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Exhibit 10.7    
    


 
 

INDEMNITY AGREEMENT
  
  BETWEEN
  
  MCLEODUSA INCORPORATED
  
  AND
  

[                        ]
  
  DATED AS OF
  

[                        ]    
    








  



 
 

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. 








 

        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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Exhibit 10.7


INDEMNITY AGREEMENT BETWEEN MCLEODUSA INCORPORATED AND [ ] DATED AS OF [ ]



TABLE OF CONTENTS


INDEMNITY AGREEMENT