Exhibit 10.12




 




OMTOOL, LTD.




 




                                                                                                July

30, 2002




 




Personal

and Confidential




 




Mr. Michael Sheehy




203 Pine Hill Road




Hollis, NH 03049




 




                Re:   Severance Eligibility




 




Dear Mike:




 




                In

connection with your “at-will” employment offer by Omtool, Ltd. (“Omtool” or the

“Company”), Omtool agrees to provide you with eligibility for the severance

benefits set forth in this letter agreement (the “Agreement”) if your

employment is terminated under the circumstances described below:




 




                1.             At-Will Employment. 

This Agreement is not a contract to employ you for a definite time

period, and is not intended to be and does not constitute a contract or part of

a contractual agreement for continued employment, either express or implied,

between the Company and you, it being acknowledged that your employment is “at

will” and that either you or Omtool may terminate the employment relationship

at any time, for any or no reason, with or without “Cause” (as defined herein)

and with or without prior notice.




 




                2.             Notice of Termination and other Matters.  Any termination of your employment, whether

by you or Omtool, will be communicated by written notice (“Notice of

Termination”) to the other party. All notices provided for in this Agreement

will be in writing and will be effective when delivered or mailed by U.S. mail,

postage prepaid, addressed to Omtool, Ltd., 8 Industrial Way, Salem, NH 03079,

and to you at the address shown above or to such other address as either Omtool

or you may have furnished to the other in writing.




 




                3.             Severance Payments and Benefits Upon a Qualified Termination.




                                (a)           Omtool will provide you with the

severance payments listed below only in the event of a Qualified Termination

and provided that you execute a general release agreement in a form acceptable

to the Company, except that the release will not effect your rights to

indemnification or vested Benefits, and provided that you continue to adhere to

any post-termination obligations including, but not limited to, any

non-competition, non-disclosure and non-solicitation covenants. A “Qualified

Termination” means your employment is terminated by the Company without “Cause”

or by you for “Good Reason” (i) within the first eighteen months of your

employment, or (ii) anytime after a Change of Control of the Company.  A termination of your employment will not

constitute a “Qualified Termination” if your employment is terminated because

(i) you die or become Disabled, (ii) Omtool terminates you for “Cause,” (iii)

you resign or retire without “Good Reason”, (iv) you resign with “Good Reason”

or you are terminated without “Cause” after the first eighteen months of your

employment but before a Change of Control, or (v) the Company files for

bankruptcy.




 




 




 





























 




 




                                (b)

          If a Qualified Termination

occurs, you will be eligible to receive the following severance pay and

benfits:




 




                                                (i)            Severance Pay.  Severance pay, in equal monthly installments

at your monthly base salary rate in effect immediately prior to the Qualified

Termination, for twelve months from the date of the Qualified Termination. The

first severance payment will be made upon the first regularly scheduled Company

payday on or following your execution of the release agreement referenced

above, in accordance with the Company’s normal payroll practices as established

or modified from time to time, and will be subject to all federal, state and/or

local payroll and withholding taxes.




 




                                                (ii)           Payment of COBRA Premiums.   If you are eligible for and elect to

continue health and dental continuation coverage in accordance with the

Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company

will pay your COBRA premium (equal to the amount it paid during your

employment) until the earlier of (x) 12 months from the date of the Qualified

Termination, or (y) the date on which you become ineligible to receive COBRA

coverage. During the period in which the Company is providing this benefit, you

will be responsible for paying the portion of the premiums required for active

employees, which will be automatically deducted from the severance payments

referenced in Section 3(b)(i). Thereafter, you will be responsible for all

COBRA payments.




 




                                (c)           In addition to the amounts set forth

in Section 3(b), in the event a Qualified Termination occurs within one year

after a Change of Control, any unvested stock options issued to you will become

immediately vested and exercisable.




 




                                (d)           In the event it shall be determined

that any payment by the Company to you (or for your benefit pursuant to this

Agreement) is an “excess parachute payment” within the meaning of Section 280G

of the Internal Revenue Code of 1986, as amended (the “Code”), in connection

with, or arising out of, your employment with the Company or a Change in

Control of the Company or a substantial portion of its assets (a “Payment”),

and would be subject to the excise tax imposed by Section 4999 of the Code (the

“Excise Tax”), then the Company shall pay to you an additional payment (the

“Gross-Up Payment”) in an amount such that the amount paid to you, net of any

Excise Tax on such Payment and any additional Excise Tax or Income Tax on the

Gross-Up Payment, shall equal the amount of such Payment. Such Gross-Up Payment

shall be subject to and paid net of any applicable withholding. The amount of

any Gross-Up Payment or Excise Tax shall be reasonably determined by the

Company after consultation with its legal and tax advisors. In the event that

the Excise Tax with respect to the Payments is subsequently determined to be

less than the amount taken into account for purposes of calculating the

Gross-Up Payment, you shall promptly repay to the Company the portion of the

Gross-Up Payment that exceeds the Gross-Up Payment that otherwise would have

been payable in connection with the actual Excise Tax imposed on the Payments.

If the actual Excise Tax imposed on the Payments is greater than originally

calculated by the Company the Company will promptly make any required

additional payments to fulfill its obligations under this section.




 
































                                (e)

          You will not be entitled to any

of the severance payments and/or benefits set forth above in Sections 3(b) or

3(c) if your employment termination from Omtool is not a Qualified

Termination.  If your employment

termination is not a Qualified Termination, your employment and this Agreement

will automatically terminate and the Company will pay you (or in the case of

death, your designated beneficiary or, if no beneficiary has been designated by

you, your estate) your base salary earned but unpaid and vacation pay accrued

but unused as of the termination date.




 




                                (f)

           If Omtool determines that you

have violated the terms of any non-competition or confidentiality provision

contained in any employment, consulting, advisory, non-disclosure,

non-competition or other similar agreement between you and Omtool, then you

agree that Omtool, regardless of the manner of your employment termination, can

refuse to pay and/or cease paying and/or performing all severance-related

obligations under this Section 3 to the extent permitted by applicable law.  The cessation of these severance payments

and benefits shall be in addition to, and not as an alternative to, any other

remedies at law or in equity available to the Company, including the right to

seek an injunction, which you shall not oppose.




 




                4.             Definitions.  For

the purposes of this Agreement, the terms listed below are defined as follows:




 




                                (a)           Disabled. 

             You are “Disabled” for

the purposes of this Agreement if you have been absent from the full-time

performance of your duties with Omtool for 180 days, whether or not

consecutively, within a any consecutive 12-month period, because of incapacity

due to physical or mental impairment that substantially limits a major life

activity, and you fail to resume performance of your essential job duties, with

or without reasonable accommodation (provided that any such accommodation does

not cause the Company an undue hardship).




 




                                (b)           Cause.    “Cause,”

which shall be determined by the Company’s Board of Directors (the “Board”),

shall mean: (i) your failure or refusal to render services to the Company, (ii)

your failure to perform adequately the duties of your employment after you

receive written notice from the Board setting forth in reasonable detail the

nature of the performance inadequacies and you fail to cure such inadequacies

within 30 days from receiving such notice, (iii) your commission of any act of

gross negligence, dishonesty which materially adversely affects the company or

its employees, insubordination or breach of fiduciary duty, (iv) your material

breach of any term of this Agreement or any other agreement with Omtool, (v)

your conviction of or plea of nolo

contendere to (A) any felony or (B) any misdemeanor involving fraud,

deceit, moral turpitude or embezzlement, (vi) your disregard of or failure to

follow the Company’s rules or policies, or your commission of any other action

that may cause material injuries to the Company, including your

misappropriation of any money or other assets or property (tangible or

intangible) of the Company.




 




 




                                (c)           Change of Control.  A “Change of Control” shall mean the

occurrence of an “Acquisition” as defined in the Company’s 1997 Stock Plan, as

amended, during the period in which you are eligible to receive the severance

payments listed in Section 3.




 





























 




                                (d)           Good Reason.  A termination by you for “Good Reason” will occur whenever any of

the following circumstances have taken place, without your written consent,

which the Company and the Board after receiving written notice thereof, have

failed to cure within 30 days of  receiving

such notice: (i) your position, duties and/or responsibilities are

significantly and materially diminished, such that you are effectively demoted;

(ii) your base salary is reduced; or (iii) in the event of a Change of Control,

Omtool or any person in control of Omtool requires you to perform your

principal duties in a new location outside of a radius of 30 miles from your

business location at the time of the Change of Control.




 




                5.             Assignment.  Omtool may assign this Agreement, which will inure to the benefit

of and be reinforced by Omtool’s successors and assigns.  You may not assign this Agreement.




 




                6.             Confidentiality.     The terms and conditions of

this Agreement are strictly confidential. 

You shall not discuss or reveal any information concerning this letter

agreement to any past or present Omtool employee or any third person or entity

other than your counsel and members of your immediate family.




 




                7.             Miscellaneous.




 




                                (a)           In

the event of any dispute, this Agreement will be construed as a whole, will be

interpreted in accordance with its fair meaning, and will not be construed

strictly for or against either you or the Company.  If one or more of the provisions contained in this Agreement

shall for any reason be held to be excessively broad as to scope, activity,

subject or otherwise so as to be un enforceable at law, such provision or

provisions shall be construed by the appropriate judicial body by limiting or

reducing it or them, so as to be enforceable to the maximum extent compatible

with the applicable law as it shall therein appear.




 




                                (b)           This

Agreement shall be deemed to be made and entered into in the State of New

Hampshire.  This Agreement and any

claims arising out of this Agreement (or any other claims arising out of the

relationship between the parties) shall be governed by and construed in

accordance with the laws of the State of New Hampshire and shall in all

respects be interpreted, enforced and governed under the internal and domestic

laws of such State, without giving effect to the principles of conflicts of

laws of such State.




 




                                (c)           No

waiver by the Company of any breach by you of any provision hereof shall be

deemed to be a waiver of any later or other breach thereof or as a waiver of

any other provision of this Agreement. 

This Agreement may not be waived, changed, discharged or terminated

orally or by any course of dealing between the parties, but only by an

instrument in writing signed by you and either the Company’s Chief Executive or

a designated, disinterested member of the Company’s Board of Directors.




 




                                (d)           You

must execute a legally enforceable separation agreement and general release in

a form acceptable to Omtool prior to the receipt of any payments set forth

above.




 





























 




 




                                 (e) This Agreement is the exclusive agreement

with respect to the severance benefits payable to you in the event of a

termination of your employment.  All

prior negotiations and agreements regarding severance benefits, whether oral or

written, express or implied, are hereby superseded and cancelled.




 




                If

this letter sets forth our agreement, kindly sign and return to Omtool the

enclosed copy of this letter.




 




                                                                                                Sincerely,




 




                                                                                                OMTOOL, LTD.




 




                                                                                                By:       /s/ Timothy P. Losik




 




                                                                                                Title:     Chief Operating Officer & CFO




 




Accepted and agreed to this

5th day of August, 2002




 




                                                                




                Michael Sheehy




 




                /s/ Michael Sheehy              




Signature