SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PACIFIC AEROSPACE & ELECTRONICS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which the
filing fee is calculated and state how it was determined.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PACIFIC AEROSPACE & ELECTRONICS, INC.
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Notice of Annual Meeting of Shareholders to Be Held October 8, 1997
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The Annual Meeting of Shareholders of Pacific Aerospace & Electronics, Inc., a
Washington corporation (the "Company"), will be held at the West Coast Wenatchee
Convention Center, located at 121 North Wenatchee Avenue, Wenatchee, Washington,
on Wednesday, October 8, 1997, at 3:00 p.m. Pacific Daylight Time, for the
following purposes:
1. To elect seven directors of the Company;
2. To approve Amendment No. 1 to the Company's Amended and Restated Stock
Incentive Plan, which is attached as Appendix A to the enclosed Proxy Statement;
3. To approve the Company's 1997 Employee Stock Purchase Plan, which is
attached as Appendix B to the Proxy Statement;
4. To ratify the appointment of Moss Adams L.L.P. as the independent
auditors of the Company; and
5. To transact any other business that may properly come before the Annual
Meeting.
The Board of Directors is not aware of any other business to come before the
Annual Meeting.
Only shareholders of record at the close of business on August 22, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournments of
that meeting.
Please complete, sign, and date the enclosed proxy and return it promptly in the
enclosed envelope. If you attend the meeting, you may revoke the proxy and vote
personally on all matters brought before the meeting. A list of shareholders
will be available for inspection by the shareholders at the Company's corporate
headquarters at 434 Olds Station Road, Wenatchee, Washington 98801.
By Order of the Board of Directors,
/s/ DONALD A. WRIGHT
Donald A. Wright, Chairman of the Board,
Chief Executive Officer and President
September 5, 1997
Wenatchee, Washington
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING IN PERSON, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE SO THAT YOUR SHARES WILL BE VOTED. THE ENVELOPE
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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<PAGE>
PACIFIC AEROSPACE & ELECTRONICS, INC.
434 Olds Station Road
Wenatchee, Washington 98801
(509) 664-8000
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PROXY STATEMENT
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Purpose
The Board of Directors of Pacific Aerospace & Electronics, Inc., a
Washington corporation (the "Company"), is furnishing this Proxy Statement in
connection with its solicitation of proxies to be voted at the Company's 1997
annual meeting of shareholders (the "Annual Meeting"). The Annual Meeting will
be held at the West Coast Wenatchee Convention Center, 121 North Wenatchee
Avenue, Wenatchee, Washington, on Wednesday, October 8, 1997, at 3:00 p.m.
Pacific Daylight Time. The accompanying Notice of Annual Meeting of
Shareholders, this Proxy Statement, and the enclosed proxy are being mailed to
shareholders first on or about September 5, 1997.
Record Date and Outstanding Shares
The Board of Directors has fixed August 22, 1997, as the record date (the
"Record Date") for determining the holders of the Company's common stock, $.001
par value (the "Common Stock") who are entitled to receive notice of, and to
vote at, the Annual Meeting. At the close of business on the Record Date, there
were 10,868,901 shares of Common Stock outstanding and entitled to vote (the
"Voting Shares"). Holders of the Voting Shares will be entitled to one vote per
share held and will not be entitled to cumulative voting rights in the election
of directors.
Proxies
The Board of Directors is soliciting the enclosed proxy for use at the
Annual Meeting and any adjournments of that meeting and will not vote the proxy
at any other meeting. All proxies that are properly executed, received by the
Company prior to or at the Annual Meeting, and not properly revoked by the
shareholder in accordance with the next paragraph, will be voted at the Annual
Meeting or any adjournments thereof in accordance with the instructions in the
proxy.
Revocation of Proxies
The person giving any proxy in response to this solicitation may revoke it
at any time before the proxy is voted:
o by filing with the Secretary of the Company, at or before the taking
of the vote at the Annual Meeting, a written notice of revocation
bearing a later date than the date of the proxy; or
o by signing and dating a subsequent proxy relating to the same shares
and delivering it to the Secretary of the Company before the Annual
Meeting; or
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<PAGE>
o by attending the Annual Meeting and voting in person. However,
attendance at the Annual Meeting without voting in person will not
constitute a revocation of a proxy.
Any written notice revoking a proxy should be sent to Pacific Aerospace &
Electronics, Inc., c/o Stoel Rives LLP, 600 University Street, 36th Floor,
Seattle, WA 98101, Attention: Sheryl A. Symonds, Secretary, or hand delivered to
the Secretary at the Annual Meeting, at or before the taking of the vote.
Quorum
The presence in person or by proxy of at least a majority of the Voting
Shares is required to constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker non-votes will be considered represented
at the meeting for the purpose of determining a quorum.
Voting
The shares represented by each proxy will be voted in accordance with the
instructions given on the proxy. If no instructions are indicated, the proxy
will be voted as follows:
o FOR the seven nominees to the Board of Directors named in this Proxy
Statement;
o FOR approval of Amendment No. 1 to the Company's Amended and Restated
Stock Incentive Plan, which is attached as Appendix A to this Proxy
Statement;
o FOR approval of the Company's 1997 Employee Stock Purchase Plan (the
"Employee Stock Plan"), which is attached as Appendix B to this Proxy
Statement;
o FOR ratification of the appointment of Moss Adams L.L.P. as the
Company's independent auditors for the fiscal year ending May 31,
1998; and
o at the discretion of the persons named in the proxy, on any other
business that may properly come before the Annual Meeting.
Results of Voting
Under applicable law and the Company's Articles of Incorporation and
Bylaws, if a quorum is present at the Annual Meeting:
1. The seven nominees for election to the Board of Directors who receive
the largest number of the votes cast for the election of directors by
the holders of the Voting Shares present in person or represented by
proxy will be elected directors. Each shareholder will be entitled to
one vote for each Voting Share held by that shareholder, and will not
be entitled to cumulate votes in the election of directors.
2. Amendment No. 1 to the Company's Amended and Restated Stock Incentive
Plan will be approved if the votes cast in favor of Amendment No. 1
exceed the number of votes cast against it.
3. The Employee Stock Plan will be approved if the votes cast in favor of
the Stock Plan exceed the number of votes cast against it.
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<PAGE>
4. The appointment of Moss Adams L.L.P. as the Company's independent
auditors will be ratified if the number of votes cast in favor of
ratification exceeds the number of votes cast against it.
Abstentions and broker non-votes will have no effect on the outcome of the
voting because they will not represent votes cast.
Solicitation of Proxies
The Company will bear the cost of preparing, printing, and mailing this
Proxy Statement and of the solicitation of proxies by the Board of Directors.
Solicitation will be made by mail and, in addition, may be made by directors,
officers, and employees of the Company personally, or by telephone or facsimile.
The Company will request brokers, custodians, nominees, and other like parties
to forward copies of proxy materials to beneficial owners of Common Stock and
will reimburse such parties for their reasonable and customary charges or
expenses in this connection.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees
The Board of Directors of the Company will consist of seven directors, who
will be elected at the Annual Meeting to serve until their successors are
elected at the next annual meeting of shareholders. Unless a proxy received by
the Company directs otherwise or is properly revoked, that proxy will be voted
FOR the election of the following nominees:
<TABLE>
<CAPTION>
Director or
Name Age Officer Since Position with Company
- ---- --- ------------- ---------------------
<S> <C> <C> <C>
Donald A. Wright 45 02/95 Chairman of the Board, Chief
Executive Officer and President
Donald B. Cotton 59 02/95 Director
Allen W. Dahl, M.D. 69 02/95 Director
Dr. Urs Diebold 46 07/97 Director
Dale L. Rasmussen 47 06/97 Director
Roger P. Vallo 62 02/95 Director
William A. Wheeler 63 06/97 Director
</TABLE>
All of the nominees are currently directors of the Company. If any nominee
is unable to stand for election, the shares represented by all proxies in favor
of the above slate will be voted for the election of the substitute nominee
recommended by the Board of Directors. The Company is not aware that any nominee
is or will be unable to stand for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL OF THE NOMINEES NAMED ABOVE.
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<PAGE>
Directors and Executive Officers
Donald A. Wright. Donald A. Wright has been the Chairman of the Board,
Chief Executive Officer and President of the Company and its predecessor, PCT
Holdings, Inc., a Nevada corporation ("PCTH"), since February 1995. He held
those same positions with PCTH's predecessor, PCT Holdings, Inc., a Washington
corporation ("Original PCTH"), since May 1994. Mr. Wright has been an officer
and director of the Company's subsidiary, Pacific Coast Technologies, Inc.
("Pacific Coast"), and its predecessor, Kyle Technology Corporation, since 1990.
Mr. Wright also has been an officer and director of each of the Company's other
operating subsidiaries since their respective acquisitions by the Company. In
addition, Mr. Wright was previously a director of Jungle Street, Inc. ("Jungle
Street").
Nick A. Gerde. Nick A. Gerde has been the Vice President Finance and Chief
Financial Officer of the Company and PCTH since February 1995, and held those
same positions with Original PCTH since August 1994. He has been the Treasurer
of the Company and PCTH since August 9, 1996. Mr. Gerde is also an officer and
director of each of the Company's operating subsidiaries. Mr. Gerde served as
Controller/CFO of Hydraulic Repair & Design, Inc., a regional hydraulic
component repair and wholesale distribution company, from March 1990 through
April 1993; Business Development Specialist with the Economic Development
Council of North Central Washington from July 1993 to June 1994; and Vice
President of Televar Northwest, Inc. (now a subsidiary of Jungle Street) from
July 1994 to February 1995. In addition, Mr. Gerde was previously a director of
Jungle Street. Mr. Gerde is a Certified Public Accountant.
Sheryl A. Symonds. Sheryl A. Symonds has been the Vice President
Administration and General Counsel of the Company since September 1, 1997. Prior
to joining the Company, Ms. Symonds was a partner at Stoel Rives LLP, currently
the Company's primary outside legal counsel. Ms. Symonds joined Stoel Rives LLP
in 1985 and became a partner in 1992. Ms. Symonds has been Secretary the Company
since August 1996 and is also Secretary of each of the Company's subsidiaries.
Donald B. Cotton. Donald B. Cotton has been a director of the Company and
PCTH since February 1995, and was a director of Original PCTH since May 1994. He
was a director of Pacific Coast from October 1993 to October 1994. Mr. Cotton
retired from GTE in 1993, where he served most recently as a vice president. He
is currently self-employed as a software consultant. Mr. Cotton is also a
director of Jungle Street.
Allen W. Dahl. Dr. Allen W. Dahl has been a director of the Company and
PCTH since February 1995, and was a director of Original PCTH since October
1994. Dr. Dahl is retired from practice as a physician in the Puget Sound region
of Washington.
Urs Diebold. Dr. Urs Diebold has been a director of the Company since July
1997. Dr. Diebold has been a managing partner of Lysys AG, a Swiss financing and
investment management company, since September 1990. Prior to joining Lysys in
1990, Dr. Diebold was an investment advisor at the Zurich office of Credit
Suisse. Dr. Diebold is also a director of several Swiss companies, including
Hottinger Zurich Valore, a Swiss company listed on the Zurich Stock Exchange,
and of one of the Company's shareholders, Capital International Fund Limited.
Dale L. Rasmussen. Dale L. Rasmussen has been a director of the Company
since June 1997. Mr. Rasmussen has been employed as the Senior Vice President
and Secretary of AirSensors, Inc. since 1989.
-5-
<PAGE>
Roger P. Vallo. Roger P. Vallo has been a director of the Company and PCTH
since February 1995 and was the Secretary of the Company and PCTH from that date
until August 1996. Mr. Vallo held those same positions with Original PCTH since
May 1994. Mr. Vallo served as a director of Pacific Coast from February 1991 to
November 1995 and as Secretary from July 1993 to October 1994. From 1990, he
served as a director of the predecessor of Pacific Coast and subsequently as a
director of Pacific Coast. Mr. Vallo is a retired Group President of GTE, and
until recently was the President and Chief Executive Officer of Prudential
Preferred Properties in Everett, Washington. Mr. Vallo is currently the
President, Chief Executive Officer and a director of Jungle Street. The Company
intends that Mr. Vallo will become the Group President of the Company's
newly-formed Information Technology Group.
William A. Wheeler. William A. Wheeler has been a director of the Company
since June 1997. Mr. Wheeler retired from Dowty Aerospace Yakima in May 1997,
where he served as President, Chief Executive Officer and Chairman of the Board
of Directors since 1979.
Director Compensation
No employee/director of the Company receives any compensation for serving
as a director. Non-employee directors receive no salary for their services and
receive no fee for their participation in meetings except as provided in the
Company's Independent Director Stock Plan (the "Director Plan").
Director Plan. The Director Plan provides for an initial award of 500
shares of Common Stock and an annual award of $5,000 worth of Common Stock to
each non-employee director. Each non-employee director who serves on a committee
of the Board of Directors is entitled to receive a fee of $1,000 per year for
each committee on which that director serves, and the chairperson of each
committee is entitled to receive an additional $500 fee per year. In addition,
each non-employee director of a subsidiary of the Company, who is not a director
of the Company, will receive a fee of up to $1,000 per year. At the Board's
option, persons who serve as directors of a subsidiary of the Company may be
eligible for additional fees. Each of the cash fees may be paid, at the Board's
option, in shares of Common Stock. As of the Record Date, 27,009 shares had been
issued to directors under the Director Plan.
Reimbursements. All directors are reimbursed for reasonable travel and
other out-of-pocket expenses incurred in attending meetings of the Board of
Directors.
Vacancies
Replacement directors for vacancies resulting from an increase in the size
of the Board of Directors or the resignation or removal of a director may be
appointed by the Board of Directors, or may be elected by the shareholders at a
special meeting. Directors so appointed or elected hold office until the next
annual meeting of shareholders and until their successors are elected and
qualified.
Board of Directors Meetings
The Company's Board of Directors met seven times during fiscal 1997. Each
incumbent director attended at least 75% of these meetings in person or by
telephone, except Mr. Rasmussen, Mr. Wheeler, and Dr. Diebold, who joined the
Board of Directors on June 2, 1997, June 9, 1997 and July 18, 1997,
respectively. The Board of Directors also approved certain actions by unanimous
written consent.
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<PAGE>
Committees of the Board of Directors
The Company's Board of Directors has established a Compensation Committee,
a Finance and Audit Committee, an Option Committee, and a Nominating Committee.
Compensation Committee. The Compensation Committee establishes salaries,
incentives, and other forms of compensation for the chief executive officer, the
chief financial officer, the general counsel, the subsidiary presidents and
certain other key employees of the Company and its subsidiaries. The
Compensation Committee also administers policies relating to compensation and
benefits other than option grants, including the Director Plan. Donald B.
Cotton, Allen W. Dahl, and William A. Wheeler are the current members of the
Compensation Committee. The Compensation Committee met three times during fiscal
1997. If the Employee Stock Purchase Plan set forth in Proposal 3 of this Proxy
Statement is approved, it will also be administered by the Compensation
Committee.
Finance and Audit Committee. The Finance and Audit Committee reviews the
Company's accounting policies, practices, internal accounting controls and
financial reporting. The Finance and Audit Committee also oversees the
engagement of the Company's independent auditors, reviews the audit findings and
recommendations of the independent auditors, and monitors the extent to which
management has implemented the findings and recommendations of the independent
auditors. Dale L. Rasmussen, Donald B. Cotton, and Allen W. Dahl are the current
members of the Finance and Audit Committee. The Finance and Audit Committee met
two times during fiscal 1997.
Nominating Committee. The Nominating Committee recommends individuals to be
presented to the shareholders for election or reelection to the Board of
Directors. Written proposals from shareholders for nominees for directors to be
elected at the 1998 annual meeting of shareholders that are submitted to the
Secretary of the Company by May 8, 1998, and that contain sufficient background
information concerning the nominee to enable a judgment to be made as to his or
her qualifications, will be considered by the Nominating Committee. Donald A.
Wright, Roger P. Vallo, and Allen W. Dahl are the current members of the
Nominating Committee. The Nominating Committee met once during fiscal 1997.
Option Committee. The Option Committee administers the Company's Amended
and Restated Stock Incentive Plan, and has the duties described in that plan.
Allen W. Dahl and Roger P. Vallo are the current members of the Option
Committee. The Option Committee met two times during fiscal 1997 and approved
certain actions by unanimous written consent.
Securities Ownership of Directors, Executive Officers and Principal Shareholders
The following table shows the Common Stock ownership, as of July 31, 1997,
by (1) each person known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock ("Principal Shareholder"); (2) each of the
Company's directors; (3) the Named Executive in the Summary Compensation Table
(see "Executive Compensation"); and (4) all executive officers and directors of
the Company as a group. The table also shows these shareholders' ownership of
the Company's publicly-traded common stock purchase warrants (the "Warrants").
This table has been prepared to the best of the Company's knowledge based on the
records of the Company's transfer agent and the Company's records on issuances
of shares, as adjusted to reflect (a) changes in ownership documented in filings
with the Securities and Exchange Commission made by certain shareholders and
provided to the Company pursuant to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and (b) statements provided to the
Company by certain shareholders.
-7-
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership of:
-------------------------------------------------------------
% of % of
Common Common % of Preferred Preferred
Name and Address of Beneficial Owner Stock(1) Stock(2) Warrants Warrants Stock(1) Stock(2)
- ------------------------------------ ------------ --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Wright
c/o Pacific Aerospace &
Electronics, Inc.
434 Olds Station Road
Wenatchee, WA 98801 1,387,474(3) 12.77% 1,500 * --- ---
Herman L. "Jack" Jones
3761 School Street
Wenatchee, WA 98801 701,437 6.45% --- --- --- ---
Roger Vallo
2707 Colby Avenue, Suite 1101
Everett, WA 98201 221,326(4) 2.04% --- --- --- ---
Donald B. Cotton
538 Timber Ridge Drive
Trophy Club, TX 76262 105,909(5) * --- --- --- ---
Allen W. Dahl, M.D.
7300 Madrona Drive NE
Bainbridge Island, WA 98110 62,825(6) * --- --- --- ---
Dr. Urs Diebold
c/o Lysys AG
Gessnerallee 38
PO Box CH-8023
Zurich, Switzerland 7,375 * --- --- --- ---
William A. Wheeler
2011 Lombard Lane
Yakima, WA 98902 4,267 * --- --- --- ---
Dale L. Rasmussen
c/o AirSensors, Inc.
708 Industrial Dr.
Tukwila, WA 98188 1,267 * --- --- --- ---
Leonardo, L.P.
c/o Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167 91,081 8.38% --- --- 12,500 42.25%
Paresco, Inc.
101 Hudson Street, 37th Floor
Jersey City, NJ 07302 161,079 1.48% --- --- 4,000 13.52%
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<PAGE>
Amount and Nature of Beneficial Ownership of:
-------------------------------------------------------------
% of % of
Common Common % of Preferred Preferred
Name and Address of Beneficial Owner Stock(1) Stock(2) Warrants Warrants Stock(1) Stock(2)
- ------------------------------------ ------------ --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Strome Partners, L.P.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401 41,953 * --- --- 2,480 8.38%
Strome Offshore, Ltd.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401 47,147 * --- --- 2,480 8.38%
Strome Susskind Hedgecap, L.P.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401 39,628 * --- --- 2,124 7.18%
GAM Arbitrage Investments, Inc.
c/o Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167 13,360 * --- --- 1,500 5.07%
All Executive Officers and
Directors as a group (nine persons) 2,675,752(7) 22.09% 6,000 * --- ---
- --------------
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of an individual to acquire them within 60 days are treated as outstanding
for determining the amount and percentage of Common or Preferred Stock
owned by such individual. Shares for which beneficial ownership is
disclaimed by an individual also are included for purposes of determining
the amount and percentage of Common or Preferred Stock owned by such
individual. To the Company's knowledge, each person has sole voting and
sole investment power with respect to the shares shown except as noted,
subject to community property laws, where applicable.
(2) Based on 10,868,901 shares of Common Stock outstanding on July 31, 1997,
and 29,585 shares of Preferred Stock outstanding on July 31, 1997 (rounded
to the nearest 1/100th of one percent).
(3) Includes 34,266 shares held by Ragen MacKenzie, Incorporated, custodian for
Donald A. Wright, in two IRA accounts. Also includes currently exercisable
warrants to purchase 100,000 shares of Common Stock, and currently
exercisable options to purchase 974,024 shares of Common Stock.
(4) Includes 216,666 shares held by PACO on behalf of Seattle-First National
Bank, custodian for Roger P. Vallo IRA.
(5) Includes 69,443 shares held by Lincoln Trust Company, custodian for Donald
B. Cotton IRA.
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<PAGE>
(6) Includes 31,249 shares issued to Evablanche Armson Dahl. Dr. Dahl disclaims
beneficial ownership of these securities.
(7) Includes currently exercisable warrants to purchase up to 125,000 shares of
Common Stock, and currently exercisable options to purchase up to 1,120,446
shares of Common Stock.
</TABLE>
Executive Compensation
Compensation of Donald A. Wright
The following table sets forth the annual and long-term compensation of
Donald A. Wright ("Named Executive") for services in all capacities to the
Company for the last three fiscal years. No other officer of the Company
received annual salary and bonuses exceeding $100,000 in the fiscal year ended
May 31, 1997.
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
---------------------------------------------- -------------------------- -------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Fiscal Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Position Year(1) ($) ($) ($) ($) (#) ($) ($)
- --------- ------- ------ ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald A.
Wright 1997 160,000(3) 0 0 0 920,000 0 400(5)
CEO(2) and 1996 110,577 0 0 0 112,560 0 400(5)
President 1995 83,654(3) 0 0 0 100,000(4) 0 0
- -----------
(1) Information is shown for the May 31 fiscal years of the Company after
November 1996, of PCTH prior to November 1996, and of Original PCTH prior
to February 1995, which employed Mr. Wright during the relevant periods.
(2) Mr. Wright became the Chief Executive Officer of Original PCTH in May 1994,
of PCTH in February 1995, and of the Company in November 1996 upon the
merger of PCTH into the Company in order to reincorporate under the laws of
the State of Washington.
(3) A portion of the compensation shown for Mr. Wright for the fiscal year
ended May 31, 1997 was paid by PCTH, and the remainder was paid by the
Company. A portion of his compensation for fiscal year ended May 31, 1995
was paid by Original PCTH, and the remainder was paid by PCTH.
(4) Represents unexercised, but exercisable, warrants to purchase 100,000
shares of Common Stock. See "Aggregated Option/SAR Exercises and Fiscal
Year-End Option/SAR Values," below.
(5) Represents estimated value of the personal use of a company car.
</TABLE>
Option Grants
The following table sets forth information on grants of stock options or
other similar rights by the Company during the last fiscal year to the Named
Executive.
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<PAGE>
<TABLE>
<CAPTION>
Percent of Total Market Price
Number of Securities Options/SARs Exercise or on Date of
Underlying Options/ Granted to Employees Base Price Grant Expiration
Name SARs Granted (#) in Fiscal Year ($/Share) ($/Share) Date
- ---- -------------------- -------------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Donald A. Wright 920,000(1) 94.52% 2.375 to 2.375 to July 2006 to
4.6875 4.6875 May 2007
</TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values.
The following table sets forth information concerning exercise of stock
options and warrants during the last fiscal year by the Named Executive and the
fiscal year end value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY-end (#) SARs at FY-end ($)
---------------------------- ------------------------------
Shares Acquired Value
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable(2) Unexercisable
- ---- --------------- -------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Wright 0 0 1,074,024(1) 58,536 $167,375 N/A
- -----------
(1) Includes warrants that were granted by Original PCTH on December 24, 1994,
and converted by the Company, as of November 30, 1996, into warrants to
purchase 100,000 shares of Common Stock at $2.00 per share, which are
currently exercisable in full.
(2) Value of exercisable options and warrants to purchase 229,024 shares having
exercise prices of less than $3.16 per share, the closing price of the
Common Stock on May 31, 1997.
</TABLE>
Wright Employment Agreement
Recent Employment Agreement. Mr. Wright was employed by the Company during
fiscal 1997 pursuant to an Employment Agreement dated June 1, 1996 (the "Recent
Employment Agreement"). Under the Recent Employment Agreement, Mr. Wright
received an annual base salary of $160,000 for fiscal year 1997.
New Employment Agreement. The Recent Employment Agreement was superseded by
an Employment Agreement dated as of June 1, 1997 (the "New Employment
Agreement"). The New Employment Agreement has a term of five years, ending on
May 31, 2002, unless terminated earlier. Under the New Employment Agreement, Mr.
Wright will receive an annual base salary of $192,000 for fiscal year 1998, a
15% increase for each of fiscal years 1999 and 2000, and such increases as are
determined by the Board of Directors for fiscal years 2001 and 2002. The New
Employment Agreement prohibits Mr. Wright from competing with the Company for
two years following termination.
Option Grant. Pursuant to the Recent Employment Agreement, the Board of
Directors awarded Mr. Wright options to purchase up to 15,000 shares of Common
Stock at $2.875 per share for his performance during fiscal year 1997, all of
which are currently exercisable. Under the New Employment Agreement, Mr. Wright
will be entitled to an award of fully-vested options to purchase 25,000 shares
of Common Stock at the end of each fiscal year during the term of the New
Employment Agreement, and
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options to purchase up to another 250,000 shares per year based on a specified
formula, both at an exercise price equal to the fair market value of the Common
Stock as of the date the options are granted.
Severance Provisions. Under the New Employment Agreement, if a "change of
control" of the Company occurs and within six months thereafter Mr. Wright is
terminated without "cause" or terminates his employment for "good reason" (as
such terms are defined in the New Employment Agreement), Mr. Wright would be
entitled to receive a severance payment equal to twice his annual base salary
then in effect, subject to certain exceptions provided in the New Employment
Agreement. The term "change of control" includes the following events: (1) a
change in composition of the Board of Directors over any two-year period such
that the directors at the beginning of the period, together with directors
subsequently approved by the continuing directors, no longer constituted a
majority of the Board, (2) any person becoming the beneficial owner of
securities having 30% or more of the voting power of the Company's outstanding
voting securities, subject to certain exceptions in the New Employment
Agreement, or (3) a change of control of beneficial ownership of the Company's
voting securities that triggers reporting under Item 16(e) of Schedule 14A of
Regulation 14 under the Exchange Act. Any such severance payment under the New
Employment Agreement would be reduced to the extent necessary to avoid
subjecting the payment to penalty taxes on parachute payments. In addition to
such severance payment, Mr. Wright and his family would be entitled to continue
to participate for one year after such termination in employee health and
medical benefits plans and programs in which they were participants when
employment terminated, to the extent permitted by such plans and programs.
Compliance With Section 16(a) Beneficial Ownership Reporting Requirements
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company pursuant to Rule 16a-3(e) during its most recent fiscal year, and
on written representations that none of the Company's officers, directors, or
principal shareholders ("Reporting Persons") were required to report any
transactions on Form 5, the Company believes that, during the fiscal year ended
May 31, 1997, the Reporting Persons complied in all material respects with all
applicable filing requirements under Section 16(a) of the Exchange Act. Donald
A. Wright and Nick A. Gerde each filed an amended report to reflect an increase
in an option exercise price related to certain previously reported option
grants. Allen W. Dahl filed an amended report to include shares that had been
acquired by his wife prior to their marriage, with respect to which he disclaims
any beneficial interest.
Certain Relationships and Related Transactions
In connection with the Company's acquisition of Cashmere Manufacturing Co.,
Inc. ("Cashmere") in May 1994, Cashmere sold the land and buildings, located in
Cashmere, Washington, where its manufacturing facilities were then located, to
Herman L. "Jack" Jones, a Principal Shareholder and retiring director of the
Company, and to John M. Eder, a former director of the Company and currently
President of another Company subsidiary, Seismic Safety Products, Inc., and an
Executive Vice President of Cashmere, for $975,207. Cashmere received a note
from Mr. Jones for the sales price, payable in monthly installments of $7,600
through May 2014, including interest at 7% per annum. The note was
collateralized by the land and the buildings that then housed Cashmere's
operations. No significant gain or loss to the Company resulted from this
transaction. Cashmere leased these premises from Mr. Jones for a term of three
years with monthly lease payments of $9,000. In May 1995, the Company and
Messrs. Jones and Eder reached an agreement for Cashmere to reacquire a portion
of the land and buildings. Under that agreement, Cashmere canceled $673,990 of
the outstanding note from Mr. Jones, Mr. Jones agreed to assume the payment
obligation of Cashmere under certain bank debt related to the property, although
Cashmere remains an obligor under that bank debt, and Cashmere renewed the
$278,795 balance of the note from Mr. Jones under the same terms as the bank
debt.
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Although Mr. Jones has agreed to negotiate to refinance the bank debt in his
name and remove Cashmere as an obligor, the loan has not yet been refinanced.
In fiscal 1995, Original PCTH entered into a funding agreement (the
"Funding Agreement") with Lysys Ltd. ("Lysys"). Under the Funding Agreement,
Lysys has the right to nominate one of the Company's directors until July 1998.
Dr. Diebold was nominated by Lysys and was appointed as a director of the
Company by the Board of Directors on July 18, 1997, upon the resignation of
Lysys' previous nominee. Dr. Diebold is a general partner of Lysys. Roger D.
Dudley, one of the Company's directors from February 1995 to November 1995, was
associated with Lysys, although he was not a director, executive officer or
equity owner of Lysys.
The Company entered into another agreement with Lysys in fiscal 1996, as
amended (the "Placement Agreement"), pursuant to which Lysys facilitated the
sale by the Company of 838,470 shares of Common Stock in an offering exempt from
registration under Regulation S of the Securities Act of 1933, as amended. The
Company raised approximately $3.4 million from the offering, from which Lysys
was paid a commission of $234,772. Pursuant to the Placement Agreement, the
Company issued 30,000 shares of Common Stock to a designee of Lysys as
additional compensation in connection with the offering.
In fiscal 1996, Allen W. Dahl, a director of the Company, loaned Morel
Industries, Inc. ("Morel") $100,000 pursuant to the terms of a promissory note,
for working capital until consummation of the Company's acquisition of Morel.
All amounts due under this note were paid in full by Morel in December 1995.
In fiscal 1996, Robert L. Smith, then a director of the Company, loaned the
Company $150,000 pursuant to a promissory note from the Company to Mr. Smith
that accrued interest at 18% per annum and was due in full on September 27,
1996. This loan, plus accrued interest and a loan fee that together amounted to
$15,000, was paid in full on August 9, 1996. The Company also issued Mr. Smith a
warrant to purchase 37,500 shares of Common Stock at $4.80 per share that is now
immediately exercisable. In addition, the warrant grants Mr. Smith certain
rights to register the shares issuable upon exercise of the warrant. Mr. Smith
waived his rights to register those shares in the July 1996 public offering and
the Preferred Stock offering. The warrant is currently held by Mr. Smith's
estate.
In June 1997, the Company entered into a letter of intent with Jungle
Street in connection with the Company's formation of its Information Technology
Group. Under the Jungle Street letter of intent, the Company would purchase
newly issued shares of common stock of Jungle Street amounting to 60% of the
outstanding common stock of Jungle Street. However, the Company is currently
contemplating an amended letter of intent with Jungle Street under which the
Company would acquire 100% of Jungle Street. The Company has also entered into
an Operations, Consulting and Expense Reimbursement Agreement with Jungle
Street, and has advanced funds to Jungle Street and its subsidiary pursuant to
that agreement. Roger Vallo and Donald Cotton, directors of the Company, are
directors and shareholders, and Mr. Vallo is CEO, of Jungle Street. In addition,
Donald A. Wright, the Company's Chief Executive Officer and President, and Nick
A. Gerde, the Company's Chief Financial Officer, Vice President, Finance and
Treasurer, are shareholders of Jungle Street and were directors until June 1997.
Allen Dahl, a director of the Company, is a shareholder, but not a director, of
Jungle Street. Messrs. Vallo, Cotton, Dahl, Wright, and Gerde have each
personally guaranteed, or indemnified guarantors of, certain obligations of
Jungle Street or its subsidiary.
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PROPOSAL 2 - APPROVAL OF AMENDMENT NO. 1 TO THE COMPANY'S
AMENDED AND RESTATED STOCK INCENTIVE PLAN
Introduction
The Company's Amended and Restated Stock Incentive Plan (the "Option Plan")
was approved at the Company's 1996 annual meeting of shareholders. The purpose
of the Option Plan is to enable the Company to attract and retain the services
of key personnel. The Board of Directors believes that stock ownership by
management and other key personnel is beneficial in aligning management's and
shareholders' interests in enhancing shareholder value. In furtherance of this
belief, the Company filed a Form S-8 Registration Statement with the Securities
and Exchange Commission in June 1997, registering the 2,000,000 shares issuable
under the Option Plan, among others (the "Form S-8 Registration Statement").
Amendment No. 1 to the Option Plan
On July 18, 1997, the Board of Directors of the Company approved Amendment
No. 1 to the Option Plan, subject to shareholder approval at the Annual Meeting.
The only change to the Option Plan proposed in Amendment No. 1 is to increase
the number of shares of Common Stock reserved for issuance under the Option Plan
from 2,000,000 shares to 3,000,000 shares. As of July 31, 1997, options to
purchase a total of 1,263,616 shares of Common Stock at exercise prices ranging
from $2.11 per share to $5.125 per share have been granted to certain officers
of the Company and its subsidiaries and one consultant of the Company, leaving
736,384 shares available for future grants under the Option Plan. The Board of
Directors is also considering the grant of options to key employees of the
Company and its subsidiaries who are not officers. The Board of Directors
believes that the shares currently available under the Option Plan are
insufficient to both expand the scope of awards to non-officer key employees,
and to continue granting options as a means of attracting, retaining and
providing incentive to officers of the Company and its subsidiaries. The Board
of Directors believes that it is appropriate to link compensation to performance
and to continue that practice through future grants of stock options. In
addition, the Board of Directors believes that the use of stock option grants to
officers and key employees helps to provide them with an incentive for their
continued employment and more closely aligns their interests with those of the
shareholders. As the Company continues to grow, the Board of Directors expects
to use stock options as a key component of its executive and key employee
compensation programs.
The descriptions of the Option Plan and Amendment No. 1 to the Option Plan
contained in this Proxy Statement are qualified in their entirety by the text of
Amendment No. 1 to the Option Plan attached as Appendix A to this Proxy
Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
AMENDMENT NO. 1 TO THE OPTION PLAN,
AS SET FORTH IN APPENDIX A TO THIS PROXY STATEMENT.
Option Plan
The Option Plan provides for the award of incentive stock options ("ISOs")
to key employees and the award of non-qualified stock options ("NSOs"), stock
appreciation rights ("SARs"), bonus rights, and other incentive grants to
employees and certain non-employees (other than non-employee directors) who have
important relationships with the Company or its subsidiaries.
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Administration. The Option Plan may be administered by the Board of
Directors or by a committee of directors or officers of the Company. The Board
of Directors has designated an Option Committee to administer the Option Plan.
The Option Committee determines and designates the individuals to whom awards
under the Option Plan should be made and the amount and terms and conditions of
the awards, except that if officers of the Company serve on the Option Committee
it may not grant options to such officers. The Option Committee may adopt and
amend rules relating to the administration of the Option Plan, but only the
Board of Directors may amend or terminate the Option Plan. The Option Plan is
administered in accordance with Rule 16b-3 adopted under the Exchange Act.
Eligibility. Awards under the Option Plan may be made to employees,
including employee directors, of the Company and its subsidiaries, and to
nonemployee agents, consultants, advisors, and other persons (but not including
nonemployee directors) that the Option Committee believes have made or will make
an important contribution to the Company or any subsidiary thereof.
Shares Available. Subject to adjustment as provided in the Option Plan, a
maximum of 2,000,000 shares of Common Stock are reserved for issuance
thereunder. The maximum number of shares with respect to which options may be
granted to any person during any fiscal year is 1,000,000. If an option, SAR or
performance unit granted under the Option Plan expires or is terminated or
canceled, the unissued shares subject to such option, SAR or performance unit
are again available under the Option Plan. In addition, if shares sold or
awarded as a bonus under the Option Plan are forfeited to the Company or
repurchased thereby, the number of shares forfeited or repurchased are again
available under the Option Plan.
Term. Unless earlier terminated by the Board, the Option Plan will continue
in effect until the earlier of: (i) ten years from the date on which the Option
Plan is adopted by the Board, and (ii) the date on which all shares available
for issuance under the Option Plan have been issued and all restrictions on such
shares have lapsed. The Board may suspend or terminate the Option Plan at any
time except with respect to options, performance units, and shares subject to
restrictions then outstanding under the Option Plan.
Stock Option Grants. The Option Committee may grant ISOs and NSOs under the
Option Plan. With respect to each option grant, the Option Committee determines
the number of shares subject to the option, the option price, the period of the
option, the time or times at which the option may be exercised (including
whether the option will be subject to any vesting requirements and whether there
will be any conditions precedent to exercise of the option), and the other terms
and conditions of the option. As of July 31, 1997, options to purchase an
aggregate of 1,263,616 shares of Common Stock had been granted under the Option
Plan.
ISOs are subject to special terms and conditions. The aggregate fair market
value, on the date of the grant, of the Common Stock for which an ISO is
exercisable for the first time by the optionee during any calendar year, may not
exceed $100,000. An ISO may not be granted to an employee who possesses more
than 10% of the total voting power of the Company's stock unless the option
price is at least 110% of the fair market value of the Common Stock subject to
the option on the date it is granted and the option is not exercisable five
years after the date of grant. No ISO may be exercisable after ten years from
the date of grant. The option price may not be less than 100% of the fair market
value of the Common Stock covered by the option at the date of grant.
In general, no vested option may be exercised unless at the time of such
exercise the optionee is employed by or in the service of the Company or any
subsidiary thereof, within 12 months following termination of employment by
reason of death or disability, or within three months following termination
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for any other reason except for cause. Options are nonassignable and
nontransferable by the optionee except by will or by the laws of descent and
distribution at the time of the optionee's death. No shares may be issued
pursuant to the exercise of an option until full payment therefor has been made.
Upon the exercise of an option, the number of shares reserved for issuance under
the Option Plan will be reduced by the number of shares issued upon exercise of
the option.
Stock Appreciation Rights. The Option Committee may grant SARs under the
Option Plan. Each SAR entitles the holder, upon exercise, to receive from the
Company an amount equal to the excess of the fair market value on the date of
exercise of one share of Common Stock of the Company over its fair market value
on the date of grant (or, in the case of a SAR granted in connection with an
option, the excess of the fair market value of one share of Common Stock of the
Company over the option price per share under the option to which the SAR
relates), multiplied by the number of shares covered by the SAR or the option.
Payment by the Company upon exercise of a SAR may be made in Common Stock, in
cash, or by a combination of Common Stock and cash.
If a SAR is granted in connection with an option, the following rules shall
apply: (i) the SAR shall be exercisable only to the extent and on the same
conditions that the related option could be exercised; (ii) the SAR shall be
exercisable only when the fair market value of the stock exceeds the option
price of the related option; (iii) the SAR shall be for no more than 100% of the
excess of the fair market value of the stock at the time of exercise over the
option price; (iv) upon exercise of the SAR, the option or portion thereof to
which the SAR relates terminates; and (v) upon exercise of the option, the
related SAR or portion thereof terminates.
Each SAR is nonassignable and nontransferable by the holder except by will
or by the laws of descent and distribution at the time of the holder's death.
Upon the exercise of a SAR for shares, the number of shares reserved for
issuance under the Option Plan will be reduced by the number of shares issued.
Cash payments of SARs will not reduce the number of shares of Common Stock
reserved for issuance under the Option Plan. No SARs have been granted under the
Option Plan.
Restricted Stock. The Option Committee may issue shares of Common Stock
under the Option Plan subject to the terms, conditions, and restrictions
determined thereby. Upon the issuance of restricted stock, the number of shares
reserved for issuance under the Option Plan shall be reduced by the number of
shares issued. No restricted shares have been granted under the Option Plan.
Stock Bonus Awards. The Option Committee may award shares of Common Stock
as a stock bonus under the Option Plan. The Option Committee may determine the
recipients of the awards, the number of shares to be awarded, and the time of
the award. Stock received as a stock bonus is subject to the terms, conditions,
and restrictions determined by the Option Committee at the time the stock is
awarded. No stock bonus awards have been granted under the Option Plan.
Cash Bonus Rights. The Option Committee may grant cash bonus rights under
the Option Plan in connection with (i) options granted or previously granted;
(ii) SARs granted or previously granted; (iii) stock bonuses awarded or
previously awarded; and (iv) shares issued under the Option Plan. Bonus rights
granted in connection with options entitle the optionee to a cash bonus if and
when the related option is exercised. The amount of the bonus is determined by
multiplying the excess of the total fair market value of the shares acquired
upon the exercise over the total option price for the shares by the applicable
bonus percentage. The bonus rights granted in connection with a SAR entitle the
holder to a cash bonus when the SAR is exercised. The amount of the bonus is
determined by multiplying the total fair market value of the shares or cash
received pursuant to the exercise of the SAR by the applicable percentage. The
bonus percentage applicable to any bonus right is determined by the Option
Committee
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but may in no event exceed 75%. Bonus rights granted in connection with stock
bonuses entitle the recipient to a cash bonus, in an amount determined by the
Option Committee, when the stock is awarded or purchased or any restrictions to
which the stock is subject lapse. No bonus rights have been granted under the
Option Plan.
Performance Units. The Option Committee may grant performance units
consisting of monetary units which may be earned if the Company achieves certain
goals established by the Committee over a designated period of time. The goals
established by the Option Committee may include earnings per share, return on
shareholders' equity, return on invested capital, and similar benchmarks.
Payment of an award earned may be in cash or in Common Stock or partly in both,
and may be made when earned, or vested and deferred, as the Option Committee
determines. Each performance unit will be nonassignable and nontransferable by
the holder except by will or by the laws of descent and distribution at the time
of the holder's death. The number of shares reserved for issuance under the
Option Plan shall be reduced by the number of shares issued upon payment of an
award. No performance units have been granted under the Option Plan.
Changes in Capital Structure. The Option Plan provides that if the
outstanding Common Stock of the Company is increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any recapitalization,
stock split or certain other transactions, appropriate adjustment will be made
by the Option Committee in the number and kind of shares available for grants
under the Option Plan. In addition, the Option Committee will make appropriate
adjustments in the number and kind of shares as to which outstanding options
will be exercisable. In the event of a merger, consolidation or other
fundamental corporate transformation, the Board may, in its sole discretion,
permit outstanding options to remain in effect in accordance with their terms;
to be converted into options to purchase stock in the surviving or acquiring
corporation in the transaction; or to be exercised, to the extent then
exercisable, during a 30-day period prior to the consummation of the
transaction.
PROPOSAL 3 - APPROVAL OF THE COMPANY'S 1997 EMPLOYEE STOCK
PURCHASE PLAN
Introduction
At the Annual Meeting, the shareholders will be asked to approve the
Company's 1997 Employee Stock Purchase Plan (the "Employee Stock Plan"). If
approved, 1,000,000 shares of the Company's Common Stock will be reserved for
sale to eligible employees (subject to adjustments as provided in the Employee
Stock Plan). The Board of Directors of the Company adopted the Employee Stock
Plan on July 18, 1997, subject to shareholder approval. The Board of Directors
recommends approval of the Employee Stock Plan to allow the Company to encourage
eligible employees of the Company and its subsidiaries to purchase the Company's
Common Stock and become shareholders of, or increase their shareholdings in, the
Company. The description of the Employee Stock Plan contained in this Proxy
Statement is qualified in its entirety by the text of the Employee Stock Plan
attached as Appendix B to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF THE COMPANY'S 1997 EMPLOYEE STOCK PURCHASE PLAN
AS SET FORTH IN APPENDIX B TO THIS PROXY STATEMENT.
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Description of Stock Plan
The Employee Stock Plan is an employee benefit program which enables
eligible employees of the Company and its subsidiaries to purchase shares of the
Company's Common Stock without incurring broker commissions and with a possible
discount from market price. Upon shareholder approval of the Employee Stock
Plan, and subject to adjustment as provided in the Employee Stock Plan, a
maximum of 1,000,000 shares of Common Stock would be reserved for issuance
thereunder. The Employee Stock Plan would terminate on the earlier of: (1)
August 31, 2008; or (2) the date on which all shares available for issuance
under the Employee Stock Plan have been sold pursuant to purchase rights
exercised under the Employee Stock Plan. The Company would pay all expenses,
except expenses related to the resale of shares acquired under the Plan.
The Employee Stock Plan would be administered by the Compensation Committee
of the Board of Directors (the "Committee"). The Committee would be authorized
to administer and interpret the Employee Stock Plan and to make such rules and
regulations as it deemed necessary to administer the Employee Stock Plan. The
custodian of the Employee Stock Plan would be a financial firm designated by the
Committee. Plan participants could sell their shares through the custodian (and
pay the brokerage fee). Participants would have rights as shareholders in the
shares that had been purchased on their behalf. The custodian would vote shares
it holds per instructions from each employee. The custodian would keep records
and give participants statements after each purchase date showing account
activity and balances as of the purchase date.
All individuals employed by the Company or its subsidiaries in a position
with regular hours of 20 hours or more per week for at least 90 days in any
particular calendar year, including the Company's officers (subject to Rule
16b-3 of the Exchange Act and any statutory limitations), would be eligible to
participate in the Employee Stock Plan. However, employees who would (whether
before or after exercising any rights under the Employee Stock Plan) own or be
deemed to own stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company (including any stock that may be
purchased under any outstanding options) would not be eligible to participate in
the Employee Stock Plan.
Eligible employees who elect to participate in the Employee Stock Plan
could make contributions to their accounts of a minimum of $20 per bi-weekly pay
period, up to 15% of their gross pay, for a maximum of $25,000 per year. The
Plan provides for 12-month offering periods, in which shares of Common Stock
would be purchased, using the funds accumulated in each participant's account,
on the last day of each 12-month offering period so long as the employee is
employed by the Company on that date. The first offering period would begin
September 1, 1998 and end on August 31, 1999. The Board of Directors or the
Committee would have the authority to change the length or timing of the
offering periods.
Under the Employee Stock Plan, the purchase price per share would be equal
to the lower of (1) 85% of the closing market price on the first business day of
each offering period; or (2) 100% of the closing market price on the last
business day of the offering period. Participants would be able to change their
payroll deductions only at the beginning of each offering period. Revocations
would be effective immediately, and no refund would be triggered in the case of
a revocation. The amount in the employee's account at the time of revocation
would be used to purchase stock on the purchase date.
All purchases of shares under the Employee Stock Plan would be made by the
accumulation of payroll deductions; no cash deposits are permitted. No interest
would be paid on amounts in individuals' accounts. Amounts in accounts at the
end of an offering period would be used in full to buy shares on
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the purchase date, unless refunded because of termination of employment, or
unless the purchase was subject to a limitation. Amounts left in accounts at the
end of an offering period because the amount was insufficient to purchase a
whole share would be rolled over. Other amounts remaining in accounts at the end
of an offering period (e.g., if a statutory maximum would have been exceeded)
would be refunded.
Purchase rights granted under the Employee Stock Plan would not be
assignable or transferable other than by will or by the laws of descent and
distribution following the participant's death. Upon a participant's termination
from employment on or before the last business day of any offering period, the
payroll deductions credited to the participant's account would be returned to
the participant. No additional payroll deductions would be made following any
such termination from employment. As of July 1, 1997, there were approximately
487 employees of the Company and its subsidiaries eligible to participate in the
Employee Stock Plan.
The Company intends to register the shares subject to the Employee Stock
Plan on Form S-8 and to deliver prospectuses describing the Employee Stock Plan
to participants.
Tax Consequences. The Employee Stock Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Internal
Revenue Code, as amended (the "Code"). Under the Code, no taxable income is
recognized by the participant with respect to shares purchased under the
Employee Stock Plan either at the time of enrollment or at any purchase date at
the end of an offering period. Taxable income is recognized only when a
participant disposes of the shares.
If a participant disposes of shares purchased pursuant to the Employee
Stock Plan after the later of (a) two years from the enrollment date; or (b) one
year from the date on which the shares were purchased, the participant would
recognize ordinary compensation income equal to the lesser of (1) the excess of
the fair market value of the shares at the time of disposition over the purchase
price; or (2) 15% of the fair market value of the shares on the enrollment date.
Any gain on the disposition in excess of the amount treated as ordinary income
would be treated as capital gains. The Company is not entitled to take a
deduction for the amount of the discount in the circumstances indicated above.
If the participant disposes of shares purchased pursuant to the Employee
Stock Plan before the expiration of the required holding period described above,
the participant would recognize ordinary income on the excess of the fair market
value of the stock on the purchase date over the purchase price. Any further
gain would be taxed at capital gain rates. The Company is entitled to a
deduction equal to the amount the participant is required to report as ordinary
compensation income.
PROPOSAL 4 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Moss Adams L.L.P. as independent
auditors of the Company for the fiscal year ending May 31, 1998, and has further
directed that the selection of such auditors be submitted for ratification by
the shareholders at the Annual Meeting. If the appointment of Moss Adams L.L.P.
is not ratified, the selection of other auditors will be considered by the Board
of Directors.
The Company has been advised by Moss Adams L.L.P. that neither that firm
nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
public accountants and clients. Moss Adams L.L.P. will have one or more
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representatives at the Annual Meeting who will be available to respond to
appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS L.L.P.
AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MAY 31, 1998.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any shareholder proposal intended for inclusion in proxy materials for the
Company's 1998 annual meeting of shareholders must be received in proper form by
the Company at its principal office no later than May 8, 1998.
OTHER MATTERS
The Board of Directors is not aware of any business other than discussed
above that will be presented for consideration at the Annual Meeting. If other
matters properly come before the Annual Meeting, it is the intention of the
persons named in the enclosed proxy to vote thereon in accordance with their
best judgment.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's 1997 Annual Report to Shareholders, which includes
the Company's Financial Statements for the fiscal year ended May 31, 1997,
accompanies this Proxy Statement. The Annual Report is not to be treated as part
of or incorporated by reference into the proxy solicitation material.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED AS SOON AS POSSIBLE.
By Order of the Board of Directors,
/s/ DONALD A. WRIGHT
Donald A. Wright
Chairman of the Board,
Chief Executive Officer and President
September 5, 1997
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Appendix A
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED STOCK INCENTIVE PLAN
OF
PACIFIC AEROSPACE & ELECTRONICS, INC.
This Amendment No. 1 amends the Amended and Restated Stock Incentive Plan
(the "Plan") approved by the shareholders of Pacific Aerospace & Electronics,
Inc. (the "Company") on October 29, 1996.
1. The first sentence of Section 2 of the Plan is hereby amended to read
as follows:
Subject to adjustment as provided below and in Section 13, the shares
to be offered under the Plan shall consist of Common Stock, $.001 par
value, of the Company, and the total number of shares of Common Stock
that may be issued under the Plan shall not exceed 3,000,000 shares.
2. This Amendment No. 1 shall be effective after its approval by the
Company's Board of Directors and Shareholders.
3. All other provisions of the Plan are hereby ratified and affirmed as if
incorporated herein.
ADOPTED BY THE BOARD OF
DIRECTORS ON JULY 18, 1997
APPROVED BY THE SHAREHOLDERS
ON _______________, 1997
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Appendix B
PACIFIC AEROSPACE & ELECTRONICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purposes.
The Pacific Aerospace & Electronics, Inc. 1997 Employee Stock Purchase Plan
is intended to provide a convenient means by which eligible employees of the
Company and its subsidiaries may purchase shares of the Common Stock of the
Company and a method by which the Company may assist and encourage employees to
become shareholders of the Company.
2. Definitions.
Capitalized terms in this Plan have the following meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(c) "Common Stock" means the common stock, $.001 par value, of the Company.
(d) "Company" means Pacific Aerospace & Electronics, Inc., a Washington
corporation and any corporate successor to all or substantially all of the
assets or voting stock of Pacific Aerospace & Electronics, Inc. that adopts the
Plan by appropriate action.
(e) "Compensation" means all cash compensation, including any variable
compensation incentives, bonuses, or overtime.
(f) "Continuous Status as an Employee" means the absence of any
interruption or termination of service as an employee of the Company or a
Designated Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of a leave of absence agreed to in writing by the
Company or a Designated Subsidiary, provided that such leave is for a period of
not more than 90 days or re-employment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "Custodian" means the brokerage firm selected by the Company to hold
shares purchased for Participants' accounts under the Plan.
(h) "Designated Subsidiaries" means the Subsidiaries whose employees are
eligible to participate in the Plan, as such subsidiaries may be designated by
the Board from time to time in its sole discretion.
(i) "Eligible Employee" means any person who has had Continuous Status as
an Employee for 90 days and is engaged, on a regularly-scheduled basis of more
than 20 hours
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per week and more than 5 months per calendar year, in providing personal
services to the Company or a Designated Subsidiary for earnings considered wages
under Section 3121(a) of the Code. No person will be an Eligible Employee if,
after an offering pursuant to the Plan, that person would own or be deemed
(under Section 424(d) of the Code) to own stock (including any stock that may be
purchased under any outstanding options (whether vested or unvested)) possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or any Subsidiary.
(j) "Enrollment Date" means the first trading day of each Offering Period.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Exercise Date" means the last trading day of each Offering Period.
(m) "Fair Market Value of a Share of Common Stock" means, for a given date,
the closing bid price of the Common Stock for that date as reported by the
National Association of Securities Dealers Automated Quotation (Nasdaq) National
Market System or, if such price is not reported, the average of the bid and
asked prices per share of Common Stock as reported by Nasdaq. If neither of the
foregoing methods is available, the Plan Administrator shall determine the Fair
Market Value of a Share of Common Stock in good faith, and such determination
will be conclusive and binding.
(n) "Offering Period" means, unless otherwise determined by the Plan
Administrator, a 12-month period during which Participants may purchase shares
of Common Stock under the Plan.
(o) "Option Price per Share" means, with respect to the shares offered in a
given Offering Period, the lower of: (i) 85% of the Fair Market Value of a Share
of Common Stock on the Enrollment Date for that Offering Period; or (ii) the
Fair Market Value of a Share of Common Stock on the Exercise Date.
(p) "Participant" means any Eligible Employee who is actively participating
in the Plan.
(q) "Plan" means this Employee Stock Purchase Plan.
(r) "Plan Administrator" means the Compensation Committee of the Board, as
appointed from time to time by the Board.
(s) "Subsidiary" means any corporation, domestic or foreign, of which not
less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. Administration.
The Plan Administrator shall supervise and administer the Plan and shall
have full power to (i) adopt, amend and rescind any rules deemed desirable and
appropriate for the
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administration of the Plan and not inconsistent with the Plan, (ii) construe and
interpret the Plan, and (iii) make all other determinations necessary or
advisable for the administration of the Plan. The Plan Administrator may
delegate administrative functions to the Custodian and/or to individuals who are
officers or employees of the Company or its Designated Subsidiaries. Subject
only to compliance with explicit provisions of the Plan, the Board and Plan
Administrator may act in their absolute discretion in all matters related to
this Plan. No member of the Board of Directors or the Plan Administrator, and no
officer or employee of the Company or any Subsidiary, shall be liable for any
action or inaction with respect to this Plan, except in circumstances involving
his or her own bad faith.
4. Offering Periods.
Shares of Common Stock will be offered for purchase under this Plan in a
series of Offering Periods, initially running from September 1, 1998 through
August 31, 1999, and thereafter from September 1 through August 31 of each year.
The Plan Administrator will have the power to change the duration and/or the
frequency of Offering Periods without stockholder approval if such change is
announced to Participants at least 15 days prior to the scheduled beginning of
the first Offering Period to be affected.
5. Participation.
Participation in this Plan is voluntary. An Eligible Employee may become a
Participant by completing an enrollment form, in a form prescribed by the Plan
Administrator, subscribing to the offering and authorizing payroll deductions,
and filing the enrollment form with the Company's payroll office at least 10
business days before the applicable Enrollment Date. Subject to the limitations
of Section 6(a), a Participant's enrollment form will remain in effect for
successive Offering Periods unless terminated as provided in Section 10.
6. Payroll Deductions.
(a) Amount. On a Participant's enrollment form, he or she will elect to
have payroll deductions made on each payday during the relevant Offering Period.
Each Participant may select his or her level of payroll deduction, subject to
any limitations imposed by law or this Plan. A Participant's total payroll
deductions during any Offering Period may not be more than 15% of the
Participant's total Compensation during the Offering Period, and the minimum
payroll deduction will be $20 per paycheck.
(b) Account. Individual accounts will be maintained for each Participant in
the Plan. Statements of account, setting forth the amounts of payroll
deductions, the per share purchase price of shares purchased, and the number of
shares purchased, will be given to Participants promptly following each Exercise
Date. All payroll deductions made for a Participant will be credited to his or
her account. A Participant may not make any additional payments into the
account.
(c) Changes. A Participant may discontinue his or her participation in the
Plan as provided in Section 10, but may not otherwise increase or decrease the
rate or amount of his
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or her payroll deductions during an Offering Period. A Participant may change
the rate or amount of his or her payroll deductions for the next Offering Period
by providing a new enrollment form to the Company at least 10 business days
before the Enrollment Date for the next Offering Period.
(d) Rule 16b-3. Employees who are officers or directors of the Company may
participate only in accordance with Rule 16b-3 under the Exchange Act.
7. Grant of Option.
On the Enrollment Date for each Offering Period, each Participant will be
granted an option to purchase, on the Exercise Date of that Offering Period, a
number of shares of Common Stock determined by dividing the Participant's
payroll deductions accumulated prior to the Exercise Date and retained in the
Participant's account as of the Exercise Date by the Option Price per Share. Any
such purchase will be subject to the limitations set forth in Sections 12 and 13
below. Exercise of the option will occur as provided in Section 8, unless the
Participant has withdrawn pursuant to Section 10.
8. Exercise of Option and Purchase of Shares.
A Participant's option for the purchase of shares will be exercised
automatically on the Exercise Date of the Offering Period. Subject to any
limitations on the number of shares that may be purchased as described in this
Plan, the maximum number of whole shares subject to option will be purchased for
the Participant at the applicable Option Price per Share with the accumulated
payroll deductions in his or her account. Any amount remaining in a
Participant's account after an Exercise Date because of limits on the number of
shares that may be purchased will be repaid to the Participant. Any amount
remaining in a Participant's account after an Exercise Date because it was not
sufficient to purchase a whole share will be carried over for application in the
next Offering Period. The shares purchased upon exercise of an option hereunder
will be deemed to be issued and sold to the Participant on the Exercise Date.
9. Delivery and Custody of Shares.
As promptly as practicable after the Exercise Date of each Offering Period,
the Company will deliver shares purchased for the Participants to the Custodian,
who will hold the shares for the Participants' accounts. The Custodian may hold
shares purchased under the Plan in nominee or street name certificates and may
commingle shares in its custody in a single account. By appropriate instructions
to the Custodian, at any time that a Form S-8 registration statement is
effective with respect to the shares or, in the opinion of counsel acceptable to
the Company, the shares may be resold without registration, a Participant may
instruct the Custodian to transfer shares held by the Custodian for the
Participant's account (with brokerage fees to be paid by the Participant).
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10. Withdrawal; Termination of Status.
(a) Withdrawal. A Participant may terminate his or her payroll deductions
during a current Offering Period by filing a withdrawal form with the Plan
Administrator at least 10 business days prior to the Exercise Date of the
Offering Period. In such event, all of the Participant's payroll deductions
credited to his or her account will be used to purchase shares in accordance
with Section 8 above, and, provided that payroll deductions may be made with
respect to any payday that is less than 10 business days after the Company's
receipt of a withdrawal form, no further payroll deductions for the purchase of
shares will be made unless the Participant reinstates participation in the Plan
by filing an enrollment form for a subsequent Offering Period. A Participant may
terminate his or her participation in the Plan as of the next Offering Period
without terminating his or her participation in the current Offering Period by
so stating on a withdrawal form filed at least 10 business days prior to the
Enrollment Date of the next Offering Period.
(b) Termination of Continuous Status as an Employee. Upon termination of a
Participant's Continuous Status as an Employee prior to the Exercise Date of an
Offering Period for any reason, including retirement or death, the payroll
deductions credited to the Participant's account will be returned to him or her
or, in the case of his or her death, to the person or persons entitled thereto
under Section 14, and the Participant's option will be automatically terminated.
(c) Termination of Full-Time Employment. If a Participant fails to maintain
Continuous Status as an Employee for at least 20 hours per week during an
Offering Period, the Participant will be deemed to have elected to withdraw from
the Plan, the payroll deductions credited to the Participant's account will be
returned to him or her, and his or her option will be automatically terminated.
(d) Withdrawal Irrevocable. A Participant's withdrawal from any Offering
Period will be irrevocable, and the Participant may not subsequently rejoin that
Offering Period. In order to resume participation in any subsequent Offering
Period, the Participant must re-enroll in the Plan by timely filing a new
enrollment form.
(e) Future Offerings. A Participant's withdrawal from an offering will not
have any effect upon his or her eligibility to participate in a future offering,
upon timely submission of a new enrollment form, or in any similar plan that may
hereafter be adopted by the Company.
11. Interest.
No interest will accrue on the payroll deductions of any Participant under
the Plan.
12. Common Stock.
(a) Shares Available under the Plan. The maximum number of shares of Common
Stock which shall be made available for sale under the Plan is 1,000,000 shares,
subject to adjustment upon changes in capitalization of the Company, as provided
in Section 17. If, on
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a given Exercise Date, the total number of shares with respect to which options
are to be exercised exceeds the number of shares then available under the Plan,
the Plan Administrator will make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable and as it
shall determine to be equitable. Any amounts remaining in a Participant's
account not applied to the purchase of stock because of the limitation in this
Section 12 will be refunded promptly after the Exercise Date.
(b) Shareholder Rights. A Participant will have no interest or voting right
in shares covered by his or her option until the shares are actually purchased
on the Participant's behalf in accordance with the Plan. After the purchase of
shares, the Participant will be entitled to all rights of a shareholder of the
Company.
13. Accrual Limitation.
No Participant will be entitled to accrue rights to acquire Common Stock
pursuant to any purchase right outstanding under this Plan if and to the extent
such accrual, when aggregated with rights to purchase Common Stock accrued under
any other purchase right outstanding under this Plan and similar rights accrued
under any other employee stock purchase plans (within the meaning of Section 423
of the Code), would otherwise permit the Participant to purchase more than
$25,000 worth of stock of the Company (determined on the basis of the fair
market value of such stock on the date or dates such rights are granted to the
Participant) for each calendar year such rights are at any time outstanding. In
the event there is any conflict between the provisions of this Section 13 and
one or more provisions of the Plan or any instrument issued under the Plan, the
provisions of this Section 13 will be controlling.
14. Designation of Beneficiary.
A Participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the Participant's account in the event
of the Participant's death. The designation of beneficiary may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of the Participant's death, the Company will
deliver the shares and/or cash to the executor or administrator of the estate of
the Participant. If no executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver the
shares and/or cash to the spouse or to any one or more dependents or relatives
of the Participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
15. Transferability.
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an option or the receipt of shares under
the Plan may be assigned, transferred, pledged or otherwise disposed of in any
way (other than by will, the laws of descent and distribution or as provided in
Section 14 hereof) by the Participant. Any
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attempt at assignment, transfer, pledge or other disposition will be without
effect, except that the Company may treat the act as an election to withdraw in
accordance with Section 10.
16. Use of Funds.
All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company will not be
obligated to segregate the payroll deductions.
17. Adjustments Upon Changes in Capitalization.
(a) Changes in Common Stock. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each option under the Plan that has not yet been exercised and the number of
shares of Common Stock that have been authorized for issuance under the Plan but
have not yet been placed under option (collectively, the "Reserves"), as well as
the Option Price per Share of Common Stock covered by each option under the Plan
that has not yet been exercised, 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 shares of Common Stock effected without receipt of consideration by
the Company. The conversion of any convertible securities of the Company will
not be deemed to have been effected without receipt of consideration. Any such
adjustment will be made by the Board, whose determination will be final, binding
and conclusive. 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, will affect, and no adjustment by reason thereof will be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution; Sale. In the event of the proposed dissolution or
liquidation of the Company, the then current Offering Period will terminate
immediately prior to the consummation of the proposed action, unless otherwise
provided by the Board. 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 that results in more than 50% of the voting stock of the
Company being held by persons who were not, directly or indirectly, shareholders
of the Company immediately prior to the merger, each option under the Plan will
be assumed, or an equivalent option will be assumed or substituted, by the
successor corporation or a parent or subsidiary of the successor corporation,
unless the Board determines, in the exercise of its sole discretion, that the
Offering Period will terminate immediately prior to the consummation of the
proposed action.
18. Amendment or Termination.
The Plan became effective upon its adoption by the Board and will continue
in effect until the earlier of (i) August 31, 2008, or (ii) the date on which
all shares available for issuance under the Plan have been issued. However, no
share of Common Stock will be issued under the Plan until the Company obtains
approval of the shareholders of the Company within 12 months after the date the
Plan was adopted. If shareholder approval is
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not obtained within 12 months, this Plan will automatically terminate. The Board
may at any time and for any reason terminate or amend the Plan, except that any
amendment that would increase the number of shares of Common Stock available for
issuance under the Plan must be approved by the shareholders within 12 months of
adoption by the Board. In addition, except as provided in Section 17, no
amendment or termination may be made that would impair the rights of any
Participant under any grant theretofore made, without his or her consent. In
addition, to the extent necessary to comply with Rule 16b-3 under the Exchange
Act or Section 423 of the Code (or any other successor rule or provision or any
other applicable law or regulation), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required. The Company shall have the right, exercisable in the sole discretion
of the Plan Administrator, to terminate all outstanding options under this Plan
immediately following the close of any Offering Period. Should the Company elect
to exercise this right, then this Plan will automatically terminate, no further
purchase rights will thereafter be granted or exercised, and no further payroll
deductions will thereafter be collected under this Plan.
19. Conditions Upon Issuance of Shares.
Shares will not be issued with respect to an option unless the exercise of
the option and the issuance and delivery of shares of Common Stock pursuant to
the option comply with all applicable provisions of law, domestic or foreign,
including without limitation the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of Nasdaq or any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
20. Tax Withholding.
Each Participant who has purchased shares under the Plan will immediately
upon notification of the amount due, if any, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
determined by the Company to be required. If the Company determines that
additional withholding is required beyond any amount deposited at the time of
purchase, the Participant will pay such amount to the Company on demand. If the
Participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the Participant, including
salary, subject to applicable law.
21. Expenses.
The Company will pay all expenses incident to operation of the Plan,
including costs of record keeping, accounting fees, legal fees, custodial fees,
commissions and issue or transfer taxes on purchases pursuant to the Plan and on
delivery of shares to a Participant. The Company will not pay expenses,
commissions or taxes incurred in connection with gifts by a Participant or sales
of shares by the Custodian at the request of a Participant. Expenses to be paid
by a Participant will be deducted from the proceeds of sale prior to remittance.
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22. Status of Plan Under Federal Tax Laws.
This Plan is designed to qualify as an employee stock purchase plan under
Code Section 423, and shall be governed and construed accordingly.
23. No Status as Employee.
Neither the action of the Company in establishing this Plan, nor any action
taken under this Plan by the Board or the Plan Administrator, nor any provision
of this Plan itself shall be construed so as to grant any person the right to
remain in the employ of the Company for any period of specific duration.
24. Governing Law.
The provisions of this Plan shall be governed by the laws of the State of
Washington.
Adopted by the Board: July 18, 1997
[Approved by the Shareholders: ______________, 1997]
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PROXY
PACIFIC AEROSPACE & ELECTRONICS, INC.
Annual Meeting, October 8, 1997
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints Donald A. Wright and Nick A. Gerde, and
each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares that the undersigned may be entitled to vote at the
Annual Meeting of Shareholders of Pacific Aerospace & Electronics, Inc. (the
"Company"), on October 8, 1997, and any adjournments thereof, with all powers
that the undersigned would possess if personally present, with respect to the
following:
1. ELECTION OF DIRECTORS: [ ] FOR all nominees except
as marked to the contrary below.
[ ] WITHOUT AUTHORITY to vote
for all nominees listed below.
(Instructions: To withhold authority to vote for any individual, strike a
line through the nominee's name below.)
Donald B. Cotton, Allen W. Dahl, Urs Diebold, Dale L. Rasmussen, Roger P. Vallo,
William A. Wheeler, and Donald A. Wright
2. APPROVAL OF AMENDMENT NO. 1 TO THE AMENDED AND RESTATED STOCK INCENTIVE
PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTENTION
3. APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTENTION
4. RATIFICATION OF APPOINTMENT OF MOSS ADAMS L.L.P. AS INDEPENDENT AUDITORS:
[ ] FOR [ ] AGAINST [ ] ABSTENTION
5. TRANSACTION OF ANY BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF. A MAJORITY OF THE PROXIES OR SUBSTITUTES AT THE MEETING
MAY EXERCISE ALL THE POWERS GRANTED HEREBY.
(Continued and to be signed on the other side)
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The shares represented by this proxy will be voted as specified on the reverse
hereof, but if no specification is made, this proxy will be voted FOR the
election of the seven identified nominees as directors; FOR the approval of
Amendment No. 1 to the Amended and Restated Stock Incentive Plan; FOR the
Employee Stock Purchase Plan; and FOR the ratification of the appointment of
Moss Adams LLP as the Company's independent auditors. The proxies may vote in
their discretion as to other matters that may come before this meeting.
No. of Shares: __________ Date: _______________, 1997
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Signature or Signatures
Please date and sign as name is imprinted hereon,
including designation as executor, trust, etc. if
applicable. A corporation must sign its name by the
president or other authorized officer.
The Annual Meeting of Shareholders of Pacific Aerospace
& Electronics, Inc. will be held at the West Coast
Wenatchee Convention Center, located at 121 North
Wenatchee Avenue, Wenatchee, Washington, on October 8,
1997, at 3:00 p.m. Pacific Daylight Time.
Please Note: Any shares of stock of the Company held in the name of fiduciaries,
custodians or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian or brokerage house itself. The beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of the
company are held in "street name" by a brokerage house, only the brokerage
house, at the instructions of its client, may vote or appoint a proxy to vote
the shares.
