<PAGE>
As filed with the Securities and
Exchange Commission on January 19, 2001. Registration No. 333-44686
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
AMENDMENT NO. 2 TO
FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
PACIFIC AEROSPACE & ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
-----------------
WASHINGTON 91-1744587
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
430 Olds Station Road, Third Floor
Wenatchee, WA 98801
(509) 667-9600 (telephone)
(509) 667-9696 (facsimile)
(Address, including zip code, and telephone and facsimile numbers,
including area code, of registrant's principal executive offices)
-----------------
Donald A. Wright
430 Olds Station Road, Third Floor
Wenatchee, WA 98801
(509) 667-9600 (telephone)
(509) 667-9696 (facsimile)
(Name, address, including zip code, and
telephone and facsimile numbers, including area code, of agent for service)
Copy to:
L. John Stevenson, Jr.
Stoel Rives LLP
One Union Square, 36th Floor
600 University Street
Seattle, WA 98101-3197
(206) 624-0900 (telephone)
(206) 386-7500 (facsimile)
Approximate date of commencement of proposed sale to the public:
From time to time after the effectiveness of this registration statement.
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plan, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be Registered(1) offering price per aggregate offering Registration
registered share(2) price(2) Fee(2)
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Common Stock 1,607,010 shares $1.47 $2,362,305 $624
============================================================================================================
</TABLE>
(1) Including:
(a) 1,142,860 shares of common stock issued on July 27, 2000;
(b) up to 385,000 shares of common stock issuable upon exercise of the
closing warrants held by two selling shareholders; and
(c) up to 79,150 shares of common stock issuable upon exercise of a
warrant held by one selling shareholder.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on an estimated value of $1.47 per share.
This value equals the average of the high and low prices of the common
stock on the Nasdaq National Market System on August 21, 2000. An amount
exceeding this registration fee was paid on August 28, 2000, upon the
filing of this registration statement.
--------------------------------------------------------------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until either (1) the registrant
files an amendment specifically stating that this registration statement shall
become effective under section 8(a) of the Securities Act of 1933, as amended;
or (2) until the date that the Securities and Exchange Commission declares this
registration statement to be effective.
--------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
RESALE PROSPECTUS
Subject to Completion, dated January 19, 2001
[LOGO OF PACIFIC AEROSPACE & ELECTRONICS, INC.]
1,607,010 Shares of Common Stock
These shares of common stock are being offered and sold from time to time by
three of our current shareholders or warrant holders. Two selling shareholders
are offering a total of 1,142,860 shares of common stock that they purchased
from us in a private placement, and three selling shareholders are offering up
to 464,140 shares of common stock that they may receive upon exercise of
warrants that they hold. We will not receive any of the proceeds from sale of
these shares. See page 24 for the names of the selling shareholders.
The selling shareholders may offer the shares to the public at fixed prices,
prevailing market prices, formula prices relating to prevailing market prices,
or negotiated prices.
Our common stock is traded on the Nasdaq National Market System under the symbol
"PCTH." On January 17, 2001, the closing price of our common stock was $.50 per
share.
Potential investors should consider the risk factors starting on page 3 before
purchasing the shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares, or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
_________ __, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
--------------------------------------------------------------------------------- ---------
<S> <C>
Risk Factors..................................................................... 3
Our Business..................................................................... 15
Information Incorporated by Reference............................................ 16
Available Information............................................................ 17
Selling Shareholders............................................................. 18
Plan of Distribution............................................................. 25
Experts.......................................................................... 26
Legal Matters.................................................................... 26
</TABLE>
______________________
Prospective investors may rely only on information contained in this prospectus
or incorporated into it by reference. Neither Pacific Aerospace & Electronics,
Inc. nor the selling shareholders have authorized any person to provide
prospective investors with any information other than that contained in this
prospectus.
______________________
2
<PAGE>
RISK FACTORS
______________________________________________________________________________
An investment in shares of our common stock involves risks. You should
carefully consider all of the information set forth in this prospectus. In
particular, you should evaluate the following risk factors before making an
investment in the shares of our common stock. If any of the following
circumstances actually occur, our business, financial condition and results of
operations could be materially and adversely affected. If that occurs, the
trading price of our common stock could decline, and you could lose all or part
of your investment.
Some of these risk factors contain forward-looking statements. These forward-
looking statements are not guarantees of our future performance. They are
subject to risks and uncertainties related to business operations, some of which
are beyond our control. Any of these risks or uncertainties may cause actual
results or future circumstances to differ materially from the forward-looking
statements set forth in this section.
______________________________________________________________________________
We have reported net losses for recent periods, and we may continue to incur net
losses, which could jeopardize our operations and decrease our stock value.
We reported a net loss of $12,869,000 for our fiscal year ended May 31, 1999, a
net loss of $13,049,000 for our fiscal year ended May 31, 2000, and a net loss
of $7,195,000 for the six months ended November 30, 2000. We believe that we
will continue to incur net losses for the remainder of fiscal 2001 and that such
losses could be substantial. We can offer no assurance that we will achieve
profitable operations or that any profitable operations will be sustained. Our
ability to achieve a profitable level of operations in the future will depend on
many factors, including our ability to reduce the level of our debt, to
assimilate our recent and potential future acquisitions, to finance production
and to realize acceptable gross profits on the products we sell. Future
profitability will also depend on our ability to develop new products, the
degree of market acceptance of our existing and new products, and the level of
competition in the markets in which we operate. If we continue to incur net
losses, our cash flow position could be further damaged, our operations could be
jeopardized, and our stock price could decrease.
Our inability to generate cash if and when needed could severely impact our
ability to continue as a going concern.
Our consolidated financial statements have been prepared assuming that we will
continue as a going concern. However, our independent auditors in their most
recent report stated that Pacific Aerospace has suffered recurring losses from
operations which raise substantial doubt about our ability to continue as a
going concern. Our consolidated financial statements do not include any
adjustments that might result from the outcome of that uncertainty. If we are
not sufficiently successful in generating cash from operating activities, we may
need to sell additional common stock or other securities, or we may need to sell
assets outside the ordinary course of business. If we need to dispose of assets
outside of the ordinary course of business to generate cash, we may not be able
to realize the carrying values of those assets upon liquidation. If we are
unable to generate the necessary cash, we could be unable to continue
operations.
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<PAGE>
If we do not raise additional cash, we may not be able to fund our operations.
Our existing cash and credit facilities may not be sufficient to meet our
obligations as they become due during fiscal 2001. Consequently, we expect that
we will need to obtain additional cash during fiscal 2001. Our actual cash
needs will depend primarily on the amount of cash generated from or used by
operations. We cannot predict accurately the amount or timing of our future
cash needs. We are required to make our next semi-annual interest payment of
approximately $3.6 million on our 11 1/4% senior subordinated notes on February
1, 2001. We do not currently have sufficient cash to make this payment. If we
cannot obtain additional cash if and when needed, we may be unable to make this
interest payment or fund our operations and pay all obligations as they become
due or at all.
If we are unable to renew our lines of credit or obtain new lines of credit, we
may be unable to fund our operations.
Our U.S. operating lines of credit expired on September 5, 2000, and have been
extended through February 5, 2001. Due to our continued losses, our current
U.S. senior lender has decided not to renew our current revolving line of credit
once we have found a replacement lender. We are currently negotiating to obtain
a replacement revolving line of credit and possible additional term loan
financing in the U.S. Our current senior lender in the U.S. has orally
expressed willingness to extend our current revolving line of credit until a
replacement facility is in place, but we do not have a written commitment to
this effect. Our line of credit in the U.K. expired in November 2000. That
line of credit has been extended through February 28, 2001, but the effective
borrowing limit has been reduced from (Pounds)3.5 million to (Pounds)1.5
million. We have requested renewal of that line. We may find it more difficult
to renew our credit lines or obtain new lines of credit, and we may have to pay
higher interest rates, because our recurring losses from operations raise
substantial doubt about our ability to continue as a going concern. If we are
unable to renew or replace our credit lines, we may not have enough cash to fund
or sustain our current operations or to meet our obligations as they become due,
including the $3.6 million interest payment on our 11 1/4% senior subordinated
notes that is due on February 1, 2001.
We have significant debt that adversely affects our financial condition.
At May 31, 2000, our total long-term debt was approximately $69.2 million, or
approximately 48% of our total assets. We have a 1.9 to 1 debt-to-equity ratio.
In general, this ratio is an indication of our ability to service our debt. The
higher the ratio, the more difficult it will be to satisfy our debt obligations.
However, as we have a total tangible stockholders' deficit of approximately $2
million at November 30, 2000, we do not believe that this ratio is a good
indication of our ability to service our debt. Unless we increase our cash flow
from operations, our current debt-to-equity ratio, coupled with continued
losses, indicates that we may have difficulty satisfying our debt obligations in
the future. We incurred substantial debt and payment obligations to finance the
acquisition of our European Aerospace Group, which was formed when we acquired
Aeromet International PLC in 1998. This debt, which consists of our senior
subordinated notes, currently constitutes $63.7 million of our long-term debt
and bears interest at
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11.25% per year. In addition, at November 30, 2000, our balance sheet includes
approximately $3.3 million of deferred financing costs, which are being charged
off to interest expense over the period that the related debt is expected to be
outstanding. We recently announced our intention to sell our European Aerospace
Group in order to reduce our outstanding senior subordinated notes. We do not
yet know whether we can sell Aeromet or, if it is sold, the amount of net
proceeds available to reduce our debt. Our debt could make us unable to obtain
additional financing in the future. It could also divert a significant portion
of our cash flow to principal and interest payments and away from operations and
necessary capital expenditures. Our debt has significantly increased our
interest expense and net loss, and we expect the interest expense to continue to
increase our net loss for the foreseeable future. Our debt also puts us at a
competitive disadvantage in relation to competitors with less debt and limits
our flexibility to adjust to downturns in our business or market conditions.
If we are not able to pay our debt, we may suffer adverse consequences.
If we do not generate sufficient cash flow to make our debt payments, we could
be forced to reduce or delay capital expenditures or to dispose of material
assets or operations, potentially at a substantial loss. If we were unable to
pay our debt, we might need to restructure or refinance our debt at potentially
higher rates of interest. Alternatively, we might need to seek additional
equity capital, which would dilute the value of the shares held by our existing
shareholders. We may not be able to do any of these things, or we may not be
able to do them on satisfactory terms. If we failed to make our debt payments,
the lenders would be able to declare all amounts we owe to be immediately due
and payable. If this were to occur, we would likely not have funds available to
us to pay off the debt. In addition, if we could not repay our secured debt,
secured lenders could proceed against any collateral securing that debt. The
collateral for our secured debt consists of substantially all of our assets,
including receivables, inventories, real property, personal property, and
intangible assets.
We must comply with a number of significant debt covenants that limit our
flexibility.
The agreements that govern our debt, particularly the indenture that governs our
11 1/4% senior subordinated notes, restrict a number of our activities. Unless
we obtain consent from our lenders, we cannot dispose of or create liens on
assets or create additional indebtedness. We are not permitted to pay dividends
to shareholders or repurchase stock. Our debt covenants restrict our ability to
acquire new businesses or make investments or loans to others. We are also
subject to covenants that limit our ability to make capital expenditures, change
the business we conduct, or engage in transactions with related parties. In
addition, if there is a change of control of our company, we may be required to
repay our debt early. If we breach any of these covenants, the lenders may be
able to declare all amounts we owe to be immediately due and payable. If this
were to occur, we would likely not have funds available to us to pay off the
debt.
We may not be successful if we fail to manage our rapid growth.
We have experienced rapid growth from both operations and acquisitions. This
growth has placed and will continue to place significant demands on our
managerial, administrative,
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<PAGE>
financial and operational resources. For example, both our total number of
employees and the number of our operating sites nearly doubled as a result of
acquiring our European Aerospace Group, which was formed when we acquired
Aeromet in July 1998. The size of our European Aerospace Group has caused and
will continue to cause it to have a significant impact on our future financial
results. As we grow and our business operations become more complex, we will
need to be increasingly diligent in our business decisions. To manage our growth
effectively, we must continue to improve our operational, accounting, financial
and other management processes and systems. Our U.S. operating divisions have
had different accounting systems, which we have integrated or are in the process
of integrating. We must also continue to attract and retain highly skilled
management and technical personnel. If we do not effectively manage these
aspects of our growth, we may not succeed.
Our past and possible future acquisition strategy could negatively impact our
performance.
We have historically pursued an aggressive acquisition strategy. Although we
are currently focusing substantially all of our attention on existing operations
and on internal growth, we expect that in the future we may evaluate and pursue
potential strategic acquisitions. We have incurred substantial losses as a
result of some of our acquisitions and investments, including approximately $4.6
million in fiscal 2000 and approximately $12.7 million in fiscal 1999. We need
to better manage our acquisition strategy. This includes accurately assessing
the value, strengths and weaknesses of acquisition candidates, as well as
successfully implementing necessary changes at newly acquired subsidiaries. In
the past, our aggressive acquisition strategy has diverted management attention
from our operations, increased borrowings, disrupted product development cycles
and diluted earnings per share. If we do not successfully manage future
acquisitions, if any, our financial performance could continue to be negatively
impacted by acquisitions.
We have experienced asset impairment and may experience additional asset
impairment in the future.
We review long-lived assets and intangibles for potential impairment of value
whenever events or changes in circumstances indicate that the carrying amount of
those assets may not be recoverable. An impairment is determined by totaling
the estimated net future cash flows derived from the asset and comparing that
total to the book value of the asset. When the total of the net future cash
flows is lower than the book value, an impairment exists. The amount of the
impairment is the difference between the present value of the net future cash
flows and the book value of the asset. During the fourth quarter of fiscal
2000, due to continuing losses and continued weakness in our business related to
changes in the commercial aerospace and transportation industries, our
evaluation resulted in the realization of a $4.6 million impairment of goodwill
and a $600,000 property impairment related to our U.S. Aerospace Group. We will
continue to evaluate our assets, especially in our aerospace groups, on a
quarterly basis until such time as our divisions become consistently profitable.
Our future evaluations could result in additional impairment charges, primarily
for goodwill and for property and equipment. These possible impairment charges
could be material as our balance sheet at November 30, 2000
6
<PAGE>
includes approximately $36 million of goodwill and $41 million of property,
plant and equipment.
We may conclude that deferred income tax assets are not sufficiently likely to
be realized and need to be written off.
We review deferred income tax assets for realizability of value quarterly. We
may conclude that deferred income tax assets do not meet the accounting
requirement of "more likely than not" to be realized and need to be written off,
resulting in an increase in deferred income tax expense and net loss. The
deferred income tax expense related to this write-off could be material as our
balance sheet at November 30, 2000, includes approximately $3.7 million of
deferred income tax assets.
Our European Aerospace Group has had and will continue to have a significant
impact on our business.
The acquisition of our European Aerospace Group in 1998 doubled the size of our
company. Approximately 50% of our assets and approximately 45% of our revenues
are associated with our operations in the United Kingdom. It is more difficult
for us to manage a business in the United Kingdom than our other businesses,
which are located in Washington State. The reasons for the increased difficulty
include differences in time, distance, business practices and cultural
variations. Our ownership of a business in Europe also subjects us to
regulatory, tax, and trade restrictions that we did not previously face. If we
retain ownership of our European Aerospace Group and do not effectively manage
that group, we may not be successful.
Changes in foreign currency exchange rates could negatively affect our financial
position.
Because of our European Aerospace Group, we may decide to engage in hedging
transactions to protect against losses caused by changes in the exchange rate
between the U.S. dollar and the British pound sterling. However, we have not
engaged in hedging transactions to date. Since approximately 50% of our
transactions are conducted in foreign currency, the exchange rate risk could be
material. For the six months ended November 30, 2000, we incurred a foreign
currency translation loss of approximately $3 million. Even if we were to engage
in hedging transactions, they may not completely offset any such losses. Our
European Aerospace Group has a few contracts that are in European currencies
other than British pounds sterling, or in U.S. dollars. We believe that the
conversion of European currencies to the Euro will not have a material adverse
effect on the European Aerospace Group's business or financial condition.
We depend on some significant customers continuing to purchase our products, and
our revenues will decline significantly if we cannot keep or replace these
customers.
We do not have long-term contracts with most of our major customers, and our
long-term contracts generally permit the customer to cancel their orders. We
depend on our customers continuing to place orders for our products. Our top
ten customers in terms of revenues during fiscal 2000 together accounted for
approximately 46% of our revenues for that year, and no other
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customer accounted for more than 2% of our revenues. Only the top four customers
individually accounted for 5% or more of our revenues, with The Boeing Company
at approximately 10%, Rolls-Royce plc at approximately 7%, PACCAR, Inc. at
approximately 6%, and Aeronautical Macchi Manufacturing Corporation (Aermacchi)
at approximately 5%. We produce machined and cast metal aircraft components for
Boeing, Rolls-Royce and Aermacchi, and cast metal heavy trucking components for
PACCAR. Because of the relatively small number of customers for most of our
products, our largest customers can influence product pricing and other terms of
trade. If we were to lose any of our largest customers, or if they reduced or
canceled orders, our business and financial performance could be harmed.
We operate in industries that are subject to cyclical downturns that could
adversely affect our revenues.
We operate in historically cyclical industries. The aerospace, defense and
transportation industries are sensitive to general economic conditions, and past
recessions have adversely affected these industries. In past years, a number of
factors have adversely affected the aerospace industry, including increased fuel
and labor costs, and intense price competition. Recently, the commercial
aircraft industry experienced a downturn in the rate of its growth due to
changing economic conditions and as a result of the ongoing financial crisis in
Asia, which caused reductions in production rates for some commercial airline
programs. The major aircraft manufacturers responded, in part, by significantly
decreasing their inventory levels. Although very recently the aerospace
industry seems to have been experiencing better results, we have not yet
benefited from the improvements. Additional cancellations or delays in aircraft
orders from customers of Boeing or Airbus could reduce demand for our products
and could have a material adverse effect on our business and financial
performance. Cyclical factors and general economic conditions could lead to a
downturn in demand for our core products and decrease our revenues.
We may fail to retain our key management and technical personnel, which could
negatively affect our business.
We believe that our ability to successfully implement our business strategy and
to operate profitably depends significantly on the continued employment of our
senior management team, led by our president, Donald A. Wright, and our ability
to retain and hire engineers and technical personnel with experience in the
aerospace and electronics industries. We have key man life insurance policies
on the life of Mr. Wright totaling $8 million. We also have an employment
agreement with Mr. Wright and several other senior managers. However, our
business and financial results could be materially adversely affected if Mr.
Wright, other members of the senior management team, or significant engineers or
technical personnel become unable or unwilling to continue in their present
employment. Our growth and future success will depend in large part on our
ability to retain and attract additional board members, senior managers and
highly skilled technical personnel with experience in the aerospace and
electronics industries. Because our U.S. operations are not located in a large
metropolitan area, we may face more difficulty in acquiring and retaining key
management and technical personnel than our competitors in major cities.
Competition for such individuals is intense, and we may not be
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successful in attracting and retaining them, which could interfere with our
ability to manage our business profitably.
We may not be able to convert all of our backlog into revenue.
We sell the majority of our products through individual purchase orders. Many
of our customers would have the right to terminate orders by paying the cost of
work in process plus a related profit factor. Historically, we have not
experienced a large number of significant order cancellations. However, from
time to time, customers cancel orders as a result of a program being cancelled
or for other reasons. As of May 31, 2000, we had purchase orders and
contractual arrangements evidencing anticipated future deliveries, which we
treat as backlog, through fiscal year 2002 of approximately $80 million. We
expect to deliver approximately $70 million of this backlog in fiscal year 2001.
We may not be able to complete all of that backlog and book it as net sales, if
we experience cancellations of pending contracts or terminations or reductions
of contracts in progress.
If we do not adapt to technological change and develop new products, we could
lose customers and our revenues could decline.
The market for our products in both the aerospace and the electronics industries
is characterized by evolving technology and industry standards, changes in
customer needs, adaptation of products to customer needs, and new product
introductions. Other companies that manufacture components for the aerospace
and electronics industries from time to time may announce new products,
enhancements, or technologies that have the potential to replace or render our
existing products obsolete. Our success will depend on our ability to enhance
our current products and develop new products to meet changing customer needs,
and achieve market acceptance of those products. We view our proprietary
technology and our level of technological development as our primary strengths.
Because most of our research and development efforts are funded by customers, it
will be essential for us to continue to respond effectively to our customers'
needs. We will also need to anticipate or respond to evolving industry standards
and other technological changes on a timely and cost-effective basis. If we do
not adequately respond to these changes, we could lose customers and our
revenues could decline.
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Our markets are highly competitive, and our competitors' strengths may prevent
us from executing our business strategy.
We have substantial competition in many of the markets that we serve. In the
electronics markets, our competitors are generally larger than we are. In the
aerospace market, we compete with both regional machine shops and forming
business and offshore foundries, which tend to have lower costs. Many of these
competitors have greater financial resources, broader experience, better name
recognition and more substantial marketing operations than we have, and they
represent substantial long-term competition for us.
We believe that our manufacturing processes, proprietary technologies and
experience provide significant advantages to our customers. These advantages
include high quality, more complete solutions, competitive prices, and physical
properties that meet stringent demands. However, competitors can use alternative
forms of manufacturing to produce many of the components and products that we
make. These competing products could be of the same or better quality and price
as those we produce. We expect our competitors to continue making new
developments, and they could develop products that customers view as more
effective or more economical than our products. In addition, our competitors may
introduce automation processes and robotics systems that could lower their costs
of production substantially. If we are not able to compete successfully against
current and future competitors, and respond appropriately to changes in industry
standards, our business could be seriously harmed.
If we cannot obtain raw materials when needed and at a reasonable cost, we could
have difficulty producing cost-effective products and delivering them on time.
Our European Aerospace Group obtains approximately 70% of its titanium from one
supplier and is subject to a lead time of approximately 65 weeks in ordering and
obtaining titanium. While the European Aerospace Group generally has managed
the ordering process to obtain titanium when needed, a labor strike at the
supplier negatively affected the group's ability to obtain timely deliveries of
titanium during fiscal 1999 and into the 2000 fiscal year. Although the
shortage of titanium did not have a material adverse effect on our European
Aerospace Group's business or on our overall financial condition, we lost some
business due to customers' dual sourcing contracts, and some customer orders
that were expected to be delivered in fiscal 1999 were delayed into fiscal 2000
and 2001. The effect of the strike emphasizes the fact that a failure to obtain
titanium or other raw materials when we need them, or significant cost increases
imposed by suppliers of raw materials such as titanium or aluminum, could damage
our business and financial performance. We generally have readily available
sources of all raw materials and supplies we need to manufacture our products
and, where possible, we maintain alternate sources of supply. However, we do not
have fixed price contracts or arrangements for all of the raw materials and
other supplies we purchase. We have experienced in the past shortages of, or
price increases for, raw materials and supplies, and shortages or price
increases may occur again in the future. Our current cash shortage has resulted
in our deliberate efforts to reduce inventories. Reduced inventories could
result in even greater raw material shortages in the future. Future shortages or
price fluctuations could have a material adverse effect on our ability to
manufacture and sell our products in a timely and cost-effective manner.
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We need to protect our intellectual property and proprietary rights, and
protection may be costly and not always available.
Significant aspects of our business depend on proprietary processes, know-how
and other technology that are not subject to patent protection. We rely on a
combination of trade secret, copyright and trademark laws, confidentiality
procedures, and other intellectual property protection to protect our
proprietary technology. However, our competitors may still develop or utilize
technology that is the same as or similar to our proprietary technology.
We have 29 U.S. patents, 7 U.S. patent applications pending (including 3 allowed
applications), 1 PCT International patent applications pending, 7 patent
applications pending in non-U.S. jurisdictions, and 1 European patent
enforceable in the U.K. We can provide no assurance that any of the patent
applications will result in issued patents, that existing patents or any future
patents will give us any competitive advantages for our products or technology,
or that, if challenged, these patents will be held valid and enforceable. Most
of our issued patents expire at various times over the next 15 years, with 13
patents expiring over the next four years. These 13 patents, as well as six
other patents that recently expired, relate to products manufactured by our U.S.
Electronics Group and constituted approximately 0.9% of our consolidated revenue
in fiscal 2000. Although we believe that the manufacturing processes of much of
our patented technology are sufficiently complex that competing products made
with the same technology are unlikely, our competitors may be able to design
competing products using the same or similar technology after these patents have
expired.
Despite the precautions we have taken, unauthorized parties may attempt to copy
aspects of our products or obtain and use information that we regard as
proprietary. Existing intellectual property laws give only limited protection
with respect to such actions, and policing violations of these laws is
difficult. The laws of other countries in which our products are or may be
distributed do not protect products and intellectual property rights to the same
extent as do the laws of the United States. We could be required to enter into
costly litigation to enforce our intellectual property rights or to defend
infringement claims by others. Infringement claims could require us to license
the intellectual property rights of third parties, but licenses may not be
available on reasonable terms, or at all.
We could be subject to product liability claims and lawsuits for harm caused by
our products.
Many of our customers use our products for applications such as aircraft,
satellites, heavy trucks and other uses in which failure could have serious
consequences. We maintain product liability insurance with a maximum coverage
of $2 million. However, this insurance may not be sufficient to cover any
claims that may arise. A successful product liability claim in excess of our
insurance coverage could have a material adverse effect on our business and
financial performance.
We must comply with environmental laws, and any failure to do so could subject
us to claims or regulatory action.
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Our facilities are subject to regulations concerning solid waste disposal,
hazardous materials generation, storage, use and disposal, air emissions, waste
water discharge, employee health and other environmental matters. A number of
the metals, chemicals and other materials used in and resulting from our
manufacturing processes are classified as hazardous substances and hazardous
wastes. If we do not meet permitting and other requirements of applicable
environmental laws, we could be liable for damages and for the costs of remedial
actions. We could also be subject to fines or other penalties, including
revocation of permits needed to conduct our business. Any permit revocation
could require us to cease or limit production at one or more of our facilities,
which could damage our business and financial performance. We have an ongoing
program of monitoring and addressing environmental matters, and from time to
time in the ordinary course of business we are required to address minor issues
of noncompliance at our operating sites. From time to time, we identify
operations or processes that lack required permits or otherwise are not in full
compliance with applicable environmental laws. Although we believe these items
have not been material to date, we maintain an environmental compliance team,
and our policy is to take steps promptly to remedy any noncompliance.
We have a policy of obtaining environmental assessment reports in connection
with the acquisition of properties at which we believe historical operations
could have caused adverse environmental conditions. We are not aware of any
historical contamination on our properties or involving neighboring activities,
except that we currently lease property in Tacoma, Washington that is located
within a superfund site that has been the subject of regulatory action for
several years. We have not been named as a potentially liable party for
contamination associated with this superfund site, and we have no reason to
believe that we will be so named.
Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with any
violations. As a generator of hazardous materials, we are subject to financial
exposure with regard to our properties even if we fully comply with these laws.
In addition, we utilize facilities that are located in industrial areas and have
lengthy operating histories. As a consequence, it is possible that historical
or neighboring activities have affected properties we currently own, and that,
as a result, additional environmental issues may arise in the future, the
precise nature of which we cannot now predict. Any present or future
noncompliance with environmental laws or future discovery of contamination could
have a material adverse effect on our results of operations or financial
condition.
As a U.S. Government contractor or subcontractor, if we do not comply with
federal laws and regulations we could lose those contracts and incur penalties.
We manufacture some of our products under contracts with the United States
government. We manufacture other products under contracts with private third
parties who utilize our products to satisfy United States government contracts
to which they are a party. Federal acquisition regulations and other federal
regulations govern these relationships. Some of these regulations relate
specifically to the seller-purchaser relationship with the government, such as
the bidding and pricing rules. Under regulations of this type, we must observe
pricing restrictions, produce
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and maintain detailed accounting data, and meet various other requirements.
Other regulations relate to the conduct of our business generally, such as
regulations and standards established by the Occupational Safety and Health Act
or similar state laws and relating to employee health and safety. In particular,
regulations governing these contracts require that we comply with federal laws
and regulations, in general, or face civil liability, cancellation or suspension
of existing contracts, or ineligibility for future contracts or subcontracts
funded in whole or in part with federal funds. In addition, loss of governmental
certification (that we are eligible for government contracted work) could cause
some of our customers, including customers in the defense industry, to reduce or
curtail their purchases from us, which could harm our business.
We have not identified any noncompliance with federal regulations affecting
these government contracts that would be material. We have identified
conditions that require attention or action. For example, as part of our
environmental compliance team efforts discussed in the previous section, we
determined that our written policies and training programs relating to employee
health and safety matters at several of our facilities required updating and
revision to ensure consistency among our United States subsidiaries and
compliance with applicable regulations. We are currently updating and
implementing these written policies and training programs. These actions are
being taken to ensure compliance with applicable laws, and not in response to
any violations identified by regulatory agencies.
We might have to issue a significant number of additional shares to the
investors in our Summer 2000 private placement, which would result in dilution
for our other shareholders.
Under the terms of the adjustable warrants and the vesting warrants issued in
our Summer 2000 private placement, we may be required to issue a significant
number of additional shares of common stock to the investors in that private
placement. Although the total number of shares of common stock issuable upon
exercise of the adjustable warrants and the vesting warrants cannot currently be
determined, we believe that applicable Nasdaq rules permit us to issue up to
6,621,712 shares of common stock as a result of the offering without shareholder
approval. If the number of shares issuable under the terms of the warrants
would exceed the number permitted by Nasdaq rules to be issued, we would have
the option either to seek shareholder approval to issue the excess shares or to
make cash payments to the investors in lieu of issuance of the excess shares.
The indenture governing our 11 1/4% senior subordinated notes would not
currently permit us to make cash payments in lieu of the excess shares. If we
seek shareholder approval to issue additional shares but do not receive the
approval, we would have to make such cash payments if the indenture permitted us
to make such cash payments. We would not be subject to additional penalties if,
after unsuccessfully using our best efforts to obtain shareholder approval, the
indenture prevented us from making such cash payments.
The dilution from our adjustable warrants and vesting warrants could decrease
the market price of our common stock.
To the extent that shares of common stock become exercisable under the
adjustable warrants and the vesting warrants issued in our Summer 2000 private
placement, the market price of our common stock could decrease because of
additional shares being acquired by the selling
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shareholders and sold in the market. The selling shareholders may have an
incentive to sell common stock in the market before the adjustable warrants
fully vest because those sales could contribute to a reduced price for our
common stock. A reduced price could allow the selling shareholders to exercise
the adjustable warrants for additional shares of common stock on subsequent
vesting dates. The issuance and sale of those additional shares could further
depress the market price of the common stock and encourage short sales of our
common stock. In addition, the possibility of dilution and decreased market
price could inhibit our opportunities to obtain additional public or private
financing when and if needed or on terms acceptable to us.
Future issuances or resales of a significant number of shares of our common
stock could negatively affect the market price of our stock.
Sales of a significant number of shares of common stock in the public market or
the prospect of such sales could adversely affect the market price of our common
stock. This offering covers the resale by the selling shareholders of up to
1,607,010 shares of common stock. This offering does not cover shares that two
of the selling shareholders may obtain under the adjustable warrants and the
vesting warrants described in this prospectus. The actual number of shares
issuable upon exercise of those warrants cannot be determined at this time
because the adjustment provisions of the adjustable warrants and vesting events
under the vesting warrants will determine the number of shares issuable under
those warrants. We are obligated to file another registration statement that
will permit the selling shareholders to resell the shares issuable under those
warrants once the number of shares issuable is determined. As of December 1,
2000, we have also reserved 2,295,000 common shares for issuance under our
publicly traded warrants with an exercise price of $4.6875 per share, 3,361,448
common shares for issuance under options outstanding under our two stock
incentive plans, with exercise prices ranging from $1.00 to $4.687 per share,
161,696 common shares for issuance under options outstanding under our
independent director stock plan, with exercise prices ranging from $.92 to $6.06
per share, and 838,609 common shares for issuance under other warrants, with
exercise prices ranging from $2.00 to $7.20 per share. We also have an employee
stock purchase plan permitting employees to purchase shares of common stock
using payroll deductions. Shares issued upon exercise of our outstanding
warrants or options or pursuant to the employee stock purchase plan would be
available for resale in the public markets, subject in some cases to volume and
other limitations. Any future issuance of a significant number of common
shares, or any future resales by the holders of a significant number of common
shares, or the prospect of such issuances or resales, could negatively affect
the market price of our common stock.
Because the minimum bid price for our common stock has been less than $1.00 for
over 30 consecutive trading days, or if we were unable to meet Nasdaq's
standards for any other reason, our common stock could be delisted from the
Nasdaq National Market System, and it could become more difficult to buy or sell
our common stock.
Our common stock is quoted on the Nasdaq National Market System. In order to
remain listed on this market, we must meet Nasdaq's listing maintenance
standards. The minimum bid price of our common stock has been lower than $1.00
since November 7, 2000.
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On December 21, 2000, we received a letter from Nasdaq raising a concern
regarding the continued listing of our common stock on the Nasdaq National
Market System. The letter advised us that our common stock had failed to
maintain a minimum bid price greater than or equal to $1.00 over the previous
thirty consecutive trading days, as required by applicable Nasdaq rules. As of
January 8, 2001, our common stock continued to trade below $1.00. The letter
advised us that we would be provided 90 calendar days, or until March 21, 2001,
to regain compliance with the minimum bid price rule. The letter further
advised that if, at any time before March 21, 2001, the bid price of our shares
of common stock is equal to or greater than $1.00 for a minimum of ten
consecutive trading days, Nasdaq would determine if we comply with the rule.
However, if we were unable to demonstrate compliance with the requirement on or
before March 21, 2001, Nasdaq would provide us with written notification that
Nasdaq had determined to delist our common stock. We would then be entitled to
request a review of that determination.
We also received a letter from Nasdaq on December 6, 2000, raising concerns
about whether we would be able to sustain compliance with the continued listing
requirements of the Nasdaq Stock Market as a result of the "going concern"
warning that we received from our independent auditors in their last audit
report. Nasdaq requested that we provide it with certain information addressing
its concerns. We responded to that request in a timely manner, and Nasdaq has
not yet notified us as to whether we adequately addressed its concerns.
If our common stock were delisted, it would trade on the electronic bulletin
board, rather than on either the Nasdaq National Market or Small Cap Systems,
and the liquidity for our common stock would be adversely affected. In
addition, delisting would trigger the vesting of penalty shares under the
vesting warrants held by the selling shareholders, which would result in
additional dilution.
OUR BUSINESS
Pacific Aerospace is an engineering and manufacturing company with operations in
the United States and the United Kingdom. We design, manufacture and sell
components and subassemblies used in technically demanding environments.
Products that we produce primarily for the aerospace and transportation
industries include machined, cast, and formed metal parts and subassemblies,
using aluminum, titanium, magnesium, and other metals. Products that we produce
primarily for the defense, electronics, telecommunications and medical
industries include components such as hermetically sealed electrical connectors
and instrument packages, and ceramic capacitors, filters and feedthroughs. Our
customers include global leaders in all of these industries. We are organized
into three operational groups: U.S. Aerospace, U.S. Electronics, and European
Aerospace.
For our fiscal year ended May 31, 2000, we had net sales of approximately $113
million, with the European Aerospace Group contributing approximately $57
million in net sales. On October 31, 2000, we announced our intention to sell
our European Aerospace Group in order to reduce our outstanding 11 1/4% senior
subordinated notes. As of May 31, 2000, we had approximately $64 million in
principal amount of 11 1/4% senior subordinated notes outstanding. Because we
have
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just begun the process of seeking buyers for our European Aerospace Group, we do
not know whether we will be successful in selling that group and, if successful,
we do not know the amount of net proceeds that would be available to reduce our
11 1/4% senior subordinated notes. If, at such time as we have committed to a
formal plan of disposition of the European Aerospace Group, any impairment of
the assets of that group can be reasonably determined, we will record any such
impairment loss in our consolidated financial statements. Although we cannot
currently reasonably determine the extent of any such impairment loss, it could
be substantial.
Our executive offices are located at 430 Olds Station Road, Third Floor,
Wenatchee, Washington, and our telephone number is (509) 667-9600.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference publicly-filed documents into this
prospectus, which means that information included in those documents is
considered part of this prospectus. Information that we file with the SEC after
the date of this prospectus will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the selling shareholders have sold all the
shares.
The following documents filed with the SEC are incorporated by reference in this
prospectus:
1. Our annual report on Form 10-K for the year ended May 31, 2000, filed
on August 28, 2000, our first amended annual report on Form 10-K/A
filed on October 13, 2000, and our second amended annual report on
Form 10-K/A filed on January 18, 2001;
2. Our amended current report on Form 8-K/A filed on July 13, 2000, and
our second amended current report on Form 8-K/A filed on January 17,
2001;
3. Our current report on Form 8-K filed on August 8, 2000;
4. Our definitive proxy statement filed on September 7, 2000;
5. Our quarterly report on Form 10-Q filed on October 12, 2000, and
our amended quarterly report on Form 10-Q/A filed on January 18, 2001;
6. Our quarterly report on Form 10-Q filed on January 12, 2001; and
7. The description of our common stock set forth in our registration
statement on Form 8-B as filed with the SEC on February 6, 1997.
You may request free copies of these filings by writing or telephoning us at the
following address: Pacific Aerospace & Electronics, Inc., 430 Olds Station Road,
Third Floor, Wenatchee, Washington 98801, Attention: Mr. Tom Barrows, Investor
Relations, (509) 667-9600.
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The information relating to Pacific Aerospace contained in this prospectus is
not comprehensive, and you should read it together with the information
contained in the incorporated documents.
AVAILABLE INFORMATION
This prospectus is part of a registration statement that we filed with the SEC.
Certain information in the registration statement has been omitted from this
prospectus in accordance with SEC rules.
We file annual, quarterly and special reports and other information with the
SEC. You may read and copy the registration statement and any other document
that we file at the SEC's public reference rooms located at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade Center,
Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Our SEC filings are
also available to you free of charge at the SEC's web site at
http://www.sec.gov.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
you should refer to the copy of the contract or other document filed as an
exhibit to the registration statement.
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SELLING SHAREHOLDERS
Shares Offered by the Selling Shareholders. The selling shareholders are
offering up to 1,607,010 shares of common stock pursuant to this prospectus.
These shares are related to a private placement that closed on July 27, 2000 and
are composed of:
. 1,142,860 shares of common stock sold by Pacific Aerospace to Strong River
Investments, Inc. and to Bay Harbor Investments, Inc. on July 27, 2000;
. up to 385,000 shares of common stock issuable to Strong River and Bay Harbor
upon exercise of closing warrants issued to them on July 27, 2000; and
. up to 79,150 shares of common stock issuable upon exercise of warrants issued
on July 27, 2000 to the placement agent that acted on behalf of Pacific
Aerospace in the private placement.
The private placement was made pursuant to the exemption from registration
contained in Rule 506 of Regulation D under the Securities Act based on the sale
to accredited investors in a private transaction with the purchasers
acknowledging that the securities cannot be resold unless registered or exempt
from registration under the securities laws. In the private placement, we agreed
with the investors to file the registration statement of which this prospectus
is a part to register the shares for resale in the U.S.
We have filed this prospectus and the related registration statement with the
SEC to allow the selling shareholders to resell the shares to third parties
according to the plan of distribution described in this prospectus. See "Plan of
Distribution."
In the private placement, we also issued to Strong River and Bay Harbor the
adjustable warrants and the vesting warrants described in this section. We are
obligated to file another registration statement with the SEC and to make and
keep it effective so that the selling shareholders will be able to resell the
shares issuable under the adjustable warrants and the vesting warrants, once the
number of shares issuable under those warrants is determined.
Description of Summer 2000 Private Placement. On July 27, 2000, we issued
1,142,860 shares of common stock and warrants to purchase additional shares to
two accredited investors, Strong River Investments, Inc. and Bay Harbor
Investments, Inc., for gross proceeds of $2.0 million. We paid a commission to
Rochon Capital Group, Ltd. comprised of $80,000 in cash and warrants to purchase
79,150 shares of common stock, at an exercise price of $1.7688 per share,
exercisable through July 27, 2003, for representing Pacific Aerospace in this
transaction. After taking into consideration other expenses related to the
transaction, we received net proceeds at closing of $1,886,500, which we used to
pay down our U.S. credit line.
We also issued to the investors on July 27, 2000, closing warrants to purchase
an aggregate of 385,000 shares of common stock at an exercise price of $2.01 per
share, exercisable through July
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27, 2003, and adjustable warrants and vesting warrants to purchase a currently
indeterminate number of shares, as described below. The vesting dates and
expiration dates contained in the warrants and the numbers of shares issuable
upon exercise of the warrants are subject to anti-dilutive adjustments. The
terms of the transaction, including the terms of the warrants, were determined
by arms length negotiations between Pacific Aerospace and the investors.
The transaction documents also provided that upon effectiveness of the
registration statement within 60 days after the first closing, a second closing
would occur, and the investors would pay an additional $1.5 million and receive
857,140 additional shares of common stock. No additional warrants would be
issued at a second closing. The effectiveness of the registration statement
within 60 days after the first closing was the only condition to the second
closing. This condition was not satisfied, and the investors have decided not to
waive the condition. As a result, the second closing will not occur.
Closing Warrants. On July 27, 2000, Pacific Aerospace issued the accredited
investors closing warrants to purchase an aggregate of 385,000 shares of common
stock at an exercise price of $2.01 per share. The closing warrants were
exercisable in full on the date of issuance and remain exercisable until their
expiration on July 27, 2003. These warrants are not subject to any adjustments
relating to market price, but the exercise price would be adjusted for the
issuance of common stock or common stock equivalents at a price below the
warrant exercise price while the warrants are outstanding. The exercise price
can be paid in cash, or the holder can utilize a cashless exercise provision.
The purpose of the closing warrants was to provide the investors with an
opportunity to obtain an additional return on their investment if the common
stock price exceeds $2.01 per share prior to expiration of the warrants.
Adjustable Warrants. The adjustable warrants permit the investors to acquire
additional shares of common stock for an exercise price of $.001 per share if
the market price of the Pacific Aerospace common stock does not achieve and
maintain a specific price during each of three vesting periods. Each vesting
period consists of the 20 consecutive trading days before each vesting date. The
vesting dates are the 20th, 40th and 60th trading days after the effective date
of the registration statement, which is the date of this prospectus, subject to
the right of the investors to accelerate the vesting dates if any of the
triggering events provided in the adjustable warrants occurs.
On each vesting date, Pacific Aerospace will determine with the investors, based
on a formula contained in the adjustable warrants, whether the warrants have
become exercisable for any warrant shares. For each vesting period, the lowest
five closing prices for Pacific Aerospace common stock during that period will
be averaged. If the average during a vesting period is less than $1.9022 per
share, the investors will be entitled to purchase additional shares in an amount
equal to: (i) one-third of the shares purchased by the investors at closing,
multiplied by (ii) the difference between $1.9022 and the average of the lowest
five closing prices for Pacific Aerospace common stock during that vesting
period, all divided by such average. The $1.9022 was derived by taking $1.75,
which was the negotiated number intended to approximate the fair market value of
the shares and warrants sold at closing, and dividing that number by .92.
Because there are three vesting periods, the formula applies on each vesting
date to one-third of
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the shares purchased by the investors at closing, which limits the effect of the
market prices during any single vesting period.
If the average of the lowest five closing prices for Pacific Aerospace common
stock is $1.9022 or above during a vesting period, Pacific Aerospace will not
have to issue additional shares of common stock for that vesting period. In
addition, if the average closing price of Pacific Aerospace common stock exceeds
$2.19 per share for any 20 consecutive trading days following the effective date
of the registration statement, no further vesting will occur and Pacific
Aerospace will never have to issue additional shares under the adjustable
warrants.
The investors can exercise adjustable warrants at an exercise price of $.001 per
share for fifteen trading days following each of the three vesting dates. The
adjustable warrants expire fifteen trading days after the third vesting date.
Once the adjustable warrants expire, the investors will not be entitled to
additional shares under the adjustable warrants, even if the Pacific Aerospace
stock price decreases after that date.
If any of several triggering events occurs before the third vesting date, the
investors will have the right to accelerate the vesting of shares under the
adjustable warrants. The triggering events include: (1) the acquisition of more
than one-third of the voting securities of Pacific Aerospace; (2) the
replacement of more than one-half of the members of the Pacific Aerospace board
of directors existing as of July 27, 2000; (3) the merger, consolidation or sale
of all or substantially all of Pacific Aerospace's assets if the holders of
Pacific Aerospace securities following the transaction hold less than two-thirds
of the securities of the surviving entity or the acquirer of the assets; (4) a
transaction that would change Pacific Aerospace from a public company to a
private company; (5) the delisting of Pacific Aerospace common stock for ten
consecutive days; (6) failure to deliver certificates to the holders in a timely
manner; (7) material breach under the transaction documents; (8) failure to
obtain an effective registration statement within 180 days after the closing; or
(9) failure to maintain the registration statement effective for the required
time period.
If any of these triggering events occurs, the investors may give Pacific
Aerospace notice, and, to the extent the adjustable warrants have not already
vested, Pacific Aerospace will have to determine whether additional shares are
issuable under the warrants, using the 20 trading days before the date of the
notice as the vesting period. These provisions have several purposes. In the
event of any of the fundamental changes to Pacific Aerospace listed as items (1)
through (5), these provisions give the investors the ability to get an early
determination of whether they are entitled to additional shares under the
adjustable warrants. Item (8) above gives the investors the right to trigger
vesting by the passage of time, even if the registration statement does not
become effective. Finally, these provisions give Pacific Aerospace an additional
incentive to comply with its obligations covered by the triggering events listed
as (6) through (9) and to cure any failure to comply.
After the number of shares issuable under the adjustable warrants is determined,
Pacific Aerospace will be required to file another registration statement to
register the resale of those shares by the investors.
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Vesting Warrants. The vesting warrants permit the investors to acquire
additional shares of common stock for an exercise price of $.001 per share if
any of two sets of triggering events occurs. The purpose of the vesting warrants
is to give Pacific Aerospace an incentive not to cause any of the triggering
events to occur prior to expiration of the vesting warrants and an incentive to
cure triggering events that occur, if they can be cured. Each set of events has
a different formula for determining the number of shares that become issuable
under the vesting warrants. If any of the nine triggering events listed above
occurs, the investors will be entitled to receive the number of additional
shares of common stock equal to the product of 30% of $3,500,000 divided by the
closing price of Pacific Aerospace common stock on the trading day before the
date of the event.
The vesting warrants also provide for additional shares under a different
formula if a second set of triggering events occurs. These events include: (1)
failure to have the registration statement effective within 60 days after the
closing; (2) other events relating to actions of Pacific Aerospace in obtaining
and maintaining an effective registration statement, and (3) the delisting of
Pacific Aerospace common stock for ten consecutive days. If any of these events
occurs, and on each monthly anniversary thereafter until cured, the investors
will be entitled to receive a number of additional shares equal to the product
of 3% of $3,500,000 divided by the closing price of Pacific Aerospace common
stock on the trading day before the date of the event or the closing price on
the trading day before the date of the anniversary, whichever is applicable.
The figure $3,500,000 represents the amount of the entire investment the
investors would have made if the second closing had occurred, and that amount
and the 30% and 3% figures were terms of the vesting warrants negotiated with
the investors.
The vesting warrants were included in this transaction instead of Pacific
Aerospace being obligated to make cash payments to the investors upon the
occurrence or continuance of the triggering events. Under the indenture
governing its outstanding 11 1/4% senior subordinated notes, Pacific Aerospace
would not be permitted to make cash payments to the investors. The vesting
warrants provide comparable equity incentives.
One of the second set of triggering events occurred because the registration
statement did not become effective within 60 days after the closing. However,
the investors waived their rights to any shares under the vesting warrants as a
result of that event. If the registration statement is not effective 180 days
after closing, shares would vest under the formula described above for the first
set of triggering events under the vesting warrants.
The vesting warrants expire five business days after the expiration of the
adjustable warrants. Once the vesting warrants expire, the investors will not be
entitled to additional shares under the vesting warrants, if one of the
triggering events occurs after the expiration date.
Limits on Shares Issuable to the Investors. The adjustable warrants and the
vesting warrants, by their terms, cannot be exercised for a number of shares
greater than the number Pacific Aerospace may issue without shareholder approval
under applicable Nasdaq rules. If the number
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of shares issuable would exceed the number of shares permitted to be issued
without shareholder approval under applicable Nasdaq rules, Pacific Aerospace
would have two choices. First, Pacific Aerospace could choose to make a cash
payment to the investors, if and to the extent the cash payment is permitted by
Pacific Aerospace's lenders, equal to the excess shares multiplied by the
closing price of Pacific Aerospace common stock on either the 60th day following
the exercise date or the exercise date, whichever is greater. Alternatively,
Pacific Aerospace could use its best efforts to obtain shareholder approval for
the issuance of the additional shares. The indenture governing the outstanding
11 1/4% senior subordinated notes would not currently permit Pacific Aerospace
to make the cash payments to the investors. If this circumstance were to arise,
Pacific Aerospace would most likely seek shareholder approval to issue
additional shares. If shareholder approval were not obtained, Pacific Aerospace
would be obligated to make the cash payment described above, if and to the
extent that the cash payment is permitted by the indenture, and would be
obligated to pay 18% per annum interest if such payment were not made when due,
if and to the extent that the interest payment is permitted by the indenture.
Pacific Aerospace would not be subject to additional penalties if, after
unsuccessfully using its best efforts to obtain shareholder approval, the
indenture prevented Pacific Aerospace from making cash payments to the
investors. In the event that the common stock is delisted from Nasdaq, Pacific
Aerospace would not be required to seek shareholder approval to issue excess
shares, and Pacific Aerospace does not expect that it would seek shareholder
approval for the issuance of excess shares.
The closing warrants, the adjustable warrants and the vesting warrants each
provides that an investor may not exercise a warrant to the extent that such
exercise would result in the investor beneficially owning more than 9.999% of
outstanding Pacific Aerospace common stock.
Effect of the Adjustable Warrants and the Vesting Warrants. The following table
outlines the number of common shares that would be issuable under the adjustable
warrants at several hypothetical adjustment prices. The table also sets forth
the total number of shares the investors would beneficially own at such
hypothetical adjustment prices and the percentage that such shares would
constitute of the resulting outstanding common stock of Pacific Aerospace,
assuming the investors had not purchased or sold any Pacific Aerospace
securities. Each of the investors, Strong River and Bay Harbor, would own half
of the securities shown below.
The closing price of Pacific Aerospace common stock on July 26, 2000, the
trading day immediately before the closing of this transaction, was $1.5938 per
share. During calendar year 1999, the closing price of Pacific Aerospace common
stock ranged from a low of $0.5938 to a high of $2.9688 per share. During
calendar year 2000, the closing price of the common stock ranged from a low of
$0.3438 to a high of $7.00 per share.
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<TABLE>
<CAPTION>
Shares Issuable Total Shares Total Shares as
Hypothetical Shares Issuable Under Shares Issuable Issued and a Percent of
Adjustment Shares Issued Under Closing Adjustable Under Vesting Issuable to Outstanding
Price/(1)/ at Closing Warrants Warrants/(1)/ Warrants/(2)/ Investors Stock/(3)/
<S> <C> <C> <C> <C> <C> <C>
$0.25 1,142,860 385,000 7,552,814 0 9,080,674 20.90%
$0.50 1,142,860 385,000 3,204,977 0 4,732,837 12.10%
$0.60 1,142,860 385,000 2,480,338 0 4,008,198 10.44%
$0.625/(4)/ 1,142,860 385,000 2,335,410 0 3,863,270 10.11%
$0.75 1,142,860 385,000 1,755,698 0 3,283,558 8.72%
$1.00 1,142,860 385,000 1,031,058 0 2,558,918 6.93%
$1.25 1,142,860 385,000 596,275 0 2,124,135 5.82%
$1.50 1,142,860 385,000 304,419 0 1,832,279 5.06%
$1.75 1,142,860 385,000 99,379 0 1,627,239 4.52%
$2.00 1,142,860 385,000 0 0 1,527,860 4.26%
$3.00 1,142,860 385,000 0 0 1,527,860 4.26%
</TABLE>
___________________
/(1)/ Under the adjustable warrants, the adjustment price would be based on the
average of the lowest five closing prices for Pacific Aerospace common
stock during the 20 consecutive trading days before each of three vesting
dates. This table assumes that the hypothetical adjustment price is the
same for each of these vesting periods.
/(2)/ If triggering events occur under the vesting warrants, the number of
shares issuable under the vesting warrants would depend on the type and
duration of the triggering event and the price of Pacific Aerospace common
stock. This table assumes that no shares are issuable under the vesting
warrants.
/(3)/ Based on 34,367,246 shares of common stock outstanding on January 8, 2001,
plus the shares issuable to investors under the adjustable warrants,
vesting warrants and closing warrants shown above.
/(4)/ Closing price of Pacific Aerospace common stock on January 8, 2001.
Information Regarding the Selling Shareholders. No selling shareholder has held
any position or office or has had any other material relationship with Pacific
Aerospace or any of its affiliates within the past three years, except that
Rochon Capital Group, Ltd. was engaged through November 16, 2000 to act as
placement agent on behalf of Pacific Aerospace.
The following table sets forth information as of January 17, 2001, to the best
of our knowledge, regarding the ownership of common stock by the selling
shareholders and as adjusted to give effect to the sale of the shares offered by
this prospectus.
<TABLE>
<CAPTION>
Shares Beneficially Owned After
Shares Offering if All Shares Offered by
Beneficially this Prospectus are Sold/(1)/
Owned Prior Shares Being -----------------------------------
Selling Shareholder to Offering/(1)/ Offered Shares Percent
------------------- --------------- ------------ -----------------------------------
<S> <C> <C> <C> <C>
Strong River Investments, Inc./(2)/ 1,527,860/(3)/ 763,930/(4)/ 0/(5)/ --/(5)/
Bay Harbor Investments, Inc./(2)/ 1,527,860/(3)/ 763,930/(4)/ 0/(5)/ --/(5)/
Rochon Capital Group, Ltd./(6)/ 79,150/(7)/ 79,150/(7)/ 0 --
</TABLE>
23
<PAGE>
___________________
/(1)/ Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to warrants that are currently exercisable or convertible or may
be exercised or converted within 60 days are deemed to be outstanding and
to be beneficially owned by the person holding the warrants for the
purpose of computing the number of shares beneficially owned.
/(2)/ Strong River Investments, Inc. and Bay Harbor Investments, Inc. are both
wholly owned subsidiaries of Enright Holding Corp., of which Mr. Avi
Vigder is managing director. Accordingly, Enright Holding Corp. and Mr.
Vigder have voting and investment power over the shares shown above as
owned by Strong River Investments, Inc. and Bay Harbor Investments, Inc.
/(3)/ Consists of: 571,430 shares of common stock issued to each of Bay Harbor
Investments, Inc. and Strong River Investments, Inc. on July 27, 2000; and
192,500 issuable under the closing warrants held by these investors.
Excludes any shares issuable under the adjustable warrants and the vesting
warrants held by these investors.
/(4)/ Consists of: 571,430 shares of common stock issued to this investor on
July 27, 2000; and 192,500 issuable under the closing warrant held by this
investor. Excludes any shares issuable under the adjustable warrant and
the vesting warrant held by this investor.
/(5)/ After this offering, Strong River and Bay Harbor will continue to hold
adjustable warrants issuable for a number of shares that depends on the
price of our common stock during three vesting periods. Those investors
also will continue to hold vesting warrants that, if triggering events
occur, will entitle the investors to additional shares depending on the
type and duration of the event and the price of Pacific Aerospace stock.
The number of shares issuable under the adjustable warrants and the
vesting warrants is not determinable at this time.
/(6)/ Voting and investment power over the shares shown above as owned by Rochon
Capital Group, Inc. is held by Phillip L. Neiman.
/(7)/ Represents shares of common stock issuable upon exercise of warrants
issued to Rochon Capital Group, Ltd. on July 27, 2000.
24
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders and any of their future pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling shareholders may use any one or more of the
following methods when selling shares:
. ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
. transactions in which the broker-dealer will attempt to sell 10,000 or more
shares as agent but may then purchase and resell a portion of the shares as
principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
. privately negotiated transactions;
. broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;
. a combination of any such methods of sale; and
. any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares of our common stock under Rule 144
under the Securities Act, if available, rather than under this prospectus. Rule
144 would be available to the selling shareholders after they have had a holding
period of one year for the securities. After the one-year holding period is
satisfied, each selling shareholder could sell common stock in market
transactions, subject to a limit during any three-month period of the greater of
1% of our outstanding common stock or the average weekly trading volume of our
common stock calculated pursuant to Rule 144. After a selling shareholder has a
two-year holding period for the securities, if the selling shareholder is not a
controlling person of our company, the selling shareholder could resell shares
of our common stock without restriction.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling shareholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Pacific Aerospace is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling shareholders. Pacific Aerospace has agreed to indemnify the selling
shareholders against specified losses, claims, damages and liabilities,
including liabilities under the Securities Act.
25
<PAGE>
EXPERTS
The consolidated financial statements of Pacific Aerospace & Electronics, Inc.
as of May 31, 1999 and 2000 and for each of the years in the three-year period
ended May 31, 2000 have been incorporated by reference in this prospectus and in
the registration statement of which this prospectus is a part in reliance upon
the report of KPMG LLP, independent certified public accountants, incorporated
by reference herein and therein, and upon the authority of that firm as experts
in accounting and auditing. The report of KPMG LLP contained in our annual
report on
Form 10-K/A for the year ended May 31, 2000, contains an explanatory paragraph
that states that Pacific Aerospace's recurring losses from operations raise
substantial doubt about our ability to continue as a going concern. Our
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
LEGAL MATTERS
The validity of the issuance of the shares offered by this prospectus has been
passed upon for Pacific Aerospace by Stoel Rives LLP of Seattle, Washington.
26
<PAGE>
<TABLE>
<S> <C>
This prospectus does not constitute an PACIFIC AEROSPACE &
offer to sell or a solicitation of an ELECTRONICS, INC.
offer to buy the shares:
. in any jurisdiction in which such
offer to sell or solicitation is 1,607,010 Shares
not unauthorized;
of
. in any jurisdiction in which the
person making such offer or Common Stock
solicitation is not qualified to do
so; or
. to any person to whom it is
unlawful to make such offer or --------------------
solicitation.
PROSPECTUS
--------------------
, 2001
---------- ---
</TABLE>
27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Distribution.
------------------------------
The following table sets forth the expenses incurred in connection with the sale
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimated except the
SEC registration fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC registration fee paid.................................. $ 2,049
Nasdaq National Market listing fee......................... 17,500
Legal fees and expenses.................................... 50,000
Accounting fees and expenses............................... 15,000
Miscellaneous.............................................. 451
Total...................................................... $85,000
</TABLE>
Item 15. Indemnification of Officers and Directors.
-----------------------------------------
Article 8 of the Company's Articles of Incorporation authorizes the Company to
indemnify its directors to the fullest extent permitted by the Washington
Business Corporation Act through the adoption of bylaws, approval of agreements,
or by any other manner approved by the Board of Directors. Such indemnification
would be available except for acts or omissions as a director finally adjudged
to be intentional misconduct or a knowing violation of law, a vote or consent to
an illegal distribution, or any transaction from which the director personally
received a benefit in money, property or services to which the director was not
legally entitled.
In accordance with such authorization, Section 10 of the Company's Bylaws (the
"Bylaws") requires indemnification, to the fullest extent permitted by
applicable law, of any person who is or has served as a director or officer of
the Company, as well as any person who, while serving as a director or officer
of the Company, served at the request of the Company as a director, officer,
employee or agent of another entity, against expenses reasonably incurred
because such person was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether formal or
informal, civil, criminal, administrative or investigative.
Notwithstanding these indemnification obligations, Section 10 of the Bylaws
states that no indemnification will be provided (a) to the extent that such
indemnification would be prohibited by the Washington Business Corporation Act
or other applicable law as then in effect, or (b) except with respect to
proceedings seeking to enforce rights to indemnification, to any director or
officer seeking indemnification in connection with a proceeding initiated by
such person unless such proceeding was authorized by the Board of Directors.
II-1
<PAGE>
Section 10 of the Bylaws also provides that expenses incurred in defending any
proceeding in advance of its final disposition shall be advanced by the Company
to the director or officer upon receipt of an undertaking by or on behalf of
such person to repay such amount if it is ultimately determined that such person
is not entitled to be indemnified by the Company, except where the Board of
Directors adopts a resolution expressly disapproving such advancement. Section
10 of the Bylaws also authorizes the Board to indemnify and advance expenses to
employees and agents of the Company on the same terms and with the same scope
and effect as the provisions thereof with respect to the indemnification and
advancement of expenses to directors and officers.
Item 16. Exhibits.
--------
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
2.1 Securities Purchase Agreement among Pacific Aerospace & Electronics, Inc., Strong
River Investments, Inc., and Bay Harbor Investments, Inc., dated as of July 27, 2000.(2)
4.l Articles of Incorporation of Pacific Aerospace & Electronics, Inc.(1)
4.2 Bylaws of Pacific Aerospace & Electronics, Inc., as amended.(3)
4.3 Form of specimen certificate for Common Stock.(1)
4.4 Registration Rights Agreement between Pacific Aerospace & Electronics, Inc., Strong
River Investments, Inc., and Bay Harbor Investments, Inc., dated as of July 27, 2000.(2)
4.5 Warrant between Pacific Aerospace & Electronics, Inc. and Strong River Investments,
Inc., dated as of July 27, 2000. (2)
4.6 Warrant between Pacific Aerospace & Electronics, Inc. and Bay Harbor Investments,
Inc., dated as of July 27, 2000. (2)
4.7 Warrant between Pacific Aerospace & Electronics, Inc. and Strong River Investments,
Inc., dated as of July 27, 2000. (2)
4.8 Warrant between Pacific Aerospace & Electronics, Inc. and Bay Harbor Investments,
Inc., dated as of July 27, 2000. (2)
4.9 Vesting Warrant between Pacific Aerospace & Electronics, Inc. and Strong River
Investments, Inc., dated as of July 27, 2000. (2)
4.10 Vesting Warrant between Pacific Aerospace & Electronics, Inc. and Bay Harbor
Investments, Inc., dated as of July 27, 2000. (2)
4.11 Placement Agent Warrant between Pacific Aerospace & Electronics, Inc. and Rochon
Capital Group, Ltd., dated as of July 27, 2000. (4)
5.1 Opinion of Stoel Rives LLP.(7)
23.1 Consent of KPMG LLP.(7)
23.2 Consent of Stoel Rives LLP (included in Exhibit 5.1).
24.1 Power of Attorney for officers and certain directors.(5)
24.2 Power of Attorney for an additional director.(6)
</TABLE>
______________________________________________________________________________
(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
on December 12, 1996.
(2) Incorporated by reference to the Company's Current Report on Form 8-K filed
on August 8, 2000.
II-2
<PAGE>
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ending August 31, 2000.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ending May 31, 2000.
(5) Filed with the Registration Statement.
(6) Filed with Amendment No. 1 to this Registration Statement.
(7) Filed with this Amendment.
Item 17. Undertakings.
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration
statement (or the most recent post-effective amendment
thereof) that, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
II-3
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under "Plan of Distribution" and Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, PACIFIC
AEROSPACE & ELECTRONICS, INC. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Amendment No. 2 to the Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Wenatchee, Washington, on January 18, 2001.
PACIFIC AEROSPACE & ELECTRONICS, INC.
By: /s/ Donald A. Wright
---------------------------
Donald A. Wright, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement on Form S-3 has been signed by the
following persons in the capacities indicated on January 18, 2001.
Signature Title
/s/ Donald A. Wright President, Chief Executive
------------------------------------------- Officer and Director
Donald A. Wright (Principal Executive Officer)
/s/ Nick A. Gerde* Chief Financial Officer, Vice
------------------------------------------- President Finance and Treasurer
Nick A. Gerde (Principal Financial and
Accounting Officer)
/s/ Werner Hafelfinger* Director
-------------------------------------------
Werner Hafelfinger
/s/ Dale L. Rasmussen* Director
-------------------------------------------
Dale L. Rasmussen
/s/ William A. Wheeler* Director
-------------------------------------------
William A. Wheeler
/s/ Robert M. Stemmler* Director
-------------------------------------------
Robert M. Stemmler
/s/ Gene C. Sharratt, Ph.D.* Director
-------------------------------------------
Gene C. Sharratt, Ph.D.
*By /s/ Donald A. Wright
---------------------------------------
Donald A. Wright
(Attorney in Fact)
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
2.1 Securities Purchase Agreement among Pacific Aerospace & Electronics, Inc., Strong
River Investments, Inc., and Bay Harbor Investments, Inc., dated as of July 27, 2000.(2)
4.l Articles of Incorporation of Pacific Aerospace & Electronics, Inc.(1)
4.2 Bylaws of Pacific Aerospace & Electronics, Inc., as amended.(3)
4.3 Form of specimen certificate for Common Stock.(1)
4.4 Registration Rights Agreement between Pacific Aerospace & Electronics, Inc., Strong
River Investments, Inc., and Bay Harbor Investments, Inc., dated as of July 27, 2000.(2)
4.5 Warrant between Pacific Aerospace & Electronics, Inc. and Strong River Investments,
Inc., dated as of July 27, 2000. (2)
4.6 Warrant between Pacific Aerospace & Electronics, Inc. and Bay Harbor Investments,
Inc., dated as of July 27, 2000. (2)
4.7 Warrant between Pacific Aerospace & Electronics, Inc. and Strong River Investments,
Inc., dated as of July 27, 2000. (2)
4.8 Warrant between Pacific Aerospace & Electronics, Inc. and Bay Harbor Investments,
Inc., dated as of July 27, 2000. (2)
4.9 Vesting Warrant between Pacific Aerospace & Electronics, Inc. and Strong River
Investments, Inc., dated as of July 27, 2000. (2)
4.10 Vesting Warrant between Pacific Aerospace & Electronics, Inc. and Bay Harbor
Investments, Inc., dated as of July 27, 2000. (2)
4.11 Placement Agent Warrant between Pacific Aerospace & Electronics, Inc. and Rochon
Capital Group, Ltd., dated as of July 27, 2000. (4)
5.1 Opinion of Stoel Rives LLP.(7)
23.1 Consent of KPMG LLP.(7)
23.2 Consent of Stoel Rives LLP (included in Exhibit 5.1).
24.1 Power of Attorney for officers and certain directors.(5)
24.2 Power of Attorney for an additional director.(6)
</TABLE>
______________________________________________________________________________
(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
on December 12, 1996.
(2) Incorporated by reference to the Company's Current Report on Form 8-K filed
on August 8, 2000.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ending August 31, 2000.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ending May 31, 2000.
(5) Filed with the Registration Statement.
(6) Filed with Amendment No. 1 to this Registration Statement.
(7) Filed with this Amendment.
