<PAGE>   1
                                                                   Exhibit 10.23


                        THIRD LOAN MODIFICATION AGREEMENT

         This Third Loan Modification Agreement ("this Agreement") is made as of
February 12, 1999 between Xionics Document Technologies, Inc., a Delaware
corporation (the "Borrower") and Fleet National Bank (the "Bank") (being the
successor by merger to Fleet Bank of Massachusetts, N.A.). For good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank act and agree as follows:

         1.     Reference is made to: (i) that certain letter agreement dated
September 27, 1995 among the Borrower, Xionics, Inc. ("Xionics") and Fleet Bank
of Massachusetts, N.A., as amended by letter dated May 9, 1996, by Loan
Modification Agreement dated as of August 21, 1996 and by Second Loan
Modification Agreement dated as of December 31, 1997 (as so amended, the "Letter
Agreement"), the Bank having succeeded to the rights of Fleet Bank of
Massachusetts, N.A. thereunder and Xionics having been merged with and into the
Borrower; (ii) that certain $4,000,000 face principal amount promissory note
dated December 31, 1997 (the "1997 Revolving Note") made by the Borrower and
payable to the order of the Bank; (iii) that certain $2,000,000 face principal
amount promissory note dated December 31, 1997 (the "1997 Term Note") made by
the Borrower and payable to the order of the Bank; (iv) that certain Inventory,
Accounts Receivable and Intangibles Security Agreement dated September 27, 1995,
as amended (as so amended, the "IAR Security Agreement") given by the Borrower
to Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of
Fleet Bank of Massachusetts, N.A. thereunder; (v) that certain Supplementary
Security Agreement - Security Interest in Goods and Chattels dated September 27,
1995, as amended (as so amended, the "Supplementary Security Agreement") given
by the Borrower to Fleet Bank of Massachusetts, N.A., the Bank having succeeded
to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (vi) that certain
Notice of Security Interest in Trademarks dated September 27, 1995, as amended
(as so amended, the "Trademark Notice") given by the Borrower to Fleet Bank of
Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of
Massachusetts, N.A. thereunder; (vii) that certain Collateral Assignment of
License dated September 27, 1995, as amended (as so amended, the "Xionics
License Assignment") relating to the "Xionics" name and mark given by the
Borrower to Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the
rights of Fleet Bank of Massachusetts, N.A. thereunder; (viii) that certain
Agreement and Consent to Collateral Assignment of License dated September 27,
1995, as amended (as so amended, the "Xionics Consent") relating to the
"Xionics" name and mark given by Xionics Limited, an English corporation, to
Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of
Fleet Bank of Massachusetts, N.A. thereunder; (ix) that certain Notice of
Collateral Assignment of License dated September 27, 1995, as amended (as so
amended, the "Xionics License Notice") relating to the "Xionics" name and mark
given by the Borrower to Fleet Bank of Massachusetts, N.A., the Bank having
succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (x)
that certain Collateral Assignment of License dated September 27, 1995, as
amended (as so amended, the "Phoenix License Assignment") relating to the
"PhoenixPage" name and mark given by the Borrower to Fleet Bank of
Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of
Massachusetts, N.A. thereunder; (xi) that certain Agreement and Consent to
Collateral Assignment of License dated September 21, 1995, as


<PAGE>   2


amended (as so amended, the "Phoenix Agreement") between Phoenix Technologies
Ltd.("Phoenix") and Fleet Bank of Massachusetts, N.A., the Bank having succeeded
to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (xii) that
certain Notice of Collateral Assignment of License dated September 27, 1995, as
amended (as so amended, the "Phoenix License Notice") relating to the
"PhoenixPage" name and mark given by the Borrower to Fleet Bank of
Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of
Massachusetts, N.A. thereunder; (xiii) that certain Notice of Security Interest
in Patents dated September 27, 1995, as amended (as so amended, the "Patent
Notice") given by the Borrower to Fleet Bank of Massachusetts, N.A., the Bank
having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder;
(xiv) that certain $5,000,000 face principal amount promissory note of even date
herewith (the "1999 Revolving Note") made by the Borrower and payable to the
order of the Bank; and (xv) that certain $1,000,000 face principal amount term
note of even date herewith (the "1999 Term Note") made by the Borrower and
payable to the order of the Bank. The Letter Agreement, the IAR Security
Agreement, the Supplementary Security Agreement, the Trademark Notice, the
Xionics License Assignment, the Xionics Consent, the Xionics License Notice, the
Phoenix License Assignment, the Phoenix Agreement, the Phoenix License Notice,
the Patent Notice, the 1999 Revolving Note and the 1999 Term Note are
hereinafter collectively referred to as the "Financing Documents". The aforesaid
Loan Modification Agreement dated as of August 21, 1996 is hereinafter referred
to as the "First Modification"; and the aforesaid Second Loan Modification
Agreement dated as of December 31, 1997 is hereinafter referred to as the
"Second Modification".

         2.     The Letter Agreement is hereby amended, effective as of the date
hereof:

         a.     By deleting in its entirety clause (i) of Section 1.1 of the
Letter Agreement (said clause having been amended by the Second Modification)
and by substituting in its stead the following:

                "(i) that certain $5,000,000 face principal amount promissory
                note (the `Revolving Note') dated February 12, 1999 made by the
                Borrower and payable to the order of the Bank,"

As a result, all references in the Letter Agreement to a "Revolving Note" will
be deemed to refer to the 1999 Revolving Note.

         b.     By deleting in its entirety clause (ii) of Section 1.1 of the
Letter Agreement (said clause having been amended by the Second Modification)
and by substituting in its stead the following:

                "(ii) that certain $1,000,000 face principal amount promissory
                note (the `Term Note') dated February 12,1999 made by the
                Borrower and payable to the order of the Bank,"

As a result, all references in the Letter Agreement to a "Term Note" will be
deemed to refer to the 1999 Term Note.


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         c.     By adding to Section 1.2 of the Letter Agreement, at the end of
such Section, the following:

                "Overdue principal of any Revolving Loan and, to the extent
                permitted by law, overdue interest shall bear interest at a
                fluctuating rate per annum which at all times shall be equal to
                the sum of (i) four (4%) percent per annum PLUS (ii) the per
                annum rate otherwise payable under the Revolving Note (but in no
                event in excess of the maximum rate from time to time permitted
                by then applicable law), compounded monthly and payable on
                demand. The Borrower hereby irrevocably authorizes the Bank to
                make or cause to be made, on a schedule attached to the
                Revolving Note or on the books of the Bank, at or following the
                time of making each Revolving Loan and of receiving any payment
                of principal, an appropriate notation reflecting such
                transaction and the then aggregate unpaid principal balance of
                the Revolving Loans. The amount so noted shall constitute
                presumptive evidence as to the amount owed by the Borrower with
                respect to principal of the Revolving Loans. Failure of the Bank
                to make any such notation shall not, however, affect any
                obligation of the Borrower or any right of the Bank hereunder or
                under the Revolving Note."

         d.     By deleting in their entireties Sections 1.4 and 1.5 of the
Letter Agreement and by substituting in their stead the following:

                "1.4. TERM LOANS; TERM NOTE. In addition to the foregoing, the
                Bank may make one or more loans (the `Term Loans') to the
                Borrower in an aggregate principal amount up to $100,000. A
                Term Loan shall be made, no more than once per calendar quarter
                (except that more than one Term Loan may be made in any calendar
                quarter provided that any additional Term Loan in any one
                calendar quarter is in an amount of at least $100,000), in
                order to finance costs of Qualifying Equipment acquired by the
                Borrower within the 60 days preceding the request for such Term
                Loan (except that Term Loans made prior to March 10, 1999 may be
                used by the Borrower to reimburse the acquisition costs of
                Qualifying Equipment acquired at any time after October 1,
                1998), each such Term Loan to be in such amount as may be
                requested by the Borrower; provided that (i) no Term Loan will
                be made after the earlier of (A) March 31, 2000 or (B) the
                earlier termination of the within-described term loan facility
                pursuant to Section 5.2 or Section 6.7; (ii) the aggregate
                original principal amounts of all Term Loans will not exceed
                $1,000,000; and (iii) no Term Loan will be in an amount more
                than 80% of the invoiced actual costs of the items of Qualifying
                Equipment with respect to which such Term Loan is made
                (excluding taxes, shipping, installation charges, training fees



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                and other `soft costs' and excluding software except as
                expressly permitted by the next following sentence). The
                Borrower may include within `Qualifying Equipment' copies of
                software (not including `shrink-wrapped' software) purchased by
                the Borrower for use in connection with the equipment otherwise
                included in `Qualifying Equipment'; provided that the total
                amount of the Term Loans advanced for such software will never
                exceed 30% of the total principal amount of the Term Loans
                outstanding. Prior to the making of each Term Loan, and as a
                precondition thereto, the Borrower will provide the Bank with:
                (i) invoices supporting the costs of the relevant Qualifying
                Equipment; (ii) such evidence as the Bank may reasonably require
                showing that the Qualifying Equipment has been delivered to and
                installed at the Borrower's Burlington, MA premises, has become
                fully operational, has been paid for by the Borrower and is
                owned by the Borrower free of all liens and interests of any
                other Person (other than the security interest of the Bank
                pursuant to the Security Agreement); (iii) Uniform Commercial
                Code financing statements, if needed, reflecting the relevant
                Qualifying Equipment with respect to which such Term Loan is
                being made; and (iv) evidence satisfactory to the Bank that the
                Qualifying Equipment is fully insured against casualty loss,
                with insurance naming the Bank as secured party and first loss
                payee. The Term Loans will be evidenced by the Term Note.
                Interest on the Term Loans shall be payable at the times and at
                the rate provided for in the Term Note. Overdue principal of any
                Term Loan and, to the extent permitted by law, overdue interest
                shall bear interest at a fluctuating rate per annum which at all
                times shall be equal to the sum of (i) four (4%) percent per
                annum PLUS (ii) the per annum rate otherwise payable under the
                Term Note (but in no event in excess of the maximum rate from
                time to time permitted by then applicable law), compounded
                monthly and payable on demand. The Borrower hereby irrevocably
                authorizes the Bank to make or cause to be made, on a schedule
                attached to the Term Note or on the books of the Bank, at or
                following the time of making each Term Loan and of receiving any
                payment of principal, an appropriate notation reflecting such
                transaction and the then aggregate unpaid principal balance of
                the Term Loans. The amount so noted shall constitute presumptive
                evidence as to the amount owed by the Borrower with respect to
                principal of the Term Loans. Failure of the Bank to make any
                such notation shall not, however, affect any obligation of the
                Borrower or any right of the Bank hereunder or under the Term
                Note.

                1.5. PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay
                principal of the Term Loans in 35 equal consecutive monthly



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<PAGE>   5


                installments (each in an amount equal to 1/36th of the aggregate
                principal amount of the Term Loans outstanding at the close of
                business on March 31, 2000), such installments to commence April
                1, 2000 and to continue thereafter on the first day of each
                month through and including February 1, 2003, PLUS a 36th and
                final payment due and payable on March 1, 2003 in an amount
                equal to all principal of the Term Loans then remaining
                outstanding and all interest accrued but unpaid thereon. The
                Borrower may prepay, at any time or from time to time, without
                premium or penalty, the whole or any portion of any Term Loan;
                provided that each such principal prepayment shall be
                accompanied by payment of all interest on the sum so prepaid
                accrued but unpaid to the date of payment. Any partial
                prepayment of principal of the Term Loans will be applied to
                installments of principal of the Term Loans thereafter coming
                due in inverse order of normal maturity. Amounts repaid or
                prepaid with respect to the Term Loans are not available for
                reborrowing."

         e.     By deleting from the first sentence of Section 1.7 of the Letter
Agreement the amount "$4,000,000" (such amount having been inserted by the First
Modification) and by substituting in its stead the following:

                "$5,000,000"

         f.     By adding to Section 2.1 of the Letter Agreement, at the end of
such Section, the following:

                "(n) The Borrower's IPS/2000 products generally do not have date
                and time dependent functions. To the extent that any ancillary
                functions contain date operators, 4-digit representations of
                year dates are used. It is therefore believed that the
                Borrower's ISP/2000 software will not encounter problems
                executing any of its functions at least until the year 9999. The
                Borrower has also reviewed certain critical software systems
                which it uses in its business operations (i.e., phone systems,
                etc.) for `Year 2000' compliance, and, based upon the
                information received by the Borrower to date, the Borrower
                believes that such software systems will continue to function in
                the manner intended, without material interruption of service or
                other difficulty resulting from the `Year 2000' problem. The
                Borrower is also in the process of contacting others of its
                critical customers, suppliers, financial institutions and
                development partners to determine if other operations and the
                products and services that they provide to the Borrower are
                `Year 2000' compliant. However, it should be noted that there
                could be undetected, unknown and/or unforeseen problems
                (including failure



                                       -5-


<PAGE>   6


                of systems, equipment, software, firmware and/or devices to
                operate properly with regard to dates in the year 2000 and
                after) in the Borrower's own IPS/2000 products and the software
                which the Borrower utilizes in its business operations, as well
                as that of its critical customers, suppliers, financial
                institutions and development partners. The Borrower will, at the
                request of the Bank, provide such reports and other information
                in its possession as the Bank may reasonably request in order to
                evidence such Year 2000 compliance."

         g.     By deleting from clause (i) of Section 3.6 of the Letter
Agreement the words "120 days" and by substituting in their stead the following:

                "90 days"

         h.     By adding to clause (v) of Section 3.6 of the Letter Agreement,
at the end of such clause, the following:

                "The Borrower will deliver to the Bank on an annual basis a
                `management letter' prepared by the Borrower's accountants (in
                whatever form same appears, including as a section of another
                report), with the management letter for the fiscal year ended
                June 30, 1998 to be delivered prior to February 16, 1999."

         i.     By deleting their entireties Sections 3.7, 3.8, 3.9 and 3.10 of
the Letter Agreement and by substituting in their stead the following:

                "3.7. DEBT TO WORTH. The Borrower will maintain as at the end of
                each fiscal quarter of the Borrower (commencing with its results
                as at December 31, 1998) on a consolidated basis a Leverage
                Ratio of not more than 1.0 to 1. As used herein, `Leverage
                Ratio' means, as at any date when same is to be determined, the
                ratio of(x) the outstanding consolidated Senior Debt of the
                Borrower and its Subsidiaries to (y) the Borrower's consolidated
                Capital Base at such date.

                3.8. CAPITAL BASE. The Borrower will maintain as at the end of
                each fiscal quarter of the Borrower (commencing with its results
                as at December 31, 1998) a consolidated Capital Base which shall
                not be less than the then-effective Capital Base Requirement. As
                used in this Section 3.8, the `Capital Base Requirement' will be
                deemed to have been $17,000,000 as at September 30, 1998; and as
                at the last day of each fiscal quarter thereafter (beginning
                with December 31, 1998) the Capital Base Requirement will be
                deemed to become an amount equal to the sum of: (i) that Capital
                Base Requirement which had



                                       -6-


<PAGE>   7


                been in effect on the last day of the immediately preceding
                fiscal quarter, PLUS (ii) 75% of the net proceeds of any equity
                securities sold by the Borrower during the fiscal quarter then
                ended and 75% of the net proceeds of any Subordinated Debt
                issued by the Borrower and/or any of its Subsidiaries during
                said fiscal quarter then ended (nothing contained herein being
                deemed to approve the issuance of any such Subordinated Debt),
                PLUS (iii) 75% of the consolidated quarterly Net Income of the
                Borrower and Subsidiaries for said fiscal quarter then ended
                (but without giving effect to any such quarterly Net Income
                which is less than zero as to any fiscal quarter).

                3.9. QUICK RATIO. The Borrower will maintain as at the end of
                each fiscal quarter (commencing with its results as at December
                31, 1998) a Quick Ratio of not less than 1.75 to 1. As used in
                this Section 3.9, `Quick Ratio' means, as at any date when same
                is to be determined the ratio of (x) the Borrower's Net Quick
                Assets to (y) Current Liabilities of the Borrower and/or its
                Subsidiaries then outstanding.

                3.10. PROFITABILITY. The Borrower will achieve consolidated
                quarterly Net Income of at least $250,000 for its fiscal quarter
                ending March 31, 1999 and for each fiscal quarter thereafter.
                Without limitation of the foregoing, the Borrower will achieve
                consolidated annual Net Income of at least $1,000,000 for its
                fiscal year ending June 30, 1999 and will achieve consolidated
                annual Net Income of at least $2,000,000 for its fiscal year
                ending June 30, 2000 and for each fiscal year thereafter."

         j.     By deleting from clause (i) of Section 5.1 of the Letter
Agreement the amount "$150,000" and by substituting in its stead the following:

                "$300,000"

         k.     By deleting the last sentence of Section 5.3 of the Letter
Agreement and by substituting in its stead the following:

                "The Borrower hereby grants to the Bank a lien, security
                interest and right of setoff as security for all liabilities and
                obligations to the Bank, whether now existing or hereafter
                arising, upon and against all deposits, credits, collateral and
                property, now or hereafter in the possession, custody,
                safekeeping or control of the Bank or any entity under the
                control of Fleet Financial Group, Inc. or in transit to any of
                them. At any time after the occurrence and during the
                continuance of an Event of Default, without further demand or
                notice, the Bank may set off the same or any part thereof and
                apply



                                       -7-


<PAGE>   8


                the same to any liability or obligation of the Borrower, even
                though unmatured and regardless of the adequacy of any other
                collateral securing any of the Loans or other Obligations. ANY
                AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR
                REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY
                LOAN OR OTHER OBLIGATION PRIOR TO EXERCISING ITS RIGHT OF SETOFF
                WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
                BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
                WAIVED."

         1.     By deleting the period at the end of the first sentence of
Section 6.3 of the Letter Agreement (as amended by the First Modification) and
by substituting in its stead the following:

                "; and further provided that, notwithstanding the foregoing
                provisions of this sentence, commencing with the quarterly
                facility fee payment due April 1, 1999 the quarterly facility
                fee shall be $4,687.50 per calendar quarter (appropriately
                prorated for any partial calendar quarter) and the Borrower will
                also pay on February 12, 1999 the sum of $500, representing the
                prorated increased facility fee (resulting from the increase in
                maximum amount of revolving credit available) for the period
                February 12, 1999 - March 31,1999."

         m.     By changing the notice of address of the Borrower, pursuant to
Section 6.6 of the Letter Agreement, to the following:

                "Xionics Document Technologies, Inc.
                70 Blanchard Road
                Burlington, MA 01803
                Attention: Robert L. Lentz, Senior Vice President,
                             Finance and Administration"

         n.     By changing the Bank's notice address, pursuant to Section 6.6
of the Letter Agreement, to:

                "Fleet National Bank
                High Technology Division
                One Federal Street
                Mail Code: MA OF D07A
                Boston, MA 02110
                Attention: Lucie Burke, Vice President"



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<PAGE>   9


         o.     By inserting into Section 6.7 of the Letter Agreement,
immediately after the fourth sentence of such Section, the following:

                "Without limitation of the foregoing generality,

                (i)    The Bank may at any time pledge all or any portion of its
                rights under the Loan Documents (including any portion of any
                Note) to any of the 12 Federal Reserve Banks organized under
                Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
                such pledge or the enforcement thereof by any party shall
                release the Bank from its obligations under any of the Loan
                Documents.

                (ii)   The Bank shall have the unrestricted right at any time
                and from time to time, and without the consent of or notice to
                the Borrower, to grant to one or more banks or other financial
                institutions (each, a `Participant') participating interests in
                the Bank's obligation to lend hereunder and/or any or all of the
                Loans held by the Bank hereunder. In the event of any such grant
                by the Bank of a participating interest to a Participant,
                whether or not upon notice to the Borrower, notwithstanding any
                such grant of a participation to a Participant the Bank shall
                remain fully responsible for the performance of its obligations
                hereunder and the Borrower shall continue to deal solely and
                directly with the Bank in connection with the Bank's rights and
                obligations hereunder. The Bank may furnish any information
                concerning the Borrower in its possession from time to time to
                prospective assignees and Participants; provided that the Bank
                shall require any such prospective assignee or Participant to
                agree in writing to maintain the confidentiality of such
                information to the same extent as the Bank would be required to
                maintain such confidentiality."

         p.     By inserting into Article VI of the Letter Agreement, at the end
of such Article, the following:

                "6.10. REPLACEMENT NOTES. Upon receipt of an affidavit of an
                officer of the Bank as to the loss, theft, destruction or
                mutilation of any Note or of any other Loan Document which is
                not of public record and, in the case of any such mutilation,
                upon surrender and cancellation of the relevant Note or other
                Loan Document, the Borrower will issue, in lieu thereof, a
                replacement Note or other Loan Document in the same principal
                amount (as to any Note) and upon the same terms and conditions.

                6.11. USURY. All agreements between the Borrower and the Bank
                are hereby expressly limited so that in no contingency or event
                whatsoever, whether by reason of acceleration of maturity of any
                Note or otherwise, shall the amount paid or agreed to be paid to
                the Bank for the use or the forbearance of the Indebtedness
                represented by any Note exceed the



                                       -9-


<PAGE>   10


                maximum permissible under applicable law. In this regard, it is
                expressly agreed that it is the intent of the Borrower and the
                Bank, in the execution, delivery and acceptance of the Notes, to
                contract in strict compliance with the laws of The Commonwealth
                of Massachusetts. If, under any circumstances whatsoever,
                performance or fulfillment of any provision of any Note or any
                of the other Loan Documents at the time such provision is to be
                performed or fulfilled shall involve exceeding the limit of
                validity prescribed by applicable law, then the obligation so to
                be performed or fulfilled shall be reduced automatically to the
                limit of such validity, and if under any circumstances
                whatsoever the Bank should ever receive as interest an amount
                which would exceed the highest lawful rate, such amount which
                would be excessive interest shall be applied to the reduction of
                the principal balance evidenced by the Notes and not to the
                payment of interest. The provisions of this Section 6.11 shall
                control every other provision of this Agreement and of each
                Note.

                6.12. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY
                KNOWINGLY, VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE
                RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON,
                ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LETTER
                AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY
                COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
                OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A
                MATERIAL INDUCEMENT FOR THE BANK TO ENTER INTO THIS LETTER
                AGREEMENT AND TO MAKE LOANS AS CONTEMPLATED HEREIN."

         q.     By deleting from the definition of "Expiration Date" appearing
in Section 7.1 of the Letter Agreement the date "December 1, 1998" (said date
having been inserted by the Second Modification) and by substituting in its
stead the following:

                "December 1, 1999"

As a result, from and after the date hereof, for the purposes of the Letter
Agreement and the other Financing Documents, the "Expiration Date" will be
deemed to be December 1, 1999.

         r.     By deleting from the definition of "Maximum Revolving Amount"
appearing in Section 7.1 of the Letter Agreement the amount "$4,000,000" (said
amount having been inserted by the First Modification) and by substituting in
its stead the following:

                "$5,000,000"



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<PAGE>   11


         s.     By deleting from the definition of "Qualifying Equipment"
appearing in Section 7.1 of the Letter Agreement the date "September 1, 1997"
(such date having been inserted by the Second Modification) and by substituting
in its stead the following:

                "October 1, 1998"

         t.     By inserting into the definition of "Qualifying Equipment"
appearing in Section 7.1 of the Letter Agreement, at the end of such definition,
the following:

                "The Borrower may include within the `equipment' described in
                clauses (i)-(iii) above software (not including `shrink-wrapped'
                software) relating to the tangible items of equipment purchased
                with proceeds of the Term Loans; provided that the total cost of
                software financed by the Term Loans shall at no time exceed 30%
                of the outstanding principal amount of the Term Loans."

         3.     Wherever in any Financing Document, or in any certificate or
opinion to be delivered in connection therewith, reference is made to a "letter
agreement" or to the "Letter Agreement", from and after the date hereof same
will be deemed to refer to the Letter Agreement, as hereby amended.

         4.     Simultaneously with the execution and delivery of this
Agreement, the Borrower is executing and delivering to the Bank the 1999
Revolving Note, in substitution for the 1997 Revolving Note. The 1999 Revolving
Note is a $5,000,000 promissory note of the Borrower, substantially in the form
attached hereto as Exhibit 1. Wherever in any of the Financing Documents, or in
any certificate or opinion to be delivered in connection therewith, reference is
made to a "Revolving Note", from and after the date hereof same will be deemed
to refer to the 1999 Revolving Note. Promptly after the Borrower has duly
executed and delivered the 1999 Revolving Note and has given the Bank all
opinions, certificates and other documentation reasonably requested by the Bank
in connection therewith and has paid all interest then accrued under the 1997
Revolving Note, the Bank will mark the 1997 Revolving Note "cancelled" and will
return same to the Borrower.

         5.     Simultaneously with the execution and delivery of this
Agreement, the Borrower is executing and delivering to the Bank the 1999 Term
Note, in substitution for the 1997 Term Note. The 1999 Term Note is a $1,000,000
promissory note of the Borrower, substantially in the form attached hereto as
Exhibit 2. Wherever in any of the Financing Documents, or in any certificate or
opinion to be delivered in connection therewith, reference is made to a "Term
Note", from and after the date hereof same will be deemed to refer to the 1999
Term Note. The Bank will, promptly after the execution and delivery of this
Agreement, cancel the 1997 Term Note and return same to the Borrower.

         6.     In consideration of the term loan facility to be represented by
the 1999 Term Note, the Borrower is paying to the Bank, at the date of this
Agreement, a facility fee of $5,000. This fee is non-refundable and is not to be
reduced by, nor applied against, any interest, fees,



                                      -11-


<PAGE>   12


charges or other amounts now or hereafter paid or payable by the Borrower under
or in connection with the Letter Agreement and/or any promissory notes now or
hereafter issued under the Letter Agreement.

         7.     By its execution below, Xionics International Limited represents
to the Bank that it has become the assignee of the "Xionics" name and mark,
subject to the license to such name and mark theretofore given to the Borrower
by Xionics Limited. Xionics Limited International confirms that such license to
the Borrower remains in full force and effect and confirms the Bank's rights
under the Xionics License Assignment. Xionics International Limited acknowledges
and agrees that the Xionics Consent remains in full force and effect for the
benefit of the Bank, and agrees to be bound thereby as effectively as if it has
been an original party thereto.

         8.     In order to induce the Bank to enter into this Agreement, the
Borrower further represents and warrants as follows:

         a.     The execution, delivery and performance of this Agreement, the
1999 Revolving Note and the 1999 Term Note have been duly authorized by the
Borrower by all necessary corporate and other action, will not require the
consent of any third party (except any such consents which have already been
received) and will not conflict with, violate the provisions of, or cause a
default or constitute an event which, with the passage of time or the giving of
notice or both, could cause a default on the part of the Borrower under its
charter documents or by-laws or under any contract, agreement, law, rule, order,
ordinance, franchise, instrument or other document, or result in the imposition
of any lien or encumbrance (except in favor of the Bank) on any property or
assets of the Borrower.

         b.     The Borrower has duly executed and delivered each of this
Agreement, the 1999 Revolving Note and the 1999 Term Note.

         c.     Each of this Agreement, the 1999 Revolving Note and the 1999
Term Note is the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its respective terms.

         d.     Giving effect to the amendments contained in this Agreement and
except as heretofore disclosed to the Bank, the statements, representations and
warranties made in the Letter Agreement, in the IAR Security Agreement and/or in
the Supplementary Security Agreement continue to be correct as of the date
hereof; except as amended, updated and/or supplemented by the attached
Supplemental Disclosure Schedule.

         e.     Giving effect to the amendments contained in this Agreement and
except as heretofore disclosed to the Bank, the covenants and agreements of the
Borrower contained in the Letter Agreement, in the IAR Security Agreement and/or
in the Supplementary Security Agreement have been complied with on and as of the
date hereof.



                                      -12-


<PAGE>   13


         f.     Giving effect to the amendments contained in this Agreement and
except as heretofore disclosed to the Bank, no event which constitutes or which,
with notice or lapse of time, or both, could constitute, an Event of Default (as
defined in the Letter Agreement) has occurred and is continuing.

         g.     No material adverse change has occurred in the financial
condition of the Borrower from that disclosed in the financial statements of the
Borrower dated September 30, 1998, heretofore furnished to the Bank.

         9.     Except as expressly affected hereby, the Letter Agreement and
each of the other Financing Documents remains in full force and effect as
heretofore.

         10.    Nothing contained herein will be deemed to constitute a waiver
or a release of any provision of any of the Financing Documents. Nothing
contained herein will in any event be deemed to constitute an agreement to give
a waiver or release or to agree to any amendment or modification of any
provision of any of the Financing Documents on any other or future occasion.



                                      -13-


<PAGE>   14


         Executed, as an instrument under seal, as of the day and year first
above written.

                                             XIONICS DOCUMENT
                                             TECHNOLOGIES, INC.

                                             By:  /s/ Robert L. Lentz
                                                  ------------------------------
                                                  Name:  Robert L. Lentz
                                                  Title: Sr. VP/CFO

                                             XIONICS INTERNATIONAL LIMITED

                                             By:  /s/ Robert L. Lentz
                                                  ------------------------------
                                                  Name:  Robert L. Lentz
                                                  Title: Director

Accepted and agreed:
FLEET NATIONAL BANK

By:  /s/ Lucie Burke
     ------------------------------
     Name:  Lucie Burke
     Title: VP



                                      -14-