SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from _________ to __________
Commission file number 0-11880
HYTEK MICROSYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
California 94-2234140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Hot Springs Road, Carson City, Nevada 89706
(Address of principal executive offices)
Issuer's telephone number: (702) 883-0820
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X___ No _____
As of October 31, 1997, the issuer had outstanding 2,941,424 shares of Common
Stock, no par value.
<PAGE>
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 27, 1997
INDEX
Page
Number
------
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at September 27, 1997 (unaudited) and
December 28, 1996 . . . . . . . . . . . . . . . . 3
Statement of Income and Accumulated Deficit
(unaudited) for the Quarter and Nine Months ended
September 27, 1997 and September 28, 1996 . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarter and
Nine Months ended September 27, 1997 and
September 28, 1996 . . . . . . . . . . . . . . . . 5
Notes to Interim Financial Statements (unaudited) . . . . .6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
September 27, 1997 December 28, 1996
Assets (Unaudited)
---------------------------------- ------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,617,855 $ 1,426,716
Accounts receivable - net of
allowance for doubtful accounts
of $50,000 at 12/28/96 and 9/27/97 1,550,277 1,125,817
Inventories 1,357,051 1,268,881
Prepaid expenses and deposits 66,338 42,503
---------------------------------- ------------------------
Total current assets 4,591,521 3,863,917
Deferred income taxes 200,000 200,000
Property, plant and equipment, at cost, less
accumulated depreciation 424,634 370,362
---------------------------------- ------------------------
Total assets $ 5,216,155 $ 4,434,279
================================== ========================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 666,657 $ 268,462
Accrued employee compensation and benefits 192,198 349,498
Accrued warranty, commissions and other 150,194 169,376
Customer deposits 37,282 172,080
Current obligations under capital lease 33,990 33,990
---------------------------------- ------------------------
Total current liabilities 1,080,321 993,406
Long-term obligations under capital lease 39,655 67,979
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 2,933,091 shares and 2,941,424
shares issued and outstanding at 12/28/96
and 9/27/97, respectively 4,974,676 4,962,677
Accumulated deficit (878,497) (1,589,783)
---------------------------------- ------------------------
Total shareholders' equity 4,096,179 3,372,894
---------------------------------- ------------------------
Total liabilities and equity $ 5,216,155 $ 4,434,279
================================== ========================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
(Unaudited)
Quarters and nine months ended September 27, 1997 and September 28, 1996
Quarter ended Nine months ended
-------------------------------------- -----------------------------------------
9/27/97 9/28/96 9/27/97 9/28/96
----------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Net revenues $ 2,046,791 $ 2,095,298 $ 5,815,430 $ 6,760,848
Costs and expenses:
Cost of sales 1,387,254 1,406,819 4,012,101 4,591,491
Engineering and development 196,978 171,896 555,386 461,276
Selling, general and
administrative 180,118 152,935 512,519 470,474
----------------- ----------------- ----------------- --------------------
Total costs and expenses 1,764,350 1,731,650 5,080,006 5,523,241
----------------- ----------------- ----------------- --------------------
Operating income 282,441 363,648 735,424 1,237,607
Interest income 7,760 4,773 27,516 5,395
Interest expense (1,307) - (4,154) (1,865)
----------------- ----------------- ----------------- --------------------
Income before provision
for income taxes 288,894 368,421 758,786 1,241,137
Provision for income taxes (7,500) - (47,500) -
----------------- ----------------- ----------------- --------------------
Net income $ 281,394 $ 368,421 $ 711,286 $ 1,241,137
Accumulated deficit:
Beginning of period $ (1,159,891) $ (2,643,711) $ (1,589,783) $ (3,516,428)
----------------- ----------------- ----------------- --------------------
End of period $ (878,497) $ (2,275,291) $ (878,497) $ (2,275,291)
----------------- ----------------- ----------------- --------------------
Net income per share $ .09 $ .12 $ .23 $ .40
----------------- ----------------- ----------------- --------------------
Common and common equivalent
shares used in per share 3,091,393 3,088,247 3,085,705 3,081,405
calculations
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS (unaudited)
Quarters and Nine Months Ended September 27, 1997
and September 28, 1996
Increase (decrease)in cash and cash equivalents
Quarter Ended Nine Months Ended
-------------------------------- ----------------------------
Sept 27, 1997 Sept 28, 1996 Sept 27, 1997 Sept 28, 1996
----------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 281,394 $ 368,421 $ 711,286 $ 1,241,137
Adjustments to reconcile net income to
cash flow provided by (used in)
operations:
Depreciation and amortization 33,488 15,827 94,888 40,157
Accounts receivable (114,244) (122,041) (424,460) (301,967)
Inventories (126,049) 241,408 (88,170) 26,282
Prepaid expenses and deposits (11,218) 455 (23,835) (3,032)
Accounts payable 384,423 (328,942) 398,195 (394,728)
Accrued employee compensation and benefits 14,363 6,114 (157,300) 101,761
Commissions and other accrued liabilities 12,527 (5,549) (19,182) (31,790)
Customer deposits (27,503) 9,286 (134,798) 66,340
-------------- ------------ ------------- -------------
Net cash provided by operating activities 447,181 184,979 356,624 744,160
Cash flows from investing activities:
Cash purchases of equipment (22,550) (37,743) (149,160) (163,521)
-------------- ------------ ------------- -------------
Net cash used in investing activities (22,550) (37,743) (149,160) (163,521)
Cash flows from financing activities:
Proceeds from short-term borrowings - - - 50,000
Repayment of short-term borrowings - - - (50,000)
Payment of capital lease obligations (8,497) - (28,325) -
Proceeds from exercise of stock options - - 12,000 48,871
-------------- ------------ ------------- -------------
Net cash provided by (used in)
financing activities (8,497) - (16,325) 48,871
Net increase in cash and cash equivalents 416,134 147,236 191,139 629,510
Cash and cash equivalents at beginning of period 1,201,721 575,269 1,426,716 92,995
-------------- ------------ ------------- -------------
Cash and cash equivalents at end of period $ 1,617,855 $ 722,505 $ 1,617,855 $ 722,505
-------------- ------------ ------------- -------------
See accompanying notes.
</TABLE>
<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 27, 1997
(Unaudited)
1. In the opinion of management, the accompanying unaudited financial
statements include all adjustments (consisting of only normal recurring
adjustments) that are necessary in order to make the financial statements
contained herein not misleading. These financial statements, notes and analyses
should be read in conjunction with the financial statements for the fiscal year
ended December 28, 1996, and notes thereto, which are contained in the Company's
Annual Report on Form 10-KSB for such fiscal year. The results for the quarter
ended September 27, 1997 are not necessarily indicative of the results that may
be expected for the entire year ending January 3, 1998. The Company operates on
a 52/53 week fiscal year, which approximates the calendar year.
2. The Company leases its Carson City facility pursuant to a continuing
lease expiring in 2005. The aggregate future minimum rental commitments as of
September 27, 1997 for this lease were:
1997 39,423
1998 160,056
1999 164,856
2000 169,800
2001 - 2005 828,678
----------
$1,359,843
----------
3. Inventories are stated at the lower of cost (determined
using the first-in, first-out method)or market.
Inventories consisted of:
9-27-97 12-28-96
------- ---------
Raw Material $586,246 $279,149
Work-In-Process 724,665 772,462
Finished Goods 46,140 217,270
------- ---------
$1,357,051 $1,268,881
---------- ----------
4. Plant and equipment are stated at cost and depreciated on a
straight-line basis over the estimated useful life of the assets, generally
three to eight years.
5. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted for both
interim and annual financial statements for periods ending after December 15,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, (whose name will be
changed to Basic Earnings per Share) the dilutive effect of stock options will
be excluded. This impact is expected to result in a one cent increase in the net
income per share for the quarter and nine months ended September 27, 1997 and a
one cent and two cent increase, respectively, for the quarter and nine months
ended September 28, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
For the purposes of the following discussion, dollar amounts have been
rounded to the nearest $1,000 and all percentages have been rounded to the
nearest 1%.
This interim report on Form 10-QSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Actual results could differ
materially from those projected in the forward-looking statements as a result of
various factors, including the factors set forth below and under "Future
Outlook" and elsewhere in this section. The Company has attempted to identify
forward-looking statements by placing an asterisk immediately following the
sentence or phrase containing the forward-looking statement(s). All statements
made herein are made as of the date of filing of this Form 10-QSB. The Company
disclaims any duty to update such statements after the date of filing of this
Form 10-QSB, except as required by law.
Results of Operations
- ---------------------
Net revenues for the quarter ended September 27, 1997 decreased by 2%
from net revenues for the quarter ended September 28, 1996. Net revenues for the
quarter ended September 27, 1997 were $2,047,000, as compared to $2,095,000 for
the quarter ended September 28, 1996. Net revenues for the nine months ended
September 27, 1997 decreased 14% to $5,815,000 from net revenues for the nine
months ended September 28, 1996 of $6,761,000. The overall reduction in revenues
for the nine-month period results from reduced demand for product from
Chesapeake Sciences Corp., the Company's largest customer. Sales to Chesapeake
for the nine months ended September 27,1997 were approximately $2.8 million,
(48% of net revenues), as compared to approximately $4.6 million (68% of net
revenues), for the prior year nine-month period.
The Company's backlog of customer orders was $10,554,000 at September
27, 1997 as compared to $5,181,000 at September 28, 1996, and $6,474,000 at
December 28, 1996. Approximately $9,775,000 of the total backlog at September
27, 1997 is currently scheduled for shipment during the next twelve months.*
Approximately $6,658,000, or 63%, of the total backlog relates to orders from
Chesapeake Sciences. Because customers may place orders for delivery at various
times throughout the year, and due to the possibility of customer changes in
delivery schedules (which have been experienced in the past), or cancellation of
orders with little or no penalty, the Company's backlog as of any particular
date may not be indicative of actual future sales.* (Historically, the Company
has not suffered any material order cancellations by Chesapeake or its other
larger customers over the past seven years.)
Cost of sales was $1,387,000, or 68% of net revenues, for the quarter
ended September 27, 1997, as compared to $1,407,000, or 67% of net revenues, for
the quarter ended September 28, 1996. Cost of sales for the nine months ended
September 27, 1997 was $4,012,000, or 69% of net revenues, as compared to
$4,591,000, or 68% of net revenues, for the nine months ended September 28,
1996. The increase in cost of sales as a percentage of net revenues reflects a
slight increase in the cost of direct labor, increased depreciation expense
resulting from the replacement of older production equipment and the spreading
of fixed costs over a smaller revenue base.
Engineering and development expenses were $197,000, or 10% of net
revenues, for the quarter ended September 27, 1997, as compared to $172,000, or
8% of net revenues, for the quarter ended September 28, 1996. Engineering and
development expenses for the nine months ended September 27, 1997 were $555,000,
or 10% of net revenues, as compared to $461,000, or 7% of net revenues, for the
nine months ended September 28, 1996. The increase in the dollar amount of
engineering and development expenses for the quarter and nine months ended
September 27, 1997, as compared to the quarter and nine months ended September
28, 1996, is primarily attributable to increased compensation costs resulting
from hiring of additional personnel required for additional
engineering-intensive programs.
Selling, general and administrative expenses were $180,000, or 9% of
net revenues, for the quarter ended September 27, 1997, as compared to $153,000,
or 7% of net revenues in the quarter ended September 28, 1996. Selling, general
and administrative expenses for the nine months ended September 27, 1997 were
$513,000, or 9% of net revenues, as compared to $470,000, or 7% of net revenues,
for the nine months ended September 28, 1996. The increase in the dollar amount
of selling, general and administrative expenditures for the quarter and nine
months ended September 27, 1997 is mainly attributable to increased costs for
the recruitment, relocation and training of additional personnel in the sale and
marketing areas combined with increased expenditures for data processing and
professional services
The Company had an operating profit of $282,000 for the quarter ended
September 27, 1997, as compared to an operating profit of $364,000 for the
quarter ended September 28, 1996. The decrease in quarterly operating results is
the result of slightly lower sales combined with increases in engineering and
development expense and selling, general and administrative expenses described
above. The Company had an operating profit of $735,000 for the nine months ended
September 27, 1997, as compared to an operating profit of $1,238,000 for the
nine months ended September 28, 1996. This reduction results from a 14% decline
in revenues combined with increased operating expenses during the first nine
months of 1997.
Interest income increased to $28,000 for the nine months ended
September 27, 1997 as compared to $5,000 for the prior year nine month period as
a result of larger average monthly cash balances in interest bearing accounts.
Federal income tax expense of $7,500 and $47,500 was recognized in the
quarter and nine months ended September 27, 1997, respectively, as a result of
the alternative minimum tax. There was no income tax expense in the prior year
periods. The Company has remaining net operating loss carryforwards for federal
income tax purposes at December 28, 1996 of approximately $4.3 million. These
carryforwards will expire between 2004 and 2008.
Liquidity and Capital Resources
- -------------------------------
The Company had $1,618,000 in cash at September 27, 1997, as compared
to $1,427,000 at December 28, 1996. This increase of $191,000 from year end is
comprised of $357,000 provided by operating activities and $12,000 in proceeds
from the exercise of stock options, partially offset by $149,000 used for the
purchase of capital equipment and $28,000 used in equipment financing
activities. Cash generated by operating activities is primarily attributable to
net income and increases in accounts payable, partially offset by increases in
accounts receivable and decreases in compensation payable and customer deposits.
Accounts receivable were $1,550,000 at September 28, 1997, as compared
to $1,126,000 at December 28, 1996. This increase is the result of an increase
in sales volume in the quarter ended September 27, 1997 as compared to the
quarter ended December 28, 1996, combined with the late receipt of a large
payment from one of the Company's largest customers.
Inventories were $1,357,000 at September 27, 1997, as compared to
$1,269,000 at December 28, 1996. This increase is the net result of increases in
raw material in anticipation of higher level fourth quarter shipments, partially
offset by a reduction in finished goods.
Prepaid expenses and deposits were $66,000 at September 27, 1997 as
compared to $43,000 at December 28, 1996. This increase reflects normal ongoing
business transactions.
Property, plant and equipment increased to $425,000 at September 27,
1997, as compared to $370,000 at 1996 fiscal year end, due to the Company's
purchase of new production and data processing equipment.
Accounts payable were $667,000 at September 27, 1997, as compared to
$268,000 at December 28, 1996. This increase is primarily the result of an
increased purchases of raw material, production supplies and equipment.
Accrued employee compensation and benefits were $192,000 at September
27, 1997, as compared to $349,000 at December 28, 1996. This decrease is
primarily the result of reduced amounts accrued for employee profit sharing due
to lower operating income levels in 1997.
Accrued warranty, commissions and other accrued liabilities were
$150,000 at September 27, 1997, as compared to $169,000 at December 28, 1996.
This reduction reflects normal recurring accruals and transactions.
Customer deposits decreased to $37,000 at September 27, 1997 as
compared to $172,000 at December 28, 1996, as the result of the delivery of
pre-paid products to customers.
At September 27, 1997 the Company had long-term obligations under
capital lease of $40,000 outstanding on its equipment lease agreement with
SierraWest Bank. This is a reduction from $68,000 outstanding at December 28,
1996, as a result of the repayment of lease obligations. The Company uses this
lease agreement to finance certain purchases of capital equipment.
At September 27, 1997 the Company maintained a $100,000 revolving line
of credit with SierraWest Bank. At such date the Company was in compliance with
all covenants of the loan agreement and no amounts were outstanding. On October
14, 1997, the Company renegotiated the credit line with SierraWest for an
additional twelve month period, increasing the amount available under the line
to $400,000 and reducing the interest rate from prime rate plus 2% to prime plus
1.5%.
Future Outlook
- --------------
The Company's backlog of unfilled customer orders has increased
significantly to a total of $10,554,000 at September 27, 1997 as compared to
$6,474,000 at December 28, 1996 and $5,181,000 at September 28, 1996.
Approximately $9,775,000 of the total backlog is currently scheduled for
shipment over the next twelve months.* However, due to the possibility of
customer changes in delivery schedules (which have been experienced in the past)
or cancellation of orders with little or no penalty, the Company's backlog as of
any particular date may not be indicative of actual future sales. Chesapeake
Sciences accounts for $6,658,000 or 63% of the total backlog. While the Company
believes the current Chesapeake delivery schedule provides a significant
opportunity to increase revenues in future periods, it is not without risk. An
inability to meet the delivery schedule due to significant, unanticipated,
materials shortages or insufficient labor resources could result in a build-up
of undeliverable partially completed product which would have a negative effect
on liquidity and financial performance. In addition, with a single large
customer of the magnitude of Chesapeake, any major order re-scheduling or
cancellation would have a material negative impact on financial results.
In addition to the current backlog, the Company has expanded its
personnel resources in the sales and marketing function. As a result, the
Company has developed several opportunities to broaden its client base with
potential new customers in both commercial and military/aerospace applications.*
Further, sales of the Company's Thermo-Electric Cooler Controller (TECC)
products (while not large in absolute dollars) continue to grow in number of
customers and unit volumes.
Management believes that ongoing operations during the remainder of 1997,
together with its line of credit, will provide sufficient cash to meet normal
operating needs without additional financing activities through the remainder of
the current fiscal year.* However, since the Company desires to expand its
technological base and production capacity, additional financing from new equity
or debt financing may be necessary.* In such case, there can be no assurance
that such financing will be available on terms acceptable to the Company or at
all.
The foregoing discussion contains forward-looking statements that are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Actual results could differ materially. Investors are warned
that forward-looking statements involve risks and unknown factors including, but
not limited to, customer cancellation or rescheduling of orders, problems
affecting delivery of vendor-supplied raw materials and components,
unanticipated manufacturing problems and availability of direct labor resources.
The Company disclaims any responsibility to update the forward-looking
statements contained herein, except as may be required by law.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Amendment dated September 11, 1997, to Line
of Credit Agreement dated December 13, 1996
between the Registrant and SierraWest Bank.
10.2 1991 Directors Stock Option Plan, as amended
September 11, 1997 (subject to Shareholder
approval).
10.3 Form of Subsequent Option Agreement for use
with 1991
Directors Stock Option Plan.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter ended September 27, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HYTEK MICROSYSTEMS, INC.
(Registrant)
Date: November 1, 1997 By: /s/ Charles S. Byrne
Charles S. Byrne,
President, Chief
Executive Officer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
HYTEK MICROSYSTEMS, INC.
Quarterly Report on Form 10-QSB
for the Quarter and Nine Months ended September 27, 1997
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------ ------------------------------
10.1 Amendment, dated October 14,1997, to Line of
Credit Agreement dated December 13, 1996
Between Registrant and SierraWest Bank.
10.2 1991 Directors Stock Option Plan as amended
September 11, 1997 (subject to
shareholder approval).
10.3 Form of Subsequent Option Agreement for use
with 1991 Directors Stock Option Plan.
27.1 Financial Data Schedule.
PROMISSORY NOTE EXHIBIT 10.1
- --------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Acct Officer Initials
- --------------------------------------------------------------------------------
$400,000 10-14-1997 10-14-1998 404022113 10 09 551876 111
- --------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: HYTEK MICROSYSTEMS, INC. (TIN: 94-2234140) Lender: SierraWest Bank
400 HOT SPRINGS RD. Reno Main Office
CARSON CITY, NV 89706-1609 P. O. BOX 10925
RENO, NV 89510
================================================================================
Principal Amount: $400,000 Initial Rate: 10.000% Date of Note: October 14, 1997
PROMISE TO PAY. HYTEK MlCROSYSTEMS, INC, ("Borrower") promises to pay to
SierraWest Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Four Hundred Thousand & 00/100 Dollars
($400,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on October 14, 1998. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning November 15,
1997, and all subsequent interest payments are due on the same day of each month
after that. The annual interest rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Prime Rate as
published in the WESTERN EDITION OF THE WALL STREET JOURNAL (the "Index"). The
Index is not necessarily the lowest rate charged by Lender on its loans. If the
Index becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the current
Index rate upon Borrower's request. Borrower understands that Lender may make
loans based on other rates as well. The interest rate change will not occur more
often than each day. The Index currently is 8.500% per annum. The interest rate
to be applied to the unpaid principal balance of this Note will be at a rate of
1.500 percentage points over the Index, resulting in an initial rate of 10.000%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $15.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Lender
in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and than Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable Iaw, increase the variable interest rate on this Note to 6.500
percentage points over the Index; The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Nevada. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Washoe County, the State of Nevada (Initial Here ). This Note shall be
governed by and construed in accordance with the laws of the State of Nevada.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address shown
above written notice of revocation of their authority: CHARLES S. BRYNE,
PRESIDENT/CEO/SECRETARY. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer printouts. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
ZERO BALANCE REQUIREMENT. Notwithstanding any other provision in this Note
including the provisions regarding advances and payments, Borrower shall
maintain an outstanding balance of $0 during a period of thirty (30) consecutive
days during each one-year.
GENERAL PROVlSIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any Iength of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
HYTEK MICROSYSTEMS, INC.
By: /S/ Charles S. Byrne
--------------------------------------
CHARLES S. BRYNE, PRESIDENT/CEO/SECRETARY
================================================================================
Variable Rate. Line of Credit. LASER PRO,
Reg. U.S. Pat. & T.M. Off., Ver. 3.24 (c) 1997 CFI ProServices,
Inc. All rights reserved. [NV-D20 HYTEK1.LN C1.OVL]Line of Credit.
FINANCE/CHUCK/PROMNOTE
HYTEK MICROSYSTEMS, INC. EXHIBIT 10.2
1991 DIRECTORS' STOCK OPTION PLAN
(Adopted by the Board of Directors on February 1,
1991 and approved by the shareholders on May 10, 1991
and as amended by the Board on September 11, 1997 and approved
by the shareholders on __________, 1998)
1. Purposes of the Plan. The purposes of this 1991 Directors' Stock
Option Plan are to attract and retain the best available personnel for service
as Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "non-statutory stock
options".
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time, and any
successor thereto.
(c) "Common Stock" shall mean the Common Stock, no par
value, of the Company.
(d) "Company" shall mean Hytek Microsystems, Inc., a
California corporation.
(e) "Continuous Status as a Director" shall mean the
absence of any interruption or termination of service
as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including
officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall
not be sufficient in and of itself to constitute
"employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(i) "Option" shall mean a stock option granted pursuant
to the Plan.
(j) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(k) "Optionee" shall mean an Outside Director who holds
an Option.
(l) "Outside Director" shall mean a Director who is not
an Employee.
(m) "Parent" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section
424(e) of the Code.
(n) "Plan" shall mean this 1991 Directors' Stock Option
Plan.
(o) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in
Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 200,000 Shares (the "Pool"). The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of and Grant of Options under the Plan.
(a) Administrator. Except as otherwise required herein,
the Plan shall be administered by the Board.
(b) Grant of Options; Terms. All grants of Options
hereunder shall be automatic and non-discretionary
and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to
determine the number of Shares to be covered by Options
granted to Outside Directors, the exercise price thereof
or the timing of the grant or the exercisability
thereof.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 15,000 Shares (the "First
Option") upon the later to occur of (A) February 1, 1991 or
(B) the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the
Company, appointment by the Board of Directors to fill a
vacancy or resignation of a Director as an Employee but not as
a Director.
(iii) Each Outside Director who shall have been in
Continuous Service as a Director for a period of five years or
more as of the last business day of each fiscal year
(commencing with fiscal 1997) shall be automatically granted
an Option to purchase 5,000 Shares (a "Subsequent Option") on
such date of each fiscal year.
(iv) Notwithstanding the provisions of subsection
(ii) and (iii) hereof, in the event that a grant of Options on
a particular date would cause the number of Shares subject to
outstanding Options plus the number of Shares previously
purchased upon exercise of Options to exceed the Pool, then
each such automatic grant on such date shall be for that
number of Shares determined by dividing the total number of
Shares remaining available for grant by the number of persons
who are becoming Outside Directors on such grant date as
provided in subsection (ii) above or who are entitled to be
granted Subsequent Options on such date under subsection (iii)
above, as the case may be. Any further grants shall then be
deferred until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board
(and, if required by Section 13 hereof, approval of the
shareholders) to increase the number of Shares that may be
issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) The terms of all Options granted hereunder
shall be as follows:
(A) the term of each Option shall be ten
years.
(B) each Option shall be exercisable only
while the Outside Director remains a Director of the
Company, except as set forth in Section 9 hereof.
(C) the exercise price per Share shall be
100% of the fair market value per Share on the date
of grant of the Option, determined in accordance with
Section 8 hereof.
(D) the First Option shall represent the
right to purchase up to 15,000 Shares and shall
become exercisable cumulatively in installments with
respect to 5,000 Shares on the first day of the
first, second and third anniversary dates of the date
of grant of such Option.
(E) Each Subsequent Option shall represent
the right to purchase up to 5,000 Shares and shall
become exercisable cumulatively as to approximately
1/12 of the Shares subject to the Subsequent Option
per month following the date of grant as follows:
Number of Months Number of Shares Cumulative Number of
After Grant Date Becoming Exercisable Shares Exercisable
1 416 416
2 417 833
3 417 1,250
4 416 1,666
5 417 2,083
6 417 2,500
7 416 2,916
8 417 3,333
9 417 3,750
10 416 4,166
11 417 4,583
12 417 5,000
-----
TOTAL 5,000
The Subsequent Option shall be fully vested and
exercisable one year from the date of grant.
Notwithstanding the foregoing, no Subsequent Options
shall become exercisable prior to the approval by the
shareholders of the amendment to the Plan adopted by
the Board on September 11, 1997.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock on a
specified date; (ii) to interpret the Plan; (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan; (iv) to authorize any person
to execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted hereunder; and (v) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations
and interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
5. Eligibility. Options may be granted only to Outside Directors
during the period such persons continue to serve as an Outside Director. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his directorship at any time.
6. Term of Plan. The Plan, and any amendment to the Plan, shall become
effective upon the earlier to occur of its adoption by the Board of Directors or
its approval by the shareholders of the Company. The Plan shall continue in
effect until February 1, 2001, unless sooner terminated under Section 13 of the
Plan.
7. Term of Option. The term of each Option shall be ten years
from the date of grant thereof, subject to earlier termination as set forth in
Section 9 hereof.
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be 100% of the fair
market value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value per Share
means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or quoted on a national market system, including
without limitation the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the fair
market value of a Share of Common Stock shall be the closing price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange (or, if quoted on more than one exchange, the exchange
with the greatest volume of trading in Common Stock on such date) or on such
national market system on the date of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable; or
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the fair
market value of a Share of Common Stock shall be the mean between the bid and
asked prices for the Common Stock on the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for
the Common Stock, the fair market value thereof shall be determined in good
faith by the Board.
(c) Form of Consideration. The consideration to be paid for
the Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, or any combination of such methods of payment.
9. Exercise of Option.
(a) Exercisability. Any Option granted hereunder shall be
exercisable at such times as are set forth in Section 4(b) hereof.
(b) No Fractional Shares. An Option may not be exercised
for a fraction of a Share.
(c) Procedure for Exercise; Rights as a Shareholder. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is being exercised has been received by the Company. Full
payment may consist of any consideration and method of payment allowable under
Section 8(c) of the Plan. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. A stock
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
(d) Effect of Exercise. Exercise of an Option in any manner
shall result in a decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
(e) Termination of Status as a Director. Except as otherwise
provided in subsection (f) of this Section 9, if an Outside Director ceases to
serve as a Director, he or she may, but only within one year after the date he
or she ceases to be a Director of the Company, exercise his or her Option to the
extent entitled to exercise it at the date of such termination. To the extent
that the Optionee was not entitled to exercise an Option at the date of such
termination, the Option shall be cancelled as of such date and the unexercisable
Shares shall be returned to the Plan. To the extent that the Optionee does not
exercise the Option with respect to the exercisable Shares within the time
specified herein, the Option shall terminate and any unexercised Shares shall be
returned to the Plan.
(f) Death of Optionee. In the event of the death of an
Optionee:
(i) During the term of the Option who is at the time of death a Director of the
Company and who shall have been in Continuous Status as a Director since the
date of grant of the Option, the Option may be exercised, at any time within one
year following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance. In such
case, the exercisability of the Option shall be accelerated such that the Option
shall be exercisable during such one-year period with respect to (A) all Shares
that were exercisable as of the date of death plus (B) such additional Shares as
would have become exercisable had the Optionee continued living and remained in
Continuous Status a Director for a period of one year after the date of death.
With respect to Shares that the Optionee would not have been entitled to
exercise until after the end of such one-year period, the Option shall be
cancelled as of the date of death and the unexercisable Shares shall be returned
to the Plan. To the extent such Option is not exercised with respect to the
exercisable Shares subject thereto within the time specified herein, the Option
shall terminate and any unexercised Shares shall be returned to the Plan at the
end of such time.
(ii) Within one year after the Optionee's termination of Continuous Status as a
Director, the Option may be exercised, at any time within one year following the
date of death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination. To the extent
that such Option is not exercised with respect to the exercisable Shares subject
thereto within the time specified herein, the Option shall terminate and any
unexercised Shares shall be returned to the Plan at the end of such time.
(g) Maximum Period of Exercisability. Notwithstanding
the provisions of subsections (e) or (f) of this
Section 9, in no event may an Option be exercised
after its ten-year term has expired.
10. Non-Transferability of Options. Except as may be otherwise provided
in a resolution duly adopted by the Board, an Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by a Director does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Stock Splits and Similar Events. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed for this purpose to
have been "effected without receipt of consideration". Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate immediately
prior to the consummation of such proposed action.
(c) Sale of Assets or Merger. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each Option shall be assumed or an
equivalent option shall be substituted by the successor corporation or a parent
or subsidiary of such successor corporation, unless such successor corporation
does not agree to such assumption or substitution, in which case the Optionee
shall have the right to exercise each Option as to all of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable, for
a period of thirty (30) days following notice to such Optionee of the
anticipated occurrence of such an event.
(d) No Other Adjustments. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
<PAGE>
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, to the extent necessary and desirable to comply with
Rule 16b-3 under the Exchange Act (or any other applicable law or regulation),
the Company shall obtain approval of the shareholders of the Company to Plan
amendments to the extent and in the manner required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in a writing signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares.
(a) Compliance with Applicable Laws. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws and the requirements of any stock exchange or
quotation system upon which the Shares may then be listed or quoted, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.
(b) Investment Intent. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares, if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
(c) No Company Liability. Inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan and the Options granted
hereunder.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve
HYTEK MICROSYSTEMS, INC. EXHIBIT 10.3
DIRECTOR'S NONSTATUTORY STOCK OPTION AGREEMENT
(Subsequent Option)
Hytek Microsystems, Inc., a California corporation (the "Company"),
has granted to ________________________(the "Optionee") an option to purchase a
total of 5,000 shares of the Company's Common Stock (the "Optioned Stock"),
at the price set forth herein, and in all respects subject to the terms,
definitions and provisions of the 1991 Directors' Stock Option Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. The terms
defined in the Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option
and is not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $____ for each Share,
which is 100% of the fair market value of the Common Stock on the date of grant
of this Option, as determined in accordance with the Plan.
3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of the Plan as follows:
(a) Right to Exercise.
(i) This Option shall become exercisable
cumulatively in installments, to the extent of approximately one-twelfth of
the Optioned Stock subject to the Option on per month following the date of
grant of this Option specified on the signature page, as follows:
<PAGE>
Number of Months After Number of Shares Cumulative Number of
Grant Date Becoming Exercisable Shares Exercisable
1 416 416
2 417 833
3 417 1,250
4 416 1,666
5 417 2,083
6 417 2,500
7 416 2,916
8 417 3,333
9 417 3,750
10 416 4,166
11 417 4,583
12 417 5,000
-----
TOTAL 5,000
However, in no event shall this Option be exercisable until shareholder approval
of the amendment to the Plan approved by the Board on September 11, 1997 has
been obtained.
(ii) This Option may not be exercised for a
fraction of a Share.
(iii) In the event of the Optionee's termination
of service as a Director due to death or any other reason, the exercisability
of this Option is governed by Sections 4 and 5 of this Agreement.
(b) Method of Exercise. This Option shall be exercisable by
written notice, which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements, if any, as to the holder's investment
intent with respect to such Shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The written notice shall be accompanied by payment
of the exercise price.
(c) Method of Payment. Payment of the exercise price
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(i) cash;
(ii) check; or
(iii) surrender of other Shares of Common Stock of
the Company, which either (A) have been owned by the Optionee
for more than six months on the date of surrender or (B) were
not acquired, directly or indirectly, from the Company, and
which have a fair market value on the date of surrender equal
to the exercise price of the Shares with respect to which the
Option is being exercised.
(d) Restrictions on Exercise. This Option may not be exercised
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted. As a condition to the
exercise of this Option, the Company may require the Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
4. Termination of Status as a Director. If the Optionee ceases to serve
as a Director, he or she may, but only within one year after the date he or she
ceases to be a Director of the Company, exercise this Option to the extent that
he or she was entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise this Option at the date of
such termination, this Option shall be cancelled as of such date. To the extent
that the Optionee does not exercise this Option with respect to the exercisable
Shares within the time specified herein, the Option shall be cancelled at the
end of such time.
5. Death of Optionee.
(a) Death While Serving as a Director. In the event of the
death of the Optionee during the term of this Option while still serving as a
Director, this Option may be exercised, at any time within one year following
the date of death, by the Optionee's estate or by a person who acquired the
right to exercise this Option by bequest or inheritance. In such case, the
exercisability of this Option shall be accelerated in full such that it shall be
exercisable during such one-year period with respect to all Shares subject to
the Option. To the extent that this Option is not exercised with respect to the
exercisable Shares subject hereto within the time specified herein, this Option
shall be cancelled as of the end of such time.
(b) Death after Termination. In the event of the death of the
Optionee within one year after the Optionee's termination of Continuous Status
as a Director, this Option may be exercised, at any time within one year
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise this Option by bequest or inheritance, but only
to the extent of the right to exercise that had accrued at the date of
termination. To the extent that this Option is not exercised with respect to the
exercisable Shares subject hereto within the time specified herein, this Option
shall be cancelled as of the end of such time.
6. Non-Transferability of Option. This Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by the Optionee does not constitute a transfer. This Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 6. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors and assigns of the
Optionee.
7. Term of Option. This Option may not be exercised more than ten years
from the date of grant hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. Notwithstanding the
provisions of Sections 4 and 5 hereof, in no event may this Option be exercised
after its ten-year term has expired.
8. Taxation Upon Exercise of Option. The Optionee understands that
exercise of this Option will result in the recognition of income for tax
purposes either on such exercise date or at a later time within six months after
such exercise, which income will be in an amount equal to the excess of the fair
market value on the applicable tax date of the Shares purchased over the
exercise price paid for such Shares. Because the application of the tax laws and
regulations to persons who are subject to Section 16(b) of the Exchange Act is
complex, the Optionee is advised to contact a tax advisor at the time of
exercise concerning the effect of the tax laws on such exercise and the
desirability of filing an 83(b) election in connection with the exercise of the
Option. Upon a resale of such Shares by the Optionee, any difference between the
sale price and the fair market value of the Shares on the date of exercise of
the Option, to the extent not already included in income, will be treated as
capital gain or loss.
DATE OF GRANT: ______________, 199__
HYTEK MICROSYSTEMS, INC.,
a California corporation
By:________________________
Title:_____________________
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
Spouse of Optionee
<PAGE>
ACKNOWLEDGEMENT OF OPTION
-------------------------
The Optionee acknowledges receipt of the Option and a copy of the
Plan. The Optionee represents that he or she is familiar with the terms and
provisions thereof and hereby accepts this Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under the Plan.
Dated: _________________, 199_
___________________________
Optionee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains Summary Financial Information extracted from Balance
Sheet at 9/27/97, Statement of Income and Accumulated Deficit at 9/27/97.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> 1,617,855
<SECURITIES> 0
<RECEIVABLES> 1,600,277
<ALLOWANCES> 50,000
<INVENTORY> 1,357,051
<CURRENT-ASSETS> 4,591,521
<PP&E> 3,030,131
<DEPRECIATION> 2,605,497
<TOTAL-ASSETS> 5,216,155
<CURRENT-LIABILITIES> 1,080,321
<BONDS> 39,655
0
0
<COMMON> 4,096,179
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,216,155
<SALES> 5,809,486
<TOTAL-REVENUES> 5,815,430
<CGS> 4,012,101
<TOTAL-COSTS> 5,080,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,154
<INCOME-PRETAX> 758,786
<INCOME-TAX> 47,500
<INCOME-CONTINUING> 711,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 711,286
<EPS-PRIMARY> 0.242
<EPS-DILUTED> 0.231
<FN>
<F1>TAG 21 Common Stock as reported above is net of $878,497 Accumulated Deficit
</FN>
</TABLE>
