<PAGE>

                                                                  Exhibit 10.17

                              EMPLOYMENT AGREEMENT

                  THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered
into as of February 2, 2000 by and between VIATEL, INC., a Delaware corporation
with an office at 685 Third Avenue, New York, New York 10017 (the "Company"),
and WILLIAM C. MURPHY, an individual currently residing at 62 Clonmel Road,
London SW6 U.K. (the "Executive").

                              W I T N E S S E T H:

             WHEREAS, the Company desires to employ Executive and Executive
desires to provide services to the Company;

             WHEREAS, the Company and the Executive desire that the Company
employs the Executive as the Company's President.

             NOW THEREFORE, each of the Company and the Executive, intending to
be legally bound, hereby mutually covenant and agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  The following terms used in this Agreement shall have the
meanings set forth below.

                  1.1 "Accrued Obligations" shall mean, as of the Date of
Termination, the sum of Executive's aggregate accrued but unpaid (A) Base
Salary, (B) Bonus Award, (C) other cash compensation and (D) vacation pay,
expense reimbursements and other cash entitlements, all determined through the
date of Termination.

                  1.2 "Base Salary" shall mean the amount set forth in Section
3.1 hereof.

                  1.3 "Bonus Award" shall mean a cash bonus equal to eighty five
percent (85%) of the Executive's Base Salary multiplied by the Bonus Multiple
for the applicable Performance Year.

                  1.4 "Bonus Multiple" shall mean the amount determined by
reference to Section 3.2 hereof.

                  1.5 "Cause" shall mean Executive's (i) material violation of
Section 2.3 hereof, which violation has not been cured within 15 days of the
date that written notice thereof is received by Executive from the Board of
Directors of the Company (the "Board"); (ii) material violation of Section 4.1
or 4.2 hereof; (iii) violation of Section 4.3 hereof; (iv) gross negligence or
dishonesty in the performance of his duties hereunder or habitual neglect in
managing the Company; PROVIDED, HOWEVER, that the Board undertakes a
comprehensive review and determines that such conduct is materially injurious or
materially damaging to the


                                      -1-
<PAGE>

Company or its reputation; or (v) conviction of any felony or a misdemeanor
involving fraud, misrepresentation or dishonesty.

                  1.6 "Change of Control" is defined to mean such time as (i) a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act), becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the total voting power of the then
outstanding Voting Stock of the Company on a fully diluted basis or (ii)
individuals who at the beginning of any period of two consecutive calendar years
constituted the Board (together with any new directors whose election by the
Board or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board then still
in office who either were members of the Board at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board then in
office.

                  1.7 "Code" shall mean the Internal Revenue Code of 1986, as
amended.

                  1.8 "Common Stock" shall mean the common stock, par value $.01
a share, of the Company.

                  1.9 "Competitive Activities" shall have the meaning set forth
in Section 4.3 hereof.

                  1.10 "Confidential Material" shall have the meaning set forth
in Section 4.2 hereof.

                  1.11 "Control" (including, with correlative meanings, the
terms "controlling," "controlled by," and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through ownership of voting securities, by contract or
otherwise.

                  1.12 "Date of Termination" shall mean (i) if employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that Executive shall not have returned to the full-time performance of
Executive's duties during such thirty (30) day period), and (ii) in all other
cases, the date specified in the Notice of Termination (which shall not be less
than thirty (30) nor more than sixty (60) days, respectively, from the date such
Notice of Termination is given).

                  1.13 "Disability" shall mean Executive's death or inability to
perform his material duties to the Company by reason of a physical or mental
disability, which inability has existed for at least six consecutive months. Any
question as to the existence of a Disability shall be determined by a qualified
physician not employed by the Company and selected by Executive (or a member of
Executive's immediate family) and approved by the Company. The written
determination of such physician shall be conclusive for all purposes relating to
this Agreement.

                  1.14 "Disability Payment" shall mean, for purposes of Section
5.3(d) hereof, an amount equal to the greater of (i) 60% of the Base Salary in
effect for the calendar year in which such Disability occurred (or the average
Base Salary if such Disability occurred over


                                      -2-
<PAGE>

more than one calendar year) and (ii) the amount payable to Executive under any
disability plan as adopted by the Company from time to time (the "Disability
Plan").

                  1.15 "EBITDA" shall mean, with respect to the Company on a
consolidated basis for any Performance Year, the Company's consolidated earnings
before interest, taxes, depreciation and amortization, as such is reported in
the Company's financial statements.

                  1.16 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

                  1.17 "Excise Tax" shall mean the excise tax imposed by Code
Section 4999 plus any interest or penalties incurred by Executive with respect
to such excise tax.

                  1.18 "Good Reason" shall mean any (i) reduction in Executive's
Base Salary, (ii) failure by the Company to continue any material benefit or
compensation plan, life insurance plan, health and accident plan, disability
plan (or plan providing Executive with substantially similar benefits) in which
Executive is participating or the material reduction by the Company of
Executive's benefits under any such plan, (iii) failure by the Company to obtain
an assumption of this Agreement by any successor of the Company (as contemplated
in Section 6.2 hereof) or (iv) material diminution in Executive's authority,
function or position with the Company which continues after 15 days of the date
that written notice thereof is given to the Board by Executive.

                  1.19 "Income Tax" shall mean all taxes other than the Excise
Tax (including any interest or penalties imposed with respect to such taxes)
including, without limitation, any income and employment taxes imposed by any
federal (including (i) FICA and Medicare taxes, and (ii) the tax resulting from
the loss of any federal deductions or exemptions which would have been available
to Executive but for receipt of the Payment), state, local, commonwealth or
foreign government.

                  1.20 "Intellectual Property" shall mean any idea, process,
trademark, service mark, trade or business secret, invention, technology,
computer program or hardware, original work of authorship, design, formula,
discovery, patent or copyright, application, record, design, plan or
specification and any related improvement, right or claim.

                  1.21 "Notice of Termination" shall mean a written notice as
provided herein.

                  1.22 "Participation," including with correlative meanings, the
term "participate," shall mean the direct or indirect participation in any
Competitive Activity, whether as an operator, manager, consultant, and whether
individually or jointly.

                  1.23 "Payment" shall mean any payment or distribution (or
acceleration of benefits) by the Company to or for Executive's benefit (whether
paid or payable or distributed or distributable (or accelerated) pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under Section 5.3(e)(iv) hereof. In addition,
Payment shall include the amount of income deemed to be received by Executive as
a result of the acceleration of the exercisability of any of Executive's options
to purchase stock of the Company, the acceleration of the lapse of any
restrictions on performance stock or restricted stock of the Company held by
Executive or the acceleration of payment from any deferral plan.


                                      -3-
<PAGE>

                  1.24 "Performance Year" shall mean each calendar year.

                  1.25 "Person" shall mean any individual or entity, whether a
governmental or other agency or political subdivision thereof or otherwise.

                  1.26 "Retirement" shall mean (1) voluntary retirement
(excluding Termination for Good Reason) before mandatory retirement age, if any,
with an immediate, nonactuarially-reduced pension under any Retirement Program,
(2) termination in accordance with any retirement arrangement other than under
the Company's Retirement Program, which is established with Executive's consent
or (3) mandatory retirement as set forth under any Retirement Program adopted by
the Company as it existed before the Change of Control or as agreed to by
Executive following a Change of Control.

                  1.27 "Retirement Program" shall mean any retirement program
plan for the employees of the Company and participating subsidiaries plus any
excess or supplemental pension plans maintained by the Company.

                  1.28 "Revenue" shall mean, with respect to the Company on a
consolidated basis for any Performance Year, the Company's consolidated net
revenue for such Performance Year as determined in accordance with generally
accepted accounting principles consistently applied, including revenue earned
during such Performance Year and less credits and discounts issued and accrued
during such Performance Year.

                  1.29 "Severance Payment" shall mean an amount equal to (i)
absent a Change of Control (A) the sum of (1) the Base Salary for the calendar
year in which the Termination occurs PLUS (2) the prior year's Bonus Award (not
to be less than $100,000) MULTIPLIED BY (B) the Severance Period Multiple; and
(ii) in the event of a Change of Control, two hundred and fifty percent of
(250%) of the sum of (A) the greater of Executive's Base Salary payable to
Executive by the Company immediately before the Date of Termination and
Executive's Base Salary which are payable to Executive by the Company
immediately before a Change of Control, whether or not such Base Salary was
includible in Executive's gross income for Federal income tax purposes; plus (B)
the average Bonus Award for the two fiscal years prior to the Change of Control,
whether or not such Bonus Award was includible in Executive's gross income for
Federal Income tax purposes.

                  1.30 "Severance Period Multiple" shall mean, the quotient
obtained by DIVIDING (i) the Severance Period by (ii) 12; PROVIDED, HOWEVER,
that the Severance Period Multiple shall not be less than one.

                  1.31 "Severance Period" shall mean the number of full calendar
months remaining in the Term on the date of any Termination.

                  1.32 "Term" shall have the meaning set forth in Section 2.2
hereof and shall include any renewal or extension as set forth herein, including
any period of consultancy under Section 5.3(e)(viii) hereof.

                  1.33 "Termination" shall mean termination of Executive's
employment with the Company for any reason.


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<PAGE>

                  1.34 "Voting Stock" shall mean with respect to any share,
interest, participation or other equivalent (however designated, whether voting
or non-voting) in equity of the Company, whether now outstanding or issued after
the date hereof, including, without limitation, any Common Stock, any preferred
stock and any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the Board.

                                   ARTICLE II

                               EMPLOYMENT AND TERM

                  2.1 EMPLOYMENT. The Executive shall be employed as the
President of the Company and Executive hereby accepts such employment. In
addition, Executive agrees that he will serve in any similar capacity on behalf
of any existing or future subsidiary of the Company as reasonably requested by
the Board.

                  2.2 TERM. (a) Subject to the provisions of Article V hereof,
the Term shall commence on the date hereof and shall end on the earlier of (i)
the second anniversary of the date hereof and (ii) the date of any Termination.
If at least six (6) months' advance written notice terminating this Agreement is
not received by either party from the other party before the end of the initial
two-year Term, then this Agreement shall be automatically renewed for successive
one year-periods.

                  2.3 DUTIES. The Executive shall be directly responsible for
the Company's daily operations and shall have all powers, duties and
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Chief Executive Officer and/or the Board
from time to time; PROVIDED, HOWEVER, that any such powers, duties and
responsibilities assigned by the Board are commensurate with such position. The
Executive shall use his best efforts and devote all of his business time,
attention and energy in performing his duties. Notwithstanding the foregoing,
nothing in this Agreement shall restrict Executive from managing his personal
investments, personal business affairs and other personal matters, or serving on
civic or charitable boards or committees, if such activities do not interfere
with the performance of his duties hereunder or conflict with the Company's
interests.

                                   ARTICLE III

                            COMPENSATION AND BENEFITS

                  3.1 BASE SALARY. For services performed by Executive, the
Company shall pay Executive an annual Base Salary of $395,000 in accordance with
the Company's regular payroll practices. On each anniversary date of this
Agreement, the Executive's Base Salary shall be increased as determined in the
sole discretion of the Compensation Committee of the Board (the "Compensation
Committee"); PROVIDED, HOWEVER, that such annual increase shall not be less than
the amount equal to the product of the Base Salary MULTIPLIED BY the percentage
increase, if any, in the Consumer Price Index for all Urban Consumers, All
Items, for the most recent twelve-month period for which such figures are then
available from the Department of Labor Bureau of Statistics or similar report.


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<PAGE>

                  3.2 BONUSES. (a) ANNUAL BONUS. (i) No later than January 15 of
each calendar year, the Company shall pay to Executive an annual Bonus in
respect of the prior fiscal year in an amount equal to the Bonus Award
multiplied by the Bonus Multiple. For purposes of this Agreement, the term
"Bonus Multiple" shall mean the multiple, if any, determined by reference to the
matrix set forth below, based on the Company's overall financial performance for
the relevant year by providing the percentage variance between "Revenue" and
"EBITDA" actually reported for the fiscal year and "Revenue" and "EBITDA" as set
forth in the annual budget adopted by the Board.

                       EBITDA VARIANCE (ACTUAL VS. BUDGET)

<TABLE>
<CAPTION>

                                    -15% TO -5%     -5% TO 5%       +5.1% TO 15%      + 15%
-----------------------------------------------------------------------------------------------
   <S>            <C>                   <C>           <C>              <C>             <C>
   REVENUE        -15% TO -5%

                                        0.6            0.7              0.8            1.0
                                   ------------------------------------------------------------
  VARIANCE        -4.99% TO 5%

                                        0.8            1.0              1.1            1.2
                                   ------------------------------------------------------------
   (ACTUAL         +5% TO 15%

                                        1.0            1.1              1.2            1.4
                                   ------------------------------------------------------------
     VS.         +15.1% TO 25%

                                        1.2            1.5              1.7            1.8
                                   ------------------------------------------------------------
   BUDGET)           + 25%              1.4            1.7              1.8            2.0

</TABLE>



                           (ii) The final determination of EBITDA with respect
to any Performance Year shall be subject to the approval of the Compensation
Committee. If such approval is not obtained within 15 days after completion of
the Company's audited financial statements for the related Performance Year, the
Compensation Committee shall appoint a nationally recognized accounting firm
(which may be the Company's auditors) to determine EBITDA in respect of such
Performance Year.

                           (iii) If Executive is employed for a part of a
Performance Year, he shall receive a pro rated Bonus Award, determined by
computing the Bonus Award as if Executive were employed for the entire
Performance Year and MULTIPLYING such Award by a fraction, of which (i) the
numerator is the number of days he was employed by the Company during such
Performance Year and (ii) the denominator is 365. Notwithstanding the foregoing,
no Bonus Award shall be paid if Executive's employment was terminated either (x)
by the Board for Cause or (y) by the Executive without Good Reason.

                           (iv) Any compensation which may be otherwise
authorized from time to time by the Board (or an appropriate committee thereof)
shall be in addition to the Base Salary and any Bonus Award.

                           (b) SPECIAL BONUSES.(i) Promptly following the
execution of this Agreement, Executive shall receive a signing bonus of
$200,000. In addition, following Executive's repatriation to the United States,
Executive shall receive a relocation bonus of $150,000, which amount shall be
offset against any annual bonus paid to Executive for fiscal year 2000.

                  3.3 STOCK OPTIONS/RESTRICTED STOCK. In connection with the
execution of this Agreement, Executive shall receive options to purchase 189,000
shares of Common Stock


                                      -6-
<PAGE>

and 48,000 shares of restricted Common Stock. In addition, Executive shall be
entitled to receive annual grants of stock options and/or restricted stock in
amounts determined by the Board (or any committee thereof) in its sole and
absolute discretion.

                  3.4 OTHER BENEFITS. In addition to the Base Salary and the
Bonus Award, Executive shall also be entitled to the following:

                      (a) PARTICIPATION IN BENEFIT PLANS. Executive shall be
entitled to participate in and receive benefits under all present and future
life, accident, disability, medical, pension, and savings plan and all similar
benefits made available to senior executive officers of the Company. Executive
shall also be entitled to participate in all other welfare and benefit plans
maintained by the Company and/or its subsidiaries, as the case may be, for their
respective employees generally.

                      (b) VACATION. Executive shall be entitled to vacation and
paid holidays consistent with the Company's practices as adopted from time to
time; PROVIDED, HOWEVER, that such vacation shall not be less than twenty (20)
days each year.

                      (c) CAR ALLOWANCE. Executive shall be entitled to receive
a car allowance of $1,000 per month while residing in the United Kingdom. Once
Executive has been repatriated to the United States, the foregoing car allowance
shall terminate and be replaced with a parking allowance in the range of $500
per month

                      (d) HOUSE HUNTING EXPENSE AND CLOSING EXPENSE ALLOWANCE.
Executive shall be entitled to reimbursement of costs (business-class airfare,
five nights accommodations and meals) associated with two trips by himself and
his wife from the United Kingdom to the United States for the purpose of
locating a primary residence in the greater New York metropolitan area. In
addition, Executive shall be entitled to reimbursement for up to $25,000 of
closing costs (inclusive of associated legal fees) in connection with the
purchase of his new primary residence in greater the New York metropolitan area.

                      (e) FAMILY REPATRIATION. Executive shall be entitled to
reimbursement for business-class airfare, ground transportation, meals and
incidentals associated with the repatriation of Executive's family to the United
States. In addition, the Company will reimburse Executive for any loss incurred
on the sale of up to two of Executive's personal automobiles located in the
United Kingdom, the reimbursable amount of which will be determined on the basis
of a percentage of the sales price based on the age of the automobile, using
five-year straight-line depreciation. Further, Executive shall also be entitled
to elect to have the Company either (i) purchase his residence in London at its
fair market value (which shall not be less than the sum of the original purchase
price paid by Executive, associated closing costs and documented costs of any
improvements made to the house by Executive) or (ii) provide rental management
of Executive's residence in London, which services will be provided by
Relocation Resources International, and pay the difference, if any, between
Executive's mortgage expense on his London residence and the monthly rental
which is obtained for the residence. In connection with Executive's
repatriation, the Company will arrange for, and bear the costs associated with,
the shipment of Executive's household goods via its international moving company
and will arrange and pay for one door-to-door air shipment of any personal
effects that Executive needs immediately upon his arrival in the


                                      -7-
<PAGE>

United States. Finally, Executive shall receive a lump-sum payment for thirty
(30) days of interim living in the New York metropolitan area based on a per
diem rate for lodging, car rental, meals and incidentals.

                      (f) EXPENSES The Company shall reimburse Executive for
reasonable travel expenses and out of pocket business expenses incurred by
Executive in the performance of his duties hereunder, provided appropriate
documentation supporting such expenses is submitted in accordance with the
Company's governing policies.

                                   ARTICLE IV

                                    COVENANTS

                  4.1 NON-INTERFERENCE. During the Term and a period of two
years thereafter, Executive agrees not to solicit or encourage any employee of
the Company who is employed in an executive, managerial, administrative or
professional capacity or who possesses Confidential Material to leave the
employment of the Company.

                  4.2 NONDISCLOSURE OF CONFIDENTIAL MATERIAL. (a) In the
performance of his duties hereunder, Executive shall have access to confidential
records and information, including, but not limited to, information relating to
(i) any Intellectual Property or (ii) the Company's business practices,
finances, developments, customers, affairs, marketing or purchasing strategy or
other secret information (collectively, clauses (i) and (ii) of this Section
4.2(a) are referred to as the "Confidential Material").

                      (b) All Confidential Material shall be disclosed to
Executive in confidence. Except in performing his duties hereunder, Executive
shall not, during the Term and at all times thereafter, disclose or use any
Confidential Material other than for Company purposes.

                      (c) All records, files, drawings, documents, equipment and
other tangible items containing Confidential Material shall be the Company's
exclusive property, and, upon termination of this Agreement, or whenever
requested by the Company, Executive shall promptly deliver to the Company all of
the Confidential Material (and copies thereof) that may be in Executive's
possession or control. The Company hereby represents and warrants that it shall
give custody of such Confidential Material to a escrow agent, with terms
acceptable to both the Company and the Executive, for a three-year period at an
annual cost not to exceed $3,000.

                      (d) The foregoing restrictions shall not apply if (i) such
Confidential Material has been publicly disclosed (not due to a breach by
Executive of his obligations hereunder or by breach of any other person of a
fiduciary or confidential obligation to the Company) or (ii) Executive is
required to disclose Confidential Material by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency, authority or
instrumentality of competent jurisdiction; PROVIDED, HOWEVER, that Executive
shall, prior to any such disclosure, immediately notify the Company of such
requirement; PROVIDED, FURTHER, that the Company shall have the right, at its
expense, to object to such disclosures and to seek


                                      -8-
<PAGE>

confidential treatment of any Confidential Material to be so disclosed on such
terms as it shall determine.

                  4.3 NON-COMPETITION. (a) The Executive shall not, during the
Term, Control any Person which is engaged, directly or indirectly, or
Participate in any business that is competitive with the Company's business of
developing, operating or expanding a facilities-based telecommunications voice
or data network within any country in any European Union member state,
Switzerland or any country (excluding the Americas) in which the Company
currently has a switch or point of presence for either origination or
termination of voice or data transmissions or in which the Company is so engaged
in business or proposes to be so engaged in business in accordance with its
strategic business plan current at the time of the Termination (including the
solicitation of any customer of the Company on behalf of any competitor or any
other business, directly, indirectly on behalf of himself or any other Person)
(collectively, "Competitive Activities"); PROVIDED, HOWEVER, that nothing in
this Agreement shall preclude Executive from owning less than 5% of any class of
publicly traded equity of any Person engaged in any Competitive Activity.
Notwithstanding the immediately preceding sentence, if the Company has ceased to
so provide such services within any such country at the time of Executive's
Termination (or any time thereafter), the covenant set forth in the immediately
preceding sentence shall no longer be applicable to such any such business in
such country.

                      (b) Upon any Termination, the Executive shall not, for
himself or any third party, directly or indirectly, for a period of one-year
following the date of such Termination engage in Competitive Activities.

                4.4   EXECUTIVE INVENTIONS AND IDEAS.

                      (a) Executive hereby agrees to assign to the Company,
without further consideration, his entire right, title and interest (within the
United States and all foreign jurisdictions), to any Intellectual Property
created, conceived, developed or reduced to practice by Executive (alone or with
others), free and clear of any lien or encumbrance. If any Intellectual Property
shall be deemed patentable or otherwise registrable, Executive shall assist the
Company (at its expense) in obtaining letters patent or other applicable
registration therein and shall execute all documents and do all things
(including testifying at the Company's expense) necessary or appropriate to
obtain letters patent or other applicable registration therein and to vest in
the Company, or any affiliate specified by the Board.

                      (b) Should the Company be unable to secure Executive's
signature on any document necessary to apply for, prosecute, obtain or enforce
any patent, copyright or other right or protection relating to any Intellectual
Property, whether due to Executive's Disability or other reason, Executive
hereby irrevocably designates and appoints the Company and each of its duly
authorized officers and agents as Executive's agent and attorney-in-fact to act
for and on Executive's behalf and stead and to execute and file any such
document and to do all other lawfully permitted acts to further the prosecution,
issuance and other enforcement of patents, copyrights or other rights or
protections with the same effect as if executed and delivered by Executive.

                                      -9-
<PAGE>

                  4.5 ENFORCEMENT.

                      (a) Executive acknowledges that violation of any covenant
or agreement set forth in this Article IV would cause the Company irreparable
damage for which the Company cannot be reasonably compensated in damages in an
action at law, and, therefore, upon any breach by Executive of this Article IV,
the Company shall be entitled to make application to a court of competent
jurisdiction for equitable relief by way of injunction or otherwise (without
being required to post a bond). This provision shall not, however, be construed
as a waiver of any of the rights which the Company may have for damages, and all
of the Company's rights and remedies shall be unrestricted.

                      (b) If any provision of this Agreement, or application
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction or be found in an arbitration proceeding to be invalid,
unenforceable or void, the remainder of this Agreement and such provisions as
applied to any other person, place and circumstance shall remain in full force
and effect. It is the intention of the parties hereto that the covenants
contained herein shall be enforced to the maximum extent (but no greater extent)
in time, area, and degree of participation as is permitted by the law of the
jurisdiction whose law is found to be applicable to the acts allegedly in breach
of this agreement, and the parties hereby agree that the court making any such
determination shall have the power to so reform the Agreement.

                      (c) The Executive understands that the provisions of this
Article IV may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to time and the scope of activity
to be restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate Executive for the restrictions contained in
this Article IV. In consideration of the foregoing and in light of Executive's
education, skills and abilities, Executive agrees that he will not assert, and
it should not be considered, that any provisions of this Article IV prevented
him from earning a living or otherwise are void, voidable or unenforceable or
should be voided or held unenforceable.

                      (d) Each of the covenants of this Article IV is given by
Executive as part of the consideration for this Agreement and as an inducement
to the Company to enter into this Agreement and accept the obligations
hereunder.

                                    ARTICLE V

                                   TERMINATION

                  5.1 TERMINATION OF AGREEMENT. Except as otherwise provided,
this Agreement shall become invalid upon any Termination of employment.


                                      -10-
<PAGE>

                  5.2 PROCEDURES APPLICABLE TO TERMINATION.

                      (a) TERMINATION FOR CAUSE. The Executive may be terminated
for Cause, upon prior written notice from the Board to Executive for termination
for Cause provided that Executive, with his counsel, shall have had the
opportunity during such period to be heard at a meeting of the Board concerning
such determination. The Executive's right to be heard in connection with a
Termination shall not otherwise effect the rights and obligations hereunder.

                      (b) RESIGNATION FOR GOOD REASON. The Executive may
terminate his employment for Good Reason, upon prior written notice from
Executive to the Board of his intent to resign for Good Reason provided that
Executive, with his counsel, shall have met with the Board, if requested by the
Board, during such period with respect to his intent to resign. The Executive's
obligation to be heard in connection with a Termination shall not otherwise
effect the rights and obligations hereunder.

                      (c) TERMINATION WITHOUT CAUSE. The Executive may be
terminated without Cause, upon prior written notice from the Board to Executive,
by a vote of the Board, provided that Executive, with his counsel, shall have
had the opportunity during such period to be heard at a meeting of the Board
with respect to such determination. The Executive's right to be heard in
connection with a Termination shall not otherwise effect the rights and
obligations hereunder.

                      (d) TERMINATION FOR DISABILITY. The Executive may be
terminated for Disability, upon prior written notice from the Board to
Executive, by a vote of the Board, provided that Executive, with his counsel,
shall have had the opportunity during such period to be heard at a meeting of
the Board with respect to such determination. The Executive's right to be heard
in connection with a Termination shall not otherwise effect the rights and
obligations hereunder.

                      (e) TERMINATION UPON A CHANGE OF CONTROL. Upon the
occurence of any transaction resulting in a Change of Control, the Executive may
terminate his employment by providing written notice of such termination to the
Company within 60 days of the effective date of such Change of Control.

                  5.3 OBLIGATIONS OF THE COMPANY UPON TERMINATION.

                      (a) ALL TERMINATIONS. Upon any Termination, the Company
shall pay to Executive, or, upon Executive's Disability, to his heirs, estate or
legal representatives, as the case may be, the following:

                          (i) all Accrued Obligations in a lump sum within 10
days after the date of Termination; and

                          (ii) all benefits accrued by Executive as of the date
of Termination under all qualified and nonqualified retirement, pension, profit
sharing and similar plans of the Company to such extent, in such manner and at
such time as are provided under the terms of such plans and arrangements.


                                      -11-
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                      (b) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD
REASON. If the Board terminates Executive's employment without Cause (excluding
Termination because of Disability), or if Executive resigns for Good Reason, in
addition to the amounts payable under Section 5.3(a) hereof:

                          (i) The Company shall pay Executive the Severance
Payment in a lump sum within 10 days after the date of Termination; and

                          (ii) The Company shall continue all benefits coverage
of Executive and any dependents then provided under its benefit plans or
policies for the unexpired portion of the Term.

                      (c) TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD
REASON. If the Board terminates Executive's employment for Cause, or if
Executive resigns without Good Reason, Executive shall only be entitled to the
amounts payable under Section 5.3(a) hereof.

                      (d) TERMINATION FOR DISABILITY. Upon Termination of
Executive because of a Disability, in addition to the amounts payable under
Section 5.3(a) hereof, the Company shall pay the aggregate Disability Payment
for the greater of (i) three years (in accordance with the Company's regular
payroll practices then in existence) and (ii) the period covered by any
Disability Plan.

                      (e) TERMINATION UPON A CHANGE OF CONTROL. If Executive
provides Notice of Termination of employment within 60 days of the date that a
Change of Control occurs, in addition to the amounts payable under Section
5.3(a) hereof, Executive shall be entitled to the benefits provided below,
without regard to any contrary provision of any plan:

                          (i) INSURANCE COVERAGE. The Company shall arrange to
provide Executive (and dependents, if applicable) with life, disability (to the
extent available at standard commercial rates), accident, dental and medical
benefits substantially equivalent to those which Executive receives, or was
entitled to receive, from the Company immediately before a Change of Control of
the Company. Such benefits shall be provided for the longer of (x) thirty six
(36) months after such Date of Termination or (y) the period during which such
benefits would have been provided to Executive, as a terminated employee, under
the applicable life, disability, accident, dental and medical plans in effect
immediately before a Change of Control of the Company (except that after a
period of thirty six (36) months such benefits shall be provided on the same
financial terms and conditions as provided for under the respective plans).

                          Should it be determined that any of the medical
benefits to be provided to Executive (and dependents, if applicable) under this
subparagraph could be included in Executive's gross income for federal, state or
local tax purposes, then the following shall apply:

                               (A) If Executive is retirement eligible on
Executive's Date of Termination, then Executive shall participate in the
Company's medical benefit plans as if Executive retired from the Company on
Executive's Date of Termination, except that the Company shall provide such
medical coverage at no cost to Executive for three


                                      -12-
<PAGE>

(3) years following Executive's Date of Termination. Thereafter, Executive shall
participate therein on the same terms as other retired employees; and

                               (B) If Executive is not eligible for retirement
upon Executive's Date of Termination, Executive will no longer continue to
participate in the Company's medical benefit plans and (i) the Company shall
provide Executive with a cash payment in an amount equal to the amount required
by Executive to pay for coverage under COBRA for the first eighteen (18) months
following Executive's loss of medical coverage, and thereafter, (ii) the Company
shall, for the subsequent eighteen (18) months, purchase for Executive, at its
cost, a policy of medical insurance providing benefits substantially similar to
the benefits Executive would have received under the Company's medical benefit
plans.

                          (ii) RETIREMENT BENEFITS. (A) The Company shall pay
Executive, at the time Executive is entitled to be paid a retirement pension
under the Retirement Program, a retirement pension equal to the greater of (x)
an amount computed in accordance with the terms of any Retirement Program in
effect immediately before the Change of Control, or (y) an amount computed in
accordance with the terms of the Retirement Program in effect immediately before
the Date of Termination, in either case less the amount of retirement pension
actually to be paid to Executive under the Retirement Program. In computing the
amounts of Executive's retirement pension hereunder and vesting thereunder,
three years shall be added to Executive's actual age and to actual service under
the Retirement Program so that Executive's retirement pension will be the amount
it would have been if Executive had been three years older than Executive
actually were, and had three years more years of service than Executive actually
had, on the Date of Termination.

                               (B) If for any reason, the retirement benefits
cannot be paid under the tax-qualified portion of the Retirement Program, the
Company shall provide such benefits to Executive through the purchase, and
delivery to Executive, of a non-qualified annuity from an insurance company, or
Executive may elect to receive a lump sum payment for the benefits.

                          (iii) FINANCIAL COUNSELING. The Company shall, within
60 days of the Date of Termination, make available to Executive financial
counseling, tax counseling and tax preparation services. Executive may select
the organization that will provide such services. However, the Company's
obligation to provide Executive benefits under this subparagraph (iii) shall be
limited to $10,000. The Company shall provide to Executive any information
Executive request regarding Executive's personal and financial situation that
Executive wish to provide to the financial counseling firm in order for the firm
to provide the counseling services required by this subparagraph (iii).

                          (iv) SEVERANCE PAYMENT. Upon a Change of Control, the
Company shall pay the Severance Payment to Executive not later than the fifth
day following the Date of Termination.

                          (v) NO REDUCTION IN SEVERANCE PAYMENT. The Severance
Payment shall not be reduced regardless of whether the Company can properly
deduct amounts paid pursuant to Code section 280G.


                                      -13-
<PAGE>

                          (vi) GROSS UP PAYMENT (A) If it shall be determined
that a Payment would be subject to an Excise Tax, then Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that, after payment by Executive of Income Tax and Excise Tax imposed upon
the Gross-Up Payment, Executive shall retain an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment. Such payment shall be made as
soon as practicable.

                               (B) All determinations required to be made
hereunder, including whether a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the public accounting firm that is retained by
the Company as of the date immediately before a Change of Control of the Company
(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and to Executive within fifteen (15) business days of the
receipt of notice from Executive that there has been a Payment, or such earlier
time as is requested by the Company (collectively, the "Determination"). If the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control of the Company, Executive may appoint
another nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined hereunder
shall be paid by the Company to Executive within ten (10) days of the
Determination. If the Accounting Firm determines that no Excise Tax is payable
by Executive, Executive may request the Accounting Firm to furnish Executive
with a written opinion that failure to report the Excise Tax on Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. If the Company exhausts its remedies hereunder,
and Executive thereafter is required to make payment of any Excise Tax or Income
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for Executive's benefit.

                          (C) Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment or the Underpayment. Such
notification shall be given as soon as practicable but no later than ten (10)
business days after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which Executive give such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:


                                      -14-
<PAGE>

                              (1) give the Company any information reasonably
requested by the Company relating to such claim,

                              (2) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,

                              (3) cooperate with the Company in good faith in
order effectively to contest such claim, and

                              (4) permit the Company to participate in any
proceeding relating to such claim;

PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or Income Tax imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this subparagraph (vi)(C), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; PROVIDED FURTHER, that if the Company directs Executive
to pay such claim and sue for a refund, the Company shall advance the amount of
such payment to Executive on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or Income Tax
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and PROVIDED FURTHER, that any extension of the statute
of limitations relating to payment of taxes for Executive's taxable year with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

                              (D) If, after the receipt by Executive of an
amount advanced by the Company, Executive become entitled to receive, and
receive, any refund with respect to such claim, Executive shall (subject to the
Company's complying with the requirements hereof) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company, a determination is made that Executive shall not be
entitled to any refund with respect to such claims and the Company does not
notify Executive in writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid.


                                      -15-
<PAGE>

                              (vii) VESTING. Upon a Change of Control, all
incentive compensation awards, whether stock options, restricted stock or
otherwise, which have not previously vested, shall automatically be deemed to
have vested and Executive may exercise such awards in accordance with the terms
and conditions of the award as if Executive were still employed by the Company.

                              (viii) CONSULTANCY ENGAGEMENT. (A) Upon the
occurrence of a Change of Control and provision of Notice of Termination by the
Executive, the Company may elect to require Executive to provide consulting
services for a six- (6) month period commencing the date of such election. Such
election shall be made by the Company's provision to Executive of written notice
made no later than thirty (30) days after the receipt of any Notice of
Termination by the Executive.

                                     (B) If such election is made, Executive
agrees to accept such engagement, in accordance with the following terms and
conditions: Executive shall be available to render such advisory and
consultative services up to thirty five (35) hours per week, but no more than
120 hours in any calendar month during the Term. Such services will be performed
during normal business hours, Monday through Friday, national and New York State
holidays excepted, and subject to reasonable absences for vacation and personal
reasons (with respect to any particular week). No more than ten (10) days away
from the New York metropolitan area, including travel, shall be required in any
calendar month.

                                     (C) As consideration for Executive's
services hereunder, the Company shall pay Executive a Consulting Fee equal to
125% of the Base Salary in effect immediately before the Change of Control and
125% of Bonus Award for the prior fiscal year pro rated for the six month term
and paid on a semi-monthly basis in accordance with regular payroll practices
prior to the Change of Control. Such fee shall be paid without regard to the
number of hours of services actually provided pursuant to the terms hereof if
the Company does not request the Executive to provide the maximum number of
hours.

                                     (D) The Company shall supply Executive with
all materials which the Executive may reasonably require and shall reimburse
Executive for any reasonable out-of-pocket expenses incurred in providing
services, including, but not limited to, first class travel if services are
required to be provided outside of New York State.

                                     (E) Executive shall be indemnified by the
Company against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action, suit,
investigation or proceeding or similar legal activity, regardless of whether
criminal, civil, administrative or investigative in nature, to which he is made
a party by reason of his then providing or having provided services to the
Company hereunder.

                                     (F) The Non-Competition period set forth in
Section 4.3 hereof shall commence on the last date of employment of Executive
(as specified in the Notice of Termination), regardless of whether the Company
exercises its option hereunder.


                                      -16-
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                              (ix) NO DUTY TO MITIGATE. Executive shall not be
required to mitigate the amount of any payment provided for hereunder by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
hereunder be reduced by any compensation earned by Executive as the result of
employment by another employer or by retirement benefits after the Date of
Termination, or otherwise; provided, however, should Executive become reemployed
in a job which (a) offers medical plan benefits which are equal to or greater
than the medical plan benefits provided to Executive under subparagraph 3.4(a),
and (b) such medical plan benefits are offered to Executive at no cost,
Executive shall no longer be eligible to receive medical plan benefits under
this Agreement.

                                   ARTICLE VI

                                  MISCELLANEOUS

                  6.1 EXECUTIVE ACKNOWLEDGMENT. The Executive acknowledges that
he has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based on his own
judgment.

                  6.2 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of Executive's heirs and representatives and the Company's
successors and assigns. The Company shall require any successor (whether direct
or indirect, by purchase, merger, reorganization, consolidation, acquisition of
assets or stock, liquidation, or otherwise), by agreement in form and substance
reasonably satisfactory to Executive, to assume performance of this Agreement in
the same manner that the Company would have been required to perform this
Agreement if no such succession had taken place. Regardless of whether such
agreement is executed, this Agreement shall be binding upon any successor of the
Company in accordance with the operation of law.

                  6.3 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class certified mail, return receipt requested, postage prepaid,
addressed as follows:

                           (a)      if to the Board or the Company, to:

                                    Viatel, Inc.
                                    685 Third Avenue, 24th Floor
                                    New York, New York 10017
                                    Attention:  General Counsel

                           (b)      if to Executive, to:

                                    62 Clonmel Road
                                    London SW6 UK

                                    with a copy to:


                                      -17-
<PAGE>

Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.

                  6.4 TAX WITHHOLDING. The Company shall provide for the
withholding of any taxes required to be withheld under federal, state and local
law (other than the employer's portion of such taxes) with respect to any
payment in cash and/or other property made by or on behalf of the Company to or
for the benefit of Executive under this Agreement or otherwise. The Company may,
at its option: (i) withhold such taxes from any cash payments owing from the
Company to Executive, (ii) require Executive to pay to the Company in cash such
amount as may be required to satisfy such withholding obligations and/or (iii)
make other satisfactory arrangements with Executive to satisfy such withholding
obligations.

                  6.5 NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. Except as
otherwise expressly provided in Section 6.2 hereof, this Agreement is not
assignable by any party, and no payment to be made hereunder shall be subject to
alienation, sale, transfer, assignment, pledge, encumbrance or other charge.
Except for the Company and its existing and future subsidiaries, no Person shall
be, or deemed to be, a third party beneficiary of this Agreement.

                  6.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed
by the parties hereto in one or more counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.

                  6.7 JURISDICTION AND GOVERNING LAW. Jurisdiction over disputes
with regard to this Agreement shall be exclusively in the courts of the State of
New York, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of New York as applied to contracts
capable of being wholly performed in such State.

                  6.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement embodies the
entire understanding of the parties hereto, and supersedes all prior employment
and related agreements, regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
both of the parties hereto.

                  6.9 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.

                  6.10 SURVIVAL. Notwithstanding anything to the contrary
herein, Section Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination for any reason whatsoever.


                                      -18-
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed and
delivered thisAgreement as of the day first written above.

                                  VIATEL, INC.

                                  By: /s/ MICHAEL J. MAHONEY
                                      --------------------------------

                                  EXECUTIVE

                                  /s/ WILLIAM C. MURPHY
                                  ------------------------------------

                                  William C. Murphy



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