<PAGE>
 
                                                                   EXHIBIT 10.12

                    AMENDEMENT TO THE OEM LICENSE AGREEMENT
                    ---------------------------------------

       This Amendment to the OEM License Agreement ("Agreement") by and between
Xerox Corporation ("Xerox") and Sandia Imaging Systems ("Sandia") is made this
27/TH/ day of December, 1996 (the "Effective Date"), by and between Xerox and
Sandia. The purpose of this Amendment is to define the terms and conditions of
Sandia's continued license of the Licensed Programs, the extension of Sandia's
licensing rights, the continued payment of royalties and the license to use
Xerox Source.

       All portions of the Agreement, unless specifically identified and
replaced by, or amended by this Amendment, are incorporated herein and continue
to be in effect and will be unchanged by this Amendment.  All capitalized terms
used herein have the same meaning as in the Agreement.

1.  DEFINITIONS
    -----------

    1.1  XEROX SOURCE. The term "Xerox Source" shall mean the human readable
         ------------
         source code documentation described in Exhibit A and any changes,
         alternations, corrections or enhancements to the source code
         documentation described in Exhibit A provided by Xerox to Sandia
         pursuant to the terms hereof or of any subsequent agreement between
         Xerox and Sandia.

    1.2  DOCUMENTATION. "Documentation shall mean Xerox' documentation for the
         -------------
         Xerox Source supplied to Sandia for internal use only.

2.  LICENSE GRANTS
    --------------

    2.1  LICENSE TO USE XEROX SOURCE
         ---------------------------

         2.1.1  LICENSE GRANT. Xerox hereby grants to Sandia a non-exclusive 
            non-transferable license, during the term of this Agreement and
            subject to Sandia's compliance with Paragraph 2.1.2 ("Protection
                                                ---------------
            of Xerox Source") and the other terms of this Agreement, to use the
            Xerox Source at it s facility located at 3208 Commander Drive,
            Carrollton, TX 75006, or upon notification to Xerox such other
            Sandia location ("Development Site") for the sole purpose of
            creating dedicated reading and writing dataglyph systems ("Systems")
            to read and write to the Products. Sandia may sell such Systems to
            Resellers and/or End-Users but such Systems shall not provide access
            to Xerox Source. Sandia shall have no right to sublicense such
            rights in and to Xerox Source to a third party. Xerox shall own the
            copyrights and patents in all of the Sandia changes and
            enhancements.

         2.1.2  PROTECTION OF XEROX SOURCE. Sandia agrees that it will not (a)
            disclose all or any portion of the Xerox Source to third
            parties, with the exception of authorized employees ("Authorized
            Employees") and 

                                                                               1
<PAGE>
 
            authorized contractors ("Authorized Contractors") (i) who
            require access thereto for a purpose authorized by this
            Agreement, (ii) who have signed the appropriate employee or
            contractor agreement substantially in the form attached as
            Exhibit B-1 ("Employee/Contractor Agreement") and who sign an
            -----------
            amendment in the form attached as Exhibit B-2 ("Confidentiality
                                              -----------
            Amendment") prior to the initial access to Xerox Source
            specifically recognizing and agreeing to protect the
            confidentiality of such information; (the forms of agreements
            attached as Exhibit B-1 (b) reproduce Xerox Source, or any
                        -----------
            portion of Xerox Source, in any form or medium, without Xerox's
            prior written permission except as necessary for developing and
            maintaining as provided in Section 2.1.1 and for archival storage,
            (c ) use Xerox Source for any purpose not specifically authorized in
            this Agreement of (d) will take the same precautions and security
            measures to protect he confidentiality and security of Xerox Source
            as Sandia does with its own source code, including, but not limited
            to, employees wearing Sandia identification badges at all times
            while on company premises; visitors signing in and being accompanied
            by Sandia employees, access to facilities during 'non-working' hours
            limited to management approved individuals. In addition, Sandia
            agrees to maintain a log which contains a list of all Authorized
            Employees and Authorized Contractors who actually have had access to
            Xerox Source. Sandia agrees to comply with Xerox's requests, from
            time to time, to provide Xerox with copies of its list and updates
            thereto, and all such Confidentiality Agreements entered into by
            Sandia and its Authorized Employees and Authorized Contractors and
            not previously provided to Xerox. Finally, upon termination or
            resignation of an employee, perform an exit interview reminding the
            employee about his/her requirements regarding confidentiality.

         2.1.3  XEROX SOURCE SUPPORT. Xerox warrants that Xerox shall make
            available, as part of the payments, to Sandia a Xerox employee
            knowledgeable about the Xerox' Source. Such employee is only
            obligated to support Sandia with one-third of his/her time, as
            calculated on an annual basis, and solely to help Sandia with its
            use of the Xerox Source as licensed under Section 2.1.1. In the
            event the assigned employee is not available during the normal work
            week, Xerox will make available another employee knowledgeable about
            the Xerox ' Source. If additional resources are needed, as
            determined by Sandia and/or Xerox, the parties agree to negotiate
            the price and terms and conditions of such additional support. In
            addition, Sandia acknowledges that the Xerox Source is of such
            complexity that it may have inherent defects, and agrees that Xerox
            makes no other warranty, either express or implied, as to any matter
            whatsoever, including without limitation, the condition of the Xerox
            Source. Xerox 

                                                                               2
<PAGE>
 
            may, from time to time, at its sole discretion, update or improve
            the Xerox Source with modifications and enhancements to the Xerox
            Source and corresponding documentation, if available, which are
            designed by Xerox to correct or improve the performance of the
            software. Xerox agrees to provide information to Sandia regarding
            any modifications or enhancements that may become available. Such
            source code updates, if any, will be provided to Sandia if requested
            and at a price (such prices to be based on the actual cost of the
            enhancement or modifications) and terms to be agreed upon. Xerox
            agrees, however, that it will provide to Sandia proposed source code
            release number 1.5 of the Xerox Source when such release becomes
            available. Sandia agrees to pay for any requested 'build' of such
            release up to but not to exceed $25,000.

         2.1.4  PROPRIETARY RIGHTS AUDIT.  During the term of this Agreement 
            and for a period of eighteen (18) months thereafter, Xerox may
            appoint an independent third party who shall have access to such
            portion of Sandia' records and premises to allow Xerox to determine
            whether Sandia is substantially in compliance with Paragraph 2.1.2
                                                               ---------------
            ("Protection of Xerox Source") of this Agreement (i.e. that Sandia
            is observing the agreed upon rules and procedures as to the
            protection and authorized use of the Xerox Source). In no event
            shall audits be made hereunder more frequently than every six (6)
            months. Such access shall be (a) during Sandia's regular business
            hours and with a minimum notification of 48 hours, (b) arranged so
            that, to the extent possible, Sandia's regular business activities
            are minimally disrupted and (c ) under the terms of an appropriate
            confidentiality agreement executed by the individual(s) conducting
            such audit. Xerox shall pay the costs of such audit. Sandia shall
            immediately correct any deficiencies discovered in the course of the
            audit.

    2.2  LICENSE TO LICENSED PROGRAMS.
         ----------------------------

         2.2.1  LICENSE GRANT.  Sandia shall have a license to the Licensed 
            Programs as provided in Section 7 of the Agreement. That right shall
            be interpreted to include the sublicensing of dataglyphing
            capability to 3/rd/ party vendors (i.e. scanner vendors) who will
            market products designed to read Sandia's keyed dataglyphs via
            products sold under the 3/rd/ party's and other labels.

    2.3  NEW EMBEDDED TECHNOLOGY.
         -----------------------

         2.3.1  Both parties recognize that Xerox is, and will continue, to 
            develop embedded technologies during the course of this Agreement.
            If Xerox develops embedded technology that the parties agree is
            competitive to 

                                                                               3
<PAGE>
 
            the Licensed Program, the parties agree that they will discuss the
            availability of such embedded technology to Sandia upon the
            commercialization of such technology by Xerox.

3.  ROYALTY
    -------

    3.1  Royalty Amounts. In consideration of the license grants provided under
         the Agreement and this Amendment, Sandia shall pay to Xerox in US
         dollars two million one hundred thousand dollars ($2,100,000) as set
         forth in the payment schedule below:

              December 15, 1997         $700,000.00 + interest
              December 15, 1998         $700,000.00 + interest
              December 15, 1999         $700,000.00 + interest

    3.2  The parties agree that Exhibit A of the Agreement is deleted and
         replaced with the new Exhibit A attached hereto.

    3.3  The parties agree that Section 3.8, including 3.8.1, 3.8.2, 3.8.3, and
         3.10 of the Agreement are not applicable until after December 31, 1999.

4.  EXHIBIT B AND D./ SANDIA'S PRODUCTS / MARKET FOR EXCLUSIVITY
    ------------------------------------------------------------

    4.1  The parties agree that Exhibit B of the Agreement is deleted and
         replaced with the new Exhibit B attached hereto. The parties agree that
         Exhibit D of the Agreement is deleted and replaced with the new Exhibit
         D attached hereto.

5.  TERMINATION
    -----------

    5.1  Section 13.1 of the Agreement is deleted and replaced with the
         following: "This Agreement is effective upon the date of execution by
         Xerox and Sandia, unless terminated sooner by a provision of this
         Agreement, will continue until December 31, 1999 and thereafter will
         automatically renew for successive one year terms."

    5.2  Section 13.2 of the Agreement is deleted.

    5.3  Section 13.3 of the Agreement is deleted and replaced as follows: At
         any time after December 31, 1999, Sandia may terminate, or not renew,
         this Agreement based upon its own business reasons and objectives
         notwithstanding that Xerox is not then in default of its obligations
         hereunder. In this circumstance, Sandia shall give Xerox written notice
         of termination or non-renewal at least ninety days in advance.

                                                                               4
<PAGE>
 
    5.4  Section 13.5 of the Agreement is deleted and replaced as follows:
         "Should Sandia fail to pay Xerox the minimum annual royalty payment by
         the expected dates as defined in Exhibit A, the provision granting
         Sandia the sole distribution rights for the Licensed Programs reverts
         to a non-exclusive license grant. Termination of exclusivity is Xerox'
         sole remedy for Sandia's failure to pay the minimum royalty, and such
         failure shall not be deemed a breach of the Agreement."

    5.5  In addition to the effects of termination set forth in Section 14 of
         the Agreement, if the license granted pursuant to Paragraph 2.1 of the
         Amendment shall be terminated; Sandia shall continue to be responsible
         for safeguarding the trade secrets and proprietary rights of Xerox in
         accordance with the terms of the Agreement and this Amendment after
         such cancellation, termination, or expiration and Sandia shall erase,
         destroy or return to Xerox any of Xerox's proprietary information
         provided pursuant to this Amendment or Agreement. Upon Xerox's request,
         Sandia shall warrant in writing to Xerox its return or destruction of
         Xerox's proprietary information within thirty (30) days of
         cancellation.

6.  GENERAL
    -------

    6.1  Governing Law. This Amendment shall be governed in all respects by the
         internal laws of California.

    6.2  Injunctive Relief. It is understood and agreed that, notwithstanding
         any other provisions of this Amendment or the Agreement, breach of the
         provisions of this Amendment or the Agreement by Sandia will cause
         Xerox irreparable damage for which recovery of money damages would be
         inadequate, and that Xerox shall therefore be entitled to obtain timely
         injunctive relief in a court of competent jurisdiction to protect
         Xerox's rights under this Amendment or the Agreement in addition to any
         and all remedies available at law.

    6.3  Waiver. The failure of either party to require performance by the other
         party of any provision hereof shall not affect the full right to
         require such performance at any time thereafter, nor shall the waiver
         by either party of a breach of any provision hereof be taken or held to
         be a waiver of the provision itself.

    6.4  Entire Agreement. This Agreement, the Agreement and their respective
         Exhibits constitute the entire agreement between the parties with
         respect to the subject matter hereof. In the event of a conflict
         between the terms and conditions of the Agreement and this Amendment,
         the terms of this Amendment shall control. This Amendment may only be
         changed by mutual agreement of authorized representatives of the
         parties in writing. 

                                                                               5
<PAGE>
 
       IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective duly authorized employees to be effective as of the date
first written on page 1 of this Agreement.

Xerox:                           Sandia:

XEROX CORPORATION                     SANDIA CORPORATION

By:                                   By: 
    ------------------------              -------------------------
Print                                 Print
Name:                                 Name:
     ----------------------                ------------------------
Title:                                Title: 
       --------------------                  ----------------------
Date:                                 Date: 
      ---------------------                 -----------------------
                                                                               6
<PAGE>
 
                                   EXHIBIT A:

                               LICENSED PROGRAMS
                               -----------------

The Licensed Program is the SmartPaper Tooklit for Windows (Version 1.1a)
previously provided to Sandia by Xerox.

ROYALTY SCHEDULE after December 31, 1999.
 
                                          ROYALTY FEE
                                          -----------
ITEMS TO APPLY ROYALTY                    % OF ACHIEVED REVENUE*
----------------------                    ----------------------
On all Sandia hardware used to read,       5%
write and decode SmartPaper Objects**,
locally or via a server***
On all Sandia software used to read,       5%
write and decode SmartPaper Objects
On all other Sandia revenues from          5%
SmartPaper related royalties and
services.
Any and all reading and writing            5%
dataglyph systems using Xerox Source.

*Sandia shall pay to Xerox a per item royalty of a percentage of Sandia's
achieved revenue as indicated above. For purposes of this Agreement, "achieved
revenue" shall be the total price at which an order for the above items is
invoiced to the customer, including any increase or decrease in the total amount
of the order, i.e., net of any returns or allowances, but excluding all costs of
shipping, tax and insurance.

**"SmartPaper Objects" are comprised of the following components: (1)
DataGlyphs; (2) Clip Regions; (3) Signature Regions; (4) Check Boxes.

***Royalty does not apply to Sandia Imaging's basic card printer, but, rather,
only to dedicated Hardware to encode and decode SmartPaper Objects.

                                                                               7
<PAGE>
 
MINIMUM ANNUAL ROYALTY PAYMENT:

By December 31, every year after 1999      $500,000

Subject to the provisions of Section 13.5, at the end of any particular year, as
described above, Sandia will determine if the accrued and payable earned
royalties for such year are less than the Minimum Annual Royalty for such year,
and shall pay Xerox in cash any such amount under the Minimum, at the time
Sandia makes the payment for the quarter then ended.

ROYALTY DISCOUNT SCHEDULE:

The 5% Royalty set forth in Amendment A on achieved revenues, as defined in
Amendment A., shall be subject to a declining percentage based on attaining
revenues beyond minimum amount thresholds:

Achieved Revenue within Calendar Year    Achieved Royalty Percentage
       Minimum of $10 Million            4.5%
       Minimum of $20 Million            4.0%
       Minimum of $30 Million            3.5%
       $30 Million or more               3.0%

                                                                               8
<PAGE>
 
                                   EXHIBIT B

                               SANDIA'S PRODUCTS

Product Description:    A product which prints and reads from any security
identification and security portable database media.  These media refer to cards
made substantially of plastic, or such other material as becomes adopted by the
identification and secured access industry and other security media including
passports, visas, drivers licenses, national identification media, boarder
crossing media all falling under the category of "security and identification
media."

                                                                               9
<PAGE>
 
                                   EXHIBIT D

                      THE MARKET FOR SANDIA'S EXCLUSIVITY
                                        
Sandia is granted by Xerox the right to be the sole value added reseller for use
of the Licensed Programs in the secured access industry.  That being, Xerox
shall not license the Licensed Programs to a third party for purposes of using
such Licensed Programs to create a competitively similar product (set forth as
in Exhibit D as Product Description) that will print and read from security
identification and security portable database media.

Sole value added reseller, as used herein, means that Xerox will not grant to a
third party a license to use the Licensed Program to make competitive products
within the above defined market.  Xerox Corporation or its subsidiaries reserved
the right to enter this market itself.

                                                                              10
<PAGE>
 
                                  EXHIBIT A-1

                                  XEROX SOURCE

For the purpose of this agreement, SmartPaper Source Code is defined to be the
source code versions of all files found in the code tree used to build version
1.1a of the SmartPaper Toolkit for Windows, plus any code that is changed or
modified, added or enhance by DDS in this code tree prior to December 15, 1996.

                                                                              11
<PAGE>
 
                                  EXHIBIT B-1

                     SANDIA'S EMPLOYEE/CONTRACTOR AGREEMENT

Sandia must provide a copy of their standard employee and contractor
confidentiality agreement for our review and incorporation into the Amendment.

                                                                              12
<PAGE>
 
                    EXHIBIT B-2:  CONFIDENTIALITY AMENDMENT
                    ---------------------------------------

In connection with my [employment by / or my engagement as an independent
contractor with] Sandia, I entered into a confidentiality agreement which
required me to treat as confidential certain proprietary information (the "Prior
Agreement").  In return for my access to certain source code owned and provided
to Sandia by Xerox Corporation ("Xerox"), Sandia and I hereby agree to amend the
Prior Agreement as follows:

1. PROPRIETARY INFORMATION.  I am to receive access to certain source code,
   ------------------------                                                 
   documentation or other proprietary information supplied to Sandia by Xerox
   ("Confidential Information") who is a third party supplier of Sandia. I
   acknowledge that such information is confidential or proprietary as defined
   by the Prior Agreement. I agree to maintain the Confidential Information in
   the strictest of confidence and to treat all such Confidential Information in
   accordance with the restrictions imposed on other proprietary or confidential
   information pursuant to the Prior Agreement.

2. INJUNCTIVE RELIEF. I understand and agree that if I breach this Agreement, as
   ------------------
   hereby amended, I will cause Sandia and its suppliers irreparable damage for
   which recovery of money damages would be inadequate, and that Sandia and its
   suppliers shall be entitled to obtain timely injunctive relief to protect
   their rights hereunder in addition to any and all remedies available at law.

3. THIRD PARTY BENEFICIARY. I understand that Xerox is a third party beneficiary
   ------------------------
   to this Agreement. I agree that Xerox is entitled to enforce all the
   provisions of this Agreement in addition to Sandia.

4. REAFFIRMATION OF OBLIGATIONS UPON REASSIGNMENT. If I am reassigned from a
   -----------------------------------------------
   project involving access to the proprietary information of Xerox to a project
   not involving such access, I agree to reaffirm my obligations pursuant to
   this agreement by re-executing this Amendment.

[EMPLOYEE/CONTRACTOR]                   SANDIA
---------------------                   ------
 
--------------------------------        -------------------------------
Signature                               Signature
 
--------------------------------        -------------------------------
Print Name                              Print Name
 
--------------------------------        -------------------------------
Date                                    Date
 
DATE TO COMMENCE ACCESS TO XEROX INFORMATION:
                                              -------------------------

                                                                              13
<PAGE>
 
                            SECURED PROMISSORY NOTE

Date: _____________________________________                                XEROX

1.  Amount Loaned $2,100,000              3.  Total of Payments (1+2) $2,100,000
 
2.  Interest on the payment due shall be  4.  Annual Percentage Rate fixed.
    at the prime rate on the payment due
    date.

a.  TERMS AND REPAYMENT: The term of this note shall be until December 15, 1999
    --------------------
    or until paid. For value received the undersigned (hereinafter referred to
    as "Debtor") promises to pay Xerox Corporation (Xerox) at its offices
    located at 3400 Hillview Avenue, PAHV 211, Palo Alto California 94304, or to
    anyone Xerox may designate, as follows: (1) On December 15, 1997, the sum of
    $7000,000 together with imputed interest at the prime rate of interest as
    published in the Wall Street Journal (Western edition) on December 15, 1997,
    computed monthly from the Effective Date of the Amendment; (2) On December
    15, 1998, the sum of $700,000 together with imputed interest at the prime
    rate of interest as published in the Wall Street Journal (Western Edition)
    on December 15, 1998, computed monthly from the Effective Date of the
    Amendment, and; (3) On December 15, 1999, the sum of $700,000 together with
    Imputed Interest at the prime rate of interest as published in the Wall
    Street Journal (Western Edition) on December 15, 1999, computed monthly from
    the Effective Date of the Amendment. This will constitute "total of payments
    (Item 3, above). Debtor agrees, however, that Xerox may at any time require
    that Debtor pay the entire unpaid balance of the amount financed and all
    unpaid accrued interest in one lump sum upon the happening of any event
    enumerated in the paragraph entitled "Default" and the interest rate shall
    be the prime rate of Interest as published in the Wall Street Journal
    (Western Edition) as of such notice by Xerox.

B.  DEFAULT  At Xerox' option, the unpaid balance of the amount financed and all
    -------
    unpaid accrued interest will become immediately due and payable without any
    notice or demand to Debtor if any one of more of the following events
    occurs:

    1. Debtor fails to make a required payment on time;

    2. Debtor ceases or suspends business;

    3. Debtor files a petition of bankruptcy or has one filed against it or
       him/her;

    4. Debtor makes an assignment for the benefit of creditors or a receiver or
       trustee is appointed for Debtor or any other type of insolvency
       proceeding is begun by or against Debtor;

                                                                              14
<PAGE>
 
    5. Debtor makes any false representation to Xerox;;

    6. Xerox determines Debtor's ability to repay this note has been impaired;

    7. Debtor fails to make timely payment on any debt owing Xerox Corporation
       or any subsidiary thereof.

    8. The OEM License Agreement between the parties dated December 28, 1994 is
       terminated.

    C. a. Debtor hereby grants to Xerox as additional security for the payment
       of the debt which is the subject of this Promissory Note 600,000 shares
       of the common stock of Lasertechnics, Inc. is to be maintained by Xerox
       in a safe deposit box during the term of this note with demand
       registration rights to be exercised in the event of default.

    b. Debtor represents, warrants, and covenants that Debtor has good and
       marketable title to the said common stock and is owned by Lasertechnics,
       Inc. in its own right free from any lien, security interest, or other
       encumbrance and that there will be no set-offs or counter-claims of any
       nature whatsoever.  Debtor will warrant and defend the title to stock
       against the lawful claims and demands of all persons;

    c. In the event the parties mutually agree to pledge other collateral;

         i. Debtor will execute alone or with Xerox such Financing Statements or
            other documents, in form satisfactory to Xerox, which Xerox may at
            any time desire to file in order to perfect and protect its security
            interests under this Promissory Note, and reimburse Xerox for the
            costs of filing the same; and that it will execute and deliver to
            Xerox any instrument, document, assignment, or other writing, which
            may be necessary or convenient to Xerox to carry out the terms of
            this Paragraph C and to perfect its security interest in and
            facilitate the collection of accounts receivable, the proceeds of
            the Collateral and any other property constituting security to
            Xerox;

        ii. Debtor hereby irrevocably nominates, constitutes and appoints Xerox
            as the true and lawful attorney-in-fact of Debtor, in its name,
            place and stead, to notify account debtors, to collect, receive,
            receipt and sue for all monies or other proceeds due from the
            accounts receivable, to endorse the name of Debtor on all commercial
            paper given in payment or in part payment thereof, and to settle,
            adjust, or compromise any claims or disputes as to the accounts as
            to the accounts receivable as 

                                                                              15
<PAGE>
 
            fully as Debtor could itself do, and to take any other steps that it
            deems necessary or desirable to fulfill Debtor's obligations
            hereunder.

       iii. Xerox shall have the right to enter upon Debtor's premises at any
            reasonable time to inspect Debtor's books and records and make
            extracts therefrom and inspect the Collateral or its proceeds, and
            Debtor shall assist Xerox in whatever way necessary to make such
            inspection.

        iv. 
D.  LEGAL FEES AND COURT COSTS. In the event that legal proceedings are
    ---------------------------
    instituted to collect any amount due upon any installment of this note, the
    undersigned, jointly and severally, agree to pay to the holder hereof in
    addition to the amount of the unpaid balance or principal and accrued unpaid
    interest, all costs and expenses of such proceedings, plus reasonable
    attorney fees.

E.  WAIVER The undersigned and all endorsers, sureties, and guarantors hereof
    ------
    hereby jointly and severally waive presentment for payment, demand, notice
    of non-payment, and notice of sureties. Guarantors hereof consent to any and
    all extension of time, renewals, waivers, or modifications that may be
    granted by Xerox with respect to the payments or other provisions of this
    note, and to the release of the collateral, or any part thereof without
    substitution and agree that additional makers, endorsers, guarantors, and
    sureties may become parties hereto without notice to them or without
    affecting their liability hereunder. No delay or omission to exercise any
    right, power or remedy accruing to Xerox upon breach or default by Debtor or
    guarantor under this promissory note shall impair any such right, power or
    remedy of Xerox, or shall be construed as a waiver of any breach or default
    or any similar breach or default thereafter occurring; nor shall any waiver
    of a single breach or default be deemed a waiver of any subsequent breach or
    default. All waivers by Xerox must be in writing.

F.  CONFESSION OF JUDGMENT: Debtor hereby empowers any attorney of any court of
    -----------------------
    competent jurisdiction within the United States or elsewhere to appear for
    Debtor and with or without one or more declarations, confess a judgment or
    judgments against Debtor in favor of the holder of this promissory note for
    all sums due hereunder plus accrued unpaid interest thereon, together with
    costs of suit and reasonable attorney fees. Debtor waives all errors that
    may occur in any such proceeding and all stays of execution, and the
    exemption of all property from levy and sale on any execution after such
    confession is hereby expressly waived by Debtor and Debtor shall claim no
    benefit of exemption under or by virtue of any exemption law now in force or
    which may hereinafter be enacted.

Payments due under this Promissory Note shall be made without claim of set-off,
counterclaim or deduction of any nature or kind or for any cause whatsoever.

                                                                              16
<PAGE>
 
Upon prior written notice, Xerox may change the address to which Debtor makes
payments under this Promissory Note.  Debtor shall give Xerox reasonable prior
written notice of any address change by Debtor.

The liability of each of the undersigned shall be absolute and unconditional and
without regard to the liability of any other party.

This promissory note and the security interest(s) granted to Xerox hereunder
shall be governed by the interpreted in accordance with the laws of California.

XEROX CORPORATION                          SANDIA CORPORATION

By:                                        By: 
     -----------------------                   -------------------------
Name:                                      Name: 
      ----------------------                     -----------------------
Title                                      Title: 
      ----------------------                      ----------------------
Date:                                      Date: 
      ----------------------                     -----------------------
Address  3400 Hillview Avenue       Address:  3208 Commander  Drive
         Palo Alto, CA  94566                 Carrollton, TX  75006

                                                                              17