FINAL SETTLEMENT AGREEMENT
               RE CANCELLATION OF CHESAPEAKE SCIENCES CORPORATION
            PURCHASE ORDERS 98B-1819, 98B-1914, 98B-1915, & 98B-2056

                                                                    Exhibit 10.1

This  Agreement  made  effective  as of the  seventeenth  day of  August,  1999,
regardless of the date of last signature  hereto,  is by and between  Chesapeake
Sciences  Corporation,  1127B Benfield Boulevard,  Millersville,  Maryland 21108
("CSC"),  and Hytek  Microsystems,  Inc., 400 Hot Springs Road,  Carson City, NV
89706 ("HYTEK").

WITNESSTH
---------

WHEREAS CSC issued  Purchase Orders  98B-1819,  98B-1914,  98B-1915,  & 98B-2056
("the CSC  Purchase  Orders") to HYTEK for  delivery of specific  quantities  of
specific hybrid assemblies, and

WHEREAS  HYTEK  accepted the CSC  Purchase  Orders and began  production  of the
specific quantities of specific hybrid assemblies, and

WHEREAS CSC wishes to cancel all remaining undelivered items on the CSC Purchase
Orders.

NOW,  THEREFORE,  upon  conclusion  of  negotiations  between the parties and in
consideration  of the  premises and  covenants  contained  herein,  and with the
intent to be legally bound, CSC and HYTEK agree:

1.   Upon  execution of this  Agreement  by  authorized  representatives  of the
     parties,  the CSC Purchase Orders shall be cancelled and null and void with
     respect  to the rights  and  obligations  of the  parties  relevant  to all
     remaining undelivered items on the CSC Purchase Orders.

2.   Appendix A, attached hereto and made a part hereof,  is a detailed  listing
     with  values  of  the  current   inventory  of  Finished   Goods   ("FGI"),
     Work-in-Process  ("WIP"),  and Components & Other ("RAW") materials related
     to all remaining  undelivered  items on the CSC Purchase  Orders grouped by
     hybrid assembly type by inventory  category (FGI, WIP, and RAW) with values
     and  notation of the physical  location of the  material  and  warranted by
     HYTEK as being complete, true, and accurate. The total value of the current
     inventory  of  FGI,  WIP,  and  RAW  materials  related  to  all  remaining
     undelivered items on the CSC Purchase Orders is $2,304,306.00.

3.   Appendix B,  attached  hereto and made a part  hereof,  is a detailed  best
     efforts  estimate by HYTEK of the probable yield quantities of the specific
     hybrid  assemblies  into FGI if the WIP & RAW  materials  were  utilized to
     complete the specific hybrid assemblies.

4.   In full  and  final  settlement  of all  claims  by  HYTEK  related  to the
     cancellation  of  the  CSC  Purchase   Orders,   CSC  shall  pay  to  HYTEK
     $2,304,306.00  plus  interest  at 9.5% per  annum.  Payments  to HYTEK  are
     calculated as 66.65% applied to the following payment schedule:
<TABLE>
Date or Event                                        Amount
<S>                                         <C>
Upon execution of this Agreement by         $300,000.00 ($272,629.53 Principal +
authorized representatives of the parti            $27,370.47   Interest @ 9.5%)
30 September 1999                                   25,212.16  (Interest @ 9.5%)
29 October 1999                                     25,212.16  (Interest @ 9.5%)
30 November 1999                                    25,212.16  (Interest @ 9.5%)
31 December 1999                             300,000.00 ($274,787.84 Principal +
                                                    $25,212.16  Interest @ 9.5%)
31 January 2000                                      23,036.75 (Interest @ 9.5%)
29 February 2000                                     23,036.75 (Interest @ 9.5%)
31 March 2000                               400,000.00  ($376,963.25 Principal +
                                                     $23,036.75 Interest @ 9.5%)
28 April 2000                                       20,052.46  (Interest @ 9.5%)
31 May 2000                                          20,052.46 (Interest @ 9.5%)
30 June 2000                                400,000.00  ($379,947.54 Principal +
                                                     $20,052.46 Interest @ 9.5%)
31 July 2000                                        17,044.54  (Interest @ 9.5%)
31 August 2000                         2,170,039.38  ($2,152,994.84  Principal +
                                                     $17,044.54 Interest @ 9.5%)
</TABLE>

<PAGE>

The FGI, WIP, and RAW inventory material ("Inventory") shall be held by HYTEK as
collateral against payment hereunder. Upon receipt by HYTEK of the final payment
above,  free and clear title to the  Inventory  shall vest in CSC. The foregoing
notwithstanding,  at any time after any  principal  payment is received by HYTEK
hereunder,  CSC shall have the right to issue written notice to HYTEK to deliver
to CSC at a specified location, and HYTEK shall so deliver,  specific quantities
of completed  specific hybrid assemblies held in FGI provided that the aggregate
value of such quantities,  as determined by application of the Unit Prices given
in paragraph 7 below,  shall not exceed the accrued  principal  payments made to
the date of such  notice to  deliver.  Immediately  upon  CSC's  receipt of such
specific  quantities of completed  specific  hybrid  assemblies,  free and clear
title to them shall vest in CSC.  At any time  following  the  vesting in CSC of
free and clear title to the Inventory or any portion thereof and/or while all or
any  portion of the  Inventory  remaining  following  such event is in the care,
custody and control of HYTEK,  HYTEK shall, at CSC's request,  execute  promptly
financing  statement(s)  required to perfect and protect the interests of CSC in
the Inventory or any portion thereof.

5.   In addition to the above  $2,304,306.00  inventory  value plus  interest at
     9.5% per annum according to the above payment schedule, CSC shall pay HYTEK
     $400.00 per month in arrears as a storage fee while the Inventory is in the
     care,  custody  and  control of HYTEK.  In the event that the last  storage
     period is a partial  month of storage,  such fee shall be prorated for that
     period. The storage fee shall be invoiced by HYTEK to CSC monthly and shall
     be due and payable Net 30.

6.   While  all  or  any  portion  of  the Inventory is in the care, custody and
     control of HYTEK, HYTEK shall:

     a.  Not move the  Inventory  to a  location  other than that  specified  in
         Appendix A without CSC's prior written agreement.

     b.  Not commingle the Inventory  with inventory of its own or third parties
         but will  store  it  separately  and  specifically  identify  it as the
         Inventory subject to this Agreement.

     c.  Not represent to any person for any reason that the  Inventory  belongs
         to HYTEK or to any third party except as provided for hereunder.

     d.  Not  attempt  to sell,  mortgage,  pledge,  assign,  borrow  against or
         otherwise  create a security  interest in favor of third parties in the
         Inventory  without the prior written consent of CSC. Upon any breach of
         the  foregoing,  CSC shall have the right to terminate  this  Agreement
         without  liability  for  payments,  termination  charges  or any  other
         amounts of any kind excepting only payments then due HYTEK from CSC.

<PAGE>

     e.  Not  use  the  Inventory  for any purpose except for the performance of
         this Agreement.

     f.  Maintain  records of all Inventory  material and any use, loss or other
         event that may diminish the Inventory in any way.

     g.  Allow  CSC,  or third  party  CSC  representatives,  to  enter  HYTEK's
         premises periodically,  on reasonable notice and during normal business
         hours, to inspect the Inventory,  conduct  physical  inventories and to
         audit the Inventory records.

     h.  Maintain the Inventory in a safe manner so as to prevent loss from  any
         cause or deterioration.

     i.  Assume all risk of loss,  destruction or damage to the Inventory  while
         in HYTEK's custody.  HYTEK will immediately notify CSC, in writing,  of
         any such loss, destruction or damage.

     j.   Credit  against  the  Inventory  value due  hereunder  until the final
          payment is made in accordance with paragraph 3 above, or pay to CSC in
          the event that title to the  Inventory has vested in CSC in accordance
          with paragraph 3 above,  for Inventory  lost,  destroyed or damaged at
          the  value  stated  in  Appendix  A  hereof  or the  Inventory  item's
          then-current  replacement cost if such specific Inventory item's value
          is not individually stated in Appendix A hereof.  HYTEK shall maintain
          insurance adequate,  but not less than  $3,457,323.00,  to fulfill its
          responsibilities  herein;  and shall provide CSC with a certificate of
          insurance prior to commencing performance of its obligations hereunder
          naming CSC as an additional  insured and a Loss Payee as its interests
          are at the time of loss.

     k.   Pay all personal property taxes and assessments that may be levied on
          the Inventory until such time as free and clear title to the Inventory
          vests in CSC in accordance with paragraph 3 above.

     l.   Defend, indemnify and hold harmless CSC from all claims,  liabilities,
          costs and expenses (including  attorneys' fees) arising as a result of
          HYTEK's storage of all or any portion of the Inventory.

7.   At its sole option and discretion CSC may at any time, and as many times as
     CSC may choose to do so, issue to HYTEK,  and HYTEK shall accept,  Purchase
     Orders  for the  completion  of all or any  portion  of the WIP  and/or RAW
     inventory into Finished Goods for delivery to CSC. In such event:

a. The Unit  Price for the  completed  specific  hybrid  assemblies  shall be as
follows:

<TABLE>
                  CSC Part Number          Description               Unit Price
                  <S>                      <C>                         <C>
                  65-400001                 OSC/ATTEN                  $210.00
                  65-400002                 Old PREAMP                 $150.00
                  65-400003                 TRACK/EQUAL                $160.00
                  65-400004                 West PREAMP                $150.00
</TABLE>

b. Delivery lead-times shall be mutually agreed between the parties at the time.

c.       For the initial Purchase Order issued under this provision,  there will
         be a one-time charge not to exceed $48,500.00 to restart the production
         line.

<PAGE>

d.       Credit  for  payments  hereunder  in  excess  of the  value  of any FGI
         delivered  to CSC as provided  in  paragraph 4 above may be treated and
         accounted for, at CSC's sole discretion, as Progress Payments under the
         Purchase Orders.

8.   This Agreement  shall be construed,  governed,  interpreted  and applied in
     accordance with the laws of the State of Maryland.

9.   The parties  hereto  acknowledge  that this Agreement sets forth the entire
     agreement  and  understanding  of parties  hereto as to the subject  matter
     hereof,  and shall not be subject to any change or  modification  except by
     the execution of a written instrument subscribed to by the parties hereto.

10.  Whenever  possible each provision of this Agreement shall be interpreted in
     the same  manner as to be  effected  and valid under  applicable  law.  The
     provisions  of this  Agreement  are  severable,  and in the event  that any
     provisions  of  this  Agreement  shall  be  determined  to  be  invalid  or
     unenforceable  under any  controlling  body of the law, such  invalidity or
     unenforceability shall not in any way affect the validity or enforceability
     of the remaining provisions hereof.

11.  The failure of either  party to assert a right  hereunder or to insist upon
     compliance  with  any  term  or  condition  of  this  Agreement  shall  not
     constitute  a waiver of that right or any other right  hereunder  and shall
     not  excuse a  similar  subsequent  failure  to  perform  any such  term or
     condition by the other party.

12.  All  notices  and  correspondence  provided  for  herein  shall be given by
     depositing  same in the United States Mail,  first class  postage  prepaid,
     mailed to the following addresses:

     If to CSC:                                 If to HYTEK:
     Chesapeake Sciences Corporation.           Hytek Microsystems, Inc.
     Attention: President                       Attention:  President
     1127B Benfield Boulevard                   400 Hot Springs Road
     Millersville, MD  21108                    Carson City,  NV  89706

     The above addresses are the registered  offices of the parties.  Changes in
     address  shall  be  given  by  utilizing  the  notice  provisions  of  this
     paragraph.

13.  This Agreement may be executed in one or more  counterparts,  each of which
     shall be deemed an original, but all of which together shall constitute one
     and the same instrument.

14.  Neither party shall be construed as being empowered to act on behalf of the
     other for any purpose.

IN  WITNESS  THEREOF,  the  parties  have duly  executed  this  Agreement  to be
effective  as of the  date  set  forth  above  regardless  of the  date  of last
signature hereto below.


AGREED ON BEHALF OF                                  AGREED ON BEHALF OF
CHESAPEAKE SCIENCES CORPORATION                      HYTEK MICROSYSTEMS, INC.

By:      /s/ John C. McDaris                         By:  /s/ Charles Byrne
-------------------------------                      --------------------------
        John C. McDaris                                   Charles Byrne

Title:            President                          Title:            President

Date:    9/16/99                                     Date:    9/14/99
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