INDEMNITY AGREEMENT

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Exhibit 10.7

INDEMNITY AGREEMENT

BETWEEN

MCLEODUSA INCORPORATED

AND

[                        ]

DATED AS OF

[                        ]

TABLE OF CONTENTS

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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)   Notwithstand