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                                                                 EXHIBIT 10.16

                             MANUFACTURING AGREEMENT

                                                        AGREEMENT #: C-06259

                                                        EFFECTIVE DATE: 4/13/98

                                                        EXPIRATION DATE: 4/16/99

                                                        CNDA#:     95182

This Agreement is entered this ("Effective Date") by and between Intel Flash
Products Division, with a place of business at 1900 Prairie City Road, Folsom,
California ("Intel") and XeTel Corporation, with place of business at 2105 Gracy
Farms Ln., Austin, Texas ("Supplier"), singularly or collectively referred to as
a Party or the Parties.


                                    RECITALS

o        WHEREAS, Intel is an international manufacturer of microprocesser and
         Flash memory components, modules and systems.

o        WHEREAS, Supplier is a provider of contract manufacturing and
         integration services; and

o        WHEREAS, Intel desires to engage the services of Supplier;

                                    AGREEMENT

NOW THEREFORE, in consideration of the mutual promises made herein and other
good and valuable consideration, the Parties agree as follows:

1.0      ADDENDA

         The following Addenda are attached hereto and incorporated herein by
reference.

         "A" Product/Manufacturing Specifications, Pricing

         "B" Quality Requirements, Performance Standards

         "C" Negotiated Changes

2.0      DEFINITIONS

2.1      "Release" means an Intel purchase order authorizing Supplier to ship a
         definite quantity of items according to a specified schedule.

2.2      "Product(s)" means Flash Memory cards released by Intel and
         manufactured by Supplier in accordance with this agreement.

2.3      "Specifications" means the Intel proprietary product specifications,
         manufacturing procedures, schematics, documentation, software, and
         other materials provided by Intel to Supplier to enable Supplier to
         manufacture Product(s) for Intel.

2.4      "Forecast" means the quantity of Product(s) Intel reasonably expects to
         release; however, Intel will not be obligated to accept or pay for such
         quantities not committed by an issued Release.

2.5      "Gross Unit Variance (GUV)" equals absolute sum of unit inventory
         difference (physical v. book) divided by total book quantity.



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2.6      "Gross Dollar Variance (GDV)" equals absolute sum of U.S. dollar
         inventory difference (physical v. book) divided by total U.S. dollar
         book value.

2.7      "Net Dollar Variance (NDV)" equals sum of net U.S. dollar inventory
         differences (physical v. book) divided by total U.S. dollar book value.

2.8      "Defects per Million (DPM)" equals the number of defective units,
         divided by the total number of samples, multiplied by one million.

2.9      "Product Documentation" means any portion of documentation for Intel
         software or hardware Product(s) in printed or electronic form
         identified in a Release and provided to Supplier to Intel.

2.10     "Software" means the software identified in a Release and provided to
         Supplier by Intel in object code form expressly for the purpose of
         duplication.

2.11     "Material Overhead (MOH)" is the fee that Intel pays supplier to manage
         turnkey material as set forth in Addendum A.

2.12     "Labor Overhead (LOH)" is the fee that Intel pays supplier to assemble
         product set forth in Addendum A.

2.13     "Build Schedule" shall mean a weekly schedule issued by Intel
         indicating five (5) business days of Product requirements.

2.14     "Premises" refers to the area in which lines are used to manufacture
         Intel Products reside.

3.0      MANUFACTURING AND INTEGRATION SPECIFICATIONS

3.1      Supplier shall manufacture and/or integrate Product(s) in accordance
         with Intel Release and the Specifications set forth in Addendum A.

3.3      Supplier shall not modify or deviate from the Specifications for
         Product(s) without prior written approval from Intel. Intel may modify
         the specifications at Intel's discretion. Supplier shall implement such
         modifications in Supplier's manufacturing process within a reasonable
         time following receipt of notification of the change from Intel.
         Supplier shall implement safety or regulatory changes to work in
         process immediately following receipt of notification of the change
         from Intel.

3.4      Intel may furnish additional Product(s) specific documentation upon
         introduction of new Product(s) to the manufacturing line and may make
         changes in such documentation, at any time, for any reason. Supplier
         will acknowledge such additional documentation or change in existing
         documentation with cost and schedule impact within forty-eight (48)
         hours after receipt of notification.

3.5      Supplier shall cooperate with Intel to provide configuration control
         and traceability systems for Product(s) supplied hereunder.

3.6      Supplier will maintain a process satisfactory to meet or exceed Intel's
         documentation and quality requirements set forth in Addendum B.


                                      2                       INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY
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4.0      LIMITED LICENSE

4.1      Intel grants to Supplier a restricted, non-exclusive, non-transferable,
         royalty-free license to copy and use the Specifications only to
         manufacture Product(s) for Intel in accordance with the terms and
         conditions of this Agreement, and for no other purpose.

4.2      No rights or licenses are granted by Intel to Supplier, expressly or by
         implication, estoppel or otherwise, with respect to any proprietary
         information or patent, copyright, trade secret or other intellectual
         property right owned or controlled by Intel, except as expressly
         provided in the Agreement and its Amendments. No express or implied
         license to Intel's Flash Memory products, system bus, processor, or
         microprocessor-level intellectual property or manufacturing process
         technology is granted.

4.4      Intel grants to Supplier a non-exclusive, non-transferable,
         royalty-free license to, i) reproduce Product Documentation in either
         original or modified form solely for Intel at Intel's direction; ii)
         distribute Product Documentation exclusively to locations identified by
         Intel and at Intel's written direction.

4.5      The license grant does not include the right to permit Supplier's
         customers, agents, distributors, or any third party to reproduce
         Software or Product Documentation without prior written approval from
         Intel.

4.6      Supplier shall reproduce all copyright notices wherever they appear in
         the Software or Product Documentation.

4.7      Supplier warrants that it will not reverse engineer or copy Intel
         designs without the written authorization of Intel.

5.0      PRICING, INVOICING AND PAYMENT

5.1      Prices for Product(s) are set forth in Addendum A, in U.S. Dollars and
         are based on an average lot size of 1200 units.

5.2      Additional charges such as taxes, freight, duties and insurance shall
         be stated separately on Supplier's invoice in U.S. Dollars. Such
         additional charges will not be reimbursed without Intel's prior written
         approval.

5.3      Intel and Supplier agree to review and adjust material and conversion
         pricing set forth in Addendum A not less than once per calendar
         quarter. Material and conversion pricing for New Product Introductions
         (NPI) or Product(s) undergoing Engineering Change Orders (ECO) which
         change the Bill of Materials (BOM) may be updated within the quarter.

5.4      Intel and Supplier agree to review and adjust material overhead prices
         set forth in Addendum A not less than once per six (6) months. Without
         limiting the foregoing, either Party may request re-negotiation of
         material, material overhead or conversion prices based upon changes in
         suppliers, materials' costs, designs, technology, forecasted volumes
         and/or market conditions. Upon receipt of such request, the Parties
         will re-negotiate prices in good faith. Pricing changes shall be
         incorporated in this document

5.5      Supplier shall, submit original invoices, which shall include the
         purchase agreement number, purchase order number (including line item
         release), part number including applicable revision level, packing slip
         number, complete bill-to address, description of Product(s),
         quantities, unit price and extended totals. Payment shall not
         constitute acceptance.



                                   3                          INTEL CONFIDENTIAL

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5.6      Additional charges, such as but not limited to Non-Recurring
         Engineering ("NRE") charges will not be reimbursed without Intel's
         prior written approval.

5.7      Supplier warrants to Intel that the price charged (for material cost,
         MOH, and conversion)) Intel for Product(s) shall be Supplier's lowest
         net price charged any customer for like products and/or services. If
         Supplier sells similar products and/or services covered by this
         Agreement to other customers at prices less than those set forth
         herein, Supplier shall adjust to the lower price any unshipped Intel
         Product(s) and all future Releases for Intel Product(s). Intel reserves
         the right to inspect and audit Supplier's records to ensure compliance
         with this requirement. Upon Supplier's written demand, such audit may
         be performed by an independent third party at Intel's expense.

5.8      Intel shall make payments to Supplier forty-five (45) days from the
         later of the receipt of Product(s) or the date of receipt of a properly
         executed invoice.

6.0      DELIVERY, RELEASES, FLEXIBILITY, AND SCHEDULING

6.1      On a monthly basis, in accordance with the Intel WW calendar, Intel
         shall provide the Supplier with a new 26-week forward-looking build
         plan schedule for finished good requirements. When a new build plan
         schedule is submitted by Intel to the Supplier, the Supplier shall
         provide Intel with a Response To Forecast (RTF) within the response
         time specified below in paragraph 6.2. If/when RTF is approved by
         Intel, this RTF becomes the active build plan schedule and is assumed
         to be capacity and materials feasible.

         On a weekly basis, Intel shall conduct a build plan review meeting with
         the Supplier. During this meeting, the Supplier shall provide
         information regarding; commits to the build plan schedule, prior weeks'
         output data, and quantity of consigned Intel Flash component inventory
         in raw material, WIP, and/or finished goods.

         On a weekly basis, Supplier shall provide Intel with Supplier's actual
         consumption of consigned Intel Flash Memory components for production,
         loss, and yield, as well as quantity of finished goods shipments.

         BUILD PLAN FLEXIBILITY

         Supplier shall provide Intel with two of flexibility options for
         altering the most current build plan schedule: volume flexibility and
         product mix flexibility.

         Volume Flexibility: Intel may provide the Supplier with an Exception
         request to an active build plan schedule. Through an Exception, Intel
         may request the Supplier to either increase or decrease the volume
         builds by 25% for each week starting from, and including, the 6th
         business day from the date the Exception request is submitted. Also,
         through an Exception request, Intel may request the Supplier to either
         increase or decrease the volume builds by 50% for each week starting
         from the 6th week from the date of the Exception request.

         When an Exception is approved by Supplier, this Exception becomes the
         active build plan Rev and is assumed to be capacity and materials
         feasible.

         Product Mix Flexibility: Intel may request revisions to the
         distribution or mix of the product line items specified on an active
         build plan schedule or build plan Rev. Starting from and including the
         6th business day from the date of the Exception, Intel may request that
         the mix of line items being manufactured are revised within the limits
         of capacity and materials availability.



                                        4                     INTEL CONFIDENTIAL

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         All Forecasts are for planning purposes only and are not commitments to
         purchase. As such, all Forecasts are subject to change and are not
         commitment(s). Supplier understands that Intel's demand is dependent on
         market and other factors beyond Intel's control. This may result in
         demand being reduced or eliminated.

6.2      Supplier will provide confirmation of receipt of Intel Releases and
         feasibility of exception requests as follows:

<TABLE>
<CAPTION>
         Type of Request                  Response Time
         ---------------                  -------------
<S>                                       <C>
         Weekly Production Updates        24 hours local time after receipt by Supplier

         Upside Flexibility Requests      48 hours local time after receipt by Supplier
         NPI-Beta/Pilot Requests          48 hours local time after receipt by Supplier
         Standard Price Quotes            5 business days local time after receipt by Supplier
</TABLE>

6.4      Supplier acknowledges that time is of the essence of this Agreement,
         and Supplier agrees to maintain one-hundred percent (100%) on-time
         delivery. "On-time delivery" means that a delivery occurs during the
         period five (5) business days before the delivery dates identified in
         Intel's Release. Supplier agrees to comply with the delivery lead times
         set forth in Addendum B. Supplier shall monitor and report weekly
         delivery and shipping performance as required in Addendum A. Intel may
         return nonconforming, early, or excess shipments at Supplier's risk and
         expense.

6.5      Supplier shall promptly notify Intel in writing if Supplier is unable
         to make any scheduled delivery. Such notice shall state the reasons
         for the delay and a corrective action plan to alleviate impact of the
         delay to Intel. At a minimum, Supplier shall use best efforts to remedy
         delays and to complete shipment of Product(s) in a timely manner,
         including without limitation, expedited delivery and use of additional
         temporary personnel at no additional charge to Intel.

6.6      Intel may reschedule any Release in whole or in part at any time.
         Supplier will use best efforts to comply with Intel's rescheduling
         requests. Intel may push out a Release one time to a maximum of 60
         days. Intel will pay a storage fee of 1%/ month on any Materials for
         these delayed Releases that cannot be used for other Releases or used
         for other customers. A second push out of a Release or a push out
         beyond 60 days will be handled as a canceled release per section 6.7.

6.7      Intel may cancel all or any part of any Release at any time. Supplier
         shall stop work immediately upon receipt of such notice. Intel shall
         not incur charges for materials which can be used for other Intel
         Product(s) or Supplier's customers. Regardless of material lead time,
         Intel's payment obligations shall not exceed the following: Intel will
         assume all Purchase Orders for components related to the release which
         are non cancelable and cannot be used for another Intel release or
         supplier product. Intel will maintain the right to sell to Supplier
         products purchased through such assumed Purchase Orders, at Intel's
         cost, for use in future releases.

6.8      Upon payment of Supplier's claim, Intel shall be entitled to all work
         and materials paid for. Before assuming payment obligation under this
         section, Intel may inspect Supplier's inventory and audit all relevant
         documents prior to paying Supplier's invoice.

7.0      TERM AND TERMINATION

7.1      The term of this Agreement shall begin on the Effective Date and
         continue for one (1) calendar year. This Agreement shall automatically
         renew for successive one (1) calendar year terms.

7.2      At Intel's option, Product(s) may be scheduled for delivery up to six
         (6) months following expiration of this Agreement.



                                       5                      INTEL CONFIDENTIAL

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7.3      Not withstanding the above, Intel may terminate this Agreement in whole
         or in part at any time and for any reason upon giving) written notice
         to Supplier. If said notice is provided ninety days in advance of
         cancellation, Intel's obligation shall not exceed Supplier's total cost
         for the materials canceled. If notice is provided less than ninety
         days in advance of cancellation date, Intel's obligation shall not
         exceed Supplier's total cost for the materials canceled, plus
         reasonable administrative and labor costs as stated in paragraph(s) 6.7
         and 6.8 above.

7.4      In the event of termination on the part of either Intel or Supplier,
         Supplier will return consigned equipment (identified in Addendum D) and
         materials at Intel's expense.

8.0      ACCEPTANCE AND WARRANTY

8.1      All Product(s) are subject to Intel's inspection and test before final
         acceptance at Intel's premises. If any inspection or test is made on
         Supplier's premises, Supplier shall provide Intel's inspectors with
         reasonable facilities and assistance at no additional charge. Neither
         inspection nor acceptance by Intel shall constitute a waiver of any
         defect or nonconformity.

8.2      Intel shall have the right to reject any Product(s) found to be
         defective or non-conforming in material, workmanship, and/or processes
         or which fails to conform with the Specifications set forth in Addendum
         A. Supplier shall promptly replace or correct such Product(s) at no
         additional charge to Intel. In addition, at Intel's request, Supplier
         will provide root cause analysis and corrective action plans for
         rejected Product(s).

8.3      Supplier warrants that all Product(s) furnished hereunder shall be
         merchantable, free from defects in workmanship and material, and shall
         conform to the specifications set forth in Addendum A. During a period
         of one (1) year after Intel's acceptance of Product(s), at Intel's
         option, Supplier shall promptly repair or replace the Product(s) or
         refund the purchase price and cost of shipment of all non-conforming
         Product(s)' at no cost to Intel and will pay Intel the cost of
         recalling or replacing any non-conforming Product(s) already shipped by
         Intel and in the field. Supplier will pay all costs of transportation
         of defective Product(s) by Intel to the facility, and return of
         repaired or replacement Product(s) by Supplier to Intel. Supplier shall
         bear the risk of loss of such Product(s) while in transit. Cost of
         recall shall include all costs associated with the following;
         identifying and locating all defective parts, notifying all affected
         Intel customers of said defective parts, replacement of said defective
         parts, cost of shipping both defective parts back to Intel for
         replacement and shipping of replacement parts to Intel's customers, as
         well as any support services required to accomplish these tasks.

8.4      Supplier shall use best efforts to maintain one-hundred percent (100%)
         quality acceptance levels as measured by Intel in accordance with the
         quality specifications set forth in Addendum B. Supplier shall be
         responsible for any expenses that result because Supplier does not meet
         all quality specifications set forth herein. Such expenses may include,
         but are not limited to (i) the cost of recalling per 8.3 above,
         correcting, or replacing defective units in the field; (ii) shipping
         additional Product(s) at Supplier's expense and risk, (iii) increasing
         inspection, and (iv) providing personnel at Intel's site to assist in
         problem resolution or rework of material. Supplier agrees to exercise
         reasonable efforts to pull in the next scheduled shipment to fill
         Product(s) void caused by any shipment rejected by Intel.

8.5      As used in this Section, the term "Epidemic Failure" means a specific
         product failure affecting five percent (5%) or more of a specific
         Product(s) weekly shipment or release, whichever is smaller, under
         warranty, which is a direct result of a defect in Suppliers material
         and workmanship. In the event of an Epidemic Failure, Supplier shall
         perform root cause analysis of the failure and cooperate with Intel to
         implement remedial actions necessary to correct the failure mode.
         Furthermore, without limiting its obligations pursuant to the warranty
         provisions set forth above, Supplier shall reimburse Intel for any and
         all standard freight and labor charges incidental to the



                                   6                         INTEL CONFIDENTIAL

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         Epidemic Failure, including, without limitation, the cost of recalling
         as per 8.3 above, or replacing the affected Product already shipped by
         Intel to Intel's distribution channel and to end customers.

8.6      Supplier shall have no liability or responsibility under section 8.5
         above for any loss or damage to the extent that any such Epidemic
         Failure claims are the result of (i) Supplier's compliance with Intel's
         supplied Specifications, (ii) the negligence of Intel, (iii)
         modification or alteration of the Product(s) by a party other than
         Supplier, and (iv) defects in Intel supplied components.

8.7      Intel or it's customers may inspect work performed by Supplier and
         Supplier's suppliers during normal business hours, including work
         performed in Supplier facilities or facilities of Supplier's suppliers
         upon 24 hours written notice. If any inspection is made by Intel upon
         Supplier's facilities of the facilities of Supplier's supplier,
         Supplier shall assist ensure reasonable facilities are available for
         the safe and efficient completion of the inspection at no charge.

9.0      RETURN OF DEFECTIVE MATERIALS

9.1      Supplier shall issue a credit memo with a Return Material Authorization
         ("RMA") tracking number for one-hundred percent (100%) of the purchase
         order price for non-conforming Product(s) returned by Intel for
         functional and non-functional defects. Credit shall be given against
         Releases. Intel reserves the right of inspection to determine root
         cause.

9.2      Supplier shall pay freight charges for the return of non-conforming
         Product(s) sent from Intel's facility to Supplier and to return
         non-conforming Product(s) to Intel's designated facility.

9.3      For return of non-conforming Product(s) which Supplier demonstrates to
         Intel to be conforming, Intel shall pay round trip freight and other
         specific costs associated with said Product(s) returned to Intel's
         designated facility.

10.0     PACKING AND SHIPMENT

10.1     All Items shall be FOB Austin, Texas or as otherwise specified in the
         Release. All Items shall be prepared for shipment in a manner which (i)
         follows good commercial practice; (ii) is acceptable to common carriers
         for shipment at the lowest rate; (iii) is adequate to ensure safe
         arrival; and (iv) meets Intel packaging requirements as specified in
         provided documents. Supplier shall mark all containers with necessary
         lifting, handling and shipping information, purchase order number,
         date of shipment and the names of the Buyer and Supplier. Buyer shall
         notify Supplier of. the method of shipment and expected delivery date.
         If no instructions are given, Supplier shall select the most cost
         effective carrier, given the time constraints known to Supplier.
         Supplier shall ship only the quantity of Items specified in the
         Release. Buyer may return at Supplier's expense any Items in excess of
         the quantity stated in the Release.

11.0     INVENTORY CONTROL

11.1     Supplier will track and account for all inventory within Supplier's
         facility.

11.2     Intel reserves the right to determine what materials will be consigned
         to Supplier and what materials will be purchased by Supplier (`turnkey'
         materials) for use in Intel Product(s).

11.3     In the event Intel directs Supplier to purchase turnkey materials,
         Supplier agrees to put forth reasonable efforts in negotiating
         competitive turnkey material prices for Intel Product(s).

11.4     Supplier shall be solely responsible for all costs associated with
         purchasing turnkey materials for Intel Product(s), including but not
         limited to, risk of loss and inventory variance. Intel agrees to
         compensate Supplier for purchasing services via the overhead rate
         defined in Addendum A.



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11.5     Materials consigned to Supplier by Intel are subject to Section 20.0,
         Consignment Provisions. Consigned materials will be classified in
         categories by Intel Finance based on item value.

11.6     Intel may consign materials to Supplier classified as "High Value Units
         (HVU)", including but not limited to Flash memory components. Supplier
         agrees to implement and maintain appropriate security and accounting
         procedures. Supplier also agrees to allow Intel Security and/or Intel
         Risk Assessment to perform audits to ensure compliance.

11.7     Intel may consign materials to Supplier that are not classified HVU,
         but still require heightened security. Supplier agrees to treat items
         identified as such.

11.8     Supplier agrees to audit consigned inventory per the category specific
         cycle counting schedules as below:

<TABLE>
<CAPTION>
             Category       Count Frequency              Count Sample Requirements
             --------       ---------------       -----------------------------------------
<S>                         <C>                   <C>
             HVU            Weekly                100% every week
             non-HVU        Quarterly             Minimum 25% per month and 90% per quarter
</TABLE>

11.9     Supplier shall adhere to the following cycle count minimum variance
         guidelines for consigned inventories:

<TABLE>
<CAPTION>
             Category                 GUV
             --------                 ---
<S>                                   <C>
             HVU                      0.5%
             non-HVU                  3.0%
</TABLE>

11.10    Supplier shall contact Intel immediately if reconciliation variance
         occurs with HVU and non-HVU material. Supplier shall report weekly
         cycle count results to Intel within one (1) working day from the end of
         the cycle count. Supplier's report shall include
         investigation/corrective action status for any measured variances
         outside the guidelines herein.

11.11    Supplier bears all risk of loss for Intel consigned inventory and shall
         reimburse Intel, at Intel's request, for the best customer price of
         Intel consigned inventory variances in excess of the guidelines herein.
         Supplier is responsible for all variances on turnkey material.

11.12    Supplier shall generally not hold finished goods inventory for greater
         than eight (8) hours. If Supplier holds finished goods inventory for
         any time greater than eight (8) hours, the finished goods shall be
         located in a secured area and controlled as consigned materials.
         Supplier agrees to take necessary security measures to assure all
         finished goods are protected from theft or damage.

11.13    Supplier shall maintain a documented and effective material disposition
         and control process. This will include a quarantine area to segregate
         discrepant material and finished goods. For HVU consigned materials and
         finished goods, the quarantine area shall meet HVU security
         requirements. Intel will review and disposition consigned materials.

12.0     NEW DEVELOPMENTS

12.1     All services performed by Supplier under this Agreement are exclusively
         for Intel. Supplier will assign and hereby does assign to Intel all
         right, title and interest to those things developed for Intel,
         henceforth known as "Intellectual Property Improvements" or "IPI",
         including, but not limited to inventions, designs, trademarks,
         discoveries, formulas, processes, plans, specifications,



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         guidelines, graphics, drawings, films, videotapes, slides, scripts,
         software programs, software documentation, training materials,
         illustrations, ideas, copyrightable works, trade secrets or other ideas
         and materials made or conceived regarding improvements to Intel
         specified manufacturing or assembly processes or Product(s) by
         Supplier, its employees, subcontractors, consultants or agents, during
         the term of and arising out of services performed under this Agreement,
         which were not in existence before this agreement, or for which Intel
         has not paid a Non-Recurring Engineering charge or tooling charge.
         Upon Intel's request, Supplier shall execute an assignment of copyright
         and any other relevant intellectual property rights to Intel covering
         any copyrightable deliverables accepted by Intel hereunder. Supplier
         shall treat all IPI as Intel Confidential Information under Section 15
         below, and shall use all IPI only for manufacturing Product(s) under
         this Agreement.

12.2     Supplier shall assist Intel, at Intel's expense, in obtaining,
         registering, perfecting and enforcing all patents, trademarks, mask
         work rights or copyrights necessary to protect Intel's interest in the
         items assigned to Intel pursuant to the foregoing paragraph. This
         includes the disclosure of all pertinent information, the execution of
         applications, specifications, oaths and assignments and any other
         papers by Supplier necessary to ensure said protection for Intel.

12.3     All documentation developed by Supplier and connected with Supplier's
         services to Intel hereunder or associated with deliverables assigned to
         Intel pursuant to the foregoing, shall be the exclusive property of
         Intel. Upon Intel's request, Supplier shall make all such documentation
         available to Intel.

12.4     Supplier agrees to allow Intel and Supplier to jointly escort Intel
         customers and/or suppliers through Supplier facilities.

13.0     OWNERSHIP AND BAILMENT RESPONSIBILITIES

13.1     Any specifications, drawings, schematics, technical information, data,
         tools, dies, patterns, masks, gauges, test equipment and other
         materials furnished or paid for by Intel shall (i) be kept
         confidential, (ii) remain or become Intel's property, (iii) be used by
         Supplier exclusively for Intel's orders, (iv) be clearly marked as
         Intel's property and segregated when not in use, (v) be kept in good
         working condition at Supplier's expense except for pre-approved
         extraordinary calibration costs, and (vi) be shipped to Intel promptly
         on demand. Supplier shall insure Intel's property and be liable for
         loss or damage while in Supplier's possession or control, ordinary wear
         and tear excepted.

13.2     Consigned Materials. Supplier's use of materials consigned by Intel to
         Supplier shall be governed by the terms and conditions of the
         Consignment Provisions set forth in Section 20.0.

13.3     Bailment of Equipment. Supplier's use of equipment supplied by Intel
         shall be governed by the terms and conditions of the Loan of Equipment
         and Bailment Provisions set forth in Addendum D.

14.0     INSURANCE

14.1     General Liability. Without limiting or qualifying Supplier's
         liabilities, obligations or indemnities otherwise assumed by Supplier
         pursuant to this Agreement, Supplier shall maintain, at its sole cost
         and expense, Commercial General Liability and Automobile Liability
         Insurance with limits of liability not less than $10,000,000.00 per
         occurrence and including liability coverage for bodily injury or
         property damage (i) assumed in a contract or agreement pertaining to
         Supplier's business and (ii) arising out of Supplier's Product,
         services or work. Supplier's insurance shall be primary, and any
         applicable insurance maintained by Intel shall be excess and
         non-contributing. The above coverages shall name Intel as additional
         insured, and shall contain a severability of interest clause.



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14.2     Fire and Casualty Insurance. Supplier shall secure, pay for, and at all
         times during the terms hereof maintain, insurance providing coverage
         upon Supplier's premises, any loaned equipment, materials, components,
         consigned inventory and work in process in an amount equal to the
         guaranteed replacement costs thereof, and insuring against theft, fire
         and other risks normally covered by standard all-risk property
         insurance. Supplier shall bear the cost of any deductible or
         co-insurance and, in the event of a loss, Supplier shall reimburse
         Intel for such deductible or co-insurance. Supplier shall provide Intel
         with a certificate of insurance showing Intel as loss payee or
         equivalent with provision for no less than thirty (30) days written
         notice to Intel of insurance termination or material changes in
         coverage.

14.3     Employer's Liability. Supplier shall also maintain statutory Workers'
         Compensation coverage, including a Broad Form All States Endorsement in
         the amount required by law, and Employers' Liability Insurance in the
         amount of $1,000,000.00 per occurrence. Such insurance shall include an
         insurer's waiver of subrogation in favor of Intel.

14.4     Certificate of Insurance. Supplier shall provide Intel with properly
         executed Certificate(s) of Insurance prior to commencement of any
         operation hereunder and shall notify Intel, no less than 30 days in
         advance, of any reduction or cancellation of the above coverages.

14.5     Insurance Inspections

         Supplier shall permit Intel to perform reasonable insurance and safety
         inspections on and around Supplier's manufacturing facilities. Supplier
         agrees to implement, at no cost to Intel, reasonable recommendations of
         safety and fire inspectors consistent with local laws and Supplier's
         company procedures to eliminate the risk of fire or hazard to
         personnel, equipment, materials and work in process. Intel shall
         conduct such inspections so as to minimize disruptions and schedule
         impacts to Supplier.

14.6     All insurance required hereunder shall be written by reputable
         companies acceptable to Intel.

15.0     CONFIDENTIALITY AND PUBLICITY

15.1     During the course of this Agreement, Supplier may be provided access to
         Intel's confidential information and materials. Supplier agrees to
         maintain such information in accordance with the terms of this
         Agreement and any applicable separate nondisclosure agreement between
         Intel and Supplier. At a minimum, Supplier agrees to maintain such
         information in confidence, to take all reasonable precautions to
         prevent unauthorized disclosure, and to use such information only
         within the scope of this Agreement until the information becomes
         publicly available through no fault of Supplier. Supplier represents
         that no information disclosed by Supplier to Intel, in any form
         whatsoever, is the confidential information of any corporation,
         individual or association not a party to this Agreement.

15.2     Supplier agrees to maintain all specifications, equipment, tooling
         costs/pricing, materials, drawings, schematics, technical information
         and all related materials, reports, Forecasts, or documentation
         furnished by Intel or generated by Supplier, (including IPI), during
         performance of this Agreement, in confidence. Supplier agrees to use
         such specifications, drawings, schematics, technical information and
         other material only for performance of this Agreement. If Supplier's
         employees or representatives are granted access by Intel to any of
         Intel's computer networks or systems, Supplier shall treat all of
         Intel's data and information accessed from such systems in the same
         manner other described herein. In addition, Supplier, its employees
         and representatives shall not use or disclose for any purpose any
         aspect or portion of third party data or information which it may
         encounter by virtue of access to Intel's computer networks. Supplier
         shall not place any Intel confidential information on any unsecured
         network such as the "Internet."



                                   10                        INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   11
15.3     The parties agree that neither will disclose the existence of this
         Agreement, nor any of the details, to any third party without the
         specific written consent of the other. If disclosure of this Agreement
         or any of the terms hereof is required by applicable law, rule or
         regulation, or is compelled by a court or governmental agency,
         authority or body: (i) the parties shall use all legitimate and legal
         means available to minimize the disclosure to third parties of the
         content of the Agreement, including without limitation seeking a
         confidential treatment request or protective order; (ii) the disclosing
         party shall inform the other party at least ten business days (i.e.,
         not a Saturday, Sunday or a day on which banks are not open for
         business in the geographic area in which the non-disclosing party's
         principal office is located) in advance of the disclosure; and (iii)
         the disclosing party shall give the other party a reasonable adequate
         opportunity to review and comment upon the disclosure, and any request
         for confidential treatment or a protective order pertaining thereto,
         prior to making such disclosure.

15.4     During the course of an agreement between Supplier and Intel, Intel may
         have or may be provided access to other confidential information and
         materials of the Supplier. Intel agrees to protect such information in
         accordance with the terms of a Confidential Non-Disclosure Agreement
         ("CNDA") between the Parties.

15.5     The obligations stated in this Section (15) shall survive the
         expiration or termination of this Agreement.

16.0     LIMITATION OF LIABILITY

         INTEL WILL NOT BE LIABLE UNDER THIS AGREEMENT FOR ANY INCIDENTAL,
         CONSEQUENTIAL, OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO, LOSS
         OF PROFITS, BUSINESS INTERRUPTIONS, OR LOSS OF USE, IRRESPECTIVE OF
         WHETHER INTEL HAS ADVANCE NOTICE OF THE POSSIBILITY OF ANY SUCH
         DAMAGES.

17.0     INDEMNIFICATION

17.1     Supplier agrees to protect, defend, indemnify and hold Intel harmless
         from and against any and all claims, liabilities, demands, penalties,
         forfeitures, suits, judgments and the associated costs and reasonable
         expenses (including attorney's fees), which Intel may hereafter incur,
         become responsible for or pay out as a result of death, personal
         injury, or bodily injury to any person, destruction or damage to any
         property, non-compliance with applicable labor and employment laws,
         contamination of or adverse effects on the environment and any clean up
         costs in connection therewith, or any violation of governmental law,
         regulation, or orders, caused, in whole or in part, by (a) Supplier's
         breach of any term or provision of this Agreement, (b) any negligent or
         willful acts, errors or omissions by Supplier, its employees, officers,
         agents, representatives or sub-contractors in the performance of this
         Agreement, or (c) Product(s) manufactured by Supplier's or services
         provided by Supplier not according to specifications.

17.2     Intel agrees to protect, defend, indemnify and hold Supplier harmless
         from and against any and all costs and expenses (including attorney's
         fees) which Supplier may hereafter incur, become responsible for or pay
         out as a result of death, personal injury and bodily injury proximately
         caused by the negligence or willful acts or omissions by Intel or its
         employees.

18.0     HAZARDOUS MATERIALS

18.1     If Product(s) or services provided hereunder include hazardous
         materials as defined by relevant local, state, and national law,
         Supplier represents and warrants that Supplier and its personnel
         providing services to Intel understand the nature of and hazards
         associated with the design and/or service of Product(s) including
         handling, transportation, and use of such hazardous materials, as
         applicable to Supplier. Supplier assumes all liability resulting from
         Supplier's actions

                                       11                     INTEL CONFIDENTIAL
             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY


<PAGE>   12


         in connection with (i) providing such hazardous materials to Intel, or
         (ii) the use of such hazardous materials in providing services to
         Intel.

18.2     Upon request from Intel, Supplier shall provide Intel with material
         safety data sheets and any other documentation reasonably necessary to
         enable Intel to comply with applicable laws and regulations.

18.3     Supplier hereby certifies that Product(s) supplied to Intel do not
         contain and are not manufactured with any ozone depleting substances,
         as those terms are defined by law.

19.0     CUSTOMS CLEARANCE AND EXPORT

19.1     Upon Intel's request, Supplier shall promptly provide Intel with a
         statement of origin for all Product(s) and with applicable customs
         documentation for Product(s) wholly or partially manufactured outside
         of the country of import.

19.2     In the event Product or any technical information is exported from the
         United States or exported/re-exported from a foreign destination by
         Supplier, Supplier shall insure that the distribution and
         export/re-export of product is in compliance with all laws,
         regulations, orders, or other restrictions of the U.S. Export
         Administration Regulations. Supplier agrees that neither it nor any of
         its subsidiaries will export/re-export any technical data, process,
         product, or service, directly or indirectly to any country for which
         the United States government or any agencies thereof requires an export
         license or other government approval without first obtaining such
         license or approval.

20.0     CONSIGNMENT PROVISIONS

20.1     CONSIGNED INVENTORY IDENTIFICATION AND USE

         Supplier shall segregate and conspicuously mark materials, tools, and
         equipment consigned to Supplier by Intel pursuant to this Agreement
         (hereinafter referred to as "Consigned Inventory") as Intel property,
         and shall use such materials exclusively for the performance of
         services in accordance with this Agreement.

20.2     SECURITY INTEREST

         Supplier shall keep the Consigned Inventory free from liens or
         encumbrances of any kind. Intel retains a security interest in the
         Consigned Inventory, and any proceeds or after-acquired property
         pursuant to the Uniform Commercial Code. Supplier agrees to cooperate
         with Intel in signing and filing any financing statements or other
         documents which Intel may deem necessary to protect and perfect its
         title and security interest in the Consigned Inventory as provided
         herein. Intel may notify other creditors of Supplier who have filed
         financing statements covering Intel's inventory that Intel claims title
         to the Consigned Inventory.

20.3     RECORD KEEPING, INSPECTION AND AUDIT OF CONSIGNED INVENTORY

20.3.1   Supplier shall account for 100% of any inventory within Supplier's
         facility. Supplier shall perform scheduled physical cycle counts of all
         such inventory according to mutually agreeable procedures. Intel
         reserves the right to observe and audit cycle counts. Supplier shall
         provide, within one (1) working day, results of the cycle counts. In
         addition, Supplier shall provide, within one (1) working day,
         appropriate records of all receipts, shipments, and returns in such
         consigned inventory. Supplier shall immediately notify Intel of any
         quantity or part number variance detected in the cycle count.


                                       12                     INTEL CONFIDENTIAL
             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY
<PAGE>   13


20.3.2   Intel reserves the right to audit Supplier's accounting procedures at
         Supplier's facility with 24 hours notice. In the event of a discrepancy
         between the records of Supplier and the records of Intel regarding the
         Consigned Inventory, the records of Intel shall be presumed correct and
         Supplier shall be responsible for any shortages in the Consigned
         Inventory unless Supplier objects in writing with substantiating
         documentation. Intel shall have the right to inspect and audit the
         Consigned Inventory at all reasonable times.

20.3.3   Supplier agrees to implement and adhere to the following loss control
         measures:

a)       Receipt Verification - All Consigned Inventory shall be verified for
         part number and quantity accuracy. Upon verification, the Consigned
         Inventory shall be immediately moved by Supplier to a secured area such
         as a locked cage. Supplier shall immediately notify Intel of receipt of
         consigned inventory and verify part number and count accuracy. In the
         event of a variant, Intel is to be notified immediately and such
         variants must be confirmed by Intel. In the event of a discrepancy
         between the records of the Supplier and the records of Intel regarding
         the consigned inventory, the records of Intel shall be presumed
         correct. The Supplier shall be responsible for any shortages in the
         consigned inventory unless Supplier can produce substantiating
         documentation that proves otherwise.

b)       Proper Segregation - Consigned Inventory shall be segregated from the
         materials of other Supplier customers at all times, and must be placed
         in a secured area. In addition, all Intel consigned inventory that has
         been identified for use in Intel prototype products shall be kept
         segregated from consigned inventory for Intel production products.

c)       Limited Access - Access to the secured area shall be limited to
         authorized Supplier and escorted Intel employees.

d)       Secured Area Owners - For each shift, one (1) Supplier employee shall
         be designated as responsible for the accuracy of the inventory at the
         secured area.

e)       Security Incident Report Forms - Security Incident Report Forms shall
         be used to explain the circumstances around any missing Consigned
         Inventory. The form shall require a description of the missing
         Consigned Inventory and Supplier's corrective actions taken to minimize
         reoccurrence. A copy of all completed Security Incident Report forms
         shall be provided to Intel immediately upon Suppliers knowledge of
         missing Consigned Inventory.


f)       Issuing a Work Order - Consigned Inventory shall be moved from the
         Consigned Inventory secured area to the floor only when needed for a
         work order. The issuance of a work order to cover for Consigned
         Inventory lost on the production floor is not allowed unless a proper
         Security Incident Report form has been completed.

g)       Damaged materials - Any damaged material shall be properly segregated
         from undamaged material quarantined for review and disposition by
         Intel.

h)       Rework - Product(s) returned for rework shall be considered HVU
         consigned material, and thereby Supplier shall control as such.

20.4     RISK OF LOSS AND INSURANCE

         Supplier shall bear the risk of loss or damage for all Consigned
         Inventory, including but not limited to "line scrap" above the
         attrition rate in addendum A, if such loss occurs as a result of
         Supplier's manufacturing process, and is not related to defects in
         materials as supplied by Intel. Supplier shall keep the Consigned
         Inventory insured against theft, fire and other risks normally covered
         by standard all-risk property insurance, in the amount of the
         replacement value. Supplier shall bear the cost of any deductible, and
         in the event of a loss, Supplier shall reimburse Intel for such


                                       13                     INTEL CONFIDENTIAL
             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY
<PAGE>   14


         deductible. Supplier shall provide Intel with a certificate of
         insurance showing Intel as an additional insured, with provision for no
         less than thirty (30) days written notice to Intel of insurance
         termination or material changes in coverage. Supplier shall immediately
         notify Intel in writing of a material variance, loss or damage, and
         shall pay Intel the material replacement cost at best customer pricing.
         Payment terms are net sixty (60) days from Supplier's receipt of
         notification.

21.0     SUPPLIER'S FACILITIES

         Supplier agrees to perform all services under this Agreement at the
         following facility or facilities:

         Supplier's Facility Address(es):

               XeTel Corporation
               2105 Gracy Farms Ln.
               Austin, Texas

         Intel shall be permitted to inspect and approve any such facility to
         evaluate security and safety policies prior to Supplier beginning
         performance under this Agreement. Supplier shall not utilize other
         facilities to manufacture Product(s) without prior written permission
         from Intel.


                                       14                     INTEL CONFIDENTIAL
             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY
<PAGE>   15


21.3     FLEXIBILITY

         Based on Forecasts provided by Intel, Supplier shall notify Intel when
         capacity available to Intel drops below 150% of forecasted volumes.

22.0     GENERAL

22.1     Contingencies. The Supplier shall be responsible for its failure to
         perform due to causes beyond its reasonable control such as acts of
         God, fire, theft, war, riot, embargoes or acts of civil or military
         authorities. If delivery is to be delayed by such contingencies,
         Supplier shall immediately notify Intel in writing and Intel may either
         (i) extend time of performance, or (ii) terminate the uncompleted
         portion of the order at no cost to Intel.

22.2     Assignment. Intel may assign or delegate its rights and obligations, or
         any part thereof under this Agreement to any or all of its wholly-owned
         subsidiaries. Supplier may not assign or factor any rights in nor
         delegate any obligations under this Agreement or any portion thereof
         without the written consent of Intel.

22.3     Compliance With Laws. Supplier shall comply with all national, state
         and local laws and regulations governing the manufacture,
         transportation or sale of Product(s) or the performance of services in
         the course of this Agreement.

22.4     Governing Law. This Agreement shall be construed and interpreted
         according to the substantive laws of the State of Delaware, U.S.A.,
         excluding its choice of law provisions.

22.5     SPECIFIC PERFORMANCE. Notwithstanding anything else contained in this
         Agreement, Supplier hereto agree that failure to perform certain
         obligations undertaken in connection with this Agreement would cause
         irreparable damage, and that monetary damages would not provide an
         adequate remedy in such event. Supplier further agrees that failure to
         deliver against accepted Purchase Orders, or to deliver confirmed
         supply or pricing, are such obligations. Accordingly, it is agreed
         that, in addition to any other remedy to which the Supplier may be
         entitled, at law or in equity, Intel shall be entitled to injunctive
         relief to prevent breaches of the provisions of this Agreement, and an
         order of specific performance to compel performance of such obligations
         in any action instituted in any court of the United States or any state
         thereof having subject matter jurisdiction. Such injunctive relief
         shall extend until such time as Intel has established a new supplier to
         perform the scope of work as set forth in this contract.

22.6     Independent Contractor. Supplier hereto is an independent contractor.
         Supplier does not have the authority to act for and/or bind Intel in
         any way, or to represent that Supplier is authorized to act on the
         behalf of Intel. Nothing herein will be construed as forming a
         partnership or agency between the Parties.


                                       15                     INTEL CONFIDENTIAL
             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY
<PAGE>   16


22.7     Notices and Requests. All notices and requests required under this
         Agreement will be in writing, will reference this Agreement and will be
         deemed given upon delivery if personally delivered or upon receipt if
         sent by registered or certified mail, postage prepaid, return receipt
         requested, to the persons and addresses listed below, which persons and
         addresses may be modified upon subsequent written notice:

         NOTICE TO INTEL:                    NOTICE TO SUPPLIER:

         Intel Corporation                   XeTel Corporation
         1900 Prairie City Road              2105 Gracy Farms Ln.
         Folsom, Ca. 95630                   Austin, Texas

         Attention: Purchasing Dept.         Attention: Legal Department
         Copy to: Robert Schenck             Copy to: John Kampfer

22.8     Inspections and Audits. Intel may, for a period of (one) year following
         termination of the Agreement, audit Supplier's relevant records to
         verify performance by Supplier of its obligations hereunder, including
         pricing. Intel will hold the audited records in confidence and will not
         disclose any information derived therefrom to any other person or
         organization without the prior written consent of Supplier. Audits will
         be conducted not more than twice each calendar year. Audit costs will
         be borne by Intel, unless audit uncovers a material performance
         deviation by Supplier, in which case audit costs will by borne by
         Supplier.

22.9     Merger, Modification and Waiver. This document (including its
         attachments) is the entire understanding between Intel and Supplier
         with respect to the subject matter hereof and merges all prior and
         contemporaneous agreements, dealings and negotiations. No modification,
         alteration or amendment shall be effective unless made in writing and
         signed by duly authorized representatives of both parties. No waiver
         of any breach hereof shall be held to be a waiver of any other or
         subsequent breach. All Releases issued to Supplier by Intel during the
         term of this Agreement shall be governed only by the terms and
         conditions of this Agreement notwithstanding any preprinted terms and
         conditions on Supplier's acknowledgment or Intel's Release.

22.10    Severability. If any provision of this Agreement is determined to be
         invalid, illegal, or unenforceable, such determination shall not affect
         the validity of the remaining provisions.


       LEGAL OK
       --------
/s/ [ILLEGIBLE] 4/16/98



INTEL CORPORATION                         SUPPLIER

/s/ [ILLEGIBLE]                           /s/ W.A. PETEN
-----------------------------------       --------------------------------------
Signature                                 Signature

                                                       W.A. Peten
-----------------------------------       --------------------------------------
Printed Name                              Printed Name

                                                     Vice President
-----------------------------------       --------------------------------------
Title                                     Title

                                                         4/27/98
-----------------------------------       --------------------------------------
Date                                      Date



                                       16                    INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   17
                                  ADDENDUM "A"
                           PRODUCT SPECIFICATIONS AND
                                 PRICE SCHEDULE


PRODUCT PRICING

Intel agrees to pay Supplier a price per unit of Product shipped (less the price
of any component other than Flash Memory components that are consigned) as
described below. Prices listed below are subject to change only after
negotiation and mutual agreement between Intel and the Supplier.

The cost of consigned Materials, lost or scrapped by Supplier due to their
assembly manufacturing process, in excess of 0.5%, will be credited to Intel at
"Best Customer" pricing.

<TABLE>
<CAPTION>
   PART            SUPPLIER            INTEL                               POUCH/       JEWEL              UNIT
DESCRIPTION       PART NUMBER       PART NUMBER       ASSEMBLY    TEST   TUBE MTRL    MTRL COST     MOH    PRICE
-----------       -----------       -----------       --------    ----   ---------    ---------    -----   -----
<S>               <C>               <C>               <C>         <C>     <C>        <C>           <C>    <C>
MiC  2MB          605141-005                          $2.56       $0.39    $3.56                   $0.43   $6.94
                                                      $2.56       $0.39                  $3.79     $0.45   $7.19
MiC  4MB          605144-005                          $3.31       $0.59    $4.29                   $0.51   $8.70
                                                      $3.31       $0.59                  $4.53     $0.54   $8.97
MiC  8MB          605749-001                          $3.31       $0.78    $4.29                   $0.51   $8.89
                                                      $3.31       $0.78                  $4.53     $0.54   $9.16
VS   2MB          605334-002        IMC002FLSC        $3.42       $0.55    $6.64          n/a      $0.80  $11.41
VS   4MB          605336-002        IMC004FLSC        $3.46       $0.56    $6.64          n/a      $0.80  $11.46
VS   6MB          605723-001        IMC006FLSC        $4.04       $0.57    $7.10          n/a      $0.85  $12.56
VS   8MB          605729-002        IMC008FLSC        $3.70       $0.59    $7.12          n/a      $0.85  $12.26
VS  16MB          605730-002        IMC016FLSC        $3.88       $0.65    $7.08          n/a      $0.85  $12.46
S2   2MB          605214-005        IMC002FLSA        $3.76       $0.54   $11.50          n/a      $1.38  $17.18
S2   4MB          605217-003        IMC004FLSA        $4.17       $0.59   $13.08          n/a      $1.57  $19.41
S2  10MB          605387-002        IMC010FLSA        $5.52       $0.63   $16.15          n/a      $1.94  $24.24
S2  20MB          605389-002        IMC020FLSA        $7.10       $0.65   $16.05          n/a      $1.93  $25.73
S2+  4MB          604578-006        IMC004FLSP        $5.76       $0.68   $23.89          n/a      $2.87  $33.20
S2+  8MB          604852-004        IMC008FLSP        $5.89       $0.70   $23.91          n/a      $2.87  $33.37
S2+ 16MB          604850-006        IMC016FLSP        $6.06       $0.71   $23.93          n/a      $2.87  $33.57
S2+ 20MB          604579-005        IMC020FLSP        $6.22       $0.73   $23.97          n/a      $2.88  $33.80
</TABLE>





<PAGE>   18


                                  ADDENDUM "B"
                   QUALITY REQUIREMENTS, PERFORMANCE STANDARDS



Supplier will use the following documents as the primary criteria for Product
acceptance:

o        IPC-A-610B II

o        Intel Workmanship Standards (DOC # 99-0007-001)

o        Intel Spec #XX-XXX; QA Requirements - Pre-weld

o        Intel Spec #XX-XXX; QA Requirements - Post-weld

o        Intel Spec #XX-XXX; QA Requirements - Packout

o        ANSI/ASQCZ1.4 Sampling Procedures and Tables for Inspection by
         Attributes

o        PCMCIA Stress Test and Mechanical Requirements

o        Various other Intel supplied Specifications as listed in the BOMs.

AOQL:

Intel will accept 2500 outgoing DPM; functional, mechanical, and visual on all
new products shipped during the first 30 days of prototype through production
volumes. After the first 30 days have passed, Buyer will accept a maximum of 500
outgoing DPM on subsequent shipments.

Intel will accept 1000 DPM SMT assembly defects (in accordance with above
specified documents) measured at final inspection prior to encasement of
assembly in cover set; provided said defects do not result in functional
failures when subjected to PCMCIA thermal and mechanical stresses.

Intel may elect to impose third party Source Inspection at Supplier's expense;
if at any time the DPM levels rise above the Intel accepted limits specified
above for more than three consecutive assembly lots of single or mixed product;
or, an "Epidemic Failure" occurs as described in paragraph 8.5. Intel and
Supplier shall agree on Qualified Source Inspection provider, within 72 hours of
imposition of this clause.

FUNCTIONAL TEST:

The Supplier will implement the Functional Test plan/Program provided by Intel
for the specific line item products. Intel will reserve the right to modify the
test procedure/program at the Supplier's location if necessary to meet DPM goals
at no additional cost to Intel.

All product that has been subjected to rework or repair during any phase of the
assembly operation, will receive a complete functional test to ensure
acceptability; even if it was subjected to functional test prior to the rework.

QUALITY REPORTS:

Supplier is to provide Intel with "First Pass" and "Final" yield reports
reflecting all inspection and test results; including Pareto analysis of top
three major defects. Reports are to be submitted at weekly intervals unless
waived in writing by Intel. The Supplier is to provide process control data
to Intel on request.

Intel and the Supplier are to meet quarterly to discuss quality/performance
issues and conduct routine audits of process and WIP.

TURNKEY MATERIAL:

Supplier will use Intel's Approved Manufacturers List (AML) for procurement of
all components and mechanical piece parts. Requests for deviations from the AML
are to be submitted in writing by the Supplier to Intel for written
authorization.



                                   18                         INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   19

CHANGE REQUEST:

All product is to be assembled and encased only at the approved facility. Any
proposed change in location of manufacturing assembly/test facility must be
approved in writing by the Intel. Any process changes anticipated by the
Supplier to the production flow or process must be communicated in writing and
approved by Intel prior to implementation. Any changes that are implemented
prior to Intel's approval may result in product that is considered defective by
Intel and be returned for rework, testing, or credit.

GENERAL:

The Supplier is to generate controlled specification documents for the assembly
of each separate line item product identified in this document or future
addenda.

Supplier is required to maintain IS09002 certification throughout the duration
of this agreement.



                                       19                    INTEL CONFIDENTIAL

              FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY