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                                                                   EXHIBIT 10.14
                              SUBSIDIARY GUARANTEE

               The Guarantors listed below (hereinafter referred to as the
"Guarantors," which term includes any successor or assign under the Indenture
(the "Indenture") and any additional Guarantors), have irrevocably and
unconditionally guaranteed (i) the due and punctual payment of the principal of,
premium, if any, and interest on the 10% Senior Subordinated Pay-In-Kind Notes
due 2007 (the "Notes") of Pacific Aerospace & Electronics, Inc., a Washington
corporation (the "Company"), whether at stated maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal and
premium, if any, on the Notes, and the due and punctual performance of all other
obligations of the Company, to the Holders or the Trustee all in accordance with
the terms set forth in Article 11 of the Indenture, (ii) in case of any
extension of time of payment or renewal of any Notes or any such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise, and (iii) the payment of any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee.

               The obligations of each Guarantor to the Holder and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee.

               No shareholder, officer, director or incorporator, as such, past,
present or future of each Guarantor shall have any liability under this
Subsidiary Guarantee by reason of his or its status as such shareholder,
officer, director or incorporator.

               This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Company's obligations under the Notes
and Indenture and shall inure to the benefit of the successors and assigns of
the Trustee and the Holders, and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a Guarantee
of payment and not of collectibility.

               This Subsidiary Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Notes to which this
Subsidiary Guarantee relates shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.

               The Obligations of each Guarantor under its Subsidiary Guarantee
shall be limited to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law.

               The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to Article 11 of the Indenture shall be junior and subordinated to the
Senior Indebtedness (as defined in the Indenture) of such Guarantor on the same
basis as the Notes are junior and subordinated to the Senior Indebtedness of the
Company. For the purposes of the foregoing sentence, (a) each Guarantor may
make, and the Trustee and the Holders of the Notes shall have the right to
receive and/or retain, payments by any of the Guarantors only at such times as
they may receive and/or retain payments in respect of the Notes pursuant to the
Indenture, including Article 10 thereof, and (b) the rights and obligations of
the relevant parties relative to the Subsidiary Guarantees and Senior
Indebtedness of any Guarantor shall be the same as their respective rights and
obligations relative to the Notes and Senior Indebtedness of the Company
pursuant to Article 10 of the Indenture.

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               THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED HEREIN
BY REFERENCE.

               Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.

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               IN WITNESS WHEREOF, each of the parties have executed this
Subsidiary Guarantee as of March 19, 2002.

                                    GUARANTORS:

                                    AEROMET AMERICA, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    BALO PRECISION PARTS, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    CASHMERE MANUFACTURING CO., INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    CERAMIC DEVICES, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    ELECTRONIC SPECIALTY CORPORATION

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

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                                    NORTHWEST TECHNICAL INDUSTRIES, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    PACIFIC AEROSPACE & ELECTRONICS
                                    INTERNATIONAL, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    PACIFIC COAST TECHNOLOGIES, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    SEISMIC SAFETY PRODUCTS, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President

                                    SKAGIT ENGINEERING & MANUFACTURING, INC.

                                    By: /s/ Donald A. Wright
                                        --------------------------------
                                         Donald A. Wright
                                         Executive Vice President<PAGE>
                                                                  EXHIBIT 10.15

                        CONVERSION ADJUSTMENT AGREEMENT

               Conversion Adjustment Agreement (this "Agreement"), dated as of
March 19, 2002, by and among Pacific Aerospace & Electronics, Inc., a Washington
corporation (the "Company"), GSCP Recovery, Inc., GSC Recovery II, L.P.,
Alliance Capital Management L.P., M.W. Post Advisory Group L.L.C., William E.
Simon & Sons Special Situation Partners II, L.P. and HBK Master Fund L.P.
(collectively, the "Holders").

                                    RECITALS

               WHEREAS, reference is made to the Exchange Agreement, dated as of
the date hereof (the "Exchange Agreement"), among, the Company, the Holders, and
the Subsidiary Guarantors (as defined therein) pursuant to which each of the
Holders have agreed to exchange their 11 1/4% Senior Subordinated Notes due 2005
of the Company (the "Old Notes") held by such Holders for certain other
securities of the Company, including common stock, preferred stock and
pay-in-kind senior subordinated notes (collectively, the "New Securities"), as
more particularly described therein;

               WHEREAS, for each $1,000 of Old Notes tendered to the Company
pursuant to the terms of the Exchange Agreement, the Holders will receive .0158
shares of the Company's Series C Convertible Preferred Stock, par value $0.001
(the "Preferred Stock"), rounded down to the nearest whole share;

               WHEREAS, upon receipt of requisite shareholder approval to amend
the Articles of Incorporation of the Company to increase the number of
authorized shares of common stock of the Company, par value $0.001 (the "Common
Stock"), as necessary to effect the full conversion of the Preferred Stock into
shares of Common Stock, the Preferred Stock shall automatically convert (the
"Automatic Conversion") into the number of shares of Common Stock of the Company
which when added to the number of shares of Common Stock of the Company received
at Closing (as defined in the Exchange Agreement) will give the Holders on a
fully-diluted basis, in the aggregate, 97.5% of the outstanding shares of Common
Stock of the Company (the "Conversion Shares");

               WHEREAS, the New Securities, including the shares of Preferred
Stock, are being distributed to the Holders via the book-entry system of The
Depository Trust Company ("DTC") upon tender of the Old Notes held by the
Holders;

                WHEREAS, the distribution of the New Securities, including the
Preferred Stock, via DTC's book-entry system and the effects of rounding down to
the nearest whole share would, in the absence of this Agreement, otherwise
result in a disproportionate allocation of shares of Preferred Stock among the
Holders following such distribution that is inconsistent with the economic
arrangement agreed to among the parties prior to the exchange transaction (the
"Economic Arrangement"); and

               WHEREAS, as more particularly described herein, the Holders
desire that the number of Conversion Shares to be received by each Holder upon
the Automatic Conversion of the Preferred Stock be adjusted to reflect the
Economic Arrangement.

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               NOW THEREFORE, in consideration of the mutual covenants and
obligations set forth herein, and subject to the terms and conditions contained
herein, the Company and each Holder hereby agree as follows:

                     Section I. NUMBER OF CONVERSION SHARES

               Section 1.1 Conversion Adjustment. Notwithstanding (i) the number
of shares of Preferred Stock received by each Holder at Closing, (ii) the
Conversion Price as set forth in the Designation of Rights and Preferences of
Series C Voting Convertible Preferred Stock (the "Certificate of Designation")
of the Company, and (iii) the number of accounts in which the Preferred Stock is
held by the Holders, the Company and each Holder hereby agree that the number of
Conversion Shares each Holder shall receive upon consummation of the Automatic
Conversion shall be calculated on a pro-rata basis as determined by the
aggregate principal amount of Old Notes tendered by such Holder in relation to
the aggregate principal amount of Old Notes tendered by all of the Holders in
the Exchange, the aggregate principal amount of which shall be $63,700,000 (the
"Conversion Adjustment"). This Section 1.1 is designed solely to effect the true
economic transaction agreed to between the Company and the Holders and to
resolve any disproportionate distributions of Preferred Stock that would
otherwise arise as a result of the rounding down of shares in DTC's book-entry
system.

               Notwithstanding the foregoing, the Conversion Adjustment shall
not serve to increase the aggregate number of Conversion Shares issuable upon
the Automatic Conversion, as such terms are set forth in the Company's
Certificate of Designation.

               Section 1.2 Amendment. This Agreement may not be amended,
modified or supplemented unless consented to in writing by all parties hereto.

               Section 1.3 Governing Law. This Agreement shall be governed by
the laws of the State of New York applicable to contracts made and to be wholly
performed in the State of New York without giving effect to the principles of
conflicts of laws thereof.

               Section 1.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument.

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               IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.

                                       THE COMPANY

                                       PACIFIC AEROSPACE &
                                       ELECTRONICS, INC.

                                       BY:  /S/ Donald A. Wright
                                          _________________________________
                                       Name:  Donald A. Wright
                                       Title: President and
                                              Chief Executive Officer

                                       THE HOLDERS

                                       GSCP RECOVERY, INC

                                       By:  /s/ Matthew Kaufman
                                          _________________________________
                                       Name:  Matthew Kaufman
                                       Title: Managing Director

                                       GSC RECOVERY II, L.P.

                                       By:    GSC Recovery II GP, L.P.,
                                              its general partner

                                       By:    GSC RII, LLC,
                                              its general partner

                                       By:    GSCP (NJ) Holdings, L.P.,
                                              its sole member

                                       By:    GSCP (NJ), Inc.,
                                              its general partner

                                       By:  /s/ Matthew Kaufman
                                          _________________________________
                                       Name:  Matthew Kaufman
                                       Title: Managing Director

                                       3

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                                  ALLIANCE CAPITAL MANAGEMENT L.P.,
                                  as investment advisor

                                  By:  Alliance Capital Management Corp.

                                  By:  /s/ Michael E. Sohr
                                     ___________________________________________
                                  Name:  Michael E. Sohr
                                  Title: Vice President

                                  M.W. POST ADVISORY GROUP L.L.C.,
                                  as investment advisor

                                  By:  /s/ Carl H. Goldsmith
                                     ___________________________________________
                                  Name:  Carl H. Goldsmith
                                  Title: Managing Director

                                  WILLIAM E. SIMON & SONS SPECIAL SITUATION
                                  PARTNERS II, L.P.

                                  By: William E. Simon & Sons Special
                                      Situations II, L.L.C., its General Partner

                                  By:  /s/ John E. Klinge
                                     ___________________________________________
                                  Name:  John E. Klinge
                                  Title: Authorized Signatory

                                  HBK MASTER FUND L.P.

                                  By: HBK Investments L.P.
                                      Investment Manager

                                  By:  /s/ William E. Rose
                                     ___________________________________________
                                  Name:  William E. Rose
                                  Title: Authorized Signatory

                                       4

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