  
				



 


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