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                                                                 EXHIBIT 10.12


                             BOX HILL SYSTEMS CORP.

August 2, 1999

161 Avenue of the Americas
New York, NY 10013

RE:  EMPLOYMENT TERMS

Dear James Lambert:

Box Hill Systems Corp., a New York corporation, (the "Company"), is pleased to
offer you employment on the following terms.

You will serve as Co-Chief Executive Officer, Chief Operating Officer, President
and a member of the Board of Directors of the Company, and will be responsible
for such duties as are normally associated with such positions. You will not be
paid any additional compensation for your services as a Director of the Company.
During your service with the Company, you will devote substantially all of your
business time to the Company. You will report to the Board of Directors
("Board") and will be subject to the direction and policies from time to time
reasonably established by the Board.

You will work out of our principal offices located in Carlsbad. You will be
expected to travel as reasonably required by your duties. The Company will
reimburse you for your reasonable travel, entertainment, business and other
expenses incurred in the course of your employment in accordance with Company
policy.

You shall receive an initial base salary of $350,000 per year, payable in
regular periodic payments in accordance with Company policy, less required
payroll deductions and withholdings. The Compensation Committee of the Board
("Compensation Committee") shall determine any changes to your base salary. You
will be entitled to not less than 4 weeks of paid vacation per year, in addition
to all Company holidays.

Upon meeting all applicable eligibility requirements, the Company will provide
you with a competitive comprehensive benefits package including health and
dental insurance. The Company will also pay for health and dental insurance for
your spouse and children under the age of 21. You will be eligible to
participate in the Company's 401(k) plan and the Company's equity incentive
plans. In addition to the foregoing, you will receive all benefits the Company
may provide from time to time to other senior executive level employees.

You shall be eligible to receive a performance bonus. The award of any
performance bonus shall be at the discretion of the Compensation Committee.
Attached as Exhibit C are the bonus levels and criteria for the remainder of
fiscal year 1999, and the year 2000.

After December 31, 2000, your base salary and annual bonus levels will be
subject to changes as determined by the Committee.


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August 2, 1999
Page 2


Your employment with the Company will be at-will in that you may terminate your
employment with the Company at any time and for any reason whatsoever. Likewise,
the Company, by a written resolution duly adopted by a majority of the Board,
may terminate your employment at any time and for any reason whatsoever. This
at-will arrangement may not be changed except by a writing signed by you and a
duly authorized officer of the Company.

Upon termination of your employment with the Company, you will be paid your then
current accrued base salary to and including the date of termination, any
accrued vacation pay and other benefits through the date of termination and all
compensation previously deferred by you, if any (together with accrued interest
and earnings thereon).

In addition, if the Company terminates your employment without Cause (defined
below) or you resign for Good Reason (defined below), then so long as (i) you
(or your representative) shall have furnished to the Company an executed release
and waiver of claims in the form attached hereto as Exhibit A (the "Release")
and (ii) the Effective Date provided for in the Release shall have occurred, the
Company shall pay to you, in a single lump sum payment, an aggregate amount
equal to one hundred percent (100%) of your then current annual base salary,
with such payment to be made concurrently with the Effective Date provided for
in such executed Release (subject to required payroll deductions and
withholdings).

If your employment with the Company is terminated for Cause or you resign, other
than for Good Reason, you shall not be entitled to receive any compensation
following such termination other than salary and vacation accrued on or prior to
the termination date and any reimbursement expenses due to you for which you
shall not have been previously reimbursed.

For purposes of this letter agreement the following definitions shall apply.

         (1) "Cause" shall be limited to the occurrence of any of the following
events, as set forth in a written resolution duly adopted by a majority of the
Board: (i) your personally continuing to engage in conduct which causes material
harm to the Company after having been given thirty (30) days written notice of
such determination by the Board (ii) your indictment for violation of any Law
constituting a felony (including the Foreign Corrupt Practices Act of 1977) or
the foreign equivalent thereof, (iii) your continuing failure to perform the
lawful directives of the Board (consistent with the terms of this letter) or
your duties and responsibilities hereunder, in each case in all material
respects and after having been given thirty (30) days written notice of such
determination by the Board which written notice shall specifically identify the
directive alleged not to have been followed or the provision of this letter
which it is alleged you have continually failed to substantially perform, the
bases for the Board's determination thereof and the specific corrective action
that the Board proposes that you take; and (iv) your incurable breach of any
material element of the Company's Confidential Information and Inventions
Agreement. In no event shall your death or disability constitute Cause or the
basis for any termination therefor;

         (2) "Good Reason" shall mean (i) a reduction in your base salary, (ii)
the relocation of your full-time office to a location other than within sixty
miles of Carlsbad, (iii) a violation or breach by the Company, in any material
respect, of any of its obligations under this letter so long as you have given
the Company thirty (30) days notice of such breach, and the Company has not
cured the breach during that thirty (30) day period,

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August 2, 1999
Page 3


         (3) "Disability" shall mean your failure or inability, for reasons of
health, to perform your usual and customary duties on behalf of the Company in
the usual and customary manner for a total of more then 90 consecutive business
days (excluding Saturdays, Sundays and Holidays (days during which the Company
is closed due to a recognized a holiday)).

In the event of any termination of your employment with the Company other than
for death or Disability, the Company shall have the right to retain you as a
consultant for a period of one (1) year from the date of such termination (the
"Consulting Period"). During the Consulting Period, the Company shall be
entitled to require you to be available to render consulting services for up to
twelve (12) days of consulting during such one (1) year period, it being
understood that the scheduling of such consulting services shall not interfere
with your work schedule for your principal employer. The Company shall schedule
such consulting for days, or portions thereof, and places reasonably
satisfactory to you, and unless you otherwise agree, all consulting services
shall be rendered in Carlsbad. In exchange for your availability during the
Consulting Period (whether or not the Company actually schedules consulting
activities), the Company shall pay you, in four (4) equal payments (the
"Consulting Payments"), an aggregate amount equal to twenty five percent (25%)
of your annual base salary in effect as of the date of your termination, with
the first such payment to be made within five (5) business days following
commencement of the Consulting Period and the next three (3) payments to be made
on the first day of each successive calendar quarter following the date of
termination. The Company shall also reimburse you for your reasonable expenses
incurred in carrying out your consulting duties hereunder.

During the time that you are employed by the Company pursuant hereto, and during
the Consulting Period, but (without limitation of your rights and remedies under
this letter agreement) only for so long as the Company continues to employ you
in accordance with the terms hereof or make Consulting Payments in accordance
with the immediately preceding paragraph, as the case may be, you will not,
without the Company's prior written consent, directly or indirectly, (i) own,
manage, operate, control or participate in any material way in the ownership,
management, operation or control of, whether as an officer, employee, partner or
otherwise, any business which directly competes with the business of the Company
or (ii) solicit or induce any employee of the Company to leave the employ of the
Company (it being understood that placing "help-wanted" or similar ads in
newspapers or other media of general circulation or distribution shall not
constitute such a solicitation or inducement); provided that nothing in this
letter agreement shall restrict you from at any time (A) engaging in any
business where your primary focus is not computer storage, whether as an owner,
manager, operator, officer, employee, partner, control person or otherwise or
(B) beneficially owning less than two percent (2%) of the outstanding equity
interests in any publicly traded Company.

The Company will indemnify you for all damages and costs that may be incurred by
you in connection with claims arising out of or relating to your acts or
omissions within the authorized scope of your employment. The Company shall
provide such indemnification, and shall advance your expenses incurred in
connection with any such claims as reasonably requested by you and as duly
approved by the Board from time to time, to the fullest extent permissible under
applicable law.

As a Company employee, you will be expected to abide by Company rules and
regulations. As a condition of employment, you will be required to sign and
comply with a Confidential

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August 2, 1999
Page 4


Information and Inventions Agreement, a copy of which is attached hereto as
Exhibit B, which, among other things, prohibits unauthorized use or
disclosure of Company proprietary information.

The employment terms in this letter supersede any other agreements or promises
made to you by anyone, whether oral or written, and compromise the final,
complete and exclusive agreement between you and the Company. As required by
law, this offer is subject to satisfactory proof of your right to work in the
United States.

Please sign and date this letter, and return it to me as soon as possible if you
wish to accept employment at the Company under the terms described above.

We look forward to your favorable reply and to a productive and enjoyable work
relationship.

Sincerely,

BOX HILL SYSTEMS CORP.

By:    /s/ Philip Black
       ----------------------
Name:  Philip Black

Title: CEO

ACCEPTED BY:

/s/ James L. Lambert
-----------------------------
James Lambert

August 2, 1999
------------------------------
         Date


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                                    EXHIBIT A

                          RELEASE AND WAIVER OF CLAIMS

         In consideration of the payments and other benefits set forth in my
employment offer letter, to which this form is attached, I hereby furnish Box
Hill Systems Corp. (the "Company") with the following release and waiver.

         I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and affiliates,
of and from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including my employment termination date with respect to any claims relating to
my employment and the termination of my employment, including but not limited
to, claims pursuant to any federal, state or local law relating to employment,
including, but not limited to, discrimination claims, claims under the
California Fair Employment and Housing Act, and the Federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"), the Federal Americans with
Disabilities Act ("AD") or claims for wrongful termination, breach of the
covenant of good faith, contract claims, tort claims, and wage or benefit
claims, including but not limited to, claims for salary, bonuses, commissions,
stock, stock options, vacation pay, fringe benefits, severance pay or any form
of compensation.

         I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.

         I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this waiver and release is knowing and
voluntary, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
the Company. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the waiver and release granted
herein does not relate to claims which may arise after this release and waiver
is executed; (b) I have the right to consult with an attorney prior to executing
this release and waiver (although I may choose voluntarily not to do so); and
(c) if on the date of execution of this release and waiver I am age 40 or older,
then (I) I have twenty-one (21) days from the date I receive this release and
waiver, in which to consider this release and waiver (although I may choose
voluntarily to execute this release and waiver earlier); and (II) I have seven
(7) days following the execution of this release and waiver to revoke my consent
to this release and waiver. This release and waiver shall be effective as of the
date of execution hereof; provided that if on the date of execution of this
release and waiver I am age 40 or older, then this release and waiver shall not
be effective until the foregoing seven (7) day revocation period has expired.
The date as of which this release and waiver is effective as aforesaid shall be
deemed the "Effective Date" hereof.

Date: __________________                             By: _____________________


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                                    EXHIBIT B

               CONFIDENTIAL INFORMATION AND INVENTIONS AGREEMENTS

For purposes of this Agreement, "Box Hill" shall include Box Hill Systems,
Corp., Artecon, Falcon, Storage Dimensions and any past, present or future
subsidiaries of those companies.

In consideration for my employment by Box Hill:

1.       I will not disclose to anyone outside of Box Hill, or use in other than
         Box Hill's business for the benefit of Box Hill any Box Hill
         Confidential Information or material relating to the business of Box
         Hill either during or after my employment at Box Hill, except with Box
         Hill's written permission. I also understand that information and
         materials received in confidence from third parties by Box Hill and its
         subsidiaries is included within the meaning of this paragraph.

2.       I will not disclose to Box Hill, or induce Box Hill to use, any
         confidential information or material belonging to others.

3.       I will comply, and do all things necessary for Box Hill to comply, with
         United States Government regulations and with provisions of contracts
         between the agencies of the United States Government of their
         contractors and Box Hill, which relate either to patent rights or to
         the safeguarding of information pertaining to the defense of the United
         States.

4.       I hereby assign to Box Hill my entire right, title and interest in any
         invention or idea, patentable or not, hereafter made or conceived
         solely or jointly by me:

                  (a)      While working at Box Hill in an executive,
                           managerial, planning, technical, research or
                           engineering capacity (including development,
                           manufacturing, systems, applied science, sales or
                           customer engineering); and

                  (b)      That relates in any manner to the actual or
                           anticipated business of Box Hill or to Box Hill's
                           actual or anticipated research and development, or is
                           suggested by or results from any task assigned to me
                           or work performed by me or on behalf of Box Hill;
                           except any invention or idea which I cannot assign to
                           Box Hill because of prior invention agreement with
                           ____________________ which is effective until
                           ____________________ (give name and date or write
                           "none")

5.       I agree that in connection with any invention or idea covered by
         paragraph 4

                  (a)      I will disclose it promptly to the Box Hill
                           Management; and

                  (b)      I will, at Box Hill's request, promptly execute a
                           specific assignment of title to Box Hill, and do
                           anything else reasonably necessary to enable Box Hill
                           to secure patent therefor in the United States and in
                           foreign countries.

<PAGE>

6.       I represent that I have indicated on the back of this form any
         inventions or ideas, not covered in paragraph 4, in which I have any
         right, title or interest, and which were previously conceived either
         wholly or in part by me, but neither published nor filed in the United
         States Patent Office, and identified all of these.

7.       I agree to comply with Box Hill's Database Policy. The policy states
         that all information in databases, whether centrally located (e.g. Minx
         or Informix) or locally (e.g. Act!) are the property of Box Hill
         Systems and are considered confidential. This information includes but
         is not limited to customer contacts, customer lists, pricing,
         inventory, vendors, billing, shipping and customer service data. I will
         not transfer, reproduce or duplicate this confidential information
         outside of the Box Hill. This includes, but is not limited to,
         transmitting database information by email, transferring the
         information verbally or by hardcopy, or any other means. Additionally,
         I will not intentionally destroy any information in central or local
         databases.

8.       I understand and acknowledge that any breach of my obligations under
         this agreement will result in irreparable harm to Box Hill and hereby
         consent to the entry of injunctive relief to prevent or restrain any
         further violation of or harm to Box Hill's rights.

9.       I acknowledge receipt of a copy of this agreement, and agree that with
         respect to the subject matter hereof, it is my entire agreement with
         Box Hill, superceding any previous oral or written communications,
         representations, understanding or agreements with Box Hill or any
         official or representative thereof.

Signed:                    /s/ James L. Lambert
                           --------------------------
Employee's Full Name:      James L. Lambert
Witness:                   Valerie Greenberg
                           (Employee's Manager or other appropriate Box Hill
                            representative)
Date:                       5 Aug. 1999


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                                    EXHIBIT C

QUARTERLY PERFORMANCE BONUS

Each quarter, you shall be eligible for a performance bonus of up to 50% of your
base salary for such quarter (Quarterly Bonus). The Quarterly Bonus shall be
based on the following formula, and on the Company's Business Plan, as approved
by the Board of Directors, for such quarter:

FORMULA

1.       REVENUE-BASED BONUS: Half of the Quarterly Bonus shall be based on
revenue. If the Company meets the Business Plan revenue goals for any given
quarter, you shall be entitled to half of the Quarterly Bonus (25% of your base
salary for such quarter) for performance during the quarter. If the Company
fails to meet the Business Plan revenue goals for a given quarter, then the
revenue-based bonus shall be paid as follows:

         if the Company attains less than 75% of the Business Plan revenue
         goals, you shall not receive any revenue-based bonus for that quarter.
         For attaining levels of revenue between 75% and 100% of plan, you shall
         receive 2% of the total Quarterly Bonus for every 1% of revenue above
         75%.

2.       INCOME-BASED BONUS: Half of the Quarterly Bonus is to be based on net
income. If the Company meets the Business Plan net income goals for any given
quarter, then you shall be entitled to half of the Quarterly Bonus (25% of your
salary for such quarter) for performance during that quarter. If the Company
fails to meet the Business Plan net income goals for a given quarter, then the
net income-based bonus shall be paid as follows:

         0.5% of the Quarterly Bonus, payable for each 1% achieved of the net
         income line of the Business Plan, up to a maximum of 100%.

BUSINESS PLAN DETERMINATIONS

Third Quarter, 1999: You shall be granted full bonus (50% of base salary).

Fourth Quarter, 1999: You shall be granted a bonus pursuant to the formula set
forth above, based on the Business Plan for the Fourth Quarter, to be approved
by the Board during the Fourth Quarter.

Fiscal Year 2000: You shall be granted bonus pursuant to the formula set forth
above, based on the Business Plan for the Year 2000, to be approved by Board
during the First Quarter of 2000.