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                                                                   EXHIBIT 10.12

                           EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, dated as of November 6, 2000
(hereinafter "Agreement"), by and between PSINet Inc. (hereinafter "the
Company"), a New York corporation with its principal place of business located
at 44983 Knoll Square, Ashburn, Virginia 20147 and Kathleen B. Horne
(hereinafter "the Executive").

                  WHEREAS, the Company has determined that it is in the best
interests of the Company to delegate certain management responsibilities of the
Company to the Executive;

                  WHEREAS, the Executive is willing to provide her services as
an employee of the Company for the inducements and on the terms and conditions
set forth below in this Agreement; and

                  NOW, THEREFORE, in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

         1.       EMPLOYMENT POSITION.

                  (a)      POSITION AND DUTIES. The Company hereby employs the
                  Executive to serve as Senior Vice President and General
                  Counsel of the Company, and the Executive hereby accepts such
                  employment in the capacity and subject to the terms and
                  conditions hereinafter set forth. This position is a corporate
                  officer position and, as an officer of the Company, the
                  Executive must stand for election by the Company's Board of
                  Directors (the "Board") each year of the Term (as defined in
                  Section 2 hereof). The Executive shall have such powers,
                  duties, authority, and responsibilities as are (i) consistent
                  with such position, (ii) assigned to such offices in the
                  Company's By-laws, and (iii) reasonably assigned to the
                  Executive by the Chairman and Chief Executive Officer of the
                  Company. The Executive accepts such employment and agrees to
                  remain in the employ of the Company and provide management
                  services to the Company, as determined by and under the
                  direction of the Chairman and Chief Executive Officer.

                  (b)      LOCATION OF EMPLOYMENT. The principal place of
                  employment of the Executive shall be in the greater
                  Washington, D.C. area. The Executive shall be available to
                  travel to the extent reasonably required to carry out the
                  duties and responsibilities as Senior Vice President and
                  General Counsel or as otherwise may be reasonably required by
                  the business of the Company.

                  (c)      MANAGEMENT RESPONSIBILITIES. The Executive shall at
                  all times perform his responsibilities and duties with
                  appropriate care and consistent with his position as may be
                  assigned by the Chairman and Chief Executive Officer of the
                  Company and shall at all times exercise reasonable judgment
                  and discretion in the performance of such responsibilities and
                  duties.

         2.       TERM OF EMPLOYMENT. The initial term of the Executive's
employment under this Agreement shall commence as of the date of this Agreement
and shall terminate on the third anniversary hereof (the "Initial Term") subject
to earlier termination as provided in Section 6.


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After the Initial Term, this Agreement shall be automatically extended each year
for an additional one (1) year period (each, a "Renewal Term"). The Initial Term
together with any Renewal Term are referred to herein collectively as the
"Term."

         3.       COMPENSATION.

                  (a)      BASE SALARY. The Company shall pay the Executive a
                  base salary at a rate of $265,000.00 per year beginning on the
                  date hereof. Beginning on January 1, 2001 and January 1 of
                  each subsequent year thereafter, the Executive's base salary
                  shall be increased at a minimum by an amount equal to five
                  percent (5%) of the Executive's then current base salary. The
                  Executive's base salary shall be subject to additional
                  increases at the discretion of the Chairman and Chief
                  Executive Officer of the Company subject to the approval of
                  the Compensation Committee of the Board (the "Compensation
                  Committee"). The Executive's base salary shall be payable in
                  such installments as the Company regularly pays its other
                  salaried employees. All payments shall be subject to the
                  deduction of payroll withholdings taxes and similar
                  assessments as required by law or by further agreement with
                  the Executive.

                  (b)      PERFORMANCE BONUS. The Company will pay the Executive
                  a bonus subject to the successful completion of the objectives
                  established for the Executive's performance for each calendar
                  year during the Term. The performance criteria will be issued
                  separately by the Chairman and Chief Executive Officer of the
                  Company with respect to each calendar year during the Term,
                  and may be changed, with mutual fairness, from time to time as
                  situations develop. The target bonus for the one-year period
                  ending December 31, 2000 will be a total of up to $125,000.00.
                  Separate criteria will be established for the Executive's
                  entitlement for the year starting January 1, 2001. Bonuses in
                  subsequent years during the Term will be at least equal to the
                  amount of the bonus during the previous calendar year.

                  (c)      STOCK OPTIONS. On the first anniversary of the date
                  of this Agreement and each subsequent anniversary date during
                  the Term, the Company shall grant the Executive options to
                  purchase 25,000 shares of the Company's common stock (the
                  "Options") pursuant to the Company's Executive Stock Incentive
                  Plan (the "Plan") or another option plan of the Company, such
                  grant being subject to the terms of this Agreement and the
                  Executive's continued employment at the time of the grant and
                  evidenced by an option agreement in such form and under the
                  terms and conditions set forth in the applicable plan.

                  (d)      VESTING OF STOCK OPTIONS. In the event of (i) a
                  Change in Control (as defined in Section 3(e) hereof); (ii)
                  the termination of the Executive's employment by the Company
                  for any reason other than for Cause (as defined in Section
                  6(c) hereof); or (iii) the termination of the Executive by the
                  Company because of the Executive's death or disability, the
                  Company shall immediately vest all of the unvested stock
                  options the Executive has received prior to the date of the
                  Change in Control or Date of Termination (as defined in
                  Section 6(j) hereof), as applicable.

                  (e)      CHANGE IN CONTROL. As used in this Agreement, "Change
                  in Control" shall mean: (i) the shareholders of the Company
                  approve an agreement for the


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                  sale of all or substantially all of the assets of the Company;
                  or (ii) the shareholders of the Company approve a merger or
                  consolidation of the Company with any other corporation (and
                  the Company implements it), other than (A) a merger or
                  consolidation which would result in the voting securities of
                  the Company outstanding immediately prior thereto continuing
                  to represent more than eighty percent (80%) of the combined
                  voting power of the voting securities of the Company, or such
                  surviving entity, outstanding immediately after such merger or
                  consolidation, or (B) a merger or consolidation effected to
                  implement a recapitalization of the Company (or similar
                  transaction) in which no "person" (as defined below) acquires
                  more than thirty percent (30%) of the combined voting power of
                  the Company's then-outstanding securities; or (iii) any
                  "person," as such term is used in Sections 13(d) and 14(d) of
                  the Securities Exchange Act of 1934, as amended (the "Exchange
                  Act") (other than (1) the Company or (2) any corporation
                  owned, directly or indirectly, by the Company or the
                  shareholders of the Company in substantially the same
                  proportions as their ownership of stock in the Company), is or
                  becomes the "beneficial owner" (as defined in Rule 13d-3 under
                  the Exchange Act), directly or indirectly, of securities of
                  the Company representing thirty percent (30%) or more of the
                  combined voting power of the Company's then outstanding
                  securities.

         4.       FRINGE BENEFITS; AUTOMOBILE ALLOWANCE.

                  (a)      During the Term, the Executive shall be entitled to
                  the maximum benefits that are generally provided to all senior
                  executives of the Company under any life insurance, group
                  insurance, medical, retirement, pension or other employee
                  benefit or incentive plans or pursuant to other arrangements
                  or understandings (excluding any equity, equity option or
                  equity bonus plans), so long as any such plan, benefit,
                  arrangement or understanding remains generally available to
                  all other senior executive officers of the Company.

                  (b)      During the Term, the Executive shall also receive an
                  automobile allowance of $800 per month or whatever greater
                  amount the Company pays to its Executives as a matter of
                  standard practice from time to time.

                  (c)      During the Term, the Executive shall be entitled to
                  financial and tax advice at the Company's expense through the
                  Mason Companies up to a maximum amount of $7,000.00 per year.

                  (d)      During the Term, the Executive shall be entitled to
                  four (4) weeks paid vacation each year which can accumulate to
                  a maximum of six (6) weeks.

         5.       EXPENSE REIMBURSEMENT. In addition to the compensation and
benefits provided in Sections 3 and 4, the Company shall, upon receipt of
appropriate documentation, reimburse the Executive for his reasonable travel,
lodging, entertainment, and other ordinary and necessary business expenses
incurred in the course of his duties on behalf of the Company during the Term.

         6.       TERMINATION. The Term is subject to early termination as
provided below:

                  (a)      TERMINATION BY THE COMPANY BECAUSE OF THE EXECUTIVE'S
                  DISABILITY. If at any time during the Term, the Company
                  determines in good faith that the Executive has been unable,
                  as a result of physical or mental illness or incapacity,


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                  to perform his duties hereunder for a period of either (i) one
                  hundred eighty (180) consecutive days during any twelve-month
                  period or (ii) ninety (90) consecutive days during any
                  twelve-month period if the Executive's physical or mental
                  illness or incapacity would reasonably be expected to continue
                  for another consecutive ninety (90) day period after such
                  initial ninety (90) day period, the Term may be terminated by
                  the Company upon thirty (30) days' written notice to the
                  Executive. Should the Executive be terminated pursuant to this
                  Section 6(a), he shall be entitled to Termination Payments as
                  provided for in Section 6(g).

                  (b)      TERMINATION BY THE COMPANY BECAUSE OF THE EXECUTIVE'S
                  DEATH. In the event that the Executive's death occurs prior to
                  the expiration of the Term, the Term shall terminate as of the
                  date of the Executive's death. Should the Executive be
                  terminated pursuant to this Section 6(b), he shall be entitled
                  to Termination Payments as provided for in Section 6(g).

                  (c)      TERMINATION BY THE COMPANY FOR CAUSE. The Executive's
                  employment may be terminated by the Company at any time for
                  "Cause." In the event of a termination for Cause, all salary
                  and benefits otherwise payable to the Executive shall cease
                  immediately upon such termination. For purposes of this
                  Agreement, the Company shall have Cause for termination of the
                  Executive's employment under this Agreement by reason of (i)
                  any breach by the Executive of his agreement not to compete or
                  solicit pursuant to Section 7 hereof; (ii) any violation of
                  Company policy which materially and adversely affects the
                  business or reputation of the Company; (iii) any act or
                  omission by the Executive constituting willful misconduct or
                  gross negligence, (iv) the Executive's conviction of a felony
                  (or a plea of guilty or NOLO CONTENDRE thereto); (v) the
                  Executive's conviction of any other criminal action (or a plea
                  of guilty or NOLO CONTENDRE thereto) that has or might
                  reasonably be expected to have an adverse effect on the
                  business or reputation of the Company or its subsidiaries;
                  (vi) the Executive's commission of an act of fraud; (vii) a
                  material breach by the Executive of any provision of this
                  Agreement which breach and the effects thereof remain uncured
                  for a period of thirty (30) days after written notice,
                  specifically identifying the breach, is given to the Executive
                  by the Company (however, it being expressly understood that
                  the Company need not provide any notice and may terminate the
                  Executive immediately where the Company in good faith believes
                  that the Executive's material breach is not curable within
                  thirty (30) days); or (viii) the Executive's voluntary
                  resignation without Good Reason and without having given the
                  Company at least thirty (30) days prior written notice.

                  (d)      TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company
                  may terminate the employment of the Executive under this
                  Agreement at any time without cause with thirty (30) days'
                  prior written notice. Should the Executive be terminated
                  pursuant to this Section 6(d), he shall be entitled to
                  Termination Payments as provided for in Section 6(g).

                  (e)      TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. The
                  Executive may terminate his employment at any time without
                  Good Reason (as that term is defined in Section 6(f)),
                  provided that the Executive shall have given the Company at
                  least thirty (30) days prior written notice of such
                  termination. In the event of termination by the Executive
                  without Good Reason, the Executive's


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                  salary and benefits shall continue during the notice period
                  specified by the Executive and shall cease thereafter.

                  (f)      TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The
                  Executive may terminate his employment at any time for Good
                  Reason. For purposes of this Agreement, "Good Reason" shall
                  mean any of the following occurrences but only if occurring
                  within twelve (12) months after a Change in Control:

                           (i)      the diminution or change, without the
                           Executive's written consent, of his position, title,
                           authority, duties or responsibilities as indicated
                           in Section 1(a) hereof;

                           (ii)     the Company requiring the Executive, without
                           his written consent, to be based at any office or
                           location or to relocate to any location other than
                           the Company's headquarters which shall be located
                           in the Washington, D.C. area;

                           (iii)    any material breach by the Company of this
                           Agreement which is not cured within thirty (30) days
                           after notice is given to the Company in accordance
                           with this Agreement.

                  (g)      TERMINATION PAYMENTS. A. If the Executive's
                  employment is terminated by the Company (1) without Cause
                  pursuant to Section 6(d) or (2) because of the Executive's
                  death or disability pursuant to Section 6(a) or (b) (each of
                  the circumstances in Section 6(g)(A)(1) and (2) being known as
                  a "Termination Event"), the Company shall provide the
                  Executive (or, in the case of his death, his estate, heirs or
                  legal representatives) the following (collectively, the
                  "Termination Payments"), to be paid or given within thirty
                  (30) days of the Date of Termination (except with respect to
                  item (iii) below which will be granted and given in accordance
                  with Section 3(d) herein):

                           (i)      a lump sum representing (1) the Executive's
                           monthly base salary as derived from the Executive's
                           annual salary and giving effect to all annual
                           increases thereto as provided in Section 3(a) herein,
                           times the greater of (Y) the number of months
                           remaining in the current Term and (Z) twenty-four
                           (24) months; and (2) all other accrued and unpaid
                           amounts due to the Executive as of the Date of
                           Termination (including, without limitation, accrued
                           vacation pay and reimbursement of business expenses);

                           (ii)     a lump sum representing all annual bonus
                           amounts, as provided for in Section 3(b) hereof,
                           calculated on the assumption that all performance
                           criteria objectives would have been exceeded, such
                           that the Executive would receive the maximum bonus
                           established by the Chairman and Chief Executive
                           Officer of the Company to which the Executive would
                           have been entitled had he remained employed by the
                           Company for the longer of (Y) the remainder of the
                           current Term or (Z) twenty-four (24) months after the
                           Date of Termination; and

                           (iii)    the vested options provided in Section 3(d).


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                           Moreover, should the Company terminate the Executive
                  without Cause pursuant to Section 6(d) herein, the Executive
                  shall be entitled to the immediate vesting of such number of
                  options as are equal to the number which would have vested,
                  ratably, monthly, had the Executive remained employed for the
                  longer of the remainder of the current Term or twenty-four
                  (24) months after the Date of Termination.

                           B.       If the Executive terminates his employment
                  for Good Reason as defined in Section 6(f) or a Termination
                  Event occurs within twelve months after a Change in Control,
                  the Executive is entitled to the Termination Payments as
                  stated in Section 6(g)(A)(i) (ii) and (iii) above as well as
                  the following:

                           (iv)     continuation of all life insurance and
                           health benefits, disability insurance and benefits
                           and reimbursement theretofore being provided to the
                           Executive and/or his family, or such other more
                           favorable benefits applicable to any senior executive
                           officer of the Company, to which the Executive would
                           have been entitled had he remained employed by the
                           Company for the longer of (Y) the remainder of the
                           current Term or (Z) twenty-four (24) months after the
                           Date of Termination, with the exception of the car
                           allowance as provided in Section 4(b) herein;

                           (v)      Company contributions, to the extent
                           permitted by applicable law, to a SEP-IRA, Keogh or
                           other retirement mechanism reasonably selected by the
                           Executive sufficient to provide the same level of
                           retirement benefits the Executive would have received
                           if he had remained employed by the Company for the
                           longer of (Y) the remainder of the current Term or
                           (Z) twenty-four (24) months after the Date of
                           Termination provided, however, that the Company shall
                           make up the difference in cash payments directly to
                           the Executive to the extent that applicable law would
                           not permit it to make such contributions;

                           C.       In consideration of the Termination Payments
                  provided in this Section 6(g)(A) and (B), the Executive agrees
                  to execute a termination of employment agreement under which
                  the Executive agrees to fully release all claims against the
                  Company.

                  (h)      TAX PROVISIONS. In the event that any payments under
                  this Agreement or any other compensation, benefit or other
                  amount from the Company for the benefit of the Executive are
                  subject to the tax imposed by Section 4999 of the Internal
                  Revenue Code of 1986, as amended (the "Code") (including any
                  applicable interest and penalties, the "Excise Tax"), no such
                  payment ("Parachute Payment") shall be reduced (except for
                  required tax withholdings) and the Company shall pay to the
                  Executive by the earlier of the date such Excise Tax is
                  withheld from payments made to the Executive or the date such
                  Excise Tax becomes due and payable by the Executive, an
                  additional amount (the "Gross-Up Payment") such that the net
                  amount retained by the Executive (after deduction of any
                  Excise Tax on the Parachute Payments, taxes based upon the Tax
                  Rate (as defined below) upon the payment provided for by this
                  Section 6(h) and Excise Tax upon the payment provided for by
                  this Section 6(h)), shall be equal to the amount the Executive
                  would have received if no Excise Tax had been imposed.


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                  A Tax counsel chosen by the Company's independent auditors,
                  provided such person is reasonably acceptable to the Executive
                  ("Tax Counsel"), shall determine in good faith whether any of
                  the Parachute Payments are subject to the Excise Tax and the
                  amount of any Excise Tax, and Tax Counsel shall promptly
                  notify the Executive of its determination. The Company and the
                  Executive shall file all tax returns and reports regarding
                  such Parachute Payments in a manner consistent with the
                  Company's reasonable good faith determination. For purposes of
                  determining the amount of the Gross-Up Payment, the Executive
                  shall be deemed to pay taxes at the Tax Rate applicable at the
                  time of the Gross-Up Payment. In the event that the Excise Tax
                  is subsequently determined to be less than the amount taken
                  into account hereunder at the time a Parachute Payment is
                  made, the Executive shall repay to the Company promptly
                  following the date that the amount of such reduction in Excise
                  Tax is finally determined the portion of the Gross-Up Payment
                  attributable to such reduction (without interest). In the
                  event that the Excise Tax is determined to exceed the amount
                  taken into account hereunder at the time a Parachute Payment
                  is made (including by reason of any payment the existence or
                  amount of which cannot be determined at the time of the
                  Gross-Up Payment), the Company shall pay the Executive an
                  additional amount with respect to the Gross-Up Payment in
                  respect of such excess (plus any interest or penalties payable
                  in respect of such excess) at the time that the amount of such
                  excess is finally determined. The Company shall reimburse the
                  Executive for all reasonable fees, expenses, and costs related
                  to determining the reasonableness of any Company position in
                  connection with this paragraph and preparation of any tax
                  return or other filing that is affected by any matter
                  addressed in this paragraph, and any audit, litigation or
                  other proceeding that is affected by any matter addressed in
                  this Section 6(h) and an amount equal to the tax on such
                  amounts at the Executive's Tax Rate. For the purposes of the
                  foregoing, "Tax Rate" means the Executive's effective tax rate
                  based upon the combined federal and state and local income,
                  earnings, Medicare and any other tax rates applicable to the
                  Executive, all at the highest marginal rate of taxation in the
                  country and state of the Executive's residence on the date of
                  determination, net of the reduction in federal income taxes
                  which could be obtained by deduction of such state and local
                  taxes.

                  (i)      NOTICE OF TERMINATION. Any termination of the
                  Executive's employment during the Term by the Company or by
                  the Executive shall be communicated by Notice of Termination
                  to the other party hereto given in accordance with Section 16
                  of this Agreement. For purposes of this Agreement, a "Notice
                  of Termination" means a written notice which (i) indicates the
                  specific termination provision in this Agreement relied upon,
                  (ii) to the extent applicable, sets forth in reasonable detail
                  the facts and circumstances claimed to provide a basis for
                  termination of the Executive's employment under the provision
                  so indicated, and (iii) if applicable, specifies a termination
                  date. The failure by the Executive or the Company to set forth
                  in the Notice of Termination any fact or circumstance which
                  contributes to a showing of Good Reason or Cause shall not
                  waive any right of the Executive or the Company hereunder or
                  preclude the Executive or the Company, as applicable, from
                  asserting such fact or circumstance in enforcing the
                  Executive's or the Company's rights hereunder.

                  (j)      DATE OF TERMINATION. For purposes of this Agreement,
                  "Date of Termination" means (i) if the Executive's employment
                  is terminated by reason of


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                  death, the date of death; or (ii) if the Executive's
                  employment is terminated under any other circumstances, the
                  date of receipt of the Notice of Termination by the party
                  being so notified or any later date specified therein. For
                  purposes of this Agreement, the Executive will be deemed to be
                  employed through the end of the calendar day on the Date of
                  Termination.

         7.       COVENANTS OF EXECUTIVE

                  (a)      COVENANT NOT TO COMPETE. In consideration of the
                  Executive's employment pursuant to this Agreement and for
                  other good and valuable consideration, the receipt and
                  adequacy of which is hereby acknowledged, the Executive agrees
                  that, so long as the Executive is employed by the Company
                  under this Agreement and for a period of twelve (12) months
                  following the termination of such employment (but only if the
                  Company has elected to enforce the restriction), the Executive
                  shall not, without the prior written consent of the Company,
                  either for the Executive or for any other person, firm or
                  corporation, own, manage, operate, control, be employed by,
                  participate in or be associated in any manner with the
                  ownership, management, operation or control of any business
                  providing Internet-related, E-commerce, web-hosting, network
                  or communication services competitive with the Company as of
                  the Date of Termination or within six (6) months thereafter.
                  The foregoing shall in no event restrict the Executive from:
                  (i) the general practice of law, either individually or in a
                  private firm practice; (ii) writing or teaching, whether on
                  behalf of for-profit, or not-for-profit institution(s); (iii)
                  investing (without participating in management or operation)
                  in the securities of any private or publicly traded
                  corporation or entity; or (iv) after termination of
                  employment, becoming employed by a hardware, software or other
                  vendor to the Company, provided that such vendor does not
                  offer Internet-related, E-commerce, web-hosting, network or
                  communication services that are competitive with the services
                  offered by the Company as of the Date of Termination or within
                  six (6) months thereafter.

                  (b)      NONSOLICITATION. In consideration of the Executive's
                  employment pursuant to this Agreement and for other good and
                  valuable consideration, the receipt and adequacy of which is
                  hereby acknowledged, the Executive agrees that, so long as the
                  Executive is employed by the Company under this Agreement and
                  for a period of eighteen (18) months following the termination
                  of such employment, the Executive agrees not to hire, solicit,
                  nor attempt to solicit for himself or any third party, the
                  services of any employee or subcontractor of the Company or
                  any of the Company's subsidiaries or affiliates without the
                  Company's prior written consent; provided, however, that the
                  Executive is not prevented from employing such person who
                  contacts the Executive on his or her own initiative and
                  without any direct or indirect solicitation by the Executive.

                  (c)      BREACH/THREATENED BREACH. The Executive may request
                  permission from the Company's Board of Director's to engage in
                  activities which would otherwise be prohibited by Section 7(a)
                  or (b). The Company shall respond to such request within
                  thirty (30) days after receipt. The Company shall notify the
                  Executive in writing if it becomes aware of any breach or
                  threatened breach of any of the provisions in Section 7(a) or
                  (b), and the Executive shall have thirty (30) days after
                  receipt of such notice in which to cure or prevent the breach,
                  to the extent that the Executive is able to do so. The
                  Executive and the Company


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                  acknowledge that any breach or threatened breach by the
                  Executive of any of the provisions in Section 7(a) or (b)
                  above cannot be remedied by the recovery of damages, and agree
                  that in the event of any such breach or threatened breach
                  which is not cured with such 30-day period, the Company may
                  pursue injunctive relief for any such breach or threatened
                  breach. If a court of competent jurisdiction determines that
                  the Executive breached any of such provisions, the Executive
                  shall not be entitled to any Termination Payments from and
                  after date of the breach. In such event, the Executive shall
                  promptly repay any Termination Payments previously made plus
                  interest thereon from the date of such payment(s) at 12% per
                  annum. If, however, the Company has suspended making such
                  Termination Payments and a court of competent jurisdiction
                  finally determines that the Executive did not breach such
                  provision or determines such provision to be unenforceable as
                  applied to the Executive's conduct, the Executive shall be
                  entitled to receive any suspended Termination Payment, plus
                  interest thereon from the date when due at 12% per annum. The
                  Company may elect (once) to continue paying the Termination
                  Payments before a final decision has been made by the court.

                  (d)      OWNERSHIP OF WORK PRODUCT. All copyrights, patents,
                  trade secrets, or other intellectual property rights
                  associated with any ideas, concepts, techniques, inventions,
                  processes, or works of authorship developed or created by the
                  Executive during the course of performing the Company's work
                  (collectively the "Work Product") shall belong exclusively to
                  the Company and shall, to the extent possible, be considered a
                  work made for hire for the Company within the meaning of Title
                  17 of the United States Code. The Executive automatically
                  assigns, and shall assign at the time of creation of the Work
                  Product, without any requirement of further consideration, any
                  right, title, or interest the Executive may have in such Work
                  Product, including any copyrights or other intellectual
                  property rights pertaining thereto. Upon request of the
                  Company, the Executive shall take such further actions,
                  including execution and delivery of instruments of conveyance,
                  as may be appropriate to give full and proper effect to such
                  assignment.

                  (e)      EQUITABLE RELIEF. The Executive acknowledges and
                  agrees that the covenants and obligations of Executive
                  contained in Section 7 hereof relate to special, unique and
                  extraordinary matters and are reasonable and necessary to
                  protect the legitimate interests of the Company and that a
                  breach of any of the terms of such covenants and obligations
                  will cause the Company irreparable harm and injury for which
                  adequate remedies at law are not available. The Executive
                  therefore agrees that the Company need not prove actual
                  damages in order to obtain injunctive relief, a restraining
                  order, an order of specific performance or any other equitable
                  relief (together, "Equitable Relief") with respect to any of
                  Executive's obligations under Section 7. The Executive hereby
                  waives any claim or defense therein that the Company has an
                  adequate remedy at law or that money damages would provide an
                  adequate remedy. It shall, however, be the option of the
                  Company whether or not to seek Equitable Relief.


         8.       REPRESENTATION AND WARRANTIES.


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                  (a)      THE COMPANY. The Company hereby represents and
                  warrants to the Executive as follows:

                           (i)      the Company is duly organized, validly
                                    existing and in good standing under the laws
                                    of the State of New York;

                           (ii)     this Agreement has been duly authorized,
                                    executed and delivered by the Company and
                                    will constitute the legal, valid and binding
                                    obligation of the Company, enforceable
                                    against the Company in accordance with its
                                    terms, subject to applicable bankruptcy,
                                    insolvency, moratorium or other similar laws
                                    affecting the rights of creditors generally
                                    and to general principles of equity whether
                                    considered in a suit at law or in equity;
                                    and

                           (iii)    the execution and delivery of this Agreement
                                    by the Company, the performance by the
                                    Company of its obligations hereunder and the
                                    consummation by the Company of the
                                    transactions contemplated hereby will not
                                    violate any agreement to which the Company
                                    is a party.

                  (b)      EXECUTIVE. The Executive hereby represents and
                  warrants to the Company as follows:

                           (i)      this  Agreement  has been duly executed and
                                    delivered by the Executive and will
                                    constitute the legal, valid and binding
                                    obligation of the Executive, enforceable
                                    against the Executive in accordance with its
                                    terms, subject to applicable bankruptcy,
                                    insolvency, moratorium or other similar laws
                                    affecting the rights of creditors generally
                                    and to general principles of equity whether
                                    considered in a suit at law or in equity;

                           (ii)     the execution and delivery of this Agreement
                                    by Executive, the performance by the
                                    Executive of his obligations hereunder and
                                    the consummation by the Executive of the
                                    transactions contemplated hereby will not
                                    violate any agreement to which he is a
                                    party; and

                           (iii)    the Executive has made such investigations
                                    of the business and properties of the
                                    Company as he deems necessary or appropriate
                                    before entering into this Agreement.

         9.       TRANSFERABILITY.


                  (a)      This Agreement is personal to the Executive and
                  without the prior written consent of the Company shall not be
                  assignable by the Executive otherwise than by will or the laws
                  of descent and distribution. This Agreement shall inure to the
                  benefit of and be enforceable by the Executive's legal
                  representatives.

                  (b)      This Agreement shall inure to the benefit of and be
                  binding upon the Company, its successors and assigns.


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<PAGE>


                  (c)      The Company shall require any successor (whether
                  direct or indirect, by purchase, merger, consolidation, share
                  exchange or otherwise) to all or substantially all of the
                  business and/or assets of the Company to expressly assume in
                  writing and agree to perform this Agreement in the same manner
                  and to the same extent that the Company would be required to
                  perform it if no such succession had taken place. As used in
                  this Agreement, "Company" shall mean the Company as defined
                  herein and any successor to its businesses and/or assets as
                  aforesaid that assumes and agrees to perform this Agreement by
                  operation of law, or otherwise. A failure of the Company to
                  cause a successor to assume this Agreement in any such
                  transaction shall be a breach of this Agreement by the
                  Company.

         10.      NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for which
the Executive may qualify (except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any other contract
or agreement entered into after the date of this Agreement with the Company.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any benefit, plan, policy, practice or program of, or any
contract or agreement entered into with, the Company shall be payable in
accordance with such benefit, plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.

         11.      FULL SETTLEMENT; MITIGATION, COSTS AFTER A CHANGE IN CONTROL.
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts (including amounts for
damages for breach) payable to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced whether or not the Executive
obtains other employment. In addition, following a Change in Control only, the
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others. Notwithstanding any other
provisions in this Agreement to the contrary, in the event that, following a
Change in Control, any successor in interest to the Company unsuccessfully
contests and/or challenges any of the Executive's rights under this Agreement,
then the successor in interest to the Company shall pay the Executive's
reasonable attorney's fees and costs incurred in such contest or challenge.

         12.      NO WAIVER. The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder shall not be
deemed to be a waiver of such provision or right or any other provision or right
of this Agreement.

         13.      ARBITRATION. With the exception of disputes arising under
Section 7 hereof, any dispute arising under this Agreement shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
and judgment upon the award rendered by the arbitrator may be rendered in any
court having jurisdiction thereof. Arbitration hereunder shall be by a single
arbitrator appointed by agreement of the parties. The parties shall agree that
any arbitration award shall be final and binding on the parties. Except as
stated otherwise in Paragraph 11 of this Agreement, each party shall bear its
own costs and attorneys' fees associated with the arbitration.


                                       11
<PAGE>


         14.      SEVERABILITY. The provisions of this Agreement will be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding, or unenforceable in its entirety or partially or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties hereto to make it fully legal, valid, binding, and
enforceable, then such provision will be stricken from this Agreement, and the
remaining provisions of this Agreement will not in any way be affected or
impaired, but will remain in full force and effect.

         15.      ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains and its
terms constitute the entire agreement of the parties and supersedes all prior
agreements regarding the subject matter herein. This Agreement supersedes and
replaces any prior or contemporaneous agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written regarding the
subject matter herein. No amendment or modification of any provision of this
Agreement shall be effective unless in writing and signed by the party against
whom enforcement of such amendment or modification is sought.

         16.      NOTICES. All notices required to be given or which may be
given under this Agreement shall be in writing, delivered in accordance with one
or more of the following and deemed received upon the earlier of (i) when it is
personally delivered to the party, (ii) three (3) days after having been mailed
by certified mail, postage prepaid, return receipt requested, (iii) two (2) days
after having been sent via overnight delivery by a recognized overnight delivery
service or (iv) one (1) day after having been sent via facsimile transmission,
in each case addressed to the party intended to be notified at the address of
such party as set forth in the records of the Company or such other address as
such party may designate in writing to the other.

         17.      GOVERNING LAW. This Agreement shall be governed by the laws
of the Commonwealth of Virginia without giving effect to the conflicts of law
principles thereof.

         18.      SURVIVAL. All provisions which may reasonably be interpreted
or construed to survive the expiration or termination of this Agreement shall
survive the expiration or termination of this Agreement.

         19.      COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
be one and the same instrument.

         20.      EXECUTION. This Agreement shall be deemed effective upon the
execution by the Company and the Executive.


                                       12
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as the date first written above.



Executive:


/s/ KATHLEEN B. HORNE
-------------------------
Kathleen B. Horne



PSINet Inc. ("Company"):


By: /s/ WILLIAM L. SCHRADER
    --------------------------------
Title: Chairman and Chief Executive Officer



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