PSINET INC
EX 10.18
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>9
<FILENAME>a2045345zex-10_18.txt
<DESCRIPTION>EX 10.18
<TEXT>

<PAGE>

                                                               Exhibit 10.18


                       SEPARATION AGREEMENT, GENERAL RELEASE
                             AND COVENANT NOT TO SUE

     This Separation Agreement, General Release and Covenant not to Sue (this
"Agreement") sets forth the complete terms under which the employment of
Harold S. Wills ("Wills") with PSINet Inc. ("PSINet") will end. This
Agreement supersedes and replaces the Employment Agreement between PSINet and
Wills dated April 3, 1996 as modified by the letter agreement dated October
16, 1998 and amended and restated by the letter agreement dated October 4, 1999
(collectively, the "Employment Agreement").

     1.   RECITALS

          a.   Wills is presently serving as the President, Chief Operating
Officer and a director of PSINet and in various capacities for certain
subsidiaries and affiliates of PSINet.

          b.   Wills and PSINet desire to conclude Wills' employment with
PSINet on mutually satisfactory terms.

          c.   Each reference in this Agreement to PSINet includes, unless
otherwise required by the context of such reference, PSINet and any of its
present or former divisions, affiliates, subsidiaries, parents, attorneys,
trustees under any employee benefit plan, officers, directors, members,
employees, agents, attorneys, representatives, predecessors, successors, and
assigns.

     2.   CHANGE IN EMPLOYMENT STATUS

     Wills hereby resigns, effective as of November 2, 2000, from (a) his
positions as President, Chief Operating Officer and a director of PSINet, (b)
his positions as an officer, manager or director of, or other executive or
fiduciary positions with, any subsidiary or affiliate of PSINet, and (c) his
position as a director of any company where he was appointed to be elected
to the Board of Directors of such company by PSINet, except as provided in
Section 5 in the case of clauses (b) and (c). Wills and PSINet agree that
Wills' employment with PSINet will continue in an advisory capacity to the
Chairman as specified in Section 3 below from November 2, 2000 through July
1, 2001 and will terminate on July 1, 2001. Wills specifically waives and
renounces any claim for employment with PSINet after July 1, 2001 and PSINet
waives the thirty (30) day notice of termination required by Section 5(a) of
the Employment Agreement. The period between November 2, 2000 and July 1,
2001 is referred to herein as the "Transition Period".

     3.   TREATMENT DURING TRANSITION PERIOD. During the Transition Period:

          a.   Wills will continue to be an employee of PSINet but will no
longer be an executive employee. Wills position shall be advisor to the
Chairman and his duties shall consist solely of consulting with the Chairman
when initiated by the Chairman and providing such services to PSINet as the
Chairman shall specifically direct in writing from time to time. Wills shall
make himself available to the Chairman during

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regular business hours of PSINet but shall have no obligation to, and shall
not without the prior request of the Chairman, come to the offices of PSINet.
Wills will, to the extent that it is not unreasonably burdensome on Wills,
consult with the Chairman at times other than during the regular business
hours of PSINet. Nothing in this Agreement shall restrict Wills from
consulting for other persons or entities during the Transition Period,
provided that Wills provides PSINet advance written notice of such consulting
opportunities and PSINet reasonably determines, and advises Wills in writing
that, such consulting engagement would not violate Section 6 hereof or
interfere with Wills' ability to perform services required under this
paragraph.

          b.   Wills will be paid a base salary at the rate of $600,000 per
annum (i.e., only a ratable portion of such amount shall be payable for
periods less than one year). This base salary will be payable in the same
installments as PSINet regularly pays its other salaried employees.

          c.   Wills will be provided employee benefits consisting of:
participation in 401(k) and related plans; life, health, accident and
disability insurance under PSINet's standard plans, policies and programs
available to employees in accordance with the provisions of such plans,
policies and programs.

          d.   PSINet will continue to make the lease, insurance, service and
maintenance payments on the company car currently provided to Wills. Wills
shall be responsible for all other costs associated with operating the
vehicle including, without limitation, all gasoline.

          e.   All outstanding employee stock options previously granted to
Wills will continue to vest according to their terms, but Wills will not be
entitled to any additional grant of employee stock options. Upon the
occurrence of a "change in control", all outstanding employee stock options
shall immediately vest without any further action on the part of PSINet or
Wills. As used in this Agreement, "change in control" shall mean: (i) the
shareholders of PSINet approve an agreement for the sale of all or
substantially all of the assets of PSINet; or (ii) the shareholders of PSINet
approve a merger or consolidation of PSINet with any other corporation (and
PSINet implements it), other than (A) a merger or consolidation which would
result in the voting securities of PSINet outstanding immediately prior
thereto continuing to represent more than eighty percent (80%) of the
combined voting power of the voting securities of PSINet, or such surviving
entity, outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of PSINet
(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 (C) any "person", as such term used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than (1) PSINet or (2) any corporation owned,
directly or indirectly, by PSINet or the shareholders of PSINet in
substantially the same proportions as their ownership of stock of PSINet), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of PSINet representing
thirty percent (30%) or more of the combined voting power of PSINet's then
outstanding securities.

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          f.   PSINet will continue to provide Wills with his existing T-1
line, an inter.net e-mail account and the equipment listed on Schedule 1
attached hereto (the "Equipment"). All cellular telephone accounts relating
to cellular telephones provided by PSINet to Wills will be transferred to
Wills or canceled at the option of Wills, in which case Wills shall return to
PSINet all cellular telephones related to such accounts.

          g.   PSINet will make available the outside financial consulting
advice on the terms such advice was made available to Wills prior to the
date hereof.

          h.   PSINet shall reimburse Wills for all reasonable and necessary
out-of-pocket business expenses incurred by Wills in the course of performing
his duties and rendering services specifically requested by the Chairman
hereunder; provided (i) such expenses and the purpose for which they were
incurred, are in accordance with PSINet's policies, and (ii) Wills timely
submits to PSINet expense reports and substantiation of the expenses in
accordance with PSINet's policies. Nothing in paragraphs d or f above shall
preclude Wills from being reimbursed in accordance with PSINet's policies for
the portion of operating expenses for the company car attributable to its
business use or cellular telephone charges relating to the business use of
cellular telephones.

          i.   During the Transition Period, Wills will not be entitled to
any employee benefits or prerequisites of any kind except as specifically
provided by this Section 3.

          j.   PSINet shall deduct from the base salary payable to Wills
under paragraph a above all deductions and withholdings as may be required by
law or by further agreement with Wills as a result of the compensation and
benefits provided to Wills pursuant to this Section 3.

     4.   TREATMENT AFTER TRANSITION PERIOD

          a.   During the period from July 2, 2001 through September 30,
2003. Wills will be paid severance payments at the rate of $600,000 per annum
(i.e., only a ratable portion of such amount shall be payable for periods
less than one year). These severance payments will be payable in the same
installments as PSINet regularly pays its other salaried employees.

          b.   During the period from July 2, 2001 through December 31, 2002.
PSINet will provide at PSINet's expense, the health and other insurance that
PSINet is obligated to make available to Wills pursuant to COBRA (the "COBRA
Benefits"). On or prior to December 31, 2002, PSINet shall pay to Wills in a
lump sum an amount equal to the cost to PSINet of providing the COBRA
Benefits for the month of December 2002 multiplied by nine (9), less any
deductions or withholdings that may be required by law.

          c.   At the end of the Transition Period, PSINet will offer to
assign to Wills the lease relating to the company car provided to Wills,
subject to the lessor's consent. If Wills accepts such offer and the lessor
consents, PSINet will make such assignment and Wills shall be responsible for
making all payments (including insurance payments) and exercising any option
to purchase under the lease. If Wills does not

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accept PSINet's offer to assign the lease or if the lessor does not consent
to the assignment, Wills shall return the company car to PSINet on or prior
to the end of the Transition Period.

          d.   Wills shall be entitled to retain the Equipment after July 1,
2001. For the period from July 2, 2001 through September 30, 2003, PSINet
will, unless otherwise directed by Wills, continue to provide the T-1 line to
Wills and Wills shall be obligated to pay to PSINet the actual costs incurred
by PSINet in providing such T-1 line. After September 30, 2003, the T-1 line
will be canceled unless Wills pays PSINet the then-prevailing market rate for
the rental of the T-1 line. Following July 1, 2001, Wills' inter.net e-mail
account will be canceled unless Wills agrees to pay PSINet its standard
charges for such account.

          e.   PSINet acknowledges that Wills may exercise any employee stock
options vested as of July 1, 2001 for a period of ninety (90) days after July
1, 2001 pursuant to their terms and the plans under which they have been
granted. Wills acknowledges that no employee stock options will vest after
July 1, 2001 and that all employee stock options not vested by July 1, 2001
as well as those not exercised within ninety (90) days after July 1, 2001
will automatically expire.

          f.   After July 1, 2001, Wills will not be entitled to any employee
benefits or perquisites of any kind except as specifically provided by this
Section 4.

          g.   PSINet shall deduct from the severance payments payable to
Wills under paragraph a above all deductions and withholdings as may be
required by law or by further agreement with Wills as a result of the
compensation and benefits provided to Wills pursuant to this Section 4, and
PSINet may deduct from such severance payments any amounts which Wills is
obligated to pay for the T-1 line or the inter.net e-mail account that are
not otherwise paid by Wills.

     5.   DIRECTORSHIPS.

          Wills agrees to resign from the Board of Directors of Xpedior,
Inc. at the next board meeting of Xpedior, Inc. Wills agrees to resign from
the Board of Directors of each of Worldpay Plc and Metrocall upon the request
by PSINet at any after the earlier of July 1, 2001 or any breach by Wills of
his obligations under this Agreement; provided, PSINet reserves the right to
require Wills to resign from such Boards prior to July 1, 2001 if it determines
that it is required to as a result of a conflict of interest or fiduciary
obligation concern, in which event Wills hereby agrees to resign promptly
upon the request of PSINet. During the period prior to the termination of the
Transition Period that Wills serves on such Boards pursuant to this Section
5, PSINet shall afford Wills such rights of indemnification under PSINet's
certificate of incorporation and bylaws and such directors' liability
insurance coverage as, in each such case, are generally afforded to persons
serving on such boards of directors at PSINet's request in accordance with
the terms of such rights or insurance.

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     6.   RESTRICTIVE COVENANTS.

          a.   From the date hereof through November 1, 2002 (the "Restricted
Period"), Wills will not, without the prior written consent of the Chairman,
discuss with any securities analyst, investment banker, securities
professional (including any fund manager or employee), bank or lending
institution (or person employed thereby), person or entity that is a party to
or may be interested in a strategic transaction or business combination with
PSINet or any of its affiliates or holder of PSINet securities anything
concerning PSINet or any aspect of its business including, without
limitation, its operations, assets, plans, projections or prospects. Without
limiting the generality of the foregoing, Wills will not, without the prior
written consent of the Chairman, hold himself out to any person or entity as
representing PSINet or having the authority to bind PSINet in any matter.

          b.   In consideration of the employment, compensation and other
benefits provided to Wills by PSINet pursuant to this Agreement and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Wills covenants to and agrees with PSiNet that during the
Restricted Period Wills shall not, without the prior written consent of
PSINet, either for himself or for any other person, firm or corporation,
manage, operate, control, participate in the management, operation or control
of, or engage in other activities or functions which he engaged in on behalf
of PSINet, its subsidiaries or affiliates for, any other person or entity
which is engaged in providing Internet-related, credit card processing,
web-hosting or network or communications services competitive with PSINet
(collectively, "Covered Services"). The foregoing shall in no event restrict
Wills from: (i) writing or teaching, whether on behalf or for-profit, or
not-for-profit institution(s); (ii) investing (without participating in
management or operation) in the securities of any private or publicly traded
corporation or entity; or (iii) becoming employed by or acting as a
consultant to a hardware, software or other vendor to PSINet, provided that
such vendor does not offer Covered Services. Should any portion of the
covenants set forth in this paragraph be unenforceable because of the scope
thereof, or the period covered thereby, or otherwise, the covenant shall be
deemed to be reduced and limited to enable it to be enforced to the extent
permissible under applicable laws and public policies.

          c.   During the Restricted Period, Wills shall not, directly or
indirectly, (i) hire or solicit any employee of PSINet or encourage any such
employee to leave such employment provided, however, that Wills shall not be
restricted to his hiring or solicitation activities with regard to PSINet
employees who respond to general advertisements not targeted at PSINet
employees, or (ii) solicit, induce or influence any customer, supplier,
lender, lessor or any other person or entity which has a business
relationship with PSINet to discontinue or reduce the extent of such
relationship with PSINet.

          d.   Wills shall not consult for or accept employment with other
persons or entities after the Transition Period and during the Restricted
Period unless Wills provides PSINet advance written notice of such consulting
or employment


                                      5


<PAGE>

opportunities. Any such consulting or employment must be in compliance with
this Agreement, including this Section 6.

          e.   Wills and PSINet acknowledge that any breach or threatened
breach by Wills of any of the provisions in this Section 6 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 thirty (30) day period, PSINet
may pursue injunctive relief for any such breach or threatened breach. Wills
shall not be entitled to any payments or other benefits or rights hereunder
after the date of a breach of his obligations under this Agreement.

     7.   CONFIDENTIALITY.

     Wills agrees to keep the existence and terms of this Agreement in strict
confidence, except that it is understood that Wills may disclose the
existence and terms of this Agreement to members of Wills' immediate family,
his attorney and his accountant and/or financial advisors, in each case where
such person has an obligation of confidentiality, or as compelled by law or
legal process. To the extent that Wills discloses the existence and terms of
this Agreement to any of the individuals listed above or discloses as
permitted by this Agreement any of the terms of this Agreement, Wills agrees
to advise any such person of this strict confidentiality provision, and to
use his best efforts to ensure that any person receiving this information
shall maintain its confidentiality. Wills agrees to respond to any inquiries
regarding his change in position or termination of employment with PSINet by
stating "no comment," which shall be the exclusive and only acceptable
response to such an inquiry. Wills agrees not to make any negative, adverse
or otherwise disparaging remarks, or statements about PSINet to any person or
entity. PSINet agrees to keep the existence and terms of this Agreement in
strict confidence, except that it is understood that PSINet may disclose the
existence and terms of this Agreement to its directors, officers, employees,
attorneys, accountants and advisors who have a duty to maintain the
confidentiality thereof or as required by law, rule, regulation, stock
exchange rule or legal process. PSINet agrees not to, and shall use
reasonable commercial efforts to ensure that its directors, officers and
employees shall not, make any negative, adverse or otherwise disparaging
remarks or statements about Wills to any person or entity. In the event
either Wills or PSINet is served with any legal process referred to above,
Wills or PSINet, as applicable, shall use reasonable efforts to provide
notice thereof to the other party and assist such other party in obtaining a
protective order with respect to such legal process.

     8.   CONFIDENTIAL INFORMATION.

     Wills understands and acknowledges that, in connection with his
employment with PSINet, Wills has been privy to and has acquired certain
proprietary and/or business information relating to PSINet and its
subsidiaries and affiliates, including without limitation confidential
information and trade or business secrets not readily available in the
marketplace or to the public. In consideration of the employment, compensation
and other benefits provided to Wills by PSINet pursuant to this Agreement and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged,


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<PAGE>

Wills agrees that, in addition to and not in limitation of applicable
requirements of law, he will not disclose divulge or make available to any
third party, directly or indirectly, any such confidential or proprietary
information.

     9.   TRADING ACTIVITY.

     Wills agrees to refrain from selling, pledging, transferring,
distributing or otherwise conveying, or engaging in any hedging activities
with respect to, any securities of PSINet Inc. for the 90-day period
following the effective date that he resigned his officer and director status
with PSINet.

     10.  TERMINATION OF EMPLOYMENT AGREEMENT.

     Wills and PSINet hereby agree that the Employment Agreement is
terminated and that neither of them shall have any rights thereunder;
provided, however, that Section 7 of the Employment Agreement, and Sections
10, 11 and 12 of the Employment Agreement to the extent that such Sections
relate to Section 7 of the Employment Agreement, shall survive the
termination of the Employment Agreement.

     11.  GENERAL RELEASE ETC.

          a. By signing this Agreement, Wills agrees, for himself, his heirs,
beneficiaries, devises, executors, administrators, attorneys, personal
representatives, and assigns, and does hereby forever release and discharge
PSINet from, and covenant not to sue for, any and all claims, debts, demands,
accounts, judgments, rights, causes of action, damages, costs, charges,
complaints, obligations, promises, agreements, controversies, suits,
expenses, compensation, responsibility and liability of every kind and
character whatever (including attorneys' fees and costs), whether in law or
equity, known or unknown, asserted or unasserted, that he has or may have
arising up to and including the date of execution of this Agreement,
including without limitation, claims or causes of action related in any way
to Wills' employment with PSINet and including any claims of wrongful
discharge, breach of express or implied contract, fraud, misrepresentation,
defamation, liability in sort, claims of any kind that may be brought in any
court or administrative agency, any claims under Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, the Employee Retirement Income Security Act,
the Family and Medical Leave Act, the Fair Labor Standards Act, or any other
federal, state or local law relating to employment, employee benefits or the
termination of employment, or any other claim arising out of or relating to
Wills' employment with PSINet; provided, however, that the foregoing shall
not constitute a waiver of (i) any rights of indemnification that Wills has
pursuant to the certificate of incorporation or bylaws of PSINet or any of
its subsidiaries or that he may have by Agreement with PSINet, in each case,
subject to and in accordance with the terms thereof or (ii) any rights of
Wills under this Agreement or any right to assert a claim under this
Agreement. Wills understands and agrees that by signing this Agreement, Wills
is forever barred from making such claims against PSINet and that should
Wills institute any proceeding against PSINet with respect to any of the
claims released herein, Wills agrees that this Agreement shall be deemed full
and complete.

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<PAGE>

accord, satisfaction and settlement of any such claim and shall constitute
sufficient basis for its immediate dismissal.

          b.   This Agreement is not and shall not be deemed an admission by
PSINet of a violation of any statute or law or wrongdoing of any kind, nor is
it an admission or finding that any claim that Wills might raise against
PSINet is or would be in any way valid or meritorious. Wills and PSINet
specifically acknowledge that this Agreement is being made solely for the
purpose of concluding Wills' employment with PSINet amicably.

          c.   Wills has agreed not to institute a suit or claim concerning
any matter released or waived herein or sue PSINet concerning such released
or waived claim. If Wills should violate this covenant and/or seek to
challenge the validity of the release in paragraph a above, Wills agrees, as
a condition precedent thereto, that he will immediately pay to PSINet
$500,000, that all future payments by PSINet hereunder will cease and,
further, that he will pay all costs and expenses of defending against such
claim or suit incurred by PSINet, including reasonable attorneys' fees and
disbursements. Such immediate return of monies and benefits paid and such
payment of costs and expenses will not be required if Wills withdraws such
claim or suit with prejudice within five (5) business days of his receipt of
a written demand for withdrawal and/or cessation. Wills further agrees that
this Agreement shall be sufficient basis for the immediate dismissal with
prejudice of any such claim or suit regardless of the forum in which it was
brought.

          d.   Wills acknowledges that PSINet was represented by Nixon
Peabody LLP in connection with this Agreement and the subject matter hereof.
Wills waives any conflict of interest that may arise out of or relate to such
representation by Nixon Peabody LLP or to any representation of PSINet by
Nixon Peabody LLP that may arise out of or relate to this Agreement.

     12.  SPECIAL RELEASE NOTIFICATION.

     The General Release, Section 11, includes a release of all claims under
the Age Discrimination in Employment Act ("ADEA") and, therefore, pursuant to
the requirements of the ADEA, Wills acknowledges that he has been advised
that this release includes, but is not limited to, all claims under the ADEA
arising up to and including the date of execution of this release; to consult
with an attorney and or other advisor of Wills' choosing concerning his
rights and obligations under this release; to fully consider this release
before executing it and that Wills has been offered ample time and
opportunity to do so; and that this release shall become effective and
enforceable 7 days following execution of this Agreement by Wills, during
which 7 day period Wills may revoke his acceptance of this Agreement by
delivering written notice to PSINet, and PSINet shall not be obligated to
make any payments or provide any benefits hereunder.

     13.  NOTICES.

          All notices or other communications under this Agreement shall be
in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by

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<PAGE>

delivery in person, by telecopy (with confirmation of receipt), or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:

     If to PSINet:

          PSINet, Inc.
          44983 Knoll Square
          Ashburn, Virginia 20147
          Attention: Vice President, Human Resources
          Telephone: (703) 726-1704
          Telecopy No.: (703) 726-4254

     If to Wills:

          Harold S. Wills
          627 Innsbruck Avenue
          Great Falls, Virginia 22066
          Telephone: (703) 757-7299
          Telecopy No.: (703) 757-0311


or to such other address as any party may have furnished to the other party
in writing in accordance with this Section 13.

     14. CONSTRUCTION OF AGREEMENT.

         a. Wills and PSINet agree that this Agreement, the exhibits hereto
and the surviving provisions of the Employment Agreement contain all the
promises and covenants made by them with respect to its subject matter. Wills
understands and agrees that PSINet shall make no payments and shall have no
obligation to Wills except as described herein.

         b. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York.

         c. If any provision of this Agreement is held invalid, such
invalidity shall not invalidate the entire Agreement, and the remainder of
the Agreement shall not be affected.

         d. This Agreement shall not be deemed valid, binding or executed
until Wills and PSINet have signed the Agreement.

         e. Wills acknowledges that he has read this Agreement and
understands its terms. Wills is satisfied with the terms of this Agreement
and agrees that the terms are binding upon him.

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<PAGE>

          f.   This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors,
administrators, successors, and to the extent permitted herein, assigns.

          g.   This Agreement may be executed and delivered in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one original. This Agreement may be executed and
delivered by facsimile signature which shall constitute an original signature
for all purposes.

          IN WITNESS THEREOF, and intending to be legally bound, the parties
have executed the foregoing on the dates shown below.

WITNESS the following signatures:

November 1, 2000                              PSINet, Inc.

                                              By: /s/ Kathleen B. Horne
                                                  ------------------------

                                              Name: Kathleen B. Horne
                                                    ----------------------

                                              Title: SVP & General Counsel
                                                     ---------------------

November 1, 2000                              /s/ Harold S. Wills
                                              -----------------------------
                                                   Harold S. Wills









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                                 SCHEDULE 1

1.   HP 700 Fax machine
2.   IBM Think Pad 370
3.   HP Office Jet G Series
4.   Car Phone that goes with the car
5.   Router and CSU/DSC that goes with the T-1 service.









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</DOCUMENT>
