Document:

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                                                                   EXHIBIT 10.12

                        [FLEET NATIONAL BANK LETTERHEAD]

December 15, 2000

Edward P. Smoot
President and Chief Executive Officer
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, California 92064

Re:  FORBEARANCE AND STANDSTILL AGREEMENT

     Reference is made to that certain Forbearance Agreement (the "Forbearance
Agreement") dated as of November 15, 2000 by and among Anacomp, Inc. (the
"Borrower"), the Banks party thereto (the "Banks") and Fleet National Bank,
f/k/a BankBoston, N.A., as Agent for the Banks (the "Agent"). Capitalized terms
used herein and not specifically defined herein shall have the meanings ascribed
to them in the Forbearance Agreement.

     The Borrower has requested that the Agent and the Banks consent to making
the following two amendments to the Forbearance Agreement. The first amendment
will delete paragraph 4(b) of the Forbearance Agreement and replace it in its
entirety with the following paragraph:

     "(b) The Borrower shall not, and shall not permit itself or any of its
Subsidiaries to, at any time directly or indirectly provide funds to the
docHarbor Subsidiary in excess of the amount for the applicable period of time
set forth in the budget (the "docHarbor Budget") attached hereto as Schedule B.
If the Borrower has not entered into an agreement in principle in writing
providing for a recapitalization, sale or other disposition of the docHarbor
Subsidiary (which for the purposes of this paragraph 4(b) shall include the
docHarbor business unit of the Borrower if the proposed transfer of assets set
forth in paragraph 4(a) above has not occurred) in form and substance reasonably
satisfactory to the Agent and Majority Banks by January 15, 2001, then the
Borrower shall deliver to the Agent and Banks by such date a new budget of the
Borrower for the purpose of reintegrating into the Borrower only those parts of
the docHarbor Subsidiary which are integral to the Document Solutions business
unit of the Borrower (the "Reintegration Budget"), which Reintegration Budget
shall then be negotiated between the Borrower and the Agent until the
Reintegration Budget is in form and substance reasonably satisfactory to the
Agent and Majority Banks. Thereafter, the Borrower shall not, and shall not
permit any of its Subsidiaries to, at any time, directly or indirectly, provide
funds to the docHarbor Subsidiary in excess of the amount for the applicable
time period set forth in the Reintegration Budget."

     The next amendment will delete Schedule B to the Forbearance Agreement and
replace it in its entirety with the new Schedule B, attached hereto as such.
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     The Agent on behalf of and with the consent of Majority Banks hereby
consents to the foregoing amendments to the Forbearance Agreement. All other
terms, conditions and provisions of the Forbearance Agreement and the other Loan
Documents are and shall remain in full force and effect.

     This letter agreement shall constitute an amendment to the Forbearance
Agreement and may be executed in counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.

     Each of the parties hereto represents and warrants to the other parties as
of the date hereof that it has full power and authority to enter into this
letter agreement and the transactions contemplated hereby, and this letter
agreement and such transactions contemplated hereby have been fully and validly
authorized, are the legal, valid and binding obligations of such party,
enforceable against such party in accordance with its terms, and are not in
contravention of any law, order or contract, indenture, loan agreement, note or
any other instrument or agreement by which it is bound and does not require any
consent, notice or filing of any kind.

     Please indicate your agreement by signing below.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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                                            Very truly yours,

                                            FLEET NATIONAL BANK,
                                            f/k/a BankBoston, N.A., as Agent
                                            and Bank

                                            By:
                                               --------------------------------
                                               Name:
                                                    ---------------------------
                                               Title:
                                                     --------------------------

AGREED TO AND ACCEPTED
as of the date first written above:

ANACOMP, INC., as Borrower

By:
    ----------------------------------------
      Name:
            --------------------------------
      Title:
             -------------------------------

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                                   SCHEDULE B

                                docHARBOR BUDGET<PAGE>

Exhibit 4.1

                          CERTIFICATE OF DETERMINATION
                                       OF
                            SERIES A PREFERRED STOCK
                                       OF
                              PHOTON DYNAMICS, INC.

                         (Pursuant to Section 401 of the
                        California General Corporation Law)

The undersigned, VINCENT F. SOLLITTO and RICHARD L. DISSLY hereby certify that:

     1. They are the duly elected and acting Chief Executive Officer and

President and Secretary, respectively, of Photon Dynamics, Inc. (the

"Corporation"). Pursuant to authority given by the Corporation's Articles of

Incorporation, the Board of Directors of the Corporation has duly adopted the

following resolutions at a meeting duly called and held on October 23, 2000:

          RESOLVED, that pursuant to the authority granted to and vested in the
          Board in accordance with the provisions of the Amended and Restated
          Articles of Incorporation of the Company, as amended (the "Articles of
          Incorporation"), the Board hereby creates from its authorized class of
          Preferred Stock a series designated as Series A1 Preferred Stock, no
          par value, of the Company;

          RESOLVED FURTHER, that the Board does hereby establish the Series A1
          Preferred Stock as follows:

          SECTION 1. DESIGNATION AND AMOUNT. One (1) share of Preferred Stock of
          the Company shall be designated as Series A1 Preferred Stock (the
          "Special Series A1 Voting Share").

          SECTION 2. DIVIDENDS AND DISTRIBUTIONS. Except as required by
          applicable law, neither the holder nor the owner, if different, of the
          Special Series A1 Voting Share shall be entitled to receive any
          dividends or distributions of the Company, whether payable in cash,
          property or in shares of capital stock.

          SECTION 3. LIQUIDATION. In the event of any liquidation, dissolution
          or winding up of the Company, the holder of the Special Series A1
          Voting Share shall not be entitled to receive any assets of the
          Company available for distribution to its shareholders.

          SECTION 4. VOTING RIGHTS. The Special Series A1 Voting Share shall
          have the following voting rights:

          (A)   with respect to all meetings of shareholders of the Company at
          which holders of the Company's common stock are entitled to vote (each
          a "Company Meeting") and with respect to any written consents, to the
          extent permitted by the Articles of Incorporation and the Company's
          By-laws, sought by the Company from its shareholders, including the
          holders of Company common stock (each a "Company Consent"), the
          Special Series A1 Voting Share shall vote together with the common
          stock of the Company as a single class and the Special Series A1
          Voting Share shall have the identical voting rights to those of the
          Company's common stock;

          (B)   the holder of the Special Series A1 Voting Share shall be
          entitled to a number of votes equal to the number of exchangeable
          shares of Image Processing Systems Inc. (the "Exchangeable Shares")
          outstanding on the record date for determining shareholders entitled
          to vote at the applicable Company Meeting or in connection with the
          applicable Company Consent, other than those held by the Company or
          its Affiliates (as defined in that certain Voting and Exchange Trust
          Agreement by and among the Company, Photon Dynamics Nova Scotia
          Company and Montreal Trust Company of Canada, to be dated and entered
          into on or before the date of issue of the Special Series A1 Voting
          Share, as such agreement may amended, modified or supplemented from
          time to time (the "Trust Agreement"));
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          (C)   except as set forth herein, or as otherwise provided by law, the
          registered holders from time to time of Exchangeable Shares shall have
          no special voting rights and their consent shall not be required for
          taking any corporate action; and

          (D)   the voting rights attached to the Special Series A1 Voting Share
          shall terminate pursuant to and in accordance with the Trust
          Agreement.

          SECTION 5. NO REDEMPTION. The Special Series A1 Voting Share shall not
          be redeemable, except that at such time as no Exchangeable Shares
          (other than the Exchangeable Shares owned by the Company and its
          Affiliates) shall be outstanding, the Special Series A1 Voting Share
          shall automatically be redeemed and canceled.

          SECTION 6. OTHER PROVISIONS. Pursuant to the terms of the Trust
          Agreement:

          (A)   during the term of the Trust Agreement, the Company will not
          issue any additional shares of the same series of such Series A1
          Preferred Stock without the consent of the holders at the relevant
          time of Exchangeable Shares;

          (B)   the votes attached to the Special Series A1 Voting Share shall
          be exercised by the Trustee (as defined in the Trust Agreement)
          pursuant to and in accordance with the Trust Agreement; and

          (C)   the powers, designations, preferences and relative,
          participating, optional and other special rights, and the
          qualifications, limitations and restrictions of the Special Series A1
          Voting Share shall be as otherwise provided in the Trust Agreement."

     2. The authorized number of shares of Preferred Stock of this corporation

is 5,000,000, and the number of shares of Preferred Stock constituting Series A1

Voting Preferred Stock, none of which has been issued, is 1.

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this certificate on December
12, 2000.

                                          /s/ Vincent F. Sollitto
                                          -----------------------
                                          VINCENT F. SOLLITTO
                                          Chief Executive Officer and President

                                          /s/ Richard L. Dissly
                                          -----------------------
                                          RICHARD L. DISSLY
                                          Chief Financial Officer and Secretary

                  The undersigned Vincent F. Sollitto, Chief Executive Officer
and President of Photon Dynamics, Inc., and Richard L. Dissly, Chief Financial
Officer and Secretary of said corporation, each certifies under penalty of
perjury that the matters set forth in the foregoing Certificate of Determination
are true of their own knowledge.

Executed in San Jose, California on December 12, 2000.

         /s/ Vincent F. Sollitto
         -----------------------
         VINCENT F. SOLLITTO
         Chief Executive Officer and President

Executed in San Jose, California on December 12, 2000.

         /s/ Richard L. Dissly
         -----------------------
         RICHARD L. DISSLY
         Chief Financial Officer and Secretary

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