Document:

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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.

                                   1                         INTEL CONFIDENTIAL

              FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   2

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
<PAGE>   3

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

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   4

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

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

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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

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   6

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

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   7

         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.

                                   7                         INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   8

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,

                                   8                         INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   9

         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.

                                   9                         INTEL CONFIDENTIAL

             FOR REVIEW, INTEL RESERVES THE RIGHT TO FURTHER MODIFY

<PAGE>   10

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<PAGE>   1
                                                                 EXHIBIT 10.17

                            PURCHASE AGREEMENT #10152

1.       AGREEMENT: This Agreement states the terms under which Cielo
         Communications, Inc. located 325 Interlocken Parkway, Broomfield,
         Colorado (hereinafter referred to as BUYER or Cielo) and XeTel Corp.,
         with place of business located at 2105 Gracy Farms Lane, Austin, Texas
         (hereinafter referred to as SELLER or XeTel) will conduct business with
         each other and to identify how such business will be conducted.

         When Cielo or BUYER is referred to in this agreement, it refers to
         Cielo Communications, Inc. and its current or future facilities
         worldwide.

2.       CONTRACT TERM: This Agreement takes effect on June 1, 1998, and will
         remain effective for an initial term of one (1) year. Thereafter, this
         Agreement shall automatically renew itself for successive one-year
         term, unless terminated pursuant to Section 23 below.

         2.1.     BUYER and SELLER will review the terms and conditions of this
                  Agreement to determine if changes need to be made. These
                  reviews will occur when the BUYER and/or SELLER make the
                  request for such a review. Any change will only be effective
                  when made in writing and signed by authorized representatives
                  of both BUYER and SELLER.

3.       SCOPE: SELLER agrees to sell to BUYER and BUYER may purchase from
         SELLER those part numbers for which SELLER is currently approved as a
         source of supply as referenced in the attached Schedule A.

         3.1.     BUYER shall have the right to make additions or subtractions
                  to the list of items in Schedule A. Pricing for additional
                  products shall be established at a value reflective of an
                  annual forecast and will use the same formula for calculating
                  the price that is used for existing assemblies in Schedule A,
                  subject to mutual agreement of the parties. The pricing will
                  be reviewed on a quarterly basis and adjusted according to the
                  forecasted volumes from the Buyer. SELLER agrees to adjust the
                  formula to meet goals identified in Section 13.

         3.2.     BUYER will supply documentation to the SELLER to assist SELLER
                  in procuring components to assemble items in Schedule A.
                  SELLER agrees to procure components approved per BUYER
                  documentation and only those part numbers listed in BUYER
                  specifications. If for some reason any component does not meet
                  BUYER specification, SELLER must notify BUYER for approval
                  prior to using the said component in any assembly. BUYER will
                  provide SELLER with new documentation or provide SELLER with a
                  Deviation Authorization if approval is granted. SELLER must
                  secure the new documentation or Deviation Authorization in
                  writing before using the component.

         3.3.     BUYER reserves the right to purchase some or all of the items
                  identified in Schedule A from other suppliers in the event
                  that BUYER deems it appropriate to do so, exercising its
                  independent business judgment. Under such circumstances, BUYER
                  will update its forecasts to reflect the necessary changes and
                  to allow SELLER to adjust forecasted demand accordingly.

4.       FORECASTS: BUYER will provide a rolling annual forecast to the SELLER
         for all items on Schedule A on monthly basis at minimum. BUYER shall
         not be obligated to purchase the exact forecasted quantity of any
         Schedule A items from SELLER, this Agreement being intended merely to
         establish the terms, conditions, and prices applicable when and if the
         BUYER does so purchase.

         4.1.     BUYER will provide SELLER with an annual Purchase Order (PO).
                  This PO will provide SELLER with the BUYER'S best estimate of
                  its long term forecast. The PO will specify the part number,
                  revision level, and quantity to be shipped or scheduled to be
                  released. BUYER will release against this PO based on
                  individual Module usage or by KANBAN trigger or other
                  notification methods.

5.       PRODUCTION AUTHORIZATION: SELLER has authorization to assemble and test
         the PO quantities as released by BUYER plus sufficient inventory to
         fill Module requests as defined by Cielo's Master Planning Schedule
         (MPS). Shipments to be made so Modules are on BUYER'S dock to meet
         delivery requirements as defined in Section 15.1.2.

         5.1.     BUYER will maintain cancellation rights for all assemblies
                  outside a 60-day rolling window unless SELLER was authorized
                  in writing by BUYER to produce assemblies outside that window.

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998

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                            PURCHASE AGREEMENT #10152

         5.2.     The PO will be revised by the BUYER as necessary and sent to
                  SELLER. At a minimum, SELLER agrees to adjust its internal
                  schedule for all PO deliveries the first week of every month
                  and more often if there are significant schedule changes.
                  SELLER shall notify BUYER of any delivery issues according to
                  Escalation Requirements as defined in Schedule D.

6.       RAW MATERIALS: BUYER material liability shall be limited to the
         Strategic Inventory Levels established in Schedule C for Non-Cancelable
         Non-Returnable (NCNR) components, excess due to minimum order quantity
         and for those long lead time materials required to sustain production
         forecasts and approved by the BUYER. Management of Min/Max levels for
         all components will be the responsibility of the SELLER. BUYER will
         assume responsibility for material required to support end of product
         life only if BUYER approves quantities purchased by SELLER.

         6.1.     BUYER may negotiate contracts with OEM's for components it has
                  specified. SELLER may piggyback these contracts, subject to
                  OEM approval. Contracts and pricing are to be used exclusively
                  for BUYER'S assemblies. Any cost savings from a BUYER'S
                  contract is to be passed directly to BUYER. Negotiation of
                  these contracts may require pricing to be adjusted during the
                  term of this agreement. BUYER and SELLER will work together to
                  determine price impact and cut in date. At that time, Schedule
                  A will be updated to reflect the new pricing. BUYER will use
                  reasonable effort to secure any authorizations needed by the
                  SELLER to procure any proprietary components. SELLER will
                  receive a copy of all such authorizations from BUYER if
                  needed.

7.       CAPACITY SURGE DEMAND: SELLER agrees to make every reasonable effort to
         ensure that, upon notice from BUYER, delivery quantities on order can
         be increased to match actual demand. This surge capacity may be
         contingent upon material availability, labor availability and equipment
         capacity. BUYER and SELLER must mutually agree on the surge plan.
         Strategic Inventory Levels established in Schedule C are to support
         such surges in BUYER demand. New designs or new releases of present
         designs may be an exception as the Strategic Inventory Levels are not
         yet secured.

8.       STANDARD LEAD TIMES GOAL/EXPECTATION: BUYER and SELLER agree to work
         together to drive toward the shortest possible lead-time to support
         BUYER customer requirements.

         8.1.     GOAL SETTING: As part of the Quarterly Meeting Review process,
                  SELLER and BUYER will assess lead time needs, develop goals
                  and plans for lead time reduction, and review progress toward
                  the established goals.

         8.2.     LONG-TERM OBJECTIVE: Assuming the materials pipeline is full
                  it is the long term objective to reduce manufacturing lead
                  time from receipt of order to shipment of finished product to
                  designated carrier from an initial 10 working days to a
                  maximum of 3 working days within 120 days of mutually agreed
                  start date for that particular assembly.

9.       RESCHEDULES AND CANCELLATIONS:

         9.1.     Provided no constraints per section 8.0, BUYER will provide a
                  rolling twelve month forecast for order management purposes.
                  The initial ninety (90) days is to be considered `firm',
                  supported by actual purchase orders for the demand
                  requirements. Within the first thirty (30) days, BUYER demand
                  may be adjusted up by 20% or down 0% of the production plan
                  loaded on SELLER'S order book during this period. Thirty-one
                  to sixty (31 to 60) days BUYER demand may be adjusted up by
                  50% or down by 20% of the production plan loaded on SELLER'S
                  order book during this period. Sixty-one to ninety (61-90)
                  days, BUYER demand may be adjusted up by 75% of the production
                  plan loaded on SELLER'S order book during this period. Greater
                  than sixty (60) days, BUYER may reschedule or cancel 100% of
                  planned demand. Buyer will be liable for material in
                  accordance with Section 6.

10.      PRICING: Will be in US Dollars and will be the same for all BUYER'S
         facilities, regardless of ordering or delivery location as subject to
         provisions of Section 14.1.1.

         10.1.    Pricing for items covered by this Agreement is listed in
                  Schedule A.

                  10.1.1.  Pricing includes packaging to good commercial
                           standards or when specified, to BUYER Procurement
                           Specifications as well as chemicals, supplies and
                           consumable materials needed to make BUYER products.

         10.2.    Pricing for all items listed in Schedule A is firm for the
                  duration of this agreement. Exceptions to this may be
                  permitted upon mutual agreement of the parties due to:

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998

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                            PURCHASE AGREEMENT #10152

                  10.2.1.  Cost of material changes beyond the control of SELLER
                           and agreed upon by BUYER and SELLER. Refer to
                           Schedule D for Escalation Schedules.

                  10.2.2.  BUYER specification revision changes, which cause
                           SELLER'S manufacturing costs to change.

                  10.2.3.  Market conditions which cause SELLER'S pricing to be
                           non-competitive will permit BUYER to reopen
                           negotiations to reduce pricing.

                  10.2.4.  Cost reduction projects by SELLER and/or BUYER will
                           permit either SELLER or BUYER to reopen negotiations
                           to reduce pricing.

                  10.2.5.  Significant forecast quantity increases or decreases
                           will permit BUYER and/or SELLER to reopen
                           negotiations to adjust pricing.

                  10.2.6.  Changes in Material Acquisition Service fee based on
                           total annual material purchases as detailed in
                           Schedule E.

         10.3.    Pricing changes of any kind will take effect only after BUYER
                  and SELLER have reached agreement regarding them via a written
                  revision of Schedule A.

11.      PURCHASE PRICE VARIANCES (PPVs): PPVs for all components needed to
         build product as listed in Schedule A will be authorized per occurrence
         by the Buyer. These PPVs will be calculated on the actual price paid
         compared with the PO pricing for the last quarter for both increases
         and decreases. PPV will be added to POs as separate itemized NRE line
         items.

         11.1.    Individual PPVs of significant impact (greater than $15,000)
                  may be addressed sooner than the quarterly update if deemed
                  necessary by the BUYER or SELLER.

12.      SAFETY STOCK:

         12.1.    Finished Goods Safety Stock. SELLER agrees to hold up to two
                  weeks of finished goods inventory. These quantities will be
                  mutually agreed upon by BUYER and SELLER, based on the
                  forecast provided pursuant to Section 9.1. At the end of each
                  month, SELLER will provide BUYER with a rolling inventory
                  aging report, and SELLER may invoice BUYER for any finished
                  goods that have been held by SELLER for more than 30 days at
                  Net 30 days. Buyer shall have the right to reduce its forecast
                  provided pursuant to Section 9.1 for the 30-day period
                  following the date of such invoice by the amount of any such
                  inventory invoiced to BUYER. In addition, BUYER agrees to be
                  liable for such finished goods in the event of cancellation by
                  BUYER of this Agreement or changes or modifications made by
                  BUYER via an Engineering Change Order (ECO) or Deviation
                  Authorization. Finished goods inventory levels are documented
                  in Schedule A. For purposes of this Section 12, all inventory
                  accounting shall be based on the FIFO method.

         12.2.    Raw Material Safety Stock: The raw material safety stocks will
                  be determined in the Strategic Inventory Level Schedule
                  (Schedule C) at no additional cost to the BUYER. Safety stock
                  levels will be reviewed and adjusted at least once per
                  quarter. BUYER agrees to be liable for these materials in the
                  event of changes or modifications made by the BUYER via an
                  Engineering Change Order (ECO), Deviation Authorization,
                  schedule reduction, quantity reduction or cancellation, or
                  contract termination by BUYER or SELLER. If circumstances
                  require SELLER to carry excessive raw material safety stock,
                  in the event of last time buys, the safety stock adder will be
                  1% per month.

13.      TOTAL COST, QUALITY, AND MANUFACTURABILITY IMPROVEMENTS:

         13.1.    GOAL AND EXPECTATIONS

                  13.1.1.  PRIMARY: To ensure that SELLER'S products and
                           services provide to BUYER a competitive advantage in
                           worldwide markets.

                  13.1.2.  SECONDARY: To improve SELLER'S costs of product and
                           services toward being the lowest cost on a global
                           basis.

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998

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                            PURCHASE AGREEMENT #10152

         13.2.    ON-GOING CONTINUOUS COST IMPROVEMENT GOALS

                  13.2.1   SELLER agrees to make continuous process
                           improvements, both with and without assistance from
                           BUYER, which will provide cumulative annual pricing
                           reductions Goals to BUYER totaling at least 2.5% of
                           the BUYER'S sell price less SELLER'S tightly
                           controlled materials, such as the Optical
                           Sub-Assemblies. This reduction does not include the
                           material reduction that is a result of BUYER level
                           contracts as defined in Section 7.

                  13.2.2   When cost reductions are identified by the SELLER,
                           the savings will generally be shared with the BUYER
                           on an equal (50/50) basis for 6 months after the
                           implementation. After 6 months the total cost
                           reduction will be reflected in Schedule A pricing.
                           SELLER may choose to pass on a larger percentage to
                           BUYER in order to meet the annual cost reduction goal
                           outlined in section 13.2.1. BUYER may agree to extend
                           the 6-month period to allow the SELLER to recapture
                           costs associated with implementation of a cost
                           reduction.

14.      FREIGHT:

         14.1.    All pricing is F.O.B. SELLER'S manufacturing facility.

         14.2.    Freight carrier to be specified to the SELLER by the BUYER. If
                  a product requires return for rework as under warranty, SELLER
                  should bear all costs associated with freight back to SELLER,
                  then freight for returning the goods to BUYER, including
                  duties, custom fees, excise taxes, etc.

         14.3.    LATE SHIPMENTS

                  14.3.1.  CAUSED BY SELLER: Freight charges and other
                           applicable expedite charges, that are over and above
                           the normal charges, which may be necessary to deliver
                           the product to BUYER will be paid for by SELLER.
                           SELLER is to contact the BUYER for freight transit
                           instructions. (NOTE: If the BUYER request expedited
                           air freight of these shipments, SELLER agrees to pay
                           for these additional expedited air freight costs.)

                  14.3.2.  CAUSED BY BUYER: When special handling is required to
                           meet an unusual demand specified by the BUYER,
                           SELLER'S special handling charges will be reimbursed
                           by the BUYER.

15.      PERFORMANCE MEASURES: SELLER and BUYER will periodically review
         performance according to Schedule B. During these periodic reviews,
         SELLER and BUYER will jointly establish goals for improvement in all
         areas. If SELLER continuously fails to improve upon performance issues
         or ignores requests by BUYER to maintain acceptable performance levels,
         BUYER may adjust the level of business given to SELLER, up to and
         including the termination of this Agreement per Section 24.

         15.1.    GOALS: Long Term: 100% Quality Acceptance Rate; 100% On-Time
                  Delivery Performance.

                  15.1.1.  QUALITY PERFORMANCE: Based upon the number of lots of
                           product received which meet BUYER'S specifications.
                           SELLER'S short-term goal is 99.7% acceptance by
                           October 1998 based on 6 month moving average.

                  15.1.2.  ON-TIME DELIVERY PERFORMANCE: Based upon the
                           quantities of acceptable quality product which arrive
                           on BUYER'S dock on the specified dock date or up to 5
                           working days earlier. SELLER'S short-term goal is 98%
                           on time by October 1998 based on 6 month moving
                           average.

16.      SHIPPING QUANTITY VARIANCES: No variance from the delivery quantities
         scheduled are allowed unless other arrangements are agreed to by the
         appropriate BUYER. SELLER will notify BUYER, in advance, of any
         proposed variances.

         16.1.    Quantities shipped over the specified delivery quantity may be
                  returned to SELLER at SELLER'S expense.

         16.2.    The un-shipped quantities of short shipments, if not closed
                  short by the BUYER, will be considered late and subject to
                  SELLER'S liability for freight costs on the shorted
                  quantities.

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998

<PAGE>   5
                            PURCHASE AGREEMENT #10152

17.      NON-CONFORMING MATERIALS:

         17.1.    The products delivered by SELLER may be inspected and tested
                  as required by the BUYER. If BUYER determines that materials
                  received do not meet the specifications to which they were
                  ordered or are defective in material or workmanship, BUYER may
                  return the materials to SELLER at SELLER'S expense for rework
                  or replacement. SELLER shall provide BUYER with a Return
                  Authorization (RA) Number within 24 hours of BUYER'S request.
                  SELLER must then repair, replace or credit BUYER'S account for
                  said items as determined by mutual agreement of both parties.
                  Repair or replacement of non-conforming assemblies is to be
                  done within one week from the date non-conforming materials is
                  received by SELLER at the manufacturing site. SELLER must also
                  provide a report to BUYER detailing the cause of the
                  non-conformance and corrective action taken to assure it will
                  not happen again.

         17.2.    Non-conforming material situations may be negotiated by the
                  BUYER to ensure that BUYER'S production requirements are
                  attained with Seller reserving first right of refusal to
                  remedy. This may include, back-charging SELLER for rework and
                  sorting costs when return of materials to SELLER does not meet
                  BUYER'S business needs. Back-charge costs will be agreed upon
                  by SELLER and the BUYER, prior to performing the rework or
                  sorting.

         17.3.    Other SELLER'S facilities can be used to perform the rework,
                  if required, to meet BUYER'S production requirements. There
                  will be no additional freight or rework charges to the BUYER.

         17.4.    Component infant mortality or components that fail not due to
                  workmanship at BUYER'S facility shall not be the
                  responsibility of the SELLER. Any repair or rework desired by
                  the BUYER shall be billed at a standard hourly rate as
                  established by the SELLER.

18.      PAYMENT METHOD AND TERMS:

         18.1.    PAYMENT METHOD: All payments will be made in US Dollars.

         18.2.    PAYMENT TERMS: Net 30 days from invoice date.

19.      CUSTOM TOOLING PURCHASES:

         19.1.    DEFINITION: Custom tooling shall be defined to include all
                  related hardware, software and supporting design documentation
                  unique or dedicated to BUYER'S requirements.

         19.2.    OWNERSHIP: Unless specifically noted on the purchase order or
                  tooling agreement document:

                  19.2.1.  Tooling purchased or paid for by BUYER shall become
                           the property of BUYER and must be returned to BUYER
                           upon request. BUYER will be responsible for packaging
                           and shipping cost for relocating BUYER tooling and
                           equipment from SELLER's facility. Any equipment
                           consigned or paid for by BUYER is to be used solely
                           for the purpose for which it was designed and used
                           only for BUYER'S assemblies. Calibration of all
                           SELLER owned/operated equipment and BUYER consigned
                           equipment must be traceable to ISO 9002 requirements
                           where applicable.

                  19.2.2.  RETURN OF TOOLING TO BUYER (if so requested by BUYER)

                           19.2.2.1. Tooling to be returned to BUYER upon
                                     BUYER'S written request within 15 days of
                                     last lot completed needing the use of the
                                     tool.

                  19.2.3.  MARKING OF TOOLING: Tooling paid for by BUYER must be
                           permanently marked, if practical, with "PROPERTY OF
                           CIELO COMMUNICATIONS, INC".

         19.3.    IN-CIRCUIT TEST (ICT)

                  19.3.1.  New Programs: SELLER will quote the necessary ICT
                           fixturing and other NRE charges on new assemblies and
                           provide an itemized list of charges in the initial
                           quotation.

         Ongoing Support: Repair and maintenance shall be the responsibility of
         the SELLER unless replacement is necessary as deemed by BUYER and
         SELLER at which time BUYER shall provide a purchase order for
         replacement of the fixture. Changes to the design causing said tooling
         to change shall be the responsibility of the BUYER.

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998
<PAGE>   6

                            PURCHASE AGREEMENT #10152

         19.4     FUNCTIONAL CIRCUIT TEST (FCT)

                  19.4.1   New Program: SELLER will quote the cost of design and
                           development of FCT and provide an itemized list, or
                           BUYER will supply SELLER with necessary equipment and
                           documentation to perform FCT.

                  19.4.2   Ongoing Support: All charges associated with
                           repair/replacement of custom or BUYER supplied
                           equipment is the responsibility of the BUYER. SELLER
                           will ask for purchase orders to cover these charges
                           or BUYER will provide replacement parts.

         19.5     Other: All charges related to repair/replacing custom tooling
                  that is unique to the BUYER'S requirements is the
                  responsibility of the BUYER. SELLER will ask for purchase
                  orders to cover these charges or BUYER will provide
                  replacement parts.

         19.6     PREVENTATIVE MAINTENANCE AND CALIBRATION: SELLER to provide
                  preventive maintenance and calibration on all equipment
                  consigned by BUYER per ISO 9002 requirements. Preventative
                  maintenance and calibration costs on all BUYER supplied
                  equipment or custom equipment procured by SELLER and paid for
                  by BUYER is the responsibility of the BUYER. SELLER agrees to
                  work with the BUYER to determine preventative maintenance and
                  calibration schedule on equipment.

         19.7     TOOLING CARE: Normal care of tooling shall be borne by SELLER.

         19.8     TOOLING REPORT: At a minimum of every 6 months, SELLER will
                  provide BUYER with a report which provides the tooling owned
                  by BUYER and its condition.

         19.9     END OF LIFE: Tooling which has reached the end of its useful
                  life and idle tooling will be retained by SELLER until BUYER
                  provides written disposition to SELLER.

         19.10    BUYER is responsible for freight costs, taxes, duties
                  calibration, preventive maintenance, or other similar costs
                  related to BUYER purchased / supplied tooling only.

20.      SELLER'S MANUFACTURING PROCESS: Both BUYER and SELLER agree to pursue
         continuous improvement in all areas of their businesses, including the
         SELLER'S manufacturing processes.

         20.1     Manufacturing process changes which can significantly affect
                  the quality, performance and/or cost of the product being
                  purchased are to be reviewed and approved by BUYER before
                  implementation by SELLER.

         20.2     Manufacturing process changes which SELLER believes will have
                  no impact upon the quality, performance and/or cost of the
                  product being purchased may be implemented at the discretion
                  of SELLER with notification to the BUYER. SELLER will remain
                  fully responsible for meeting product specification and
                  usability requirements.

21.      SUPPLIER DEVELOPMENT PROGRAM: SELLER agrees to actively participate
         with BUYER in BUYER'S Supplier Development Program.

         21.1     FORMAL QUARTERLY REVIEW: As part of the Supplier Development
                  Program, BUYER and SELLER agree to alternate hosting of Formal
                  Quarterly Meetings. The following representatives should
                  attend at a minimum:

                  Management - BUYER and SELLER

                  Program Manager - SELLER

                  Commodity Manager - BUYER

         The agenda is noted in Schedule B.

22.      MISCELLANEOUS TERMS AND CONDITIONS:

         22.1     All terms and conditions will be per the terms and conditions
                  found in this Agreement. If any difference exists between the
                  terms and conditions of the purchase orders and this
                  Agreement, the terms and conditions of this Agreement will
                  take precedence.

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998

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                            PURCHASE AGREEMENT #10152

         22.2     All issues, disputes and particular items which arise and
                  which are not specifically addressed in this Agreement and/or
                  the individual BUYER purchase orders will be discussed and
                  resolved through good faith negotiations.

23.      CONTRACT TERMINATION:

         23.1     This Agreement may be terminated by BUYER within 180 days
                  written notice of breach of this agreement, provided SELLER
                  has not cured said breach within 60 days of receipt of breach.
                  Voiding of this agreement shall not relieve BUYER of its
                  obligation to pay for finished goods or raw materials which
                  have been ordered or delivered, as defined in Section 7, and
                  shall not relieve SELLER of any liabilities incurred during
                  the term of this Agreement, including, without limitation, any
                  liability of SELLER for breach of this Agreement and any
                  liability of SELLER for warranty obligation on the terms of
                  this Agreement.

         23.2     This Agreement may be terminated for cause by SELLER upon 180
                  days written notice of breach of this agreement, provided
                  BUYER has not cured said breach within 60 days of receipt of
                  breach Voiding of this Agreement shall not relieve BUYER of
                  its obligation to settle all outstanding sums due and payable
                  for finished goods or raw materials which have been ordered or
                  delivered, as defined in Section 7, and for any other
                  liabilities incurred during the term of this Agreement. Nor
                  shall it relieve SELLER of any liabilities incurred during the
                  term of this Agreement, including, without limitation, any
                  liability of SELLER for breach of this Agreement and any
                  liability of SELLER for warranty obligation on the terms of
                  this Agreement.

         23.3     SELLER or BUYER may terminate this Agreement without cause
                  upon six (6) months written notice. In the event of such
                  termination the parties shall mutually agree on the phase out
                  plan.

         23.4     Survival of Certain Provisions: Notwithstanding anything to
                  the contrary in this Agreement, the following sections shall
                  survive termination of this Agreement: 17, 18, 19, 22, 26, 27,
                  28 and 29.

24.      FORCE MAJEURE: No party will be liable to the other parties for its
         failure to perform or for delay in the performance of its obligations
         under this Agreement to the extent such failure or delay results from
         causes beyond its reasonable control, including, without limitation,
         acts of God, fires, explosions, wars or other hostilities,
         insurrections, revolutions, earthquakes, floods, epidemics or
         quarantine restrictions, unforeseeable governmental restrictions or
         controls, or transportation embargoes or interruptions; provided,
         however, that if a party is prevented from performing its obligations
         under this Agreement because of such extraordinary circumstances for a
         period of 10 consecutive days, the other parties may terminate this
         Agreement immediately upon notice to the other parties.

25.      CONTINGENCY PLAN: SELLER to provide BUYER a mutually acceptable
         disaster recovery plan within 3 months of signing this agreement. Upon
         approval of the disaster recovery plan by BUYER, the document will be
         added to this agreement.

26.      INDEMNIFICATION: Each party warrants to the other that it has full
         right, power, legal capacity and authority to enter into and perform
         this Agreement and that it will indemnify and hold harmless the other
         party for any breach of this warranty.

         26.1     Indemnification by SELLER: SELLER agrees, at its own expense
                  to indemnify the BUYER against any damages, costs (including
                  attorneys' fees and costs) or other liability arising from any
                  claim brought against them with respect to any products
                  manufactured by SELLER, (collectively "BUYERS Losses") to the
                  extent such BUYER Losses are caused by SELLER's failure to
                  manufacturer the Products in conformance with the
                  Specifications and with SELLER's warranties as set forth in
                  this Agreement, or by SELLERS's misconduct or negligence;
                  provided, with respect to any claim or action, that BUYER
                  provides (i) prompt written notice of such claim or action,
                  (ii) sole control and authority over the defense or settlement
                  of such claim or action and (iii) proper and full information
                  and reasonable assistance to defend and/or settle any such
                  claim or action.

         26.2     Notwithstanding anything to the contrary herein, neither party
                  nor its agent(s), representative(s) or employee(s) shall be
                  liable to the other pursuant to this agreement for amounts
                  representing loss of revenues, loss of profits, loss of
                  business or indirect, consequential, special or punitive
                  damages of the other party, however caused and on any theory
                  of liability, even if the other party has been advised of the
                  possibility of such damages. The liability of the BUYER, its
                  agent(s)

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998
<PAGE>   8

                            PURCHASE AGREEMENT #10152

                  representative(s) and employee(s) to SELLER for damages or
                  alleged damages whether in contract or tort (including strict
                  liability and negligence) with respect to this agreement is
                  limited to and shall not exceed the amounts paid by BUYER to
                  SELLER under this agreement during the twelve (12) months
                  immediately preceding the event and/or Product giving rise to
                  the damages.

27.      WARRANTY: Should SELLER'S product(s) be confirmed as being faulty due
         to a defect in workmanship or fail to meet the mutually agreed upon
         specifications in effect on the date of sale within one year of
         shipment to BUYER or its customer, SELLER will repair or replace these
         faulty goods free of cost, if returned to SELLER within thirty days
         after the end of the warranty period. Goods returned after this period
         will be repaired or replaced for a charge to be negotiated. For any
         material BUYER deems necessary to have repaired or replaced at its or
         its customer's facility due faulty workmanship, SELLER shall have the
         first right of refusal to send or supply the necessary resources to
         remedy the situation in a timely manner as mutually agreed between the
         two parties.

28.      CONFIDENTIAL INFORMATION

         28.1     Nondisclosure and Nonuse: Each party shall treat as
                  confidential all Confidential Information of the other party,
                  shall not use such Confidential Information except as set
                  forth in this Agreement, and shall use reasonable efforts not
                  to disclose such Confidential Information to any third party.
                  Each party shall disclose Confidential Information of the
                  other party only to its directors, officers, employees, and
                  consultants who are required to have such information in order
                  for such party to carry out the transactions contemplated by
                  this Agreement and who have signed nondisclosure agreements
                  protecting the Confidential Information on substantially the
                  same terms as this Agreement. Each party shall promptly notify
                  the other party of any actual or suspected misuse or
                  unauthorized disclosure of the other party's Confidential
                  Information.

         28.2     Exceptions: Notwithstanding the above, neither party shall
                  have liability to the other with regard to any Confidential
                  Information of the other which the receiving party can prove:
                  (i) was in the public domain at the time it was disclosed or
                  has entered the public domain through no fault of the
                  receiving party; (ii) was known to the receiving party,
                  without restriction at the time of disclosure as demonstrated
                  by files in existence at the time of disclosure; (iii) is
                  disclosed with the prior written approval of the disclosing
                  party; (iv) becomes known to the receiving party without
                  restriction from a source other than the disclosing party
                  without breach of this Agreement by the receiving party and
                  otherwise not in violation of the disclosing party's rights;
                  (v) is disclosed generally to third parties by the disclosing
                  party without restrictions similar to those contained in this
                  Agreement; (vi) is disclosed pursuant to the order or
                  requirement of a court, administrative agency, or other
                  governmental body; provided however that the receiving party
                  shall provide prompt notice of such court order or requirement
                  to the disclosing party to enable the disclosing party to seek
                  a protective order or otherwise prevent or restrict
                  disclosure.

         28.3     Return of Confidential Information: Upon expiration of this
                  Agreement, each party shall promptly return all Confidential
                  Information of the other party.

         28.4     Remedies: Any breach of the restrictions contained in this
                  Section 28 is a breach of this Agreement which may cause
                  irreparable harm to the nonbreaching party. Any such breach
                  shall entitle the nonbreaching party to injunctive relief in
                  addition to all legal remedies.

         28.5     "Confidential Information" of a party shall mean any
                  information disclosed by that party to the other pursuant to
                  this Agreement which is written, graphic, machine readable or
                  other tangible form and is marked "Confidential",
                  "Proprietary" or in some other manner to indicate its
                  confidential nature. Confidential Information may also include
                  oral information disclosed by one party to the other pursuant
                  to this Agreement, provided that such information is
                  designated as confidential at the time of disclosure and is
                  reduced to writing by the disclosing party within thirty (30)
                  days after its oral disclosure, and such writing is marked in
                  a manner to indicate its confidential nature and delivered to
                  the receiving party.

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998

<PAGE>   9

                            PURCHASE AGREEMENT #10152

29.      MISCELLANEOUS

         29.1     Amendments and Waivers: Any term of this Agreement may be
                  amended or waived only with the written consent of the parties
                  or their respective successors and assigns. Any amendment or
                  waiver effected in accordance with this Section 29.1 shall be
                  binding upon the parties and their respective successors and
                  assigns.

         29.2     Successors and Assigns: SELLER shall not assign any of its
                  rights, obligations or privileges (by operation of law or
                  otherwise) hereunder without the prior written consent of
                  BUYER. BUYER shall have the right to assign its rights,
                  obligations and privileges hereunder to an assignee that
                  agrees in writing to be bound by the terms of this Agreement.
                  Subject to the foregoing, the terms and conditions of this
                  Agreement shall inure to the benefit of and be binding upon
                  the respective permitted successors and assigns of the
                  parties.

         29.3     Governing Law; Jurisdiction: This Agreement and all acts and
                  transactions pursuant hereto and the rights and obligations of
                  the parities hereto shall be governed, construed and
                  interpreted in accordance with the laws of the State of
                  Colorado without giving effect to principles of conflicts of
                  law.

         29.4     Notices: Any notice required or permitted by this Agreement
                  shall be in writing and shall be deemed sufficient upon
                  receipt, when delivered personally or by courier, overnight
                  delivery service or confirmed facsimile, or forty-eight (48)
                  hours after being deposited in the regular mail as certified
                  or registered mail (airmail if sent internationally) with
                  postage prepaid if such notice is addressed to the party to be
                  notified at such party's address or facsimile number as set
                  forth, or subsequently modified by written notice.

         29.5     Severability: If one or more provisions of this Agreement are
                  held to be unenforceable under applicable law, the parties
                  agree to renegotiate such provision in good faith, in order to
                  maintain the economic position enjoyed by each party as close
                  as possible to that under the provision rendered
                  unenforceable. In the event that the parties cannot reach a
                  mutually agreeable and enforceable replacement for such
                  provision, then (i) such provision shall be excluded from this
                  Agreement, (ii) the balance of the Agreement shall be
                  interpreted as if such provision were so excluded and (iii)
                  the balance of the Agreement shall be enforceable in
                  accordance with its terms.

         29.6     Entire Agreement: This agreement and the documents referred to
                  herein are the product of both parties hereto, and constitute
                  the entire Agreement between such parties pertaining to the
                  subject matter hereof and thereof, and merge all prior
                  negotiations and drafts of the parties with regard to the
                  transactions contemplated herein and therein. Any and all
                  other written or oral agreements existing between the parties
                  hereto regarding such transactions are expressly cancelled.

         29.7     Independent Contractors: The relationship of SELLER and BUYER
                  established by this Agreement is that of independent
                  contractors, and nothing contained in this Agreement will be
                  construed (i) to give either party the power to direct and
                  control the day-to-day activities of the other (ii) to
                  construe the parties as partners, joint ventures, co-owners or
                  otherwise as participants in a joint or common undertaking, or
                  (iii) to allow either party to create ore assume any
                  obligation on behalf of the other for any purpose whatsoever.

Please acknowledge receipt and acceptance of this Agreement by signing below:

BY SELLER:   /s/ BILL PETEN               BY BUYER:   /s/ TIM BOUR
             --------------------------               -------------------------
PRINT NAME:  Bill Peten                   PRINT NAME: Tim Bour
             --------------------------               -------------------------
TITLE:       VP Materials                 TITLE:      President & CEO
             --------------------------               -------------------------
COMPANY      XeTel, Corp.                 COMPANY     Cielo Communications. Inc.
             --------------------------               -------------------------
DATE:        6/2/98                       DATE:       6/4/98
             --------------------------               -------------------------

                                                       Purchase Agreement #10152
                                                                          Rev. A
                                                                    June 1, 1998
<PAGE>   10

                                   SCHEDULE A
                            PURCHASE AGREEMENT ITEMS

<TABLE>
<CAPTION>
                                          MATERIAL  ASSEMBLY   TEST             ANNUAL
PART NUMBER       DESCRIPTION               COST      COST     COST    PROFIT    QTY     KANBAN SIZE
-----------   -----------------------     --------  --------   ----    ------   ------   -----------
<S>           <C>                         <C>       <C>        <C>     <C>      <C>      <C>
30-2020-701   FC1063SW-GBIC-Untested

30-2020-751   FC1063SW-GBIC-Tested

30-2028-701   GBE1250SW-GBIC-Untested

30-2028-751   GBE1250SW-GBIC-Tested
</TABLE>

BUYER:                                       SELLER:

-----------------------------------          -----------------------------------
David L. Rechberger,           Date          Tracee Casarez,                Date
Sr. Supply Engineer Manager                  Program Manager

                                                       Purchase Agreement #10152
                                                          Schedule A, Revision A
                                                                    June 1, 1998
<PAGE>   11

                                   SCHEDULE B
                                QUARTERLY REVIEW

<TABLE>
<CAPTION>
                    XeTel Responsibility                                        Cielo Responsibility
<S>                                                         <C>

                                            BUSINESS PLANS/STRATEGIES
---------------------------------------------------------------------------------------------------------------

o    Sales                                                  o    Sales
o    Business Climate                                       o    Business Climate
o    Product/Customer Mix                                   o    Product/Customer Mix
o    Expansion Plans                                        o    Expansion Plans
o    Organization Charts/Changes                            o    Organization Charts/Changes
o    Product line Updates                                   o    Product line Updates
o    New Programs                                           o    New Programs
o    Supplier Development Program                           o    Supplier Development Program

                                                 PROCESS UPDATES
---------------------------------------------------------------------------------------------------------------

o    Cost Reductions                                        o    Forecast Accuracy
o    Safety Stock Program                                   o    Payment of Invoices
o    Procurement (availability, pricing)                    o    Information Exchange - EDI
o    Receiving Inspection
o    Manufacturing Process
o    Lead Time Reduction
o    Test (ICT, FCT, Burn-In)
o    Shipping
o    Open ADR/SCAR
o    Finished Goods Safety Stock

                                                    MEASURES
---------------------------------------------------------------------------------------------------------------

o    Receiving Inspection                                   o    Incoming Receiving Inspection
     -    Overall Lot Acceptance of Components                   -    Delivery Performance
     -    PWB Lot Acceptance by assembly                         -    Delivery Performance, last 4 quarters
     -    PWB Defect Pareto by assembly                          -    PWA Lot Acceptance, last 4 quarters
     -    Supplier Quality Performance                           -    PWA Defect Pareto by Product Line, last 4
o    In Process Verification                                          quarters (top 5 defects only)
     -    As needed to identify trend
o    ICT
     -    1st Pass ICT Yield by PWA, last 6 months
     -    ICT Defect Pareto by PWA, last 6 months
          (top 5 defects only)
o    FCT
     -    1st Pass Functional Yield by PWA, last 6 months
     -    Functional Defect Pareto by PWA, last 6 months
          (top 5 defects only)
o    Final QA
     -    Final QA Yield by PWA
     -    Final QA Defect Pareto by PWA (top 5 defects
          only)
     -    Delivery Performance (Service Level)
o    Miscellaneous
     -    % Scrap at Assembly Level by PWA
     -    Failure Analysis Results on Failed Components
     -    Failure Report Updated
     -    Cumulative First Pass Yield
     -    Total annual forecasted materials expenditures
     -    FG Inventory Aging Report
</TABLE>

BUYER:                                       SELLER:

/s/ DAVID L. RECHBERGER       6/3/98         /s/ TRACEE CASAREZ       6/2/98
------------------------------------         -------------------------------
David L. Rechberger,          Date           Tracee Casarez,          Date
Sr. Supply Engineer                          Program Manager

                                                       Purchase Agreement #10152
                                                          Schedule B, Revision A
                                                                    June 1, 1998

<PAGE>   12
                                   SCHEDULE D
                              ESCALATION SCHEDULE

<TABLE>
<CAPTION>
                                                                                             Expected
                                                                                             Time for
                         Event or Action                                 Critical Level    Notification
                         ---------------                                 --------------    ------------
<S>                                                                      <C>               <C>
Change in component lead time affecting potential safety stock levels         3,4           72 hrs

Change in pricing affecting PCBA price                                        2,3,4         72 hrs

End of life notification                                                      2,3,4         72 hrs

Report of lot failure by manufacturing                                        3,4           24 hrs

Report of tool/equipment failure requiring action by Cielo                    3,4           24 hrs

Notification of contract breach or termination date by Xetel                  1,2,3,4       24 hrs

Notification of contract breach or termination date by Cielo                  1,2,3,4       24 hrs

List of component parts whose qty are below minimum level                     2,3,4         5 days

List of component parts whose qty exceeds maximum level                       3,4           5 days

Change in personnel critical to Cielo system or process                       1,2,3,4       3 days

Lack of requested response by Cielo                                           1,2,3,4       1= 30-day late
                                                                                            2= 15 day late
                                                                                            3= 10 day late
                                                                                            4= 5 day late

Lack of requested response by Xetel                                           1,2,3,4       1= 30-day late
                                                                                            2= 15 day late
                                                                                            3= 10 day late
                                                                                            4= 5 day late

Lack of response to Corrective Action Request                                 1,2,3,4       1= 30-day late
                                                                                            2= 15 day late
                                                                                            3= 10 day late
                                                                                            4= 5 day late

Failure to execute MRP by EMR Cielo                                           3,4           24 hrs
Line down not affecting delivery of needed PCBA's                             2,3,4         24 hrs
Line down affecting delivery of needed PCBA's                                 1,2,3,4       2 hrs

</TABLE>

<TABLE>
<CAPTION>
LEVEL          CIELO                   XETEL                          SUPPLIER
-----          -----                   -----                          --------
<S>       <C>                     <C>                             <C>
  1       President/CEO           President/CEO                   President/CEO
          VP Sales/Marketing      VP Operations                   VP Operations
          VP Operations           VP Sales/Marketing              VP Sales/Marketing
          Commodity Manager       VP Materials                    VP Materials
          Buyer/Planner           Program Management Director     General Manager
          Buyer/Planner           Program Manager                 General Manager
                                  Materials Coordinator           Account Manager
                                                                  Product Manager
                                                                  In-Plant Operator

  2       VP Operations           VP of Materials                 General Manager
          Buyer/Planner           Program Management Director     General Manager
          Commodity Manager       Program Manager                 Product Manager
          Buyer/Planner           Materials Coordinator           Account Manager
                                                                  In-Plant Operator

  3       Commodity Manager       Program Manager                 Product Manager
          Buyer/Planner           Materials Coordinator           Account Manager
                                                                  In-Plant Operator

  4       Buyer/Planner           Materials Coordinator           Account Manager
                                                                  In-Plant Operator
</TABLE>

BUYER:                                       SELLER:

/s/ DAVID L. RECHBERGER      6/3/98          /s/ TRACEE CASAREZ           6/2/98
-----------------------------------          -----------------------------------
David L. Rechberger,           Date          Tracee Casarez,                Date
Sr. Supply Engineer                          Program Manager

                                                       Purchase Agreement #10152
                                                          Schedule D, Revision A
                                                                    June 1, 1998
<PAGE>   13
                    MATERIALS ACQUISITION SERVICE (MAS) FEE

The MAS rate is inclusive of all costs including freight. MAS rate is subject
to further adjustments based on the total annual agreed upon forecasted volume
of unit assemblies for the next four quarters based on the following Table:

<TABLE>
<CAPTION>
Total Annual Forecasted Material                      Material Acquisition Service Fee
 Expenditures (Millions of $)                                  OSAs & Overall
================================                      ================================
<S>                                                   <C>
   Optical Sub-assemblies**                                          3%
               1                                                     15%
             2 - 3                                                  6.0%
             3 - 5                                                  5.8%
             5 - 10                                                 5.75%
            10 - 15                                                 5.5%
            15 - 20                                                 4.5%
            20 - 25                                                 4.0%
              25+                                                   3.5%
</TABLE>

The MAS fee will be calculated by multiplying the appropriate MAS percentage
based on the total material expenditure level times the total value of the
materials provided by SELLER excluding chemicals/supplies and packaging of any
given assembly.

<TABLE>
<S>                                                            <C>
BUYER:                                                         SELLER:

/s/ DAVE RECHBERGER                    6/3/98                  /s/ TRACEE CASAREZ                   6/2/98
-----------------------------------------------                --------------------------------------------
Dave Rechberger - Sr. Supply Engineer   Date                   Tracee Casarez - Program Manager      Date
</TABLE>

                                                       Purchase Agreement #10152
                                                          Schedule E, Revision A
                                                                    June 1, 1998

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